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What changed in Tarsus Pharmaceuticals, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Tarsus Pharmaceuticals, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+862 added−779 removedSource: 10-K (2024-02-27) vs 10-K (2023-03-17)

Top changes in Tarsus Pharmaceuticals, Inc.'s 2023 10-K

862 paragraphs added · 779 removed · 590 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

200 edited+65 added−39 removed183 unchanged
Biggest changeMoreover, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act; • the federal civil False Claims Act, which imposes civil penalties, sometimes pursued through civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, claims for payment of government funds that are false or fraudulent or making a false statement material to an obligation to pay money to the government or knowingly concealing or knowingly and improperly avoiding, decreasing, or concealing an obligation to pay money to the federal government; • the federal Health Insurance Portability and Accountability Act ("HIPAA"), which imposes criminal liability for, among other things, knowingly and willfully executing or attempting to execute a scheme to defraud any healthcare benefit program, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense, or knowingly and willfully making false statements relating to healthcare matters; • HIPAA and its implementing regulations, also imposes obligations, on certain covered entity health care providers, health plans and health care clearinghouses as well as their business associates that perform certain services involving the use or disclosure of individually identifiable health information, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; • federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; • the FDCA, which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical devices, including off-label or pre-approval promotion; • the federal Physician Payments Sunshine Act, which requires applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to annually report to Centers for Medicare & Medicaid Services ("CMS") information regarding direct or indirect payments and other transfers of value to physicians and teaching hospitals (and certain other practitioners as of 2022), as well as information regarding ownership and investment interests held by physicians and their immediate family members; and • analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non- governmental third-party payers, including private insurers, state laws that require pharmaceutical manufacturers to comply with the industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures, state laws that require pharmaceutical manufacturers to report information on the pricing of certain drug products, state and local laws that require the licensure and registration of pharmaceutical sales representatives, and state and foreign laws that govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Biggest changePharmaceutical and other healthcare companies also are subject to other federal false claims laws, including, among others, federal criminal healthcare fraud and false statement statutes that extend to non-government health benefit programs; 28 • the federal Health Insurance Portability and Accountability Act ("HIPAA"), which imposes criminal liability for, among other things, knowingly and willfully executing or attempting to execute a scheme to defraud any healthcare benefit program, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense, or knowingly and willfully making false statements relating to healthcare matters; • HIPAA and its implementing regulations, also imposes obligations, on certain covered entity health care providers, health plans and health care clearinghouses as well as their business associates that perform certain services involving the use or disclosure of individually identifiable health information, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; • federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; • the FDCA, which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical devices, including off-label or pre-approval promotion; • the federal Physician Payments Sunshine Act, which requires applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to annually report to Centers for Medicare & Medicaid Services ("CMS") information regarding direct or indirect payments and other transfers of value to physicians and teaching hospitals (and certain other practitioners as of 2022), as well as information regarding ownership and investment interests held by physicians and their immediate family members; and • analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non- governmental third-party payers, including private insurers, state laws that require pharmaceutical manufacturers to comply with the industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures, state laws that require pharmaceutical manufacturers to report information on the pricing of certain drug products, state and local laws that require the licensure and registration of pharmaceutical sales representatives, and state and foreign laws that govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
There are two phenotypes for rosacea: patients who present with papulopustular rosacea ("PPR"), and patients who do not (non-PPR), with approximately 55% of patients presenting with the PPR phenotype and 45% presenting with the non-PPR phenotype.
There are two phenotypes for rosacea: patients who present with papulopustular rosacea ("PPR"), and patients who do not present with PPR (non-PPR), with approximately 55% of patients presenting with the PPR phenotype and 45% presenting with the non-PPR phenotype.
We are targeting potentially at least 30 days of prophylactic protection against Lyme disease with a simple oral regimen of TP-05. Given that lotilaner was developed specifically, in part, to eradicate ticks with systemic administration to domesticated animals such as dogs or cats, the pharmacology of lotilaner for Lyme prophylaxis is well understood.
We are targeting potentially at least 30 days of prophylactic protection against Lyme disease with a simple oral regimen of TP-05. Given that lotilaner was developed specifically, in part, to eradicate ticks with systemic administration to domesticated animals such as dogs or cats, the pharmacology of lotilaner for Lyme disease prophylaxis is well understood.
We owe Elanco tiered royalties during the royalty term in the mid-to-high single digits on our future net sales and those of our sublicensees.
We owe Elanco tiered royalties during the royalty term in the mid-to-high single digits on our future net sales and those of our sublicensees.
Whether or not it obtains FDA approval for a product, an applicant will need to obtain the necessary approvals by the comparable foreign regulatory authorities before it can commence clinical trial or marketing of the product in those countries or jurisdictions. Marketing Authorization In the EEA, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA.
Whether or not it obtains FDA approval for a product, an applicant will need to obtain the necessary approvals by the comparable foreign regulatory authorities before it can commence clinical trial or marketing of the product in those countries or jurisdictions. Marketing Authorization In the EEA, medicinal products can only be commercialized after obtaining a Marketing Authorization ("MA").
Because many people are either undiagnosed or misdiagnosed, the treatment of Lyme disease with antibiotics may be commonly delayed or absent. 16 Current Lyme Prophylaxis Options and Their Limitations Lyme disease is currently prevented through behavior modification – avoiding areas where ticks are prevalent, wearing clothing which minimizes tick exposure, using insect repellants, and physically removing ticks that have attached.
Because many people are either undiagnosed or misdiagnosed, the treatment of Lyme disease with antibiotics may be commonly delayed or absent. Current Lyme Disease Prophylaxis Options and Their Limitations Lyme disease is currently prevented through behavior modification – avoiding areas where ticks are prevalent, wearing clothing which minimizes tick exposure, using insect repellants, and physically removing ticks that have attached.
If we receive payments from sublicensees, we are obligated to pay Elanco a variable percentage beginning in the low double-digits of such proceeds and decreasing after certain milestones are met, except for sublicense revenue generated after achieving regulatory approval for the use of lotilaner to applications in humans other than to treat or cure any eye or skin disease or condition.
If we receive payments from sublicensees, we are obligated to pay Elanco a variable percentage beginning in the low to mid double-digits of such proceeds and decreasing after certain milestones are met, except for sublicense revenue generated after achieving regulatory approval for the use of lotilaner to applications in humans other than to treat or cure any eye or skin disease or condition.
Many of the companies against which we may compete have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
Many of the companies against which we may compete have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory 18 approvals and marketing approved products than we do. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical studies to assess new safety risks or imposition of distribution restrictions or other restrictions under a REMS program.
Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies 27 or clinical studies to assess new safety risks or imposition of distribution restrictions or other restrictions under a REMS program.
The following figures illustrate how Demodex folliculorum mites enter and reside in the eyelash follicles: 9 Figure 3: Demodex folliculorum Mites Entering and Residing in Eyelash Follicles Demodex infestation can lead to Demodex blepharitis in three main ways: 1) Mechanical: Overcrowded mites scrape the epithelial cell lining of the eyelash follicles with their claws and lay eggs, causing follicular distention, misdirected lashes, eyelash loss and irritation.
The following figures illustrate how Demodex folliculorum mites enter and reside in the eyelash follicles: Figure 3: Demodex folliculorum Mites Entering and Residing in Eyelash Follicles Demodex infestation can lead to Demodex blepharitis in three main ways: 1) Mechanical: Overcrowded mites scrape the epithelial cell lining of the eyelash follicles with their claws and lay eggs, causing follicular distention, misdirected lashes, eyelash loss and irritation.
Clinical Trials The clinical stage of development involves the administration of the investigational product to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s control, in accordance with GCP requirements, which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial.
Clinical Trials The clinical stage of development involves the administration of the investigational product to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s control, in accordance with GCP requirements, which include the requirement that all research subjects provide their informed 24 consent for their participation in any clinical trial.
Our patent portfolio includes a combination of issued patents and pending patent applications licensed from third parties, as well as those assigned solely to us based on our ongoing development activities. The patents and applications in our portfolio can be categorized as related to TP-03, TP-04, TP-05 or future pipeline product candidates and alternative technologies.
Our patent portfolio includes a combination of issued patents and pending patent applications licensed from third parties, as well as those assigned solely to us based on our ongoing development activities. The patents and applications in our portfolio can be categorized as related to XDEMVY, TP-03, TP-04, TP-05 or future pipeline product candidates and alternative technologies.
Any agency or judicial enforcement action could have a material adverse effect on our business, market acceptance of our products, and our reputation. Our product candidates are considered small molecule drugs and must be approved by the FDA through the NDA process before they may be legally marketed in the U.S.
Any agency or judicial enforcement action could have a material adverse effect on our business, market acceptance of our products, and our reputation. 23 Our product candidates are considered small molecule drugs and must be approved by the FDA through the NDA process before they may be legally marketed in the U.S.
The IRA also creates a drug price negotiation program under which the prices for Medicare units of certain high Medicare spend drugs and biologicals without generic or biosimilar competition will be capped by reference to, among other things, a specified non-federal average manufacturer price starting in 2026.
The IRA also creates a drug price negotiation program under which the prices for Medicare units of certain high Medicare spend drugs and biologicals without generic or biosimilar competition will be capped by reference to, among other things, a specified non-federal average manufacturer price 34 starting in 2026.
Our Approach: TP-05 Oral Formulation for the Prophylactic Protection against Lyme Disease Since Borrelia is usually transferred during the second or third day following a tick bite, our approach is to eradicate the tick before it can transmit the bacteria. To do this, we are developing TP-05 as an oral formulation of lotilaner.
Our Approach: TP-05 Oral Formulation for the Prophylactic Protection against Lyme Disease Since Borrelia is usually transferred during the second or third day following a tick bite, our approach is to eradicate the tick before it can transmit the bacteria. To do this, we are developing TP-05 as an oral tablet formulation of lotilaner.
In addition, in order to be eligible to have its products paid for with federal funds under the Medicaid and Medicare Part B programs and purchased by certain federal agencies and grantees, a manufacturer also must participate in the U.S. Department of Veterans Affairs ("VA") Federal Supply Schedule ("FSS") pricing program.
In addition, to be eligible to have its products paid for with federal funds under the Medicaid and Medicare Part B programs and purchased by certain federal agencies and grantees, a manufacturer also must participate in the U.S. Department of Veterans Affairs ("VA") Federal Supply Schedule ("FSS") pricing program.
Moreover, pursuant to regulations issued by the DoD Defense Health Agency to implement 30 Section 703 of the National Defense Authorization Act for Fiscal Year 2008, manufacturers are required to provide rebates on utilization of their innovator and single source products that are dispensed to TRICARE beneficiaries by TRICARE network retail pharmacies.
Moreover, pursuant to regulations issued by the DoD Defense Health Agency to implement Section 703 of the National Defense Authorization Act for Fiscal Year 2008, manufacturers are required to provide rebates on utilization of their innovator and single source products that are dispensed to TRICARE beneficiaries by TRICARE network retail pharmacies.
This window from the time of bite to the time of transmission offers an opportunity for intervention to prevent Lyme disease if the tick can be killed prior to the transfer of the Borrelia bacteria. Lyme disease can be a serious condition that may affect multiple organ systems and produce a broad range of symptoms.
This window from the time of bite to the time of transmission offers an opportunity for intervention to prevent Lyme disease if the tick can be killed prior to the transfer of the Borrelia bacteria. 16 Lyme disease can be a serious condition that may affect multiple organ systems and produce a broad range of symptoms.
The application must include both negative and ambiguous results of preclinical studies and clinical trials, as well as positive findings. Data may come from company- 24 sponsored clinical trials intended to test the safety and efficacy of a product’s use or from a number of alternative sources, including studies initiated by investigators.
The application must include both negative and ambiguous results of preclinical studies and clinical trials, as well as positive findings. Data may come from company-sponsored clinical trials intended to test the safety and efficacy of a product’s use or from a number of alternative sources, including studies initiated by investigators.
Manufacturing, sales, promotion and other activities also are potentially subject to federal and state consumer protection and unfair competition laws. The distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage and security requirements intended to prevent the unauthorized sale of pharmaceutical products.
Manufacturing, sales, promotion and other activities also are potentially subject to federal and state consumer protection and unfair competition laws. 29 The distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage and security requirements intended to prevent the unauthorized sale of pharmaceutical products.
The CCPA created new transparency requirements, granted California consumers (as that word is broadly defined in the law) 27 several new rights with regard their personal information, and places increased privacy and security obligations on entities handling personal data of consumers or households.
The CCPA created new transparency requirements, granted California consumers (as that word is broadly defined in the law) several new rights with regard their personal information, and places increased privacy and security obligations on entities handling personal data of consumers or households.
TP-05 Oral Formulation for the Potential Prophylactic Protection against Lyme Disease Lyme Disease Lyme disease is the most common vector-borne disease in the U.S., caused by infection of Borrelia bacteria following bite by a tick vector, predominantly ticks of the Ixodes genus (namely Ixodes scapularis in the U.S.).
TP-05 Oral Formulation for Prophylactic Protection against Lyme Disease Lyme Disease Lyme disease is the most common vector-borne disease in the U.S., caused by infection of Borrelia bacteria following a bite by a tick vector, predominantly ticks of the Ixodes genus (namely Ixodes scapularis in the U.S.).
Moreover, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or MMA, established the Medicare Part D program to provide a voluntary prescription drug benefit to Medicare beneficiaries. Under Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private entities that provide coverage of outpatient prescription drugs.
Moreover, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 ("MMA") established the Medicare Part D program to provide a voluntary prescription drug benefit to Medicare beneficiaries. Under Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private entities that provide coverage of outpatient prescription drugs.
The primary endpoint was complete collarette cure (grade zero defined as - zero to two collarettes per lid) and the secondary endpoints included complete mite eradication (mite density of zero mites per lash) and composite cure (the presence of zero to two collarettes on the upper eyelid and the absence of erythema (redness)).
The primary endpoint was complete collarette cure (grade zero defined as - zero to two collarettes per lid) and the secondary endpoints included complete mite 13 eradication (mite density of zero mites per lash) and composite cure (the presence of zero to two collarettes on the upper eyelid and the absence of erythema (redness).
We believe that this space will be sufficient to meet our needs for the foreseeable future and that any additional space we may require will be available on commercially reasonable terms. Legal Proceedings We are not currently a party to any material legal proceedings.
We believe that this space will be sufficient to meet our needs for the foreseeable future and that any additional space we may require will be available on commercially reasonable terms. 35 Legal Proceedings We are not currently a party to any material legal proceedings.
The process generally involves the following: • completion of extensive preclinical studies in accordance with applicable regulations, including studies conducted in accordance with good laboratory practice ("GLP") requirements; • submission to the FDA of an IND, which must become effective before human clinical trials may begin in the U.S. and must be updated annually or when significant changes are made; 22 • approval by an independent IRB or independent ethics committee at each clinical trial site before each trial may be initiated; • performance of adequate and well-controlled human clinical trials in accordance with applicable IND regulations, GCP, requirements and other clinical trial-related regulations to establish substantial evidence of the safety and efficacy of the investigational product for each proposed indication; • submission to the FDA of an NDA; • a determination by the FDA within 60 days of its receipt of an NDA to accept the submission for review; • satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities where the drug will be produced to assess compliance with cGMP requirements, and of selected clinical investigational sites to assess compliance with GCP; • potential FDA audit of the preclinical study and/or clinical trial sites that generated the data in support of the NDA filing; • payment of user fees for FDA review of the NDA; • FDA review and approval of the NDA, including consideration of the views of any FDA advisory committee, prior to any commercial marketing or sale of the drug in the U.S.; and • compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Migration Strategy ("REMS") and the potential requirement to conduct post-approval studies.
The process generally involves the following: • completion of extensive preclinical studies in accordance with applicable regulations, including studies conducted in accordance with good laboratory practice ("GLP") requirements; • submission to the FDA of an IND, which must become effective before human clinical trials may begin in the U.S. and must be updated annually or when significant changes are made; • approval by an independent IRB or independent ethics committee at each clinical trial site before each trial may be initiated; • performance of adequate and well-controlled human clinical trials in accordance with applicable IND regulations, GCP, requirements and other clinical trial-related regulations to establish substantial evidence of the safety and efficacy of the investigational product for each proposed indication; • submission to the FDA of an NDA; • a determination by the FDA within 60 days of its receipt of an NDA to accept the submission for review; • satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities where the drug will be produced to assess compliance with cGMP requirements, and of selected clinical investigational sites to assess compliance with GCP; • potential FDA audit of the preclinical study and/or clinical trial sites that generated the data in support of the NDA filing; • payment of user fees for FDA review of the NDA as well as annual fees after NDA approval; • FDA review and approval of the NDA, including consideration of the views of any FDA advisory committee, prior to any commercial marketing or sale of the drug in the U.S.; and • compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Migration Strategy ("REMS") and the potential requirement to conduct post-approval studies.
Further, according to studies we have conducted, approximately 56% of cataract patients have Demodex infestation, which may increase the risk for infection after cataract and refractive surgery. Therefore, treating Demodex blepharitis may potentially improve patient satisfaction with cataract and refractive surgery.
According to studies we have conducted, approximately 56% of cataract patients have Demodex infestation, which may increase the risk for infection after cataract and refractive surgery. Therefore, treating Demodex blepharitis may potentially improve patient satisfaction with cataract and refractive surgery.
The Complete Response Letter may require additional clinical data, including 25 the potential requirement to conduct additional pivotal Phase 3 clinical trial(s) and/or other significant and time-consuming requirements related to clinical trials, or to conduct additional preclinical studies or manufacturing changes.
The Complete Response Letter may require additional clinical data, including the potential requirement to conduct additional pivotal Phase 3 clinical trial(s) and/or other significant and time-consuming requirements related to clinical trials, or to conduct additional preclinical studies or manufacturing changes.
National Institutes of Health, ClinicalTrials.gov. 23 A sponsor who wishes to conduct a clinical trial outside of the U.S. may, but need not, obtain FDA authorization to conduct the clinical trial under an IND.
National Institutes of Health, ClinicalTrials.gov. A sponsor who wishes to conduct a clinical trial outside of the U.S. may, but need not, obtain FDA authorization to conduct the clinical trial under an IND.
If the CHMP 29 accepts such a request, the time limit of 210 days will be reduced to 150 days, but it is possible that the CHMP may revert to the standard time limit for the Centralized Procedure if it determines that it is no longer appropriate to conduct an accelerated assessment. • MAs based on the Mutual Recognition Procedure or the Decentralized Procedure are available for products not falling within the mandatory scope of the Centralized Procedure.
If the CHMP accepts such a request, the time limit of 210 days will be reduced to 150 days, but it is possible that the CHMP may revert to the standard time limit for the Centralized Procedure if it determines that it is no longer appropriate to conduct an accelerated assessment. 31 • MAs based on the Mutual Recognition Procedure or the Decentralized Procedure are available for products not falling within the mandatory scope of the Centralized Procedure.
We believe TP-05 is currently the only non-vaccine, drug-based, preventive therapeutic in development that targets the ticks, and potentially prevents Lyme disease transmission.
We believe TP-05 is currently the only non-vaccine, drug-based, preventive therapeutic in clinical development that targets the ticks, and potentially prevents Lyme disease transmission.
The estimated natural expiration date of these issued patents are 2038, and if additional patents issue on these pending applications of ours, the estimated natural expiration dates are between approximately 2038 and 2040.
The estimated natural expiration dates of these issued patents are 2038, and if additional patents issue on the pending applications of ours, the estimated natural expiration dates are between approximately 2038 and 2040.
The Titan study was an IRB-approved, retrospective chart review of 1,032 patients across six U.S.-based ophthalmology and optometry practices conducted by seven investigators. The study was designed to better understand the prevalence of Demodex blepharitis via collarettes in U.S. eye care clinics.
The Titan study was an institutional review board ("IRB") -approved, retrospective chart review of 1,032 patients across six U.S.-based ophthalmology and optometry practices conducted by seven investigators. The study was designed to better understand the prevalence of Demodex blepharitis via collarettes in U.S. eye care clinics.
All 55 patients were seen at one location and may not be representative of the U.S. population. However, subsequent studies including the two TP-03 pivotal Saturn studies that had >800 patients, consistently demonstrate a correlation between the presence of collarettes and Demodex mites.
All 55 patients were seen at one location and may not be representative of the U.S. population. However, subsequent studies including the two TP-03 pivotal Saturn studies that had >800 patients, consistently demonstrated a correlation between the presence of collarettes and Demodex mites.
Demodex folliculorum, which is commonly found in the follicle, is the more common sub-species of mite that causes Demodex blepharitis. The pathognomonic sign of Demodex blepharitis is a specific type of eyelid debris known as the collarette, which is also sometimes referred to as cylindrical dandruff or waxy scurf.
Demodex folliculorum, which is commonly found in the follicle, is the more common sub-species of mite that causes Demodex blepharitis. 9 The pathognomonic sign of Demodex blepharitis is a specific type of eyelid debris known as the collarette, which is also sometimes referred to as cylindrical dandruff, sleeves, or waxy scurf.
Blepharitis is challenging to manage, recurs frequently, and its progression can lead to scarring of the eyelid, loss of proper eyelid and tear-film function, eyelid and lash abnormalities, inflammation of the conjunctiva and surrounding skin, suboptimal surgical outcomes, corneal damage, and potentially in extreme cases, blindness.
Blepharitis can be challenging to manage, recurs frequently, and its progression can lead to scarring of the eyelid, loss of proper eyelid and tear-film function, eyelid and lash abnormalities, inflammation of the conjunctiva and surrounding skin, suboptimal surgical outcomes, corneal damage, and potentially in extreme cases, blindness.
Data from the Centers for Disease Control and Prevention ("CDC") show that the risk of Lyme disease is spreading to new geographical areas, resulting in a significant need for prophylactic solutions. Currently, there are no FDA-approved pharmacological prophylactic options for Lyme disease.
Data from the Centers for Disease Control and Prevention ("CDC") show that the risk of Lyme disease is spreading to new geographic areas, resulting in a significant need for prophylactic solutions. Currently, there are no FDA-approved pharmacological prophylactic options for Lyme disease.
In addition, the IRA establishes a Medicare Part B inflation rebate scheme effective January 2023 and a Medicare Part D inflation rebate scheme effective October 2022, under which, generally speaking, manufacturers will owe rebates if the price of a Part B or Part D drug increases faster than the pace of inflation.
In addition, the IRA established a Medicare Part B inflation rebate scheme effective January 2023 and a Medicare Part D inflation rebate scheme effective October 2022, under which, generally speaking, manufacturers will owe rebates if the price of a Part B or Part D drug increases faster than the pace of inflation.
Although we believe blepharitis and Demodex blepharitis are significantly under-diagnosed diseases, with limited treatment alternatives, there are already approximately 1.5 million annual Demodex blepharitis diagnoses in the U.S. based on findings from a U.S. prevalence study (the "Titan study") and data that show blepharitis classified per the International Classification of Diseases, Tenth Revision, Clinical Modification ("ICD-10-CM").
Although we believe blepharitis and Demodex blepharitis are significantly under-diagnosed diseases with limited treatment alternatives, there are already approximately 1.5 million annual Demodex blepharitis 8 diagnoses in the U.S. based on findings from the Titan study and data that show blepharitis classified per the International Classification of Diseases, Tenth Revision, Clinical Modification ("ICD-10-CM").
Other available products include Galderma's Epsolay, a topical cream containing 5% encapsulated benzoyl peroxide and Journey Medical Corporation's Zilxi, a topical foam containing 1.5% minocycline is being commercialized for the treatment of Subtype II rosacea, characterized by small, dome-shaped erythematous papules that resemble acne but are associated with burning and stinging sensations.
Other available products include Galderma's Epsolay, a topical cream containing 5% encapsulated benzoyl peroxide and Journey Medical Corporation's Zilxi, a topical foam containing 1.5% minocycline, both of which are being commercialized for the treatment of Subtype II rosacea, characterized by small, dome-shaped erythematous papules that resemble acne but are associated with burning and stinging sensations.
We believe that the key competitive factors affecting the success of any of our product candidates will include efficacy, combinability, safety profile, convenience, cost, level of promotional activity devoted to them and intellectual property protection.
We believe that the key competitive factors affecting the success of any of our products or product candidates will include efficacy, combinability, safety profile, convenience, cost, level of promotional activity devoted to them and intellectual property protection.
Federal law requires that any company that participates in the Medicaid Drug Rebate Program also participate in the Public Health Service’s 340B drug pricing program in order for federal funds to be available for the manufacturer’s drugs under Medicaid and Medicare Part D.
Federal law requires that any company that participates in the Medicaid Drug Rebate Program also participate in the Public Health Service’s 340B drug pricing program in order for federal funds to be available for the manufacturer’s drugs under Medicaid and Medicare Part B.
The cause of rosacea remains multifactorial but there is increasing evidence that Demodex mites play a role in the disease. Studies have found a correlation between Demodex infestation and rosacea, with a higher density of Demodex mites found in the skin of rosacea patients than in controls.
The cause of rosacea remains multifactorial but there is increasing evidence that Demodex mites play a role in the disease. Studies have found a correlation between Demodex infestation and rosacea, with a higher density of Demodex mites found in the skin of rosacea patients.
Approximately 1.5 million doses of the vaccine were sold in 1999, but the product was quickly pulled from the market following negative press and a class-action litigation claiming a dangerous side effect profile.
Approximately 1.5 million doses of the vaccine were sold in 1999, but the product was quickly removed from the market following negative press and a class-action litigation claiming a dangerous side effect profile.
We are aware of other companies developing prescription therapies for blepharitis, including Azura Ophthalmics, Aperta Biosciences, LLC, Formosa Pharmaceuticals, Inc., Glaukos Corp., Hovione Scientia, Nicox SA, Premark Pharma, Quorum Innovations and Viatris.
We are aware of other companies developing potential prescription therapies for blepharitis, including Azura Ophthalmics, Aperta Biosciences, LLC, Formosa Pharmaceuticals, Inc., Glaukos Corp., Hovione Scientia, Nicox, Premark Pharma, Quorum Innovations and Viatris.
In addition, there is growing awareness among ECPs of the pathognomonic sign of Demodex infestation called collarettes or cyclindrical dandruff; which is a specific type of debris found at the base of the eyelashes.
In addition, there is growing awareness among ECPs of the pathognomonic sign of Demodex infestation called collarettes or cylindrical dandruff; which is a specific type of debris found at the base of the eyelashes.
The following figures illustrate the intended paralysis of mites in the hair follicle by TP-03 administration: Figure 5: Progression of TP-03 Application, Mite Paralysis and Eradication Clinical Development Program To date we have completed one Phase 1 trial, four Phase 2 trials, one Phase 2b/3 trial, and one Phase 3 trial for TP-03 in Demodex blepharitis, all of which met primary, secondary and/or certain exploratory endpoints, while demonstrating the drug was well tolerated.
The following figures illustrate the intended paralysis of mites in the hair follicle by XDEMVY administration: Figure 5: Progression of XDEMVY Application, Mite Paralysis and Eradication Clinical Development Program To date we have completed one Phase 3 trial, one Phase 2b/3 trial, four Phase 2 trials, and one Phase 1 trial for XDEMVY in Demodex blepharitis, all of which met primary, secondary and/or certain exploratory endpoints, while demonstrating XDEMVY was well tolerated.
These patents and patent applications relate to lotilaner and are issued or pending in, for example, the U.S., Australia, Brazil, Canada, Chile, China, several European territories, India, Japan, South Korea, Mexico, New Zealand, the Russian Federation, South Africa and Taiwan.
These patents and patent applications relate to lotilaner and are issued or pending in, for example, the U.S., Argentina, Australia, Brazil, Canada, Chile, China, 19 Columbia, several European territories, India, Japan, South Korea, Mexico, New Zealand, the Russian Federation, South Africa and Taiwan.
One drop of TP-03 was self-administered twice per day in each eye for six weeks. Enrolled patients received no treatment for blepharitis symptoms (i.e. lid hygiene) during the trial or 14 days prior to enrollment.
One drop of XDEMVY was self-administered twice per day in each eye for six weeks. Enrolled patients received no treatment for blepharitis symptoms (i.e. lid hygiene) during the trial or 14 days prior to enrollment.
License Agreements January 2019 Elanco In-License Agreement for Skin and Eye Diseases or Conditions in Humans In January 2019, we entered into an agreement with Elanco granting us an exclusive, worldwide, sublicensable license to certain intellectual property for the development, marketing, and commercialization of lotilaner for the treatment, palliation, prevention or cure of any eye or skin disease or condition in humans (as amended, the "Eye and Derm Elanco Agreement").
License Agreements Elanco In-License Agreement for Skin and Eye Diseases or Conditions in Humans In January 2019, we entered into an agreement with Elanco granting us exclusive, worldwide, sublicensable license rights to certain intellectual property for the development, marketing, and commercialization of lotilaner for the treatment, palliation, prevention or cure of any eye or skin disease or condition in humans (as amended and restated in June 2022, the "Eye and Derm Elanco Agreement").
In our work with key opinion leaders and various associations to increase Demodex blepharitis awareness and education, we have highlighted prevalence, impact, and simplicity of diagnosis of Demodex blepharitis. Our goal is to educate ECPs about the prevalence of Demodex blepharitis, simplicity and efficient diagnosis and the positive profile of our products.
In our work with key opinion leaders and various associations to increase Demodex blepharitis awareness and education, we have highlighted prevalence, impact, and simplicity of diagnosis of Demodex blepharitis. Our goal is to continue to educate ECPs about the prevalence of Demodex blepharitis, simplicity and efficient diagnosis, and the positive profile of our product.
Our Strategy Our goal is to transform the treatment of Demodex blepharitis with a first ever FDA approved pharmaceutical therapeutic, and to develop our pipeline of innovative therapies that target certain parasite-mediated diseases with large market opportunities.
Our Strategy Our goal is to transform the treatment of Demodex blepharitis with XDEMVY, the first ever FDA-approved pharmaceutical therapeutic for the treatment of Demodex blepharitis, and to develop our pipeline of innovative therapies that target certain parasite-mediated diseases with large market opportunities.
Lotilaner’s mechanism of targeting and killing Demodex mites has been established through our preclinical study and clinical trials evaluating TP-03 in Demodex blepharitis, which is why we believe it may be effective in another Demodex driven disease.
Lotilaner’s mechanism of targeting and killing Demodex mites has been established through our preclinical study and clinical trials evaluating XDEMVY in Demodex blepharitis, which is why we believe it may be effective in another Demodex driven disease.
Our third-party manufacturers are also subject to periodic inspections of facilities by the FDA and other authorities, including procedures and operations used in the testing and manufacture of TP-03 to assess compliance with applicable regulations.
Our third-party manufacturers are also subject to periodic inspections of facilities by the FDA and other authorities, including procedures and operations used in the testing and manufacture of XDEMVY to assess compliance with applicable regulations.
In September 2020, we commenced the Saturn-1 trial and completed enrollment of 421 patients aged 18 and over having more than ten collarettes on the upper lid and at least mild erythema of the upper eyelid margin. Each patient had at least 1.5 mites per lash on the upper and lower eyelids combined.
In September 2020, we commenced the Saturn-1 trial and completed enrollment of 421 adult patients having more than ten collarettes on the upper lid and at least mild erythema of the upper eyelid margin. Each patient had at least 1.5 mites per lash on the upper and lower eyelids combined.
Our third-party service providers, our third-party supply chain providers, their facilities and the TP-03 used in our clinical trials or for commercial sale are required to be in compliance with the requirements of cGMP.
Our third-party service providers, our third-party supply chain providers, their facilities and XDEMVY used in our clinical trials or for commercial sale are required to be in compliance with the requirements of cGMP.
The drug product manufacturing is a compounding and aseptic filling operation that we believe could be transferred to additional CMOs as necessary. We have identified suppliers for TP-04 topical formulation for rosacea and TP-05 oral formulation for Phase 1/2 trials for Lyme disease.
The drug product manufacturing is a compounding and aseptic filling operation that we believe could be transferred to additional CMOs as necessary. We have suppliers for TP-04 topical formulation for rosacea and TP-05 oral formulation for our Phase 1/2 trials.
The EU Clinical Trials Regulation is applicable as of January 31, 2022 and is applicable directly in all countries of the EEA (which is comprised of 27 Member States of the EU plus Norway, Iceland and Liechtenstein).
The EU Clinical Trials Regulation is applicable as of January 31, 2022 and is applicable directly in all countries of the European Economic Area ("EEA") (which is comprised of 27 Member States of the EU plus Norway, Iceland and Liechtenstein).
Third-party payers may limit coverage to specific product candidates on an approved list, known as a formulary, which might not include all FDA-approved drugs for a particular indication. We may need to conduct expensive pharmaco-economic studies to demonstrate the medical necessity and cost effectiveness of our products.
Third-party payers may limit coverage to specific product candidates on an approved list, known as a formulary, which might not include all FDA-approved drugs for a particular indication. We may need to conduct additional expensive pharmaco-economic Phase 4 real-world studies to demonstrate the medical necessity and cost effectiveness of our products.
While dry eye is a multi-factorial disease, TP-03 is designed to relieve some of the key elements that may be contributing to MGD by virtue of causing the death of the Demodex brevis mites as well as decreasing the inflammation of the eyelid caused by Demodex blepharitis.
While dry eye is a multi-factorial disease, TP-03 is designed to relieve some of the key elements that may be contributing to MGD by eradicating the Demodex brevis mites as well as decreasing the inflammation of the eyelid caused by Demodex blepharitis.
These changes included aggregate reductions to Medicare payments to providers of 2% per fiscal year, effective April 1, 2013, required by the Budget Control Act of 2021, as amended by the American Taxpayer Relief Act of 2012 (“ATRA”). Subsequent legislation extended the 2% reduction, generally to 2031.
These changes included aggregate reductions to Medicare payments to providers of 2% per fiscal year required by the Budget Control Act of 2021, as amended by the American Taxpayer Relief Act of 2012 (“ATRA”). Subsequent legislation extended the 2% reduction, generally to 2031.
Additional Analysis: ▪ 89% of patients on TP-03 achieved a clinically meaningful collarette reduction, defined as zero to ten collarettes per lid at day 43 compared to 33% of those on vehicle (p The Saturn-1 Trial The Saturn-1 trial was a randomized, controlled, multi center, double-masked Phase 2b/3 trial that evaluated the safety and efficacy of TP-03 in adults with Demodex blepharitis.
Additional Analysis: • 89% of patients on XDEMVY achieved a clinically meaningful collarette reduction, defined as zero to ten collarettes per lid at day 43 compared to 33% of those on vehicle (p The Saturn-1 Trial The Saturn-1 trial was a randomized, controlled, multicenter, double-masked Phase 2b/3 trial that evaluated the safety and efficacy of XDEMVY in adults with Demodex blepharitis.
In accordance with the terms of the Eye and Derm Elanco Agreement, we are obligated to make further cash payments to Elanco upon our achievement of various clinical milestones up to an aggregate maximum of $3.0 million and various sales milestones up to an aggregate maximum of $79.0 million.
In accordance with the terms of the Eye and Derm Elanco Agreement, we are obligated to make further cash payments to Elanco upon our achievement of various clinical milestones up to an aggregate maximum of $2.0 million and various sales milestones up to an aggregate maximum of $75.0 million.
Healthcare Reform The U.S. government, state legislatures, and foreign governments have shown significant interest in implementing cost containment programs to limit the growth of government-paid healthcare costs, including price-controls, restrictions on reimbursement, and requirements for substitution of generic products for branded prescription drugs.
Healthcare Reform The U.S. government, state legislatures, and foreign governments have shown significant interest in implementing cost containment programs to limit the growth of government-paid healthcare costs, including price-controls, restrictions on reimbursement, and requirements for substitution of generic products and/or lower cost over the counter alternatives for branded prescription drugs.
We have included our website address in this Annual Report on Form 10-K solely as an inactive textual reference. Facilities We currently lease approximately 27,807 square feet of office and laboratory space in Irvine, California under certain leases that last expire in January 2024, with a renewal option for a term of three years.
We have included our website address in this Annual Report on Form 10-K solely as an inactive textual reference. Facilities We currently lease approximately 32,145 square feet of office and laboratory space in Irvine, California under certain leases that last expire in January 2027, with a renewal option for a term of three years.
We have implemented processes to manage compliance with the CCPA and we continue to assess the impact of the CPRA, and other state legislation, on our business as additional information and guidance becomes available. Products must meet applicable child-resistant packaging requirements under the U.S. Poison Prevention Packaging Act.
We have implemented processes to manage compliance with the CCPA and other state laws and we continue to assess their impact on our business as additional information and guidance becomes available. Products must meet applicable child-resistant packaging requirements under the U.S. Poison Prevention Packaging Act.
While there are no currently available on-label prescription pharmaceutical treatments available for the treatment of blepharitis or Demodex blepharitis specifically, a number of other treatments are currently available for the treatment of blepharitis in the U.S. Current treatments for blepharitis in the U.S. include over the counter and off-label remedies such as tea tree oil, lid wipes and artificial tears.
Other than XDEMVY, there are currently no other on-label prescription pharmaceutical treatments available for the treatment of blepharitis or Demodex blepharitis specifically, in the U.S. Other than XDEMVY, current treatments for blepharitis in the U.S. include over the counter and off-label remedies such as tea tree oil, lid wipes and artificial tears.
Primary Endpoint: • 56% of patients on TP-03 achieved complete collarette cure, defined as zero to two collarettes per lid at day 43, compared to 13% on vehicle (p Secondary Endpoints: • 52% of patients on TP-03 achieved mite eradication defined as zero mites per lash at day 43, compared to 15% on vehicle (p • 31% of patients on TP-03 compared to 9% of patients on vehicle (p • 19% of patients on TP-03 achieved a complete composite cure, based on achieving both complete collarette cure and complete lid erythema cure, compared to 4% on vehicle (p Safety Profile: • Consistent with the results from Saturn-1, Saturn-2 demonstrated that TP-03 was well tolerated with a safety profile similar to the vehicle group. ▪ 91% of TP-03 patients reported that the drop comfort was neutral to very comfortable. ▪ There were no serious treatment-related adverse events nor any treatment-related adverse events leading to treatment discontinuation.
Primary Endpoint: • 55% of patients on XDEMVY achieved complete collarette cure, defined as zero to two collarettes per lid at day 43, compared to 12% on vehicle (p Secondary Endpoints: • 50% of patients on XDEMVY achieved mite eradication defined as zero mites per lash at day 43, compared to 14% on vehicle (p • 30% of patients on XDEMVY compared to 9% of patients on vehicle (p • 19% of patients on XDEMVY achieved a complete composite cure, based on achieving both complete collarette cure and complete lid erythema cure, compared to 4% on vehicle (p Safety Profile: • Consistent with the results from Saturn-1, Saturn-2 demonstrated that TP-03 was well tolerated with a safety profile similar to the vehicle group. ▪ 91% of XDEMVY patients reported that the drop comfort was neutral to very comfortable. ▪ There were no serious treatment-related adverse events nor any treatment-related adverse events leading to treatment discontinuation.
The pre-specified primary and secondary endpoints were met, and complete resolution of Demodex blepharitis signs (e.g. grade zero collarettes) was demonstrated in patients treated with TP-03 (lotilaner ophthalmic solution, 0.25%). 44% of patients on TP-03 achieved the primary endpoint of complete collarette reduction at day 43 compared to 7% on vehicle (p 13 The secondary endpoint of complete mite eradication achieved statistically significant results by day 15, and 68% of patients on TP-03 achieved mite eradication compared to 18% on vehicle (p For composite cure, 13.4% of patients on TP-03 achieved a complete cure based on a composite endpoint of collarette cure and erythema cure compared to 1.0% on vehicle (p In July 2021, we presented additional data from the Saturn-1 Trial at the American Society of Cataract and Refractive Surgery 2021 Annual Meeting demonstrating high treatment response rates, and reinforcing the potential of TP-03 to be the standard of care for Demodex blepharitis patients. • 95% of TP-03 patients showed a significant improvement in mite count, achieving ≤0.5 mites per lash • 93% of TP-03 patients improved by at least one collarette grade We also announced results from an additional Saturn-1 safety analysis, which reinforced TP-03’s positive profile, revealing that TP-03 had no clinically significant adverse effect on multiple safety measures including Corrected Distance Visual Acuity ("CDVA"), corneal staining, and intraocular pressure ("IOP"), and no significant findings from slit lamp biomicroscopy or fundus exam in the study.
The pre-specified primary and secondary endpoints were met, and improvement in lids (reduction of collarettes to no more than 2 collarettes per upper lid) was demonstrated in 44% of patients treated with XDEMVY. 44% of patients on XDEMVY achieved the primary endpoint of complete collarette reduction at day 43 compared to 7% on vehicle (p The secondary endpoint of complete mite eradication achieved statistically significant results by day 15, and 68% of patients on XDEMVY achieved mite eradication compared to 17% on vehicle (p For composite cure, 13.4% of patients on TP-03 achieved a complete cure based on a composite endpoint of collarette cure and erythema cure compared to 1.0% on vehicle (p In July 2021, we presented additional data from the Saturn-1 Trial at the American Society of Cataract and Refractive Surgery 2021 Annual Meeting demonstrating high treatment response rates, and reinforcing the potential of XDEMVY to be the standard of care for Demodex blepharitis patients. • 95% of XDEMVY patients showed a significant improvement in mite count, achieving ≤0.5 mites per lash • 93% of XDEMVY patients improved by at least one collarette grade We also announced results from an additional Saturn-1 safety analysis, which reinforced XDEMVY’s positive profile, revealing that XDEMVY had no clinically significant adverse effect on multiple safety measures including Corrected Distance Visual Acuity ("CDVA"), corneal staining, and intraocular pressure ("IOP"), and no significant findings from slit lamp biomicroscopy or fundus exam in the study.
If we receive payments from sublicensees, we are obligated to pay Elanco a variable percentage beginning in the low double-digits of such proceeds and decreasing after certain milestones are met, except for sublicense revenue generated after achieving regulatory approval for the use of lotilaner to treat or cure any eye or skin disease or condition in humans.
If we receive certain types of payments from sublicensees, we are obligated to pay Elanco a variable percentage in the mid to high single digits of such proceeds and decreasing after certain milestones are met, except for sublicense revenue generated after achieving regulatory approval for the use of lotilaner to treat or cure any eye or skin disease or condition in humans.
Lotilaner is a lipophilic molecule, which may promote its uptake in the oily sebum of the hair follicle, where the mites reside. In clinical trials, TP-03 is topically applied to the eye twice daily to ensure delivery of the drug to the eyelid margin. Following mite eradication, collarettes eventually clear from the eyelid since they are composed of mite-related waste.
Lotilaner is a lipophilic molecule, which may promote its uptake in the oily sebum of the hair follicle, where the mites reside. In clinical trials, XDEMVY was topically applied to the eye BID to ensure delivery of the drug to the eyelid margin. Following mite eradication, collarettes eventually clear from the eyelid since they are composed of mite-related waste.
We believe we can improve upon existing treatments in the market, like ivermectin cream (Soolantra), with an API that is potentially more effective (longer half-life, more lipophilic, greater therapeutic window).
We believe we can improve upon existing treatments in the market, with an API that is potentially more effective (longer half-life, more lipophilic, greater therapeutic window).
Further, patients continue to have underlying risk of Demodex infestation, as there could be a recurrence or reinfestation based on the presence of Demodex mites in the facial pores even after eradication of Demodex mites from the eyelid.
Further, patients continue to have underlying risk of Demodex infestation, as there could be a recurrence or reinfestation based on the presence of Demodex mites in the facial pores even after eradication of Demodex mites from the eyelid, that may potentially necessitate retreatment.
To our knowledge, Azura Ophthalmics, Aperta Biosciences, LLC and Glaukos Corp. are the only companies currently focused on Demodex blepharitis and Nicox SA and Premark Pharma are the only companies with blepharitis programs that have completed Phase 2 trials.
To our knowledge, Azura Ophthalmics, Aperta Biosciences, LLC and Glaukos Corp. are the only companies currently focused on Demodex blepharitis and are in pre-clinical stage, and Premark Pharma, Azura Ophthalmics and Nicox are the only companies with blepharitis programs that have completed Phase 2 trials.
Clinical trials authorized under the current Clinical Trials Directive before January 31, 2023 can continue to be conducted under the Clinical Trials Directive until January 31, 2025.
Clinical trials that were authorized under the Clinical Trials Directive before January 31, 2023 can continue to be conducted under the Clinical Trials Directive until January 31, 2025.
Diversity, Equity, and Inclusion 32 We are committed to creating and maintaining a workplace free from discrimination or harassment on the basis of race, color, citizenship, religion, creed, national origin, ancestry, gender, sexual orientation, age, marital status, veteran status, disability, medical condition, or any other status protected by applicable law.
Diversity, Equity, and Inclusion We are committed to creating and maintaining a workplace free from discrimination or harassment on the basis of race, color, citizenship, religion, creed, national origin, ancestry, gender, sexual orientation, age, marital status, veteran status, disability, medical condition, or any other status protected by applicable law. Our employment policies and compliance trainings prohibit such discrimination and harassment.
Development of TP-03 for Meibomian Gland Disease (MGD) Beyond Demodex blepharitis, we intend to explore the clinical potential for TP-03 in MGD, a chronic abnormality of the meibomian glands, which are glands on the inner part of the eyelid that secrete lipids and other molecules that are critical to maintaining a healthy tear film on the surface of the eye.
Development of TP-03 for MGD Beyond Demodex blepharitis, we are exploring the clinical potential for the use of TP-03 in the treatment of MGD, a chronic abnormality of the meibomian glands, which are glands on the inner part of the eyelid that secrete lipids and other molecules that are critical to maintaining a healthy tear film on the surface of the eye.
Of the thirty-two patients in the study, 100% of patients with at least one collarette had Demodex present. Those patients without collarettes were divided into two groups; patients who were using lid scrubs for a full year and those who were not.
Patients were divided into three main groups: those with collarettes; those without collarettes and those who had been using daily lid scrubs for a full year; and as well as those without collarettes who were not using daily lid scrubs. Of the thirty-two patients in the study, 100% of patients with at least one collarette had Demodex present.
Furthermore, states are constantly adopting new laws or amending existing laws, requiring attention to frequently changing regulatory requirements. For example, California has enacted the California Consumer Privacy Act ("CCPA").
Furthermore, states are constantly adopting new laws or amending existing laws, requiring attention to frequently changing regulatory requirements. For example, California has enacted the California Consumer Privacy Act ("CCPA"), as amended by the California Privacy Rights Act ("CPRA").
Under the Medicaid Drug Rebate Program, we would be required to pay a mandatory rebate to each state Medicaid program for our covered outpatient drugs that are dispensed to Medicaid beneficiaries and paid for by a state Medicaid program as a condition of having federal funds being made available to the states for our drugs under Medicaid and, if applicable, Part B of the Medicare program.
Under the Medicaid Drug Rebate Program, we are required to pay a mandatory rebate to each state Medicaid program for our covered outpatient drugs that are dispensed to Medicaid beneficiaries and paid for by a state Medicaid program as a condition of having federal funds being made available to the states for our drugs under Medicaid.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur future capital requirements will depend on many factors, including: • the scope and costs of manufacturing development and commercial manufacturing activities and our ability to scale them up; • the scope, rate of progress, costs and results of our drug discovery, preclinical development activities, laboratory testing and clinical trials for our product candidates; • the number and scope of clinical programs we decide to pursue; • the extent to which we acquire or in-license other product candidates and technologies; • the cost, timing and outcome of regulatory review of our product candidates, including the potential for regulatory authorities to require that we conduct more studies and trials than those that we currently expect to conduct and the costs of post-marketing studies or risk evaluation and mitigation strategies that could be required by regulatory authorities; 42 • potential changes in the regulatory environment and enforcement rules; • the cost and timing of establishing sales and marketing capabilities, if any of our product candidates receive marketing approval; • the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; • our ability to establish and maintain collaborations on favorable terms, if at all; • our ability to satisfy our outstanding debt obligations; • our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development of our product candidates; • potential changes in pharmaceutical pricing and reimbursement infrastructure; • the costs associated with being a public company; and • the cost associated with commercializing our product candidates, if they receive marketing approval.
Biggest changeOur future capital requirements will depend on many factors, including: 59 • the cost and timing, receipt and amount of sales and marketing capabilities of any current and future products, including the success of our commercialization efforts involving XDEMVY; • market acceptance of our current and future products, including XDEMVY, and the impact of any competing products; • the ability of patients or healthcare providers to obtain coverage of or sufficient reimbursement for any current or future products; • the scope and costs of manufacturing development and commercial manufacturing activities and our ability to scale them up; • the scope, rate of progress, costs and results of our drug discovery, preclinical development activities, laboratory testing and clinical trials for our product candidates; • the number and scope of clinical programs we decide to pursue; • the extent to which we acquire or in-license other product candidates and technologies; • the cost, timing and outcome of regulatory review of our product candidates, including the potential for regulatory authorities to require that we conduct more studies and trials than those that we currently expect to conduct and the costs of post-marketing studies or risk evaluation and mitigation strategies that could be required by regulatory authorities; • suspensions or delays in enrollment of our ongoing and future clinical trials, issues with data collection, or changes to the number of subjects we decide to enroll in clinical trials, including as a result of health pandemics, competing trials, or otherwise; • the costs of commercialization activities for any current or future products that are approved for sale, including marketing, sales, and distribution costs, and any discounts or rebates to obtain access; • potential changes in the regulatory environment and enforcement rules; • the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; • our ability to establish and maintain collaborations on favorable terms, if at all; • our ability to satisfy our outstanding debt obligations; • our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the sales and marketing activities associated with the commercialization of our products, including XDEMVY, and the development of our product candidates; • potential changes in pharmaceutical pricing and reimbursement infrastructure; • the costs related to any future collaboration or licensing partners upon the achievement of negotiated milestones; • the costs associated with any product liability or other lawsuits related to our products; • the expense needed to attract and retain skilled personnel; and • the costs associated with being a public company.
If a successful clinical trial or product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such claims and our business operations could be impaired.
If a successful product or clinical trial liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such claims and our business operations could be impaired.
On March 12, 2023, the Department of the Treasury, the Federal Reserve, and the FDIC jointly released a statement that depositors at SVB would have access to their funds, even those in excess of the standard FDIC insurance limits, under a systemic risk exception.
On March 12, 2023, the Department of the Treasury, the Federal Reserve, and the FDIC jointly released a statement that depositors at SVB would have access to their funds, even those in excess of the standard FDIC insurance limits, under a systemic risk exception.
To the extent we hold cash deposits in amounts that exceed the FDIC insurance limitation, in the event of a failure of any of the financial institutions where we maintain deposits, we may incur a loss to the extent such loss exceeds the FDIC insurance limitation, and such a failure could have a material adverse effect upon our liquidity, operations and our results of operations.
To the extent we hold cash deposits in amounts that exceed the FDIC insurance limitation, we may incur a loss in the event of a failure of any of the financial institutions where we maintain deposits, to the extent such loss exceeds the FDIC insurance limitation, and such a failure could have a material adverse effect upon our liquidity, operations and our results of operations.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited. We have incurred substantial losses during our history which we expect to continue, do not expect to become profitable in the near future, and we may never achieve profitability.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited. We have incurred substantial losses during our history which we expect to continue, we do not expect to become profitable in the near future, and we may never achieve profitability.
Those factors may include the following: • the design or results of clinical trials; • the likelihood of approval by the FDA or comparable foreign regulatory authorities; • the potential market for the product candidate; • the costs and complexities of manufacturing and delivering such product candidate to patients; • the potential of competing products; • the existence of uncertainty with respect to our ownership of technology or other rights, which can exist if there is a challenge to such ownership without regard to the merits of the challenge; and • industry and market conditions generally.
Those factors may include the following: • the potential market for the product candidate; • the costs and complexities of manufacturing and delivering such product candidate to patients; • the design or results of clinical trials; • the likelihood of approval by the FDA or comparable foreign regulatory authorities; • the potential of competing products; • the existence of uncertainty with respect to our ownership of technology or other rights, which can exist if there is a challenge to such ownership without regard to the merits of the challenge; and • industry and market conditions generally.
The commencement and completion of clinical trials can be delayed for a number of reasons, including delays related to: • the FDA or comparable foreign regulatory authorities placing the clinical trial on hold; • subjects failing to enroll or remain in our trial at the rate we expect; • subjects choosing an alternative treatment or other product candidates, or participating in competing clinical trials; • lack of adequate funding to continue the clinical trial; • subjects experiencing severe or unexpected drug-related adverse effects; • failure to demonstrate efficacy of the product; • any interruptions or delays in the supply of our product candidates for our clinical trials; • a facility manufacturing any of our product candidates or any of their components being ordered by the FDA or comparable foreign regulatory authorities to temporarily or permanently shut down due to violations of cGMP regulations or other applicable requirements, or infections or cross-contaminations of product candidates in the manufacturing process; • any changes to our manufacturing process that may be necessary or desired; • any failure or delay in reaching an agreement with CROs, vendors and clinical trial sites; • third-party clinical investigators losing the licenses or permits necessary to perform our clinical trials, not performing our clinical trials on our anticipated schedule or consistent with the clinical trial protocol, good clinical practices ("GCP") or regulatory requirements or other third parties not performing data collection or analysis in a timely or accurate manner; • third-party contractors becoming debarred, disqualified or suspended or otherwise penalized by the FDA or other comparable foreign regulatory authorities for violations of applicable regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or all of the data produced by such contractors in support of our marketing applications; • one or more Institutional Review Boards ("IRBs"), other ethics committees refusing to approve, suspending or terminating the trial at an investigational site, precluding enrollment of additional subjects, or withdrawing its approval of the trial; or • changes in regulatory requirements and policies, which may require us to amend clinical trial protocols to comply with these changes and resubmit our clinical trial protocols to IRBs or ethics committees for reexamination.
The commencement and completion of clinical trials can be delayed for a number of reasons, including delays related to: • the FDA or comparable foreign regulatory authorities placing the clinical trial on hold; • subjects failing to enroll or remain in our trial at the rate we expect; • subjects choosing an alternative treatment or other product candidates, or participating in competing clinical trials; • lack of adequate funding to continue the clinical trial; • subjects experiencing severe or unexpected drug-related adverse effects; • failure to demonstrate efficacy of the product; • any interruptions or delays in the supply of our product candidates for our clinical trials; 55 • a facility manufacturing any of our product candidates or any of their components being ordered by the FDA or comparable foreign regulatory authorities to temporarily or permanently shut down due to violations of cGMP regulations or other applicable requirements, or infections or cross-contaminations of product candidates in the manufacturing process; • any changes to our manufacturing process that may be necessary or desired; • any failure or delay in reaching an agreement with CROs, vendors and clinical trial sites; • third-party clinical investigators losing the licenses or permits necessary to perform our clinical trials, not performing our clinical trials on our anticipated schedule or consistent with the clinical trial protocol, good clinical practices ("GCP") or regulatory requirements or other third parties not performing data collection or analysis in a timely or accurate manner; • third-party contractors becoming debarred, disqualified or suspended or otherwise penalized by the FDA or other comparable foreign regulatory authorities for violations of applicable regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or all of the data produced by such contractors in support of our marketing applications; • one or more Institutional Review Boards ("IRBs"), other ethics committees refusing to approve, suspending or terminating the trial at an investigational site, precluding enrollment of additional subjects, or withdrawing its approval of the trial; or • changes in regulatory requirements and policies, which may require us to amend clinical trial protocols to comply with these changes and resubmit our clinical trial protocols to IRBs or ethics committees for reexamination.
The Affordable Care Act, among other things: (i) introduced a new average manufacturer price definition for drugs and biologics that are inhaled, infused, instilled, implanted or injected and not generally dispensed through retail community pharmacies; (ii) increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and expanded rebate liability from fee-for-service Medicaid utilization to include the utilization of Medicaid managed care organizations as well; (iii) established a branded prescription drug fee that pharmaceutical manufacturers of branded prescription drugs must pay to the federal government; (iv) expanded the list of covered entities eligible to participate in the 340B drug pricing program; (v) established a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% (increased from 50% in 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D (which, under the IRA, will be replaced by a new manufacturer discount program starting in 2025); (vi) expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability; (vii) created a licensure framework for follow on biologic products; and (viii) established a Center for Medicare & Medicaid Innovation, CMMI, at the CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.
The Affordable Care Act, among other things: (i) introduced a new average manufacturer price definition for drugs and biologics that are inhaled, infused, instilled, implanted or injected and not generally dispensed through retail community pharmacies; (ii) increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and expanded rebate liability from fee-for-service Medicaid utilization to include the utilization of Medicaid managed care organizations as well; (iii) established a branded prescription drug fee that pharmaceutical manufacturers of branded prescription drugs must pay to the federal government; (iv) expanded the list of covered entities eligible to participate in the 340B drug pricing program; (v) established a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% (increased from 50% in 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D (which, under the IRA, will be replaced by a new manufacturer discount program starting in 2025); (vi) expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability; (vii) created a licensure framework for follow on biologic products; and (viii) established a Center for Medicare & Medicaid Innovation ("CMMI"), at the Center for Medicare & Medicaid Services ("CMS") to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.
Any of our present and future clinical trials may be delayed, halted, not authorized, or approval of any of our products may be delayed or may not be obtained due to any of the following: • any preclinical study or clinical trial may fail to produce safety and efficacy results satisfactory to the FDA or comparable foreign regulatory authorities; • preclinical and clinical data can be interpreted in different ways, which could delay, limit or prevent marketing approval; • negative or inconclusive results from a preclinical study or clinical trial or adverse events during a clinical trial could cause a preclinical study or clinical trial to be repeated or a development program to be terminated, even if other studies or trials relating to the development program are ongoing or have been completed and were successful; • the FDA or comparable foreign regulatory authorities can place a clinical hold on a trial if, among other reasons, it finds that subjects enrolled in the trial are or would be exposed to an unreasonable and significant risk of illness or injury; • the facilities that we utilize, or the processes or facilities of third-party vendors, including without limitation the contract manufacturers who will be manufacturing drug substance and drug product for us or any potential collaborators, may not satisfactorily complete inspections by the FDA or comparable foreign regulatory authorities; and • we may encounter delays or rejections based on changes in FDA regulations, standards or policies or the regulations, standards or policies of comparable foreign regulatory authorities during the period in which we develop a product candidate or the period required for review of any final marketing approval before we are able to market any product candidate.
Any of our present and future clinical trials may be delayed, halted, not authorized, or approval of any of our products may be delayed or may not be obtained due to any of the following: • any preclinical study or clinical trial may fail to produce safety and efficacy results satisfactory to the FDA or comparable foreign regulatory authorities; • preclinical and clinical data can be interpreted in different ways, which could delay, limit or prevent marketing approval; • negative or inconclusive results from a preclinical study or clinical trial or adverse events during a clinical trial could cause a preclinical study or clinical trial to be repeated or a development program to be terminated, even if other studies or trials relating to the development program are ongoing or have been completed and were successful; • the FDA or comparable foreign regulatory authorities can place a clinical hold on a trial if, among other reasons, it finds that subjects enrolled in the trial are or would be exposed to an unreasonable and significant risk of illness or injury; 79 • the facilities that we utilize, or the processes or facilities of third-party vendors, including without limitation the contract manufacturers who are or will be manufacturing drug substance and drug product for us or any potential collaborators, may not satisfactorily complete inspections by the FDA or comparable foreign regulatory authorities; and • we may encounter delays or rejections based on changes in FDA regulations, standards or policies or the regulations, standards or policies of comparable foreign regulatory authorities during the period in which we develop a product candidate or the period required for review of any final marketing approval before we are able to market any product candidate.
If we obtain approval of our product candidates and ultimately commercialize our product candidates in foreign markets, we would be subject to additional risks and uncertainties, including: • our customers’ ability to obtain reimbursement for our product candidates in foreign markets; • our inability to directly control commercial activities if we are relying on third parties; • the burden of complying with complex and changing foreign regulatory, tax, accounting and legal requirements; • different medical practices and customs in foreign countries affecting acceptance in the marketplace; • import or export licensing requirements; • longer accounts receivable collection times; • longer lead times for shipping; • language barriers for technical training and the need for language translations; • reduced protection of intellectual property rights in some foreign countries; • the existence of additional potentially relevant third-party intellectual property rights; • foreign currency exchange rate fluctuations; and • the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute.
If we obtain approval of our product candidates and ultimately commercialize our product candidates in foreign markets, we would be subject to additional risks and uncertainties, including: • our customers’ ability to obtain reimbursement for our product candidates in foreign markets; • our inability to directly control commercial activities if we are relying on third parties; • the burden of complying with complex and changing foreign regulatory, tax, accounting and legal requirements; 56 • different medical practices and customs in foreign countries affecting acceptance in the marketplace; • import or export licensing requirements; • longer accounts receivable collection times; • longer lead times for shipping; • language barriers for technical training and the need for language translations; • reduced protection of intellectual property rights in some foreign countries; • the existence of additional potentially relevant third-party intellectual property rights; • foreign currency exchange rate fluctuations; and • the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute.
If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive, if there are safety concerns or if we determine that the observed safety or efficacy profile would not be competitive in the marketplace, we may: • incur unplanned costs; • be delayed in obtaining marketing approval for our product candidates; • not obtain marketing approval at all; • obtain marketing approval in some countries and not in others; • obtain approval for indications or patient populations that are not as broad as intended or desired; • obtain approval with labeling that includes significant use or distribution restrictions or safety warnings; • be subject to additional post-marketing testing requirements; or • have the product removed from the market after obtaining marketing approval.
If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive, if there are safety concerns or if we determine that the observed safety or efficacy profile would not be competitive in the marketplace, we may: • incur unplanned costs; • be delayed in obtaining marketing approval for our product candidates; • not obtain marketing approval at all; • obtain marketing approval in some countries and not in others; • obtain approval for indications or patient populations that are not as broad as intended or desired; • obtain approval with labeling that includes significant use or distribution restrictions or safety warnings; 53 • be subject to additional post-marketing testing requirements; or • have the product removed from the market after obtaining marketing approval.
For example: • others may be able to make product candidates that are similar to ours but that are not covered by the claims of the patents that we own or have exclusively licensed; • we or our licensors or future collaborators might not have been the first to make the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed; • we or our licensors or future collaborators might not have been the first to file patent applications covering certain of our inventions; 72 • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • it is possible that our pending patent applications will not lead to issued patents; • issued patents that we own or have exclusively licensed may be held invalid or unenforceable, as a result of legal challenges by our competitors; • our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • we cannot ensure that any of our patents, or any of our pending patent applications, if issued, or those of our licensors, will include claims having a scope sufficient to protect our product candidates; • we cannot ensure that any patents issued to us or our licensors will provide a basis for an exclusive market for our commercially viable product candidates or will provide us with any competitive advantages; • the Supreme Court of the U.S., other U.S. federal courts, Congress, the USPTO or similar foreign authorities may change the standards of patentability and any such changes could narrow or invalidate, or change the scope of, our or our licensors’ patents; • patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time; • we cannot ensure that our commercial activities or product candidates will not infringe upon the patents of others; • we cannot ensure that we will be able to successfully commercialize our product candidates on a substantial scale, if approved, before the relevant patents that we own or license expire; • we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property; • we may not develop additional proprietary technologies that are patentable; and • the patents of others may have an adverse effect on our business.
For example: • others may be able to make product candidates that are similar to ours but that are not covered by the claims of the patents that we own or have exclusively licensed; • we or our licensors or future collaborators might not have been the first to make the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed; • we or our licensors or future collaborators might not have been the first to file patent applications covering certain of our inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • it is possible that our pending patent applications will not lead to issued patents; • issued patents that we own or have exclusively licensed may be held invalid or unenforceable, as a result of legal challenges by our competitors; • our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • we cannot ensure that any of our patents, or any of our pending patent applications, if issued, or those of our licensors, will include claims having a scope sufficient to protect our product candidates; • we cannot ensure that any patents issued to us or our licensors will provide a basis for an exclusive market for our commercially viable product candidates or will provide us with any competitive advantages; • the Supreme Court of the U.S., other U.S. federal courts, Congress, the USPTO or similar foreign authorities may change the standards of patentability and any such changes could narrow or invalidate, or change the scope of, our or our licensors’ patents; • patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time; • we cannot ensure that our commercial activities or product candidates will not infringe upon the patents of others; • we cannot ensure that we will be able to successfully commercialize our product candidates on a substantial scale, if approved, before the relevant patents that we own or license expire; • we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property; • we may not develop additional proprietary technologies that are patentable; and 78 • the patents of others may have an adverse effect on our business.
We will remain an emerging growth company until the earlier of (1) December 31, 2025, the last day of the fiscal year following the fifth anniversary of the completion of our initial public offering, (b) the last day of the fiscal year (a) in which we have total annual gross revenue of at least $1.235 billion or (b) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of 83 the prior June 30th and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
We will remain an emerging growth company until the earlier of (1) December 31, 2025, the last day of the fiscal year following the fifth anniversary of the completion of our initial public offering, (b) the last day of the fiscal year (a) in which we have total annual gross revenue of at least $1.235 billion or (b) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
In addition, our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may make the acquisition of our company more difficult, including the following: • a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors; • the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror; • the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • the requirement that a special meeting of stockholders may be called only by a majority vote of our entire board of directors, the chairman of our board of directors or our chief executive officer, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; 86 • the requirement for the affirmative vote of holders of at least 66 2/3% of the voting power of all of the then-outstanding shares of the voting stock, voting together as a single class, to amend the provisions of our amended and restated certificate of incorporation or our amended and restated bylaws, which may inhibit the ability of an acquiror to effect such amendments to facilitate an unsolicited takeover attempt; and • advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.
In addition, our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may make the acquisition of our company more difficult, including the following: • a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors; • the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror; • the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • the requirement that a special meeting of stockholders may be called only by a majority vote of our entire board of directors, the chairman of our board of directors or our chief executive officer, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; 92 • the requirement for the affirmative vote of holders of at least 66 2/3% of the voting power of all of the then-outstanding shares of the voting stock, voting together as a single class, to amend the provisions of our amended and restated certificate of incorporation or our amended and restated bylaws, which may inhibit the ability of an acquiror to effect such amendments to facilitate an unsolicited takeover attempt; and • advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.
Collaborations pose a number of risks, including the following: • collaborators have significant discretion in determining the amount and timing of efforts and resources that they will apply to these collaborations; • collaborators may not perform their obligations as expected; • collaborators may not pursue development of our product candidates or may elect not to continue or renew development programs based on results of clinical trials or other studies, changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition or business combination, that divert resources or create competing priorities; • collaborators may not pursue commercialization of any product candidates that achieve marketing approval or may elect not to continue or renew commercialization programs based on results of clinical trials or other studies, changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition or business combination, that may divert resources or create competing priorities; • collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; 65 • we may not have access to, or may be restricted from disclosing, certain information regarding product candidates being developed or commercialized under a collaboration and, consequently, may have limited ability to inform our stockholders about the status of such product candidates on a discretionary basis; • collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates and products if the collaborators believe that the competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours; • product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of our product candidates; • a collaborator may fail to comply with applicable regulatory requirements regarding the development, manufacture, distribution or marketing of a product candidate or product; • a collaborator may seek to renegotiate or terminate their relationship with us due to unsatisfactory clinical results, manufacturing issues, a change in business strategy, a change of control or other reasons; • a collaborator with marketing and distribution rights to one or more of our product candidates that achieve marketing approval may not commit sufficient resources to the marketing and distribution of such product or products; • disagreements with collaborators, including disagreements over intellectual property or proprietary rights, contract interpretation or the preferred course of development, might cause delays or terminations of the research, development or commercialization of product candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive; • collaborators may not properly obtain, maintain, enforce, defend or protect our intellectual property or proprietary rights or may use our proprietary information in such a way as to potentially lead to disputes or legal proceedings that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation; • disputes may arise with respect to the ownership of intellectual property developed pursuant to our collaborations; • collaborators may infringe, misappropriate or otherwise violate the intellectual property or proprietary rights of third parties, which may expose us to litigation and potential liability; and • collaborations may be terminated for the convenience of the collaborator, and, if terminated, we could be required to raise additional capital to pursue further development or commercialization of the applicable product candidates.
Collaborations pose a number of risks, including the following: • collaborators have significant discretion in determining the amount and timing of efforts and resources that they will apply to these collaborations; • collaborators may not perform their obligations as expected; • collaborators may not pursue development of our product candidates or may elect not to continue or renew development programs based on results of clinical trials or other studies, changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition or business combination, that divert resources or create competing priorities; • collaborators may not pursue commercialization of any product or product candidates that achieve marketing approval or may elect not to continue or renew commercialization programs based on results of clinical trials or other studies, changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition or business combination, that may divert resources or create competing priorities; • collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; • we may not have access to, or may be restricted from disclosing, certain information regarding product candidates being developed or commercialized under a collaboration and, consequently, may have limited ability to inform our stockholders about the status of such product candidates on a discretionary basis; • collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with XDEMVY or our product candidates and products if the collaborators believe that the competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours; • product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of our product candidates; • a collaborator may fail to comply with applicable regulatory requirements regarding the development, manufacture, distribution or marketing of a product candidate or product; • a collaborator may seek to renegotiate or terminate their relationship with us due to unsatisfactory clinical results, manufacturing issues, a change in business strategy, a change of control or other reasons; • a collaborator with marketing and distribution rights to one or more of our product candidates that achieve marketing approval may not commit sufficient resources to the marketing and distribution of such product or products; • disagreements with collaborators, including disagreements over intellectual property or proprietary rights, contract interpretation or the preferred course of development, might cause delays or terminations of the research, development or commercialization of product candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive; • collaborators may not properly obtain, maintain, enforce, defend or protect our intellectual property or proprietary rights or may use our proprietary information in such a way as to potentially lead to disputes or legal proceedings that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation; • disputes may arise with respect to the ownership of intellectual property developed pursuant to our collaborations; 71 • collaborators may infringe, misappropriate or otherwise violate the intellectual property or proprietary rights of third parties, which may expose us to litigation and potential liability; and • collaborations may be terminated for the convenience of the collaborator, and, if terminated, we could be required to raise additional capital to pursue further development or commercialization of the applicable product candidates.
We cannot assure you that our third-party service providers with access to our or our customers’, suppliers’, trial patients’ and employees’ personally identifiable and other sensitive or confidential information in relation to which we are responsible will not breach contractual obligations imposed by us, or that they will not experience data security breaches or attempts thereof, which could have a corresponding effect on our business, including putting us in breach of our obligations under privacy laws and regulations and/or which could in turn adversely affect our business, results of operations and financial condition.
We cannot assure you that our third-party service providers with access to our or our customers’, suppliers’, trial patients’ and employees’ personally identifiable and other sensitive or confidential information in relation to which we are responsible will not breach contractual obligations imposed by us, or that they will not experience data security breaches or attempts thereof, which could have a corresponding effect on our business, including putting us in breach of our obligations under privacy and data protection laws and regulations and/or which could in turn adversely affect our business, results of operations and financial condition.
In the event that any of our manufacturers fails to comply with such requirements or to perform its obligations to us in relation to quality, timing or otherwise, or if our supply of components or other materials becomes limited or interrupted for other reasons, we may be forced to manufacture the materials ourselves, for which we currently do not have the capabilities or resources, or enter into an agreement with another third party, which we may not be able to do on commercially reasonable terms, if at all.
In the event that any of our manufacturers fails to comply with such requirements or to perform its obligations to us in relation to quality, timing or otherwise, or if our supply of XDEMVY, components or other materials becomes limited or interrupted for other reasons, we may be forced to manufacture XDEMVY or other materials ourselves, for which we currently do not have the capabilities or resources, or enter into an agreement with another third party, which we may not be able to do on commercially reasonable terms, if at all.
Disputes may arise regarding intellectual property subject to a licensing agreement, including: • the scope of rights granted under the license agreement and other interpretation related issues; • the extent to which our technology and processes infringe intellectual property of the licensor that is not subject to the licensing agreement; • the sublicensing of patent and other rights; • our diligence obligations under the license agreement and what activities satisfy those diligence obligations; 67 • the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and • the priority of invention of patented technology.
Disputes may arise regarding intellectual property subject to a licensing agreement, including: • the scope of rights granted under the license agreement and other interpretation related issues; • the extent to which our technology and processes infringe intellectual property of the licensor that is not subject to the licensing agreement; • the sublicensing of patent and other rights; • our diligence obligations under the license agreement and what activities satisfy those diligence obligations; • the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and • the priority of invention of patented technology.
While we have not experienced any such system failure, accident or security breach to date, we cannot assure you that our data protection efforts and our investment in information technology will prevent significant breakdowns, data leakages, breaches in our systems or other cyber incidents that could have a material adverse effect upon our reputation, business, operations or financial condition, whether due to a loss of our trade secrets or other proprietary information or other similar disruptions.
While we have not experienced any such system failure, accident or security breach to date, we cannot assure you that our data protection efforts and our investment in information technology and cybersecurity will prevent significant breakdowns, data leakages, breaches in our systems or other cyber incidents that could have a material adverse effect upon our reputation, business, operations or financial condition, whether due to a loss of our trade secrets or other proprietary information or other similar disruptions.
We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed 89 fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
Although we seek to protect our ownership of intellectual property rights by ensuring that our agreements with our employees, collaborators, and other third parties with whom we do business include provisions requiring such parties to assign rights in inventions to us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of our employees’ former employers or other third parties.
Although we seek to protect our ownership of intellectual property rights by ensuring that our agreements with our employees, collaborators, and other third parties with whom we do business include provisions requiring 77 such parties to assign rights in inventions to us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of our employees’ former employers or other third parties.
There may be shortages in the raw materials used in the manufacturing of our product candidates or laboratory supplies for our preclinical studies and clinical trials, in each case, because of ongoing efforts to address the outbreak. We cannot assure that the inability to collect such clinical data would not have an adverse impact on our clinical trial results.
There may be shortages in the raw materials used in the manufacturing of our product candidates or laboratory supplies for our preclinical studies and clinical trials, in each case, because of ongoing efforts to address the outbreak. 40 We cannot assure that the inability to collect such clinical data would not have an adverse impact on our clinical trial results.
Department of Treasury, FDIC and Federal Reserve Board have announced a program to provide up to $25 billion of loans to financial institutions secured by certain of such government securities held by financial institutions to mitigate the risk of potential losses on the sale of such 44 instruments, widespread demands for customer withdrawals or other liquidity needs of financial institutions for immediately liquidity may exceed the capacity of such program.
Department of Treasury, FDIC and Federal Reserve Board have announced a program to provide up to $25 billion of loans to financial institutions secured by certain of such government securities held by financial institutions to mitigate the risk of potential losses on the sale of such instruments, widespread demands for customer withdrawals or other liquidity needs of financial institutions for immediately liquidity may exceed the capacity of such program.
We cannot guarantee that any of our patent searches or analyses, including the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third party patent and pending application in the U.S. and abroad that is relevant to or necessary for the commercialization of our product candidates in any jurisdiction.
We cannot guarantee that any of our patent searches or analyses, including the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third party patent and pending application in the U.S. and abroad that is relevant to or necessary for the commercialization of XDEMVY or our product candidates in any jurisdiction.
If the breadth or strength of protection provided by our patents and patent applications is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates. Our owned and licensed patent estate includes patent applications, many of which are at an early stage of prosecution.
If the breadth or strength of protection provided by our patents and patent applications is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop or commercialize XDEMVY or our current or future product candidates. Our owned and licensed patent estate includes patent applications, many of which are at an early stage of prosecution.
In addition, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. Furthermore, our competitors may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner.
In addition, given the amount of time required for the development, testing and regulatory review of 68 new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. Furthermore, our competitors may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner.
Despite the implementation of security measures, given their size and complexity and the increasing amounts of confidential information that they maintain, our internal information technology systems and those of our third-party CROs and other contractors and consultants are potentially vulnerable to breakdown or other damage or interruption from service interruptions, system malfunction, natural disasters, interruptions or cyber incidents resulting from the conflict between Russia and Ukraine, terrorism, war and telecommunication and electrical failures, as well as security breaches from inadvertent or intentional actions by our employees, contractors, consultants, business partners, and/or other third parties, or from cyber-attacks by malicious third parties (including the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information), which may compromise our system infrastructure or lead to data leakage.
Despite the implementation of security measures, given their size and complexity and the increasing amounts of confidential information that they maintain, our internal information technology systems and those of our third-party CROs, CMO, and other contractors and consultants are potentially vulnerable to breakdown or other damage or interruption from service interruptions, system malfunction, natural disasters, interruptions or cyber incidents resulting from the conflict between 38 Russia and Ukraine, terrorism, war and telecommunication and electrical failures, as well as security breaches from inadvertent or intentional actions by our employees, contractors, consultants, business partners, and/or other third parties, or from cyber-attacks by malicious third parties (including the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information), which may compromise our system infrastructure or lead to data leakage.
We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which, particularly when taken together with our lack of earthquake insurance, could have a material adverse effect on our business. Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.
We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which, particularly when taken together with our lack of earthquake insurance, could have a material adverse effect on our business. Unfavorable global and geopolitical economic conditions could adversely affect our business, financial condition or results of operations.
We also make assumptions, estimations, calculations, and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully evaluate all data. Preliminary or top-line results also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published.
We also make assumptions, estimations, 58 calculations, and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully evaluate all data. Preliminary or top-line results also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published.
In such cases, we may decide that the more prudent course of action is to simply monitor the situation or initiate or seek some other non-litigious action or solution. 70 Changes in patent law in the U.S. and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.
In such cases, we may decide that the more prudent course of action is to simply monitor the situation or initiate or seek some other non-litigious action or solution. Changes in patent law in the U.S. and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.
The obligations under the Credit Facility are secured by a first priority lien on substantially all of our assets, excluding our intellectual property on which there is a negative pledge, subject to customary exceptions. If we were unable to repay amounts due under the Credit Facility, Hercules and SVB could proceed against such assets.
The obligations 62 under the Credit Facility are secured by a first priority lien on substantially all of our assets, excluding our intellectual property on which there is a negative pledge, subject to customary exceptions. If we were unable to repay amounts due under the Credit Facility, Hercules and SVB could proceed against such assets.
In such an event, potential competitors might be able to enter the market with similar or identical products or technology. If we or our licensors fail to maintain the patents and patent applications relating to our product candidates, our competitive position, business, financial condition, results of operations and prospects would be adversely affected.
In such an event, potential competitors might be able to enter the market with similar or identical products or technology. If we or our licensors fail to maintain the patents and patent applications relating to XDEMVY or our product candidates, our competitive position, business, financial condition, results of operations and prospects would be adversely affected.
Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us and could require us to make substantial licensing and royalty payments. We could be forced, including by court order, to cease developing, manufacturing and commercializing the infringing technology or product.
Even if we were able to obtain a license, it could be non-exclusive, thereby giving our 74 competitors access to the same technologies licensed to us and could require us to make substantial licensing and royalty payments. We could be forced, including by court order, to cease developing, manufacturing and commercializing the infringing technology or product.
Any of these occurrences could adversely affect our competitive business position, business prospects and financial condition. Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question.
Any of these occurrences could adversely affect our competitive business position, business prospects and financial condition. Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in 75 question.
Additional changes that may affect our 75 business include the expansion of new programs such as Medicare payment for performance initiatives for physicians under the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”) which first affected physician payment in 2019. It is unclear how the introduction of the Medicare quality payment program will impact our business.
Additional changes that may affect our business include the expansion of new programs such as Medicare payment for performance initiatives for physicians under the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”) which first affected physician payment in 2019. It is unclear how the introduction of the Medicare quality payment program will impact our business.
These third parties are not our employees, and except for remedies available to us under our agreements with such third party, we have limited ability to control the amount or timing of resources that any such third party will devote to our clinical trials. Some of these third parties may terminate their engagements with us at any time.
These third parties are not our employees, and except for remedies available to us under our agreements with such third party, we have limited ability to control the amount or timing of resources that any such third party will devote to our clinical trials. Some of these third parties may terminate their 63 engagements with us at any time.
Further, we may not be aware of all third-party intellectual property rights potentially relating to our product candidates or their intended uses, and as a result the impact of such third-party intellectual property rights upon the patentability of our own patents and patent applications, as well as the impact of such third-party intellectual property upon our ability to commercialize our products, is highly uncertain.
Further, we may not be aware of all third-party intellectual property rights potentially relating to XDEMVY or our product candidates or their intended uses, and as a result the impact of such third-party intellectual property rights upon the patentability of our own patents and patent applications, as well as the impact of such third-party intellectual property upon our ability to commercialize our products, is highly uncertain.
We may not be successful in our efforts to establish a strategic partnership or other alternative 64 arrangements for our product candidates because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our product candidates as having the requisite potential to demonstrate safety and efficacy.
We may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for our product candidates because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our product candidates as having the requisite potential to demonstrate safety and efficacy.
If we do not have sufficient funds, we may not be able to further develop our product candidates or bring them to market and generate product revenue. Collaborations that we have entered into and may enter in the future may not be successful, and any success will depend heavily on the efforts and activities of such collaborators.
If we do not have sufficient funds, we may not be able to further develop our product candidates or bring them to market and generate product revenue. 70 Collaborations that we have entered into and may enter in the future may not be successful, and any success will depend heavily on the efforts and activities of such collaborators.
We may not be granted patent term extension either in the U.S. or in any foreign country because of, for example, failing to exercise due 69 diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements.
We may not be granted patent term extension either in the U.S. or in any foreign country because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements.
Net prices for products may be reduced by mandatory discounts or rebates required by government healthcare programs or private payers, by any future laws limiting drug prices and by any future relaxation of laws that presently restrict imports of product from countries where they may be sold at lower prices than in the U.S.
Net prices for products may be reduced by mandatory 84 discounts or rebates required by government healthcare programs or private payers, by any future laws limiting drug prices and by any future relaxation of laws that presently restrict imports of product from countries where they may be sold at lower prices than in the U.S.
Further, entering into such license agreements could impose various diligence, commercialization, royalty or other obligations on us. Future licensors may allege that we have breached our license agreement with them, and accordingly seek to terminate our license, which could adversely affect our competitive business position and harm our business prospects.
Further, entering into such 72 license agreements could impose various diligence, commercialization, royalty or other obligations on us. Future licensors may allege that we have breached our license agreement with them, and accordingly seek to terminate our license, which could adversely affect our competitive business position and harm our business prospects.
While we do not intend to engage in unfair or deceptive acts or practices, the FTC has the power to enforce promises as it interprets them, and events that we cannot fully control, such as data breaches, may be result in FTC enforcement. Enforcement by the FTC under the FTC Act can result in civil penalties or enforcement actions.
While we do not intend to engage in unfair or deceptive acts or practices, the FTC has the power to enforce promises as it interprets them, and events that we cannot fully control, such as data breaches, may result in FTC enforcement. Enforcement by the FTC under the FTC Act can result in civil penalties or enforcement actions.
We face significant competition, and if our competitors develop and market technologies or products more rapidly than we do or that are more effective, safer or less expensive than the product candidates we develop, our commercial opportunities will be negatively impacted. Our product candidates will, if approved, also compete with existing branded, generic and off-label products.
We face significant competition, and if our competitors develop and market technologies or products more rapidly than we do or that are more effective, safer or less expensive than the product candidates we develop, our commercial opportunities will be negatively impacted. XDEMVY and our product candidates, if approved, will also compete with existing branded, generic and off-label products.
The development and commercialization of new drug products is highly competitive. We face competition with respect to our product candidates that we may seek to develop or commercialize in the future, from many different sources, including major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide and existing treatments.
The development and commercialization of new drug products is highly competitive. We face competition with respect to XDEMVY and our product candidates that we may seek to develop or commercialize in the future, from many different sources, including major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide and existing treatments.
Litigation or other 68 legal proceedings relating to intellectual property claims, with or without merit, are unpredictable and generally expensive and time consuming and, even if resolved in our favor, are likely to divert significant resources from our core business, including distracting our technical and management personnel from their normal responsibilities.
Litigation or other legal proceedings relating to intellectual property claims, with or without merit, are unpredictable and generally expensive and time consuming and, even if resolved in our favor, are likely to divert significant resources from our core business, including distracting our technical and management personnel from their normal responsibilities.
If we or any third parties we may engage are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or such third parties are not able to maintain regulatory compliance, our product candidates may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability.
If we or any third parties we may engage with are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or such third parties are not able to maintain regulatory compliance, our product candidates may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability.
The GDPR may increase our responsibility and liability in relation to personal data that we process and we may be required to expend significant capital and other resources to ensure ongoing compliance with applicable privacy and data security laws, to protect against security breaches and hackers, or to alleviate problems caused by such breaches.
The GDPR may increase our responsibility and liability in relation to personal data that we process and we may be required to expend significant capital and other resources to ensure ongoing compliance with applicable privacy and data security laws, to 86 protect against security breaches and hackers, or to alleviate problems caused by such breaches.
Furthermore, significant disruptions of our internal information technology systems or security breaches could result in the loss, misappropriation, and/or unauthorized access, use, or disclosure of, or the prevention of access to, confidential information (including trade secrets or other intellectual property, proprietary business information, and personal information), which could result in financial, legal, business, and reputational harm to us.
Furthermore, significant disruptions of our information technology systems or security breaches could result in the loss, misappropriation, and/or unauthorized access, use, or disclosure of, or the prevention of access to, confidential information (including trade secrets or other intellectual property, proprietary business information, and personal information), which could result in financial, legal, business, and reputational harm to us.
The current inflationary environment related to increased aggregate demand, supply chain constraints and the effects from the armed conflict in Ukraine (including the effects of the sanctions that were implemented in response to the conflict and the resulting impacts on the commodity market and supply chains) have also increased our operating expenses and may continue to affect our operating expenses.
The current inflationary environment related to increased aggregate demand, supply chain constraints and the effects from the armed conflict in Ukraine (including the effects of the sanctions that were implemented in response to the conflict and the resulting impacts on the commodity market and supply chains) and Israel have also increased our operating expenses and may continue to affect our operating expenses.
Additionally, the net losses we incur may fluctuate significantly from quarter to quarter such that a period-to-period comparison of our results of operations may not be a good indicator of our future performance. The size of our future net losses will depend, in part, on the 40 rate of future growth of our expenses and our ability to generate revenue.
Additionally, the net losses we incur may fluctuate significantly from quarter to quarter such that a period-to-period comparison of our results of operations may not be a good indicator of our future performance. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation, resulting in court decisions, 62 including Supreme Court decisions, which have increased uncertainties as to the ability to enforce patent rights in the future.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation, resulting in court decisions, including Supreme Court decisions, which have increased uncertainties as to the ability to enforce patent rights in the future.
Because we have not yet conducted a formal patent landscape analysis related to our product candidates, we may not be aware of issued patents that a third party might assert are infringed by one of our current or future product candidates, which could materially impair our ability to commercialize our product candidates.
Because we have not yet conducted a formal patent landscape analysis related to XDEMVY or our product candidates, we may not be aware of issued patents that a third party might assert are infringed by XDEMVY or one of our current or future product candidates, which could materially impair our ability to commercialize XDEMVY or our product candidates.
Because we have not yet conducted a formal patent landscape analysis related to our product candidates, we may not be aware of issued patents that a third party might assert are infringed by one of our current or future product candidates, which could materially impair our ability to commercialize our product candidates.
Because we have not yet conducted a formal patent landscape analysis related to XDEMVY or our product candidates, we may not be aware of issued patents that a third party might assert are infringed by one of XDEMVY or our current or future product candidates, which could materially impair our ability to commercialize XDEMVY or our product candidates.
If we are unable to do so, we may have to curtail the development of such product candidate, reduce or delay one or more of our other development programs, delay the potential commercialization or reduce the scope of any planned sales or marketing activities for such product candidate, or increase our expenditures and undertake development, manufacturing or commercialization activities at our own expense.
If we are unable to do so, we may have to curtail the development of such product candidate, reduce or delay one or more of our other development programs, delay the commercialization or reduce the scope of any planned sales or marketing activities for such product candidate, or increase our expenditures and undertake development, manufacturing or commercialization activities at our own expense.
We, and the third parties with whom we share our facilities, are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Each of our operations involve the use of hazardous and flammable materials, including chemicals and biological and radioactive materials.
We, and the third parties with whom we share our facilities, are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and 82 disposal of hazardous materials and wastes. Each of our operations involve the use of hazardous and flammable materials, including chemicals and biological and radioactive materials.
Activities subject to these laws could also involve the improper use or misrepresentation of information obtained in the course of clinical trials, creation of fraudulent data in preclinical studies or clinical trials or illegal misappropriation of 76 drug product, which could result in regulatory sanctions and cause serious harm to our reputation.
Activities subject to these laws could also involve the improper use or misrepresentation of information obtained in the course of clinical trials, creation of fraudulent data in preclinical studies or clinical trials or illegal misappropriation of drug product, which could result in regulatory sanctions and cause serious harm to our reputation.
To manage our anticipated future growth, we must: 34 • identify, recruit, integrate, maintain and motivate additional qualified personnel; • manage our development efforts effectively, including the initiation and execution of clinical trials for our product candidates; and • improve our operational, financial and management controls, reporting systems and procedures.
To manage our anticipated future growth, we must: • identify, recruit, integrate, maintain and motivate additional qualified personnel; • manage our development efforts effectively, including the initiation and execution of clinical trials for our product candidates; and • improve our operational, financial and management controls, reporting systems and procedures.
If we are unable to obtain and maintain sufficient intellectual property protection for our product candidates, or if the scope of the intellectual property protection is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be adversely affected.
If we are unable to obtain and maintain sufficient intellectual property protection for XDEMVY or our product candidates, or if the scope of the intellectual property protection is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be adversely affected.
Although we have pending U.S. and foreign patent applications in our portfolio, we cannot predict: • if and when patents may issue based on our patent applications; • the scope of protection of any patent issuing based on our patent applications; • whether the claims of any patent issuing based on our patent applications will provide protection against competitors; • whether or not third parties will find ways to invalidate or circumvent our patent rights; • whether or not others will obtain patents claiming aspects similar to those claimed in our patents and patent applications; • whether we will need to initiate litigation or administrative proceedings to enforce and/or defend our patent rights which will be costly whether we win or lose; and/or • whether the patent applications that we own or in-license will result in issued patents with claims that cover our product candidates or uses thereof in the U.S. or in other foreign countries.
Although we have pending U.S. and foreign patent applications in our portfolio, we cannot predict: • if and when patents may issue based on our patent applications; • the scope of protection of any patent issuing based on our patent applications; • whether the claims of any patent issuing based on our patent applications will provide protection against competitors; • whether or not third parties will find ways to invalidate or circumvent our patent rights; • whether or not others will obtain patents claiming aspects similar to those claimed in our patents and patent applications; • whether we will need to initiate litigation or administrative proceedings to enforce and/or defend our patent rights which will be costly whether we win or lose; and/or 73 • whether the patent applications that we own or in-license will result in issued patents with claims that cover our products or product candidates or uses thereof in the U.S. or in other foreign countries.
Elements 71 of our product candidate, including processes for their preparation and manufacture, may involve proprietary know-how, information, or technology that is not covered by patents, and thus for these aspects we may consider trade secrets and know-how to be our primary intellectual property.
Elements of our product candidate, including processes for their preparation and manufacture, may involve proprietary know-how, information, or technology that is not covered by patents, and thus for these aspects we may consider trade secrets and know-how to be our primary intellectual property.
It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. We also have outsourced elements of our operations to third parties, and as a result we manage a number of third-party contractors who have access to our confidential information.
It is critical that we do so in a secure manner to maintain the confidentiality, availability and integrity of such confidential information. We also have outsourced elements of our operations to third parties, and as a result we manage a number of third-party contractors who have access to our confidential information.
We also may in the future enter into in-license or out-license agreements with multiple licensors and strategic agreements, which, subject us 57 to various obligations, including diligence obligations, reporting and notification obligations, payment obligations for achievement of certain milestone as well as other material obligations.
We also may in the future enter into in-license or out-license agreements with multiple licensors and strategic agreements, which, subject us to various obligations, including diligence obligations, reporting and notification obligations, payment obligations for achievement of certain milestone as well as other material obligations.
In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered 63 trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings.
In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings.
Further, the European/UK data protection laws (including laws on data transfers as set out above) may also be updated/revised, accompanied by new guidance and/or judicial/regulatory interpretations, which could entail further impacts on our compliance efforts and increased cost.
Further, the European/UK data protection laws (including laws on international data transfers as set out above) may also be updated/revised, accompanied by new guidance and/or judicial/regulatory interpretations, which could entail further impacts on our compliance efforts and increased cost.
On occasion, large judgments have been awarded in class action lawsuits based on products that had unanticipated adverse effects. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we could incur substantial liabilities.
On occasion, large judgments have been awarded in class action lawsuits based on products that had unanticipated adverse effects. If we cannot successfully defend ourselves against claims that XDEMVY or our product candidates caused injuries, we could incur substantial liabilities.
We will need to raise substantial additional capital to complete the development and commercialization of our other product candidates through one or more of: equity offerings, draws from our Credit Facility, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or other sources.
We will need to raise substantial additional capital to complete the development and commercialization of XDEMVY and our other product candidates through one or more of: equity offerings, draws from our Credit Facility, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or other sources.
Any product candidate for which we obtain regulatory approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising, and promotional activities for such product, will be subject to continual requirements of and review by the FDA, the EMA and other regulatory authorities.
XDEMVY, and any other product candidate for which we obtain regulatory approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising, and promotional activities for such product, will be subject to continual requirements of and review by the FDA, the EMA and other regulatory authorities.
Although we plan to carefully manage our relationships with our CROs, investigators and 59 other third parties, we may nonetheless encounter challenges or delays in the future, which could have a material and adverse impact on our business, financial condition and prospects.
Although we plan to carefully manage our relationships with our CROs, investigators and other third parties, we may nonetheless encounter challenges or delays in the future, which could have a material and adverse impact on our business, financial condition and prospects.
Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business. Efforts to ensure that our collaborations or business arrangements with third parties, and our business generally, comply with applicable healthcare laws and regulations will likely be costly.
Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business. 83 Efforts to ensure that our collaborations or business arrangements with third parties, and our business generally, comply with applicable healthcare laws and regulations will likely be costly.
If our operations are found to be in violation of any of these laws or any other current or future governmental laws and regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, individual imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, contractual damages, reputational harm, diminished profits and future earnings, additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations, any of which could substantially disrupt our operations.
If our operations are found to be in violation of any of these laws or any other current or future governmental laws and regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgements, individual imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, contractual damages, reputational harm, diminished profits and future earnings, additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations, any of which could substantially disrupt our operations.
In the U.S., the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. The Affordable Care Act substantially changed the way healthcare is financed by both the government and private insurers, and significantly impacts the U.S. pharmaceutical industry.
In the U.S., the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. The Affordable Care Act of 2010 substantially changed the way healthcare is financed by both the government and private insurers, and significantly impacts the U.S. pharmaceutical industry.
Our arrangements with ECPs, patients, third-party payers and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may affect our business or financial arrangements and relationships through which we would market, sell and distribute our products.
Our arrangements with ECPs, patients, third-party payers and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may affect our business or financial arrangements and relationships through which we market, sell and distribute our products.
In some cases, the technical skills or technology required to manufacture our product candidates may be unique or proprietary to the original manufacturer and we may have difficulty transferring such skills or technology to another third party and a feasible alternative may not exist.
In some cases, the technical skills or technology required to manufacture XDEMVY or our product candidates may be unique or proprietary to the original manufacturer and we may have difficulty transferring such skills or technology to another third party and a feasible alternative may not exist.
There can also be no assurance that the comparable foreign regulatory authority in any jurisdiction in which we seek regulatory approval for our product candidates will accept data from clinical trials conducted outside such jurisdiction.
There can also be no assurance that the comparable foreign regulatory authority in any jurisdiction in which we seek regulatory approval for our product candidates will accept data 57 from clinical trials conducted outside such jurisdiction.
We may experience delays in our ongoing 48 clinical trials, and we do not know whether planned clinical trials will begin on time, need to be redesigned, enroll patients on time or be completed on schedule, if at all.
We may experience delays in our ongoing clinical trials, and we do not know whether planned clinical trials will begin on time, need to be redesigned, enroll patients on time or be completed on schedule, if at all.
Should we be required to obtain licenses to any third-party technology, including any such patents required to 66 manufacture, use or sell our product candidates, such licenses may not be available to us on commercially reasonable terms, or at all.
Should we be required to obtain licenses to any third-party technology, including any such patents required to manufacture, use or sell our product candidates, such licenses may not be available to us on commercially reasonable terms, or at all.
The enrollment of patients depends on many factors, including: • the patient eligibility criteria defined in the protocol; • size of the patient population required for analysis of the trial’s primary endpoints; • the proximity of patients to study sites; • the design of the trial; • our ability to recruit clinical trial investigators with the appropriate competencies and experience; • clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating; • our ability to obtain and maintain patient consents; • costs to, or lack of adequate compensation for, prospective patients; • difficulties of enrolling patients or patients continuing to participate in follow-up visits due to ongoing or new health pandemics; and • the risk that patients enrolled in clinical trials will drop out of the trials before completion.
The enrollment of patients depends on many factors, including: • the patient eligibility criteria defined in the protocol; • size of the patient population required for analysis of the trial’s primary endpoints; 54 • the proximity of patients to study sites; • the design of the trial; • our ability to recruit clinical trial investigators with the appropriate competencies and experience; • clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating; • our ability to obtain and maintain patient consents; • costs to, or lack of adequate compensation for, prospective patients; • difficulties of enrolling patients or patients continuing to participate in follow-up visits due to ongoing or new health epidemics; and • the risk that patients enrolled in clinical trials will drop out of the trials before completion.
If we are unable to continue to attract and retain high quality personnel, our ability to pursue 35 our growth strategy will be limited, and our business, prospects, financial condition and results of operations may be adversely affected.
If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited, and our business, prospects, financial condition and results of operations may be adversely affected.
In addition, there are risks inherent in conducting clinical trials in multiple jurisdictions, inside and outside of the U.S. and if we conduct trials outside of the U.S., we may face risks, such as: • regulatory and administrative requirements of the jurisdiction where the trial is conducted that could burden or limit our ability to conduct our clinical trials; • foreign exchange rate fluctuations; • manufacturing, customs, shipment and storage requirements; • cultural differences in medical practice and clinical research; • diminished protection of intellectual property in some countries; • different cultural attitudes to self-reported adverse events (such as burning, stinging, blurry vision) leading to a different safety profile; and • the risk that the patient populations in such trials are not considered representative as compared to the patient population in the target markets where approval is being sought.
In addition, there are risks inherent in conducting clinical trials in multiple jurisdictions, inside and outside of the U.S. and if we conduct trials outside of the U.S., we may face risks, such as: • regulatory and administrative requirements of the jurisdiction where the trial is conducted that could burden or limit our ability to conduct our clinical trials; • foreign exchange rate fluctuations; • manufacturing, customs, shipment and storage requirements; • cultural or legal differences in the standards for medical practice and clinical research; • diminished protection of intellectual property in some countries; • different cultural attitudes to self-reported adverse events (such as burning, stinging, blurry vision) leading to a different safety profile; and • the risk that the patient populations in such trials are not considered representative as compared to the patient population in the target markets where approval is being sought.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. We currently lease approximately 27,807 square feet of office and laboratory space in Irvine, California under certain leases that expire in January 2024, with a renewal option for a term of three years.
Biggest changeItem 2. Properties. We currently lease approximately 32,145 square feet of office and laboratory space in Irvine, California under certain leases that expire in January 2027, with a renewal option for a term of three years.
We believe that this space will be 87 sufficient to meet our needs for the foreseeable future and that any additional space we may require will be available on commercially reasonable terms.
We believe that this space will be sufficient to meet our needs for the foreseeable future and that any additional space we may require will be available on commercially reasonable terms.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeRegardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors. Item 4. Mine Safety Disclosures. None. 88 PART II
Biggest changeRegardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors. 94 Item 4. Mine Safety Disclosures. None. 95 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHolders of Common Stock As of March 9, 2023, the closing price of our common stock on the Nasdaq was $14.91 per share, and there were approximately 30 holders of record of our common stock.
Biggest changeHolders of Common Stock As of February 21, 2024, the closing price of our common stock on the Nasdaq was $30.13 per share, and there were approximately 32 holders of record of our common stock.
Securities Authorized for Issuance under Equity Compensation Plans The information required by this item will be contained in our definitive proxy statement to be filed with the SEC in connection with our Annual Meeting of Stockholders within 120 days after December 31, 2022 and is incorporated in this Annual Report on Form 10-K by reference.
Securities Authorized for Issuance under Equity Compensation Plans The information required by this item will be contained in our definitive proxy statement to be filed with the SEC in connection with our Annual Meeting of Stockholders within 120 days after December 31, 2023 and is incorporated in this Annual Report on Form 10-K by reference.
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Other Information As disclosed in our Current Report on Form 8-K filed with the SEC on January 18, 2024, we announced that Jose Trevejo, M.D., Ph.D. would be leaving his role as the Company’s Chief Medical Officer (the “Transition”), effective as of January 18, 2024 (the “Transition Date”) and leaving his employment with the Company on February 17, 2024 (the “Separation Date”). 96 In connection with the Transition and Dr.
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Trevejo’s termination of employment, on February 21, 2024, we entered into a separation and severance agreement with Dr.
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Trevejo, which provides for the following benefits effective upon and after the Separation Date: severance payments equal to twelve months of base salary and twelve months of company-paid continued benefits coverage, a lump sum bonus payment payable in 2024 equal to his 2023 annual target bonus adjusted based in part on the 2023 Company performance score and Company discretion, accelerated vesting of options for 13,789 shares of our common stock, and an option exercise period extension for certain options, in exchange for a release and waiver of claims and continued compliance with his confidentiality obligations.
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The foregoing summary of the terms of the Separation Agreement is qualified in its entirety by reference to the complete text of the Separation Agreement, a copy of which will be filed with our Quarterly Report on 10-Q for the quarter ending March 30, 2024. Item 6. Reserved 97 Table of Content

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe federal research and development tax credits begin to expire in 2040 unless previously utilized, and the California credit carryforwards are available indefinitely. 94 Table of Co ntents Results of Operations Comparison of the Years Ended December 31, 2022 and 2021 The following table summarizes our results of operations for the periods indicated: Year Ended December 31, 2022 2021 Change (in thousands) Revenues: License fees $ 23,893 $ 53,067 $ (29,174) Collaboration revenue 1,923 3,960 (2,037) Total revenues 25,816 57,027 (31,211) Operating expenses: Cost of license fees and collaboration revenue 955 2,075 (1,120) Research and development 42,624 41,712 912 General and administrative 44,949 25,397 19,552 Total operating expenses 88,528 69,184 19,344 Loss from operations before other income (expense) and income taxes (62,712) (12,157) (50,555) Other income (expense): Interest income 3,499 36 3,463 Interest expense (2,199) — (2,199) Other income (expense), net 86 (73) 159 Unrealized loss on equity investments (268) (591) 323 Change in fair value of equity warrants issued by licensee (501) (987) 486 Total other income (expense), net 617 (1,615) 2,232 Loss from operations before income taxes (62,095) (13,772) (48,323) Benefit (provision) for income taxes 4 (55) 59 Net loss $ (62,091) $ (13,827) $ (48,264) License Fees and Collaboration Revenue License fees and collaboration revenue was $25.8 million for the year ended December 31, 2022.
Biggest changeResults of Operations Comparison of the Years Ended December 31, 2023 and 2022 The following table summarizes our results of operations for the periods indicated: Year Ended December 31, 2023 2022 Change (in thousands) Revenues: Product sales, net $ 14,729 $ — $ 14,729 License fees and collaboration revenue 2,718 25,816 (23,098) Total revenues 17,447 25,816 (8,369) Operating expenses: Cost of sales 1,593 — 1,593 Cost of license fees and collaboration revenue — 955 (955) Research and development 50,312 42,624 7,688 Selling, general and administrative 108,700 44,949 63,751 Total operating expenses 160,605 88,528 72,077 Loss from operations (143,158) (62,712) (80,446) Other income (expense): Interest income 10,337 3,499 6,838 Interest expense (3,346) (2,199) (1,147) Other (expense) income, net (102) 86 (188) Unrealized gain (loss) on equity investments 259 (268) 527 Change in fair value of equity warrants issued by licensee 117 (501) 618 Total other income, net 7,265 617 6,648 Loss before income taxes (135,893) (62,095) (73,798) Benefit from income taxes — 4 (4) Net loss $ (135,893) $ (62,091) $ (73,802) 104 Table of Content Product Sales, Net During the year ended December 31, 2023, in conjunction with the launch of XDEMVY, we recognized revenue of $14.7 million from product sales, net of rebates, chargebacks, discounts, and other adjustments driven by approximately 17,400 prescriptions of XDEMVY to patients.
Until such time as we can generate significant revenue from product sales and achieve profitability, if ever, we expect to finance our operations through private or public equity or debt financings, or collaborations, strategic alliances, or licensing arrangements with third parties. Adequate funding may not be available to us when needed on acceptable terms, or at all.
Until such time as we can generate significant revenue from product sales and achieve profitability, if ever, we expect to finance our operations through public equity or debt financings, or collaborations, strategic alliances, or licensing arrangements with third parties. Adequate funding may not be available to us when needed on acceptable terms, or at all.
We also granted the underwriters a 30-day option to purchase up to 840,000 additional shares of common stock at the public offering price, less discounts and commissions.
We also granted the underwriters a 30-day option to purchase up to 840,000 additional shares of common stock at the public offering price, less underwriting discounts and commissions.
Shelf Registration Statement On November 1, 2021, we filed a shelf registration statement on Form S-3 that was declared effective by the SEC on November 5, 2021 (the “Shelf Registration Statement”), which permitted us to offer up to $300.0 million of common stock, preferred stock, debt securities and warrants in one or more offerings and in any combination, including in units from time to time.
On November 1, 2021, we filed a shelf registration statement on Form S-3 that was declared effective by the SEC on November 5, 2021 (the “2021 Shelf Registration Statement”), which permitted us to offer up to $300.0 million of common stock, preferred stock, debt securities and warrants in one or more offerings and in any combination, including in units from time to time.
Our requirements of a future capital raise will depend on many factors, including: • the scope, timing, rate of progress and costs of our drug discovery efforts, preclinical development activities, laboratory testing and clinical trials for our product candidates; • the number and scope of clinical programs we decide to pursue; • the cost, timing and outcome of preparing for and undergoing regulatory review of our product candidates; • the scope and costs of development and commercial manufacturing activities; • the cost and timing associated with commercializing our product candidates, if they receive marketing approval; • the amount of revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval; • the achievement of milestones or occurrence of other developments that trigger payments under any collaboration agreements we might have at such time and availability of our Credit Facility; • the extent to which we acquire or in-license other product candidates and technologies; • the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; • our ability to establish and maintain collaborations on favorable terms, if at all; • our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development of our product candidates and, ultimately, the sale of our products, following FDA approval; • our implementation of various computerized information systems; • impact of health epidemics, including COVID-19, on our clinical development or operations; and • the costs associated with being a public company.
Our requirements of a future capital raise will depend on many factors, including: • the amount of revenue received from commercial sales of XDEMVY or our product candidates, should any of our product candidates receive marketing approval; • the cost and timing associated with commercializing XDEMVY or our product candidates, if they receive marketing approval; • the scope, timing, rate of progress and costs of our drug discovery efforts, preclinical development activities, laboratory testing and clinical trials for our product candidates; • the number and scope of clinical programs we decide to pursue; • the cost, timing and outcome of preparing for and undergoing regulatory review of our product candidates; • the scope and costs of development and commercial manufacturing activities; 108 Table of Content • the achievement of milestones or occurrence of other developments that trigger payments under any collaboration agreements we might have at such time and availability of our Credit Facility; • the extent to which we acquire or in-license other product candidates and technologies; • the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; • our ability to establish and maintain collaborations on favorable terms, if at all; • our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development of our product candidates and, ultimately, the sale of our products, following FDA approval; • our implementation of various computerized information systems; • impact of health epidemics on our clinical development or operations; and • the costs associated with being a public company.
The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods.
The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue earned and expenses incurred during the reporting periods.
In come Tax Benefit (Provision) Since our inception, we have not recorded any U.S. federal or state income tax benefits for the net operating losses we have incurred in each year, or for our earned research and development tax credits, due to our uncertainty of realizing a benefit from either.
Benefit from Income Taxes Since our inception, we have not recorded any U.S. federal or state income tax benefits for the net operating losses we have incurred in each year, or for our earned research and development tax credits, due to our uncertainty of realizing a benefit from either.
We will recognize additional license fees and collaboration revenue to the extent other events occur, specifically related to (i) milestone achievement of a drug supply agreement execution, (ii) milestone achievement of regulatory events in the China Territory, and (iii) royalties and milestones from our licensee's product sales of TP-03 in the China Territory.
We will recognize additional license fees and collaboration revenue under the China Out-License to the extent other events occur, specifically related to (i) milestone achievement of an additional drug supply agreement execution, (ii) milestone achievement of regulatory events in the China Territory, and (iii) royalties and milestones from our licensee's product sales of TP-03 in the China Territory.
Net Cash Provided by Financing Activities Net cash provided by financing activities was $94.0 million for the year ended December 31, 2022 which consisted primarily of (i) $74.4 million of net proceeds from the issuance of common stock in our Follow-On Public Offering, (ii) $20.0 million of proceeds from our Credit Facility, partially offset by $0.9 million of issuance costs, (iii) $0.5 million of proceeds from our employee stock purchase plan, and (iv) $0.1 million of proceeds from the exercise of vested employee stock options.
Net cash provided by financing activities was $94.0 million for the year ended December 31, 2022 which consisted of (i) $74.4 million of net proceeds from the issuance of common stock from our May 2022 Public Offering, (ii) $20.0 million of proceeds from our Credit Facility, partially offset by $0.9 million of issuance costs, (iii) $0.5 million of proceeds from our employee stock purchase plan, and (iv) $0.1 million of proceeds from the exercise of vested employee stock options.
Research and Development Expenses Research and development expenses consist of expenses incurred in connection with the development of our product candidates, including: • fees paid to third parties to conduct certain research and development activities on our behalf, including under agreements with CROs; • payments under licensing agreements, such as our upfront in-license fee for lotilaner; • consulting costs and certain allocated payroll and employee-related expenses (including stock-based compensation and salaries) for personnel engaged in research and development functions; • costs related to compliance with clinical regulatory requirements; • costs of procuring drug products for use in our preclinical studies and clinical trials; and 93 Table of Co ntents • facilities expenses, which include direct and allocated expenses for rent of our laboratory.
Research and Development Expenses Research and development expenses consist of expenses incurred in connection with the development of our product candidates, including: • fees paid to third parties to conduct certain research and development activities on our behalf, including under agreements with CROs; • payments under licensing agreements, such as our upfront in-license fee for lotilaner; • consulting costs and certain allocated payroll, employee benefit and other employee-related costs (including stock-based compensation, salaries, payroll taxes) for personnel engaged in research and development functions; • costs related to compliance with clinical regulatory requirements; • costs of procuring drug products for use in our preclinical studies and clinical trials; and • facilities expenses, which include direct and allocated expenses for rent of our laboratory.
Corporate and Financial Overview We were incorporated as a Delaware corporation in November 2016, and our headquarters is located in Irvine, California.
Corporate and Financial Overview We were incorporated as a Delaware corporation in November 2016, and our headquarters are located in Irvine, California.
If we are required to enter into collaborations and other arrangements to address our liquidity needs, we may have to give up certain rights that limit our ability to develop and commercialize our product candidates or may have other terms that are not favorable to us or our stockholders, which could 98 Table of Co ntents materially and adversely affect our business and financial prospects.
If we are required to enter into collaborations and other arrangements to address our liquidity needs, we may have to give up certain rights that limit our ability to develop and commercialize our product candidates or may have other terms that are not favorable to us or our stockholders, which could materially and adversely affect our business and financial prospects.
Other Income (Expense), Net Other income (expense), net primarily consists of (i) interest income earned on our cash, cash equivalents, and marketable securities, (ii) interest expense on the Credit Facility executed in February 2022, and (iii) the change in estimated fair value of the LianBio equity warrants and LianBio common stock we received as part of our China Out-License in March 2021.
Other Income, Net Other income, net primarily consists of (i) interest income earned on our cash, cash equivalents, and marketable securities, (ii) interest expense on the Credit Facility, and (iii) the change in estimated fair value of the LianBio equity warrants and LianBio common stock we received as part of the China Out-License.
Funding Requirements Cash Runway Our operating expenditures currently consist of research and development costs (including activities within our preclinical, clinical, regulatory, and drug manufacturing initiatives) and general and administrative costs. Our use of cash is impacted by the timing and extent of payments for each of these activities and other business requirements.
Funding Requirements Liquidity Our operating expenditures currently consist of cost of sales, research and development costs (including activities within our preclinical, clinical, regulatory, and drug manufacturing initiatives) and selling, general and administrative costs. Our use of cash is impacted by the timing and extent of payments for each of these activities and other business requirements.
We will remain an emerging growth company until the earliest of (1) the last day of our first fiscal year (a) following the fifth anniversary of the completion of our IPO, (b) in which we have total annual gross revenues of at least $1.235 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million of the prior June 30th and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. 103 Table of Co ntents
We will remain an emerging growth company until the earliest of (1) December 31, 2025, which is the last day of our first fiscal year following the fifth anniversary of the completion of our IPO, (2) the last day of our first fiscal year (a) in which we have total annual gross revenues of at least $1.235 billion or (b) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million, as of the prior June 30th and (3) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. 112 Table of Content
We anticipate that our operating expenses will increase significantly as we: • seek regulatory approvals for TP-03 and other product candidates that successfully complete clinical development, if any; • advance the clinical development of TP-03 for the treatment of MGD, TP-04 for the potential treatment of rosacea and TP-05 for potential Lyme prophylaxis; • establish our own sales force in the U.S. to commercialize TP-03 upon regulatory approval and our other products for which we obtain such approvals; • engage with contract manufacturers to ensure a sufficient supply chain capacity to provide commercial quantities of any products for which we may obtain marketing approval; • maintain, expand and protect our intellectual property portfolio; • hire additional staff, including clinical, scientific, technical, regulatory, marketing, operations, financial, and other support personnel, to execute our business plan; and 92 Table of Co ntents • add information systems and personnel to support our product development and potential future commercialization efforts, and to enable us to operate as a public company.
We anticipate that our operating expenses will increase significantly as we: • commercialize XDEMVY and our other products for which we obtain regulatory approvals; • maintain regulatory approval for XDEMVY and seek regulatory approval for our other product candidates that successfully complete clinical development, if any; • advance the clinical development of TP-03 for the potential treatment of MGD, TP-04 for the potential treatment of rosacea and TP-05 for the potential Lyme disease prophylaxis; • engage with contract manufacturers to ensure a sufficient supply chain capacity to provide commercial quantities of XDEMVY and any other products for which we may obtain marketing approval; • maintain, expand and protect our intellectual property portfolio; • hire additional staff, including clinical, scientific, technical, regulatory, marketing, operations, financial, and other support personnel, to execute our business plan; and • add information systems and personnel to support our product development and commercialization efforts, and to enable us to operate as a public company.
Recent Business Highlights TP-03 Demodex Blepharitis : To date, we have completed seven clinical trials that include a Phase 1 trial, four Phase 2 trials, a Phase 2b/3 Saturn-1 trial, and a Phase 3 Saturn-2 trial for TP-03 in Demodex blepharitis, all of which met their primary, secondary and/or certain exploratory endpoints, with the drug well tolerated.
To date, we have completed seven clinical trials that include a Phase 3 Saturn-2 trial, a Phase 2b/3 Saturn-1 trial, four Phase 2 trials, and a Phase 1 trial for XDEMVY in Demodex blepharitis, all of which met their primary, secondary and/or certain exploratory endpoints, with the drug well tolerated throughout each trial.
Our net loss was $62.1 million and $13.8 million for the years ended December 31, 2022 and 2021, respectively. Our net losses may fluctuate significantly from quarter to quarter and year to year and could be substantial.
Our net loss was $135.9 million and $62.1 million for the years ended December 31, 2023 and 2022, respectively. Our net losses may fluctuate significantly from quarter to quarter and year to year and could be substantial.
After giving effect to the exercise of the underwriters’ option, we sold 5,889,832 shares for total gross proceeds of $79.5 million, before underwriting discounts, commissions and other estimated offering expenses for total net proceeds received of $74.3 million.
After giving effect to the exercise of the underwriters’ option, we sold 5,889,832 shares for total net proceeds received of $74.2 million, after underwriting discounts, commissions and other offering-related expenses.
See the section titled “Special Note Regarding Forward-Looking Statements” elsewhere in this Annual Report on Form 10-K. Overview Our Business We are a biopharmaceutical company focused on the development and commercialization of therapeutics, starting with eye care.
See the section titled “Special Note Regarding Forward-Looking Statements” elsewhere in this Annual Report on Form 10-K. Overview Our Business We are a commercial stage biopharmaceutical company focused on the development and commercialization of therapeutics, starting with eye care. Our lead product, XDEMVY ® was approved by the U.S.
While our significant accounting policies are described in the notes to our financial statements also included in this Annual Report on Form 10-K, we believe these critical accounting policies are the most important to understanding and evaluating our reported financial results.
Historically, revisions to our estimates have not resulted in a material change to the financial statements. While our significant accounting policies are described in the notes to our financial statements also included in this Annual Report on Form 10-K, we believe these critical accounting policies are the most important to understanding and evaluating our reported financial results.
Such arrangements include those related to the contractual obligations described below: Lease Commitments Our operating lease commitments reflect payments due for our active lease agreements in Irvine, California, for adjacent office and laboratory suites which expire on January 31, 2024, with a renewal option for a term of three years.
Such arrangements include those related to the contractual obligations described below: Lease Commitments Our operating lease commitments reflect payments due for our active lease agreements in Irvine, California, for adjacent office and laboratory suites which expire on January 31, 2027.
As of the date of this filing, we have $130.0 million of remaining tranched availability as follows: • $20.0 million upon the NDA submission of TP-03 in September 2022; • $35.0 million upon FDA approval of TP-03; • $50.0 million upon achievement of certain quarterly revenue thresholds; and • $25.0 million available with lender approval.
As of the date of this filing, we have $125.0 million of remaining tranched availability as follows: • $15.0 million, which became available in September 2022 upon our NDA submission of TP-03 to the FDA; • $35.0 million, which became available in July 2023 upon FDA approval of XDEMVY; • $50.0 million upon achievement of certain quarterly revenue thresholds; and • $25.0 million available with lender approval.
Recent Accounting Pronouncements A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in the notes to which they relate within our financial statements.
To date, actual amounts have not differed materially from our estimates. Recent Accounting Pronouncements A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in the notes to which they relate within our financial statements.
This amount represents the contractual milestones achieved or allocated under the China Out-License that have been fully or partially completed by December 31, 2022. These allocated amounts represented the satisfaction of the transfer of license rights to LianBio and the completion of clinical-related performance obligations.
These amounts represent the contractual milestones achieved or allocated under the China Out-License that have been fully or partially completed by the period ends. These allocated amounts represented the satisfaction of the transfer of license rights to LianBio and the completion of related performance obligations.
The increase primarily consists of (i) $3.5 million of increased interest income earned on our cash, cash equivalents and marketable securities, (ii) $0.5 million change in estimated fair value of the LianBio equity warrants we received as part of our China Out-License in March 2021, and (iii) $0.3 million change in fair value of the LianBio common stock (after our exercise of the first and second warrant tranches).
The increase is primarily due to (i) $6.8 million of increased interest income earned on our cash, cash equivalents and marketable securities, (ii) $0.6 million change in estimated fair value of the LianBio equity warrants we received as part of our China Out-License in March 2021, and (iii) $0.5 million change in fair value of the LianBio common stock.
TP-03 China Territory Out-License : In March 2021, we executed the China Out-License with LianBio, granting exclusive commercial rights to TP-03 for the treatment of Demodex blepharitis and MGD within the China Territory.
TP-03 China Territory Out-License : In March 2021, we executed an out-license agreement (the "China Out-License") with LianBio Ophthalmology Limited ("LianBio"), granting exclusive commercial rights to TP-03 for the treatment of Demodex blepharitis and MGD within The People’s Republic of China, Macau, Hong Kong, and Taiwan (the "China Territory").
We are developing product candidates to address targeted diseases with high unmet medical needs, which currently include TP-03 for the potential treatment of MGD, TP-04 for the potential treatment of rosacea, and TP-05 for potential Lyme disease prophylaxis and community malaria reduction.
We are investigating the development of our product candidates to address targeted diseases with high unmet medical needs, which currently include TP-03 for the potential treatment of meibomian gland disease ("MGD"), TP-04, a novel gel formulation of lotilaner for the potential treatment of rosacea, and TP-05, a novel investigative oral formulation of lotilaner, for potential Lyme disease prophylaxis and community malaria reduction.
We expect that our general and administrative expenses will increase substantially in the future as a result of expanding our operations, including hiring personnel, preparing for potential commercialization of our product candidates, and additional facility occupancy costs, as well various incremental costs associated with being a public company (including increased legal and accounting fees, regulatory costs associated with maintaining compliance with the rules of the Nasdaq Stock Market and SEC regulations, investor relations activities, directors and officers liability insurance premiums, and other accompanying compliance and governance costs).
Other selling, general and administrative expenses include sales and marketing costs to support our commercial launch, consulting fees, legal services, rent and other facilities costs, patient assistance donations, and other general operating expenses, not otherwise classified as research and development expenses. 103 Table of Content We expect that our selling, general and administrative expenses will increase substantially in the future as a result of expanding our operations, including hiring personnel, continued commercialization of XDEMVY, preparing for potential commercialization of our other product candidates, and additional facility occupancy costs, as well as various incremental costs associated with being a public company, including: increased legal and accounting fees, regulatory costs associated with maintaining compliance with the rules of the Nasdaq Stock Market and SEC regulations, investor relations activities, directors and officers liability insurance premiums, and other accompanying compliance and governance costs.
Poorly controlled and progressive blepharitis can lead to corneal damage over time and, in extreme cases, blindness. There may be as high as approximately 25 million people in the U.S. who suffer from Demodex blepharitis. We designed TP-03 to target and eradicate the root cause of Demodex blepharitis – Demodex mite infestation.
Poorly controlled and progressive blepharitis can lead to corneal damage over time and, in extreme cases, blindness. There may be as many as approximately 25 million people in the U.S. who suffer from Demodex blepharitis.
Credit Facility In February 2022, we drew $20.0 million from our Credit Facility with Hercules and SVB. Capital draws, at our election, are in $5.0 million increments. This Credit Facility was amended in January 2023.
Capital draws are at our election and are in $5.0 million increments. Concurrent with the execution of the Credit Facility we drew $20.0 million. This Credit Facility was amended in January 2023 and August 2023.
We also granted the underwriters a 30-day option to purchase up to 840,000 additional shares of common stock at the public offering price, less underwriting discounts and commissions. In June 2022, the underwriters partially exercised their option to purchase an additional 289,832 shares of common stock at the offering price of $13.50 per share, before underwriting discounts and commissions.
In June 2022, the 106 Table of Content underwriters partially exercised their option to purchase an additional 289,832 shares of common stock at the offering price of $13.50 per share, before underwriting discounts and commissions.
TP-04 Rosacea, Galatea Trial : In March 2023, we initiated the Galatea trial, a Phase 2a trial evaluating TP-04, a novel gel formulation of lotilaner, for the treatment of rosacea.
We plan to discuss and determine the potential regulatory path with the FDA. TP-04 Rosacea, Galatea Trial : In March 2023, we initiated the Galatea trial, a Phase 2a trial evaluating TP-04, a novel gel formulation of lotilaner, for the treatment of rosacea.
It is designed to rapidly and durably provide systemic blood levels of lotilaner potentially sufficient to kill infected ticks attached to the human body before they can transmit the Borrelia bacteria that causes Lyme disease. Credit Facility with Hercules Capital and Silicon Valley Bank : On February 2, 2022 we executed the Credit Facility Hercules Capital and SVB.
It is designed to rapidly and durably provide systemic blood levels of lotilaner potentially sufficient to kill infected ticks attached to the human body before they can transmit the Borrelia bacteria that causes Lyme disease.
The Carpo trial, evaluating TP-05 for the potential prevention of Lyme disease in humans, is a randomized, double-blind trial that will evaluate the efficacy of TP-05 in killing lab grown, non-disease carrying ticks after they have attached to the skin of healthy volunteers, as well as confirm the safety, tolerability, and blood concentration of TP-05.
The Carpo trial evaluated the efficacy of TP-05 in killing lab grown, non-disease carrying ticks after they have attached to the skin of healthy volunteers, as well as confirm the safety, tolerability, and blood concentration of TP-05.
General and Administrative Expenses General and administrative expenses increased by $19.6 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Selling, General and Administrative Expenses Selling, general and administrative expenses increased by $63.8 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
Summary Statement of Cash Flows The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below: Year Ended December 31, 2022 2021 (in thousands) Net cash (used in) provided by: Operating activities $ (49,030) $ 3,748 Investing activities (144,629) (586) Financing activities 93,987 21 Net (decrease) increase in cash and cash equivalents $ (99,672) $ 3,183 Net Cash (Used in) Provided by Operating Activities Net cash used in operating activities was $49.0 million for the year ended December 31, 2022, which primarily consisted of our net loss of $62.1 million partially offset by stock-based compensation of $13.5 million.
Summary Statement of Cash Flows The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below: Year Ended December 31, 2023 2022 (in thousands) Net cash provided by (used in): Operating activities $ (117,493) $ (49,030) Investing activities 140,604 (144,629) Financing activities 130,176 93,987 Net increase (decrease) in cash and cash equivalents $ 153,287 $ (99,672) Net Cash Used in Operating Activities Net cash used in operating activities was $117.5 million for the year ended December 31, 2023, which primarily consisted of a net loss of $135.9 million and a change in net operating assets and liabilities of $0.3 million, partially offset by net non-cash and other charges of $18.1 million.
In addition, we made contractual payments of $4.5 million to Elanco (see Note 8(b) ). 99 Table of Co ntents Net Cash Used in Investing Activities Net cash used in investing activities was $144.6 million for the year ended December 31, 2022, and primarily relates to $149.4 million of purchased marketable securities and $0.5 million of purchased office equipment and leasehold improvements for our laboratory and administrative offices.
Net cash used in investing activities was $144.6 million for the year ended December 31, 2022, and relates to $149.4 million of purchased investments and $0.5 million of purchased office equipment and leasehold improvements for our laboratory and administrative offices.
We completed the Follow-On Public Offering under this Shelf Registration Statement. Also, as part of this Shelf Registration Statement, we concurrently filed a sales agreement prospectus covering the sale of up to $100.0 million of our common stock pursuant to an Open Market Sale Agreement SM (the “ATM Agreement”) with Jefferies LLC.
The 2023 Shelf Registration Statement replaced the 2021 Shelf Registration Statement. Also, as part of the 2021 Shelf Registration Statement, we concurrently filed a sales agreement prospectus covering the sale of up to $100.0 million of our common stock pursuant to an Open Market Sale Agreement TM (the “2021 ATM Prospectus”) with Jefferies LLC.
To date we have financed our operations through private placements of preferred stock, convertible promissory notes, the net proceeds from issuance of common stock in our IPO and Follow-On Public Offering, cash proceeds from our China Out-License, and draw-downs from our Credit Facility.
To date we have financed our operations through private placements of preferred stock, convertible promissory notes, net proceeds from issuance of common stock in our Initial Public Offering ("IPO"), our subsequent follow-on public offerings in May 2022 (the "May 2022 Public Offering") and August 2023 (the "August 2023 Public Offering", collectively the "Follow-On Public Offerings"), and our sales agreement prospectus (the "2023 ATM Prospectus"), as well as proceeds from product sales, net, our China Out-License, and drawdowns from the Credit Facility.
The Credit Facility, as amended, 96 Table of Co ntents includes an extended period to draw down the tranche associated with the NDA submission, from March 15, 2023 to March 15, 2024 provided at least $5 million is drawn on or before March 15, 2023 and at least an additional $5 million is drawn on or before September 15, 2023.
The Credit Facility, as amended, set a maximum interest rate, updated the terms of prepayment under the Credit facility and includes an extended period to drawdown the tranche associated with the NDA submission, from March 15, 2023 to March 15, 2024 provided at least $5.0 million was drawn on or before March 15, 2023 and at least an additional $5.0 million was drawn on or before September 15, 2023.
If we are unable to raise additional capital or enter into such agreements as and when needed, we could be forced to significantly delay, scale back, or discontinue our product development and/or commercialization plans, which would negatively and adversely affect our financial condition.
If we are unable to raise additional capital or enter into such agreements as and when needed, we could be forced to significantly delay, scale back, or discontinue our product development and/or commercialization plans, which would negatively and adversely affect our financial condition. 100 Table of Content Because of the numerous risks and uncertainties associated with drug product development and commercialization, we are unable to accurately predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability.
Amounts constrained as variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. We evaluate whether the milestones are considered probable of being reached and not otherwise constrained.
The amount of variable consideration that is included in the transaction price may be constrained and is included in product sales, net only to the extent that it is probable that a significant reversal in the amount of the cumulative 101 Table of Content revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
For the years ended December 31, 2022 and 2021, the vast majority of our external and internal research and development expenses are attributable to our TP-03 program for Demodex blepharitis.
Prior to commercialization of XDEMVY, for the years ended December 31, 2023 and 2022, the vast majority of our external and internal research and development expenses were attributable to the development of XDEMVY.
The Credit Facility requires interest-only debt service payments that are expected to remain through its maturity in February 2027 and its remaining tranches are subject to undrawn expiry in either March 2024 or December 2024 (see Note 10 ).
The Credit Facility requires interest-only debt service payments that are expected to remain through its maturity in February 2027 and its remaining tranches are subject to undrawn expiry in either March 2024 or December 2024. Our cash runway estimate is predicated on current assumptions for future revenue, operating expenses, and debt availability and may require future adjustments.
Cost of License Fees and Collaboration Revenue Cost of license fees and collaboration revenue includes (i) the proportion of expense recognized under the terms of the China Out-License payable under the terms of our in-license agreement for lotilaner, and (ii) valuation adjustments to the equity warrants and LianBio common stock for the portion contractually due under our January 2019 in-license agreement.
Cost of License Fees and Collaboration Revenue Cost of license fees and collaboration revenue includes the proportion of expense recognized under the terms of the China Out-License payable under the terms of our in-license agreement for lotilaner.
Our cash runway estimate is predicated on current assumptions for future revenue, operating expenses, and debt availability and may require future adjustments. Accordingly, we may be required to raise additional capital earlier than we currently expect based on our cash requirements and market dynamics.
Accordingly, we may be required to raise additional capital earlier than we currently expect based on our cash requirements and market dynamics.
We anticipate having at least $60.0 million of availability for new draws under our Credit Facility by December 2023 and $75.0 million of additional tranched availability through December 2024.
We also anticipate having at least $50.0 million of available capital from our Credit Facility through March 2024 and an additional $75.0 million of additional tranched availability through December 2024.
We believe that our cash and investments of $217.0 million as of December 31, 2022 is sufficient to fund our current and planned operations for at least the next twelve months from the date of filing this Annual Report on Form 10-K.
We have incurred significant losses and negative cash flows from operations since our inception and had an accumulated deficit of $244.7 million as of December 31, 2023. 107 Table of Content We believe that our cash, cash equivalents and marketable securities of $227.4 million as of December 31, 2023 is sufficient to fund our current and planned operations for at least the next twelve months from the date of filing this Annual Report on Form 10-K.
" Components of our Results of Operations License Fees and Collaboration Revenue We recognize license fees and collaboration revenue as identified performance obligations are satisfied or other events occur, specifically related to (i) TP-03 pivotal trial completion and the delivery of associated clinical data and reports to our licensee, (ii) achievement of certain clinical and regulatory events in the China Territory, (iii) milestone achievement of a drug supply agreement execution, and (iv) royalties and milestones from our licensee's product sales of TP-03 in the China Territory.
We will recognize additional license fees and collaboration revenue under the China Out-License to the extent other events occur, specifically related to (i) milestone achievement of an additional drug supply agreement execution, (ii) milestone achievement of certain regulatory events in the China Territory, and (iii) royalties and milestones from our licensee's 102 Table of Content product sales of TP-03 in the China Territory.
We expect to report topline data from the Phase 2a Carpo trial during the second half of 2023. We believe TP-05 is currently the only non-vaccine, drug-based, prophylaxis in development that targets the ticks, and potentially prevents Lyme disease transmission.
On February 22, 2024, we announced positive topline results from the Carpo trial, which demonstrated statistical significance in the mortality of ticks compared to vehicle (p We believe TP-05 is currently the only non-vaccine, drug-based prophylaxis in development that targets ticks, and potentially prevents Lyme disease transmission.
JOBS Act Accounting Election The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies.
Accordingly, we have not recorded any liabilities for these indemnification rights and agreements as of December 31, 2023. 111 Table of Content JOBS Act Accounting Election The Jumpstart Our Business Startups Act of 2012 permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies.
Cost of License Fees and Collaboration Revenue Cost of license fees and collaboration revenue was $1.0 million for the year ended December 31, 2022. This amount relates to our contractual payment obligations to Elanco, in proportion to our recognized license fee and collaboration revenue in the same period.
This amount relates to our contractual payment obligations to Elanco, in proportion to our recognized license fee and collaboration revenue under the China Out-License arrangement in the same period.
Since our inception, our operations have been substantially financed by cash proceeds of private placements of preferred stock, IPO proceeds from the issuance of common stock, China Out-License consideration, Credit Facility draw, and the Follow-On Public Offering of common stock.
Liquidity and Capital Resources Sources of Liquidity Overview Since our inception, we have financed our operations substantially through private placements of preferred stock, net proceeds from the issuance of common stock through our IPO, Follow-on Public Offerings, and the 2023 ATM Prospectus, as well as proceeds from product sales, net, the China Out-License, and drawdowns from the Credit Facility.
IPO and Follow-On Public Offering In connection with our October 2020 IPO, we sold 6,325,000 shares of our common stock (inclusive of the full exercise of the underwriters' option to purchase 825,000 shares of common stock). After deducting underwriting discounts, commissions and other related expenses, our IPO proceeds were $91.7 million. In May 2022, we completed the Follow-On Public Offering.
After deducting underwriting discounts, commissions and other related expenses, our IPO proceeds were $91.7 million. In May 2022, we completed the May 2022 Public Offering in which 5,600,000 shares of our common stock were sold at a public offering price of $13.50 per share.
TP-05 Lyme Disease, Callisto and Carpo Trials : In December 2022, we announced positive topline results from the completed Phase 1 Callisto trial and enrollment of the first patient in the Phase 2a Carpo trial. The Callisto and Carpo trials are designed to evaluate TP-05, a novel investigative oral, non-vaccine pharmacological prophylactic for the potential prevention of Lyme disease.
The Carpo trial is designed to evaluate TP-05, a novel investigative oral, non-vaccine pharmacological prophylactic for the potential prevention of Lyme disease in humans.
We expect to complete our clinical programs for these product candidates, and as appropriate, pursue regulatory approval and prepare for the possible commercialization for each. General and Administrative Expenses General and administrative expenses consist of personnel-related costs including payroll, benefits, and stock-based compensation for our executive, finance, sales and marketing, and other administrative functions.
Selling, General and Administrative Expenses Selling, general and administrative expenses consist of personnel-related costs including salaries, benefits, stock-based compensation and other personnel-related expenses for our executive, finance, sales and marketing, and other administrative functions.
The increase was primarily due to (i) $10.4 million of increased payroll and personnel-related costs (including stock-based compensation) for 19 employee additions year-over-year to support our business growth and commercialization efforts, (ii) $9.7 million of increased commercial and market research costs as we continue our commercial expansion and prepare for the potential launch of TP-03 in the second half of 2023, and (iii) $0.4 million of increased IT application expenses to support the continued growth and expansion of our corporate infrastructure.
The increase was primarily due to (i) $27.7 million of increased payroll and personnel-related costs (including increased stock-based compensation expense of $4.1 million) for 157 employee additions year-over-year to support our business growth and commercial leadership hires for our recent commercial launch of XDEMVY, (ii) $0.9 million of severance costs related to our former Chief Financial Officer's separation from the Company in June 2023, (iii) $22.3 million of increased commercial costs as we continued our commercial expansion and prepared for the recent commercial launch of XDEMVY, (iv) $6.2 million of increased IT applications, legal and other professional expenses to support the continued growth and expansion of our corporate infrastructure and (v) $6.5 million of increased facilities and office and administrative expenses.
These increases were partially offset by $1.0 million of decreased professional and legal fees. We expect sales and marketing headcount and associated vendor spend to meaningfully increase during 2023 as part of our TP-03 commercial launch-related activities. Other Income (Expense), Net Other income (expense), net increased $2.2 million for the year ended December 31, 2022.
Sales and marketing headcount and associated vendor spend increased significantly during 2023 due to our commercial launch and related activities for XDEMVY. Other Income, Net Other income, net increased by $6.6 million for the year ended December 31, 2023.
We believe the fair value of the indemnification rights and agreements is minimal. Accordingly, we have not recorded any liabilities for these indemnification rights and agreements as of December 31, 2022.
We believe the fair value of the indemnification rights and agreements is minimal.
Net cash provided by financing activities was $21 thousand for the year ended December 31, 2021 which consisted of (i) $0.2 million of proceeds from our employee stock purchase plan, and (ii) $0.1 million of proceeds from the exercise of vested employee stock options.
This cash used in investing activities was offset by $5.3 million of proceeds received from maturities of investments. 110 Table of Content Net Cash Provided by Financing Activities Net cash provided by financing activities was $130.2 million for the year ended December 31, 2023 which consisted of (i) $99.4 million of net proceeds from the issuance of common stock from our August 2023 Public Offering, (ii) $19.2 million of net proceeds from common stock sold under the 2023 ATM Prospectus, (iii) $10.0 million of proceeds from our Credit Facility, (iv) $1.0 million of proceeds from our employee stock purchase plan, and (v) $0.6 million of proceeds from the exercise of vested employee stock options.
The increase was primarily due to (i) $7.3 million of increased payroll and personnel-related costs (including stock-based compensation), for 22 employee additions year-over-year to drive our product development initiatives, (ii) $1.0 million of increased regulatory and consulting costs related to our NDA filing for TP-03, (iii) $0.5 million of licensing milestone expense upon enrollment of the first patient in the first Phase 2a Carpo trial for the treatment of Lyme disease in December 2022, and (iv) $0.3 million of increased product manufacturing and formulation costs.
The increase was primarily due to (i) $10.6 million of increased payroll and personnel- 105 Table of Content related costs (including increased stock-based compensation expense of $2.1 million), for 25 employee additions year-over-year to drive our product development initiatives, (ii) $0.6 million of increased other indirect expenses, (iii) $1.0 million of milestone expense related to our in-license agreement with Elanco, (iv) $2.1 million of increased TP-05 program expenses primarily related to the Carpo trial initiated in December 2022 and the new food effect study initiated during the first quarter of 2023, and (v) $0.6 million of increased spend related to other early-stage programs.
On March 15, 2023 we made a $5.0 million draw (including SVB's commitment of $1.25 million) from the $25.0 million tranche associated with the NDA submission of TP-03. This Credit Facility includes a four-year period of interest-only payments and is extendable for a fifth year to February 2027 maturity, upon our expected achievement of required conditions.
On March 15, 2023 and September 15, 2023, respectively, we made draws of $5.0 million (including SVB's commitment of $1.25 million) from the $25.0 million tranche associated with the NDA submission of TP-03.
We also received equity in LianBio as part of our China Out-License, a portion of which remains subject to a China-based regulatory vesting provision.
As of the date of this filing, we have received aggregate contractual cash proceeds from LianBio of $82.5 million, representing initial consideration of $15.0 million and $67.5 million for the achievement of specified milestone events. We also received equity in LianBio as part of this China Out-License, a portion of which remains subject to a China-based regulatory vesting provision.
If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels. As of December 31, 2022, our aggregate cash, cash equivalents and marketable securities was $217.0 million – see " Liquidity and Capital Resources.
Even if we are able to generate significant revenue from product sales, net we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels.
We do not know with certainty when, or if, any of these items will ultimately occur. 97 Table of Co ntents We expect to incur significant operating losses for the foreseeable future, and for these losses to further increase, as we expand our clinical development programs and as we prepare for the potential commercial launch of TP-03.
Other Liquidity Risks We expect to incur significant operating losses for the foreseeable future, and for these losses to further increase, as we expand our clinical development programs for our other product candidates and given the recent commercial launch of XDEMVY.
However, the ultimate effect from this pandemic on our development timelines for TP-03 and our other product candidates is inherently uncertain. See the section titled Risk Factors in this report for a further discussion of the potential adverse impact of COVID-19 on our business, results of operations and financial condition.
See the section titled Risk Factors for further discussion of the potential adverse impact of unfavorable global and geopolitical economic conditions on our business, results of operations and financial condition.
We do not yet have revenue from product sales. Our reported revenue within license fees and collaboration revenue is from our China Out-License; we expect to report additional revenue under these captions in future periods.
We began generating product sales during the year ended December 31, 2023 following the FDA approval of XDEMVY in July 2023 and our subsequent commercial launch in August 2023. Our reported revenue within license fees and collaboration revenue is from our China Out-License and clinical supply agreement; we expect to report additional revenue under this caption in future periods.
The API of TP-03, lotilaner, paralyzes and eradicates mites and other parasites through the inhibition of parasite-specific GABA-Cl channels. We intend to further advance our pipeline with lotilaner API to address several diseases across therapeutic categories in human medicine, including eye care, dermatology, and other diseases.
We have also completed, and/or have ongoing clinical trials for TP-03 for the potential treatment of MGD, TP-04 for the potential treatment of rosacea and TP-05 for potential Lyme disease prophylaxis. We intend to further advance our pipeline with the lotilaner API to address several diseases in human medicine, including eye care, dermatology, and infectious disease prevention.
We have incurred significant net operating losses in every year since our inception and expect to continue to incur significant operating expenses and, other than the effect of license fee revenue and collaboration revenue from the China Out-License, increasing operating losses for the foreseeable future.
We have incurred significant net operating losses in every year since our inception and expect to continue to incur significant operating expenses as we commercialize XDEMVY for Demodex blepharitis, and, as we advance our other product candidates through clinical trials, regulatory submissions, and potential commercialization.
Our California net operating losses will begin to expire in 2037.
Our California net operating losses will begin to expire in 2037. The federal research and development tax credits begin to expire in 2040 unless previously utilized, and the California credit carryforwards are available indefinitely.
As of December 31, 2022, our contractual commitments for our leases were $0.9 million, which will be paid over the lease term. Purchase Obligations We enter contracts in the normal course of business with CROs for our clinical trials and CMOs for contract manufacturing activities. As of December 31, 2022, our contractual commitments for such obligations were $10.8 million.
As of December 31, 2023, our contractual commitments for our leases were $2.4 million, which will be paid over the remaining lease term of 3.1 years. Purchase Obligations As of December 31, 2023, we have entered into manufacturing supply agreements for the commercial supply of XDEMVY.
This cash used in investing activities was partially offset by $5.3 million of proceeds received from sales of our marketable securities. Net cash used in investing activities was $0.6 million for the year ended December 31, 2021, which consisted of leasehold improvements for our laboratory and administrative offices and various purchases of computer hardware/software and office equipment.
Net Cash Provided by (Used in) Investing Activities Net cash provided by investing activities was $140.6 million for the year ended December 31, 2023, and relates to $174.8 million of proceeds from maturities of investments.
We currently have no other financing commitments, such as lines of credit or guarantees.
The Credit Facility includes a four-year period of interest-only payments and is extendable for a fifth year to February 2027 maturity, upon our expected achievement of required conditions. We currently have no other financing commitments, such as lines of credit or guarantees.
Removed
Our lead product candidate, TP-03 (lotilaner ophthalmic solution, 0.25%), is a novel investigational eye drop to treat blepharitis caused by the infestation of Demodex mites, which is referred to as Demodex blepharitis.
Added
Food and Drug Administration ("FDA") on July 24, 2023 for the treatment of blepharitis caused by the infestation of Demodex mites, which is referred to as Demodex blepharitis.
Removed
In November 2022, we announced that the NDA submission package for TP-03 for the treatment of Demodex blepharitis was accepted by the FDA, with a PDUFA decision date of August 25, 2023. We believe TP-03 has the potential to be the first therapeutic approved by the FDA and become the definitive standard of care for the treatment of Demodex blepharitis.
Added
XDEMVY is the first and only therapeutic approved by the FDA and we believe is the definitive standard of care for the treatment of Demodex blepharitis. XDEMVY targets and eradicates the root cause of Demodex blepharitis – Demodex mite infestation.
Removed
During 2022, we began the expansion of our commercial organization to support our business growth and the commercial leadership needed for TP-03 commercial launch readiness in the second half of 2023. We expect this commercial expansion to continue with a meaningful ramp during 2023 as part of our TP-03 commercial launch-readiness activities.
Added
The active pharmaceutical ingredient ("API") of XDEMVY, lotilaner, paralyzes and eradicates mites and other parasites through the inhibition of parasite-specific gamma-aminobutyric acid-gated chloride ("GABA-Cl") channels.

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Other TARS 10-K year-over-year comparisons