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Item 1. Business

2022-03-25 compared with 2021-03-11 · 237 added, 387 removed, 575 unchanged (52% of the section changed)

We are a clinical-stage biotechnology company developing therapeutics for immuno-oncology, genetic disorders and other indications based on our proprietary Spherical Nucleic Acid, or SNA, technology.

We are an early-stage biotechnology company developing nucleic acid therapies targeting ribonucleic acid against validated targets to neurological disorders and hair loss.

Our team includes a diverse scientific group with expertise in nucleic acid chemistry, drug development and neuroscience.

Headquartered in Chicago, Illinois, we conduct our discovery and development efforts in-house with a dedicated 30,000 square foot facility, including rapid and automated high throughput nucleic acid synthesis and screening.

In December 2021, we announced our commitment to a plan to wind down our immuno-oncology program for cavrotolimod (AST-008) and our XCUR-FXN preclinical program for the treatment of Friedreich’s ataxia.

We have transformed our strategic plan, with new focus on realignment of our research and development resources to support (i) the development of our preclinical program targeting SCN9A for neuropathic pain, (ii) the continued advancement of our partnered programs with Ipsen Biopharm Limited, or Ipsen, to develop SNA-based treatments in neuroscience targeting Huntington’s disease and Angelman syndrome, (iii) our continued advancement of our partnered program with AbbVie Inc., or AbbVie, to develop SNA-based treatments for hair loss disorders, as well as (iv) the continued research and development of other undisclosed therapeutic product candidates.

Our therapeutic discovery and development efforts are supported by our proprietary Spherical Nucleic Acid, or SNA, technology.

SNAs are nanoscale constructs consisting of densely packed synthetic nucleic acid sequences that are radially arranged in three dimensions.

We believe the design of our SNAs gives rise to distinct chemical and biological properties that may provide advantages over other nucleic acid therapeutics and enable therapeutic activity outside of the liver.

We are conducting IND-enabling studies for XCUR-FXN, an SNA–based therapeutic candidate, for the treatment of Friedreich’s ataxia (FA) and expect to initiate a first-in-patient Phase 1b clinical trial in 2022.

We are also working to advance our SNA–based therapeutic candidate cavrotolimod (AST-008) in an ongoing Phase 1b/2 clinical trial in cancer patients.

We believe that one of the key strengths of our proprietary SNAs is that they have the potential for increased cellular uptake compared to conventional linear oligonucleotides and as a result the potential to achieve higher efficacy at the same doses of oligonucleotide administered.

We have shown in clinical and preclinical studies that SNAs may have therapeutic potential in neurology, immuno-oncology and dermatology.

In addition, we have shown in preclinical studies that SNAs may have therapeutic potential in ophthalmology, pulmonology, and gastroenterology.

As a consequence, we have expanded our pipeline into neurology, and are conducting early stage research activities in ophthalmology, pulmonology, and gastroenterology.

In June 2020, we reported that we dosed the first patient in the metastatic Merkel cell carcinoma (MCC) cohort of the Phase 2 portion of the clinical trial of cavrotolimod (AST-008).

As of February 23, 2021, we had 16 clinical trial sites open for enrollment and 7 additional sites pending activation.

We expect to open up to 30 sites for the Phase 2 stage of the clinical trial.

We anticipate all sites will be activated by the end of 2021.

As of February 23, 2021, we had dosed 16 patients with 32 mg of cavrotolimod (AST-008) in the Phase 2 portion of the clinical trial, including the primary and exploratory cohorts.

Including the six patients dosed with 32 mg of cavrotolimod (AST-008) in the Phase 1b portion of the clinical trial, a total of 22 patients have been dosed with 32 mg of cavrotolimod (AST-008).

Our platform for therapeutic nucleic acids has demonstrated potential high potency, broad uptake, and prolonged efficacy in both in vitro and in vivo neurological models.

The basis of our discovery approach harnesses our expertise in oligonucleotide chemistry for use against validated targets where we can screen thousands of oligonucleotides efficiently and identify top candidates in the appropriate cell and live animal models.

We are conducting preclinical studies for a non-opioid analgesic directed against SCN9A (Nav1.7);

undisclosed targets in Huntington’s disease and Angelman syndrome as part of our collaboration with Ipsen;

and undisclosed targets in hair loss disorders as part of our collaboration with AbbVie.

The table below sets forth the current status of development of our SNA therapeutic candidates.

We are also conducting early stage research activities in ophthalmology, respiratory and gastrointestinal applications.

These early stage research activities are described in more detail in the section titled “Our Therapeutic Development Programs–Preclinical research programs.”

(1) In combination with checkpoint inhibitors.

Impact of Covid-19

With the global spread of the coronavirus disease 2019, or COVID-19, pandemic during 2020, we continue to monitor closely the developments and continue to take active measures to protect the health of our employees and their families, our communities, as well as our clinical trial investigators, patients, and caregivers.

In response to the evolving COVID-19 pandemic and related public health directives, orders and guidance, and to ensure the safety and wellbeing of our employees and support community efforts to reduce transmission of COVID-19, we have implemented work-from-home policies in accordance with guidance from federal, state/provincial or municipal government and health authorities.

We implemented a number of measures to ensure employee safety and business continuity.

Under social distancing guidelines for COVID-19, we were typically operating with less than 50% of our R&D staff on-site at any one time through June 30, 2020.

As of July 1, 2020, we took occupancy of approximately 30,000 square feet of laboratory and office space in our new headquarters in Chicago, Illinois.

Since then, we have operated under COVID-19 social distancing guidelines and have generally operated with 100% of our R&D staff on-site.

Our office and general and administrative team continues to work predominantly from home.

We are managing laboratory staffing and taking other appropriate managerial actions to maintain progress on our preclinical and collaboration programs.

Business travel has been suspended, and online and teleconference technology is used to meet virtually rather than in person.

We have taken measures to secure our research and development project activities, while work in laboratories and facilities has been organized to reduce risk of COVID-19 transmission.

For employees working in our laboratories and facilities, we have also taken additional

safety measures, including implementing social distancing, providing and requiring the use of personal protective equipment, temperature screening, restricting business travel, and under certain circumstances, requiring COVID-19 testing to access our workplace.

R&D operations

Our preclinical development program in FA is ongoing and we began IND-enabling studies for XCUR-FXN in late 2020.

We also continue to progress our collaborations with AbbVie and Dermelix.

However, if the COVID-19 pandemic or its impact or effects continues to persist for an extended period of time, we could experience additional delays in our enrollment of patients for the Phase 2 trial of cavrotolimod (AST-008) and significant disruptions to our preclinical development timelines, which would adversely affect our business, financial condition, results of operations and growth prospects.

We are working closely with our third-party manufacturers and other partners to manage our supply chain activities and mitigate potential disruptions as a result of the COVID-19 pandemic.

We have observed minor delays in receipt of key chemicals, reagents and materials as certain manufacturers have had supply disruptions, related to the COVID-19 pandemic.

If the COVID-19 pandemic continues to persist for an extended period of time and impacts essential distribution systems such as FedEx and postal delivery, we could experience future disruptions to our supply chain and operations, and associated delays in the manufacturing and our clinical supply, which would adversely impact our preclinical and clinical development activities.

Clinical operations

We have one active clinical program, cavrotolimod (AST-008).

We have completed enrollment for the Phase 1b stage of the clinical trial and have begun the Phase 2 dose expansion phase in patients with advanced or metastatic Merkel cell carcinoma, or cutaneous squamous cell carcinoma.

During the third quarter of 2020 and through December 31, 2020, we observed delays in our enrollment plans and clinical trial site start-ups for the Phase 2 dose expansion phase of the trial.

We believe the effects of the COVID-19 pandemic or its impact contributed to such delays.

As a result, we have taken additional measures to increase the enrollment of patients, including frequent interaction with our clinical trial sites currently open as well as increasing the number of clinical trial sites that potentially are activated for this trial so that we may continue to enroll patients as initially planned, in accordance with related directives, orders and guidance from relevant health and safety authorities.

However, these delays have caused us to lengthen our clinical development timeline for cavrotolimod (AST-008), and we now expect to report overall response rate, or ORR, results in the first half of 2022 rather than by year end 2021 as previously guided in September 2020.

We remain committed to maintaining our development plans for cavrotolimod (AST-008) and continue to monitor and manage the rapidly evolving situation.

We have taken and continue to take measures to implement remote and virtual approaches, including remote patient monitoring where possible, to maintain patient safety and trial continuity and to preserve study integrity.

Should the COVID-19 pandemic or its impact or effects continue, our ability to maintain patient enrollment and our clinical development timeline could continue to be negatively impacted.

We could also see an impact on our ability to supply study drug, report trial results, or interact with regulators, ethics committees or other important agencies due to limitations in regulatory authority employee resources or otherwise.

In addition, we rely on contract research organizations or other third parties to assist us with clinical trials, and we cannot guarantee that they will continue to perform their contractual duties in a timely and satisfactory manner as a result of the COVID-19 pandemic.

As the COVID-19 pandemic persists for an extended period of time, we continue to be impacted and could experience additional delays in patient enrollment for our Phase 2 clinical trial of cavrotolimod (AST-008).

Any significant disruptions to our clinical development timelines would further delay our anticipated timeline for results and adversely affect our business, financial condition, results of operations and growth prospects.

We intend to build a leading nucleic acid therapeutics company based on our proprietary SNA technology.

Recent Developments

In December 2021, we implement a reduction in force where we eliminated approximately 50% of our existing workforce on a staggered basis through January 2022 as well as other cost-cutting measures.

Effective February 4, 2022, Matthias Schroff, Ph.D.

was appointed as our President and Chief Executive Officer and as a member of the Board to succeed Brian Bock, our former Chief Executive Officer and director.

We also announced the resignations of Andrew Sassine, Timothy Walbert and Bosun Hau from the Board.

COVID-19 Business Update

The ongoing COVID-19 global pandemic continues to have unpredictable impacts on global societies, economies, financial markets, and business practices.

We continue to monitor the impact of the COVID-19 pandemic and related developments, and our focus remains on safeguarding employee health, while minimizing the negative effects on our business and continuing to advance research and development of our therapeutic candidates.

For discussion regarding the impact of the COVID-19 global pandemic on our business and financial results, see “Risk Factors” in Part I, Item 1A and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Annual Report on Form 10-K.

We intend to build a leading nucleic acid therapeutics company based on our expertise in oligonucleotide chemistry targeting ribonucleic acid that in part is utilized via our proprietary SNA technology.

The key elements of our strategy are:

• Advance XCUR-FXN to clinical proof-of-concept and approval to offer meaningful benefit to Friedreich’s ataxia (FA) patients.

We designed and optimized XCUR-FXN, our bi-specific FA therapeutic candidate, to increase frataxin protein levels via two distinct mechanisms and, in in vitro experiments, have observed synergistic upregulation of FXN mRNA in cells treated with XCUR-FXN compared to its mono-targeting components alone at the same total oligonucleotide dose.

In FA patient-derived induced neurons, XCUR-FXN has shown potent, dose-dependent upregulation of frataxin protein.

In isolated mitochondria from the same induced neurons, XCUR-FXN normalized frataxin protein levels at low concentrations, resulting in substantial improvements in mitochondrial respiration, as measured by succinate dehydrogenase (SDH) activity.

We are working in collaboration with Friedreich’s Ataxia Research Alliance (FARA), to develop XCUR-FXN.

We commenced IND-enabling studies for XCUR-FXN in late 2020 and expect to initiate a first-in-patient Phase 1b clinical trial in 2022.

• Expand our pipeline of therapeutic candidates for neurological disorders to fully exploit the potential of our SNA technology.

We have identified multiple SNA compounds that modulate SCN9A and CLN3 mRNA, for potential treatment of neuropathic pain and CLN3 Batten disease, respectively.

We are also evaluating the application of our SNA technology in additional neurological conditions with unmet medical needs, including multiple forms of spinocerebellar ataxia, amyotrophic lateral sclerosis (ALS), Angelman syndrome, and Huntington’s disease.

• Rapidly advance cavrotolimod (AST-008) through clinical development for select cancer indications.

AST-008 is our most advanced therapeutic candidate.

Using data from the completed Phase 1b stage of our Phase 1b/2 clinical trial, a recommended Phase 2 dose of 32 mg cavrotolimod (AST-008) was identified for the Phase 2 portion of the clinical trial which is currently underway, where cavrotolimod (AST-008) is being given in combination with pembrolizumab or cemiplimab for the treatment of locally advanced or metastatic Merkel cell carcinoma, or cutaneous squamous cell carcinoma, respectively, in patients with progression despite anti-PD-(L)1 therapy.

We are enrolling two separate cohorts of patients with advanced or metastatic MCC or CSCC.

Each cohort is expected to enroll up to 29 patients who have failed anti-PD-1/PD-L1, or programmed cell death protein 1/programmed death-ligand 1, therapy.

In addition, we have added an exploratory cohort to include patients with melanoma who have progressed on PD-(L)-1 therapy and MCC patients who do not qualify for the primary MCC cohort.

In June 2020, we reported that we dosed the first patient in the MCC cohort of the trial.

As of February 23, 2021, we had 16 clinical trial sites open for enrollment and 7 additional sites pending activation.

We expect to open up to 30 sites for the Phase 2 stage of the clinical trial.

We anticipate all sites will be activated by the end of 2021.

As of February 23, 2021, we had dosed 16 patients with 32 mg of cavrotolimod (AST-008) in the Phase 2 portion of the clinical trial, including the primary and exploratory cohorts.

Including the six patients dosed with 32 mg of cavrotolimod (AST-008) in the Phase 1b portion of the clinical trial, a total of 22 patients have been dosed with 32 mg of cavrotolimod (AST-008).

In January 2021, we announced that the U.S.

Food and Drug Administration, or the FDA, has granted Fast Track designations for cavrotolimod (AST-008), for two development programs:

(i) cavrotolimod in combination with anti-programmed death-1 (PD-1) therapy for the treatment of patients with locally advanced or metastatic MCC refractory to prior anti-PD-1/anti-PD-ligand 1 (anti-PD-(L)1) blockade and (ii) cavrotolimod in combination with anti-PD-1 therapy for the treatment of patients with locally advanced or metastatic cutaneous squamous cell carcinoma (CSCC) refractory to prior anti-PD-1 blockade.

In March 2021, we announced that the FDA has granted Orphan Drug Designation for cavrotolimod (AST-008) for the treatment of patients with MCC.

• Use our proprietary SNA technology to develop additional therapeutic candidates.

We have demonstrated in preclinical studies that in certain applications, SNAs exhibit superior biodistribution properties compared to linear oligonucleotides being both more persistent and more stable in the tissue or organ of interest.

As a consequence, SNAs may have potential applications in a variety of additional organs, including the eye, gastrointestinal tract and lungs.

We believe that we have the opportunity to enhance the therapeutic potential of known oligonucleotides of clinical utility by incorporating them in our SNA platform.

In addition, we may be

able to develop novel therapeutic candidates targeting validated therapeutic targets.

We are conducting early stage research activities in ophthalmology, pulmonology, and gastroenterology.

• Advance SNA platform in dermatological indications with suitable partners.

In February 2019, we entered into a License and Development Agreement with Dermelix.

Under the terms of agreement, Dermelix licensed worldwide rights to research, develop, and commercialize Exicure’s technology for the treatment of Netherton syndrome and up to five additional rare skin indications.

Additionally, in November 2019, we entered into the AbbVie Collaboration Agreement, pursuant to which we, in collaboration with AbbVie, are developing SNA-based treatments for hair loss disorders.

• Advance preclinical development targeting SCN9A in pain to therapeutic candidate selection and IND-enabling studies.

Chronic pain is a major burden on society, making it a leading cause of disability.

Patients have few pharmacological treatment options for their pain and even fewer when addictive opioid analgesics are excluded.

SCN9A is a validated target for the treatment of chronic pain and we believe that antisense oligonucleotides targeting SCN9A have potential to be a highly effective, well-tolerated, non-addictive pain relief treatment.

The promise of antisense oligonucleotides is the selectivity to SCN9A and the knockdown of the Nav1.7 channel while sparing other critical sodium channels and thereby avoiding deleterious side effects, which has been a limiting safety challenge common with a small molecule approach.

We are exploring the development of several potential SNA candidates that have shown promise in our preclinical studies a significant level of knockdown of the SCN9A transcript.

Human genetic studies suggest that reduction of SCN9A expression by approximately 50% may provide therapeutically relevant pain relief.

Additionally, intrathecally dosed SNAs demonstrate robust distribution across the spinal cord and dorsal root ganglia, or DRG, in animals, which may facilitate SCN9A knockdown in the pain-relevant cells.

From these findings, we continue to pursue the development of several potential candidates with the aim of helping patients with chronic pain where quality of life is significantly impacted, and few long-term treatment options exist.

• Continue to advance our preclinical development programs with Ipsen in the central nervous system, or the CNS, and with AbbVie in dermatology.

In July 2021 we signed a collaboration agreement with Ipsen to develop SNA-based treatments in neuroscience, targeting Huntington’s disease and Angelman syndrome.

This partnership combines our differentiated SNA platform for hard-to-drug targets requiring deep brain penetration and persistence with Ipsen’s expertise in neuroscience and rare diseases.

In November 2019, we signed a collaboration agreement with Allergan Pharmaceuticals International Limited, or Allergan, to develop SNA-based treatments for hair loss disorders.

This collaboration is a combination of our knowledge of nucleic acid therapeutics and dermatology with Allergan’s expertise in medical aesthetics.

In May, 2020, Allergan was acquired by AbbVie.

Both the AbbVie and Ipsen agreements included upfront cash payments and multiple preclinical milestones with initial discovery and development work to be conducted by us.

We continue preclinical advancement of these programs in close collaboration with our partners and anticipate achievement of potential pre-clinical milestones in 2023.

• Enter into additional partnerships to accelerate development and commercialization of our SNA therapeutic candidates.

We believe our proprietary SNA technology lends itself to license agreements or development partnerships with pharmaceutical companies that have development or commercial expertise in a particular therapeutic area of interest where it would be uneconomical or impractical for us to develop SNA therapeutics independently.

• Continue to expand our core capabilities in high throughput screening and automated analyses.

We believe there may be a number of therapeutic areas where our SNA technology can be applied to bring first-in-class or best-in-class medicines to patients.

We believe our oligonucleotide chemistry expertise along with our know-how and capability for high throughput screening of oligonucleotides, and our proprietary SNA technology enable us to

enter into license agreements or development partnerships with companies that have development or commercial expertise in CNS where it would be uneconomical or impractical for us to develop SNA therapeutics independently.

Additionally, we are currently pursuing various strategic alternatives for maximizing stockholder value of cavrotolimod, including various out-licensing scenarios.

• Continue to expand our core capabilities in oligonucleotide chemistry, high throughput screening and automated analyses.

We believe there continues to be opportunity in optimizing oligonucleotide chemistry to advance greater efficacy and safety with nucleic acid therapeutics.

This along with our SNA technology can be applied to bring first-in-class or best-in-class medicines to patients.

Our goal is to identify and advance to clinical development therapeutic candidates for multiple different genetically-defined disorders in parallel, either on our own or with strategic collaborators.

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We believe the three-dimensional structure of our SNAs provides novel technological and commercial opportunities.

We have licensed IP from Northwestern University and have also filed patents independently to protect our IP.

We have licensed intellectual property, or IP, from Northwestern and have also filed patents independently to protect our IP.

Our license from Northwestern University is for exclusive worldwide rights to the use of SNA technology for therapeutic applications.

We will continue to protect our IP and innovations arising from our research and development efforts, and prudently in-license technologies where appropriate for protection of our therapeutic pipeline and the broader SNA technology.

Any patents arising from applications covering cavrotolimod (AST-008) would expire between 2034 and 2040.

Our patent arising from an application covering XCUR-FXN would expire by 2041.

Patents arising from applications covering XCUR17 and AST-005 would expire by 2037 and 2035, respectively.

We will continue to protect our IP and innovations arising from our R&D efforts, and prudently in-license technologies where appropriate for protection of our therapeutic pipeline and the broader SNA technology.

Our Proprietary Technology:

Spherical Nucleic Acids

Our therapeutic discovery and development efforts rely on our proprietary SNA technology.

Our therapeutic discovery and development efforts are supported by our proprietary SNA technology.

SNAs are nanoscale constructs consisting of densely packed synthetic nucleic acid molecules that are radially arranged in three dimensions.

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SNAs may also be designed to modulate splicing of pre-mRNA in the nucleus to enhance or alter the product of a target protein and mitigate a genetic defect.

Finally, SNAs may be designed to potentially elicit an anti-tumor immune response by agonizing toll like receptors in the endosomes.

Finally, SNAs may be designed to potentially elicit an immune response such as an anti-tumor immune response by agonizing toll like receptors in the endosomes.

Examples of our proprietary SNA constructs

All of our SNAs contain oligonucleotides that are densely packed and radially oriented.

We believe the key advantages of our proprietary SNAs include:

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Local delivery of nucleic acid therapeutics through biological barriers, such as the skin, has been a significant technical challenge.

In a Phase 1 clinical trial of XCUR17 in patients with mild to moderate psoriasis, eleven of the twenty-one patients treated with the highest strength XCUR17 gel were observed to have a reduction in redness and improvement in healing as determined by blinded physician assessments.

Further, in preclinical studies, we have demonstrated delivery and activity of our SNAs in the central nervous system, eye, lung, and gastrointestinal tract.

In a Phase 1 clinical trial of XCUR17 in patients with mild to moderate psoriasis, 11 of the 21 patients treated with the highest strength of XCUR17 gel were observed to have a reduction in redness and improvement in healing as determined by blinded physician assessments.

Further, in preclinical studies, we have demonstrated delivery and activity of our SNAs in the CNS, eye, lung, and gastrointestinal tract.

• SNAs potentially exhibit superior biodistribution properties compared to linear oligonucleotides.

In the fall of 2018, we completed a biodistribution study in rats comparing nusinersen to nusinersen in SNA format.

We found that more nusinersen in SNA format was retained in the rats’ brain and spinal cord compared to nusinersen retained in the rats’ brain and spinal cord at 24, 72 and 168 hours.

We believe that we have the opportunity to enhance the therapeutic potential of known oligonucleotides of clinical utility by incorporating them in our SNA platform.

In addition, we may be able to develop novel therapeutic candidates using our SNA platform.

We found that more nusinersen in SNA format was retained in the rats’ brain and spinal cord compared to nusinersen retained in the rats’ brain and spinal cord at each of 24, 72 and 168 hours.

We believe that we have the opportunity to enhance the therapeutic potential of oligonucleotides by incorporating them in our SNA platform.

Our facilities can design thousands of oligonucleotides and SNAs, rapidly testing these candidates through automated high throughput screening to discover novel nucleic acid therapeutic candidates.

• SNAs can potentially target multiple genes with a single therapeutic candidate.

Our development candidate for Friedreich’s ataxia, XCUR-FXN, is employing a bi-specific approach to upregulate frataxin mRNA levels via two distinct mechanisms, employing an SNA carrying two distinct oligonucleotides.

Furthermore, in collaboration with Dr.

Amy Paller, one of our scientific advisors, at the 2019 meeting of the Society for Investigative Dermatology, we presented data demonstrating the application of our SNA technology for concurrently targeting two different genes in a single SNA compound.

We believe we can concurrently target three or more genes with a single SNA compound.

This feature potentially allows us to identify novel therapeutic candidates to treat multiple variants of a given genetic disorder or multiple genetic targets for a single disorder with one therapeutic candidate.

In a proof-of-concept study in collaboration with Dr.

Amy Paller, one of our scientific advisors, we presented data demonstrating the application of our SNA technology for concurrently targeting two different genes in a single SNA compound.

We believe we can concurrently apply up to three oligonucleotides on a single SNA compound.

This feature will potentially allow us to identify novel therapeutic candidates to treat multiple variants of a given genetic disorder or multiple genetic targets for a single disorder with one therapeutic candidate.

We believe multi-targeting might be particularly beneficial for complex genetic diseases with more than one underlying genetic driver.

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First, by administering SNAs locally, we expect to minimize systemic exposure thereby decreasing safety risk.

Second, because SNAs enter cells and tissues without lipid or polymer encapsulation or complexation, we expect to avoid the toxicity risks associated with these delivery systems.

Finally, due to the nuclease resistance attributable to the architecture of the SNA, we use fewer chemical modifications than are customary in nucleic acid therapeutic development.

In each of the Phase 1 clinical trials of AST-005 and

XCUR17, we observed no drug associated adverse events when the SNA therapeutic candidate was applied topically to the skin of patients with mild to moderate psoriasis.

As of February 23, 2021, 1 of the 22 patients dosed with 32 mg of cavrotolimod (AST-008) has experienced a treatment-related SAE as determined by the clinical trial investigator.

This patient, enrolled in the Phase 2 stage of the clinical trial, reported a treatment-related serious adverse event, or SAE, of hypotension, flu-like symptoms which subsequently resolved.

None of the 14 patients dosed in the Phase 1b portion of the clinical trial with doses of cavrotolimod (AST-008) less than 32 mg experienced a treatment related SAE.

Thus, as of February 23, 2021, in total, 1 of 36 patients treated with cavrotolimod (AST-008) have experienced a treatment related SAE.

Second, because SNAs enter cells and tissues without lipid or polymer encapsulation or complexation, we believe we can avoid the toxicity risks associated with these delivery systems.

Finally, due to the nuclease resistance attributable to the architecture of the SNA, we use fewer chemical modifications than are customarily used in the nucleic acid therapeutic development.

In each of the Phase 1 clinical trials of AST-005 and XCUR17, we observed no drug associated adverse events when the SNA therapeutic candidate was applied topically to the skin of patients with mild to moderate psoriasis.

As of February 23, 2022, 5 of the 44 patients dosed with 32 mg of cavrotolimod (AST-008) in the Phase 1b and Phase 2 stages of the clinical trial have experienced a treatment-related serious adverse event, or SAE, as determined by the clinical trial investigator .

The treatment-related SAEs experienced by these five patients were flu-like symptoms (n=6), hypotension

(n=2), and injection site reaction (n=2).

None of the 20 patients dosed in the Phase 1b portion of the clinical trial with doses of cavrotolimod (AST-008) experienced a treatment-related SAE.

In summary, as of February 23, 2022, in total, 5 of 58 patients treated with cavrotolimod (AST-008) have experienced a treatment-related SAE.

• SNAs can be administered locally into a number of different cell and tissue types.

SNAs enter cells through class A scavenger receptors, which are present on the surface of many cell types.

We believe that by accessing this mechanism, our SNAs could have therapeutic applications in organs beyond the liver, such as the brain, eye, gastrointestinal tract, lung, and skin.

In preclinical studies, more than 50 cell lines and primary cells have been shown to internalize SNAs.

• Immuno-oncology SNAs may produce a powerful immune response against tumors.

In its Phase 1 trial, cavrotolimod (AST-008) was shown to elicit high levels of certain cytokines as well as activate important effector cells of the immune system, including T cells and natural killer cells which are the main drivers of an anti-tumor response.

In preclinical studies, SNAs localized to endosomes and stimulated the immune system via TLRs.

We have also observed in preclinical studies that SNAs can generate a cancer-specific adaptive immune response.

In addition, in preclinical studies in a variety of cancer models, SNAs, in combination with certain checkpoint inhibitors, exhibited a greater anti-tumor response and increased survival than did such checkpoint inhibitors alone.

Moreover, when administered as a monotherapy, cavrotolimod (AST-008) exhibited anti-tumor activity in mouse cancer models.

We believe that by accessing this mechanism, our SNAs could have therapeutic applications in organs beyond the liver, such as the brain, eye, and skin.

In preclinical studies, we have observed more than 50 cell lines and primary cells have been shown to internalize SNAs.

• SNAs may produce a powerful immune response that has applications for anti-infective and anti-tumoral responses.

In our Phase 1 clinical trial in healthy volunteers, we observed that cavrotolimod (AST-008), when delivered subcutaneously, was shown to elicit high levels of certain cytokines as well as activate important effector cells of the immune system, including T cells and natural killer, or NK, cells which are the main drivers of an anti-tumor response.

In preclinical studies, SNAs localized to endosomes and stimulated the immune system via toll-like receptors, or TLRs.

We have also observed in our preclinical studies that SNAs can generate a cancer-specific adaptive immune response.

In addition, in our preclinical studies in a variety of cancer models, SNAs, in combination with certain checkpoint inhibitors, exhibited a greater anti-tumor response and increased survival than did such checkpoint inhibitors alone.

Moreover, we observed that cavrotolimod (AST-008), when administered as a monotherapy, exhibited anti-tumor activity in mouse cancer models.

• SNAs have shown greater resistance to nuclease degradation.

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In preclinical studies, SNAs have been shown to have an increased nuclease resistance compared to linear oligonucleotides.

We believe this is a result of our 3-D approach, and as a consequence, we believe that smaller amounts of SNAs may be required to achieve therapeutic efficacy compared to linear oligonucleotides.

• SNAs can be manufactured at commercial scale.

Based on our manufacturing work to date, we believe SNAs can be made in a low cost, high-throughput, scalable, and reproducible manner using current Good Manufacturing Practices, or cGMPs.

We believe this is a result of our 3-D approach (as discussed further above), and as a consequence, we believe that smaller amounts of SNAs may be required to achieve therapeutic efficacy compared to linear oligonucleotides.

Our Therapeutic Development Programs

We are investigating the utility of our SNA technology for the treatment of neurological conditions and have ongoing research programs underway.

See below “Neurology–Proof-Of-Concept Work with Nusinersen” for more information on our initial studies and resulting data that indicate that the SNA platform may be well-suited for development of new therapeutics directed towards diseases of the central nervous system.

XCUR-FXN, Friedreich’s ataxia

We are developing XCUR-FXN, an SNA-based therapeutic candidate for the treatment of Friedreich’s ataxia, or FA.

FA is an autosomal recessive, neurodegenerative disease characterized by progressively impaired muscle coordination caused by the degeneration of neurons in the cerebellum and dorsal root ganglia in the spinal cord.

FA patients may also experience impairment of visual, auditory and speech functions.

FA patients also commonly suffer from life-threatening heart conditions such as hypertrophic cardiomyopathy, myocardial fibrosis and heart failure.

The typical age of onset for FA is between 5 and 15 years.

We estimate that approximately 13,000 patients across the United States, Europe, Canada and Australia are affected by FA.

There are currently no FDA-approved treatments for FA.

We have conducted extensive preclinical research evaluating the suitability of our SNA technology for genetically defined neurological diseases, including efficacy studies in animal models, and biodistribution in rodent and non-human primates.

Based on the results, we believe we can target FA at the genetic source and meet an important unmet medical need for FA patients.

FA is driven by expansion of guanine-adenine-adenine bases of the DNA sequence, or GAA, triplet repeats in the first intron of frataxin, or FXN, gene.

The expanded repeat of FXN forms an intramolecular triple-helix, which impairs transcription and reduces levels of frataxin protein.

Our strategy is to use a genetically-targeted SNA therapy to increase FXN protein.

We have designed XCUR-FXN to take advantage of a key attribute of our SNA technology, the ability to incorporate more than one active oligonucleotides in a single SNA molecule.

These two mechanisms are addressed by two different oligonucleotides, both of which are incorporated at a specific ratio in XCUR-FXN.

As discussed during our R&D day presentation in January 2021, in preclinical experiments, we observed that XCUR-FXN increased frataxin protein levels in fibroblasts and neurons derived from FA patients to near normal levels.

Importantly, we observed near normal levels of frataxin protein in mitochondrion, the target cellular compartment, and 70-80% of near normal mitochondrial activity in neurons derived from FA patients.

We initiated IND-enabling studies for XCUR-FXN in late 2020 and expect to initiate a first-in-patient Phase 1b clinical trial for XCUR-FXN in 2022.

We are collaborating closely with the Friedreich’s Ataxia Research Alliance (FARA), the non-profit, charitable organization dedicated to accelerating research leading to treatments and a cure for FA, in the design and site selection of the Phase 1b clinical trial.

The Phase 1b clinical trial is designed to demonstrate safety and characterize pharmacokinetic properties of multiple ascending doses of XCUR-FXN in FA patients and inform Phase 2/3 dose selection.

We are also planning to examine multiple biomarkers, including brain imaging and measurements of frataxin levels in patient cerebrospinal fluid (CSF), to provide rapid read-out for target engagement and pharmacodynamic (PD) effects.

We may include one or more exploratory endpoints, such as modified Friedreich’s Ataxia Rating Scale (mFARS), to prepare for a subsequent pivotal clinical trial.

We are investigating the utility of our SNA technology for the treatment of neurological conditions in pain, Huntington’s disease and Angelman syndrome.

Additionally, see below “Neurology–Proof-Of-Concept Work with Nusinersen” for more information on our initial studies and resulting data that indicate that the SNA platform may be well-suited for development of new therapeutics directed towards diseases of the central nervous system.

SCN9A, Our Lead Program Candidate for the Treatment of Chronic Pain

• There are insufficient treatment options for patients.

Most patients with chronic pain are forced to rely on opioid medications that are often poorly tolerated, can be highly addictive, and are prone to the development of tolerance.

Broad use of opioid medications to treat both acute and chronic pain has helped fuel the ongoing and devastating opioid epidemic in the U.S.

There is an unmet need for the development of new analgesic treatment options, particularly ones that are highly efficacious and can be given for many years without concern of tolerance or addiction.

• Antisense oligonucleotides have potential to be a highly effective, well-tolerated, non-addictive pain relief.

Oligonucleotides are capable of modulating gene expression via multiple mechanisms, enabling therapeutic applications to previously undruggable targets.

Currently, there are ten FDA approved and marketed antisense oligonucleotides, or ASOs, of which one, nusinersen, acts on the CNS to treat spinal muscular atrophy, or SMA, in pediatric and adult patients, and we are aware of other potential product candidates being evaluated in clinical trials for various neurological disorders.

We believe the success of nusinersen to treat SMA provides a proof-of-concept that targeting gene expression in various tissues within the CNS is possible, including for the treatment of chronic pain that we are pursuing with our development of our SCN9A preclinical therapeutic candidate.

• SCN9A is a validated target for the treatment of chronic pain.

SCN9A is the gene encoding Nav1.7, a trans-membrane sodium channel that plays a critical role in pain signaling.

Nav1.7 is highly expressed in

DRG neurons, which mediate transmission of external pain signals to the brain.

Nav1.7-targeting therapies could provide a novel, non-opioid treatment option for neuropathic pain conditions in which currently available therapies are largely ineffective.

We are developing SNAs targeting SCN9A for the treatment of chronic pain.

Our compounds are designed to decrease Nav1.7 protein expression via RNase H-mediated degradation of SCN9A mRNA.

Nav1.7 is translated from SCN9A mRNA within the cell body of the DRG, a critical tissue in pain signaling.

We are exploring the development of several potential SNA candidates that have shown promise in our preclinical studies a significant level of knockdown of the SCN9A transcript.

These compounds are highly selective for SCN9A and do not affect other sodium channels, which has been a limiting safety challenge with a small molecule approach.

Human genetic studies suggest that reduction of SCN9A expression by approximately 50% may provide therapeutically relevant pain relief.

Additionally, intrathecally dosed SNAs demonstrate robust distribution across the spinal cord and DRGs in animals, which we believe suggests that our SCN9A compound may facilitate SCN9A knockdown in the pain-relevant cells.

From these findings, we plan to continue preclinical development of a number of potential candidates in 2022, including undertaking in vivo testing.

We anticipate from results from initial in vivo animal studies by year-end 2022 with goal of therapeutic candidate selection in the second half of 2023.

Huntington’s disease and Angelman syndrome

In July 2021 we signed a collaboration agreement with Ipsen to develop SNA-based treatments in neuroscience, targeting Huntington’s disease and Angelman syndrome.

This partnership combines our differentiated SNA platform for hard-to-drug targets requiring deep brain penetration and persistence with Ipsen’s expertise in neuroscience and rare diseases.

Other neurological indications

We are building on our proof-of-concept work with nusinersen (see below) and our therapeutic candidate XCUR-FXN to further explore new therapeutic applications of our SNA technology in neurology.

We have leveraged our oligonucleotide chemistry expertise and high throughput capabilities for development and screening of SNAs in discovery efforts across a broad range of indications and therapeutic targets.

We aim to address indications with great unmet medical need and where we believe the attributes of our SNA technology would lead to therapeutic and commercial advantages.

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(i) indications where there is a known genetic basis for the disorder, (ii) disorders where we can target multiple genes, (iii) the existence of a patient registry or a patient advocacy group that can work with us for easier trial enrollment, (iv) the competitive therapeutic landscape including disorders not easily addressable by small molecules or antibodies, (v) indications with no approved therapies, and (vi) indications amenable to localized therapeutic administration.

Based on these and other criteria, we are currently exploring additional neurological conditions, including spinocerebellar ataxia, Batten disease, amyotrophic lateral sclerosis (ALS), and Huntington’s disease.

Preclinical development activities are underway for SCN9A for neuropathic pain and CLN3 for Batten disease.

While we previously initiated discovery efforts in Batten disease, spinocerebellar ataxia, and sporadic amyotrophic lateral sclerosis, we have suspended further development of these programs as part of our strategic measures to reduce cash burn as we prioritize our pipeline focus.

We may in the future explore collaborative opportunities that would allow us to continue development of these initial discovery efforts.

Neurology–Proof-Of-Concept Work with Nusinersen

Despite delivery challenges, nucleic-acid based therapy has been successfully developed to treat a central nervous system, or CNS, disorder.

Despite delivery challenges, nucleic-acid based therapy has been successfully developed to treat a CNS disorder.

Nusinersen, by Ionis Pharmaceuticals and Biogen Inc., was approved by the FDA in late 2016 for the treatment of spinal muscular atrophy, or SMA.

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In June 2018, we and researchers from The Ohio State University Wexner Medical Center presented a poster at the Cure SMA Annual Conference titled:

“Nusinersen in spherical nucleic acid (SNA) format improves efficacy both in vitro in SMA patient fibroblasts and in Δ7 SMA mice and reduces toxicity in mice.” It was observed in a preclinical study that nusinersen in SNA format prolonged survival by four-fold (maximal survival of 115 days compared to 28 days for nusinersen-treated mice) as well as doubled the levels of healthy full-length SMN2 mRNA

and protein in SMA patient fibroblasts when compared to nusinersen.

Based on the results of this preclinical study, we intend to further pursue our early stage research activities in neurological applications.

In June 2019, we announced data from a preclinical study evaluating the biodistribution of SNAs in the non-human primate central nervous system.

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These key data indicate that the SNA platform may be well-suited for development of new therapeutics directed towards diseases of the central nervous system.

Dermatology, Hair loss disorders

In November 2019, we signed a collaboration agreement with Allergan to develop SNA-based treatments for hair loss disorders.

This collaboration is a combination of our knowledge of nucleic acid therapeutics and dermatology with Allergan’s expertise in medical aesthetics.

On May 8, 2020, Allergan was acquired by AbbVie.

Together with AbbVie, we continue to progress these collaboration activities.

Immuno-oncology, cavrotolimod (AST-008)

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TLR9 agonists bind to and activate TLR9.

We believe cavrotolimod (AST-008) may be used for immuno-oncology applications in combination with checkpoint inhibitors.

We have observed that, in preclinical studies in a variety of tumor models, cavrotolimod (AST-008), applied in combination with certain checkpoint inhibitors, exhibited anti-tumor responses and survival rates that were greater than those demonstrated by checkpoint inhibitors alone.

We have also demonstrated that cavrotolimod (AST-008) was active when administered subcutaneously, intratumorally or intravenously, in both prevention and established mouse tumor models.

The administration of cavrotolimod (AST-008) also produced localized as well as abscopal anti-tumor activity in mouse cancer models.

Additionally, the administration of cavrotolimod (AST-008) in combination with certain checkpoint inhibitors conferred adaptive immunity in breast and colon cancer mouse models.

In mouse tumor models, administration of cavrotolimod (AST-008) with anti-PD-1 antibodies suppresses regulatory T-cells, or Tregs, and myeloid-derived suppressor cells, or MDSCs, and increases the levels of CD8 effector T-cells.

We believe these important results suggest that the combination of immuno-oncology SNAs and checkpoint inhibitors could potentially treat a larger proportion of cancer patients than checkpoint inhibitors alone.

We believe cavrotolimod (AST-008) may be used for anti-infective and immuno-oncology applications with the latter in combination with checkpoint inhibitors.

On December 10, 2021, in connection with our announcement to implement strategic measures to reduce cash burn and prioritize our pipeline focus, we announced the wind-down of our cavrotolimod (AST-008).

We have discontinued further enrollment of the ongoing Phase1b/2 clinical trial in patients with solid tumors.

We are currently pursuing various strategic alternatives to maximize shareholder value of cavrotolimod, including pursuit of out-licensing activities.

Phase 2 clinical development of cavrotolimod (AST-008)

Using data from the completed Phase 1b stage of our Phase 1b/2 clinical trial, a recommended Phase 2 dose of 32 mg cavrotolimod (AST-008) was identified for the Phase 2 portion of the clinical trial which is currently underway, whereby cavrotolimod (AST-008) is being given in combination with pembrolizumab or cemiplimab for the treatment of locally advanced or metastatic Merkel cell carcinoma, or cutaneous squamous cell carcinoma, respectively, in patients with progression despite approved anti-PD-(L)1 therapy.

We are enrolling two separate cohorts of patients with advanced or metastatic MCC or CSCC.

Each cohort is expected to enroll up to 29 patients who have failed anti-PD-1/PD-L1, or programmed cell death protein 1/programmed death-ligand 1, therapy.

In addition, we have added an exploratory cohort to include patients with melanoma who have progressed on PD-(L)-1 therapy and MCC patients who do not qualify for the primary MCC cohort.

Using data from the completed Phase 1b stage of our Phase 1b/2 clinical trial, a recommended Phase 2 dose of 32 mg cavrotolimod (AST-008) was identified for the Phase 2 portion of the clinical trial, whereby cavrotolimod (AST-008) was given in combination with pembrolizumab or cemiplimab for the treatment of locally advanced or metastatic Merkel cell carcinoma, or MCC, or cutaneous squamous cell carcinoma, or CSCC, respectively, in patients with progression despite approved anti-PD-(L)1 therapy.

This trial was designed to enroll two separate cohorts of up to 29 patients with advanced or metastatic MCC or CSCC who have failed anti-PD-1/PD-L1, or programmed cell death protein 1/programmed death-ligand 1, therapy.

In addition, we added an exploratory cohort to include patients with melanoma who have progressed on PD-(L)-1 therapy and MCC patients who do not qualify for the primary MCC cohort.

In June 2020, we reported that we dosed the first patient in the MCC cohort of the trial.

The diagram below illustrates our planned design of the Phase 2 portion of the trial (not including the exploratory cohort):

cavrotolimod (AST-008);

Recommended Phase 2 dose;

pembrolizumab

As of February 23, 2021, we had 16 clinical trial sites open for enrollment and 7 additional sites pending activation.

We expect to open up to 30 sites for the Phase 2 stage of the clinical trial.

We anticipate all sites will be activated by the end of 2021.

As of February 23, 2021, we had dosed 16 patients with 32 mg of cavrotolimod (AST-008) in the Phase 2 portion of the clinical trial, including the primary and exploratory cohorts.

Including the six patients dosed with 32 mg of cavrotolimod (AST-008) in the Phase 1b portion of the clinical trial, a total of 22 patients have been dosed with 32 mg of cavrotolimod (AST-008).

As of February 23, 2021, 1 of the 22 patients dosed with 32 mg of cavrotolimod (AST-008) has experienced a treatment-related SAE as determined by the clinical trial investigator.

This patient, enrolled in the Phase 2 stage of the clinical trial, reported a treatment-related SAE of hypotension, flu-like symptoms which subsequently resolved.

None of the 14 patients dosed in the Phase 1b portion of the clinical trial with doses of cavrotolimod (AST-008) less than 32 mg experienced a treatment related SAE.

Thus, as of February 23, 2021, in total, 1 of 36 patients treated with cavrotolimod (AST-008) have experienced a treatment related SAE.

In January 2021, we announced that the FDA has granted Fast Track designations for cavrotolimod (AST-008), for two development programs:

(i) cavrotolimod in combination with anti-programmed death-1 (PD-1) therapy for the treatment of patients with locally advanced or metastatic Merkel cell carcinoma (MCC) refractory to prior anti-PD-1 blockade and (ii) cavrotolimod in combination with anti-PD-1 therapy for the treatment of patients with locally advanced or metastatic cutaneous squamous cell carcinoma (CSCC) refractory to prior anti-PD-(L)1 blockade.

In March 2021, we announced that the FDA has granted Orphan Drug Designation for cavrotolimod (AST-008) for the treatment of patients with MCC.

As of February 23, 2022, we have dosed 38 patients with 32 mg of cavrotolimod (AST-008) in the Phase 2 portion of the clinical trial, including the primary and exploratory cohorts.

As of February 23, 2022, five of the 38 patients dosed with 32 mg of cavrotolimod (AST-008) in the Phase 2 portion of the clinical trial have experienced serious adverse events, or SAEs, assessed as related to cavrotolimod by clinical trial investigators.

The treatment-related SAEs experienced by these five patients were flu-like symptoms (n=6), hypotension (n=2), and injection site reaction (n=2).

No SAEs were reported in the Phase 1b portion of the clinical trial.

Phase 1b/2 clinical development of cavrotolimod (AST-008)

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We have completed the enrollment of the Phase 1b stage of the clinical trial.

The 20 patients from the Phase 1b stage included those with advanced or metastatic Merkel cell carcinoma, or MCC, head and neck squamous cell carcinoma,

cutaneous squamous cell carcinoma, or CSCC, melanoma and leiomyosarcoma.

The 20 patients from the Phase 1b stage included those with advanced or metastatic Merkel cell carcinoma, or MCC, head and neck squamous cell carcinoma, or CSCC, melanoma and leiomyosarcoma.

At the time of enrollment, 85% of patients were experiencing progressive disease despite treatment with PD-1 blockade and 65% of patients had been treated with 2 or more lines of systemic therapy.

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the most common adverse events were flu-like symptoms and injection site reactions, which we believe reflects local and systemic immune activation and are commonly expected effects from TLR9 activation;

• Confirmed overall response rate, or ORR, of 21% (4/19 evaluable patients) in the Phase 1b dose-escalation stage across all doses, with 1 complete response and 3 partial responses;

• Confirmed ORR of 21% (4/19 evaluable patients) in the Phase 1b dose-escalation stage across all doses, with 1 complete response and 3 partial responses;

• Confirmed ORR 33% (2/6 patients) in the highest dose cohort (32 mg), which was selected as the Phase 2 recommended dose;

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Uninjected tumors also showed increased immune cell levels after patients received cavrotolimod (AST-008) plus pembrolizumab;

• Dose-dependent activation of key immune cells, including cytotoxic T cells and natural killer cells, as well as increases in cytokine/chemokine levels in patient blood after cavrotolimod (AST-008) treatment alone, and cavrotolimod (AST-008) plus pembrolizumab treatment;

• Dose-dependent activation of key immune cells, including cytotoxic T cells and NK cells, as well as increases in cytokine/chemokine levels in patient blood after cavrotolimod (AST-008) treatment alone, and cavrotolimod (AST-008) plus pembrolizumab treatment;

• The cavrotolimod pharmacodynamic profile corroborated the efficacy data, as increased serum cytokines/chemokines, activated immune cells, and tumor infiltration by immune cells were observed.

Phase 1 clinical development of cavrotolimod (AST-008)

The Phase 1 clinical trial was a first-in-human clinical trial of cavrotolimod (AST-008) evaluating the safety, tolerability, pharmacokinetics, and pharmacodynamics of cavrotolimod (AST-008) in healthy volunteers.

The trial was a randomized, single ascending dose, or SAD, trial.

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We began subject dosing in the fourth quarter of 2017 and announced our initial analyses of the results of the trial on September 20, 2018.

Based on our initial analyses of the Phase 1 clinical trial results, cavrotolimod (AST-008) was shown to be safe and tolerable in all subjects, with no serious adverse events and no dose limiting toxicity.

Cavrotolimod (AST-008) was well tolerated and all cavrotolimod (AST-008)-related adverse events were of short duration, reversible and consistent with TLR9 activation.

Such adverse events included flu-like symptoms, injections site reactions, and non-clinically significant lymphopenia and neutropenia.

Based on our initial analyses of the Phase 1 clinical trial results, cavrotolimod (AST-008) was shown to be safe and tolerable in all subjects, with no SAEs and no dose limiting toxicity.

Cavrotolimod (AST-008) was well tolerated and all cavrotolimod (AST-008)-related AEs were of short duration, reversible and consistent with TLR9 activation.

Such AEs included flu-like symptoms, injections site reactions, and non-clinically significant lymphopenia and neutropenia.

In addition to the principal safety and tolerability endpoint, the trial screened for levels of select cytokines and markers of immune cell activation.

Cavrotolimod (AST-008) was shown to elicit high levels of certain cytokines as well as activate important effector cells of the immune system including T cells and natural killer cells.

Cavrotolimod (AST-008) was shown to elicit high levels of certain cytokines as well as activate important effector cells of the immune system including T cells and NK cells.

For the four subjects receiving the trial’s top dose of about 20 µg/kg of cavrotolimod (AST-008), initial analyses suggest that the average fold-increase above baseline for these cytokines is approximately as follows:

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MCP-1, or CCL2, is a small cytokine which helps recruiting monocytes, memory T cells, and dendritic cells.

In addition to the cytokine response, cavrotolimod (AST-008) was shown to activate important effector cells of the immune system, including natural killer cells or NK cells which are cytotoxic lymphocytes critical to the innate immune system, and T cells which are key effector cells of the adaptive immune system.

In addition to the cytokine response, cavrotolimod (AST-008) was shown to activate important effector cells of the immune system, including NK cells which are cytotoxic lymphocytes critical to the innate immune system, and T cells which are key effector cells of the adaptive immune system.

At the trial’s top dose of about 20 µg/kg, cavrotolimod (AST-008) elicited 9.5 fold and 3.5 fold increases in the fraction of activated T cells and natural killer cells, respectively, compared to baseline.

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We believe that activation by cavrotolimod (AST-008) of the key effectors cells of both the innate and adaptive immune system makes cavrotolimod (AST-008) suitable for combination with checkpoint inhibitors.

XCUR17 is an SNA that targets the mRNA that encodes interleukin 17 receptor alpha, or IL-17RA, a protein that is considered essential in the initiation and maintenance of psoriasis.

Although the availability of inhibitors of TNF revolutionized the systemic treatment of severe psoriasis, studies of disease pathogenesis have shifted attention to the IL-17 pathway in which IL-17RA is a key driver of psoriasis.

Our strategy is to reduce the levels of IL-17RA in the skin by topically applying XCUR17.

In the fourth quarter of 2018, we reported results from our Phase 1 clinical trial of XCUR17.

Of the 21 treated patients, we observed that the 11 patients treated with the highest strength of XCUR17 gel had a reduction in redness and improvement in healing as determined by blinded physician assessments.

We also observed no adverse safety events and no relevant changes in mean psoriatic infiltrate thickness related to treatment with XCUR17.

In October 2019, at the 15th Annual Meeting of the Oligonucleotide Therapeutics Society, we disclosed biomarker results from the skin biopsies collected from the 21 patients treated in the Phase 1 clinical trial.

Clinical observations in this Phase 1 trial correlated with psoriasis-related markers and histological changes from biopsies provided by the patients.

In this trial, we observed clinically that XCUR17 had:

• Resulted in a decrease in the levels of psoriasis and inflammation markers downstream of its target, IL-17RA;

• Produced a statistically significant reduction in keratin 16 expression, a key marker of psoriasis (p=0.002);

• Resulted in reductions in the major inflammatory markers beta defensin 4A, interleukin 19, and interleukin 36A versus psoriatic skin at baseline;

• Revealed clinical improvements that matched reductions in keratin 16 protein and epidermal thickness.

We believe these findings suggest that SNA-based drugs, such as XCUR17, may address clinical symptoms in patients with inflammatory diseases, such as psoriasis.

We currently are not conducting additional clinical activities for XCUR17 and we seek to out-license the XCUR17 program.

Preclinical research programs

In addition to our named pipeline programs, a variety of early stage research efforts are ongoing in areas we believe will best leverage the properties of the SNA.

Potential applications of the SNA include those in neurology, ophthalmology, pulmonology, and the gastroenterology.

Ophthalmology

Ophthalmic therapies, such as antibodies, peptides or aptamers, are typically injected into the eye to reach their target tissues and achieve therapeutic effects.

We believe that the penetration properties of the SNA may result in the delivery of therapeutically relevant concentrations of oligonucleotides to certain tissues in the eye.

We have observed in preclinical studies the delivery of SNAs into the eye either through eyedrops or intravitreal injections.

We believe that the eye may be an attractive organ for locally-applied SNAs because (i) it is a small and immune-privileged organ, (ii) there are established and non-invasive clinical assessment procedures, and (iii) effective trials can be designed by using a contralateral control eye.

We believe that our preclinical data using SNA technology may provide proof-of-concept for expansion of our research and development activities into ophthalmological genetic disorders.

Our preclinical data indicated that SNAs distributed to both posterior (retinal) and anterior (cornea) ocular structures, exhibited higher distribution and persisted longer compared to linear oligonucleotides, and did not cause inflammation in the eye.

In one study, to assess penetration into the eye, Dutch belted rabbits were given either eyedrops containing no SNAs, referred to as vehicle, or an SNA in a formulation targeting an ocular gene of interest.

The eyedrops were administered to the animals 18 times over the course of five days.

On the fifth day, the rabbit eyes were analyzed for SNA content.

The results indicate that SNAs were detected in tissues at the surface of the eye, where the application occurred, but also in the retina and vitreous humor, indicating that the SNA had penetrated into the eye.

We believe SNAs may possess key potential advantages over gene therapy in the eye.

These key potential advantages include:

(i) delivery via intravitreal injections which are safer and easier than subretinal injections, (ii) tunable and reversible control of target expression, and (iii) the ability to treat toxic gain-of-function diseases and target large genes.

We believe, based on our internal analysis, that there are approximately 250 rare ophthalmological diseases with known genetic targets, such as CLN3 for Batten disease, BEST1 for vitelliform macular dystrophy, and USH2A for usher syndrome type 2A.

As such, we intend to continue to evaluate expansion of our preclinical research and development activities in ophthalmology.

Gastroenterology

A variety of gastrointestinal disorders, including ulcerative colitis and Crohn’s disease, collectively referred to as irritable bowel disease, or IBD, are inadequately treated with existing therapies such as immunosuppressive steroids and anti-TNF antibodies.

We believe that orally applied SNAs may provide the opportunity to treat diseases such as IBD by taking advantage of the local tissue penetration of the SNA technology.

Accordingly, the effect of oral SNA treatment was assessed in an induced IBD mouse model.

After the induction of colitis, the mice were treated with anti-TNF SNAs on day 1, 2, 3 and 4, for a total four doses, at 200 or 1000 µg/dose/mouse by oral gavage.

Control mice were treated with vehicle only.

The mice were monitored for mortality and scored clinically for seven days.

On day 7, the surviving animals were sacrificed.

Gross pathology assessment was performed on the proximal colon.

Clinical scores for the mice during the course of the study were assigned by considering the body weight, stool consistency, bleeding and any abnormalities observed in fur coat and abdomen.

Gross pathology scores were assigned on the last day of study from the colons removed from the animals after euthanization.

Gross pathology

scores ranging from 0 to 5, indicating no abnormalities and multiple ulcers, respectively, were assigned based on the severity of the inflammation and ulceration in the colon.

The results showed statistically significant improvement in clinical score and gross pathology for animals treated with 1000 µg/dose of anti-TNF SNAs compared to those treated with vehicle only.

Overall, the results suggest that oral administration of SNA had a positive effect on disease symptoms as reflected by lower clinical and pathology scores.

Altering the immunological state of the lung has promising therapeutic implications for the treatment of allergic diseases, such as asthma.

In a preliminary assessment, we demonstrated an alteration of the immunological state both locally in the lung and systemically in mice after the inhalation of SNAs.

An intranasal dose of PBS or nebulized formulation of cavrotolimod (AST-008) was administered to mice at 7.5 mg/kg to assess the pharmacodynamic effects of SNA delivery to the lungs.

Four mice per group were used.

At 4, 10, 16, or 24 hours following administration, serum was collected from the animals and bronchoalveolar lavage, or BAL, was performed to produce fluid from the lung surface.

Finally, lung tissue was also collected from the animals.

The fluids and tissue were subjected to cytokine concentration analysis.

The results show that nebulized SNAs can produce a cytokine response in the lung tissue and BAL fluid, as well as systemically, as measured in the mouse serum.

We believe these results have implications for the potential treatment of allergic diseases of the lung.

Our Collaboration Programs

Ipsen Collaboration Agreement

On July 30, 2021, we entered into a Collaboration, Option and License Agreement with Ipsen, or Ipsen Collaboration Agreement.

Pursuant to the Ipsen Collaboration Agreement, we granted to Ipsen exclusive access and options to license SNA-based therapeutics arising from two collaboration programs related to the treatment of Huntington’s disease and Angelman syndrome (each, an “Ipsen Collaboration Program”), respectively.

Each such license (obtained in connection with the exercise of an Ipsen Option, as defined and discussed further below) would grant to Ipsen exclusive, royalty-bearing, sublicensable, worldwide rights to develop, manufacture, use and commercialize such SNA therapeutics.

Under the terms of the Ipsen Collaboration Agreement, we received an upfront payment of $20 million, or the Ipsen Upfront Payment, and, if Ipsen exercises any of its option rights under the agreement, Ipsen will pay us an option exercise fee equal to $10 million for each such option if exercised during the first option period, or $25 million for each such option if exercised during the second option exercise period.

Ipsen will also pay a pre-clinical milestone payment of $5 million for each Ipsen Collaboration Program upon achievement of such milestone regardless of whether an option is exercised.

If Ipsen exercises an option for a program, we are eligible to receive up to an aggregate of $180 million for development and regulatory milestone payments and $762 million for product approval and sales milestone payments associated with aggregate worldwide sales.

In the event a therapeutic candidate subject to the collaboration results in commercial sales, we are eligible to receive tiered royalties at percentages ranging from the mid-single digits to the mid-teens on future net product sales of such commercialized therapeutic candidates.

A percentage of the aforementioned payments will be due to Northwestern, upon receipt, pursuant to our existing license agreements with Northwestern.

AbbVie Collaboration Agreement

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Under each such license, we grant to AbbVie exclusive, royalty-bearing, sublicenseable, nontransferable, worldwide rights to develop, manufacture, use and commercialize such SNA therapeutics.

Under the terms of the AbbVie Collaboration Agreement, we received an upfront payment of $25 million, and, if AbbVie exercises any of its option rights under the agreement, AbbVie will pay us an option exercise fee equal to $10 million for each exercised option, if such option is exercised during the initial option exercise period.

$10 million for each exercised option, if such option is exercised during the initial option exercise period.

AbbVie may extend an option exercise period beyond the applicable initial exercise period for a particular program for an additional fee.

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A percentage of the aforementioned payments will be due to Northwestern University, or Northwestern, upon receipt, pursuant to our existing license agreements with Northwestern.

Dermelix Collaboration Agreement

On February 17, 2019, we entered into a License and Development Agreement, or the Dermelix License Agreement, with DERMELIX, LLC, d/b/a Dermelix Biotherapeutics.

Under the terms of agreement, Dermelix licensed worldwide rights to research, develop, and commercialize Exicure’s technology for the treatment of Netherton Syndrome, or NS, and, at Dermelix’s option, up to five additional rare skin indications.

Dermelix will initially develop a targeted therapy for the treatment of NS.

NS is a rare and severe autosomal

recessive disorder caused by loss-of-function mutations in the SPINK5 gene, which encodes the serine protease inhibitor LEKTI involved in skin barrier function.

NS affects approximately one in 200,000 children born each year, and is characterized by severely inflamed, red, scaled, itchy skin, and patients are at increased risk of mortality in the first year of life due to recurrent infections and dehydration as a result of the impaired skin barrier.

Currently, there are no approved treatments for NS patients and off-label use of standard of care treatments are of limited utility.

Under the terms of the Dermelix License Agreement, Exicure received an upfront payment of $1 million at closing of the transaction and is eligible to receive up to an additional $1 million upon the exercise of each of the five options granted to Dermelix.

Exicure will be responsible for conducting the early-stage development for each indication up to IND enabling toxicology studies.

Dermelix will assume subsequent development, commercial activities and financial responsibility for such indications.

Dermelix will pay the costs and expenses of development and commercialization of any licensed products under the Dermelix License Agreement, including our expenses incurred in connection with development activities and in accordance with the development budget.

For each of NS as well as any additional licensed product for which Dermelix exercises one of its options, Exicure is eligible to receive potential payments totaling up to $13.5 million upon achievement of certain development and regulatory milestones and up to $152.5 million upon achievement of certain sales milestones per indication in each of six indications.

In addition, Exicure will receive low double-digit royalties on annual net sales for SNA therapeutics developed.

Purdue Collaboration Agreement

AST-005 is an SNA targeting TNF for the treatment of mild to moderate psoriasis.

In a completed Phase 1 clinical trial, AST-005, when topically administered, resulted in no drug associated adverse events, and demonstrated a reduction of TNF mRNA.

The TNF mRNA reduction elicited by the highest strength of AST-005 gel was statistically significant when compared to the effects of the vehicle.

In 2016, we entered into a research collaboration, option and license agreement with Purdue Pharma L.P., under which a Phase 1b clinical trial evaluated the effect of AST-005 gel in patients with chronic plaque psoriasis.

The trial demonstrated that AST-005 is safe and tolerable in patients at higher doses than previously studied, but did not result in a statistically significant decrease in echo lucent band thickness, one of the key indicators of efficacy.

In 2018, Purdue declined to exercise its option to develop AST-005 at that time, but indicated its intent to retain rights relating to the TNF target and reserved its right to continue joint development, with Exicure, of new anti-TNF drug candidates and to retain its exclusivity and other rights in AST-005.

In 2019, Purdue, while re-asserting its right to develop new anti-TNF therapeutic candidates, indicated it will not select any collaboration targets.

As a result, we will not receive any research, regulatory and commercial sales milestones contingent upon successful development of such collaboration targets.

At this time, there are no active development activities underway for a new anti-TNF therapeutic candidate.

As a consequence, we also believe that it is highly unlikely that we will receive any research, regulatory and commercial sales milestones from Purdue for any anti-TNF therapeutic candidates.

A percentage of the aforementioned payments will be due to Northwestern upon receipt, pursuant to our existing license agreements with Northwestern.

Our Intellectual Property

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Our commercial success depends in part on our ability to obtain and maintain proprietary protection for our therapeutic candidates, manufacturing and process discoveries and other know-how, to operate without infringing the proprietary rights of others, and to prevent others from infringing on our proprietary rights.

We have been building and continue to build our intellectual property portfolio relating to cavrotolimod (AST-008), XCUR-FXN, XCUR17, and AST-005 therapeutic candidates and our SNA technology platform.

We have been building and continue to build our intellectual property portfolio relating to our current and future therapeutic candidates and our SNA technology platform.

Our policy is to seek to protect our proprietary position by, among other methods, filing and licensing U.S.

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We also intend to rely on trade secrets, know-how, and technological innovation to develop and maintain our proprietary position.

We cannot be sure that patents will be granted with respect to any of

our owned or licensed pending patent applications or with respect to any patent applications filed or licensed by us in the future, nor can we be sure that any of our existing owned or licensed patents or any patents that may be granted or licensed to us in the future will be commercially useful in protecting our technology.

We cannot be sure that patents will be granted with respect to any of our owned or licensed pending patent applications or with respect to any patent applications filed or licensed by us in the future, nor can we be sure that any of our existing owned or licensed patents or any patents that may be granted or licensed to us in the future will be commercially useful in protecting our technology.

Patent Rights

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Our general practice is to seek patent protection in major markets worldwide, including the U.S., Canada, China, Japan, Australia, certain members of the European Union, among others.

Majority of the issued patents and allowed patent applications are licensed from Northwestern University.

Among the pending patent applications, we license 29 from NU, we exclusively own 73, we jointly own 2 with Dermelix, and we jointly own 8 with Northwestern University.

Our license from Northwestern University is for royalty bearing worldwide exclusive rights to the use of SNAs for therapeutic applications.

Majority of the issued patents and allowed patent applications are licensed from Northwestern.

Among the pending patent applications, we license 22 from Northwestern, we exclusively own 77, we jointly own 1 with Seven Score Pharmaceuticals, LLC (which was assigned from Dermelix), and we jointly own 5 with Northwestern.

Our license from Northwestern is for royalty bearing worldwide exclusive rights to the use of SNAs for therapeutic applications.

Pursuant to the license, we are allowed to manufacture, use, offer for sale, sell and import products covered by the licensed patent rights.

Our SCN9A patent portfolio includes two provisional applications in the United States relating to modified oligonucleotides that reduce SCN9A mRNA and NaV1.7 channel activity in cells.

The application broadly describes oligonucleotides that span select lengths of the SCN9A mRNA where we observed high target knockdown, and the use of such compounds to treat a wide range of pain conditions and related symptomology.

Any patents that may issue from this application would expire by 2042.

The expiration date does not take into consideration any potential patent term adjustment that may be applied by the U.S.

Patent Office upon issuance of the patent, any terminal disclaimers that may be filed in the future or any regulatory extensions that may be obtained.

Our cavrotolimod (AST-008) patent portfolio includes 37 issued and 31 pending U.S.

nonprovisional and foreign patent applications.

Foreign jurisdictions where we are seeking patent protection for our cavrotolimod (AST-008) patent portfolio include Canada, China, Japan, Australia, the European Union, India, South Korea and Mexico.

Each of these applications is a composition of matter and method of use type application.

The claims of these applications are directed to certain nanoscale constructs, liposomal particles, and multivalent nanostructures, and their methods of use for treating cancer and other disorders.

Foreign jurisdictions where we are seeking patent protection for our cavrotolimod (AST-008) patent portfolio include Canada, China, Japan, Australia, the European Union, India, South Korea and

Each of these applications is a composition of matter and/or method of use type application.

The claims of these applications are directed to certain nanoscale constructs, liposomal particles, and multivalent nanostructures, and their methods of use for treating cancer and other disorders, with or without additional therapeutic agents such as checkpoint inhibitors.

Any patents that may issue from these applications would expire between 2034 and 2040.

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Patent Office upon issuance of the patent, any terminal disclaimers that may be filed in the future or any regulatory extensions that may be obtained.

We have discontinued further enrollment of the ongoing Phase1b/2 clinical trial of cavrotolimod (AST-008) in patients with solid tumors.

As a result, we may elect to abandon or let lapse some or all of these patents and applications.

Our XCUR-FXN patent portfolio includes one pending U.S.

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Patent Office upon issuance of the patent, any terminal disclaimers that may be filed in the future or any regulatory extensions that may be obtained.

Our XCUR17 patent portfolio includes four issued and eleven pending U.S.

As of December 31, 2021, we have indefinitely suspended further development of XCUR-FXN program for the treatment of Friedreich’s ataxia.

As a result, we are unlikely to pursue this application further and may elect to abandon it.

Our XCUR17 patent portfolio includes four issued and ten pending U.S.

nonprovisional and foreign patent applications.

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Patent Office upon issuance of the patent, any terminal disclaimers that may be filed in the future or any regulatory extensions that may be obtained.

As of December 31, 2021, we are no longer actively developing XCUR17 and may elect not to pursue these patents further.

Our AST-005 patent portfolio includes three issued and seven pending U.S.

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Patent Office upon issuance of the patent, any terminal disclaimers that may be filed in the future or any regulatory extensions that may be obtained.

Upon receiving FDA approval for cavrotolimod (AST-008), XCUR-FXN, XCUR17, or AST-005, we intend to list applicable patents in the FDA’s Orange Book.

As of December 31, 2021, neither we nor any of our collaborators are actively developing AST-005 and may elect to abandon these patents.

Upon receiving FDA approval for SCN9A, cavrotolimod (AST-008), XCUR17, or AST-005, we intend to list applicable patents in the FDA’s Orange Book.

Patent life determination depends on the date of filing of the application and other factors as promulgated under the patent laws.

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Trade Secret and Other Protection

In addition to patented intellectual property, we also rely on trade secrets and proprietary know-how to protect our technology, especially when we do not believe that patent protection is appropriate or can be obtained.

In addition to patented intellectual property, we may also rely on trade secrets and proprietary know-how to protect our technology, especially when we do not believe that patent protection is appropriate or can be obtained.

It is our policy to require our employees and consultants, outside scientific collaborators, sponsored researchers and other advisors who receive confidential information from us to execute confidentiality agreements upon the commencement of employment or consulting relationships.

These agreements provide that all confidential information developed or made known to these individuals during the course of the individual’s relationship with the company is to be kept confidential and is not to be disclosed to third parties except in specific circumstances.

The agreements provide that all inventions conceived by an employee shall be the property of our Company.

The agreements also provide that all inventions conceived by an employee shall be the property of the Company.

There can be no assurance, however, that these agreements will provide meaningful protection or adequate remedies for our trade secrets in the event of unauthorized use or disclosure of such information.

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We have filed for trademark protection for the following marks:

LIFE HAPPENS IN 3D, LIFE IN 3D, and EXICURE.

EXICURE and Exicure logo.

We currently have one registered trademark, EXICURE.

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Northwestern University License Agreements

In September 2009, Northwestern University and AuraSense LLC, or ASLLC, our former parent, entered into a license agreement under which Northwestern University granted ASLLC an exclusive, worldwide license under certain Northwestern University patents and patent applications to exploit products and processes in the field of the use of nanoparticles, nanotechnology, microtechnology or nanomaterial-based constructs as or accompanying therapeutics or theradiagonostics and in or for intracellular diagnostic applications and intracellular research.

On December 12, 2011, ASLLC assigned to us all of its worldwide rights and interests under the Northwestern University-ASLLC license in the field of the use of nanoparticles, nanotechnology, microtechnology or nanomaterial-based constructs as therapeutics or accompanying therapeutics as a means of delivery, but expressly excluding diagnostics, or assigned field.

In accordance with the terms and conditions of this assignment, we assumed all liabilities and obligations of ASLLC to Northwestern University as set forth Northwestern University its license agreement in the assigned field and in August 2015 we entered into a restated license agreement with Northwestern University, or Restated License Agreement.

In February 2016, we obtained exclusive license as to Northwestern University’s rights in certain SNA technology we jointly own with Northwestern University, or Co-owned Technology License.

The Company’s license to Northwestern University’s rights is limited to the assigned field, however we have no such limitation as to our own rights in this jointly owned technology.

In June 2016, we entered into an exclusive license with Northwestern University to obtain worldwide rights to certain inhibitors of glucosylceramide synthase and their use in wound healing in diabetes, or Wound Healing License.

Our rights and obligations in the Co-owned Technology License and the Wound Healing License agreements are substantially the same as in the Restated License Agreement from August 2015, or collectively referred to as the Northwestern University License Agreements.

As of December 31, 2019, all pending patent applications under the Wound Healing License have been abandoned.

For purposes of the assigned field, therapeutic uses means the use of products and processes that are covered by the patents and patent applications licensed from Northwestern University for the purpose of providing a therapy or course of medical treatment to address a medical condition or disease.

The Northwestern University License Agreements provide to us the exclusive, worldwide right to make, have made, use, modify, sell, offer for sale and import any product or process that is covered by any claim in the licensed Northwestern University patents and patent applications.

In September 2009, Northwestern and AuraSense LLC, or ASLLC, our former parent, entered into a license agreement, or the Northwestern University License Agreement, under which Northwestern granted ASLLC an exclusive, worldwide license under certain Northwestern patents and patent applications to exploit products and processes in the field of the use of nanoparticles, nanotechnology, microtechnology or nanomaterial-based constructs as or accompanying therapeutics or theradiagonostics and in or for intracellular diagnostic applications and intracellular research.

On December 12, 2011, ASLLC assigned to us all of its worldwide rights and interests under the Northwestern ASLLC license in the field of the use of nanoparticles, nanotechnology, microtechnology or nanomaterial-based constructs as therapeutics or accompanying therapeutics as a means of delivery, but expressly excluding diagnostics, or assigned field.

For purposes of the assigned field, therapeutic uses means the use of products and processes that are covered by the patents and patent applications licensed from Northwestern for the purpose of providing a therapy or course of medical treatment to address a medical condition or disease.

In accordance with the terms and conditions of this assignment, we assumed all liabilities and obligations of ASLLC to Northwestern as set forth in its license agreement in the assigned field and in August 2015 we entered into a restated license agreement with Northwestern, or Restated License Agreement.

In February 2016, we obtained exclusive license as to Northwestern’s rights in certain SNA technology we jointly own with Northwestern, or Co-owned Technology License.

The Company’s license to Northwestern’s rights is limited to the assigned field, however we have no such limitation as to our own rights in this jointly owned technology.

We have the right to sublicense these rights to third parties.

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Second, the license specifically prohibits us from using the licensed patent rights with regard to diagnostics, including without limitation, theradiagnostics.

Third, though the license is otherwise exclusive in the assigned field, Northwestern University retains the right to use the licensed patent rights for research, teaching, and other educational purposes, including the right to distribute and publish materials related to the licensed patent rights.

Third, though the license is otherwise exclusive in the assigned field, Northwestern retains the right to use the licensed patent rights for research, teaching, and other educational purposes, including the right to distribute and publish materials related to the licensed patent rights.

Fourth, the license is subject to the rights of the U.S.

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unless such requirement is waived by the U.S.

Fifth, other than in certain circumstances, the Northwestern University License Agreements are non-transferable without the consent of Northwestern University.

Under the terms of the Northwestern University License Agreements, depending on the circumstances, either we or Northwestern University can sue to enforce the patent rights against third party infringers.

In order to secure the assignment of the Northwestern University-ASLLC license in the field, we assumed the obligation to pay Northwestern University an annual license fee, which may be credited against any royalties based on sales of licensed products that are due to Northwestern University in the same year, and to reimburse Northwestern University for expenses associated with the prosecution and maintenance of the licensed patent rights.

In addition, we assumed the obligation to pay Northwestern University royalties at a low single-digit percentage of any net revenue generated by our sale or transfer of any licensed product.

In the event we grant a sublicense under the licensed patent rights, we also assumed the obligation to pay Northwestern University, on a quarterly basis, a percentage of all sublicense payments we receive, and the greater of a mid-teen percentage of all sublicensee royalties or a low single-digit percent of any net revenue generated by a sublicensee’s sale or transfer of any licensed product.

We may terminate the Northwestern University License Agreements at any time by providing 90 days written notice to Northwestern University.

Northwestern University may terminate the agreements or, alternatively, convert our exclusive rights to non-exclusive rights if we fail to comply with certain prescribed timelines for research, development, marketing and manufacturing milestones for the licensed products.

Northwestern University may also terminate the agreements if we sue, or do not terminate all agreements with a sublicensee who sues Northwestern University, in a matter not arising from the agreements themselves.

Fifth, other than in certain circumstances, the Northwestern University License Agreements are non-transferable without the consent of Northwestern.

Under the terms of the Northwestern University License Agreements, depending on the circumstances, either we or Northwestern can sue to enforce the patent rights against third party infringers.

In order to secure the assignment of the Northwestern ASLLC license in the field, we assumed the obligation to pay Northwestern an annual license fee, which may be credited against any royalties based on sales of licensed products that are due to Northwestern in the same year, and to reimburse Northwestern for expenses associated with the prosecution and maintenance of the licensed patent rights.

In addition, we assumed the obligation to pay Northwestern royalties at a low single-digit percentage of any net revenue generated by our sale or transfer of any licensed product.

In the event we grant a sublicense under the licensed patent rights, we also assumed the obligation to pay Northwestern, on a quarterly basis, a percentage of all sublicense payments we receive, and the greater of a

mid-teen percentage of all sublicensee royalties or a low single-digit percent of any net revenue generated by a sublicensee’s sale or transfer of any licensed product.

We may terminate the Northwestern University License Agreements at any time by providing 90 days written notice to Northwestern.

Northwestern may terminate the agreements or, alternatively, convert our exclusive rights to non-exclusive rights if we fail to comply with certain prescribed timelines for research, development, marketing and manufacturing milestones for the licensed products.

Northwestern may also terminate the agreements if we sue, or do not terminate all agreements with a sublicensee who sues Northwestern, in a matter not arising from the agreements themselves.

Either party may terminate the agreements in the event of a material breach by the other that remains uncured for a period of 30 days after the non-breaching party provides notice to the breaching party.

The agreements will automatically terminate if we reach specified thresholds of financial distress.

In the event of termination, all rights immediately revert to Northwestern University.

In the event of termination, all rights immediately revert to Northwestern.

The agreements will automatically expire upon the expiration of the last to expire patent rights.

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There can be no assurance that an issued patent will remain valid and enforceable in a court of law through the entire patent term.

Should the validity of a patent be challenged, the legal process associated with defending the

patent can be costly and time consuming.

Should the validity of a patent be challenged, the legal process associated with defending the patent can be costly and time consuming.

Issued patents can be subject to oppositions, interferences and other third party challenges that can result in the revocation of the patent or limit patent claims such that patent coverage lacks sufficient breadth to protect subject matter that is commercially relevant.

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Others may independently develop substantially equivalent confidential and proprietary information or otherwise gain access to our trade secrets.

commencement of employment or consulting relationships.

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We do not currently own or operate manufacturing facilities for the production of preclinical, clinical or commercial quantities of any of our therapeutic candidates.

We currently contract with two therapeutic substance and two drug product manufacturers for the supply of SNAs and we expect to continue to do so to meet the preclinical and any clinical requirements of our therapeutic candidates.

We do not have a long-term agreement with these third parties.

We currently contract with two therapeutic substance and two drug product manufacturers for the supply of SNAs and we expect to continue to do so to meet our preclinical supply needs and any future clinical requirements of our therapeutic candidates.

We do not have long-term agreements with any of these third parties.

We have agreements for the supply of such therapeutic materials with manufacturers or suppliers that we believe have sufficient capacity to meet our demands.

In addition, we believe that adequate alternative sources for such supplies exist.

We have observed minor delays in receipt of key chemicals, reagents and materials as certain manufacturers have had supply disruptions related to the COVID-19 pandemic.

However, there is a risk that, if supplies are interrupted, it would materially harm our business.

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cGMPs are regulatory requirements for the production of therapeutics that will be used in humans.

We believe that our scientific knowledge and expertise in SNA-based therapies provide us with competitive advantages over the various companies and other entities that are attempting to develop oligonucleotide based-therapeutics.

We believe that our scientific knowledge, facilities, and expertise in oligonucleotide chemistry and SNA-based therapies provide us with competitive advantages over the various companies and other entities that are attempting to develop oligonucleotide based-therapeutics.

However, we face competition at the technology and therapeutic indication levels from both large and small biotechnology companies, academic institutions, government agencies and public and private research institutions.

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We are aware of several companies that are developing oligonucleotide delivery platforms and oligonucleotide based therapeutics.

These competitors include Ionis Pharmaceuticals, Inc., Alnylam Pharmaceuticals, Inc., Dicerna Pharmaceuticals, Inc., Arbutus Biopharma Corp., Wave Life Sciences Ltd., Arrowhead Pharmaceuticals, Inc., ProQR Therapeutics N.V., Stoke Therapeutics, Inc., Neubase Therapeutics, Inc., Idera Pharmaceuticals, Inc., Avidity Biosciences, Checkmate Pharmaceuticals, Inc., Dyne Therapeutics, Inc., Atalanta Therapeutics, Inc., and others.

These and other competitors compete with us in recruiting scientific and managerial talent, and for the finite funding available from biotechnology and pharmaceutical companies.

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If our lead therapeutic candidates are approved for the indications for which we undertake clinical trials, they will compete with therapies that are either in development or currently marketed, such as the following:

Competition in immuno-oncology

In oncology, we face significant competition from pharmaceutical and biotechnology companies as well as universities and private and public research institutions.

For application in conjunction with immune checkpoint inhibitors, there are several immuno-oncology competitors to cavrotolimod both in development and on the market.

Cavroltolimod, a TLR9 agonist, is among several other agents in this class being studied in clinical trials for different tumor types, including melanoma and head and neck squamous cell carcinoma.

Currently, the checkpoint inhibitors avelumab and pembrolizumab are approved by the FDA for patients with advanced MCC and cemiplimab is approve for the treatment of advanced CSCC.

We are aware of many ongoing clinical trials where these and other checkpoint inhibitors are being tested in combination with experimental therapies to potentially treat MCC and CSCC, such as Replimune’s oncolytic virus-based RP1 which is in development for solid tumors, including melanoma and cutaneous squamous cell carcinoma, and experimental therapies by NantKWest, Kartos Therapeutics, 4SC, and others for potential treatment of MCC.

Furthermore, adoptive cell therapies such as CAR-T cells, that demonstrate efficacy for the treatment of B-cell malignancies, are being evaluated for solid tumors.

Competition in Friedreich’s ataxia

We consider the following therapeutics to be competitors and potential future competitors to XCUR-FXN for the treatment of Friedreich’s ataxia:

Therapeutic Company Description of therapeutic Development Phase

Omaveloxolone Reata Pharmaceuticals Synthetic triterpenoid that activates Nrf2 and restores mitochondial activity Registrational phase 2

Vatiquinone PTC Therapeutics Small molecule antioxidant that protects against oxidative stress-mediated cell death Registrational phase 3

CTI-1601 Larimar Therapeutics Recombinant human frataxin fusion protein Phase 1

Leriglitazone Minoryx Therapeutics Small molecule PPARγ that protects against mitochondrial dysfunction and oxidative stress Phase 2

Syn-TEF Design Therapeutics Synthetic transcription elongation factor Preclinical

In addition, there are ongoing programs and gene therapy approaches using adeno-associated virus (AAV) vectors that, if approved, may compete with XCUR-FXN for the treatment of FA.

Government Regulation and Product Approval

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The approval process and requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from place to place, and the time may be longer or shorter than that required for FDA approval.

The currently applicable Clinical Trials Directive 2001/20/EC and Commission Directive 2005/28/EC on GCP setting out the system for the approval of clinical trials in the European Union, or EU, have been implemented through national legislation in the EU Member States.

Under this system, an applicant must obtain approval from the national competent authorities in all EU Member States in which the clinical trials are to be conducted.

Furthermore, the applicant may only start a clinical trial at a specific study site once approved by the competent ethics committee.

In 2014, a new Clinical Trials Regulation 536/2014, replacing the current Clinical Trials Directive, was adopted.

The new Regulation will become directly applicable in all EU Member States (without national implementation) once the EU Portal and Database are fully functional.

Clinical Trials Regulation 536/2014 became directly applicable in all EU Member States (without national implementation) on January 31, 2022.

The new Regulation seeks to simplify and streamline the approval of clinical trials in the EU.

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The national procedure allows the applicant to choose the EU Member State in which they wish to first submit an application.

The mutual recognition procedure allows a marketing authorization granted in one EU Member State via the national procedure to be recognized in other EU Member States.

The mutual recognition procedure allows a marketing authorization granted in one EU Member State via the national procedure

to be recognized in other EU Member States.

The decentralized procedure allows a medicine that has not yet been authorized in the EU to be authorized in several EU Member States.

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Healthcare Reform

In March 2010, Congress passed the ACA, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of health spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry, and impose additional policy reforms.

In March 2010, Congress passed the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the ACA, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of health spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry, and impose additional policy reforms.

The ACA contains a number of provisions, including those governing enrollment in federal healthcare programs, reimbursement changes, and fraud and abuse, impacting existing government healthcare programs and resulting in the development of new programs, including Medicare payment for performance initiatives, and improvements to the physician quality reporting system and feedback program.

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Since its enactment, there have been judicial, administrative, executive and Congressional legislative challenges to certain aspects of the ACA.

On December 14, 2018, a Texas U.S.

District Court Judge ruled that the ACA is unconstitutional in its entirety because the “individual mandate,” or the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year, was repealed by Congress as part of the Tax Cuts and Jobs Act of 2017, or the Tax Act.

Additionally, on December 18, 2019, the U.S.

Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well.

Supreme Court is currently reviewing the case, although it is unknown when a decision will be made.

It is unclear how the Supreme Court ruling, other such litigation, and the healthcare reform measures of the Biden administration will impact the ACA.

For example, in 2017, the U.S.

Congress enacted the Tax Cuts and Jobs Act of 2017, or Tax Act, which eliminated the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” On June 17, 2021 the U.S.

Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress.

Thus, the ACA will remain in effect in its current form.

Further, prior to the U.S.

Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace.

The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA.

It is possible that the ACA will be subject to judicial or congressional challenges in the future.

Third-Party Payor Coverage and Reimbursement

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In order for a pharmaceutical product to (i) receive federal reimbursement under Medicaid and Medicare Part B (the part of the federal Medicare program covering outpatient items and services for the aged and disabled) or (ii) be sold directly to U.S.

government agencies, the manufacturer must extend discounts to entities eligible to participate in the 340B drug pricing program, which is a federal program that requires manufacturers to provide discounts to certain statutorily defined safety-net providers.

certain statutorily defined safety-net providers.

The required 340B discount on a given product is calculated based on certain Medicaid Drug Rebate Program metrics the manufacturer is required to report to CMS.

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In addition, companion diagnostic tests require coverage and reimbursement separate and apart from the coverage and reimbursement for their companion pharmaceutical or biological products.

Similar challenges to

obtaining coverage and reimbursement, applicable to pharmaceutical or biological products, will apply to companion diagnostics.

Similar challenges to obtaining coverage and reimbursement, applicable to pharmaceutical or biological products, will apply to companion diagnostics.

Additionally, if any companion diagnostic provider is unable to obtain reimbursement or is inadequately reimbursed, that may limit the availability of such companion diagnostic, which would negatively impact prescriptions for our product candidates, if approved.

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This includes aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, started in April 2013, and, due to subsequent legislative amendments, will stay in effect through 2031 with the exception of a temporary suspension from May 1, 2020 through March 31, 2022, unless additional Congressional action is taken.

Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 3% in the final fiscal year of this sequester.

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024.

On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, or the ATRA, which among other things, also reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers.

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For example, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that seek to implement several of the administration’s proposals.

As a result, the FDA released a final rule on September 24, 2020, effective November 30, 2020, providing guidance for states to build and submit importation plans for drugs from Canada.

Further, on November 20, 2020, the Department of Health and Human Services finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Medicare Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law.

The implementation of the rule has been delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation.

The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which have also been delayed pending review by the Biden administration until March 22, 2021.

As a result, the FDA released a final rule and guidance in September 2020, providing pathways for states to build and submit importation plans for drugs from Canada.

On November 20, 2020, CMS issued an interim final rule implementing the Trump administration’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021.

On December 28, 2020, the U.S.

District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule.

It is unclear whether the Biden administration will work to reverse these measures or pursue similar policy initiatives.

As a result of litigation challenging the Most Favored Nation model, on December 27, 2021, CMS published a final rule that rescinded the Most Favored Nation model interim final rule.

In July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs.

In response to Biden’s executive order, on September 9, 2021, the Department of Health and Human Services, or HHS, released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue to advance these principles.

No legislation or administrative actions have been finalized to implement these principles.

In addition, Congress is considering drug pricing as part of other reform initiatives.

It is also possible that additional governmental action is taken in response to the COVID-19 pandemic.

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The requirements governing therapeutic pricing vary widely from country to country.

For example, in the EU, pricing and reimbursement of pharmaceutical products are regulated at a national level under

the individual EU Member States’ social security systems.

Some foreign countries provide options to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use.

For example, in the EU, pricing and reimbursement of pharmaceutical products are regulated at a national level under the individual EU Member States’ social security systems.

Some foreign countries provide options to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control

the prices of medicinal products for human use.

A country may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market.

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We may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business.

HIPAA, as amended by HITECH, and its implementing regulations, including the final omnibus rule published on January 25, 2013, imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information.

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, including the final omnibus rule published on January 25, 2013, imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information.

Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates,” defined as independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity, and their covered subcontractors.

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We may also be subject to federal transparency laws, including the federal Physician Payment Sunshine Act, which was part of the ACA and requires manufacturers of certain drugs and biologics, among others, to track and disclose payments and other transfers of value they make to U.S.

physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors) and teaching hospitals, as well as physician ownership and investment interests held by physicians and their immediate family members in the manufacturer.

Effective January 1, 2022, these reporting obligations will extend to include transfers of value made in the previous year to certain non-physician providers, such as physician assistants and nurse practitioners.

physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors), other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, as well as physician ownership and investment interests held by physicians and their immediate family members in the manufacturer.

This information is subsequently made publicly available in a searchable format on a CMS website.

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Sales and Marketing

Our current focus is on the development of our existing portfolio, the initiation and completion of clinical trials and, if and where appropriate, the registration of our therapeutic candidates.

Our current focus is on the development of our existing portfolio.

We currently do not have marketing, sales and distribution capabilities.

If we receive marketing and commercialization approval for any of our

therapeutic candidates, we intend to market the product through strategic alliances and distribution agreements with third parties.

If we receive marketing and commercialization approval for any of our therapeutic candidates, we intend to market the product through strategic alliances and distribution agreements with third

The ultimate implementation of our strategy for realizing the financial value of our therapeutic candidates is dependent on the results of clinical trials for our therapeutic candidates, the availability of funds and the ability to negotiate acceptable commercial terms with third parties.

Human Capital Resources

As of December 31, 2020, we had 63 full time employees, of which 54 were engaged in research and development activities and 9 were engaged in finance, legal, human resources, business development and general management.

As of December 31, 2021, we had 47 full time employees, of which 37 were engaged in R&D activities and 10 were engaged in finance, legal, human resources, business development and general management.

In December 2021, we implemented a reduction in force of approximately 50% of our workforce.

We have no collective bargaining agreement with our employees and we have not experienced any work stoppages.

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To facilitate talent attraction and retention, we strive to make Exicure a safe and rewarding workplace, with opportunities for our employees to grow and develop in their careers, supported by strong compensation, benefits and health and wellness programs.

Our base pay program aims to compensate staff members relative to the value of the contributions of their role, which takes into account the skills, knowledge and abilities required to perform each position, as well as the experience brought to the job.

In addition to salaries, our compensation program includes potential annual discretionary bonuses, equity awards under our equity incentive program, a 401(k) Plan with matching contributions, an employee stock purchase plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off to include time for volunteer activities, family leave, flexible work schedules, among others.

We also use targeted equity-based grants with vesting conditions to facilitate retention of personnel, particularly those with critical skills and experience.

Our base pay program aims to compensate staff members at market levels and relative to the value of the contributions of their role, which takes into account the skills, knowledge and abilities required to perform each position, as well as the experience brought to the job.

In addition to salaries, our compensation program includes potential annual discretionary bonuses, equity awards under our equity incentive program, a 401(k) Plan with matching contributions, an employee stock purchase plan, healthcare and insurance benefits, health savings and flexible spending accounts, and flexible paid time off to allow our employees to balance their obligations both professionally and personally.

We use targeted equity-based grants with vesting conditions to facilitate retention of personnel, particularly those with critical skills and experience.

Potential annual discretionary bonuses are pursuant to our annual incentive programs to reward eligible staff in alignment with achievement of Company-wide goals that are established annually and designed to drive aspects of our strategic priorities that support and advance our strategy across our Company.

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All full-time staff members are eligible to participate in the same core health and welfare and retirement savings plans.

For individuals that were impacted in our December 2021 reduction in force, we supported them with market-based severance, COBRA subsidy and outplacement assistance.

For individuals that were retained in the restructuring, we have provided them with additional, market-level incentives to stay with us and facilitate business continuity.

Our Compensation Committee provides oversight over our compensation strategy including review of our plans, policies, and programs.

In response to the evolving COVID-19 pandemic and related public health directives, orders and guidance, and to ensure the safety and wellbeing of our employees, we have implemented work-from-home policies to support the community efforts to reduce the transmission of COVID-19 and protect employees, complying with guidance from federal, state/provincial or municipal government and health authorities.