UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DCWashington, D.C. 20549

FORM 10-K

(Mark One)

FOR THE FISCAL YEAR ENDED DECEMBER

For the fiscal year ended December 31, 20192022

OR

FOR THE TRANSITION PERIOD FROM                 TO                

Commission file number: File Number 001-36003

CONATUS PHARMACEUTICALS INC.Histogen Inc.

(Exact name of registrantRegistrant as specified in its charter)Charter)

Registrant’s telephone number, including area code: (858) 376-2600526-3100

(Registrant’s Telephone Number, Including Area Code)

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

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by a check mark if the registrantRegistrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes☐No☒

Indicate by a check mark if the registrantRegistrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934.    Act. Yes☐No☒

Indicate by check mark whether the registrantRegistrant: (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 registrantRegistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒No☐

Indicate by check mark whether the registrantRegistrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrantRegistrant was required to submit such files). Yes☒No☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  YES ☐    No   NO ☒

TheAs of June 30, 2022, the last day of the Registrant’s most recently completed second quarter, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarterRegistrant was approximately $8.4$5.4 million, based on the closing price of the registrant’s common stock on the Nasdaq Global Market of $0.26 per share.

As of March 2, 2020, the registrant had 33,170,487 shares of common stock ($0.0001 par value) outstanding.on The NASDAQ Global Market on June 30, 2022 of $2.28 per share.

The number of shares of Registrant’s Common Stock outstanding as of March 8, 2023 was 4,271,759.

CONATUS PHARMACEUTICALS INC.Table of Contents

TABLE OF CONTENTS

FORM 10-K

For the Year Ended December 31, 2019

INDEX

i

PART

PART I

FORWARD-LOOKING STATEMENTS AND MARKET DATACautionary Note Regarding Forward-Looking Statements

This annual report on Form 10-KAnnual Report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended.amended (the “Exchange Act”). All statements other than statements of historical facts contained in this annual report,Annual Report are forward-looking statements, including statements regarding:

These statements involve known and unknown risks, uncertainties and other important factors that may cause Conatus’our actual results, performance orand achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. This annual report on Form 10-K also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other data about Conatus’ industry. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. In addition, projections, assumptions and estimates of Conatus’ future performance and the future performance of the markets in which Conatus operates are necessarily subject to a high degree of uncertainty and risk.

In some cases, you can identify forward-looking statements by termsterminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,“expects,” “target,“intends,” “project,“plans,” “contemplate,“anticipates,” “believe,“believes,” “estimate,“estimates,” “predict,“predicts,” “potential” or “continue”“potential,” “continue,” or the negative of these terms or other similar expressions. Thecomparable terminology. These forward-looking statements in this annual report are only predictions. Conatus hasWe have based these forward-looking statements largely on Conatus’our current expectations and projections about future events and financial trends that Conatus believeswe believe may affect itsour business, financial condition and results of operations. These forward-looking statements speak only as of the date of this annual reportAnnual Report and are subject to a number of risks, uncertainties and assumptions, including those described in Part I, Item 1A, “Risk Factors.” The events and circumstances reflected in Conatus’our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, Conatus operateswe operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, Conatus doeswe do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

Conatus use its registeredWe have common law trademark CONATUS PHARMACEUTICALS,rights in this annual report. This annual report also includes trademarks, tradenamesthe unregistered marks “Histogen Inc.,” “Histogen Therapeutics Inc.,” “Histogen,” and service marks that are the property of other organizations.Histogen logo in certain jurisdictions. Solely for convenience, trademarks and tradenames referred to in this annual reportAnnual Report appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that Conatuswe will not assert, to the fullest extent under applicable law, itsour rights or that the applicable owner will not assert its rights, to these trademarks and tradenames.

Conatus maintains a website at www.conatuspharma.com,

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Item 1. Business.

Overview

We are clinical-stage therapeutics company focused on developing potential first-in-class clinical and preclinical small molecule pan-caspase and caspase selective inhibitors that protect the body’s natural process to which Conatus regularly post copies of its press releasesrestore immune function. Our product candidates include emricasan, CTS-2090 and CTS-2096. Currently, we are developing emricasan for acute bacterial skin and skin structure infections (ABSSSI) as well as additional information about Conatus. Conatus’ filings with the Securitiesevaluating its use for other infectious diseases. Our pipeline also includes novel preclinical product candidates including CTS-2090 and Exchange Commission, or SEC,CTS-2096, which are available freehighly selective small molecule inhibitors of charge through its website as soon as reasonably practicable after being electronically filed with or furnished to the SEC. Interested persons can subscribe on Conatus’ website to email alerts that are sent automatically when Conatus issues press releases, files its reports with the SEC or posts certain other information to its website. Information contained in its website does not constitute a part of this report or its other filings with the SEC.

Overview

Conatus is a biotechnology company that has been focused on the development and commercialization of novel medicines to treat chronic diseases with significant unmet need. Conatus has been developing emricasan, an orally active pan-caspase inhibitor,caspase-1 designed for the treatment of patients with chronic liver disease. certain inflammatory diseases.

Our Product Candidates

Small Molecule Pipeline

In June 2019, Conatus2021, we announced that top-linetop line results from its ENCORE-LF clinical trialthe Phase 1 study of emricasan in mild symptomatic COVID-19 patients to assess safety, tolerability, and preliminary efficacy. The study demonstrated that emricasan was safe and well-tolerated during the 14 days of dosing and at the day 45 follow-up, as compared to placebo with no reports of serious adverse events. Patients who completed treatment with emricasan had a complete resolution of the symptoms most commonly associated with mild COVID-19, such as cough, headache, and fatigue at day 7 and continued through day 45. No patients in the placebo arm who completed the study experienced COVID-19 associated symptom resolution at any time point out to day 14. Some of the placebo patients did have COVID-19 symptom resolution at day 30 while others experienced symptoms that persisted at day 45. A total of 13 subjects were consented and randomized to receive either placebo or 25 mg emricasan orally, BID for 14 days. PK samples, taken at day 14 of the study to check for compliance, revealed that one patient in the treatment arm did not meetshow any indications of emricasan or its primary endpoint,known metabolites in plasma, leading to a reclassification of the patient for the subsequent analysis shown in Figure 1.

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Figure 1. Per-protocol analysis of time to complete resolution of symptoms. Symptoms were defined by the 14-point questionnaire recommended by the FDA for outpatient COVID-19 studies. For the first 14 days, patients had daily tele-visits. In-person follow up visits were conducted on days 14, 30 and Conatus and its partner, Novartis had no further plans45. The Kaplan-Meier plots for time-to-recovery show faster recovery in patients treated with emricasan, and in September 2019, Conatus and Novartis entered into an amendmentwith a median of 5 (interquartile range 4-6 days) vs 37 days (interquartile range of 30-45) for participants randomized to the Collaboration Agreement, pursuantplacebo group. The mean number of days to recovery for patients was 4.8 days with a SD=0.83 in the emricasan arm and 37.5 days, SD=8.2 in the placebo arm (p=0.001).

At present, the Company has decided to pause development of emricasan as a treatment for COVID-19 in favor of development activities related to emricasan as a treatment for ABSSSI.

Additionally within our small molecule pipeline, we have assembled a proprietary portfolio of orally active molecules that inhibit inflammasome pathways and thus the activation of the potent inflammatory cytokine interleukin-1β, or IL-1β. Inhibition of IL-1β is a clinically validated approach to treating inflammatory diseases, with injectable biologic products using that mechanism of action already on the market. The NLRP3 inflammasome pathway, for example, is dependent upon caspase-1, which they mutually agreedactivates IL-1β. As such, caspase-1 occupies a uniquely central position in the inflammasome pathway, and we have leveraged our scientific expertise in caspase research and development to terminate the Collaboration Agreement.design potent, selective and orally bioavailable inhibitors of caspase-1. Excess IL-1β has been linked to a variety of diseases including rare genetic inflammatory diseases, neurological diseases, cancer, liver and other gastrointestinal diseases, and cardiovascular diseases.

CTS-2090

and CTS-2096 are selective caspase-1 inhibitors targeting inflammasome activation and have potential to treat a variety of inflammation mediated diseases. Inflammasomes are a collection of large multiprotein structures responsible for the activation of inflammatory responses. There are six known inflammasome subtypes - NLRP1, NLRP3, NLRC4, NLRP6, AIM2 and IFI 16 - that respond to different stimuli. A primary function of the inflammasomes is to generate active caspase 1caspase-1 from procaspase 1 in response to various pathogens and other stimuli. The ultimate products produced by the activation of caspase 1 are highly pro-inflammatory cytokines, IL-1ß and IL-18. In addition, caspase 1 initiates pyroptosis, a highly inflammatory form of cell death, through the cleavage of gasdermin D.

The NLRP3 inflammasome pathway,selection of product candidate, CTS-2090, as a lead compound is based on its preclinical profile, including high selectivity for example, is dependent upon caspase 1, which activates IL-1ß. As such, caspase 1 occupiescaspase-1, and drug-like properties showing a uniquely central positionhigh degree of drug exposure in the inflammasome pathway,intestinal track after oral administration. Similarly, we intend to evaluate CTS-2096, as an additional caspase-1 inhibitor drug candidate, and Conatus has leveragedare in the process of exploring its scientific expertisedrug like properties.

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Technology and Product Licensing Opportunities

Previously, our focus was on developing our proprietary hypoxia-generated growth factor technology platform and stem cell-free biologic products as potential first-in-class restorative therapeutics that ignite the body’s natural process to repair and maintain healthy biological function. In December 2022, we announced termination of our HST-003 study for futility related to patient recruitment and due to pipeline reprioritization, in caspase researchthe third quarter of 2022, we suspended all IND enabling activities on our HST-004 program.

While we are actively seeking collaboration partners or acquirors for our Human Multipotent Cell Conditioned Media, or CCM and developmentour Human Extracellular Matrix, or hECM, there are no assurances that we will find a collaboration partner or acquirer for CCM or hECM or that the terms and timing of any such arrangements would be acceptable to design potent, selectiveus.

Our proprietary hypoxia-generated growth factor technology is based on the discovery that growing fibroblast cells under simulated embryonic conditions induces them to become multipotent with stem cell-like properties. The environment created by our proprietary process mimics the conditions within the womb — very low oxygen and orally bioavailable inhibitorssuspension culture. When incubated under these conditions, the fibroblast cells generate biological materials, growth factors and proteins, that have the potential to stimulate a person’s own stem cells to activate and replace/regenerate damaged cells and tissue. Our proprietary manufacturing process provides targeted solutions that harness the body’s inherent regenerative power across a broad range of caspase 1. Excess IL-1ß has been linked totherapeutic indications including joint cartilage regeneration and spinal disc repair.

Our manufacturing process yields multiple biologic products from a single bioreactor, including CCM and hECM, creating a spectrum of product candidates for a variety of diseases including rare genetic inflammatory diseases, cancer, livermarkets from one core technology.

Biologics Technology Platform

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CCM Skin Care Ingredient

Market and Commercial Opportunity

Our small molecule pipeline of clinical and preclinical candidates, emricasan, CTS-2090 and CTS-2096, address what we believe to be significant competitors, particularly through collaborative arrangements with large, established companies. Conatus believesunderserved, multibillion-dollar global markets for the key competitive factors that will affect the developmenttreatments for infectious and commercial success of its product candidatesinflammatory diseases. We are efficacy, safety and tolerability profile, reliability, convenience of dosing, price and reimbursement.currently developing emricasan for ABSSSI.

Material Contracts

Pfizer Inc.

In July 2010, Conatuswe entered into a Stock Purchase Agreement with Pfizer pursuant to which Conatusit acquired all of the outstanding capital stock of Idun Pharmaceuticals, Inc. (“Idun”), a wholly-owned subsidiary of Pfizer at the time, in consideration for an upfront payment of $250,000 and a promissory note in the principal amount of $1.0 million. In July 2013, the promissory note was amended to become convertible into shares of Conatus common stock following the completion of its initial public offering, at the option of the holder, at a price per share equal to the fair market value of Conatus common stock on the date of conversion. Conatus had the right to prepay the promissory note at any time, and in January 2017, Conatus voluntarily prepaid the entire balance of the principal and accrued interest of the promissory note. The promissory note bore interest at a per annum interest rate equal to 7%, compounded quarterly, and interest was payable on a quarterly basis during the term of the promissory note.time. Pursuant to the Stock Purchase Agreement, Conatuswe will be required to make additional payments to Pfizer totaling $18.0 million upon the achievement of specified regulatory milestones relating to emricasan.

Prior to the termination of the Collaboration Agreement with Amerimmune on November 28, 2022, the obligations pursuant to the Stock Purchase Agreement were the responsibility of our former collaboration partner, Amerimmune. In accordance with authoritative guidance, amounts for the milestone payments will be recognized when it is probable that the related contingent liability has been incurred and the amount owed is reasonably estimated. No amounts for the milestone payments have been recorded during the year ended December 31, 2022.

Idun Distribution Agreement

In January 2013, Conatusthe Company conducted a spin-off of its subsidiary Idun, which Conatusthe Company had acquired from Pfizer in the transaction described above, to Conatus stockholders at that time. Immediately prior to the spin-off, all rights

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relating to emricasan were distributed to Conatusthe Company pursuant to a distribution agreement.

Novartis Pharma AGPUR

In December 2016, ConatusApril 2019, Private Histogen entered into a Settlement, Release and Termination Agreement (“PUR Settlement”) with PUR Biologics, LLC and its members which terminated the Collaboration AgreementLicense, Supply and Operating Agreements between Private Histogen and PUR, eliminated Private Histogen’s membership interest in PUR and returned all in-process research and development assets to Private Histogen (the “Development Assets”). The agreement also provided indemnifications and complete releases by and among the parties. The acquisition of the Development Assets was accounted for as an asset acquisition in accordance with Novartis, pursuant to which Conatus granted Novartis an exclusive option to collaborate with Conatus to develop products containing emricasan. In May 2017, Novartis exercised its option under the Collaboration Agreement. Pursuant to such exercise, Conatus granted Novartis an exclusive, worldwide license to its intellectual property rights relating to emricasan to collaborate with ConatusASC 805-50-50, Acquisition of Assets Rather than a Business.

As consideration for the global development and commercialization of products containing emricasan either as a single active ingredient or in combination with other Novartis compounds for liver cirrhosis or liver fibrosis, for the treatment, diagnosis and prevention of disease in all indications in humans. The license became effective upon Conatus’ receipt of a $7.0 million option exercise payment in July 2017. In September 2019, Conatus and Novartis entered into an amendment to the Collaboration Agreement, pursuant to which they mutually agreed to terminate the Collaboration Agreement.

Under the Collaboration Agreement, Conatus was responsible for completing the three ENCORE trials. Conatus shared the costs of these three trials equally with Novartis. In addition, until the completionreacquisition of the three Phase 2b trials, ConatusDevelopment Assets, Private Histogen compensated PUR with both equity and Novartis were to share the costscash components, including 8,366 shares of the non-treatment observational study that will follow patients from the three ENCORE Phase 2b trialsSeries D convertible preferred stock with a fair value of $1.75 million and the previously completed Phase 2b POLT-HCV-SVR trial. After the completiona potential cash payout of the three ENCORE Phase 2b trials, Novartis would have assumed 100% of the observational study costs. Novartis was also responsible for 100% of certain expenses for required registration-supportive nonclinical activities. Novartis was responsible for Phase 3 development of products containing only emricasan as an active ingredient, or Emricasan Only Products, and all development for products containing emricasan and one or more other Novartis active ingredients, or Combination Products. Emricasan Only Products and Combination Products are collectively referred to

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as Emricasan Products. A joint steering committee comprised of senior personnel from Conatus and Novartis oversaw the collaboration, development and commercialization of the Emricasan Products. Pursuant to the terms of termination, Novartis and Conatus will continue to share the costs of the Phase 2b trials equally until December 31, 2019 and Novartis will pay up to $150,000 for its share of the costs of the Phase 2b trials, if any, in 2020.

Pursuant to the Collaboration Agreement, Conatus received an upfront payment of $50.0$6.25 million and the option exercise payment of $7.0 million from Novartis. Conatus was eligible to receive up to an aggregate of $650.0(the “Cap Amount”). Private Histogen paid PUR $0.5 million in milestone payments over the termupfront cash, forgave approximately $22 thousand of the Collaboration Agreement, contingent on the achievementaccounts receivable owed by PUR to Private Histogen, and settled an outstanding payable of certain development, regulatory and commercial milestones. Novartis would have been requiredPUR of approximately $23 thousand owed to pay Conatus tiered royalties ranging from the high-teensa third party. The Company is also obligated to the high-twenties as a percentage of net sales of Emricasan Only Products, and tiered royalties ranging from the high-single digits to the mid-teens as a percentage of net sales of Combination Products, subject to reduction in certain cases. After the initiation of the first Phase 3 clinical trial for an Emricasan Product, Conatus had an option to elect to enter into a co-commercialization agreement with Novartis under which Conatus was eligible receive up to 30% of the commercial profits less the same percentage of the commercial losses for Emricasan Products in the United States, subject to certain reductions inmake milestone and royalty payments. Aspayments, including (a) a result$0.4 million payment upon the unconditional acceptance and approval of a New Drug Application or Pre-Market Approval Application by the FDA related to the Development Assets, (b) a $0.4 million commercialization milestone upon reaching gross sales (by the Company or licensee) of the termination$0.5 million of products incorporating the Collaboration Agreement, Conatus will not receiveDevelopment Assets, and (c) a five percent (5%) royalty on net revenues collected by Histogen from commercial sales (by the Company or licensee) of products incorporating the Development Assets. The aforementioned cash payments, along with any future milestone and royalty or profitpayments, are all applied against the Cap Amount. In accordance with authoritative guidance, amounts for the milestone and loss sharingroyalty payments underwill be recognized when it is probable that the Collaboration Agreement.

Concurrent withrelated contingent liability has been incurred and the entry intoamount owed is reasonably estimated. No amounts for the Collaboration Agreement, Conatus entered into an Investment Agreement with Novartis, or the Investment Agreement, whereby Conatus agreed to sellmilestone and Novartis agreed to purchase, convertible promissory notes, in one or two closings, for an aggregate principal amount of up to $15.0 million. In February 2017, Conatus issuedroyalty payments have been recorded as a convertible promissory note, or the Novartis Note, in the principal amount of $15.0 million, pursuant to the Investment Agreement. The maturity date of the Novartis Note wascontingent liability at December 31, 2019,2022 and it bore interest on the unpaid principal balance at a rate of 6% per annum. In December 2018, Conatus, at its option, converted the entire outstanding principal of $15.0 million2021.

Governmental Regulation

FDA Regulation and accrued and unpaid interest of the Novartis Note into 2,882,519 shares of Conatus common stock. Pursuant to the terms of the Novartis Note, the principal and accrued and unpaid interest converted into shares of Conatus common stock at a conversion price equal to 120% of the 20-day trailing average closing price per share of the common stock immediately prior to the conversion date.Marketing Approval

Intellectual Property

The proprietary nature of, and protection for, Conatus’ product candidates and discovery programs and know-how are important to its business. Conatus has sought patent protection in the United States and internationally for emricasan, crystalline forms of emricasan and certain methods of treatment with emricasan. In addition, Conatus has patent protection covering certain other preclinical stage compounds. Conatus’ policy is to pursue, maintain and defend patent rights whether developed internally or licensed from third parties and to protect the technology, inventions and improvements that are commercially important to the development of its business.

Conatus’ commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection of its current and future product candidates and the methods used to develop and manufacture them, as well as successfully defending these patents against third-party challenges. Conatus’ ability to stop third parties from making, using, selling, offering to sell or importing its products depends on the extent to which it has rights under valid and enforceable patents that cover these activities. Conatus cannot be sure that patents will be granted with respect to any of its pending patent applications or with respect to any patent applications filed by it in the future, nor can it be sure that any of its existing patents or any patents that may be granted to it in the future will be commercially useful in protecting its product candidates, discovery programs and processes. For this and more comprehensive risks related to Conatus’ intellectual property, please see “Risk Factors—Risks Related to Conatus’ Intellectual Property.”

Conatus’ patent portfolio includes patents directed to crystalline forms of emricasan. As of December 31, 2019, Conatus had received one United States patent and corresponding foreign patents directed to crystalline forms of emricasan. Foreign patents have been granted in Australia, Canada, China, Denmark, France, Germany, Great Britain, Greece, Hong Kong, Ireland, Israel, Italy, Japan, Mexico, Netherlands, Portugal, Romania, Singapore, South Korea, Spain, Sweden, Switzerland, Taiwan and Turkey. Conatus expects that the crystalline forms and methods of use patent, if the appropriate maintenance, renewal, annuity or other governmental fees are paid, will expire in 2028 (United States) and 2027 (international). It is possible that the term of a crystalline forms patent in the United States could be extended up to five additional years under the provisions of the Hatch-Waxman Act. Patent term extension may be available in certain foreign countries upon regulatory approval. Conatus’ patent portfolio also includes patent applications directed to composition of matter and methods of use for its internally developed caspase inhibitors, including CTS-2090.

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Government Regulation

Government authorities in the United States (at the federal, state and local level) and in other countries extensively regulate, among other things, the research, development, testing, manufacturing, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of drug products such as those Conatus develops. Emricasan, CTS-2090 and any other product candidates that Conatus develops must be approved by the FDA before they may be legally marketed in the United States and by the appropriate foreign regulatory agency before they may be legally marketed in foreign countries.

United States Drug Development Process

In the United States,U.S., the FDA regulates drugsactive pharmaceutical ingredients (API), drug products, biological products, and medical devices under the Federal Food, Drug, and Cosmetic Act (“FDCA”)(FDCA), the Public Health Service (PHS) Act, and implementingother federal regulations. DrugsThese FDA-regulated products are also subject to other federal, state and local statutes and regulations.regulations, as well as applicable laws or regulations in foreign countries, as applicable. The processFDA, and comparable regulatory agencies in state and local jurisdictions and in foreign countries, impose substantial requirements on the research, development, testing, manufacture, quality control, labeling, packaging, storage, distribution, record-keeping, approval, post-approval monitoring, advertising, promotion, marketing, sampling and import and export 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.FDA-regulated products. Failure to comply with the applicable United States requirements at any time during the productdrug development process, approval process or after approval may subject an applicant to administrative or judicial sanctions. FDAsanctions or non-approval of product candidates. These sanctions could include among other actions,a clinical hold on clinical trials, FDA’s refusal to approve pending applications or related supplements, withdrawal of an approval, a clinical hold,untitled or warning letters, product recalls, or withdrawals from the market, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement, or civil penalties or criminal penalties.prosecution. Such actions by government agencies could also require us to expend a large number of resources to respond to the actions. Any agency or judicial enforcement action could have a material adverse effect on Conatus. The process required by the FDA beforeus.

IND and Clinical Trials of Drug

Prior to commencing a human clinical trial of a drug may be marketed in the United States generally involves the following:

Before testing any compounds with potential therapeutic value in humans, a product candidate enters the preclinical testing stage. Preclinical tests include laboratory evaluations of drug chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and activity of the product candidate. The conduct of the preclinical tests must comply with federal regulations and requirements including GLPs. The sponsor must submitcontains the results of the preclinical tests, togetherstudies along with other information, such as information about product chemistry, manufacturing information, analytical data, any available clinical data or literatureand controls and a proposed clinical protocol, must be submitted to the FDA as part of an IND.FDA. An IND is a request for authorization from the FDA to administer an investigational drug or biological product to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for human studies. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA within the 30-day time period raises concerns or questions regardingabout the proposedconduct of the clinical trials and places the IND on clinical hold within that 30-day time period.trial. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns with the FDA

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before the clinical trial canmay begin. The FDA may also imposeA separate submission to the existing IND must be made for each successive clinical holds on a product candidate at any time before ortrial to be conducted during clinical trials duedrug development.

An independent Institutional Review Board (IRB) for each site proposing to safety concerns or non-compliance. Accordingly, Conatus 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 trials.

Clinical trials involve the administration of the product candidate to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or underconduct the clinical trial sponsor’s control, in accordance with GCPs, which includemust review and approve the requirementinvestigational plan for the trial before it commences at that all research subjects provide their informedsite. Informed written consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria and the parameters to be used to monitor subject safety and assess efficacy. Each protocol, and any subsequent amendments to the protocol, must be submitted to the FDA as part of the IND. Further,obtained from each clinical trial must be reviewed and approved by an independent institutional review board, or 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 issues such 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 informed consent form that must be provided to each clinical trial subject or his or her legal representative and mustsubject.

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monitor the clinical trial until completed. There are also requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries.

Human clinical trials for drug and biological products typically are typically conducted in three sequential phases that may overlap or be combined:overlap:

The FDCA permits the FDA and an IND sponsor to agree in writing on the design and size of clinical trials intended to form the primary basis of a claim of effectiveness in an NDA. This process is known as a Special Protocol Assessment, or SPA. An SPA agreement may not be changed by the sponsor or the FDA after the clinical trial begins except with the written agreement of the sponsor and the FDA, or if the FDA determines that a substantial scientific issue essential to determining the safety or effectivenessefficacy of the drug was identified after the testing began. For certain types of protocols, including carcinogenicity protocols, stability protocols and Phase 3 protocols forin an expanded patient population at multiple clinical trials that will form the primary basis of an efficacy claim, the FDA has agreed under its performance goals associated with the Prescription Drug User Fee Act, (“PDUFA”), to provide a written response on most protocols within 45 days of receipt. However, the FDA does not always meet its PDUFA goals, and additional FDA questions and resolution of issues leading up to an SPA agreement may result in the overall SPA process being much longer, if an agreement is reached at all.

Progress reports detailing the results of theAll clinical trials must be submitted at least annuallyconducted in accordance with FDA regulations, including good clinical practice (GCP) requirements, which are intended to protect the rights, safety and well-being of trial participants, define the roles of clinical trial sponsors, administrators and monitors and ensure clinical trial data integrity. Regulatory authorities, including the FDA, and written INDan IRB, a data safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events or any finding from tests in laboratory animals that suggests a significant risk for human subjects. Phase 1, Phase 2 and Phase 3 clinical trials may fail to be completed successfully within any specified period, if at all. The FDA, the IRBmonitoring board or the sponsor, may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects or patientsparticipants are being exposed to an unacceptable health risk. Similarly, an IRB can suspendrisk or terminate approval of a clinical trial at its institution ifthat the clinical trial is not being conducted in accordance with FDA requirements.

During the IRB’s requirementsdevelopment of a new drug or ifbiologic, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior to submission of an IND (pre-IND), at the end of Phase II clinical trials (End-of-Phase (EOP) II), and before an NDA (pre-NDA) is submitted. Meetings at other times may be requested (Type A or C meetings). These meetings can provide an opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice and for the sponsor and the FDA to reach agreement on the next phase of development. Sponsors typically use the EOP II meeting(s) to discuss their Phase II clinical trials results and present their plans for the pivotal Phase III registration trial that they believe will support approval of the new drug/biologic.

An investigational drug product that is a combination of two different drugs in the same dosage form or a combination of a drug/biologic with a device must comply with an additional rule that requires that each component make a contribution to the claimed effects of the drug has been associated with unexpected serious harm to patients. Additionally, someproduct/combination device. This typically requires larger studies that test the drug against each of its components.

Disclosure of Clinical Trial Information

Sponsors of clinical trials of FDA-regulated products, including drugs, biologics, and devices, are overseen by an independent grouprequired to register and disclose certain clinical trial information. Information related to the product, patient population, phase of qualified experts organized byinvestigation, study sites and investigators, and other aspects of the clinical trial, sponsor, knownis made public as a data safety monitoring board or data monitoring committee. This group provides authorization for whether or not a trial may move forward at designated checkpoints based on accesspart of the registration. Sponsors also are obligated to certain data fromdiscuss the results of their clinical trials after completion. Disclosure of the clinical trial. A trial results can be delayed until the new product or new indication being studied has been approved.

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Competitors may alsouse this publicly available information to gain knowledge regarding the progress of development programs.

The New Drug Application (NDA) Approval Process

Our drug products must be suspended or terminated based on evolving business objectives and/or competitive climate.approved by the FDA through the NDA approval process before they may be legally marketed in the U.S. The process required by the FDA before drugs may be marketed in the U.S. generally involves the following:

Concurrent with clinical trials, companies usually complete additional

In order to obtain approval to market a drug in the U.S., a marketing application must be submitted to the FDA that provides data establishing to the FDA’s satisfaction the safety and effectiveness of the investigational drug for the proposed indication. Each NDA submission requires a substantial user fee payment unless a waiver or exemption applies. The application includes all relevant data available from pertinent non-clinical studies, or preclinical studies and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls and proposed labeling, among other information. Data can come from company-sponsored clinical trials intended to test the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators that meet GCP requirements.

Companies also must develop additional information about the chemistry and physical characteristics of the drug as well asand finalize a process for the NDA sponsor’s manufacturing the drugproduct in commercial quantities in accordancecompliance with cGMPcurrent good manufacturing practice (CGMP) requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate, and among other things,the manufacturer must develop and validate methods for testing the identity, strength, quality and purity of the final drug.API and drug product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.shelf-life.

FDA Review and Approval Processes

The results of drug development, preclinicalnon-clinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of athe drug, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the drug. The application includes both negative and ambiguous results of preclinical and clinical trials as well as positive findings. Data may come from company-sponsored clinical trials intended to test the safety and effectiveness of a use of a drug or from a number of alternative sources, including studies initiated by investigators. To supportproduct.

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marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and effectiveness of the investigational product candidate to the satisfaction of the FDA. The submission of an NDA is subject to the payment of substantial user fees; a waiver of such fees may be obtained under certain limited circumstances.

In addition, under the Pediatric Research Equity Act, (“PREA”), an NDA or supplement to an NDA must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers. Unless otherwise required by regulation, PREA does not apply to any drug for an indication for which orphan designation has been granted. However, if only one indication for a drug has orphan designation, a pediatric assessment may still be required for any applications to market that same drug for the non-orphan indication(s).

The FDA reviews all NDAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing andfiling. FDA may request additional information rather than acceptingaccept an NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. The FDA must make a decision on acceptinghas 60 days from its receipt of an NDA for filing within 60 days of receipt. Onceto conduct an initial review to determine whether the submission isapplication will be accepted for filing, the FDA begins an in-depth review of the NDA. Under the goals and policies agreed to by the FDA under PDUFA, the FDA has ten months from the 60-day filing date in which to complete its initial review of a standard NDA and respond to the applicant and six months for a priority NDA, if the drug is a new molecular entity. The FDA does not always meet its PDUFA goal dates for standard and priority NDAs, and the review process is often significantly extended by FDA requests for additional information or clarification.filing.

AfterIf the NDA submission is accepted for filing, the FDA reviews the NDA to determine, among other things, whether the drugproposed product is safe and effective for its intended use, and whether the drugproduct is being manufactured in accordance with cGMPCGMPs to assure and preserveensure the drug’sproduct’s identity, strength, quality and purity. The FDA has agreed to specific performance goals on the review of NDAs and seeks to review standard NDAs within 12 months from submission. The review process may refer applications for drug 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 boundextended by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.FDA for three additional months to consider certain late submitted information or information intended to clarify information already provided in the submission.

Before approving an NDA, the FDA will inspect the facilities at which the drug is manufactured. The FDA will not approve the drug unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the drug within required specifications. Additionally, before approving an NDA, the FDA may inspect one or more clinical sites to assure compliance with GCP requirements. 8

After the FDA evaluates the application, manufacturing process and manufacturing facilities,NDA, it maywill issue either an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application is not ready for approval. A Complete Response Letter usually describes all of the specific deficiencies in the NDA identified by the FDA. The Complete Response Letter may require additional clinical data and/or an additional pivotal Phase 3 clinical trial(s), and/or other significant, expensive and time-consuming requirements related to clinical trials, preclinical studies or manufacturing. If a Complete Response Letter is issued, the applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data andadditional information is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive, and the FDA may interpret data differently than Conatus interprets the same data.

If a drug 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 drug. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling or may condition the approval of the NDA on other changes to the proposed labeling, development of adequate controls and specifications or a commitment to conduct one or more post-market studies or clinical trials. For example, the FDA may require Phase 4 testing, which involves clinical trials designed to further assess a drug’s safety and effectiveness, and may require testing and surveillance programs to monitor the safety of approved products that have been commercialized. The FDA may also determinerefer applications for novel drug products or drug products that present difficult questions of safety or effectiveness to an advisory committee, typically a riskpanel that includes clinicians and other experts, for review, evaluation and mitigation strategy, or REMS,a recommendation as to whether the application should be approved and, if so, under what conditions. The FDA is necessary to assurenot bound by the safe userecommendations of the drug. Ifan advisory committee, but it considers such recommendations carefully when making decisions.

Before approving an NDA, the FDA concludes a REMStypically will inspect the facilities where the product is needed, the sponsor of the NDA must submit a proposed REMS; themanufactured. The FDA will not approve the NDA without an approved REMS, if required. A REMS could include medication guides, physician communication plans or elements to assure safe use, such as restricted distribution methods, patient registriesproduct unless it determines that the manufacturing processes and other risk minimization tools. Following approval of an NDA with a REMS, the sponsor is responsible for marketing the drugfacilities are in compliance with CGMP requirements and adequate to assure consistent production of the REMSproduct within required specifications. We currently have manufacturing facilities at our corporate headquarters; however, we intend to facilitate a technology transfer of such functions and obligations to a third-party contract development manufacturing organization, for its clinical materials, and certain of its commercial partners for their commercial supply. Until such time as we no longer manufacture any clinical or commercial supply of product, we must submit periodic REMS assessments to the FDA.

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Orphan Drug Designation

In the United States, under the Orphan Drug Act,ensure that our facilities satisfy FDA manufacturing requirements. Additionally, before approving an NDA, the FDA may grant orphan designation to a druginspect one or biological product intended to treat a rare disease or condition. Such diseases and conditions are those that affect fewer than 200,000 individuals in the United States, or if they affect more than 200,000 individuals in the United States, there is no reasonable expectation that the cost of developing and making a drug available in the United Statesclinical sites for these types of diseases or conditions will be recovered from sales of the drug. Orphan Drug Designation must be requested before submitting an NDA. compliance with GCP regulations.

If the FDA grants Orphan Drug Designation,determines the identityapplication, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies and often will request additional testing or information. This may significantly delay further review of the therapeutic agent and its potential orphan use are disclosed publicly byapplication. If the FDA finds that agency. Orphan Drug Designation doesa clinical site did not convey any advantage in or shortenconduct the duration of the regulatory review and approval process, but it can lead to financial incentives, such as opportunities for grant funding toward clinical trial costs, tax advantages and user-fee waivers.

If a drug that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the drug is entitled to orphan drug marketing exclusivity for a period of seven years. Orphan drug marketing exclusivity generally prevents the FDA from approving another application, including a full NDA, to market the same drug or biological product for the same indication for seven years, except in limited circumstances, including if the FDA concludes that the later drug is safer, more effective or makes a major contribution to patient care. For purposes of small molecule drugs, the FDA defines “same drug” as a drug that contains the same active chemical entity and is intended for the same use as the drug in question. A designated orphan drug may not receive orphan drug marketing exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. Orphan drug marketing exclusivity rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patientsaccordance with the rare disease or condition.

Conatus submitted applications for orphan drug designation for emricasan for the treatment of fibrosis in HCV-POLT patients in the United States and the EU. In late 2013, Conatus received orphan drug designation from the FDA for the treatment of POLT patients with reestablished fibrosis in their liver to delay the progression to cirrhosis and end-stage liver disease. In the EU, Conatus withdrew the application based on feedback from the applicable regulatory body that emricasan may have efficacy in fibrosis outside of the HCV-POLT patient population.

Expedited Development and Review Programs

The FDA has a Fast Track program that is intended to expedite or facilitate the process for reviewing new drugs that meet certain criteria. Specifically, new drugs are eligible for Fast Track designation if they are intended, alone or in combination with one or more drugs, to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. Fast Track designation applies to the combination of the product candidate and the specific indication for which it is being studied. If a product candidate receives Fast Track designation,GCP regulations, the FDA may consider for review sections ofdetermine the NDA on a rolling basis beforedata generated by the complete application is submitted, ifclinical site should be excluded from the sponsor provides a schedule forprimary efficacy analyses provided in the NDA. Additionally, notwithstanding the submission of the sections of the NDA,any requested additional information, the FDA agrees to accept sections of the NDA and determinesultimately may decide that the schedule is acceptable andapplication does not satisfy the sponsor pays any required user fees upon submission of the first section of the NDA.regulatory criteria for approval.

Any drug submitted to the FDA for approval, including a drug with a Fast Track designation, may also be eligible for other types of FDA programs intended to expedite development and review, such as Priority Review and Accelerated Approval. A drug is eligible for Priority Review if it has the potential to provide safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in the treatment, diagnosis or prevention of a disease compared to marketed products. The FDA will attempt to direct additional resources to the evaluation of an application for a new drug designated for Priority Review in an effort to facilitate the review. Additionally, a drug may be eligible for Accelerated Approval. Drugs studied for their safety and effectiveness in treating serious or life-threatening diseases or conditions may receive Accelerated Approval upon a determination that the drug has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require, thatadditional clinical trials after a sponsorproduct is approved. These so-called Phase IV or post-approval clinical trials may be a condition for continuing drug approval. The results of Phase IV clinical trials can confirm the effectiveness of a drug or biological product receiving Accelerated Approval perform adequatecandidate and well-controlled post-marketing clinical trials.can provide important safety information. In addition, the FDA currently requires, as a condition for Accelerated Approval, pre-approval of promotional materials, which could adversely impactnow has express statutory authority to require sponsors to conduct post-marketing trials to specifically address safety issues identified by the timing of the commercial launch of the drug.agency.

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The FDA may also accelerate the approval ofhas authority to require a designated Breakthrough Therapy, which is a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or conditionRisk Evaluation and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The sponsor of a Breakthrough Therapy may request the FDA to designate the drug as a Breakthrough Therapy at the time of, or any time after, the submission of an IND for the drug. If the FDA designates a drug as a Breakthrough Therapy, it must take actions appropriate to expedite the development and review of the application, which may include holding meetings with the sponsor and the review team throughout the development of the drug; providing timely advice to, and interactive communication with, the sponsor regarding the development of the drugMitigation Strategy (“REMS”) to ensure that the development program to gatherbenefits of a drug outweigh its risks. A sponsor may also voluntarily propose a REMS as part of the nonclinical and clinical data necessaryNDA submission. The need for approvala REMS is determined as efficient as practicable; involving senior managers and experienced review staff, as appropriate, in a collaborative, cross-disciplinary review; assigning a cross-disciplinary project lead forpart of the FDA review team to facilitate an efficient review of the development programNDA. Elements of a REMS may include “dear doctor letters,” a medication guide, more elaborate targeted educational programs, and in some cases elements to serve as a scientific liaison betweenassure safe use (“ETASU”), which is the review teammost restrictive REMS. ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring and the sponsor; and taking steps to ensure that the designuse of patient registries. These elements are negotiated as part of the clinical trials is as efficient as practicable, when scientifically appropriate, such as by minimizingNDA approval, and in some cases the number of patients exposed to a potentially less efficacious treatment.

Fast Track designation, Priority Review, Accelerated Approval and Breakthrough Therapy designation do not change the standards for approval butdate may expedite the development or approval process. In February 2016, Conatus announced that the FDA granted Fast Track designation to the emricasan development program for the treatment of liver cirrhosis caused by NASH.

Post-Approval Requirements

Any drugs for which Conatus receives FDA approvals are subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and distribution requirements and complying with FDA promotion and advertising requirements, which include, among other requirements, standards for direct-to-consumer advertising, restrictions on promoting drugs for uses or in patient populations that are not described in the drug’s approved labeling (known as “off-label use”), limitations on industry sponsored scientific and educational activities and requirements for promotional activities involving the internet. Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not market or promote such off-label uses.

In addition, quality control and manufacturing procedures must continue to conform to applicable manufacturing requirements after approval. Conatus relies, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of its product candidates and products in accordance with cGMP regulations. cGMP regulations require among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies andbe delayed. Once implemented, REMS are subject to periodic unannounced inspections byassessment and modification.

Changes to some of the conditions established in an approved application, including changes in indications, labeling, manufacturing processes or facilities, may require submission and FDA approval of a new NDA or NDA supplement before the change can be implemented. An NDA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and certain state agencies for compliance with cGMPactions in reviewing NDA supplements as it does in reviewing original NDAs.

Even if a product candidate receives regulatory approval, the approval may be limited to specific disease states, patient populations and other laws. Accordingly, manufacturers must continue to expend time, money and effortdosages, or might contain significant limitations on use in the areaform of production and quality control to maintain cGMP compliance. Discoverywarnings, precautions or contraindications, or in the form of onerous risk management plans, restrictions on distribution or post-marketing trial requirements. Further, even after regulatory approval is obtained, later discovery of previously unknown problems with a product after approval may result in restrictions on athe product manufacturer or holder of an approved NDA, including, among other things, recall oreven complete withdrawal of the product from the market. In addition, changes to the manufacturing process are strictly regulated and depending on the significance of the change, may require prior FDA approval before being implemented. Other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.

The FDA also may require Phase 4 testing and surveillance to monitor the effects of an approved productDelay in obtaining, or place conditions on an approval that could restrict the distribution or use of the product. Discovery of previously unknown problems with a product or the failure to comply with applicable FDA requirements can have negative consequences, including adverse publicity, judicialobtain, regulatory approval for our products, or administrative enforcement, warning letters from the FDA, mandated corrective advertising or communications with doctors and civil or criminal penalties, among others.obtaining approval but for significantly

Newly discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management measures, such as a REMS.9

limited use, would harm our business. Also, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of Conatus’ product candidates underour products in development. In addition, we cannot predict what adverse governmental regulations may arise from future U.S. or foreign governmental action.

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United States Patent Term Restoration and Marketing ExclusivityThe Hatch-Waxman Amendments

Depending upon the timing, duration and specifics of the FDA approval of the use of Conatus’ product candidates, some of its United States patents may be eligible for limited patent term extension underUnder the Drug Price Competition and Patent Term Restoration Act of 1984, as amended, commonly referred toknown as the Hatch-Waxman Amendments.Amendments, a portion of a product’s U.S. patent term that was lost during clinical development and regulatory review by the FDA may be restored. The Hatch-Waxman Amendments permitalso provide a patentprocess for listing patents pertaining to approved products in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations (commonly known as the Orange Book) and for a competitor seeking approval of an application that references a product with listed patents to make certifications pertaining to such patents. In addition, the Hatch-Waxman Amendments provide for a statutory protection, known as non-patent exclusivity, against the FDA’s acceptance or approval of certain competitor applications.

Patent Term Restoration

Patent term restoration term ofcan compensate for time lost during drug development and the regulatory review process by returning up to five years as compensationof patent life for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyondthat covers a total of 14 years from the product’s approval date. The patent term restorationnew product or its use. This period is generally one-half the time between the effective date of an IND (falling after issuance of the patent) and the submission date of an NDA, plus the time between the submission date of an NDA and the approval of that application. Onlyapplication, provided the sponsor acted with diligence. Patent term restorations, however, cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only one patent applicable to an approved drug is eligible for the extension,may be extended and the application for the extension must be submittedapplied for prior to the expiration of the patent. The United States Patent and Trademark Office,USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.

Orange Book Listing

In seeking approval for a drug through an NDA, applicants are required to list with the future, Conatus may apply for restorationFDA each patent whose claims cover the applicant’s product. Upon approval of patent term for one of its currently owned or licensed patents to add patent life beyond its current expiration date, depending on the expected lengtha drug, each of the patents listed by the NDA holder in the drug’s application or otherwise are published in the FDA’s Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential generic competitors in support of approval of an abbreviated new drug application (ANDA). An ANDA permits marketing of a drug product that has the same active ingredient(s) in the same strengths and dosage form as the listed drug and has been shown through bioequivalence testing to be therapeutically equivalent to the listed drug. Other than the requirement for bioequivalence testing, ANDA applicants are not required to conduct, or submit results of, preclinical studies or clinical trials to prove the safety or effectiveness of their drug product. Drugs approved under and other factors involved inANDA are commonly referred to as “generic equivalents” to the listed drug and can often be substituted by pharmacists under prescriptions written for the original listed drug.

Section 505(b)(2) of the FDCA provides an alternate regulatory pathway to FDA approval for new or improved formulations or new uses of previously approved drug products. Specifically, Section 505(b)(2) permits the filing of an NDA where at least some of the relevant NDA.information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference.

Any applicant who files an ANDA seeking approval of a generic equivalent version of a drug listed in the Orange Book or a 505(b)(2) NDA referencing a drug listed in the Orange Book must certify to the FDA that (i) no patent information on the drug product that is the subject of the application has been submitted to the FDA; (ii) such patent has expired; (iii) the date on which such patent expires; or (iv) such patent is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the application is submitted. This last certification is known as a paragraph IV certification. A notice of the paragraph IV certification must be provided to each owner of the patent that is the subject of the certification and to the holder of the approved NDA to which the ANDA or 505(b)(2) application refers. The applicant also may elect to submit a “section viii” statement certifying that its proposed label does not contain (or carves out) any language regarding the patented method-of-use rather than certify to a listed method-of-use patent. If the reference NDA holder and patent owners assert a patent challenge directed to one of the Orange Book listed patents within 45 days of the receipt of the paragraph IV certification notice, the FDA is prohibited

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from approving the application until the earlier of 30 months from the receipt of the paragraph IV certification expiration of the patent, settlement of the lawsuit or a decision in the infringement case that is favorable to the applicant. The ANDA or 505(b)(2) application also will not be approved until any applicable non-patent exclusivity listed in the Orange Book for the branded reference drug has expired.

Market Exclusivity

Market exclusivity provisions under the FDCA also can also delay the submission or the approval of certain competing marketingdrug applications. The FDCA provides a five-year period of non-patent marketing exclusivity within the United StatesU.S. to the first applicant to obtaingain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application, (“ANDA”),ANDA or a 505(b)(2) NDA submitted by another company for another drug based on the same active moiety, regardlessversion of whether thesuch drug is intended for the same indication as the original innovative drug or for another indication, where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement to one of the patents listed with the FDA by the innovator NDA holder. Paragraph IV certification.

The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, clinical investigations to supportfor new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the modification for which the drug received approval on the basis ofconditions associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original active agent for the original indication or condition of use.ingredient. Five-year and three-year exclusivity will not delay the submission or approval of anya full NDA. However,NDA; however, an applicant submitting a full NDA would beis required to conduct or obtain a right of reference to all of the preclinicalnon-clinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

Other types of non-patent marketing exclusivity include orphan drug exclusivity under the Orphan Drug Act, which may offer a seven-year period of marketing exclusivity as described above, and pediatric exclusivity under the Best PharmaceuticalsPost-Marketing Requirements for Children Act, which may add six months to existing exclusivity periods and patent terms. This six-month pediatric exclusivity may be granted based on the voluntary completionFDA Regulated Products

Following approval of a pediatric trialnew product, the Company and the approved products are subject to continuing regulation by the FDA, state and foreign regulatory authorities including, among other things, monitoring and record-keeping activities, reporting adverse experiences to the applicable regulatory authorities, providing regulatory authorities with updated safety and efficacy information, manufacturing products in accordance with an FDA-issued “Written Request”CGMP requirements, product sampling and distribution requirements, and complying with promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising and restrictions on promoting products for uses or in patient populations that are not consistent with the drug’s approved labeling (known as “off-label use”), limitations on industry-sponsored scientific and educational activities and requirements for promotional activities involving the internet, including social media. Although physicians may prescribe products for off-label uses, manufacturers may not market or promote such a trial.

Foreign Government Regulation

In additionoff-label uses. Modifications or enhancements to regulations in the United States, Conatus will beproduct or its labeling or changes of the site of manufacture are often subject to a varietythe approval of regulations in other jurisdictions governing, among other things, clinical trials, marketing authorization, manufacturing and any commercial sales, promotion and distribution of its products.

Whether or not Conatus obtains FDA approval for a product candidate, it must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries. Certain countries outside of the United States have a similar process that requires the submission of a clinical trial application much like an IND prior to the commencement of human clinical trials. In the EU, for example, a clinical trial application, or CTA, must be submitted to each country’s national health authority and an independent ethics committee, much like the FDA and IRB requirements in the United States, respectively. Once the CTA is approved in accordance with a country’s requirements, clinical trialsother regulators, who may proceed.

The requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, the clinical trials are conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.

In the European Economic Area, or EEA (comprised of the 28 EU Member States plus Iceland, Liechtenstein and Norway), medicinal products must be authorized for marketing by using either the centralized authorization proceduremay not grant approval, or national authorization procedures.

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Centralized procedure: Under the centralized procedure, following the opining of the European Medicines Agency’s, (“EMA’s”), Committee for Medicinal Products for Human Use, (the “CHMP”), the European Commission issues a single marketing authorization valid across the EEA. The centralized procedure is compulsory for human medicines derived from biotechnology processes advanced therapy medicinal products (such as gene therapy, somatic cell therapy and tissue engineered products), products that contain a new active substance indicated for the treatment of certain diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative disorders, diabetes, autoimmune diseases and other immune dysfunctions, viral diseases, and officially designated orphan medicines. For medicines that do not fall within these categories, an applicant has the option of submitting an application for a centralized marketing authorization to the EMA, as long as the medicine concerned contains a new active substance not yet authorized in the EEA, is a significant therapeutic, scientific or technical innovation, or if its authorization would be in the interest of public health in the EEA. Under the centralized procedure the maximum timeframe for the evaluation of a marketing authorization application, or MAA, by the EMA is 210 days, excluding clock stops, when additional written or oral information is to be provided by the applicant in response to questions asked by the CHMP. Accelerated assessment might be granted by the CHMP in exceptional cases, when a medicinal product is expected to be of a major public health interest, particularly from the point of view of therapeutic innovation. The timeframe for the evaluation of an MAA under the accelerated assessment procedure is 150 days, excluding clock stops.

National authorization procedures: There are also two other possible routes to authorize medicinal products in several countries, which are available for products that fall outside the scope of the centralized procedure:

In the EEA, new products authorized for marketing, or reference products, qualify for eight years of data exclusivityThe FDA, state and an additional two years of market exclusivity upon marketing authorization. The data exclusivity period prevents generic or biosimilar applicants from relying on the preclinical and clinical trial data contained in the dossier of the reference product when applying for a generic or biosimilar marketing authorization in the EU during a period of eight years from the date on which the reference product was first authorized in the EU. The market exclusivity period prevents a successful generic or biosimilar applicant from commercializing its product in the EU until 10 yearsforeign regulatory authorities have elapsed from the initial authorization of the reference product in the EU. The 10-year market exclusivity period can be extended to a maximum of 11 years if, during the first eight years of those 10 years, 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 benefit in comparison with existing therapies.

The criteria for designating an “orphan medicinal product” in the EEA are similar in principle to those in the United States. In the EEA, a medicinal product may be designated as orphan if (a) it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (b) either (i) such condition affects no more than five in 10,000 persons in the EU when the application is made, or (ii) the product, without the benefits derived from orphan status, would not generate sufficient return in the EU to justify investment; and (c) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the EU, or if such a method exists, the product will be of significant benefit to those affected by the condition. Orphan medicinal products are eligible for financial incentives such as reduction of fees or fee waivers and are, upon grant of a marketing authorization, entitled to ten years of market exclusivity for the approved therapeutic indication. During this ten-year orphan market exclusivity period, no similar medicinal product for the same indication may be placed on the market. An orphan product can also obtain an additional two years of market exclusivity in the EU for pediatric studies. The ten-year market exclusivity may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan designation, for example, if the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally, marketing authorization may be granted to a similar product for the same indication at any time if the: (a) second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior; (b) applicant consents to a second orphan medicinal product application; or (c) applicant cannot supply enough orphan medicinal product.

If Conatus failsbroad enforcement powers. Failure to comply with applicable regulatory requirements could result in enforcement action by the FDA, state or foreign regulatory requirements, itauthorities (as applicable), which may be subject in those countries to, among other things, include the following:

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Any of generic products. Adoption of price controls and cost-containment measures and adoption of more restrictive policiesthese sanctions could result in jurisdictions with existing controls and measures could further limit Conatus’ net revenue and results. Decreases in third-party reimbursement for Conatus’ product candidateshigher than anticipated costs or a decision by a third-party payor not to cover its product candidates could reduce physician usage of its products once approvedlower than anticipated sales and have a material adverse effect on its sales,our reputation, business, financial condition and results of operationsoperations. Such actions by government agencies could also require us to expend a large amount of resources to respond to the actions. Any agency or judicial enforcement action could have a material adverse effect on us.

In the U.S., after a product is approved, its manufacture is subject to comprehensive and financial condition.

Healthcare Reform

A primary trendcontinuing regulation by the FDA. The FDA regulations require that products be manufactured in registered facilities and in accordance with CGMP. We expect to rely on third parties for the production of clinical and commercial quantities of our products in accordance with CGMP regulations. CGMP regulations require, among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation and the obligation to investigate and correct deviations from CGMP. These regulations also impose certain organizational, procedural and documentation requirements with respect to manufacturing and quality assurance activities. Manufacturers and other entities involved in the U.S. healthcare industrymanufacture and elsewhere is cost containment. Government authoritiesdistribution of approved drugs, biologics and medical devices are required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and state agencies for compliance with CGMP and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain CGMP compliance.

NDA holders using contract manufacturers, laboratories or packagers are responsible for the selection and monitoring of qualified firms and, in certain circumstances, suppliers to these firms. These firms and, where applicable, their suppliers are subject to inspections by the FDA at any time, and the discovery of violative conditions, including failure to conform to CGMP, could result in enforcement actions that can interrupt the operation of any such firm or result in restrictions on product supply, including, among other things, recall or withdrawal of the product from the market.

Newly-discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management measures.

Healthcare Laws and Regulations

Sales of our product candidates, if approved, or any other future product candidate will be subject to healthcare regulation and enforcement by the federal government and the states and foreign governments in which we might conduct our business. The healthcare laws and regulations that may affect our ability to operate include the following:

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Also, many states have similar laws and regulations, such as anti-kickback and false claims laws that may be broader in scope and may apply regardless of payor, in addition to lower Medicare and Medicaid spending.

Since its enactment, there have been judicial and Congressional challenges to certain aspects of the Affordable Care Act. Conatus expects that the current presidential administration and U.S. Congress will likely continue to seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the Affordable Care Act. Recently, the Tax Cuts and Jobs Act, or the Tax Act, was enacted, which, among other things, removes penalties for not complying with the Affordable Care Act’s individual mandate to carry health insurance. On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, ruled that the individual mandate is a critical and inseverable feature of the Affordable Care Act, and therefore, because it was repealed as part of the Tax Act, the remaining provisions of the Affordable Care Act are invalid as well. While the Trump Administration and CMS have both stated that the ruling will have no immediate effect, it is unclear how this decision, subsequent appeals, if any, and other efforts to repeal and replace the Affordable Care Act will impact the Affordable Care Act and Conatus’ business. As such, there is still uncertainty with respect to the impact President Trump’s administration and the U.S. Congress may have, if any, and any changes will likely take time to unfold, and could have an impact on coverage and reimbursement for healthcare items and services coveredreimbursed under Medicaid and other state programs. Additionally, we may be subject to state laws that require pharmaceutical companies to comply with the federal government’s and/or pharmaceutical industry’s voluntary compliance guidelines, state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures, as well as state and foreign laws governing the privacy and security of health information, many of which differ from each other in significant ways and often are not preempted by plansHIPAA.

Additionally, to the extent that were authorized byour product is sold in a foreign country, we may be subject to similar foreign laws.

Chemistry, Manufacturing, and Controls

For our small molecule pipeline product candidates, we have successfully developed production processes that are scalable and economically viable. We have used contract manufacturing organizations for our own preclinical and clinical supply. Currently, we are not a party to any manufacturing agreements.

For our biologics technology platform licensing opportunities, we had established in-house research development and manufacturing capabilities in our corporate headquarters.

Intellectual Property

The proprietary nature of, and protection for, the Affordable Care Act. Conatus cannot predict the ultimate content, timing or effect of any healthcare reform legislation or the impact of potential legislation on it.

In addition, other legislative changesCompany’s product candidates and discovery programs and know-how are important to its business. We have been proposed and adoptedsought patent protection in the United States sinceand internationally for emricasan and crystalline forms of emricasan. In addition, the Affordable Care ActCompany has patent protection covering certain other preclinical stage compounds. The Company’s policy is to reduce healthcare expenditures. These changes include aggregate reductionspursue, maintain and defend patent rights whether developed internally or licensed from third parties and to protect the technology, inventions and improvements that are commercially important to the development of Medicare paymentsits business.

As of February 1, 2023, we hold or control 9 issued U.S. patents, 6 pending U.S. patent applications, and 62 patents in various jurisdictions outside the United States related to providersour small molecule product candidates and biologics technology. Additionally, we are pursuing 24 corresponding patent applications that are pending in various foreign jurisdictions. Further advancement of 2% per fiscal year that, dueour intellectual property portfolio will require the filing of patent applications related to subsequent legislative amendments, will remainour small molecule compounds and product candidates. We have patents extending into the late 2020s, and early 2040 related to our small molecule product candidates, and late 2020s, and 2030 related to our biologics technology platform product candidates, as well as trade secrets protecting our intellectual property. Our patent

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prosecution strategy includes exploration of opportunities to expand our patent life in effect through 2027 unless additional actionorder to broaden our existing patent portfolio.

The following is taken by Congress. On January 2, 2013,a further description of certain of our key issued patents and pending applications related to our small molecule product candidates, including composition of matter coverage, method of protection, expiration date, number of related patents issued/pending in the American Taxpayer Relief Act of 2012 was signed into law,US and foreign jurisdictions and the product candidates to which among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies. Individual stateseach patent/application relates. We currently hold or control:

In addition, below is a further description of certain of our key issued patents related to our biologics technology platform, including the method of protection, expiration date, number of related patents issued in the US and foreign jurisdictions and the product candidates to which each patent relates. We currently hold or control:

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Wherever possible, we seek to protect our inventions by the federal governmentfiling U.S. patents as well as foreign counterpart applications in select other countries. Because patent applications in the stateU.S. are maintained in secrecy for at least eighteen months after the applications are filed, and foreign governmentssince publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain that we were the first to make the inventions covered by each of our issued or pending patent applications, or that we were the first to file for protection of inventions set forth in such patent applications. Our planned or potential products may be covered by third-party patents or other intellectual property rights, in which Conatus will conductcase continued development and marketing of its businessproducts would require a license. Required licenses may not be available to us on commercially acceptable terms, if at all. If we do not obtain these licenses, we could encounter delays in product introductions while we attempt to design around the patents, or we could find that the development, manufacture or sale of products requiring such licenses are not possible.

In addition to patent protection, we also rely on know-how, trade secrets and the careful monitoring of proprietary information, all of which can be difficult to protect. We seek to protect some of our proprietary technology and processes by entering into confidentiality agreements with our employees, consultants, and contractors. These agreements may be breached, we may not have adequate remedies for any breach and our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our employees or our consultants or contractors use intellectual property owned by others in their work for us, disputes may also arise as to the rights in related or resulting know-how and inventions.

Competition

The biopharmaceutical industry is highly competitive, and many of our competitors have substantially greater financial resources and experience in research and development, manufacturing, conducting clinical trials, obtaining regulatory approvals and marketing products.

While we believe our small molecule pipeline focus on addressing underserved, multibillion-dollar global markets, in-house research and development, knowledge, experience, and scientific resources offer competitive advantages, we face competition in the biopharmaceutical industry. The key competitive factors affecting the success of emricasan and our other product candidates are successful completion of clinical trials and timely regulatory approval in markets worldwide.

Emricasan (ABSSSI)

Currently there is no direct competition in the pharmaceutical market for the treatment of ABSSSI (“Acute bacterial skin and skin structure infections”) using a product candidate developed by Conatuspan-caspase inhibitor:

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Emricasan (COVID-19)

Geographic and Financial Segment Information

To date, Conatus has viewed its operations and managed its business as one segment operating primarilyCurrently there are no approved treatments in the United States.pharmaceutical market for the treatment of COVID-19 using a commercially available, or available under Emergency Use Authorization (EUA), pan-caspase inhibitor:

Other treatments which aim to interfere with different aspects of the disease that are currently on the market as FDA approved drugs, under a FDA EUA or in active clinical development include: Remdesivir/Veklury (approved RNApol inhibitor), Dexamethasone (corticosteroid, anti-inflammatory), Bamlanivimab (Lilly, anti-COVID mAbs), and Casirivmab/Imdevimab (Regeneron, anti-COVID mAbs), Bamlaniviman/etesevimab combination (Lilly, anti-COVID mAbs combination), baricitinib/remdesivir combination (Lilly; combination treatment of remdesivir with a janus kinase inhibitor). More recently, molnupiravir (Merck), a viral RNA-dependent RNA polymerase inhibitor, and the PAXLOVID (nirmatrelvir ritonavir® combination treatment; Pfizer), a potent inhibitor of the virus poly-protein processing protease, and Evusheld (viral spike-protein binding monoclonal antibody combination; AstraZeneca) have been approved by the FDA under an EUA and have demonstrated moderate to significantly effective reductions in hospitalizations if taken early. Others are Sotrovimab (viral spike-protein binding; GSK), Actemra (IL-6 receptor binding; Genentech).

Human Capital

Employees

As of March 2, 2020, ConatusDecember 31, 2022, we had 67 full-time employees 5 of whom are full-time,and 3 of whom hold Ph.D. or M.D. degrees, 1 of whom wasour employees are engaged in research and development activities and 5 of whom were in general and administrative positions.activities. None of itsour employees are subject to arepresented by labor unions or covered by collective bargaining agreement. Conatus considers itsagreements. We consider our relationship with itsour employees to be good.good notwithstanding the claims brought by two former employees. See Item 3. Legal Proceedings.

About ConatusWe recognize that attracting, motivating and retaining talent at all levels is vital to our continued success. Our employees are a significant asset and we aim to create an equitable, inclusive and empowering environment in which our employees can grow and advance their careers, with the overall goal of developing, expanding and retaining our workforce to support our current pipeline of product candidates and future business goals. By focusing on employee retention and engagement, we also improve our ability to support our clinical trials, our product candidate pipeline,

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our platform technologies, business and operations, and also protect the long-term interests of our security holders. Our success also depends on our ability to attract, engage and retain a diverse group of employees. Our efforts to recruit and retain a diverse and passionate workforce include providing competitive compensation and benefits packages and ensuring we listen to our employees.

We value innovation, passion, data-driven decision making, persistence and honesty, and are building a diverse environment where our employees can thrive and be inspired to make exceptional contributions to bring novel and more effective therapies to patients.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, motivating and integrating our existing and future employees. The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees, consultants and directors through grants of stock-based compensation awards and payments of cash-based performance bonus awards, in order to increase stockholder value and the success of our company by motivating our employees to perform to the best of their abilities and achieve our objectives. We are committed to providing a competitive and comprehensive benefits package to our employees. Our benefits package provides a balance of protection along with the flexibility to meet the individual health and wellness needs of our employees. We plan to continue to refine our efforts related to optimizing our use of human capital as we grow, including improvements in the way we hire, develop, motivate and retain employees.

Corporate History and Reorganization

We were incorporated under the laws of Delaware under the statename Conatus Pharmaceuticals, Inc. as a private company in July 2005. We completed our initial public offering in July 2013. In May 2020, we acquired Histogen Therapeutics, Inc. (formerly known as Histogen, Inc.) through its merger with a wholly owned subsidiary of Delaware in 2005. Conatus’ours, with Histogen Therapeutics surviving as our wholly-owned subsidiary. As part of that transaction, Conatus Pharmaceuticals, Inc. changed its name to Histogen Inc. Our principal executive offices are located at 16745 West Bernardo Dr.,10655 Sorrento Valley Road, Suite 250,200, San Diego, California 92127,CA 92121 and itsour telephone number is (858) 376-2600. Conatus’526-3100. Our website address is www.conatuspharma.com. The information inwww.histogen.com. Information contained on, or accessiblethat can be accessed through, Conatus’our website is not incorporated by reference into this Annual Report, and isyou should not consideredconsider information on our website to be part of this filing.Annual Report on Form 10-K. We have included our website address as an inactive textual reference only.

Available Information

Conatus files electronically with17

Item 1A. Risk Factors.

Summary of Risk Factors

We are providing the Securities and Exchange Commission, or SEC, its annual reportsfollowing summary of the risk factors contained in this Annual Report on Form 10-K quarterly reportsto enhance the readability and accessibility of our risk factor disclosures. This summary does not address all of the risks that we face. We encourage you to carefully review the full risk factors contained in this Annual Report on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Conatus makes available on its website at www.conatuspharma.com, free of charge, copies of these reports, as soon as reasonably practicable after it electronically file such material with, or furnish it to, the SEC. The SEC maintains a website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The address of that website is www.sec.gov. The information10-K in or accessible through the SEC and Conatus’ website are not incorporated into, and are not considered part of, this filing. Further, the references to the URLstheir entirety for these websites are intended to be inactive textual references only.

In January 2020, Conatus entered into a Merger Agreement with Histogen, pursuant to which, subject to the approval of Conatus stockholders and the satisfaction or waiver of the conditions set forth in the Merger Agreement, Histogen would become a wholly-owned subsidiary of Conatus, referred to herein as the merger. If the merger is completed, which could be as early as the second quarter of 2020, the business of Histogen will become the business of Conatus. Additionaladditional information regarding the merger including riskmaterial factors that make an investment in our securities speculative or risky. The primary categories by which we classify risks include those related to Histogen can be found in Conatus’ registration statement on Form S-4.  You should carefully consider the following risk factors, together with the other information contained in this annual report on Form 10-K, including Conatus’ financial statementsto: (i) our business and the related notesFDA Regulation, (ii) our intellectual property, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before making a decision to purchase or sell shares of Conatus(iii) owning our common stock. Conatus cannot assure you that anySet forth below within each of these categories is a summary of the events discussedprincipal factors that make an investment in the risk factors below will not occur. These risks could have a material and adverse impact on Conatus’ business, results of operations, financial condition and growth prospects. If that were to happen, the trading price of Conatusour common stock could decline. Additional risks and uncertainties not presently knownspeculative or risky.

General Risks

Risks Related to Our Business, Industry, and FDA Regulation

There can be no assurance that

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Risks Related to Our Intellectual Property

Risks Related to Owning Our Common Stock

RISK FACTORS

Investing in our securities involves a high degree of risk. You should consider carefully the following risks factors, together with all of the other information included or incorporated by reference in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The risks described below are material risks currently known, expected or reasonably foreseeable by us. However, the risks described below are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial may also affect our business, operating results, prospects or financial condition. If any of these risks actually materialize, our business, prospects, financial condition, and results of operations could be seriously harmed. This could cause the trading price of our common stock to decline, resulting in a loss of all or part of your investment.

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General Risks

We must raise additional funds to finance our operations to remain a going concern.

As of December 31, 2022, the Company has an accumulated deficit of $88.3 million and expects to incur operating losses and generate negative cash flows from operations for the foreseeable future. As of December 31, 2022, we had approximately $12.1 million in cash and cash equivalents. Based on our current business plan and related operating budget, there is substantial doubt about the Company’s ability to continue as a going concern within one year from the date the consolidated financial statements are issued.

We have not yet established ongoing sources of revenues sufficient to cover our ongoing operating costs and will need to continue efforts to raise additional capital to support our future operating activities, including progression of our development programs, preparation for commercialization, and other operating costs. Management’s plans with regard to these matters include entering into a combination of debt or additional equity financing arrangements, strategic partnerships, collaboration and licensing arrangements, or other similar arrangements. There can be no assurance that we will be able to obtain additional financing on terms acceptable to us, on a timely basis or at all. In addition, changing circumstances may cause us to increase our spending significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control. We may need to raise additional funds sooner than we anticipate if we choose to expand more rapidly than we presently anticipate.

The consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. Based on the current business plan and operating budget, there is substantial doubt about the Company’s ability to continue as a going concern within one year from the date the consolidated financial statements are issued. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations in the near term. If we are unable to obtain sufficient funding, our business, prospects, financial condition and results of operations will be materially and adversely affected, and we may be unable to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our audited financial statements, and it is likely that investors will lose all or a part of their investment. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms or at all.

We will require additional capital for the further development and, if approved, commercialization of our product candidates. Additional capital may not be available when we need it, on terms acceptable to us or at all. If adequate capital is not available to us on a timely basis, we may be required to significantly delay, scale back or discontinue our research and development programs or the commercialization of any product candidates, if approved, or be unable to continue or expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition, results of operations, growth prospects and cause the price of our common stock to decline.

Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.

Our consolidated financial statements as of December 31, 2022, were prepared under the assumption that we will continue as a going concern for the next twelve months. Due to our recurring losses from operations, we concluded that there is substantial doubt in our ability to continue as a going concern within one year after the financial statements are issued without additional capital becoming available. Our independent registered public accounting firm has issued an audit opinion that included an explanatory paragraph expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. Our ability to continue as a going concern is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies, reduce expenditures,

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and, ultimately, to generate revenue. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We will need to raise additional capital; however, it may be unavailable to us or, even if capital is obtained, may cause dilution or place significant restrictions on our ability to operate our business.

Our operations have required substantial amounts of cash since inception. To date, we have funded our operations primarily through the sale of our preferred and common stock. We are currently advancing one product candidate through clinical development, and have other product candidates in preclinical development, as well as early-stage research projects. Developing our product candidates is expensive, and we expect to continue to spend substantial amounts as we fund our early-stage research projects and continue to advance our programs through preclinical and clinical development. Even if we are successful in developing our product candidates, obtaining regulatory approvals and potentially launching and commercializing any product candidate will require substantial additional funding. Since we will be unable to generate sufficient, if any, cash flow to fund our operations for the foreseeable future, we will need to seek additional equity or debt financing to provide the capital required to maintain or expand our operations.

There can be no assurance that we will be able to raise sufficient additional capital on acceptable terms or at all. If such additional financing is not available on satisfactory terms, or is not available in sufficient amounts, we may be required to significantly delay, scale back or discontinue our research and development programs or the commercialization of any product candidates, if approved, or be unable to continue or expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition, results of operations, growth prospects and cause the price of our common stock to decline. In addition, we may be required to grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Our inability to fund our business could lead to the loss of your investment.

Our future capital requirements will depend on many factors, including, but not limited to:

If we raise additional capital by issuing common stock, or any other equity securities or securities convertible into equity, the percentage ownership of our existing stockholders may be reduced, and accordingly these stockholders

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may experience substantial dilution. We may also issue equity securities that provide for rights, preferences and privileges senior to those of our common stock. Given our need for cash and that equity issuances are the most common type of fundraising for similarly situated companies, the risk of dilution is particularly significant for our stockholders.

Further, SEC regulations limit the amount of funds we can raise during any 12-month period pursuant to our shelf registration statement on Form S-3. We are currently subject to General Instruction I.B.6 to Form S-3, or the Baby Shelf Rule, and the amount of funds we can raise through primary public offerings of securities in any 12-month period using our registration statement on Form S-3 is limited to one-third of the aggregate market value of the voting and non-voting common equity held by non-affiliates. We are currently limited by the Baby Shelf Rule as of the filing of this Annual Report on Form 10-K, until such time as our public float exceeds $75 million. If we are required to file a new registration statement on another form, we may incur additional costs and be subject to delays due to review by SEC staff.

If we fail to retain current members of our senior management and scientific personnel, or to attract and keep additional key personnel, we may be unable to successfully develop or commercialize our product candidates.

Our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends on our continued ability to attract, retain, and motivate highly qualified management and scientific personnel. Competition for qualified personnel is intense. We may not be successful in attracting qualified personnel to fulfill our current or future needs and there is no guarantee that any of these individuals will join us on a full-time employment basis, or at all. Additionally, if we are unable to raise capital, this may further harm our ability to attract and retain key personnel. In the event we are unable to fill critical open employment positions, we may need to delay our operational activities and goals, including the development of our product candidates, and may have difficulty in meeting our obligations as a public company. We do not maintain “key person” insurance on any of our employees.

In addition, competitors and others are likely in the future to attempt to recruit our employees. The loss of the services of any of our key personnel, the inability to attract or retain highly qualified personnel in the future or delays in hiring such personnel, particularly senior management, and other technical personnel, could materially and adversely affect our business, financial condition, and results of operations. In addition, the replacement of key personnel likely would involve significant time and costs, and may significantly delay or prevent the achievement of our business objectives.

On November 8, 2021, Richard Pascoe stepped down from his position as our President and Chief Executive Officer and as a member of our Board. The Board appointed Steven J. Mento, Ph.D., a current member of the Company’s Board of Directors, as Executive Chairman and Interim President and Chief Executive Officer as of November 8, 2021. On February 22, 2022, we announced the Board’s decision to postpone any search for a permanent President and Chief Executive Officer at this time. We may also have to take additional measures to retain existing executives and other personnel.

From time to time, our management seeks the advice and guidance of certain scientific advisors and consultants regarding clinical and regulatory development programs and other customary matters. These scientific advisors and consultants are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us. In addition, our scientific advisors may have arrangements with other companies to assist those companies in developing products or technologies that may compete with ours.

Our common stock may be delisted from Nasdaq if we fail to comply with Nasdaq’s continued listing requirements, the failure of which could lead to the delisting of our common stock from Nasdaq and our common stock trading, if at all, only on the over-the-counter market, or OTC market.

We must continue to satisfy the Nasdaq Capital Market’s continued listing requirements, including, among other things, the corporate governance requirements, and the minimum closing bid price requirement. If we fail to satisfy the continued listing requirements of Nasdaq, which we have in the past. Nasdaq may take steps to delist our common stock. While we currently are in compliance with the Nasdaq listing rules, if we fail in the future to comply with Nasdaq listing rules, it could lead to the delisting of our common stock from Nasdaq and our common stock trading, if at all, only on the over-the-counter market, or OTC market.

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If we fail to maintain our listing on Nasdaq, it would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. Delisting from Nasdaq could also result in negative publicity and could also make it more difficult for us to raise additional capital. The absence of such a listing may adversely affect the acceptance of our common stock as currency or the value accorded by other parties. Further, if we are delisted, we would also incur additional costs under state blue sky laws in connection with any sales of our securities. These requirements could severely limit the market liquidity of our common stock and the ability of our stockholders to sell our common stock in the secondary market. If our common stock is delisted by Nasdaq, our common stock may be eligible to trade on an over-the-counter quotation system, such as the OTCQB market, where an investor may find it more difficult to sell our common stock or obtain accurate quotations as to the market value of our common stock. We cannot assure you that our common stock, if delisted from Nasdaq, will be listed on another national securities exchange or quoted on an over-the counter quotation system. If our common stock is delisted, it may come within the definition of “penny stock” as defined in the Exchange Act, and would be covered by Rule 15g-9 of the Exchange Act. That Rule imposes additional sales practice requirements on broker-dealers who sell securities to persons other than established customers and accredited investors. For transactions covered by Rule 15g-9, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale. Consequently, Rule 15g-9, if it were to become applicable, would affect the ability or willingness of broker-dealers to sell our securities, and accordingly would affect the ability of stockholders to sell their securities in the public market. These additional procedures could also limit our ability to raise additional capital in the future.

We will need to increase the size of our organization and may not successfully manage our growth.

We are a clinical-stage biopharmaceutical company with a small number of employees, and our management systems currently in place are not likely to be adequate to support our future growth plans. Our ability to grow and to manage our growth effectively will require us to hire, train, retain, manage and motivate additional employees and to implement and improve our operational, financial and management systems. These demands also may require the hiring of additional senior management personnel or the development of additional expertise by our senior management personnel. Hiring a significant number of additional employees, particularly those at the management level, would increase our expenses significantly. Moreover, if we fail to expand and enhance our operational, financial and management systems in conjunction with our potential future growth, it could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Business, Industry and FDA Regulation

We are involved, and may become involved in the future, in disputes and other legal or regulatory proceedings that, if adversely decided or settled, could materially and adversely affect our business, financial condition and results of operations.

We are, and may in the future become, party to litigation, arbitration, regulatory proceedings or other disputes. In general, claims made by or against us in disputes and other legal or regulatory proceedings can be expensive and time consuming to bring or defend against, requiring us to expend significant resources and divert the efforts and attention of our management and other personnel from our business operations. These potential claims include, but are not limited to, personal injury claims, class action lawsuits, intellectual property claims, employment litigation and regulatory investigations and causes of action relating to the advertising and promotional claims about our products.

On January 19, 2022, we provided a notice of material breach in connection with Amerimmune’s non-performance under the Collaboration Agreement and, on March 3, 2022, we filed the Arbitration Demand. On March 11, 2022, JAMS issued a Notice of Commencement of Arbitration letter, confirming the commencement of the arbitration as of that date. As part of our Arbitration Demand, we sought a declaratory judgment that Amerimmune had materially breached the Collaboration Agreement, and we are therefore entitled to terminate the Collaboration Agreement. On November 28, 2022, the arbitrator issued an interim award in favor of the Company, granting the Company’s request for declaratory relief and specific performance terminating the Collaboration Agreement and denying each of Amerimmune’s counterclaims. On January 2, 2023, the arbitrator issued a final award affirming the arbitration outcome set forth in the interim award and further awarding the Company its costs in pursuing the arbitration. On February 9, 2023, the Company filed a petition in the Superior Court of California, County of San Diego, seeking to confirm the arbitration award. A hearing on the petition is currently scheduled for May 26, 2023. While we expect

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the court to confirm the arbitration award, there cannot be absolute certainty that such arbitration award will be confirmed by the Superior Court of California.

Two former employees of the Company filed a complaint in the Superior Court of California, County of San Diego, alleging certain employment-related claims, described in more depth in the following risk factor titled “Employee litigation and unfavorable publicity could negatively affect our future business.”.

Any adverse determination against us in these proceedings, or even the allegations contained in the claims, regardless of whether they are ultimately found to be without merit, may also result in settlements, injunctions or damages that could have a material adverse effect on our business, financial condition and results of operations.

We are a clinical-stage development company, have a very limited operating history, are not currently profitable, do not expect to become profitable in the near future and may never become profitable.

We are a clinical-stage biopharmaceutical company, have no approved products and have generated minimal revenues from the sale of products. We are focused on developing potential first-in-class clinical and preclinical small molecule pan-caspase and caspase selective inhibitors that protect the body’s natural process to restore immune function. Our product candidates include emricasan, CTS-2090 and CTS-2096. Currently, we are developing emricasan for acute bacterial skin and skin structure infections (ABSSSI) as well evaluating its use for other infectious diseases. We also have novel preclinical product candidates including CTS-2090 and CTS-2096, which are highly selective small molecule inhibitors of caspase-1 designed for the treatment of certain inflammatory diseases.

Our operations to date have been limited to organizing, staffing, and financing our company, applying for patent rights, manufacturing on a clinical scale, undertaking clinical trials of our product candidates, and engaging in research and development. As a result, we have limited historical operations upon which to evaluate our business and prospects and have not yet demonstrated an ability to obtain marketing approval for any of our product candidates or successfully overcome the risks and uncertainties frequently encountered by companies in the biopharmaceutical industry. We also have generated limited revenues from licensing agreements or product sales to date and continue to incur significant research and development and other expenses. As a result, we have not been profitable and have incurred significant operating losses in every reporting period since our inception, except for the year ended December 31, 2017. For the years ended December 31, 2022 and 2021, we reported net losses of $10.6 million and $15.0 million, respectively, and had an accumulated deficit of $88.3 million as of December 31, 2022.

For the foreseeable future, we expect to continue to incur losses, which will increase significantly from historical levels as we expand our drug development activities, seek regulatory approvals for our product candidates and begin to commercialize them if they are approved by the U.S. Food and Drug Administration (the “FDA”) or comparable foreign regulatory authorities. Even if we succeed in developing and commercializing one or more product candidates, we may never become profitable.

We are dependent on the success of one or more of our current product candidates, which are in early stages of clinical development, and we cannot be certain that any of them will receive regulatory approval or be commercialized.

We currently have one product candidate in development, emricasan, for acute bacterial skin and skin structure infections (ABSSSI) as well evaluating its use for other infectious diseases. We had also previously been focused on developing HST-003 for the treatment of articular cartilage defects in the knee and HST-004 for the spine, and stopped development activities following our strategic pipeline review in late 2022. To date, we have spent significant time, money, and effort on the development of our product candidates, emricasan, HST-003, HST-004, and other pre-clinical assets. To date, no pivotal clinical trials designed to provide clinically and statistically significant proof of efficacy, or to provide sufficient evidence of safety to justify approval, have been completed with any of our product candidates. Success in preclinical studies and early clinical trials does not ensure that later clinical trials will generate adequate data to demonstrate the efficacy and safety of a therapeutic candidate.

There is no guarantee that any future clinical trials will be started or completed in a timely fashion or succeed. Further, we have experienced delays in enrollment of patients in our clinical trials due to the COVID-19 pandemic, which

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could result in material delays and complications with respect to our research and development programs and clinical trials. Our ability ultimately to reach profitability is critically dependent on our future success in obtaining regulatory approval and/or commercialization for our product candidates. However, there can be no guarantee that any future clinical trials will be timely commenced, successful, or that regulators will approve our product candidates in a timely manner, or at all. None of our product candidates have been approved for marketing or are being marketed or commercialized at this time.

We do not anticipate that any of our current product candidates will be eligible to receive regulatory approval from the FDA or comparable foreign authorities and begin commercialization for a number of years, if ever. Even if we ultimately receive regulatory approval for any of these product candidates, we or our current or potential future partners, if any, may be unable to commercialize them successfully for a variety of reasons. These include, for example, the availability of alternative treatments, lack of cost-effectiveness, the cost of manufacturing the product on a commercial scale and competition with other drugs or therapies. The success of our product candidates may also be limited by the prevalence and severity of any adverse side effects. If we fail to commercialize one or more of our current product candidates, we may be unable to generate sufficient revenues to attain or maintain profitability, and our financial condition and stock price may decline.

The termination of our Collaboration Agreement with Amerimmune resulted in all rights to emricasan being returned to us. Any further development of emricasan will require significant resources from us or another collaboration partner, and in the event that we do not find a collaboration partner, the development of emricasan could be significantly delayed or result in the discontinuation of the development of emricasan.

In late 2022, in accordance with an arbitration award, we terminated the Amerimmune Collaboration Agreement and all rights to emricasan, CTS-2090, and CTS-2096 were returned to us. Further development of emricasan will require significant resources from us or another collaboration partner. We or a new collaboration partner will be responsible for funding any new emricasan development and clinical trial activities undertaken after the termination. Any such further development will require significant resources to develop and commercialize emricasan, and such further development may not be possible in the near term without a new collaboration partner. There are no assurances that we will have access to additional capital or find a new collaboration partner or that the terms and timing of any such arrangements would be acceptable to us. As a result, we could experience a significant delay in the emricasan development process. If we determine instead to discontinue the development of emricasan, we will not receive any future return on our investment from that product candidate.

Employee litigation and unfavorable publicity could negatively affect our future business.

From time to time, companies become involved in employment related litigation, including claims of age discrimination, sexual harassment, gender discrimination, creating a hostile workplace, retaliation, wrongful termination, immigration violations, or other local, state, and federal labor law violations. In recent years, there has been an increase in the number of discrimination and harassment claims generally. Coupled with the expansion of social media platforms and similar devices that allow individuals access to a broad audience, these claims have had a significant negative impact on some businesses. Certain companies that have faced employment or harassment related lawsuits have had to terminate management or other key personnel, and have suffered reputational harm that has negatively impacted their business. Any employment-related claim could negatively affect our business.

On or about February 17, 2022, two former employees, each of whom separately resigned and terminated their employment with Histogen, filed a complaint in the Superior Court of California, County of San Diego against us, our Board of Directors and certain other of our current and prior employees. The former non-executive employees of the Company have asserted causes of action for whistleblower status, retaliation, discrimination, unfair business practices, wrongful termination, violation of civil rights, and other California state law claims. The Company objects to the naming of each of the defendants in this matter and denies each of the plaintiffs’ claims. The plaintiffs agreed to pre-arbitration mediation, which was conducted on May 4, 2022, as was required by the arbitration agreement executed by each of the plaintiffs. Considering that the parties did not resolve the matter through this mediation, we petitioned the San Diego Superior Court for an order that the matter be submitted to arbitration consistent with each of the plaintiff’s arbitration agreements. The hearing for the motion to compel arbitration was held on August 12, 2022 and the San Diego Superior Court issued a ruling to uphold the binding arbitration agreements signed by both plaintiff’s. The matter is expected to proceed to arbitration but is the responsibility of the plaintiffs to initiate the arbitration

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proceeding. We believe that our defense costs, settlement monies, damages or any other awards would be covered by our liability insurance; provided, however, insurance may not cover all claims or could exceed our insurance coverage. We also believe that there are substantial defenses to this lawsuit, and we intend to vigorously defend against each of these claims. While this litigation matter is in the early stages, we believe the action is without merit.

However, because of the uncertain nature of litigation, the outcome of these claims or any other such employment related actions and proceedings cannot be predicted with certainty and an unfavorable resolution of one or more of them could have a material adverse effect on our business, financial condition, results of operations, cash flows, reputation, brand identity and the trading price of our securities. Any such litigation, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks important to the success of our business.

Clinical drug development involves uncertain outcomes, and results of earlier studies and trials may not be predictive of future trial results.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. For example, in late 2011, Conatus ceased clinical development of a product candidate, CTS-1027, for which it had incurred $31.3 million in research and development expenses prior to such time. The results of preclinical studies and early clinical trials of emricasanrelating to our product candidates may not be predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or safety profiles, notwithstanding promising results in earlier trials.

Emricasan has been the subject of eight completed Phase 1 and twelve completed Phase 2 clinical trials. Conatus We cannot be certain that any of itsour current or future clinical trials will be successful.successful and support regulatory approval in any jurisdiction. Failure in one indication may have negative consequences for the development of emricasanour product candidates for other indications. Any such failure may harm Conatus’our business, prospects, and financial condition.

If development of our product candidates does not produce favorable results, we, and any future collaborators, may be unable to commercialize these products.

To receive regulatory approval for the commercialization of our product candidate emricasan, being developed for ABSSSI, and our other preclinical product candidates, CTS-2090 and CTS-2096, or any other product candidates that we may develop, adequate and well-controlled clinical trials must be conducted to demonstrate safety and efficacy in humans to the satisfaction of the FDA and comparable foreign regulatory authorities. In order to support marketing approval, these agencies typically require successful results in one or more Phase 3 clinical trials, which our current product candidates have not yet reached and may never reach. In addition to the risks described above under “Clinical drug development involves uncertain outcomes, and results of earlier studies and trials may not be predictive of future trial results,” we may experience numerous unforeseen events during, or as a result of, the development process that could delay or prevent commercialization of our current or future product candidates, including the following:

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In the future, we or any future collaborators will be responsible for establishing the targeted endpoints and goals for development of our product candidates. These targeted endpoints and goals may be inadequate to demonstrate the safety and efficacy levels required for regulatory approvals. Even if we believe data collected during the development of our product candidates are promising, such data may not be sufficient to support marketing approval by the FDA or comparable foreign authorities. Further, data generated during development can be interpreted in different ways, and the FDA or comparable foreign authorities may interpret such data in different ways than us or our collaborators. Our failure to adequately demonstrate the safety and efficacy of our product candidates would prevent our receipt of regulatory approval, and ultimately the potential commercialization of these product candidates.

In addition, since we do not currently possess the resources necessary to complete development and commercialize our product candidates or any other product candidates that we may develop, we have entered into and may seek to enter into license agreements to assist in the development and potential future commercialization of some or all of our product candidates as a component of our strategic plan. See “Risk Factor – “We expect to depend on collaborations with third parties for the research, development and commercialization of certain of the product candidates we may develop. If any such collaborations are not successful, we may not be able to realize the market potential of those product candidates”.

We may fail to select or capitalize on the most scientifically, clinically or commercially promising or profitable product candidates.

We continue to evaluate our business strategy and, as a result, may modify our strategy in the future. In this regard, we may, from time to time, focus our product development efforts on different product candidates or may delay, suspend or terminate the future development of a product candidate at any time for strategic, business, financial or other reasons. For example, in late 2022, we decided to pause development activities on our CCM and our hECM lines of product candidates and focus development efforts elsewhere within the Phase 2b POLT-HCV-SVR,product portfolio while we continue to seek potential strategic partners for such assets. As a result of changes in our strategy, we have and may in the Phase 2b ENCORE-PH,future change or refocus our existing product development, commercialization and manufacturing activities. This could require changes in our facilities and our personnel. Any product development changes that we implement may not be successful. In particular, we may fail to select or capitalize on the Phase 2b ENCORE-NFmost scientifically, clinically or commercially promising or profitable product candidates. Our decisions to allocate our research and development, management and financial resources toward particular product candidates may not lead to the Phase 2b ENCORE-LFdevelopment of viable commercial products and may divert resources from better opportunities. Similarly, our decisions to delay or terminate product development programs may also prove to be incorrect and could cause us to miss valuable opportunities.

We expect to continue to incur significant research and development expenses, which may make it difficult for us to attain profitability.

We expect to expend substantial funds in research and development, including preclinical studies and clinical trials didof our product candidates, and to manufacture and market any product candidates in the event they are approved for commercial sale. We also may need additional funding to develop or acquire complementary companies, technologies and assets, as well as for working capital requirements and other operating and general corporate purposes. Moreover, our planned increases in staffing will dramatically increase our costs in the near and long-term. Because of the numerous risks and uncertainties associated with drug development, we are unable to predict the timing or amount of our expenses, or when we will be able to generate any meaningful revenue or achieve or maintain profitability, if ever. In addition, our expenses could increase beyond our current expectations if we are required by the FDA, or foreign regulatory agencies, to perform studies in addition to those that we currently anticipate, or if there are any delays in any of our or our future collaborators’ clinical trials or the development of any of our product candidates. Even if one or more of our product candidates is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved product candidate and ongoing compliance efforts.

However, our spending on current and future research and development programs and product candidates for therapeutic indications may not meet their primary endpoints.yield any commercially viable products. Due to our limited financial and managerial resources, we must focus on a limited number of research programs and product candidates and on specific therapeutic indications. Our resource allocation decisions may cause us to fail to capitalize on viable product candidates or profitable market opportunities.

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Because the successful development of our product candidates is uncertain, we are unable to precisely estimate the actual funds we will require to develop and potentially commercialize them. In addition, we may not be able to generate sufficient revenue, even if we are able to commercialize any of our product candidates, to become profitable.

We expect to depend on collaborations with third parties for the research, development and commercialization of certain of the product candidates we may develop. If any such collaborations are not successful, we may not be able to realize the market potential of those product candidates.

We anticipate seeking third-party collaborators for the research, development, and commercialization of certain of the product candidates we may develop. For example, we previously entered into an agreement with Amerimmune under which we and Amerimmune were jointly developing emricasan for the treatment of COVID-19. As a result of the recent clinical failurestermination of emricasan, Conatus discontinuedthe Collaboration Agreement with Amerimmune in late 2022, we will need to invest or find a collaboration partner to invest significant resources in the further development of emricasanemricasan.

The process of establishing and maintaining collaborative relationships is difficult, time-consuming and involves significant uncertainty, such as:

If any collaborator fails to fulfill its responsibilities in a timely manner, or at all, our research, clinical development, manufacturing or commercialization efforts related to that collaboration could be delayed or terminated, or it may be necessary for us to assume responsibility for expenses or activities that would otherwise have been the responsibility of our collaborator. If we are unable to establish and maintain collaborative relationships on acceptable terms or to successfully transition terminated collaborative agreements, we may have to delay or discontinue further development

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of one or more of our product candidates, undertake development and commercialization activities at our own expense or find alternative sources of capital.

For any such arrangements with third parties, we will likely have shared or limited control over the amount and timing of resources that our collaborators dedicate to the development or potential commercialization of any product candidates we may seek to develop with them. Our ability to generate revenue from these arrangements with commercial entities will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements. We cannot predict the success of any collaboration that we enter into.

In addition, we may face significant competition in seeking appropriate collaborations and the negotiation process is time-consuming and complex, and we may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of the product candidate for which we are seeking to collaborate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop product candidates or bring them to market and generate product revenue.

Our product candidates may cause undesirable side effects that could delay or prevent their regulatory approval or commercialization or have other significant adverse implications on our business, financial condition and results of operations.

Undesirable side effects observed in clinical trials or in supportive preclinical studies with our product candidates could interrupt, delay or halt their development and could result in the denial of regulatory approval by the FDA or comparable foreign authorities for any or all targeted indications or adversely affect the marketability of any such product candidates that receive regulatory approval. In turn, this could eliminate or limit our ability to commercialize our product candidates.

Our product candidates may exhibit adverse effects in preclinical toxicology studies and adverse interactions with other drugs. There are also risks associated with additional requirements the FDA or comparable foreign authorities may impose for marketing approval with regard to a particular disease.

Our product candidates may require a risk management program that could include patient and healthcare provider education, usage guidelines, appropriate promotional activities, a post-marketing observational study, and ongoing safety and reporting mechanisms, among other requirements. Prescribing could be limited to physician specialists or physicians trained in the use of the drug, or could be limited to a more restricted patient population. Any risk management program required for approval of our product candidates could potentially have an adverse effect on our business, financial condition and results of operations.

Undesirable side effects involving our product candidates may have other significant adverse implications on our business, financial condition and results of operations. For example:

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In addition, if any of our product candidates receive marketing approval and we or others later identify undesirable side effects caused by the product:

Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, financial condition, results of operations, and growth prospects. We cannot predict whether our product candidates will cause toxicities in humans that would preclude or lead to the revocation of regulatory approval based on nonclinical studies or early-stage clinical trials.

Delays in the commencement or completion of clinical trials could result in increased costs to us and delay our ability to establish strategic license agreements.

Delays in the commencement or completion of clinical trials could significantly impact our drug development costs. We do not know whether planned clinical trials will begin on time or be completed on schedule, if at all.

The commencement of clinical trials can be delayed for a variety of reasons, including, but not limited to, delays related to:

In addition, once a clinical trial has begun, it may be suspended or terminated by us, our licensees, the institutional review boards or data safety monitoring boards charged with overseeing our clinical trials, the FDA or comparable foreign authorities due to a number of factors, including:

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The progress of clinical trials and clinical studies also may be affected by significant global public health matters such as the current novel coronavirus outbreak. Factors related to the novel coronavirus outbreak that may impact the timing and conduct of our clinical trials and clinical studies include:

In addition, if patients or subjects participating in our clinical trials or studies were to contract COVID-19, there could be an adverse impact on the trials or studies. For example, such patients may be unable to participate further or may need to limit participation in a clinical trial or study; the results and data recorded for such patients may differ from those that would have been recorded if the patients had not been affected by COVID-19; or such patients could experience adverse events that could be attributed to the drug product under investigation.

If we experience delays in the completion or termination of any clinical trial of our product candidates, the commercial prospects of our product candidates will be harmed, and our ability to commence product sales and generate product revenues from any of our product candidates will be delayed. In addition, any delays in completing our clinical trials will increase our costs and slow down our product candidate development and approval process. Delays in completing our clinical trials could also allow our competitors to obtain marketing approval before we do or shorten the patent protection period during which we may have the exclusive right to commercialize our product candidates. Any of these occurrences may harm our business, financial condition and prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

Results of earlier clinical trials may not be predictive of the results of later-stage clinical trials.

The results of preclinical studies and early clinical trials of product candidates may not be predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy results despite having progressed through preclinical studies and initial clinical trials. Many companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to adverse safety profiles or lack of efficacy, notwithstanding promising results in earlier studies. Similarly, our future clinical trial results may not be successful for these or other reasons.

This product candidate development risk is heightened by any changes in the planned clinical trials compared to the completed clinical trials. As product candidates are developed through preclinical and early-stage to late-stage clinical trials towards approval and commercialization, it is customary that various aspects of the development program, such as manufacturing and methods of administration, are altered along the way in an effort to optimize processes and results. While these types of changes are common and are intended to optimize the product candidates for late-stage clinical trials, approval and commercialization, such changes carry the risk that they will not achieve these intended objectives.

Any of these changes could make the results of our planned clinical trials or other future clinical trials we may initiate less predictable and could cause our product candidates to perform differently, including causing toxicities, which could delay completion of our clinical trials, delay approval of our product candidates, and/or jeopardize our ability to commence product sales and generate revenues.

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If we experience delays in the enrollment of patients in our clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.

We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or other regulatory authorities. Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors, including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating, as well as the impact of the COVID-19 pandemic.

If we fail to enroll and maintain the number of patients for which the clinical trial was designed, the statistical power of that clinical trial may be reduced, which would make it harder to demonstrate that the product candidate being tested in such clinical trial is safe and effective. Additionally, enrollment delays in our clinical trials may result in increased development costs for our product candidates, which would cause our value to decline and limit our ability to obtain additional financing. Our inability to enroll a sufficient number of patients for any of our current or future clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether.

A pandemic, epidemic or outbreak of an infectious disease, such as COVID-19, or the perception of their effects, may materially and adversely affect our business, operations and financial condition.

Outbreaks of epidemic, pandemic or contagious diseases, such as COVID-19, have and may continue to significantly disrupt our business. Such outbreaks pose the risk that we or our employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time due to spread of the disease, or due to shutdowns that may be requested or mandated by federal, state and local governmental authorities both within and outside the United States. Business disruptions could include disruptions or restrictions on our ability to travel, as well as temporary closures of our facilities and the facilities of clinical trial sites, service providers, suppliers or contract manufacturers. While it is not possible at this time to estimate the overall impact that the COVID-19 pandemic could have on our business, the continued rapid spread of COVID-19, both across the United States and through much of the world, and the measures taken by the governments of countries and local authorities has disrupted and could delay advancing our product pipeline, could delay our clinical trials, and could delay our overall development activities. Any of these effects could adversely affect our ability to obtain regulatory approval for and to commercialize our product candidates, increase our operating expenses and have a material adverse effect on our business, prospects and financial condition.

We continue to evaluate the impact COVID-19 may have on our ability to effectively conduct our business operations as planned while taking into account regulatory, institutional, and government guidance and policies, but there can be no assurance that we will be able to avoid part or all of any impact from the spread of COVID-19 or its consequences. Any shutdowns or other business interruptions could result in material and negative effects to our ability to conduct our business in the manner and on the timelines presently planned, which could have a material adverse effect on our business, prospects and financial condition.

We intend to rely on third parties to conduct our preclinical studies and clinical trials and perform other tasks. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business, financial condition and results of operations could be substantially harmed.

We intend to rely upon third-party CROs, medical institutions, clinical investigators and contract laboratories to monitor and manage data for our ongoing preclinical and clinical programs. Nevertheless, we maintain responsibility for ensuring that each of our clinical trials and preclinical studies is conducted in accordance with the applicable protocol, legal, regulatory, and scientific standards and our reliance on these third parties does not relieve us of our regulatory responsibilities. We and our CROs and other vendors are required to comply with current requirements on good manufacturing practices (“CGMP”), good clinical practices (“GCP”) and good laboratory practice (“GLP”) which are a collection of laws and regulations enforced by the FDA, and comparable foreign authorities for all of our product candidates in clinical development. Regulatory authorities enforce these regulations through periodic inspections of preclinical study and clinical trial sponsors, principal investigators, preclinical study and clinical trial

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sites, and other contractors. If we or any of our CROs or vendors fails to comply with applicable regulations, the data generated in our preclinical studies and clinical trials may be deemed unreliable and the FDA, or comparable foreign authorities may require us to perform additional preclinical studies and clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP regulations. In addition, our clinical trials must be conducted with products produced consistent with CGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the development and regulatory approval processes.

We may not be able to enter into arrangements with CROs on commercially reasonable terms, or at all. In addition, our CROs will not be our employees, and except for remedies available to us under our agreements with such CROs, we will not be able to control whether or not they devote sufficient time and resources to our ongoing preclinical and clinical programs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the data, they obtain is compromised due to the failure to adhere to our protocols, regulatory requirements, or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. CROs may also generate higher costs than anticipated. As a result, our business, financial condition and results of operations and the commercial prospects for our product candidates could be materially and adversely affected, our costs could increase, and our ability to generate revenue could be delayed.

Switching or adding additional CROs, medical institutions, clinical investigators or contract laboratories involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work replacing a previous CRO. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. There can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse effect on our business, financial condition or results of operations.

The FDA regulatory approval process is lengthy and time-consuming and if Conatus resumes development of emricasan or CTS-2090, itwe could experience significant delays in the clinical development and regulatory approval of emricasan or CTS-2090, its business will be substantially harmed.our product candidates.

ConatusWe may experience delays in commencing and completing clinical trials of emricasan or CTS-2090. For example, based on data in 2013 regarding a new HCV antiviral being developed by another company, Conatus chose to delay and change its previously planned Phase 2b/3 HCV-POLT clinical trial to the Phase 2b POLT-HCV-SVR clinical trial. Conatus doesour product candidates. We do not know whether planned

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clinical trials will begin on time, need to be redesigned, enroll patients on time or be completed on schedule, if at all. Any of Conatusour future clinical trials may be delayed for a variety of reasons, including delays related to:

Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the clinical trial, the design of the clinical trial, competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new drugs that may be approved for the indications Conatus iswe are investigating. In addition, significant numbers of patients who enroll

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in Conatus’our clinical trials may drop out during the clinical trials for various reasons. Conatus believesWe believe it appropriately accounts for such increased risk of dropout rates in itsour trials when determining expected clinical trial timelines, but Conatuswe cannot assure you that itsour assumptions are correct, or that it will not experience higher numbers of dropouts than anticipated, which would result in the delay of completion of such trials beyond itsour expected timelines. For example, Conatus’ previous Phase 2b ACLF clinical trial experienced lower than expected enrollment rates, and Conatus elected to complete the trial prior to reaching the initial targeted number of patients.

ConatusWe could encounter delays if physicians encounter unresolved ethical issues associated with enrolling patients in clinical trials of emricasan or CTS-2090our product candidates in lieu of prescribing existing treatments that have established safety and efficacy profiles. Further, a clinical trial may be suspended or terminated by Conatus,us, the IRBs in the institutions in which such trials are being conducted, the data monitoring committee for such trial, or by the FDA or other regulatory authorities due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or Conatus’our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. If Conatus experienceswe experience termination of, or delays in the completion of, any clinical trial of itsour product candidates, the commercial prospects for such product candidate will be harmed, and Conatus’our ability to generate product revenues will be delayed. In addition, any delays in completing Conatus’our clinical trials will increase itsour costs, slow down itsour product development and approval process and jeopardize itsour ability to commence product sales and generate revenues. Any of these occurrences may harm Conatus’our business, prospects, financial condition and results of operations significantly. Furthermore, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of a product candidate.

The clinical trials for emricasan and CTS-2090 involve a high degree of uncertainty and risk of failure, and some of Conatus’ development activities involve indications with little or no previous product candidate development activities as well as patient populations with critical illnesses and potential challenges for enrollment and participation in clinical trials.

In connection with clinical trials, Conatus faceswe face risks that:

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We cannot assure you that any future clinical trial for emricasan or CTS-2090our product candidates will be started or completed on schedule, or at all. Any failure or significant delay in completing clinical trials for Conatus’our product candidates would harm the commercial prospects for such product candidate and adversely affect Conatus’our financial results. Difficulties and failures can occur at any stage of clinical development, and Conatuswe cannot assure you that it will be able to successfully complete the development and commercialization of any product candidate in any indication.

If Conatus resumes development of emricasan and is unable to obtain regulatory approval of emricasan, Conatus will not be able to commercialize this product candidate and its business will be adversely impacted.

Conatus has not obtained regulatory approval for any product candidate. If Conatus fails to obtain regulatory approval to market emricasan, its only clinical-stage product candidate, it will be unable to sell emricasan, which will significantly impair its ability to generate revenues. To receive approval, Conatus must, among other things, demonstrate with substantial evidence from clinical trials that the product candidate is both safe and effective for each indication for which approval is sought, and failure can occur in any stage of development. Satisfaction of the approval requirements typically takes several years, and the time and money needed to satisfy them may vary substantially, based on the type, complexity and novelty of the pharmaceutical product. Conatus has not commenced any Phase 3 clinical trials of emricasan to date, and Conatus cannot predict if, or when, its future clinical trials will generate the data necessary to support an NDA and if, or when, it might receive regulatory approvals for emricasan.

The FDA generally requires two confirmatory clinical trials for approval of an NDA. Under the FDA’s Accelerated Approval Program, the FDA may grant “accelerated approval” to product candidates that have been studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit to patients over existing treatments. Accelerated approval provides a pathway for an investigational product to be approved on the basis of adequate and well-controlled clinical studies establishing that the product candidate has an effect on a surrogate endpoint that the FDA considers reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. The Accelerated Approval Program does not change the statutory requirements for marketing approval. In addition, as a condition of approval, the FDA may require that a sponsor of a drug receiving accelerated approval perform adequate and well-controlled post-marketing clinical studies. The FDA also generally requires pre-approval of promotional materials as a condition of accelerated approval.

Emricasan could fail to receive regulatory approval for many reasons, including the following:

This lengthy approval process as well as the unpredictability of future clinical trial results may result in Conatus’ failure to obtain regulatory approval to market emricasan, which would significantly harm its business, prospects, financial condition and results of operations. In addition, even if Conatus were to obtain approval, regulatory authorities may grant approval contingent on the performance of costly post-marketing clinical trials or the imposition of a risk evaluation and mitigation strategy, or REMS, requiring substantial additional post-approval safety measures. Moreover, any approvals that Conatus may obtain may not cover all of the clinical indications for which it is seeking approval or could contain significant limitations in the form of narrow indications, warnings, precautions or contra-indications with respect to conditions of use. In such event, Conatus’ ability to generate revenues would be greatly reduced and its business would be harmed.

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Changes in funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new products and services from being developed or commercialized in a timely manner, which could negatively impact Conatus’our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including (i) government budget and funding levels, (ii) the ability to hire and retain key personnel and accept the payment of user fees and (iii) statutory, regulatory and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect its business. For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process Conatus’our regulatory submissions, which could have a material adverse effect on itsour business.

We are subject to a multitude of manufacturing risks, any of which could substantially increase our costs and limit supply of our product candidates.

Even if Conatus resumes developmentThe process of anymanufacturing our product candidatecandidates is complex, highly regulated, and obtains and maintains regulatory approval for a product candidate in one jurisdiction, it may never obtain regulatory approval for such product candidate in any other jurisdiction, which would limit its market opportunities and adversely affect Conatus’ business.

Obtaining and maintaining regulatory approval for a product candidate in one jurisdiction does not guarantee that Conatus will be ablesubject to obtain or maintain regulatory approval in any other jurisdiction.several risks. For example, even if the FDA grants marketing approval for a product candidate, comparable regulatory authorities in foreign countries must also approve theprocess of manufacturing marketing and promotion of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the United States, including additional preclinical studies or clinical trials. In many countries outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that country. In some cases, the price that Conatus intends to charge for its products is also subject to approval. Conatus is expected to submit a marketing authorization application, or MMA, to the European Medicines Agency, or the EMA, for approval of a product candidate in the European Union, or the EU. As with the FDA, obtaining approval of an MAA from the EMA is a similarly lengthy and expensive process, and the EMA has its own procedures for approval of product candidates. Even if a product is approved, the FDA or the EMA, as the case may be, may limit the indications for which the product may be marketed, require extensive warnings on the product labeling, require a REMS or require expensive and time-consuming clinical trials or reporting as conditions of approval. Regulatory authorities in countries outside of the United States and the EU also have requirements for approval ofour product candidates with which Conatus must comply prioris extremely susceptible to marketing in those countries. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirementsproduct loss due to contamination, equipment failure or improper installation or operation of equipment, or vendor or operator error. Even minor deviations from normal manufacturing processes for any of our product candidates could result in significantreduced production yields, product defects, and other supply disruptions. If microbial, viral, or other contaminations are discovered in our product candidates or in the manufacturing facilities in which our product candidates are made, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. In addition, the manufacturing facilities in which our product candidates are made could be adversely affected by equipment failures, labor shortages, natural disasters, public health crises, pandemics and epidemics, such as the ongoing COVID-19 pandemic, power failures and numerous other factors.

In addition, any adverse developments affecting manufacturing operations for our product candidates may result in shipment delays, difficultiesinventory shortages, lot failures, withdrawals or recalls, or other interruptions in the supply of our product candidates. We also may need to take inventory write-offs and costsincur other charges and expenses for Conatusproduct candidates that fail to meet specifications, undertake costly remediation efforts, or seek costlier manufacturing alternatives.

We intend to rely primarily on third parties to manufacture our preclinical and could delay or prevent the introduction of its products in certain countries.

Further, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries,drug supplies, and regulatory approval in one country does not ensure approval in any other country, while a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory approval process in others. Also, regulatory approval for any product candidate may be withdrawn. If Conatus fails to comply with the regulatory requirements in international markets and/or receive applicable marketing approvals, its target market will be reduced and its ability to realize the full market potential of a product candidate will be harmed, which would adversely affect itsour business, prospects, financial condition and results of operations.operations could be harmed if those third parties fail to provide us with sufficient quantities of drug product or fail to do so at acceptable quality levels or prices.

We currently have the infrastructure or capability internally to manufacture certain of our preclinical and clinical drug supplies for use in our clinical trials, but we have engaged a contract manufacturing organization and once the technology transfer process is complete, we will rely completely on third parties for such manufacturing. We lack the resources and the capability to manufacture any of our product candidates on a late-stage clinical or commercial scale. We will rely on our manufacturers to purchase from third-party suppliers the materials necessary to produce our product candidates for our clinical trials. There are a limited number of suppliers for raw materials that we use to manufacture our product candidates, and there may be a need to identify alternate suppliers to prevent a possible disruption of the manufacture of the materials necessary to produce our product candidates for our clinical trials, and, if approved, ultimately for commercial sale. We do not have any control over the process or timing of the acquisition

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of these raw materials by our manufacturers. Although we generally do not begin a clinical development and receives regulatory approval fortrial unless we believe we have a sufficient supply of a product candidate Conatus will be subject to ongoing regulatory obligations and continued regulatory review, which may resultcomplete such clinical trial, any significant delay or discontinuity in significant additional expense. Additionally,the supply of a product candidate, if approved,or the raw material components thereof, for an ongoing clinical trial due to the need to replace a third-party manufacturer could beconsiderably delay completion of our clinical trials, product testing and potential regulatory approval of our product candidates, which could harm our business, financial condition and results of operations.

We and our contract manufacturers are subject to labeling and other restrictions and market withdrawal, and Conatussignificant regulation with respect to manufacturing our product candidates. The manufacturing facilities on which we rely may be subjectnot continue to penalties if it fails to comply withmeet regulatory requirements or experiences unanticipated problems with such product candidate.requirements.

Any regulatory approvals that Conatus receivesAll entities involved in the preparation of therapeutics for a product candidate may be subject to limitations on the approved indicated uses for which such product candidate may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials and surveillance to monitor the safety and efficacy of theor commercial sale, including our contract manufacturers for our product candidate. The FDA may also require a REMS in order to approve a product candidate, which could entail requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. In addition, if the FDA or a comparable foreign regulatory authority approves a product candidate, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export and recordkeeping for such product candidate will becandidates, are subject to extensive and ongoing regulatory requirements. These requirements include submissionsregulation. Components of safety and other post-marketing information and reports, registration, as well as continued compliance with current good manufacturing practices,a finished therapeutic product approved for commercial sale or cGMPs, and good clinical practice regulations, or GCPs, for anyused in late-stage clinical trials that it conducts post-approval. Later discovery of previously unknown problemsmust be manufactured in accordance with a product candidate, including adverse events of

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unanticipated severity or frequency, or with its third-party manufacturers orCGMP. These regulations govern manufacturing processes and procedures and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved for sale. Poor control of production processes can lead to the introduction of contaminants or failure to comply with regulatory requirements,inadvertent changes in the properties or stability of our product candidates that may resultnot be detectable in among other things:

The FDA’s and other regulatory authorities’ policies may change, and additional government regulations may be enacted that could prevent, limit or delaysubstantially delayed until any violations are corrected to the satisfaction of the regulatory authority, if ever.

The regulatory authorities also may, at any time following approval of a product candidate. For example, in December 2016,for sale, audit the 21st Century Cures Act,manufacturing facilities of our third-party contractors. If any such inspection or Cures Act, was signed into law. The Cures Act, among other things, is intendedaudit identifies a failure to modernize the regulationcomply with applicable regulations or if a violation of drugs and spur innovation. If Conatus is slowour product specifications or unable to adapt to changes in existing requirementsapplicable regulations occurs independent of such an inspection or audit, we or the adoptionrelevant regulatory authority may require remedial measures that may be costly or time consuming for us or a third party to implement, and that may include the temporary or permanent suspension of new requirementsa clinical trial or policies,commercial sales or if Conatus is not able to maintain regulatory compliance, it may lose any marketing approval that it may have obtained, and it may not achievethe temporary or sustain profitability, which would adversely affect itspermanent closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business, prospects, financial condition and results of operations.

Conatus also cannot predictIf we or any of our third-party manufacturers fail to maintain regulatory compliance, the likelihood, natureFDA or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. For example, certain policies of the Trump administration may impact its business and industry. Namely, the Trump administration has taken several executive actions,comparable foreign authorities can impose regulatory sanctions including, the issuance ofamong other things, refusal to approve a number of executive orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. It is difficult to predict how these executive orders will be implemented and the extent to which they will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on the FDA’s ability to engage in oversight and implementation activities in the normal course, Conatus’ business may be negatively impacted.

Even if Conatus resumes development of and obtains regulatory approvalpending application for a product candidate, withdrawal of an approval, or suspension of production. As a result, our business, financial condition and results of operations may be materially and adversely affected.

Additionally, if supply from one manufacturer is interrupted, an alternative manufacturer would need to be qualified through an NDA supplement, or equivalent foreign regulatory filing, which could result in further delay. The regulatory agencies may also require additional studies or trials if a new manufacturer is relied upon for commercial production. Switching manufacturers may involve substantial costs and is likely to result in a delay in our desired clinical and commercial timelines.

These factors could cause us to incur higher costs and could cause the delay or termination of clinical trials, regulatory submissions, required approvals, or commercialization of our product candidates. Furthermore, if our suppliers fail to meet contractual requirements and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, our clinical trials may be delayed, or we could lose potential revenue.

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Any license agreement that we may enter into in the future may not gain market acceptance among physicians, patientsbe successful, which could adversely affect our ability to develop and otherscommercialize our current and potential future product candidates.

We may seek license agreements with biopharmaceutical companies for the development or commercialization of our current and potential future product candidates. To the extent that we decide to enter into license agreements, we will face significant competition in seeking appropriate licensees. Moreover, license agreements are complex and time consuming to negotiate, execute and implement. We may not be successful in our efforts to establish and implement license agreements or other alternative arrangements should we choose to enter into such arrangements, and the medical community.

terms of the arrangements may not be favorable to us. If and when we enter into additional license agreements with a third party for development and commercialization of a product candidate, iswe can expect to relinquish some or all of the control over the future success of that product candidate to the third party. The success of our license agreements will depend heavily on the efforts and activities of our licensees. Licensees generally have significant discretion in determining the efforts and resources that they will apply to the product candidate.

Disagreements between parties to a license arrangement can lead to delays in developing or commercializing the applicable product candidate and can be difficult to resolve in a mutually beneficial manner. In some cases, licenses with biopharmaceutical companies and other third parties are terminated or allowed to expire by the other party. Any such termination or expiration would adversely affect our business, financial condition and results of operations.

If we face allegations of noncompliance with the law and encounter sanctions, our reputation, revenues and liquidity may suffer, and any of our product candidates that are ultimately approved for commercialization its acceptancecould be subject to restrictions or withdrawal from the market.

Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to generate revenues from any of our product candidates that are ultimately approved for commercialization. If regulatory sanctions are applied or if regulatory approval is withdrawn, our business, financial condition and results of operations will depend onbe adversely affected. Additionally, if we are unable to generate revenues from product sales, our potential for achieving profitability will be diminished and our need to raise capital to fund our operations will increase.

We are exposed to product liability, non-clinical and clinical liability risks, which could place a number of factors, including:substantial financial burden upon us, should lawsuits be filed against us.

Ifof pharmaceutical formulations and products. In addition, the use in our clinical trials of pharmaceutical products and the subsequent sale of these products by us or our potential licensees may cause us to bear a portion of or all product candidate is approved but fails to achieve market acceptance among physicians, patientsliability risks. A successful liability claim or others in the medical community, Conatus will not be able to generate significant revenues, which wouldseries of claims brought against us could have a material adverse effect on itsour business, prospects, financial condition and results of operations.

CoverageOur research and reimbursement may be limited or unavailable in certain market segments for a product, which could make it difficult for Conatus to sell the product profitably.

Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which drugs they will cover and the amount of reimbursement. Reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a product is:

Obtaining coverage and reimbursement approval for a product from a government or other third-party payor is a time-consuming and costly process that could require Conatus to provide to the payor supporting scientific, clinical and cost-effectiveness data fordevelopment activities involve the use of its products. Conatus may nothazardous materials, which subject us to regulation, related costs and delays and potential liabilities.

Our research and development activities involve the controlled use of hazardous materials, chemicals and various radioactive compounds. If an accident occurs, we could be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. If reimbursement of Conatus’ future products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, Conatus mayheld liable for resulting damages, which could be unable to achieve or sustain profitability.

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Conatus may seek approval to market a product candidate in both the United States and in select foreign jurisdictions. If Conatus obtain approval in one or more foreign jurisdictions for a product candidate, it will besubstantial. We are also subject to rulesnumerous environmental, health and workplace safety laws and regulations, inincluding those jurisdictions. In some foreign countries, particularly those ingoverning laboratory procedures, exposure to blood-borne pathogens and the EU, the pricinghandling of prescription pharmaceuticalsbiohazardous materials. Additional federal, state and biologics is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after obtaining marketing approval for a product candidate. In addition, market acceptancelocal laws and sales of the product will depend significantly on the availability of adequate coverage and reimbursement from third-party payors for the product and may be affected by existing and future health care reform measures.

In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that could impact Conatus’ ability to sell its products profitably. In particular, in 2010, the Affordable Care Act, was enacted, which, among other things, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, established annual fees on manufacturers of certain branded prescription drugs, required manufacturers to participate in a discount program for certain outpatient drugs under Medicare Part D and promoted programs that increase the federal government’s comparative effectiveness research, which will impact existing government healthcare programs and will result in the development of new programs. An expansion in the government’s role in the United States healthcare industry may further lower rates of reimbursement for pharmaceutical products.

Other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. For example, the Budget Control Act of 2011 resulted in aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2027 unless additional Congressional action is taken. On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

There have been, and likely will continue to be, legislative and regulatory proposals at the federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. For instance, there have recently been public hearings in the U.S. Congress concerning pharmaceutical product pricing, which have resulted in several Congressional inquiries and proposed and enacted legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for pharmaceutical products. Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Conatus cannot predict the initiatives thataffecting our operations may be adopted in the future. The continuing effortsWe may incur substantial costs to comply with, and substantial fines or penalties if we violate any of the government, insurance companies, managed care organizationsthese laws or regulations.

We rely significantly on information technology and other payorsany failure, inadequacy, interruption or security lapse of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:

Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors, which may adversely affect Conatus’ future profitability.operate our business effectively.

A variety of risks associated with marketing products internationally could materially adversely affect Conatus’ business.

Conatus may seek regulatory approval for a product candidate outside of the United States and, accordingly, Conatus expects that it will be subject to additional risks related to operating in foreign countries if Conatus obtains the necessary approvals, including:

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These and other risks associated with its international operations may materially adversely affect Conatus’ ability to attain or maintain profitable operations.

If Conatus resumes the development of emricasan or CTS-2090 and fails to develop and commercialize any other product candidates, Conatus may be unable to grow its business.

Emricasan and CTS-2090 are Conatus’ only product candidates. In order to develop and commercialize any additional product candidates, Conatus may be required to invest significant resources to acquire or in-license the rights to such product candidates or to conduct drug discovery activities. In addition, any other product candidates will require additional, time-consuming development efforts prior to commercial sale, including preclinical studies, extensive clinical trials and approval by the FDA and applicable foreign regulatory authorities. All product candidates are prone to the risks of failure that are inherent in pharmaceutical product development, including the possibility that the product candidate will not be shown to be sufficiently safe and/or effective for approval by regulatory authorities. In addition, Conatus cannot assure you that it will be able to acquire, discover or develop any additional product candidates, or that any additional product candidates Conatus may develop will be approved, manufactured or produced economically, be successfully commercialized or widely accepted in the marketplace or be more effective than other commercially available alternatives. Research programs to identify new product candidates require substantial technical, financial and human resources whether or not Conatus ultimately identifies any candidates. If Conatus is unable to develop or commercialize emricasan, CTS-2090 or any other product candidates, its business and prospects will suffer.

Conatus cannot be certain that emricasan, CTS-2090 or any other product candidates that it develops will produce commercially viable drugs that safely and effectively treat liver, inflammasome-related or other diseases. Even if Conatus is successful in completing preclinical and clinical development and receiving regulatory approval for one commercially viable drug for the treatment of one disease, Conatus cannot be certain that it will also be able to develop and receive regulatory approval for other product candidates for the treatment of other forms of that disease or other diseases. If Conatus fails to develop a pipeline of potential product candidates other than emricasan or CTS-2090, Conatus will not have any prospects for commercially viable drugs should its efforts to develop and commercialize emricasan or CTS-2090 be unsuccessful, and its business prospects would be harmed significantly.

If Conatus resumes development of emricasan, it may not be able to obtain orphan drug exclusivity for emricasan for any indication.

In the United States, under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biological product intended to treat a rare disease or condition. Such diseases and conditions are those that affect fewer than 200,000 individuals in the United States, or if they affect more than 200,000 individuals in the United States, there is no reasonable expectation that the cost of developing and making a drug product available in the United States for these types of diseases or conditions will be recovered from sales of the product. Orphan Drug Designation must be requested before submitting an NDA. If the FDA grants Orphan Drug Designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by that agency. Orphan Drug Designation does not convey any advantage in or shorten the duration of the regulatory review and approval process, but it can lead to financial incentives, such as opportunities for grant funding toward clinical trial costs, tax advantages and user-fee waivers.

If a drug that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the drug is entitled to orphan drug marketing exclusivity for a period of seven years. Orphan drug marketing exclusivity generally prevents the FDA from approving another application, including a full NDA, to market the same drug or biological product for the same indication for seven years, except in limited circumstances, including if the FDA concludes that the later drug is safer, more effective or makes a major contribution to patient care. For purposes of small molecule drugs, the FDA defines “same drug” as a drug that contains the same active chemical entity and is intended for the same use as the drug in question. A designated orphan drug may not receive orphan drug marketing exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. Orphan drug marketing exclusivity rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.

The criteria for designating an orphan medicinal product in the EU are similar in principle to those in the United States. Under Article 3 of Regulation (EC) 141/2000, a medicinal product may be designated as orphan if (1) it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (2) either (a) such condition affects no more than five in 10,000 persons in the EU when the application is made, or (b) the product, without the benefits derived from orphan status, would not generate sufficient return in the EU to justify investment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the EU, or if such a method exists, the product will be of significant benefit to those affected by the condition, as defined in Regulation (EC) 847/2000. Orphan medicinal products are eligible for financial incentives such as reduction of fees or fee waivers and are, upon grant of a marketing authorization, entitled to ten years

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of market exclusivity for the approved therapeutic indication. The application for orphan designation must be submitted before the application for marketing authorization. The applicant will receive a fee reduction for the marketing authorization application if the orphan designation has been granted, but not if the designation is still pending at the time the marketing authorization is submitted. Orphan designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

The ten-year market exclusivity in the EU may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan designation, for example, if the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally, marketing authorization may be granted to a similar product for the same indication at any time if:

Conatus originally applied for Orphan Drug Designation for emricasan for the treatment of fibrosis in HCV-POLT patients in the United States and the EU. In late 2013, the FDA granted an Orphan Drug Designation for emricasan for the treatment of POLT patients with reestablished fibrosis to delay the progression to cirrhosis and end-stage liver disease. In the EU, Conatus withdrew the application based on feedback from the applicable regulatory body that emricasan may have efficacy in fibrosis outside of the HCV-POLT patient population.

Conatus cannot assure you that it will be able to obtain orphan drug exclusivity for emricasan in any jurisdiction for the target indications in a timely manner or at all or that a competitor will not obtain orphan drug exclusivity that could block the regulatory approval of emricasan for several years. If Conatus is unable to obtain Orphan Drug Designation in the United States or in the EU, it will not receive market exclusivity, which might affect its ability to generate sufficient revenues. If a competitor is able to obtain orphan exclusivity that would block emricasan’s regulatory approval, its ability to generate revenues could be significantly reduced, which could harm Conatus’ business prospects, financial condition and results of operations.

If Conatus resumes development of emricasan, Conatus may be unable to maintain or effectively utilize orphan drug exclusivity for emricasan for any indication.

Conatus received Orphan Drug Designation from the FDA for emricasan for the treatment of POLT patients with reestablished fibrosis to delay the progression to cirrhosis and end-stage liver disease. Conatus may be unable to obtain regulatory approval for emricasan for this orphan population or any other orphan population, or Conatus may be unable to successfully commercialize emricasan for such orphan population due to risks that include:

If Conatus is unable to obtain regulatory approval for emricasan for any orphan population or is unable to successfully commercialize emricasan for such orphan population, it could harm Conatus’ business prospects, financial condition and results of operations.

Conatus may form or seek strategic alliances or collaborations in the future. Such alliances and collaborations may inhibit future opportunities, or Conatus may not realize the benefits of such collaborations or alliances.

Conatus may form or seek strategic alliances, joint ventures or collaborations or enter into licensing arrangements with other third parties that it believes will complement or augment its development and commercialization efforts with respect to its product candidates that it may develop. Future efforts for alliances or collaborations may also require Conatus to incur non-recurring and other charges, increase its near- and long-term expenditures, issue securities that dilute its existing stockholders or disrupt its management and business. In addition, Conatus faces significant competition in seeking appropriate strategic partners, and the negotiation process is time-consuming and complex. Furthermore, Conatus may not be able to realize the benefit of such transactions if it is unable to successfully integrate them with its existing operations and company culture. Conatus cannot be certain that, following a strategic transaction or license, it will achieve the revenues or specific net income that justifies such transaction.

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Conatus’ business and operations would suffer in the event of system failures.

Despite the implementation of security measures, Conatus’our internal computer systems and those of its current and future CROs and other contractors and consultantsthird parties with which we contract are vulnerable to damage from cyber-attacks, computer viruses, unauthorized access, natural disasters,

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terrorism, war and telecommunication and electrical failures. While Conatus has not experienced any such material system failure, accidentSystem failures, accidents or security breach to date, if such an event were to occur andbreaches could cause interruptions in itsour operations itand could result in a material disruption of itsour drug development programs and itsclinical activities and business operations. For example, theoperations, in addition to possibly requiring substantial expenditures of resources to remedy. The loss of drug development or clinical trial data from completed or future clinical trials could result in delays in Conatus’our regulatory approval efforts and significantly increase itsour costs to recover or reproduce the data. Likewise, Conatus relies on third parties to manufacture its product candidates and conduct clinical trials, and similar events relating to their computer systems could also have a material adverse effect on its business. To the extent that any disruption or security breach were to result in a loss of, or damage to, Conatus’our data or applications, or inappropriate disclosure of confidential or proprietary information, Conatuswe could incur liability and our development programs and the further development and commercialization of itsour product candidates could be delayed.

Business disruptions could seriously harm Conatus’ future revenuesOur employees and financial condition and increase its costs and expenses.

Conatus’ operations could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or manmade disasters or business interruptions, for which it is predominantly self-insured. For example, in December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China. The coronavirus has impacted the global economy, including limiting travel to China, and may impact our operations including potential interruption of our clinical operations and supply chain. The extent to which the coronavirus will impact our results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others.  The occurrence of any of these business disruptions could seriously harm Conatus’ operations and financial condition and increase its costs and expenses. Conatus relies on third-party manufacturers to produce its product candidates. Conatus’ ability to obtain clinical supplies of its product candidates could be disrupted if the operations of these suppliers are affected by a man-made or natural disaster or other business interruption. Conatus’ corporate headquarters is located in California near major earthquake faults and fire zones. The ultimate impact on Conatus, its significant suppliers and its general infrastructure of being located near major earthquake faults and fire zones and being consolidated in certain geographical areas is unknown, but Conatus’ operations and financial condition could suffer in the event of a major earthquake, fire or other natural disaster.

Conatus relies significantly on information technology, which faces certain risks, and any failure, inadequacy, interruption or security lapse of that technology, including any cybersecurity incidents, could harm its ability to operate its business effectively.

Conatus relies significantly on its information technology to effectively manage and conduct its business and operations. Any failure, inadequacy or interruption of that infrastructure or security lapse of that technology, including cybersecurity incidents, could harm Conatus’ ability to operate its business effectively. In the ordinary course of business, Conatus collects, stores and transmits confidential information, and it is critical that Conatus does so in a secure manner in order to maintain the confidentiality and integrity of such confidential information. Significant disruptions to Conatus’ information technology systems or breaches of information security could adversely affect its business. Conatus’ information technology systems are potentially vulnerable to service interruptions and security breaches from inadvertent or intentional actions by its employees, partners, vendors, or from attacks by malicious third parties. Maintaining the secrecy of this confidential, proprietary, and/or trade secret information is important to Conatus’ competitive business position. While Conatus has taken steps to protect such information and invested in information technology, there can be no assurance that its efforts will prevent service interruptions or security breaches in its systems or the unauthorized or inadvertent wrongful access or disclosure of confidential information that could adversely affect its business operations or result in the loss, dissemination, or misuse of critical or sensitive information. Cybersecurity attacks in particular are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, misappropriation of its confidential or otherwise protected information and corruption of data. A breach of Conatus’ security measures or the accidental loss, inadvertent disclosure, unapproved dissemination or misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether as a result of theft, hacking, or other forms of deception, or for any other cause, could enable others to produce competing products, use its proprietary technology and/or adversely affect its business position. Further, a breach in security, unauthorized access resulting in misappropriation, theft, or sabotage with respect to its proprietary and confidential information, including research or clinical data, could require significant capital investments to remediate and could adversely affect Conatus’ business, financial condition and results of operations.

Conatus’ employees, independent contractors, principal investigators, consultants commercial collaborators, service providers and other vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

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Conatus isWe are exposed to the risk that its employees, independent contractors, principal investigators, consultants, commercial collaborators, service providers and other vendors may engage in fraudulentof employee or consultant fraud or other illegal activity.misconduct. Misconduct by these partiesour employees or consultants could include intentional reckless and/or negligent conduct or disclosure of unauthorized activitiesfailures to Conatus that violatecomply with FDA laws and regulations, including those laws that require the reporting of true, complete andprovide accurate information to the FDA, comply with manufacturing standards, comply with federal and state healthcare fraud and abuse laws and regulations, or laws that require the true, complete and accurate reporting ofreport financial information or data.data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission,commissions, customer incentive programs and other business arrangements. Activities subject to these lawsEmployee and consultant misconduct also could involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to Conatus’our reputation. Conatus has adopted a code of business conduct and ethics, but itIt is not always possible to identify and deter third-partysuch misconduct, and the precautions Conatus takeswe take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting itus from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against Conatus,us, and Conatus iswe are not successful in defending itself or asserting itsour rights, those actions could have a significant impact on its business, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, reputational harm, diminished profits and future earnings, and curtailment of its operations, any of which could adversely affect its ability to operate its business and its results of operations.

Conatus’ current and future relationships with investigators, health care professionals, consultants, third-party payors and customers will be subject to applicable healthcare regulatory laws. Conatus or its collaborators’ failure to comply with those laws could have a material adverse effect on itsour business, financial condition and results of operations, and result in the imposition of significant fines or other sanctions against us.

Business disruptions such as natural disasters could seriously harm our future revenues and financial condition.condition and increase our costs and expenses.

Conatus’We and our suppliers may experience a disruption in their business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors and customers, may expose it to broadly applicable fraud and abuse and other healthcare laws and regulations. These laws may constrain the businessas a result of natural disasters. A significant natural disaster, such as an earthquake, hurricane, flood or financial arrangements and relationships through which Conatus conducts its operations, including how it researches, markets, sells and distributes its product candidates for which it obtains marketing approval. Such laws include, without limitation:

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If Conatus or its collaborators’ operations are found to be in violation of any of such laws or any other governmental regulations that apply to Conatus, it may be subject to penalties, including civil and criminal penalties, damages, fines, the curtailment or restructuring of its operations, the exclusion from participation in federal and state healthcare programs or similar programs in other countries or jurisdictions, integrity oversight and reporting obligations to resolve allegations of non-compliance, and individual imprisonment, any ofsuppliers, which could adversely affect its ability to operate Conatus’have a material and adverse effect on our business, and its results of operations.

Risks Related to Conatus’ Reliance on Third Parties

Since Conatus and Novartis terminated the Collaboration Agreement, Conatus will not receive any future milestone, royalty or profit and loss sharing payments under the Collaboration Agreement, and Conatus may not be able to enter into a similar agreement on favorable terms, or at all.

In June 2019, Conatus announced that top-line results from its ENCORE-LF clinical trial of emricasan did not meet the primary endpoint, and Conatus was discontinuing further treatment of patients enrolled in the ENCORE-LF clinical trial. In addition, results from the 24-week extension in Conatus’ ENCORE-PH clinical trial of emricasan were consistent with results from the initial 24-week treatment period and did not meet predefined objectives. Previously, in March 2019, Conatus announced that top-line results from the Phase 2b ENCORE-NF clinical trial of emricasan also did not meet the primary endpoint. Consequently, Conatus and Novartis entered into an amendment to the Collaboration Agreement, pursuant to which they mutually agreed to terminate the Collaboration Agreement in September 2019.

As a result, Conatus will not receive additional milestones under the Collaboration Agreement, and Conatus may be unable to raise the additional capital required to further develop and commercialize emricasan, if it resumes development, or enter into a collaboration agreement with another pharmaceutical company with equivalent or comparable terms, or at all. Further, any delays in entering into new strategic partnership agreements related to emricasan could delay the development and commercialization of emricasan, which would harm Conatus’ business, prospects, financial condition and results of operations. In addition, a strategic transaction may not result in any future development and commercializationterrorist acts or acts of emricasan, which would harm Conatus’ business, prospects, financial condition and results of operations.

Conatus relies on third parties to conduct its clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, Conatus may not be able to obtain regulatory approval for or commercialize a product candidate, and its business could be substantially harmed.

Conatus anticipates that it will continue to engage one or more third-party CROs in connection with future clinical trials for any product candidate. Conatus relies heavily on these parties for execution of its clinical trials, and it controls only certain aspects of their activities. Nevertheless, Conatus is responsible for ensuring that each of its trials is conducted in accordance with applicable protocol, legal, regulatory and scientific standards, and its reliance on its CROs does not relieve it of its regulatory responsibilities. Conatus and its CROs are required to comply with GCPs, which are regulations and guidelines enforced bywar targeted at the FDA and comparable foreign regulatory authorities for product candidates in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If Conatus or any of its CROs fail to comply with applicable GCPs, the clinical data generated in its clinical trials may be deemed unreliable, and the FDA or comparable foreign regulatory authorities may require Conatus to perform additional clinical trials before approving its marketing applications. Conatus cannot assure you that, upon inspection, such regulatory authorities will determine that any of its clinical trials comply with the GCPs. In addition, Conatus’ clinical trials must be conducted with drug product produced under cGMP regulations and will require a large number of test subjects. Conatus’ failure or any failure by its CROs to comply with these regulations or to recruit a sufficient number of patients may require Conatus to repeat clinical trials, which would delay the regulatory approval process. Moreover, Conatus’ business may be implicated if any of its CROs violate federal or state fraud and abuse or false claims laws and regulations or healthcare privacy and security laws. Conatus’ CROs are not its employees and, except for remedies available to Conatus under its agreements with such CROs, it cannot control whether or not they devote sufficient time and resources to Conatus’ ongoing preclinical, clinical and nonclinical programs. These CROs may also have relationships with other commercial entities, including its competitors, for whom they may also be conducting clinical trials or other drug development activities, which could affect their performance on Conatus’ behalf. Conatus’ clinical trials may be extended, delayed or terminated if CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to Conatus’ clinical protocols or regulatory requirements or for other reasons. As a result, Conatus may not be able to complete development of, obtain regulatory approval for or successfully commercialize any product candidate. Therefore,

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Conatus’ financial results and the commercial prospects for any product candidate would be harmed, Conatus’ costs could increase and its ability to generate revenues could be delayed.

Switching or adding CROs involves substantial cost and requires extensive management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact Conatus’ ability to meet its desired clinical development timelines. Although Conatus carefully manages its relationships with its CROs, there can be no assurance that Conatus will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on its business, prospects, financial condition and results of operations.

Conatus relies completely on third parties to manufacture its preclinical and clinical drug supplies, and Conatus intends to rely on third parties to produce commercial supplies of any product candidates, if approved. The development and commercialization of any product candidate could be stopped, delayed or made less profitable if those third parties fail to obtain and maintain regulatory approval of their facilities, fail to provide Conatus with sufficient quantities of drug product or fail to do so at acceptable quality levels or prices.

Risks Related to Conatus’ Financial Position and Capital Requirements

To conserve capital, Conatus may undertake additional workforce and cost reduction activities in the future. These activities may cause Conatus to be unable to fully support and manage its operations.

In June 2019 and September 2019, Conatus implemented restructuring plans to conserve capital, and it may, in the future, need to undertake additional workforce reductions or restructuring activities. As a result of the reduction in its workforce, Conatus faces an increased risk of employment litigation. Conatus also needs to effectively manage its operations and facilities. Following Conatus’ workforce reductions in June 2019 and September 2019, it is possible that its infrastructure may be inadequate to support its future efforts and business strategy or to maintain operational, financial and management controls and reporting systems and procedures. If Conatus cannot successfully manage its operations, it may be unsuccessful in executing its business strategy, including potential strategic alternatives.

Conatus has a limited operating history, has incurred significant operating losses since its inception and anticipates that it will continue to incur losses for the foreseeable future.

Conatus’ operations began in 2005, and it has only a limited operating history upon which you can evaluate its business and prospects. Conatus’ operations to date have been limited to conducting product development activities and performing research and development with respect to its clinical and preclinical programs. In addition, as an early-stage company, Conatus has limited experience and has not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the pharmaceutical area. Nor has Conatus demonstrated an ability to obtain regulatory approval for or to commercialize a product candidate. Consequently, any predictions about its future performance may not be as accurate as they would be if Conatus had a history of successfully developing and commercializing pharmaceutical products.

Conatus has incurred significant operating losses since its inception, including net losses of $11.4 million, $18.0 million and $17.4 million for the years ended December 31, 2019, 2018 and 2017, respectively. As of December 31, 2019, Conatus had an accumulated deficit of $198.0 million. Conatus’ prior losses, combined with expected future losses, have had and will continue to have an adverse effect on its stockholders’ equity and working capital. Conatus’ losses have resulted principally from costs incurred in its research and development activities. In addition, if Conatus obtains regulatory approval of any product candidate, Conatus may incur significant sales and marketing expenses. Because of the numerous risks and uncertainties associated with developing pharmaceutical products, Conatus is unable to predict the extent of any future losses or whether or when it will become profitable, if ever.

Conatus has not generated any revenues to date from product sales. Conatus may never achieve or sustain profitability, which could depress the market price of its common stock andU.S., could cause its stockholdersdamage or disruption to lose all or a part of their investment.

Conatus’ ability to become profitable depends in part on its ability to developus, our employees, facilities, partners and commercialize emricasan or CTS-2090. To date, Conatus has no products approved for commercial sale and has not generated any revenues from sales of any product candidate, and it does not know when, or if, it will generate revenues in the future. Conatus does not anticipate generating revenues, if any, from sales of emricasan or CTS-2090 for at least the next several years, and it will never generate revenues from emricasan or CTS-2090 if it does not obtain regulatory approval of such product candidates. Conatus’ ability to generate future revenues depends heavily on its success in:

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Even if Conatus does generate product sales, it may never achieve or sustain profitability. Conatus’ failure to become and remain profitable would depress the market price of its common stock and could impair its ability to raise capital, expand its business, diversify its product offerings or continue its operations.

Raising additional capital may cause dilution to existing Conatus stockholders, restrict Conatus’ operations or require it to relinquish rights to its technologies or product candidate.

Conatus may seek additional capital through a combination of public and private equity offerings, debt financings, strategic partnerships and alliances and licensing arrangements. To the extent that Conatus raises additional capital through the sale of equity or convertible debt securities, the ownership interests of its stockholders will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of its stockholders. The incurrence of indebtedness would result in increased fixed payment obligations and could involve certain restrictive covenants, such as limitations on Conatus’ ability to incur additional debt, limitations on its ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact its ability to conduct its business. If Conatus raises additional funds through strategic partnerships and alliances and licensing arrangements with third parties, it may have to relinquish valuable rights to its technologies or product candidate, or grant licenses on terms unfavorable to it.

Conatus’ ability to utilize its net operating loss, or NOL, carryforwards and certain other tax attributes may be limited.

Under Section 382 of the Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be limited. Conatus previously completed a study to assess whether an ownership change, as defined by Section 382 of the Code, had occurred from its formation through December 31, 2017. Based upon this study, Conatus determined that ownership changes had occurred in 2006 and 2013 but concluded that the annual utilization limitation would be sufficient to utilize its pre-ownership change NOLs and research and development credits prior to expiration, with the exception of a de minimis amount. Future ownership changes may limit Conatus’ ability to utilize remaining tax attributes. As of December 31, 2019, Conatus had federal and state NOL carryforwards of $145.5 million and $76.4 million, respectively. Conatus also had federal, including orphan drug, and state research and development credit carryforwards of $8.3 million and $2.4 million, respectively. Furthermore, under recently enacted U.S. tax legislation, although the treatment of tax losses generated in taxable years ending before December 31, 2017 has generally not changed, tax losses generated in taxable years beginning after December 31, 2017 may only be utilized to offset 80% of taxable income annually. This change may require Conatus to pay federal income taxes in future years despite generating a loss for federal income tax purposes in prior years.

Unstable market and economic conditions may have serious adverse consequences on Conatus’ business, financial condition and stock price.

As widely reported, global credit and financial markets have experienced extreme disruptions in the past several years, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. Conatus’ general business strategy may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, or do not improve, it may make any necessary equity or debt financing more difficult, more costly and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable termssuppliers, which could have a material adverse effect on Conatus’ growth strategy,our business, financial performancecondition and stock priceresults of operations.

We may engage in strategic transactions that could impact our liquidity, increase our expenses and present significant distractions to our management.

From time to time, we may consider strategic transactions, such as acquisitions of companies, asset purchases and out-licensing or in-licensing of products, product candidates or technologies. Additional potential transactions that we may consider include a variety of different business arrangements, including spin-offs, strategic partnerships, joint ventures, restructurings, divestitures, business combinations and investments. Any such transaction may require us to incur non-recurring or other charges, may increase our near- and long-term expenditures and may pose significant integration challenges or disrupt our management or business, which could adversely affect our business, financial condition and results of operations. For example, these transactions may entail numerous operational and financial risks, including:

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Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, any transactions that we do complete may be subject to the foregoing or other risks and could require Conatushave a material adverse effect on our business, financial condition and results of operations.

Risks Relating to delayOur Intellectual Property

We may not be successful in obtaining or abandon clinical development plans. In addition, there is a risk that onemaintaining necessary rights to our product candidates through acquisitions and in-licenses.

One or more of Conatus’ current service providers, manufacturers andour programs may require the use of proprietary rights held by third parties. We may need to acquire or in-license additional intellectual property in the future with respect to other partnersproduct candidates. Moreover, we may not survive these difficult economic times, which could directly affect Conatus abilitybe unable to attain its operating goals on schedule and on budget.

At December 31, 2019, Conatus had $20.7 millionacquire or in-license any compositions, methods of cash and cash equivalents. While Conatus is not aware of any downgrades, material losses,use, processes, or other significant deterioration inintellectual property rights from third parties that we identify as necessary for our product candidates. We face competition with regard to acquiring and in-licensing third-party intellectual property rights, including from a number of more established companies. These established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license intellectual property rights to us. We also may be unable to acquire or in-license third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment.

We may enter into license agreements with U.S. and foreign academic institutions to accelerate development of our current or future preclinical product candidates. Typically, these agreements include an option for the fair value of its cash equivalents since December 31, 2019, no assurance can be given that deterioration of the global credit and financial markets would not negatively impact its current portfolio of cash equivalents or its abilitycompany to meet its financing objectives. Furthermore, its stock price may decline due in partnegotiate a license to the volatility ofinstitution’s resulting intellectual property rights. Even with such an option, we may be unable to negotiate a license within the stock market.

Risks Relatedspecified timeframe or under terms that are acceptable to Conatus’ Intellectual Property

us. If Conatus’ effortswe are unable to protectlicense rights from the proprietary nature ofinstitution, the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursue our desired program.

If we are unable to successfully obtain required third-party intellectual property rights or maintain our existing intellectual property rights, we may need to abandon development of the related to its technologies are not adequate, itprogram and our business, financial condition and results of operations could be materially and adversely affected.

We may not be able to compete effectivelyprotect our proprietary or licensed technology in its market.the marketplace.

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Conatus relies upon a combination of patents,We depend on our ability to protect our proprietary or licensed technology. We rely on trade secret, protectionpatent, copyright and trademark laws, and confidentiality, licensing, and other agreements with employees and third parties, all of which offer only limited protection. Our success depends in large part on our ability and any licensor’s or licensee’s ability to obtain and maintain patent protection in the U.S. and other countries with respect to our proprietary or licensed technology and products. We currently in-license some of our intellectual property rights to develop our product candidates and may in-license additional intellectual property rights in the future. We cannot be certain that patent

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We believe we will be able to obtain, through prosecution of patent applications covering our owned technology and technology licensed from others, adequate patent protection for our proprietary drug technology, including those related to our in-licensed intellectual property. If we are compelled to spend significant time and money protecting or enforcing our licensed patents and future patents we may own, designing around patents held by others or licensing or acquiring, potentially for large fees, patents or other proprietary rights held by others, our business, financial condition and results of operations may be materially and adversely affected. If we are unable to effectively protect the intellectual property related to its technologies. Any disclosure tothat we own or misappropriation by third parties of its confidential proprietary information could enable competitors to quickly duplicate or surpass its technological achievements, thus eroding its competitive position in its market.

Composition-of-matter patents on the API and crystalline forms are generally considered to be the strongest form of intellectual property protection for pharmaceutical products, as such patents provide protection without regard to any method of use. Conatus cannot be certain that the claims in its patent applications covering composition-of-matter or crystalline forms of emricasan or CTS-2090 will be considered patentable by the United States Patent and Trademark Office, or the USPTO, courts in the United States, or by the patent offices and courts in foreign countries. Method-of-use patents protect the use of a product for the specified method. This type of patent does not prevent a competitor from making and marketing a product that is identical to its product for an indication that is outside the scope of the patented method. Moreover, even if competitors do not actively promote their product for its targeted indications, physiciansin-license, other companies may prescribe these products “off-label.” Although off-label prescriptions may infringe or contribute to the infringement of method-of-use patents, the practice is common and such infringement is difficult to prevent or prosecute.

The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. Some of Conatus’ patents related to emricasan were acquired from a predecessor owner and were therefore not written by it or its attorneys, and it did not have control over the drafting and prosecution of these patent applications. Further, the former patent owners might not have given the same attention to the drafting and early prosecution of these patents and applications as Conatus would have if it had been the owners of the patents and applications and had control over the drafting and prosecution. In addition, the former patent owners may not have been completely familiar with United States patent law, possibly resulting in inadequate disclosure and/or claims. This could result in findings of invalidity or unenforceability of the patents Conatus owns or patents issuing with reduced claim scope.

In addition, the patent applications that Conatus owns or that it may license may fail to result in issued patents in the United States or in other foreign countries. Even if the patents do successfully issue, third parties may challenge the validity, enforceability or scope thereof, which may result in such patents being narrowed, invalidated or held unenforceable. Furthermore, even if they are unchallenged, Conatus’ patents and patent applications may not adequately protect its intellectual property or prevent others from designing around its claims.

In addition to the protection afforded by patents, Conatus seeks to rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable, processes for which patents are difficult to enforce and any other elements of its drug discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. Although Conatus requires all of its employees to assign their inventions to it, and require all of its employees, advisors and any third parties who have access to its proprietary know-how, information or technology to enter into confidentiality agreements, Conatus cannot be certain that its trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to its trade secrets or independently develop substantially equivalent information and techniques. Furthermore, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, Conatus may encounter significant problems in protecting and defending its intellectual property both in the United States and abroad. If Conatus is unable to prevent unauthorized material disclosure of its intellectual property to third parties, Conatus will not be able to establishoffer the same or maintain a competitive advantage in its market,similar products for sale, which could materially adversely affect itsour business, operatingfinancial condition and results of operations.

The patents of others from whom we may license technology, and financial condition.

Third-party claims of intellectual property infringementany future patents we may prevent or delay Conatus’ drug discovery and development efforts.

Conatus’ commercial success depends in part on its and its collaborators avoiding infringement of the patents and proprietary rights of third parties. There is a substantial amount of litigation involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, as well as administrative proceedings for challenging patents, including interference and reexamination proceedings before the USPTO or oppositions and other comparable proceedings in foreign jurisdictions. Under United States patent reform, new procedures including inter partes review and post grant review have been implemented. As stated above, this reform brings uncertainty to the possibility of challenge to its patents in the future. Numerous United States and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which it or its collaborators are developing product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that a product candidate may give rise to claims of infringement of the patent rights of others.

Third parties may assert that Conatus or its collaborators are employing their proprietary technology without authorization. Thereown, may be third-party patents ofchallenged, narrowed, invalidated or circumvented, which Conatus or its collaborators are currently unaware with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of a Conatus product candidate. Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that a product candidate may infringe. In addition, third parties may obtain patents in the future and claim that use of Conatus or its collaborators’ technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of a product candidate, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block thecould limit our ability to commercializestop competitors from marketing the product candidate unless Conatussame or its

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collaborators obtain a license undersimilar products or limit the applicable patents, or until such patents expire or they are finally determined to be held invalid or unenforceable. Similarly, if any third-partylength of term of patent were held by a court of competent jurisdiction to cover aspects of its formulations, processes for manufacture or methods of Conatus, including combination therapy or patient selection methods, the holders of any such patent may be able to block the ability to develop and commercialize the product candidate, unless Conatus or its collaborators obtain a license or until such patent expires or is finally determined to be held invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all. If Conatus or its collaborators are unable to obtain a necessary license to a third-party patent on commercially reasonable terms, or at all, Conatus’ ability to commercialize a product candidate may be impaired or delayed, which could in turn significantly harm Conatus’ business.

Parties making claims against Conatus may seek and obtain injunctive or other equitable relief, which could effectively block the ability to further develop and commercialize a product candidate. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from its business. In the event of a successful claim of infringement against Conatus, itprotection that we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign its infringing products, which may be impossible or require substantial time and monetary expenditure. Conatus cannot predict whether any such license would be available at all or whether it would be available on commercially reasonable terms. Furthermore, even in the absence of litigation, Conatus or its collaborators may need to obtain licenses from third parties to advance Conatus’ research or allow commercialization of a product candidate. Conatus may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, Conatus or its collaborators would be unable to further develop and commercialize a product candidate, which could harm Conatus’ business significantly.our products.

Conatus or its collaborators may be involved in lawsuits to protect or enforce its patents, which could be expensive, time-consuming and unsuccessful.

Competitors may infringe Conatus’ patents. To counter infringement or unauthorized use, Conatus or its collaborators may be required to file infringement claims, which can be expensive and time-consuming. In an infringement proceeding, a court may decide that one or more of Conatus’ patents is not valid or is unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that Conatus’ patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of Conatus’ patents at risk of being invalidated, held unenforceable, or interpreted narrowly and could put Conatus’ patent applications at risk of not issuing. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from Conatus’ business. In the event of a successful claim of infringement against Conatus, it or its collaborators may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign its infringing products, which may be impossible or require substantial time and monetary expenditure.

Interference proceedings provoked by third parties or brought by the USPTO may be necessary to determine the priority of inventions with respect to Conatus’ patents or patent applications. An unfavorable outcome could require Conatus to cease using the related technology or to attempt to license rights to it from the prevailing party. Conatus’ business could be harmed if the prevailing party does not offer it a license on commercially reasonable terms. Litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract Conatus’ management and other employees. Conatus may not be able to prevent misappropriation of its trade secrets or confidential information, particularly in countries where the laws may not protect those rights as fully as in the United States.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of Conatus’ confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of Conatus’ common stock.

Obtaining and maintaining Conatus’ patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and Conatus’our patent protection for licensed patents, pending patent applications and potential future patent applications and patents could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on any issuedpatents and/or patent areapplications will be due to be paid to the USPTOU.S. Patent and foreignTrademark Office (“USPTO”) and various governmental patent agencies outside of the U.S. in several stages over the lifetime of the patent.applicable patent and/or patent application. The USPTO and various foreignnon-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. WhileIn many cases, an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules,rules. However, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patentIf this occurs with respect to our in-licensed patents or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In such an event, Conatus’applications we may file in the future, our competitors might be able to enter the market,use our technologies, which would have a material adverse effect on Conatus’ business.our business, financial condition, and results of operations.

38The patent positions of pharmaceutical products are often complex and uncertain. The breadth of claims allowed in pharmaceutical patents in the U.S. and many jurisdictions outside of the U.S. is not consistent. For example, in many jurisdictions, the support standards for pharmaceutical patents are becoming increasingly strict. Some countries prohibit method of treatment claims in patents. Changes in either the patent laws or interpretations of patent laws in the U.S. and other countries may diminish the value of our licensed or owned intellectual property or create uncertainty. In addition, publication of information related to our current product candidates and potential products may prevent us from obtaining or enforcing patents relating to these product candidates and potential products, including without limitation composition-of-matter patents, which are generally believed to offer the strongest patent protection.

Patents that we currently license and patents that we may own or license in the future do not necessarily ensure the protection of our licensed or owned intellectual property for a number of reasons, including, without limitation, the following:

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Our competitors may be able to circumvent our licensed patents or future patents we may own by developing similar or alternative technologies or products in a non-infringing manner. Our competitors may seek to market generic versions of any approved products by submitting abbreviated new drug applications to the FDA in which our competitors claim that our licensed patents or any future patents we may own are invalid, unenforceable, or not infringed. Alternatively, our competitors may seek approval to market their own products similar to or otherwise competitive with our products. In these circumstances, we may need to defend or assert our licensed patents or any future patents we may own, including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or other agency with jurisdiction may find our licensed patents or any future patents we may own invalid or unenforceable. We may also fail to identify patentable aspects of our research and development before it is too late to obtain patent protection. Even if we own or in-license valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve our business objectives.

ConatusThe issuance of a patent is not conclusive as to our inventorship, scope, ownership, priority, validity, or enforceability. In this regard, third parties may challenge our licensed patents or any future patents we may own in the courts or patent offices in the U.S. and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated, or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products or limit the duration of the patent protection of our technology and potential products. In addition, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such product candidates might expire before or shortly after such product candidates are commercialized.

We may infringe the intellectual property rights of others, which may prevent or delay our drug development efforts and prevent us from commercializing or increase the costs of commercializing our products, if approved.

Our commercial success depends significantly on our ability to operate without infringing the patents and other intellectual property rights of third parties. For example, there could be issued patents of which we are not aware that our current or potential future product candidates infringe. There also could be patents that we believe we do not infringe, but that we may ultimately be found to infringe.

Moreover, patent applications are in some cases maintained in secrecy until patents are issued. The publication of discoveries in the scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made and patent applications were filed. Because patents can take many years to issue, there may be currently pending applications of which we are unaware that may later result in issued patents that our product candidates or potential products infringe. For example, pending applications may exist that claim or can be

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amended to claim subject matter that our product candidates or potential products infringe. Competitors may file continuing patent applications claiming priority to already issued patents in the form of continuation, divisional, or continuation-in-part applications, in order to maintain the pendency of a patent family and attempt to cover our product candidates.

Third parties may assert that we are employing their proprietary technology without authorization and may sue us for patent or other intellectual property infringement. These lawsuits are costly and could adversely affect our business, financial condition and results of operations and divert the attention of managerial and scientific personnel. If we are sued for patent infringement, we would need to demonstrate that our product candidates, potential products, or methods either do not infringe the claims of the relevant patent or that the patent claims are invalid, and we may not be able to do this. Proving invalidity is difficult. For example, in the U.S., proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and scientific personnel could be diverted in pursuing these proceedings, which could have a material adverse effect on us. In addition, we may not have sufficient resources to bring these actions to a successful conclusion. If a court holds that any third-party patents are valid, enforceable and cover our products or their use, the holders of any of these patents may be able to block our ability to commercialize our products unless we acquire or obtains a license under the applicable patents or until the patents expire.

We may not be able to enter into licensing arrangements or make other arrangements at a reasonable cost or on reasonable terms. Any inability to secure licenses or alternative technology could result in delays in the introduction of our products or lead to prohibition of the manufacture or sale of products by us. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, in any such proceeding or litigation, we could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially and adversely affect our business, financial condition, and results of operations. Any claims by third parties that we have misappropriated their confidential information or trade secrets could have a similar material and adverse effect on our business, financial condition, and results of operations. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations.

Any claims or lawsuits relating to infringement of intellectual property rights brought by or against us will be costly and time consuming and may adversely affect our business, financial condition, and results of operations.

We may be required to initiate litigation to enforce or defend our licensed and owned intellectual property. Lawsuits to protect our intellectual property rights can be very time consuming and costly. There is a substantial amount of litigation involving patent and other intellectual property rights in the biopharmaceutical industry generally. Such litigation or proceedings could substantially increase our operating expenses and reduce the resources available for development activities or any future sales, marketing, or distribution activities.

In any infringement litigation, any award of monetary damages we receive may not be commercially valuable. 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 litigation. Moreover, there can be no assurance that we will have sufficient financial or other resources to file and pursue such infringement claims, which typically last for years before they are resolved. Further, any claims we assert against a perceived infringer could provoke these parties to assert counterclaims against us alleging that we have infringed their patents. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to develop our product candidates.

In addition, our licensed patents and patent applications, and patents and patent applications that we may apply for, own or license in the future, could face other challenges, such as interference proceedings, opposition proceedings, re-examination proceedings and other forms of post-grant review. Any of these challenges, if successful, could result

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in the invalidation of, or in a narrowing of the scope of, any of our licensed patents and patent applications and patents and patent applications that we may apply for, own or license in the future. Any of these challenges, regardless of their success, would likely be time consuming and expensive to defend and resolve and would divert our management and scientific personnel’s time and attention.

Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involves both technological and legal complexity and is costly, time-consuming, and inherently uncertain. For example, the U.S. previously enacted and is currently implementing wide-ranging patent reform legislation. Specifically, on September 16, 2011, the Leahy-Smith America Invents Act (the “Leahy-Smith Act”) was signed into law and included a number of significant changes to U.S. patent law, and many of the provisions became effective in March 2013. However, it may take the courts years to interpret the provisions of the Leahy-Smith Act, and the implementation of the statute could increase the uncertainties and costs surrounding the prosecution of our licensed and future patent applications and the enforcement or defense of our licensed and future patents, all of which could have a material adverse effect on our business, financial condition, and results of operations.

In addition, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce patents that we might obtain in the future.

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

Filing, prosecuting and defending patents on product candidates throughout the world would be prohibitively expensive. Competitors may use our licensed and owned technologies in jurisdictions where we have not licensed or obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we may obtain or license patent protection, but where patent enforcement is not as strong as that in the U.S. These products may compete with our products in jurisdictions where we do not have any issued or licensed patents and any future patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our licensed patents and future patents we may own, or marketing of competing products in violation of our proprietary rights generally. Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the U.S. As a result, we may encounter significant problems in protecting and defending our licensed and owned intellectual property both in the U.S. and abroad. For example, China currently affords less protection to a company’s intellectual property than some other jurisdictions. As such, the lack of strong patent and other intellectual property protection in China may significantly increase our vulnerability regarding unauthorized disclosure or use of our intellectual property and undermine our competitive position. Proceedings to enforce our future patent rights, if any, in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business.

We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.

In order to protect our proprietary and licensed technology and processes, we rely in part on confidentiality agreements with our corporate partners, employees, consultants, manufacturers, outside scientific advisors and sponsored researchers and other advisors. These agreements may not effectively prevent disclosure of our confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential

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information. In addition, others may independently discover our trade secrets and proprietary information. Failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

We may be subject to claims that itsour employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties.

Conatus has received confidential and proprietary information from third parties. In addition, Conatus employsWe employ individuals who were previously employed at other biotechnology or pharmaceuticalbiopharmaceutical companies. ConatusAlthough we have no knowledge of any such claims against us, we may be subject to claims that itwe or itsour employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of these third parties or Conatusour employees’ former employers.employers or other third parties. Litigation may be necessary to defend against these claims. Even if ConatusThere is successfulno guarantee of success in defending against these claims, and even if we are successful, litigation could result in substantial cost and be a distraction to itsour management and other employees. To date, none of our employees have been subject to such claims.

Risks RelatedWe may be subject to Ownershipclaims challenging the inventorship of Conatus’ Common Stock

If Conatus is not able to comply with the applicable continued listing requirements or standards of the Nasdaq Capital Market, its common stock could be delisted.

Conatus’ common stock is currently listed on the Nasdaq Capital Market. In order to maintain that listing, Conatus must satisfy minimum financialour licensed patents, any future patents we may own and other continued listing requirementsintellectual property.

Although we are not currently experiencing any claims challenging the inventorship of our licensed patents or our licensed or owned intellectual property, we may in the future be subject to claims that former employees, licensees or other third parties have an interest in our licensed patents or other licensed or owned intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and standards, including those regarding director independenceother claims challenging inventorship. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business, financial condition, and independent committee requirements, minimum stockholders’ equity, minimum share price,results of operations. Even if we are successful in defending against such claims, litigation could result in substantial costs and certain corporate governance requirements. There can be no assurances that Conatus will be ablea distraction to comply with the applicable listing standards.management and other employees.

On May 29, 2019, Conatus received a letter from the Nasdaq staff indicating that, for the last thirty consecutive business days, the bid price for its common stock had closed below the minimum $1.00 per share requirement for continued listing on the Nasdaq Global Market under Nasdaq Listing Rule 5450(a)(1). Conatus had a period of 180 calendar days, or until November 25, 2019, to regain compliance. On November 25, 2019, Conatus filed an application to transfer the listing of its common stock from the Nasdaq Global Market to the Nasdaq Capital Market.

On November 27, 2019, Conatus received approval from Nasdaq to transfer the listing of Conatus’ common stock from the Nasdaq Global Market to the Nasdaq Capital Market. Conatus’ common stock was transferred to the Nasdaq Capital Market effective as of the open of business on November 29, 2019, and continues to tradeIf we do not obtain additional protection under the symbol “CNAT.” The Nasdaq Capital Market operates in substantially the same manner as the Nasdaq Global MarketHatch-Waxman Amendments and listed companies must meet certain financial requirements and comply with Nasdaq’s corporate governance requirements.

In connection with the transfer to the Nasdaq Capital Market, Conatus has been granted an additional 180-day grace period, until May 25, 2020, to regain compliance with the minimum $1.00 per share requirement for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5810(c)(3)(A). If compliance cannot be demonstrated by May 25, 2020, or Conatus does not comply withsimilar foreign legislation extending the terms of thisour licensed patents and any future patents we may own, our business, financial condition and results of operations may be materially and adversely affected.

Depending upon the timing, duration, and specifics of FDA regulatory approval for our product candidates, one or more of our licensed U.S. patents or future U.S. patents that we may license or own may be eligible for limited patent term restoration under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during drug development and the FDA regulatory review process. This period is generally one-half the time between the effective date of an investigational new drug application (“IND”) (falling after issuance of the patent), and the submission date of an NDA, plus the time between the submission date of an NDA and the approval of that application. Patent term restorations, however, cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval by the FDA.

The application for patent term extension is subject to approval by the Nasdaq staffUSPTO, in conjunction with the FDA. It takes at least six months to obtain approval of the application for patent term extension. We may not be granted an extension because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than our requests. If we are unable to obtain patent term extension or restoration or the term of any such extension is less than our requests, the period during which we will provide written notification that Conatus’ securitieshave the right to exclusively market our product will be delisted. In the eventshortened and our competitors may obtain earlier approval of such a notification, Conatus may appeal the Nasdaq staff’s determinationcompeting products, and our ability to delist its securities, but there cangenerate revenues could be no assurance the Nasdaq staff would grant Conatus’ request for continued listing.materially adversely affected.

In the event that its44

Risks Related Owning Our Common Stock

The market price of our common stock is delisted from the Nasdaq Capital Markethas been and is not eligible for quotation or listing on another market or exchange, trading of its common stock could be conducted only in the over-the-counter market or on an electronic bulletin board established for unlisted securities, such as the Pink Sheets or the OTC Bulletin Board. In such event, it could become more difficult to dispose of, or obtain accurate price quotations for, its common stock, and there would likely also be a reduction in its coverage by securities analysts and the news media, which could cause the price of its common stock to decline further. Also, it may be difficult for Conatus to raise additional capital if it is not listed on a major exchange.

The price of Conatus’ stock may be volatile.

Prior to Conatus’ IPO, there was no public market for its common stock. Since the commencement of trading in connection with Conatus’ IPO in July 2013 through January 31, 2020, the sale price per share of its common stock on Nasdaq has ranged from a low of $0.25 to a high of $15.67. The trading price of Conatus’ common stock is likely to continue to be highly volatilevolatile.

The market price of our common stock has been and may continue to be volatile. Our stock price could be subject to wide fluctuations in response to variousa variety of factors, someincluding the following:

Research51

includable as subaward costs. The following table shows our research and development expenses by type of activity (in thousands):

We cannot determine with certainty the timing of initiation, the duration or the completion costs are expensed as incurred.

of current or future preclinical studies and clinical trials of our product candidates due to the inherently unpredictable nature of preclinical and clinical development, including any potential expanded dosing beyond the original protocols based in part on ongoing clinical success. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. The costsWe anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, may vary significantly over the liferegulatory developments and our ongoing assessments of a project owingeach product candidate’s commercial potential. We will need to factors that include but are not limited to the following:

Conatus does not have anyto what degree such arrangements would affect our development plans for further development of emricasan and has suspended development of its inflammasome disease candidate, CTS-2090.capital requirements.

General and Administrative Expenses

General and administrative expenses consist principallyprimarily of personnel-related costs, insurance costs, facility costs and professional fees for legal, patent, consulting, investor and public relations, accounting and audit services. Personnel-related costs consist of salaries, benefits, and related costs for personnel in executive, finance, business development and administrative functions. Otherstock-based compensation. We expect our general and administrative expenses includeto increase substantially as we: (i) incur additional costs related toassociated with being a public company, as well asincluding audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance facilities, travel, patent filingpremiums, and maintenance, legalinvestor relations costs, (ii) hire additional personnel, and consulting expenses.(iii) protect our intellectual property.

Other Income (Expense)

Interest Income

Interest income consists primarily of interest income earned on its cash,our cash equivalents, and marketable securities.which consist of money market funds. Our interest income has not been significant due to low interest earned on invested balances.

Interest ExpenseOther Income

Interest expenseOther income primarily consists of accrued interestthe Paycheck Protection Program Loan forgiven by the Small Business Administration on its $15.0May 21, 2021.

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Results of Operations

Comparison of Years Ended December 31, 2022 and 2021

The following table sets forth our selected statements of operations data for the years ended December 31, 2022 and 2021 (in thousands):