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What changed in Aclaris Therapeutics, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Aclaris Therapeutics, Inc.'s 2023 and 2024 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 2024 report.

+579 added−449 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-27)

Top changes in Aclaris Therapeutics, Inc.'s 2024 10-K

579 paragraphs added · 449 removed · 388 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

118 edited+48 added−24 removed90 unchanged
Biggest changeAccordingly, we are investigating our drug candidates pursuant to IND applications and would expect to seek approval through the New Drug Application, or NDA, pathway. ​ An applicant seeking approval to market and distribute a new drug product in the United States must typically undertake the following: ​ ● completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practice regulations; ● submission to the FDA of an IND which must take effect before clinical trials may begin; ● approval by an independent institutional review board, or IRB, representing each clinical site before clinical testing may be initiated at the clinical site; ● performance of adequate and well-controlled clinical trials in accordance with good clinical practice, or GCP, regulations to establish the safety and efficacy of the proposed drug product for each indication; ● preparation and submission to the FDA of an NDA; ● review of the NDA by an FDA advisory committee, if applicable; ● satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product or its components are produced to assess compliance with current good manufacturing practices, or cGMP, and regulations to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity; ● payment of user fees and securing FDA approval of the NDA; and ● compliance with any post-approval requirements, including potential requirements for a risk evaluation and mitigation strategy and post-approval studies required by the FDA. ​ Once a drug candidate is identified for development, it enters the preclinical or nonclinical testing stage.
Biggest changeThe process required by the FDA before new drug and biologic product candidates may be marketed in the United States generally involves the following: ● completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practice (“GLP”) regulations; ● submission to the FDA of an IND which must take effect before clinical trials may begin; ● approval by an independent institutional review board (“IRB”) representing each clinical site before clinical testing may be initiated at the clinical site; ● performance of adequate and well-controlled clinical trials in accordance with good clinical practice (“GCP”) regulations to establish the safety and efficacy of the proposed drug product for each indication; ● preparation and submission to the FDA of a New Drug Application (“NDA”) for a drug or a Biologics License Application (“BLA”) for a biologic, after completion of all pivotal trials; ● determination by the FDA within 60 days of its receipt of an NDA or BLA to file the application for review; ● review of the NDA or BLA by an FDA advisory committee, if applicable; ● satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the drug or biologic or its components are produced to assess compliance with current good manufacturing practices (“cGMP”) and regulations to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity; ● payment of user fees and securing FDA approval of the NDA or BLA; and ● compliance with any post-approval requirements, including potential requirements for a risk evaluation and mitigation strategy and post-approval studies required by the FDA. ​ Once a drug or biological product candidate is identified for development, it enters the preclinical or nonclinical testing stage.
For example, in Japan, it may be possible to extend the patent term for up to five years and in the European Union, it may be possible to obtain a supplementary patent certificate that would effectively extend patent protection for up to five years. ​ Coverage and Reimbursement ​ We believe the success of our drug candidates, if approved, will depend on obtaining and maintaining coverage and adequate reimbursement as a prescription treatment or in the absence of coverage and adequate reimbursement, on the extent to which patients will be willing to pay out of pocket for our prescription drug products. ​ Third-party payors determine which prescription drug products they will cover and establish reimbursement levels.
For example, in Japan, it may be possible to extend the patent term for up to five years and in the European Union, it may be possible to obtain a supplementary patent certificate that would effectively extend patent protection for up to five years. ​ Coverage and Reimbursement ​ We believe the success of our product candidates, if approved, will depend on obtaining and maintaining coverage and adequate reimbursement as a prescription treatment or in the absence of coverage and adequate reimbursement, on the extent to which patients will be willing to pay out of pocket for our prescription drug products. ​ Third-party payors determine which prescription drug products they will cover and establish reimbursement levels.
Sponsors typically use the meeting at the end of Phase 2 to discuss their Phase 2 clinical trial results and present their plans for the pivotal Phase 3 clinical trial or trials that they believe will support the approval of the new drug. ​ Concurrent with clinical trials, sponsors usually complete additional animal safety studies and also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing commercial quantities of the product in accordance with cGMP requirements.
Sponsors typically use the meeting at the end of Phase 2 to discuss their Phase 2 clinical trial results and present their plans for the pivotal Phase 3 clinical trial or trials that they believe will support the approval of the new drug or biologic. ​ Concurrent with clinical trials, sponsors usually complete additional animal safety studies and also develop additional information about the chemistry and physical characteristics of the drug or biologic and finalize a process for manufacturing commercial quantities of the product in accordance with cGMP requirements.
These sanctions could include: ​ ● refusal to approve pending applications; ● withdrawal of an approval; ● imposition of a clinical hold; ● warning letters; ● product seizures or detention, or refusal to permit the import or export of products; ● restrictions on the marketing or manufacturing of the product; ● total or partial suspension of production or distribution or product recalls; or ● injunctions, fines, disgorgement, or civil or criminal penalties. ​ The FDA strictly regulates the marketing, labeling, advertising and promotion of drug products that are placed on the market.
These sanctions could include: ​ ● refusal to approve pending applications; ● withdrawal of an approval; ● imposition of a clinical hold; ● warning letters; ● product seizures or detention, or refusal to permit the import or export of products; ● restrictions on the marketing or manufacturing of the product; ● total or partial suspension of production or distribution or product recalls; or ● injunctions, fines, disgorgement, or civil or criminal penalties. ​ The FDA strictly regulates the marketing, labeling, advertising and promotion of drug and biological products that are placed on the market.
However, there is no guarantee that a product will be considered by the EEA’s regulatory authorities to be an NCE, and products may not qualify for data exclusivity. ​ Other Health Care Laws ​ Health care providers, physicians and third-party payors in the United States and elsewhere will play a primary role in the recommendation and prescription of any of our drug candidates for which marketing approval is obtained.
However, there is no guarantee that a product will be considered by the EEA’s regulatory authorities to be an NCE, and products may not qualify for data exclusivity. ​ Other Health Care Laws ​ Health care providers, physicians and third-party payors in the United States and elsewhere will play a primary role in the recommendation and prescription of any of our product candidates for which marketing approval is obtained.
In addition to the payments described above, if we sell, license or transfer any of the intellectual property acquired from Confluence pursuant to the Confluence Agreement to a third party, we will be obligated to pay the former Confluence equity holders a portion of any consideration received from such sale, license or transfer in specified circumstances. 9 Table of Contents ​ Government Regulation and Product Approval ​ Governmental authorities in the United States, at the federal, state and local level, and analogous authorities in other countries extensively regulate, among other things, the research, development, testing, manufacture, safety surveillance, efficacy, quality control, labeling, packaging, distribution, record keeping, promotion, storage, advertising, distribution, marketing, sale, export and import, and the reporting of safety and other post-market information of products such as the ones we are developing.
In addition to the payments described above, if we sell, license or transfer any of the intellectual property acquired from Confluence pursuant to the Confluence Agreement to a third party, we will be obligated to pay the former Confluence equity holders a portion of any consideration received from such sale, license or transfer in specified circumstances. ​ Government Regulation and Product Approval ​ Governmental authorities in the United States, at the federal, state and local level, and analogous authorities in other countries extensively regulate, among other things, the research, development, testing, manufacture, safety surveillance, efficacy, quality control, labeling, packaging, distribution, record keeping, promotion, storage, advertising, distribution, marketing, sale, export and import, and the reporting of safety and other post-market information of products 11 Table of Contents such as the ones we are developing.
The FDA may then approve the new drug candidate for all or some of the labeled indications for which the referenced product has been approved, as well as for any new indication sought by the 505(b)(2) applicant. ​ The ANDA or Section 505(b)(2) applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA’s Orange Book.
The FDA may then approve the new product candidate for all or some of the labeled indications for which the referenced product has been approved, as well as for any new indication sought by the 505(b)(2) applicant. ​ The ANDA or Section 505(b)(2) applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA’s Orange Book.
Violations of this law are punishable by up to ten years in prison, and can also result in criminal fines, civil monetary penalties, administrative penalties and exclusion from participation in federal health care programs. ​ Additionally, the intent standard under the Anti-Kickback Statute was amended by the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the Affordable Care Act, to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
Violations of this law are punishable by up to ten years in prison, and can also result in criminal fines, civil monetary penalties, administrative penalties and exclusion from participation in federal health care programs. ​ Additionally, the intent standard under the Anti-Kickback Statute was amended by the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “Affordable Care Act”), to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
In addition, the FDA may require testing and surveillance programs to monitor the effect of approved products that have been commercialized, and the FDA has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs. ​ Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and some state agencies for compliance with GMP regulations and other laws.
In addition, the FDA may require testing and surveillance programs to monitor the effect of approved products that have been commercialized, and the FDA has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs. ​ Drug and biologic manufacturers and other entities involved in the manufacture and distribution of approved products are required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and some state agencies for compliance with GMP regulations and other laws.
Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. However, companies may share truthful and not misleading information that is otherwise consistent with the product’s FDA approved labeling.
Drugs and biologics may be promoted only for the approved indications and in accordance with the provisions of the approved label. However, companies may share truthful and not misleading information that is otherwise consistent with the product’s FDA approved labeling.
Our competitors also may obtain FDA or other regulatory approval for their drug candidates more rapidly than our potential third-party partners may obtain approval for our drug candidates, which could result in our competitors establishing a strong market position before our drug candidates are able to enter the market. ​ Many of the companies against which we are competing, or against which we may compete in the future, have significantly greater financial resources and expertise in research and development, manufacturing, and preclinical and clinical development than we do.
Our competitors also may obtain FDA or other regulatory approval for their product candidates more rapidly than our potential third-party partners may obtain approval for our product candidates, which could result in our competitors establishing a strong market position before our product candidates are able to enter the market. ​ Many of the companies against which we are competing, or against which we may compete in the future, have significantly greater financial resources and expertise in research and development, manufacturing, and preclinical and clinical development than we do.
These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and subject registration for clinical trials, as well as in acquiring technologies complementary to, or that may be necessary for, our development programs. ​ Intellectual Property ​ Our success depends in large part upon our ability to obtain and maintain proprietary protection for our drug candidates and to operate without infringing the proprietary rights of others.
These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and subject registration for clinical trials, as well as in acquiring technologies complementary to, or that may be necessary for, our development programs. ​ Intellectual Property ​ Our success depends in large part upon our ability to obtain and maintain proprietary protection for our product candidates and to operate without infringing the proprietary rights of others.
Our potential third-party partners’ arrangements with third-party payors, health care professionals and customers may expose them to broadly applicable fraud and abuse and other health care laws and regulations, including, without limitation, the federal Anti-Kickback Statute and the federal civil False Claims Act, that may constrain the business or financial arrangements and relationships through which they sell, market and distribute any drug candidates for which marketing approval is obtained.
Our potential third-party partners’ arrangements with third-party payors, health care professionals and customers may expose them to broadly applicable fraud and abuse and other health care laws and regulations, including, without limitation, the federal Anti-Kickback Statute and the federal civil False Claims Act, that may constrain the business or financial arrangements and relationships through which they sell, market and distribute any product candidates for which marketing approval is obtained.
Even if such data and information are submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. ​ Post-approval Requirements ​ Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA and other governmental agencies, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion, and reporting of adverse experiences with the product.
Even if such data and information are submitted, the FDA may ultimately decide that the NDA or BLA does not satisfy the criteria for approval. ​ Post-approval Requirements ​ Drugs and biologics manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA and other governmental agencies, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion, and reporting of adverse experiences with the product.
Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. ​ 12 Table of Contents Failure to comply with the applicable U.S. requirements at any time during the product development process or approval process, or after approval, may subject us to administrative or judicial sanctions, any of which could have a material adverse effect on us.
Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. ​ 14 Table of Contents Failure to comply with the applicable U.S. requirements at any time during the product development process or approval process, or after approval, may subject us to administrative or judicial sanctions, any of which could have a material adverse effect on us.
Our website and information included in or linked to our website are not part of this Annual Report. ​ Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge through our website as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission, or SEC.
Our website and information included in or linked to our website are not part of this Annual Report. ​ Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge through our website as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (“SEC”).
Failure to submit timely, accurately and completely the required information for all payments, transfers of value and ownership or investment interests may result in civil monetary penalties for “knowing failures.” Certain states also mandate implementation of compliance programs, impose restrictions on drug manufacturer marketing practices, require registration of certain employees engaged in marketing activities in the 15 Table of Contents location, and/or require the tracking and reporting of gifts, compensation and other remuneration to health care professionals, including physicians. ​ We have developed a comprehensive compliance program that establishes internal controls to facilitate adherence to the rules and program requirements to which we are subject.
Failure to submit timely, accurately and completely the required information for all payments, transfers of value and ownership or investment interests may result in civil monetary penalties for “knowing failures.” Certain states also mandate implementation of compliance programs, impose restrictions on drug manufacturer marketing practices, require registration of certain employees engaged in marketing activities in the location, and/or require the tracking and reporting of gifts, compensation and other remuneration to health care professionals, including physicians. ​ We have developed a comprehensive compliance program that establishes internal controls to facilitate adherence to the rules and program requirements to which we are subject.
We aim to take advantage of all of the intellectual property rights that are available to us and believe that this comprehensive approach will provide us with proprietary positions for our drug candidates, where available. ​ We also protect our proprietary information by requiring our employees, consultants, contractors and other advisors to execute nondisclosure and assignment of invention agreements upon commencement of their respective employment or engagement.
We aim to take advantage of all of the intellectual property rights that are available to us and believe that this comprehensive approach will provide us with proprietary positions for our product candidates, where available. ​ We also protect our proprietary information by requiring our employees, consultants, contractors and other advisors to execute nondisclosure and assignment of invention agreements upon commencement of their respective employment or engagement.
We cannot predict how pending and future health care legislation will impact our business, and any changes in coverage and reimbursement that further restricts coverage of our drug candidates could harm our business. ​ Foreign governments also have their own health care reimbursement systems, which vary significantly by country and region, and we cannot be sure that coverage and adequate reimbursement will be made available with respect to our drug candidates, if approved, under any foreign reimbursement system.
We cannot predict how pending and future health care legislation will impact our business, and any changes in coverage and reimbursement that further restricts coverage of our product candidates could harm our business. ​ Foreign governments also have their own health care reimbursement systems, which vary significantly by country and region, and we cannot be sure that coverage and adequate reimbursement will be made available with respect to our product candidates, if approved, under any foreign reimbursement system.
It is impossible to predict whether legislative changes will be enacted, or whether FDA regulations, guidance or interpretations will be issued or changed or what the impact of such changes, if any, may be. ​ Non-patent Exclusivity ​ The FDCA provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to obtain approval of an NDA for a new chemical entity, or NCE.
It is impossible to predict whether legislative changes will be enacted, or whether FDA regulations, guidance or interpretations will be issued or changed or what the impact of such changes, if any, may be. ​ Non-patent Exclusivity ​ The FDCA provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to obtain approval of an NDA for a new chemical entity (“NCE”).
If market exclusivity is granted for an NCE, during the exclusivity period, the FDA may not accept for review or approve an abbreviated new drug application, or ANDA, or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval.
If market exclusivity is granted for an NCE, during the exclusivity period, the FDA may not accept for review or approve an abbreviated new drug application (“ANDA”) or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval.
While march-in rights have not previously been exercised, it is uncertain if that will continue under the new framework. The effect of reducing prices and reimbursement for certain of our drug candidates, if approved, could significantly impact our business and consolidated results of operations. In addition, the IRA may meaningfully influence our pharmaceutical industry business strategies.
While march-in rights have not previously been exercised, it is uncertain if that will continue under the new framework. The effect of reducing prices and reimbursement for certain of our product candidates, if approved, could significantly impact our business and consolidated results of operations. In addition, the IRA may meaningfully influence our pharmaceutical industry business strategies.
These decisions are based on the limited access to data from the ongoing trial. ​ During the development of a new drug, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior to the submission of an IND, at the end of Phase 2 and before an NDA is submitted.
These decisions are based on the limited access to data from the ongoing trial. ​ During the development of a new drug or biologic, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior to the submission of an IND, at the end of Phase 2 and before an NDA is submitted.
Obtaining and maintaining favorable reimbursement can be a time-consuming and expensive process, and our potential third-party partners may not be able to negotiate or continue to negotiate reimbursement or pricing terms for our drug candidates, if approved, with third-party payors at levels that are profitable to us, or at all.
Obtaining and maintaining favorable reimbursement can be a time-consuming and expensive process, and our potential third-party partners may not be able to negotiate or continue to negotiate reimbursement or pricing terms for our product candidates, if approved, with third-party payors at levels that are profitable to us, or at all.
For example, the Affordable Care Act imposed, among other things, annual reporting requirements to the Centers for Medicare & Medicaid Services, or CMS, for covered manufacturers for certain payments and other transfers of value provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other health care professionals (such as physician assistants and nurse practitioners) and teaching hospitals, as well as information regarding ownership and investment interests held by physicians and their immediate family members.
For example, the Affordable Care Act imposed, among other things, annual reporting requirements to the Centers for Medicare & Medicaid Services (“CMS”) for covered manufacturers for certain payments and other transfers of value provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other health care professionals (such as physician assistants and nurse practitioners) and teaching hospitals, as well as information regarding ownership and investment interests held by physicians and their immediate family members.
Penalties for federal civil False Claims Act violations may include up to three times the actual damages sustained by the government, plus mandatory civil penalties for each separate false claim, the potential for exclusion from participation in federal health care programs, and, although the federal civil False Claims Act is a civil statute, False Claims Act violations may also implicate various federal criminal statutes. ​ The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, prohibits among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any health care benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for health care benefits, items or services.
Penalties for federal civil False Claims Act violations may include up to three times the actual damages sustained by the government, plus mandatory civil penalties for each separate false claim, the potential for exclusion from participation in federal health care programs, and, although the federal civil False Claims Act is a civil statute, False Claims Act violations may also implicate various federal criminal statutes. ​ 17 Table of Contents The federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) prohibits among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any health care benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for health care benefits, items or services.
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, including the final omnibus rule published on January 25, 2013, mandates, among other things, the adoption of uniform standards for the electronic exchange of information in common health care transactions, as well as standards relating to the privacy and security of individually identifiable health information, which require the adoption of administrative, physical and technical safeguards to protect such information.
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”) and their implementing regulations, including the final omnibus rule published on January 25, 2013, mandates, among other things, the adoption of uniform standards for the electronic exchange of information in common health care transactions, as well as standards relating to the privacy and security of individually identifiable health information, which require the adoption of administrative, physical and technical safeguards to protect such information.
The European Union does have a compensation program similar to patent term extension called supplementary patent certificate that would effectively extend patent protection for up to five years. ​ We also use other forms of protection, such as trademark, copyright, and/or trade secret protection, to protect our intellectual property, particularly where we do not believe patent protection is appropriate or obtainable.
The European Union does have a compensation program similar to patent term extension called supplementary patent certificate that would effectively extend patent protection for up to five years. ​ 10 Table of Contents We also use other forms of protection, such as trademark, copyright, and/or trade secret protection, to protect our intellectual property, particularly where we do not believe patent protection is appropriate or obtainable.
Our drug candidates, if approved, may not be considered cost effective, and government and third-party private health insurance coverage and reimbursement may not be available to patients or sufficient to allow our potential third-party partners to sell our drug candidates, if approved, on a competitive and profitable basis.
Our product candidates, if approved, may not be considered cost effective, and government and third-party private health insurance coverage and reimbursement may not be available to patients or sufficient to allow our potential third-party partners to sell our product candidates, if approved, on a competitive and profitable basis.
Thus, approval of an ANDA or 505(b)(2) NDA could be delayed for a significant period of time depending on the patent certification the applicant makes and the reference drug sponsor’s decision to initiate patent litigation. ​ The ANDA or Section 505(b)(2) application also will not be approved until any applicable non-patent exclusivity listed in the Orange Book for the referenced product has expired. ​ 18 Table of Contents Patent Term Extension ​ In the United States, after NDA approval, owners of relevant drug patents may apply for up to a five-year patent extension, which provides patent term restoration as compensation for the patent term lost during the FDA regulatory review process for the first permitted commercial marketing of a drug product.
Thus, approval of an ANDA or 505(b)(2) NDA could be delayed for a significant period of time depending on the patent certification the applicant makes and the reference drug sponsor’s decision to initiate patent litigation. ​ The ANDA or Section 505(b)(2) application also will not be approved until any applicable non-patent exclusivity listed in the Orange Book for the referenced product has expired. ​ Patent Term Extension ​ In the United States, after NDA approval or BLA licensure, owners of relevant drug patents may apply for up to a five-year patent extension, which provides patent term restoration as compensation for the patent term lost during the FDA regulatory review process for the first permitted commercial marketing of a drug product.
An ANDA provides for marketing of a drug product that has the same active ingredients, generally in the same strengths and dosage form, as the listed drug and has been shown through pharmacokinetic, or PK, testing to be bioequivalent to the listed drug.
An ANDA provides for marketing of a drug product that has the same active ingredients, generally in the same strengths and dosage form, as the listed drug and has been shown through PK testing to be bioequivalent to the listed drug.
The allowable patent term extension is calculated as half of the drug’s testing phase, which is the time between the IND submission becoming effective and the NDA submission, and all of the review phase, which is the time between NDA submission and approval, up to a maximum extension of five years.
The allowable patent term extension is calculated as half of the drug’s testing phase, which is the time between the IND submission becoming effective and the NDA or BLA submission, and all of the review phase, which is the time between NDA or BLA submission and approval, up to a maximum extension of five years.
Our KINect platform enables us to identify potential drug candidates through a unique combination of our proprietary chemical library of kinase inhibitors, our novel approaches to inhibitor modalities, our expertise in SBDD, and our custom kinase assays. ​ Our focus has been on difficult to drug kinase targets that exhibit some level of clinical, genetic and/or pharmacological disease validation.
Our KINect platform enables us to identify potential small molecule product candidates through a unique combination of our proprietary chemical library of kinase inhibitors, our novel approaches to inhibitor modalities, our expertise in SBDD, and our custom kinase assays. ​ Our focus has been on difficult to drug kinase targets that exhibit some level of clinical, genetic and/or pharmacological disease validation.
Among other things, HITECH makes HIPAA’s security standards directly applicable to “business associates”, namely independent contractors or agents of HIPAA covered entities that create, receive or obtain protected health information in connection with providing a service for or on behalf of a covered entity and their subcontractors that use, disclose, access, or otherwise process protected health information.
Among other things, HITECH makes HIPAA’s security standards directly applicable to “business associates,” namely independent contractors or agents of HIPAA covered entities that create, receive or obtain protected health information in connection with providing a service for or on behalf of a covered entity and their subcontractors that use, disclose, access, or otherwise process protected health information.
We rely on third parties for the manufacture of preclinical and clinical supplies for our drug candidates. ​ Competition ​ The pharmaceutical industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary drugs.
We rely on third parties for the manufacture of preclinical and clinical supplies for our product candidates. ​ Competition ​ The pharmaceutical industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary drugs.
A priority review designation is intended to direct overall attention and resources to the evaluation of such applications, and to shorten the FDA’s goal for taking action on the NDA from ten months to six months from filing of the NDA.
A priority review designation is intended to direct overall attention and resources to the evaluation of such applications, and to shorten the FDA’s goal for taking action on the NDA or BLA from ten months to six months from filing of the NDA or BLA.
If the product has not received a National MA in any Member State at the time of application, it can be approved simultaneously in various Member States through the Decentralized Procedure. ​ In the EEA, upon receiving marketing authorization, NCEs generally receive eight years of data exclusivity and an additional two years of market exclusivity.
If the product has not received a National MA in any Member State at the time of application, it can be approved simultaneously in various Member States through the Decentralized Procedure. 16 Table of Contents ​ In the EEA, upon receiving marketing authorization, NCEs generally receive eight years of data exclusivity and an additional two years of market exclusivity.
A key element of our strategy is to build and expand our pipeline of drug candidates. To build our pipeline, we may seek to in-license or acquire additional drug candidates, in addition to developing assets in-house. ● Pursue strategic alternatives for our drug candidates.
A key element of our strategy is to build and expand our pipeline of product candidates. To build our pipeline, we may seek to in-license or acquire additional product candidates, in addition to developing assets in-house. ● Pursue strategic alternatives for our product candidates.
If the FDA concludes a REMS is needed, the sponsor of the NDA must submit a proposed REMS, and the FDA will not approve the application without an approved REMS, if required. A REMS can substantially increase the costs of obtaining approval.
If the FDA concludes a REMS is needed, the sponsor of the NDA or BLA must submit a proposed REMS, and the FDA will not approve the application without an approved REMS, if required. A REMS can substantially increase the costs of obtaining approval.
Third-party payors regularly update reimbursement amounts and also from time to time revise the methodologies used to determine reimbursement amounts. Accordingly, these updates could impact the demand for our drug candidates, if approved.
Third-party payors regularly update reimbursement amounts and also from time to time revise the methodologies used to determine reimbursement amounts. Accordingly, these updates could impact the demand for our product candidates, if approved.
These trials are intended to establish the overall risk-benefit ratio of the product and provide an adequate basis for product approval and labeling claims. ​ Phase 4 clinical trials are conducted after approval to gain additional experience from the treatment of patients in the intended therapeutic indication and to document a clinical benefit in the case of drugs approved under accelerated approval regulations, or when otherwise requested by the FDA in the form of post-market requirements or commitments.
These trials are intended to establish the overall risk-benefit ratio of the drug or biological product candidate and provide an adequate basis for product approval and labeling claims. ​ Phase 4 clinical trials are conducted after approval to gain additional experience from the treatment of patients in the intended therapeutic indication and to document a clinical benefit in the case of drugs or biologics approved under accelerated approval regulations, or when otherwise requested by the FDA in the form of post-market requirements or commitments.
An IRB for each site participating in the clinical trial must review and approve the protocol before the clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each research subject or the subject’s legal representative, monitor the study until completed and otherwise comply with IRB regulations. ​ Clinical trials are typically conducted in three sequential phases that may overlap or be combined: ​ ● Phase 1.
An IRB for each site participating in the clinical trial 12 Table of Contents must review and approve the protocol before the clinical trial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each research subject or the subject’s legal representative, monitor the study until completed and otherwise comply with IRB regulations. ​ Clinical trials are typically conducted in three sequential phases that may overlap or be combined: ​ ● Phase 1.
The approval process and requirements governing the conduct of clinical trials, product licensing and promotion, pricing and reimbursement vary greatly by geographic region, and the time may be longer or shorter than that required for FDA approval. ​ In the European Economic Area, or EEA, which is composed of the Member States of the European Union plus Norway, Iceland and Liechtenstein, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. ​ There are two types of MAs: ​ ● The Community MA, which is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal Products for Human Use, or CHMP, of the European Medicines Agency, or EMA, and which is valid throughout the entire territory of the EEA.
The approval process and requirements governing the conduct of clinical trials, product licensing and promotion, pricing and reimbursement vary greatly by geographic region, and the time may be longer or shorter than that required for FDA approval. ​ In the European Economic Area (“EEA”) which is composed of the Member States of the European Union plus Norway, Iceland and Liechtenstein, medicinal products can only be commercialized after obtaining a Marketing Authorization (“MA”). ​ There are two types of MAs: ​ ● The Community MA, which is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal Products for Human Use (“CHMP”) of the European Medicines Agency (“EMA”), and which is valid throughout the entire territory of the EEA.
In addition, certain state laws govern the privacy and security of health information in certain circumstances, some of which are more stringent than HIPAA and many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
In addition, certain state laws govern the privacy and security of health information in certain circumstances, some of which are more stringent than HIPAA and many of which differ from each 18 Table of Contents other in significant ways and may not have the same effect, thus complicating compliance efforts.
Item 1. Business ​ Overview ​ We are a clinical-stage biopharmaceutical company focused on developing novel drug candidates for immuno-inflammatory diseases. Our proprietary KINect drug discovery platform combined with our preclinical development capabilities allows us to identify and advance potential drug candidates that we may develop independently or in collaboration with third parties.
Item 1. Business ​ Overview ​ We are a clinical-stage biopharmaceutical company focused on developing novel small and large molecule product candidates for immuno-inflammatory diseases. Our proprietary KINect drug discovery platform combined with our preclinical development capabilities allows us to identify and advance potential product candidates that we may develop independently or in collaboration with third parties.
Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.
Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug or biological product candidate has been associated with unexpected serious harm to patients.
Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval may subject an applicant and/or sponsor to a variety of administrative or judicial sanctions, including refusal by regulatory authorities to approve applications, withdrawal of an approval, imposition of a clinical hold, import/export delays, issuance of warning letters and untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, or civil or criminal investigations and penalties brought by FDA and the Department of Justice or other governmental entities. ​ United States Government Regulation ​ NDA Approval Processes ​ In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations.
Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval may subject an applicant and/or sponsor to a variety of administrative or judicial sanctions, including refusal by regulatory authorities to approve applications, withdrawal of an approval, imposition of a clinical hold, import/export delays, issuance of warning letters and untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, or civil or criminal investigations and penalties brought by FDA and the Department of Justice or other governmental entities. ​ United States Government Regulation ​ NDA and BLA Approval Processes In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and its implementing regulations, and biologics under the FDCA, the Public Health Service Act (“PHSA”) and their implementing regulations.
In addition, FDA regulations and guidance are often issued revised or reinterpreted by the agency in ways that may significantly affect our business and our drug candidates.
In addition, FDA regulations and guidance are often issued revised or reinterpreted by the agency in ways that may significantly affect our business and our product candidates.
The SEC also maintains a website that contains our reports, proxy and information statements and other information. The address of the SEC’s website is www.sec.gov. ​ 20 Table of Contents
The SEC also maintains a website that contains our reports, proxy and information statements and other information. The address of the SEC’s website is www.sec.gov. ​ 22 Table of Contents
It is unclear how such challenges and any additional health care reform measures of the Biden administration will impact the Affordable Care Act and our business. ​ In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted.
It is unclear how such challenges and any additional health care reform measures of the second Trump administration will impact the Affordable Care Act and our business. ​ In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted.
To obtain reimbursement or pricing approval in some countries, we may be required to conduct a pharmacoeconomic study that compares the cost-effectiveness of our drug candidate to other available therapies. Such pharmacoeconomic studies can be costly and the results uncertain.
To obtain reimbursement or pricing approval in some countries, we may be required to conduct a pharmacoeconomic study that compares the cost-effectiveness of our product to other available therapies. Such pharmacoeconomic studies can be costly and the results uncertain.
The submission of an NDA is subject to the payment of user fees, but a waiver of such fees may be obtained under specified circumstances. The FDA reviews all NDAs submitted for a period of 60 days to ensure that they are sufficiently complete for substantive review before it accepts them for filing.
The submission of an NDA or BLA is subject to the payment of user fees, but a waiver of such fees may be obtained under specified circumstances. The FDA reviews all NDAs and BLAs submitted for a period of 60 days to ensure that they are sufficiently complete for substantive review before it accepts them for filing.
Any such approved importation plans, if implemented, may result in lower drug prices for products covered by those programs. ​ The Affordable Care Act, the IRA, as well as other federal and state health care reform measures that have been and may be adopted in the future, could harm our future revenue.
Any such approved importation plans, if implemented, may result in lower drug prices for products covered by those programs. ​ 19 Table of Contents The Affordable Care Act, the IRA, as well as other federal and state health care reform measures that have been and may be adopted in the future, could harm our future revenue.
The resubmitted application also is subject to review before the FDA accepts it for filing. ​ During the approval process, the FDA also will determine whether a risk evaluation and mitigation strategy, or REMS, is necessary to assure the safe use of the product.
The resubmitted application also is subject to review before the FDA accepts it for filing. ​ During the approval process, the FDA also will determine whether a risk evaluation and mitigation strategy (“REMS”) is necessary to assure the safe use of the product.
We believe this platform can generate inhibitors with fit-for purpose mechanisms ranging from reversible, to reversible-covalent to irreversible-covalent kinase and kinase complex inhibitors along with targeted protein degraders. ​ We are actively progressing several discovery programs focused on delivering the next wave of drug candidates from our KINect platform.
We believe this platform can generate inhibitors with fit-for purpose mechanisms ranging from reversible, to reversible-covalent to irreversible-covalent kinase and kinase complex inhibitors along with targeted protein degraders. ​ We are actively progressing several discovery programs focused on delivering the next wave of small molecule product candidates from our KINect platform.
As part of the Confluence acquisition we acquired our investigational drug candidates zunsemetinib, ATI-1777 and ATI-2138. ​ Under the Confluence Agreement, we agreed to pay the former Confluence equity holders aggregate remaining contingent consideration of up to $75.0 million based upon the achievement of specified regulatory and commercial milestones set forth in the Confluence Agreement.
As part of the Confluence acquisition we acquired our investigational product candidates zunsemetinib, lepzacitinib and ATI-2138. ​ Under the Confluence Agreement, we agreed to pay the former Confluence equity holders aggregate remaining contingent consideration of up to $75.0 million based upon the achievement of specified regulatory and commercial milestones set forth in the Confluence Agreement.
The manufacturing process must be capable of consistently producing quality batches of the drug and the manufacturer must develop methods for testing the quality, purity and potency of the drug.
The manufacturing process must be capable of consistently producing quality batches of the drug or biologic and the manufacturer must develop methods for testing the quality, purity and potency of the drug or biologic.
After the FDA evaluates the NDA and conducts inspections of manufacturing facilities where the drug product and/or its active pharmaceutical ingredient will be produced, it may issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.
After the FDA evaluates the NDA or BLA and conducts inspections of manufacturing facilities where the drug or biological product candidate and/or its active pharmaceutical ingredient will be produced, it may issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug or biologic with specific prescribing information for specific indications.
Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its proposed shelf-life. ​ The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests and other control mechanisms, proposed labeling and other relevant information 11 Table of Contents are submitted to the FDA as part of an NDA requesting approval to market the product.
Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the drug or biological product candidate does not undergo unacceptable deterioration over its proposed shelf-life. ​ The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests and other control mechanisms, proposed labeling and other relevant information are submitted to the FDA as part of an NDA or BLA requesting approval to market the product.
These novel approaches are currently being utilized to prosecute additional validated, difficult to drug kinase targets with the goal of demonstrating potential platform utility. ​ 6 Table of Contents Reversible and Irreversible Covalent Inhibitors: Central to the KINect platform is our novel chemical library of several hundred compounds specifically designed to target non-catalytic cysteine residues near the adenosine triphosphate, or ATP, binding site of more than 300 kinases.
These novel approaches are currently being utilized to prosecute additional validated, difficult to drug kinase targets with the goal of demonstrating potential platform utility. ​ Reversible and Irreversible Covalent Inhibitors: Central to the KINect platform is our novel chemical library of several hundred compounds specifically designed to target non-catalytic cysteine residues near the adenosine triphosphate (“ATP”) binding site of more than 300 kinases.
The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, places the IND on clinical hold. In such a case, the IND sponsor and the 10 Table of Contents FDA must resolve any outstanding concerns before clinical trials can begin.
The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, places the IND on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can begin.
The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and through a newly established manufacturer discount program. It is possible that the Affordable Care Act will be subject to judicial or Congressional challenges in the future.
The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and through a newly established manufacturer discount program. It is possible that the Affordable Care Act will be subject to additional challenges and amendments in the future.
Clinical trials are performed on a limited patient population intended to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage. ● Phase 3.
Clinical trials are performed on a limited patient population intended to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the drug or biological product candidate for specific targeted diseases and to determine dosage tolerance and optimal dosage. ● Phase 3.
We are exploring selective degraders of kinase targets with multiple biological functions in addition to the catalytic activity. ​ This integrated drug discovery engine allows us to rapidly progress potential drug candidates from idea to Investigational New Drug, or IND.
We are exploring selective degraders of kinase targets with multiple biological functions in addition to the catalytic activity. ​ This integrated drug discovery engine allows us to rapidly progress potential product candidates from idea to IND.
For example, we own issued patents in the United States and other foreign countries, as well as pending applications in the United States and foreign countries directed to various novel inhibitors of JAK1 and/or JAK3, including ATI-1777, and methods of using the same, which, if issued, would expire in 2038, subject to any applicable adjustment or extension.
For example, we own issued patents in the United States and China, as well as pending applications in the United States and foreign countries directed to various novel inhibitors of JAK1 and/or JAK3, including lepzacitinib, and methods of using the same, which, if issued, would expire in 2038, subject to any applicable adjustment or extension.
Failure to promptly conduct any required Phase 4 clinical trials could result in withdrawal of approval. ​ Clinical trials are inherently uncertain, and Phase 1, Phase 2 and Phase 3 testing may not be successfully completed.
Failure to promptly conduct any required Phase 4 clinical trials could result in withdrawal of approval of an NDA or BLA. ​ Clinical trials are inherently uncertain, and Phase 1, Phase 2 and Phase 3 testing may not be successfully completed.
The study enrolled 60 healthy subjects across 6 dosing cohorts ranging from 10 to 80 mg of total daily doses, with eight active and two placebo controlled per arm. Data from the trial demonstrated that ATI-2138 was generally well tolerated at all doses tested in the trial and had dose proportional PK.
The trial enrolled 60 healthy volunteers across 6 dosing cohorts ranging from 10 to 80 mg of total daily doses, with eight volunteers receiving ATI-2138 and two volunteers receiving placebo in each arm. Data from the trial demonstrated that ATI-2138 was generally well tolerated at all doses tested and had dose proportional PK.
The patent term of a European patent is 20 years from its filing date; however, unlike in the United States, the European patent does not grant patent term adjustments.
The patent term of a European patent is 20 years from its filing date; however, unlike in the United States, the European patent is not subject to patent term adjustments.
The drug is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and elimination.
The drug or biological product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and elimination.
Further, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022, or IRA, into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in Affordable Care Act marketplaces through plan year 2025.
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in Affordable Care Act marketplaces through plan year 2025.
We own pending patent applications in the United States, European Union and other foreign countries directed to methods of treating various cancers, such as breast cancer and pancreatic cancer, by orally administering zunsemetinib, which, if issued, would each expire in 2041, subject to any applicable adjustment or extension.
We own a pending patent application in the United States directed to methods of treating various cancers, such as breast cancer and pancreatic cancer, by orally administering zunsemetinib, which, if issued, would expire in 2041, subject to any applicable adjustment or extension.
We also own a pending PCT application directed to methods of using ATI-2138, which if issued, would expire in 2043, subject to any applicable adjustment or extension. ​ With respect to our MK2 signaling pathway inhibitor development program, we own numerous issued patents and pending applications to novel MK2 pathway inhibitors, including zunsemetinib, and various methods of use that expire, or would expire, between 2031 and 2041, subject to any applicable patent term adjustment or extension that may 8 Table of Contents be available in a particular country.
We also own a pending PCT application directed to methods of synthesizing such novel inhibitors of JAK1 and/or JAK3, including lepzacitinib, which, if issued, would expire in 2044, subject to any applicable adjustment or extension. ​ With respect to our MK2 signaling pathway inhibitor development program, we own numerous issued patents and pending applications to novel MK2 pathway inhibitors, including zunsemetinib, and various methods of use that expire, or would expire, between 2031 and 2041, subject to any applicable patent term adjustment or extension that may be available in a particular country.
Our business could be harmed 19 Table of Contents if reimbursement of our drug candidates, if approved, is unavailable or limited in scope or amount or if pricing is set at unsatisfactory levels. ​ Employees and Human Capital Resources ​ As of December 31, 2023, we had 91 total employees, of which 86 were full-time employees.
Our business could be harmed if reimbursement of our product candidates, if approved, is unavailable or limited in scope or amount or if pricing is set at unsatisfactory levels. 21 Table of Contents ​ Employees and Human Capital Resources ​ As of December 31, 2024, we had 64 total employees, of which 61 were full-time employees.
If a drug candidate is found to be potentially effective and to have an acceptable safety profile in Phase 2 clinical trials, the clinical trial program will be expanded to Phase 3 clinical trials to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical trial sites.
If a drug or biological product candidate is found to be potentially effective and to have an acceptable safety profile in Phase 2 clinical trials, the clinical trial program will be expanded to Phase 3 clinical trials to further evaluate dosage, to provide substantial evidence of efficacy, or purity and potency, and to further test for safety in an expanded patient population at geographically dispersed clinical trial sites.
It may request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information.
It may request additional information rather than accept 13 Table of Contents an NDA or BLA for filing. In this event, the NDA or BLA must be resubmitted with the additional information.
Further, we own one U.S. patent and numerous pending patent applications in the United States, European Union and other foreign countries directed to certain methods of manufacturing zunsemetinib and crystal forms of zunsemetinib, which, if issued, would each expire in 2041, subject to any applicable adjustment or extension.
Further, we own one U.S. patent and a pending patent application in the United States directed to certain methods of manufacturing zunsemetinib, as well as pending applications in the United States and Japan to crystal forms of zunsemetinib, which, if issued, would each expire in 2041, subject to any applicable adjustment or extension.
“Soft” JAK inhibitors are designed to be topically applied and active in the skin, but rapidly metabolized and inactivated when they enter the bloodstream, which may result in low systemic exposure. ​ In January 2024, we announced positive top-line results from our Phase 2b study of ATI-1777 in patients with mild to severe atopic dermatitis (ATI-1777-AD-202).
“Soft” JAK inhibitors are designed to be topically applied and active in the skin, but rapidly metabolized and inactivated when they enter the bloodstream, which may result in low systemic exposure. ​ In January 2024, we announced positive top-line results from our Phase 2b multicenter, randomized, double-blind, vehicle-controlled, parallel-group trial of lepzacitinib in patients with mild to severe atopic dermatitis.
(now known as Aclaris Life Sciences, Inc.), or Confluence, in 2017.
(now known as Aclaris Life Sciences, Inc.) (“Confluence”), in 2017.
The Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, permits a patent term extension of up to five years beyond the expiration of the patent.
The Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman Act”), permits a patent term extension of up 20 Table of Contents to five years beyond the expiration of the patent.
For example, on January 5, 2024, the FDA approved Florida’s proposal to import certain drugs from Canada for specific state healthcare programs. It is unclear if and how this program will be implemented and whether it will be subject challenges in the United States or 17 Table of Contents Canada.
For example, on January 5, 2024, the FDA approved Florida’s proposal to import certain drugs from Canada for specific state healthcare programs. It is unclear if and how this program will be implemented and whether it will be subject challenges in the United States or Canada. Other states have also submitted proposals that are pending review by the FDA.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeMoreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their drug candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their drugs. ​ We may experience numerous unforeseen events during or as a result of clinical trials that could delay or prevent our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates, including: ​ ● regulators or IRBs may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; ● we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites or prospective contract research organizations, or CROs, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; ● clinical trials of our drug candidates may produce negative or inconclusive results, including failure to demonstrate statistical significance, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon drug development programs; ● the number of patients required for clinical trials of our drug candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, or participants may drop out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate; ● our drug candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or IRBs to suspend or terminate the trials; ● our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; 25 Table of Contents ● regulators or IRBs may require that we or our investigators suspend or terminate clinical development for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; ● the cost of clinical trials of our drug candidates may be greater than we anticipate; and ● the supply or quality of our drug candidates or other materials necessary to conduct clinical trials of our drug candidates may be insufficient or inadequate. ​ We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by a data safety monitoring board for such trial or by the FDA or other regulatory authorities.
Biggest changeThe results from an open-label trial may not be predictive of future clinical trial results of a product candidate when studied in a controlled environment with a placebo or active control. ​ We may experience numerous unforeseen events during or as a result of clinical trials that could delay or prevent our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our product candidates, including: ​ ● regulators or IRBs may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; ● we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites or prospective contract research organizations (“CROs”), the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; ● clinical trials of our product candidates may produce negative or inconclusive results, including failure to demonstrate statistical significance, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon drug development programs; ● the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, or participants may drop out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate; ● patients or clinical trial investigators may not comply with or may deviate from the clinical trial protocol, including failing to follow specified testing procedures, schedules, or other protocol requirements, which could impact the integrity of clinical trial data and potentially jeopardize the trial; ● while a product candidate may show evidence of clinical activity, we may experience a high placebo effect which will make it difficult to show a statistically significant effect of the product candidate as compared to the control arm; 28 Table of Contents ● our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or IRBs to suspend or terminate the trials; ● our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; ● regulators or IRBs may require that we or our investigators suspend or terminate clinical development for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; ● the cost of clinical trials of our product candidates may be greater than we anticipate; and ● the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate. ​ We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by a data safety monitoring board for such trial or by the FDA or other regulatory authorities.
Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. ​ If we experience delays in the completion of, or termination of, any clinical trial of our drug candidates, our costs will increase, our drug candidate development process will be slowed, the commercial prospects of our drug candidates will be harmed, and our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates will be delayed.
Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. ​ If we experience delays in the completion of, or termination of, any clinical trial of our product candidates, our costs will increase, our product candidate development process will be slowed, the commercial prospects of our product candidates will be harmed, and our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our product candidates will be delayed.
Regardless of merit or eventual outcome, product liability claims may result in: ​ ● decreased demand for any drug candidates that we may develop and, if approved, are commercialized by our potential third-party partners; ● injury to our reputation and significant negative media attention; ● withdrawal of clinical trial participants; ● significant costs to defend the related litigation; ● substantial monetary awards paid to trial participants or patients; ● loss of revenue; ● reduced resources of our management to pursue our business strategy; and ● our inability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates. ​ We currently hold $10 million in product liability insurance coverage in the aggregate, with a per incident limit of $10 million, which may not be adequate to cover all liabilities that we may incur.
Regardless of merit or eventual outcome, product liability claims may result in: ​ ● decreased demand for any product candidates that we may develop and, if approved, are commercialized by our potential third-party partners; ● injury to our reputation and significant negative media attention; ● withdrawal of clinical trial participants; ● significant costs to defend the related litigation; ● substantial monetary awards paid to trial participants or patients; ● loss of revenue; ● reduced resources of our management to pursue our business strategy; and ● our inability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our product candidates. ​ We currently hold $10 million in product liability insurance coverage in the aggregate, with a per incident limit of $10 million, which may not be adequate to cover all liabilities that we may incur.
If we are required to conduct additional clinical trials or other testing of our drug candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our drug candidates or other testing, if the results of these trials or tests are not favorable or if there are safety concerns, we may not be able to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates, and our potential third-party partners may: ​ ● be delayed in obtaining marketing approval for our drug candidates; ● not obtain marketing approval at all; ● obtain marketing approval for indications or patient populations that are not as broad as intended or desired; ● obtain marketing approval with labeling that includes significant use or distribution restrictions or safety warnings; ● be subject to additional post-marketing testing requirements; or ● have the drug removed from the market after obtaining marketing approval. ​ Our drug development costs will also increase if we experience delays in testing.
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 favorable or if there are safety concerns, we may not be able to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our product candidates, and our potential third-party partners may: ​ ● be delayed in obtaining marketing approval for our product candidates; ● not obtain marketing approval at all; ● obtain marketing approval for indications or patient populations that are not as broad as intended or desired; ● obtain marketing approval with labeling that includes significant use or distribution restrictions or safety warnings; ● be subject to additional post-marketing testing requirements; or ● have the drug removed from the market after obtaining marketing approval. ​ Our drug development costs will also increase if we experience delays in testing.
If we are unable to raise additional funds through equity or debt financings or other arrangements with third parties when needed, we may be required to delay, limit, reduce or terminate our drug development efforts or grant rights to third parties to develop technologies, intellectual property, or drug candidates that we would otherwise prefer to develop ourselves. ​ We have a limited history as a clinical-stage biopharmaceutical company developing and partnering our drug candidates, which may make it difficult to evaluate the success of our business to date and to assess our future viability. ​ Our operations over the last several years have been largely focused on undertaking preclinical studies and conducting clinical trials, drug discovery, acquiring new drug candidates and related intellectual property, and raising capital.
If we are unable to raise additional funds through equity or debt financings or other arrangements with third parties when needed, we may be required to delay, limit, reduce or terminate our drug development efforts or grant rights to third parties to develop technologies, intellectual property, or product candidates that we would otherwise prefer to develop ourselves. ​ We have a limited history as a clinical-stage biopharmaceutical company developing and partnering our product candidates, which may make it difficult to evaluate the success of our business to date and to assess our future viability. ​ Our operations over the last several years have been largely focused on undertaking preclinical studies and conducting clinical trials, drug discovery, acquiring new product candidates and related intellectual property, and raising capital.
If we fail to identify and enter into partnerships with third parties to further develop, obtain marketing approval for and/or commercialize our drug candidates, any partnerships we enter into do not result in the successful development, marketing approval for and commercialization of our drug candidates, the number of addressable patients is not as significant as estimated by our potential third-party partners, the indication approved by regulatory authorities is narrower than expected, or the treatment population is narrowed by competition, physician choice or treatment guidelines, we may not earn significant revenue from agreements with potential third-party partners for such drug candidates, even if the drug candidates are approved for marketing. ​ Because of the numerous risks and uncertainties associated with drug development, we are unable to accurately predict the timing or amount of expenses or when, or if, we will be able to achieve profitability.
If we fail to identify and enter into partnerships with third parties to further develop, obtain marketing approval for and/or commercialize our product candidates, any partnerships we enter into do not result in the successful development, marketing approval for and commercialization of our product candidates, the number of addressable patients is not as significant as estimated by our potential third-party partners, the indication approved by regulatory authorities is narrower than expected, or the treatment population is narrowed by competition, physician choice or treatment guidelines, we may not earn significant revenue from agreements with potential third-party partners for such product candidates, even if the product candidates are approved for marketing. ​ Because of the numerous risks and uncertainties associated with drug development, we are unable to accurately predict the timing or amount of expenses or when, or if, we will be able to achieve profitability.
Our ability to identify and develop additional drug candidates is subject to numerous risks, including that: ​ ● our drug discovery methods and our KINect platform may not be successful in identifying additional drug candidates; ● our discovery programs may initially show promise in identifying potential drug candidates, yet fail to yield drug candidates for clinical development; and ● potential drug candidates may, on further study, be shown to have harmful side effects or other characteristics that indicate that they are unlikely to be drug candidates that will receive marketing approval and achieve market acceptance. ​ In addition, discovery programs require substantial technical, financial and human resources.
Our ability to identify and develop additional product candidates is subject to numerous risks, including that: ​ ● our drug discovery methods and our KINect platform may not be successful in identifying additional product candidates; ● our discovery programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development; and ● potential product candidates may, on further study, be shown to have harmful side effects or other characteristics that indicate that they are unlikely to be product candidates that will receive marketing approval and achieve market acceptance. ​ In addition, discovery programs require substantial technical, financial and human resources.
In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is derived from information that is typically extensive, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular program, drug candidate or our business. ​ If the interim, topline or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates may be harmed, which could harm our business, operating results, prospects or financial condition. ​ Changes in methods of drug candidate manufacturing or formulation may result in additional costs or delay. ​ As drug candidates are developed through preclinical studies to late-stage clinical trials towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods and formulation, are altered along the way in an effort to optimize processes and results.
In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is derived from information that is typically extensive, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular program, product candidate or our business. ​ If the interim, topline or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition. ​ Changes in methods of product candidate manufacturing or formulation may result in additional costs or delay. ​ As product candidates are developed through preclinical studies to late-stage clinical trials towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods and formulation, are altered along the way in an effort to optimize processes and results.
In addition, any such challenge on any divested product could harm our ability to earn revenue from the arrangements for such product. ​ If we do not obtain protection under the Hatch-Waxman Act by extending the patent term and obtaining data exclusivity for our drug candidates, our business may be materially harmed. ​ Our success will largely depend on our ability to obtain and maintain patent and other intellectual property in the United States and other countries with respect to our proprietary technology, drug candidates and our target indications.
In addition, any such challenge on any divested product could harm our ability to earn revenue from the arrangements for such product. ​ If we do not obtain protection under the Hatch-Waxman Act by extending the patent term and obtaining data exclusivity for our product candidates, our business may be materially harmed. ​ Our success will largely depend on our ability to obtain and maintain patent and other intellectual property in the United States and other countries with respect to our proprietary technology, product candidates and our target indications.
During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to develop our drug candidates and provide our services. ​ We and the third parties upon which we rely are subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, attacks enhanced or facilitated by AI, telecommunications failures, earthquakes, fires, floods, and other similar threats. ​ In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, ability to develop our drug candidates or provide our services, loss of sensitive data and income, reputational harm, and diversion of funds.
During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to develop our product candidates and provide our services. ​ We and the third parties upon which we rely are subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, attacks enhanced or facilitated by AI, telecommunications failures, earthquakes, fires, floods, and other similar threats. ​ In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, ability to develop our product candidates or provide our services, loss of sensitive data and income, reputational harm, and diversion of funds.
The market price for our common stock may be influenced by many factors, including: ​ ● the commencement, enrollment and/or results of any preclinical studies and clinical trials we may conduct, or changes in the development status of our drug candidates; ● any delay in our regulatory filings for any of our drug candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter or a request for additional information; ● adverse results from, delays in or termination of clinical trials; ● adverse regulatory decisions, including failure of any of our drug candidates to receive marketing approval; ● unanticipated serious safety concerns related to the use of any drug candidate or previously sold commercial product; ● changes in financial estimates by us or by any securities analysts who might cover our stock; ● conditions or trends in our industry; ● changes in the structure of health care payment systems; ● changes in the market valuations of similar companies; ● stock market price and volume fluctuations of comparable companies and, in particular, those that operate in the biotechnology industry; ● publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities analysts; ● announcements by us or our competitors of significant acquisitions, strategic partnerships or divestitures; ● announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us; ● investors’ general perception of our company and our business; ● recruitment or departure of key personnel; ● overall performance of the equity markets; ● trading volume of our common stock; 51 Table of Contents ● disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; ● significant lawsuits, including patent or stockholder litigation; ● general political and economic conditions; and ● other events or factors, many of which are beyond our control. ​ In the past, stockholders have initiated class action lawsuits against us and other pharmaceutical companies following periods of volatility in the market prices of these companies’ stock.
The market price for our common stock may be influenced by many factors, including: ​ ● the commencement, enrollment and/or results of any preclinical studies and clinical trials we may conduct, or changes in the development status of our product candidates; ● any delay in our regulatory filings for any of our product candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, 55 Table of Contents including without limitation the FDA’s issuance of a “refusal to file” letter or a request for additional information; ● adverse results from, delays in or termination of clinical trials; ● adverse regulatory decisions, including failure of any of our product candidates to receive marketing approval; ● unanticipated serious safety concerns related to the use of any product candidate or previously sold commercial product; ● changes in financial estimates by us or by any securities analysts who might cover our stock; ● conditions or trends in our industry; ● changes in the structure of health care payment systems; ● changes in the market valuations of similar companies; ● stock market price and volume fluctuations of comparable companies and, in particular, those that operate in the biotechnology industry; ● publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities analysts; ● announcements by us or our competitors of significant acquisitions, strategic partnerships or divestitures; ● announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us; ● investors’ general perception of our company and our business; ● recruitment or departure of key personnel; ● overall performance of the equity markets; ● trading volume of our common stock; ● disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; ● significant lawsuits, including patent or stockholder litigation; ● general political and economic conditions; and ● other events or factors, many of which are beyond our control. ​ In the past, stockholders have initiated class action lawsuits against us and other pharmaceutical companies following periods of volatility in the market prices of these companies’ stock.
If any physician or other health care provider or entity with whom we or our potential third-party partners expect to do business is found not to be in compliance with applicable laws, it may be subject to significant criminal, civil or administrative sanctions, including exclusions from participation in government health care programs, which could also materially affect our ability to earn revenue from arrangements with such third-party partners for our drug candidates. ​ Recently enacted and future legislation may increase the difficulty and cost for our potential third-party partners to obtain marketing approval of our drug candidates and commercialize our drug candidates, if approved, and affect the prices our potential third-party partners may obtain. ​ In the United States, and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the health care system that could prevent or delay marketing approval of our drug candidates, restrict or regulate post-approval activities and affect our potential third-party partners’ ability to profitably sell any of our drug candidates for which our potential third-party partners obtain marketing approval, and consequently affect our ability to earn revenue from arrangements with such third-party partners for our drug candidates. ​ Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in health care systems with the stated goals of containing health care costs, improving quality and/or expanding access.
If any physician or other health care provider or entity with whom we or our potential third-party partners expect to do business is found not to be in compliance with applicable laws, it may be subject to significant criminal, civil or administrative sanctions, including exclusions from participation in government health care programs, which could also materially affect our ability to earn revenue from arrangements with such third-party partners for our product candidates. ​ Recently enacted and future legislation may increase the difficulty and cost for our potential third-party partners to obtain marketing approval of our product candidates and commercialize our product candidates, if approved, and affect the prices our potential third-party partners may obtain. ​ In the United States, and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the health care system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our potential third-party partners’ ability to profitably sell any of our product candidates for which our potential third-party partners obtain marketing approval, and consequently affect our ability to earn revenue from arrangements with such third-party partners for our product candidates. ​ Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in health care systems with the stated goals of containing health care costs, improving quality and/or expanding access.
If any of our drug candidates receive marketing approval, the accompanying label may limit the approved use of our product in this way, which could limit sales of the product. ​ The process of obtaining marketing approvals, both in the United States and abroad, is expensive and may take many years if additional clinical trials are required, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the drug candidates involved.
If any of our product candidates receive marketing approval, the accompanying label may limit the approved use of our product in this way, which could limit sales of the product. ​ The process of obtaining marketing approvals, both in the United States and abroad, is expensive and may take many years if additional clinical trials are required, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved.
Further, disclosure of interim, topline or preliminary data by us or by our competitors could result in volatility in the price of our common stock. ​ Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the potential of the particular program, the likelihood of marketing approval or commercialization of the particular drug candidate, any approved product, and our company in general.
Further, disclosure of interim, topline or preliminary data by us or by our competitors could result in volatility in the price of our common stock. ​ Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the potential of the particular program, the likelihood of marketing approval or commercialization of the particular product candidate, any approved product, and our company in general.
If a present or future partner of ours were to be involved in a business combination, the continued pursuit and emphasis on our drug development or commercialization program could be delayed, diminished or terminated. ​ If we are not able to establish partnerships, we may have to alter our development and commercialization plans. ​ Our drug development programs for our drug candidates will require substantial additional capital.
If a present or future partner of ours were to be involved in a business combination, the continued pursuit and emphasis on our drug development or commercialization program could be delayed, diminished or terminated. ​ If we are not able to establish partnerships, we may have to alter our development and commercialization plans. ​ Our development programs for our product candidates will require substantial additional capital.
Our ability to earn revenue from these arrangements will depend on our partners’ abilities to successfully perform the functions assigned to them in these arrangements. ​ Partnerships involving our drug candidates would pose the following risks to us: ​ ● partners have significant discretion in determining the efforts and resources that they will apply to these arrangements; ● partners may not perform their obligations as expected; ● partners may not pursue development, marketing approval or commercialization of any drug candidates that achieve marketing approval or may elect not to continue or renew development or commercialization 33 Table of Contents programs based on clinical trial results, changes in the partners’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities; ● partners may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a drug candidate, repeat or conduct new clinical trials or require a new formulation of a drug candidate for clinical testing; ● partners could independently develop, or develop with third parties, products that compete directly or indirectly with our drug candidates if the partners believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours; ● drug candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own products or drug candidates, which may cause our partners to cease to devote resources to the development and/or commercialization of our drug candidates, if approved; ● a partner with marketing and distribution rights to one or more of our drug candidates that achieve marketing approval may not commit sufficient resources to the marketing and distribution of such drug candidates; ● disagreements with partners, including disagreements over proprietary rights, contract interpretation or the preferred course of development or commercialization, might cause delays or termination of the research, development or commercialization of drug candidates, might lead to additional responsibilities for us with respect to drug candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive; ● partners may not properly maintain or defend our or their intellectual property rights or may use our or their proprietary information in such a way as to invite litigation that could jeopardize or invalidate such intellectual property or proprietary information or expose us to potential litigation; ● partners may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; and ● partnerships may be terminated for the convenience of the partner and, if terminated, we could be required to raise additional capital to pursue further development and/or commercialization of the applicable drug candidates. ​ Partnership agreements may not lead to development, marketing approval or commercialization of drug candidates in the most efficient manner or at all.
Our ability to earn revenue from these arrangements will depend on our partners’ abilities to successfully perform the functions assigned to them in these arrangements. ​ Partnerships involving our product candidates would pose the following risks to us: ​ ● partners have significant discretion in determining the efforts and resources that they will apply to these arrangements; ● partners may not perform their obligations as expected; ● partners may not pursue development, marketing approval or commercialization of any product candidates that achieve marketing approval or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the partners’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities; ● partners 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; ● partners could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates if the partners believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours; 37 Table of Contents ● product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own products or product candidates, which may cause our partners to cease to devote resources to the development and/or commercialization of our product candidates, if approved; ● a partner 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 candidates; ● disagreements with partners, including disagreements over proprietary rights, contract interpretation or the preferred course of development or commercialization, might cause delays or termination 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; ● partners may not properly maintain or defend our or their intellectual property rights or may use our or their proprietary information in such a way as to invite litigation that could jeopardize or invalidate such intellectual property or proprietary information or expose us to potential litigation; ● partners may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; and ● partnerships may be terminated for the convenience of the partner and, if terminated, we could be required to raise additional capital to pursue further development and/or commercialization of the applicable product candidates. ​ Partnership agreements may not lead to development, marketing approval or commercialization of product candidates in the most efficient manner or at all.
In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a drug. To obtain coverage and reimbursement or pricing approval in some countries, our potential third-party partners may be required to conduct a clinical trial that compares the cost-effectiveness of our drug candidate to other available procedures.
In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a drug. To obtain coverage and reimbursement or pricing approval in some countries, our potential third-party partners may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available procedures.
If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant civil, criminal and administrative penalties, including, without limitation, damages, fines, disgorgement, imprisonment, exclusion from participation in government health care programs, such as Medicare and Medicaid, additional reporting obligations and oversight if we are 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. ​ In addition, we have a hybrid work model of remote and in-person operations for our employees that enables us to continue to develop our drug candidates and provide contract research services to our clients.
If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant civil, criminal and administrative penalties, including, without limitation, damages, fines, disgorgement, imprisonment, exclusion from participation in government health care programs, such as Medicare and Medicaid, additional reporting obligations and oversight if we are 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. ​ In addition, we have a hybrid work model of remote and in-person operations for our employees that enables us to continue to develop our product candidates and provide contract research services to our clients.
Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; or stoppages in our business operations (including clinical trials); inability to process personal data or to operate in certain jurisdictions; limited ability to develop our drug candidates; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to our business model or operations. ​ We are subject to governmental economic sanctions and export and import controls that could impair our potential third-party partners’ ability to compete in international markets or subject us or our potential third-party partners to liability if we or they are not in compliance with applicable laws. ​ As a U.S. company, we are subject to U.S. import and export controls and economic sanctions laws and regulations, and we are required to import and export our drug candidates, technology and services in compliance with those laws and regulations, including the U.S.
Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; or stoppages in our business operations (including clinical trials); inability to process personal data or to operate in certain jurisdictions; limited ability to develop our product candidates; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to our business model or operations. ​ We are subject to governmental economic sanctions laws and export and import controls that could impair our potential third-party partners’ ability to compete in international markets or subject us or our potential third-party partners to liability if we or they are not in compliance with applicable laws. ​ As a U.S. company, we are subject to U.S. import and export controls and economic sanctions laws and regulations, and we are required to import and export our product candidates, technology and services in compliance with those laws and regulations, including the U.S.
If any of our drug candidates receives marketing approval, the accompanying label may limit the approved use of our drug, which could limit sales of the drug by our potential third-party partners. The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the drug.
If any of our product candidates receives marketing approval, the accompanying label may limit the approved use of our drug, which could limit sales of the drug by our potential third-party partners. The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the drug.
Any delays in completing clinical trials would delay or prevent our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates. ​ Our clinical trials may fail to demonstrate the safety and efficacy of our drug candidates, or serious adverse or unacceptable side effects may be identified during the development of our drug candidates, which could increase our costs or necessitate the abandonment or limitation of the development of our drug candidates or prevent or delay our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates. ​ If our drug candidates are associated with side effects in clinical trials or have characteristics that are unexpected, our costs could increase or we may need to abandon their development or limit development to more narrow uses in which the side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective.
Any delays in completing clinical trials would delay or prevent our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our product candidates. ​ Our clinical trials may fail to demonstrate the safety and efficacy of our product candidates, or serious adverse or unacceptable side effects may be identified during the development of our product candidates, which could increase our costs or necessitate the abandonment or limitation of the development of our product candidates or prevent or delay our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our product candidates. ​ If our product candidates are associated with side effects in clinical trials or have characteristics that are unexpected, our costs could increase or we may need to abandon their development or limit development to more narrow uses in which the side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective.
Significant preclinical study or clinical trial delays also could shorten any periods during which our potential third-party partners may have the exclusive right to commercialize our drug candidates or allow competitors to bring drugs to market before such third-party partners do, which would impact our ability to successfully identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our drug candidates. ​ If we experience delays or difficulties in the enrollment of subjects in clinical trials, our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates could be delayed or prevented. ​ Successful and timely completion of clinical trials will require that we enroll a sufficient number of subjects.
Significant preclinical study or clinical trial delays also could shorten any periods during which our potential third-party partners may have the exclusive right to commercialize our product candidates or allow competitors to bring drugs to market before such third-party partners do, which would impact our ability to successfully identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our product candidates. ​ If we experience delays or difficulties in the enrollment of subjects in clinical trials, our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our product candidates could be delayed or prevented. ​ Successful and timely completion of clinical trials will require that we enroll a sufficient number of subjects.
In addition, the uncertainties associated with litigation could compromise our ability to compete in the marketplace, including compromising our ability to raise the funds necessary to continue our clinical trials, continue our internal research programs, or pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates. ​ If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed. ​ In addition to seeking and maintaining patents for our drug candidates, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position.
In addition, the uncertainties associated with litigation could compromise our ability to compete in the marketplace, including compromising our ability to raise the funds necessary to continue our clinical trials, continue our internal research programs, or pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our product candidates. ​ If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed. ​ In addition to seeking and maintaining patents for our product candidates, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position.
If reimbursement of our drug candidates is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our potential third-party partners may not able to generate revenue, which in turn may adversely affect our ability to earn revenue from arrangements with such third-party partners for our drug candidates. ​ If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business. ​ We 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.
If reimbursement of our product candidates is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our potential third-party partners may not able to generate revenue, which in turn may adversely affect our ability to earn revenue from arrangements with such third-party partners for our product candidates. ​ If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business. ​ We 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.
Clinical trials often fail to demonstrate safety and efficacy of the drug candidate studied for the target indication. ​ Additionally, if we or others identify undesirable side effects caused by our drugs, a number of potentially significant negative consequences could result, including: ​ ● we may need to abandon the development or limit the further development of our drug candidates, including in various populations and for certain indications; ● regulatory authorities may withdraw approval to market such product; ● regulatory authorities may require additional warnings on the labels; ● a medication guide outlining the risks of such side effects for distribution to patients may be required; ● we could be sued and held liable for harm caused to patients; ● our reputation and physician or patient acceptance of our drug candidates, if approved, may suffer; and ● our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates would be harmed. ​ Any of these events could prevent us from pursuing strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize the particular drug candidate and could significantly harm our business, results of operations and prospects. ​ 27 Table of Contents Interim, topline and preliminary data from our clinical trials that we announce or publish from time to time may change as more subject data become available and are subject to audit and verification procedures that could result in material changes in the final data. ​ From time to time, we may publicly disclose interim, topline or preliminary data from our clinical trials, which are based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a full analysis of all data related to the particular trial.
Clinical trials often fail to demonstrate safety and efficacy of the product candidate studied for the target indication. ​ Additionally, if we or others identify undesirable side effects caused by our product candidates, a number of potentially significant negative consequences could result, including: ​ ● we may need to abandon the development or limit the further development of our product candidates, including in various populations and for certain indications; ● regulatory authorities may withdraw approval to market such product; ● regulatory authorities may require additional warnings on the labels; ● a medication guide outlining the risks of such side effects for distribution to patients may be required; ● we could be sued and held liable for harm caused to patients; ● our reputation and physician or patient acceptance of our product candidates, if approved, may suffer; and ● our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our product candidates would be harmed. ​ 30 Table of Contents Any of these events could prevent us from pursuing strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize the particular product candidate and could significantly harm our business, results of operations and prospects. ​ Interim, topline and preliminary data from our clinical trials that we announce or publish from time to time may change as more subject data become available and are subject to audit and verification procedures that could result in material changes in the final data. ​ From time to time, we may publicly disclose interim, topline or preliminary data from our clinical trials, which are based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a full analysis of all data related to the particular trial.
We may fail to satisfy one or more the Nasdaq Global Select Market requirements for continued listing of our common stock in the future. There can be no assurance that we will be successful in maintaining the listing of our common stock on the Nasdaq Global Select Market, or, if transferred, on the Nasdaq Capital Market.
We may fail to satisfy one or more of the Nasdaq Global Select Market’s requirements for continued listing of our common stock in the future. There can be no assurance that we will be successful in maintaining the listing of our common stock on the Nasdaq Global Select Market, or, if transferred, on the Nasdaq Capital Market.
If we are unable to raise sufficient additional capital or generate revenue from transactions with potential third-party partners for the development and/or commercialization of our drug candidates , we could be forced to curtail our planned operations. ​ Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies, intellectual property, potential future revenue streams or drug candidates. ​ Until such time, if ever, as we can earn substantial revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings and license and partnership agreements.
If we are unable to raise sufficient additional capital or generate revenue from transactions with potential third-party partners for the development and/or commercialization of our product candidates , we could be forced to curtail our planned operations. ​ Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies, intellectual property, potential future revenue streams or product candidates. ​ Until such time, if ever, as we can earn substantial revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings and license and partnership agreements.
If we do not accurately evaluate the commercial potential or target market for a particular drug candidate, we may relinquish valuable rights to that drug candidate through partnerships, licensing or other arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such drug candidate. ​ For any of our drug candidates that receive marketing approval, our potential third-party partners may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success. ​ For any of our drug candidates that receive marketing approval, our potential third-party partners may fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community.
If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through partnerships, licensing or other arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate. ​ For any of our product candidates that receive marketing approval, our potential third-party partners may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success. ​ For any of our product candidates that receive marketing approval, our potential third-party partners may fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community.
Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. ​ If we raise additional funds through partnerships, strategic alliances or marketing, distribution or licensing arrangements with potential third-party partners, we may be required to relinquish valuable rights to our technologies, intellectual property, potential future revenue streams, or drug candidates or grant licenses on terms that may not be favorable to us.
Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. ​ If we raise additional funds through partnerships, strategic alliances or marketing, distribution or licensing arrangements with potential third-party partners, we may be required to relinquish valuable rights to our technologies, intellectual property, potential future revenue streams, or product candidates or grant licenses on terms that may not be favorable to us.
Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the drug candidate’s safety and efficacy. Securing marketing approval also requires the submission of information about the drug manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities.
Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of information about the drug manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities.
If these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our drug candidates.
If these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our product candidates.
Many drug candidates that initially showed promise in early stage testing have later been found to cause side effects that prevented further development of the drug candidate. ​ Before any potential third-party partners can obtain marketing approvals for the commercial sale of our drug candidates, we must demonstrate through lengthy, complex and expensive preclinical testing and clinical trials that our drug candidates are both safe and effective for use in each target indication, and failures can occur at any stage of testing.
Many product candidates that initially showed promise in early-stage testing have later been found to cause side effects that prevented further development of the product candidate. ​ Before any potential third-party partners can obtain marketing approvals for the commercial sale of our product candidates, we must demonstrate through lengthy, complex and expensive preclinical testing and clinical trials that our product candidates are both safe and effective for use in each target indication, and failures can occur at any stage of testing.
Any similar new laws may result in additional reductions in Medicare and other health care funding, which could have a material adverse effect on our ability to earn revenue from arrangements with our potential third-party partners for our drug candidates. ​ We expect that the Affordable Care Act, as well as other health care reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that our potential third-party partners receive for any approved drug candidate.
Any similar new laws may result in additional reductions in Medicare and other health care funding, which could have a material adverse effect on our ability to earn revenue from arrangements with our potential third-party partners for our product candidates. ​ We expect that the Affordable Care Act, as well as other health care reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that our potential third-party partners receive for any approved product candidate.
If we are unable to raise capital when needed, we could be forced to curtail our planned operations. ​ Identifying potential drug candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our drug candidates.
If we are unable to raise capital when needed, we could be forced to curtail our planned operations. ​ Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our product candidates.
Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation; ● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their respective implementing regulations, which impose obligations on covered health care providers, health plans, and health care clearinghouses, as well as their business associates that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity and their subcontractors that use, disclose, access, or otherwise process protected health information, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; ● the federal Open Payments program, created under Section 6002 of the Affordable Care Act (commonly known as the Physician Payments Sunshine Act) and its implementing regulations, which requires specified manufacturers of drugs, devices, biologics or medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services, or CMS, information related to “payments or other transfers of value” made to physicians, which is defined to include doctors, dentists, optometrists, podiatrists and chiropractors, other health care professionals (such as physician assistants and nurse practitioners), and teaching hospitals, and for applicable manufacturers to report annually to CMS 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 health care items or services reimbursed by non-governmental third-party payors, including private insurers; state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to health care providers; state, local and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other health care providers or marketing expenditures; state laws that require drug manufacturers to report pricing information regarding certain drugs; and/or that require registration of certain employees engaged in marketing activities in the location; and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. ​ Efforts to ensure that our or our potential third-party partners’ business arrangements with third parties will comply with applicable health care laws and regulations may involve substantial costs.
Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation; ● HIPAA, as amended by HITECH, and their respective implementing regulations, which impose obligations on covered health care providers, health plans, and health care clearinghouses, as well as their business associates that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity and their subcontractors that use, disclose, access, or otherwise process protected health information, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; ● the federal Open Payments program, created under Section 6002 of the Affordable Care Act (commonly known as the Physician Payments Sunshine Act) and its implementing regulations, which requires specified manufacturers of drugs, devices, biologics or medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to CMS information related to “payments or other transfers of value” made to physicians, which is defined to include doctors, dentists, optometrists, podiatrists and chiropractors, other health care professionals (such as physician assistants and nurse practitioners), and teaching hospitals, and for applicable manufacturers to report annually to CMS 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 health care items or services reimbursed by non-governmental third-party payors, including private insurers; state and foreign laws that require 48 Table of Contents pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to health care providers; state, local and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other health care providers or marketing expenditures; state laws that require drug manufacturers to report pricing information regarding certain drugs; and/or that require registration of certain employees engaged in marketing activities in the location; and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. ​ Efforts to ensure that our or our potential third-party partners’ business arrangements with third parties will comply with applicable health care laws and regulations may involve substantial costs.
The following examples are illustrative: ​ ● we, our licensors or any potential third-party partners might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own; ● we, our licensors or any potential third-party partners 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 exclusively license may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges; ● our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for certain research and development activities, 40 Table of Contents as well as 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 major commercial markets; and ● we may develop additional proprietary technologies that are not patentable. ​ Risks Related to Regulatory Approval of Our Drug Candidates and Other Legal Compliance Matters ​ If our potential third-party partners are not able to obtain, or if there are delays in obtaining, required regulatory approvals, our drug candidates will not be able to be commercialized, and our ability to earn revenue from arrangements with such third-party partners will be materially impaired. ​ Our drug candidates and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA, other regulatory agencies in the United States and similar regulatory authorities outside the United States.
The following examples are illustrative: ​ ● we, our licensors or any potential third-party partners might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own; ● we, our licensors or any potential third-party partners 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 exclusively license may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges; ● our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for certain research and development activities, as well as 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 major commercial markets; and ● we may develop additional proprietary technologies that are not patentable. ​ Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters ​ If our potential third-party partners are not able to obtain, or if there are delays in obtaining, required regulatory approvals, our product candidates will not be able to be commercialized, and our ability to earn revenue from arrangements with such third-party partners will be materially impaired. ​ Our product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA, other regulatory agencies in the United States and similar regulatory authorities outside the United States.
If we are required by regulatory authorities to perform studies in addition to those expected, or if there are any delays in the initiation and completion of our clinical trials, the development of any of our drug candidates or the identification and consummation of transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our drug candidates, our expenses could increase. ​ Even if we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.
If we are required by regulatory authorities to perform studies in addition to those expected, or if there are any delays in the initiation and completion of our clinical trials, the development of any of our product candidates or the identification and consummation of transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our product candidates, our expenses could increase. ​ Even if we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.
Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject drug candidate, the costs and complexities of manufacturing and delivering such drug candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, 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 design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject 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, 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.
Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. ​ Remote work has become more common and has increased risks to our information technology systems and data, as more of our employees utilize network connections, computers, and devices outside our premises or network, including working at home, while in transit and in public locations.
Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. ​ Remote work has increased risks to our information technology systems and data, as more of our employees utilize network connections, computers, and devices outside our premises or network, including working at home, while in transit and in public locations.
Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our drug candidates. ​ Our drug candidates may compete with other products and drug candidates for access to manufacturing facilities.
Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates. ​ Our product candidates may compete with other products and product candidates for access to manufacturing facilities.
In addition, if the breadth or strength of protection provided by our patents and patent applications that we own or license is threatened, it could dissuade companies from partnering with us to license, develop and/or commercialize our drug candidates. ​ Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or our potential third-party partners or otherwise provide us or our potential third-party partners with any competitive advantage.
In addition, if the breadth or strength of protection provided by our patents and patent applications that we own or license is threatened, it could dissuade companies from partnering with us to license, develop and/or commercialize our product candidates. ​ Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or our potential third-party partners or otherwise provide us or our potential third-party partners with any competitive advantage.
Our potential third-party partners may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our drug candidates in any market. ​ 41 Table of Contents A variety of risks associated with marketing our drug candidates by our potential third-party partners internationally could harm our business. ​ If our drug candidates, if approved, are marketed internationally by our potential third-party partners, our potential third-party partners would be subject to additional risks related to operating in foreign countries, including: ​ ● differing regulatory requirements in foreign countries; ● the potential for so-called parallel importing, which is what happens when a local seller, faced with high or higher local prices, opts to import goods from a foreign market (with low or lower prices) rather than buying them locally; ● unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements; ● economic weakness, including inflation, or political instability in particular foreign economies and markets; ● foreign reimbursement, pricing and insurance regimes; ● compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; ● foreign taxes, including withholding of payroll taxes; ● foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; ● difficulties staffing and managing foreign operations; ● workforce uncertainty in countries where labor unrest is more common than in the United States; ● potential liability under the U.S.
Our potential third-party partners may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our product candidates in any market. ​ A variety of risks associated with marketing our product candidates by our potential third-party partners internationally could harm our business. ​ If our product candidates, if approved, are marketed internationally by our potential third-party partners, our potential third-party partners would be subject to additional risks related to operating in foreign countries, including: ​ ● differing regulatory requirements in foreign countries; ● the potential for so-called parallel importing, which is what happens when a local seller, faced with high or higher local prices, opts to import goods from a foreign market (with low or lower prices) rather than buying them locally; ● unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements; ● economic weakness, including inflation, or political instability in particular foreign economies and markets; ● foreign reimbursement, pricing and insurance regimes; ● compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; ● foreign taxes, including withholding of payroll taxes; ● foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; ● difficulties staffing and managing foreign operations; ● workforce uncertainty in countries where labor unrest is more common than in the United States; ● potential liability under the U.S.
If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed. ​ The validity, scope and enforceability of any of our patents that cover any of our drug candidates can be challenged by competitors. ​ If any of our drug candidates advance through development or are approved by the FDA or foreign regulatory authority, one or more third parties may challenge the current patents, or patents that may issue in the future, within our portfolio covering these drug candidates.
If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed. ​ The validity, scope and enforceability of any of our patents that cover any of our product candidates can be challenged by competitors. ​ If any of our product candidates advance through development or are approved by the FDA or foreign regulatory authority, one or more third parties may challenge the current patents, or patents that may issue in the future, within our portfolio covering these product candidates.
Our potential third-party partners’ arrangements with third-party payors, health care professionals and customers may expose them to broadly applicable fraud and abuse and other health care laws and regulations, including, without limitation, the federal Anti-Kickback Statute and the federal civil False Claims Act, that may constrain the business or financial arrangements and relationships through which they sell, market and distribute any drug candidates for which marketing approval is obtained.
Our potential third-party partners’ arrangements with third-party payors, health care professionals and customers may expose them to broadly applicable fraud and abuse and other health care laws and regulations, including, without limitation, the federal Anti-Kickback Statute and the federal civil False Claims Act, that may constrain the business or financial arrangements and relationships through which they sell, market and distribute any product candidates for which marketing approval is obtained.
While we are currently taking precautions to prevent doing any business, directly or indirectly, with countries, governments and persons targeted by U.S. sanctions and to ensure that our drug candidates are not exported or used by countries, governments and persons targeted by U.S. sanctions, such measures may be circumvented. ​ Furthermore, if we or our potential third-party partners export our drug candidates, the exports may require authorizations, including a license, a license exception or other appropriate government authorization.
While we are currently taking precautions to prevent doing any business, directly or indirectly, with countries, governments and persons targeted by U.S. sanctions and to ensure that our product candidates are not exported or used by countries, governments and persons targeted by U.S. sanctions, such measures may be circumvented. ​ Furthermore, if we or our potential third-party partners export our product candidates, the exports may require authorizations, including a license, a license exception or other appropriate government authorization.
Similar provisions are available in certain foreign countries, such as the European Union and Japan. ​ If we are unable to extend the expiration date of our existing patents or obtain new patents with longer expiry dates, our competitors may be able to take advantage of our investment in development and clinical trials by referencing 39 Table of Contents our clinical and preclinical data to obtain approval of competing products following our patent expiration and launch their product earlier than might otherwise be the case. ​ Any trademarks we have obtained or may obtain may be infringed or successfully challenged, resulting in harm to our business. ​ We expect to rely on trademarks as one means to distinguish our products, services or technologies from those of our competitors.
Similar provisions are available in certain foreign countries, such as the European Union and Japan. ​ If we are unable to extend the expiration date of our existing patents or obtain new patents with longer expiry dates, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data to obtain approval of competing products following our patent expiration and launch their product earlier than might otherwise be the case. ​ Any trademarks we have obtained or may obtain may be infringed or successfully challenged, resulting in harm to our business. ​ We expect to rely on trademarks as one means to distinguish our products, services or technologies from those of our competitors.
The success of any drug candidates that we develop will depend on several factors, including: ​ ● successful completion of preclinical studies and our clinical trials; ● successful development of manufacturing processes; ● receipt of timely approvals from applicable regulatory authorities; ● the identification and consummation of transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our drug candidates; ● the commercial launch of our drug candidates, if approved, by a potential third-party partner; ● our potential third-party partners’ ability to achieve acceptance of our drug candidates, if approved, by patients, the medical community and third-party payors, and willingness of patients to pay out of pocket for our drug candidates when third-party payor coverage and reimbursement is limited or unavailable; ● our potential third-party partners’ ability to achieve success in educating physicians and patients about the benefits, administration and use of our drug candidates, if approved; ● the prevalence and severity of adverse events experienced with our drug candidates; ● the availability, perceived advantages, cost, safety and efficacy of alternative treatments for the proposed indications of our drug candidates; ● obtaining and maintaining patent, trademark and trade secret protection and regulatory exclusivity for our drug candidates and otherwise protecting the intellectual property portfolio; ● maintaining compliance with regulatory requirements, including current good manufacturing practices, or cGMPs; ● our potential third-party partners’ ability to compete effectively with other treatment procedures; and ● our potential third-party partners’ ability to maintain a continued acceptable safety, tolerability and efficacy profile of our drug candidates following marketing approval. ​ Whether marketing approval will be granted is unpredictable and depends upon numerous factors, including the substantial discretion of the regulatory authorities.
The success of any product candidates that we develop will depend on several factors, including: ​ ● successful completion of preclinical studies and our clinical trials; ● successful development of manufacturing processes; ● receipt of timely approvals from applicable regulatory authorities; ● the identification and consummation of transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our product candidates; ● the commercial launch of our product candidates, if approved, by a potential third-party partner; ● our potential third-party partners’ ability to achieve acceptance of our product candidates, if approved, by patients, the medical community and third-party payors, and willingness of patients to pay out of pocket for our product candidates when third-party payor coverage and reimbursement is limited or unavailable; ● our potential third-party partners’ ability to achieve success in educating physicians and patients about the benefits, administration and use of our product candidates, if approved; ● the prevalence and severity of adverse events experienced with our product candidates; ● the availability, perceived advantages, cost, safety and efficacy of alternative treatments for the proposed indications of our product candidates; ● obtaining and maintaining patent, trademark and trade secret protection and regulatory exclusivity for our product candidates and otherwise protecting the intellectual property portfolio; ● maintaining compliance with regulatory requirements, including cGMPs; ● our potential third-party partners’ ability to compete effectively with other treatment procedures; and ● our potential third-party partners’ ability to maintain a continued acceptable safety, tolerability and efficacy profile of our product candidates following marketing approval. ​ Whether marketing approval will be granted is unpredictable and depends upon numerous factors, including the substantial discretion of the regulatory authorities.
We cannot predict how pending and future health care legislation will impact our business, and any changes in coverage and reimbursement that further restricts coverage of our drug candidates could harm our business. ​ Foreign governments also have their own healthcare reimbursement systems, which vary significantly by country and region, and we cannot be sure that coverage and adequate reimbursement will be made available with respect to our drug candidates, if approved, under any foreign reimbursement system.
We cannot predict how pending and future health care legislation will impact our business, and any changes in coverage and reimbursement that further restricts coverage of our product candidates could harm our business. ​ Foreign governments also have their own healthcare reimbursement systems, which vary significantly by country and region, and we cannot be sure that coverage and adequate reimbursement will be made available with respect to our product candidates, if approved, under any foreign reimbursement system.
We may need to increase our insurance coverage and we may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. ​ Risks Related to Our Dependence on Third Parties ​ We rely on third parties to conduct clinical trials for our drug candidates, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials. ​ We engage CROs to conduct clinical trials of our drug candidates.
We may need to increase our insurance coverage and we may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. ​ Risks Related to Our Dependence on Third Parties ​ We rely on third parties to conduct clinical trials for our product candidates, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials. ​ We engage CROs to conduct clinical trials of our product candidates.
Any such challenge could result in the invalidation of, or render unenforceable, some or all of the relevant patent claims or a finding of non-infringement , which would harm our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates, and earn revenue from such arrangements.
Any such challenge could result in the invalidation of, or render unenforceable, some or all of the relevant patent claims or a finding of non-infringement , which would harm our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our product candidates, and earn revenue from such arrangements.
Failure to comply with export control and sanctions regulations may expose us or our potential third-party partners to government investigations and penalties. ​ If we are found to be in violation of U.S. sanctions or import or export control laws, it could result in civil and criminal, monetary and non-monetary penalties, including possible incarceration for those individuals responsible for the violations, the loss of export or import privileges and reputational harm. ​ 49 Table of Contents We and our potential third-party partners are subject to anti-corruption and anti-money laundering laws with respect to our and their operations and non-compliance with such laws can subject us to criminal and/or civil liability and harm our business. ​ We and our potential third-party partners are subject to the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S.
Failure to comply with export control and sanctions regulations may expose us or our potential third-party partners to government investigations and penalties. ​ If we are found to be in violation of U.S. sanctions or import or export control laws, it could result in civil and criminal, monetary and non-monetary penalties, including possible incarceration for those individuals responsible for the violations, the loss of export or import privileges and reputational harm. ​ We and our potential third-party partners are subject to anti-corruption and anti-money laundering laws with respect to our and their operations and non-compliance with such laws can subject us to criminal and/or civil liability and harm our business. ​ We and our potential third-party partners are subject to the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S.
Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license. ​ We may need to license intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms. ​ A third party may hold intellectual property, including patent rights, that are important or necessary to the development and/or commercialization of our drug candidates.
Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license. ​ We may need to license intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms. ​ A third party may hold intellectual property, including patent rights, that are important or necessary to the development and/or commercialization of our product candidates.
It is possible that governmental authorities will conclude that our or our potential third-party partners’ business practices, including relationships with physicians and other health care providers, some of whom may recommend, purchase and/or prescribe our drug candidates, if approved, may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other health care laws and regulations.
It is possible that governmental authorities will conclude that our or our potential third-party partners’ business practices, including relationships with physicians and other health care providers, some of whom may recommend, purchase and/or prescribe our product candidates, if approved, may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other health care laws and regulations.
While march-in rights have not previously been exercised, it is uncertain if that will continue under the new framework. It is unclear whether these or similar policy initiatives will be implemented in the future. The effect of reducing prices and reimbursement for certain of our drug candidates, if approved, could significantly impact our business and consolidated results of operations.
While march-in rights have not previously been exercised, it is uncertain if that will continue under the new framework. It is unclear whether these or similar policy initiatives will be implemented in the future. The effect of reducing prices and reimbursement for certain of our product candidates, if approved, could significantly impact our business and consolidated results of operations.
We may never succeed in these activities and, even if we do, may never earn revenue from our drug candidates that is significant enough to achieve profitability. ​ For any of our drug candidates, our revenue will be dependent, in part, upon our ability to identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize those drug candidates.
We may never succeed in these activities and, even if we do, may never earn revenue from our product candidates that is significant enough to achieve profitability. ​ For any of our product candidates, our revenue will be dependent, in part, upon our ability to identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize those product candidates.
In the event of a successful claim of infringement against us or our potential third-party partners, we or our potential third-party partners may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing drug candidate or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
In the event of a successful claim of infringement against us or our potential third-party partners, we or our potential third-party partners may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing product candidate or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future. ​ If we or our potential third-party partners are found to infringe a third party’s intellectual property rights, we or such partners could be required to obtain a license from such third party to continue developing or commercializing our drug candidates and technology.
Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future. ​ If we or our potential third-party partners are found to infringe a third party’s intellectual property rights, we or such partners could be required to obtain a license from such third party to continue developing or commercializing our product candidates and technology.
Our current and anticipated future dependence upon others for the manufacture of our drug candidates may adversely affect our future profit margins and our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates on a timely and competitive basis. ​ We intend to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates.
Our current and anticipated future dependence upon others for the manufacture of our product candidates may adversely affect our future profit margins and our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our product candidates on a timely and competitive basis. ​ We intend to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our product candidates.
In addition, later discovery of previously unknown adverse events or other problems with our drugs, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may have negative consequences, including: ● restrictions on such drugs, manufacturers or manufacturing processes; ● restrictions on the labeling or marketing of a drug; ● restrictions on drug distribution or use; ● requirements to conduct post-marketing studies or clinical trials; ● warning letters; ● recall or withdrawal of the drugs from the market; ● refusal to approve pending applications or supplements to approved applications; ● clinical holds; ● fines, restitution or disgorgement of profits or revenue; ● suspension or withdrawal of marketing approvals; ● refusal to permit the import or export of our drugs; ● drug seizure; or ● injunctions or the imposition of civil or criminal penalties. ​ Non-compliance with the European Union’s requirements regarding safety monitoring or pharmacovigilance, and with requirements related to the development of drugs for the pediatric population, can also result in significant financial penalties.
In addition, later discovery of previously unknown adverse events or other problems with our product candidates, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may have negative consequences, including: ● restrictions on such product candidates, manufacturers or manufacturing processes; ● restrictions on the labeling or marketing of a product; ● restrictions on drug distribution or use; ● requirements to conduct post-marketing studies or clinical trials; ● warning letters; ● recall or withdrawal of the products from the market; ● refusal to approve pending applications or supplements to approved applications; ● clinical holds; ● fines, restitution or disgorgement of profits or revenue; ● suspension or withdrawal of marketing approvals; ● refusal to permit the import or export of our products; ● drug seizure; or ● injunctions or the imposition of civil or criminal penalties. ​ Non-compliance with the European Union’s requirements regarding safety monitoring or pharmacovigilance, and with requirements related to the development of products for the pediatric population, can also result in significant financial penalties.
In addition, the FDA or other comparable foreign regulatory authorities may not consider sufficient any additional required studies, clinical trials, data or information that we perform and complete or generate, or we may decide to abandon the program. ​ It is possible that our drug candidates currently in development will never obtain marketing approval.
In addition, the FDA or other comparable foreign regulatory authorities may not consider sufficient any additional required studies, clinical trials, data or information that we perform and complete or generate, or we may decide to abandon the program. ​ It is possible that our product candidates currently in development will never obtain marketing approval.
Our business could be harmed if reimbursement of our drug candidates, if approved, is unavailable or limited in scope or amount or if pricing is set at unsatisfactory levels. ​ Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any of our drug candidates that we may develop and are commercialized by our potential third-party partners or impact any commercial products that we have previously sold or are being sold by third-party partners. ​ We face an inherent risk of product liability exposure related to the testing of our drug candidates in human clinical trials and an even greater risk relating to any of our commercial products that we have previously sold or are being sold by third-party partners.
Our business could be harmed if reimbursement of our product candidates, if approved, is unavailable or limited in scope or amount or if pricing is set at unsatisfactory levels. ​ Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any of our product candidates that we may develop and are commercialized by our potential third-party partners or impact any commercial products that we have previously sold or are being sold by third-party partners. ​ We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and relating to any of our commercial products that we have previously sold or are being sold by third-party partners.
Litigation or other proceedings to enforce or defend intellectual property rights are often very complex in nature, may be expensive and time-consuming, may divert our management's attention from our core business, and may result in unfavorable results that could limit our ability to prevent third parties from competing with our drug candidates, if approved.
Litigation or other proceedings to enforce or defend intellectual property rights are often very complex in nature, may be expensive and time-consuming, may divert our management's attention from our core business, and may result in unfavorable results that could limit our ability to prevent third parties from competing with our product candidates, if approved.
Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a drug candidate.
Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate.
Our future capital requirements will depend on many factors, including: ​ ● the number and development requirements of the drug candidates that we may pursue; 22 Table of Contents ● the scope, progress, results and costs of preclinical development, laboratory testing and conducting preclinical and clinical trials for our drug candidates; ● the costs, timing and outcome of regulatory review of our drug candidates; ● the extent to which we in-license or acquire drug candidates and technologies; ● the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; ● our ability to identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our drug candidates; and ● our ability to earn revenue from licenses to, or partnerships or other arrangements with, third parties. ​ We will require additional capital to develop our drug candidates and to support our discovery efforts.
Our future capital requirements will depend on many factors, including: ​ ● the number and development requirements of the product candidates that we may pursue; ● the scope, progress, results and costs of preclinical development, laboratory testing and conducting preclinical and clinical trials for our product candidates; 24 Table of Contents ● the costs, timing and outcome of regulatory review of our product candidates; ● the extent to which we in-license or acquire product candidates and technologies; ● the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; ● our ability to identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our product candidates; and ● our ability to earn revenue from licenses to, or partnerships or other arrangements with, third parties. ​ We will require additional capital to develop our product candidates and to support our discovery efforts.
Such changes carry the risk that they will not achieve these intended objectives, and may also require additional testing, FDA notification or FDA approval. Any of these changes could cause our drug candidates to perform differently and affect the results of planned clinical trials or other future clinical trials conducted with the altered materials.
Such changes carry the risk that they will not achieve these intended objectives, and may also require additional testing, FDA notification or FDA approval. Any of these changes could cause our product candidates to perform differently and affect the results of planned clinical trials or other future clinical trials conducted with the altered materials.
This could result in the need for alternative trial sites, which could be costly and time-consuming and delay the clinical development of our drug candidates. ​ We may not be successful in our efforts to increase our pipeline of drug candidates, including by in-licensing or acquiring additional drug candidates. ​ A key element of our strategy is to build and expand our pipeline of drug candidates.
This could result in the need for alternative trial sites, which could be costly and time-consuming and delay the clinical development of our product candidates. ​ We may not be successful in our efforts to increase our pipeline of product candidates, including by in-licensing or acquiring additional product candidates. ​ A key element of our strategy is to build and expand our pipeline of product candidates.
Moreover, 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 False Claims Act; ● federal civil and criminal false claims laws, including, without limitation, the federal civil False Claims Act (that can be enforced through civil whistleblower or qui tam actions), and the civil monetary penalties law, which impose criminal and civil penalties, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; ● federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability for, among other things, executing a scheme to defraud any health care benefit program or making false statements relating to health care matters.
Moreover, 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 False Claims Act; ● federal civil and criminal false claims laws, including, without limitation, the federal civil False Claims Act (that can be enforced through civil whistleblower or qui tam actions), and the civil monetary penalties law, which impose criminal and civil penalties, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; ● federal HIPAA, which imposes criminal and civil liability for, among other things, executing a scheme to defraud any health care benefit program or making false statements relating to health care matters.
Our likely partners for any such arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. If we do enter into any such arrangements with any third parties, we will likely have limited control over the amount and timing of resources that our partners dedicate to the development or commercialization of our drug candidates.
Our likely partners for any such arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. If we do enter into any such arrangements with any third parties, we will likely have limited control over the amount and timing of resources that our partners dedicate to the development or commercialization of our product candidates.
We seek to protect our proprietary position by filing patent applications in the United States and abroad related to our drug candidates. ​ The patent prosecution process is expensive and time-consuming, however, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.
We seek to protect our proprietary position by filing patent applications in the United States and abroad related to our product candidates. ​ The patent prosecution process is expensive and time-consuming, however, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.
As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued that protect our technology or drug candidates, in whole or in part, or which effectively prevent others from commercializing competitive technologies and drug candidates.
As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued that protect our technology or product candidates, in whole or in part, or which effectively prevent others from commercializing competitive technologies and product candidates.
A business arrangement that does not substantially comply with a safe harbor, however, is not necessarily illegal under the Anti-Kickback Statute, but may be subject to additional scrutiny by the government. ​ If our or our potential third-party partners’ operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us or them, we or our potential third-party partners may be subject to significant civil, criminal and administrative penalties, including, without limitation, damages, fines, disgorgement, imprisonment, exclusion from participation in government health care programs, such as Medicare and Medicaid, 44 Table of Contents additional reporting requirements and oversight if we or they become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws and the curtailment or restructuring of our or their operations, which could have a material adverse effect on our ability to earn revenue from arrangements with such third-party partners for our drug candidates.
A business arrangement that does not substantially comply with a safe harbor, however, is not necessarily illegal under the Anti-Kickback Statute, but may be subject to additional scrutiny by the government. ​ If our or our potential third-party partners’ operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us or them, we or our potential third-party partners may be subject to significant civil, criminal and administrative penalties, including, without limitation, damages, fines, disgorgement, imprisonment, exclusion from participation in government health care programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we or they become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws and the curtailment or restructuring of our or their operations, which could have a material adverse effect on our ability to earn revenue from arrangements with such third-party partners for our product candidates.
If those arrangements are not successful, we may not be able to capitalize on the market potential of these drug candidates. ​ We intend to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates.
If those arrangements are not successful, we may not be able to capitalize on the market potential of these product candidates. ​ We intend to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our product candidates.
We or our potential third-party partners may engage third-party intermediaries in connection with the development or commercialization of our drug candidates, if approved, and to obtain necessary permits, licenses and other regulatory approvals. We, our potential third-party partners or the third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities.
We or our potential third-party partners may engage third-party intermediaries in connection with the development or commercialization of our product candidates, if approved, and to obtain necessary permits, licenses and other regulatory approvals. We, our potential third-party partners or the third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities.
In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income 53 Table of Contents may be limited.
In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited.
In addition, the delisting of our common stock from a national exchange could have a material adverse effect on our access to capital markets, and any limitation on market liquidity or reduction in the price of our common stock as a result of that delisting could adversely affect our ability to raise capital on terms acceptable to us, or at all. ​ Sales of a substantial number of shares of our common stock into the market could cause the market price of our common stock to drop significantly, even if our business is doing well. ​ Sales of a substantial number of shares of our common stock in the public market could occur at any time.
In addition, the delisting of our common stock from a national exchange could have a material adverse effect on our access to capital markets, and any limitation on market liquidity or reduction in the price of our common stock as a result of that delisting could adversely affect our ability to raise capital on terms acceptable to us, or at all. ​ 56 Table of Contents Sales of a substantial number of shares of our common stock into the market could cause the market price of our common stock to drop significantly, even if our business is doing well. ​ Sales of a substantial number of shares of our common stock in the public market could occur at any time.
Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit the ability to stop others from using or commercializing similar or identical technology and drug candidates, or limit the duration of the patent protection of our technology and drug candidates.
Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit the ability to stop others from using or commercializing similar or identical technology and product candidates, or limit the duration of the patent protection of our technology and product candidates.
Any drug candidate for which our potential third-party partners obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such drug candidate, will be subject to continual requirements of and review by the FDA and other regulatory authorities.
Any product candidate for which our potential third-party partners obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such product candidate, will be subject to continual requirements of and review by the FDA and other regulatory authorities.
The degree of market acceptance of any drug candidate, if approved, will depend on a number of factors, including: ​ ● the efficacy, safety and potential advantages compared to alternative treatments; ● our potential third-party partners’ ability to offer the products for sale at competitive prices; ● the convenience and ease of administration compared to alternative treatments; ● the willingness of the target patient population to try new treatments and of physicians to prescribe these treatments; ● the ability of our potential third-party partners to retain a sales force; ● the strength of our potential third-party partners’ marketing and distribution support; ● the availability of third-party payor coverage and adequate reimbursement or the willingness of patients to pay for these products; ● the prevalence and severity of any side effects; and ● any restrictions on the use of our products together with other medications. ​ 29 Table of Contents We face substantial competition, which may result in others discovering, developing or commercializing drugs before or more successfully than we do. ​ The development and commercialization of new drugs is highly competitive.
The degree of market acceptance of any product candidate, if approved, will depend on a number of factors, including: ​ ● the efficacy, safety and potential advantages compared to alternative treatments; ● our potential third-party partners’ ability to offer the products for sale at competitive prices; ● the convenience and ease of administration compared to alternative treatments; ● the willingness of the target patient population to try new treatments and of physicians to prescribe these treatments; ● the ability of our potential third-party partners to retain a sales force; ● the strength of our potential third-party partners’ marketing and distribution support; ● the availability of third-party payor coverage and adequate reimbursement or the willingness of patients to pay for these products; ● the prevalence and severity of any side effects; and ● any restrictions on the use of our products together with other medications. ​ We face substantial competition, which may result in others discovering, developing or commercializing drugs before or more successfully than we do. ​ The development and commercialization of new drugs is highly competitive.
We expect to continue to incur significant expenses and operating losses in the near term as we: ​ ● pursue strategic alternatives, including identifying and seeking to consummate transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates; ● continue to develop our drug candidates; ● continue to discover and develop additional drug candidates; ● maintain, expand and protect our intellectual property portfolio; and ● incur legal, accounting, investor relations and other administrative expenses in operating as a public company. 21 Table of Contents ​ To become and remain profitable, we must succeed in a range of challenging activities, including completing preclinical testing and clinical trials of our drug candidates and pursuing strategic alternatives, including identifying and consummating transactions with third-party partners, for the further development and/or commercialization of our drug candidates, as well as discovering and developing additional drug candidates.
We expect to continue to incur significant expenses and operating losses in the near term as we: ​ ● pursue strategic alternatives, including identifying and seeking to consummate transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our product candidates; ● continue to develop our product candidates; ● continue to discover and develop additional product candidates; ● maintain, expand and protect our intellectual property portfolio; and ● incur legal, accounting, investor relations and other administrative expenses in operating as a public company. ​ 23 Table of Contents To become and remain profitable, we must succeed in a range of challenging activities, including completing preclinical testing and clinical trials of our product candidates and pursuing strategic alternatives, including identifying and consummating transactions with third-party partners, for the further development and/or commercialization of our product candidates, as well as discovering and developing additional product candidates.
Even if we are successful in continuing to build our pipeline, the potential drug candidates that we develop, in-license or acquire may not be suitable for clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to be drugs that will receive marketing approval and achieve market acceptance. ​ We may expend our limited resources to pursue a particular drug candidate or indication and fail to capitalize on drug candidates or indications that may be more profitable or for which there is a greater likelihood of success. ​ Because we have limited financial and management resources, we focus on development programs and drug candidates that we identify for specific indications or therapeutic areas.
Even if we are successful in continuing to build our pipeline, the potential product candidates that we develop, in-license or acquire may not be suitable for clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to receive marketing approval and achieve market acceptance. ​ We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success. ​ Because we have limited financial and management resources, we focus on development programs and product candidates that we identify for specific indications or therapeutic areas.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Audit Committee is responsible for overseeing the Company’s cybersecurity risk management processes, including oversight of mitigation of risks from cybersecurity threats. ​ Our cybersecurity risk assessment and management processes are implemented and maintained by certain Company management, including our Chief Financial Officer who is supported by our IT department which includes personnel with over 10 years of experience overseeing and working with various cybersecurity tools. ​ Our cybersecurity risk management strategy relies on input from management to help us understand cybersecurity risks, establish priorities, and determine the scope and details of our cybersecurity program and to implement it.
Biggest changeThe Audit Committee is responsible for overseeing the Company’s cybersecurity risk management processes, including oversight of mitigation of risks from cybersecurity threats. ​ Our cybersecurity risk assessment and management processes are implemented and maintained by certain Company management, including our Chief Financial Officer who is supported by our IT department which includes personnel with experience overseeing and working with various cybersecurity tools.
We implement and maintain various information security and risk management processes designed to protect the confidentiality, integrity, and availability of our Information Assets and mitigate harm to our business. ​ We rely on a multidisciplinary team (including members from information technology (IT), which reports to our Chief Financial Officer, finance, and legal, as well as third party service providers as described further below) to identify, assess, and manage cybersecurity threats that could impact our business.
We implement and maintain various information security and risk management processes designed to protect the confidentiality, integrity, and availability of our Information Assets and mitigate harm to our business. ​ We rely on a multidisciplinary team (including members from information technology (“IT”), which reports to our Chief Financial Officer, finance, and legal, as well as third party service providers as described further below) to identify, assess, and manage cybersecurity threats that could impact our business.
For example, the IT department works with management to prioritize our risk management processes and mitigate cybersecurity threats that are more likely to lead to a material impact to our business. ​ 58 Table of Contents We work with third parties from time to time that assist us to identify, assess, and manage material risks from cybersecurity threats, including, for example, professional services firms (including legal counsel), threat intelligence service providers, cybersecurity software providers, managed cybersecurity service providers, forensic investigators, and penetration testing firms. ​ For a description of the risks from cybersecurity threats that may materially affect us and how they may do so, refer to “Item 1A.
For example, the IT department works with management to prioritize our risk management processes and mitigate cybersecurity threats that are more likely to lead to a material impact to our business. ​ We work with third parties from time to time that assist us to identify, assess, and manage material risks from cybersecurity threats, including, for example, professional services firms (including legal counsel), threat intelligence service providers, cybersecurity software providers, managed cybersecurity service providers, forensic investigators, and penetration testing firms. ​ For a description of the risks from cybersecurity threats that may materially affect us and how they may do so, refer to “Item 1A.
These measures we implement for certain of our Information Assets include: policies and procedures designed to address cybersecurity threats, including an incident response plan; incident detection and response; risk assessments; background checks on our personnel; encryption of data; network security controls; data segregation; access controls; physical security; asset management, tracking and disposal; employee security training; penetration testing; and cyber insurance. ​ Our assessment and management of material risks from cybersecurity threats are integrated into our overall risk management processes.
These measures we implement for certain of our Information Assets include: policies and procedures designed to address cybersecurity threats, including an incident response plan; incident detection and response; risk assessments; background checks on our personnel; encryption of data; network security controls; data segregation; access controls; physical security; asset management, tracking and disposal; employee security training; penetration testing; and cyber insurance. ​ 63 Table of Contents Our assessment and management of material risks from cybersecurity threats are integrated into our overall risk management processes.
Risk factors” in this Annual Report on Form 10-K, including “If our information technology systems, those of third parties upon which we rely, or our data are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; and other adverse consequences.” ​ Governance ​ Our board of directors, through its Audit Committee, is responsible for overseeing the Company’s risk management strategy with respect to cybersecurity threats.
Risk factors” in this Annual Report, including “If our information technology systems, those of third parties upon which we rely, or our data are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; and other adverse consequences.” ​ Governance ​ Our board of directors, through its Audit Committee, is responsible for overseeing the Company’s risk management strategy with respect to cybersecurity threats.
Item 1C. Cybersecurity ​ Risk Management and Strategy ​ We rely on information technology and data to operate our business of developing new drugs and providing contract research services. Our critical information technology resources include computer networks and hardware, third party hosted services, communications systems and software, and critical data including confidential, personal, proprietary and sensitive data (collectively, “Information Assets”).
Item 1C. Cybersecurity ​ Risk Management and Strategy ​ We rely on information technology and data to operate our business of developing product candidates and providing contract research services. Our critical information technology resources include computer networks and hardware, third party hosted services, communications systems and software, and critical data including confidential, personal, proprietary and sensitive data (collectively, “Information Assets”).
Our cybersecurity incident response process involves members of management who also participate in our disclosure controls and procedures. ​ Our cybersecurity incident response plan and information security incidence response procedures are designed to escalate certain cybersecurity incidents to members of management depending on the circumstances, including the Chief Financial Officer and the General Counsel.
Our cybersecurity incident response process involves members of management who also participate in our disclosure controls and procedures. ​ Our cybersecurity incident response plan and information security incidence response procedures are designed to escalate certain cybersecurity incidents to members of finance and legal, depending on the circumstances, who report to the Chief Financial Officer and the General Counsel.
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For example, our Senior Director of IT has over 20 years of experience in IT infrastructure and cybersecurity, with extensive expertise in security frameworks, regulatory compliance, and cloud infrastructure management. ​ Our cybersecurity risk management strategy relies on input from management to help us understand cybersecurity risks, establish priorities, and determine the scope and details of our cybersecurity program and to implement it.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties ​ We lease 11,564 square feet of space for our headquarters in Wayne, Pennsylvania, which we use for our therapeutics business. The lease has a term through February 2029. ​ We also sublease 26,694 square feet of office and laboratory space in St. Louis, Missouri, which we use for our therapeutics and contract research businesses.
Biggest changeItem 2. Properties ​ We lease 11,564 square feet of space for our headquarters in Wayne, Pennsylvania, which we use for our therapeutics business. The lease has a term through February 2029. 64 Table of Contents ​ We also sublease 20,433 square feet of office and laboratory space in St.
The sublease has an initial term through June 2029. We have the option to extend the initial term for two additional five-year periods. ​ 59 Table of Contents We believe that our facilities are suitable and adequate to meet our current needs. ​ ​
Louis, Missouri, which we use for our therapeutics and contract research businesses. The sublease has an initial term through May 2029. We have the option to extend the initial term for two additional five-year periods. ​ We believe that our facilities are suitable and adequate to meet our current needs. ​ ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThis number of holders of record also does not include stockholders whose shares may be held in trust by other entities. ​ Recent Sales of Unregistered Securities ​ None. ​ Purchases of Equity Securities by the Issuer and Affiliated Parties ​ None. ​ Stock Performance Graph ​ The graph below compares the cumulative total stockholder return for the period December 31, 2018 through December 31, 2023 for (i) our common stock, (ii) the Nasdaq Biotechnology Index and (iii) the Nasdaq Composite Index.
Biggest changeThis number of holders of record also does not include stockholders whose shares may be held in trust by other entities. ​ Recent Sales of Unregistered Securities ​ None. ​ Purchases of Equity Securities by the Issuer and Affiliated Parties ​ None. ​ Stock Performance Graph ​ We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required by Item 201(e) of Regulation S-K. ​ ​
We anticipate that we will retain all of our future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future. ​ Stockholders ​ As of January 31, 2024, we had 70,925,042 shares of common stock outstanding held by 49 holders of record.
We anticipate that we will retain all of our future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future. ​ Stockholders ​ As of January 31, 2025, we had 107,918,821 shares of common stock outstanding held by 54 holders of record.
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The graph assumes an investment of $100 on December 31, 2018 in each of our common stock, the Nasdaq Biotechnology Index and the Nasdaq Composite Index and the reinvestment of dividends, if any, although we have never declared or paid any dividends on our common stock.
Removed
The stock price performance shown on the graph below is based on historical data and is not indicative of future stock price performance. ​ The graph and table below shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act or the Exchange Act. 61 Table of Contents ​ ​ ​ ​ 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 ​ Aclaris Therapeutics, Inc. ​ $ 100.00 ​ $ 25.58 ​ $ 87.55 ​ $ 196.75 ​ $ 213.13 ​ $ 14.21 ​ Nasdaq Composite Index ​ $ 100.00 ​ $ 136.69 ​ $ 198.10 ​ $ 242.03 ​ $ 163.28 ​ $ 236.17 ​ Nasdaq Biotechnology Index ​ $ 100.00 ​ $ 125.11 ​ $ 158.17 ​ $ 158.20 ​ $ 142.19 ​ $ 148.72 ​ ​ ​

Item 7. Management's Discussion & Analysis

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

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Biggest changeThis increase was partially offset by higher forfeiture credits during the year ended December 31, 2023 as a result of our restructuring in 2023 compared to the year ended December 31, 2022. ​ General and Administrative ​ The following table summarizes our general and administrative expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ (In thousands) ​ ​ 2023 2022 ​ Change Personnel $ 8,016 $ 6,028 $ 1,988 Professional and legal fees ​ ​ ​ 5,534 ​ ​ 4,319 ​ ​ 1,215 Facility and support services ​ ​ 3,023 ​ 2,302 ​ 721 Other general and administrative ​ ​ ​ 2,240 ​ ​ 2,341 ​ ​ (101) Stock-based compensation ​ ​ ​ 12,285 ​ ​ 10,143 ​ ​ 2,142 Bad debt ​ ​ ​ 1,314 ​ ​ — ​ ​ 1,314 Total general and administrative expenses ​ ​ $ 32,412 ​ $ 25,133 ​ $ 7,279 ​ Personnel and stock-based compensation ​ The aggregate increase in personnel and stock-based compensation expenses during the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to an increase in costs associated with higher average headcount prior to our restructuring, compensation adjustments, and equity awards granted in 2023. ​ 72 Table of Contents Professional and legal fees ​ The increase in professional and legal fees, including accounting, investor relations and corporate communication costs, during the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily driven by an increase in patent and accounting related expenses. ​ Facility and support services ​ The increase in facility and support services, including general office expenses, information technology costs and other expenses, during the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily driven by an increase in rent expense due to leasing additional office and laboratory space during the year ended December 31, 2023, as well as an increase in information technology costs. ​ Bad debt ​ Bad debt expenses were related to our determination that amounts due to us as of December 31, 2023 pursuant to the asset purchase agreement with EPI Health are uncertain as a result of the bankruptcy filing by EPI Health, which was initiated in July 2023. ​ Licensing ​ The increase in licensing expenses during the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily driven by amounts payable to third parties during the year ended December 31, 2023 in connection with amounts earned under the Sun Pharma agreement and an increase in amounts payable to third parties in connection with amounts earned under the Lilly agreement. ​ Revaluation of Contingent Consideration ​ The fair value of our contingent consideration liability decreased during the year ended December 31, 2023 mainly due to the removal of estimated sales of zunsemetinib for moderate to severe rheumatoid arthritis, moderate to severe hidradenitis suppurativa and moderate to severe psoriatic arthritis, following our decision to discontinue further development of our MK2 inhibitor programs in immuno-inflammatory diseases .
Biggest changeBecause we in-licensed ATI-052 in 2024, there were no related expenses for the year ended December 31, 2023. ​ Lepzacitinib ​ The decrease in expenses for lepzacitinib during the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to lower costs associated with preclinical development activities and costs associated with a Phase 2b clinical trial in subjects with atopic dermatitis, which was initiated in May 2022 and was completed in January 2024. ​ Zunsemetinib ​ The decrease in expenses for zunsemetinib during the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to a decrease in costs associated with Phase 2 clinical development activities which were completed in 2023 as well as a decrease in product manufacturing costs. ​ Personnel and stock-based compensation ​ The decrease in personnel and stock-based compensation expenses during the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to lower headcount, lower termination benefits and higher forfeiture credits as a result of our restructuring that was announced in December 2023. 75 Table of Contents General and Administrative ​ The following table summarizes our general and administrative expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ December 31, ​ ​ ​ (In thousands) ​ 2024 2023 ​ Change Personnel $ 6,786 $ 8,016 $ (1,230) Professional and legal fees ​ ​ 4,508 ​ ​ 5,534 ​ ​ (1,026) Facility and support services ​ 2,234 ​ 3,023 ​ (789) Other general and administrative ​ ​ 1,892 ​ ​ 2,240 ​ ​ (348) Stock-based compensation ​ ​ 6,783 ​ ​ 12,285 ​ ​ (5,502) Bad debt ​ ​ — ​ ​ 1,314 ​ ​ (1,314) Total general and administrative expenses ​ $ 22,203 ​ $ 32,412 ​ $ (10,209) ​ Personnel and stock-based compensation ​ The aggregate decrease in personnel and stock-based compensation expenses during the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to lower headcount and higher forfeiture credits. ​ Professional and legal fees ​ The decrease in professional and legal fees, including accounting, investor relations and corporate communication costs, during the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily driven by a decrease in accounting related expenses, which were partially offset by an increase in business development expenses. ​ Facility and support services ​ The decrease in facility and support services, including general office expenses, information technology costs and other expenses, during the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily driven by a decrease in rent expense and information technology expenses. ​ Bad debt ​ Bad debt expenses were related to our determination that amounts due to us as of December 31, 2023 pursuant to the asset purchase agreement with EPI Health are uncertain as a result of the bankruptcy filing by EPI Health in July 2023.
We may not be able to generate revenue from these programs if, among other things, our clinical trials are not successful, the FDA does not approve our drug candidates currently in clinical trials when we expect, or at all, or we are not able to identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our drug candidates. ​ Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, research and development expenses, laboratory and related supplies, legal and other regulatory expenses, and administrative and overhead costs.
We may not be able to generate revenue from these programs if, among other things, our clinical trials are not successful, the FDA does not approve our product candidates currently in clinical trials when we expect, or at all, or we are not able to identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our product candidates. ​ Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, research and development expenses, laboratory and related supplies, legal and other regulatory expenses, and administrative and overhead costs.
In addition, the Sarbanes-Oxley Act of 2002, as well as rules adopted by the SEC and the Nasdaq Stock Market LLC, requires public companies to implement specified corporate governance practices that could increase our compliance costs. ​ We believe our existing cash, cash equivalents and marketable securities are sufficient to fund our operating and capital expenditure requirements for a period greater than 12 months from the date of issuance of our consolidated financial statements that appear in Item 8 of this Annual Report on Form 10-K based on our current operating assumptions.
In addition, the Sarbanes-Oxley Act of 2002, as well as rules adopted by the SEC and the Nasdaq Stock Market LLC, requires public companies to implement specified corporate governance practices that could increase our compliance costs. ​ We believe our existing cash, cash equivalents and marketable securities are sufficient to fund our operating and capital expenditure requirements for a period greater than 12 months from the date of issuance of our consolidated financial statements that appear in Item 8 of this Annual Report based on our current operating assumptions.
Prior to our acquisition of Confluence in August 2017, we did not generate any revenue. We have financed our operations over the last several years primarily through sales of our equity securities and incurring indebtedness in the form of loans from commercial lenders. We may engage in additional debt and equity financing transactions in order to raise funds.
Prior to our acquisition of Confluence, we did not generate any revenue. We have financed our operations over the last several years primarily through sales of our equity securities and incurring indebtedness in the form of loans from commercial lenders. We may engage in additional debt and equity financing transactions in order to raise funds.
Our funding requirements in the near term will depend on many factors, including: ​ ● the number and development requirements of the drug candidates that we may pursue; ● the scope, progress, results and costs of preclinical development, laboratory testing and conducting preclinical and clinical trials for our drug candidates; ● the costs, timing and outcome of regulatory review of our drug candidates; ● the extent to which we in-license or acquire additional drug candidates and technologies; ● the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; ● our ability to identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our drug candidates; and ● our ability to earn revenue as a result of licenses to, or partnerships or other arrangements with, third parties. ​ See “Risk Factors” for additional risks associated with our substantial capital requirements. ​ 76 Table of Contents Leases ​ We occupy space for our headquarters in Wayne, Pennsylvania under a lease agreement which has a term through February 2029.
Our funding requirements in the near term will depend on many factors, including: ​ ● the number and development requirements of the product candidates that we may pursue; ● the scope, progress, results and costs of preclinical development, laboratory testing and conducting preclinical and clinical trials for our product candidates; ● the costs, timing and outcome of regulatory review of our product candidates; ● the extent to which we in-license or acquire additional product candidates and technologies; ● the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; ● our ability to identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our product candidates; and ● our ability to earn revenue as a result of licenses to, or partnerships or other arrangements with, third parties. ​ See “Risk Factors” for additional risks associated with our substantial capital requirements. ​ Leases ​ We occupy space for our headquarters in Wayne, Pennsylvania under a lease agreement which has a term through February 2029.
We will require additional capital to develop our drug candidates and to support our discovery efforts. Additional funds may not be available on a timely basis, on commercially acceptable terms, or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term business strategy.
We will require additional capital to develop our product candidates and to support our discovery efforts. Additional funds may not be available on a timely basis, on commercially acceptable terms, or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term business strategy.
If we are unable to raise sufficient additional capital or generate revenue from transactions with potential third-party partners for the development and/or commercialization of our drug candidates, we may need to substantially curtail our planned operations. ​ We may raise additional capital through the sale of equity or debt securities.
If we are unable to raise sufficient additional capital or generate revenue from transactions with potential third-party partners for the development and/or commercialization of our product candidates, we may need to substantially curtail our planned operations. ​ We may raise additional capital through the sale of equity or debt securities.
These contracts generally provide for termination upon notice, and therefore we believe that our non-cancelable obligations under these agreements are not material. ​ Segment Information ​ We have two reportable segments, therapeutics and contract research. The therapeutics segment is focused on identifying and developing innovative therapies to address significant unmet needs for immuno-inflammatory diseases.
These contracts generally provide for termination upon notice, and therefore we believe that our non-cancelable obligations under these agreements are not material. ​ 80 Table of Contents Segment Information ​ We have two reportable segments, therapeutics and contract research. The therapeutics segment is focused on identifying and developing innovative therapies to address significant unmet needs for immuno-inflammatory diseases.
Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions caused by a variety of factors including geopolitical tensions, rising interest rates, and inflationary pressures.
Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions caused by a variety of factors including geopolitical tensions and inflationary pressures.
In addition, to the extent we are able to consummate transactions with potential third-party partners to further develop, obtain marketing approval for and/or commercialize our drug candidates, we may receive upfront payments, milestone payments or royalties from such arrangements that would increase our liquidity. ​ As of December 31, 2023, we had cash, cash equivalents and marketable securities of $181.9 million.
In addition, to the extent we are able to consummate transactions with potential third-party partners to further develop, obtain marketing approval for and/or commercialize our product candidates, we may receive upfront payments, milestone payments or royalties from such arrangements that would increase our liquidity. ​ As of December 31, 2024, we had cash, cash equivalents and marketable securities of $203.9 million.
In such an event, our stockholders’ ownership will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of a holder of our common stock. ​ Because of the numerous risks and uncertainties associated with research and development of pharmaceutical drugs, we are unable to estimate the exact amount of our working capital requirements.
In such an event, our stockholders’ ownership will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of a holder of our common stock. ​ 79 Table of Contents Because of the numerous risks and uncertainties associated with research and development of pharmaceutical product candidates, we are unable to estimate the exact amount of our working capital requirements.
Louis, Missouri under a sublease agreement which has a term through June 2029. ​ Our aggregate remaining lease payment obligation for these two spaces was $4.6 million as of December 31, 2023. ​ Agreement and Plan of Merger – Confluence ​ Under the Confluence Agreement, we agreed to pay the former Confluence equity holders aggregate remaining contingent consideration of up to $75.0 million based upon the achievement of specified regulatory and commercial milestones set forth in the Confluence Agreement.
Louis, Missouri under a sublease agreement which has a term through May 2029. ​ Our aggregate remaining lease payment obligation for these two spaces was $3.2 million as of December 31, 2024. ​ Agreement and Plan of Merger with Confluence ​ Under the Confluence Agreement, we agreed to pay the former Confluence equity holders aggregate remaining contingent consideration of up to $75.0 million based upon the achievement of specified regulatory and commercial milestones set forth in the Confluence Agreement.
Our future funding requirements will be heavily determined by the resources needed to support the development of our drug candidates. ​ As a publicly traded company, we incur and will continue to incur significant legal, accounting and other similar expenses.
Our future funding requirements will be heavily determined by the resources needed to support the development of our product candidates, without taking into account any potential business development activities. ​ As a publicly traded company, we incur and will continue to incur significant legal, accounting and other similar expenses.
Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view towards liquidity and capital preservation. ​ We currently have no ongoing material financing commitments, such as lines of credit or guarantees, that are expected to affect our liquidity, other than our contingent obligations under the Confluence Agreement, which is summarized above under “Overview—Acquisition and License Agreements,” and our lease obligations. ​ Equity Financing ​ Sale of Common Stock under At-the-Market Facility ​ In April 2023, we sold 3.4 million shares of our common stock for aggregate gross proceeds of $27.5 million, pursuant to a sales agreement with SVB Securities LLC and Cantor Fitzgerald & Co., as sales agents, dated February 23, 2023.
Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view towards liquidity and capital preservation. ​ We currently have no ongoing material financing commitments, such as lines of credit or guarantees, that are expected to affect our liquidity, other than our contingent obligations under the Confluence Agreement, Biosion Agreement and CTTQ Agreement, which are summarized above under “Overview—Acquisition and License Agreements,” and our lease obligations. ​ Equity Financing ​ Private Placement ​ In November 2024, we closed a private placement in which we sold 35.6 million shares of our common stock for aggregate gross proceeds of $80.0 million.
The decrease was driven by lower overall hours billed, partially due to an increased focus on internal development programs, which was offset by a higher average billing rate. ​ Licensing ​ Licensing revenue was $28.2 million and $25.1 million for the years ended December 31, 2023 and 2022, respectively.
The decrease was driven by lower overall hours billed, which was offset by a higher average billing rate. ​ Licensing ​ Licensing revenue was $16.2 million and $28.2 million for the years ended December 31, 2024 and 2023, respectively.
This increase was partially offset by both the upfront payment received under the Lilly agreement and the upfront payment received under the Pediatrix agreement during the year ended December 31, 2022. ​ Cost and Expenses ​ Cost of Revenue ​ Cost of revenue was $3.4 million and $4.0 million for the years ended December 31, 2023 and 2022, respectively, and in each case related to providing laboratory services to our clients.
The decrease was primarily driven by the upfront payment received under the Sun Pharma agreement during the year ended December 31, 2023, partially offset by the achievement of higher milestones under license agreements during the year ended December 31, 2024. ​ Cost and Expenses ​ Cost of Revenue ​ Cost of revenue was $2.8 million and $3.4 million for the years ended December 31, 2024 and 2023, respectively, and in each case related to providing laboratory services to our clients.
We paid selling commissions and other fees of $2.2 million in connection with the sale. ​ Cash Flows ​ Cash and cash equivalents were $39.9 million as of December 31, 2023 compared to $45.3 million as of December 31, 2022.
We paid selling commissions of $0.8 million in connection with the sale. 77 Table of Contents Cash Flows ​ Cash and cash equivalents were $24.6 million as of December 31, 2024 compared to $39.9 million as of December 31, 2023.
We also had $142.0 million in short- and long-term marketable securities as of December 31, 2023 compared to $184.5 million as of December 31, 2022. ​ The sources and uses of cash that contributed to the change in cash and cash equivalents were: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, (In thousands) 2023 2022 Cash and cash equivalents beginning balance ​ $ 45,277 ​ $ 27,349 Net cash used in operating activities ​ (78,325) ​ (67,567) Net cash provided by investing activities ​ 46,220 ​ 12,628 Net cash provided by financing activities ​ ​ 26,706 ​ ​ 72,867 Cash and cash equivalents ending balance ​ $ 39,878 ​ $ 45,277 ​ 74 Table of Contents Operating Activities ​ Cash flow related to operating activities was the result of: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, (In thousands) 2023 2022 Net loss ​ $ (88,481) ​ $ (86,908) Non-cash adjustments to reconcile net loss to net cash used in operating activities ​ 767 ​ 20,536 Change in accounts payable and accrued expenses ​ ​ 10,518 ​ ​ 960 Change in accounts receivable ​ ​ 186 ​ ​ 139 Change in prepaid expenses and other assets ​ (1,315) ​ (2,294) Net cash used in operating activities ​ $ (78,325) ​ $ (67,567) ​ Net cash used in operating activities increased for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily as a result of higher net loss after adjusting for revaluation of contingent consideration.
We also had $179.3 million in short- and long-term marketable securities as of December 31, 2024 compared to $142.0 million as of December 31, 2023. ​ The sources and uses of cash that contributed to the change in cash and cash equivalents were: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, (In thousands) 2024 2023 Cash and cash equivalents beginning balance ​ $ 39,878 ​ $ 45,277 Net cash used in operating activities ​ (20,075) ​ (78,325) Net cash (used in) provided by investing activities ​ (69,769) ​ 46,220 Net cash provided by financing activities ​ ​ 74,536 ​ ​ 26,706 Cash and cash equivalents ending balance ​ $ 24,570 ​ $ 39,878 ​ Operating Activities ​ Cash flow related to operating activities was the result of: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, (In thousands) 2024 2023 Net loss ​ $ (132,065) ​ $ (88,481) Non-cash adjustments to reconcile net loss to net cash used in operating activities ​ 101,068 ​ 767 Change in accounts receivable ​ ​ (20) ​ ​ 186 Change in prepaid expenses and other assets ​ (4,855) ​ (1,315) Change in accounts payable and accrued expenses ​ ​ (8,130) ​ ​ 10,518 Change in deferred income ​ ​ 23,927 ​ ​ — Net cash used in operating activities ​ $ (20,075) ​ $ (78,325) ​ Net cash used in operating activities decreased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily as a result of lower net losses after adjusting for non-cash items and proceeds from the royalty sale to OMERS.
The contract research segment earns revenue from the provision of laboratory services. ​ Recently Issued Accounting Pronouncements ​ In November 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This standard requires disclosure of significant segment expenses and other segment items by reportable segment.
We are currently assessing the impact of this ASU. ​ In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This standard requires disclosure of significant segment expenses and other segment items by reportable segment.
In addition to the payments described above, if we sell, license or transfer any of the intellectual property acquired from Confluence pursuant to the Confluence Agreement to a third party, we will be obligated to pay the former Confluence equity holders a portion of any consideration received from such sale, license or transfer in specified circumstances. ​ R&D Obligations ​ We enter into contracts in the normal course of business with CROs, contract manufacturing organizations and other service providers for clinical trials, preclinical studies and testing, manufacturing and other services and products for operating purposes.
In addition to the payments described above, we have also agreed to pay a portion of any sublicense consideration received from the grant of any sublicense or similar rights under any of the rights or licenses granted to us under the Biosion Agreement. ​ R&D Obligations ​ We enter into contracts in the normal course of business with CROs, contract manufacturing organizations and other service providers for clinical trials, preclinical studies and testing, manufacturing and other services and products for operating purposes.
As a result, we recorded an impairment charge of $6.6 million, the full balance of the IPR&D intangible asset. ​ Other Income, net ​ Other income, net increased during the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to higher interest income on investment portfolio balances. ​ 73 Table of Contents Liquidity and Capital Resources ​ Overview ​ Since our inception, we have incurred net losses and negative cash flows from our operations.
Our impairment analysis resulted in a fair value of the IPR&D intangible asset which was less than the carrying value and as a result, we recorded an impairment charge for the full balance of the IPR&D intangible asset during the year ended December 31, 2023. ​ Other Income ​ Interest Income ​ Interest income decreased during the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to lower interest income on investment portfolio balances. ​ Non-cash Royalty Income ​ Non-cash royalty income includes income related to the proceeds from the sale of future royalties to OMERS, recognized under the “units-of-revenue” method. ​ Liquidity and Capital Resources ​ Overview ​ Since our inception, we have incurred net losses and negative cash flows from our operations.
We are assessing the impact of this ASU and upon adoption expect that any impact would be limited to additional segment expense disclosures in the footnotes to the our consolidated financial statements. ​ In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This standard enhances disclosures related to income taxes, including the rate reconciliation and information on income taxes paid.
We are currently assessing the impact of this ASU. ​ In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This standard enhances disclosures related to income taxes, including the rate reconciliation and information on income taxes paid. This ASU becomes effective for annual periods beginning after December 15, 2024.
This was partially offset by lower discount rates resulting from lower risk-free rates and changes in credit spreads, as well as the passage of time. ​ Investing Activities ​ Cash flow related to investing activities was the result of: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, (In thousands) 2023 2022 Purchases of property and equipment ​ $ (1,309) ​ $ (605) Purchases of marketable securities ​ (135,675) ​ (164,753) Proceeds from sales and maturities of marketable securities ​ ​ 183,204 ​ ​ 177,986 Net cash provided by investing activities ​ $ 46,220 ​ $ 12,628 ​ The change in net cash provided by investing activities for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily resulted from higher sales and maturities of marketable securities during the year ended December 31, 2023, and a reduction of purchases of marketable securities, which were higher during the year ended December 31, 2022. ​ Financing Activities ​ Cash flow related to financing activities was the result of: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, (In thousands) 2023 2022 Proceeds from issuance of common stock under the at-the-market sales agreement, net of issuance costs ​ $ 26,714 ​ $ 72,744 Payments of employee withholding taxes related to restricted stock unit award vesting ​ ​ (102) ​ ​ (34) Proceeds from exercise of employee stock options and the issuance of stock ​ 94 ​ 157 Net cash provided by financing activities ​ $ 26,706 ​ $ 72,867 ​ 75 Table of Contents Net cash provided by financing activities decreased for the year ended December 31, 2023 compared to December 31, 2022 primarily due to larger proceeds in 2022 from sales under our at-the-market sales agreement. ​ Funding Requirements ​ We anticipate we will incur net losses in the near term as we continue the development of our drug candidates and continue to discover and develop additional drug candidates.
The change was primarily 78 Table of Contents due to the consideration paid for the acquisition of in-licensed assets in connection with the Biosion Agreement and CTTQ Agreement and lower sales and maturities of marketable securities, partially offset by a reduction in purchases of marketable securities. ​ Financing Activities ​ Cash flow related to financing activities was the result of: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, (In thousands) 2024 2023 Proceeds from issuance of common stock under securities purchase agreement, net of issuance costs ​ $ 74,913 ​ $ — Proceeds from issuance of common stock under the at-the-market sales agreement, net of issuance costs ​ ​ — ​ ​ 26,714 Payments of employee withholding taxes related to restricted stock unit award vesting and exercise of employee stock options ​ ​ (409) ​ ​ (102) Proceeds from exercise of employee stock options and the issuance of stock ​ 32 ​ 94 Net cash provided by financing activities ​ $ 74,536 ​ $ 26,706 ​ The increase in net cash provided by financing activities for the year ended December 31, 2024 compared to December 31, 2023 was primarily due to proceeds from our private placement in November 2024, offset by proceeds from sales under our at-the-market sales agreement in 2023. ​ Funding Requirements ​ We anticipate we will incur net losses in the near term as we continue the development of our product candidates and continue to discover and develop additional product candidates.
We paid selling commissions of $0.8 million in connection with the sale. ​ In April 2022, we sold 4,838,709 shares of our common stock for aggregate gross proceeds of $75.0 million, pursuant to a sales agreement with SVB Securities LLC and Cantor Fitzgerald & Co., as sales agents, dated May 20, 2021.
We paid placement agent and other fees of $5.1 million in connection with the private placement. ​ At-the-Market Facility ​ In April 2023, we sold 3.4 million shares of our common stock for aggregate gross proceeds of $27.5 million, pursuant to a sales agreement with Leerink Partners LLC (formerly SVB Securities LLC) and Cantor Fitzgerald & Co., as sales agents, dated February 23, 2023.
This ASU becomes effective for annual periods beginning in 2024 and interim periods in 2025.
This ASU becomes effective for annual periods beginning after December 15, 2026 and interim reporting periods within annual reporting periods beginning after December 15, 2027.
Cost of revenue decreased during the year ended December 31, 2023 due to lower variable costs resulting from the decrease in hours billed, partially offset by an increase in fixed overhead costs, including personnel-related costs. ​ Research and Development ​ The following table summarizes our research and development expenses by drug candidate or, for unallocated expenses, by type: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ (In thousands) ​ ​ 2023 2022 ​ Change Zunsemetinib $ 36,461 $ 28,133 $ 8,328 ATI-1777 ​ ​ ​ 12,129 ​ ​ 12,113 ​ ​ 16 ATI-2138 ​ ​ ​ 12,143 ​ ​ 7,704 ​ ​ 4,439 ATI-2231 ​ ​ ​ 1,575 ​ ​ 4,828 ​ ​ (3,253) Discovery ​ ​ 6,881 ​ 4,564 ​ 2,317 Other research and development ​ ​ ​ 3,417 ​ ​ 1,564 ​ ​ 1,853 Personnel ​ ​ ​ 18,977 ​ ​ 15,162 ​ ​ 3,815 Stock-based compensation ​ ​ ​ 6,801 ​ ​ 3,745 ​ ​ 3,056 Total research and development expenses ​ ​ $ 98,384 ​ $ 77,813 ​ $ 20,571 ​ Zunsemetinib ​ The increase in expenses for zunsemetinib during the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to higher costs associated with drug candidate manufacturing and costs associated with clinical development activities for a Phase 2b trial in subjects with rheumatoid arthritis, which initiated in December 2021 and was completed in November 2023.
Cost of revenue decreased during the year ended December 31, 2024 due to lower variable costs resulting from a decrease in hours billed, which was offset by an increase in termination benefits as a result of our restructuring that was announced in December 2023. 74 Table of Contents ​ Research and Development ​ The following table summarizes our research and development expenses by product candidate or, for unallocated expenses, by type: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ December 31, ​ ​ ​ (In thousands) ​ 2024 2023 ​ Change Bosakitug ​ $ 299 ​ $ — ​ $ 299 ATI-2138 ​ ​ 4,209 ​ ​ 12,143 ​ ​ (7,934) ATI-052 ​ ​ 1,895 ​ ​ — ​ ​ 1,895 Lepzacitinib ​ ​ 1,300 ​ ​ 12,129 ​ ​ (10,829) Zunsemetinib ​ 4,496 ​ 36,461 ​ (31,965) Discovery ​ 5,775 ​ 6,881 ​ (1,106) Other research and development ​ ​ 1,031 ​ ​ 4,992 ​ ​ (3,961) Personnel ​ ​ 11,446 ​ ​ 18,977 ​ ​ (7,531) Stock-based compensation ​ ​ 3,135 ​ ​ 6,801 ​ ​ (3,666) Total research and development expenses ​ $ 33,586 ​ $ 98,384 ​ $ (64,798) ​ ATI-2138 ​ The decrease in expenses for ATI-2138 during the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to a decrease in clinical development expenses associated with a Phase 1 MAD trial which was completed in September 2023, as well as a decrease in preclinical development activities.
The increase was partially offset by a decrease in costs associated with clinical development activities for a Phase 2a trial in subjects with hidradenitis suppurativa, which initiated in December 2021 and was completed in March 2023. ​ 71 Table of Contents ATI-1777 ​ ATI-1777 expenses were higher during the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to an increase in costs associated with a Phase 2b clinical trial in subjects with atopic dermatitis, which initiated in May 2022 and was completed in December 2023.
This decrease was partially offset by clinical development expenses associated with a Phase 2a trial that was initiated in August 2024. ​ ATI-052 ​ Research and development expenses related to ATI-052 for the year ended December 31, 2024 primarily consisted of product candidate manufacturing costs and preclinical development activities.
This decrease was partially offset by lower discount rates resulting from lower risk-free rates and changes in credit spreads, as well as the passage of time. ​ The fair value of our contingent consideration liability increased during the year ended December 31, 2022 mainly due to an increase in future sales level assumptions for zunsemetinib and the passage of time. ​ Intangible Asset Impairment ​ During the quarter ended December 31, 2023, we performed an impairment analysis on the IPR&D intangible asset due to our decision to discontinue further development of the drug candidate for immuno-inflammatory diseases.
During the quarter ended December 31, 2023, we performed an impairment analysis on the IPR&D intangible asset acquired from Confluence due to our decision to discontinue further development of the product candidate for immuno-inflammatory diseases.
Management’s Discussion and Analysis of Financial Condition and Results of Operations. ​ Comparison of Years Ended December 31, 2023 and 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ (In thousands) 2023 2022 Change Revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contract research ​ ​ $ 3,035 ​ $ 4,395 ​ $ (1,360) Licensing ​ ​ ​ 28,214 ​ ​ 25,100 ​ ​ 3,114 Other ​ ​ ​ — ​ ​ 257 ​ ​ (257) Total revenue ​ ​ ​ 31,249 ​ ​ 29,752 ​ ​ 1,497 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Costs and expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of revenue ​ ​ ​ 3,423 ​ ​ 4,023 ​ ​ (600) Research and development ​ ​ 98,384 ​ 77,813 ​ 20,571 General and administrative ​ ​ 32,412 ​ 25,133 ​ 7,279 Licensing ​ ​ ​ 14,658 ​ ​ 7,937 ​ ​ 6,721 Revaluation of contingent consideration ​ ​ ​ (26,900) ​ ​ 4,700 ​ ​ (31,600) Intangible asset impairment ​ ​ ​ 6,629 ​ ​ — ​ ​ 6,629 Total costs and expenses ​ ​ 128,606 ​ 119,606 ​ 9,000 Loss from operations ​ ​ (97,357) ​ (89,854) ​ (7,503) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income, net ​ ​ 8,509 ​ 2,946 ​ 5,563 Loss before income taxes ​ ​ ​ (88,848) ​ ​ (86,908) ​ ​ (1,940) Income tax benefit ​ ​ ​ (367) ​ ​ — ​ ​ (367) Net loss ​ ​ $ (88,481) ​ $ (86,908) ​ $ (1,573) ​ 70 Table of Contents Revenue ​ Contract Research ​ Contract research revenue was $3.0 million and $4.4 million for the years ended December 31, 2023 and 2022, respectively, and was comprised of fees earned from the provision of laboratory services to our clients.
We use an expected dividend yield of zero because we have not paid cash dividends to date and have no intention of paying cash dividends in the future. ​ The fair value of each RSU is measured using the closing price of our common stock on the date of grant. ​ 73 Table of Contents Results of Operations ​ Comparison of Years Ended December 31, 2024 and 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ (In thousands) 2024 2023 Change Revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contract research ​ $ 2,541 ​ $ 3,035 ​ $ (494) ​ Licensing ​ ​ 16,179 ​ ​ 28,214 ​ ​ (12,035) ​ Total revenue ​ ​ 18,720 ​ ​ 31,249 ​ ​ (12,529) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Costs and expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of revenue ​ ​ 2,792 ​ ​ 3,423 ​ ​ (631) ​ Research and development ​ 33,586 ​ 98,384 ​ (64,798) ​ General and administrative ​ 22,203 ​ 32,412 ​ (10,209) ​ Licensing ​ ​ 12,666 ​ ​ 14,658 ​ ​ (1,992) ​ Revaluation of contingent consideration ​ ​ 2,500 ​ ​ (26,900) ​ ​ 29,400 ​ In-process research and development ​ ​ 86,905 ​ ​ 6,629 ​ ​ 80,276 ​ Total costs and expenses ​ 160,652 ​ 128,606 ​ 32,046 ​ Loss from operations ​ (141,932) ​ (97,357) ​ (44,575) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest income ​ 7,953 ​ 8,509 ​ (556) ​ Non-cash royalty income ​ ​ 1,914 ​ ​ — ​ ​ 1,914 ​ Total other income ​ ​ 9,867 ​ ​ 8,509 ​ ​ 1,358 ​ Loss before income taxes ​ ​ (132,065) ​ ​ (88,848) ​ ​ (43,217) ​ Income tax benefit ​ ​ — ​ ​ (367) ​ ​ 367 ​ Net loss ​ $ (132,065) ​ $ (88,481) ​ $ (43,584) ​ ​ Revenue ​ Contract Research ​ Contract research revenue was $2.5 million and $3.0 million for the years ended December 31, 2024 and 2023, respectively, and was comprised of fees earned from the provision of laboratory services to our clients.
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The increase was primarily driven by the upfront payment received under the Sun Pharma agreement during the year ended December 31, 2023 and an increase in royalties.
Added
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and the related notes to those statements included later in this Annual Report on Form 10-K (this “Annual Report”).
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The increase was partially offset by lower costs associated with drug candidate manufacturing and other preclinical development activities. ​ ATI-2138 ​ The increase in expenses for ATI-2138 during the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to an increase in clinical development expenses associated with a Phase 1 MAD trial, as well as an increase in preclinical development activities and ancillary studies. ​ ATI-2231 ​ The decrease in expenses for ATI-2231 during the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to preclinical development activities, IND-enabling studies and drug manufacturing in the prior period as we progressed the program toward IND submission in 2023. ​ Discovery ​ The increase in expenses related to discovery during the year ended December 31, 2023 compared to the year ended December 31, 2022 was due to continued investment in our discovery-stage programs as we progressed programs toward candidate selection. ​ Personnel and stock-based compensation ​ The increase in personnel and stock-based compensation expenses during the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to an increase in costs associated with higher average headcount, compensation adjustments, equity awards granted in 2023 and severance expenses that included the cost of termination benefits given to employees that were involuntarily terminated during the year ended December 31, 2023.
Added
In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs and expectations that involve risks and uncertainties. Our actual results and the timing of events could differ materially from those discussed in these forward-looking statements.
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Our impairment analysis resulted in a fair value of the IPR&D intangible asset which was less than the carrying value.
Added
Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report, particularly in Part I, Item 1A. “Risk Factors,” and “Special Note Regarding Forward-Looking Statements.” ​ Overview ​ We are a clinical-stage biopharmaceutical company focused on developing novel small and large molecule product candidates for immuno-inflammatory diseases.
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This change was partially offset by the impairment charge related to the IPR&D intangible asset during the year ended December 31, 2023, as well as an increase in licensing expense accruals between periods. ​ The decrease in non-cash adjustments to reconcile net loss to net cash used in operating activities was mainly the result of a gain in revaluation of contingent consideration during the year ended December 31, 2023 compared to a loss in revaluation of contingent consideration during the year ended December 31, 2022.
Added
Our proprietary KINect drug discovery platform combined with our preclinical development capabilities allows us to identify and advance potential product candidates that we may develop independently or in collaboration with third parties.
Removed
The gain was primarily due to the removal of estimated sales from zunsemetinib for moderate to severe rheumatoid arthritis, moderate to severe hidradenitis suppurativa and moderate to severe psoriatic arthritis following our decision to discontinue further development of our MK2 inhibitor programs in immuno-inflammatory diseases.
Added
In addition to identifying and developing our novel product candidates, we are pursuing strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our novel product candidates.
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This ASU becomes effective January 1, 2025. We are currently assessing the impact of this ASU. ​ ​ 77 Table of Contents
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We also provide contract research services to third parties enabled by our early-stage research and development expertise. ​ Financial Overview ​ Since our inception, we have incurred significant net losses. Our net loss was $132.1 million for the year ended December 31, 2024 and $88.5 million for the year ended December 31, 2023.
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As of December 31, 2024, we had an accumulated deficit of $902.9 million. We expect to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates from discovery through preclinical and clinical development. In addition, our product candidates, even if they are approved by regulatory agencies for marketing, may not achieve commercial success.
Added
We may also not be successful in pursuing strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our product candidates. Furthermore, we have incurred and expect to continue to incur significant costs associated with operating as a public company, including legal, accounting, investor relations and other expenses.
Added
As a result, we will need substantial additional funding to support our continuing operations. ​ We have historically financed our operations primarily with sales of equity securities and incurring indebtedness in the form of loans from commercial lenders.
Added
In the near term, we expect to finance our operations through these and other capital sources, including potential partnerships with other companies or other strategic transactions. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on commercially acceptable terms, or at all.
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If we fail to raise capital or enter into such agreements as, and when needed, we may have to significantly delay, scale back or discontinue the development of one or more of our product candidates.
Added
Impact of Macroeconomic Conditions on Our Business ​ Unfavorable conditions in the economy both in the United States and abroad may negatively affect the growth of our business and our results of operations. For example, macroeconomic events, including inflationary pressure and geopolitical conflicts, have led to economic uncertainty globally.
Added
The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods. If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed.
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For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, see the section titled “Risk Factors.” ​ Acquisition and License Agreements ​ Exclusive License Agreement with Biosion ​ In November 2024, we entered into an exclusive license agreement (the “Biosion Agreement”) with Biosion, Inc.
Added
(“Biosion”) pursuant to which we received the exclusive rights to develop, manufacture and commercialize bosakitug 67 Table of Contents (ATI-045) and ATI-052 worldwide, excluding Mainland China, Macau, Hong Kong and Taiwan (“Greater China”). In connection with the Biosion Agreement, we also entered into a collaboration agreement (the “CTTQ Agreement”) with Biosion and Chia Tai Tianqing Pharmaceutical Group, Co., Ltd.
Added
(“CTTQ”), a licensee of bosakitug in Greater China. ​ As partial consideration for the rights and licenses under the Biosion Agreement and CTTQ Agreement, we agreed to, in the aggregate, (i) pay $30.0 million in upfront cash consideration, plus $4.5 million for the reimbursement of certain development costs, (ii) issue warrants (the “Warrants”) to purchase 14,281,985 shares of our common stock and (iii) pay $6.2 million for the reimbursement of certain development costs and drug product material as set forth in the Biosion Agreement.
Added
We determined that the transaction was an acquisition of assets with no alternative future use and therefore expensed as incurred the fair value of the consideration given of $85.6 million as a component of in-process research and development expense during the year ended December 31, 2024.
Added
We incurred $1.3 million in expenses related to this transaction which were expensed as incurred.
Added
In addition, we agreed to pay, in the aggregate, (i) up to $125 million upon the achievement of specified regulatory milestones commencing with product approval, (ii) up to $795 million upon the achievement of specified sales milestones, (iii) a tiered low-to-mid single digit royalty based upon a percentage of annual net sales, subject to specified reductions as set forth in the Biosion Agreement, and (iv) a portion of any sublicense consideration received from the grant of any sublicense or similar rights under any of the rights or licenses granted to us under the Biosion Agreement.
Added
We will expense these payments in the period when either they are determined to be probable of occurring or when the payment is triggered. The Warrants have an initial exercise price of $0.00001 per share, subject to adjustment as provided in the Warrants.
Added
The Warrants are immediately exercisable, subject to any applicable overseas direct investment filing that may be required for the holders. The Warrants will terminate when exercised in full. We classified the Warrants within equity because they are indexed to our own stock.
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We assigned an estimated fair value of $44.8 million to the Warrants, which was based on the fair value of our common stock on the date of issuance less the nominal exercise price of $0.00001 per share. ​ Royalty Purchase Agreement with OCM IP Healthcare Portfolio LP ​ In July 2024, we entered into a royalty purchase agreement with OCM IP Healthcare Portfolio LP, an investment vehicle for Ontario Municipal Employees Retirement System (“OMERS”).
Added
Under the royalty purchase agreement, we sold to OMERS a portion of the future royalty payments and the remaining anniversary milestones associated with our existing license to Eli Lilly and Company (“Lilly”), relating to OLUMIANT® (baricitinib) for the treatment of alopecia areata (see “—License Agreement with Eli Lilly and Company”).
Added
Under the terms of the royalty purchase agreement, we received an upfront payment of $26.5 million.
Added
In exchange, OMERS acquired a portion of the royalty payable by Lilly to us for worldwide net sales of OLUMIANT for the treatment of alopecia areata from April 1, 2024 through the remainder of the royalty term under our license agreement with Lilly, and 100% of the remaining anniversary milestone payments payable by Lilly to us under the license agreement.
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The royalty payments and milestones we sold to OMERS represent our entire financial interest in the Lilly license agreement after taking into account our other contractual third-party obligations. ​ We recognized $1.9 million of non-cash royalty income during the year ended December 31, 2024. ​ License Agreement with Sun Pharmaceutical Industries, Inc. ​ In December 2023, we entered into an exclusive patent license agreement with Sun Pharmaceutical Industries, Inc.
Added
(“Sun Pharma”). Under the license agreement, we granted Sun Pharma exclusive rights under certain patents that we exclusively license from a third party. The patents relate to the use of deuruxolitinib, Sun Pharma’s JAK inhibitor, or other isotopic forms of ruxolitinib, to treat alopecia areata or androgenetic alopecia.
Added
Under the license agreement, Sun Pharma has paid us an upfront payment and certain regulatory payments, and has agreed to pay us other regulatory and commercial milestone payments upon the achievement of specified milestones set forth in the agreement, and a mid single-digit tiered royalty calculated as a percentage of Sun Pharma’s net sales.
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We have separate contractual obligations under which we have agreed to pay to third parties a portion of the consideration we may receive under the license agreement. ​ We recognized $3.0 million and $15.0 million of licensing revenue during the years ended December 31, 2024 and 2023, respectively. 68 Table of Contents License Agreement with Pediatrix Therapeutics, Inc.
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In November 2022, we entered into a license agreement with Pediatrix Therapeutics, Inc. (“Pediatrix”) under which we granted Pediatrix the exclusive rights to develop, manufacture and commercialize lepzacitinib in Greater China.
Added
Pediatrix has paid us an upfront payment, and has agreed to pay us development, regulatory and commercial milestone payments upon the achievement of specified milestones set forth in the agreement, and a tiered royalty ranging from a low-to-high single digit percentage of net sales of lepzacitinib by Pediatrix in Greater China.
Added
A portion of the consideration received from Pediatrix is payable to the former Confluence equity holders as described below under the caption “—Agreement and Plan of Merger with Confluence.” ​ License Agreement with Eli Lilly and Company ​ In August 2022, we entered into a non-exclusive patent license agreement with Lilly.
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Under the license agreement, we granted Lilly non-exclusive rights under certain patents and patent applications that we exclusively license from a third party. The patents and patent applications relate to the use of baricitinib, Lilly’s JAK inhibitor, to treat alopecia areata.
Added
Under the license agreement, Lilly has paid us an upfront payment and regulatory and certain commercial milestone payments, and agreed to pay us anniversary payments and other commercial milestone payments upon the achievement of specified milestones as set forth in the agreement, and a low single-digit royalty calculated as a percentage of Lilly’s net sales of baricitinib for the treatment of alopecia areata.
Added
We have separate contractual obligations under which we have agreed to pay to third parties an amount equal to any regulatory and commercial milestone payments we receive under the Lilly license agreement, as well as a portion of the upfront consideration and a portion of the royalties we may receive under the license agreement.
Added
In July 2024, we entered into a royalty purchase agreement with OMERS pursuant to which we sold to OMERS a portion of our future royalty payments and the remaining anniversary milestones associated with the license to Lilly (see “—Royalty Purchase Agreement with OCM IP Healthcare Portfolio LP” above). ​ We recognized $13.2 million and $12.7 million of licensing revenue during the years ended December 31, 2024 and 2023, respectively.
Added
Asset Purchase Agreement with EPI Health, LLC In October 2019, we sold RHOFADE (oxymetazoline hydrochloride) cream, 1% (“RHOFADE”) to EPI Health, LLC (“EPI Health”) pursuant to an asset purchase agreement. In July 2023, EPI Health filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code.
Added
Through the bankruptcy process, EPI Health and its parent company, Novan, Inc., sold the RHOFADE assets to a third party, which excluded our asset purchase agreement with EPI Health and the outstanding amounts due. The sale was approved by the bankruptcy court in September 2023.
Added
As a result of the bankruptcy proceedings, all amounts that were due and outstanding by EPI Health have been fully reserved. Agreement and Plan of Merger with Confluence In 2017, we entered into an Agreement and Plan of Merger (the “Confluence Agreement”) with Confluence Life Sciences, Inc.
Added
(now known as Aclaris Life Sciences, Inc.) (“Confluence”) , Aclaris Life Sciences, Inc., our wholly-owned subsidiary (“Merger Sub”), and Fortis Advisors LLC, as representative of the equity holders of Confluence.
Added
Pursuant to the terms of the Confluence Agreement, Merger Sub merged with and into Confluence, with Confluence surviving as our wholly-owned subsidiary. ​ Under the Confluence Agreement, we have agreed to pay the former Confluence equity holders aggregate remaining contingent consideration of up to $75.0 million based upon the achievement of specified regulatory and commercial milestones set forth in the Confluence Agreement.
Added
In addition to the payments described above, if we sell, license or transfer any of the intellectual property acquired from Confluence pursuant to the Confluence Agreement to a third party, we will be obligated to pay the former Confluence equity holders a portion of any consideration received from such sale, license or transfer in specified circumstances. ​ 69 Table of Contents Discontinued Programs ​ We were previously developing zunsemetinib (ATI-450) as a potential treatment for various immuno-inflammatory diseases, including hidradenitis suppurativa, psoriatic arthritis, and rheumatoid arthritis.
Added
Following the results of the Phase 2 trials for these programs, we discontinued further development of our mitogen-activated protein kinase-activated protein kinase 2 (“MK2”) inhibitor programs in immuno-inflammatory diseases in 2023. ​ We were also previously exploring the use of ATI-2231, our second MK2 inhibitor, as a potential treatment for oncology diseases, but decided to pursue this with zunsemetinib due to its more advanced clinical development package. ​ Restructuring ​ In December 2023, our board of directors approved a reduction of our workforce by approximately 46%, which was completed as of December 31, 2024.
Added
For the year ended December 31, 2024, we incurred severance expenses of $2.7 million and made cash severance payments of $5.6 million to impacted employees.
Added
In the year ended December 31, 2023, we recorded a restructuring charge of $3.1 million, representing one-time termination benefits for employees with retention periods less than the sixty-day minimum retention period. ​ Components of Our Results of Operations ​ Revenue ​ Contract Research ​ We earn revenue from the provision of laboratory services.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk ​ Our cash equivalents and marketable securities consist of money market funds, asset-backed debt securities, commercial paper, corporate debt securities, foreign government agency debt securities, U.S. government debt securities and U.S. government agency debt securities.
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Item 7A. Quantitative and Qualitative Disclosures about Market Risk ​ We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item. ​ ​ ​ 81 Table of Contents
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Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Our marketable securities are subject to interest rate risk and will fall in value if market interest rates increase.
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However, due to the short-term nature and low-risk profile of our investment portfolio, we do not expect that an immediate 10% change in market interest rates would have a material effect on the fair market value of our investment portfolio.
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We have the ability to hold our marketable securities until maturity, and therefore we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a change in market interest rates on our investments. ​ Foreign currency risk ​ Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in exchange rates.
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Our primary exposure to currency risk is foreign government agency debt securities. We do not enter into any derivative financial instruments to manage our exposure to foreign currency risk.
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Due to the conservative nature of our investment portfolio and other financial instruments, we do not believe an immediate 10% change in currency rates would have a material effect on the fair market value of our portfolio. ​ Inflation Risk ​ Inflation generally affects us by increasing our cost of labor.
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Although inflation has increased generally in the United States in recent months, we do not believe that inflation has had a material effect on our business, financial condition or results of operations during the year ended December 31, 2023. ​ ​ 78 Table of Contents

Other ACRS 10-K year-over-year comparisons