UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-K

(Mark One)

x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 20152017

¨ Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                     to

Commission File Number:001-32587

ALTIMMUNE, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code:(410) 269-2600code

(240)654-1450

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes¨  ☐    Nox

  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes¨  ☐    Nox

  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yesx  ☒    No¨

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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yesx  ☒    No¨

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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of RegulationS-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form10-K or any amendment to this Form10-K.x  ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” andfiler,” “smaller reporting company,” and “emerging growth company” in Rule 12b—212b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Act).    Yes¨  ☐    Nox

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The aggregate market value of voting and non-votingthe Registrant’s common equitystock held bynon-affiliates, of the registrant was approximately $81.0 million based upon the closing price of the Registrant’s common equitystock on the NYSE MKTNASDAQ Global Market of $3.20, on the last business day of the registrant’s most recently completed second fiscal quarter (JuneJune 30, 2015). In determining this amount, the registrant has assumed solely for this purpose that all of its directors, executive officers and persons beneficially owning 10% or more of the outstanding shares of common stock of the registrant may be considered to be affiliates. This assumption shall not be deemed conclusive as to affiliate status for this or any other purpose.2017 was approximately $49.4 million.

The number ofThere were 22,271,089 shares of the registrant’s Common Stock,Registrant’s common stock, $0.0001 par value $0.0001 per share, outstanding as ofon March 7, 2016 was 65,251,230.

30, 2018.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’sRegistrant’s definitive Proxy Statement forproxy statement related to its 2016 Annual Meeting2018 annual meeting of Stockholders, or Annual Report on Form 10-K/A for the fiscal year ended December 31, 2015,stockholders (the “Proxy Statement”) to be filed on or before April 29, 2016,subsequently are incorporated by reference into Part III of this Annual Report.

PHARMATHENE, INC.report. The Proxy Statement or an amendment to this annual report onForm 10-K will be filed within 120 days of the end of the fiscal year covered by this annual report on Form10-K.

ALTIMMUNE, INC.

ANNUAL REPORT ON FORM10-K

TABLE OF CONTENTS

Merger Sub Corp I Inc. (“Merger Sub Corp”) and Mustang Merger Sub II LLC (“Merger Sub LLC”). Pursuant to the Merger Agreement, Merger Sub LLC agreed to acquire 100% of the outstanding capital stock of Private Altimmune in a reverse triangular merger and reorganization pursuant to section 368(a) of the Internal Revenue Code (the “Mergers”). Prior to the Mergers, PharmAthene was a publicly traded biodefense company engaged in Phase 2 clinical trials in developing twoa next generation anthrax vaccines. The next generation vaccinesvaccine.

On May 4, 2017, Private Altimmune and PharmAthene closed the Mergers in accordance with the terms of the Merger Agreement. Upon the closing of the Mergers, (i) Merger Sub Corp merged with and into Private Altimmune, with Private Altimmune remaining as the surviving corporation; (ii) Private Altimmune then merged with and into Merger Sub LLC, with Merger Sub LLC (renamed as “Altimmune LLC”) remaining as the surviving entity; and (iii) PharmAthene was renamed as “Altimmune, Inc.” Upon closing of the Mergers, all equity instruments of Private Altimmune were exchanged for corresponding equity instruments of PharmAthene. Except where the context indicates otherwise, references to “we,” “us,” “our,” “Altimmune” or the “Company” refer, for periods prior to the completion of the Mergers, to Private Altimmune and its subsidiaries, and for periods following the completion of the Mergers to the combined company and its subsidiaries.

Our Business

We are intendedfocused on the development of products to stimulate robust and durable immune responses for the prevention and treatment of disease. We have two proprietary platform technologies, RespirVec and Densigen, each of which has been shown, in preclinical studies and early clinical trials, to activate the immune system in distinctly different ways than traditional vaccine methods. Using these technologies, we have generated clinical product candidates which potentially represent an entirely new approach to harnessing the immune system.

We have two programs using the Respirvec recombinant adenovirus technology. NasoVAX, an intranasally administered recombinant influenza vaccine, uses an adenovector to achieve expression of the influenza antigen in the target cell, thereby potentially stimulating a broader and more rapid timeimmune response than traditional influenza vaccines. Our planned Phase 2 program for NasoVAX started in September 2017. Initial data, released in March 2018, indicated that NasoVAX was well tolerated at all doses tested, and achieved 100% seroprotection with the two higher doses. Final data from this study will be available in 3Q 2018 and the company is moving forward with continued development of a quadrivalent NasoVAX product which will be ready for clinical evaluation in early 2019. The second RespirVec product, NasoShield, is an anthrax vaccine designed to provide rapid, stable protection after one intranasal administration. We launched a Phase 1 trial for NasoShield in the first quarter of 2018 and anticipate topline data midyear.

With the support of NIAID, we are developing an alternative anthrax vaccine candidate, SparVax-L, a recombinant protein-based anthrax vaccine designed to require fewer doses for protection and less stringent requirements forhave a longer shelf-life than the only currently licensed anthrax vaccine. The shelf life of the liquid formulation was insufficient to meet the government standards and the product was reformulated in a lyophilized (dry powder) formulation. We have demonstrated a significant improvement (two years at room temperature controlled storage and handlingsix years at refrigerated temperatures) with the lyophilized formulation. Recent preclinical experiments have shown it to be 100% protective with atwo-dose regiment (zero and 14 days) with higher toxin neutralizing antibodies than the currently usedlicensed vaccine.

Based on the Densigen platform, HepTcell is an immunotherapy for patients chronically infected with HBV. HepTcell is currently in a Phase 1 trial in the United Kingdom and South Korea in patients with chronic HBV. Preliminary results from this trial were inconclusive. We are awaiting the six month follow up results, which we expect will be available in the third quarter of 2018, to determine whether to continue further development of HepTcell, including any further clinical trials. Oncosyn, a cancer immunotherapeutic is in preclinical development.

Our Strategy

Key elements of our strategy include the following:

The Human Immune System

The human immune system consists of a series of specialized structures and cell types that work together to protect the body from disease. The immune system can respond to pathogens in two different ways — via the innate immune response or via the adaptive immune response. Adaptive immunity is developed in response to antigens expressed by a particular pathogen, is highly specific to those antigens, and takes from one to several weeks upon initial recognition of the pathogen to mount an effective response. The adaptive immune system responds to a pathogen through both antibody-mediated and T cell-mediated immunity. The antibody-mediated humoral response is primarily directed toward the neutralization of extracellular pathogens (including viruses), which renders them harmless. T cell-mediated cellular immunity functions to recognize cells that need to be destroyed either because they harbor a pathogen or because the cell has transformed into a cancer cell. The adaptive immune response also includes the mucosal immune system, which is localized to mucosal tissues like the lining of the respiratory tract. The mucosal immune system uses a specialized type of antibody called IgA to block pathogens at the site of entry into the body.

In contrast to the slower, highly specific responses of the adaptive immune response, the innate immune system is designed to provide a rapid and broad response to attacking pathogens. There are numerous types of innate immune cells with specialized functions. Their principal characteristic is the ability to respond quickly when a pathogen is encountered. The innate immune system can recognize viruses, bacteria and fungi, and is

initiated immediately upon recognition of an invading organism to provide protection against infection while the adaptive immune response is being developed. In addition to acting directly on the pathogen threat, the innate immune system facilitates and improves the adaptive immune response. Together, the adaptive and innate immune systems provide a concerted response to the control and clear the pathogen from the host.

Current Product Candidates in Development

Since 2006,

Source: Company data

NasoVAX

NasoVAX is an adenovectored influenza vaccine candidate that is delivered intranasally. NasoVAX has demonstrated safety and the ability to induce an immune response against influenza in two Phase 1 trials in healthy volunteers. We completed enrollment of Phase 2 clinical trial program in the fourth quarter of 2017 and reported preliminary data in March 2018. NasoVAX was well tolerated and immunogenic, and we have been engagedplan to continue development of NasoVAX seasonal influenza vaccine with a quadrivalent study to start in legal proceedings with SIGA. On December 23, 2015, the Delaware Supreme Court affirmed the Delaware Court of Chancery's judgment against SIGA which provides an estimated total award of approximately $205 million plus interest. Additionally, if approved by the Bankruptcy Court, a reorganization plan filed by SIGA on December 15, 2015 and as amended on February 9, 2016 provides for SIGA to emerge from bankruptcy and provides for the final resolution of PharmAthene’s litigation claim against SIGA during 2016 or early 2017.

During the first half of 2019. Additional development of NasoVAX for the treatment of pandemic influenza is contingent on successful results in the seasonal influenza program and financial support from BARDA or other governmental agencies for additional development of a pandemic vaccine.

Influenza Overview

Influenza is one of the most common viral respiratory infections, leading to significant morbidity and mortality. In particular, young children, adults over 65, pregnant women and individuals in long-term care facilities are vulnerable to developingflu-related complications. People with underlying medical conditions such as asthma, obesity, neurological disorders, and chronic lung, heart, liver or kidney problems are also at high risk for complications. The World Health Organization reports that up to 650,000(http://www.who.int/mediacentre/news/releases/2017/seasonal-flu/en/) of those infected with the flu each year die as a result ofinfluenza-related complications. The number of deaths associated with seasonal influenza vary from year to year, based on the severity of circulating strains and the effectiveness of that year’s influenza vaccine The CDC has posted estimates of seasonal flu deaths and estimates that from the 2010-2011 flu season to the 2013-2014 flu seasoninfluenza-associated deaths in the United States ranged from a low of 12,000 (during 2011-2012) to a high of 56,000 (during 2012-2013)(https://www.cdc.gov/flu/about/disease/us_flu-related_deaths.htm). For comparison, the number of deaths from breast cancer in 2017 was approximately 40,000.

It is well known that elderly populations are at greater risk for influenza andinfluenza-related complications. In the Morbidity and Mortality Weekly Report (“MMWR”) (https://www.cdc.gov/mmwr/

index2018.html), from February 16, 2018, the United States Centers for Disease Control and Prevention (“CDC”), confirmed previous findings that as many as 59% of hospitalizations and 85% of deaths occur among adult age³65 years. However, the heightened risk based on age is not confined to senior citizens — for example, a 2014 MMWR report oninfluenza-associated intensive care unit admissions in the 2013 – 2014 flu season showed that persons aged 41 – 64 years had six times the risk of death and almost four times the risk of intensive care unit admission as those aged 40 or younger, demonstrating that influenza is a real concern for much of the adult population.

There are many influenza strains in circulation during a given flu season and the individual strains are systematically named by: (i) the type of influenza virus, either A or B; (ii) the geographical location where the strain was isolated; (iii) which isolate of potentially many from that location it represents (starting with the number “01”); and (iv) the year it was isolated. For example, an isolate from the pandemic influenza virus known as the swine flu might be called A/California/04/2009. This system of naming virus strains sometimes includes information on the subtype of influenza virus as a suffix at the end of the name, such as A/California/04/2009 (H1N1), where the familiar designation “H1N1” reveals the subunit structure of the virus, designating an influenza subtype comprised of hemagglutinin protein H1 and neuraminidase protein N1.

Vaccination against influenza virus can be an effective way to prevent infections. However, the effectiveness of vaccination can vary greatly from year to year, and the overall level of protection is suboptimal. According to the CDC, the average overall adjusted vaccine effectiveness for influenza seasons has been approximately 40% from 2005 – 2018 (https://www.cdc.gov/flu/professionals/vaccination/effectiveness-studies.htm). One reason for vaccine ineffectiveness is the constantly changing nature of influenza virus strains. The viral protein hemagglutinin (HA) is an important target of vaccination, and each type of HA protein, such as H1 or H3, has multiple forms which can vary from year to year. Because the process used to produce over 99% of influenza vaccine doses today requires six months of advance planning, regulatory agencies must commit to the strains to be used well in advance of the start of the flu season. Since each strain is different, an immune response generated against one form of H1 protein may not protect against infection with a virus containing another form of H1 protein. The low estimated 19% overall efficacy of the 2014 – 2015 flu vaccine in the United States was attributed to the fact that more thantwo-thirds of the H3N2 viruses circulating that season were of a different form than the H3N2 strain included in vaccine production. Worse still, a more dramatic change in influenza virus makeup occasionally arises when an entirely new HA protein emerges, which can result in a human pandemic. Because humans have never encountered the new HA protein they are likely to have little or no immunity, leaving them at much greater risk for serious complications or death. Current vaccines are suboptimal because of their narrow strain specific responses and the long lead times needed for vaccine production that results in mismatches between strains represented in the vaccine and the predominant circulating strains. We have demonstrated in repeated preclinical studies that NasoVAX may provide the type of cross-protection necessary to address a broad variety of HA proteins and has a more rapid production time than the vast majority of currently approved vaccines. Additionally, recent data suggest that glycosylation patterns may also be an important component of increasing vaccine efficacy. It was noted that vaccines that were manufactured in chicken eggs were less efficacious than similar vaccines manufactured in cell culture-based manufacturing processes.

The CDC recommends that everyone in the United States over six months of age receive an annual influenza vaccination. According to the CDC, vaccine manufacturers have projected that the market for influenza vaccines in the United States will be approximately 151 to 166 million doses for the 2017 – 2018 flu season, and have reported approximately 154.7 million doses distributed as of February 17, 2018. Through other market sources we narrowedestimate that the scopesubstantial majority of these vaccines contain inactivated virus produced in eggs. According to World Health Organization estimates, the U.S. influenza market is expected to be approximately $2.0 billion in 2018. Despite observations of limited efficacy, the CDC estimates that influenza vaccination prevented approximately 7.2 million illnesses, 3.1 million medically attended illnesses and 90,000 hospitalizations in 2013 – 2014. However, in 2014 – 2015, the CDC estimates that influenza vaccination prevented only 1.9 million illnesses, 966,000 medically attended illnesses and 67,000 hospitalizations,

significantly lower than previous seasons because of the reduced effectiveness of the 2014 – 2015 vaccine against the predominant circulating influenza viruses. New vaccines with improved clinical efficacy and effectiveness are needed to further reduceinfluenza-related morbidity and mortality. One of the most important improvements needed for influenza vaccines is the ability to provide cross-protection between different HA protein types, which would address the issue created with changing viruses mentioned above. Many companies and laboratories have attempted to develop “universal” influenza vaccines that are directed against viral proteins that are highly conserved in sequence among all viral genetic subtypes of influenza; however, it is not clear that the type of immune response generated against those proteins will be sufficiently effective for approval by the U.S. Food and Drug Administration (“FDA”).

We believe there is an opportunity to develop and market an improved vaccine to prevent influenza given the low overall efficacy of currently approved vaccines, especially in those populations with the highest needs: children under two years of age, adults older than 65 years of age and immunocompromised patients.

Our Solution, NasoVAX

NasoVAX is an influenza vaccine candidate that consists of a segment of the influenza viral genome packaged in an adenovector that is delivered intranasally. The power of our product development programs, reducedRespirVec platform, together with the intranasal route of administration, allows NasoVAX to mimic the typical route of infection taken by influenza viruses, potentially stimulating a highly robust and broad immune response as a result.

We believe NasoVAX has a number of important advantages over traditional vaccines, including the potential for:

By employing our employee headcountRespirVec platform and executed other cost reductions. These actions were intended to allow the Company to have sufficient cash to recognize the benefitintranasal administration, we mobilize key elements of the SIGA awardadaptive immune system: not just the antibody-based response triggered by traditional vaccines, but also mucosal immunity to provide a first line of defense and advance our Anthraxcellular immunity to help control and clear the infection. In addition to this adaptive immunity, NasoVAX stimulates the rapidly acting innate immune response. The innate immune response generally occurs within hours of a pathogen invading, as the body’s first line of defense, and complements the longer-lasting pathogen-specific immunity generated by the other components of the immune system. Vaccine developers have long known of the importance of triggering innate immunity. Typically, this is accomplished through the use of adjuvants, which are often crude mixtures that are unrelated to the vaccine programs withoutproduct itself. Because it is designed to activate the innate immune response, NasoVAX may act as its own adjuvant, potentially obviating the need for an additional adjuvant component to raisethe vaccine. By triggering innate immunity, NasoVAX may confer rapid protection that complements the longer-lasting protection based on antibodies and cellular immunity.

Clinical Data

A Phase 2a clinical study of NasoVAX was conducted in 60 healthy young adult volunteers randomized to one of 3 doses of NasoVAX. Immunogenicty measures were also compared to those from 20 similar subjects

vaccinated in an open label study of Fluzone, an injectable influenza vaccine. 100% seroprotection was achieved in the two higher NasoVAX doses, compared to 95% seroprotection after Fluzone. Other antibody measurements were similar for Fluzone and the highest NasoVAX dose, and median cellular immune response 8 days after vaccination was over5-fold higher with NasoVAX. Rates of local and systemic side effects were not statistically different than in placebo recipients and did not increase with dose.

Phase 2 clinical results

Preclinical Data

NasoVAX directed against influenza H5N1, commonly referred to as bird flu, results in 100% survival in a ferret model of H5N1 infection that, in the absence of an effective vaccine, leads to 100% mortality within seven days. We believe that this may potentially translate into better protection for humans as well.

NasoVAX protects ferrets from H5N1 bird flu

Figure 2. Protection of ferrets from bird flu H5N1 infection by NasoVAX

Source: Company data

In preclinical models, NasoVAX vaccines lead to protection against influenza across dissimilar influenza strains. Vaccination of mice with NasoVAX directed against influenza strain A/New Caledonia/20/1999 provided complete protection from a lethal viral challenge using a divergent strain, A/California/04/2009, to which a traditional vaccine for A/New Caledonia/20/1999 would have offered very little cross-protection. This type of activity may potentially provide increased efficacy in flu seasons when the vaccine developed is not a good match for the flu strain actually circulating.

NasoVAX provides cross-strain protection

Figure 3. Protection of mice against a divergent influenza strain not targeted by the vaccine

Source: Company data

This protection may not only be due to the development ofinfluenza-specific antibodies, but also to the stimulation of the innate immune system by NasoVAX. As shown in the graph below, mice receiving an intranasal administration of NasoVAX had superior rates of survival to the lethal challenge given just two days post-vaccination. These rates of survival at a near-term challenge indicate that NasoVAX activates the innate immune system. In contrast, in intramuscular administration of NasoVAX, the route used for most influenza vaccines, the effect was not observed.

NasoVAX provides protection from influenza within 2 days

Figure 4. Rapid protection of mice from influenza after immunization with NasoVAX

Source: Company data

The table below highlights certain features of NasoVAX identified during our preclinical studies and Phase 1 clinical trials and compares these with features of certain widely used commercially available influenza vaccines, and certain influenza vaccine product candidates we consider to be potential competitors to NasoVAX. Typically, the injected influenza vaccines that most people receive are either the killed or split vaccines as

illustrated below. The live attenuated vaccine referenced below is currently the only approved intranasal vaccine. The recombinant/virus like particle (“VLP”) vaccine category includes approved and Phase 2 development-stage influenza vaccines, while the bacterial category is another Phase 2 development-stage vaccine. Taken together, these feature comparisons suggest that NasoVAX potentially offers advantages over each of these products and product candidates in speed of response, multi-faceted response, ease and convenience of administration, speed and ease of manufacturing, and ability to protect against a broad range of flu viruses.

Comparison of influenza vaccine profiles

Table 1. Flu vaccine competitive landscape

Source: Company and publicly available data. Findings not based onhead-to-head

comparative preclinical or clinical trials.

Clinical Trial Plan for NasoVAX

Our Phase 2 clinical trial program for NasoVAX for the treatment of seasonal influenza commenced in the third quarter of 2017 completed enrollment in the fourth quarter of 2017 and reported data in the first quarter of 2018. This trial extended the previous dose ranges tested and evaluated both antibody and cellular immune responses. 100% of subjects in the two highest dose groups achieved seroprotective antibody levels to the matched strains and strong cellular immune responses were seen in the highest dose group. Final data to include durability of immune response is expected to be available inmid-2018.

We are also planning two additional capital. Duringtrials as part of our Phase 2 program. One is a dose ranging trial of a quadrivalent NasoVAX vaccine in healthy adult subjects stratified by age to include healthy elderly subjects. This vaccine will include H3 and B strains in addition to the H1 influenza strain evaluated in the recent Phase 2a study. The subjects will be assessed for antibody response and other measures of immunogenicityone-month post vaccination, as well as be regularly monitored for duration of response. We anticipate commencing this trial in the first half of 2019 and expect immunogenicity data in the second half of 2019, with additional safety and durability data to follow. We plan to use the results of this trial to select dosing for a larger dose confirmation trial.

HepTcell

HepTcell is an immunotherapy product candidate directed against multiple HBV genotypes. HepTcell is a completely synthetic peptide product candidate based on our proprietary Densigen technology which we believe may help the immune system destroy infected cells and clear chronic HBV infection. In July 2015, we focusedcommenced a Phase 1 trial of HepTcell in the United Kingdom and South Korea in patients chronically infected

with HBV. HepTcell was well tolerated but elicited HBV specific cellular immune responses were not significantly different than placebo. We plan to complete evaluation of other immune and virologic measures in these study subjects and will report the end of study results later this year.

Chronic Hepatitis B Overview

Hepatitis is an inflammation of the liver usually caused by a viral infection. There are five main unrelated hepatitis viruses, referred to as types A, B, C, D and E. Hepatitis is categorized as acute when it lasts less than six months and chronic when it persists longer. In particular, types B and C lead to chronic disease in hundreds of millions of people and, together, are the most common cause of liver cirrhosis and liver cancer.

HBV is the most common cause of viral hepatitis and is spread through blood products, contaminated needles or sexual contact, and from mother to infant. HBV infections are particularly endemic in Southeast Asia,sub-Saharan Africa, the Amazon basin, parts of the Middle East and in some Eastern European countries, where 70% – 90% of the population is infected before the age of 40. Even though prophylactic vaccination programs have led to declines in HBV infections in many countries, chronic infection remains a significant problem in certain areas.

Most adults infected with HBV recover naturally; however, according to the Hepatitis B Foundation, five to ten percent of infected adults go on to develop chronic infections. CHB infection is a major worldwide health care challenge with approximately 257 million people worldwide chronically infected, resulting in 857,000HBV-related deaths per year due to cirrhosis, liver failure and hepatocellular carcinoma.

The management of CHB has improved dramatically in the last 20 years, owing to the development of new small molecule antivirals directed against the HBV polymerase protein. While these therapies can effectively suppress HBV replication, they do not result in eradication of the virus and therefore their administration can rarely be discontinued. They reduce but do not eliminate the risk of HBV related complications.

Therapeutic vaccination is a promising immunotherapeutic approach to induce immune control over the disease. CD4+ and CD8+ T cell responses have been shown to be critical for clearance of acute HBV infection and immune control can be linked to the strength and quality ofHBV-specific T cell responses.

CHB patients are known to have profound defects inanti-HBV-specific T cell immune responses, termed immunotolerance, thereby compromising critical protective and disease control mechanisms. We believe that a treatment like HepTcell, which has been shown in preclinical studies to stimulate theHBV-specific T cell response, could help destroy infected cells and clear chronic HBV infections.

Our Solution, HepTcell

In HepTcell, specific viral peptide sequences, chosen for their ability to elicit broad human leukocyte antigen (“HLA”) type-independent immune responses, are coupled to a fluorocarbon chain so that, upon administration, the immunotherapy creates a short-term depot, which we believe will lead to a strong and sustained activation of the immune system. The final study product consists of a mixture of nine peptides between 32 and 40 amino acids long that are designed to be effective across the full spectrum of HBV genotypes. The peptides were selected using bioinformatics and validated usingin vitro screening of immune responses from blood ofHBV-infected patients. We believe that our effortssynthetic HepTcell product candidate, if approved, could be produced by commodity peptide manufacturers around the world according to a robust and cost-effective process.

Everyone’s immune system responds differently to stimuli due to innate differences in HLA type, a shorthand expression for the proteins that, in part, make up the immune system and that vary from individual to individual. For this reason, organ transplants have to be matched carefully to avoid rejection. The HLA type

determines how each person’s unique immune system will react to immunotherapy, leading to differing levels of efficacy. The discovery of the Densigen technology, on creating alternativeswhich HepTcell is based, has potentially solved the problem of HLA restriction, with the possibility that nearly all patients may benefit from immunotherapy without a need for settlingmatching. In addition, we believe that HepTcell has potential advantages over therapeutic vaccines under development for CHB because it is based on the SIGA litigation claimincorporation of highly antigenic sequences that appear to be constant across multiple HBV strains or genotypes.

Preclinical Data

In our preclinical studies, mice immunized with HepTcell generated a robust T cell response. In one study, we tested HepTcell in a mouse model that reflects theHBV-induced immunotolerance seen in the clinical setting. Mice in the active arm were infected at week 0 with a vector that expresses all of the HBV proteins(AAV-HBV), and developing business plans around possible outcomes.control mice received saline. Both active and control arms were subsequently treated at weeks 12, 14, 16 and 21 with HepTcell immunotherapy combined with the adjuvant IC31. At week 23 strongHBV-specific T cell responses in the spleen and liver were measured through detection of IFNgamma-secreting T cells.

HepTcell induces immunity in immunotolerized mice

Figure 5. HepTcell with IC31 adjuvant breaks immune-tolerance and induces a robust immune response in both the spleen and the liver in a murine model of chronic HBV infection

Source: Company data

The Company anticipatesresults demonstrate that eventual receipta robust immune response may be induced by HepTcell independent of an award from SIGA could generate substantial taxable income to the Company,HBV-mediated immunotolerance. We believe this response is characterized not just by a portionsufficiency of which can potentially be offsetactivated T cells, but also by the Company’s tax net operating loss carryforwards. At December 31,strength of recognition which governs the T cell’s ability to effectively eliminateHBV-infected cells. By combining HepTcell together with the adjuvant IC31, we increased the magnitude of the immune response up to three-fold. We chose IC31 because it is a fully synthetic adjuvant consistent with the synthetic nature of HepTcell itself. A synthetic adjuvant provides consistent quality and has a better controlled manufacturing process, in contrast to many adjuvants that, while effective, are comprised of undefined mixtures of natural substances.

HBV replicates only in humans and other primates. Accordingly, we conducted anin vivo proof of concept study where it loaded rodent cells with either HBV proteins or proteins from an unrelated pathogen, influenza. We then injected these cells into mice that had been previously administered HepTcell to assessin vivo cell killing activity in the treated mice. Within one day, 91.7% of HBV loaded cells were eliminated compared to control cells loaded with proteins from the unrelated pathogen. These preclinical study results show the possibility of HepTcell to recognize and kill cells containing HBV proteins.

HepTcell induces specific killing of autologousHBV-loaded cells

Figure 6. HepTcell therapy allows thein vivo recognition and cell killing ofHBV-loaded cells in mice

Source: Company data

Clinical Trial Plan for HepTcell

We launched a Phase 1 trial in July 2015 we had available $156 million in accumulated losses availablethe United Kingdom and South Korea and enrolled 60 chronically infected HBV patients with controlled disease under standard of care. The primary objective of the trial was to offset income, subjectassess the safety and tolerability of HepTcell. As a secondary objective, the trial measured the immune response induced by HepTcell following administration. The trial evaluated two dose levels, both with and without a novel adjuvant, compared to limitations imposedplacebo and adjuvant alone. Each cohort received three doses of HepTcell, at days 1, 29 and 57, and assessed T cell response and HBsAg and HBsAg-antibody levels over asix-month period. We are also measuring the phenotype of cell-mediated immune response that is induced by the Internal Revenue Codeimmunotherapy. The vaccine was well tolerated and was not associated with hepatic flares. Although the blinded results available at the end of 1986 (the “Code”). On November 25, 2015,2017 demonstrated increases in Tcell response in higher dose cohorts, which both contained controls, the Company adopted a Shareholders Rights Planunblinded data was inconclusive, with similar results between treated patients and controls. We plan to help ensure thatcomplete evaluation of additional immunologic and virologic data from these subjects by the NOLs remain available to help maximize the value for our shareholdersend of any amount received from the SIGA litigation.

During 2016,2018. There can be no assurances we will continue the development of HepTcell or any other Densigen based product candidate.

Our Anthrax Vaccine Franchise

NasoShield is a preclinical vaccine product candidate based on our RespirVec technology encoding theBacillus anthracis protective antigen. In ahead-to-head comparison with the existing approved anthrax vaccine in a gold-standard animal model, a single dose of NasoShield showed complete protection from inhalation anthrax and wasnon-inferiorto develop our plansmultiple doses of the existing approved anthrax vaccine while providing for a more rapid and stable immune response. We estimate that annual sales in the United States of the existing approved anthrax vaccine are approximately $300 million. We have developed the product candidate with the support of BARDA, and, subject to create shareholder valuetheir continued financial and other support, we launched a Phase 1 trial with NasoShield in first quarter of 2018 and are anticipating data from this trial midyear 2018. Previous work related to the alternative SIGA litigation outcomesdevelopment of NasoShield was also supported by NIAID.

In addition, we have a second anthrax vaccine candidate, SparVax-L, that is based on a recombinant protein technology encoding theBacillus anthracis protective antigen. In ahead-to-head comparison with the existing approved anthrax vaccine in a gold-standard animal model, two doses of SparVax-L showed complete protection from inhalation anthrax and will commence executionwasnon-inferior to two doses of those plans.the existing approved anthrax vaccine. We have also shown extended shelf life both at room temperature (at least 24 months) and refrigerated temperatures (at least 6 years). The recent preclinical work also showed a greater protective antibody response that the currently licensed vaccine in thathead-to-head study.

Anthrax Overview

Anthrax is a disease that arises from infection with a bacterial pathogen,Bacillus anthracis. Anthrax can be spread by inhalation of bacterial spores which can be released from infected livestock or livestock products; however, this is extremely rare. The greater fear, and key driver for development of anthrax vaccines, is the potential use of anthrax spores by bioterrorists. The bacterial spores are readily aerosolized and could be used against the military or civilian population. Without timely treatment, inhalation anthrax is almost always fatal, and antibiotic treatment is significantly less effective if not initiated shortly after infection. The U.S. government has made significant investments in ensuring that appropriate countermeasures are in place to prevent and treat these infections. Individuals at high risk, such as active duty military personnel, are routinely vaccinated as a preventative measure, and the government stockpiles adequate doses of vaccine for distribution to the broader population in case of a bioterrorism attack.

Anthrax Vaccine Program Product CandidatesAbsorbed trade name BioThrax, is a protein-based vaccine produced from culture filtrates of an avirulent,non-encapsulated strain ofBacillus anthracis. Forpre-exposure prophylaxis, it is given as a series of three intramuscular injections at zero, one and six months, at which point the vaccinated subject is considered protected. These initial injections are followed by two additional injections over the next year and yearly booster immunizations thereafter. BioThrax is the only anthrax vaccine approved by the FDA and had sales of $287 million in 2017. In a BioThrax study, approximately 60% to 80% of recipients experienced injection site adverse events following the first dose of the vaccine, primarily tenderness, erythema (skin rash), edema (fluid accumulation under the skin), warmth, induration (skin thickening), pain and itching. BioThrax is currently only given to high risk individuals, such as U.S. military personnel, and a significant number of those individuals have refused the vaccine in past voluntary programs, presumably because of the lengthy immunization procedure and documented adverse events. Thus, we believe that there is a market opportunity for a more effective, safer and more convenient anthrax vaccine to expand beyond the current market.

Our Solution, NasoShield

NasoShield is a vaccine product candidate based on our RespirVec technology encoding the anthrax protective antigen. In ahead-to-head comparison with the existing approved anthrax vaccine in a gold-standard animal model, a single dose of NasoShield showed complete protection from inhalation anthrax and wasnon-inferior to multiple doses of the existing approved anthrax vaccine while providing for a more rapid and stable immune response. We have developed the product candidate with the support of BARDA, and, with their continued financial and other support, we launched a Phase 1 trial with NasoShield in the first quarter of 2018. Previous work related to the development of NasoShield was also supported by NIAID.

NasoShield is an anthrax vaccine product candidate based on the RespirVec platform and contains the coding region for the PA83 protective antigen fromBacillus anthracis. We believe NasoShield has advantages over the existing anthrax vaccine, as suggested by our preclinical studies, including the potential for:

These potential advantages of NasoShield, together with its convenient nasal delivery and robust, scalable manufacturing process, lead us to believe that NasoShield has the potential to be an important next generation anthrax vaccine.

Preclinical Data

Vaccination of animals with a single intranasal dose of NasoShield followed by spores via inhalation after 70 days resulted in statisticalnon-inferiority for survival relative to two doses of BioThrax, meaning that one

dose of NasoShield provided no worse protection than two doses of BioThrax, with survival rates between 97% and 100%. In these experiments BioThrax was delivered by two intramuscular injections separated by 28 days.

During 2015, we terminated development

Figure 7.Non-inferiority of SparVax^®NasoShield vs. BioThrax in a rabbit inhalation anthrax model

Source: Company data

NasoShield vaccination in this preclinical study also demonstrates an important advantage over BioThrax, because the protective neutralizing antibody titer rises faster and has greater persistence than the immune response induced following vaccination with BioThrax. The level of antibody present within two weeks of NasoShield dosing is consistent with the level associated with 95% probability of survival in this study. As shown in the graph below, NasoShield also leads to focus our resources on developmentthe generation of two next generation Anthrax vaccines. SparVax^® was a liquid Recombinant Protective Antigen (“rPA”)an antibody response that is relatively consistent between 28 and 70 days prior to the lethal anthrax vaccine designedchallenge, while the response to protect against inhalational anthrax, the most lethal form ofB. anthracis infection in humans. Vaccination with SparVax^® can generate significant titers of antibodies and up to 100% protection in rabbits and non-human primates that are subsequently exposed to lethal inhalation dosesBioThrax is much less durable.

Figure 8. Time course of anthrax spores. SparVax^® humanantibody development

Source: Company data

Clinical Trial Plan for NasoShield

In July 2016, we were awarded a $120.2 million, five-year contract from BARDA to advance NasoShield into clinical studies involving over 770 individuals showed that itdevelopment. The award was generally well tolerated and immunogenic. Our next generation Anthrax vaccines use rPA, rPA manufacturing processes and development technologies producedincreased to $127.5 million in March 2017. We commenced a Phase 1 trial in the SparVax^® programfirst quarter of 2018 with preliminary data expected midyear 2018. This study is a double-blind placebo controlled dose-escalation study evaluating safety and immunogenicity of NasoShield in healthy volunteers. It will also include a randomized open-label BioThrax comparator arm. The primary endpoint of the

trial is safety; we will also assess immunogenicity as a secondary endpoint. The trial is expected to develop vaccines intendedtake approximately 18 months to have significantly improved time to protection, dosing schedules, administration convenience and handling requirements compared to SparVax^®.complete.

SparVax-L

OnIn September 9, 2014, we signed a contract with NIAID that funds the preclinical development of a next generation lyophilized anthrax vaccine based on the Company’s proprietary technology platform which contributes the rPA bulk drug substance that was used in the liquid SparVax^®formulation.SparVax-L. Data generated to date demonstrates that our rPAthe recombinant protective antigen protein can be stably formulated in a lyophilized state for extended storage at room temperature, storage.and even longer at refrigerator temperature. Formulation of SparVax-L for long shelf life also increased the potency of vaccine such that in a preclinical model greater immunogenicity was observed compared to identical doses of a previous formulation of the antigen shown to be well-tolerated and immunogenic in earlier clinical studies. The next phase of the program is a demonstration of the final form of the vaccine in a single unit, dual-chambered syringe designed for simpler storage and ease of use. All of the necessary components of the vaccine will be contained in a single logistics transport and storage will be greatly improved. We expect to commence animalAnimal efficacy studies demonstrated that the vaccine is efficacious even after storage at room temperature, and a repeat dose toxicology study of SparVax-L showed the lyophilized vaccine to be well-tolerated. These data can be used in the second quarter of 2016, which if successful, can lead to oursupport a filing with the U.S. Food and Drug Administration (“FDA”) an Investigational New Drug Application (“IND”) in 2017 andFDA to update the SparVax^® IND, which is currently on clinical hold, to allow for the commencement of a subsequent clinical trial.

In late 2017, we initiated an additional preclinical study to demonstrate that atwo-dose regimen of SparVax-L was able to protect animals at least as well as the currently licensed vaccine. In fact, we showed that a single dose resulted in 67% survival and atwo-dose regimen achieved 100% survival, and also induced greater toxin neutralizing (protective) antibodies than the currently licensed vaccine.

Survival Following Challenge

Source: Company data

Pre-challenge TNA Response to Vaccination

Source: Company data

Our Technology Platforms

Our product candidates are based on two complementary technology platforms: RespirVec and Densigen. Our respiratory anti-infective product candidates are derived from our RespirVec platform, in which rapid as well as long-term immune protection is elicited by intranasal delivery of adenovectored pathogen sequences. We are targeting chronic diseases using our Densigen platform which recruits T cells to generate a sustained response to intracellular targets.

RespirVec

Our RespirVec platform consists of our proprietary process related to intranasal delivery of replication-deficient adenoviruses and is comprised of patents that we own or license. RespirVec is a viral vector based on a modified version of adenovirus that is used to deliver selected antigens to the immune system so that a robust response can occur. Our RespirVec technology has important potential advantages compared to other vaccine platforms. The ability of vaccines based on the RespirVec platform to induce mucosal immunity, as shown in our preclinical studies, is an important differentiator, as mucosal immunity is generally considered to be desirable for protection against respiratory pathogens. In addition, by using an adenovirus to enter the cell, we trigger the activation of local innate immunity, further boosting the immune recognition and response to the antigen expressed by the vector, essentially creating an adjuvant-like effect. Because the innate immune response can occur very quickly and is broad in its specificity, this immune response has the potential to provide a rapidly developing line of protection against divergent strains of a virus. Unlike most other vaccines, immunotherapies based on RespirVec enter the cells of the upper respiratory tract and express the antigen intracellularly, just as occurs during an actual respiratory infection. This allows the immune system to recognize the pathogen in the same context as a natural infection and as a result a more natural and robust immune response may be elicited that includes not only the humoral response of traditional vaccines, but also activation of the T cell and mucosal components of the immune system. Traditional vaccines are based on proteins rather than a viral vector and consequently rely primarily on the immune system’s antibody response, rather than the type of broad immune involvement seen with RespirVec technology.

Key aspects of our RespirVec technology, supported by our preclinical studies and clinical trials, include:

Adenovirus, when unmodified, is one of the causes of the common cold and as such it is well-suited for delivery of antigens using the intranasal route of delivery. One potential disadvantage associated with the use of adenovirus-based vectors is thatpre-existing antibodies against the vector, either as a result of previous natural infections or prior therapy with the vector, may interfere with the ability of the vector to express the pathogen. Importantly, these negative effects have been primarily observed following intramuscular injection of similar vectors. Utilizing the intranasal route of delivery seems to bypass this effect, as demonstrated by us and others in preclinical models. We have also observed this in our Phase 1 seasonal influenza trial, where there was no correlation between the amounts ofpre-existing adenoviral antibodies in study subjects and the ability of those subjects to generateinfluenza-specific antibodies when NasoVAX was dosed intranasally.

RespirVec bypassespre-existing vector immunity

Figure 10. Lack of correlation between anti-adenovirus antibody titer and immune response to NasoVAX

Source: Company data

The graph above plots the level of anti-adenovirus titer versus hemagglutinin inhibition, a measure of vaccine activity. If a correlation existed between the level ofpre-existing anti-vector antibody and vaccine activity, one would expect the data points in the graph to follow a trend where a point with a high anti-adenovirus titer would also have a low fold HI, yet this was not observed. For example, the two data points with the highest anti-adenovirus antibody level had the highest vaccine activity in one case and one of the lowest vaccine activities in the other case, indicating a lack of association. These results suggest that the presence of adenovirus neutralizing antibodies may not negatively impact the efficacy of intranasally delivered RespirVec-based vaccines.

Our experience suggests that vaccines based on the RespirVec technology can be developed through a simple, fast, safe and relatively inexpensive manufacturing process, which would be an advantage over most otherinfluenza-based vaccine products. Because the manufacturing process uses recombinant DNA to synthesize pathogen-optimized products, manufacturing RespirVec-based products can be done potentially more rapidly than other vaccine types without the need to grow or handle dangerous pathogens. We believe that our RespirVec technology also lends itself to manufacture in smaller scale bioreactors, which may yield millions of doses without the need for large cell culture oregg-based production facilities. The ability to manufacture in cell culture instead of chicken eggs is proving to provide increased efficacy with influenza vaccines.

Densigen

We developed antigens consisting of 30 – 40 amino acid long synthetic peptides that encode a high density of CD4 and CD8 T cell epitopes that are selected to broaden the HLA class reactivity of the product. We refer to these high-density antigens as Densigens, which are covered by patents owned by us. Immunotherapeutic product candidates based on our Densigen technology contain a collection of carefully selected Densigens that are designed to elicit activity across multiple targets for the disease. Synthetic peptide-based antigens have potential advantages over viral or recombinant protein antigens because they may be able to be manufactured at large scale with high purity. However, the development of peptide-based vaccines has been limited due their relatively low immunogenicity in the absence of adjuvants. As demonstrated in preclinical studies, we have enhanced the ability of Densigen peptides to elicit an immune response by attaching a biologically inert fluorocarbon chain to each peptide, resulting in a depot effect. This effect can be seen in the figure below where the T cell immune response is significantly greater in animals treated with the fluorocarbon-containing peptide than in those treated with peptide without the fluorocarbon chain (native peptide).

Densigen technology improves T cell immunogenicity

Figure 11. Preclinical demonstration of the depot effect

Source: Company data

This change in the chemical structure, in turn, drives the aggregation of these peptides into micelles, which are more stable and longer-lasting structures than naked peptides. This conformational shift into micelles provides a depot for these peptide antigens and protects them from proteolytic degradation and diffusion, thereby prolonging exposure to the immune system. Our studies also indicate that the aggregation-inducing properties of the fluorocarbon chain can be modified by pH and salt concentrations such that the vaccine product candidate can be maintained in a soluble format until after intramuscular administration.

The following is our illustration of a single Densigen peptide and the aggregate that it forms after intramuscular administration:

Source: Company graphic

Applications of Our Technologies in Animal Health

Highly pathogenic strains of avian and swine influenza threaten the agricultural industry and are potential sources of genetic material that can lead to pandemic influenza outbreaks in humans. We have partnered with leading academic researchers and the United States Department of Agriculture to design and test the potential of our technologies in animal health and are encouraged by the results obtained to date.

We believe that applications in animal health provide potentialout-licensing opportunities for our technologies and we continue to pursue animal health research using external sources of funding.

Competition

The biopharmaceutical industry and the vaccine market are intensely competitive and are characterized by rapid technological progress. In general, competition among pharmaceutical products is based in part on product efficacy, safety, reliability, availability, price and patent position. An important factor is the relative timing of the market introduction of our products and our competitors’ products. Accordingly, the speed with which we can

develop products, complete the clinical trials and approval processes and supply commercial quantities of the products to the market is an important competitive factor. Our competitive position also depends upon our ability to show differentiation with a product that is more efficacious, particularly in the relevant target populations, and/or be less expensive and quicker to manufacture. We also depend upon our ability to attract and retain qualified personnel, obtain patent protection or otherwise develop proprietary products or processes and secure sufficient capital resources for the often substantial period between technological conception and commercial sale.

Large and established companies such as AstraZeneca, GlaxoSmithKline (“GSK”), Johnson & Johnson and Sanofi Pasteur, among others, compete in the influenza vaccine market. These companies compete with us with their greater experience and expertise in securing government contracts and grants to support their research and development efforts, conducting testing and clinical trials, obtaining regulatory approvals to market products, manufacturing such products on a broad scale and marketing approved products. These companies also compete with us by having significantly greater research and marketing capabilities than we do and may also have products that have been approved or are in late stages of development and have collaborative arrangements in our target markets with leading companies and research institutions. Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel compounds or toin-license novel compounds that could make the product that we develop obsolete.

We also face competition from smaller companies such as Novavax, which is developing an influenza vaccine; Inovio Pharmaceuticals, which is developing an HBV therapeutic vaccine; and Emergent Biosolutions, which manufactures the existing anthrax vaccine, PaxVax and Pfenex which are developing anthrax vaccines. Any of these smaller companies may develop competing products more rapidly than we do. A number of companies of varying sizes are also pursuing the development of a “universal” flu vaccine. In addition, we face substantial competition for government funding, particularly for our anthrax vaccine program.

Intellectual Property

We generally seek patent protection for our technology and product candidates in the United States and abroad. The patent coverage available to biotechnology companies is generally uncertain because it involves complex legal and factual considerations. Our success will depend, in part, on whether we can:

Patent Rights Related to our RespirVec Platform Technology

Immunotherapy for Respiratory Pathogens — Intranasal Application of Adenoviral Vector Vaccines

We are developing a rapid and prolonged immunologic-therapeutic technology, for which we have a patent issued in the United States, Europe and Japan for influenza; and pending applications in the United States, Europe, Japan, and other commercially relevant jurisdictions. The claims are directed to methods for inducing an immune response against respiratory pathogens including influenza andBacillus anthracis, the causative agent of anthrax, comprising intranasal administration of an effective amount of E1 and/or E3 deleted adenovirus. The patent and, if issued, the patent(s) resulting from the pending applications have an expiration date no earlier than March 2032, not giving effect to any potential extensions and assuming payment of all associated fees.

Topical and Intranasal Application of Adenoviral Vectors Expressing HeterologousAntigen — In-Licensed from the University of Alabama at Birmingham Research Foundation

We are the exclusive licensee of patents owned by the University of Alabama at Birmingham Research Foundation (“UABRF”). These patents are directed to topical noninvasive application of genetic vectors. These patents are issued in the United States and certain European countries, including Great Britain, France, Germany,

Italy, Netherlands and Spain, as well as other commercially relevant jurisdictions. The claims are directed to methods ofnon-invasively inducing a systemic immune response in a bird or mammal against a gene product comprising contacting skin, or intranasal administration, of the bird or mammal with a genetic vector in an amount effective to induce the response. Theex-U.S. patents are expected to have an expiration date no earlier than May 2020, not giving effect to any potential extensions and assuming payment of all associated fees. The issued U.S. patents are expected to have an expiration date no earlier than August 2018, not giving effect to any potential extensions and assuming payment of all associated fees.

We are also the exclusive licensee of one issued U.S. patent application owned by the UABRF directed to mucosal application of genetic vectors. The claims are directed to methods ofnon-invasive immunization by administering anon-replicating adenovirus vector expressing influenza antigens via intranasal administration. The issued U.S. patent has an expiration date no earlier than January 2020, not giving effect to any potential extensions and assuming payment of all associated fees.

On July 6, 2015,March 1, 1998, we signed aentered into an exclusive license agreement with ImmunoVaccine Technologies (“IMV”)the UABRF, which was amended and restated on June 2, 2014 and further amended as of October 16, 2015, pursuant to which we obtained an exclusive license under the patent rights described above to develop, manufacture and commercialize anon-invasive vaccine technology within the field of use, which includes any diagnostic, vaccine or therapeutic use or methods, in any country in which the licensed patents are pending or have been granted. The UABRF reservednon-commercial rights customarily reserved by academic licensors and rights outside the field of use. Although the UABRF retained primary responsibility for the exclusive usefiling, prosecution, maintenance and defense of the DepoVax^TMvaccine platform (“DPX”),licensed patents, we have the right to develop an anthrax vaccine utilizing PharmAthene’s rPA. Initial efficacy data generated usingreview and comment on all patent protection activities and we agreed to reimburse the DPX adjuvant with rPA indicates that the addition of DPX may reduce the number of doses required and shorten the time necessary for protection against an Anthrax challenge. The DPX adjuvant has recently been shown to be safe and effective in a human clinical trial for a Respiratory Syncytial Virus (“RSV”) vaccine based on the safety data released in October 2015 by IMV. We expect, based upon our preliminary research, but cannot guarantee, that our DPX rPA vaccine, once fully developed, will combine the proven safety and efficacy of the DPX adjuvant with the mature manufacturing of the rPA bulk drug substance, and facilitate the acceleration of our program through preclinical development and an IND filing with the FDA. We expect to file our IND with the FDAUABRF for the DPX rPA vaccine near the endcost of 2016 or the beginning of 2017.

We intend to seek development partners to fund development and commercialization of our next generation anthrax vaccines.

Stockholder Rights Plan to Preserve Value of Net Operating Loss Carryforwards

On November 25, 2015, the Company’s Board of Directors adopted a stockholder rights plan (“Rights Plan”) in an effort to preserve the value of its NOLs under Section 382 of the Code. The description and terms of the rights are set forth in a Section 382 Rights Agreement, dated as of November 25, 2015 (the “Section 382 Rights Agreement”), by and between the Company and Continental Stock Transfer & Trust Company, as Rights Agent.

PharmAthene's use of its NOLs could be substantially limited if the Company experiences an "ownership change" as defined in Section 382 of the Code. In general, an ownership change occurs if there is a cumulative change in PharmAthene's ownership by 5% shareholders (as defined in Section 382 of the Code) that increases by more than 50 percentage points over the lowest percentage owned by such shareholders at any time during the prior three years on a rolling basis. The Rights Plan was adopted to reduce the likelihood of an unintended ownership change occurring.

activities.

In connection with the adoption of the Rights Plan, on November 25, 2015 (the “Rights Dividend Declaration Date”), the Board declared a non-taxable dividend distribution of one share purchase right (“Right”) for each outstanding shareoriginal license, we paid anup-front license fee and issued 119,550 shares of common stock to the Company's stockholders of recordUABRF. We also agreed to make certain payments, including an annual maintenance payment and royalty payments as of the close of business on December 9, 2015. The Section 382 Rights Plan is intended to act as a deterrent to any person (an “Acquiring Person”) acquiring (together with all affiliates and associates of such person) beneficial ownership of 4.99% or more of the Company’s outstanding common stock within the meaning of Section 382 of the Code, without the approval of the Board of Directors. Stockholders who beneficially owned 4.99% or more of the Company’s outstanding common stock as of the Rights Dividend Declaration Date are not be deemed to be an Acquiring Person, but such person will be deemed an Acquiring Person if such person (together with all affiliates and associates of such person) becomes the beneficial owner of securities representing a percentage of net sales of licensed products covered by valid claims of any licensed patent in the Company’s common stock that exceeds by 0.5% or morecountry of sale until the lowest percentage of beneficial ownershipexpiration of the Company’s common stocklast to expire of such patents in such country. The royalty payments are subject to a minimum annual royalty amount following the first commercial sale of a licensed product, ranging from low five figures to low six figures. To date, we have paid UABRF $478,000 under the agreement, including promissory notes to UABRF in connection with the license agreement that such person had at any timehave since been repaid, and an additional $94,000 in fees that were converted to equity.

We may terminate the Rights Dividend Declaration Date.license agreement without cause, and the agreement contains customary provisions for either party to terminate prior to the expiration of the agreement. In its discretion,addition, UABRF may terminate the Board may exempt certain persons whose acquisition of securities is determinedagreement if by the Board not to jeopardizeearlier of (i) the availability to the Company's NOLs or other tax benefits and may also exempt certain transactions.

Subject to the terms, provisions and conditionsend of the Section 382 Rights Agreement,third calendar year after the first commercial sale of a licensed product and (ii) January 1, 2023 (as extended by the October 2015 amendment), 50% of the minimum royalty payments due in that year does not originate from net sales of licensed products. The agreement expires on the date upon which the last of the licensed patents expires.

Adenovirus Vectored Vaccines — Adjuvant Combination

We are developing technology directed tonon-invasive administration of adenovirus vectored vaccines, for which a patent application is pending in the United States, Europe, Japan other commercially relevant jurisdictions. The claims are directed to methods for increasing immunogenicity of an adenovirus vectored vaccine with a double stranded RNA polynucleotide adjuvant. If issued, the patent(s) resulting from the pending patent application and future patent applications, if any, are expected to have an expiration date no earlier than September 2034, not giving effect to any potential extensions and assuming payment of all associated fees.

PER.C6 CellLine — In-Licensed from Janssen Vaccines & Prevention B.V (Formerly Crucell Holland, B.V.)

We are thenon-exclusive licensee of patent rights held by Janssen Vaccines & Prevention B.V (Formerly Crucell Holland, B.V.) (“Janssen”), covering a method of producing an adenoviral vector stock using cell lines including the Rights become exercisable,PER.C6 cell line, which may be used for the development and manufacture of vaccine products.

The Janssen patent rights include patents issued in the United States, of which one family of patents is expected to have an expiration date no earlier than March 2017 and another no earlier than April 2020, in each Right would initially representcase not giving effect to any potential extensions and assuming payment of all associated fees.

We entered into an amended agreement with Janssen, effective as of October 4, 2005, which amended and restated our prior license agreements with Janssen. Under the amended agreement, we obtained anon-exclusive, worldwide license (with the right to purchasesublicense) under certain patent rights andknow-how to use Janssen’s proprietary cell line to develop, manufacture and commercialize vaccines to prevent and/or treat influenza virus and anthrax infection in humans.

In consideration for the license, we paid anup-front license fee, issued equity shares, and agreed to pay certain development-based milestone payments through FDA approval of licensed products, up to an aggregate amount of approximately $2.5 million. We also agreed to pay royalty payments as a percentage of net sales of products in any country where the manufacture of such product is covered by a valid claim of any licensed patent or uses licensedknow-how, subject to a royalty stacking reduction and minimum annual royalty payments, until the expiration of the term of the amended agreement. To date, we have paid Janssen $2.1 million in cash and equity under the agreement.

We may terminate the Second Restated License Agreement without cause, and the agreement contains customary provisions for either party to terminate prior to the expiration of the agreement. The Second Restated License Agreement expires on aproduct-by-product andcountry-by-country basis on the later of the date upon which the last of the licensed patents applicable to the relevant product expires or 15 years from the Company one one-thousandthdate of a sharefirst commercial sale of the Company’s Series A Junior Participating Preferred Stock, par value $0.0001 per share, for a purchase price of $6.00 per Right (the “Purchase Price”). If issued, each fractional share of Series A Junior Participating Preferred Stock would give the stockholder approximately the same dividend, voting and liquidation rights as does one sharerelevant product. Upon expiration of the Company’s common stock. However, prior to exercise, a Right does not give its holder any rights as a stockholder ofamended agreement, or if we terminate the Company, including any dividend, voting or liquidation rights.

The Rights will expire on the earliest of (i) the close of business on November 25, 2018, (ii) the time at which the Rights are redeemed or exchanged under the Rights Plan, (iii) the repeal of Section 382 or any successor statute and the Board's determination that the Rights Plan is no longer necessaryamended agreement for the preservation of the Company's NOLs or (iv) the beginning of a taxable year of the Company in which the Board determines that no NOLs may be carried forward.

The issuance of the Rights is not a taxable event and will not affect the Company's reported financial condition or results of operations, including earnings per share. Additional information regarding the Rights Plan is contained in the Company’s current report on Form 8-K, filed on November 25, 2015.

SIGA Litigation

In December 2006,Janssen’s material breach, we filed a complaint against SIGA in the Delaware Court of Chancery.The complaint alleged, among other things, that we haveretain the right to license exclusivelyexploit the development and marketing rights for SIGA’s drug candidate, Tecovirimat, also known as ST-246^®, pursuant to a merger agreement between the parties that was terminated in 2006.The complaint also alleged that SIGA failed to negotiate in good faith the terms of such a license pursuant to the terminated mergergranted.

We further amended our agreement with us.Janssen, effective as of September 25, 2015, primarily to streamline our manufacturing license arrangements. Prior to this amendment, we entered into three-party manufacturing license agreements with each manufacturer and Janssen. The amendment enables us to directly grant sublicenses of certain of our rights under Janssen’s patent rights andknow-how to manufacturers, subject to Janssen’s consent which may not be withheld if the manufacturer meets certain criteria.

Patent Rights Related to Our Densigen Platform Technology

In September 2014, SIGA filedFluorocarbon Antigen Delivery Vectors

We are developing a voluntary petition for relief under Chapter 11 offluorocarbon antigen construct platform technology. Our patents covering this technology are issued in the United States, Bankruptcy CodeJapan and certain European countries, including the United Kingdom, Germany and France. Additional patents are issued and/or patent applications are pending in other commercially relevant jurisdictions. The claims are directed to the U.S. Bankruptcy Courtfluorocarbon antigen construct, compositions comprising the construct and methods of using the construct to stimulate an immune response. The patents and, if issued, the patent(s) resulting from the pending patent applications are expected to have an expiration date no earlier than April 2025, not giving effect to any potential extensions and assuming payment of all associated fees.

Formulation of Antigen Delivery Vectors — Manufacturing Process for the Southern District of New York (the "Bankruptcy Court"). SIGA’s petition for bankruptcy initiated a process whereby its assets are protected from creditors, including PharmAthene.

In January 2015, after years of litigation, the Delaware Court of Chancery issued a final order and judgment, or the Judgment, finding that we are entitled to receive a lump sum award of $194.6 million, or the Total Judgment, comprised of (1) expectation damages of $113.1 million for the valueFinal Formulation of the Company’s lost profits for Tecovirimat, plus (2) pre-judgment interest on that amount from 2006 and varying percentagesAntigen Delivery Vectors

We are developing an intermediary of the Company’s reasonable attorneys’ and expert witness fees totaling $81.5 million. Undermanufacturing process for solubilizing the Final Order and Judgment, PharmAthene is also entitled to post-judgment simple interest.

On December 15, 2015, SIGA filed a reorganization plan, amended on February 9, 2016 (the "Plan") with the Bankruptcy Court that providesfluorocarbon antigens, for among other things, the process by which SIGA may emerge from bankruptcy, which includes the process by which PharmAthene's Judgment will be satisfied. The Plan remains subject to the approval of the Bankruptcy Court and therefore remains subject to change, withdrawal or rejection by either SIGA or the Bankruptcy Court. The Plan provides generally that PharmAthene will receive, in full settlement and satisfaction of its claim, no later than 120 days plus another potential 90 days after the Delaware Supreme Court affirms a final order, one of the following, determined in SIGA’s sole discretion:

SIGA has a 120-day period (plus a 90-day extension if exercised and the conditions to such extension are met) during which it must satisfy PharmAthene's claim according to one of the above alternatives. The beginning of that 120-day period depends upon whether SIGA files timely a Petition for Certiorari in the U.S. Supreme Court. If SIGA does not timely petition the U.S. Supreme Court, the 120-day period commences after March 22, 2016, which is 90 days after the Delaware Supreme Court ruling. If SIGA does timely petition the U.S. Supreme Court, the 120-day period commences when such petition is denied or that process results in a final order granting PharmAthene a claim.

Under the Plan, SIGA will pay $5 million to PharmAthene upon plan approval. It would also pay PharmAthene $20 million if it petitions the U.S. Supreme Court for Certiorari and an additional $20 million if it decides to extend the 120 period by an additional 90 days. The payments are creditable against the final judgment and are not refundable.

The description of the Plan provided above is a brief summary of the Plan, which includes numerous other conditions and substantive provisions relating to the operation of the business of SIGA. Copies of the Plan are available from the Bankruptcy Court. For a description of risks related to our ability to recognize value relating to this litigation, see the “Risk Factors” section of this annual report below.

On December 23, 2015, the Delaware Supreme Court affirmed the Delaware Court of Chancery's Judgment as a result of which, with additional post-judgment interest, if calculated based on the original decision, would provide for an estimated total award of approximately $205 million. However, PharmAthene’s entitlement to interest from and after SIGA’s bankruptcy filing may be negatively impacted by the proceedings before the Bankruptcy Court.

There can be no assurances if and when the Company will receive any payments from SIGA as a result of the Judgment. SIGA has indicated in filings with the Bankruptcy Court that it does not currently have cash sufficient to satisfy the award. It is also uncertain whether SIGA will have such cash in the future. PharmAthene’s ability to collect the Judgment depends upon a number of factors, including SIGA’s financial and operational success, which is subject to a number of significant risks and uncertainties (certain of which are outlined in SIGA’s filings with the SEC), as to which we have limited knowledge and which we have no ability to control, mitigate or fully evaluate. Furthermore, because SIGA has filed for protection under the federal bankruptcy laws, PharmAthene is automatically stayed from taking any enforcement actiona patent issued in the Delaware Court of Chancery. The Company’s ability to collect a money judgment from SIGA remains subject to further proceedings in the Bankruptcy Court.

Post-SIGA Payment Plans:

In the event that SIGA pays PharmAthene cash in fullUnited States, Europe and barring any unexpected material events, PharmAthene currently expects that it will distribute at least 90% of the after tax net cash proceeds to its shareholders. The timingJapan and form of distribution will depend upon the Company's analysis of the Company's current situation, applicable corporate statutes relating to distributions and the economic consequences to the shareholders. After distribution of these cash proceeds, we intend to seek an M&A transaction to maximize the value of the Company's remaining assets and anthrax vaccine programs.

The Company will develop a transition plan and strategy for operating SIGA as a separate business in the event SIGA chooses to settle our claim by turning over 100% of its common stock to the Company.

Background

We have been engaged in the biodefense business through our predecessor entity since our inception in 2001. Our subsidiary PharmAthene Canada, Inc. was operated in support of the Protexia^® contract with the U.S. Army Space and Missile Command issued to develop a nerve agent counter measure. In July 2012, we substantially liquidated our Canadian subsidiary, which we acquired in 2005. All assets in Canada have been disposed of. In March 2008, PharmAthene, Inc., through its wholly owned subsidiary PharmAthene UK Limited, acquired from Avecia Biologics Limited the rights to develop SparVax^®. In 2009, the contract was novated from PharmAthene UK Limited to PharmAthene, Inc. In June 2015, we substantially completed the liquidation of PharmAthene UK Limited.

We are a Delaware corporation with executive offices located at One Park Place, Suite 450, Annapolis, Maryland 21401 and our telephone number is 410-269-2600. Our common stock trades on the NYSE MKT (formerly NYSE Amex) under the symbol “PIP.” We maintain a website athttp://www.PharmAthene.com. The information contained on or connected to our website is expressly not incorporated by reference into this annual report. We make available for download free of charge through our website this annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we have electronically filed, or furnished, them to the SEC.

U.S. Government Regulation of Biological Products

General

Regulation by governmental authoritiespatent applications pending in the United States and other countries will have a significant impact on our research, product development, manufacturing and marketing of any biopharmaceutical products. The nature and the extent to which regulations apply to us will vary depending on the nature of any such products. Our potential biopharmaceutical products will require regulatory approval by governmental agencies prior to commercialization. The products we are developing are subject to federal regulation in the United States, principally by the FDA under the Public Health Service Act and Federal Food, Drug, and Cosmetic Act, or FFDCA, and by state and local governments,Japan, as well as regulatoryother commercially relevant jurisdictions. The claims are directed to acetic acid formulations of certain fluorocarbon antigen linked peptides. The patent and, other authorities in foreign governments that include rigorous preclinical and clinical testing and other approval procedures. Such regulations govern or influence, among other things,if issued, the research, development, testing, manufacture, safety and efficacy requirements, labeling, storage, recordkeeping, licensing, advertising, promotion, distribution and export of products, manufacturing and the manufacturing process. In many foreign countries, such regulations also govern the prices charged for products under their respective national social security systems and availability to consumers.

The Public Health Service Act classifies our current drug candidates which are produced using biological systems, as biological drug products, or Biologics. All drugs intended for human use, including Biologics, are subject to rigorous regulation by the FDA in the United States and similar regulatory bodies in other countries. The steps ordinarily required by the FDA before a biological drug product may be marketed in the United States are similar to steps required in most other countries and include, but are not limited to:

The research, development and approval process requires substantial time, effort and financial resources, and approvals may not be granted on a timely or commercially viable basis, if at all.

Preclinical testing includes laboratory evaluations to characterize the product’s composition, impurities, stability, and mechanism of its biologic effect, as well as animal studies to assess the potential safety, purity and potency of each product. Preclinical safety tests must be conducted by laboratories that comply with FDA regulations regarding Good Laboratory Practices, or GLP, and the U.S. Department of Agriculture’s Animal Welfare Act. Violations of these laws and regulations can, in some cases, lead to invalidation of the tests, requiring such tests to be repeated and delaying approval of the BLA. The results of the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND and are reviewed by the FDA before the commencement of human clinical trials. Unless the FDA objects to an IND by placing the study on clinical hold, the IND will go into effect 30 days following its receipt by the FDA. The FDA may authorize trials only on specified terms and may suspend clinical trials at any time on various grounds, including a finding that patients are being exposed to unacceptable health risks. If the FDA places a study on clinical hold, the sponsor must resolve all of the FDA’s concerns and have the FDA lift the clinical hold, before the study may proceed. The IND application process may become extremely costly and substantially delay development of products. Similar restrictive requirements also apply in other countries. Additionally, positive results of preclinical tests will not necessarily indicate positive results in clinical trials.

Clinical trials involve the administration of the investigational product to humans under the supervision of qualified principal investigators. Our clinical trials must be conducted in accordance with Good Clinical Practice, or GCP, regulations under protocols submitted to the FDA as part of an IND. In addition, each clinical trial must be approved and conducted under the auspices of an institutional review board, or IRB, and requires the patients’ informed consent. The IRB considers, among other things, ethical factors, the safety of human subjects, and the possibility of liability of the institutions conducting the trial. The IRB at each institution at which a clinical trial is being performed may suspend a clinical trial at any time for a variety of reasons, including a belief that the test subjects are being exposed to an unacceptable health risk. Since our products are being developed using fundingpatent(s) resulting from the U.S. Government, additional review by either the NIH’s IRB or the DoD’s IRB-equivalent may also be required. These reviews take place following approval by the independent IRB. As the sponsor, we can also suspend or terminate a clinical trial atpending patent applications are expected to have an expiration date no earlier than December 2031, not giving effect to any time.potential extensions and assuming payment of all associated fees.

Clinical trials are typically conducted in three sequential phases, Phases 1, 2, and 3, involving an increasing number of human subjects. These phases may sometimes overlap or be combined. Phase 1 trials are performed in a small number of healthy human subjects or subjects with the targeted condition, and involve testing for safety, dosage tolerance, absorption, distribution, metabolism and excretion or immunogenicity for vaccine products. Phase 2 studies, which may involve upPatent Rights Related to hundreds of subjects, seek to identify possible adverse effects and safety risks, preliminary information related to the efficacy of the product for specific targeted diseases, dosage tolerance, and optimal dosage. Finally, Phase 3 trials may involve up to thousands of individuals often at geographically dispersed clinical trial sites, and are intended to provide the documentation of effectiveness and important additional safety data required for licensing. Prior to commencing Phase 3 clinical trials many sponsors elect to meet with FDA officials to discuss the conduct and design of the proposed trial or trials.

In addition, federal law requires the listing, on a publicly-available website, of detailed information on clinical trials for investigational drugs. Some states have similar or supplemental clinical trial reporting laws.

In 2002, the FDA amended its requirements applicable to BLAs to permit the approval of certain Biologics that are intended to reduce or prevent serious or life-threatening conditions based on evidence of safety from trial in healthy subjects and effectiveness from appropriate animal studies when human efficacy studies are not ethical or feasible. These regulations, also known as the Animal Rule, and published in the Code of Federal Regulations (21 CFR 601 Subpart H), authorize the FDA to rely on evidence from animal studies to provide evidence of a product’s effectiveness under circumstances where there is a reasonably well-understood mechanism for the toxicity of the agent. Under these requirements, and with FDA’s prior agreement, Biologics used to reduce or prevent the toxicity of chemical, biological, radiological or nuclear substances may be approved for use in humans based on evidence of effectiveness derived from appropriate animal studies and any additional supporting data. Products evaluated for effectiveness under this rule are evaluated for safety under pre-existing requirements for establishing the safety of new drug and biological products, including Phase 1 through Phase 2 clinical trials. Under certain circumstances a single animal species may be acceptable if that animal model is sufficiently well-characterized for predicting a response in humans. The animal study endpoint must be clearly related to the desired benefit in humans and the information obtained from animal studies must allow for selection of an effective dose in humans. Products approved under the Animal Rule are subject to additional requirements including post-marketing study requirements, restrictions imposed on marketing and distribution and requirements to provide information to patients.

We will rely on the Animal Rule for our product candidates because we cannot ethically expose humans to anthrax. Other countries do not, at this time, have established criteria for review and approval of these types of products outside their normal review process, i.e., there is no Animal Rule equivalent in countries other than the United States.

Success in early-stage animal studies and clinical trials does not necessarily assure success in later-stage clinical trials. Data obtained from animal studies and clinical activities are not always conclusive and may be subject to alternative interpretations that could delay, limit or even prevent regulatory approval.

All data obtained from the preclinical studies and clinical trials, in addition to detailed information on the manufacture and composition of the product, would be submitted in a BLA to the FDA for review and approval for the manufacture, marketing and commercial shipments of any of our products. FDA approval of the BLA is required before commercial marketing or non-investigational interstate shipment may begin in the United States. The FDA may also conduct an audit of the clinical trial data used to support the BLA.

However, under Project BioShield, the Secretary of DHHS may, with the concurrence of the Secretary of the Department of Homeland Security and upon the approval of the President, contract to purchase unapproved counter measures for the Strategic National Stockpile, or SNS, in specified circumstances. The U.S. Congress is notified of a recommendation for a stockpile purchase after Presidential approval. Project BioShield specifies that a company supplying the counter measure to the SNS is paid on delivery and acceptance of a substantial portion of the counter measure. To be eligible for purchase under these provisions, the Secretary of DHHS must determine that there are sufficient and satisfactory clinical results or research data, including data, if available, from preclinical and clinical trials, to support a reasonable conclusion that the counter measure will qualify for approval or licensing within eight years. The legislation also allows unlicensed products to be procured for the SNS so that they are available at the time an emergency is declared.

Project BioShield also allows the Secretary of DHHS to authorize the emergency use of medical products that have not yet been approved by the FDA. To exercise this authority, the Secretary of DHHS must conclude that:

Although this provision permits the Secretary of DHHS to circumvent the FDA approval process, its use would be limited to rare circumstances.

We believe our products would be eligible both for consideration for procurement into the SNS and for use in the event of an emergency, although there is no guarantee that our products would meet the criteria set forth by DHHS or the FDA for procurement and Emergency Use Authorization, respectively.

With regard to a BLA, the FDA may deny or delay approval of an application that does not meet applicable regulatory criteria, e.g., if the FDA determines that the preclinical or clinical data or the manufacturing information does not adequately establish the safety, purity and potency (including efficacy) of the Biologic. The FDA has substantial discretion in the approval process and may disagree with an applicant’s interpretation of the data submitted in its BLA. The FDA can request additional information, seek clarification regarding information already provided in the submission or ask that additional clinical trials be conducted, all of which can delay approval. The FDA also may, at any time, require the submission of product samples and testing protocols for lot-by-lot confirmatory review or testing, known as lot release, by the FDA prior to commercial distribution. This means a specific lot of Biologic cannot be released for commercial distribution until the FDA has authorized such release. Similar types of regulatory processes will be encountered as efforts are made to market any Biologic internationally. We will be required to assure product performance and manufacturing processes from one country to another.

If the FDA approves a product, it may limit the approved uses for the product as described in the product labeling, require that contraindications, warning statements or precautions be included in the product labeling, require that additional studies be conducted following approval as a condition of the approval, impose restrictions and conditions on product distribution, prescribing or dispensing in the form of a risk evaluation and mitigation strategy, or otherwise limit the scope of any approval or limit labeling. Once it approves a BLA, the FDA may revoke or suspend the product approval if compliance with post-market regulatory standards is not maintained or if problems occur after the product reaches the marketplace. In addition, the FDA may require post-marketing studies to monitor the effect of approved products, and may limit further marketing of the product based on the results of these post-market studies. The Animal Rule requires post-marketing studies, such as field studies, to verify and describe the product’s clinical benefit and assess its safety should an exigency exist that leads to the product being used in humans; the nature of these studies will be discussed with FDA as part of the BLA process. The FDA has broad post-market regulatory and enforcement powers, including the ability to levy civil and criminal penalties, suspend or delay issuance of approvals, seize or recall products and revoke approvals.

Biologics manufacturers, distributors and their subcontractors are required to register their facilities with the FDA and state agencies and are subject to periodic inspections, or inspections “for cause” by the FDA and other authorities, where applicable, and must comply with the FDA’s current Good Manufacturing Practices, or cGMP, regulations, the FDA’s general biological product standards, and the product establishment standards set forth in the approved BLA. The cGMP requirements for biological products in particular are extensive and compliance with them requires considerable time, resources and ongoing investment. The regulations require manufacturers to establish validated systems to ensure that products meet high standards of sterility, purity and potency. The requirements apply to all stages of the manufacturing process, including the synthesis, processing, sterilization, packaging, labeling, storage and shipment of the biological product. For all drugs and biological products, the regulations require investigation and correction of any deviations from cGMP requirements and impose documentation requirements upon us and any third party manufacturers that it may decide to use. Manufacturing establishments are subject to periodic unannounced inspections by the FDA and state agencies for compliance with all cGMP requirements. The FDA is authorized to inspect manufacturing facilities without a warrant at reasonable times and in a reasonable manner.

We, or our present or future suppliers, may not be able to comply with cGMP and other FDA regulatory requirements. Failure to comply with the statutory and regulatory requirements subjects the manufacturer to possible legal or regulatory action, such as a delay or refusal to approve a BLA, suspension of manufacturing, seizure or recall of a product, or civil or criminal prosecution of the company or individual officers or employees.

Post-Marketing Regulation

Any products manufactured or distributed pursuant to FDA licenses or approvals are subject to pervasive and continuing regulation by the FDA, including but not limited to:

Adverse experiences with the product must be reported to the FDA and could result in the imposition of market restrictions through labeling changes, recalls, or withdrawal of product approval. Product approvals may be revoked if compliance with regulatory requirements is not maintained or if problems concerning safety or effectiveness of the product occur following approval. As a condition of NDA or BLA approval, the FDA may require post-approval testing and surveillance to monitor a product’s safety or efficacy. The FDA also may impose other conditions, including labeling restrictions which can materially impact the potential market and profitability of a product.

With respect to post-market product advertising and promotion, the FDA imposes a number of complex regulations on entities that advertise and promote Biologics, including, among others, standards and restrictions on direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the Internet. The FDA has very broad enforcement authority under the FFDCA, and failure to abide by these regulations can result in administrative and judicial enforcement actions, including the issuance of a Warning Letter directing correction of deviations from FDA standards, a requirement that future advertising and promotional materials be pre-cleared by the FDA, and state and federal civil and criminal investigations and prosecutions. Foreign regulatory bodies also strictly enforce these and other regulatory requirements and drug marketing may be prohibited in whole or in part in other countries.

We, our collaborators or our third party contract manufacturers may not be able to comply with the applicable regulations. After regulatory approvals are obtained, the subsequent discovery of previously unknown problems, or the failure to maintain compliance with existing or new regulatory requirements, may result in:

Other Regulations

In addition to the substantial regulations enforced by the FDA, we are also subject to various federal, state and local laws, regulations and recommendations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals, and the use and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with our various activities. We cannot accurately predict the extent of government regulation that might result from any future legislation or administrative action.

Changing Legal and Regulatory Landscape

Periodically legislation is introduced in the U.S. Congress that could change the statutory provisions governing the approval, manufacturing and marketing of drugs, including biological products. In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and products. We cannot predict whether or when legislation impacting our business will be enacted, what FDA regulations, guidance or interpretations may change, or what the impact of such changes, if any, may be in the future.

Process and Analytical Development, and Manufacturing

We have no drug substance or drug product development, analytical or manufacturing facilities of our own, and have been relying on third-party contract manufacturing organizations, or CMOs, and contract research organizations, or CROs. CMOs have experience in developing biological manufacturing processes and operating under cGMPs established by the Code of Federal Regulations and the Food, Drug and Cosmetic Act (Biologics) regulated by the FDA, and we rely on them for clinical and future commercial production of our product candidates. CROs provide cGLP/cGMP-compliant services for product analytical tests.

Certain raw materials used in producing our product candidates are available from only one source or a limited number of sources. We attempt to mitigate the risk associated with such sole source raw materials by actively managing our supplies. We have not experienced any shortages in supplies of such raw materials. Unavailability of certain materials or the loss of current sources of production could cause an interruption in production on a temporary basis pending establishment of new sources or, in some cases, implementation of alternative processes.

Intellectual Property

Our rPA Platform Technology

Part of our value depends in part on our ability to obtain patents, to protect trade secrets, and to operate without infringing upon the proprietary rights of others. We seek to protect our proprietary position by, among other methods, filing U.S. and foreign patent applications related to the proprietary technology, inventions and improvements that are important to our business.

The following table identifies each of our material issued andnon-abandoned patents and published pending applications, in order of importance to us:

In addition, we are a party to various exclusive andnon-exclusive licenses, which provide access to intellectual property andknow-how useful for our products. Some of our licenses, which generally extend for the life of any applicable patent, require us to pay royalties on sales of products that may be derived from or produced using the licensed technology. For additional information on our license agreements, please refer toNote 7 - Commitments and Contingencies - License Agreements in the Notes to our Consolidated Financial Statements.

We currently own no material trademarks.

recently received trademark designation for SparVax and we also were recently notified of a notice of allowance for SparVax-L from the United States Patent and Trademark Office.

We have relied upon certain proprietary trade secrets,know-how and continuing technological advances to develop a competitive position. In efforts to maintain confidentiality and ownership of trade secrets, proprietary information and developments, all of our employees are required to execute agreements regarding confidentiality and assign to us all rights to any inventions and processes they develop while they are employed by us. We may in the future use license agreements to access external products and technologies as well as to convey our own intellectual property to others. We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary rights are covered by valid and enforceable patents or are effectively maintained as trade secrets.

Patent Rights Related to Our Product Candidates

CompetitionNasoVAX, an Influenza Vaccine

We are developing a rapid and prolonged immunologic-therapeutic technology for influenza, for which we have a patent issued in the United States, Europe and Japan for influenza and patent applications pending in the United States, Europe and Japan, as well as other commercially relevant jurisdictions. The issued and pending claims are directed to methods for inducing a rapid protective response against influenza, comprising intranasal administration of an effective amount of E1 and/or E3 deleted adenovirus. The patent and, if issued, the patent(s) resulting from the pending applications are expected to have an expiration date no earlier than March 2032, not giving effect to any potential extensions and assuming payment of all associated fees. NasoVAX is also covered by the patents and patent applications relating to our RespirVec platform technology, including a U.S. patent application which has been issued by the United States Patent and Trademark Office (“USPTO”) and includes claims directed to methods ofnon-invasive immunization by administering anon-replicating adenovirus vector expressing influenza antigens via intranasal administration.

NasoShield and SparVax-L, Anthrax Vaccines

We are developing a rapid and prolonged immunologic-therapeutic technology for anthrax, for which we have a patent granted in Europe and Japan. Additional patent applications are pending in the United States, Europe, Japan and other commercially relevant jurisdictions. The issued and pending claims are directed to methods for inducing a rapid protective response against anthrax, comprising intranasal administration of an effective amount of E1 and/orE3-deleted adenovirus expressing aBacillus anthracis antigen. The patent, if issued, resulting from the pending applications are expected to have an expiration date no earlier than March 2032, not giving effect to any potential extensions and assuming payment of all associated fees. NasoShield is also covered by an allowed US patent application. The allowed claims are directed to methods of inducing a protective immune response against inhalation anthrax, comprising intranasal administration of an adenoviral vector expressing anthrax protective antigen. The patent resulting from this allowed patent application is expected to have an expiration date no earlier than July 2024, not giving effect to any potential extensions and assuming payment of all associated fees. The claims are directed to intranasal administration of anon-replicating adenovirus vector that contains and expresses anthrax spore protein antigens for use in preventing and treating anthrax infections. If issued, the patent resulting from this patent application is expected to have an expiration date no earlier than July 2024, not giving effect to any potential extensions and assuming payment of all associated fees. NasoShield is also covered by the patents and patent applications relating to our RespirVec platform technology.

HepTcell, Chronic Hepatitis B Immunotherapy

We are developing an HBV immunotherapy technology directed to compositions comprising fluorocarbon constructs with specific peptide HBV antigen sequences. Our patent applications covering this technology are pending in the United States, Europe and Japan, as well as other commercially relevant jurisdictions. The claims are directed to HBV antigen peptide sequences comprising T cell epitopes linked to fluorocarbon chains and compositions comprising at least two of the fluorocarbon linked HBV antigen peptide sequences. If issued, the patent(s) resulting from the pending patent applications are expected to have an expiration date no earlier than December 2033, not giving effect to any potential extensions and assuming payment of all associated fees. HepTcell is also covered by the patents and patent applications relating to our Densigen platform technology.

Oncosyn, Therapeutic Cancer Vaccine

We are developing a therapeutic cancer vaccine technology using compositions comprising at least two specific tumor peptide antigens, wherein those sequences comprise T cell epitopes. Our patent applications covering this technology are pending in the United States, Europe, Japan and other commercially relevant jurisdictions. If issued, the patent(s) resulting from the pending patent application and future patent applications, if any, are expected to have an expiration date no earlier than September 2034, not giving effect to any potential extensions and assuming payment of all associated fees. Oncosyn is also covered by the patents and patent applications relating to our Densigen platform technology.

Veterinary Product Candidates

Weco-own with Auburn University patents and patent applications covering technology directed to an avian vaccine using human adenovirus vectors for the delivery of avian immunogens and antigens. These patents are issued in the United States and Europe, as well as other commercially relevant jurisdictions; and an application is pending in the United States. The claims are directed to methods for avian (in ovo or embryonic) administration of a human adenoviral vector expressing avian influenza antigens. The patents and, if issued, the patent(s) resulting from the patent applications are expected to have an expiration date no earlier than August 2026, not giving effect to any potential extensions and assuming payment of all associated.

Government Contracts

BARDA Anthrax Contract

On September 7, 2011, we signed a contract with the BARDA pursuant to which we are developing our NasoShield anthrax vaccine. That contract with BARDA was extended through September 2016. In July 2016,

we signed a new contract with BARDA, which was further amended on March 24, 2017. The five-year contract, valued at up to $127.5 million, will fund clinical development of NasoShield.

Under the 2011 BARDA contract, BARDA paid us a fixed fee and reimburses certain of our costs for the research and development of anAd5-vectored, protective antigen-based intranasal anthrax vaccine throughnon-clinical assessment of efficacy,bio-distribution and toxicity, manufacturing process and development as required for IND application, regulatory review, and development of a Phase 1 dose ranging protocol to assess safety and immunogenicity. The 2011 BARDA contract was completed in September 2016. During the term of the 2011 BARDA contract, we received an aggregate of approximately $17.8 million from BARDA.

Under the current contract, BARDA pays us a fixed fee and reimburses certain of our costs for the research and development of anAd5-vectored, protective antigen-based intranasal anthrax vaccine through current good manufacturing practice (“cGMP”) manufacture and conduct of a Phase 1 clinical trial dose ranging assessment of safety and immunogenicity. The contract consists of an initial base performance period providing approximately $21.6 million in funding for the period July 2016 through July 2018. BARDA has seven options to extend the contract to fund certain continued development and manufacturing activities for the anthrax vaccine, including Phase 2 clinical studies. Each option, if exercised by BARDA, would provide additional funding ranging from approximately $1.1 million to $34.4 million for the period July 2018 through July 2021. To date, we have received an aggregate of approximately $9.3 million in revenue under the current BARDA contract.

We own the intellectual property rights to inventions made by us in the performance of work under the BARDA contracts, provided that we disclose such inventions to the U.S. government and notifies the U.S. government of our election to retain title. The U.S. government will have anon-exclusive,non-transferable, irrevocable,paid-up license to practice, or have practiced for or on our behalf, such inventions throughout the world, in addition to other rights customarily reserved by the U.S. government for intellectual property generated using government funds.

BARDA is a division of the U.S. Department of Health and Human Services (“HHS”) in the Office of the Assistant Secretary for Preparedness and Response that supports the advanced research and development, manufacturing, acquisition and stockpiling of medical countermeasures. Our contracts with BARDA, like those awarded by other U.S. government agencies, contain provisions not typically found in commercial contracts. Most notably, BARDA, or the U.S. government acting through BARDA, may terminate, modify or amend our contract, in whole or in part, for nearly any reason or no reason.

NIAID Anthrax Contract

As a result of the Mergers on May 4, 2017, we acquired a contract with NIAID that funds the preclinical development SparVax-L. Data generated to date demonstrates that our rPA can be stably formulated in a lyophilized state for room temperature storage. The next phase of the program is a demonstration of the final form of the vaccine in a single unit, dual-chambered syringe designed for simpler storage and ease of use. All of the necessary components of the vaccine will be contained in a single logistics transport and storage will be greatly improved. Animal efficacy studies in 2016 preliminary data indicate that the vaccine is efficacious even after storage at room temperature. Additionalnon-clinical toxicology studies have been performed, which can support a filing with FDA to update the SparVax^®IND to allow for the commencement of a subsequent clinical trial. In late 2017, we initiated an additional preclinical study to demonstrate that atwo-dose regimen of SparVax-L was able to protect animals at least as well as the currently licensed vaccine. In fact, we showed that with a single dose, we obtained 67% survival and that with thetwo-dose regimen not only did we obtain 100% survival, but we obtained much higher toxin neutralizing (protective) antibodies than the currently licensed vaccine.

United States Government Regulation

Biological products, such as our product candidates, are subject to regulation under the Federal Food, Drug, and Cosmetic Act (“FD&C Act”), and the Public Health Service (“PHS Act”), as well as other federal, state and local statutes and regulations. Both the FD&C Act and the PHS Act and their corresponding regulations govern,

among other things, the testing, manufacturing, safety, efficacy, labeling, packaging, storage, record keeping, distribution, reporting, advertising and other promotional practices involving biological products. FDA approval must be obtained before clinical testing of biological products. FDA approval also must be obtained before marketing of biological products. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources, and each process may take several years to complete, although certain expedited programs potentially applicable to our product candidates, such as FDA fast track approval processes for certain new drugs with the potential to address unmet medical needs for certain serious or life-threatening conditions, may potentially expedite approval processes. Certain federal incentive programs are also potentially applicable to our product candidates, such as for “orphan drugs” that treat rare conditions, and programs supporting the development of bioterrorism medical countermeasures. Data obtained from clinical activities is not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. The FDA may not grant approval on a timely basis, or at all, and we may encounter difficulties or unanticipated costs in our efforts to secure necessary governmental approvals, which could delay or preclude us from marketing our product candidates. In addition, the FDA may limit the indications for use or place other conditions on any approvals that could restrict the commercial application of the products. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval. In addition, 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 product candidates or products, operating restrictions and criminal prosecutions, any of which could adversely affect our ability to commercialize our product candidates.

Biological Products Development Process

The process required by the FDA before a biological product may be marketed in the United States generally involves the following:

Before testing any biological product candidate in humans, the product candidate enters the preclinical study stage. Preclinical studies include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and activity of the product candidate. The conduct of certain preclinical studies must comply with federal regulations and requirements including GLPs.

The pharmaceutical industryclinical trial sponsor must submit the results of the preclinical studies, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. Some preclinical studies may continue even after the IND is characterizedsubmitted. The FDA requires a30-day waiting period after the filing of each IND before clinical trials may begin. The FDA may also place the clinical trial on a clinical hold within that30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The FDA may also impose clinical holds on a biological product candidate at any time before or during clinical trials due to safety concerns ornon-compliance. If the FDA imposes a clinical hold, studies may not recommence without FDA authorization and then only under terms authorized by rapidly evolving technologythe FDA. Accordingly, we cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin, or that, once begun, issues will not arise that suspend or terminate such studies.

Clinical trials involve the administration of the biological product candidate to healthy volunteers or patients under the supervision of qualified investigators. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and intense competition. A largeexclusion criteria, and the parameters to be used to monitor subject safety, including stopping rules that assure a clinical trial will be stopped if certain adverse events (“AEs”), should occur. Each protocol and any amendments to the protocol must be submitted to the FDA as part of the IND. Clinical trials must be conducted and monitored in accordance with the FDA’s regulations comprising the GCP requirements, including the requirement that all research subjects provide informed consent. Further, each clinical trial must be reviewed and approved by an IRB at or servicing each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed consent that must be signed by each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed.

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

Post-approval clinical trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These clinical trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safetyfollow-up.

During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data and clinical trial investigators. Annual progress reports detailing the results of the clinical trials must be submitted to the FDA. Written IND safety reports must be promptly submitted to the FDA, the National Institute of Health (“NIH”) and the investigators for serious and unexpected AEs, any findings from other studies, tests in laboratory animals orin vitro testing and other sources that suggest a significant risk for human subjects, or any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendar days after the sponsor determines that the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within seven calendar days after the sponsor’s initial receipt of the information. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. 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 biological product has been associated with unexpected serious harm to patients.

Concurrent with clinical trials, companies usually complete additional animal studies, develop additional information about the physical characteristics of the biological product and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. To help reduce the risk of the introduction of adventitious agents with use of biological products, the PHS Act emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the sponsor must develop methods for testing the identity, strength, quality, potency and purity of the final biological product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf life.

Review and Approval Processes

After the completion of clinical trials of a biological product, the FDA approval of a BLA must be obtained before commercial marketing of the biological product. The BLA must include results of product development, laboratory and animal studies, human studies, information on the manufacture and composition of the product, proposed labeling and other relevant information. In addition, under the Pediatric Research Equity Act, a BLA or supplement to a BLA must contain data to assess the safety and effectiveness of the biological product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers. The testing and approval processes require substantial time and effort and there can be no assurance that the FDA will accept the BLA for filing and, even if filed, that any approval will be granted on a timely basis, if at all. In addition, BLAs for seasonal influenza vaccines are currently required to be submitted annually, and we would expect the same requirement to be applicable to our influenza product candidate.

Under the Prescription Drug User Fee Act (“PDUFA”), as amended, each BLA must be accompanied by a significant user fee. PDUFA also imposes an annual product fee for biologics and an annual establishment fee on facilities used to manufacture prescription biologics. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business.

Following submission of the application, the FDA reviews the BLA to determine if it is substantially complete before the agency accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or

not properly reviewable at the time of submission and may request additional information. In this event, the BLA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins anin-depth substantive review of the BLA. The FDA reviews the BLA to determine, among other things, whether the proposed product is safe and potent, or effective, for its intended use, and has an acceptable purity profile, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’s identity, safety, strength, quality, potency and purity. The FDA may refer applications for novel biological products or biological products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. During the biological product approval process, the FDA also will determine whether a Risk Evaluation and Mitigation Strategy (“REMS”), is necessary to assure the safe use of the biological product. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS; the FDA will not approve the BLA without a REMS, if required.

Before approving a BLA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites to assure that the clinical trials were conducted in compliance with IND study requirements and GCP requirements. To assure cGMP, cGTP and GCP compliance, an applicant must incur significant expenditure of time, money and effort in the areas of training, record keeping, production and quality control.

Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteria for approval and deny approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than how we interpret the same data. If the agency decides not to approve the BLA in its present form, the FDA will issue a complete response letter that usually describes all of the specific deficiencies in the BLA identified by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes; or major, for example, requiring additional clinical trials. Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the BLA, addressing all of the deficiencies identified in the letter, or withdraw the application.

If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing, or dispensing in the form of a risk management plan, or otherwise limit the scope of any approval. In addition, the FDA may require post-marketing clinical trials, sometimes referred to as Phase 4 clinical trials, designed to further assess a biological product’s safety and effectiveness, and testing and surveillance programs to monitor the safety of approved products that have been commercialized.

Post-Approval Requirements

After regulatory approval of a product is obtained, there may be a number of post-approval requirements. For example, as a condition of approval of a BLA, the FDA may require post-marketing testing and surveillance to monitor the product’s safety or efficacy. In addition, holders of an approved BLA are required to keep extensive records, to report certain adverse reactions and production problems to the FDA, to provide updated safety and efficacy information and to comply with requirements concerning advertising and promotional labeling for their products. Also, quality control and manufacturing procedures must continue to conform to cGMP regulations and practices, as well as the manufacturing conditions of approval set forth in the BLA. The FDA periodically inspects manufacturing facilities to assess compliance with cGMP, which imposes certain

procedural, substantive and recordkeeping requirements. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.

Future FDA inspections may identify compliance issues at manufacturer facilities or at the facilities of third-party suppliers that may disrupt production or distribution or require substantial resources to correct and prevent recurrence of any deficiencies and could result in fines or penalties by regulatory authorities. In addition, discovery of problems with a product or the failure to comply with applicable requirements may result in restrictions on a product, manufacturer or holder of an approved BLA, including withdrawal or recall of the product from the market or other voluntary,FDA-initiated or judicial action, including fines, injunctions, civil penalties, license revocations, seizure, total or partial suspension of production or criminal penalties, any of which could delay or prohibit further marketing. Newly discovered or developed safety or efficacy data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications.

Certain U.S. Regulatory Incentives and Other Programs

Priority Rule Voucher (PRV)

The 21st Century Cures Act (“Cures Act”), which was signed into law on December 13, 2016, established a new priory review voucher (PRV) program for material threat Medical Countermeasures (“MCMs”). Upon approval of a material threat MCM application, the FDA will award a PRV provided certain criteria are met. When a marketing application receives a priority review designation, the FDA’s goal is to take action on that application within 6 months. To be considered a material threat MCM PRV, the MCM application must be: (i) intended for use to prevent or treat harm from a biological, chemical, radiological, or nuclear agent (or harm caused by an MCM used against such agent) determined by the Department of Homeland Security to be a material threat; (ii) eligible for priority review; (iii) approved after the date of enactment of the Cures Act; and (iv) for a drug for which an active ingredient has not been previously approved by the FDA.

Animal Rule and Project BioShield Emergency Use Authorization

In 2002, the FDA amended its requirements applicable to BLAs to permit the approval of certain biologics that are intended to reduce or prevent serious or life-threatening conditions based on evidence of safety from trial in healthy subjects and effectiveness from appropriate animal studies when human efficacy studies are not ethical or feasible. These regulations, also known as the “Animal Rule,” and published in the Code of Federal Regulations (21 CFR 601 Subpart H), authorize the FDA to rely on evidence from animal studies to provide evidence of a product’s effectiveness under circumstances where there is a reasonably well-understood mechanism for the toxicity of the agent. Under these requirements, and with FDA’s prior agreement, biologics used to reduce or prevent the toxicity of chemical, biological, radiological or nuclear substances may be approved for use in humans based on evidence of effectiveness derived from appropriate animal studies and any additional supporting data. Products evaluated for effectiveness under this rule are evaluated for safety under preexisting requirements for establishing the safety of new drug and biological products, including Phase 1 through Phase 2 clinical trials. Under certain circumstances a single animal species may be acceptable if that animal model is sufficiently well-characterized for predicting a response in humans. The animal study endpoint must be clearly related to the desired benefit in humans and the information obtained from animal studies must allow for selection of an effective dose in humans. The Animal Rule also requires post-marketing studies, such as field studies, to verify and describe the product’s clinical benefit and assess its safety should an exigency exists that leads to the product being used in humans; the nature of these studies will be discussed with FDA as part of the BLA process. Products approved under the Animal Rule are subject to additional requirements, such as restrictions imposed on marketing or distribution or requirements to provide information to patients.

The Animal Rule drug development pathway typically involves costs and time in excess of what would be expended in conducting human vaccine clinical trials not requiring compliance with the Animal Rule. There is an

alternative regulatory pathway available for biological warfare drug candidates, called Emergency use Authorization under the Project BioShield Act of 2004 (“Project BioShield”), which avoids the Animal Rule’s reliance on animal models focused on efficacy. We are seeking to rely upon Emergency Use Authorization, but there can be no assurance that this alternative model will apply to our anthrax vaccine product candidate.

Under Project BioShield, the Secretary of HHS may, with the concurrence of the Secretary of the Department of Homeland Security (“DHS”), and upon the approval of the President, contract to purchase unapproved medical countermeasures for the Strategic National Stockpile (“SNS”), in specified circumstances. The U.S. Congress is notified of a recommendation for a stockpile purchase after Presidential approval. Project BioShield specifies that a company supplying the countermeasure to the SNS is paid on delivery of a substantial portion of the countermeasure. To be eligible for purchase under these provisions, the Secretary of HHS must determine that there are sufficient and satisfactory clinical results or research data, including data, if available, from preclinical studies and clinical trials, to support a reasonable conclusion that the countermeasure will qualify for approval or licensing within eight years. The legislation also allows unlicensed products to be procured for the SNS so that they are available at the time an emergency is declared.

Project BioShield also allows the Secretary of HHS to authorize the emergency use of medical products that have not yet been approved by the FDA. To exercise this authority, the Secretary of HHS must conclude that:

Although this provision permits the Secretary of HHS to circumvent the FDA approval process, its use would be limited to rare circumstances. Our product candidates will be eligible both for consideration for procurement into the SNS and for use in the event of an emergency, although there is no guarantee that our product candidates will meet the criteria set forth by HHS or the FDA for procurement and Emergency use Authorization, respectively. Both our NasoShield anthrax vaccine product candidate and our NasoVAX pandemic influenza vaccine product candidate may potentially be eligible for the SNS under Project BioShield.

Marketing Exclusivity for Reference Biological Products

As part of the ongoing efforts of governmental authorities to lower health care costs by facilitating generic competition to pharmaceutical products, the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”), enacted as part of the Health Care and Education Reconciliation Act in 2010 (“Health Care Reform Law”), created a new abbreviated regulatory approval pathway in the United States for biological products that are found to be “biosimilar” or “interchangeable” with a biological “reference product” previously licensed under a BLA. This abbreviated approval pathway is intended to permit a biosimilar to come to market more quickly and less expensively by relying to some extent on the data generated by the reference product’s sponsor, and the FDA’s previous review and approval of the reference product. Under the BPCIA, a biosimilar sponsor’s ability to seek or obtain approval through the abbreviated pathway is limited by periods of exclusivity granted by the FDA to the holder of the reference product’s BLA, and no biosimilar application may be accepted by the FDA for review until 4 years after the date the reference product was first licensed by the FDA, and no biosimilar application, once accepted, may receive final approval until 12 years after the reference product was first licensed by the FDA.

While we would expect to be granted this12-year period of exclusivity for our product candidates, if approved, notably, this period of reference product market exclusivity applies only to the biosimilar pathway and

will not, for example, provide protection against any biological product for a similar indication that achieves FDA approval under a traditional BLA based on the sponsor’s own research data There is also risk that the12-year period of biological reference product exclusivity could be shortened due to congressional action, or that the FDA will not consider our product candidates, if they are approved, to be reference products for competing products, potentially creating the opportunity for competition sooner than anticipated. Once approved, biosimilars likely would compete with, and in some circumstances may be deemed under the law to be “interchangeable with,” the previously approved reference product. The extent to which a biosimilar, once approved, will be substituted for any one of our product candidates, if approved, in a way that is similar to traditional generic substitution fornon-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing. Although there is uncertainty regarding the impact of this new program, it seems likely that if any of our product candidates are approved by the FDA, there is risk that the approval of a biosimilar competitor to one of our products could have an adverse impact on our business. In particular, a biosimilar could be significantly less costly to bring to market and priced significantly lower than our product, if approved by the FDA.

FDA Fast Track Programs

Certain FDA programs are intended to speed the availability of drugs that treat serious diseases, which could potentially apply to our product candidates, although this cannot be assured, and we do not currently have any products with fast track designation. The FDA fast track programs, one of which is fast track designation, are designed to facilitate the development and review of new drugs that are intended to treat serious or life-threatening conditions and that demonstrate the potential to address unmet medical needs for the conditions. Fast track designation applies to a combination of the product and the specific indication for which it is being studied. Thus, it is the development program for a specific drug for a specific indication that receives fast track designation. The sponsor of a product designated as being in a fast track drug development program may engage in close early communication with the FDA, including through timely meetings and feedback on clinical trials. Products in fast track drug development programs also may be eligible for FDA priority review or accelerated approval, if relevant criteria are met; in other words, the review cycle may have asix-month review clock instead of a twelvemonth review clock). Sponsors may also be able to submit completed portions of an application before the entire application is completed; however, the review clock will not officially begin until the entire completed BLA is submitted to and filed by the FDA. The FDA may notify a sponsor that its program is no longer classified as a fast track development program if the fast track designation is no longer supported by emerging data, the designated drug development program is no longer being pursued, or another product that meets the unmet medical need for the same indication.

Pediatric Exclusivity

Under the BPCIA, which was part of the Health Care Reform Law, biologics, such as our product candidates, may be eligible for pediatric exclusivity, an incentive intended to encourage medical product research for children. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods applicable to biological products under the BPCIA — namely, the four-year period during which the FDA will not consider an application for a biosimilar product, and the12-year period during which the FDA will not approve a biosimilar application. Thissix-month exclusivity, which runs from the end of these exclusivity protection periods, may be granted based on the voluntary completion of a pediatric trial in accordance with anFDA-issued “written request” for such a trial. It is possible, but not assured, that certain of our current or future product candidates may be targeted to pediatric populations, such as our influenza vaccine candidates, and so pursuit of this incentive may be relevant to us.

Orphan Drug Designation

The FDA may grant orphan drug designation to drugs intended to treat a “rare disease or condition” that affects fewer than 200,000 individuals in the United States, or that affects more than 200,000 individuals in the

United States and for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for such a disease or condition will be recovered from sales in the United States for that drug. Orphan drug designation must be requested before submitting an application for marketing approval. Orphan drug designation can provide opportunities for grant funding towards clinical trial costs, tax advantages and FDA user fee exemptions. In addition, if a product that has an orphan drug designation subsequently receives FDA approval for the indication for which it has such designation, the product may be entitled to orphan drug exclusivity, which means the FDA would not approve any other application to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity or a meaningfully different mode of administration. It is possible, but not assured, that certain of our current or future product candidates may be targeted to rare diseases or conditions, such as with respect to our cancer vaccine activities, and so pursuit of this incentive may be relevant to us.

U.S. Regulations Affecting Certain Federally Funded Programs, such as Medicare and Medicaid

Pharmaceutical manufacturers with products that are reimbursed by U.S. federally funded programs such as Medicare and Medicaid are subject to regulation by the Centers for Medicare & Medicaid Services (“CMS”) and enforcement by HHS the Office of the Inspector General (“OIG”), and in the event our product candidates are approved, regulation by CMS and enforcement by HHS OIG would be relevant to the Company. Some of these laws, referred to as “false claims laws,” prohibit the submission or causing the submission of false or fraudulent claims for reimbursement to federal, state and other health care payers and programs. Other laws, referred to as “anti-kickback laws,” prohibit soliciting, offering, receiving or paying remuneration in order to induce the referral of a patient or ordering, purchasing, leasing or arranging for, or recommending ordering, purchasing or leasing of, items or services that are paid for by federal, state and other health care payers and programs.

The federal Anti-Kickback Law prohibits providers and others from directly or indirectly soliciting, receiving, offering or paying any remuneration with the intent of generating referrals or orders for services or items covered by a government health care program. Many states have enacted similar laws. Courts have interpreted this law very broadly, including by holding that a violation has occurred if even one purpose of the remuneration is to generate referrals, even if there are other lawful purposes. There are statutory and regulatory exceptions, or safe harbors, that outline arrangements that are deemed lawful. However, the fact that an arrangement does not fall within a safe harbor does not necessarily render the conduct illegal under the Anti-Kickback Law. In sum, even common business arrangements, such as discounted terms and volume incentives for customers in a position to recommend or choose drugs for patients, such as physicians and hospitals, can result in substantial legal penalties, including, among others, exclusion from Medicare and Medicaid programs, and arrangements with referral sources must be structured with care to comply with applicable requirements. Also, certain business practices, such as payment of consulting fees to health care providers, sponsorship of educational or research grants, charitable donations, interactions with health care providers that prescribe products for uses not approved by the FDA and financial support for continuing medical education programs, must be conducted within narrowly prescribed and controlled limits to avoid the possibility of wrongfully influencing health care providers to prescribe or purchase particular products or as a reward for past prescribing. Violations of the Anti-Kickback Law may be punished by civil and criminal penalties or exclusion from participation in federal health care programs, including Medicare and Medicaid.

The Federal False Claims Act (“FCA”) is violated by any entity that “presents or causes to be presented” knowingly false claims for payment to the federal government. In addition, the Health Care Reform Law amended the FCA to create a cause of action against any person who knowingly makes a false statement material to an obligation to pay money to the government or knowingly conceals or improperly decreases an obligation to pay or transmit money or property to the government. For the purposes of these recent amendments, an “obligation” includes an identified overpayment, which is defined broadly to include “any funds that a person receives or retains under Medicare and Medicaid to which the person, after applicable reconciliation, is not entitled…” The FCA is commonly used to sue those who submit allegedly false Medicare or Medicaid claims, as well as those who induce or assist others to submit a false claim. “False claims” can result not only from

non-compliance with the express requirements of applicable governmental reimbursement programs, such as Medicaid or Medicare, but also fromnon-compliance with other laws, such as the Anti-Kickback Law or laws that require quality care in service delivery. The fraud and abuse regulations have been subject to varying interpretations, as well as heightened enforcement activity over the past few years, and significant enforcement activity has been the result of “relators,” who serve as whistleblowers by filing complaints in the name of the United States (and if applicable, particular states) under federal and state false claims laws. Under the federal FCA, relators can be entitled to receive up to 30% of total recoveries. Violations of the FCA can result in treble damages, and each false claim submitted can be subject to a civil penalty, which, for penalties assessed after January 29, 2018 whose associated violations occurred after November 2, 2015, ranges from a minimum of $11,181 to a maximum of $22,363 per claim. Most states have adopted similar state false claims laws, and these state laws have their own penalties which may be in addition to federal FCA penalties.

The Health Care Reform Law significantly strengthened the federal FCA and federal Anti-Kickback Law provisions, which could lead to the possibility of increased whistleblower or relator suits, and among other things made clear that a federal Anti-Kickback Law violation can be a basis for federal FCA liability. The bringing of any FCA action, even if unsuccessful could require us to devote resources to investigate and defend the action, as well as result in reputational harm. Failure to comply with fraud and abuse laws could result in significant civil and criminal penalties and costs, including the loss of licenses and the ability to participate in federal and state health care programs, and could have a material adverse effect on our business. In addition, many of these laws are vague or indefinite and have not been interpreted by the courts and have been subject to frequent modification and varied interpretation by prosecutorial and regulatory authorities, increasing the risk of noncompliance. We cannot predict whether changes in applicable law, or interpretation of laws, or changes in our services or marketing practices in response to changes in applicable law or interpretation of laws, could have a material adverse effect on our business.

U.S. Health Care Reform Law

Our financial prospects could be affected by changes in health care spending and policy in the United States and abroad. We operate in a highly regulated industry and new laws or judicial decisions, or new interpretations of existing laws or decisions, related to health care availability, the method of delivery or payment for health care products and services could negatively impact our business, operations and financial condition.

For example, in the United States there is significant interest in promoting health care reform, as evidenced by the enactment in the United States of the Patient Protection and Affordable Care Act and the companion Health Care Reform Law. The Health Care Reform Law increased federal oversight of private health insurance plans and included a number of provisions designed to reduce Medicare expenditures and the cost of health care generally, to reduce fraud and abuse, and to provide access to increased health coverage.

The Health Care Reform Law has also imposed substantial changes to the U.S. system for paying for health care, including programs to extend medical benefits to millions of individuals who have lacked insurance coverage. Generally, implementation of the Health Care Reform Law has thus far included significant cost-saving, revenue and payment reduction measures with respect to, for example, several government health care programs that might cover our products in the United States, should they be commercialized, including Medicaid and Medicare. Additional downward pricing pressure associated with the Health Care Reform Law includes that the Health Care Reform Law established and provided significant funding for a Patient-Centered Outcomes Research Institute to coordinate and fund Comparative Effectiveness Research, as those terms are defined in the Health Care Reform Law. While the stated intent of Comparative Effectiveness Research is to develop information to guide providers to the most efficacious therapies, outcomes of Comparative Effectiveness Research could influence the reimbursement or coverage for therapies that are determined to be less cost effective than others. Should any of our products be approved for sale, but then determined to be less cost effective than alternative therapies, the levels of reimbursement for these products, or the willingness to reimburse at all, could be impacted, which could materially impact our financial results.

President Trump is seeking to repeal and replace the Health Care Reform Law. Repeal and replace legislation was passed in the House of Representatives, but did not obtain the necessary votes in the Senate. Subsequently, the President has affirmed his intention to repeal and replace the Health Care Reform Law and has taken a number of administrative actions to materially weaken the Health Care Reform Law. For example, on January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the Health Care Reform Law to waive, defer, grant exemptions from, or delay the implementation of any provision of the Health Care Reform Law that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. Further, on December 22, 2017, President Trump signed the Tax Cuts and Jobs Act into law, which repealed the individual mandate of the Health Care Reform Law. The uncertain status of the Health Care Reform Law limits our ability to forecast changes that may occur in the future, and its repeal without adequate replacement may have a negative impact on our business.

Another provision of the Health Care Reform Law, generally referred to as the Physician Payment Sunshine Act or Open Payments Program, has imposed new reporting and disclosure requirements for pharmaceutical and medical device manufacturers and distributors with certainFDA-approved products, such as approved vaccines, with regard to payments or other transfers of value made to certain U.S. health care practitioners, such as physicians and academic medical centers, and with regard to certain ownership interests held by physicians in reporting entities. The CMS publishes information from these reports on a publicly available website, including amounts transferred and the physician and teaching hospital identities.

Under the Physician Payment Sunshine Act, should any of our products be approved for sale, we may be required to collect and report detailed information regarding certain financial relationships we have with physicians and teaching hospitals. Our compliance with these rules may also impose additional costs. It is difficult to predict how the new requirements, which also preempt similar state law reporting requirements, may impact our relationships between pharmaceutical companies and physicians or teaching hospitals.

It is likely that federal and state legislatures within the United States and foreign governments will continue to consider changes to existing health care legislation. We cannot predict the reform initiatives that may be adopted in the future or whether initiatives that have been adopted will be repealed or modified. The continuing efforts of the government, insurance companies, managed care organizations and other payers of health care services to contain or reduce costs of health care may adversely affect:

Environmental Regulations

We are also subject to regulation under the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and other present and potential federal, state or local regulations, including national and local regulations that govern our facility in France. These and other laws govern our use, handling and disposal of various biological and chemical substances used in, and waste generated by our operations. Our research and development involve the controlled use of hazardous materials, chemicals and viruses. Although we believe that our safety procedures for handling and disposing of such materials comply with the standards prescribed by state and federal regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any damages that result and any such liability could exceed our resources. Additionally, for formulations containing controlled substances, we are subject to Drug Enforcement Act regulations.

Pricing Regulations

There have been a number of federal and state legislative changes made over the last few years regarding the pricing of pharmaceutical and biological products, government control and other changes to the health care system of the United States. Concerns about drug pricing have been expressed by members of Congress and President Trump. It is uncertain how such legislative changes will be adopted or what actions federal, state or private payers for medical goods and services may take in response to such legislation. We cannot predict the effect such health care changes will have on our business, and no assurance can be given that any such reforms will not have a material adverse effect.

Non-U.S. Government Regulations

European Drug Development

Our products will also be subject to extensive regulatory requirements in the European Union. As in the United States, medicinal products can only be marketed if a marketing authorization from the competent regulatory agencies has been obtained. See “— European Marketing Authorization” below.

As in the United States, the various phases of preclinical and clinical research in European Union are subject to significant regulatory controls. The EU Clinical Trials Directive (2001/20/EC) (Clinical Trials Directive) provides the clinical trials regulatory framework in the European Union, but the European Union member states have transposed and applied the provisions of the Directive differently. This has led to significant variations in the regimes of the different member states. Under the current regime, before a clinical trial can be initiated it must be approved in each of the European Union countries where the trial is to be conducted by the relevant National Competent Authority (NCA), and one or more Ethics Committees (ECs), and a Clinical Trial Authorization must be obtained.

Similar to the FDA, Europe’s Committee for Medicinal Products for Human use (“CHMP”) has adopted ICH S6 as a guideline governing preclinical testing of biologics. Sponsors usually must conduct pharmacodynamic (PD) studies, such asin vitro binding assays andin vivo studies that assess the product’s pharmacologic activity and define its mechanism of action. Biologics typically undergo single- and repeat-dose toxicity studies using relevant species. Safety pharmacology studies, which evaluate the product’s functional effects on major body systems and specific organs, and local tolerance testing can be done separately or subsumed in toxicity testing. Sponsors also usually conduct single- and multiple-dose pharmacokinetic (PK) and/or toxicokinetic studies to assess absorption, disposition, exposure and clearance (in particular, antibody-mediated clearance), and explore dose-response relationships. This information is used to predict margins of safety for human studies. Immunogenicity testing might include screening and mechanistic studies.

Clinical Trial Authorization in the European Union

The Clinical Trials Directive and European Commission guidance describe the steps that a sponsor must take before commencing a clinical trial. According to these documents, a clinical trial may commence only if: (i) the anticipated therapeutic and public health benefits outweigh any foreseeable risks and inconveniences to the subjects; (ii) the trial subjects understand the objectives and risks of the trial and give informed, written consent to participate; (iii) the trial safeguards the physical and mental integrity of the subjects; and (iv) insurance covers the liability of the sponsor and investigator. To comply with these requirements, the trial sponsor must take certain steps. In general, the sponsor must take responsibility for trial conduct, appointment of an appropriate investigator, selection of the institution that will conduct the trial, quality control, data collection standards, protocol drafting, and creation of the investigator’s brochure. The sponsor then must apply for approval from both the ethics committee and the relevant NCA in the member state. Written authorization may be required for all biologics trials and is required for trials involving medicines containing genetically modified organisms, medicines for gene therapy, and medicines for somatic cell therapy (including xenogenic cell therapy). The opinion of the ethics committee should be issued within 60 days. A review period of 30 days can

be added for medicines requiring written authorization noted earlier, and for xenogenic cell therapy, there are no time limits for authorization. This timeframe can be extended by an additional 90 days (in addition to the original 90 days) if the ethics committee consults a national group or committee. The trial may begin only if (i) the ethics committee has issued a favorable opinion and (ii) no competent authority has informed the applicant of grounds fornon-acceptance.

Good Clinical Practices and Other Considerations for Clinical Trials

Clinical trials of biologics must comply with GCP, as described in Directive 2005/28/EC on Good Clinical Practice and the ICH E6 guideline, which the CHMP has adopted. The directive and guideline describe general governing principles for clinical trials. The rights, safety and well-being of trial subjects must prevail over the interests of science and society. Investigators must obtain freely given informed consent from every trial subject before each subject is enrolled. Clinical trial information must be handled, recorded and stored with respect for relevant confidentiality and privacy rules. Trials must comply with the ethical principles of the World Medical Association’s Declaration of Helsinki. Specific GCP guidelines apply to trials of advanced therapy medicinal products. These guidelines regulate issues such as the donation, procurement and testing of human tissues and cells; the implementation of a traceability system; and specific rules on safety reporting and long-termfollow-up. Under the Clinical Trials Directive, special requirements apply to clinical trials conducted on minors and other persons not able to give informed legal consent. These requirements are intended to preserve the dignity of the trial subjects, confirm that the benefits of the trial outweigh the risks and ensure that subjects’ representatives give consent with as much involvement of the subject as possible. Competent authorities must record information regarding trials in the European database of clinical trials which is accessible only to other competent authorities, the European Medicines Agency (“EMA”), and the European Commission. CHMP has issued a guideline on quality requirements during the clinical trial period for investigational medicinal products containing biological or biotechnology-derived substances. The guideline describes quality documentation that should be submitted to the competent authority as part of the sponsor’s investigational medicinal product dossier (“IMPD”). The IMPD should include, among other things, (i) an adequate description of the process and process controls, including a flow chart of all sizes engagesuccessive steps and details ofin-process testing and (ii) a description and justification of “any reprocessing during manufacture of the drug substance.” The guideline also recognizes that sponsors will improve and optimize their manufacturing processes during clinical development and describes the steps sponsors should take following these changes. Specifically, the sponsor must compare the quality attributes of thepre- and post-change biological active substances and relevant intermediates, and conduct a comparability exercise where necessary. Forfirst-in-human clinical trials, sponsors should use product representative of the material used during thenon-clinical testing phase. Finally, with regard to characterization, the guideline requires details on the biological activity to be provided, recognizing that the extent of characterization data will further increase in activities similarlater phases.

Study Design Considerations

General regulatory guidance on study design applies to our activitiesbiologics as well as small molecule medicines. According to the guidance, there is a “close, but variable correlation” between phase of development and manytype of our competitorsstudy, but one type of trial can occur in several different phases. The guidance therefore identifies the most typical kind of study for each phase.

Phase 1 usually involves the initial introduction of the investigational product into human subjects, and studies in this phase usually have substantially greater financialnon-therapeutic objectives. Specifically, Phase 1 studies typically investigate initial safety and other resourcestolerability, PK, PD and/or drug activity, to preliminarily determine the potential therapeutic benefit of a medicine. Phase 1 studies may be conducted in healthy volunteers or certain types of patients. If the medicine has significant potential toxicity (e.g., cytotoxic products), the trial will usually be conducted in patients.

The most typical Phase 2 study is a therapeutic exploratory study that explores efficacy in narrowly defined, relatively homogenous groups of patients. Initially, studies may use a variety of designs (e.g., concurrent controls

and comparisons with baseline status). Subsequent Phase 2 trials usually are randomized and concurrently controlled, allowing for evaluation of the medicine’s safety and efficacy for a particular indication. A major goal of this phase is to determine the dose(s) for Phase 3 trials.

Phase 3 typically involves therapeutic confirmatory studies that are designed to verify the preliminary evidence obtained in Phase 2 and to provide a sufficient basis for marketing authorization. Phase 3 studies may also further explore the dose response relationship, or explore the drug’s use in wider populations, in different stages of disease, or in combination with another drug. With regard to medicines administered for long periods, extended exposure trials ordinarily occur during Phase 3, although the sponsor may start them in Phase 2.

To ensure that clinical trials in all three phases of development will be adequate to support a Marketing Authorization Application (“MAA”), sponsors should design these trials with the MAA requirements in mind. Biologics in general need to comply with the requirements set out in Part III of the Annex I to Directive 2003/63/EC, and advanced therapy medicinal products need to comply with the requirements described in Part IV.

Consultation with the European Medicines Agency

A sponsor may obtain, from the EMA, scientific advice regarding clinical trial protocols. Although this advice does not bind the ethics committees or NCAs and is not binding for purposes of a future MAA, it can be useful to guide revisions to the protocol. The agency’s remarks will only address scientific issues and will generally focus on matters such as the selection of endpoints and comparator, the duration of treatment orfollow-up and the design of pivotal studies. Advice also might address a sponsor’s proposal to deviate from a CHMP guideline. If the applicant decides not to follow the EMA’s advice, it should justify this decision in its MAA. EMA guidance details the procedures for requesting scientific advice. The fact that an applicant requests advice from EMA does not preclude it from also seeking advice from national competent authorities or from foreign regulators, such as the FDA. The process of obtaining advice from the national competent authorities is often less formal than requesting advice from the EMA, and such advice can prove helpful. Consequently, seeking such advice is a common choice among applicants. Applicants also may seek parallel scientific advice from the EMA and FDA. Generally, the parallel scientific procedure is available for “important breakthrough drugs,” that is, products that the EMA and FDA have identified as falling within therapeutic areas of overlapping interest (e.g., oncology products, vaccines and blood products). The goal of these meetings is to provide clarity regarding the regulatory requirements of each region and the reasons for any differences between them. A sponsor requesting parallel scientific advice should authorize the agencies to exchange all information about the product, including trade secrets. After the parallel scientific advice procedure, each agency will provide its own independent advice on the questions at issue. There is no guarantee of harmonized advice or identical regulatory decisions on the approvability of the product.

European Marketing Authorization

In the European Economic Area (“EEA”), which includes the28-member states of the European Union plus Norway, Iceland and Liechtenstein, medicinal products can only be placed on the market after obtaining a Marketing Authorization, or MA. The MAA is based on the results of pharmaceutical tests, preclinical tests and clinical trials conducted on the medicinal product in question. There are two types of marketing authorization:

application for eight years, after which generic marketing authorization can be submitted, and the innovator’s data may be referenced, but not approved for two years. The overallten-year period may be extended to a maximum of 11 years if, during the period of data exclusivity, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical stagesbenefit in comparison with existing therapies.

Orphan Designation in the European Union

The EMA is also able to grant orphan designation in respect of development: Emergent BioSolutions, Inc., Green Cross, Panacea Biotec Ltd.,medicinal products. To qualify the medicinal product must be intended for the diagnosis, prevention or treatment of (i) a life-threatening or chronically debilitating condition affecting not more than 5 in 10,000 persons in the European Union or (ii) a life-threatening, seriously debilitating or serious and PaxVax. Therechronic condition in the European Union where without incentives it is unlikely that the marketing of the medicinal product in the European Union would generate sufficient return to justify the necessary investment. Further, no satisfactory method of diagnosis, prevention or treatment of the condition in question must exist in the European Union or, if such method exists, the medicinal product must be of significant benefit to those affected by that condition.

Orphan medicinal products still remain subject to the same regulatory approval process, albeit that they are always assessed through the Centralized Procedure. However, sponsors of orphan medicinal products are eligible to benefit from a number of companiesincentives offered, including certain assistance with anthrax vaccinesdevelopment of the medicinal product, reduced fees for MA applications and protection from market competition once the medicinal product is authorized, as below.

Where an MA in preclinical development including, butrespect of an orphan medicinal product is granted, the EMA and the competent authorities of the member states shall not, limitedfor a period of ten years, accept another application for an MA, or grant an MA or accept an application to Bavarian Nordic, IBio, Pfenex, Soligenixextend an existing MA, for the same therapeutic indication, in respect of a similar medicinal product, unless: (i) the holder of the MA for the original orphan medicinal product has given its consent to the second applicant; (ii) the holder of the MA for the original orphan medicinal product is unable to supply sufficient quantities of the medicinal product; or (iii) the second applicant can establish the second medicinal is safer, more effective or otherwise clinically superior.

Other Jurisdictions

In addition to regulations in the United States and Vaxin and therethe European Union, we may be subject to a variety of regulations in other companies developing competing vaccinesjurisdictions governing, among other things, clinical trials and any commercial sales and distribution of our product. Whether or not we obtain FDA approval for a product, we must obtain approval from comparable regulatory authorities in foreign countries before we can commence clinical trials in such countries and the approval of the regulators of foreign countries before we may market products in such countries. The approval process and requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from place to place, and the time may be longer or shorter than that required for FDA approval.

Acceptance of Foreign Clinical Trials in the United States and Europe

The FDA has adopted regulations governing its acceptance of foreign clinical data not conducted under an IND to support IND applications or marketing authorizations, such as BLAs. The conditions include requirements regarding the ability of the FDA to conduct onsite inspections to validate such data, and compliance with GCPs. Where a marketing application is based solely on foreign data, additional requirements apply, including a demonstration that the foreign data are applicable to the U.S. population and U.S. medical practice.

EU Directive 2001/83/EC allows for clinical trials conducted outside the European Union to be taken into consideration during the review of an MAA in the European Union if such trials have been designed,

implemented and reported based on principles equivalent to those of the Clinical Trials Directive with regard to good clinical practice and ethical principles. Moreover, they should comply with the ethical principles outlined in the Declaration of Helsinki. The applicant must submit a statement declaring such compliance as part of the MAA. In December 2008, the EMA published a strategy paper on the acceptance of data from foreign clinical trials conducted in “third countries,” particularly those outside the “‘traditional’ Western European and North American research areas.” According to this strategy paper, there is a “growing concern both among regulators and in public debate about how well these trials are conducted from an ethical and scientific/organizational standpoint.” The EMA has called for increased cooperation between international regulatory authorities involved in the supervision of clinical trials and has put forth other proposals to address these issues.

Manufacturing and Source of Supply

We do not have any manufacturing facilities. We currently rely, and expect to continue to rely, on third parties for the manufacture of our product candidates for preclinical studies and clinical trials, as well as for commercial manufacture if our product candidates receive marketing approval. To date, we have obtained materials for clinical trials andnon-clinical studies from third-party manufacturers who are not aware of.

suppliers to us. For our product candidates, we intend to identify and qualify additional contract manufacturers to provide commercial scale manufacturing prior to submission of an NDA to the FDA.

U.S. Government Contracts

Substantially all of our revenues to date have been derived from grants and U.S. Governmentgovernment contracts. There can be no assurances that our remaining U.S. Governmentgovernment contract will be continued, renewed beyond the base period, or that we can enter into new contracts or receive new grants to supply the U.S. or other governments with our products. The process of obtaining government contracts is lengthy and uncertain.

U.S. Governmentgovernment contracts typically are subject to audit by the government and contain termination provisions for the government allowing it to terminate at its discretion, which subjects us to additional risks. These risks include the ability of the U.S. Governmentgovernment unilaterally to:

The Company has been audited by BARDA through 2014 and has agreed on final indirect rates with the Defense Contract Audit Agency (“DCAA”) through 2011.

Termination-for-convenience provisions generally enable us to recover only our costs incurred or committed, settlement expenses, and profit on the work completed prior to termination.Termination-for-default provisions do not permit these recoveries and would make us liable for excess costs incurred by the U.S. Governmentgovernment in procuring undelivered items from another source.

Employees

As of December 31, 2015,2017, we employed 11 persons, including five 5 individualshad 30 full-time employees, 14 of whom hold M.D. or Ph.D. degrees and 15 of whom hold other advanced degrees. Of our total workforce, 22 are engaged primarily in research and development activities and 6 individualseight are engaged primarily in generalexecutive, finance and accounting, and administrative functions, such as human resources, financefunctions. As of December 31, 2017, we had 24 employees in the United States and accounting.six employees in the United Kingdom. None of our U.S. employees are party to anyrepresented by labor unions or covered by collective bargaining agreement, and we believe thatagreements. We consider our relationshiprelations with our employees isto be good.

Financial Information

Our consolidated contract revenues were $10.6 million, $10.2approximately $10.7 million and $17.9$2.8 million during the fiscal years ended December 31, 2015, 2014 and 2013, respectively. As of December 31, 2015 our contract with NIAID was funded for approximately $10.1 million, of which approximately $4.5 million and $0.6 million was recognized as revenue during the years ended December 31, 20152017 and 2014,2016, respectively.

Information on For the portion of our consolidated revenues attributable to each of our three product candidates during those years is incorporated by reference to the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations – Year Endedyear ended December 31, 2015 Compared to December 31, 2014”2017, we recognized $8.9 million and “– Year Ended December 31, 2014 Compared to December 31, 2013.” For further information about operating$1.8 million as revenue operating income,from the BARDA and identifiable assets and liabilities attributable toNIAID contracts, respectively. All of the contract revenues in 2016 were generated from our operations, see Item 6. Selected Financial Data and Item 8. Financial Statements and Supplementary Data.

contract with BARDA.

Financial Information by Geographic Area

For the fiscal years ended December 31, 2015, 20142017 and 2013,2016, all revenues from external customers were attributed togenerated in the United States, customers. Ourwhich is our country of domicile isdomicile. As of December 31, 2017 and 2016, long-lived assets with a net book value of $23.4 million and $600,000, respectively, were located in the United States. As of December 31, 2015, 20142017 and 2013, all2016, long-lived assets with a net book value of $15.9 million and $33.3 million, respectively, were located inoutside of the United States.

Research and Development

During the fiscal years ended December 31, 2015, 20142017 and 2013,2016, we spent approximately $5.1 million, $9.3$18.4 million and $15.3$7.2 million on research and development activities, respectively.

Corporate Information

We completed the Mergers between Private Altimmune and PharmAthene in 2017. Our stock is traded on the Nasdaq Global Market (“NASDAQ”) under the symbol “ALT”. Our principal executive offices located at 910 Clopper Road, Suite 201S, Gaithersburg, Maryland 20878, with an additional operating site in London, United Kingdom. Our telephone number is (240)654-1450, and our Internet website is www.altimmune.com and our investor relations website is located under the “Investors” tab. The information on, or that can be accessed through, our website is not part of this annual report on Form10-K and is not incorporated by reference herein.

“Altimmune,” our logo and other trademarks, trade names or service marks of the Company appearing in this annual report on Form10-K, including NasoVAX, HepTcell, RespirVec, Densigen, NasoShield and Oncosyn, are the property of the Company. The other trademarks, trade names and service marks appearing in this proxy statement/prospectus/consent solicitation are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this annual report on Form10-K may appear without the^® or TM symbol.

Available Information

We make available our annual reports on Form10-K, quarterly reports on Form10-Q, and current reports on Form8-K, and amendments to these reports, free of charge through our website (www.altimmune.com) as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC. We also make available on our website reports filed by our executive officers and Directors on Forms 3, 4, and 5 regarding their ownership of our securities. Our Code of Business Conduct and Ethics, and any amendments to our Code of Business Conduct and Ethics, are also available on our website under the “Investors” tab.

The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.

Item 1A. Risk Factors.

IfIn addition to the other information included in this annual report on Form10-K, the following risk factors should be carefully considered when evaluating an investment in us. These risk factors and other uncertainties may cause our actual future results or performance to differ materially from any future results or performance expressed or implied in the forward-looking statements contained in this report and in other public statements we make. In addition, because of thethese risks and uncertainties, set forth below actually materialize,as well as other variables affecting our business,operating results, our past financial condition and/or resultsperformance is not necessarily indicative of operations could be materially and adversely affected, the trading price of our common stock could decline and a stockholder could lose all or part of his or her investment. The risks and uncertainties set forth below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently consider immaterial may also impair our business operations.

future performance.

Risks Related to our Financial Condition. History of Losses: Limited Resources.

Our Business, Financing Requirements, Product Development and Clinical Trials

We have experienced a significant decline in revenues, a trend which we expect will continue. All of our immediately foreseeable future revenues relate to one contract with the U.S. Government. We will not achieve sufficient revenues from this agreement to attain profitability.

We have incurred significant losses since our founding and anticipate that we commenced operations.will continue to incur significant losses for the foreseeable future and may never achieve or maintain profitability.

We are a clinical-stage biotechnology company and have not yet generated revenues from product sales. To date, substantially all of our revenues have been derived from grants and contracts with governmental agencies, primarily our BARDA contract for our anthrax vaccine product candidate. We have incurred net losses in most periods since our inception, including a net loss of $46.4 million for the year ended December 31, 2017 and a net loss of $ 11.1 million for the year ended December 31, 2016. As of December 31, 2015,2017, we have an accumulated deficit of $77.9 million. To date, we have not received regulatory approvals for any products or generated any revenues from the sale of products, and we do not expect to generate any product revenues in the foreseeable future. We do not know whether or when we will generate product revenues or become profitable.

We have devoted most of our financial resources to research and development, including preclinical and clinical development of product candidates. We have not completed pivotal clinical trials for any product candidate. Our leading product candidates remain in early stage clinical development, and it will be several years, if ever, before we have a product candidate ready for commercialization. Even if we obtain regulatory approval to market a product candidate, our future revenues will depend upon the size of any markets in which our product candidates have received approval, our ability to achieve sufficient market acceptance, reimbursement from third-party payers and other factors.

The net losses we incur may fluctuate significantly from quarter to quarter and year to year, such that aperiod-to-period comparison of our results of operations may not be a good indication of our future performance. In any particular quarter or quarters, our operating results could be below the expectations of securities analysts or investors, which could cause our stock price to decline.

Our profitability depends on our ability to develop and commercialize our current and future product candidates.

To become and remain profitable, we must succeed in developing and eventually commercializing products that generate significant revenue. This will require us to be successful in a range of challenging activities, including completing preclinical studies and clinical trials of our product candidates, discovering additional product candidates, obtaining regulatory approval for these product candidates, forming strategic partnerships and alliances with third parties and manufacturing, marketing and selling any products for which we may obtain regulatory approval. We are only in the preliminary stages of most of these activities. We may never succeed in these activities and, even if we do, we may never generate revenues that are significant enough to achieve profitability. If some or all of our product candidates do not prove to be safe, pure and efficacious, then we may have to abandon those product candidates altogether and we will be unable to generate revenues from sales of such products.

We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses will increase significantly if and as we:

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. If we are required by the FDA or other regulatory authorities to perform studies in addition to those currently expected, or if there are any delays in completing our clinical trials or the development of any of our product candidates, our expenses could increase.

Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or even continue our operations.

Future conditions might require us to make substantial write-downs in our assets, which would adversely affect our balance sheet and results of operations.

We review our long-lived tangible and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. We also test our goodwill and indefinite-lived intangible assets for impairment at least annually in the fourth quarter, or when events or changes in the business environment indicate that the carrying value of the reporting unit may exceed its fair value. During 2017, as a result of our declining share price, we tested our goodwill and indefinite-lived intangible assets for impairment both as of interim and at year end. Based on the result of the test, we have determined that that our goodwill was impaired. An aggregate impairment charge of $35.9 million was recorded for the year, including an impairment charge of $26.6 million recorded during the three months ended September 30, 2012. Any such significant write-downs of our long-lived assets in the future could adversely affect our balance sheet and results of operations.

Our ability to continue as a going concern will require us to obtain additional financing to fund our current operations, which may be unavailable on acceptable terms, or at all.

Our recurring operating losses and current operating plans raise substantial doubt about our ability to continue as a going concern. We expect to incur additional losses in the future in connection with our research

and development activities. As a result, our independent registered public accounting firms included an explanatory paragraph in their reports on our consolidated financial statements as of and for the years ended December 31, 2017 and 2016 with respect to this uncertainty. Our ability to continue as a going concern will require us to obtain additional financing to fund our current operating plans. There can be no assurance that such capital will be available in sufficient amounts or on terms acceptable to us. We believe that the net proceeds from the Mergers, our redeemable preferred stock offering in August of 2017 and our existing cash will be sufficient to fund our projected operating requirements at least through December 2018. We have based these estimates, however, on assumptions that may prove to be wrong, and we could spend our available financial resources much faster than we currently expect and need to raise additional funds sooner than we anticipate. If we are unable to raise capital when needed or on acceptable terms, we would be forced to delay, reduce or terminate our research and drug development programs or commercialization efforts.

We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed would force us to delay, limit, reduce or terminate our product development or commercialization efforts.

We do not expect to generate revenue from product sales, licensing fees, royalties, milestones, contract research or other sources in an amount sufficient to fully fund our operations for the foreseeable future. Therefore, we will use our existing cash resources, together with funding received from BARDA, and will require additional funds to maintain our operations, continue our research and development programs, commence future preclinical studies and clinical trials, seek regulatory approvals and manufacture and market our products. As of December 31, 2017, our cash balance was $12.3 million. Based on our current operating plan, we believe that our existing cash will be sufficient to fund our projected operating expenses and capital expenditure requirements into the first quarter of 2019. However, we do not expect that these funds will be sufficient to enable us to complete the clinical trials needed to seek marketing approval or commercialize any of our product candidates. Furthermore, our operating plan may change as a result of many factors currently unknown to us, and we may need additional funds sooner than planned.

We believe that we will continue to expend substantial resources for the foreseeable future developing our product candidates. These expenditures will include costs associated with research and development, maintaining our intellectual property estate, potentially acquiring new technologies, obtaining regulatory approvals and manufacturing products, forming partnerships and strategic alliances, as well as marketing and selling products approved for sale, if any. In addition, other unanticipated costs may arise. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates.

Our future capital requirements depend on many factors, including:

We may also seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available to us when needed, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other development activities for one or more of our product candidates or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary to commercialize our product candidates.

Raising additional capital may cause dilution to the Company’s stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates on unfavorable terms.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, BARDA funding, and license and development agreements through strategic partnerships with third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt or preferred stock financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such as incurring additional debt, issuing additional equity, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships with third parties, we may have to relinquish valuable rights to our technologies or product candidates, future revenue streams, research programs or product candidates, or otherwise grant licenses on terms that are not favorable. If we are unable to raise additional capital when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts for our leading product candidates or our preclinical product candidates, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Conversion of the redeemable preferred stock has significantly diluted our common stock, and the continued installment payments or conversion of the redeemable preferred stock or exercise of the related warrants will further dilute our common stock and may have an adverse effect on the market price of our common stock.

In August 2017, we issued and sold 15,656 shares of our redeemable preferred stock, initially convertible into 5,863,564 shares of our common stock (without regard to any limitations on conversion governing the redeemable preferred stock). In connection with the issuance of the redeemable preferred stock, we also issued warrants initially exercisable to purchase 2,345,427 shares of our common stock (without regard to any limitations on exercise set forth in the warrants). We cannot predict if and when the holders of redeemable

preferred stock and warrants may sell such shares of converted or exercised common stock. In addition, we owe installment payments to the holders of the redeemable preferred stock starting in December of 2017 and continuing until August of 2018. We have the option, subject to certain conditions, to meet our installment payment obligations with respect to the redeemable preferred stock by issuing shares of our common stock to the holders of the redeemable preferred stock at a conversion price based on the current market price at the time of the installment payment. The conversion price for the installment payments may be less than the fixed conversion price of the redeemable preferred stock of $2.67 per share, resulting in increased dilution to our common stock. These issuances have resulted in, and, to the extent we continue to issue shares of our common stock to satisfy our installment obligations, will continue to result in substantial dilution to the holders of our common stock and may have an adverse effect on the market price of our common stock. Additionally, the conversion of shares of redeemable preferred stock into shares of common stock or the exercise of warrants for shares of our common stock will result in substantial dilution to holders of our common stock. Further, the sale of a significant amount of these shares of common stock in the open market or the perception that these sales may occur could adversely affect prevailing market prices of our common stock, including causing the market price of our common stock to decline or become highly volatile.

The recently passed comprehensive tax reform bill could adversely affect our business and financial condition.

On December 22, 2017, President Trump signed into law the TCJA, which significantly revises the Internal Revenue Code of 1986, as amended. The TJCA, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income in respect of net operating losses generated during or after 2018 and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits. Notwithstanding the reduction in the corporate income tax rate, the overall impact of the new federal tax law is uncertain and our business and financial condition could be adversely affected. In addition, it is uncertain if and to what extent various states will conform to the newly enacted federal tax law. The impact of this tax reform on holders of our common stock is also uncertain and could be adverse.

We may not be able to utilize a significant portion of our net operating loss carryforwards, which could harm our results of operations.

We had accumulatedU.S. federal net operating loss carryforwards of approximately $24.5 million as of December 31, 2017. These net operating loss carryforwards will begin to expire at various dates beginning in 2020. As of December 31, 2017, after giving effect to new corporate tax rates prescribed by the TCJA, we have recorded a valuation allowance of $13.8 million against our net deferred tax asset. The TCJA limits the amount of net operating losses that we are permitted to deduct in any taxable year to 80% of our taxable income in such year. The TCJA also eliminates the ability to carry back net operating losses to prior years, but allows net operating losses generated after 2017 to be carried forward indefinitely. As such, there is a risk that due to such items, our existing net operating losses could expire or be unavailable to offset future income. These new rules apply regardless of the occurrence of an ownership change.

A tax examination recently initiated by the Internal Revenue Service could negatively affect our cash on hand or our tax attributes

The Internal Revenue Service (the “IRS”) has notified the Company that the IRS has begun a tax examination of PharmAthene’s U.S. federal income tax return for the year ended December 31, 2016. The examination of PharmAthene’s U.S. federal income tax return has just begun and so it is difficult to predict the outcome or consequences of such an examination. However, depending on the claims raised by the IRS and the

resolution of the examination, the Company could become responsible for additional tax liabilities, including potentially interest and penalties. Additionally, the examination could result in adjustments to the amount of tax attributes of the Company, including potential reductions in net operating losses of $223.7 million sincethe Company or reductions of the tax basis in the assets of the Company. These consequences could have a material adverse impact on the Company’s operations going forward. If we are assessed a significant tax liability, we would be forced to delay, reduce or eliminate some or all of our inception,research and had net lossesdrug development programs or commercialization efforts. We could also be in default on certain of approximately $3.4 million, $10.0 millionour contractual obligations.

Because our product candidates are in an early stage of development, there is a high risk of failure, and $11.7 millionwe may never succeed in developing marketable products or generating product revenue.

Our preclinical and clinical results are not necessarily predictive of the final results of our ongoing or future clinical trials. We have completed early, small,proof-of-concept clinical trials with our NasoVAX influenza vaccine, and we are in in Phase 1 clinical development with HepTcell and late-stage preclinical development with our NasoShield program. Success in preclinical studies may not be predictive of similar results in humans during clinical trials, and successful results from early or small clinical trials of a vaccine candidate may not be replicated in later and larger clinical trials. Clinical trials are expensive, time consuming and uncertain as to outcome, and we cannot guarantee that any of these activities will be successful. If the last three years, respectively. We intendresults of our ongoing or future clinical trials are inconclusive with respect to maintain sufficient resources and personnel so thatthe efficacy of our product candidates, if we can seek partners, co-developersdo not meet our clinical endpoints with statistical significance or acquirersif there are safety concerns or adverse events associated with our product candidates, we may be prevented or delayed in obtaining marketing approval for our biodefense programs and continueproduct candidates, or we may determine to execute under our government contract with NIAID while waitingsuspend development of or abandon specific product candidates. For example, we suspended the development of a Densigen platform-based product candidate, Flunisyn, which was being developed as a T cell vaccine for the collectiontreatment of influenza, in favor of NasoVAX. Clinical trials with this product candidate showed that it was well tolerated and able to induce robust T cell responses against the viral sequences represented, but a comparison of the amount awarded to us byentire study population in later-stage clinical trials showed no statistical differences between the Delaware Chancery Court’s affirmed judgment.vaccinated and placebo groups for several measures of protection.

WeIn addition, we can offer no assurances that we have correctly estimated the resources or personnel necessary to seek partners,co-developers or acquirers for our biodefense programs or execute under our NIAID contract.contract acquired and assumed in connection with the Mergers. If a larger workforce or one with a different skillset is ultimately required to maintain ourthese operations, we may be unable to maximize our existing anthrax vaccine program.

Our product candidates, all of which are biological drug candidates, are subject to extensive governmental regulations relating to, among other things, research, clinical trials, manufacturing, import, export and commercialization. Furthermore, the valuetiming of the SIGA litigationmarketing approval for our NasoShield product candidate is subject to obtaining continued funding and consent from BARDA, which is uncertain. In order to obtain regulatory approval for the commercial sale of any product candidate, we must demonstrate through extensive preclinical studies and clinical trials that the product candidate is safe and effective for use in each target indication. Even if we obtain regulatory approval, that approval may be for indications or patient populations that are not as broad as intended or desired or may require labeling that includes significant use or distribution restrictions or safety warnings. Also, we may gain regulatory approval for our existing biodefense assets.leading product candidates or our other preclinical product candidates in some but not all of the jurisdictions we seek to obtain regulatory approval. For example, failure to obtain regulatory approval of our products in any of the U.S., European or Japanese markets would materially and adversely affect the Company. Failure to obtain regulatory approval of some but not all of the target indications may result in limited commercial opportunity for the approved product. We may never obtain regulatory approval for these product candidates in any jurisdiction. We also cannot assure youmay be required to perform additional or unanticipated clinical trials to obtain approval or be subject to additional post-marketing testing requirements to maintain regulatory approval. In addition, regulatory authorities may withdraw their approval of the product or impose restrictions on its distribution in the form of a modified risk evaluation and mitigation strategy.

We are heavily dependent on the success of our leading product candidates, NasoVAX and HepTcell, as well as SparVax-L acquired in connection with the Mergers. If we ultimately are unable to develop, obtain regulatory approval for or commercialize NasoVAX, HepTcell, SparVax-L, or any other product candidate, our business will be substantially harmed.

We currently have no products approved for commercial distribution. Our business strategy is to build a pipeline of product candidates using our proprietary RespirVec and Densigen platforms, including our leading product candidates, NasoVAX and HepTcell, and to progress those product candidates through clinical development for the treatment of different types of diseases. We are also focused on SparVax L acquired in connection with the Mergers. We may not be able to develop products that are safe and effective for all or any of the indications that we have accurately estimatedtarget. Even if we are successful in building a product pipeline, the cashpotential product candidates that we identify may not be suitable for clinical development for a number of reasons, including causing harmful side effects or demonstrating other characteristics that indicate a low likelihood of receiving marketing approval or achieving market acceptance. If our methods of identifying potential product candidates fail to produce a pipeline of potentially viable product candidates, then our success as a business will be dependent on the success of fewer potential product candidates, which introduces risks to our business model and cash equivalents necessarypotential limitations to finance our operations untilany success we may achieve.

Because we have received SIGA’s payment,limited financial and managerial resources, we must focus on a limited number of research programs and product candidates and on specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future discovery and preclinical development programs and product candidates for specific indications may not yield any commercially viable products. Furthermore, until such time as we are able to build a broader product candidate pipeline, if any. If revenuesever, any adverse developments with respect to our leading product candidates, NasoVAX and HepTcell, would have a more significant adverse effect on our overall business than if we maintained a broader portfolio of product candidates.

We may encounter substantial delays in our clinical trials, or our clinical trials may fail to demonstrate the safety and efficacy of our product candidates to the satisfaction of applicable regulatory authorities.

Before obtaining marketing approval from regulatory authorities for the sale of our NIAIDproduct candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidates in humans. Clinical testing is expensive, time consuming and uncertain as to outcome. We cannot guarantee that clinical trials will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical trials can occur at any stage of testing. Events that may prevent successful or timely completion of clinical development include:

Delays, including delays caused by the value of the our lost profits for Tecovirimat,above factors, can be costly and could negatively affect our ability to collectcomplete a monetary judgment,clinical trial. For example, we have had delays in previous clinical trials, including post-petition interest, from SIGA remains subject to further proceedings in the Federal Bankruptcy Court, which precludes the current calculation of a predictable value of the SIGA litigation. Uncertainties include SIGA’s filingthose conducted for relief under Chapter 11 of the United States Bankruptcy Code, which protects its assets from creditors, including us.

There can be no assurances if and when the Company will receive any payments from SIGANasoVAX, as a result of clinical holds imposed by the Judgment. SIGA has indicatedFDA or other regulatory authorities and requests for additional or new information on vaccine product testing in filingsconnection with the Bankruptcy Court that it does not currently have cash sufficient to satisfy the award. It is also uncertain whether SIGA will have such cash in the future. PharmAthene’s ability to collect the Judgment depends upon a number of factors, including SIGA’s financial and operational success, which is subject to a number of significant risks and uncertainties (certain of which are outlined in SIGA’s filings with the SEC), as to which we have limited knowledge and which we have no ability to control, mitigate or fully evaluate Furthermore, because SIGA has filed for protection under the federal bankruptcy laws, PharmAthene is automatically stayed from taking any enforcement action in the Delaware Court of Chancery, including with respectan IND submitted to the Judgment. The Company’s ability to collect a money judgment from SIGA remains subject to further proceedings in the Bankruptcy Court.FDA.

We cannot provide assurancesgive any assurance that we will be able to obtain financing on acceptable termsresolve any future clinical holds imposed by the FDA or at all andother regulatory authorities outside of the United States, or any equity financing we do obtain will result in dilution.

If, for the reasonsdelay caused by other factors described in the preceding risk factorsabove or any other factors, on a timely basis or at all. If we are not able to successfully initiate and complete subsequent clinical trials, we will not be able to obtain regulatory approval and will not be able to commercialize our product candidates.

We may find it difficult to enroll patients in our clinical trials, which could delay or prevent clinical trials of our product candidates.

Identifying and qualifying patients to participate in clinical trials of our product candidates is critical to our success. The timing of our clinical trials depends on the speed at which we can recruit patients to participate in testing our product candidates. If patients are unwilling to participate in our trials because of negative publicity from adverse events in the biotechnology industries, public perception of vaccine safety issues or for other reasons, including competitive clinical trials for similar patient populations, the timeline for recruiting patients, conducting studies and obtaining regulatory approval of potential products may be delayed. These delays could result in increased costs, delays in advancing our product development, delays in testing the effectiveness of our technology or termination of the clinical trials altogether.

We may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or desired characteristics to achieve diversity in a trial, to complete our clinical trials in a timely manner. Patient enrollment is affected by several factors, including:

We may not be able to initiate or continue clinical trials if we require additional cash priorcannot enroll a sufficient number of eligible patients to receiving any payment from SIGA,participate in the clinical trials required by regulatory agencies.

Even if we enroll a sufficient number of eligible patients to initiate our clinical trials, we may be forcedunable to cease operations unlessmaintain participation of these patients throughout the course of the clinical trial as required by the clinical trial protocol, in which event we may be unable to use the research results from those patients. For example, we may face difficulties in identifying patient populations with active disease to enroll in our HBV product clinical trial for HepTCell. Other clinical trials involving patients with active HBV have sometimes faced difficulties in working with these patient populations, which may include significant numbers of individuals with difficulties with treatment compliance, such as active drug users. While we are abledeveloping strategies to obtain financingaddress this issue, there is no guarantee that these strategies will prove successful.

If we have difficulty enrolling, and maintaining the enrollment of a sufficient number of patients to conduct our clinical trials as planned, we may need to delay, limit or terminate ongoing or planned clinical trials, any of which would have an adverse effect on acceptable terms.our business.

It may be difficult to predict the time and cost of product development. Unforeseen problems may prevent further development or approval of our product candidates.

Our product candidates, including vaccines and immunotherapies, involve novel approaches to activate the immune system. Consequently, it may be difficult to predict the time and cost of product development. For example, the RespirVec platform involves intranasally administered adenovectored vaccines and the Densigen platform involves synthetic peptide T cell vaccines. Unforeseen problems with our approaches to vaccines and immunotherapy may prevent further development or approval of our product candidates. Because of the novelty of our approaches, there may be unknown safety risks associated with the vaccines that we develop or the clinical endpoints that we establish in trials may not be generally accepted by regulatory agencies, which may therefore require us to perform large field studies to demonstrate efficacy. There can be no assurancesassurance that any development problems we would be successful in obtaining sufficient financing on commercially reasonable terms or at all. Our requirements for additional capital may be substantial and will be dependent on many factors.

To the extent that we raise additional capital through the sale of securities, the issuance of those securities or shares underlying such securities would result in dilution that could be substantial to our stockholders. In addition, if we incur additional debt financing, a substantial portion of our operating cash flow may be dedicated to the payment of principal and interest on such indebtedness, thus limiting funds available for our business activities.

Our ability to use our net operating loss carryforwards (NOLs) may be limited.

We have incurred substantial losses during our history. If we cannot collect a money judgment from SIGA, we are highly unlikely to be profitable for the foreseeable future and therefore will not generate future taxable income that we can use our net operating loss carryforwards, or NOLs, to offset. As of December 31, 2015, we had U.S. federal NOLs of $156.3 million. The $156.3 million in U.S. federal NOLs will begin to expire in various years between 2022 and 2035, if not limited by triggering events prior to such time. Under the provisions of the Internal Revenue Code, changes in our ownership, in certain circumstances, will limit the amount of U.S. federal NOLs that can be utilized annuallyexperience in the future will not cause significant delays or unanticipated costs, or that such development problems can be solved.

In addition, novel vaccine adjuvants, which are included in HepTcell and Oncosyn, our product candidates based on the Densigen technology, may pose an increased safety risk to offset taxable income. In particular, section 382patients. Adjuvants are compounds that are added to vaccine antigens to enhance the activation and improve immune response and efficacy of vaccines. Development of vaccines with novel adjuvants requires evaluation in larger numbers of patients prior to approval than would be typical for therapeutic drugs. Guidelines for evaluation of vaccines with novel adjuvants have been established by the FDA and other regulatory bodies and expert committees. The safety of any vaccine, because of the Internal Revenue Code imposes limitations onpresence of an adjuvant, may have side effects considered to pose too great a company’s abilityrisk to use NOLs upon certain changes in such ownership. Calculations pursuantpatients to Section 382warrant approval of the Internal Revenue Code can be very complicatedvaccine. Traditionally, regulatory authorities have required extensive study of novel adjuvants because vaccines typically get administered to healthy populations, in particular infants, children and no assurance can be giventhe elderly,

rather than in people with disease. As a result, although it is anticipated that upon further analysis,HepTcell and Oncosyn are intended for the treatment of patients suffering from a disease, regulatory agencies such as the FDA may nevertheless require us to conduct extensive safety testing prior to approval to demonstrate a low risk of rare and severe adverse events caused by our ability to take advantageproduct candidates that include novel vaccine adjuvants.

If approved, the novel mechanism of our NOLs may be limited to a greater extent than we currently anticipate. If we are limited in our ability to use our NOLs in future years in which we have taxable income, we will pay more taxes than if we were able to utilize our NOLs fully. For example, the annual utilizationaction of the U.S. federal NOL carryforwards generated in tax years prior to 2007 may be subject to limitation. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership that we cannot predict or control that could result in further limitations being placed on our ability to utilize our federal NOLs.

On November 25, 2015, our Board of Directors approved a Section 382 rights plan (the “Rights Plan”) in an effort to protect our NOLs. We intend to submit the Rights Plan to a stockholder vote at the Company's 2016 annual meeting of stockholders. If the Company's stockholders do not approve the Rights Plan, we intend to terminate the plan. Although the Rights Plan is intended to reduce the likelihood of an “ownership change” that could adversely affect utilization of our NOLs, there is no assurance that the Rights Plan will prevent all transfers that could result in such an “ownership change.”

The Rights Plan could make it more difficult for a third party to acquire, or could discourage a third party from acquiring, a large block of our common stock. A third party that acquires 4.9% or more of our common stock could suffer substantial dilution of its ownership interest under the terms of the Rights Plan. Thisvaccines may adversely affect the marketabilityphysician and patient perception and acceptance of our common stock by discouraging existingproducts. Public perception of vaccine safety issues, including adoption of novel vaccine mechanisms of action, may adversely influence willingness of subjects to participate in clinical trials, or potential investorsif approved, to prescribe and receive novel vaccines. For example, GSK pulled from acquiring our stockthe market an approved vaccine to prevent Lyme disease (Lymerix) in February 2002 after anecdotal evidence of joint pain resulted in subjects’ unwillingness to receive the vaccine. The FDA found no evidence that the vaccine caused a safety risk; however, GSK pulled the vaccine due to low sales resulting from the negative public perception associated with the reports on joint pain. In addition, parental aversion to new vaccines or additional sharesvaccines in general may adversely influence later stage clinical trials of our stock. It is also possible that the Rights Plan could delayinfluenza product candidate or, frustrate the removal of incumbent directors and could make more difficult a merger, tender offer or proxy contest involving us, or impede an attempt to acquire a significant or controlling interest in us, even if such events might be beneficial to us and our stockholders. 

Risks Related to Product Development and Commercialization

approved, its commercial success.

We have not commercialized any products or recognized any revenues from sales. Ourrely, and expect to continue to rely, on third parties to conduct preclinical studies and clinical trials for our product candidates, are still under development, which reducesand if they do not properly and successfully perform their value from the perspective of potential partners, co-developers or acquirers.

obligations to us, we may not be able to obtain regulatory approvals for our product candidates.

We have not commercialized any product candidates or recognized any revenues from product sales. It is unlikely that we will receive future fundingrely, and expect to continue to rely, on third parties, such as CROs, clinical data management organizations, medical institutions and clinical investigators to assist in managing, monitoring and otherwise carrying out our clinical trials. We compete with many other companies for the resources of these third parties. The third parties on whom we rely generally may terminate their engagements at any time, and having to enter into alternative arrangements would delay development and commercialization of our product candidates. Even if we do receive such funding, there can be no assurances that any

Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our product candidates would meet the safety and efficacy standards required for commercialization. To develop and commercialize biodefense treatment and prophylactic product candidates, we must provideresponsibilities. For example, the FDA and foreign regulatory authorities require compliance with humanapplicable law, regulations and standards, including GCP, for designing, conducting, monitoring, recording, analyzing and reporting the results of clinical trials to assure that the data and non-clinical animalresults are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Although we rely on third parties to conduct our clinical trials, we are responsible for ensuring that each of these clinical trials is conducted in accordance with applicable law, regulations and standards, including our general investigational plan and protocol.

Furthermore, if these third parties do not successfully carry out their duties under their agreements, if the quality or accuracy of the data that demonstrate adequate safety and effectiveness. To generate this data, we would havethey obtain is compromised due to subjecttheir failure to adhere to clinical trial protocols or to regulatory requirements, or if they otherwise fail to comply with clinical trial protocols or meet expected deadlines, then the clinical trials of our product candidates may not meet regulatory requirements. If clinical trials do not meet regulatory requirements or if these third parties need to significantbe replaced, then preclinical development activities or clinical trials may be extended, delayed, suspended or terminated. If any of these events occur, we may not be able to obtain regulatory approval of our product candidates on a timely basis or at all.

We also expect to rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on the part of our distributors could delay clinical development or marketing approval of our product candidates or commercialization of our products, producing additional losses and depriving us of potential product revenue.

We face substantial competition from other pharmaceutical and biotechnology companies, which may result in others discovering, developing or commercializing products before, or more successfully, than we do.

The development and commercialization of new drug products is highly competitive. Our future success depends on our ability to demonstrate and maintain a competitive advantage with respect to the design,

development and commercialization of our product candidates. Our objective is to design, develop and commercialize new products with superior efficacy, convenience, tolerability and safety. In many cases, the products that we intend to commercialize, if successfully commercialized, will compete with existing market-leading products.

Many of our potential competitors have significantly greater financial, manufacturing, marketing, drug development, technical and human resources than we do. Large pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining regulatory approvals, recruiting patients and manufacturing pharmaceutical products. Large and established companies such as AstraZeneca, GSK, Johnson & Johnson and Sanofi Pasteur, among others, compete in the influenza vaccine market. These companies have greater experience and expertise in securing government contracts and grants to support their research and development efforts, including extensive non-clinical studiesconducting testing and clinical testing. trials, obtaining regulatory approvals to market products, manufacturing such products on a broad scale and marketing approved products. These companies also have significantly greater research and marketing capabilities than we do and may also have products that have been approved or are in late stages of development, and have collaborative arrangements in our target markets with leading companies and research institutions. Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel compounds or toin-license novel compounds that could make the products that we develop obsolete.

We cannot be sure that our approach to drug discovery would be effective or would result inalso face competition from smaller companies such as Novavax, which is developing a recombinant influenza vaccine; Inovio Pharmaceuticals, which is developing an HBV therapeutic vaccine; Emergent Biosolutions, which manufactures the existing anthrax vaccine; and PaxVax and Pfenex, which are developing anthrax vaccines. Any of these smaller companies may develop competing products more rapidly than we do. A number of companies of varying sizes are also pursuing the development of a “universal” flu vaccine. In addition, we have substantial competition for government funding, particularly for our anthrax vaccine program. As a result of all of these factors, our competitors may succeed in obtaining patent protection and/or FDA approval or discovering, developing and commercializing products before we do. In addition, any drug.new product that we develop that competes with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to overcome price competition and to be commercially successful. If we are not able to compete effectively against potential competitors, our business will not grow and our financial condition and operations will suffer.

We may not be able to comply with the requirements of foreign jurisdictions in conducting trials within the United Kingdom or any other foreign country.

We have conducted clinical trials in the United Kingdom and South Korea for HepTcell, and future clinical trials may be conducted in other foreign jurisdictions. Our development efforts have been primarily focused on one product candidate, SparVax^®ability to successfully initiate, enroll and complete a clinical trial in the United Kingdom or any other foreign country is subject to numerous risks unique to conducting business in foreign countries, including:

If we fail to successfully meet requirements for the conduct of clinical trials outside of the United States, we may be delayed in obtaining, or be unable to obtain, regulatory approval for our product candidates were successful when tested in animals, such success would not be a guaranteethe United States or in countries outside of the safety or effectivenessUnited States.

If we fail to attract and keep senior management and key scientific personnel, we may be unable to successfully develop our products, conduct our clinical trials and commercialize our product candidates.

We are highly dependent on members of such product candidates in humans.

our senior management, including William Enright, our President and Chief Executive Officer, Dr. Sybil Tasker, our Chief Medical Officer and Senior Vice President of Clinical Research and Development, and Dr. M. Scot Roberts, our Chief Scientific Officer, as well as Dr. Bertrand Georges, our Chief Technology Officer and a key employee of the Company. Although we have entered into employment agreements with each of these members of senior management and key employees, the loss of the services of any of these persons could impede the achievement of our research, development effortsand commercialization objectives. We maintain keyman insurance policies on Mr. Enright and Dr. Georges for $2.0 million and £500,000, respectively, but not for any other member of our senior management or any other employee.

Recruiting and retaining qualified scientific, clinical, manufacturing, sales and marketing personnel will also be critical to our success. The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize products. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than the Company and may have commitments under consulting or advisory contracts with other entities that may limit their availability to the Company. If we are time-consumingunable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.

Our acquisitions may expose us to unknown liabilities.

Because we have acquired all the outstanding shares of most of our acquired companies, our investment in those companies are or will be subject to delays. Even ifall of their liabilities other than their respective debts which we paid or will pay at the time of the acquisitions. If there are unknown liabilities or other obligations, our potential partners, co-developers or acquirers initially received positive early-stage preclinical or clinical results, such resultsbusiness could be materially affected. We may not be indicative of resultsalso experience issues relating to internal controls over financial reporting, issues that could be anticipated in the later stages of drug development. Delays in obtaining results in non-clinical studies and clinical testing can occur for a variety of reasons, such as slower than anticipated enrollment by volunteers in the trials, adverse events related to the products, failureaffect our ability to comply with Good Clinical Practices, unforeseen safetythe Sarbanes-Oxley Act tax examinations by the IRS or state tax authorities, or issues unsatisfactory results in trials, perceived defects inthat could affect our ability to comply with other applicable laws.

Risks Related to the design of clinical trials, changes in regulatory policy as well as for reasons detailed in the section entitled “—Necessary reliance on the Animal Rule in conducting trials is time-consuming and expensive.”Regulatory Approval Process

Any delay or adverse clinical event arising during any of the clinical trials could force us or our potential partners, co-developers or acquirers to conduct additional clinical trials in orderIf we are not able to obtain required regulatory approvals, we will not be able to commercialize our product candidates and our ability to generate revenue will be materially impaired.

Our product candidates and the activities associated with their development and commercialization, including their design, research, testing, manufacture, safety, efficacy, recordkeeping, labeling, packaging, storage, approval, fromadvertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and other regulatory bodies. Developmentagencies in the United States and foreign jurisdictions. Failure to obtain marketing approval for our product candidates will prevent us from commercializing them in those markets.

We have not received approval from regulatory authorities to market any product candidate in any jurisdiction, and it is possible that neither our current product candidates nor any product candidates that we may seek to develop in the future will ever obtain the appropriate regulatory approvals necessary for us to commence product sales.

We expect to rely on third-party CROs and consultants to assist in filing and supporting the applications necessary to gain marketing approvals. Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication of each of our product candidates to establish the product candidates’ safety and efficacy for such indications. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, regulatory authorities.

The pathway to regulatory approvals is time consuming and unpredictable, involves substantial costs would increaseand consumes management time and attention. It is not possible to predict the timing or success of obtaining regulatory approvals with any degree of certainty, and as a result, it is difficult forecast our future financial results or prospects. Any unexpected development in the regulatory approval process, including delays or denials of regulatory approvals or significant modifications to our product candidates required by our regulators, could materially and adversely affect our business, results of operations and financial condition, and could substantially harm our stock price.

Our product candidates may cause undesirable side effects or have other properties that delay or prevent their regulatory approval or limit their commercial potential.

Undesirable side effects caused by our product candidates or even competing products in development that utilize a common mechanism of action could cause regulatory authorities to interrupt, delay or halt clinical trials and could result in the denial of regulatory approval by the FDA or other regulatory authorities and potential product liability claims. Serious adverse events deemed to be caused by our product candidates could have a material adverse effect on the development of our product candidates and our business as a whole. The most common adverse events in the clinical trials evaluating the safety and tolerability of the NasoVAX influenza vaccine have been headache, runny noses and sore throats. The most common adverse events observed in clinical trials for product candidates developed using the Densigen platform include injection site reactions, headache, malaise and fatigue.

Our understanding of the relationship between our product candidates and these events, as well as our understanding of adverse events reported in future clinical trials of other product candidates, may change as we gather more information, and additional unexpected adverse events may be observed. In addition, the side effect profile of pharmaceutical drugs cannot be fully established based on preapproval clinical trials involving a limited number of patients. Routine review and analysis of post-marketing safety surveillance and clinical trials will provide additional information, for example, potential evidence of rare, population-specific or long-term adverse reactions, and may adversely affect the commercialization of the product, and even lead to the suspension or withdrawal of product marketing authorization.

If we or others identify undesirable side effects caused by our product candidates either before or after receipt of marketing approval, a number of potentially significant negative consequences could result, including:

Any of these events could prevent us from achieving or maintaining marketing approvals for and market acceptance of our product candidates and could have a material adverse effect on our business and financial results.

If we fail to obtain regulatory approval innon-U.S. jurisdictions, we will not be able to market our products in those jurisdictions.

We intend to market certain of our product candidates, if approved, in the United Kingdom and other international markets, in addition to the United States. Such marketing will require separate regulatory approvals in each market and compliance with numerous and varying regulatory requirements. The approval procedures vary among countries and may involve requirements for additional testing, and the time required to obtain approval may differ from that required to obtain FDA approval. In addition, in many countries outside the United States, such as certain countries of the European Union, a vaccine must be approved for reimbursement, including the price that can be charged, before it can be approved for sale in that country. In these countries, pricing discussions with governmental authorities can take considerable time after the receipt of marketing approval for a product, and additional clinical research may be required to enable comparison of the cost effectiveness of our product candidate to other available alternatives. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. However, the failure to obtain approval in one jurisdiction may compromise our ability to obtain approval elsewhere. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all.

Even if we receive regulatory approval for our product candidates, such products will be subject to ongoing regulatory review, which may result in significant additional expense and other restrictions.

Any regulatory approvals that we receive for our product candidates may be subject to limitations on the approved indicated uses for which the product may be marketed or they experience material delays into conditions of approval. We may also be required to conduct post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product potentially over many years. If the FDA or other regulatory authority approves any of our product candidates, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMP, and compliance with cGMP and GCP for any clinical trials that we conduct post-approval. Any such restrictions may result in significant additional expense or needcould limit sales of the approved product.

Later discovery of previously unknown problems with an approved product, including adverse events of unanticipated severity or frequency, or with manufacturing operations or processes, may result in, among other things:

In addition, applicable regulatory policies of governmental authorities, such as the FDA, may change and additional government regulations may be enacted that could affect any regulatory approval that we may receive for our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may

arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or not able to maintain regulatory compliance, we may lose any marketing approval that may have been obtained and we may not achieve or sustain profitability, which would adversely affect our business.

If the FDA or comparable foreign regulatory authorities approve generic or biosimilar versions of any of our products that receive marketing approval, or if any product approvals we obtain do not provide us with the exclusivity periods we hope to achieve, the sales of our products could be adversely affected.

As part of the ongoing efforts of governmental authorities to lower health care costs by facilitating generic competition to pharmaceutical products, the BPCIA enacted as part of the Health Care Reform Law, created a new abbreviated regulatory approval pathway in the United States for biological products that are found to be “biosimilar” to or “interchangeable” with a biological “reference product” previously licensed under a BLA. This abbreviated approval pathway is intended to permit a biosimilar to come to market more quickly and less expensively by relying to some extent on the data generated by the reference product’s sponsor and the FDA’s previous review and approval of the reference product. Under the BPCIA, a biosimilar sponsor’s ability to seek or larger trials than planned. If delaysobtain approval through the abbreviated pathway is limited by periods of exclusivity granted by the FDA to the holder of the reference product’s BLA, and no biosimilar application may be accepted by the FDA for review until four years after the date the reference product was first licensed by the FDA, and no biosimilar application, once accepted, may receive final approval until 12 years after the reference product was first licensed by the FDA.

Once approved, biosimilars likely would compete with, and in some circumstances may be deemed under applicable laws to be “interchangeable with,” the previously approved reference product. The extent to which a biosimilar, once approved, will be substituted for any one of our product candidates, if approved, in a way that is similar to traditional generic substitution fornon-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are significant, orstill developing. Although there is uncertainty regarding the impact of this new program, it seems likely that if any of our product candidates do not proveare approved by the FDA, there is risk that the approval of a biosimilar competitor to one of our products could have an adverse impact on our business. In particular, a biosimilar could be safe, pure,significantly less costly to bring to market and potent (including efficacy) or do not receive requiredpriced significantly lower than our product, if approved by the FDA.

We may also be subject to competition from biosimilar products in Europe. To date, 27 biosimilar products have been authorized by the EMA. As in the United States the regulatory approvals, we or our potential partners, co-developers or acquirers may have to abandon the product candidate altogether and will be unable to recognize revenues from the sale of that product.

For any andapproval pathway for biosimilar products in Europe is abbreviated. A biosimilar sponsor must however still provide all of the foregoing reasons,preclinical and clinical data required to demonstrate the valuesimilarity of their product with the reference product. The level of data required is assessed on a case by case basis but it will be less than that required for an original biological product. The pathway is more complex than the abridged procedure that may be followed to obtain authorization of a generic version of anon-biological product but it would still allow the biosimilar product to be brought to market more quickly and less expensively than our original product. That said, in Europe applications for marketing authorizations in relation to biosimilar products are subject to the same data and market exclusivity as apply to genericnon-biologic products so no biosimilar product could be approved or placed on the market during the periods such exclusivity applies to our product. Marketing authorization of a biosimilar product in Europe does not guarantee that the biosimilar product may be substituted for the reference product. Interchangeability of a biosimilar product with the reference product is not assessed by the EMA but this determination is left to each of the member states. We cannot know at this stage the extent to which any biosimilar product would be interchangeable with our reference product, and this may vary between member states.

Pediatric exclusivity is another type of regulatory market exclusivity our competitors may pursue. In the United States, the FDA has the authority to award additional exclusivity for approved products where the sponsor conducts specified testing on pediatric or adolescent populations upon the written request of the FDA. If granted, pediatric exclusivity adds six months to existing exclusivity periods applicable to biological products under the

BPCIA — namely, the four-year period during which the FDA will not consider an applicable for a biosimilar product, and the twelve-year period during which the FDA will not approve a biosimilar application. Thissix-month exclusivity, which runs from the end of these exclusivity protection periods, may be granted based on the voluntary completion of a pediatric trial in accordance with an FDA-issued “written request” for such trial. In Europe, as well, pediatric studies are incentivized by the reward of additional exclusivity. Pediatric Investigation Plans (“PIPs”), are determined by the Pediatric Committee of the EMA. Where an application for a marketing authorization is submitted in respect of a medicinal product designated as an orphan medicinal product and that application contains the results of the PIP studies, market exclusivity for that orphan medicinal product is extended by two years if the product is authorized across Europe. We may pursue pediatric exclusivity for one or more of our product candidates but may not succeed in obtaining it. There is also a risk that a competitor may achieve pediatric exclusivity that would delay any potential approvals of our product candidates.

Orphan drug designation presents yet another regulatory incentive that may be available to us and our competitors. The FDA may grant orphan drug designation to products intended to treat a “rare disease or condition” that affects fewer than 200,000 individuals in the eyesUnited States, or affects more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of potential partners, co-developersdeveloping and making available in the United States a drug for such disease or acquirerscondition will be recovered from sales in the United States of such drug. Organ drug designation must be requested before submitting an application for marketing approval. Orphan drug designation can provide opportunities for grant funding towards clinical trial costs, tax advantages and FDA user fee exemptions. In addition, if a product that has an orphan drug designation subsequently receives FDA approval for the indication for which it has such designation, the product may be significantly less than we expect, resultingentitled to orphan drug exclusivity, which means the FDA would not approve any other application to market the same drug for a period of seven years, except in lower proceedslimited circumstances, such as a showing of clinical superiority to usthe product with orphan exclusivity or a meaningfully different mode of administration.

In the European Union, orphan drug status offers similar but not identical benefits as those in the United States. We may pursue orphan drug designation for one or more of our product candidates but obtaining such designation cannot be assured. Additionally, should a competitor receive orphan drug designation for a product to treat the same disease and same indication as one of our product candidates, there is a risk that the FDA or a comparable European regulatory body could delay approving our product candidate.

Developing a drug product, such as NasoShield, to address biological warfare involves special considerations, including compliance with the “Animal Rule,” that may increase drug development delays and costs, and result in a longer and more uncertain regulatory approval process.

Under a special FDA procedure available for studying certain biological warfare products, such as NasoShield, our anthrax vaccine product candidate, the FDA makes available a research pathway known as the “Animal Rule,” which permits the conduct of clinical trials without exposing human subjects to deadly substances, such as anthrax. These regulations authorize the FDA to rely on evidence from animal studies to provide evidence of a product’s effectiveness under circumstances where there is a reasonably well-understood mechanism for the toxicity of the agent. Under these requirements, and with the FDA’s prior agreement, biologics used to reduce or prevent the toxicity of chemical, biological, radiological or nuclear substances may be approved for use in humans based on evidence of effectiveness derived from appropriate animal studies and any agreement weadditional supporting data. Products evaluated for effectiveness under this rule are evaluated for safety under preexisting requirements for establishing the safety of new drug and biological products, including Phase 1 through Phase 2 clinical trials. Under certain circumstances a single animal species may enterbe acceptable if that animal model is sufficiently well-characterized for predicting a response in humans. The animal study endpoint must be clearly related to the desired benefit in humans and the information obtained from animal studies must allow for selection of an effective dose in humans. The Animal Rule also requires post-marketing studies, such as field studies, to verify and describe the product’s clinical benefit and assess its safety should an exigency exist that leads to the product being used in humans; the nature of these studies will be discussed with such partners, co-developers or acquirers.

Necessary reliance onFDA as part of the BLA process. Products approved under the Animal Rule in conducting trials is time-consuming and expensive.are subject to additional requirements, such as restrictions imposed on marketing or distribution or requirements to provide information to patients.

To obtain FDA approval for biological warfare defense products under current FDA regulations, companies are requiredCompliance with the Animal Rule, would generally require us to utilize animal model studies for efficacy and provide certain animal and human safety data underin order to obtain FDA approval for our anthrax vaccine product candidate. The Animal Rule drug development pathway typically involves costs and delays in excess of what would be expended in conducting human vaccine clinical trials not requiring compliance with the Animal Rule. For many ofAlthough there is an alternative regulatory pathway available for biological warfare drug candidates, called Emergency Use Authorization, which avoids the biological and chemical threats,Animal Rule’s reliance on animal models are not yet available, and as such we orfocused on efficacy, there can be no assurance that this alternative model will apply to our potential partners, co-developers or acquirers have to developanthrax vaccine product candidate.

Developing appropriate animal models whichin compliance with the Animal Rule is a time-consuming and expensive research effort. Further, we or they may not be able to sufficiently demonstrate the animal correlation to the satisfaction of the FDA, as these corollaries are difficult to establish and are often unclear. The FDA may decide that our data areis insufficient for approval and require additionalnon-clinical, clinical or other studies, refuse to approve our products, or place restrictions on our or our partners’, co-developers’ or acquirers’ ability to commercialize those products. As a general matter, complying with the Animal Rule involves a more uncertain pathway to regulatory approval, as relatively few products have been approved in this manner. This means that it may be particularly difficult for us to predict the timing or ultimate success of receiving FDA approval for NasoShield. Further, other countries have not, at this time, established criteria for review and approval of these types of products outside their normal review process,process; i.e., there is no Animal Rule equivalent, and consequently there can be no assurance that a companywe will be able to make a submission for marketing approval in foreign countries based on such animal data.

Additionally, few facilities in the United States and internationally have the capability to test animalsperform animal testing with anthrax nerve agents, or other lethal biotoxins or chemical agents or otherwise assist us in qualifying the requisite animal models. We or our potential partners, co-developers or acquirers have to compete with other biodefense companies for access to this limited pool of highly specialized resources andresources. We therefore may not be able to secure contracts to conduct the testing of our anthrax vaccine product candidate in a predictable timeframe or at all.

Additionally, under the Project BioShield Act of 2004 (“Project BioShield”), the Secretary of HHS may, with the concurrence of the Secretary of DHS and upon the approval of the President, contract to purchase unapproved medical countermeasures for the SNS, in specified circumstances. The U.S. Congress is notified of a recommendation for a stockpile purchase after Presidential approval. Project BioShield specifies that a company supplying the countermeasure to the SNS is paid on delivery of a substantial portion of the countermeasure. To be eligible for purchase under these provisions, the Secretary of HHS must determine that there are sufficient and satisfactory clinical results or research data, including data, if available, from preclinical studies and clinical trials, to support a reasonable conclusion that the countermeasure will qualify for approval or licensing within eight years. The legislation also allows unlicensed products to be procured for the SNS so that they are available at the time an emergency is declared.

Project BioShield also allows the Secretary of HHS to authorize the emergency use of medical products that have not yet been approved by the FDA. To exercise this authority, the Secretary of HHS must conclude that:

Although this provision permits the Secretary of HHS to circumvent the FDA approval process, its use would be limited to rare circumstances. Our product candidates will be eligible both for consideration for procurement into the SNS and for use in the event of an emergency, although there is no guarantee that our

product candidates will meet the criteria set forth by HHS or the FDA for procurement and Emergency-use Authorization, respectively. Both our NasoShield anthrax vaccine product candidate and our NasoVAX pandemic influenza vaccine product candidate may potentially be eligible for the SNS under Project BioShield.

Expanding our operations internationally adds complexity to our operations and poses additional risks to our business.

We acquired ITS on March 10, 2015 and subsequently renamed it Altimmune UK Limited. By acquiring Altimmune UK, we gained access to the Densigen technology and product candidates based on the Densigen platform, including HepTcell and Oncosyn. Historically, we have been engaged in business activities principally in the United States. Altimmune UK, together with its subsidiary, Altimmune France, marks our first significant direct entry into a foreign market (other than our joint ventures). Our business or financial performance may be adversely affected due to the risks of operating internationally, including but not limited to economic and political instability, failure to comply with foreign laws and regulations and adverse changes in the health care policies of the United Kingdom and European Union, adverse changes in law and regulations affecting the operations of Altimmune UK and Altimmune France going forward and difficulties and costs of staffing and managing our new operations in the United Kingdom and France. Additionally, we may in the future shut down or reduce our international operations, which would result in us incurring additional costs. If any of these events were to materialize, they could lead to disruption of our business, significant expenditures and/or damages to our reputation, which could have a material adverse effect on our results of operations, financial condition or prospects.

EvenForeign currency exchange rate fluctuations could materially impact our consolidated financial position and results of operations.

As a result of the expansion of our operations to the United Kingdom through our acquisition of Altimmune UK, a portion of our expenses and revenues are derived from operations in the United Kingdom, principally with respect to salaries and related personnel expenses associated with our research and development operations. We translate financial results denominated in foreign currency, primarily British pounds, into U.S. dollars for our consolidated financial statements. During periods of a strengthening U.S. dollar, our reported revenues and net income could be reduced because foreign currencies may translate into fewer U.S. dollars. To date, we have not engaged in any hedging strategies, and any such strategies related to transaction exposures, such as forward contracts, options and foreign exchange swaps, that we implement to mitigate this risk may not eliminate our exposure to foreign exchange fluctuations.

In all jurisdictions in which we operate, we are also subject to laws and regulations that govern foreign investment, foreign trade and currency exchange transactions. These laws and regulations may limit our ability to repatriate cash as dividends or otherwise to the United States and may limit our ability to convert foreign currency cash flows into U.S. dollars.

We are subject to taxation in certain foreign jurisdictions due to the acquisition of Altimmune UK. Any adverse development in the tax laws of such jurisdictions or any disagreement with our tax positions could have a material adverse effect on our business, financial condition or results of operations. In addition, our effective tax rate could change materially as a result of certain changes in our mix of U.S. and foreign earnings and other factors, including changes in tax laws.

We are subject to taxation in, and to the tax laws and regulations of, certain foreign jurisdictions as a result of our acquisition of Altimmune UK. Adverse developments in these tax laws or regulations, or any change in position regarding the application, administration or interpretation thereof, in any applicable jurisdiction, could have a material adverse effect on our business, financial condition or results of operations. In addition, the tax authorities in any applicable jurisdiction may disagree with the tax treatment or characterization of any of our transactions, which, if successfully challenged by such tax authorities, could have a material adverse effect on

our business, financial condition or results of operations. Certain changes in the mix of our earnings between jurisdictions and assumptions used in the calculation of income taxes, among other factors, could have a material adverse effect on our overall effective tax rate. In addition, legislative proposals to change the U.S. taxation of foreign earnings could also increase our effective tax rate.

Risks Related to Market Volatility and the Referendum of the United Kingdom’s Membership of the European Union

The United Kingdom held a referendum on June 23, 2016 in which a majority voted for the United Kingdom’s withdrawal from the European Union (referred to as “Brexit”). As a result of this vote, negotiations have commenced to determine the terms of the United Kingdom’s withdrawal from the European Union as well as its relationship with the European Union going forward, including the terms of trade between the United Kingdom and the European Union. The effects of Brexit have been and are expected to continue to befar-reaching. Brexit and the perceptions as to its impact may adversely affect business activity and economic conditions in Europe and globally and could continue to contribute to instability in global financial and foreign exchange markets. Brexit could also have the effect of disrupting the free movement of goods, services and people between the United Kingdom and the European Union; however, the full effects of Brexit are uncertain and will depend on any agreements the United Kingdom may make to retain access to European Union markets.

In addition, we expect that Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which European Union laws to replicate or replace. If the United Kingdom were to significantly alter its regulations affecting our potential partners, co-developers or acquirers wereindustry, we could face significant new costs. It may also be time-consuming and expensive for us to alter our internal operations in order to comply with new regulations. Altered regulations could also add time and expense to the process by which our product candidates receive regulatory approval in the United Kingdom and European Union. Similarly, it is unclear at this time what Brexit’s impact will have on our intellectual property rights and the process for obtaining, maintaining and defending such rights. It is possible that certain intellectual property rights, such as trademarks, granted by the European Union will cease being enforceable in the United Kingdom absent special arrangements to the contrary, and we are required to refile our trademarks and other intellectual property applications domestically in the United Kingdom.

Lastly, as a result of the Brexit, other European countries may seek to conduct referenda with respect to their continuing membership in the European Union. Given these possibilities and others we may not anticipate, as well as the lack of comparable precedent, the full extent to which our business, results of operations and financial condition could be adversely affected by Brexit is uncertain.

Risks Related to Our Intellectual Property

It is difficult and costly to protect our proprietary rights, and we may not be able to overcomeensure their protection. If our patent position and other intellectual property rights do not adequately protect our product candidates, others could compete against us (including directly), which could materially harm our business, results of operations and financial condition.

We rely upon a combination of patents, patent applications, trade secret protection and confidentiality agreements to protect the obstaclesintellectual property related to funding, developmentour product candidates, platform technology and commercialization describedknow-how. The patent position of biotechnology companies is generally uncertain, because it involves complex legal and factual considerations. The standards applied by the USPTO and foreign patent offices in granting patents are not always applied uniformly or predictably. For example, there is no uniform worldwide policy regarding patentable subject matter or the scope of claims allowable in biotechnology patents. In addition, some countries do not grant patent claims directed to methods of treating humans, and in these Risk Factors, our productscountries patent protection may not become profitablebe available at all to protect our product candidates. The patent applications that we own orin-license may fail to result in issued patents with claims that cover our product candidates in the United States or in other countries.

The patent prosecution process is expensive and manufacturing problemstime consuming, and our current or side effects discoveredfuture licensors, licensees or collaborators may not be able to prepare, file and prosecute all necessary or desirable patent applications at later stages could further increase costsa reasonable cost or in a timely manner. Moreover, in some circumstances, we may not have the right to control the preparation, filing and prosecution of commercialization.

It is uncertain whetherpatent applications, or to maintain the patents, covering technology that we will receive future fundinglicense from or license to third parties, making us reliant on our licensors, licensees or collaborators. Therefore, these patents and patent applications may not be prosecuted and enforced in a manner consistent with the best interests of the developmentCompany’s business. If our current or future licensors, licensees or collaborators fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be lost or impaired. If our licensors, licensees or collaborators are not fully cooperative or disagree with the Company as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised.

If patent applications we hold or havein-licensed with respect to our product candidates fail to issue, if their breadth or strength of protection is threatened, or if they fail to provide meaningful exclusivity for our product candidates, it could dissuade companies from collaborating with us. We and our licensors have filed several patent applications covering aspects of our product candidates. We cannot offer any assurance about which, if any, patents will issue, the breadth of any such patents or whether any issued patents will be found invalid or unenforceable, or will be successfully challenged by third parties.

Patent applications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued. We cannot be certain that our licensors were the first to satisfy the requirements necessary to secure patent rights relating to any particular invention. Furthermore, if third parties have filed such patent applications, an interference proceeding in the United States can be initiated by such third party, or by the USPTO itself, to determine who was the first to invent any of the subject matter covered by the patent claims of our patent applications.

Even if we did receive such funding,patents do successfully issue and even if we succeed in commercializingsuch patents cover our product candidates, withthird parties may challenge their validity, enforceability or scope, which may result in such patents being narrowed or invalidated. Any successful challenge to our patents or patent applications, or to any other patents or patent applications owned by or licensed to us, could deprive us of the helprights necessary to prevent competition from third parties, which may impair the commercial success of potential partnersany product candidate that we may develop. There is no assurance that all potentially relevant prior art relating to our patents and patent applications or co-developers,those of our licensors has been found, and prior art that we have not identified could be used by a third party to invalidate a patent or alone, we couldprevent a patent from issuing from a pending patent application. Furthermore, even if they are unchallenged, our patents and patent applications, or those of our licensors, may not assure you that any drugs resulting fromadequately protect our research and development efforts would become commercially available. Even if we succeeded in (co-)developing and commercializingtechnology, provide exclusivity for our product candidates, theyprevent others from designing around our patents with similar products, or prevent others from operating in jurisdictions in which we did not pursue patent protection. Any of these outcomes could impair our ability to prevent competition from third parties, which may never generate sufficienthave an adverse impact on our business.

Any loss of, or sustainable revenuesfailure to enable usobtain, patent protection could have a material adverse impact on our business. We may be unable to be profitable.

Even if effective,prevent competitors from entering the market with a product that reachesis similar to or the same as our products.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States may be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other

jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, but enforcement rights are not as strong as those in the United States. These products may compete with our product candidates and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in some foreign jurisdictions. The legal systems of certain countries do not favor the enforcement of patents and other intellectual property protection, which could make it difficult for us to stop the infringement of our patents generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. 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. The earliest any of our patents are scheduled to expire is August 2018.

Patent terms may be inadequate to protect our competitive position on our products for an adequate amount of time.

Patents have a limited lifespan. In most countries, including the United States, the natural expiration of a patent is 20 years from the date that the application for the patent is filed. In some cases, the term of a U.S. patent is shortened by a terminal disclaimer that reduces its term to that of an earlier-expiring patent. Various extensions of patent term may be available in particular countries; however, in all circumstances the life of a patent, and the protection it affords, has a limited term. If we encounter delays in obtaining regulatory approvals, the period of time during which we could market a product under patent protection could be reduced. We expect to seek extensions of patent terms where these are available in any countries where we are prosecuting patents. Such possible extensions include those permitted under the Drug Price Competition and Patent Term Restoration Act of 1984 in the United States, which permits a patent term extension of up to five years to cover anFDA-approved product. The actual length of the extension will depend on the amount of patent term lost while the product was in clinical trials. However, the applicable authorities, including the USPTO and FDA in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. If this occurs, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data, and then may be able to launch their product earlier than might otherwise be the case.

We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming and unsuccessful.

Competitors may infringe our patents or misappropriate or otherwise violate our intellectual property rights. To counter infringement or unauthorized use, litigation may be necessary to enforce or defend our intellectual property rights, to protect our trade secrets and/or to determine the validity and scope of our own intellectual property rights or the proprietary rights of others. Such litigation can be expensive and time consuming, which could divert management resources and harm our business and financial results. Many of our current and potential competitors have the ability to dedicate substantially greater resources to litigate intellectual property rights than we can. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property.

Patent assertion, including initiating litigation, increases the likelihood that the accused third party will seek to narrow or invalidate our asserted patent. The scope and validity of our asserted patent may be challenged in a

variety of post-grant proceedings before the USPTO and foreign patent offices. In addition, in an infringement proceeding, a court may decide that our asserted patent is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patients do not cover the technology in question. An adverse result in any litigation proceeding or other legal proceeding could therefore put one or more of our patents at risk of being invalidated, held unenforceable or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

Third-party claims of intellectual property infringement or misappropriation may prevent or delay our development and commercialization efforts.

Our commercial success depends in part on our ability to develop, manufacture, market and sell our product candidates, and to use our or our licensors’ proprietary technologies without infringing the patents and proprietary rights of third parties. Numerous U.S. and foreign issued patents and pending patent applications owned by third parties exist in the fields in which we are developing and may develop our product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to FDA-mandatedclaims of infringement of the patent rights of third parties. We may not have identified all U.S. and foreign patents or –requested additionalpublished patent applications that affect our business either by blocking our ability to commercialize our product candidates or by covering similar technologies that affect our market.

Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims, for example, to materials, formulations, methods of manufacture, methods of analysis and/or methods for treatment related to the use or manufacture of our product candidates. In some cases, we may have failed to identify such relevant third-party patents or patent applications. For example, patent applications filed before November 29, 2000 and certain patent applications filed after that date that will not be filed outside the United States remain confidential until issued as patents. Except for the preceding exceptions, patent applications in the United States and elsewhere are generally published only after a waiting period of approximately 18 months after the earliest filing. Therefore, patent applications covering our platform technology or our product candidates could have been filed by others without our knowledge. Additionally, pending patent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our platform technologies or product candidates and/or the use, analysis and/or manufacture of our product candidates.

If any third-party patents are held by a court of competent jurisdiction to cover aspects of our materials, formulations, methods of manufacture, methods of analysis and/or methods for treatment, the holders of any such patents may be awarded monetary damages, obtain injunctive or other equitable relief, or both. An award of monetary damages may be substantial and may include treble damages and attorneys’ fees for willful infringement. An award of injunctive relief could block our ability to develop and commercialize the applicable product candidate until such patent expired or unless we obtain a license. Such licenses may not be available on acceptable terms, if at all. Even if we were able to obtain a license, the rights may benon-exclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be forced to redesign an infringing product, prevented from commercializing a product, or forced to cease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms.

Defending against claims of patent infringement or misappropriation of trade secrets could be costly and time consuming, regardless of the outcome. Thus, even if we were to ultimately prevail, or to settle at an early stage, such litigation could burden us with substantial unanticipated costs. In addition, litigation or threatened litigation could result in significant demands on the time and attention of our management team, distracting them from the pursuit of other company business.

We may face a claim of misappropriation if a third party believes that we inappropriately obtained and used trade secrets of such third party. If we are found to have misappropriated a third party’s trade secrets, we may be prevented from further using such trade secrets, limiting our ability to develop our product candidates, and we may be required to pay damages.

During the course of any patent or other intellectual property litigation, there could be public announcements of the results of hearings, rulings on motions, and other interim proceedings in the litigation. If securities analysts or investors regard these announcements as negative, the perceived value of our product candidates, platform technology or intellectual property could be diminished. Accordingly, the market price of our common stock may decline. In addition, the uncertainties associated with litigation could have an adverse effect on our ability to raise the funds necessary to continue our clinical trials, changescontinue our research programs, license necessary technology from third parties or enter into development partnerships that would help us bring our product candidates to market.

We may be subject to claims that our employees, independent contractors or re-approvalsconsultants have wrongfully used or disclosed alleged trade secrets of their former employers, or our employees may challenge the inventorship of our patents.

As is common in the biotechnology and pharmaceutical industry, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Some of these individuals, including members of our senior management, executed proprietary rights,non-disclosure andnon-competition agreements, or similar agreements, in connection with such previous employment. Although we use reasonable efforts to ensure that our employees, independent contractors and consultants do not use the proprietary information orknow-how of others in their work for us, we may be subject to claims that we or these individuals have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such third party.

We may have inventorship disputes arise from conflicting obligations of employees, consultants or others who are involved in developing our product candidates. In addition, we may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as an inventor orco-inventor. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms or at all. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

We havein-licensed a portion of our intellectual property, and, if we fail to comply with our obligations under these arrangements, we could lose such intellectual property rights or owe damages to the licensor of such intellectual property.

We are a party to a number of license agreements that are important to our business, and we may enter into additional license agreements in the future. Certain of ourin-licensed intellectual property covers, or may cover, RespirVec and certain of our product candidates. Our existing license agreements impose, and we expect that future license agreements will impose, various diligence, milestone payment, royalty and other obligations on the Company. If there is any conflict, dispute, disagreement or issue ofnon-performance between the Company and our licensing partners regarding our rights or obligations under the license agreements, including any such conflict, dispute or disagreement arising from our failure to satisfy payment obligations under any such agreement, we may owe damages, our licensor may have a right to terminate the affected license, and our ability to utilize the affected intellectual property in our product discovery and development efforts and our ability to enter into collaboration or marketing agreements for an affected product candidate may be adversely affected.

We may need to license certain intellectual property from third parties, and such licenses may not be available on commercially reasonable terms or at all.

A third party may hold intellectual property, including patent rights, that is important or necessary to the development or commercialization of our product candidates. If the patented or proprietary technology of third parties is necessary for us to commercialize our product candidates, we would be required to obtain a license from these third parties. Such a license may not be available on commercially reasonable terms or at all, which could materially harm our business.

Confidentiality agreements with employees and third parties may not prevent unauthorized disclosure of proprietary information.

In addition to the protection afforded by patents, we rely on confidentiality agreements to protect trade secrets and proprietaryknow-how that may not be patentable or that we may elect not to patent, processes for which patents are difficult to enforce and any other elements of our technology and development processes that involve proprietaryknow-how, information or technology that is not covered by patents. In particular, we seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, outside scientific advisors, contractors and collaborators. These agreements require that all confidential information developed by the individual or made known to the individual by the Company during the course of the individual’s relationship with us be kept confidential and not disclosed to third parties. We also enter into agreements with our employees that provide that any inventions conceived by the individual in the course of rendering services to the Company shall be our exclusive property. However, we may not obtain these agreements in all circumstances, and individuals with whom we have these agreements may not comply with their terms. Although we use reasonable efforts to protect ourknow-how, our employees, consultants, contractors or outside scientific advisors might intentionally or inadvertently disclose ourknow-how or other proprietary information to competitors. In addition, competitors may otherwise gain access to ourknow-how or independently develop substantially equivalent information and techniques.

Enforcing a claim that a third party illegally obtained and is using any of ourknow-how is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States sometimes are less willing than U.S. courts to protectknow-how. Misappropriation or unauthorized disclosure of ourknow-how could impair our competitive position and may have a material adverse effect on our business.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented, declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential partners or customers in our markets of interest. At times, competitors may adopt trade names or trademarks similar to those of the Company’s, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. For example, we have experienced threatened or actual opposition for two trademarks that we were pursuing. We decided to discontinue our use of one of those trademarks, and the other matter was resolved on favorable terms. Although these matters have been resolved on terms that did not materially harm the Company, we may become subject to other trademark challenges in the future. If we are unable to establish long-term name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected.

Risks Related to Commercialization of the Company’s Product Candidates

Our future commercial success depends upon attaining significant market acceptance of our product candidates, if approved, among physicians, patients, third-party payers and others in the medical community.

Even if we obtain marketing approval for our product candidates, or any other product candidates that we may develop or acquire in the future, the product may not gain market acceptance among physicians, third-party payers, patients and others in the medical community. Market acceptance of any approved products depends on a number of other factors, including:

Market acceptance is critical to our ability to generate significant revenue. Any product candidate, if approved and commercialized, may be accepted in only limited capacities or not at all. If any approved products are not accepted by the market to the extent that we expect, we may not be able to generate significant revenue and our business would suffer.

We rely on, and expect to continue to rely on, third parties to manufacture our product candidates and related materials for our clinical trials and preclinical studies, and these third parties may not perform satisfactorily.

We do not have any manufacturing facilities or personnel, and we rely on, and expect to continue to rely on, third-party manufacturers and suppliers to manufacture and supply vaccines for our preclinical studies and clinical trials, and on related materials, such as anthrax, influenza and HBV products. We rely on a change in labelingsmall number of third-party manufacturers and suppliers to manufacture and supply bulk drug substance and fill finished vaccines for our initial clinical trials. This reliance on a small number of third parties increases the risk that we will not have sufficient quantities of our product candidates or other products needed for our preclinical studies and clinical trials, or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.

Any of these third parties that we rely upon may terminate their engagement with us at any time. If we need to enter into alternative arrangements, it could delay our product development activities. In addition, our reliance on these third parties for manufacturing activities will reduce our control over these activities but will not relieve us of our responsibility to ensure compliance with all required regulations regarding manufacturing.

Reliance on third-party manufacturers entails risks to which we would not be subject if we or others identify side effects ormanufactured the product candidates itself, including:

Any of these events could increase the cost and expenses of commercializing and marketing them. It could also lead to the suspensionpreclinical and clinical trial delays or revocation offailure to obtain regulatory approval, or affect our ability to successfully commercialize future products. Some of these events could be the basis for FDA or other regulatory authority action, including clinical holds, fines, injunctions, civil penalties, license revocations, recall, seizure, total or partial suspension of production, or criminal penalties.

In addition, our product candidates involve technically complex manufacturing processes, and even slight deviations at any point in the products.

We orproduction process may lead to production failures, and may cause the production of our potential partners or co-developers, and our and their respective CMOs are also required to comply with the applicable FDA cGMP regulations. These regulations include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation. Manufacturing facilities are subject to inspection by the FDA. These facilities must be approved to supply licensed products to the commercial marketplace. We or our potential partners or co-developers, and our respective contractbe disrupted, potentially for extended periods of time. Third-party manufacturers may not be able to comply with the applicable cGMP, regulations or similar regulatory requirements and other FDA regulatory requirements. Should weoutside the United States. Our failure, or they failthe failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on it, including clinical holds, fines, injunctions, civil penalties, delays, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates.

Our product candidates and any products that we may develop may compete with other product candidates and products for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for the Company. Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval. We have limited arrangements in place for redundant supply or a second source for bulk drug substance. If our current contract manufacturers cannot perform as agreed, we may be required to replace such manufacturers, and it may prove very difficult and time consuming to identify potential alternative manufacturers who could manufacture our product candidates. Accordingly, we may incur added costs and delays in identifying and qualifying any such replacement.

Our current and anticipated future dependence upon others for the manufacture of our product candidates or products may adversely affect our future profit margins and our ability to commercialize any products that receive marketing approval on a timely and competitive basis.

If we are unable to manufacture our products in sufficient quantities, or at sufficient yields, or are unable to obtain regulatory approvals for a manufacturing facility for our products, we may experience delays in product development, clinical trials, regulatory approval and commercial distribution.

Completion of our clinical trials and commercialization of our product candidates require access to, or development of, facilities to manufacture our product candidates at sufficient yields and at commercial scale, and this manufacturing involves a complicated process with which we have limited experience. Even if clinical trials are successful, we still may be unable to commercialize a product due to difficulties in obtaining regulatory approval for our engineering processes or problems in scaling that process to commercial production. We have no experience manufacturing, or managing third parties in manufacturing, any of our product candidates in the volumes that will be necessary to support large-scale clinical trials or commercial sales. Efforts to establish these

capabilities may not meet initial expectations as to scheduling,scale-up, reproducibility, yield, purity, cost, potency or quality.

We expect to rely on third parties for the manufacture of clinical and, if approved for marketing, commercial quantities of our product candidates. These third-party manufacturers must also receive FDA or other applicable governmental authority approval before they can produce clinical material or commercial products. Our products may be in competition with other products for access to these facilities and may be subject to finesdelays in manufacture if third parties give other products greater priority. We may not be able to enter into any necessary third-party manufacturing arrangements on acceptable terms, or on a timely basis. In addition, we may have to enter into technical transfer agreements and share ourknow-how with the third-party manufacturers, which can be time consuming and may result in delays.

No known manufacturer has received FDA clearance to manufacture large scale quantities of commercial products with the modified version of adenovirus used in the production of product candidates based on our proprietary RespirVec technology. The Company or our contract manufacturers therefore will need to develop a scalable manufacturing process for any product candidates that we may develop and commercialize that use our RespirVec technology. Our contract manufacturing organizations may encounter technical or scientific issues related to development or manufacturing that we may be unable to resolve in a timely manner or with available funds. If we or our manufacturing partners are unable to scale the manufacturing process to produce commercial quantities of our product candidates, or our manufacturing partners do not pass required regulatorypre-approval inspections, our commercialization efforts may be adversely affected.

Our reliance on contract manufacturers may adversely affect our operations or result in unforeseen delays or other sanctionsproblems beyond our control. Because of contractual restraints and the limited number of third-party manufacturers with the expertise, required regulatory approvals and facilities to manufacture our products on a commercial scale, replacement of a manufacturer may be expensive and time consuming and may cause interruptions in the production of our product candidates. A third-party manufacturer may also encounter difficulties in production. These problems may include:

Any delay or interruption in the manufacture of our products could have a material adverse effect on our business, financial condition, results of operations and cash flows.

If we are unable to establish sales, marketing and distribution capabilities, we may not be successful in commercializing our product candidates if and when they are approved.

We do not have a sales or marketing infrastructure and have no experience in the sale, marketing or distribution of pharmaceutical products. To achieve commercial success for any product for which we obtain marketing approval, and for which we decide to independently commercialize, we will need to establish a sales and marketing organization.

In the future, we may build a focused sales and marketing infrastructure to market orco-promote some of our product candidates in the United States and in Europe, if and when they are approved. There are risks

involved with our establishing our own sales, marketing and distribution capabilities. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

Factors that may inhibit our efforts to commercialize our products on our own include:

If we do not establish our own sales, marketing and distribution capabilities and instead enter into arrangements with third parties to perform these services, our product revenues and our profitability, if any, could be precluded fromlower than if we were to market, sell and distribute any products that we develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell, market and distribute our product candidates or may be unable to do so on terms that are favorable to the Company. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If we do not establish sales, marketing the products.

and distribution capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates.

We may become subjectencounter difficulties in managing our growth and expanding our operations successfully.

As we seek to advance our product liability claims,candidates through clinical trials and commercialization, we will need to expand our development, regulatory, manufacturing, marketing and sales capabilities or contract with third parties to provide these capabilities for the Company. As our operations expand, we expect that we will need to manage additional relationships with various strategic partners, suppliers and other third parties. Future growth will impose significant added responsibilities on members of management. Our future financial performance and our ability to commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we must be able to manage our development efforts and clinical trials effectively and hire, train and integrate additional management, administrative and, if necessary, sales and marketing personnel. We may not be able to accomplish these tasks, and our failure to accomplish any of them could prevent us from successfully growing our business.

We may not be successful in establishing and maintaining strategic partnerships, which could adversely affect our ability to develop and commercialize products.

A key part of our strategy is to seek strategic partnerships in the future, including potentially with major biotechnology or pharmaceutical companies for late-stage development and commercialization of our product candidates. We face significant competition in seeking appropriate partners for our product candidates, and the negotiation process is time consuming and complex. In order for the Company to successfully partner our product candidates, potential partners must view these product candidates as economically valuable in markets they determine to be attractive in light of the terms that we are seeking and other products available for licensing from other companies. Even if we are successful in our efforts to establish strategic partnerships, the terms that

we agree upon may not be favorable to the Company, and we may not be able to maintain such strategic partnerships if, for example, development or approval of a product is delayed or sales of an approved product are disappointing. Any delay in entering into strategic partnership agreements related to our product candidates could delay the development and commercialization of our product candidates and reduce their competitiveness even if they reach the market.

In addition, any future partnerships we may enter into pose a number of risks, including that our partners may breach their agreements with the Company, and we may not be able to adequately protect our rights under these agreements. Furthermore, prospective partners will likely negotiate for certain rights to control decisions regarding the development and commercialization of our product candidates, if approved, and may not conduct those activities in the same manner as we would.

If we fail to establish and maintain strategic partnerships related to our product candidates, we will bear all of the risk and costs related to the development of any such product candidate, and we may need to seek additional financing, hire additional employees and otherwise develop expertise which we do not have and for which we have not budgeted. This could negatively affect the development of any unpartnered product candidate.

We may acquire other businesses, form joint ventures or make investments in other companies or technologies that could negatively affect our operating results, dilute our stockholders’ ownership, increase our debt or cause us to incur significant expense.

As part of our business strategy, we may pursue acquisitions of assets or licenses of assets, including preclinical, clinical or commercial stage products or product candidates, businesses, strategic alliances, joint ventures and collaborations, to expand our existing technologies and operations.

In the future, we may not be able to find suitable partners or acquisition candidates, and we may not be able to complete such transactions on favorable terms, if at all. If we make any acquisitions, we may not be able to integrate these acquisitions successfully into our existing business, and we could assume unknown or contingent liabilities. Any future acquisitions also could result in damagesthe incurrence of debt, contingent liabilities or future write-offs of intangible assets or goodwill, any of which could have a negative impact on our cash flows, financial condition and results of operations. Integration of an acquired company also may disrupt ongoing operations and require management resources that exceedwe would otherwise focus on developing our insurance coverage.existing business. We may experience losses related to investments in other companies, which could harm our financial condition and results of operations. We may not identify or complete these transactions in a timely manner, on a cost-effective basis, or at all, and we may not realize the anticipated benefits of any acquisition, license, strategic alliance or joint venture.

To finance such a transaction, we may choose to issue shares of our common stock as consideration, which would dilute the ownership of our stockholders. If the price of our common stock is low or volatile, we may not be able to acquire other companies or fund a joint venture project using our stock as consideration. Alternatively, it may be necessary for us to raise additional funds for these activities through public or private financings or through the issuance of debt. Additional funds may not be available on terms that are favorable to the Company, or at all, and any debt financing may involve covenants limiting or restricting our ability to take certain actions.

If product liability lawsuits are brought against the Company, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.

We face an inherent risk of exposure to product liability suits in connection withas a result of the clinical testing of our product candidates being tested in clinical trials or sold commercially. Weand will face an even greater risk if we commercialize any products. For example, we may become subject to a product liability suitbe sued if any product we (co-)develop allegedly causes injury or if treated individuals subsequently become infectedis found to be otherwise unsuitable during product testing, manufacturing, marketing or suffer adverse effects from our products. Regardless of merit or eventual outcome,sale. Any such product liability claims may resultinclude allegations of defects in decreased demand formanufacturing, defects in design, a failure to warn of dangers inherent in the product, injury to our reputation, withdrawalnegligence, strict liability and a breach of clinical trial volunteers, and loss of revenues.

unauthorized persons. A data security breach could lead to the loss of trade secrets or other employees. To achieveintellectual property, the anticipated benefitsvalue of an acquisition, therewhich may be contingent upon maintaining our confidentiality, or could lead to the public exposure of personal information (including sensitive personal medical information) of clinical trial participants, our employees and others, or adversely impact the conduct of scientific research and clinical trials, including the submission of research results to support marketing authorizations. This could require us to expend significant efforts and resources or incur significant expense to eliminate these problems and address related security concerns. In addition, procedures and safeguards must be an integrationcontinually evolve to meet new data security challenges, and enhancing protections, and conducting investigations and remediation, may impose additional costs on the Company. If we were to suffer a breakdown in our systems, storage, distribution or tracing, we could experience significant disruptions affecting our business, reputational harm or claims against us by private parties and/or governmental agencies.

In addition, the European Parliament and the Council of the two companies’ businesses, technologiesEuropean Union have adopted a new pan-European General Data Protection Regulation (“GDPR”), effective May 25, 2018, which increases privacy rights for individuals in Europe, extends the scope of responsibilities for data controllers and employeesdata processors and imposes increased requirements and potential penalties on companies, offering goods or services to individuals who are located in an efficientEurope or monitoring the behavior of such individuals (including by companies based outside of Europe). Noncompliance can result in penalties of up to the greater of EUR 20 million, or 4% of global company revenues. While we expect to have substantially compliant programs and effective manner.

controls in place to comply with the GDPR requirements, our compliance with the new regulation is likely to impose additional costs on us and we cannot predict whether the interpretations of the requirements, or changes in our practices in response to new requirements or interpretations of the requirements could have a material adverse effect on our business.

Risks Related to Our Dependence on U.S.the Company’s BARDA Contract and Other Government Contracts

Programs

AllWithout the BARDA anthrax contract award, we would only be able to move forward with the NasoShield program at our own risk and without BARDA reimbursement, and may therefore suspend or terminate it.

In recent financial periods, a significant portion of our revenues have been derived from our BARDA contract. For the years ended December 31, 2017 and 2016, BARDA funding for the development of NasoShield accounted for approximately 83% and 81% of our total consolidated revenue and grants and contracts, respectively. There are significant uncertainties and risks associated with our BARDA contract for our NasoShield anthrax vaccine program. Although in July 2016 we received a new BARDA contract that may fund our NasoShield anthrax vaccine program until 2021, the majority of the funds will be received during the final three years of the contract and are dependent on achieving the following positive clinical results during the initialtwo-year period: to demonstrate interim safety and immune response to the vaccine in the Phase 1 clinical study.

Our BARDA contracts arecost-plus-fixed-fee contracts that only reimburse certain specified activities.

Our BARDA contracts arecost-plus-fixed-fee contracts that only reimburse certain specified activities related to our anthrax vaccine program that have been previously authorized by BARDA. There is no guarantee that additional activities will not be needed and, if so, that BARDA will reimburse the Company for these activities. There are also significant requirements associated with operating as a federal government contractor, which include having appropriate accounting, project tracking and earned-value management systems implemented and operational, and we may not be able to consistently meet these requirements. Performance under the BARDA contracts requires that we comply with appropriate regulations and operational mandates, which require us to engage internal and external expertise for compliance. Our ability to be regularly and fully reimbursed for our activities depends and will depend on our ability to comply and demonstrate compliance with such requirements. In the past, we have experienced delays in reimbursements under a BARDA contract on account of compliance issues, which we have had to dedicate substantial time and resources to remedy, including through modifications to our statement of work related to the program. In addition, under certain circumstances, BARDA may advise us to delay certain activities and invest additional time and resources before proceeding. If

we follow such BARDA advice, overall program delays and costs associated with additional resources for which we have not planned may result. The costs associated with following such advice may or may not be reimbursed by BARDA under the contract. We may decide not to follow the advice provided by BARDA and instead pursue activities that we believe are in the best interest of our anthrax vaccine program and our business as a whole, even if BARDA would not reimburse us under our contract.

Prior to the Mergers with PharmAthene, the NIAID notified PharmAthene that it will exercise only one of the additional remaining options under its contract.

As part of the Mergers, we assumed PharmAthene’s contract with NIAID. The NIAID contract is incrementally funded. Over the base period of the contract, PharmAthene was awarded initial funding of approximately $5.2 million, which includes a cost reimbursement component and a fixed fee component payable upon achievement of certain milestones. NIAID exercised four options under this agreement to provide additional funding of approximately $8.8 million and an extension of the period of performance through December 31, 2017. The contract has a maximum total value of up to approximately $28.1 million if all technical milestones were met and all eight contract options were exercised by NIAID. In April 2017, PharmAthene was notified by NIAID that it will exercise only one of the additional remaining options under the contract to provide funding for a rabbit challenge study. Work under all exercised options will bring total committed and final funding under the NIAID contract to $15.1 million. The recoverability of the acquired IPR&D intangible asset is dependent on future funding to support further development.

Most of our immediately foreseeable future revenues relate to our contract withare contingent upon grants, contracts and loans from the U.S. Government. We willand other governments,non-profit entities and academic institutions, and we may not achieve sufficient revenues from thisthese sources either to maintain operations or any future agreements toeventually attain profitability.

Substantially all of our revenues to date have been derived from U.S. and European government grants, contracts and loans (such as our current BARDA contract), and from time to time, we may apply for additional contracts, grants or loans from government agencies,non-profit entities and academic institutions. Such contracts, grants or loans can be highly attractive, because they provide additional capital to fund the ongoing development of our technologies and product candidates without diluting our stockholders. However, there is often significant competition for these contracts, grants and U.S. Government contracts. Afterloans, and the expirationprocess of our SparVax^®contract, our main source of revenueobtaining government and other contracts, grants and loans is our September 2014 contract with NIAID for the development of a next generation lyophilized anthrax vaccine based on our proprietary technology platform which contributes the rPA BDS that is used in the liquid SparVax^® formulation. We will not achieve sufficient revenues from this contract to attain profitability.

Welengthy and uncertain. Entities offering contracts, grants or loans may not choosehave requirements to apply for new government funding for anyor to otherwise be eligible to receive certain contracts, grants or loans that our competitors may be able to satisfy that we cannot. In addition, such entities may make arbitrary decisions as to whether to offer contracts or make grants or loans, to whom the contracts, grants or loans will be awarded and the size of our programs. Ifthe contracts, grants or loans to each awardee. Even if we applied for additional funding,are able to satisfy the award requirements, there is no guarantee that we will be a successful awardee. Therefore, we may not be able to win any contracts, grants or loans in a timely manner, if at all, and there can be no assurance that existing government or other contracts, grants or loans will be renewed or that we would be successful in enteringcan enter into new contracts or receivingreceive new grants or loans.

With respect to supply the United States or other governments withBARDA funding we receive for our products. The process of obtaining government contracts is lengthy and uncertain. Ifanthrax vaccine product candidate, if the U.S. Government madegovernment makes significant contract awards for the supply to the SNS to our competitors, rather than to us, our business wouldwill be harmed and it is unlikely that we maywould ultimately be unableable to supply that particular treatment or product either in the United States or to foreign governments or other third parties. Further, changes in U.S. Governmentgovernment budgets and agendas, funding strategies, cost overruns in our programs, or others, or advances by our competitors, may result in changes in the timing of funding for, a decreased andde-prioritized emphasis on, or termination of, U.S. Governmentgovernment contracts that support the development and/or procurement of the biodefense products.product we are developing. For example, the outbreak of Ebola in 2014 changed the near-term focus and priorities of BARDA to help ensure sufficient progress was being made on a solution for that disease. This resulted in a delay of funding to somenon-Ebola programs until Congress appropriated additional funds to BARDA specific for this purpose.

FundingU.S. government funding is also subject to U.S. Congressional appropriations which are generally made on an annual basis even for multi-year contracts. More generally, due to the ongoing economic and political uncertainty, the U.S. Government

government may reduce or delay spending in the biodefense field or eliminate funding of certain programs altogether, which further decreasescould decrease the likelihood of future government contract awards or that the government would procure products from us.the Company. Future funding levels for two of our historical government customers, BARDA and the U.S. Department of Defense, for the advanced development and procurement of medical counter measurescountermeasures are uncertain, and may be subject to budget cuts and/or government shutdowns as the U.S. Congress and the President look to reduce the U.S. budget deficit. Potential reductions in funding could severely limit our ability to maintain, renew or enter into new contracts and therefore materially and adversely impact our business. A government shutdown could result in a suspension or delayed funding, which may materially and adversely affect our ability to continue our anthrax program.

Further, the 21^st Century Cures Act (“Cures Act”), was signed into law on December 13, 2016 and, among other things, includes a provision requiring timely and accurate recommended utilization guidelines for MCMs, including for products in the Strategic National Stockpile. The Cures Act requires HHS to balance a multitudereport to the appropriate committees of competingCongress when funding in the SRF, available to procurement of MCMs falls below $1.5 billion and how the amount of funding will impact identified MCM priorities.

The Cures Act ensures coordinated and efficient processes for executing MCM development and procurement programs by clarifying that the Director of BARDA carry out the programs funded by the SRF, as well as the procurement contracts, grants, and cooperative agreements under BARDA.

U.S. Governmentgovernment agencies have special contracting authorityrequirements that givesgive them the ability to terminate and/or modify its contracts.

unilaterally control contracts such as our BARDA contract.

U.S. Governmentgovernment contracts, such as our BARDA contract, typically contain unilateral termination provisions for the government and are subject to audit and contain termination provisions allowingmodification by the government to terminate all or part of a contract at its sole discretion, which will subject usthe Company to additional risks.risks during the term of such contracts. These risks include the ability of the U.S. Governmentgovernment unilaterally to:

As stated above, theThe U.S. Government cangovernment will be able to terminate or modify any of its contracts with usthe Company, including our BARDA contract, either for its convenience (at its sole discretion) or for default if we faildefault by failing to perform in accordance with the contract schedule and terms.Termination-for-convenience provisions generally enable us to recover only our costs incurred or committed, settlement expenses, and profit on the work completed prior to termination. A contractor’s rights under a termination for convenience are limited to an adjustment of profit and, with the contracting officer’s concurrence, a reduction in the estimated cost. Under the general termination for convenience procedures, a partial termination is treated as a full termination when (i) the terminated portion is clearly severable from the balance of the contract or (ii) when contract performance is virtually complete or performance of the continued portion of the contract is only on subsidiary items or is otherwise not substantial. Termination-for-default provisions do not permit these recoveries and couldwould make us liable for excess costs incurred by the U.S. Governmentgovernment in procuring undelivered items from another source.

The U.S. Government’sgovernment’s determination to award any contracts may be challenged by an interested party, such as another bidder, at the relevant agency, GAO or the U.S. Court of Federal Claims (either in the first instanceGovernment Accountability Office (“GAO”) or in review of a prior agency or GAO decision).federal court. If such a challenge is successful, a contract award may bere-evaluated and terminated.

The laws and regulations governing the procurement of goods and services by the U.S. Governmentgovernment provide procedures by which other bidders and other interested parties (typically, other offerors) may challenge the award of a government contract. If we were awarded a government contract, suchSuch challenges or protests could be filed regardless of whetherwith respect to any U.S. government contract awarded to the award was actually improper.Company, including our BARDA contract, even if there are not any valid legal grounds on which to base the protest. If a protest isany such protests are filed, the government agency may decide, and in certain circumstances iswill be statutorily required, either by statute or by court order, to suspend our performance under the contract while the protest issuch protests are being considered by the U.S. Government Accountability Office, or GAO or the U.S. Court of Federal Claims,applicable federal court, thus potentially delaying delivery of goods and services and payment. In addition, we might needcould be forced to expend considerable funds to defend any potential award. If a protest is successful, the government may be ordered to terminate our contract andre-evaluate bids and make an bids. The government could even be directed to award based on the re-evaluation or amend the solicitation, invite new bids, and make an award based on an evaluation of such revised bids.

For example, in March 2010, a third-party filed a bid protest with the GAO challenging the February 2010 decisionpotential contract to one of the DHHS to modify its existing research and development contract with us for the development of SparVax^®. In March 2010 DHHS suspended performance under the modification pursuant to the automatic stay provisions of the Competition in Contract Act (31 U.S.C. § 3553(d)) and the Federal Acquisition Regulation, pending a decision by the GAO on the protest. While the bid protest was ultimately denied, and the related DHHS “stop work” order canceled in June 2010, the protest contributed to a reduction in revenues and cash and cash equivalents over the period that work could not be performed under the modification. In addition, we incurred unexpected general and administrative expenses to intervene in the protest.

other bidders.

Our business is subject to audit by the U.S. Government,government, and amay be subject to audit by foreign governments. A negative audit could adversely affect our business.

During 2015, BARDA audited previous years of indirect costs chargedOur business is subject to audit by us on the SparVax^® contract. Depending on the outcomeU.S. government in part because of the audit,funding we receive for our receipt of revenue during 2016 for work previously completedanthrax vaccine program under the SparVax^®program is uncertain.

Otherour BARDA contract. U.S. Governmentgovernment agencies such as the Defense Contract Audit Agency, or the DCAA also routinely audit and investigate government contractors. These agencies review among other things, a contractor’s performance under its contracts, incurred costs, cost structure and compliance with applicable laws, regulations and standards.

For example, BARDA audited indirect costs charged with respect to the SparVax^® contract for the years 2008 through 2014.

The DCAA also reviews the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation and management information systems. Any costs found to be improperly allocated to a specific contract will not be reimbursed, while such costs already reimbursed must be refunded. If an audit uncovers improper or illegal activities, weit may be subject to civil and criminal penalties and administrative sanctions, including:

including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from conducting business with the U.S. government. In addition, wea contractor could suffer serious reputational harm if allegations of impropriety were made against us.it.

In the future, we may also be subject to audits by foreign governments, as we from time to time receive funding fromnon-U.S. government sources.

Laws and regulations affecting government contracts make it more costly and difficult for us to successfully conduct our business.

Our business plan includes the continued development of our anthrax vaccine candidate, NasoShield, pursuant to our BARDA contract in addition to applying for additional contracts, grants or loans from government agencies,non-profit entities and academic institutions. We must comply with numerous laws and regulations relating to the formation, administration and performance of government contracts, which can make it more difficult for us to retain our rights under these contracts. These laws and regulations affect how we conduct business with government agencies. Among the most significant government contracting regulations that affect our business are:

Foreign governments typically also have laws and regulations governing contracts with their respective agencies. These foreign laws and regulations affect how we and our customers conduct business and, in some instances, impose added costs on our business. Any changes in applicable laws and regulations could restrict our ability to maintain our existing contracts and obtain new contracts, which could limit our ability to conduct our business and materially and adversely affect our revenues and results of operations.

Risks Related to Dependence on or Competition From Third PartiesReimbursement and Government Regulation

Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates, if they are approved, which could make it difficult for us to sell our products profitably.

Because weMarket acceptance and sales of any approved products will depend significantly on clinical research centersthe availability of adequate coverage and other contractorsreimbursement from third-party payers and may be affected by existing and future health care reform measures. Third-party payers, such as government health care programs, and private health insurers and health plans, decide which drugs they will provide coverage for clinical and non-clinical testing,establish reimbursement levels. Coverage and reimbursement decisions by a third-party payer may depend upon a number of factors, including testing under the Animal Rule, and for certain research and development activities, the resultsthird-party payer’s determination that use of our clinical trial, non-clinical animal efficacy studies, and research and development activities are largely beyond our control.a product is:

The nature

Third-party payers, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of clinical trialscontrolling health care costs. Coverage and our business strategy of outsourcing substantially all of our research and development and manufacturing work require that we rely on clinical research organizations and other contractorsreimbursement can vary significantly from payer to assist us with research and development, clinical and non-clinical testing (including animal efficacy studies under the Animal Rule), patient enrollment, manufacturing and other activities.payer. As a result, obtaining coverage and reimbursement approval for any approved product from each government and other third-party payer may require us to provide supporting scientific, clinical and cost-effectiveness data for the use of such products to each payer separately, with no assurance that we will be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. We cannot be sure that coverage or adequate reimbursement will be available for any of our success depends largelyproduct candidates, and we cannot be sure that coverage determinations or reimbursement amounts will not reduce the demand for, or the price of, our products. If reimbursement is not available or is available only to limited levels, we may not be able to commercialize certain of our products, even if they are approved by the FDA or other regulatory authorities. In addition, in the United States third-party payers are increasingly attempting to contain health care costs by limiting both coverage and the level of reimbursement of new drugs. As a result, significant uncertainty exists as to whether and how much third-party payers will reimburse patients for their use of newly approved drugs, which in turn will put pressure on the successpricing of drugs.

Price controls may be imposed, which may adversely affect our future profitability.

In international markets, reimbursement and health care payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies. In some countries, particularly member states of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. In these third parties in performing their responsibilities. Although we prequalifycountries, pricing negotiations with governmental authorities can take considerable time after receipt of marketing approval for a product. In addition, there can be considerable pressure by governments and

other stakeholders on coverage, prices and reimbursement levels, including as part of cost containment measures. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after coverage and reimbursement has been obtained. Reference pricing used by various European Union member states and parallel distribution, or arbitrage betweenlow-priced and high-priced member states, can further reduce revenues. In some countries, additional clinical research may be required to enable comparison of the cost-effectiveness of our contractors and believe thatproduct candidates, if they are fully capableapproved, to other available vaccines in order to obtain or maintain coverage, reimbursement or pricing approval. Publication of performingdiscounts by third-party payers or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. In the United States, concerns about drug pricing have been expressed by members of Congress and President Trump. There can be no assurance that our product candidates, if approved, will be considered cost-effective by third-party payers, that an adequate level of reimbursement will be available or that the third-party payers’ reimbursement policies will not adversely affect our ability to sell our products profitably. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be adversely affected.

We are subject to multiple and substantial federal and state health care and other laws, and the complexity of our regulatory compliance obligations is likely to increase in the event our product candidates are commercialized.

Our business operations and activities may be directly or indirectly subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute and the federal FCA. If we obtain FDA approval for any of our product candidates and begin commercializing those products in the United States, our potential exposure under such laws will increase significantly, and our costs associated with compliance with such laws are also likely to increase. These laws may impact, among other things, our current activities with principal investigators and research subjects, as well as proposed and future sales, marketing and education programs.

In addition, we may be subject to patient privacy regulation by the federal government and state governments in which we conduct our business. In addition to the Anti-Kickback Statute, FCA and Physician Payments Sunshine Act, the laws that may affect our ability to operate include, but are not limited to:

In addition, the pace of clinical or non-clinical development, regulatory approval and commercialization of any of our product candidates couldoutside the United States will also subject us to foreign equivalents of the health care laws mentioned above, among other foreign laws, as well as compliance with the codes of practice of certain associations within such countries (for example, the Association of the British Pharmaceutical Industry (ABPI) in the United Kingdom).

Efforts to help ensure that our business arrangements will comply with applicable health care laws and codes of practice may involve substantial costs. We have adopted policies and practices that are designed to help ensure that the Company, our employees, officers, agents, intermediaries and other third parties comply with applicable laws, but it is not always possible to assure compliance with applicable requirements, and the precautions we take to achieve compliance may not be significantly delayedeffective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. It is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other health care laws and regulations. If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to the Company, we may be subject to penalties, including, without limitation, civil, criminal and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal health care programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment or restructuring of our operations.

The impact of recent health care reform legislation and other changes in the health care industry and in health care spending on the Company is currently unknown, and may adversely affect our business model.

Our financial prospects could be adversely affected.

We depend on third parties to manufacture, package and distribute compounds for our product candidates and key components for our product candidates. The failure of these third parties to provide their services or to perform them successfully could harm our business.

Third-party manufacturers, suppliers and distributors, like most companies, have been adversely affected by changes in health care spending and policy in the weakeningUnited States and abroad. We operate in a highly regulated industry and new laws or judicial decisions, or new interpretations of existing laws or decisions, related to health care availability, the method of delivery or payment for health care products and services could negatively impact our business, operations and financial condition.

For example, in the United States there is significant interest in promoting health care reform, as evidenced by the enactment in the United States of the global economy and as such may be more susceptible to being acquired as part of the current wave of consolidations in the pharmaceutical industry. If our third-party suppliers continue to experience financial difficulties as a result of weak demand for their products or for other reasons and are unable to obtain the capital necessary to continue their present level of operations or are acquired by others, they may have to reduce their activities and/or their priorities or our working relationship with them might change. A material deterioration in their ability or willingness to meet their obligations to us could cause a delay in our development program and potential future sales and jeopardize our ability to meet our obligations under our contract with the government or other third parties.

We do not have any of our own manufacturing facilities. We have therefore utilized third parties to manufacture, package and distribute our product candidates and key components of our product candidates. Any material disruption in manufacturing (i.e. due to third party capacity or availability limitations) could cause a delay in development programs and potential future sales, if any. Furthermore, certain compounds, media, or other raw materials used to manufacture our drug candidates are available from only one or a limited number of sources. Any delays or difficulties in obtaining key components for our product candidates or in manufacturing, packaging or distributing our product candidates could delay clinical trials and further development of these potential products. Additionally, the third parties we rely on for manufacturing and packaging are subject to regulatory review, and any regulatory compliance problems with these third parties could significantly delay or disrupt any commercialization activities we may engage in.

We face competition from companies with greater financial, personnel and research and development resources, further limiting our commercial opportunities.

The biopharmaceutical industry is characterized by rapid and significant technological change. Even if we were able to overcome the obstacles to funding, development and commercialization described in these Risk Factors, our success would depend on our ability to establish and maintain a market for our product candidates. There are many organizations, both public and private, including major pharmaceutical and chemical companies, specialized biotechnology firms, universities and other research institutions engaged in developing pharmaceutical and biotechnology products. Many of these organizations have substantially greater financial, technical, intellectual property, research and development, and human resources than we have. Competitors may develop products or other technologies that are more effective than any that we may be developing or may obtain FDA approval for products more rapidly.

Even if we were able to overcome the obstacles to funding, development and commercialization described in these Risk Factors, we still must compete in the manufacturing and marketing of such products, areas in which we have limited experience. Many of these organizations also have manufacturing facilities and established marketing capabilities that would enable such companies to market competing products through existing channels of distribution. Any commercial opportunities will be reduced or eliminated if our competitors develop and market products that:

The Patient Protection and Affordable Care Act and the Health Care Reform Law. The Health Care Reform Law increased federal oversight of private health insurance plans and included a number of provisions designed to reduce Medicare expenditures and the cost of health care generally, to reduce fraud and abuse, and to provide access to increased health coverage.

The Health Care Reform Law has also imposed substantial changes to the U.S. system for paying for health care, including programs to extend medical benefits to millions of individuals who have lacked insurance coverage. Generally, implementation of the Health Care Reform Law has thus far included significant cost-saving, revenue and payment reduction measures with respect to, for example, several government health care

programs that might cover our products in the United States, should they be commercialized, including Medicaid and Medicare. Additional downward pricing pressure associated with the Health Care Reform Law includes that the Health Care Reform Law established and provided significant funding for a Patient-Centered Outcomes Research Institute to coordinate and fund Comparative Effectiveness Research, as those terms are defined in the Health Care Reform Law. While the stated intent of Comparative Effectiveness Research is to develop information to guide providers to the most efficacious therapies, outcomes of Comparative Effectiveness Research could influence the reimbursement or Affordablecoverage for therapies that are determined to be less cost effective than others. Should any of our products be approved for sale, but then determined to be less cost effective than alternative therapies, the levels of reimbursement for these products, or the willingness to reimburse at all, could be impacted, which could materially impact our financial results.

President Trump is seeking to repeal and replace the Health Care Reform Law. Repeal and replace legislation was passed in the House of Representatives, but did not obtain the necessary votes in the Senate. Subsequently, President Trump affirmed his intention to repeal and replace the Health Care Reform Law and has taken a number of administrative actions to materially weaken the Health Care Reform Law. For example, on January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the Health Care Reform Law to waive, defer, grant exemptions from, or delay the implementation of any provision of the Health Care Reform Law that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. Further, on December 22, 2017, President Trump signed the Tax Cuts and Jobs Act signed into law, by President Obama on March 23, 2010, amendswhich repealed the Public Health Service Act to create an abbreviated licensure pathway for biological products that are demonstrated to be “biosimilar” to or “interchangeable” with an FDA-licensed biological product. Under this new law, a biological product may be demonstrated to be “biosimilar” if data show that, among other things, the product is “highly similar” to an already-approved biological product. To date, the FDA has not approved a biological product as biosimilar or interchangeable. Since passageindividual mandate of the AffordableHealth Care Act in 2010, however, the FDA has been establishing standards for licensure to ensure the safety and effectiveness of biosimilars. Because biological products are complex products, the development and approval of biosimilars is a complicated and challenging process. Numerous companies are reportedly developing biosimilar products and several applications for licensure have reportedly been submitted to the FDA under the new law. On March 6, 2015, the FDA approved a biosimilar application filed by Novartis for a competing version of Amgen’s cancer treatment biologic drug product, Neupogen. Scientists, clinicians, and other personnel at the FDA are continuing to work out the detailsReform Law. The uncertain status of the biosimilar application requirements, and the FDA’s review and licensure process, which are expected to vary on a product-by-product basis.

If we were successful in developing licensed biological products and a competitor company/companies chose to develop biosimilar products and receives FDA licensure for such products, this competition could impact the revenue projections for our products.

Even if we were successful in developing effective products, and obtain FDA and other regulatory approvals necessary for commercializing them, our products may not compete effectively with other successful products. Our competitors may succeed in developing and marketing products either that are more effective than those that we may develop, alone or with our collaborators, making our products obsolete, or that are marketed before any products that we develop are marketed.

Risks Related to Political and Social Factors

Political or social factors may delay or impairHealth Care Reform Law affects our ability to market our productsplan, and our business may be materially adversely affected.

Products developed to treat diseases caused by, or to combat the threat of, bioterrorism will be subject to changing political and social environments. The political and social responses to bioterrorism have been unpredictable. Even if we were able to overcome the obstacles to funding, development and commercialization described in these Risk Factors, political or social pressures may delay or cause resistance to bringing our products to market or limit pricing of our products, which would harm our business.

Risks Related to Intellectual Property

Part of our value depends on our ability (i) to obtain and maintain protection for our proprietary technology and that of our licensors and collaborators and (ii) not to infringe on patents and proprietary rights of third parties.