☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). 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:~~Act.

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

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November 7, 2017,~~August 4, 2023, there were ~~29,758,347~~57,046,172 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q ~~and the~~(Quarterly Report), our audited consolidated financial statements and accompanying notes thereto for the fiscal year ended December 31, ~~2016~~2022 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are contained in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission ~~or SEC,~~(SEC), on March ~~16, 2017.~~14, 2023 (2022 Annual Report).

This Quarterly Report ~~on Form 10-Q~~ contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended ~~or the~~(the Exchange ~~Act.~~Act). Such forward looking statements, which represent our intent, belief or current expectations, involve risks and uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “predict,” “potential,” “believe,” “should” and similar expressions. Factors that could cause or contribute to differences in results include, but are not limited to those set forth under the heading “Risk Factors” ~~under~~in Part II, Item 1A, ~~of Part II below,~~ and elsewhere in this Quarterly ~~Report on Form 10-Q.~~Report. Except as required by law we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this ~~report~~Quarterly Report or to reflect actual outcomes.

We ~~engage~~are a biotherapeutics company engaged in the discovery and ~~clinical~~ development of ~~innovative~~first-in-class medicines ~~for patients suffering~~ from ~~severe, rare diseases using~~ our ~~knowledge of Physiocrine biology,~~proprietary tRNA synthetase platform. We have concentrated our research and development efforts on a newly discovered ~~set~~area of ~~immunological~~biology, the extracellular functionality and ~~physiological pathways. Through our research efforts,~~signaling pathways of tRNA synthetases. Built on more than a decade of foundational science on extracellular tRNA synthetase biology and its effect on immune responses, we ~~believe~~have built a global intellectual property estate directed to a potential pipeline of protein compositions derived from 20 tRNA synthetase genes and their extracellular targets, such as neuropilin-2 (NRP2).

Our primary focus is efzofitimod, a clinical-stage product candidate which targets NRP2 to resolve chronic inflammation that ~~Physiocrines evolved over billions~~can lead to fibrosis. Efzofitimod has a novel mechanism of ~~years to promote homeostasis in complex organisms. We have evidence to support that some of these proteins evolved to govern~~action for potentially treating lung inflammation and ~~orchestrate the mammalian immune system.~~fibrosis. We believe ~~immune imbalance is underappreciated in many disease types and may ultimately be responsible for much~~by targeting NRP2 on myeloid cells during active inflammation, efzofitimod works upstream of ~~the pathophysiology associated with a number of important genetic and immunology based diseases.~~

~~By focusing on immune pathways in disease, we believe our therapeutic candidates have the potential~~currently available immunomodulators to restore ~~patients to a healthier state, achieve homeostatic balance~~immune homeostasis, thereby resolving chronic inflammation and ~~ultimately lead to improved clinical outcomes.~~

preventing the progression of fibrosis. We internally discovered and developed Resolaris, our first Physiocrine-based therapeutic candidate, based on a protein naturally secreted from muscle that acts on T-cells at the tissue level to promote healthier muscle. We believe this may translate into an innovative therapeutic for rare genetic myopathies with an immune component (e.g. T-cells in the patients’ muscle), including limb-girdle muscular dystrophy, facioscapulohumeral muscular dystrophy, and Duchenne muscular dystrophy. Resolaris also represents an example of our first therapeutic modality – natural protein therapy – adding back a pathway that is insufficiently produced by the human body to counteract disease.

We have completed a robust Phase 1b/2 program with Resolaris. Across all of our studies, 44 patients have received Resolaris for a total drug exposure of 204 patient months. We believe the results from our Phase 1b/2 program are supportive of the advancement of Resolaris as a treatment for various rare myopathies with an immune component. For future clinical development, initiation of a randomized placebo-controlled trial with Resolaris is contingent upon the identification of a PD assay and execution of a partnership related to one or more of our programs.

~~Our scientists successfully engineered the first fusion protein with a Physiocrine, iMod.Fc, to provide designed properties to enhance the immuno-modulatory aspects of a Physiocrine~~ ~~in vivo. We plan to develop iMod.Fc~~developing efzofitimod as a potential ~~therapeutic~~disease-modifying therapy for patients with ~~rare pulmonary diseases with an immune component, including~~ interstitial lung disease (ILD). ~~This fusion protein,~~ILDs are predominantly immune-mediated disorders that are characterized by chronic inflammation, which ~~utilizes~~can lead to progressive fibrosis of the ~~Fc region~~lung. There are limited treatment options for ILD and there remains a high unmet medical need. Sarcoidosis and systemic sclerosis (SSc, also known as scleroderma)-associated ILD (SSc-ILD) are two major forms of ILD. During 2022, the U.S. Food and Drug Administration (FDA) granted efzofitimod orphan drug designations for the treatment of sarcoidosis and for the treatment of SSc, and Fast Track designations for the treatment of pulmonary sarcoidosis and for the treatment of SSc-ILD. The European Commission (EC) granted efzofitimod an ~~antibody, also potentially represents~~orphan drug designation for the treatment of sarcoidosis in January 2023 and for the treatment of SSc in June 2023, based on the opinion of the European Medicines Agency (EMA) Committee for Orphan Medicinal Products (COMP).

In September 2021, we announced positive results and clinical proof-of-concept from a ~~novel Fc-Physiocrine platform for future Physiocrine-based therapies. We plan to commence~~double-blind, placebo-controlled Phase 1/1b/2a clinical ~~development for the iMod.Fc program by the end of 2017. This program will investigate~~trial in 37 patients with pulmonary sarcoidosis. The study was designed to evaluate the safety, tolerability, immunogenicity ~~pharmacokinetics~~ and ~~pharmacodynamics~~preliminary efficacy of ~~intravenous iMod.Fc~~three doses of efzofitimod, 1.0, 3.0 and 5.0 mg/kg, in ~~healthy volunteers~~the context of a forced steroid taper. Efzofitimod was safe and well-tolerated at all doses administered with no serious drug-related adverse events or signal of immunogenicity. Additionally, the study demonstrated consistent dose response for efzofitimod on key efficacy endpoints and improvements compared to placebo, including measures of steroid reduction, lung function, pulmonary sarcoidosis symptom measures and inflammatory biomarkers. These data were subsequently presented at the American Thoracic Society (ATS) International Conference and published in the peer-reviewed journal CHEST during 2022.

In February 2022, we met with the FDA in an end-of-Phase 2 meeting to discuss our plans for subsequent clinical development and path to registration for efzofitimod for pulmonary sarcoidosis. Subsequently, we initiated a global pivotal Phase 3 randomized, double-blind, placebo-controlled clinical trial to evaluate the efficacy and safety of efzofitimod in patients with ~~ILD.~~

~~Our third program represents a third therapeutic modality distinct from Resolaris or iMod.Fc. ORCA~~pulmonary sarcoidosis (the EFZO-FIT study). The EFZO-FIT study is a ~~preclinical research program that targets~~52-week study consisting of three parallel cohorts randomized equally to either 3.0 mg/kg or 5.0 mg/kg of efzofitimod or placebo dosed intravenously once a ~~novel, proprietary immuno-oncology pathway using antibodies~~month for a total of 12 doses. The study is currently enrolling and intends to ~~change levels~~enroll 264 subjects with pulmonary sarcoidosis at multiple centers in the United States, Europe, Brazil, and Japan. The trial design incorporates a forced steroid taper. The primary endpoint of ~~Resokine~~the study is steroid reduction. Secondary endpoints include measures of lung function and sarcoidosis symptoms. In September 2022, we dosed the first patient in ~~tumor settings. We believe tumors, across multiple tumor types, utilize Resokine to evade immune system responses. We have evaluated the therapeutic potential of targeting~~ this ~~novel pathway in multiple in-vitro and in-vivo tumor models, in comparison to and in combination with incumbent check-point modulators.~~ study.

Based on the ~~tumor model data,~~results of the Phase 1b/2a clinical trial, we believe ~~that targeting this pathway can reduce~~efzofitimod has potential applications in the treatment of other ILDs, such as chronic hypersensitivity pneumonitis (CHP) and connective tissue disease related ILD (CTD-ILD), including SSc-ILD and rheumatoid arthritis-associated ILD. As such, we designed a focused Phase 2 proof-of-concept study of efzofitimod (the EFZO-CONNECT study) in patients with SSc-ILD. The EFZO-CONNECT study is a randomized, double-blind placebo-controlled proof-of-concept study to evaluate the efficacy, safety and tolerability of efzofitimod in patients with SSc-ILD. This will be a 28-week study with three parallel cohorts randomized 2:2:1 to either 270 mg or 450 mg of efzofitimod or placebo dosed intravenously monthly for a total of six doses. The study intends to enroll 25 patients at multiple centers in ~~some cases, reverse tumor growth either~~the United States. The primary objective of the study will be to evaluate the efficacy of multiple doses of intravenous efzofitimod on pulmonary, cutaneous and systemic manifestations in patients with SSc-ILD. Secondary objectives will include safety and tolerability. The study is expected to initiate in the third quarter of 2023.

In January 2020, we entered into a collaboration and license agreement (Kyorin Agreement) with Kyorin Pharmaceutical Co., Ltd. (Kyorin) for the development and commercialization of efzofitimod for the treatment of ILD in Japan. Under the Kyorin Agreement, Kyorin received an exclusive right to develop and commercialize efzofitimod in Japan for all forms of ILD, and is obligated to fund all research, development, regulatory, marketing and commercialization activities in Japan. In September 2020, Kyorin began dosing patients in a Phase 1 clinical trial of efzofitimod (known as KRP-R120 in Japan) and completed the last subject visit in December 2020. The Phase 1 clinical trial, which was conducted and funded by Kyorin, was a placebo-controlled clinical trial to evaluate the safety, pharmacokinetics (PK) and immunogenicity of efzofitimod in 32 healthy Japanese male volunteers. Efzofitimod was observed to be generally well-tolerated with no drug-related serious adverse events, and PK findings were consistent with previous studies of efzofitimod. Kyorin is also participating in the EFZO-FIT study as the local sponsor in Japan. In February 2023, Kyorin dosed the first

patient in Japan in the EFZO-FIT study which triggered a $10.0 million milestone payment to us. To date, the Kyorin Agreement has generated $20.0 million in upfront and milestone payments to us and we are eligible to receive up to an additional $155.0 million in the aggregate upon the achievement of certain development, regulatory and sales milestones, as well as tiered royalties on any net sales in Japan.

Extracellular tRNA synthetase biology represents a novel set of potential physiological modulators and therapeutic targets.

Using efzofitimod as a ~~monotherapy~~model, we have developed a process to advance novel tRNA synthetase domains from a concept to therapeutic candidate. This process leverages our early discovery work as well as current scientific understanding of tRNA synthetase evolution, protein structure, gene splicing and tissue-specific regulation to identify potentially active protein domains. Screening approaches are employed to identify target cells and extracellular receptors for these tRNA synthetase-derived proteins. These cellular systems can then be used in mechanism-of-action studies to elucidate the role these proteins play in cellular responses and their potential therapeutic utility. We are working to identify new tRNA synthetase based drug candidates through our internal discovery efforts and industry and academic collaborations, including our collaboration with Dualsystems Biotech AG (Dualsystems). Dualsystems has agreed to utilize their proprietary receptor screening technology and research expertise to attempt to identify and validate new target receptors for tRNA synthetases. Through our internal research efforts, the Dualsystems collaboration and other industry and academic collaborators, we intend to continue to advance our product development efforts within our tRNA synthetase biology platform.

Global economic and business activities continue to face widespread macroeconomic uncertainties, including related to the ongoing Ukraine-Russia conflict, labor shortages, inflation and monetary supply shifts, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in ~~combination therapy.~~

~~Our expansive Physiocrine patent estate provides us with potential product protection as we pioneer this new~~the banking system or financing markets, rising interest rates and ~~important area~~financial and credit market fluctuations, volatility in the capital markets and recession risks, which has resulted in further volatility in the U.S. and global financial markets and which has led to, and may continue to lead to, additional disruptions to trade, commerce, pricing stability, credit availability and supply chain continuity globally. The ultimate long-term impact of ~~human biology. To protect our industry unique pipeline based~~these evolving geopolitical and macroeconomic conditions on our ~~proprietary new biology,~~business is uncertain, although we ~~have built an intellectual property estate comprising over 220 issued patents or allowed patent applications that are owned or exclusively licensed by us,~~continue to actively monitor the impact of these factors on our results of operations, financial condition and cash flows. The extent of the impact of these factors on our operational and financial performance, including ~~over 300 potential Physiocrine-based protein compositions. We believe it is~~our ability to execute our business strategies and initiatives in the ~~best interest of~~expected timeframe, will depend on future developments, which are uncertain and cannot be predicted; however, any continued or renewed disruption resulting from these factors could negatively impact our ~~stakeholders, including patients, caregivers,~~business.

Liquidity and our stockholders, to advance one or more of our three current programs based on Physiocrine biology with the expertise of or funding from appropriate strategic partners. Since our inception in 2005, we have devoted substantially all of our resources to the therapeutic application of Physiocrines, including the preclinical development of and clinical trials for Resolaris, the creation, licensing and protection of related intellectual property and the provision of general and administrative support for these operations. Capital Resources

We have ~~not generated any revenue~~incurred losses and negative cash flows from ~~product sales~~operations since our inception. As of June 30, 2023, we had an accumulated deficit of $441.9 million and ~~through September~~we expect to continue to incur net losses for the foreseeable future. As of June 30, ~~2017, have funded our operations primarily with~~2023, we had cash, cash equivalents, restricted cash and available-for-sale investments of $112.0 million. During the ~~aggregate proceeds from the sales~~quarter ended March 31, 2023, we completed an underwritten follow-on public offering of 23,125,000 shares of our common stock, ~~in our initial~~including the partial exercise of the underwriters’ option to purchase additional shares, at a price to the public of $2.25 per share. The total net proceeds from the offering ~~(IPO), private placements of our capital stock, convertible promissory notes, commercial bank debt~~were approximately $48.1 million, after deducting underwriting discounts, commissions and offering expenses payable by us. We also received a ~~convertible promissory note issued to our landlord and term loans.~~

$10.0 million milestone payment from the Kyorin Agreement during the quarter ended March 31, 2023. In ~~May 2015, we completed our IPO whereby~~addition, during the six months ended June 30, 2023, we sold ~~6,164,000~~an aggregate of 4,332,210 shares of common stock at a weighted-average price of $2.29 per share for net proceeds of approximately $9.5 million under the Jefferies ATM Offering Program as described below. We believe that our current cash, cash equivalents, restricted cash and available-for-sale investments will be sufficient to meet our material cash requirements from known contractual and other obligations for a period of at least one year from the date of this Quarterly Report. We believe we will meet longer-term material cash requirements from known contractual and other obligations through a combination of cash, cash equivalents, restricted cash and available-for-sale investments. In addition to the factors discussed under “Material Cash Requirements,” our ability to fund our longer-term operating needs will depend on our ability to raise additional funding through equity or debt offerings, grant funding, collaborations, strategic partnerships and/or licensing arrangements, and other factors, including those discussed in Part II, Item 1A. “Risk Factors – We will need to raise additional capital or enter into strategic partnering relationships to fund our operations.”

From our inception through June 30, 2023, we have financed our operations primarily through the sale of equity securities and convertible debt, venture debt, term loans and through license and collaboration agreement revenues.

In February 2023, we completed an underwritten follow-on public offering ~~price~~ of $14.00 per share. As a result of the IPO, we raised a total of $75.9 million in net proceeds after deducting underwriting discounts and commissions of approximately $6.0 million and offering expenses of approximately $4.4 million. In addition, in connection with the IPO, all outstanding redeemable convertible preferred stock converted into 16,279,85923,125,000 shares of our common ~~stock.~~

~~In June 2016, we filed~~stock, including the partial exercise of the underwriters’ option to purchase additional shares, at a ~~Registration Statement on Form S-3 (File No. 333-211998) containing two prospectuses: (i) a base prospectus which covers~~price to the public of $2.25 per share. The total net proceeds from the offering ~~issuance~~were approximately $48.1 million, before deducting underwriting discounts, commissions and ~~sale of up~~offering expenses payable by us.

In April 2022, we entered into an Open Market Sale AgreementSM with Jefferies LLC (Jefferies) implementing an “at-the-market” offering program (the Jefferies ATM Offering Program), pursuant to $150.0 million in the aggregate of an indeterminate number of shares of common stock and preferred stock, an indeterminate principal amount of debt securities and an indeterminate number of warrants and units; and (ii) a sales agreement prospectus covering the offering, issuance and sale of up to a maximum aggregate offering price of $20.0 million of our common stock that may be sold from time to time under a sales agreement with Cowen and Company, LLC (Cowen). In accordance with the terms of such sales agreement entered with Cowen,which we may offer and sell, from time to time and at our option, up to an aggregate of $65.0 million of shares of our common stock ~~having an aggregate offering price~~through Jefferies, acting as sales agent. Jefferies is entitled to a fixed commission rate of up to ~~$35.0 million from time to time through Cowen. To date, no~~3.0% of the gross sales proceeds of shares sold under the Jefferies ATM Offering Program. During 2022, we sold an aggregate of 1,421,627 shares of common stock ~~have been sold pursuant to such sales agreement. We will be required to file another prospectus supplement in~~at a weighted-average price of $3.09 per share for net proceeds of approximately $4.0 million under the ~~event we intend to offer more than $20.0 million in shares of our common stock in accordance with~~Jefferies ATM Offering Program. During the ~~sales agreement. The sales agreement prospectus amount of $20.0 million is included in the base prospectus amount of $150.0 million.~~

In August 2017, we completed our Private Placement in which a select group of institutional investors and other accredited investors, certain of whom are affiliated with our directors and officers, purchased our equity securities. Pursuant to the Securities Purchase Agreement,six months ended June 30, 2023, we sold ~~(i)~~ an aggregate of ~~5,872,120~~4,332,210 shares of ~~our~~ common stock at a weighted-average price of ~~$2.65~~$2.29 per ~~unit (each common stock unit consisting~~share for net proceeds of ~~one share~~approximately $9.5 million under the Jefferies ATM Offering Program.

On February 6, 2023, we announced that our partner Kyorin dosed the first patient in Japan in the EFZO-FIT study, which triggered a $10.0 million milestone payment by Kyorin to us pursuant to the Kyorin Agreement. We recorded this $10.0 million milestone as revenue in the year ended December 31, 2022 and received the cash in February 2023. Kyorin is our partner for the development and commercialization of ~~our common stock~~efzofitimod for ILD in Japan. Under the Kyorin Agreement, we have generated $20.0 million in upfront and ~~a warrant~~milestone payments to ~~purchase 0.375 shares of our common stock), (ii) an aggregate of 2,285,952 Preferred Shares at a price of $13.25 per unit (each preferred stock unit consisting of one Preferred Share~~date and ~~a warrant~~are eligible to ~~purchase 1.875 shares of our common stock) and (iii) warrants to purchase~~receive up to an additional $155.0 million in the aggregate upon the achievement of ~~6,488,205 shares~~certain development, regulatory and sales milestones, as well as tiered royalties on any net sales in Japan. Kyorin has the exclusive rights to develop and commercialize efzofitimod in Japan for all forms of ILD.

The following table sets forth a summary of the net cash flow activity for each of the periods indicated (in thousands):

Operating activities. Net cash used in operating activities for the six months ended June 30, 2023 and 2022 was $12.6 million and $19.2 million, respectively. The net cash used in operating activities in each of these periods primarily consisted of cash used to support our EFZO-FIT study and research and development expenses. The fluctuation in net cash used in operating activities resulted primarily from our receipt of the $10.0 million Kyorin milestone payment during the six months ended June 30, 2023. No milestone payments were received during the six months ended June 30, 2022.

Investing activities. Net cash (used in) provided by investing activities for the six months ended June 30, 2023 and 2022 was $(42.3) million and $24.6 million, respectively. The fluctuation in net cash (used in) provided by investing activities resulted primarily from the timing differences in investment purchases, sales and maturities, and the fluctuation of our ~~common stock at an exercise price~~portfolio mix between cash equivalents and investment holdings. The average term to maturity in our investment portfolio is less than two years. Net cash used in investing activities for the six months ended June 30, 2023 included $3.6 million of ~~$4.64 per share that expire on December 31, 2019. The gross~~tenant improvement costs for our new corporate headquarters facility pursuant to a lease agreement we entered into in May 2022.

Financing activities. Net cash provided by financing activities for the six months ended June 30, 2023 and 2022 was $57.5 million and $1.5 million, respectively. Net cash provided by financing activities for the six months ended June 30, 2023 consisted primarily of $48.1 million in net proceeds from our underwritten follow-on public offering and $9.5 million in net proceeds from the ~~Private Placement were $45.8 million. After giving effect to~~issuance of common stock through the ~~costs related to~~Jefferies ATM Offering Program. Net cash provided by financing activities for the ~~Private Placement, the~~six months ended June 30, 2022 consisted primarily of $1.5 million in net proceeds ~~were $42.5 million.~~from the issuance of common stock through a prior “at-the-market” offering program that we terminated in April 2022.

~~We have never been profitable and have incurred net losses in each annual and quarterly period since our inception. For the nine months ended September 30, 2017 and 2016,~~18

To date, we have ~~incurred consolidated net losses of $36.7 million and $45.3 million, respectively. As of September 30, 2017, we had an accumulated deficit of $252.7 million.~~

Substantially all of our net losses resulted from costs incurred in connection with our development of and clinical trials for Resolaris, our other research and development programs (including iMod.Fc and ORCA) and from general and administrative costs associated with our operations. We expect to continue to incur significant expenses and operating losses for the foreseeable future, at least until we apply for and receive regulatory approval for Resolaris, iMod.Fc, product candidates from our ORCA program or another product candidate and generate substantialnot generated any revenues from its commercialization, if ever. Our net losses may fluctuate significantly from quarter to quarter and year to year, depending on the nature and extent of our research and development expenses and clinical trials.product sales. We expect our expenses ~~will fluctuate~~to increase in connection with our ongoing activities, particularly as ~~we:~~

We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years at a minimum. If we obtain ~~regulatory~~marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. We currently have no sales or marketing capabilities and would need to expand our organization to support these activities. Accordingly, we will need to ~~raise~~obtain substantial additional ~~capital. The amount~~funding in connection with our continuing operations. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and ~~timing of our~~uncertainties, and actual results could vary materially.

Our future ~~funding~~capital requirements are difficult to forecast and will depend on many factors, including:

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, grant funding, collaborations, strategic partnerships and/or licensing arrangements, and when we are closer to commercialization of our product candidates potentially through debt financings. To the extent we raise additional capital through the sale of equity, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. If we ~~will seek to fund our operations~~raise additional funds through ~~public or private equity or debt financings,~~ collaborations, strategic partnerships or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, our other ~~sources. However, we~~technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us. The incurrence of additional indebtedness would increase our fixed payment obligations and may require us to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We may be unable to raise additional ~~capital or enter into such other arrangements when needed~~funds on ~~favorable~~acceptable terms or at all. If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. If we are unable to ~~obtain funding on a timely basis,~~raise additional funds, we may be required to ~~significantly curtail,~~ delay, limit, reduce or ~~discontinue one~~terminate our product development or ~~more of~~future commercialization efforts or grant rights to develop and market our ~~research or development programs or the commercialization of any~~ product candidates oreven if we ~~may~~would otherwise prefer to develop and market such product candidates ourselves.

As of June 30, 2023, our material cash requirements from known contractual and other obligations consisted primarily of (i) the Lease (as defined below), and (ii) our master financing lease agreement that we entered into in April 2022 for various research and development and informational technology equipment.

In May 2022, we entered into a lease (Lease) with San Diego Creekside, LLC (Landlord), as lessor, pursuant to which we agreed to lease from Landlord approximately 23,696 rentable square feet (subject to increase pursuant to the terms of the Lease) of office and laboratory space. The term of the lease (the Lease Term) commenced on March 20, 2023 (the Lease Commencement Date) and will continue for 124 months. We have an option to extend the Lease Term for five years. Base rent during such extension period would be ~~unable~~at the fair market rent for the premises. Under the terms of the Lease, the base rent during the first 12 months of the Lease Term will be $5.75 per square foot of rentable area per month, subject to ~~expand our operations, maintain our current organization~~certain upward adjustments of approximately 3.0% annually. As of June 30, 2023, we have incurred $5.6 million in tenant improvement costs, and ~~employee base or otherwise capitalize~~these costs are included in property and equipment, net on our ~~business opportunities,~~unaudited condensed consolidated balance sheet. We are entitled to an allowance of up to $5.5 million for tenant improvements of which as ~~desired,~~of June 30, 2023, we received $4.8 million from the Landlord. The Lease also includes an option to utilize an additional allowance of up to $0.6 million, which, ~~could materially affect~~if used by us, would be repaid by us as additional monthly base rent, amortized at eight percent (8.0%) per annum during the Lease Term. We provided a $0.7 million security deposit in the form of a letter of credit which is included in restricted cash on our ~~business, financial condition~~unaudited condensed consolidated sheet as of June 30, 2023. During the three months ended June 30, 2023, additional common area amenities were completed by the Landlord which provided us with access to approximately 1,500 additional rentable square feet. Our base rent will be increased for this additional rentable square feet at the same monthly base rent per rentable square foot as contemplated in the Lease.

In April 2022, we entered into a financing lease to lease various research and ~~results~~development and information technology equipment over a 48-month term. Financing lease liabilities total $2.0 million as of ~~operations.~~June 30, 2023. Additionally, we provided $2.7 million in cash collateral for the financing lease, and this amount is included in restricted cash on our unaudited condensed consolidated sheet as of June 30, 2023.

We conduct substantially all of our activities through aTyr Pharma, Inc., a Delaware corporation, at our facility in San Diego, California. aTyr Pharma, Inc. was incorporated in the ~~state~~State of Delaware in September 2005. The unaudited condensed consolidated financial statements in this Quarterly Report include our accounts and our 98% majority-owned subsidiary in Hong Kong, Pangu BioPharma, ~~Limited~~ as of ~~September~~June 30, ~~2017.~~2023. All intercompany transactions and balances are eliminated in consolidation.

In January 2020, we entered into the Kyorin Agreement with Kyorin for the development and commercialization of efzofitimod for the treatment of ILD in Japan. Under the Kyorin Agreement, Kyorin received an exclusive right to develop and commercialize efzofitimod in Japan for all forms of ILD, and Kyorin is obligated to fund all research, development, regulatory, marketing and commercialization activities in Japan. The Phase 1 clinical trial, which was conducted and funded by Kyorin, was a placebo-controlled clinical trial to evaluate the safety, PK and immunogenicity of efzofitimod in 32 healthy Japanese male volunteers. Efzofitimod was observed to be generally well-tolerated with no drug-related serious adverse events and PK findings were consistent with previous studies of efzofitimod. Kyorin is also participating in the EFZO-FIT study as the local sponsor in Japan. In February 2023, Kyorin dosed the first patient in Japan in the EFZO-FIT study. This achievement triggered a $10.0 million milestone payment by Kyorin to us pursuant to the Kyorin Agreement. Under the Kyorin Agreement, we have generated $20.0 million in upfront and milestone payments to date and are eligible to receive up to an additional $155.0 million in the aggregate upon the achievement of certain development, regulatory and sales milestones, as well as tiered royalties on any net sales in Japan.

To date, our research and development expenses have related primarily to the development of, and clinical trials for, ~~Resolaris~~our product candidates, and to research efforts ~~targeting the~~for potential ~~therapeutic application of other Physiocrine-based immuno-modulators in rare disease indications.~~therapeutics based on tRNA synthetase biology and NRP2 biology. These expenses consist primarily of:

Research and development costs are expensed as incurred. Clinical trial and other development costs incurred by third parties are expensed as the contracted work is performed. We accrue for costs incurred as the services are being provided by monitoring the status of the trial or project and the invoices received from our external service providers. We adjust our accrual as actual costs become known.

Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that the levels of our research and development expenses will ~~decrease~~continue to increase in ~~the current year~~future years and will consist primarily of costs related to ~~advancing~~ our ~~iMod.Fc program into~~ clinical development and ~~research, discovery~~manufacturing of efzofitimod for patients with pulmonary sarcoidosis and ~~development activities relating to our discovery engine for~~SSc-ILD, and other potential therapeutics based on ~~Physiocrine biology, including our ORCA program.~~tRNA synthetase biology.

~~We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future preclinical studies and clinical trials of our product candidates.~~ At this time, due to the inherently unpredictable nature of preclinical and clinical development and given the early stage of our programs, we are unable to estimate with any certainty the costs we will incur or the timelines we will require in the continued development of ~~Resolaris, iMod.Fc~~our product candidates. We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future preclinical studies and ~~any other~~clinical trials of our product ~~candidates that we may develop, including product candidates from our ORCA program.~~candidates. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. We 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, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential. In addition, we cannot forecast which programs or product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

General and administrative expenses consist primarily of salaries and related costs for employees in executive, finance and administration, corporate development and administrative support functions, including stock-based compensation expenses and benefits. Other significant general and administrative expenses include accounting, legal services, expenses associated with applying for and maintaining patents, ~~costs~~cost of insurance, ~~costs~~cost of various consultants, occupancy costs, information systems costs and depreciation.

Other income (expense) consists primarily of interest income earned on cash and cash equivalents and available-for-sale investments and interest expense on our Term Loans outstanding with Silicon Valley Bank (SVB) and Solar Capital Ltd. (Solar).

Our management’s discussion and analysis of financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United ~~States, or GAAP.~~States. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements, as well as the reported expenses during the reporting periods. We monitor and analyze these items for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on our historical experience and on various other factors we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ materially from these estimates under different assumptions or conditions.

We discuss our accounting policies and assumptions that involve a higher degree of judgment and complexity within Note 2 to our audited consolidated financial statements in our 2022 Annual Report on Form 10-K. Except for changes disclosed in Note 1 to the Notes to Condensed Consolidated Financial Statements included in Item 1, Part 1 of this Quarterly Report on Form 10-Q, management believes thereReport. There have been no material changes to our critical accounting policies and estimates as disclosed in our 2022 Annual ~~Report on Form 10-K.~~Report.

Comparison of the Three Months Ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022

The following table summarizes our results of operations for the three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 (in thousands):

Research and development expenses. Research and development expenses were ~~$7.1~~$9.8 million and ~~$10.4~~$9.1 million for the three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016,~~2022, respectively. The ~~decrease~~increase of ~~$3.3~~$0.7 million was due primarily to ~~a $2.2~~an increase of $2.5 million ~~decrease related to~~in clinical trial costs for the EFZO-FIT study offset by reductions of $1.0 million in manufacturing costs ~~incurred~~due to the timing of manufacturing activities and $0.7 million in ~~support of Resolaris and a $1.8 million decrease as a result of the completion of clinical trials related to Resolaris. The decrease was partially offset by a $0.3 million increase related to~~earlier stage discovery research ~~efforts, a $0.2 million increase in iMod.Fc research~~ and ~~non-clinical~~ development ~~costs and $0.2 million increase related to ORCA research activities.~~costs.

General and administrative expenses. General and administrative expenses ~~remained relatively consistent at~~were $3.7 million ~~versus $3.5~~and $3.4 million for the three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016,~~2022 respectively. The increase of $0.3 million was due primarily to an increase of $0.3 million in compensation related expense.

Other income (expense), net. Other ~~expense~~income (expense), net was ~~$0.4~~$1.2 million and $0.2 million for the three months ended ~~September~~June 30, ~~2017~~2023 and ~~other income was $46,000 for the three months ended September 30, 2016.~~2022, respectively. The ~~change~~increase was primarily a result of higher cash, cash equivalents, restricted cash and available-for-sale investments balances at June 30, 2023 as compared to the same period in the prior year, which resulted from the underwritten follow-on public offering we completed in February 2023, sales under the Jefferies ATM Offering Program and increased interest ~~expense related to our Term Loans.~~rates.

Comparison of the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022

The following table summarizes our results of operations for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 (in thousands):

Research and development expenses. Research and development expenses were ~~$24.8~~$19.2 million and ~~$33.7~~$18.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016,~~2022, respectively. The ~~decrease~~increase of ~~$8.9~~$1.2 million was due primarily to ~~$6.5~~an increase of $4.4 million ~~decrease related to manufacturing~~in clinical trial costs ~~incurred in support of Resolaris, a $4.0 million decrease as a result of~~for the ~~completion of clinical trials related to Resolaris, a $0.3 million decrease in discovery projects, and a $0.3 million decrease in stock based compensation. The decrease was partially~~ EFZO-FIT study offset by ~~a $1.1~~reductions of $1.9 million ~~increase related to~~in manufacturing activities and ongoing and $1.5 million in earlier stage discovery research and ~~non-clinical~~ development ~~costs incurred for iMod.Fc and a $1.1 million increase related to ORCA research activities.~~ costs.

General and administrative expenses. General and administrative expenses were ~~$11.2~~$7.1 million and ~~$11.7~~$6.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016,~~2022, respectively. The ~~decrease~~increase of ~~$0.5~~$0.2 million was due primarily to ~~a decrease~~an increase of $0.2 million in ~~professional fees.~~compensation related expense.

Other income (expense), net. Other ~~expense~~income (expense), net was ~~$0.8~~$2.0 million and $0.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~other income was $0.1 million for the nine months ended September 30, 2016.~~2022, respectively. The ~~change~~increase was primarily a result of ~~increased interest expense related to our Term Loans.~~

We have incurred losses and negative cash flows from operations since our inception. As of September 30, 2017, we had an accumulated deficit of $252.7 million and we expect to continue to incur net losses for the foreseeable future. We believe that our existinghigher cash, cash equivalents, restricted cash and available-for-sale investments ~~of $90.4 million~~balances at June 30, 2023 as ~~of September 30, 2017 will be sufficient~~compared to ~~meet our anticipated cash requirements for a~~the same period ~~of one~~in the prior year, which resulted from the ~~filing date of this Quarterly Report.~~

~~From our inception through September 30, 2017, we have funded our operations primarily with aggregate proceeds from the~~underwritten follow-on public offering in February 2023, sales ~~of our common stock in our IPO, private placements of our capital stock, convertible promissory notes, commercial bank debt and a convertible promissory note issued to our landlord and term loans.~~

In November 2016, we entered into a loan and security agreement (the Loan Agreement) with SVB and Solar to borrow to $20.0 million, issuable in three separate tranches of $10.0 million, $5.0 million and $5.0 million, respectively. The first tranche of $10.0 million was funded on November 18, 2016 (Term A Loan). Under the Term A Loan, we received cash proceeds of $7.3 million, net of a $2.6 million repayment of the principal, accrued interest and $0.5 million final payment under our previous $10.0 million loan and security agreement with SVB (SVB Loan). We did not pay any termination or other fees in connection with the repayment of amounts due under the ~~SVB Loan.~~Jefferies ATM Offering Program and increased interest rates.

In June 2017, we entered into an amendment of the Loan Agreement which modified certain conditions under which we may receive and repay term loans under the Loan Agreement. The Loan Agreement, as amended, provides that (i) up to $5.0 million in the second tranche of term loans could be drawn down by us at any time before the earlier of June 30, 2017 or an event of default, at our discretion, and (ii) an additional $5.0 million in the third tranche of term loans may be drawn down by us at any time after June 30, 2017 and before the earlier of December 31, 2017 or an event of default, at our discretion, subject to achievement of certain milestones. In connection with the amendment to the Loan Agreement, the second tranche of $5.0 million was funded on June 30, 2017 (Term B Loan). We received cash proceeds of $4.9 million, net of debt issuance costs of $0.1 million.

Pursuant to the Loan Agreement, as amended, we were originally obligated to make interest only payments through December 1, 2017, followed by consecutive equal monthly payments of principal and interest in arrears through the maturity date of November 18, 2020. The interest only period was extended to June 1, 2018 upon achievement of certain milestones as set forth in the Loan Agreement, as amended. The Term A Loan and Term B Loan (collectively, as Term Loans) bear interest at the prime rate, as reported in The Wall Street Journal on the last date of the month preceding the month in which interest will accrue, plus 4.10%. A final payment equal to 8.75% of the funded amounts is payable when the Term Loans become due or upon the prepayment of the respective outstanding balance. We have the option to prepay the outstanding balance of the loan in full, subject to a prepayment fee ranging from 1.0% to 3.0% depending upon when the prepayment occurs, including any non-usage fees. The Loan Agreement, as amended, provides for a 2.0% non-usage fee for any unfunded amount in the event we do not draw the third tranche, payable no later than the expiration date for the third tranche, as applicable, or the date of cancellation of the loan due to prepayment or an event of default. No such events have occurred or are anticipated as of September 30, 2017.

In connection with the Term A Loan, we issued warrants to each of SVB and Solar to purchase an aggregate of 47,771 shares of our common stock with an exercise price of $3.14 per share. In connection with the Term B Loan, we issued warrants to each of SVB and Solar to purchase an aggregate of 20,833 shares of our common stock with an exercise price of $3.60 per share. The warrants are immediately exercisable and have a maximum contractual term of seven years.

~~The following table sets forth a summary of the net cash flow activity for each of the periods indicated (in thousands):~~

~~Operating activities.~~ Net cash used in operating activities was $32.1 million and $41.2 million for the nine months ended September 30, 2017 and 2016, respectively. The difference between net cash used in operating activities and our net loss during the nine month ended September 30, 2017 was due primarily to our net losses of $36.7 million, partially offset by non-cash-charges consisting primarily of $3.6 million for stock-based compensation and $0.6 million for depreciation and amortization and a decrease in our operating assets and liabilities of $0.4 million. The difference between net cash used in operating activities and our net loss during the nine months ended September 30, 2016 was due primarily to our net losses of $45.3 million and an increase in our operating assets and liabilities of $0.8 million, partially offset by non-cash charges consisting of $3.9 million for stock-based compensation and $0.7 million for depreciation and amortization.

~~Investing activities.~~ Net cash used in investing activities for the nine months ended September 30, 2017 was primarily due to purchases of $65.3 million of investment securities and $1.2 million of property and equipment offset by the maturity of $42.3 million of investment securities. Net cash provided by investing activities for the nine months ended September 30, 2016 was due primarily to the maturities of $51.7 million of investment securities offset by the purchases of $26.2 million of investment securities and $0.6 million of property and equipment. We invest cash in excess of our immediate operating requirements with various maturities to optimize our return on investment while satisfying our liquidity needs.

~~Financing activities.~~ Net cash provided by financing activities for the nine months ended September 30, 2017 was $47.5 million and consisted primarily of proceeds of $42.5 million from the private placement, net of offering costs paid in the period and $4.9 million from the Term B Loan, net of issuance cost. Net cash used in financing activities for the nine months ended September 30, 2016 was $2.5 million and consisted primarily of principal payments on the SVB Loan.

To date, we have not generated any revenues from product sales. We expect our expenses to increase in connection with our ongoing activities, particularly as we advance our product candidates in clinical development, continue our research and development activities with respect to potential therapeutics based on Physiocrine biology, and seek marketing approval for Resolaris, iMod.Fc and other product candidates that we may develop, including product candidates from our ORCA program. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. We currently have no sales or marketing capabilities and would need to expand our organization to support these activities. Furthermore, we expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially.

~~Our future capital requirements are difficult to forecast and will depend on many factors, including:~~

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

~~The following table summarizes our contractual obligations as of September 30, 2017:~~

We enter into contracts in the normal course of business with clinical trial sites and clinical supply manufacturing organizations and with vendors for preclinical safety and research studies, research supplies and other services and products purposes. These contracts generally provide for termination after a notice period, and therefore are cancelable contracts and not included in the table of contractual obligations and commitments.

For discussion of recently issued accounting pronouncements, refer to Note 1 – Recent Accounting Pronouncements in Part I, Item 1, ~~of Part I,~~ Notes to Condensed Consolidated Financial Statements ~~(unaudited)~~(Unaudited) – ~~Note 1 – Recent Accounting Pronouncements.~~

~~We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined~~included elsewhere in ~~the rules and regulations of the SEC.~~this Quarterly Report.

We are exposed to market risk related to changes in interest rates. As of September 30, 2017, we had cash and cash equivalents, and available-for-sale investments totaling of $90.4 million. We invest our excess cash in investment-grade, interest-bearing securities. The primary objective of our investment activities is to preserve principal and liquidity. To achieve this objective, we invest in money market funds, U.S. treasury and high quality marketable debt instruments of corporations and financial institutions, government sponsored and asset backed securities with contractual maturity dates of less than one year. If interest rates were to increase instantaneously and uniformly by 100 basis points, compared to interest rates as of September 30, 2017, the increase would not have had a material effect on the fair market value of our portfolio.

We do not believe that our cash, cash equivalents and investments have significant risk of default or illiquidity. While we believe our cash and cash equivalents do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value. In addition, we maintain significant amounts of cash and cash equivalents at one or more financial institutions that are in excess of federally insured limits.

Our Term Loans bear interest at variable rates equal to the sum of the prime rate, as reported in the Wall Street Journal on the last date of the month preceding the month in which interest will accrue, plus 4.10%. Accordingly, increases in these published rates would increase our interest payments under the Term Loans. A one percentage point increase in interest rates would increase expense by approximately $0.2 million annually and would not materially affect our results of operations.

We incur expenses, including for CROs and clinical trial sites, outside the United States based on contractual obligations denominated in currencies other than the U.S. dollar, including Pounds Sterling and Euro. At the end of each reporting period, these liabilities are converted to U.S. dollars at the then-applicable foreign exchange rate. As a result, our business is affected by fluctuations in exchange rates between the U.S. dollar and foreign currencies. We do not enter into foreign currency hedging transactions to mitigate our exposure to foreign currency exchange risks. Exchange rate fluctuations may adversely affect our expenses, results of operations, financial position and cash flows. Recently, the Pounds Sterling has experienced higher volatility as a result of the British political decision to leave the European Union (Brexit). However, to date, fluctuations including those related to the Brexit have not had a significant impact to us and a movement of 10% in the U.S. dollar to Pounds Sterling or U.S. dollar to Euro exchange rates would not have a material effect on our results of operations or financial condition.

Inflation generally affects us by increasing our cost of labor, manufacturing, clinical trial, and other research and development and administration costs. We do not believe that inflation has had a material effect on our results of operations or financial condition during the periods presented.

~~Evaluation~~We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports required by the Exchange Act, is recorded, processed, summarized and reported within the timelines specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of ~~Disclosure Controls~~achieving the desired control objectives, and ~~Procedures~~in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

WeAs required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our ~~Principal~~Chief Executive Officer and ~~Principal~~Chief Financial ~~and Accounting~~ Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as ~~defined in Rules 13a-15(e) and 15d-15(e) under~~of the ~~Exchange Act as~~end of ~~September 30, 2017.~~the quarter covered by this Quarterly Report. Based on ~~this evaluation,~~the

foregoing, our ~~Principal~~Chief Executive Officer and ~~Principal~~Chief Financial ~~and Accounting~~ Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of ~~September 30, 2017.~~the end of the quarter covered by this Quarterly Report.

~~There were no~~An evaluation was also performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of any changes into our internal control over financial reporting ~~that occurred~~(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during ~~our latest fiscal~~the quarter covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Our evaluation did not identify any changes in our internal control over financial reporting that occurred during the quarter covered by this Quarterly Report, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We are not a party to any material legal proceedings at this time. From time to time, we may be subject to various legal proceedings and claims that arise in the ordinary course of our business activities. Although the results of litigation and claims cannot be predicted with certainty, we do not believe we are party to ~~any~~arny claim or litigation the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our results of operations or financial condition. Regardless of the outcome, litigation can have an adverse effect on us because of defense and settlement costs, diversion of management resources and other factors.

Below is a summary of the principal factors that make an investment in our securities speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found following this summary and should be carefully considered, together with other information in this Quarterly Report and our other filings with the Securities and Exchange Commission (SEC) before making investment decisions regarding our securities.

Investing in our securities involves substantial risk. The risks described under the heading “Risk Factors” immediately following this summary may cause us to not realize the full benefits of our strengths or may cause us to be unable to successfully execute all or part of our strategy. Some of the more significant risks we face include the following:

You should carefully consider the following risk factors, as well as the other information in this ~~report,~~Quarterly Report and in our other public ~~filings.~~filings with the SEC. The occurrence of any of ~~the following~~these risks could harm our business, financial condition, results of operations and/or growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this ~~report~~Quarterly Report and those we may make from time to time. You should consider all of the risk factors described in our other public filings when evaluating our business. The risk factors set forth below that are marked with an asterisk (*) contain changes to the similarly titled risk factors included in, or did not appear as separate risk factors in, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 14, 2023.

Risks related to the discovery, development and regulation of our product candidates ~~based on Physiocrine biology~~

~~Resolaris, iMod.Fc~~We may encounter substantial delays and ~~any~~ other ~~product candidates that~~challenges in our ongoing or planned clinical trials or we may ~~develop~~fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities.*

Before obtaining marketing approval from ~~our discovery engine represent novel therapeutic approaches, which may cause significant delays or may not result in any commercially viable drugs.~~

We have concentrated our research and development efforts on Physiocrine biology, a new area of biology. Our future success is highly dependent on the successful development of product candidates based on Physiocrine biology, including Resolaris, iMod.Fc and additional product candidates arising from the Resokine pathway, including potential candidates from our ORCA program or other pathways. Physiocrine-based biology represents a novel approach to drug discovery and development, and to our knowledge, no drugs have been developed using, or based upon, this approach. Despite the successful development of other naturally occurring proteins, such as erythropoietin and insulin, as therapeutics, Physiocrines represent a novel class of protein therapeutics, and our development of these therapeutics is based on our new understanding of human physiology. In particular, the mechanism of action of Physiocrines and their role in immuno-modulation and tissue regeneration have not been studied extensively, nor has the safety of this class of protein therapeutics been evaluated extensively in humans. The therapeutic product candidates that we elect to develop may not have the physiological functions that we currently ascribe to them, may have limited or no therapeutic applications, or may present safety problems of which we are not yet aware. We cannot be sure that our discovery engine will yield therapeutic product candidates that are safe, effective, approvable by regulatory authorities ~~manufacturable, scalable, or profitable.~~

Because our work in Physiocrine biology and our product candidates represent a new therapeutic approach, developing and commercializing our product candidates subjects us to a number of challenges, including:

~~establishing sales and marketing capabilities after obtaining any~~could impair our ability to obtain U.S. regulatory approval for such product candidates.

A failure of one or more clinical trials can occur at any stage of testing, and our clinical trials may not be successful. Events that may prevent successful or timely completion of clinical development include, but are not limited to:

•

our inability to ~~gain market acceptance; and~~

generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation of human clinical trials, including trials of certain dosages;

•

~~developing therapeutics~~delays in reaching consensus with regulatory agencies on trial design, including the endpoints for ~~rare~~our global pivotal Phase 3 study of efzofitimod in patients with pulmonary sarcoidosis (the EFZO-FIT study), and ~~more common diseases~~prioritization of outcome measurements that would best support the evaluation of efzofitimod’s efficacy;

•

delays in reaching agreement on acceptable terms with prospective clinical contract research organizations (CROs) and clinical trial sites, including any delays resulting from changes in CROs;

•

delays in obtaining required institutional review board or ~~indications beyond those addressed by our current product candidates.~~

Ethics Committee approval at each clinical trial site;

~~Moreover, public perception of safety issues, including adoption of new therapeutics or novel approaches to treatment, may adversely influence the willingness of subjects~~•

delays in recruiting suitable patients to participate in our clinical trials, or delays that may result if ~~approved,~~the number of ~~physicians~~patients required for a clinical trial is larger than we anticipate;

•

imposition of a clinical hold by regulatory agencies, which may occur at any time before or during a clinical trial, including after our submission of data to ~~adopt~~these agencies or an inspection of our clinical trial operations or trial sites;

•

failure by our CROs, investigators, other third parties or us to adhere to clinical trial requirements;

•

failure to perform in accordance with the good clinical practices (GCPs) of the FDA or applicable regulatory requirements in other countries;

•

delays in the testing, validation, manufacturing and ~~prescribe novel therapeutics. Physicians, hospitals and third-party payors often~~delivery of our product candidates to the clinical sites;

•

delays in having patients complete participation in a trial or return for post-treatment follow-up;

•

disagreements with regulators regarding our interpretation of data from preclinical studies or clinical trials;

•

occurrence of adverse events associated with a product candidate that are ~~slow~~viewed to adopt new products, technologies and treatment practices. Physicians may decide the therapy is too complex or unproven to adopt and may choose not to administer the therapy. Based on these and other factors, healthcare providers and payors may decide that the benefits of any Physiocrine-based therapeutic for which we receive regulatory approval do not or will not outweigh its ~~costs.~~ potential benefits; or

•

changes in regulatory requirements and guidance that require amending or submitting new clinical protocols.

Any delay in or inability to successfully ~~develop commercially viable drugs would have an adverse impact on~~complete preclinical and clinical development (including any delays resulting from any changes in a future CRO) could result in additional costs to us and impair our ~~business, prospects, financial condition~~ability to generate revenue. In addition, if we make manufacturing or formulation changes to our product candidates (including our technology transfer to another contract development manufacturing organization (CDMO) for bulk drug substance and production capacity changes for efzofitimod), we may need to conduct additional studies to bridge our modified product candidates to earlier versions.

If the results of ~~operations.~~our clinical trials are perceived to be negative or inconclusive, or if there are safety concerns or adverse events associated with our product candidates, we may be required to perform additional clinical trials to support approval or be subject to additional post-marketing testing requirements; be delayed in obtaining marketing approval for our product candidates, if at all; obtain approval for indications or patient populations that are not as broad as intended or desired; obtain approval with labeling that includes significant use or distribution restrictions or safety warnings; be subject to changes in the way the product is manufactured or administered; have regulatory authorities withdraw their approval of the product or impose restrictions on its distribution in the form of a modified risk evaluation and mitigation strategy; be subject to litigation; or experience damage to our reputation.

To date, the safety and efficacy of efzofitimod has only been studied in a limited number of humans. Accordingly, efzofitimod and any future product candidates could potentially cause unexpected adverse events. In addition, the inclusion of critically ill patients in our clinical trials may result in deaths or other adverse medical events due to the natural progression of the disease.

Further, if patients drop out of our ongoing or future trials, miss scheduled doses or follow-up visits or otherwise fail to follow trial protocols, or if our trials are otherwise disrupted due to the ongoing Ukraine-Russia conflict, outbreaks of contagious diseases (such as the COVID-19 pandemic) or other adverse macroeconomic or geopolitical events, the integrity of data from our trials may be compromised or not accepted by the FDA or other regulatory authorities, which would represent a significant setback for the applicable program. In addition, the COVID-19 pandemic previously impacted clinical trials broadly, including our completed efzofitimod Phase 1b/2a trial in patients with pulmonary sarcoidosis, where many sites stopped enrollment and patients chose not to enroll or continue participating in the trial due to the impact of COVID-19. While we completed the clinical trial, the availability of results from the Phase 1b/2a clinical trial was delayed until September 2021. We may experience delays in site initiation and patient enrollment, failures to comply with study protocols, delays in the manufacture of study drug for clinical testing and other difficulties in starting or completing our EFZO-FIT study, our EFZO-CONNECT study or future trials due to the ongoing Ukraine-Russia conflict, outbreaks of contagious diseases (such as the COVID-19 pandemic) or other adverse macroeconomic or geopolitical events.

If we are unable to successfully complete or otherwise advance clinical development, obtain regulatory or marketing approval for, or successfully commercialize our therapeutic product candidates, including efzofitimod, or experience significant delays in doing so, our business will be materially harmed.*

To date, we have expended significant time, resources and effort on the discovery and development of ~~Resolaris,~~product candidates related to the extracellular proteins derived from the histidyl tRNA synthetase (HARS) family, including conducting preclinical studies and clinical trials. We have not yet ~~commenced or~~ completed any evaluation of ~~Resolaris~~our product candidates in human clinical trials designed to demonstrate efficacy to the satisfaction of the FDA. We have not yet commenced clinical development of iMod.Fc. Our ORCA program is a preclinical program and we have yet to select a therapeutic candidate for development. We currently generate no revenue from the sale of any product, and our ability to generate product revenues and to achieve commercial success, which we do not expect will occur for many years, if ever, will initially depend on our ability to successfully develop, obtain regulatory approval for and commercialize our therapeutic candidates in the United States and any foreign jurisdictions. Before we can market or sell our therapeutic candidates in the United States or foreign jurisdictions, we will need to commence and complete additional clinical trials (including our Phase 2 study in systemic sclerosis (SSc, also known as scleroderma)-associated ILD (SSc-ILD) (the EFZO-CONNECT study) and larger, pivotal trials ~~which we have not yet commenced)~~like the EFZO-FIT study), manage clinical and manufacturing activities, obtain necessary regulatory approvals from the FDA in the United States and from similar regulatory authorities in other jurisdictions, obtain adequate clinical and commercial manufacturing supplies, build commercial capabilities, which may include entering into a marketing collaboration with a third party, and in some jurisdictions, obtain reimbursement authorization, among other things. We cannot assure you that we will be able to successfully complete the necessary clinical trials, obtain regulatory approvals, secure an adequate commercial supply for, or otherwise successfully commercialize our therapeutic candidates. If we do not receive regulatory approvals for ~~Resolaris or iMod.Fc,~~our product candidates, and even if we do obtain regulatory approvals, we may never generate significant revenues, if any, from commercial sales. If we fail to successfully commercialize our therapeutic candidates, we may be unable to generate sufficient revenues to sustain and grow our company, and our business, prospects, financial condition and results of operations will be adversely affected.

~~Data generated~~The FDA has not approved any product candidate for the treatment of patients with pulmonary sarcoidosis, and as such, there is no established FDA regulatory pathway for approval of a drug in ~~our preclinical studies and patient sample data relating to~~that indication. As a result, the ~~Resokine pathway~~EFZO-FIT study, even if successful, may not be ~~predictive or indicative~~sufficient to support FDA approval, which would materially and adversely harm our business.

During the third quarter of 2022, we initiated the ~~immuno-modulatory activity or therapeutic effects, if~~EFZO-FIT study. To date, the FDA has not approved any ~~of our~~ product ~~candidates in patients.~~

~~Our scientists discovered~~for the ~~Resokine pathway using~~ ~~in vivo~~ screening systems designed to test potential immuno-modulatory activity in animal models of severe immune activity or inflammation, combined with data relating to the potential blockade of the Resokine pathway in a populationtreatment of patients with ~~myopathy~~ pulmonary sarcoidosis, and as such, there is no established FDA regulatory pathway for approval of a drug in

that ~~occurs in a particular rare disease, anti-synthetase syndrome, with Jo-1 antibodies. Translational medicine, or the application of basic scientific findings~~indication. The most appropriate efficacy endpoints to develop therapeutics that promote human health, is subject to a number of inherent risks. In particular, scientific hypotheses formed from nonclinical observations may prove to be incorrect, and the data generated in animal models or observed in limited patient populations may be of limited value, and may not be applicable in clinical trials conducted under the controlled conditions required by applicable regulatory requirements and our protocols. For example, wedemonstrate clinically meaningful treatment effects have not ~~extensively studied~~been established. In this instance, without regulatory precedent for established endpoints, the ~~activity~~FDA has not endorsed a specific means for measurement of steroid reduction. Therefore, we are measuring steroid reduction in multiple ways in an effort to support an approval. Our rationale for selecting endpoints for the ~~Resokine pathway~~EFZO-FIT study is based on the anticipated effects of efzofitimod in pulmonary sarcoidosis consistent with the results of our completed Phase 1b/2a study in patients with ~~rare genetic myopathies~~pulmonary sarcoidosis. The FDA has highlighted the risk of proceeding with ~~an immune component, or RMICs, which forms the basis for our clinical trials~~a larger study of Resolaris in FSHD and limb-girdle muscular dystrophy 2B, or LGMD2B, nor have we evaluated the activity of the Resokine pathway in patients with interstitial lung disease, or ILD. Our knowledge of the activity of this pathway in Jo-1 antibody patients may not be applicable to our target patient populations in RMICs or rare pulmonary diseases with an immune component, or RPICs. In addition, our classification of diseaseslonger duration based on ~~the existence of immune cell invasion (RMICs and RPICs)~~our limited Phase 1b/2a data, and our ~~hypothesis that these represent potential indications for Resolaris~~inability to replicate the findings in our Phase 1b/2a study would not support FDA approval and iMod.Fc may not prove to be therapeutically relevant. Accordingly, the conclusions that we have drawn from animal studies and patient sample data regarding the potential immuno-modulatory activity of molecules containing the immuno-modulatory domain, or iMod domain, may not be substantiated in other animal models or in clinical trials. Any failure to demonstrate in controlled clinical trials the requisite safety and efficacy of Resolaris, iMod.Fc or other product candidates, including potential candidates from our ORCA program, will adversely affect our business, prospects, financial condition and results of operations.

~~We have not studied~~In addition, the FDA has substantial discretion in the approval process and may refuse to accept any application or decide that our ~~therapeutic product candidates in any human clinical trials designed primarily to show efficacy.~~

~~Preclinical and clinical~~ data are ~~often susceptible to varying interpretations~~insufficient for approval and ~~analyses,~~require additional preclinical, clinical or other trials, which ~~may~~would be costly and significantly delay ~~limit or prevent~~the potential for regulatory approval. Many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products. Accordingly, our preclinical and clinical studies should not be relied upon as evidence that any future clinical trials will succeed. Study designs and results from previous studies are not necessarily predictive of our future clinical trial designs or results, and initial results may not be confirmed upon full analysis of the complete study data. In particular, ~~Resolaris~~even if we were to receive positive data from the EFZO-FIT study, the FDA may determine that the data is not ~~achieve positive results in any future clinical trials in RMICs, and any results observed in our Phase 1b/2 clinical trials~~compelling enough for approval. The FDA may also require a panel of Resolaris in patients with FSHD and LGMD2B may not be predictive of results for any such future clinical studies. iMod.Fc may not achieve positive results in our planned clinical trials in healthy subjects and in RPICs or any other clinical studies. The results of preclinical studies for our ORCA program may not be indicativeexperts, referred to as an Advisory Committee, to deliberate on the adequacy of the ~~future success of product candidates developed in such program. Additionally, our therapeutic candidates may fail to show the desired~~ safety and efficacy ~~in later stages~~data to support approval. The opinion of ~~clinical development, such as pivotal clinical trials, despite having successfully advanced through initial clinical trials. Any failure of our therapeutic product candidates at any stage in~~ the ~~clinical development process would~~Advisory Committee, although not binding, may have a ~~material adverse~~significant impact on our ~~business, prospects, financial condition~~ability to obtain approval of efzofitimodbased on the completed clinical trials.

Interim, top-line and ~~results of operations.~~

Because we are developing novel product candidates for the treatment of diseases in which there is little clinical drug development experience and, in some cases, are using new endpoints or methodologies, the regulatory pathways for approval are not well defined, and as a result, there is greater risk thatpreliminary data from our clinical trials ~~will not~~that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publicly disclose preliminary or top-line data from our ~~desired outcomes.~~

~~Our initial~~ clinical ~~focus is~~studies, which are based on a preliminary analysis of then-available data, and the ~~development~~results and related findings and conclusions are subject to change following a more comprehensive review of ~~Physiocrine-based therapeutics for~~ the ~~treatment~~data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of ~~rare diseases, including FSHD, LGMD2B~~our analyses of data, and ~~potentially DMD, where patients~~we may ~~benefit from~~not have received or had the ~~activation of immuno-modulatory pathways. There are currently no approved treatments for FSHD or LGMD2B.~~opportunity to fully and carefully evaluate all data. As a result, the ~~design~~top-line results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and ~~conduct of clinical trials for these indications are~~fully evaluated. Top-line data also remain subject to ~~increased risk,~~audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, top-line data should be viewed with caution until the final data are available. From time to time, we may ~~experience setbacks with~~also disclose interim data from our clinical ~~trials for Resolaris or other product candidates that~~studies.

In addition, we may ~~develop because~~report interim analyses of the limited clinical experience in our target indications. In particular, regulatory authorities in the United States and European Union have not issued definitive guidance as to how to measure and achieve efficacy. In later stage trials, we may not achieve a pre-specified endpoint with statistical significance in our planned clinical trials of Resolaris in this indication or in other indications where there is limited or no regulatory guidance regarding appropriate clinicalonly certain endpoints which would decrease the chance of obtaining marketing approval for Resolaris. Additionally, it is difficult to establish clinically relevant endpoints for some of these indications because it may take a long time before any therapeutic effects of a drug can be observed.

~~We could also face challenges in designing clinical trials and obtaining regulatory approval for product candidates~~rather than all endpoints. Interim data from our discovery engine due to the lack of historical clinical trial experience for this novel class of therapeutics. At the moment, because no Physiocrine-based products have received regulatory approval anywhere in the world, it is difficult to determine whether regulatory agencies will be receptive to the approval of our product candidates and to predict the time and cost associated with obtaining regulatory approval. The clinical trial requirements of the FDA and other regulatory agencies and the criteria these regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of the potential products. The regulatory approval process for novel product candidates such as ours can be more expensive and take longer than for other, better known or more extensively studied classes of product candidates. Any inability to design clinical trials with protocols and endpoints acceptable to applicable regulatory authorities, and to obtain regulatory approvals for our product candidates, would have an adverse impact on our business, prospects, financial condition and results of operations.

~~We may encounter substantial delays and other challenges in our clinical trials or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities.~~

Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidates in humans. Clinical trials are expensive, time-consuming, often delayed and uncertain as to outcome. We cannot guarantee that our clinical trials of Resolaris in RMICs, planned clinical trials of iMod.Fc in RPICs, or any other clinical trials that we may ~~plan to conduct, will be initiated or conducted as planned or completed on schedule, if at all. Following our submission of an investigational new drug application, or IND,~~complete are subject to the FDA to evaluate Resolaris in our Phase 1b/2 trial in adult patients with FSHD in the United States, our IND was placed on full clinical hold to address the nonclinical issue of the comparability of the drug substance used in our preclinical toxicology studies torisk that used in our Phase 1 clinical trial and proposed for use in the U.S. clinical trial in FSHD patients. We responded to the FDA’s comparability request, and, in January 2015, our IND was removed from full clinical hold, allowing us to initiate the Phase 1b/2 trial in the United States. Our IND was placed on partial clinical hold, which prohibited the evaluation of Resolaris at doses higher than 3.0 mg/kg. The partial clinical hold was lifted in December 2016. We cannot assure you that our product candidates will not be subject to new clinical holds or significant delay in the future. Any inability to initiate or complete our clinical trials of our product candidates in the United States, as a result of clinical holds or otherwise, would delay our clinical development plans, may require us to incur additional clinical development costs and could impair our ability to obtain U.S. regulatory approval for such product candidates.

~~inability to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation of human clinical trials, including trials of certain dosages;~~

~~delays in reaching consensus with regulatory agencies on trial design;~~

~~delays in reaching agreement on acceptable terms with prospective clinical contract research organizations, or CROs, and clinical trial sites;~~

~~delays in obtaining required Institutional Review Board, or IRB, or Ethics Committee approval at each clinical trial site;~~

~~delays in recruiting suitable patients to participate in our clinical trials, or delays that may result if the number of patients required for a clinical trial is larger than we anticipate;~~

~~imposition of a clinical hold by regulatory agencies, which may occur after our submission of data to these agencies or an inspection of our clinical trial operations or trial sites;~~

~~failure by our CROs, investigators, other third parties or us to adhere to clinical trial requirements;~~

~~failure to perform in accordance with the FDA’s good clinical practices, or GCPs, or applicable regulatory requirements in other countries;~~

~~delays in the testing, validation, manufacturing and delivery of our product candidates to the clinical sites;~~

~~delays in having patients complete participation in a trial or return for post-treatment follow-up;~~

~~disagreements with regulators regarding our interpretation of data from preclinical studies or clinical trials;~~

~~occurrence of adverse events associated with the product candidate that are viewed to outweigh its potential benefits; or~~

~~changes in regulatory requirements and guidance that require amending or submitting new clinical protocols.~~

Any delay in or inability to successfully complete preclinical and clinical development could result in additional costs to us and impair our ability to generate revenue. In addition, if we make manufacturing or formulation changes to our product candidates (including recent changes in our contract manufacturer, production capacity and manufacturing cell line), we may need to conduct additional studies to bridge our modified product candidates to earlier versions. Clinical trial delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do, which could impair our ability to obtain orphan exclusivity and successfully commercialize our product candidates and may harm our business and results of operations.

~~If the results of our clinical trials are perceived to be negative or inconclusive, or if there are safety concerns or adverse events associated with our product candidates, we may:~~

~~be required to perform additional clinical trials to support approval or be subject to additional post-marketing testing requirements;~~

~~be delayed in obtaining marketing approval for our product candidates, if at all;~~

~~obtain approval for indications or patient populations that are not as broad as intended or desired;~~

~~obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;~~

~~be subject to changes in the way the product is manufactured or administered;~~

~~have regulatory authorities withdraw their approval of the product or impose restrictions on its distribution in the form of a modified risk evaluation and mitigation strategy, or REMS;~~

~~be subject to litigation; or~~

~~experience damage to our reputation.~~

To date, the safety and efficacy of Physiocrine-based therapeutics in humans has not been studied to any significant extent. Accordingly, our product candidates could potentially cause adverse events that have not yet been predicted. In addition, the inclusion of critically ill patients in our clinical trials may result in deaths or other adverse medical events due to the natural progression of the disease. As described above, any of these events could prevent us from successfully completing the clinical development of our product candidates and impair our ability to commercialize any products.

~~Our therapeutic product candidates~~ may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

Undesirable side effects caused by Resolaris, iMod.Fc and any other product candidates that we may discover or develop, or safety, tolerability or toxicity issues that may occur in our preclinical studies, clinical trials or in the future, could cause us or regulatory authorities to interrupt, restrict, delay, or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities.

In our Phase 1b/2 clinical trials, we have observed low levels of antibodies to Resolaris in some subjects in response to the administration of Resolaris. Although such elevated antibody observations were without associated clinical symptoms, the development of higher levels of such antibodies over a longer course of treatment may ultimately limit the efficacy of Resolaris and trigger a negative autoimmune response, including the development of anti-synthetase syndrome. Anti-synthetase syndrome can include one or more of the ~~following~~ clinical ~~features: ILD, inflammatory myopathy~~outcomes may materially change as patient enrollment continues and ~~inflammatory polyarthritis. Other symptoms which may occur in this setting include fever, weight loss, fatigue, Raynaud’s phenomenon of the digits, rash~~more patient data become available. Adverse differences between preliminary or interim data and difficulty swallowing. Some patients in our Phase 1b/2 clinical trials have experienced generalized infusion related reactions, or IRRs, and discontinued dosing. We established procedural measures, including a decreased concentration and intravenous delivery rate of Resolaris, in an effort to minimize the occurrence of generalized IRRs and the formation of anti-drug antibodies. After implementation of these procedures, we did observe a decreased rate of IRRs in our clinical trials, but we cannot assure that these measures will continue to be effective in minimizing the occurrence of generalized IRRs or the formation of anti-drug antibodies in future clinical trials, or result in the retention of patients in future clinical trials. Generalized IRRs and other complications or side effects could harm further development and/or commercialization of Resolaris, iMod.Fc and any other product candidates. Additionally, our product candidates are designed to be administered by intravenous injection, which may cause side effects, including acute immune responses and injection site reactions. The risk of adverse immune responses remains a significant concern for protein therapeutics, and we cannot assure that these or other risks will not occur in any of our clinical trials for Resolaris, iMod.Fc or other product candidates we may develop. There is also a risk of delayed adverse events as a result of long-term exposure to protein therapeutics that must be administered repeatedly for the management of chronic conditions, such as the development of antibodies, which may occur over time. If any such adverse events occur, which may include the development of anti-synthetase syndrome from antibodies or the occurrence of IRRs associated with antibodies, further advancement of our clinical trials could be halted or delayed, which would have a material adverse effect on our business, prospects, financial condition and results of operations.

If one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects or other safety concerns caused by such products, a number of potentially significant negative consequences could result, including but not limited to:

~~regulatory authorities may withdraw approvals or suspend licenses of such products;~~

~~regulatory authorities may require additional warnings on the label;~~

we may be required to create a REMS plan, which could include a medication guide outlining the risks of such side effects for distribution to patients, a communication plan for healthcare providers, or other elements to assure safe use;

~~we could be sued and held liable for harm caused to patients; and~~

~~our reputation may suffer.~~

~~Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and~~final data could significantly harm our business ~~prospects, financial condition and results~~prospects. Further, disclosure of ~~operations.~~interim data by us or by our competitors could result in volatility in the price of our common stock.

WeFurther, others, including regulatory agencies, may not ~~be successful~~accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of a particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our ~~efforts~~disclosure, and any information we determine not to ~~identify~~disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or ~~discover additional~~otherwise regarding a particular product, ~~candidates.~~

~~A key element of~~product candidate or our strategy is to leverage our discovery engine to identify Physiocrines that exhibit activity in physiological disease pathways of interest, and to develop product candidates that are suitable for therapeutic application. A significant portion ofbusiness. If the ~~research~~top-line data that we ~~are conducting involves new compounds~~report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and ~~drug discovery methods, including~~commercialize, our proprietary technology. Our drug discovery activities using our proprietary technology may not be successful in identifying product candidates that are useful in treating rare or more common diseases. Our research programs, including ORCA, may initially show promise in identifying potential product candidates, such as iMod.Fc, yet fail to yield product candidates for clinical development for a number of reasons, including:

~~the research methodology used may not be successful in identifying appropriate potential product candidates; or~~

~~potential~~ product candidates may ~~on further study,~~ be ~~shown to have harmful side effects or other characteristics that indicate that they are unlikely to be medicines that will receive marketing approval and achieve market acceptance.~~

Research programs to identify new product candidates require substantial technical, financial and human resources. We may choose to focus our efforts and resources on a potential product candidate that ultimately proves to be unsuccessful. If we are unable to identify suitable product candidates for preclinical and clinical development and regulatory approval, we will not be able to generate product revenues,harmed, which ~~would have an adverse impact on~~could harm our business, operating results, prospects or financial ~~condition~~condition.

We have encountered and ~~results of operations.~~

We may continue to encounter delays and difficulties enrolling patients in our clinical trials for a variety of reasons, including the limited number of patients who have the diseases for which certain of our product candidates are being studied, which could delay or halt the clinical development of our product candidates.*

Identifying and qualifying patients to participate in clinical trials for our product candidates is critical to our success. ~~In particular, each~~Certain of the conditions for which we ~~evaluated Resolaris is a~~may elect to evaluate our product candidates may be rare ~~disease~~diseases with limited patient pools from which to draw for clinical trials.

For example, ~~while~~we are conducting the EFZO-FIT study in patients with pulmonary sarcoidosis. While estimates of ~~FSHD~~pulmonary sarcoidosis prevalence vary, studies exploring the topic have identified average prevalence rates of approximately one in 17,000. Applying this rate to the U.S. population, as of November 1, 2014, yields a domestic FSHD population of approximately 19,000. In addition, we estimate that ~~LGMD~~pulmonary sarcoidosis affects an estimated ~~16,000~~200,000 patients in the ~~U.S.,~~United States. Of that population, however, we estimate that approximately ~~3,000 of whom have LGMD2B.~~30% experience progressive disease such that our targeted population is significantly smaller. The eligibility criteria for any of our clinical trials may further limit the pool of available participants in our trials. For example, if patients have been previously prescribed certain other medications to treat pulmonary sarcoidosis, they may not be

eligible to participate in the EFZO-FIT study, thus further reducing our patient pool. We may be unable to identify and enroll a sufficient number of patients with the disease in question and who meet the eligibility criteria for, and are willing to participate in, ~~our~~the clinical trials. Once enrolled, patients may decide or be required to discontinue from ~~our~~the clinical ~~trials~~trial due to inconvenience, burden of trial requirements, adverse events associated with ~~our product candidates or~~efzofitimod, limitations required by trial ~~protocols.~~protocols or other reasons. Additionally, we are conducting the EFZO-CONNECT study in patients with SSc-ILD. It is estimated that approximately 100,000 people in the United States are affected by SSc and up to 80% may develop ILD.

Our ability to identify, recruit, enroll and maintain a sufficient number of patients, or those with required or desired characteristics to achieve diversity in ~~a study, to complete~~ our clinical trials in a timely manner may also be affected by other factors, ~~including:~~including, but not limited to:

•

proximity and availability of clinical trial sites for ~~prospective~~ patients;

•

severity of the disease under investigation;

•

design of the study protocol and the burdens to patients of compliance with our study ~~protocols;~~

protocol;

•

perceived risks and benefits of the product candidate under study;

•

availability of competing therapies and clinical trials for the patient populations and indications under study;

•

efforts to facilitate timely enrollment in clinical trials;

•

patient referral practices of physicians; and

•

ability to monitor patients adequately during and after treatment.

~~We are initially focused on the development of Physiocrine-based therapeutics to treat rare conditions.~~ We plan to seek initial marketing approval in the United States. We may not be able to initiate or continue clinical trials if we cannot enroll a sufficient number of eligible patients to participate in the clinical trials required by the FDA or other regulatory agencies. Our ability to successfully initiate, enroll and complete a clinical trial in any foreign country is subject to numerous risks unique to conducting business in foreign countries, ~~including:~~including, but not limited to:

•

difficulty in establishing or managing relationships with or changes in CROs and physicians;

•

different requirements and standards for the conduct of clinical trials;

•

our inability to locate qualified local consultants, physicians and partners; and

•

the potential burden of complying with a variety of foreign laws, medical standards and regulatory requirements, including the regulation of ~~pharmaceutical and~~ biotechnology products and treatment.

Additionally, if patients are unwilling to participate in our clinical trials because of negative publicity from adverse events in our clinical trials or in the biotechnology or protein therapeutics industries or for other reasons, including competitive clinical trials for similar patient populations or complications arising from the ongoing Ukraine-Russia conflict, the timeline for recruiting patients, conducting studies and obtaining regulatory approval of potential products may be delayed. These delays could result in increased costs, delays in advancing our product development or termination of our clinical trials altogether. If we have difficulty enrolling and maintaining a sufficient number of patients to conduct our clinical trials as planned for any reason, we may need to delay, limit or terminate clinical trials, any of which would have an adverse effect on our business, prospects, financial condition and results of operations.

Furthermore, clinical trial delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do, which could impair our ability to obtain orphan exclusivity and successfully commercialize our product candidates and may have an adverse effect on our business, financial condition and results of operations.

Our current product candidates and any other product candidates that we may develop from our discovery engine represent novel therapeutic approaches, which may cause significant delays or may not result in any commercially viable drugs.*

We have concentrated the bulk of our research and development efforts to date on studying extracellular functions of tRNA synthetase biology, a newly discovered area of biology. We have also identified neuropilin-2 (NRP2) as a receptor for efzofitimod and have focused research efforts on NRP2 biology. Our future success is highly dependent on the successful development of product candidates based on these new areas of biology, including efzofitimod, and additional product candidates arising from proteins derived from tRNA synthetases, including aminoacyl-tRNA synthetase (AARS) and aspartyl-tRNA synthetase (DARS). Extracellular tRNA synthetase-based biology represents a novel approach to drug discovery and development, and to our knowledge, no drugs have been developed using, or based upon, this approach. Despite the successful development of other naturally occurring proteins, such as erythropoietin and insulin, as therapeutics, proteins derived from HARS, AARS or DARS families and from other tRNA synthetase

pathways represent a novel class of protein therapeutics, and our development of these therapeutics is based on our new understanding of human physiology. In particular, the mechanism of action of tRNA synthetases and their role in immunomodulation and tissue regeneration have not been studied extensively, nor has the safety of this class of protein therapeutics been evaluated extensively in humans. The therapeutic product candidates that we elect to develop may not have the physiological functions that we currently ascribe to them, may have limited or no therapeutic applications, or may present safety problems of which we are not yet aware. We cannot be sure that our discovery engine will yield therapeutic product candidates that are safe, effective, approvable by regulatory authorities, manufacturable, scalable, or profitable.

Because our work represents a new therapeutic approach, developing and commercializing our product candidates, including efzofitimod, subjects us to a number of challenges, including:

•

defining indications within our targeted diseases and clinical endpoints within each indication that are appropriate to support regulatory approval, including with respect to the EFZO-FIT study and the EFZO-CONNECT study, and prioritization of outcome measurements that would best support the evaluation of efzofitimod’s efficacy;

•

obtaining regulatory approval from the FDA and other regulatory authorities that have little or no experience with the development of extracellular tRNA synthetase-based therapeutics;

•

educating medical personnel regarding the potential side effect profile of each of our product candidates, such as the potential for the development of antibodies against our purified protein therapeutics;

•

developing processes for the safe administration of these product candidates, including long-term follow-up for all patients who receive our product candidates;

•

sourcing clinical and, if approved, commercial supplies for the materials used to manufacture and process our product candidates;

•

developing a manufacturing process and distribution network that ensures consistent manufacture of our product candidates in compliance with current good manufacturing practices (cGMPs) and related requirements, with a cost of goods that allows for an attractive return on investment;

•

obtaining and maintaining third-party coverage and adequate reimbursement of our product candidates;

•

establishing sales and marketing capabilities after obtaining any regulatory approval to gain market acceptance; and

•

developing therapeutics for diseases or indications beyond those addressed by our current product candidates.

Moreover, public perception of safety issues, including adoption of new therapeutics or novel approaches to treatment, may adversely influence the willingness of subjects to participate in clinical trials, or if approved, of physicians to adopt and prescribe novel therapeutics. Physicians, hospitals and third-party payors often are slow to adopt new products, technologies and treatment practices. Physicians may decide the therapy is too complex or unproven to adopt and may choose not to administer the therapy. Based on these and other factors, healthcare providers and payors may decide that the benefits of any therapeutic candidates for which we receive regulatory approval do not or will not outweigh its costs. Any inability to successfully develop commercially viable drugs would have an adverse impact on our business, prospects, financial condition and results of operations.

Data generated in our preclinical studies and patient sample data relating to the immunomodulatory domain of HARS, including efzofitimod, may not be predictive or indicative of the immunomodulatory activity or therapeutic effects, if any, of our product candidates in patients.

Our scientists discovered the activity of the immunomodulatory domain of HARS, including efzofitimod, using in vitro and in vivo screening systems designed to test potential immunomodulatory activity in animal models of immune activity or inflammation. Translational medicine, or the application of basic scientific findings to develop therapeutics that promote human health, is subject to a number of inherent risks. In particular, scientific hypotheses formed from preclinical observations may prove to be incorrect, and the data generated in animal models or observed in limited patient populations may be of limited value, and may not be applicable in clinical trials conducted under the controlled conditions required by applicable regulatory requirements and our protocols. For example, we have not extensively studied the activity of efzofitimod in patients with ILD.

Our classification of diseases based on the existence of excessive immune cell activation or lack thereof and our hypothesis that these represent potential indications for our product candidates may not prove to be therapeutically relevant. Accordingly, the conclusions that we have drawn from animal studies and patient sample data regarding the potential immunomodulatory activity of efzofitimod may not be substantiated in other animal models or in clinical trials. Further, based on the discovery of the involvement of NRP2 in the mechanism of action of efzofitimod, we are still expanding our knowledge of the role of the NRP2 pathway in regulating immune responses. Although we were able to establish clinical proof-of-concept for efzofitimod in our Phase 1b/2a clinical trial in patients with pulmonary sarcoidosis, this may not be validated in other clinical trials. Any failure to demonstrate in controlled clinical

trials the requisite safety and efficacy of our product candidates will adversely affect our business, prospects, financial condition and results of operations.

We have previously conducted and we or our third party collaborators may conduct additional clinical trials of efzofitimod outside of the United States. The FDA, however, may not accept data from such trials, in which case our development plans will be delayed, which could materially harm our business.*

In June 2018, we completed a Phase 1 clinical trial of efzofitimod in healthy subjects in Australia. This randomized, double-blind, placebo-controlled study investigated the safety, tolerability, immunogenicity, and pharmacokinetics (PK) of intravenous efzofitimod in 36 healthy volunteers. In addition, we or our third party collaborators may choose to conduct additional clinical trials for efzofitimod in countries outside the United States, subject to applicable regulatory approval. For example, our partner, Kyorin Pharmaceutical Co., Ltd. (Kyorin), conducted an efzofitimod Phase 1 clinical trial in 32 healthy Japanese male volunteers and is participating in the EZFO-FIT study. We will seek to enroll subjects in the EZFO-FIT study in centers in United States, Europe and Brazil and Kyorin will seek to enroll subjects in the EZFO-FIT study in centers in Japan.

Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of such study data is generally subject to certain conditions. For example, in cases where data from foreign clinical trials are intended to serve as the basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of foreign data alone unless (i) the data are applicable in the U.S. population and U.S. medical practice; and (ii) the trials were performed by clinical investigators of recognized competence and pursuant to GCP regulations. Additionally, the FDA’s clinical trial requirements, including sufficient size of patient populations and statistical powering, must be met. In addition, when studies are conducted only at sites outside of the United States, the FDA generally does not provide advance comment on the clinical protocols for the studies, and therefore there is an additional risk that the FDA could determine that the study design or protocol for a non-U.S. clinical trial was inadequate, which would likely require us to conduct additional clinical trials, in which case our development plans will be delayed, which could materially harm our business.

Conducting clinical trials outside the United States also exposes us to additional risks, including risks associated with:

•

additional foreign regulatory requirements;

•

foreign exchange fluctuations;

•

compliance with foreign manufacturing, customs, shipment and storage requirements;

•

cultural differences in medical practice and clinical research;

•

evolving geopolitical and macroeconomic developments, including the ongoing Ukraine-Russia conflict; and

•

diminished protection of intellectual property in some countries.

Further, the integrity of data from any clinical trials conducted outside of the United States may not be acceptable to the FDA.

Our therapeutic product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

Undesirable side effects caused by our product candidates, or safety, tolerability or toxicity issues that may occur in our preclinical studies, clinical trials or in the future, could cause us or regulatory authorities to interrupt, restrict, delay, or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities.

In our Phase 1b/2 clinical trials for our first clinical trial candidate, ATYR1940 (slightly truncated recombinant HARS protein), completed in 2016 and 2017, we observed low levels of antibodies to ATYR1940 in some subjects in response to the administration of ATYR1940. Although these antibody observations were without associated clinical symptoms, the development of higher levels of such antibodies over a longer course of treatment may ultimately limit efficacy and trigger a negative autoimmune response. In addition, some patients in our Phase 1b/2 clinical trials of ATYR1940 experienced generalized infusion related reactions (IRRs) and discontinued dosing. We established procedural measures, including a decreased concentration and intravenous delivery rate of ATYR1940, in an effort to minimize the occurrence of generalized IRRs and the formation of anti-drug antibodies. After implementation of these procedures, we observed a decreased rate of IRRs in our clinical trials of ATYR1940. We did not observe IRRs in our completed Phase 1b/2a clinical trial of efzofitimod in patients in pulmonary sarcoidosis or in our other efzofitimod clinical trials, but we cannot assure that this will be the case in any future clinical trials. Generalized IRRs and other complications or side effects could harm further development and/or commercialization of our product candidates, including efzofitimod. Additionally, our product candidates are designed to be administered by intravenous injection, which may cause side effects, including acute immune responses and injection site reactions. The risk of adverse immune responses remains a significant concern for protein therapeutics, and we cannot assure that

these or other risks will not occur in any of our clinical trials our product candidates. There is also a risk of delayed adverse events as a result of long-term exposure to protein therapeutics that must be administered repeatedly for the management of chronic conditions, such as the development of antibodies, which may occur over time. If any such adverse events occur, which may include the development of a negative autoimmune response from antibodies or the occurrence of IRRs associated with antibodies, further advancement of our clinical trials could be halted or delayed, which would have a material adverse effect on our business, prospects, financial condition and results of operations.

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, prospects, financial condition and results of operations.

We may not be successful in our efforts to identify or discover additional product candidates.*

A key element of our strategy is to expand applications of efzofitimod to additional immune-mediated diseases and leverage our discovery engine to identify the therapeutic potential of extracellular proteins derived from tRNA synthetases to help identify or discover additional product candidates. A significant portion of the research that we are conducting involves new compounds and drug discovery methods, including our proprietary technology. Our drug discovery activities using our proprietary technology may not be successful in identifying product candidates that are useful in treating diseases. Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development for a number of reasons, including:

•

the research methodology used may not be successful in identifying appropriate potential product candidates; or

•

potential product candidates may, on further study, be shown to have harmful side effects or other characteristics that indicate that they are unlikely to be product candidates that will receive marketing approval and achieve market acceptance.

Research programs to identify new product candidates require substantial technical, financial and human resources. We may choose to focus our efforts and resources on a potential product candidate that ultimately proves to be unsuccessful. If we are unable to identify suitable product candidates for preclinical and clinical development and regulatory approval, we will not be able to generate product revenues, which would have an adverse impact on our business, prospects, financial condition and results of operations.

We may face manufacturing stoppages and other challenges associated with the clinical or commercial manufacture of our ~~Physiocrine-based therapeutics.~~product candidates.*

All entities involved in the preparation of therapeutics for clinical trials or commercial sale, including our existing ~~contracted development and manufacturing organizations (CDMOs)~~CDMOs for our product candidates, are subject to extensive regulation. Components of a finished therapeutic product approved for commercial sale or use in late-stage clinical trials must be manufactured in accordance with ~~cGMP.~~cGMPs. These regulations govern manufacturing processes and procedures (including record keeping) 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 to inadvertent changes in the properties or stability of our product candidates that may not be detectable in final product testing. We or our CDMOs must supply all necessary documentation in support of a biologics license application ~~or BLA, or a new drug application, or NDA,~~(BLA) on a timely basis and must adhere to the FDA’s ~~GLP~~Good Laboratory Practices and cGMP regulations enforced by the FDA through its facilities inspection program. The facilities and quality systems of our CDMOs and other CROs must pass a pre-approval inspection for compliance with applicable regulations as a condition of regulatory approval of our product candidates. In addition, the regulatory authorities may, at any time, audit or inspect a manufacturing facility involved with the preparation of our product candidates or the associated quality systems for compliance with the regulations applicable to the activities being conducted. If these facilities do not pass a pre-approval plant inspection, FDA approval of the products will not be granted. If global health concerns prevent the FDA or other regulatory authorities from conducting their regular inspections, it could impact the ability of our CDMOs to provide us with product for clinical trials.

The regulatory authorities also may, at any time following approval of a product for sale, audit the facilities in which the product is manufactured. If any such inspection or audit of our facilities or those of our CDMOs and CROs identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulations occurs independently of such an inspection or audit, we or the relevant 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 a clinical trial or commercial sales or the temporary or permanent closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business.

If we or any of our CDMOs and CROs fail to maintain regulatory compliance, the FDA can impose regulatory sanctions including, among other things, refusal to approve a pending application for a new biologic ~~product or drug~~ product, or revocation of a pre-existing approval. Additionally, if supply from one approved manufacturer is interrupted, there could be a significant disruption in clinical or commercial supply. An alternative manufacturer would need to be qualified through a BLA ~~or NDA~~ supplement which could result in further delay. The

regulatory agencies may also require additional studies 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.

In addition, the manufacture of ~~Resolaris, iMod.Fc and any other Physiocrine-based therapeutics that we may develop~~our product candidates presents challenges associated with biologics production, including the inherent instability of larger, more complex molecules and the need to ensure uniformity of the drug substance produced in different facilities or across different batches. We have changed cell lines for the production of Resolaris in connection with our engagement of a new CDMO to meet our projected needs for pivotal clinical trials and a commercial chemistry, manufacturing and controls specification, which may present production challenges or delays. The process of manufacturing biologics is extremely susceptible to product loss due to contamination, equipment failure or improper installation or operation of equipment, or vendor or operator error. Even minor deviations from normal manufacturing and distribution processes for any of our product candidates could result in reduced production yields, product defects, and other supply disruptions. Furthermore, although ~~Physiocrines~~tRNA synthetases represent a class of proteins that may share ~~immuno-modulatory~~immunomodulatory properties in various physiological pathways, each ~~Physiocrine~~tRNA synthetase has a different structure and may have unique manufacturing requirements that are not applicable across the entire class. For example, Fc fusion proteins, such as ~~iMod.Fc,~~efzofitimod, include an additional antibody domain to improve ~~pharmacokinetic, or~~ PK characteristics, and may therefore require a more complex and time-consuming manufacturing process than other ~~Physiocrines.~~tRNA synthetase-based therapeutic candidates. Currently, we are producing our ~~iMod.Fc~~efzofitimod molecule in E.coli by expression in inclusion bodies and refolding to recreate the native structure. With regard to our ORCA program, if we are successful in selecting an antibody IND candidate, we will work with third parties for cell line development and antibody manufacturing which may be subject to delays or staging based on our program priorities or other third party factors that may be beyond our control.. The manufacturing processes for one of our product candidates may not be readily adaptable to other product candidates that we develop, and we may need to engage multiple third-party manufacturers to produce our product candidates. For example, we recently engaged an additional CDMO to manufacture efzofitimod and will need to complete a technology transfer and validation process before the new CDMO will be able to produce additional bulk drug substance. Any adverse developments affecting manufacturing operations for our product candidates may result in shipment delays, inventory shortages, lot failures, withdrawals or recalls or other interruptions in the supply of our drug substance and drug product which could delay the development of our product candidates. We may also have to write off inventory, incur other charges and expenses for supply of drug product that fails to meet specifications or expires, undertake costly remediation efforts, or seek more costly manufacturing alternatives. Any manufacturing stoppage or delay, or any inability to consistently manufacture adequate supplies of our product candidates for our clinical trials or on a commercial scale will harm our business, prospects, financial condition and results of operations.

~~Although~~Even if we complete the ~~FDA~~necessary preclinical studies and clinical trials, we cannot predict when or if we will obtain regulatory approval to commercialize a product candidate, and the ~~European Commission~~scope of any approval may be narrower than we expect.

We cannot commercialize a product until the appropriate regulatory authorities have ~~granted~~reviewed and approved the product candidate. Even if our product candidates demonstrate safety and efficacy in clinical trials, the regulatory agencies may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval.

Additional delays may result if an FDA advisory committee or regulatory authority recommends non-approval or restrictions on approval. In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory agency policy during the period of product development, clinical trials and the review process. Regulatory agencies also may approve a product candidate for fewer or more limited indications than requested, may impose restrictions on dosing or may grant approval subject to the performance of post-marketing studies. In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of our product candidates.

Although we have obtained orphan drug designation ~~to Resolaris~~for efzofitimod for the treatment of ~~FSHD~~sarcoidosis and ~~LGMD,~~systemic sclerosis in the United States and for the treatment of sarcoidosis in the European Union (EU) we may not receive orphan drug designation for ~~Resolaris~~efzofitimod in other jurisdictions or for other indications that we may pursue, or for any other product candidates we may develop under any new applications for orphan drug designation that we may submit, and any orphan drug designations that we have received or may receive may not confer marketing exclusivity or other expected commercial benefits.*

The FDA ~~and the European Commission have each~~ granted orphan drug ~~designations~~designation to ~~Resolaris~~efzofitimod for the treatment of ~~FSHD~~sarcoidosis in January 2022 and SSc in April 2022. The European Commission, on the basis of the opinion of the European Medicines Agency (EMA) Committee for Orphan Medicinal Products (COMP) granted orphan drug designation to efzofitimod for the treatment of sarcoidosis in January 2023 and for the treatment of ~~LGMD.~~SSc in June 2023. We may ~~also~~ apply for orphan drug designation ~~in other territories and~~for efzofitimod for other indications and product ~~candidates.~~ candidates in the United States and the EU.

Under the Orphan Drug Act, the FDA may designate a drug or biologic product as an orphan drug if it is intended to treat a rare disease or condition, defined as a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the EU, the EMA’s COMP grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention, or treatment of a life-threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the EU. Additionally, designation is granted for products intended for the diagnosis, prevention, or treatment of a life-threatening, seriously debilitating or serious and chronic condition when, without incentives, it is unlikely that sales of the drug in the EU would be sufficient to justify the necessary investment in developing the drug or biological product or where there is no satisfactory method of diagnosis, prevention, or treatment, or, if such a method exists, the medicine must be of significant benefit to those affected by the condition.

Orphan drug status confers up to ten years of marketing exclusivity in Europe, and up to seven years of marketing exclusivity in the United States, for a particular product in a specified indication. ~~To date, we have been granted~~Obtaining an orphan drug designation ~~for only one product candidate in the United States~~can be difficult and ~~the European Union for two indications. We~~we cannot assure you that we will be able to obtain orphan drug designation in other jurisdictions or for other indications, or rely on orphan drug or similar designations to exclude other companies from manufacturing or selling products using the same principal mechanisms of action for the same indications that we pursue beyond these timeframes. Furthermore, marketing exclusivity in Europe can be reduced from ten years to six years if the initial designation criteria have significantly changed since the market authorization of the orphan product. Even if we are the first to obtain marketing authorization for an orphan drug indication, there are circumstances under which a competing product may be approved for the same indication during the period of marketing exclusivity, such as if the later product is shown to be clinically superior to the orphan product, or if the later product is deemed a different product than ours. Further, the marketing exclusivity would not prevent competitors from obtaining approval of the same product candidate as ours for indications other than those in which we have been granted orphan drug designation, or for the use of other types of products in the same indications as our orphan product.

Even if we complete the necessary preclinical studies and clinical trials, we cannot predict when or if we will obtain regulatory approval to commercialize a product candidate, and the scope of any approval may be narrower than we expect.

We cannot commercialize a product until the appropriate regulatory authorities have reviewed and approved the product candidate. Even if our product candidates demonstrate safety and efficacy in clinical trials, the regulatory agencies may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval. Additional delays may result if an FDA Advisory Committee or regulatory authority recommends non-approval or restrictions on approval. In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory agency policy during the period of product development, clinical trials and the review process. Regulatory agencies also may approve a product candidate for fewer or more limited indications than requested, may impose restrictions on dosing or may grant approval subject to the performance of post-marketing studies. In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of our product candidates.

~~Failure to obtain marketing approval in international jurisdictions would prevent our medicines from being marketed in such jurisdictions.~~

In order to market and sell our medicines in the European Union and many other jurisdictions, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing, and we have limited regulatory experience in many jurisdictions. The time required to obtain approval in one jurisdiction may differ substantially from that required to obtain approval in other jurisdictions. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by one regulatory authority does not ensure approval by regulatory authorities in other countries or jurisdictions, and we may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our medicines in any market.

A breakthrough therapy or ~~fast track~~Fast Track designation by the FDA, including the Fast Track designation we received for efzofitimod, may not lead to expedited development or regulatory review or approval.*

In ~~October 2016 and January 2017,~~2022, the FDA granted ~~Resolaris fast track designations~~Fast Track designation to efzofitimod for the treatment of ~~FSHD~~pulmonary sarcoidosis and ~~LGMD2B, respectively.~~for the treatment of SSc-ILD. We may ~~also~~ seek, from time to time, breakthrough therapy or ~~fast track~~Fast Track designation for ~~Resolaris for other indications and for any other~~our product ~~candidates that we may develop, although we may elect not to do so.~~candidates. A breakthrough therapy ~~program~~designation is for a product candidate intended to treat a serious or life-threatening condition, and preliminary clinical evidence indicates that the product candidate may demonstrate substantial improvement on a clinically significant endpoint(s) over available therapies. A ~~fast track program~~Fast Track designation is for a product candidate that treats a serious or life-threatening condition, and ~~nonclinical~~preclinical or clinical data demonstrate the potential to address an unmet medical need. The FDA has broad discretion whether or not to grant these designations. Accordingly, even if we believe a particular product candidate is eligible for breakthrough therapy or ~~fast track~~Fast Track designation, we cannot assure you that the FDA would decide to grant it. Even ~~though we have received fast track designation for Resolaris for the treatment of FHSD and LGMD2B, or even~~ if we receive breakthrough therapy or ~~fast track~~Fast Track designation, ~~of other indications or for our other product candidates,~~ we may not experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may withdraw breakthrough therapy or ~~fast track~~Fast Track designation if it believes that the product no longer meets the qualifying criteria. In addition, the breakthrough therapy program is a relatively new program. As a result, we cannot be certain whether any of our product candidates can or will qualify for breakthrough therapy designation. Our business may be harmed if we are unable to avail ourselves of these or any other expedited development and regulatory pathways.

Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could negatively impact our business.

The ability of the FDA to review and approve proposed clinical trials or new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions. 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 product candidates to be reviewed and/or approved by necessary government agencies, which would adversely affect our 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.

Even if we obtain regulatory approval for a product candidate, our products will remain subject to regulatory scrutiny.

Even if ~~Resolaris, iMod.Fc or any other~~we obtain regulatory approval for a product ~~candidates that we may develop, including potential~~candidate, such product ~~candidates from our ORCA program, are approved, they~~ will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies, adverse event reporting and submission of safety, efficacy, and other post-market information, including both federal and state requirements in the United States and requirements of comparable foreign regulatory authorities.

Manufacturers and manufacturers’ facilities are required to comply with extensive FDA, and comparable foreign regulatory authority, requirements, including ensuring that quality control and manufacturing procedures conform to cGMP regulations. As such, weWe and our ~~contract manufacturers~~CDMOs will be subject to continual review and inspections to assess compliance with ~~cGMP~~cGMPs and adherence to commitments made in any BLA ~~NDA,~~ or marketing authorization application ~~or MAA.~~(MAA). Accordingly, we and others with whom we work will need to continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, and quality control.

Any regulatory approvals that we receive for our product candidates may be subject to limitations on the approved indicated uses for which the product may be marketed or 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 the product candidate. ~~We will be required to report certain adverse reactions and production problems, if any, to the FDA and comparable foreign regulatory authorities.~~ If new safety issues emerge, we may be required to change our labeling. Any new legislation addressing drug safety or efficacy issues could result in delays in product development or commercialization, or increased costs to assure compliance.

We will have to comply with requirements concerning advertising and promotion for our products. Promotional communications with respect to prescription drugs are heavily scrutinized by the FDA, the Department of Justice, state attorneys general and comparable foreign regulatory authorities. For example, we may face claims associated with the use or promotion of our products for uses outside the scope of their approved label indications. Violations, including actual or alleged promotion of our products for unapproved, or off-label, uses are subject to enforcement letters, inquiries and investigations, and civil and criminal sanctions. Any actual or alleged failure to comply with labeling and promotion requirements may have a negative impact on our business. In the United States, engaging in impermissible promotion of our products for off-label uses can also subject us to false claims litigation under federal and state statutes, which can lead to civil and criminal penalties and fines, ~~and~~ agreements that would materially restrict the manner in which we promote or distribute our drug ~~products.~~products and exclusion from Medicare, Medicaid and other federal and state healthcare programs. These false claims statutes include the federal False Claims Act, which allows any individual to bring a lawsuit against a pharmaceutical company on behalf of the federal government alleging submission of false or fraudulent claims, or causing to present such false or fraudulent claims, for payment by a federal program such as Medicare or Medicaid. If the government prevails in the lawsuit, the individual will share in any fines or settlement funds. Since 2004, these False Claims Act lawsuits against pharmaceutical companies have increased significantly in volume and breadth, leading to several substantial civil and criminal settlements based on certain sales practices promoting off-label drug uses. This growth in litigation has increased the risk that a pharmaceutical company will have to defend a false claims action, pay settlement fines or restitution, agree to comply with burdensome reporting and compliance obligations, and be excluded from Medicare, Medicaid and other federal and state healthcare programs. If we do not lawfully promote our approved products, we may become subject to such litigation and, if we are not successful in defending against such actions, those actions could compromise our ability to become profitable.

The holder of an approved BLA ~~NDA~~ or MAA must submit new or supplemental applications and obtain approval for certain changes to the approved product, product labeling, or manufacturing process. We could also be asked to conduct post-marketing clinical trials to verify the safety and efficacy of our products in general or in specific patient subsets. If original marketing approval were obtained through an accelerated approval pathway, we could be required to conduct a successful post-marketing clinical trial to confirm clinical benefit for our products. An unsuccessful post-marketing study or failure to complete such a trial could result in the withdrawal of marketing approval.

If a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of a product, such regulatory agency may impose restrictions on that product or us, including requiring withdrawal of the product from the market. If we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may, among other things:

•

issue untitled or warning letters;

•

impose civil or criminal penalties;

•

suspend or withdraw regulatory approval;

•

suspend any of our ongoing clinical trials;

•

refuse to approve pending applications or supplements to approved applications submitted by us;

•

impose restrictions on our operations, including closing our ~~contract manufacturers’~~CDMOs’ facilities; or

•

seize or detain products, or require or request a product recall.

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 commercialize and generate revenue from our products. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected.

Because of our focus on treatments for severe, rare diseases, Resolaris, iMod.Fc and other product candidates that we develop may be subject to requests for treatment use under individual patient INDs, which would present a variety of risks.

FDA regulations permit an investigational drug or biologic to be used for the treatment of an individual patient by a licensed physician under certain circumstances if the patient has a serious disease or condition, generally defined as a disease or condition associated with morbidity that has a substantial impact on day-to-day functioning. We believe that Resolaris, iMod.Fc and other product candidates that we develop may be susceptible to physician requests for use in these settings given the severity of the disease indications that we are targeting and the limited availability of approved and other investigational therapeutics for these indications. The treatment use of our product candidates under individual patient INDs would present a number of risks, including the following:

The treatment use of our product candidates under individual patient INDs may be subject to less stringent or otherwise different protocols from our clinical trials, subjecting the patient to additional risk, which could negatively affect the perception of our product candidates among physicians, patients and regulators;

~~The actual or perceived availability of a product candidate for use under individual patient INDs may impair patient enrollment in our clinical trials; and~~

Any decision to make quantities of our product candidates available for use under individual patient INDs may impair our or our third-party manufacturers’ ability to timely supply adequate quantities of our product candidates for our clinical trials.

Physicians may independently file individual patient INDs for Resolaris or, when in clinical trials, for iMod.Fc or one of our other product candidates. We may disagree with a physician’s or the FDA’s conclusion that our product candidate is suitable for evaluation under a particular individual patient IND, and any decision by us not to make our product candidate available for evaluation under this setting may subject us to negative publicity or market perception.

As part of the recently enacted 21st Century Cures Act, or Cures Act, as the manufacturer of an investigational drug for a serious disease or condition, we will be required to make available, such as by posting on our website, our policy on evaluating and responding to requests for individual patient access to such investigational drug. This requirement applies on the later of 60 calendar days after the date of enactment of the Cures Act or the first initiation of a Phase 2 or Phase 3 trial of the investigational drug.

Risks related to our financial condition and need for additional capital ~~requirements~~

~~We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.~~

We are a clinical stage biotherapeutics company, and we have not yet generated any revenues from product sales. We have incurred net losses in each year since our inception in 2005, including net losses of $36.7 million and $45.3 million for the nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017, we had an accumulated deficit of $252.7 million.

We have devoted most of our financial resources to research and development, including our clinical and preclinical development activities. To date, we have financed our operations primarily through the sale of equity securities and convertible debt and through venture debt. The amount of our future net losses will depend, in part, on the rate of our future expenditures and our ability to obtain funding through equity or debt financings, grant funding or strategic collaborations. We have not commenced pivotal clinical trials for any product candidate and it will be several years, if ever, before we have a product candidate ready for commercialization. Even if we obtain regulatory approval to market a product candidate, our future revenues will depend upon the size of any markets in which our product candidates have received approval, and our ability to achieve sufficient market acceptance, reimbursement from third-party payors and adequate market share for our product candidates in those markets. However, even if we obtain adequate market share for our product candidates, because the potential markets in which certain of our product candidates may ultimately receive regulatory approval are very small, we may never become profitable despite obtaining such market share and acceptance of such products.

~~We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will fluctuate in connection with our ongoing activities as we:~~

~~continue our research and preclinical and clinical development of Resolaris, iMod.Fc or any other product candidates that we may develop, including potential product candidates from our ORCA program;~~

initiate and conduct any additional preclinical studies, clinical trials or other studies for Resolaris, iMod.Fc and any other product candidates that we may develop, including potential product candidates from our ORCA program;

~~further develop the manufacturing process for our product candidates;~~

~~change or add additional manufacturers, including manufacturers of quantities of drug substance suitable for pivotal clinical trials and commercialization;~~

~~seek regulatory approvals for our product candidates that successfully complete clinical trials;~~

~~establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;~~

~~seek to identify and validate additional product candidates, including potential product candidates from our ORCA program;~~

~~make milestone or other payments under our in-license agreements;~~

~~maintain, protect and expand our portfolio of owned and in-licensed intellectual property;~~

~~acquire or in-license other product candidates and technologies;~~

~~attract and retain skilled personnel;~~

~~create additional infrastructure to support our operations as a public company and our product development and planned future commercialization efforts; and~~

~~experience any delays or encounter challenges with any of the above.~~

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

~~We have never generated any revenue from product sales and may never be profitable.~~

Our ability to generate revenue and achieve profitability depends on our ability, alone or with strategic collaboration partners, to successfully complete the development of, and obtain the regulatory approvals necessary to commercialize, Resolaris, iMod.Fc and any other product candidates that we may develop, including potential product candidates from our ORCA program. We do not anticipate generating revenues from product sales for the foreseeable future, if ever. Our ability to generate future revenues from product sales depends heavily on our success in:

completing research, preclinical development and clinical development of Resolaris, iMod.Fc and other product candidates, including potential product candidates from our ORCA program, potentially with a partner in one or more of our programs;

~~seeking and obtaining regulatory approvals for product candidates for which we complete clinical trials;~~

developing a sustainable, scalable, reproducible, and transferable manufacturing process for Resolaris, iMod.Fc and any other product candidates that we may develop, including potential product candidates from our ORCA program;

establishing and maintaining supply and manufacturing relationships with third parties that can provide products and services that are adequate in both amount and quality to support clinical development and the market demand for our product candidates, if approved;

launching and commercializing product candidates for which we obtain regulatory approval, either by collaborating with a partner or, if launched independently, by establishing a sales force, marketing and distribution infrastructure;

~~maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trademarks, trade secrets and know-how;~~

~~obtaining market acceptance of Physiocrine-based therapeutics and our product candidates as viable treatment options for our target indications;~~

~~addressing any competing technological and market developments;~~

~~implementing additional internal systems and infrastructure, as needed;~~

~~identifying and validating new therapeutic product candidates based on Physiocrine biology;~~

~~attracting, hiring and retaining qualified personnel; and~~

~~negotiating favorable terms in any licensing, collaboration or other arrangements into which we may enter.~~

Even if one of our product candidates is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any such approved product candidate. Our expenses could increase beyond expectations if we are required by the FDA or other regulatory agencies, domestic or foreign, to perform clinical trials and other studies in addition to those that we currently anticipate. In cases where we are successful in obtaining regulatory approvals to market one or more of our product candidates, our revenue will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval, the accepted price for the product, the ability to get reimbursement at any price, the competition we face, and whether we own the commercial rights for that territory. If the number of our addressable rare disease patients is not as significant as we estimate, the indication approved by regulatory authorities is narrower than we expect, or the reasonably accepted population for treatment is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of such products, even if approved. Even if we are able to generate revenues from the sale of any approved products, we may not become profitable and may need to obtain additional funding to continue operations.

We will need to raise additional capital or enter into strategic partnering relationships to fund our operations. ~~Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations.~~*

~~We are currently conducting three therapeutic programs in three different therapeutic areas.~~ The development of therapeutic product candidates is expensive, and we expect our research and development expenses to ~~increase substantially in connection with our ongoing activities.~~

fluctuate. As of ~~September~~June 30, ~~2017,~~2023, our cash, cash equivalents, restricted cash and available-for-sale investments were approximately ~~$90.4~~$112.0 million. In February 2023, we completed an underwritten follow-on public offering of 23,125,000 shares of our common stock, including the partial exercise of the underwriters’ option to purchase additional shares, at a price to the public of $2.25 per share. The total net proceeds from the offering were approximately $48.1 million, after deducting underwriting discounts, commissions and offering expenses payable by us. We ~~expect~~also received a $10.0 million milestone payment from the collaboration and license agreement (Kyorin Agreement) with Kyorin in February 2023. In addition, during the six months ended June 30, 2023, we sold an aggregate of 4,332,210 shares of common stock at a weighted-average price of $2.29 per share for net proceeds of approximately $9.5 million under the Jefferies ATM Offering Program. We believe that our ~~existing~~current cash, cash equivalents, restricted cash and available-for-sale investments, will be sufficient to ~~fund~~meet our ~~current operations through~~material cash requirements for known contractual and other obligations for a period of at least one year from the ~~next 12 months.~~date of this Quarterly Report. However, our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through ~~public or private~~ equity ~~offerings~~ or debt ~~financings, government or other third-party~~offerings, grant funding, ~~marketing and distribution arrangements and other~~ collaborations, strategic ~~alliances and~~partnerships and/or licensing ~~arrangements or a combination of these approaches.~~arrangements. Our future funding requirements are difficult to forecast and will depend on many factors, including but not limited to:

•

the type, number, scope ~~rate of~~ progress, expansions, results, costs and ~~cost~~timing of, our clinical trials ~~nonclinical testing,~~ and preclinical studies for our product candidates or other ~~related activities;~~

potential product candidates or indications which we are pursuing or may choose to pursue in the future, including any changes in our CROs;

•

the ~~cost~~costs, timing and outcome of ~~manufacturing clinical supplies, and establishing commercial supplies,~~regulatory review of our product ~~candidates~~candidates;

•

potential delays of our planned clinical trials of efzofitimod;

•

any resulting cost increases as a result of geopolitical and ~~any products that we may develop;~~

macroeconomic conditions, including the ongoing Ukraine-Russia conflict, outbreaks of contagious diseases (such as the COVID-19 pandemic), liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets, labor shortages, economic slowdowns, recessions or market corrections, inflation and monetary supply shifts, rising interest rates and tightening of credit markets;

•

the number and characteristics of product candidates that we pursue;

•

the ~~cost,~~scope, progress, results and costs of preclinical development, and clinical trials for other product candidates;

•

the manufacturing of preclinical study and clinical trial materials, including technology transfers to additional CDMOs, and any delays in the manufacturing of study drug as a result of geopolitical and macroeconomic conditions, including the ongoing Ukraine-Russia conflict, outbreaks of contagious diseases (such as the COVID-19 pandemic), liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets, labor shortages, economic slowdowns, recessions or market corrections, inflation, rising interest rates and tightening of credit markets;

•

our ability to maintain existing and enter into new collaboration and licensing arrangements and the timing of any payments we may receive under such arrangements;

•

the costs and ~~outcomes~~timing of ~~regulatory review~~preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; and

•

the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product ~~candidates;~~

~~the cost and timing of establishing sales,~~candidates for which we receive marketing ~~and distribution capabilities; and~~

~~the terms and timing of any collaborative, licensing, and other arrangements that we may establish, including any required milestone and royalty payments thereunder.~~

approval.

In any event, we will require additional capital to complete additional clinical trials, ~~including larger, pivotal clinical trials,~~ to obtain regulatory approval for, and to commercialize, our product ~~candidates.~~candidates, such as efzofitimod.

For some of our programs and product candidates, we may decide to enter into strategic partnerships, including collaborations with pharmaceutical and biotechnology companies, to enhance and accelerate the development and potential commercialization of our product candidates. We face significant competition in seeking appropriate partners, and the negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish a strategic partnership or other collaborative arrangement for any of our product candidates and programs for a variety of reasons, including strategic fit with partners and differences in analysis of commercial value and regulatory risk. We may not be able to negotiate strategic partnerships on a timely basis, on acceptable terms or at all. We are unable to predict when, if ever, we will enter into any strategic partnership because of the numerous risks and uncertainties associated with establishing strategic partnerships. Even if we are successful in our efforts to establish strategic partnerships, the terms that we agree upon may not be favorable to us and we may not be able to maintain such strategic partnerships if, for example, we encounter unfavorable results or delays during development or approval of a product candidate or sales of an approved product are lower than expectations.

Raising funds in the current and future economic environment may present additional challenges. Even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations. If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of any product candidates, or we may be unable to expand our operations, maintain our current organization and employee base or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.

Raising additional capital may cause dilution to our existing stockholders, restrict our operations, require us to relinquish rights to our technologies or product candidates on terms unfavorable to us and divert management’s attention from our product development activities.

The terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities ~~whether equity or debt,~~ by us, or the possibility of such issuance, may cause the market price of our shares to decline. The sale of additional equity or convertible securities would cause dilution to all of our stockholders. The incurrence of ~~additional~~ indebtedness would ~~increase our~~result in fixed payment obligations and may require us to agree to certain restrictive covenants, such as limitations on our ability to incur ~~additional~~ debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. WeAs a result of geopolitical and macroeconomic conditions, including the ongoing Ukraine-Russia conflict, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets, the global credit and financial markets have experienced volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, inflation, rising interest rates and uncertainty about economic stability. If the equity and credit markets deteriorate, it may ~~seek funds through arrangements with collaborative partners~~make any necessary debt or ~~otherwise at an earlier stage than desirable~~equity financing more difficult, more costly and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects.more dilutive. In addition, any fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates.

~~We have a~~Additionally, financial markets around the world experienced volatility following the invasion of Ukraine by Russia in February 2022. In response to the invasion, the United States, United Kingdom and European Union (EU), along with others, imposed significant ~~amount~~new sanctions and export controls against Russia, Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future. The full economic and social impact of ~~debt~~the sanctions imposed on Russia (as well as possible future punitive measures that may ~~cause risks that~~be implemented), as well as the counter measures imposed by Russia, in addition to the ongoing

Ukraine-Russian conflict, which could ~~adversely affect~~conceivably expand into the surrounding region, remains uncertain; however, both the conflict and related sanctions have resulted and could continue to result in disruptions to trade, commerce, pricing stability, credit availability and/or supply chain continuity in both Europe and globally, and has introduced significant uncertainty into global markets. In particular, the ongoing Ukraine-Russia conflict has contributed to rapidly rising costs of living (driven largely by higher energy prices) in Europe and other advanced economies. Further, a weak or declining economy could strain our suppliers and manufacturers, possibly resulting in additional supply disruption for the production of efzofitimod. As a result, our business ~~operating~~and results of operations may be adversely affected by the ongoing Ukraine-Russia, particularly to the extent it escalates to involve additional countries, further economic sanctions or wider military conflict. We are conducting the EFZO-FIT study and intend to enroll 264 subjects at multiple centers in United States, Europe, Brazil and Japan and we are conducting the EFZO-CONNECT and intend to enroll 25 patients at multiple centers in the United States.

In addition, global economic and business activities continue to face widespread macroeconomic uncertainties, including liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial ~~condition.~~

~~In November 2016, we entered into a loan~~ and ~~security agreement, or Loan Agreement, for a term loan with Silicon Valley Bank~~credit market fluctuations, volatility in the capital markets, labor shortages, inflation and ~~Solar Capital Ltd.,~~monetary supply shifts, and recession risks, which has resulted in further volatility in the U.S. and global financial markets and which has led to, ~~borrow up~~and may continue to ~~$20.0 million principal in new term loans, $10.0 million of which was funded in November 2016~~lead to, additional disruptions to trade, commerce, pricing stability, credit availability and ~~$5.0 million of which was funded in June 2017.~~supply chain continuity globally. The remaining $5.0 million is available for draw until December 31, 2017, at our discretion, subject to achievement of certain milestones. The Term Loans are secured by substantially all of our assets and the assets of our domestic subsidiaries, except that the collateral does not include any intellectual property held by us or our respective subsidiaries or more than 65% of any voting securities in our foreign subsidiaries owned or held of record by us. However, pursuant to the terms of a negative pledge arrangement, we have agreed not to encumber anyultimate long-term impact of the ~~intellectual property~~ongoing Ukraine-Russia conflict and other evolving geopolitical and macroeconomic conditions on our business is uncertain, although we continue to actively monitor the impact of ~~ours or~~these factors on our ~~subsidiaries.~~results of operations, financial condition and cash flows. The ~~level~~extent of the impact of these factors on our operational and ~~nature of our indebtedness could, among other things:~~

~~make it difficult for us to obtain any necessary financing in the future;~~

~~limit our flexibility in planning for or reacting to changes in our business;~~

~~reduce funds available for use in our operations and corporate development initiatives;~~

~~impair~~financial performance, including our ability to ~~incur additional debt because of financial~~execute our business strategies and ~~other restrictive covenants or the liens on our assets that secure our current debt;~~

~~hinder our ability to raise equity capital, because~~initiatives in the ~~event of a liquidation~~expected time frame, will depend on future developments, which are uncertain and cannot be predicted; however, any continued or renewed disruption resulting from these factors could negatively impact our business.

We may decide to enter into additional strategic partnerships, including collaborations with pharmaceutical and biotechnology companies, to enhance and accelerate the development and potential commercialization of our ~~business, debt holders receive~~product candidates, such as ATYR2810, a ~~priority before equity holders;~~

~~make us more vulnerable~~product candidate from our NRP2 antibody program. We face significant competition in seeking appropriate partners, and the ~~event of a downturn~~negotiation process is time-consuming and complex. Moreover, we may not be successful in our ~~business;~~efforts to establish any new strategic partnership or other collaborative arrangement for any of our product candidates and

~~place us at~~ programs for a ~~possible competitive disadvantage relative to less leveraged competitors~~variety of reasons, including strategic fit with partners and ~~competitors that have better access to capital resources.~~

differences in analysis of commercial value and regulatory risk. We may ~~also incur significantly more debt in the future, which~~not be able to negotiate strategic partnerships on a timely basis, on acceptable terms or at all. We are unable to predict when, if ever, we will ~~increase each of the risks described above related to our indebtedness.~~

~~The Loan Agreement for the Term Loans contain operating covenants that may restrict our business and financing activities.~~

~~The Loan Agreement restricts, among other things, our ability to:~~

~~convey, sell, lease, transfer, assign or otherwise dispose of certain of our assets;~~

~~engage in any business other than the businesses we currently engage in or reasonably related thereto or reasonable extensions thereof;~~

~~undergo certain change of control events;~~

~~create, incur, assume, or be liable with respect to certain indebtedness;~~

~~grant certain liens;~~

~~pay dividends and make certain other restricted payments;~~

~~make certain investments;~~

enter into any ~~material transactions~~new strategic partnership because of the numerous risks and uncertainties associated with ~~any affiliates, with certain exceptions; or~~

~~permit certain of~~establishing strategic partnerships. Even if we are successful in our ~~subsidiaries~~efforts to ~~hold or maintain certain assets in excess of certain specified amounts.~~

~~The operating restrictions and covenants in~~establish new strategic partnerships, the ~~Loan Agreement, as well as any future financing agreements~~terms that we agree upon may ~~enter into, may restrict our ability~~not be favorable to ~~finance our operations, engage in business activities or expand or fully pursue our business strategies. Our ability to comply with these covenants may be affected by events beyond our control~~us and we may not be able to ~~meet those covenants. A breach~~maintain such strategic partnerships if, for example, we encounter unfavorable results or delays during development or approval of a product candidate or sales of an approved product are lower than expectations.

We are a pre-commercial biotherapeutics company and have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.*

We are a pre-commercial biotherapeutics company, and we have not yet generated any revenues from product sales. We have incurred net losses in each year since our inception in 2005, including consolidated net losses of $24.3 million for the six months ended June 30 2023. As of June 30, 2023, we had an accumulated deficit of $441.9 million.

We have devoted most of our financial resources to research and development, including our clinical and preclinical development activities. To date, we have financed our operations primarily through the sale of equity securities and convertible debt and through venture debt, term loans and license and collaboration agreement revenues. The amount of our future net losses will depend, in part, on the rate of our future expenditures and our ability to obtain funding through equity offerings, grant funding, collaborations, strategic partnerships and/or licensing arrangements. We have not completed registrational clinical trials for any product candidate to date and it will be several years, if ever, before we have a product candidate ready for commercialization. Even if we obtain regulatory approval to market a product candidate, our future revenues will depend, in part, upon the size of any markets in which our product candidates have received approval, and our ability to achieve sufficient market acceptance, reimbursement from third-party payors and adequate market share for our product candidates in those markets.

We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will fluctuate in connection with our ongoing activities as we: continue our research and preclinical and clinical development of efzofitimod or any other product candidates that we may develop; obtain clinical trial materials and further develop the ~~covenants under~~manufacturing process for our product candidates; seek regulatory approvals for our product candidates that successfully complete clinical trials; ultimately establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval; seek to identify and validate additional product candidates; maintain, protect and expand our intellectual property portfolio; acquire or in-license other product candidates and technologies and collaborate with a third party on ATYR2810; attract and retain

skilled personnel; and create additional infrastructure to support our operations as a public company and our product development and planned future commercialization efforts.

Our revenues, expenses and income or losses may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. In any particular quarter or quarters, our operating results could be below the ~~Loan Agreement could result in a default under the Loan Agreement,~~expectations of securities analysts or investors, which could cause ~~all~~our stock price to decline.

We have never generated any revenue from product sales and may never be profitable.

Our ability to generate revenue and achieve profitability depends on our ability, alone or with strategic collaboration partners, to successfully complete the development of, and obtain the ~~outstanding indebtedness under~~regulatory approvals necessary to commercialize our product candidates. We do not anticipate generating revenues from product sales for the ~~Term Loans~~foreseeable future, if ever. Our ability to generate future revenues from product sales depends heavily on our success in:

•

completing research, preclinical development and clinical development of our product candidates, potentially with a strategic partner;

•

seeking and obtaining regulatory approvals for product candidates for which we complete clinical trials;

•

developing a sustainable, scalable, reproducible, and transferable manufacturing process for our product candidates and establishing supply and manufacturing relationships with third parties;

•

maintaining, protecting and expanding our intellectual property portfolio;

•

obtaining market acceptance of our product candidates as viable treatment options for our target indications;

•

identifying and validating new therapeutic product candidates;

•

attracting, hiring and retaining qualified personnel; and

•

negotiating favorable terms in any licensing, collaboration or other arrangements into which we may enter.

Risks related to our reliance on third parties

We depend on our existing collaborations and may depend on collaborations with additional third parties for the development and commercialization of certain of our product candidates. If our collaborations are not successful, we may not be able to capitalize on the market potential of these product candidates.*

We have entered into, and may continue to enter into, research collaborations for the research and development of specified product candidates. Our sole source of revenue depends upon the performance by these collaborators of their responsibilities under these arrangements. For example, while we are eligible to receive up to an additional $155.0 million in milestone payments under the Kyorin Agreement, as well as tiered royalties ranging from the mid-single digits to mid-teens on any net sales in Japan, whether and when we receive these payments will depend on Kyorin’s development and commercialization of efzofitimod in Japan, over which we have limited control. The development efforts of our collaborators are subject to the same risks and uncertainties described above with respect to our independently developed product candidates.

Some collaborators may not succeed in their product development efforts. It is possible that our collaborators may be unable to obtain regulatory approval of our product candidates or successfully market and commercialize any such products for which regulatory approval is obtained. For example, while we have received $20.0 million in upfront and milestone payments from Kyorin to date, if Kyorin’s operations are limited as a result of geopolitical and macroeconomic conditions or other reasons, the development of efzofitimod in Japan may be significantly delayed and adversely affected, which may in turn delay or limit our receipt of any additional payments under the Kyorin Agreement. Other collaborators may not devote sufficient time or resources to the programs covered by these arrangements, and we may have limited or no control over the time or resources allocated by these collaborators to these programs. The occurrence of any of these events may cause us to derive little or no revenue from these arrangements, lose opportunities to validate our product candidates, or force us to curtail or cease our development efforts in these areas.

Our collaborators may breach or terminate their agreements with us, including termination without cause at subject to certain prior written notice requirements, and we may be unsuccessful in entering into and maintaining other collaborative arrangements for the development of product candidates. For example, Kyorin has the right to terminate the agreement for any reason upon 90 days advance written notice to us. In addition, if we are unable to maintain existing collaboration arrangements or enter into new ones, our ability to generate licensing, milestone or royalty revenues would be materially impaired.

We rely, and expect to continue to rely, on third parties to conduct some or all aspects of our product manufacturing, protocol development, research and preclinical and clinical testing, and these third parties may not perform satisfactorily.

We currently rely, and expect to continue to rely, on third parties to conduct some or all aspects of product manufacturing, protocol development, research and preclinical and clinical testing with respect to our product candidates. Any of these third parties may terminate their engagements with us at any time. If we need to enter into alternative arrangements, it could delay our product development activities. Our reliance on these third parties for research and development activities reduces our control over these activities but does not relieve us of our responsibility to ensure compliance with all required regulations and study protocols. For example, for ~~Resolaris, iMod.Fc and~~ any ~~other~~ product candidates that we develop and commercialize on our own, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable study plan and protocols and ~~cGCPs~~GCPs so long as we continue to develop and commercialize on our own.

If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our research and development activities, including clinical trials, in accordance with regulatory requirements or our stated study plans and protocols, we will not be able to complete, or may be delayed in completing, the preclinical studies and clinical trials required to support future BLA ~~or NDA~~ submissions and approval of our product candidates.

We rely ~~on third parties to manufacture our clinical supply of Resolaris,~~ and we intend to rely on third parties to produce ~~nonclinical,~~preclinical, clinical and commercial supplies of ~~iMod.Fc and any future~~our product candidates.

WeOther than some internal capacity to support preclinical activities, we do not have, nor do we plan to acquire, the infrastructure or capability internally to manufacture our ~~nonclinical~~preclinical and clinical quantities of our product candidates, and we lack the internal resources and capability to manufacture any of our product candidates on a clinical or commercial scale. Reliance on CDMOs ~~and CROs,~~ entails risks to which we would not be subject if we manufactured the product candidates ourselves, including:

•

the inability to negotiate manufacturing agreements with third parties under commercially reasonable terms;

•

reduced control as a result of using third-party CDMOs ~~and CROs~~ for all aspects of manufacturing activities;

•

termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to us; and

•

disruptions to the operations of our CDMOs ~~CROs~~ or suppliers caused by conditions unrelated to our business or operations, including the insolvency or bankruptcy of the CDMOs ~~CROs~~ or ~~supplier.~~

suppliers.

Any of these events could lead to clinical trial delays or failure to obtain regulatory approval, or impact our ability to successfully commercialize future products. Some of these events could be the basis for FDA action, including injunction, recall, seizure or total or partial suspension of production.

Additionally, each CDMO may require licenses to manufacture our product candidates or components thereof if the applicable manufacturing processes are not owned by the CDMO or in the public domain, and we may be unable to transfer or sublicense the intellectual property rights we may have with respect to such activities. These factors could cause the delay of clinical development, regulatory submissions, required approvals or commercialization of our product candidates, cause us to incur higher costs and prevent us from commercializing our products successfully.

We ~~currently rely~~previously relied on a single CDMO for process development and scale-up of efzofitimod, including the manufacture of bulk drug substance ~~for Resolaris~~ for our projected needs for ~~ongoing~~initial clinical trials. We have entered into an agreement with another CDMO for the transfer of the process, scale-up and ~~anticipated pivotal~~manufacturing of bulk drug substance for future clinical trials. Subject to the satisfactory completion of process validation and other requirements, we may contract with this CDMO for larger scale commercial manufacturing. Similarly, we currently rely on a single CDMO for process development and scale-up of iMod.Fc. With regard to our ORCA program, if we are successful in selecting an antibody IND candidate, we plan to work with third party CDMOs for cell line development and antibody manufacturing. We do not have long-term contracts with our CDMOs, and our CDMOs may terminate their agreements with us for a variety of reasons including technical issues or our material breach of our obligations under the applicable agreement. Furthermore, our CDMOs may reallocate resources away from the production of our product candidates if we delay manufacturing under certain circumstances, and the manufacturing facilities in which our product candidates are made could be adversely affected by earthquakes and other natural disasters, labor shortages, power failures, labor shortages, economic slowdowns, rising interest rates, inflation and monetary supply shifts, evolving geopolitical developments, such as the ongoing Ukraine-Russia conflict, and numerous other factors. If our CDMOs fail to meet contractual requirements, and we are unable to secure one or more replacement CDMOs capable of production at a substantially equivalent cost, our clinical development activities may be delayed, or we could lose potential revenue. Manufacturing biologic drugs

is complicated and tightly regulated by the FDA and comparable regulatory authorities around the world, and although alternative CDMOs with the necessary manufacturing and regulatory expertise and facilities exist, it could be expensive and take a significant amount of time to arrange for alternative CDMOs, transfer manufacturing procedures to these alternative CDMOs, and demonstrate comparability of material produced by such new CDMOs. New CDMOs of any product would be required to comply with applicable regulatory requirements. These CDMOs may not be able to manufacture our product candidates at costs, or in quantities, or in a timely manner necessary to complete the clinical development of our product candidates or make commercially successful products.

We rely, and expect to continue to rely, on third parties to conduct, supervise and monitor our clinical trials, and if these third parties perform in an unsatisfactory manner, it may harm our business.*

We have relied, and expect to continue to rely, on third-party CROs, clinical investigators and clinical trial sites to ensure our clinical trials are conducted properly and on time. While we have and will continue to enter into agreements governing their activities, we will have limited influence over their actual performance. We will control only certain aspects of our CROs’ activities. Nevertheless, we will be responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol, legal and regulatory requirements, and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities.

We and our investigators and CROs are required to comply with GCPs for conducting, recording and reporting the results of clinical trials to assure that the data and reported results are credible and accurate and that the rights, integrity and confidentiality of clinical trial participants are protected. The FDA enforces GCPs through periodic inspections of study sponsors, principal investigators and clinical trial sites. If we or our investigators and CROs fail to comply with applicable GCPs, the clinical data generated in our future clinical trials may be deemed unreliable and the FDA may require us to perform additional unanticipated clinical trials before approving any marketing applications. Upon inspection, the FDA may determine that our clinical trials did not comply with GCPs. In addition, our future clinical trials will require a sufficient number of test subjects to evaluate the safety and effectiveness of our product candidates. Accordingly, if our investigators and CROs fail to comply with these regulations or fail to recruit a sufficient number of patients, we may be required to repeat such clinical trials, which would delay the regulatory approval process.

Our investigators and CROs are not our employees, and we are therefore unable to directly monitor whether or not they devote sufficient time and resources to our clinical and ~~nonclinical~~preclinical programs. They may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities that could harm our competitive position. If our investigators or CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for any 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. As a result, enrollment and data integrity from monitoring of the trial may suffer, our financial results ~~would~~could be harmed, our costs could increase, our ability to generate revenues could be delayed and the commercial prospects for our product candidates ~~will~~could be adversely affected.

Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.*

We rely on third parties to manufacture our product candidates, and we collaborate with both industry and various academic institutions in the development of our discovery engine for therapeutic applications based on ~~Physiocrine~~tRNA synthetase biology. In connection with these activities, we are required, at times, to share trade secrets with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements or other similar agreements with our collaborators, advisors, employees and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, such as trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business, prospects, financial condition and results of operations.

In addition, these agreements typically restrict the ability of our collaborators, advisors, employees and consultants to publish data potentially relating to our trade secrets. Our academic collaborators typically have rights to publish data, provided that we are notified in advance and may delay publication for a specified time in order to secure intellectual property rights to which we are entitled arising from the collaboration. In other cases, publication rights are controlled exclusively by us, although in some cases we may share these rights with other parties. We also conduct joint research and development programs that may require us to share trade secrets under the terms of our research and development partnerships or similar agreements. Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of these agreements, independent development or publication of information including our trade secrets in cases where we do not have proprietary or otherwise protected rights at the time of publication.

A competitor’s discovery of our trade secrets would impair our competitive position and have an adverse impact on our business, prospects, financial condition and results of operations.

~~Risks related to~~We may not be successful in establishing collaborations for the development, clinical testing, manufacture, and commercialization of ATYR2810.

In the third quarter of 2022, we announced that we intend to focus our ~~product candidates~~

~~If we are unable~~resources on the efzofitimod program and made the strategic decision not to ~~establish sales~~use internal resources to initiate a Phase 1 study of ATYR2810. We intend to pursue alternative avenues, including academic or other collaborations with corporations, licensors, licensees, and ~~marketing capabilities or enter into agreements with third~~other parties ~~to market and sell our product candidates, we may be unable to generate any revenues.~~

~~We do not currently have any infrastructure~~ for the ~~sales, marketing~~development, clinical testing, manufacture, and ~~distribution~~commercialization of pharmaceutical products. In order to market our product candidates, if approved by the FDA or any other regulatory body, we must build our sales, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. There are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

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

~~our inability to recruit and retain adequate numbers of effective sales and marketing personnel;~~

~~the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future medicines;~~

~~the lack of complementary medicines to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and~~

~~unforeseen costs and expenses associated with creating an independent sales and marketing organization.~~

If we enter into arrangements or collaborations with third parties to perform sales, marketing and distribution services, our product revenues or the profitability of these product revenues to us are likely to be lower than if we were to market and sell any medicines that we develop ourselves. In addition,ATYR2810, although we may not be successful in ~~entering into arrangements with third parties to sell~~establishing such collaborations. Any future collaborations for the development, clinical testing, manufacture, and ~~market our product candidates or~~commercialization of ATYR2810 may be ~~unable to do so~~terminable at the sole discretion of the collaborator. Replacement collaborators might not be available on attractive terms, ~~that are favorable to us. We likely will have little control over such third parties, and~~or at all. The activities of any of them may fail to devote the necessary resources and attention to sell and market our medicines effectively. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, wecollaborator will not be ~~successful in commercializing~~within our ~~product candidates.~~

~~We rely on third-party manufacturers~~control and may not be within our power to ~~produce Resolaris, iMod.Fc~~influence. Any collaborators may not perform their obligations to our satisfaction, or at all, we may not derive any revenue or profits from such collaborations, and any ~~other product candidates that~~collaborators may ultimately compete with us. If any collaboration is not pursued, we may ~~develop, but we have not entered into agreements with any such manufacturers~~require substantially greater capital to ~~support commercialization.~~

We have not yet secured manufacturing capabilities for commercial quantities of Resolaris, iMod.Fc or any other product candidates. Although we intend to rely on third-party manufacturers for commercialization, we have only entered into agreements with such manufacturers to support our human proof-of-concept clinical trials. We have not yet entered into a long-term commercial supply agreement to support full scale commercial production,undertake development and we or our contract manufacturers may be unable to process validation activities necessary to enter into commercial supply agreements or otherwise negotiate agreements with the manufacturers to support our commercialization activities at commercially reasonable terms.

We may run into technical or scientific issues related to development or manufacturing that we may be unable to resolve in a timely manner or with available funds. If we or our manufacturing partners are unable to scale the manufacturing process to produce commercial quantitiesmarketing of our ~~product candidates, or our manufacturing partners do not pass required regulatory pre-approval inspections, our commercialization efforts will be harmed.~~

~~In addition, any significant disruption in our relationships with our manufacturers could harm our business. There are a relatively small number of potential manufacturers for Resolaris, iMod.Fc~~proposed products and ~~any other product candidates that we may develop, and such manufacturers~~ may not be able to supply our drug products at the times we need them or on commercially reasonable terms. Any disruption to our relationship with our current manufacturers and any manufacturers that we contract with in the future will result in delays in our ability to complete the clinical development of, or to commercialize, Resolaris, iMod.Fc and any other product candidates we may develop and ~~may require us to incur additional costs.~~

We face intense competition and rapid technological change and the possibility that our competitors may develop therapies that are more advanced or effective than ours, which may adversely affect our financial condition and our ability to successfully commercialize our product candidates.

We are engaged in the development of medicines for severe, rare diseases, which is a competitive and rapidly changing field. We have competitors both in the United States and internationally, including major multi-national pharmaceutical companies, biotechnology companies and universities and other research institutions. In the area of rare myopathies with an immune component, we expect to face competition from a number of companies, academic institutions and other organizations, including Sarepta Therapeutics, PTC Therapeutics, Inc., Santhera Pharmaceuticals, Italfarmaco S.p.A, Summit Therapeutics, Catabasis Pharmaceuticals, Inc., FibroGen, Inc., F. Hoffmann-La Roche AG, Milo Biotechnology, LLC, Nobelpharma Co. Ltd., Pfizer, Inc., Acceleron Pharma, Mallinckrodt plc, ReveraGen BioPharma, Inc., Capricor Therapeutics, Inc., Nippon Shinyaku Co Ltd, Daiichi Sankyo Co Ltd, Phrixus Pharmaceuticals, Akashi Therapeutics, EspeRare Foundation, and Taiho Pharmaceutical Co Ltd that are engaged in the clinical development of therapeutics to address muscle loss and muscle weakness in a variety of indications. More specifically, in the area of LGMD, we are aware of a number of academic institutions engaged in the clinical development of therapeutics, including Genethon, a not-for-profit research laboratory created by the Association Française contre les Myopathies, or French Muscular Dystrophy Association, which has completed an experimental Phase 1 clinical trial in LGMD2C using gene therapy; and NeuroGen Brain and Spine Institute in India, which has completed a Phase 1 clinical trial in an unspecified form of LGMD using stem cell therapy.market such products effectively, if at all. In addition, ~~Pfizer currently has~~ a ~~program Domagrozumab (PF-06252616) which is in Phase 1b/2 clinical trials for the treatment~~lack of ~~LGMD2I as well as a Phase 2 program for DMD;~~development and ~~Myonexus Therapeutics in collaboration with the Nationwide Children’s Hospital, are currently conducting a Phase 1/2a clinical trial of an AAV vector~~marketing collaborations may lead to transport the alpha-sarcoglycan gene into muscles in LGMD2D. Although there are currently no approved products for the treatment of FSHD, Acceleron Pharma Inc. is developing a clinical candidate, ACE-083, a locally acting protein therapeutic designed to increase muscle mass and strength in patients with neuromuscular disorders and other diseases characterized by a loss of muscle function, including FSHD in which it initiated a Phase 2 trial in the fourth quarter of 2016. In addition, Facio Therapies, Novogen, Fulcrum Therapeutics, Ultragenyx Pharmaceuticals, Inc. and Idera Pharmaceuticals, Inc. are developing chemical compounds that may repress one of the causal genes responsible for FSHD. In the area of DMD, two therapies have been approved in the last 12 months: Exondys 51 from Sarepta and Emflaza from Marathon Pharmaceuticals. Exondys 51 is an antisense oligonucleotide indicated for the treatment of DMD in patients who have a confirmed mutation of the DMD gene that is amenable to exon 51 skipping. Emflaza is a steroid for the treatment of DMD in patients over five years of age and PTC Therapeutics, Inc. recently acquired all rights to Emflaza. Many larger companies, universities and private and public research institutions are also actively engaged in the development of therapeutics to address muscle loss and muscle weakness in a variety of indications.

We may also face competition from numerous companies in the field of RPICs, including both marketed products, such as Esbriet (pirfenidone) and Ofev (nintedanib), both of which were approved by the FDA for the treatment of IPF in October 2014, as well as numerous products in development, such as pamrevlumab (FibroGen).

The immuno-oncology subsector of the biotechnology and biopharmaceutical industries is characterized by rapid evolution of technologies, fierce competition and strong defense of intellectual property. We face substantial competition from biotechnology and biopharmaceutical companies developing products in immuno-oncology.

Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing and manufacturing organizations. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis, products that are more effective, safer, more convenient or less costly than any product candidate that we may develop, or achieve earlier patent protection, regulatory approval, product commercialization and market penetration than us. Additionally, technologies developed by our competitors may render our potential product candidates uneconomical or obsolete, and we may not be successful in marketing our product candidates against competitors.

Even if we are successful in achieving regulatory approval to commercialize a product candidate faster than our competitors, we may face competition from biosimilars due to the changing regulatory environment. In the United States, the Biologics Price Competition and Innovation Act of 2009 created an abbreviated approval pathway for biological products that are demonstrated to be “highly similar,” or biosimilar, to or “interchangeable” with an FDA-approved biological product. This new pathway could allow competitors to reference data from biological products already approved after 12 years from the time of approval. In Europe, the European Commission has granted marketing authorizations for several biosimilars pursuant to a set of general and product class-specific guidelines for biosimilar approvals issued over the past few years. In Europe, a competitor may reference data from biological products already approved, but will not be able to get on the market until ten years after the time of approval. This ten-year period will be extended to 11 years if, during the first eight of those ten years, the marketing authorization holder obtains an approval for one or more new therapeutic indications that bring significant clinical benefits compared with existing therapies. In addition, companies may

be developing biosimilars in other countries that could compete with our products. If competitors are able to obtain marketing approval for biosimilars referencing our products, our products may become subject to competition from such biosimilars, with the attendant competitive pressure and consequences. Expiration or successful challenge of our applicable patent rights could also trigger competition from other products, assuming any relevant exclusivity period has expired.

Finally, as a result of the expiration or successful challenge of our patent rights, we could face more litigation with respect to the validity or scope of patents relating to our competitors’ products. The availability of our competitors’ products could limit the demand, and the price we are able to charge, for any products that we may develop and commercialize.

~~The commercial success of any current or future product candidate will depend upon the degree of market acceptance by physicians, patients, third-party payors and others in the medical community.~~

Even with the requisite approval from the FDA and comparable foreign regulatory authorities, the commercial success of our product candidates will depend in part on the medical community, patients, and third-party payors accepting our product candidates as medically useful, cost-effective, and safe. Any product that we bring to the market may not gain market acceptance by physicians, patients, third-party payors and others in the medical community. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable. The degree of market acceptance of these product candidates, if approved for commercial sale, will depend on a number of factors, including:

~~the potential efficacy and potential advantages over alternative treatments;~~

~~the prevalence and severity of any side effects, including any limitations or warnings contained in a product’s approved labeling;~~

~~the prevalence and severity of any side effects resulting from the administration of our product candidates by injection;~~

~~the clinical indications for which approval is granted;~~

~~relative convenience and ease of administration;~~

~~the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;~~

~~the strength of marketing and distribution support and timing of market introduction of competitive products;~~

~~publicity concerning our products or competing products and treatments; and~~

~~the availability of sufficient third-party insurance coverage or reimbursement.~~

Even if a potential product displays a favorable efficacy and safety profile in preclinical studies and clinical trials, market acceptance of the product will not be known until after it is launched. Our efforts to educate the medical community and third-party payors on the benefits of the product candidates may require significant resources and may never be successful. Such efforts to educate the marketplace may require more resources than are required by the conventional technologies marketed by our competitors, and our competitors may have substantially greater resources or brand recognition to effectively market their products. If our product candidates are approved but fail to achieve an adequate level of acceptance by physicians, patients, third-party payors, and others in the medical community, we will not be able to generate sufficient revenue to become or remain profitable.

The insurance coverage and reimbursement status of newly-approved products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for new or current products could limit our ability to market those products and decrease our ability to generate revenue.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services, or CMS, an agency within the U.S. Department of Health and Human Services, as CMS decides whether and to what extent a new medicine will be covered and reimbursed under Medicare. Private payors often follow CMS with respect to coverage policy and payment limitations in setting their own reimbursement policies. It is difficult to predict what CMS will decide with respect to reimbursement for fundamentally novel products such as ours, as there is no body of established practices and precedents for these new products. Reimbursement agencies in Europe may be more conservative than CMS. For example, a number of cancer drugs have been approved for reimbursement in the United States, but have not been approved for reimbursement in certain European countries. There may be significant delays in obtaining reimbursement for newly approved medicines, and our inability to promptly obtain coverage and profitable payment rates from third-party payors for any approved medicines could have a material adverse effect on our business, prospects, financial condition and resultsintroducing ATYR2810 into certain markets and/or reduced sales of ~~operations.~~proposed products in such markets.

Outside the United States, international sales are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada, and other countries has and will continue to put pressure on the pricing and usage of our product candidates. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. In general, the prices of medicines under such systems are substantially lower than in the United States. Other countries allow companies to fix their own prices for medicines, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits. Net prices for medicines may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that currently restrict imports of medicines from countries where they may be sold at lower prices than in the United States.

In addition, drug prices are under significant scrutiny in the markets in which our products may be sold. Drug pricing and other health care costs continues to be subject to intense political and societal pressures which we anticipate will continue and escalate on a global basis. As a result, our business and reputation may be harmed, our stock price may be adversely impacted and experience periods of volatility, we may have difficulty raising funds and our results of operations may be adversely impacted.

If the market opportunities for our product candidates are smaller than we believe they are, our revenues may be adversely affected and our business may suffer. Because the target patient populations of our product candidates are small, we must be able to successfully identify patients and capture a significant market share to achieve and maintain profitability.

We focus our research and product development on treatments for rare diseases. Given the small number of patients who have the diseases that we are targeting, it is critical to our ability to grow and become profitable that we continue to successfully identify patients with these rare diseases. Our projections of both the number of people who have these diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our product candidates, are based on our beliefs and estimates. These estimates have been derived from a variety of sources, including the scientific literature, surveys of clinics, patient foundations, or market research, and may prove to be incorrect. New studies may change the estimated incidence or prevalence of these diseases. The number of patients may turn out to be lower than expected. The effort to identify patients with diseases we seek to treat is in early stages, and we cannot accurately predict the number of patients for whom treatment might be possible. Additionally, the potentially addressable patient population for each of our product candidates may be limited or may not be amenable to treatment with our product candidates, and new patients may become increasingly difficult to identify or gain access to, which would adversely affect our results of operations and our business. Further, even if we obtain significant market share for our product candidates, because the potential target populations are very small, we may never achieve profitability despite obtaining such significant market share.

Our target patient populations are relatively small, and there is currently no standard of care treatment directed at some of our target indications, such as FSHD and LGMD2B. As a result, the pricing and reimbursement of our product candidates, if approved, is uncertain, but must be adequate to support commercial infrastructure. If we are unable to obtain adequate levels of reimbursement, our ability to successfully market and sell our product candidates will be adversely affected. The manner and level at which reimbursement is provided for services related to our product candidates (e.g., for administration of our product to patients) is also important. Inadequate reimbursement for such services may lead to physician resistance and adversely affect our ability to market or sell our products.

Risks related to our intellectual property

If we are unable to obtain, maintain or protect intellectual property rights related to our product candidates, or if the scope of such intellectual property protection is not sufficiently broad, we may not be able to compete effectively in our markets.*

We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our technologies and product candidates. Our success depends in large part on our and our licensors’ abilities to obtain and maintain patent and other intellectual property protection in the United States and in other countries for our proprietary technology and product candidates.

We have sought to protect our proprietary position by filing patent applications in the United States and abroad related to our novel technologies and product candidates that are important to our business. This process is expensive and time consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection.

The patentability of inventions, and the validity, enforceability and scope of patents in the biotechnology and pharmaceutical fields involves complex legal and scientific questions and can be uncertain. As a result, patent applications that we own or in-license may not issue as patents with claims that cover our product candidates, or at all, in the United States or in foreign countries for many reasons. For example, there is no assurance that we were the first to invent or the first to file patent applications in respect of the inventions claimed in our patent applications or that our patent applications claim patentable subject matter. We may also be unaware of potentially relevant prior art relating to our patents and patent applications, and this prior art, if any, may be used by third parties as grounds to seek to invalidate a patent or to prevent a patent from issuing from a pending patent application. Even if patents do successfully issue and even if such patents disclose aspects of our product candidates, third parties may challenge their validity, enforceability or scope, which may result in such patents being narrowed or invalidated. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property, provide exclusivity for our product candidates or prevent others from designing around our claims. If the breadth or strength of protection provided by the patents and patent applications we hold, license or pursue with respect to our product candidates is threatened, it could threaten our ability to commercialize our product candidates. Further, if we encounter delays in our clinical trials, the period of time during which we could market any of our product candidates under patent protection, if approved, would be reduced. Since patent applications in the United States and most other countries are confidential for a period of time after filing, we cannot be certain that we were the first to file any patent application related to our product candidates. Changes to the patent laws in the United States and other jurisdictions could also diminish the value of our patents and patent applications or narrow the scope of our patent protection. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse ~~impact~~effect on our business.

If the patent applications we own or have in-licensed that relate to our programs or product candidates do not issue as patents, if their breadth or strength of protection is threatened, or if they fail to provide exclusivity for our product candidates, it could dissuade companies from collaborating with us to develop product candidates, and threaten our ability to commercialize future products. We cannot offer any assurances about which, if any, patents will issue, the breadth of any such patents or whether any issued patents will be found invalid and unenforceable or will be threatened by third parties. Any successful opposition to these patents or any other patents owned by or licensed to us could deprive us of rights necessary for the successful commercialization of any product candidates that we may develop. In addition, patents have a limited term. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Although various extensions may be available, the life of a patent, and the protection it affords, is limited. Even if a patent does issue for any of our pending patent applications, possible delays in regulatory approvals could mean that the period of time during

which we could market a product candidate under patent protection could be reduced from what we generally would expect. Since patent applications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we were the first to file any patent application related to a product candidate. Furthermore, if third parties have filed such patent applications, an interference proceeding in the United States can be initiated by a third party to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. Even if patents covering aspects of our product candidates are obtained, once the patent life has expired for a product, we may be open to competition from generic medications.

In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our product candidate discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems, but it is possible that these security measures could be breached. Although we expect all of our employees and consultants to assign their inventions to us, and all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed or that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. For example, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Misappropriation or unauthorized disclosure of our trade secrets could impair our competitive position and may have a material adverse effect on our business. Additionally, if the steps we take to maintain the confidentiality of our trade secrets are inadequate, we may have insufficient recourse against third parties for misappropriating our proprietary information and processes. In addition, others may independently discover our trade secrets and proprietary information. For example, the FDA, as part

of its Transparency Initiative, is currently considering whether to make additional information publicly available on a routine basis, including information that we may consider to be trade secrets or other proprietary information, and it is not clear at the present time how the FDA’s disclosure policies may change in the future, if at all.

If due to the effects on our operations of general political and economic conditions, including the ongoing Ukraine-Russia conflict, labor shortages, economic slowdowns, recessions or market corrections, inflation and monetary supply shifts, rising interest rates and tightening of credit markets resulting from the pandemic, the conflict or another cause, we are unable to generate new animal, or in vitro data, in time to support new, or updated patent application filings, or prior to patent conversion deadlines, it could materially impact the enforceability or scope of those patent filings.

If we are unable to prevent material disclosure of the non-patented intellectual property related to our technologies to third parties, and there is no guarantee that we will have any such enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, results of operations and financial condition.

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 United States. As a result, we may encounter significant problems in preventing third parties from practicing our inventions in countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions.

Claims that our product candidates or the manufacture, sale or use of our future products infringe the patent or other intellectual property rights of third parties could result in costly litigation or could require substantial time and money to resolve, even if litigation is avoided.

Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions and inter partes reexamination proceedings before the United States Patent and Trademark Office ~~or USPTO,~~(USPTO) and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are pursuing development candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties.

Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formed during the

manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire.

Similarly, if any third-party patents are held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtain a license or until such patent expires. In either case, such a license may not be available on commercially reasonable terms or at all.

Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may not be able to be obtained on reasonable commercial terms or at all, or require substantial time and monetary expenditure.

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

Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired, we may be open to competition from competitive products, including generics or biosimilars. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

We may not be successful in obtaining or maintaining necessary rights to our ~~Physiocrine~~ therapeutic product candidates and processes for our development pipeline through acquisitions and in-licenses.

We believe that we have rights to intellectual property, through licenses from third parties and under patents that we own, that is necessary or useful to develop our product candidates. Because our programs may involve additional product candidates that may require the use of proprietary rights held by third parties, the growth of our business will likely depend in part on our ability to acquire, in-license or use these proprietary rights. In addition, our product candidates may require specific formulations to work effectively and efficiently and these rights may be held by others. We may be unable to acquire or in-license any compositions, methods of use, processes or other third-party intellectual property rights from third parties that we identify on reasonable commercial terms or at all. The licensing and acquisition of third-party intellectual property rights is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire third-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities.

We sometimes collaborate with U.S. and foreign academic institutions to accelerate our preclinical research or development under written agreements with these institutions. These institutions may provide us with an option to negotiate a license to the institution’s rights in technology resulting from the collaboration. Regardless of any such right of first negotiation for intellectual property, we may be unable to negotiate a license within the specified ~~time frame~~timeframe or under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursue our program.

In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment. If we are unable to successfully obtain rights to required third-party intellectual property rights, our business, financial condition and prospects for growth could suffer.

If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.

We are a party to a number of intellectual property license agreements that are important to our business and expect to enter into additional license agreements in the future. Our existing license agreements impose, and we expect that future license agreements will impose, various diligence, milestone payment, royalty and other obligations on us. If we fail to comply with our obligations under these agreements, or we are subject to a bankruptcy, the licensor may have the right to terminate the license, in which event we would not be able to market products covered by the license. For example, under the terms of the license agreements that we may enter into pursuant to our amended and restated research funding and option agreement with The Scripps Research Institute, or TSRI, TSRI has the right to terminate the license under various circumstances, including our failure to make payments to TSRI when due, our default in our indemnification and insurance obligations under the agreement, our failure to meet diligence obligations, as determined by TSRI, our underreporting or underpayment of amounts due to TSRI, our conviction of a felony related to the manufacture, use or sale of licensed products, services or processes and our institution of any challenges to the validity or enforceability of any of the licensed patents.

We may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates, and we have done so from time to time. We may fail to obtain any of these licenses at a reasonable cost or on reasonable commercial terms, if at all. In that event, we may be required to expend significant time and resources to develop or license replacement technology.

If we are unable to do so, we may be unable to develop or commercialize the affected product candidates, which could harm our business significantly. We cannot provide any assurances that third-party patents do not exist which might be enforced against our current product candidates or future products, resulting in either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties or other forms of compensation to third parties.

In some cases, patent prosecution of our licensed technology is controlled by the licensor. Under the license agreements that we may enter into pursuant to our amended and restated research funding and option agreement with TSRI, TSRI is responsible for the prosecution and maintenance of the licensed patent rights, subject to our right to be consulted and to be informed of the progress of patent applications, patents and related submissions. If our licensors fail to obtain and maintain patent or other protection for the proprietary intellectual property we license from them, we could lose our rights to the intellectual property or our exclusivity with respect to those rights, and our competitors could market competing products using such intellectual property. In certain cases, we may control the prosecution of patents resulting from licensed technology. In the event we breach any of our obligations related to such prosecution, we may incur significant liability to our licensors. Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issues and is complicated by the rapid pace of scientific discovery in our industry. Disputes may arise regarding intellectual property subject to a license agreement, including:

•

the scope of rights granted under the license agreement and other interpretation-related issues;

•

the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the license agreement;

•

the sublicensing of patent and other rights under our collaborative development relationships;

•

our diligence obligations under the license agreement and what activities satisfy those diligence obligations;

•

the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our sublicensees or partners, if any; and

•

the priority of invention of patented technology.

If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.

We may become involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming and unsuccessful.

Competitors may infringe or otherwise violate our patents, the patents of our licensors or our other intellectual property rights. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. Any claims that we assert against perceived infringers could also provoke these parties to assert counterclaims against us alleging that we infringe their intellectual property rights. In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid, is unenforceable or is not infringed, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.

Interference or derivation proceedings provoked by third parties or brought by us may be necessary to determine the priority of inventions or other matters of inventorship with respect to our patents or patent applications or those of our licensors. We may also become involved in other proceedings, such as re-examination or opposition proceedings, before the USPTO or its foreign counterparts relating to our intellectual property or the intellectual property rights of others. An unfavorable outcome in any such proceedings could require us to cease using the related technology or to attempt to license rights to it from the prevailing party, or could cause us to lose valuable intellectual property rights. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms, if any license is offered at all. Our defense of litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States. In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties, or enter into development partnerships that would help us bring our product candidates to market. We may also become involved in disputes with others regarding the ownership of intellectual property rights. For example, we jointly develop intellectual property with certain parties, and disagreements may therefore arise as to the ownership of the intellectual property developed pursuant to these relationships. If we are unable to resolve these disputes, we could lose valuable intellectual property rights.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also 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 material adverse effect on the price of our common stock.

We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

We employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employee’s former employer or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.

We may be subject to claims that former employees, collaborators or other third parties have an ownership interest in our patents or other intellectual property. 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 other claims challenging inventorship or ownership, or we may enter into agreements to clarify the scope of our rights in such intellectual property. 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. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

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

Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents or applications will be due to be paid to the USPTO and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents or applications. We have systems in place to remind us to pay these fees, and we employ an outside firm and rely on our outside counsel to pay these fees due to non-U.S. patent agencies. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. We employ law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which non-compliance 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. In such an event, our competitors might be able to enter the market and this circumstance would have a material adverse effect on our business.

Issued patents covering our product candidates could be found invalid or unenforceable if challenged in court.

If we or one of our licensors initiated legal proceedings against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post grant review, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover our product candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Such a loss of patent protection would have a material adverse ~~impact~~effect on our business.

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

As is the case with many other biotechnology companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biotechnology industry involve both technological and legal complexity, and therefore obtaining, maintaining and enforcing biotechnology patents is costly, time-consuming and inherently uncertain. In addition, recent legislative and judicial developments in the United States and elsewhere have in some cases removed the protection afforded to patent owners, made patents more difficult to obtain, or increased the uncertainty regarding the ability to obtain, maintain and enforce patents.

For example, Congress has recently passed, and the United States is currently implementing, wide-ranging patent reform legislation, and may pass further patent reform legislation in the future. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. For example, in ~~a recent case,~~ Association for Molecular Pathology v. Myriad Genetics, Inc., the U.S. Supreme Court held that certain claims to naturally occurring substances are not patentable. Although we do not believe that any of the patents owned or licensed by us will be found invalid based on this decision, we cannot predict how future decisions by the courts, ~~the U.S.~~ Congress, or the USPTO may impact the value of our patents. 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 generally, once obtained. Depending on decisions and actions by ~~the U.S.~~ Congress, the federal courts, the USPTO and their respective foreign counterparts, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to maintain and enforce our existing patents and patents that we might obtain in the future.

~~Recent patent~~Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the validity or defense of our issued patents.

On September 16, 2011, the Leahy-Smith America Invents Act ~~or the~~(the Leahy-Smith ~~Act,~~Act) was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law, including provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. The USPTO is ~~currently~~ developing regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, were enacted March 16, 2013. Although it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.

~~We have not yet registered Resolaris as a trademark, and~~ ~~have recently abandoned our plans to use Stalaris as a trademark. Failure to secure or maintain adequate protection for our trademarks could adversely affect our business.~~

We have filed a U.S. trademark application for the Resolaris mark but it has not yet matured to registration, and we have yet to file any foreign trademark applications for the Resolaris mark. The USPTO has examined our U.S. application for the Resolaris mark and there ~~are no outstanding objections to the application. We recently abandoned plans to use the Stalaris mark following the USPTO’s examination of our application and based in part on its~~ initial refusal to register the mark due to a perceived likelihood of confusion with the mark Stelara, which is the subject of two registrations owned by Johnson & Johnson (J&J) covering various biopharmaceutical and dermo-cosmetic care preparations. In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings have been filed and may in the future be filed against certain of our trademark applications or registrations (although our US application for the Resolaris mark made it through the opposition period unchallenged), and our trademark applications or registrations may not survive such proceedings.

Furthermore, third parties have alleged, and may allege in the future, that the Resolaris mark in particular or any other trademark or trade name that we elect to use for our product candidates, may cause confusion in the marketplace. Specifically, in April 2015, Alexion Pharmaceuticals (Alexion) sent a letter to our counsel alleging that our anticipated use of the Resolaris trademark would cause patients, practitioners and researchers to mistakenly associate us with Alexion or its Soliris product. Alexion claims ownership of a U.S. trademark registration for its Soliris mark. Alexion concluded its letter by requesting that we select a new name for our Resolaris product and withdraw our pending trademark application for the mark. In addition, in January of 2013 Novartis AG (Novartis) filed an opposit ion against our U.S. application for the Resolaris mark (as well as applications for two other marks – Verlaris and Resokilaris) based on its U.S. trademark registration for the Ilaris mark. In October of 2014, Novartis withdrew its opposition to the Resolaris application based on the fact that we voluntarily abandoned the applications for the Verlaris and Resokilaris marks. At the time, counsel for Novartis indicated that while Novartis would not challenge our registration of the Resolaris mark, it remained concerned about potential confusion between the Resolaris and Ilaris marks and reserved the right to challenge the use of Resolaris if any such confusion were to arise.

In February 2017, our counsel received a letter from counsel to Novartis alleging that our anticipated use of the Stalaris trademark would cause consumer confusion with its Ilaris product. Additionally, Novartis also reiterated its concerns about the potential for confusion between the Resolaris mark and Novartis’ Ilaris mark. Novartis concluded its letter by demanding that we abandon our U.S. trademark application for the Stalaris mark. We have successfully negotiated a settlement of the matter with Novartis wherein we agreed to abandon plans to use the Stalaris mark, and Novartis agreed not to object to our use of the Resolaris mark so long as we work to mitigate any possibility of confusion between our Resolaris-branded product and Novartis’ Ilaris-branded product. Finally, in April 2017, our counsel received a letter from counsel to J&J claiming ownership of common law rights and two U.S. trademark registrations for the trademark Stelara. J&J’s letter alleged that our anticipated use of the Stalaris mark would lead consumers to falsely believe it is selling, endorsing or sponsoring our products sold under the Stalaris mark. J&J concluded its letter by demanding that we withdraw our trademark application and cease plans to use the Stalaris mark. We have communicated with J&J through counsel, and J&J confirms that it is satisfied that we have abandoned plans to use the Stalaris mark.

We evaluate such actual and potential allegations in the course of our business, and such evaluations have and may in the future cause us to change our commercialization or branding strategy for our produc t candidates, which may require us to incur additional costs. In particular, while matters appear to be resolved with Novartis and J&J, Alexion or another party may assert additional allegations against our trademarks in the future and we will determine as necessary whether we need to, or should, select a different name for the product or contest any trademark enforcement actions. Moreover, any name we propose to use with our product candidates in the United States must be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark. The FDA typically conducts a review of proposed product names, including an evaluation of potential for confusion with other product names. If the FDA objects to any of our proposed proprietary product names, we may be required to expend significant additional resources in an effort to identify a suitable substitute name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA.

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

Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

Risks related to our business operations

~~Our future success depends on our ability to retain key employees, consultants and advisors and to attract, retain and motivate qualified personnel.~~

We are highly dependent on principal members of our executive team, the loss of whose services may adversely impact the achievement of our objectives. While we have entered into employment agreements with each of our executive officers, any of them could leave our employment at any time, as all of our employees are “at will” employees. Recruiting and retaining other qualified employees, consultants and advisors for our business, including scientific and technical personnel, will also be critical to our success. There is currently a shortage of skilled personnel in our industry, which is likely to continue. As a result, competition for skilled personnel is intense and the turnover rate can be high. We may not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for individuals with similar skill sets. In addition, the available pool of skilled employees may be further reduced if immigration laws change in a manner that increases restrictions on immigration. Failure to succeed in preclinical studies or clinical trials may make it more challenging to recruit and retain qualified personnel. The inability to recruit or loss of the services of any executive, key employee, consultant or advisor may impede the progress of our research, development and commercialization objectives. Furthermore, our common stock is currently trading at a price below the exercise price of most of our outstanding stock options. As a result, these “under water” options are less useful as a motivation and retention tool for our existing employees. Conversely, if our employees exercise outstanding stock options and sell their stock in the public market resulting in significant gains, we may experience an increased turnover rate.

We recently experienced a leadership transition. On November 1, 2017, Sanjay S. Shukla, M.D., M.S., our Chief Medical Officer, succeeded John D. Mendlein, Ph.D., our prior Chief Executive Officer. Dr. Shukla is now serving as our President and Chief Executive Officer. Our future performance will depend, in part, on our ability to successfully transition Dr. Shukla to his new role, continue to retain and attract senior management talent, including qualified medical expertise and leadership to supplement the executive team. Our failure to manage this transition effectively could result in inefficiencies in the development and commercialization or our product candidates, timing and outcomes of future regulatory approvals, advancement of our business development efforts and results of operations.

~~We are subject to a variety of risks associated with international operations that could materially adversely affect our business.~~

We currently conduct research activities through our majority-owned (98%) Hong Kong subsidiary, Pangu BioPharma Limited, in collaboration with the Hong Kong University of Science and Technology. Additionally, we have conducted our Phase 1b/2 clinical trials, and may conduct future clinical trials, in the European Union. If any of our product candidates are approved for commercialization outside of the United States, we expect to either use our own sales organization or selectively enter into agreements with third parties to market our products on a worldwide basis or in more limited geographical regions. We are, and we expect that we will continue to be, subject to a variety of risks related to international operations, including:

~~different regulatory requirements for approval of drugs and biologics in foreign countries;~~

•

~~reduced or uncertain protection for intellectual property;~~

~~unexpected changes in tariffs, trade barriers and regulatory requirements;~~

~~economic weakness, including inflation, or political instability in particular foreign economies and markets;~~

~~compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; and~~

~~foreign currency fluctuations, which could result in reduced revenues, and other obligations incident to doing business in another country.~~

Any failure to continue our international operations or to commercialize our product candidates outside of the United States may impair our ability to generate revenues and harm our business, prospects and results of operations.

~~We may need to expand our organization and we may experience difficulties in managing this growth, which could disrupt our operations.~~

As we prepare for additional clinical trials of Resolaris and iMod.Fc and expand our other clinical development activities, as well as continue our operations as a public company, we may increase our full-time employee base and hire more consultants and contractors. In addition to certain members of our management team being relatively new to our company, our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our growth could require significant capital expenditures and may divert financial resources from other projects, such as the conduct of additional clinical activities for Resolaris, initiation of clinical activities for iMod.Fc and the development of additional product candidates, including potential candidates from our ORCA program. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate or grow revenues could be reduced, and we may not be able to implement our business strategy. Our future financial performance and our ability to develop and commercialize product candidates and compete effectively will depend, in part, on our ability to effectively manage any future growth.

We may use our financial and human resources to pursue a particular business strategy, research program or product candidate and fail to capitalize on strategies, programs or product candidates that may be more profitable or for which there is a greater likelihood of success.*

Because we have limited resources, we may forego or delay pursuit of certain strategic opportunities or opportunities with certain programs, or product candidates or ~~for~~ indications that later prove to have greater commercial potential. We may focus on or pursue one indication over another potential indication and such development efforts may not be successful, which would cause us to delay the clinical development and approval of efzofitimod and other product candidates. In addition, our decisions as to which of our discovery programs to advance into preclinical and clinical development could preclude us from advancing others. For example, in the third quarter of 2022, we announced that we intend to focus our resources on the efzofitimod program, and we made the strategic decision not to use internal resources to initiate a Phase 1 study of ATYR2810. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. For example, based on analysis from an independent consultant that we engaged during 2022, we estimate that there is a $2-3 billion dollar market opportunity in ILD, including pulmonary sarcoidosis and SSc-ILD and excluding idiopathic pulmonary fibrosis. Depending on the accuracy of this estimate, we may not be most efficiently allocating

resources toward the advancement of efzofitimod versus the advancement of other development efforts. In addition, we may elect to pursue a research, clinical or commercial strategy that ultimately does not yield the results that we desire. Our spending on current and future research and development programs for product candidates may not result in any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through strategic collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate, or we may allocate internal resources to a product candidate in a therapeutic area or market in which it would have been more advantageous to enter into a partnering arrangement. Any failure to allocate resources or capitalize on strategies in a successful manner will have an adverse impact on our business.

Our future success depends on our ability to retain key employees, consultants and advisors and to attract, retain and motivate qualified personnel.

In response to competition, rising inflation rates and labor shortages, we may need to adjust employee cash compensation, which would affect our operating costs and our margins, or equity compensation, which would affect our outstanding share count and cause dilution to existing stockholders. We may not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for individuals with similar skill sets. In addition, the available pool of skilled employees may be further reduced if immigration laws change in a manner that increases restrictions on immigration. Further, failure to succeed in preclinical studies or clinical trials may make it more challenging to recruit and retain qualified personnel. The inability to recruit or loss of the services of any executive, key employee, consultant or advisor may impede the progress of our research, development and commercialization objectives.

We may undertake internal restructuring activities in the future that could result in disruptions to our business or otherwise materially harm our results of operations or financial condition.

From time to time we may undertake internal restructuring activities as we continue to evaluate and attempt to optimize our cost and operating structure in light of developments in our business strategy and long-term operating plans. For example, we implemented a corporate and program prioritization plan in May 2018 that included a reduction in our workforce. Any such restructuring activities may result in write-offs or other restructuring charges. There can be no assurance that any restructuring activities that we have undertaken or undertake in the future will achieve the cost savings, operating efficiencies or other benefits that we may initially expect. Restructuring activities may also result in a loss of continuity, accumulated knowledge and inefficiency during transitional periods and thereafter. In addition, internal restructurings can require a significant amount of time and focus from management and other employees, which may divert attention from commercial operations. If any internal restructuring activities we have undertaken or undertake in the future fail to achieve some or all of the expected benefits therefrom, our business, results of operations and financial condition could be materially and adversely affected.

We are subject to a variety of risks associated with international operations that could materially adversely affect our business.*

We currently conduct research activities through Pangu BioPharma Limited, in collaboration with the Hong Kong University of Science and Technology. Additionally, we have conducted clinical trials in the EU and in Australia and may conduct future clinical trials internationally. Our partner, Kyorin, conducted an efzofitimod Phase 1 clinical trial in healthy volunteers in Japan, and has joined the EFZO-FIT study, a global Phase 3 clinical trial designed to enroll 264 subjects at multiple centers in United States, Europe, Brazil and Japan. If any of our product candidates are approved for commercialization outside of the United States, we expect to either use our own sales organization or selectively enter into agreements with third parties to market our products on a worldwide basis or in more limited geographical regions, as with Kyorin and efzofitimod in Japan. We are, and we expect that we will continue to be, subject to a variety of risks related to international operations, including, but not limited to: liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, different regulatory requirements for approval of drugs and biologics in foreign countries; reduced or uncertain protection for intellectual property; unexpected changes in tariffs, trade barriers and regulatory requirements; economic weakness, including labor shortages, economic slowdowns, recessions, inflation and monetary supply shifts, rising interest rates and tightening of credit markets, or political instability in particular foreign economies and markets, including as a result of the ongoing Ukraine-Russia conflict; compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; foreign currency fluctuations, which could result in reduced revenues, and other obligations incident to doing business in another country; and the global impacts of contagious disease outbreaks.

Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.

We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants and commercial partners. Misconduct by these parties could include intentional failures to comply with the regulations of the FDA and non-U.S. regulators, provide accurate information to the FDA and non-U.S. regulators, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information or 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, misconduct, 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, customer incentive programs and other business arrangements. Such misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in significant regulatory sanctions and cause serious harm to our reputation. We have adopted a code of business conduct and ethics applicable to all of our employees, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

We face potential product liability, and, if successful claims are brought against us, we may incur substantial liability and costs. If the use of our product candidates ~~harms~~harm patients, or is perceived to harm patients even when such harm is unrelated to our product candidates, our regulatory approvals could be revoked or otherwise negatively impacted and we could be subject to costly and damaging product liability claims.

The use of our product candidates in clinical trials and the sale of any products for which we obtain marketing approval exposes us to the risk of product liability claims. Product liability claims might be brought against us by patients, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with our products. There is a risk that our product candidates may induce adverse events. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product liability claims may result in:

•

impairment of our business reputation;

•

withdrawal of clinical trial participants;

•

costs due to related litigation;

•

distraction of management’s attention from our primary business;

•

substantial monetary awards to patients or other claimants;

•

the inability to commercialize our product candidates; and

•

decreased demand for our product candidates, if approved for commercial sale.

We carry product liability insurance for our clinical trials covering ~~$5.0~~$10.0 million per occurrence and up to ~~$5.0~~$10.0 million in the aggregate, subject to certain deductibles and exclusions. Although we believe the amount of our insurance coverage is typical for companies similar to us in our industry, we may not have adequate insurance coverage or be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If and when we obtain marketing approval for product candidates, we intend to expand our insurance coverage to include the sale of commercial products; however, we may be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts. On occasion, large judgments have been awarded in class action lawsuits based on drugs or medical treatments that had unanticipated adverse effects. A successful product liability claim or series of claims brought against us could cause our stock price to decline and adversely affect our reputation and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business.

Patients with the diseases targeted by our product candidates are often already in severe and advanced stages of disease and may have both known and unknown significant pre-existing and potentially life-threatening health risks. During the course of treatment, patients may suffer adverse events, including death, for reasons that may be related to our product candidates. Such events could subject us to costly litigation, require us to pay substantial amounts of money to injured patients, delay, negatively impact or end our opportunity to receive or maintain regulatory approval to market our products, or require us to suspend or abandon our commercialization efforts. Even in a circumstance in which we do not believe that an adverse event is related to our products, the investigation into the circumstance may be time-consuming or inconclusive. These investigations may interrupt our sales efforts, delay our regulatory approval process in other countries, or impact and limit the type of regulatory approvals our product candidates receive or maintain. As a result of these factors, a product liability claim, even if successfully defended, could have a material adverse effect on our business, financial condition or results of operations.

We are, or may become, subject to stringent and evolving U.S. and foreign laws, regulations, rules, policies, contractual obligations and other obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations could have a material adverse effect on our business and financial condition including, a disruption of clinical trials or commercialization of products; regulatory investigations or actions; litigation (including class claims) and mass arbitration demands; fines and penalties; reputational harm; loss of revenue or profits; and other adverse business consequences.*

We collect, receive, store, process, use, generate, transfer, disclose, make accessible, protect and share (Process or Processing) personal data and other sensitive information, including information we or our third party partners (such as CROs and clinical trial sites) collect about patients and healthcare providers in connection with clinical trials necessary to operate our business.

Therefore, we are, or may become, subject to data privacy and security laws, regulations, rules, guidance, and industry standards as well as external and internal privacy and security policies, contractual requirements and other obligations that apply to the Processing of personal data both by us and on our behalf (collectively, Data Protection Requirements). The number and scope of the Data Protection Requirements are changing, subject to differing applications and interpretations, and may be inconsistent between jurisdictions. New Data Protection Requirements may be proposed or enacted. Additionally, given the breadth and evolving nature of Data Protection Requirements, preparing for and complying with these requirements is rigorous, time-intensive and requires significant resources and a review of our technologies, systems and practices, as well as those of any third-party collaborators, service providers, contractors or consultants that Process personal data on our behalf. We may at times fail (or be perceived to have failed) to do so. Moreover, despite our efforts, our personnel or third parties upon whom we rely may fail to comply with such obligations, which could negatively impact our business operations and compliance posture.

If we or the third parties upon which we rely fail, or are perceived to have failed, to address or comply with Data Protection Requirements, this could result in government enforcement actions against us that could include investigations, fines, penalties, audits and inspections, additional reporting requirements and/or oversight, temporary or permanent bans on all or some Processing of personal data, orders to destroy or not use personal data. Further, individuals or other relevant stakeholders could bring a variety of claims (including class claims and mass arbitration demands) against us for our actual or perceived failure to comply with the Data Protection Requirements. In particular, plaintiffs have become increasingly more active in bringing privacy-related claims against companies, including class claims and mass arbitration demands. Some of these claims allow for the recovery of statutory damages on a per violation basis, and, if viable, carry the potential for monumental statutory damages, depending on the volume of data and the number of violations. Any of these events could have a material adverse effect on our reputation, business, or financial condition, and could lead to a loss of actual or prospective customers, collaborators or partners; interrupt or stop clinical trials; result in an inability to Process personal data or to operate in certain jurisdictions; limit our ability to develop or commercialize our products; require us to revise or restructure our operations; or otherwise materially adversely affect our operations (each, a Material Adverse Impact).

In the United States, federal, state and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws and consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act). and other similar laws (e.g. wiretapping laws). For example, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 (CPRA), (collectively, CCPA) applies to personal information of California consumers, business representatives, and employees, and requires businesses to provide specific disclosures in privacy notices and honor requests of California residents to exercise certain privacy rights. The CCPA provides for administrative fines of up to $7,500 per violation and allows private litigants affected by certain data breaches to recover significant statutory damages. Although the CCPA exempts some data processed in the context of clinical trials, the CCPA may increase compliance costs and potential liability with respect to other personal data maintained about California residents. In addition, the CPRA expanded the CCPA’s requirements and established a regulatory agency to implement and enforce the law. Other states, such as Virginia, Colorado, Utah and Connecticut, have also passed comprehensive privacy laws, and similar laws are being considered in several other states. While these states, like the CCPA, also exempt some data processed in the context of clinical trials, these developments may further complicate compliance efforts, and may increase legal risk and compliance costs for us and the third parties upon whom we rely. In addition, data privacy and security laws have been proposed at the federal, state and local levels in recent years, which could further complicate compliance efforts.

Outside the United States, an increasing number of laws, regulations, and industry standards may govern data privacy and security. For example, the European Union’s General Data Protection Regulation (EU GDPR), the United Kingdom’s GDPR (UK GDPR), and Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or LGPD) (Law No. 13,709/2018) impose strict requirements for processing personal data. We may become subject to an increasing number of foreign privacy laws, particularly as we have begun to sponsor clinical trials in foreign jurisdictions, including in Europe. The EU's General Data Protection Regulation (EU GDPR) and the United Kingdom’s GDPR (UK GDPR), regulate the collection and use of personal data in the European Economic Area (EEA) and the United Kingdom respectively. The EU and UK GDPR impose strict requirements on controllers and processors of personal data, including special protections for “special categories of personal data”, which includes health and genetic information of individuals residing in the EA or in the United Kingdom (UK). Failure to comply with the requirements of the EU and UK GDPR may result in warning letters, litigation, orders banning the processing of personal data, mandatory audits and financial penalties, including fines of up to 4% of the total worldwide annual turnover, or €20,000,000 (17,500,000 British Pounds under the UK GDPR), in either

case, whichever is greater; or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests. Kyorin has also enrolled clinical trial patients in Japan and may be subject to local laws and regulations regarding data privacy, including the Act on the Protection of Personal Information. As another example, the General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or LGPD) (Law No. 13,709/2018) may apply to our operations. The LGPD broadly regulates processing personal data of individuals in Brazil and imposes compliance obligations and penalties comparable to those of the EU GDPR.

In the ordinary course of business, we may transfer personal data from Europe and other jurisdictions to the United States or other countries. Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries. In particular, the European Economic Area (EEA) and the UK have significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it generally believes are inadequate. Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border data transfer laws. Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the United States in compliance with law, such as the EEA and UK’s standard contractual clauses, the UK’s International Data Transfer Agreement / Addendum, and the EU-U.S. Data Privacy Framework (which allows for transfers for relevant U.S.-based organizations who self-certify compliance and participate in the Framework), these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States. If there is no lawful manner for us to transfer personal data from the EEA, the UK, or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions (such as Europe) at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business. Additionally, companies that transfer personal data out of the EEA and UK to other jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators, individual litigants, and activities groups. Some European regulators have ordered certain companies to suspend or permanently cease certain transfers of personal data out of Europe for allegedly violating the EU and UK GDPR’s cross-border data transfer limitations.We are also bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful. For example, certain privacy laws, such as the EU and UK GDPR and the CCPA, may require our customers to impose specific contractual restrictions on their service providers. We also publish privacy policies, marketing materials and other statements, such as compliance with certain certifications, regarding data privacy and security. If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences.

Unfavorable macroeconomic conditions could adversely affect our business, financial condition orresults of operations.*

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. For example, the global financial crisis caused volatility and disruptions in the capital and credit markets. In addition, due to general political and economic conditions, including the ongoing Ukraine-Russia conflict, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets, the global credit and financial markets have experienced extreme volatility and disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, inflation, rising interest rates and uncertainty about economic stability. A severe or prolonged economic downturn, such as the global financial crisis, could result in a variety of risks to our business, including inability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our CDMOs and CROs, possibly resulting in supply disruption. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

We or the third parties upon whom we depend may be adversely affected by earthquakes, droughts, floods, fires, hurricanes or other natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

We are located in San Diego, California and our manufacturing activities are conducted by CDMOs and our clinical trials are conducted at various locations in the United States and abroad. Some of these geographic locations have in the past experienced natural disasters, including severe earthquakes. Earthquakes, droughts, floods, fires, hurricanes, disease epidemics or other natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition and prospects. If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our facilities, that damaged critical infrastructure, such as the manufacturing facilities of our CDMOs and clinical sites utilized by our CROs, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, as well as limits on our insurance coverage, which could have a material adverse effect on our business, prospects, financial condition and results of operations.

Risks related to the commercialization of our product candidates

If we are unable to establish sales, marketing and distribution capabilities or enter into agreements with third parties to market and sell our product candidates, we may be unable to generate any revenues.

We do not currently have any infrastructure for the sales, marketing and distribution of pharmaceutical products. In order to market our product candidates, if approved by the FDA or any other regulatory body, we must build our sales, marketing, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. There are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

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

We rely on third-party manufacturers to produce our product candidates, but we have not entered into agreements with any such manufacturers to support commercialization.

We have not yet secured manufacturing capabilities for commercial quantities of any of our product candidates. Although we intend to rely on third-party manufacturers for commercialization, we have not yet entered into a long-term commercial supply agreement to support full scale commercial production, and we or our CDMOs may be unable to process validation activities necessary to enter into commercial supply agreements or otherwise negotiate agreements with the manufacturers to support our commercialization activities at commercially reasonable terms.

We may run into technical or scientific issues related to development or manufacturing that we may be unable to resolve in a timely manner or with available funds. For example, we recently engaged an additional CDMO to manufacture efzofitimod bulk drug substance and will need to complete a technology transfer and validation process before the new CDMO will be able to produce additional bulk drug substance for our clinical trials or otherwise. The new CDMO has not previously manufactured efzofitimod bulk drug substance, which subjects us to heightened risks that it will experience delays in validating the manufacturing process. If the new CDMO experiences such delays, particularly delays in producing efzofitimod in compliance with cGMP regulations, we could be forced to delay future clinical trials or the submission of regulatory approval applications to the FDA. In addition, due to the fact that all prior cGMP batches of efzofitimod, including those that we intend to use in the EFZO-FIT study, have been produced by our existing CDMO, we will be required to complete comparability studies prior to using efzofitimod produced at the new CDMO’s facilities in subsequent clinical trials or submitting regulatory approval applications to the FDA. If we are unable to demonstrate such comparability to the satisfaction of the FDA, it may result in delays to future clinical trials or a deficiency in future regulatory applications. If we or our CDMOs are unable to scale the manufacturing process to produce commercial quantities of our product candidates, or our CDMOs do not pass required regulatory pre-approval inspections, our commercialization efforts will be harmed.

In addition, any significant disruption in our relationships with our CDMOs could harm our business. There are a relatively small number of potential manufacturers for our product candidates, and such manufacturers may not be able to supply our drug products at the times we need them or on commercially reasonable terms. Any disruption to our relationship with our current CDMOs and any manufacturers that we contract with in the future will result in delays in our ability to complete the clinical development of, or to commercialize, our product candidates, and may require us to incur additional costs.

The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. We have competitors both in the United States and internationally, including major multi-national pharmaceutical companies, biotechnology companies and universities and other research institutions. Although we believe we are the only company engaged in the discovery and development of therapeutics based on novel functions of tRNA synthetases, we are aware of other companies that could compete with our product candidates in their target therapeutic indications, such as our lead candidate, efzofitimod, for the treatment of pulmonary sarcoidosis, SSc-ILD and other ILD.

The commercial success of any current product candidate or future product candidates will depend upon the degree of market acceptance by physicians, patients, third-party payors and others in the medical community.

The availability and extent of coverage and adequate reimbursement by third-party payors, including government health administration authorities, private health coverage insurers, managed care organizations and other third-party payors is essential for most patients to be able to afford expensive treatments. Sales of any of our product candidates that receive marketing approval will depend substantially, both in the United States and internationally, on the extent to which the costs of such product candidates will be covered and reimbursed by third-party payors. If reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize an adequate return on our investment.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services (CMS), as CMS decides whether and to what extent a new medicine will be covered and reimbursed under Medicare. Private payors often follow CMS with respect to coverage policy and payment limitations in setting their own reimbursement policies. It is difficult to predict what CMS will decide with respect to reimbursement for fundamentally novel products such as ours, as there is no body of established practices and precedents for these new products. One third-party payor’s determination to provide coverage for a product candidate does not assure that other payors will also provide coverage for the product candidate. Further, no uniform policy for coverage and reimbursement exists in the United States, and coverage and reimbursement can differ significantly from payor to payor. As a result, the coverage determination process is often time-consuming and costly. This process will require us to provide scientific and clinical support for the use of our products to each third-party payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Reimbursement agencies in Europe may be more conservative than third-party payors in the United States. For example, a number of cancer drugs have been approved for reimbursement in the United States, but have not been approved for reimbursement in certain European countries. There may be significant delays in obtaining reimbursement for newly approved medicines, and our inability to promptly obtain coverage and profitable payment rates from third-party payors for any approved medicines could have a material adverse effect on our business, prospects, financial condition and results of operations.

prices for medicines may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that currently restrict imports of medicines from countries where they may be sold at lower prices than in the United States.

Moreover, increasing efforts by governmental and third-party payors, in the United States and abroad, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for new products and, as a result, they may not cover or provide adequate payment for our product candidates. For example, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the ACA) was passed in March 2010, and substantially changed the way healthcare is financed by both governmental and private insurers, and continues to significantly impact the U.S. pharmaceutical industry. There have been executive, judicial and congressional challenges to certain aspects of the ACA. While Congress has not passed comprehensive repeal legislation, it has enacted laws that modified certain provisions of the ACA such as removing penalties, starting January 1, 2019, for not complying with the ACA’s individual mandate to carry health insurance. On June 17, 2021 the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (IRA) into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and through a newly established manufacturer discount program. It is possible that the ACA will be subject to judicial or Congressional challenges in the future. It is unclear how any such challenges and the healthcare reform measures of the Biden administration will impact the ACA and our business.

In addition, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent presidential executive orders, congressional inquiries and proposed and enacted federal and state 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 products. For example, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, the U.S. Department of Health and Human Services (HHS) released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles. Further, the IRA, among other things, (1) directs the HHS to negotiate the price of certain single-source drugs and biologics covered under Medicare and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. These provisions will take effect progressively starting in fiscal year 2023, although the Medicare drug price negotiation program is currently subject to legal challenges. HHS has and will continue to issue and update guidance as these programs are implemented. It is currently unclear how the IRA will be implemented but is likely to have a significant impact on the pharmaceutical industry. In addition, in response to the Biden administration's October 2022 executive order, on February 14, 2023, HHS released a report outlining three new models for testing by the Center for Medicare and Medicaid Innovation which will be evaluated on their ability to lower the cost of drugs, promote accessibility, and improve quality of care. It is unclear whether the models will be utilized in any health reform measures in the future. We expect to experience pricing pressures in connection with the sale of any of our product candidates, due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional health reform measures. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.

In addition, drug prices are under significant scrutiny in the markets in which our products may be sold. Drug pricing and other health care costs continues to be subject to intense political and societal pressures which we anticipate will continue and escalate on a global basis. If coverage and reimbursement is available only to limited levels, we may not be able to successfully commercialize our product candidates for which we obtain marketing approval. As a result, we may have difficulty raising capital and our results of operations may be adversely impacted.

Our business operations and current and future relationships with investigators, healthcare professionals, consultants, third-party payors and customers may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, transparency laws, health information privacy and security laws and other healthcare laws and regulations. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.*

Although we do not currently have any products on the market, our current and future operations may be, directly or indirectly through our prescribers, customers and third-party payors, subject to various federal and state healthcare laws and regulations. The laws that may affect our ability to operate include:

•

the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or paying any remuneration (including any kickback, bribe or certain rebates), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part,

under federal and state healthcare programs such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

•

the U.S. federal false claims, including the False Claims Act, which can be enforced through whistleblower actions, and civil monetary penalties laws, which, among other things, impose criminal and civil penalties against individuals or entities for knowingly presenting, or causing to be presented, to the U.S. federal government, claims for payment or approval that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government. In addition, the government may assert that a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;

•

the federal Health Insurance Portability and Accountability Act (HIPAA), which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items or services; similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

•

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH), which imposes certain obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information without appropriate authorization by covered entities, i.e. health plans, healthcare clearinghouses and certain healthcare providers, as well as their business associates and covered subcontractors that perform certain services for or on their behalf involving the use or disclosure of individually identifiable health information;

•

the U.S. federal legislation commonly referred to as Physician Payments Sunshine Act, enacted as part of the ACA, and its implementing regulations, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the CMS information related to certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members; and

•

analogous state and foreign laws and regulations.

If our operations are found to be in violation of any of the laws described above or any other governmental laws and regulations that may apply to us, we may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, or similar programs in other countries or jurisdictions, disgorgement, imprisonment, contractual damages, reputational harm, diminished profits, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws and the delay, reduction, termination or restructuring of our operations.

Risks related to the ownership of our common stock

The market price of our common stock historically has been highly volatile and is likely to continue to be volatile, and you could lose all or part of your investment.*

The market price of our common stock has been volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Quarterly Report, these factors include:

•

adverse results or delays in preclinical studies or clinical trials;

•

manufacturing sufficient quantities of product candidates for use in clinical trials;

•

the imposition of a clinical hold on our product candidates or our inability to cause the clinical hold to be lifted;

•

any delay in filing an IND or BLA for any of our product candidates and any adverse development or perceived adverse development with respect to the FDA’s review of that IND or BLA;

•

failure of our strategic partners to perform under our collaborations or early termination of collaborations;

•

failure to successfully develop and commercialize our product candidates;

•

limited market sizes and pricing for our product candidates;

•

failure by us or our licensors to prosecute, maintain or enforce intellectual property rights covering our product candidates and processes;

•

changes in laws or regulations applicable to current or future products;

•

inability to obtain adequate product supply for our product candidates or the inability to do so at acceptable prices;

•

adverse regulatory decisions;

•

introduction of new products, services or technologies by our competitors;

•

inability to obtain additional capital;

•

failure to meet or exceed financial or operational projections we may provide to the public;

•

failure to meet or exceed the financial or operational projections of the investment community;

•

the perception of the biopharmaceutical industry by the public, politicians, legislatures, regulators and the investment community;

•

significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;

•

disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;

•

additions or departures of key scientific or management personnel;

•

significant lawsuits, including patent or stockholder litigation;

•

if securities or industry analysts issue an adverse or misleading opinion regarding our common stock;

•

changes in the market valuations of similar companies;

•

changes in the structure of healthcare payment systems;

•

sales of our common stock by us or our stockholders in the future;

•

a potential additional reverse stock split if we are unable to maintain a stock price above $1.00 per share of common stock;

•

trading volume of our common stock; and

•

general political and macroeconomic conditions, including the ongoing Ukraine-Russia conflict, outbreaks of contagious diseases (such as the COVID-19 pandemic), liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets, and other geopolitical and macroeconomic conditions, including labor shortages, economic slowdowns, recessions, inflation and monetary supply shifts, rising interest rates and tightening of credit markets, and the resulting impacts on our business operations or financial condition.

In addition, companies trading in the stock market in general, and on the Nasdaq Capital Market and biotechnology companies in particular, have experienced extreme price and volume fluctuations, and we have in the past experienced volatility that has been unrelated or disproportionate to our operating performance. From January 1, 2022 through August 4, 2023 the closing price of our common stock has ranged between $1.72 and $7.54 per share. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.

Our executive officers, directors, 5% holders and their affiliates currently own a significant percentage of our stock and will be able to exert significant control over matters submitted to stockholders for approval.*

As of August 4, 2023, based on the latest information available to us, our executive officers, directors, holders known by us to own 5% of our voting stock and their affiliates own approximately 50.1% of our voting stock. Therefore, our executive officers, directors, holders known by us to own 5% of our voting stock and their affiliates will have the ability to influence us through their ownership positions and may be able to determine all matters requiring stockholder approval. For example, these stockholders, acting together, may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may believe are in your best interest as one of our stockholders.

Future sales and issuances of equity securities could result in dilution to our stockholders, impose restrictions or limitations on our business and could cause our stock price to fall.*

We will need additional capital in the future to continue our planned operations, and we may seek additional funding through a combination of equity offerings, debt, grant funding, collaborations, strategic partnerships and/or licensing arrangements.

In February 2023, we completed an underwritten follow-on public offering of 23,125,000 shares of our common stock, including the partial exercise of the underwriters’ option to purchase additional shares, at a price to the public of $2.25 per share. The total net proceeds from the offering were approximately $48.1 million, after deducting underwriting discounts, commissions and offering expenses payable by us.

In April 2022, we entered into an Open Market Sale AgreementSM with Jefferies LLC (Jefferies) implementing an “at-the-market” offering program, (the Jefferies ATM Offering Program) pursuant to which we may offer and sell, from time to time and at our option, up to an aggregate of $65.0 million of shares of our common stock through Jefferies, acting as sales agent. Jefferies is entitled to a fixed commission rate of up to 3.0% of the gross sales proceeds of shares sold under the Jefferies ATM Offering Program. During 2022, we sold an aggregate of 1,421,627 shares of common stock at a weighted-average price of $3.09 per share for net proceeds of approximately $4.0 million under the Jefferies ATM Offering Program. During the six months ended June, 2023, we sold an aggregate of 4,332,210 shares of common stock at a weighted-average price of $2.29 per share for net proceeds of approximately $9.5 million under the Jefferies ATM Offering Program.

These financing activities may have an adverse effect on our stockholders’ rights, the market price of our common stock and on our operations, and may require us to relinquish rights to some of our technologies, intellectual property or product candidates, issue additional equity or debt securities, or otherwise agree to terms unfavorable to us.

In addition, sales of a substantial number of shares of our common stock by our existing stockholders in the public market or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock, even if there is no relationship between such sales and the performance of our business.

We have also registered or plan to register all common stock that we may issue under our employee benefits plans as well as shares of common stock underlying options to purchase shares of our common stock that were granted as inducement grants. As a result, once registered, these shares can be freely sold in the public market upon issuance, subject to restrictions under the securities laws. In addition, our directors and executive officers may establish programmed selling plans under Rule 10b5-1 of the Securities Exchange Act of 1934 (Exchange Act) for the purpose of effecting sales of our common stock. If any of these events cause a large number of our shares to be sold in the public market, the sales could reduce the trading price of our common stock and impede our ability to raise future capital.

Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.*

We have incurred substantial losses during our history, we do not expect to become profitable in the near future and we may never achieve profitability. Net operating loss carryforwards (NOLs) that expire unused will be unavailable to offset future income tax liabilities. Under current law, federal net operating losses incurred in tax years beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such federal NOLs is limited to 80% of taxable income.

In addition, under Section 382 of the Internal Revenue Code of 1986, as amended (Code) a corporation that undergoes an “ownership change” (as defined under Section 382 of the Code and applicable Treasury Regulations) is subject to limitations on its ability to utilize its pre-change NOLs to offset post-change taxable income. We have experienced ownership changes in the past, and may experience future ownership changes, under Section 382 of the Code that could affect our ability to utilize our NOLs to offset our income. Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs or other unforeseen reasons, portions of our existing NOLs could expire or otherwise be unavailable to reduce future income tax liabilities, including for state tax purposes. For these reasons, we may not be able to utilize a material portion of our NOLs, even if we attain profitability, which could potentially result in increased future tax liability to us and could adversely affect our operating results and financial condition.

Uncertainties in the interpretation and application of existing, new and proposed tax laws and regulations could materially affect our tax obligations and effective tax rate.

The tax regimes to which we are subject or under which we operate are unsettled and may be subject to significant change. The issuance of additional guidance related to existing or future tax laws, or changes to tax laws or regulations proposed or implemented by the current or a future U.S. presidential administration, Congress, or taxing authorities in other jurisdictions, including jurisdictions outside of the United States, could materially affect our tax obligations and effective tax rate. To the extent that such changes have a

negative impact on us, including as a result of related uncertainty, these changes may adversely impact our business, financial condition, results of operations, and cash flows.

The amount of taxes we pay in different jurisdictions depends on the application of the tax laws of various jurisdictions, including the United States, to our international business activities, tax rates, new or revised tax laws, or interpretations of tax laws and policies, and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for pricing intercompany transactions pursuant to our intercompany arrangements or disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest, and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations. Our financial statements could fail to reflect adequate reserves to cover such a contingency. Similarly, a taxing authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection, often referred to as a “permanent establishment” under international tax treaties, and such an assertion, if successful, could increase our expected tax liability in one or more jurisdictions.

We do not intend to pay dividends on our common stock, and therefore any returns will be limited to the value of our stock.

We have never declared or paid any cash dividends on our common stock. We anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the appreciation of their stock.

In addition, future debt instruments may materially restrict our ability to pay dividends on our common stock. Any future determination related to dividend policy will be made at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, tax considerations, legal or contractual restrictions, business prospects, the requirements of current or then-existing debt instruments, general economic conditions and other factors our board of directors may deem relevant.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could make it more difficult for a third party to remove our current management, acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders.

Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions that may have the effect of delaying or preventing a change in control of us or changes in our management. Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:

•

authorize “blank check” preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock;

•

create a classified board of directors whose members serve staggered three-year terms;

•

specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, our chief executive officer or our president;

•

prohibit stockholder action by written consent;

•

establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors;

•

provide that our directors may be removed only for cause;

•

provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;

•

specify that no stockholder is permitted to cumulate votes at any election of directors;

•

expressly authorize our board of directors to modify, alter or repeal our amended and restated bylaws; and

•

require supermajority votes of the holders of our common stock to amend specified provisions of our amended and restated certificate of incorporation and amended and restated bylaws.

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.

In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us.

Any provision of our amended and restated certificate of incorporation or amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.

Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the exclusive forum for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or employees to our company or our stockholders, (iii) any action asserting a claim against our company arising pursuant to any provision of the Delaware General Corporation Law or our amended and restated certificate of incorporation or bylaws, or (iv) any action asserting a claim against our company governed by the internal affairs doctrine. This choice of forum provision does not apply to suits brought to enforce a duty or liability created by the Securities Act or the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction.

This choice of forum provision may limit a stockholder’s ability to bring certain claims in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. If a court were to find this choice of forum provision to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.

General Risk Factors

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities. In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

If our information technology systems or data, or those maintained on our behalf, are or were compromised, this could result in a Material Adverse Impact.*

In the ordinary course of our business, we and the third-parties upon which we rely Process (as defined above) proprietary, confidential and sensitive information, including personal data (including key-coded data, health information and other special categories of personal data), intellectual property, trade secrets, and proprietary business information owned or controlled by ourselves or other third parties (collectively, Sensitive Information).

We and our third-party service providers utilize information technology systems to process Sensitive Information in connection with our business activities, and we face a variety of evolving threats that could cause security incidents.

Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity and availability of our Sensitive Information and information technology systems, and those of the third parties upon which we rely. Such threats are prevalent, continue to rise, are increasingly difficult to detect and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation state supported actors. Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to conduct our business.

We and the third parties upon which we rely are subject to a variety of evolving threats, including but not limited to software bugs; malicious code (such as viruses and worms); denial-of-service attacks (such as credential stuffing); credential harvesting; advanced persistent threat intrusions; natural disasters; terrorism; war; telecommunication and electrical failures; ransomware attacks; social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks); server malfunction; software or hardware failures; supply-chain attacks; loss of data or other computer assets; and other similar issues. Particularly, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions, delays, or outages in our operations, disruption of clinical trials, loss of data (including data related to clinical trials), and other Material Adverse Impacts (as defined above). To alleviate the financial, operational and reputational impact of a ransomware attack, it may be preferable to make extortion payments, but we may be unwilling or unable to do so (including, for example, if applicable laws or regulations prohibit such payments).

Additionally, remote work has become more common and has increased the risk to our information technology assets and data, as more of our employees utilize network connections, computers and devices outside of our premises and networks, including working at home, while in transit and public locations. Additionally, future or past business transactions could expose us to additional risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies. Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.

We use third-party service providers and subprocessors to help us operate our business and engage in Processing on our behalf or otherwise share Sensitive Information with our partners or other third parties in conjunction with our business. These third party service providers and technologies operate critical business systems to Process Sensitive Information in a variety of contexts, including, without limitation, cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, and other functions. Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place. If our third-party service providers experience a security incident or other interruption, we could experience Material Adverse Impacts. While we may be entitled to damages if our third-party service providers fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award. Similarly, supply chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’ infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised.

Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our Sensitive Information or our information technology systems, or those of the third parties upon whom we rely. A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our services.

We may expend significant resources, fundamentally change our business activities and practices, or modify our operations, including our clinical trial activities, or information technology in an effort to protect against security incidents and to mitigate, detect, and remediate actual and potential vulnerabilities. Applicable Data Protection Requirements (as defined above) may require us to implement specific security measures or use industry-standard or reasonable measures to protect against security incidents.

While we have implemented security measures designed to protect against security incidents, there can be no assurance that we, or any third-party partner, will be successful in preventing a security incident or mitigating their effects. We take steps to detect and remediate vulnerabilities in our information technology systems, but we may not be able to detect and remediate all vulnerabilities because the threats and techniques used to exploit the vulnerability change frequently and are often sophisticated in nature. Therefore, such vulnerabilities could be exploited but may not be detected until after a security incident has occurred. These vulnerabilities pose material risk to our business. Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities.

Furthermore, applicable Data Protection Requirements may require us to notify relevant stakeholders of security breaches. Such disclosures are costly, and the disclosures or the failure to comply with such requirements could lead to Material Adverse Impacts.

If we, our service providers, partners or other relevant third parties have experienced or in the future experience any security incident(s), it may result in a Material Adverse Impact. For example, the loss of data from completed clinical trials for our product candidates could result in delays in our regulatory approval efforts and significantly increase our costs. Theft of our Sensitive Information could require substantial expenditures to remedy. If we or the third parties upon which we rely experience a security incident, we could suffer reputational harm or face litigation or adverse regulatory action, fines, other penalties, business interruption, and diversion of funds. As a result, we could experience Material Adverse Impacts.

Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations. Furthermore, we cannot be sure that our insurance coverage, will be adequate or otherwise protect us from or adequately mitigate liabilities or damages with respect to claims, costs, expenses, litigation, fines, penalties, business loss, data loss, regulatory

actions or Material Adverse Impacts arising out of our Processing operations, privacy and security practices, or security breaches we may experience. The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of large excess or deductible or co-insurance requirements), could have a Material Adverse Impact.

In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position.

We are subject to anti-corruption laws in the jurisdictions in which we operate.

We are subject to a number of anti-corruption laws, including the ~~U.S.~~ Foreign Corrupt Practices Act ~~or the FCPA,~~of 1977, as amended (FCPA), and various other anti-corruption laws. The FCPA generally prohibits companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business and/or other benefits. Our business relies on approvals and licenses from government and regulatory entities, and as a result, we are subject to certain elevated risks associated with interactions with these entities. Although we have adopted a code of business conduct and ethics that includes provisions governing the interactions of employees with government entities to mitigate these ~~risks.~~risks, there can be no assurance that this will be successful in preventing violations of anti-corruption laws. If we are not in compliance with anti-corruption laws and other laws governing the conduct of business with government entities (including local laws), we may be subject to criminal and civil penalties and other remedial measures, which could harm our reputation and have a material adverse ~~impact~~effect on our business, financial condition, results of operations and prospects. Any investigation of any actual or alleged violations of such laws could also harm our reputation or have an adverse impact on our business, prospects, financial condition and results of operations.

We have incurred and will continue to incur significant costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.*

As a public company, we have incurred and will continue to incur legal, accounting and other ~~expenses that we did not incur as a private company.~~expenses. In addition, the Sarbanes-Oxley Act of 2002 ~~or Sarbanes-Oxley Act,~~ as well as rules subsequently implemented by the ~~Securities and Exchange Commission, or~~ SEC and The Nasdaq ~~Global Select~~Stock Market have imposed various requirements on public companies. In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act ~~or the~~(the Dodd-Frank ~~Act,~~Act) was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas such as “say on pay” and proxy access. Recent legislation permits smaller “emerging growth companies” to implement many of these requirements over a longer period and up to five years from the pricing of our IPO. We have elected to take advantage of this legislation but cannot guarantee that we will not be required to implement these requirements sooner than budgeted or planned and thereby incur unexpected expenses. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate. Our management and other personnel ~~will need to~~ devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations ~~will~~ increase our legal and financial compliance costs and ~~will~~ make some activities more time-consuming and costly. For example, ~~we expect~~ these rules and regulations to make it more difficult and more expensive for us to maintain director and officer liability insurance and we have been required to incur substantial costs to maintain our current levels of such coverage.

~~Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.~~

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. The recent global financial crisis caused extreme volatility and disruptions in the capital and credit markets. For example, in the recent U.K. referendum on its membership in the European Union resulted in a vote in favor of leaving the European Union (commonly referred to as “Brexit”), which could lead to a period of considerable uncertainty, particularly in relation to global financial markets which in turn could adversely affect our ability to raise additional capital. A severe or prolonged economic downturn, such as the recent global financial crisis, could result in a variety of risks to our business, including inability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our manufacturers, possibly resulting in supply disruption. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

We or the third parties upon whom we depend may be adversely affected by earthquakes, droughts, floods, fires or other natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

We are located in San Diego, California and our manufacturing activities are conducted by contract manufacturing organizations at various locations in the United States. We currently anticipate that if Resolaris receives marketing approval, commercial production may take place in the United States and/or the United Kingdom. Some of these geographic locations have in the past experienced natural disasters, including severe earthquakes. Earthquakes, droughts, floods, fires, disease epidemics or other natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition and prospects. If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our facilities, that damaged critical infrastructure, such as the manufacturing facilities of our CDMOs, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, as well as limits on our insurance coverage, which could have a material adverse effect on our business, prospects, financial condition and results of operations.

~~Risks related to the ownership of our common stock~~

~~The market price of our common stock may be highly volatile, and you could lose all or part of your investment.~~

~~The market price of our common stock is likely to be volatile. Our stock price could be subject to wide fluctuations in response to a variety of factors, including the following:~~

~~adverse results or delays in preclinical studies or clinical trials;~~

~~the imposition of a clinical hold on our product candidates or our inability to cause the clinical hold to be lifted;~~

~~any delay in filing a BLA, NDA or IND for any of our product candidates and any adverse development or perceived adverse development with respect to the FDA’s review of that BLA, NDA or IND;~~

~~failure to successfully develop and commercialize our product candidates;~~

~~the perception of limited market sizes or pricing for our product candidates;~~

~~failure by us or our licensors to prosecute, maintain or enforce intellectual property rights covering our product candidates and processes;~~

~~changes in laws or regulations applicable to future products;~~

~~inability to obtain adequate product supply for our product candidates or the inability to do so at acceptable prices;~~

~~adverse regulatory decisions;~~

~~introduction of new products, services or technologies by our competitors;~~

~~inability to obtain additional capital;~~

~~failure to meet or exceed financial or operational projections we may provide to the public;~~

~~failure to meet or exceed the financial or operational projections of the investment community;~~

~~the perception of the pharmaceutical industry by the public, politicians, legislatures, regulators and the investment community;~~

~~significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;~~

~~disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;~~

~~additions or departures of key scientific or management personnel;~~

~~significant lawsuits, including patent or stockholder litigation;~~

~~if securities or industry analysts do not publish research or reports about our business, or they issue an adverse or misleading opinion regarding our stock;~~

~~changes in the market valuations of similar companies;~~

~~general market or macroeconomic conditions;~~

~~sales of our common stock by us or our stockholders in the future; and~~

~~trading volume of our common stock.~~

In addition, companies trading in the stock market in general, and The Nasdaq Global Select Market and biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.

Our executive officers, directors, principal stockholders and their affiliates own a significant percentage of our stock and will be able to exert significant control over matters submitted to stockholders for approval.

~~As of November 7, 2017, based on the latest information available to us, our executive officers, directors, principal stockholders and their affiliates beneficially own approximately~~ ~~76.9% of our voting stock,~~ ~~including 14.8% held by entities affiliated with EcoR1 Capital and 9.50% held by~~ ~~Viking Global Opportunities Illiquid Investments Sub-Master LP (VGO Fund, together with its affiliates, Viking).~~ The percentage of our common stock beneficially owned by Viking would increase substantially if Viking waived the ownership percentage limitation of 9.50% of the shares of our common stock then issued and outstanding (Viking Percentage Limitation) and would further increase substantially if we obtained the approval of our stockholders to the extent required in accordance with the NASDAQ Global Market rules (the Requisite Approval) (up to 39.4% assuming no other shares of common stock were issued upon exercise of the warrants purchased by all other selling stockholders). VGO Fund can waive or change the Viking Percentage Limitation on 61 days notice. ~~Assuming~~ ~~all of the shares issued in the Private Placement are sold by the purchasers in such transaction~~, our executive officers, directors, principal stockholders and their affiliates would beneficially own approximately 25.6% of our voting stock. Therefore, our executive officers, directors, principal stockholders and their affiliates will have the ability to influence us through their ownership positions and may be able to determine all matters requiring stockholder approval. For example, these stockholders, acting together, may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may believe are in your best interest as one of our stockholders.

~~We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.~~

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act reduced disclosure obligations regarding executive compensation and our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years from the pricing of our IPO, although circumstances could cause us to lose that status earlier, including if the market value of our common stock held by non-affiliates exceeds $700 million as of any June 30 before that time or if we have total annual gross revenue of $1.07 billion or more during any fiscal year before that time, in which cases we would no longer be an emerging growth company as of the following December 31 or, if we issue more than $1.07 billion in non-convertible debt during any three-year period before that time, we would cease to be an emerging growth company immediately. Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company” which would allow us to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

~~Future sales and issuances of equity or debt securities could result in dilution to our stockholders, impose restrictions or limitations on our business and could cause our stock price to fall.~~

We will need additional capital in the future to continue our planned operations, and we may seek additional funding through a combination of equity offerings, debt financings, government or other third-party funding and other collaborations, strategic alliances and licensing arrangements. These financing activities may have an adverse effect on our stockholders’ rights, the market price of our common stock and on our operations, and may require us to relinquish rights to some of our technologies, intellectual property or product candidates, issue additional equity or debt securities, or otherwise agree to terms unfavorable to us. We have an effective shelf registration statement on Form S-3 that provides for the sale of up to $150 million in the aggregate of common stock, preferred stock, debt securities, warrants and/or units by us from time to time in one or more offerings. We have also entered into a sales agreement with Cowen and Company, LLC for the sale of up to $35 million of common stock, from time to time, $20 million of which is currently registered under the Form S-3. To date, no shares of common shares have been sold pursuant to such sales agreement. Any future debt financings may impose restrictive covenants or otherwise adversely affect the holdings or the rights of our stockholders, and any equity financings will be dilutive to our stockholders. Furthermore, additional equity or debt financing might not be available to us on reasonable terms, if at all.

In additional, sales of a substantial number of shares of our common stock by our existing stockholders (including those stockholders who purchased securities in our Private Placement) in the public market or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. Certain holders of our securities are entitled to rights with respect to the registration of their shares under the Securities Act pursuant to a registration and voting rights agreement. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act. For example, we registered 5,740,048 shares of our common stock, 11,429,760 shares of our common stock issuable upon the conversion of an aggregate of 2,285,952 shares of Class X Convertible Preferred Stock and 6,438,678 shares of our common stock issuable upon exercise of warrants issued by us in the Private Placement for resale on a Form S-3, which was declared effective by the SEC on September 27, 2017. As a result, the common stock is currently available for resale to the public and to the extent warrants are exercised by the holders and the Class X Preferred Stock is converted to common stock after obtaining stockholder approval and other conditions specified in the Securities Purchase Agreement, any shares of such common stock may result in dilution to our stockholders. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock, even if there is no relationship between such sales and the performance of our business.

We have also registered all common stock that we may issue under our employee benefits plans as well as shares of common stock underlying an option to purchase up to 145,000 shares of our common stock that was granted as an inducement grant. As a result, these shares can be freely sold in the public market upon issuance, subject to restrictions under the securities laws. In addition, our directors and executive officers may establish programmed selling plans under Rule 10b5-1 of the Securities Exchange Act for the purpose of effecting sales of our common stock. If any of these events cause a large number of our shares to be sold in the public market, the sales could reduce the trading price of our common stock and impede our ability to raise future capital.

If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our stock, the price of our stock could decline.

The trading market for our common stock ~~will rely~~relies in part on the research and reports that industry or financial analysts publish about us or our business. ~~We may never obtain research coverage by industry or financial analysts.~~ If no or few analysts commence coverage or continue coverage of us, the trading price of our stock would likely decrease. ~~Even if we do obtain analyst coverage, if~~If one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our stock could decline. If one or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline.

We could be subject to securities class action litigation.

In the past, securities class action litigation has often been brought against ~~a company~~companies following a decline in the market price of ~~its~~their securities. This risk is especially relevant for us because pharmaceutical companies have experienced significant stock price ~~volatility in recent years.~~volatility. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our ~~business.~~business and cause our stock price to decline.

We have broad discretion in the use of our cash, ~~and~~ cash equivalents, restricted cash and available-for-sale investments and are exposed to risks related to the marketable securities we may ~~not use them effectively.~~purchase.

We have considerable discretion in the application of our existing cash, cash equivalents, restricted cash and ~~cash equivalents.~~available-for-sale investments. We expect to use our existing cash to fund research and development activities and for working capital and general corporate purposes, including funding the costs of operating as a public company. In addition, pending their use, we may invest our existing cash in certain short-term investments, including but not limited to investment-grade, interest-bearing securities. WeHistorically,

investment in these securities has been highly liquid and has experienced only very limited defaults. However, volatility in the financial markets in recent years has created additional uncertainty regarding the liquidity and safety of these investments. Additionally, we may use ~~these proceeds~~this cash, cash equivalents, restricted cash and available-for-sale investments for purposes that do not yield a significant return or any return at all for our stockholders.

~~Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.~~

We have incurred substantial losses during our history, we do not expect to become profitable in the near future and we may never achieve profitability. Unused losses generally are available to be carried forward to offset future taxable income, if any, until such unused losses expire. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, 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 net operating loss carryforwards, or NOLs, and other pre-change tax attributes (such as research tax credits) to offset its post-change taxable income or taxes may be limited. We completed an analysis through September 7, 2011 and determined that on November 30, 2006 an ownership change occurred, for which we have adjusted our NOL and research and development tax credit carryforwards. We completed an analysis through June 30, 2017 and determined that an ownership change occurred on April 9, 2013 and May 6, 2015 and are in the process of analyzing the impact to our NOL and research and development tax credit carryforwards. We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. As a result, our ability to use our pre-change NOLs to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

~~We do not intend to pay dividends on our common stock, and therefore any returns will be limited to the value of our stock.~~

Provisions in our amended and restated certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more difficult for a third party to remove our current management, acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders.

~~create a classified board of directors whose members serve staggered three-year terms;~~

~~specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, our chief executive officer or our president;~~

~~prohibit stockholder action by written consent;~~

~~provide that our directors may be removed only for cause;~~

~~provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;~~

~~specify that no stockholder is permitted to cumulate votes at any election of directors;~~

~~expressly authorize our board of directors to modify, alter or repeal our amended and restated bylaws; and~~

~~require supermajority votes of the holders of our common stock to amend specified provisions of our amended and restated certificate of incorporation and amended and restated bylaws.~~

~~These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety ~~Disclosure~~Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Incorporated by Reference

Exhibit
Number
Exhibit Title
Form
File No.
Exhibit
Filing Date
3.1
Restated Certificate of Incorporation of the Registrant
S-1/A
333-203272
3.2
May 1, 2015
3.2
Amended and Restated Bylaws of the Registrant
S-1/A
333-203272
3.4
April 27, 2015
3.3
Certificate of Designation of Preferences, Rights and Limitations of Class X Convertible Preferred Stock
8-K
001-37378
3.1
August 31, 2017
4.1
Specimen Common Stock Certificate
S-1/A
333-203272
4.1
April 27, 2015
4.2
Warrant to Purchase Stock issued to Comerica Bank on March 18, 2011
S-1
333-203272
4.3
April 6, 2015
4.3
Warrant to Purchase Stock issued to Silicon Valley Bank on July 24, 2013
S-1
333-203272
4.4
April 6, 2015
4.4
Warrant to Purchase Stock issued to Silicon Valley Bank on November 18, 2016
10-K
001-37378
4.5
March 16, 2017
4.5
Warrant to Purchase Stock issued to Solar Capital Ltd on November 18, 2016
10-K
001-37378
4.6
March 16, 2017
4.6
Warrant to Purchase Stock issued to Silicon Valley Bank on June 30, 2017
10-Q
001-37378
4.7
August 14, 2017
4.7
Warrant to Purchase Stock issued to Solar Capital Ltd on June 30, 2017
10-Q
001-37378
4.8
August 14, 2017
10.1
Securities Purchase Agreement, dated August 27, 2017, by and among the Company and the Purchasers
8-K
001-37378
10.1
August 28, 2017
10.2
Registration Rights Agreement, dated August 27, 2017, by and among the Company and the Purchasers
8-K
001-37378
10.2
August 28, 2017
10.3
Form of Warrant to Purchase Common Stock
8-K
001-37378
10.3
August 28, 2017
10.4
Employment Agreement, dated November 1, 2017, by and between the Company and Sanjay S. Shukla, M.D., M.S.
—
—
—
Filed herewith
10.5
Strategic Advisor Agreement, dated November 1, 2017, by and between the Company and John D. Mendlein, Ph.D.
—
—
—
Filed herewith
31.1
Certification of Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
—
—
—
Filed herewith
31.2
Certification of Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
—
—
—
Filed herewith
32.1
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
—
—
—
Filed herewith
32.2
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
—
—
—
Filed herewith

Index to Exhibits


			Incorporated by Reference
Exhibit Number	Exhibit Title	Form	File No.	Exhibit	Filing Date
3.1	Restated Certificate of Incorporation of the Registrant	10-Q	001-37378	3.1	November 14, 2022
3.2	Certificate of Amendment to Restated Certificate of Incorporation of the Registrant	8-K	001-37378	3.1	June 28, 2019
3.3	Certificate of Amendment to Restated Certificate of Incorporation of the Registrant	10-Q	001-37378	3.3	May 12, 2020
3.4	Certificate of Amendment to Restated Certificate of Incorporation of the Registrant	8-K	001-37378	3.1	May 4, 2021
3.5	Certificate of Amendment to Restated Certificate of Incorporation of the Registrant	8-K	001-37378	3.1	April 29, 2022
3.6	Certificate of Amendment to Restated Certificate of Incorporation of the Registrant	8-K	001-37378	3.1	May 19, 2023
3.7	Amended and Restated Bylaws of the Registrant	10-Q	333-203272	3.6	November 14, 2022
4.1	Specimen Common Stock Certificate	S-1/A	333-203272	4.1	April 27, 2015
4.2	Warrant to Purchase Stock issued to Silicon Valley Bank on November 18, 2016	10-K	001-37378	4.5	March 16, 2017
4.3	Warrant to Purchase Stock issued to Solar Capital Ltd. on November 18, 2016	10-K	001-37378	4.6	March 16, 2017
4.4	Warrant to Purchase Stock issued to Silicon Valley Bank on June 30, 2017	10-Q	001-37378	4.7	August 14, 2017
4.5	Warrant to Purchase Stock issued to Solar Capital Ltd. on June 30, 2017	10-Q	001-37378	4.8	August 14, 2017
4.6	Warrant to Purchase Stock issued to Silicon Valley Bank on December 22, 2017	10-K	001-37378	4.8	March 20, 2018
4.7	Warrant to Purchase Stock issued to Solar Capital Ltd. on December 22, 2017	10-K	001-37378	4.9	March 20, 2018
10.1	aTyr Pharma, Inc. 2015 Stock Option and Incentive Plan, as amended	8-K	001-37378	10.1	May 19, 2023
31.1	Certification of Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	—	—	—	Filed herewith
31.2	Certification of Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	—	—	—	Filed herewith
32.1#	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	—	—	—	Filed herewith


32.2#	~~Incorporated by Reference~~Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	—	—	—	Filed herewith
~~Exhibit~~ ~~Number~~101.INS	~~Exhibit Title~~Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document	~~Form~~—	~~File No.~~—	~~Exhibit~~—	~~Filing Date~~Filed herewith
~~101.INS~~101.SCH	~~XBRL Instance Document~~	—	—	—	~~Filed herewith~~
~~101.SCH~~	Inline XBRL Taxonomy Extension Schema Document	—	—	—	Filed herewith
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	—	—	—	Filed herewith
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	—	—	—	Filed herewith
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	—	—	—	Filed herewith
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document	—	—	—	Filed herewith
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)	—	—	—	Filed herewith

# The information in Exhibits 32.1 and 32.2 shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act (including this Quarterly Report), unless the Registrant specifically incorporates the foregoing information into those documents by reference.

~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	aTyr Pharma, Inc.

Date: ~~November 14, 2017~~August 9, 2023	By:	/s/ Sanjay S. Shukla
		Sanjay S. Shukla, M.D., M.S.
		President and Chief Executive Officer ~~(Principal Executive Officer)~~
		(Principal Executive Officer)
	~~By:~~	~~/s/ John T. Blake~~
	By:	~~John T. Blake~~/s/ Jill M. Broadfoot
~~Senior Vice President, Finance~~		Jill M. Broadfoot
		Chief Financial Officer
		(Principal Financial and Accounting Officer)


Delaware	20-3435077
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

10240 Sorrento Valley, Suite 300, San Diego, CA	92121
(Address of principal executive offices)	(Zip Code)


~~Delaware~~Title of each class	Trading Symbol(s)	~~20-3435077~~Name of each exchange on which registered
~~(State or other jurisdiction~~ ~~of incorporation)~~Common Stock, par value $0.001 per share	LIFE	~~(IRS Employer~~ ~~Identification No.)~~

~~3545 John Hopkins Court, Suite #250, San Diego, CA~~		~~92121~~
~~(Address of principal executive offices)~~		~~(Zip Code)~~The Nasdaq Capital Market


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~☒	Smaller reporting company	☒

		Emerging growth company		☒	☐


	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements		3
Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2017~~2023 (unaudited) and December 31, ~~2016~~2022		3
Condensed Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 (unaudited)		4
Condensed Consolidated Statements of Comprehensive Loss for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 (unaudited)		5
Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022 (unaudited)		6
Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 (unaudited)		67
Notes to Condensed Consolidated Financial Statements (unaudited)		78
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
Item 3. Quantitative and Qualitative Disclosures About Market Risk		22
Item 4. Controls and Procedures		2322
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		2423
Item 1A. Risk Factors		2423
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		5759
Item 3. Defaults Upon Senior Securities		5759
Item 4. Mine Safety Disclosures		5759
Item 5. Other Information		5759
Item 6. Exhibits		5859
SIGNATURES		6062


	September 30,			December 31,			June 30,			December 31,
	2017			2016			2023			2022
	(unaudited)						(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	29,765		$	38,388		$	12,313		$	9,981
Available-for-sale investments, short-term		60,616			33,759
Prepaid expenses and other assets		1,825			2,621
Available-for-sale investments								96,268			56,165
Other receivables								1,287			11,775
Prepaid expenses								4,563			2,950
Total current assets		92,206			74,768			114,431			80,871
Available-for-sale investments, long-term		—			4,002
Restricted cash								3,419			3,165
Property and equipment, net		2,191			1,421			5,812			3,059
Operating lease, right-of-use assets								7,119			7,250
Financing lease, right-of-use assets								1,894			1,248
Other assets		90			333			72			193
Total assets	$	94,487		$	80,524		$	132,747		$	95,786
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,592		$	2,606		$	516		$	3,106
Accrued expenses		3,861			5,450			10,788			9,862
Current portion of deferred rent		—			130
Current portion of long-term debt, net of issuance costs		2,267			339
Current portion of operating lease liability								621			630
Current portion of financing lease liability								443			264
Total current liabilities		9,720			8,525			12,368			13,862
Long-term debt, net of current portion and issuance costs		12,479			9,198
Commitments and contingencies (Note 3)
Long-term operating lease liability, net of current portion								12,802			9,633
Long-term financing lease liability, net of current portion								1,525			1,007
Commitments and contingencies (Note 4)
Stockholders’ equity:
Preferred stock, $0.001 par value; authorized shares – 5,000,000 at September 30, 2017 and December 31, 2016; Class X Convertible Preferred Stock issued and outstanding shares– 2,285,952 and no shares at September 30, 2017 and December 31, 2016, respectively		2			—
Common stock, $0.001 par value; authorized shares – 150,000,000 as of September 30, 2017 and December 31, 2016; issued and outstanding shares – 29,715,798 and 23,744,832 as of September 30, 2017 and December 31, 2016, respectively		30			24
Preferred stock, $0.001 par value per share; 5,000,000 undesignated authorized shares as of June 30, 2023 (unaudited) and December 31, 2022; no shares issued or outstanding as of June 30, 2023 (unaudited) and December 31, 2022								—			—
Common stock, $0.001 par value per share; 170,000,000 and 85,000,000 authorized shares as of June 30, 2023 (unaudited) and December 31, 2022, respectively; issued and outstanding shares – 57,046,172 as of June 30, 2023 (unaudited) and 29,498,488 as of December 31, 2022								57			29
Additional paid-in capital		325,031			278,832			548,436			489,502
Accumulated other comprehensive loss		(63	)		(76	)		(333	)		(433	)
Accumulated deficit		(252,712	)		(215,979	)		(441,923	)		(417,634	)
Total aTyr Pharma, Inc. stockholders’ equity								106,237			71,464
Noncontrolling interest in Pangu BioPharma Limited								(185	)		(180	)
Total stockholders’ equity		72,288			62,801			106,052			71,284
Total liabilities and stockholders’ equity	$	94,487		$	80,524		$	132,747		$	95,786


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016			2023			2022			2023			2022
	(unaudited)												(unaudited)
Operating expenses:
Research and development	$	7,133		$	10,395		$	24,757		$	33,702		$	9,840		$	9,135		$	19,219		$	18,031
General and administrative		3,694			3,470			11,188			11,711			3,718			3,449			7,126			6,931
Total operating expenses		10,827			13,865			35,945			45,413			13,558			12,584			26,345			24,962
Loss from operations		(10,827	)		(13,865	)		(35,945	)		(45,413	)		(13,558	)		(12,584	)		(26,345	)		(24,962	)
Other income (expense), net		(363	)		46			(788	)		124
Net loss		(11,190	)		(13,819	)		(36,733	)		(45,289	)
Total other income (expense), net														1,216			163			2,051			387
Consolidated net loss														(12,342	)		(12,421	)		(24,294	)		(24,575	)
Net loss attributable to noncontrolling interest in Pangu BioPharma Limited														4			1			5			2
Net loss attributable to aTyr Pharma, Inc.													$	(12,338	)	$	(12,420	)	$	(24,289	)	$	(24,573	)
Net loss per share, basic and diluted	$	(0.43	)	$	(0.58	)	$	(1.50	)	$	(1.91	)	$	(0.22	)	$	(0.44	)	$	(0.50	)	$	(0.88	)
Weighted average common shares outstanding, basic and diluted		25,818,008			23,696,511			24,462,835			23,669,154
Shares used in computing net loss per share, basic and diluted														55,143,805			28,063,387			48,557,347			27,941,560


	Three and Six Months Ended June 30, 2023 (unaudited)
	Common Stock				Additional Paid-In		Other Comprehensive			Accumulated			Noncontrolling			Total Stockholders’
	Shares		Amount		Capital		Gain/(Loss)			Deficit			Interest			Equity
Balance as of December 31, 2022		29,498,488	$	29	$	489,502	$	(433	)	$	(417,634	)	$	(180	)	$	71,284
Issuance of common stock upon release of restricted stock units		22,111		—		—		—			—			—			—
Issuance of common stock from at-the-market offerings, net of offering costs		694,012		1		1,488		—			—			—			1,489
Issuance of common stock from underwritten follow-on public offering, net of offering costs		23,125,000		23		48,050		—			—			—			48,073
Stock-based compensation		—		—		619		—			—			—			619
Net unrealized gain on investments, net of tax		—		—		—		185			—			—			185
Net loss		—		—		—		—			(11,951	)		(1	)		(11,952	)
Balance as of March 31, 2023		53,339,611		53		539,659		(248	)		(429,585	)		(181	)		109,698
Issuance of common stock pursuant to employee stock purchase plan		32,363		—		65		—			—			—			65
Issuance of common stock upon release of restricted stock units		36,000		—		—		—			—			—			—
Issuance of common stock from at-the-market offerings, net of offering costs		3,638,198		4		8,054		—			—			—			8,058
Stock-based compensation		—		—		658		—			—			—			658
Net unrealized loss on investments, net of tax		—		—		—		(85	)		—			—			(85	)
Net loss		—		—		—		—			(12,338	)		(4	)		(12,342	)
Balance as of June 30, 2023		57,046,172	$	57	$	548,436	$	(333	)	$	(441,923	)	$	(185	)	$	106,052
	Three and Six Months Ended June 30, 2022 (unaudited)
	Common Stock				Additional Paid-In		Other Comprehensive			Accumulated			Noncontrolling			Total Stockholders’
	Shares		Amount		Capital		Gain/(Loss)			Deficit			Interest			Equity
Balance as of December 31, 2021		27,793,035	$	28	$	481,832	$	(263	)	$	(372,296	)	$	(175	)	$	109,126
Issuance of common stock upon release of restricted stock units		2,500		—		—		—			—			—			—
Issuance of common stock upon exercise of stock options		259		—		1		—			—			—			1
Issuance of common stock from at-the-market offerings, net of offering costs		260,455		—		1,480		—			—			—			1,480
Stock-based compensation		—		—		417		—			—			—			417
Net unrealized loss on investments, net of tax		—		—		—		(496	)		—			—			(496	)
Net loss		—		—		—		—			(12,153	)		(1	)		(12,154	)
Balance as of March 31, 2022		28,056,249		28		483,730		(759	)		(384,449	)		(176	)		98,374
Issuance of common stock pursuant to employee stock purchase plan		1,958		—		5		—			—			—			5
Issuance of common stock from at-the-market offerings, net of offering costs		69,251		—		34		—			—			—			34
Stock-based compensation		—		—		517		—			—			—			517
Net unrealized loss on investments, net of tax		—		—		—		(51	)		—			—			(51	)
Net loss		—		—		—		—			(12,420	)		(1	)		(12,421	)
Balance as of June 30, 2022		28,127,458	$	28	$	484,286	$	(810	)	$	(396,869	)	$	(177	)	$	86,458

	Three and Nine Months Ended September 30,
	2017		2016
Class X Convertible Preferred Stock (if-converted)		11,429,760		—
Warrants for common stock		6,642,332		25,970
Common stock options and restricted stock units		4,745,715		4,356,751
Employee stock purchase plan		38,862		37,944
		22,856,669		4,420,665

			Fair Value Measurements Using
			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)				Fair Value Measurements Using
As of September 30, 2017:
									Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
As of June 30, 2023
Assets:
Current:
Cash equivalents	$	17,907	$	17,907	$	—	$	—	$	9,121	$	9,121	$	—	$	—
Available-for-sale investments, short-term:
Asset-backed securities		7,402		—		7,402		—
Available-for-sale investments:
Commercial paper		21,193		—		21,193		—		49,993		—		49,993		—
Corporate debt securities		21,594		—		21,594		—		23,890		—		23,890		—
United States treasury securities		10,427		10,427		—
Sub-total short-term investments		60,616		10,427		50,189		—
Municipal bonds										1,000		—		1,000		—
U.S. government agencies										21,385		—		21,385		—
Total available-for-sale investments										96,268		—		96,268		—
Total assets measured at fair value	$	78,523	$	28,334	$	50,189	$	—	$	105,389	$	9,121	$	96,268	$	—
As of December 31, 2016:
Assets:
Current:
Cash equivalents	$	29,251	$	29,251	$	—	$	—
Available-for-sale investments, short-term:
Commercial paper		7,843		—		7,843		—
Corporate debt securities		20,913		—		20,913		—
United States treasury securities		5,003		5,003		—		—
Sub-total short-term investments		33,759		5,003		28,756		—
Available-for-sale investments, long-term:
Asset-backed securities		4,002		—		4,002		—
Sub-total long-term investments		4,002		—		4,002		—
Total assets measured at fair value	$	67,012	$	34,254	$	32,758	$	—

	September 30, 2017
	Gross Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Market Value
Available-for-sale investments, short-term:
Asset-backed securities	$	7,403		—		(1	)	$	7,402
Commercial paper		21,193		—		—			21,193
Corporate debt securities		21,601		—		(7	)		21,594
United States treasury securities		10,433		—		(6	)		10,427
	$	60,630	$	—	$	(14	)	$	60,616


		June 30, 2023
	Contractual Maturity	Gross Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Market Value
Available-for-sale investments:
Commercial paper	Within 1 year	$	50,069	$	—	$	(76	)	$	49,993
Corporate debt securities	1 to 2 years		24,042		1		(153	)		23,890
Municipal bonds	Within 1 year		1,000		—		—			1,000
U.S. government agencies	Within 1 year		21,440		—		(55	)		21,385
		$	96,551	$	1	$	(284	)	$	96,268


		December 31, 2022
	Contractual Maturity	Gross Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Market Value
Available-for-sale investments:
Commercial paper	Within 1 year	$	28,121	$	—	$	(47	)	$	28,074
Corporate debt securities	1 to 2 years		26,401		—		(307	)		26,094
Municipal bonds	Within 1 year		2,026		—		(29	)		1,997
		$	56,548	$	—	$	(383	)	$	56,165

	December 31, 2016
	Gross Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Market Value
Available-for-sale investments, short-term:
Commercial paper	$	7,843	$	—	$	—		$	7,843
Corporate debt securities		20,942		—		(29	)		20,913
United States Treasury securities		5,002		1		—			5,003
	$	33,787	$	1	$	(29	)	$	33,759
Available-for-sale investments, long-term:
Asset-backed securities	$	4,001	$	1	$	—		$	4,002
	$	4,001	$	1	$	—		$	4,002

	September 30, 2017
2017	$	—
2018		3,500
2019		6,000
2020		6,813
	$	16,313


	Operating Leases
2023	$	644
2024		1,915
2025		1,975
2026		1,923
2027		1,942
2028 and thereafter		12,071
Less: Amount representing interest		(6,398	)
Present value of lease payments		14,072
Less: Current portion of operating lease liability		(621	)
Less: Tenant improvement allowance not yet received		(649	)
Long-term operating lease liability, net of current portion	$	12,802


	Number of Outstanding Stock Options			Weighted- Average Exercise Price
Outstanding as of December 31, 2022		2,956,170		$	7.45
Granted		1,110,085		$	2.21
Canceled/forfeited/expired		(96,289	)	$	6.62
Outstanding as of June 30, 2023		3,969,966		$	6.00

	Number of Outstanding Options			Weighted Average Exercise Price
Outstanding as of December 31, 2016		4,014,988		$	6.73
Granted		1,041,619		$	3.27
Exercised		(32,221	)	$	1.15
Canceled/forfeited/expired		(327,971	)	$	6.99
Outstanding as of September 30, 2017		4,696,415		$	5.98

	Three Months Ended September 30,		Nine Months Ended September 30,
	2017	2016	2017	2016
Expected term (in years)	6.06	6.02 – 6.08	5.50 – 6.08	5.50 – 6.08
Risk-free interest rate	2.1%	1.2% – 1.4%	1.9% – 2.1%	1.2% – 1.9%
Expected volatility	105.9%	80.7% – 81.0%	104.0% – 124.4%	80.7% – 82.5%
Expected dividend yield	0.0%	0.0%	0.0%	0.0%

	Number of Outstanding Restricted Stock Units			Weighted Average Grant Date Fair Value
Balance as of December 31, 2016		76,713		$	4.95
Granted		22,000		$	3.30
Released		(36,099	)	$	4.96
Forfeited		(13,314	)	$	4.67
Balance as of September 30, 2017		49,300		$	4.28


	Financing Leases
2023	$	292
2024		585
2025		585
2026		628
2027		203
Less: Amount representing interest		(325	)
Present value of lease payments		1,968
Less: Current portion of financing lease liability		(443	)
Long-term financing lease liability, net of current portion	$	1,525


	~~September~~June 30, 2023
Common stock warrants	~~2017~~	13,760
~~Class X Preferred Stock (if-converted to common stock)~~		~~11,429,760~~
~~Common stock warrants~~		~~6,642,332~~
Common stock options and ~~awards outstanding~~restricted stock units		~~4,745,715~~4,033,293
Shares available under the 2015 ~~Plan~~equity incentive plan		~~729,139~~3,958,183
Shares available under the ~~2015 ESPP~~2022 inducement plan		~~614,115~~88,600
Shares available under the employee stock purchase plan		~~24,161,061~~768,958
		8,862,794


	Number of Outstanding Restricted Stock Units			Weighted-Average Grant Date Fair Value
Balance as of December 31, 2022		121,438		$	5.09
Released		(58,111	)	$	4.69
Balance as of June 30, 2023		63,327		$	5.45


	Three Months Ended June 30,				Increase/
	2023		2022		Decrease
Research and development expenses	$	9,840	$	9,135	$	705
General and administrative expenses		3,718		3,449		269
Other income (expense), net		1,216		163		1,053

	Three Months Ended September 30,					Increase /
	2017			2016		(Decrease)
Research and development expenses	$	7,133		$	10,395	$	(3,262	)
General and administrative expenses		3,694			3,470		224
Other income (expense)		(363	)		46		(409	)

			Payments Due by Period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
			(in thousands)
Term Loans, principal payments including final payment	$	16,313	$	2,000	$	12,000	$	2,313	$	—
Operating lease (1)		1,800		1,100		700		—		—
Total	$	18,113	$	3,100	$	12,700	$	2,313	$	—