UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)



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

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER~~JUNE 30, ~~2017~~2020



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

FOR THE TRANSITION PERIOD FROM TO

Commission file number: 001-36912

CIDARA THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)



Delaware		46-1537286
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

6310 Nancy Ridge Drive, Suite 101 San Diego, CA 92121		(858) 752-6170
(Address of Principal Executive ~~Offices)~~Offices, including Zip Code)		(Registrant’s Telephone Number, Including Area Code)

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



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.0001 Per Share	CDTX	The Nasdaq Global Market

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 x No o

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 x No o

Indicate by check mark whether 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.



Large accelerated filer	o		Accelerated filer	xo

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

			Emerging growth company	x

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. xo

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

As of ~~October~~July 31, ~~2017,~~2020, the registrant had ~~20,238,143~~42,959,195 shares of Common Stock ($0.0001 par value) outstanding.

CIDARA THERAPEUTICS, INC.

TABLE OF CONTENTS



PART I. FINANCIAL INFORMATION		3
	Item 1. Financial Statements	3
	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2017~~2020 (unaudited) and December 31, ~~2016~~2019	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 (unaudited)	5
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity for the three and six months ended June 30, 2020 and 2019 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	67
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1522
	Item 3. Quantitative and Qualitative Disclosures about Market Risk	2130
	Item 4. Controls and Procedures	2130
PART II. OTHER INFORMATION		2130
	Item 1. Legal Proceedings	2232
	Item 1A. Risk Factors	2232
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4966
	Item 3. Defaults Upon Senior Securities	5066
	Item 4. Mine Safety ~~Disclosure~~Disclosures	5066
	Item 5. Other Information	5066
	Item 6. Exhibits	5067
SIGNATURES		5068

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CIDARA THERAPEUTICS, INC.

Condensed Consolidated Balance Sheets


	September 30, 2017			December 31, 2016			June 30, 2020			December 31, 2019
(In thousands, except share and per share data)	(unaudited)						(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	54,276		$	85,367		$	54,826		$	50,268
Short-term investments	9,876			19,252
Accounts receivable	321			—
Prepaid expenses and other current assets	1,730			779
Restricted cash							9,259			10,000
Accounts receivable, prepaid expenses and other current assets							5,954			5,546
Total current assets	66,203			105,398			70,039			65,814
Property and equipment, net	1,043			1,374			472			429
Operating lease right-of-use asset							1,257			1,632
Other assets	190			190			1,635			1,101
Total assets	$	67,436		$	106,962		$	73,403		$	68,976

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,777		$	2,909		$	2,933		$	1,887
Accrued liabilities	3,186			3,338			4,426			4,068
Accrued compensation and benefits	1,987			2,662			2,900			3,658
Deferred revenue							11,196			9,803
Current portion of lease liability							878			818
Current portion of term loan	1,667			—			9,234			9,965
Total current liabilities	8,617			8,909			31,567			30,199
Term loan, less debt issuance costs	8,185			9,794
Other long-term liabilities	61			80
Lease liability							484			942
Total liabilities	16,863			18,783			32,051			31,141
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized and no shares issued or outstanding at September 30, 2017 and December 31, 2016, respectively	—			—
Common stock, $0.0001 par value; 200,000,000 shares authorized at September 30, 2017 and December 31, 2016; 16,879,006 and 16,865,737 shares issued and outstanding, respectively, at September 30, 2017; 16,837,126 and 16,773,232 shares issued and outstanding, respectively, at December 31, 2016	2			2
Preferred stock, $0.0001 par value; 10,000,000 shares authorized at June 30, 2020 and December 31, 2019:
Series X Convertible Preferred stock, $0.0001 par value; 5,000,000 shares authorized at June 30, 2020 and December 31, 2019; 1,096,519 and 565,231 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively							—			—
Common stock, $0.0001 par value; 200,000,000 shares authorized at June 30, 2020 and December 31, 2019; 42,019,195 and 33,838,466 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively							4			3
Additional paid-in capital	186,534			181,840			336,782			297,659
Accumulated other comprehensive loss	(1		)	(1		)
Accumulated deficit	(135,962		)	(93,662		)	(295,434		)	(259,827		)
Total stockholders' equity	50,573			88,179			41,352			37,835
Total liabilities and stockholders' equity	$	67,436		$	106,962		$	73,403		$	68,976

See accompanying notes.

CIDARA THERAPEUTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

Three Months Ended
September 30,
Nine Months Ended
September 30,
(In thousands, except share and per share data) 2017
2016
2017
2016
Operating expenses:

Research and development $ 9,159

$ 8,729

$ 32,593

$ 24,389
General and administrative 3,090

3,607

9,669

9,694
Total operating expenses 12,249

12,336

42,262

34,083
Loss from operations (12,249 )
(12,336 )
(42,262 )
(34,083 )
Other income (expense):

Interest income (expense), net (8 )
109

(38 )
312
Total other income (expense) (8 )
109

(38 )
312
Net loss $ (12,257 )
$ (12,227 )
$ (42,300 )
$ (33,771 )
Other comprehensive loss:

Unrealized loss on short-term investments (1 )
(13 )
—

(9 )
Comprehensive loss $ (12,258 )
$ (12,240 )
$ (42,300 )
$ (33,780 )
Basic and diluted net loss per share $ (0.73 )
$ (0.88 )
$ (2.51 )
$ (2.44 )
Shares used to compute basic and diluted net loss per share 16,864,211

13,910,145

16,830,749

13,863,453



	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands, except share and per share data)	2020			2019			2020			2019
Revenues:
Collaboration revenue	$	3,392		$	—		$	5,922		$	—
Total revenues	3,392			—			5,922			—
Operating expenses:
Research and development	17,634			10,743			30,630			23,412
General and administrative	3,969			3,525			8,064			7,260
Total operating expenses	21,603			14,268			38,694			30,672
Loss from operations	(18,211		)	(14,268		)	(32,772		)	(30,672		)
Other income (expense):
Change in fair value of contingent forward purchase obligations	—			681			—			411
Interest (expense) income, net	(95		)	40			(73		)	153
Total other (expense) income, net	(95		)	721			(73		)	564
Net loss and comprehensive loss	$	(18,306	)	$	(13,547	)	$	(32,845	)	$	(30,108	)
Recognition of beneficial conversion feature	—			—			(2,762		)	—
Net loss attributable to common shareholders	$	(18,306	)	$	(13,547	)	$	(35,607	)	$	(30,108	)
Basic and diluted net loss per common share	$	(0.45	)	$	(0.47	)	$	(0.90	)	$	(1.19	)

Shares used to compute basic and diluted net loss per common share	40,965,180			28,590,651			39,410,751			25,248,314

See accompanying notes.

CIDARA THERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)



	Six Months Ended June 30,
(In thousands)	2020			2019
Operating activities:
Net loss	$	(32,845	)	$	(30,108	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	143			170
Stock-based compensation	2,241			2,541
Non-cash interest expense	8			15
Amortization of debt issuance costs	2			4
Operating lease right-of-use assets and liabilities, net	(23		)	60
Change in fair value of contingent forward purchase obligations	—			(411		)
Changes in assets and liabilities:
Accounts receivable, prepaid expenses, other current assets, and other assets	(974		)	(781		)
Accounts payable and accrued liabilities	1,381			(1,357		)
Accrued compensation and benefits	(526		)	(87		)
Deferred revenue	1,393			—
Net cash used in operating activities	(29,200		)	(29,954		)

Investing activities:
Purchases of property and equipment	(132		)	(35		)
Net cash used in investing activities	(132		)	(35		)

Financing activities:
Proceeds from issuance of common and preferred stock pursuant to rights offering, net of issuance costs	29,186			—
Proceeds from issuance of common stock, net of issuance costs	4,699			—
Proceeds from exercise of stock options	5			—
Principal paid on Term Loan	(741		)	—
Net cash provided by financing activities	33,149			—
Net increase (decrease) in cash, cash equivalents, and restricted cash	3,817			(29,989		)
Cash, cash equivalents, and restricted cash at beginning of period	60,268			74,562
Cash, cash equivalents, and restricted cash at end of period	$	64,085		$	44,573

Supplemental disclosure of cash flows:
Interest paid	$	255		$	315
Non-cash investing activities:
Property and equipment included in accounts payable	$	55		$	—
Right-of-use asset obtained in exchange for lease liability	$	—		$	2,295
Non-cash financing activities:
Sale of shares pursuant to Employee Stock Purchase Plan	$	231		$	210

See accompanying notes.

CIDARA THERAPEUTICS, INC.

Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity

(unaudited)

Nine Months Ended
September 30,
(In thousands) 2017 2016
Operating activities:
Net loss $ (42,300 ) $ (33,771 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 528
547
Stock-based compensation 4,206
3,254
Non-cash interest expense 58
—
Amortization of discount or premium on short-term investments (45 ) (127 )
Deferred rent (19 ) (4 )
Changes in assets and liabilities:
Accounts receivable (337 ) —
Prepaid expenses and other current assets (952 ) (506 )
Accounts payable and accrued liabilities (1,185 ) 1,607
Accrued compensation (372 ) 1,072
Other assets —
(117 )
Net cash used in operating activities (40,418 ) (28,045 )

Investing activities:
Purchases of short-term investments (9,880 ) (69,617 )
Maturities of short-term investments 19,300
60,000
Purchases of property and equipment (166 ) (287 )
Net cash provided by (used in) investing activities 9,254
(9,904 )

Financing activities:
Proceeds from exercise of stock options 152
70
Repurchase of unvested restricted stock (79 ) —
Debt issuance costs —
(24 )
Deferred public offering costs —
(37 )
Net cash provided by financing activities 73
9
Net decrease in cash and cash equivalents (31,091 ) (37,940 )
Cash and cash equivalents at beginning of period 85,367
62,562
Cash and cash equivalents at end of period $ 54,276
$ 24,622

Supplemental disclosure of cash flows:
Interest paid $ 378
$ —
Non-cash investing activities:
Property and equipment acquired but not yet paid $ 16
$ 38
Non-cash financing activities:
Vesting of early exercised stock options $ 35
$ 166
Purchase of shares pursuant to Employee Stock Purchase Plan $ 301
$ 294



	Three and Six Months Ended June 30, 2020
	Series X Convertible Preferred Stock			Common Stock			Additional Paid-In Capital		Accumulated Deficit			Total Stockholders' Equity
(In thousands, except share data)	Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Deficit			Total Stockholders' Equity
Balance, December 31, 2019	565,231	$	—	33,838,466	$	3	$	297,659	$	(259,827	)	$	37,835
Rights offering, net of offering costs	531,288	—		6,639,307	1		29,185		—			29,186
Recognition of beneficial conversion feature	—	—		—	—		2,762		(2,762		)	—
Issuance of common stock, net of offering costs	—	—		7,600	—		19		—			19
Issuance of common stock for exercise of options	—	—		1,834	—		5		—			5
Issuance of common stock for restricted share units vested	—	—		72,304	—		—		—			—
Stock-based compensation	—	—		—	—		1,246		—			1,246
Net loss	—	—		—	—		—		(14,539		)	(14,539		)
Balance, March 31, 2020	1,096,519	$	—	40,559,511	$	4	$	330,876	$	(277,128	)	$	53,752
Issuance of common stock, net of offering costs	—	—		1,326,769	—		4,680		—			4,680
Issuance of common stock under Employee Stock Purchase Plan	—	—		132,915	—		231		—			231
Stock-based compensation	—	—		—	—		995		—			995
Net loss	—	—		—	—		—		(18,306		)	(18,306		)
Balance, June 30, 2020	1,096,519	$	—	42,019,195	$	4	$	336,782	$	(295,434	)	$	41,352



	Three and Six Months Ended June 30, 2019
	Series X Convertible Preferred Stock			Common Stock				Additional Paid-In Capital		Accumulated Deficit			Total Stockholders' Equity
(In thousands, except share data)	Shares	Amount		Shares		Amount		Additional Paid-In Capital		Accumulated Deficit			Total Stockholders' Equity
Balance, December 31, 2018	445,231	$	—	27,816,014		$	3	$	277,871	$	(218,735	)	$	59,139
Stock-based compensation	—	—		—		—		1,284		—			1,284
Vesting of restricted stock units	—	—		25,837		—		—		—			—
Issuance of Series X Convertible Preferred Stock in exchange for common stock	120,000	—		(1,200,000	)	—		—		—			—
Net loss	—	—		—		—		—		(16,561		)	(16,561		)
Balance, March 31, 2019	565,231	$	—	26,641,851		$	3	$	279,155	$	(235,296	)	$	43,862
Stock-based compensation	—	—		—		—		1,257		—			1,257
Issuance of common stock under Employee Stock Purchase Plan	—	—		126,138		—		210		—			210
Net loss	—	—		—		—		—		(13,547		)	(13,547		)
Balance, June 30, 2019	565,231	$	—	26,767,989		$	3	$	280,622	$	(248,843	)	$	31,782

See accompanying notes.

CIDARA THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. THE COMPANY AND BASIS OF PRESENTATION

Description of Business

Cidara Therapeutics, Inc., or the Company, was originally incorporated in Delaware in December 2012 as K2 Therapeutics, Inc., and its name was changed to Cidara Therapeutics, Inc. in July 2014. The Company is a biotechnology company focused on the discovery, development and commercialization of novel ~~anti-infectives. The Company’s product portfolio is comprised of proprietary product candidates~~anti-infectives for the treatment and prevention of diseases that are inadequately addressed by current standard of care therapies. The Company is developing a pipeline of product and development candidates, with a focus on serious fungal and viral infections. The Company’s lead product candidate is rezafungin acetate, an intravenous formulation of a novel echinocandin being developed for the treatment and prevention of serious fungal infections. The Company is also advancing its Cloudbreak® antiviral platform to develop Antiviral Fc-Conjugates, or AVCs, for the prevention and ~~bacterial~~treatment of influenza and other viral infections. ~~In March 2016, the~~

The Company formed a wholly-owned ~~subsidiary,~~subsidiaries, Cidara Therapeutics UK Limited, in England, and Cidara Therapeutics (Ireland) Limited, in Ireland, in March 2016 and October 2018, respectively, for the purpose of developing its product candidates in Europe.

Basis of Presentation

The Company has a limited operating history and the sales and income potential of the Company’s business and market are unproven. The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has experienced net losses and negative cash flows from operating activities since its inception. At ~~September~~June 30, ~~2017,~~2020, the Company had an accumulated deficit of ~~$136.0~~$295.4 million. The Company expects to continue to incur net losses into the foreseeable future. Successful transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support the Company’s cost structure. ~~The~~

At June 30, 2020, the Company ~~has prepared~~had cash, ~~flow forecasts which indicate, based~~cash equivalents and restricted cash of $64.1 million. Based on ~~its~~the Company’s current business plan, management believes that existing cash ~~resources available~~ and ~~the October 2017 private placement of common stock (see Note 10), that it~~cash equivalents will ~~have~~not be sufficient ~~resources~~ to fund ~~its business, including its ongoing clinical trials,~~the Company’s obligations for ~~at least the next 12~~twelve months from the ~~date~~issuance of ~~this filing.~~these financial statements. The Company’s ability to execute its operating plan depends on its ability to obtain additional funding through equity offerings, debt financings or potential licensing and collaboration arrangements. The accompanying consolidated financial statements have been prepared assuming the Company will ~~need~~continue as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business. However, the Company’s current working capital, anticipated operating expenses and net losses and the uncertainties surrounding its ability to raise additional capital as needed, as discussed below, raise substantial doubt about its ability to continue as a going concern for a period of one year following the date that these financial statements are issued. The consolidated financial statements do not include any adjustments for the recovery and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company plans to continue to fund its losses from ~~operations. It anticipates raising capital~~operations through cash and cash equivalents on hand, as well as through future equity offerings, debt financings, other third party funding, and ~~equity financing, through government funding~~potential licensing or ~~through collaborations~~collaboration arrangements. There can be no assurance that additional funds will be available when needed from any source or, ~~partnerships with other entities. Debt or equity financing, government funding or collaborations and partnerships with other entities may not~~if available, will be available on ~~a timely basis on~~ terms that are acceptable to the ~~Company, or at all. If~~Company. Even if the Company ~~is not able~~raises additional capital, it may also be required to ~~secure adequate additional funding,~~modify, delay or abandon some of its plans which could have a material adverse effect on the ~~Company may be forced~~Company’s business, operating results and financial condition and the Company’s ability to ~~delay, reduce or eliminate~~achieve its research and development programs or future commercialization efforts, or to make reductions in spending, extend payment terms with suppliers, liquidate or grant rights to assets where possible, or suspend or curtail planned programs.intended business objectives. Any of these actions could materially harm the Company’s business, results of operations and future prospects.

In addition to the foregoing, the Company is monitoring closely the impact of the COVID-19 pandemic on its business and has taken steps designed to protect the health and safety of its employees while continuing its operations. Given the level of uncertainty regarding the duration and impact of the COVID-19 pandemic on capital markets and the U.S. economy, the Company is currently unable to assess the impact of the COVID-19 pandemic on its future access to capital. The Company is continuing to monitor the spread of COVID-19 and its potential impact on the Company's operations. The full extent to which the COVID-19 pandemic will impact the Company's business, results of operations, financial condition, clinical trials, and preclinical research will depend on future developments that are highly uncertain, including actions taken to contain or treat COVID-19 and their effectiveness, as well as the economic impact on national and international markets.

Unaudited Interim Financial Data—

The accompanying condensed consolidated financial statements are unaudited and have been prepared by the Company in accordance with U.S. generally accepted accounting principles, or GAAP, as found in the Accounting Standards Codification, or ASC, of the Financial Accounting Standards Board, or FASB. Certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted. These interim condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of the Company’s financial position and results of operations for the interim periods ended ~~September~~June 30, ~~2017~~2020 and ~~2016.~~2019.

Basis of Consolidation—

The consolidated financial statements include the accounts of the Company and its wholly-owned ~~subsidiary.~~subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

~~Use of Estimates~~—The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of expenses during the reporting period. The Company evaluates its estimates and assumptions on an ongoing basis. The most significant estimates in the Company’s consolidated financial statements relate to estimating the fair value of the Company’s common shares used to account for share-based compensation and certain accruals, including those related to preclinical and clinical activities. Although the estimates are based on the Company’s knowledge of current events, comparable companies, and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

Segment Information—

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, the Chief Executive Officer, in

making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business as one operating segment.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents—

The Company considers all short-term investments purchased with a maturity of three months or less when acquired to be cash equivalents.

~~Investments Available-for-Sale— Available-for-sale securities are carried at fair value,~~Restricted cash represents cash that the Company is required to maintain on hand in order to maintain compliance with an operating covenant in the ~~unrealized gains and losses reported in accumulated other comprehensive income (loss). The amortized cost of debt securities is adjusted~~Third Amendment to the Company's Loan Agreement with Pacific Western Bank. See Note 4 for amortization of premiums and accretion of discounts to maturity. The amortization of premiums and accretion of discounts is included in interest income. Realized gains and losses and declines in value judged to be other-than-temporary, if any, on available-for-sale securities are included in other income (expense). The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income. Securities with maturity dates of 12 months or less from the date of purchase are classified as short-term investments and securities with maturity dates of more ~~than 12 months are classified as long-term investments.~~information.

Concentration of Credit Risk—

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash ~~equivalents and short-term investments. Periodically, the~~equivalents. The Company maintains deposits in government insured financial institutions in excess of government insured limits. The Company invests its cash balances in financial institutions that it believes have high credit quality, has not experienced any losses on such accounts and does not believe it is exposed to significant credit risk.

Patent Costs—

The Company expenses all costs as incurred in connection with patent applications (including direct application fees, and the legal and consulting expenses related to making such applications), and such costs are included in general and administrative expenses in the accompanying statements of operations.

Income Taxes—

The Company follows the FASB's ASC 740, Income Taxes,, in reporting deferred income taxes. ASC 740 requires a company to recognize deferred tax assets and liabilities for expected future income tax consequences of events that have been recognized in the Company’s consolidated financial statements. Under this method, deferred tax assets and liabilities are determined based on temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in the years in which the temporary differences are expected to reverse. Valuation allowances are provided if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company accounts for uncertain tax positions pursuant to ASC 740, which prescribes a recognition threshold and measurement process for financial statement recognition of uncertain tax positions taken or expected to be taken in a tax return. If the tax position meets this threshold, the benefit to be recognized is measured as the tax benefit having the highest likelihood of being realized upon ultimate settlement with the taxing authority. The Company recognizes interest accrued related to unrecognized tax benefits and penalties in the provision for income taxes.

Revenue Recognition—

The Company recognizes ~~revenues~~revenue is accordance with Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers, which applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under Topic 606, an entity recognizes revenue when ~~all four~~its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the ~~following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery~~transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

In a contract with multiple performance obligations, the Company must develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation, which determines how the transaction price is allocated among the performance obligations. The estimation of the ~~products and/~~stand-alone selling price(s) may include estimates regarding forecasted revenues or ~~services has occurred; (3) the selling price is fixed or determinable;~~costs, development timelines, discount rates, and ~~(4) collectibility is reasonably assured.~~

~~Grant Funding~~—probabilities of technical and regulatory success. The Company evaluates each performance obligation to determine if it can be satisfied at a point in time or over time. Any change made to estimated progress towards completion of a performance obligation and, therefore, revenue recognized will be recorded as a change in estimate. In addition, variable consideration must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price.

If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in a contract, the Company recognizes revenues from the transaction price allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from the allocated transaction price. The Company evaluates the measure of progress at each reporting period and, if necessary, adjusts the measure of performance and related revenue or expense recognition as a change in estimate.

At the inception of each arrangement that includes milestone payments, the Company evaluates whether the milestones are considered probable of being reached. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s or a collaboration partner’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company re-evaluates the probability of achievement of milestones that are within its or a collaboration partner’s control, such as operational developmental milestones and any related constraint, and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which will affect collaboration revenues and earnings in the period of adjustment. Revisions to the Company’s estimate of the transaction price may also result in negative collaboration revenues and earnings in the period of adjustment.

For arrangements that include sales-based royalties, including commercial milestone payments based on the level of sales, and a license is deemed to be the predominant item to which the royalties relate, the Company will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has ~~received~~been allocated has been satisfied, or partially satisfied. To date, the Company has not recognized any royalty revenue from collaborative arrangements.

In September 2019, the Company entered into a Collaboration and License Agreement, or the Collaboration Agreement, with Mundipharma Medical Company, or Mundipharma. The Company concluded that there were three significant performance obligations under the Collaboration Agreement: the license, the research and development ~~funding through~~services, and the clinical supply services, and that the obligations are distinct from each other. Revenue associated with the license was recognized upon delivery in September 2019.

The Company concluded that progress towards completion of the research and development and clinical supply performance obligations related to the Collaboration Agreement is best measured in an amount proportional to the collaboration expenses incurred and the total estimated collaboration expenses. The Company periodically reviews and updates the estimated collaboration expenses, when appropriate, which may adjust revenue recognized for the period. While such changes to the Company’s estimates have no impact on the Company’s reported cash flows, the amount of revenue recorded in the period could be materially impacted. The transaction price to be recognized as revenue under the

Collaboration Agreement consists of the upfront payment and estimated reimbursable research and development and clinical supply costs.

Potential future payments for variable consideration, such as clinical, regulatory or commercial milestones, will be recognized when it is probable that, if recorded, a ~~grant from a nonprofit organization.~~ significant reversal will not take place. Potential future royalty payments will be recorded as revenue when the associated sales occur.

See Note 7 - Significant Agreements and Contracts for more information.

Grant Funding

The Company has evaluated the terms of the ~~grant~~research and development grants to assess its obligations and the classification of funding received. Amounts billable for funded research and development are recognized in the statement of operations as a reduction to research and development expense over the grant period as the related costs are incurred to meet the Company's obligations.

Research and Development Costs—

Research and development expenses consist of wages, benefits and stock-based compensation charges for research and development employees, scientific consultant fees, facilities and overhead expenses, laboratory supplies, manufacturing expenses, and ~~preclinical~~nonclinical and clinical trial costs. The Company accrues ~~preclinical~~nonclinical and clinical trial expenses based on work performed, which relies on estimates of total costs incurred based on patient enrollment, completion of studies, and other events.

~~Costs~~Preclinical and Clinical Trial Accruals

The Company makes estimates of its accrued expenses as of each balance sheet date in the financial statements based on the facts and circumstances known at that time. Accrued expenses for preclinical studies and clinical trials are based on estimates of costs incurred and fees that may be associated with services provided by contract research organizations, or CROs, clinical trial investigational sites and other clinical trial-related activities. Payments under certain contracts with such parties depend on factors such as successful enrollment of patients, site initiation and the completion of clinical trial milestones. In accruing for these services, the Company estimates the time period over which services will be performed and the level of effort to be expended in ~~purchasing technology assets and intellectual property are charged~~each period. If possible, the Company obtains information regarding unbilled services directly from these service providers. However, the Company may be required to estimate these services based on other available information. If the Company underestimates or overestimates the activities or fees associated with a study or service at a given point in time, adjustments to research and development expenses may be necessary in future periods. Historically, estimated accrued liabilities have approximated actual expense ~~if the technology has not been conclusively proven to be feasible and has no alternative future use.~~

~~Comprehensive Loss—Comprehensive loss is defined as the~~incurred. Subsequent changes in estimates may result in a material change in equity during a period from transactions and other events and/or circumstances from non-owner sources. The Company’s only component of other comprehensive loss is unrealized gains (losses) on marketable securities. Comprehensive gains (losses) have been reflected in the condensed consolidated statements of operations and comprehensive loss and as a separate component of the statements of convertible preferred stock and stockholders’ equity (deficit) for all periods presented.accruals.

Stock-based Compensation—

The Company accounts for stock-based compensation expense related to ~~employee~~ stock options and employee stock purchase plan rights by estimating the fair value on the date of grant using the Black-Scholes option pricing model. The fair value of Restricted Stock Units, ~~(RSUs)~~or RSUs, and Performance-based RSUs, ~~(PRSUs) granted to employees~~or PRSUs, is estimated based on the closing price of the Company's common stock on the date of grant. For awards subject to time-based vesting conditions, stock-based compensation expense is recognized ratably over the requisite service period of the awards. For awards subject to performance-based vesting conditions, the Company assesses the probability of achievement of the individual milestones under the stock-based awards and recognizes stock-based compensation expense over the implicit service period commencing once the Company believes the performance criteria is probable of achievement. The Company ~~accounts for stock options, RSUs, and PRSUs granted~~recognizes forfeitures related to ~~non-employees using the fair value approach. These~~ stock-based ~~awards are subject to periodic revaluation over their vesting terms.~~compensation as they occur.

Net Loss Per Share—

Basic net loss per share is ~~computed~~calculated by dividing the net loss allocable to common shares by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss allocable to common shares by the weighted-average number of common shares and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods. Dilutive common stock equivalents are comprised of ~~convertible preferred stock,~~warrants, Series X Convertible Preferred Stock, and unvested restricted common stock subject to repurchase, ~~warrants,~~as well as RSUs, and ~~RSUs~~PRSUs and options outstanding under the Company’s stock option plans. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding.

Net loss allocable to common shares for the six months ended June 30, 2020 includes a one-time, non-cash deemed dividend of $2.8 million resulting from the recognition of a beneficial conversion feature. See Note 5 to our financial statements for additional information.

The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because to do so would be anti-dilutive (in common stock equivalent shares):


	September 30,		Three and Six Months Ended June 30,
	2017	2016	2020	2019
Common stock options and RSUs issued and outstanding	3,323,599	2,343,644
Common stock warrants	17,331	—	12,517,328	12,517,328
Common stock subject to repurchase	13,269	79,807
Series X Convertible Preferred stock			10,965,190	5,652,310
Common stock options, RSUs and PRSUs issued and outstanding			6,665,426	5,690,778
Total	3,354,199	2,423,451	30,147,944	23,860,416

Fair Value of Financial Instruments—

The Company follows ~~authoritative guidance~~ASC 820-10 issued by the FASB with respect to fair value reporting for financial assets and liabilities. The guidance defines fair value, provides guidance for measuring fair value and requires certain disclosures. The guidance does not apply to measurements related to share-based payments. The guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.

The Company’s financial instruments consist of cash and cash equivalents, ~~marketable securities,~~restricted cash, accounts receivable, prepaid expenses, accounts payable, accrued liabilities, a contingent forward purchase obligation, and long-term debt. Fair value estimates of these instruments are made at ~~a specific point in time~~each reporting period end based on relevant market information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. The carrying amount of cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses, accounts payable, and accrued liabilities are generally considered to be representative of their respective fair values because of the short-term nature of those instruments. The fair value of ~~short-term investments~~contingent forward purchase obligations is based ~~upon market prices quoted~~ on ~~the last day of the fiscal period or other observable market inputs.~~a probability-weighted valuation approach (See Note 3). The Company believes that the fair value of long-term debt approximates its carrying value.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting period. The Company evaluates its estimates and assumptions on an ongoing basis. The most significant estimates in the Company’s consolidated financial statements relate to estimating the fair value of the Company’s stock options, estimated collaboration expenses and incurred expenses related to the Mundipharma Collaboration Agreement, and certain accruals, including those related to nonclinical and clinical activities. Although the estimates are based on the Company’s knowledge of current events, comparable companies, and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

Recently Issued Accounting Standards~~—During 2014,~~

Recently Issued Accounting Standards Not Yet Adopted

In December 2019, the FASB issued ASU ~~2014-09,~~ ~~"Revenue from Contracts with Customers~~,2019-12, "Simplifying the Accounting for Income Taxes," which ~~outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers~~eliminates certain exceptions within ASC 740, Income Taxes, and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 outlines a five-step process for revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards, and also requires enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows from contracts with customers. Numerous ASUs were issued in 2016 to require additional disclosures, to provide clarification on a number of specific issues pertaining to ASU 2014-09, and to

~~defer the effective date for ASU 2014-09 to interim and annual periods beginning after December 31, 2017. The Company is currently evaluating the impact~~clarifies other aspects of the ~~new standard on its CARB-X Subaward Agreement. Given the timing of the signing of the contract the Company elected not~~current guidance to ~~early adopt the guidance.~~promote consistency among reporting entities. The ~~Company’s evaluation of the new~~updated guidance ~~is ongoing, as is the assessment of the adoption method and the ultimate impact the adoption of this standard will have on the Company's consolidated financial statements.~~

~~During 2017, the FASB issued ASU No. 2017-09, "Compensation - Stock Compensation: Scope of Modification Accounting," which provides clarity and guidance around which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The standard~~ is effective for interim and annual periods beginning after December 15, ~~2017.~~2020. Early adoption is permitted. The Company does not expect the standard to have a material impact on its financial statements upon adoption.

Recently Adopted Accounting Standards

In August 2018, the FASB issued ASU 2018-13, "Changes to the Disclosure Requirements for Fair Value Measurement," which modifies certain disclosure requirements on fair value measurements. The Company adopted ASU 2018-13 effective January 1, 2020. The adoption of this ~~guidance is~~standard did not ~~expected to~~ have a material impact on the Company's financial statements.

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." The updated guidance replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 requires that an entity measure and recognize expected credit losses for financial assets held at amortized cost and replaces the incurred loss impairment methodology in prior GAAP with a methodology that requires consideration of a broader range of information to estimate credit losses, and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, the standard now requires allowances to be recorded instead of reducing the amortized cost of the investment. This standard limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases. The Company adopted ASU 2016-13 effective January 1, 2020. Based on the composition of the Company's financial assets, current economic conditions, historical experience, issuer-specific factors and market data, the adoption of this standard did not have a material impact on the Company's financial statements. The Company will continue to actively monitor the impact of the recent COVID-19 pandemic on expected credit losses.

3. ~~SHORT-TERM INVESTMENTS~~

~~The following table summarizes the available-for-sale securities held at September 30, 2017 and December 31, 2016 (in thousands):~~

As of September 30, 2017 Amortized Cost Unrealized Gains Unrealized Losses Fair Value
Corporate debt $ 9,877
$ —
$ (1 ) $ 9,876
Total $ 9,877
$ —
$ (1 ) $ 9,876

As of December 31, 2016 Amortized Cost Unrealized Gains Unrealized Losses Fair Value
Commercial paper $ 19,253
$ 1
$ (2 ) $ 19,252
Total $ 19,253
$ 1
$ (2 ) $ 19,252

All available-for-sale securities held at September 30, 2017 and December 31, 2016 had maturities of less than one year. Unrealized gains and losses on available-for-sale securities are included as a component of other comprehensive loss. The securities in unrealized loss positions had not been in a continuous unrealized loss position for 12 months or longer. The Company reviews its investments to identify and evaluate investments that have an indication of possible other-than-temporary impairment. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

4. FAIR VALUE MEASUREMENTS

The Company follows ASC 820-10, Fair Value Measurements and Disclosures,, which among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement ~~that should be~~ determined based on assumptions that market participants would use in pricing an asset or liability. The carrying amounts of accounts payable and accrued liabilities are considered to be representative of their respective fair values because of the short-term nature of those instruments. Based on the borrowing rates available to the Company for loans with similar terms, which is considered a Level 2 input as described below, the Company believes that the fair value of long-term debt approximates its carrying value.

As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

Level 1:1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2:2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3:3: Unobservable inputs infor which there is little or no market data, which require the reporting entity to develop its own assumptions, ~~and~~ which reflect those that a market participant would use.

The Company classifies investments in money market funds within Level 1 as the prices are available from quoted prices in active markets. Investments in commercial paper, corporate debt and reverse repurchase agreements are classified ~~with~~within Level 2 as these instruments are valued using observable market inputs including reported trades, broker/dealer quotes, bids and/or offers.

As discussed in Note 5, on May 21, 2018, the Company entered into a subscription agreement with certain investors providing for the purchase and sale of up to an aggregate of $120.0 million of its common stock and preferred stock in three closings. The second and optional third closings and warrants related to the optional third closing, which are triggered by the Company's announcement of topline data of Part B of its STRIVE Phase 2 clinical trial of rezafungin, contain features for subsequent closings that are not solely within the control of the Company and that embody an obligation that the Company must settle by issuing a variable number of shares when the obligation is based predominantly on having a fixed value at inception. In accordance with ASC 480, "Distinguishing Liabilities from Equity," the Company determined that these closings are classified as liabilities and represent contingent forward purchase obligations. These liabilities are required to be recorded at their estimated fair value initially and on a recurring basis. The contingent forward purchase obligations are classified within Level 3 of the fair value hierarchy as the Company is using a probability-weighted valuation approach, utilizing significant unobservable inputs including the probability and estimated timing of achieving positive or negative results associated with Part B of the STRIVE Phase 2 clinical trial and estimated discount rates related to the risk of achievement of the expected equity issuances. The liability was initially recorded at $4.3 million on May 21, 2018. Fair value adjustments resulting in a gain of $0.4 million were recorded during the six month period ended June 30, 2019. The contingent forward purchase obligation did not exist as of June 30, 2020 and December 31, 2019.

None of the Company’s non-financial assets or liabilities are recorded at fair value on a non-recurring basis. No transfers between levels have occurred during the periods presented.

The following tables summarize the Company’s financial instruments measured at fair value on a recurring basis (in thousands):

TOTAL LEVEL 1 LEVEL 2 LEVEL 3
September 30, 2017
Assets:
Money market funds $ 16,539
$ 16,539
$ —
$ —
U.S. Treasury reverse repurchase agreements 37,500
—
37,500
—
Corporate debt 9,876
—
9,876

Total assets at fair value $ 63,915
$ 16,539
$ 47,376
$ —
December 31, 2016
Assets:
Money market funds $ 84,830
$ 84,830
$ —
$ —
Commercial paper 19,252
—
19,252
—
Total assets at fair value $ 104,082
$ 84,830
$ 19,252
$ —



	TOTAL		LEVEL 1		LEVEL 2		LEVEL 3
June 30, 2020
Assets:
Cash and money market funds	$	54,826	$	54,826	$	—	$	—
Restricted cash and money market accounts	9,259		9,259		—		—
Total assets at fair value	$	64,085	$	64,085	$	—	$	—

December 31, 2019
Assets:
Cash and money market accounts	$	50,268	$	50,268	$	—	$	—
Restricted cash and money market accounts	10,000		10,000		—		—
Total assets at fair value	$	60,268	$	60,268	$	—	$	—

5.4. DEBT

Term Loans— On October 3, 2016, the Company entered into a loan and security agreement, ~~(the "Loan Agreement"),~~or the Loan Agreement, with Pacific Western Bank, as the collateral agent and a lender, ~~(the "Lender"),~~or the Lender, pursuant to which the Lender agreed to lend to the Company up to $20.0 million in a series of term loans. Contemporaneously, the Company borrowed $10.0 million from the Lender, ~~(the "Term~~or the Term A ~~Loan").~~

Loan. Under the terms of the Loan Agreement, ~~and subject to~~because the ~~achievement of~~Company achieved positive ~~Phase 2~~ clinical results from the STRIVE ~~study (the "Milestone"),~~Phase 2 clinical trial of rezafungin by March 31, 2018, or the Milestone, the Company ~~may,~~had the option to borrow, at its sole discretion, ~~through~~until October 3, 2018, ~~borrow~~ from the Lender up to an additional $10.0 million, ~~(the "Term~~or the Term B ~~Loan," and together with Term A Loan, the "Term Loans"). Upon the occurrence of certain events, including but~~Loan. The Company did not ~~limited to the Company’s failure to satisfy its payment obligations~~borrow any funds available under the Term B Loan ~~Agreement,~~before the breach of certain of its other covenants under the Loan Agreement, including the receipt of positive Phase 2 clinical data from the rezafungin (formerly known as CD101 IV) program by March 31, 2018, or the occurrence of a material adverse change, the collateral agent will have the right, among other remedies, to declare all principal and interest and other amounts due to the Lender under the Loan Agreement immediately due and payable.draw period ended.

The Company’s obligations under the Loan Agreement are secured by a first priority security interest in substantially all of the Company’s current and future assets, other than its intellectual property, which is subject to a double negative pledge.

The Company may prepay the borrowed amounts, provided that the Company will be obligated to pay a prepayment fee equal to (i) 2.0% of the applicable principal amount of the Term ~~Loans mature~~Loan if the prepayment occurs before the first anniversary of the applicable funding date, and (ii) 1.0% of the applicable principal amount of the Term Loan if the prepayment occurs after the first anniversary of the funding date of such Term Loan but on or prior to the second anniversary of the funding date of such Term Loan.

While any amounts are outstanding under the Loan Agreement, the Company is subject to a number of affirmative and restrictive covenants, including covenants regarding dispositions of property, business combinations or acquisitions, incurring additional indebtedness and transactions with affiliates, among other customary covenants. The Company is also restricted from paying dividends or making other distributions or payments on its capital stock, subject to limited exceptions.

Pursuant to the Loan Agreement, on October 3, ~~2020 (the "Maturity Date"). Payments~~2016, the Company issued to the Lender a warrant to purchase an aggregate of up to 17,331 shares of the Company’s common stock at an exercise price of $11.54 per share. If the Company borrows additional amounts under the ~~Term Loans~~Loan Agreement, it will, in connection with any such borrowing, issue the Lender an additional warrant to purchase that number of shares of the Company’s common stock as is equal to 2.0% of the additional principal amount borrowed divided by the exercise price. The exercise price shall be ~~interest-only through April 2,~~equal to the 30-day average closing price of the Company’s common stock, calculated as of the date immediately prior to the date of such additional borrowing. The warrants are immediately exercisable and will expire ten years from the date of the grant.

On June 13, 2018, the Company and the Lender entered into a First Amendment to the Loan Agreement, which ~~will be extended by six months if~~reset the Milestone ~~event is achieved.~~ to require the Company to achieve positive data from Part B of the STRIVE Phase 2 clinical trial of rezafungin on or prior to July 31, 2019.

On July 27, 2018, the Company and the Lender entered into a Second Amendment to the Loan Agreement, which amended, among other things, the interest-only period, the date of maturity, or the Maturity Date, and the interest rate.

The interest-only period will be followed by 30equal monthly payments of principal and ~~interest, provided that there~~interest. The interest-only period will be 24followed by equal monthly payments ~~if the Milestone event is achieved.~~of principal and interest. The Term Loans will bear interest at a variable annual rate equal to the greater of (i) 4.5% or (ii) the Lender’s prime interest rate plus ~~1.0%~~0.75%. At ~~September~~June 30, ~~2017,~~2020, the Term ~~Loans bear~~A Loan bears interest at ~~5.25%~~4.5%.

On July 29, 2019, the Company announced positive data from Part B of the STRIVE clinical trial, which satisfied the Milestone. Within 30 days of satisfying the Milestone, the Company was required to agree with the Lender on an amendment to the Loan Agreement to define a new financial covenant and/or milestone for fiscal year 2019 and all subsequent fiscal years during the term of the Loan Agreement. On August 27, 2019, the Lender extended the deadline to execute this amendment to October 15, 2019, and on October 11, 2019, the Lender further extended this deadline until November 7, 2019.

On November 5, 2019, the Company and the Lender entered into a Third Amendment to the Loan Agreement, which reset the operating covenant to require the Company to maintain cash equal to or greater than the Company's outstanding indebtedness to the Lender, which is equivalent to a compensating balance and results in a restricted cash balance of $9.3 million and $10.0 million as of June 30, 2020 and December 31, 2019, respectively. The amendment also extended the interest-only period through April 3, 2020 and the maturity date through July 3, 2022.

The Company evaluated the First, Second and Third Amendments to determine whether the amendments represented modifications or extinguishment of debt. The Company determined that the amendments did not represent a substantial change from the original Loan Agreement and accounted for the amendments as debt modifications. Costs previously deferred under the original terms of the Loan Agreement are amortized into interest expense over the new term of the Second Amendment.

Upon the occurrence of certain events, including but not limited to the Company’s failure to satisfy its payment obligations under the Loan Agreement, the breach of certain of its other covenants under the Loan Agreement or the occurrence of a material adverse change, the Lender has the right, among other remedies, to declare all principal and interest and other amounts due to the Lender under the Loan Agreement immediately due and payable. The principal payments due under the Loan Agreement have been classified as a current liability at June 30, 2020 and December 31, 2019 due to the considerations discussed in Note 1 and the assessment that the material adverse change clause under the Loan Agreement is not within the Company's control. The Company has not been notified of an event of default by the Lenders as of the date of the filing of this Form 10-Q.

As of ~~September~~June 30, ~~2017,~~2020, future principal payments due under the Third Amendment of the Term A Loan are as follows (in thousands):


Year ended:
December 31, 2017	$	—
December 31, 2018	2,667
December 31, 2019	4,000
December 31, 2020	3,333		$	2,222
December 31, 2021			4,444
December 31, 2022			2,593
Total future principal payments due under the Term A Loan	$	10,000	$	9,259

6.5. STOCKHOLDERS’ EQUITY

2020 Rights Offering

On January 22, 2020, the Company initiated a rights offering to raise gross proceeds of $30.0 million through the distribution of subscription rights to holders of its common stock, Series X Preferred Stock,— and warrants to purchase common stock issued on May 21, 2018, or the Rights Offering. On February 12, 2020, the Company sold 6,639,307 shares of common stock and 531,288 shares of Series X Preferred Stock for $2.51 and $25.10 per share, respectively, for aggregate gross proceeds of $30.0 million. Total offering costs of $0.8 million were offset against the proceeds from the sale of common stock for total net proceeds of $29.2 million. The Rights Offering was fully backstopped by Biotechnology Value Fund, L.P., or BVF, and Stonepine Capital, LP, or Stonepine.

With respect to the Series X Convertible Preferred Stock, because the effective conversion price on the commitment date was below the fair value of the common stock at the date of issuance, a beneficial conversion feature with a calculated fair value of $2.8 million existed at the issuance date. As the Series X Convertible Preferred stock is fully convertible at issuance, the full $2.8 million was recorded at issuance as a one-time deemed dividend on February 12, 2020. This one-time, non-cash deemed dividend impacted accumulated deficit and additional paid in capital at June 30, 2020 and net loss attributable to common stockholders and net loss attributable to common stockholders per share for the six months ended June 30, 2020.

With respect to the common stock, because the purchase price was below fair value on the issuance date, a bonus element exists at the issuance date. Basic and diluted net loss per common share and shares used to compute basic and diluted net loss per common share have been retroactively adjusted for all periods presented to reflect this bonus element.

Mundipharma Stock Purchase Agreement

On September 3, 2019, the Company entered into a Stock Purchase Agreement, or the Purchase Agreement, with Mundipharma AG, or the Purchaser, a related party, pursuant to which the Company issued to the Purchaser 4,781,408 shares of its common stock, or the Shares, in a private placement at a price per share of $1.884 (a 20% premium to the volume weighted average price of the Company’s common stock for the 10 trading days prior to September 3, 2019) for an aggregate purchase price of approximately $9.0 million.

Under the Purchase Agreement, until September 3, 2020, or the Lock-Up Period, the Purchaser may not transfer or sell the Shares without the prior written consent of the Company. In addition, pursuant to the terms of the Stock Purchase Agreement, the Company filed a registration statement with the U.S. Securities and Exchange Commission, or the SEC, to register for resale the 4,781,408 shares of common stock purchased by the Purchaser.

May 2018 Registered Direct Offering

On May 21, 2018, the Company entered into a subscription agreement with certain investors providing for the purchase and sale, in a registered direct offering, of up to an aggregate of $120.0 million of its common stock and preferred stock in three closings. On May 23, 2018, the Company completed the first closing, which was comprised of 6,185,987 shares of common stock at an offering price of $4.70 per share, 445,231 shares of Series X Convertible Preferred Stock at an offering price of $47.00 per share, and an option fee relating to the third closing paid by the investors for a total of $0.5 million. In a private placement concurrent with the first closing, or the First Private Placement, the Company also sold warrants, at $0.125 per warrant share, to purchase an aggregate of 12,499,997 shares of common stock. Net proceeds for the first closing and the First Private Placement were $49.5 million.

The Company performed an analysis to allocate the proceeds from the May 2018 registered direct offering to the offering's various components on a relative fair value basis, including the contingent forward purchase obligations (discussed further in Note 3) as well as the common stock, Series X Convertible Preferred Stock, warrants, and option fee. With respect to the Series X Convertible Preferred Stock, because the adjusted conversion price on the commitment date (following the allocation of proceeds on a fair value basis) was below the fair value of the common stock at the date of issuance, a beneficial conversion feature with a calculated fair value of $10.3 million existed at the issuance date. The beneficial conversion feature is amortized as a deemed dividend to the preferred holders. As the Series X Convertible Preferred Stock is fully convertible at issuance, the full amortization of the $10.3 million was recorded at issuance as a one-time, non-cash deemed dividend on May 23, 2018.

The second closing of the registered direct offering was contingent on the Company’s announcement of topline data from Part B of its STRIVE global randomized Phase 2 clinical trial of rezafungin provided that the Company would not be obligated to complete the second closing if the purchase price was less than $4.70 per share, and the third closing of the registered direct offering was to occur after the second closing, but at the Company’s option. On July 29, 2019, the Company announced positive data from Part B of its STRIVE clinical trial. Because the volume weighted average price of the Company's common stock for the five trading days following the public release of topline data from Part B of the STRIVE clinical trial of rezafungin was below $6.27, the resulting purchase price for the second and third closings of the May 2018 registered direct offering would have been less than $4.70 per share. Accordingly, the Company was unable to complete the second and third closings without first obtaining the approval of its stockholders.

On August 7, 2019, the Company notified the purchasers in the May 2018 registered direct offering that it had elected not to consummate the second closing of the offering. Accordingly, the obligations of the parties to the registered direct offering terminated and are of no further force or effect, and the second closing will not be held. As a result of this election, the optional third closing of the offering and the related concurrent private placement of warrants will not be held.

Preferred Stock

Under the amended and restated certificate of incorporation, the Company’s board of directors has the authority, without further action by the stockholders, to issue up to 10,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding. The Company had 10,000,000 shares of preferred stock authorized ~~and no~~at June 30, 2020.

In May 2018, the Company designated 5,000,000 shares of preferred stock as Series X Convertible Preferred Stock with a par value of $0.0001 per share. As of June 30, 2020, 1,096,519 shares of Series X Convertible Preferred Stock were issued and outstanding.

On March 22, 2019, the Company entered into an Exchange Agreement with BVF, and certain of its affiliated entities, pursuant to which BVF and certain of its affiliates, without monetary consideration, agreed to exchange an aggregate of 1,200,000 shares of the Company’s common stock for an aggregate of 120,000 shares of the Company’s Series X Convertible Preferred Stock.

The specific terms of the Series X Convertible Preferred Stock are as follows:

Conversion: Each share of Series X Convertible Preferred Stock is convertible at the option of the holder into 10 shares of common stock. Holders are not permitted to convert Series X Convertible Preferred Stock into common stock if, after conversion, the holder, its affiliates, and any other person whose beneficial ownership of common stock would be aggregated with the holder's for purposes of Section 13(d) or Section 16 of the Exchange Act, would beneficially own more than 9.99% of the number of shares of common stock outstanding ~~at September 30, 2017.~~immediately after the conversion.

Dividends: Holders of Series X Convertible Preferred Stock are not entitled to receive any dividends except to the extent that dividends are paid on the Company's common stock. If dividends are paid on shares of common stock, holders of Series X Convertible Preferred Stock are entitled to participate in such dividends on an as-converted basis.

Liquidation: Upon the liquidation, dissolution, or winding up of the company, each holder of Series X Convertible Preferred Stock will participate pari passu with any distribution of proceeds to holders of common stock.

Voting: Shares of Series X Convertible Preferred Stock will generally have no voting rights, except as required by law and except that the consent of the holders of a majority of the outstanding Series X Convertible Preferred Stock will be required to amend the terms of the Series X Convertible Preferred Stock, if such action would adversely alter or change the preferences, rights, privileges or powers of, or restrictions provided for the benefit of the Series X Convertible Preferred Stock, or to increase or decrease (other than by conversion) the number of authorized shares of Series X Convertible Preferred Stock.

The Company evaluated the Series X Convertible Preferred Stock for liability or equity classification under ASC 480, "Distinguishing Liabilities from Equity," and determined that equity treatment was appropriate because the Series X Convertible Preferred Stock did not meet the definition of the liability instruments defined thereunder as convertible instruments. Specifically, the Series X Convertible Preferred Stock does not meet the criteria for classification as an ASC 480 liability. As such, the Series X Convertible Preferred Stock is recorded as permanent equity. Additionally, the Series X Convertible Preferred Stock is not redeemable for cash or other assets (i) on a fixed or determinable date, (ii) at the option of the holder, and (iii) upon the occurrence of an event that is not solely within control of the Company.

Common Stock—

The Company had 200,000,000 shares of common stock authorized as of ~~September~~June 30, ~~2017.~~2020. Holders of outstanding shares of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the holders of common stock. Subject to the rights of the holders of any class of the Company’s capital stock having any preference or priority over common stock, the holders of common stock are entitled to receive dividends that are declared by the Company’s board of directors out of legally available funds. In the event of a liquidation, dissolution or winding-up, the holders of common stock are entitled to share ratably in the net assets remaining after payment of liabilities, subject to prior rights of preferred stock, if any, then outstanding. The common stock has no preemptive rights, conversion rights, redemption rights or sinking fund provisions, and there are no dividends in arrears or default. All shares of common stock have equal distribution, liquidation and voting rights, and have no preferences or exchange rights.

In September 2019, the Company began to sell shares of common stock under a controlled equity sales agreement with Cantor Fitzgerald & Co. During the six months ended June 30, 2020, the company sold 1,334,369 shares for net proceeds of approximately $4.7 million, after deducting placement agent fees.

Common Stock Warrants

As of June 30, 2020 and December 31, 2019, warrants to purchase 12,517,328 shares of common stock were outstanding at a weighted average exercise price of $6.82 per share.

Common Stock Reserved for Future Issuance

— Common stock reserved for future issuance is as follows (in common stock equivalent shares):


	September 30, 2017	December 31, 2016	June 30, 2020	December 31, 2019
Stock options and RSUs issued and outstanding	3,323,599	2,295,393
Common stock warrants			12,517,328	12,517,328
Series X Convertible Preferred Stock			10,965,190	5,652,310
Common stock options, RSUs and PRSUs issued and outstanding			6,665,426	5,360,563
Authorized for future stock awards under the Company's option plans	1,022,967	1,404,933	2,190,815	559,898
Authorized for future issuance under the ESPP	423,098	306,813	669,210	463,741
Common stock warrants	17,331	17,331
Total	4,786,995	4,024,470	33,007,969	24,553,840

~~7. STOCK~~6. EQUITY INCENTIVE PLANS

2015 Equity Incentive Plan

In March 2015, the Company’s board of directors and stockholders approved and adopted the 2015 Equity Incentive Plan, (“or the 2015 ~~EIP”).~~EIP. Under the 2015 EIP, the Company may grant stock options, stock appreciation rights, restricted stock, RSUs, and other awards to individuals who are employees, officers, directors, or consultants of the Company. The number of shares of stock available for issuance under the 2015 EIP will be automatically increased each January 1 by 4% of the outstanding number of shares of the Company’s common stock on the immediately preceding December 31 or such lesser number as determined by the Company’s board of directors.

Terms of stock award agreements, including vesting requirements, are determined by the board of directors, subject to the provisions of the 2015 EIP. Stock options granted by the Company generally vest over a three- or four-year ~~year~~ period. Certain stock options are subject to acceleration of vesting in the event of certain change of control transactions. The stock options may be granted for a term of up to 10 years from the date of grant. The exercise price for stock options granted under the 2015 EIP must be at a price no less than 100% of the estimated fair value of the shares on the date of grant as determined by the board of directors, provided that for an incentive stock option granted to an employee who at the time of grant owns stock representing more than 10% of the voting power of all classes of stock of the Company, the exercise price shall be no less than 110% of the estimated value on the date of grant.

2015 Employee Stock Purchase Plan

In March 2015, the Company’s board of directors and stockholders approved and adopted the 2015 Employee Stock Purchase Plan, or the ESPP. The number of shares of stock available for issuance under the ESPP will be automatically increased each January 1 by the ~~lower~~lesser of (i) 1% of the outstanding number of shares of the Company’s common stock on the immediately preceding December 31, (ii) 490,336 shares, or (iii) such lesser number as determined by the Company’s board of directors.

The ESPP allows substantially all employees to purchase the Company’s common stock through a payroll deduction at a price equal to 85% of the lower of the fair market value of the stock as of the beginning or the end of each purchase period. An employee’s payroll deductions under the ESPP are limited to 15% of the employee’s eligible compensation. During the ~~nine~~three and six months ended ~~September~~June 30, ~~2017, 52,086~~2020, 132,915 shares were issued pursuant to the ESPP.

~~Restricted~~ ~~Stock~~

The Company permits exercise of certain stock options prior to vesting. Any such unvested shares are restricted and subject to repurchase by the Company until the conditions for vesting are met. At September 30, 2017 and December 31, 2016, the liabilities for the cash received from the early exercise of stock options were $30,000 and $144,000, respectively, and were classified in accrued liabilities on the balance sheet. The Company reduces the liability as the underlying shares vest in accordance with the vesting terms outlined in the stock option agreements, which are generally 4 years. At September 30, 2017, 13,269 unvested shares were subject to repurchase by the Company.

Restricted Stock Units

The following table summarizes RSU and PRSU activity during the ~~nine~~six months ended ~~September~~June 30, ~~2017:~~2020:



	Number of RSUs and PRSUs
Outstanding at December 31, ~~2016~~2019	—383,885
RSUs and PRSUs granted	~~240,000~~125,975
RSUs and PRSUs vested	—(72,304	)
RSUs and PRSUs canceled	(~~10,000~~21,880	)
Outstanding at ~~September~~June 30, ~~2017~~2020	~~230,000~~415,676

~~For the nine months ended September 30, 2017, stock-based~~

Stock-based compensation expense related to RSUs and PRSUs was approximately ~~$9,000.~~$0.1 million and $0.2 million, respectively, for the three and six months ended June 30, 2020, and $0.1 million and $0.1 million, respectively, for the three and six months ended June 30, 2019. At ~~September~~June 30, ~~2017,~~2020, estimated unrecognized compensation expense related to RSUs and PRSUs ~~granted to employees~~grants was approximately ~~$1.5~~$1.2 million.

Stock Options

The following table summarizes stock option activity during the ~~nine~~six months ended ~~September~~June 30, ~~2017:~~2020:

Number of
Shares

Weighted
Average
Exercise Price

Weighted
Average
Remaining
Contractual Life
in Years

Total Aggregate
Intrinsic Value (in thousands)
Outstanding at December 31, 2016 2,295,393
$ 7.82
8.20 $ 6,774
Options granted 1,013,951
7.77

Options exercised (27,246 ) 5.58

Options canceled (188,499 ) 9.15

Outstanding at September 30, 2017 3,093,599
$ 7.75
8.27 $ 4,007
Vested and expected to vest at September 30, 2017 3,093,599
$ 7.75
8.27 $ 4,007
Exercisable at September 30, 2017 1,518,239
$ 7.37
7.69 $ 2,763



	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years	Total Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2019	4,976,678		$	4.37	7.27	$	3,880
Options granted	1,579,500		2.13
Options exercised	(1,834	)	2.61
Options canceled	(304,594	)	8.15
Outstanding at June 30, 2020	6,249,750		$	3.62	7.52	$	5,890
Vested and expected to vest at June 30, 2020	6,249,750		$	3.62	7.52	$	5,890
Exercisable at June 30, 2020	2,512,826		$	5.32	6.57	$	1,222

The intrinsic value of a stock option is the difference between the market price of the common stock at the measurement date and the exercise price of the option.

Stock-based compensation expense recognized for restricted shares, RSUs, PRSUs, stock options, and the ESPP has been reported in the statements of operations as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016		2020		2019		2020		2019
Research and development	$	666	$	669	$	1,805	$	1,550	$	528	$	654	$	1,129	$	1,297
General and administrative	889		641		2,401		1,704		467		603		1,112		1,244
Total	$	1,555	$	1,310	$	4,206	$	3,254	$	995	$	1,257	$	2,241	$	2,541

The weighted-average grant date fair value of ~~employee~~ stock options granted by the Company during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 was ~~$5.55~~$1.47 per share. ~~The total grant date fair value of employee stock options that vested during the nine months ended September 30, 2017 was $3.7 million.~~ As of ~~September~~June 30, ~~2017,~~2020, total unrecognized share-based compensation expense related to unvested ~~employee~~ stock options ~~of the Company~~ was approximately ~~$8.7~~$4.9 million. This unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately ~~2.0~~1.71 years.

As of ~~September~~June 30, ~~2017,~~2020, total unrecognized compensation expense related to the ESPP was approximately ~~$0.6~~$0.2 million. This unrecognized compensation cost is expected to be recognized over approximately ~~1.1~~0.5 years.

8.7. SIGNIFICANT AGREEMENTS AND CONTRACTS

~~Combating Antibiotic Resistant Bacteria Accelerator (CARB-X) Subaward~~Mundipharma Collaboration Agreement

On ~~March 30, 2017,~~September 3, 2019, the Company entered into the Collaboration Agreement with Mundipharma, a ~~Cost Reimbursement Research Subaward Agreement (the "Subaward Agreement") with~~related party, for a strategic collaboration to develop and commercialize rezafungin in an intravenous formulation, or the ~~Trustees~~Licensed Product, for the treatment and prevention of ~~Boston University.~~ invasive fungal infections.

Under the ~~Subaward~~Collaboration Agreement, the Company will be responsible for leading the conduct of an agreed global development plan, or the Global Development Plan, that includes the Company’s ongoing Phase 3 pivotal clinical trial of the Licensed Product for the treatment of candidemia and/or invasive candidiasis, or the ReSTORE Trial, and the Company’s planned Phase 3 pivotal clinical trial of the Licensed Product for the prophylaxis of invasive fungal infections in adult allogeneic blood and marrow transplant recipients, or the ReSPECT Trial, as well as specified GLP-compliant non‑clinical studies and chemistry, manufacturing and controls, or CMC, development activities for the Licensed Product.

Mundipharma will be responsible for performing all development activities, other than Global Development Plan activities, that may be necessary to obtain and maintain regulatory approvals for the Licensed Product in the Mundipharma Territory, at Mundipharma’s sole cost.

Pursuant to the Collaboration Agreement, the Company granted Mundipharma an exclusive, royalty‑bearing license to develop, register and commercialize the Licensed Product outside of the United States and Japan, or the Mundipharma Territory, subject to the Company’s retained right to lead a global development program for the Licensed Product in both the Mundipharma Territory and in the United States and Japan, or the Company Territory, as described below.

The Company also granted Mundipharma an option to obtain exclusive licenses to develop, register and commercialize rezafungin in a formulation for subcutaneous administration, or Subcutaneous Product, and in formulations for other modes of administration, or Other Products, in the Mundipharma Territory, subject to similar retained rights of the Company to conduct mutually agreed global development activities for such products. In addition, the Company granted Mundipharma a co‑exclusive, worldwide license to manufacture the Licensed Product and rezafungin.

Until the seventh anniversary of the first commercial sale of the Licensed Product in the Mundipharma Territory, each party has granted the other party an exclusive, time-limited right of first negotiation to obtain a license to any anti-fungal product (other than Licensed Product, Subcutaneous Product and Other Products) that such party proposes to out-license in the other party’s territory. However, in the event of the acquisition of a party by a third party, this right of first negotiation will not apply to any such anti‑fungal product of the acquiring third party prior to consummation of the acquisition of such party, acquired by such acquiring third party from another third party after consummation of the acquisition of such party, or developed internally by the acquiring third party, either before or after consummation of the acquisition of such party, without the use of, reliance upon or reference to any technology of the acquired party that is ~~a subawardee~~licensed to the other party under the ~~CARB-X program. CARB-X~~Collaboration Agreement, any technology of the other party that is ~~a public-private partnership focused on antibacterials, created~~licensed to the acquired party under the Collaboration Agreement, or any technology jointly developed by the ~~U.S. Department~~parties pursuant to the Collaboration Agreement.

The Company retains the exclusive right to develop, register and commercialize the Licensed Product, Subcutaneous Product and Other Products in the Company Territory, and Mundipharma has granted the Company certain licenses under Mundipharma-controlled technology and jointly-developed technology to develop, register and commercialize Licensed Product, Subcutaneous Product and Other Products in the Company Territory and to manufacture such products and rezafungin worldwide.

The parties have agreed to share equally (50/50) the costs of ~~Health~~Global Development Plan activities, or Global Development Costs, subject to a cap on Mundipharma’s Global Development Cost share of $31.2 million. The Company would receive additional financial support for Global Development Plan activities through a near-term milestone payment by Mundipharma of $11.1 million. Mundipharma is entitled to credit the full amount of this milestone payment toward future royalties payable to the Company, subject to a limit on the amount by which royalty payments to the Company may be reduced in any quarter. If Mundipharma has not fully credited the amount of such milestone payment toward royalties payable to the Company before the earlier of (i) December 31, 2024 and ~~Human Services (HHS)~~(ii) termination of the Collaboration Agreement by Mundipharma, the Company will be obligated to refund the uncredited portion of such milestone payment to Mundipharma on the earlier of such dates.

The total potential transaction value is $568 million, including an equity investment (see Note 5), ~~Biomedical Advanced~~ an up-front payment, global development funding, and certain development, regulatory, and commercial milestones. The Company is also eligible for double-digit royalties in the teens on tiers of annual net sales.

Either party may terminate the Collaboration Agreement for uncured material breach by the other party. After September 3, 2020, Mundipharma may terminate the Collaboration Agreement at will, provided that if Mundipharma terminates the Collaboration Agreement in its entirety prior to the last visit of the last patient in both the ReSPECT Trial and the ReSTORE Trial, Mundipharma will continue to be liable for its share of Global Development Costs as described above. The Company may terminate the Agreement if Mundipharma or any of its affiliates or sublicensees, directly or indirectly through any third party, commences any interference or opposition proceeding with respect to, challenges the validity or enforceability of, or opposes any extension of or the grant of a supplementary protection certificate with respect to, any of the Company's patent rights licensed to Mundipharma, or upon an insolvency event of Mundipharma.

Revenue Recognition

The Company determined the transaction price is equal to the up-front fee of $30.0 million plus the research and development funding of $31.2 million. The price paid for the common stock was determined to be at fair market value after applying a lack of marketability discount as Mundipharma received restricted shares. Therefore, no additional premium or discount was allocated to the transaction price of the Agreement for the share issuance. The transaction price was allocated to the performance obligations on the basis of the relative stand-alone selling price estimated for each performance obligation. In estimating the stand-alone selling price for each performance obligation, the Company developed assumptions that require judgment and included forecasted revenues, expected development timelines, discount rates, probabilities of technical and regulatory success and costs for manufacturing clinical supplies.

A description of the distinct performance obligations identified under the Agreement, as well as the amount of revenue allocated to each distinct significant performance obligation, is as follows:

Licenses of Intellectual Property. The license to the Company’s intellectual property, bundled with the associated know-how, represents a distinct performance obligation. The license and associated know-how was transferred to Mundipharma during September 2019, therefore the Company recognized the full revenue related to this performance obligation in the amount of $17.9 million in September 2019 as license revenue in its condensed consolidated statements of operations and comprehensive income.

Research and Development ~~Authority (BARDA),~~Services. The Company and ~~National Institute~~Mundipharma share equally in the costs of ~~Allergy and Infectious Diseases (NIAID). CARB-X is funded by BARDA and~~ongoing rezafungin clinical development in the ~~London-based Wellcome Trust, a global charitable foundation (Wellcome), and administered by~~Licensed Territory up to the ~~Boston University School of Law.~~

specified cap. The ~~subaward supports development~~Company records these cost-sharing payments due from Mundipharma as collaboration revenue. The Company concluded that progress towards completion of the Company's CD201 product candidate and back-up candidates. The back-up candidates include antibody-drug conjugates that the Company is testing in various animal models of bacterial infections. Under the Subaward Agreement, during an initial phase that began on April 1, 2017 and ends upon acceptance by the U.S. Food and Drug Administration of an initial new drug application, CARB-X will reimburse up to $3.9 million of qualifying development expenses. If all of the milestones in such initial phase are met, the CARB-X Joint Oversight Committee will evaluate the progress made in such initial phase and determine whether to exercise its option to fund a second stage. During the second stage, CARB-X would reimburse up to $3.0 million of qualifying development expenses through a Phase 1 clinical trial. Such second stage would be subject to a new subaward agreement.

~~The Subaward Agreement can be terminated upon the delivery of 30 days written notice~~performance obligation related to the ~~Company for default or convenience. Upon receipt of a notice of termination,~~research and development services is best measured in an amount proportional to the ~~Company must discontinue contract activities and CARB-X must pay the Company a final settlement based on eligible expenses incurred under the Subaward Agreement.~~

Under the Subaward Agreement, the Company is reimbursed for direct costs incurred plus allowable indirect costs which consist of fringe benefits and allowable general and administrative expenses. For the three and nine month periods ended September 30, 2017, the Company recognized reductions to research and development expenses incurred and the total estimated research and development expenses.

Clinical Supply Services. The Company's initial obligation to supply rezafungin for ongoing clinical development in the Licensed Territory represents a distinct performance obligation. The Company concluded that progress towards completion of ~~$0.2 million~~the performance obligations related to the clinical supply services is best measured in an amount proportional to the clinical supply services expenses incurred and ~~$0.4 million, respectively, for costs eligible for reimbursement~~the total estimated clinical supply services.

Milestone Payments. The Company determined that as of June 30, 2020, all the potential milestone payments are probable of significant revenue reversal as their achievement is highly dependent on factors outside the Company's control or are otherwise constrained under the ~~Subaward Agreement.~~variable consideration guidance. Therefore, these payments have been fully constrained and are therefore not included in the transaction price. At the end of each subsequent reporting period, the Company will re-evaluate the probability of achievement of each milestone and any related constraint.

Royalties. As the license is deemed to be the predominant item to which sales-based royalties relate, the Company will recognize revenue when the related sales occur. No royalty revenue was recognized during the six months ended June 30, 2020.

The following table presents a summary of ~~September~~the activity in the Company's contract liabilities (recorded as deferred revenue on the balance sheet) during the six months ended June 30, ~~2017, billed accounts receivable were $0.1 million~~2020 (in thousands):



Opening balance, December 31, 2019	$	9,803
Payments received in advance	7,315
Revenue from performance obligations satisfied during reporting period	(5,922		)
Closing balance, June 30, 2020	$	11,196

The closing balance as of June 30, 2020 are classified as a current liability since the rights to consideration are expected to be satisfied within one year.

The following table presents our contract revenues disaggregated by timing of revenue recognition and ~~unbilled accounts receivable were $0.2 million related to reimbursable expenses under the Subaward Agreement.~~excludes royalty revenue (in thousands):



	Three Months Ended June 30, 2020				Six Months Ended June 30, 2020
	Point in Time		Over Time		Point in Time		Over Time
Revenue from Mundipharma Collaboration Agreement:
Research and Development Services	$	—	$	3,182	$	—	$	5,174
Clinical Supply Services	—		210		—		748
Total revenue from Mundipharma Collaboration Agreement	$	—	$	3,392	$	—	$	5,922

9.8. COMMITMENTS AND CONTINGENCIES

~~Litigation—From time to time,~~Lease Obligations

The following table presents information about the ~~Company may be involved in various lawsuits, legal proceedings, or claims that arise in~~amount, timing and uncertainty of cash flows arising from the ordinary course of business. Management believes there are no claims or actions pending against the Company as of September 30, 2017 which will have, individually or in the aggregate, a material adverse effect on its business, liquidity, financial position, or results of operations. Litigation, however, is subject to inherent uncertainties, and an adverse result in such matters may arise from time to time that may harm the Company’s business.

~~Lease Obligations—In June 2014, the Company entered into an~~Company's operating lease agreement for laboratory and office space in San Diego, California. Amendments for additional space were entered into in February 2015, March 2015, and August 2015. The lease expires in December 2018 with options for two individual two-year extensions. The lease is subject to charges for common area maintenance and other costs, and base rent is subject to 3% annual increases every July. Rent expense is being recorded on a straight-line basis over the life of the lease.

~~Future minimum payments required under the~~ lease as of ~~September~~June 30, ~~2017 are summarized~~2020 (in thousands):



2020	$	484
2021	998
Total undiscounted operating lease payments	$	1,482
Less: Imputed interest	(120		)
Present value of lease payments	$	1,362

The balance sheet classification of the Company's operating lease is as follows (in thousands):

2017 $ 184
2018 746
Total minimum lease payments $ 930



Balance Sheet Classification:
Operating lease right-of-use asset	$	1,257

Current lease liability	$	878
Lease liability	484
Total operating lease liability	$	1,362

As of June 30, 2020, the weighted average remaining lease term was 1.5 years.

~~Rent expense~~Cash paid for amounts included in the present value of operating lease liabilities was ~~$530,000 and $537,000~~$0.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020.

Operating lease costs were $0.5 million for the six months ended June 30, 2020. These costs are primarily related to the Company's long-term operating lease, but also include immaterial amounts for variable leases and ~~2016, respectively.~~short-term leases with terms greater than 30 days.

Contractual Obligations—

The Company enters into contracts in the normal course of business with vendors for research and development activities, manufacturing, and professional services. These contracts generally provide for termination either on notice or ~~within 30 days of notice.~~

~~10. SUBSEQUENT EVENTS~~

~~Private Placement—In October 2017, the Company closed~~after a private placement transaction with certain accredited investors pursuant to which an aggregate of 3,360,000 shares of common stock were sold at a price of $6.00 per share. The Company received net proceeds of approximately $19.0 million after deducting commissions and offering expenses.notice period.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report, and our Annual Report on Form 10-K, or our Annual Report, for the year ended December 31, ~~2016,~~2019, filed with the Securities and Exchange Commission, or the SEC, on March ~~16, 2017.~~3, 2020.

Forward-Looking Statements

The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, clinical and nonclinical data, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of ~~management.~~management and the impact of the COVID-19 pandemic on the foregoing. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this Quarterly Report and in our other filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made and we do not assume any obligation to update any forward-looking statements.

Overview

We are a biotechnology company focused on the discovery, development and commercialization of novel anti-infectives for the treatment and prevention of diseases that are inadequately addressed by current standard of care therapies. We are developing a ~~balanced~~ pipeline of product and development candidates, with ~~an initial~~a focus on serious fungal and ~~bacterial~~viral infections.

Our lead product candidate is rezafungin acetate, ~~formerly known as CD101 IV,~~ an intravenous formulation of a novel echinocandin. Rezafungin ~~acetate has been approved~~is being developed as a once-weekly, high-exposure therapy for the ~~international nonproprietary name,~~first-line treatment and prevention of serious, invasive fungal infections. In addition, we are using our Cloudbreak® antiviral platform to develop Antiviral Fc-Conjugates, or ~~INN,~~AVCs, for ~~CD101 by~~the prevention and treatment of influenza and other viral infections, including RSV, HIV, and Coronavirus, including the strain causing COVID-19.

COVID-19 Update

In March 2020, the World Health Organization declared COVID-19 a pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and ascreated significant volatility and disruption of financial markets.

We are closely monitoring the impact of the COVID-19 global pandemic on our business and have implemented measures designed to protect the health and safety of our workforce, including a ~~United States Adopted Name,~~work-from-home policy in line with state and local requirements for employees who can perform their jobs offsite. We are continuing our essential research and laboratory activities at our facilities and are taking precautionary measures to protect our employees working in our facilities in such capacities, including establishing a written worksite-specific COVID-19 prevention plan.

We are reliant on our information technology systems, infrastructure and data to conduct our business. Adopting a work-from-home policy during this pandemic has increased the complexity of our computer systems, making them inherently more vulnerable to service interruption or ~~USAN, for CD101 by the USAN Council.~~destruction, malicious intrusion and random attack.

~~Rezafungin has improved pharmacokinetics compared~~While we have not experienced significant disruptions to ~~existing echinocandins and has~~our manufacturing supply chain or distribution to date, we are currently unable to assess the potential ~~for expanded utility across patient settings. Rezafungin is~~impact that an extended duration of this pandemic would have on our manufacturing or distribution processes in the ~~only once-weekly product candidate currently~~future.

As we continue to actively advance our rezafungin Phase 3 clinical development program, we remain in ~~development that is intended~~close contact with our principal investigators and clinical sites and are assessing the impact of COVID-19 on our trials, expected timelines and costs on an ongoing basis. While the ReSTORE Phase 3 clinical trial for the treatment of candidemia and ~~prevention~~invasive candidiasis remains open for enrollment, and the ReSPECT Phase 3 clinical trial for prophylaxis began enrollment in May 2020, we continue to monitor the near and long term impact of ~~life-threatening invasive fungal infections.~~

COVID-19 on the ability of our clinical investigators to recruit patients at each of our global clinical trial sites. In addition, many clinical trial operational activities typically require travel, such as site activation, monitoring, investigators’ meetings and quality audits. These activities are still impacted by travel restrictions.

As the recent outbreak of the COVID-19 pandemic continues to spread throughout areas in which we operate, we believe the outbreak is having a negative impact on our operating results and financial condition. The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, impact on our clinical trials, employees and vendors, all of which are ~~developing CD201~~uncertain and cannot be predicted. Given these uncertainties, we remain unable to reasonably estimate the related impact to our ~~antibody-drug conjugates for multidrug-resistant bacterial infections as part~~business, operating results and financial condition, if any. We will continue to evaluate the impact of the COVID-19 pandemic on our proprietary Cloudbreak™ platform, which is designed to discover compounds that directly kill pathogens and also direct a patient’s immune system to attack and eliminate bacterial, fungal or viral pathogens.business.

Rezafungin

Rezafungin ~~acetate~~ is a novel molecule in the echinocandin class of antifungals. We are developing rezafungin for the first-line treatment and prevention of ~~systemic~~serious, invasive fungal infections which are associated with high mortality rates. We are currently enrolling patients with candidemia and invasive candidiasis in a Phase 2 clinical trial called the STRIVE study. We plan to enroll at least 90 patients in the microbiological intent-to-treat, or mITT, population in the STRIVE study, with 30 patients in each of two rezafungin arms and 30 patients receiving the comparator drug, caspofungin. We expect topline data from this study in the first quarter of 2018.

Based on a high-level review of blinded data from a subset of approximately the first half of the total number of patients to be enrolled in the STRIVE study, the overall clinical response rate on the primary endpoint of the study investigator's assessment of cure at day 14 is trending higher, and the 30-day all-cause mortality rate is trending lower, than the respective response rates of caspofungin from prior pivotal clinical trials. In addition, the blinded safety assessment of this patient subset suggests that all doses in the study are well tolerated to date. These preliminary blinded interim results are subject to change once the data have been unblinded and the full data set is analyzed and reported by us. Because these are blinded data, we have no way of knowing whether there is a treatment effect in any of the treatment arms on either an absolute basis or relative to any of the other treatment arms. Further, this is a discrete study that is in no way related to or dependent upon any prior clinical study of caspofungin, so it is unclear how any historical outcome rate from any such prior study would relate to outcomes from this study. In addition, these results represent a small sample size, and interim data from clinical trials are subject to the risk that one or more of the clinical outcomes may materially change

as patient enrollment continues and more patient data becomes available. Preliminary interim data also remain subject to audit and verification procedures that may result in the final data being materially different from the blinded preliminary interim data we analyzed, and clinical data are often susceptible to multiple interpretations and analyses. For all of the above reasons, undue reliance should not be placed on preliminary blinded interim data, and such data should be viewed with caution until the final unblinded data are available.

~~We recently received feedback from the FDA that the results of the STRIVE Phase 2 study, along with the results of a single~~ Phase 3 ~~study with a non-inferiority margin of 20%, together with data from our~~clinical trials

Our Phase ~~1 studies, will be supportive of registration in the U.S.~~3 clinical development plans for treatment of candidemia and invasive candidiasis in patients with limited or no treatment options, assuming positive efficacy and safety results. Pending final results from the STRIVE study, and subject to feedback from European regulators, we plan to conduct arezafungin are as follows:

Phase 3 ReSTORE Treatment Trial: A single, global, randomized, double-blind, controlled Phase 3 pivotal clinical trial in ~~approximately 150~~ patients with candidemia ~~and~~and/or invasive candidiasis. The ReSTORE clinical trial protocol is modeled after our Phase 2 STRIVE clinical trial. Rezafungin, dosed at 400 mg for the first week followed by 200 mg once weekly for up to four weeks in total, is being compared to caspofungin, dosed daily, with an optional step down to oral fluconazole, in a 1:1 randomization regime. The primary efficacy outcome for the U.S. Food and Drug Administration, or FDA, is all-cause mortality at day 30, and the primary efficacy outcome for the European Medical Agency, or EMA, is global ~~Phase 3~~response (clinical, radiological, and mycological response) at day 14. We expect this trial ~~is expected~~ to ~~begin in mid-2018, with topline data expected in mid-2020.~~

~~With this Phase 3 study size,~~enroll approximately 184 evaluable patients. As previously announced, we ~~estimate~~are closely monitoring the effect of the COVID-19 coronavirus on our ReSTORE enrollment and clinical trial operations, and are taking steps to mitigate its impact. We expect that the total number of patients exposed to our selected dose and duration of rezafungin treatment will be less than the target safety database of 300 patients. For this reason, as well as to maintain enrollment momentum before the startresults of the ~~Phase 3 study, we intend to continue enrollment at STRIVE study sites after database lock. This continuation of~~ReSTORE clinical trial, along with the ~~STRIVE study, which we call STRIVE Part B, will evaluate a dose selected~~results from the STRIVE ~~study in comparison~~clinical trial, will be sufficient to ~~caspofungin in a 2:1 randomization regime.~~

~~We believe there is significant unmet medical need~~support the submission of marketing approval applications for ~~a safe and well tolerated agent with the spectrum of~~ rezafungin in the prevention of fungal infections in vulnerable patients, including those undergoing bone marrow or solid organ transplant or patients with hematologic malignancies undergoing chemotherapy. We have conducted preclinical studies demonstrating the efficacy of rezafungin in preventing ~~Candida, Aspergillus~~ ~~and~~ ~~Pneumocystis~~ infections in neutropenic animals. Based on these studies and in conjunction with clinical safety, tolerability and pharmacokinetic data, we believe that once-weekly rezafungin could be an effective prophylactic agent for invasive fungal infections in at-risk patients.this indication.

~~Based on FDA and MHRA feedback we have received to date, and subject to further European regulatory feedback and financial resources, we plan to conduct a~~Phase 3 ReSPECT Prophylaxis (Prevention) Trial: A single, global, randomized, double-blind, controlled Phase 3 pivotal clinical trial in patients undergoing allogeneic ~~bone~~blood and marrow transplant to ~~enable use of~~assess rezafungin in a 90-day prophylaxis ~~regimen. Subject~~regimen to ~~further regulatory discussions, we believe that this study could start in mid-2018~~prevent infections due to Candida, Aspergillus and ~~produce topline results in mid-2020.~~

~~Based on our interactions with~~Pneumocystis. Rezafungin, dosed at 400 mg for the first week followed by 200 mg once weekly doses out to 90 days, is being compared to a regimen containing two drugs (an azole and Bactrim) dosed once daily for 90 days. The primary efficacy outcome for the FDA and ~~MHRA,~~EMA is fungal-free survival at day 90. We expect this trial to enroll approximately 462 patients. In May 2020, we ~~believe that our planned Phase 3~~enrolled the first patient in the ReSPECT clinical trial. While the ReSPECT trial ~~in prophylaxis, supported~~has been impacted by the ~~data from our planned Phase 3~~ongoing effects of the COVID-19 global pandemic, we are progressing with regulatory and clinical activities so that we may continue activating sites when appropriate. Additionally, commencement of the ReSPECT clinical trial in the United States also remains contingent upon obtaining agreement with the FDA.

Mundipharma Collaboration

On September 3, 2019, we announced a strategic partnership with Mundipharma Medical Company to develop and commercialize rezafungin in an intravenous formulation for the treatment ~~of candidemia~~ and ~~invasive candidiasis and the remainder of our rezafungin treatment program, could suffice for approval of rezafungin for both the prophylaxis and treatment~~prevention of invasive fungal infections. Under the terms of the collaboration agreement, we granted Mundipharma an exclusive, royalty-bearing license to develop, register and commercialize rezafungin outside the U.S. and Japan. The total potential transaction value is $568 million, including an equity investment, an up-front payment, global development funding, and certain development, regulatory, and commercial milestones. To date, we have received $9.0 million from the sale of our equity to Mundipharma, $30.0 million in up-front payments and $8.0 million in global development funding. We expect to receive an additional $34.4 million in global development funding as we continue to conduct our rezafungin Phase 3 clinical development program.

Cloudbreak ~~Immunotherapy~~Antiviral Platform

We ~~continue to advance~~believe our Cloudbreak immunotherapy platform, which we believe has broad potential applications across a wide spectrum of infectious diseases, including bacterial, fungal and viral infections. We believe that our Cloudbreakantiviral platform is a fundamentally new approach to prevent and treat life-threatening infectious disease that provides potent antimicrobial activity and immune system engagement in a single long-acting molecule. The Cloudbreak antiviral platform recognizes that infectious disease often results when a microbial pathogen is able to evade or overcome the host immune system. Our Cloudbreak candidates are designed to counter infection in two ways, by directly targeting and destroying invading pathogens and by focusing the immune system at the site of infection. We believe this is a potentially transformative approach, distinct from current therapies, monoclonal antibodies and vaccines. Our lead Cloudbreak candidates are AVCs for the prevention and treatment of ~~infectious disease. To date, we~~influenza. We have

generated preclinical, in vivo proof of concept data ~~in both~~for our Cloudbreak ~~antibacterial program and our Cloudbreak antifungal~~influenza program. In ~~September 2016,~~July 2019, we ~~selected a~~began conducting studies in support of an investigational new drug application on our lead ~~Cloudbreak~~ development candidate, ~~CD201.~~CD377 for influenza prevention and pandemic preparedness. We expect to file an IND application for CD377 in mid-2021.

~~CD201 is a novel, bispecific antimicrobial immunotherapy being developed for the treatment of multidrug-resistant Gram-negative bacterial infections, including those caused by pathogens harboring the~~ ~~mcr-1~~ ~~plasmid. Cidara~~The Cloudbreak antiviral platform has ~~received a grant for up~~also enabled us to ~~$6.9 million from the Combating Antibiotic Resistance Accelerator, or CARB-X, to advance~~expand the development of ~~CD201~~AVCs to target other life-threatening viruses, including RSV and ~~back-up candidates. The back-up candidates include antibody-drug conjugates~~HIV. In response to the global pandemic, we have also leveraged our Cloudbreak antiviral platform to identify, and are now conducting in vitro and in vivo testing of, new AVCs against Coronavirus, or CoV, including the strain causing COVID-19.

Liquidity Overview

Since our inception, we have devoted substantially all of our financial resources and efforts to research and development and have incurred significant operating losses. As of June 30, 2020, we had an accumulated deficit of $295.4 million. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future.

In connection with the preparation of our financial statements for the three and six month period ended June 30, 2020, we performed an analysis of our ability to continue as a going concern. We believe, based on our current business plan, that ~~we are testing in various animal models~~our existing cash and cash equivalents will not be sufficient to fund our obligations for twelve months from the issuance of ~~bacterial infections.~~these financial statements. Our ability to execute our current business plan depends on our ability to obtain additional funding through equity offerings, debt financings or potential licensing and collaboration arrangements. We may not be able to raise additional funding on terms acceptable to us, or at all, and any failure to raise funds as and when needed will compromise our ability to execute on our business plan.

FINANCIAL OPERATIONS OVERVIEW

Revenues

To date, we have ~~not~~ generated ~~any revenues.~~all of our revenues from our strategic partnership with Mundipharma. In the future, we may generate revenue from a combination of license fees and other upfront payments, other funded research and development agreements, milestone payments, product sales, government and other third-party funding and royalties in connection with strategic alliances. We expect that any revenue we generate will fluctuate from quarter-to-quarter as a result of the timing of ~~qualifying reimbursable expenses. In addition, future revenues could fluctuate based on the timing of~~ our achievement of ~~preclinical,~~nonclinical, clinical, regulatory and commercialization milestones, the timing and amount of payments relating to such milestones and the extent to which any

of our products are approved and successfully commercialized. If we are unable to fund our development costs or we are unable to develop product candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenues and our results of operations and financial position would be adversely affected.

Research and development expenses

To date, our research and development expenses have related primarily to ~~preclinical~~nonclinical development of our rezafungin acetate and ~~CD201~~CD377 product candidates and our Cloudbreak ~~immunotherapy technology~~antiviral platform, as well as clinical development of rezafungin ~~and CD101 topical.~~acetate. Research and development expenses consist of wages, benefits and stock-based compensation for research and development employees, as well as the cost of scientific consultants, facilities and overhead expenses, laboratory supplies, manufacturing expenses and ~~preclinical~~nonclinical and clinical trial costs. We accrue clinical trial expenses based on work performed, which relies on estimates of total costs incurred based on patient enrollment, completion of studies or ~~activities~~other actives within studies and other events.

Research and development costs are expensed as incurred and 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 study or project and the invoices received from our external service providers. We adjust our accruals as actual costs become known.

We have received potential research and development funding through a grant from CARB-X and a ~~nonprofit organization.~~partnership grant from the NIAID. We have evaluated the terms of the ~~grant~~grants to assess our obligations and the classification of funding received. Amounts received for funded research and development are recognized in the statement of operations as a reduction to research and development expense over the grant period as the related costs are incurred to meet our obligations.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to increase over the next several years as we continue to conduct ~~preclinical~~nonclinical and clinical studies, expand our research and development pipeline and progress our product candidates through clinical trials. However, it is difficult to determine with certainty the duration, costs and timing to complete our current or future ~~preclinical~~nonclinical programs and clinical trials of our product candidates.

The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors that include, but are not limited to, the following:

the impact of the COVID-19 pandemic and other similar health crises;

per patient trial costs;

the number of patients that participate in the trials;

the number of sites included in the trials;

the countries in which the trials are conducted;

the length of time required to enroll eligible patients;

the number of doses that patients receive;

the drop-out or discontinuation rates of patients;

potential additional safety monitoring or other studies requested by regulatory ~~agencies;~~authorities;

the duration of patient follow-up;

the phase of development of the product ~~candidates;~~candidate; and

the efficacy and safety profile of the product candidates.

Research and development expenses by major program or category were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016		2020		2019		2020		2019
Rezafungin	$	5,202	$	2,423	$	18,432	$	7,354	$	11,373	$	6,448	$	18,853	$	13,890
CD101 topical	119		1,904		1,313		4,524
Cloudbreak immunotherapy platform	731		844		2,610		2,367
Cloudbreak antiviral platform									1,984		404		3,001		1,255
Personnel costs	2,622		2,586		8,211		7,628		3,763		3,401		7,609		7,070
Other research and development expenses	485		972		2,027		2,516		514		490		1,167		1,197
Total research and development expenses	$	9,159	$	8,729	$	32,593	$	24,389	$	17,634	$	10,743	$	30,630	$	23,412

We typically deploy our employees, consultants and infrastructure resources across our programs. Thus, some of our research and development expenses are not attributable to an individual program but are included in other research and development expenses as shown above.

In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each product candidate, as well as an assessment of each product candidate’s commercial potential.

In February 2017, we reported results from our Phase 2 clinical trial of CD101 topical, which was designed to evaluate gel and ointment topical formulations of CD101 in women with moderate-to-severe vulvovaginal candidiasis, or VVC. The study found that while the gel and ointment topical formulations of CD101 tested in the study were well tolerated, both formulations were similar in efficacy to each other but lower in clinical and mycological cure rates compared to oral fluconazole. As a result, we discontinued the CD101 topical development program for VVC.

General and administrative expenses

General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our executive, finance, legal, business development, commercial planning, and support functions. Other general and administrative expenses include facility and overhead costs not otherwise included in research and development expenses, consultant expenses, travel expenses and professional fees for auditing, tax, legal, and other services. We expect that general and administrative expenses will increase in the future as we expand our operating activities and incur additional costs associated with operating as a publicly traded company. These increases will likely include legal fees, accounting fees, directors’ and officers’ liability insurance premiums and costs associated with investor relations.

Other income (expense)

Other income (expense) consists primarily of the change in the fair value of the contingent forward purchase obligation and related issuance costs, interest income and expense, and various income or expense items of a non-recurring nature.

We earn interest income from interest-bearing accounts and money market funds for cash and cash equivalents. Interest expense represents interest payable related to term loans and the amortization of debt issuance costs.

Contingent forward purchase obligation

On May 21, 2018, we entered into a subscription agreement with certain investors providing for the purchase and sale of up to an aggregate of $120.0 million of common stock and preferred stock in three closings. The second and optional third closings and warrants related to the optional third closing are triggered by our announcement of topline data from our STRIVE Part B Phase 2 clinical trial of rezafungin. We determined that these closings are classified as liabilities and represent contingent forward purchase obligations. The liability was initially recorded at $4.3 million on May 21, 2018. Fair value adjustments resulting in a loss of $0.4 million were recorded during the six month period ended June 30, 2019. Because we elected not to consummate the second closing of the offering in August 2019, the contingent forward purchase obligation did not exist as of June 30, 2020 or December 31, 2019.

Beneficial conversion feature

In February 2020, we completed a rights offering, pursuant to which we sold 6,639,307 shares of common stock and 531,288 shares of Series X Convertible Preferred Stock for gross proceeds of $30.0 million. Because the effective conversion price of the Series X Convertible Preferred Stock on the commitment date was below the fair value of the common stock at the date of issuance, a beneficial conversion feature with a calculated fair value of $2.8 million existed at the issuance date. As the Series X Convertible Preferred Stock was fully convertible at issuance, the full $2.8 million was recorded at issuance as a one-time deemed dividend on February 12, 2020. This one-time, non-cash deemed dividend impacted accumulated deficit and additional paid in capital at June 30, 2020 and net loss attributable to common stockholders and net loss attributable to common stockholders per share for the six months ended June 30, 2020.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

In March 2017, we entered into a Subaward Agreement with CARB-X, under which CARB-X will reimburse us for qualifying development expenses for CD201. We reflect these costs reimbursed under this agreement as a reduction of our research and development expenses. See Note 2 to our financial statements for additional information.

In 2017, we granted Restricted Stock Units (RSUs) and Performance-based RSUs (PRSUs) to employees. We estimate the fair value of RSUs and PRSUs based on the closing price of the Company's common stock on the date of grant. For awards subject to time-based vesting conditions, stock-based compensation expense is recognized ratably over the requisite service period of the awards. For awards subject to performance-based vesting conditions, we assess the probability of achievement of the individual milestones under the stock-based awards and recognize stock-based compensation expense over the implicit service period commencing once we believe the performance criteria is probable of achievement.

The preparation of our unaudited financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and the revenues and expenses incurred during the reported periods. We believe that the estimates, assumptions and judgments involved in the accounting policies described in Management’s Discussion and Analysis of Financial Condition and Results of Operations and under Note 2 to our financial statements contained in our Annual Report have the greatest potential impact on our financial statements, so we consider them to be our critical accounting policies and estimates. ~~Other than our accounting for those items discussed above, there~~There were no material changes to our critical accounting policies and estimates during the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2020.

Revenue Recognition

We recognize revenue is accordance with Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers, which applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under Topic 606, we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for contracts with customers, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer. At contract inception, once the contract is determined to be within the scope of Topic 606, we assess the goods or services promised within each contract, determine those that are performance obligations, and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. We utilize key assumptions to determine a stand-alone selling price for performance obligations, which may include revenue forecasts, expected development timelines, discount rates, probabilities of technical and regulatory success and costs for manufacturing clinical supplies. Because the amount of revenue recognized for each performance obligation is determined based upon its relative stand-alone selling price, an increase or

decrease of 10% in the estimated fair value of each performance obligation would not have a significant impact on the amount of revenue recognized.

Grant Funding

The Company has evaluated the terms of the research and development grants to assess its obligations and the classification of funding received. Amounts billable for funded research and development are recognized in the statement of operations as a reduction to research and development expense over the grant period as the related costs are incurred to meet the Company's obligations.

Restricted Stock Units

We estimate the fair value of RSUs and PRSUs based on the closing price of our common stock on the date of grant. For awards subject to time-based vesting conditions, stock-based compensation expense is recognized ratably over the requisite service period of the awards. For awards subject to performance-based vesting conditions, we assess the probability of achievement of the individual milestones under the stock-based awards and recognize stock-based compensation expense over the implicit service period commencing once we believe the performance criteria is probable of achievement.

Preclinical and Clinical Trial Accruals

We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on the facts and circumstances known to us at that time. Our accrued expenses for preclinical studies and clinical trials are based on estimates of costs incurred and fees that may be associated with services provided by contract research organizations, or CROs, clinical trial investigational sites and other clinical trial-related activities. Payments under certain contracts with such parties depend on factors such as successful enrollment of patients, site initiation and the completion of clinical trial milestones. In accruing for these services, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If possible, we obtain information regarding unbilled services directly from these service providers. However, we may be required to estimate these services based on other information available to us. If we underestimate or overestimate the activities or fees associated with a study or service at a given point in time, adjustments to research and development expenses may be necessary in future periods. Historically, our estimated accrued liabilities have approximated actual expense incurred. Subsequent changes in estimates may result in a material change in our accruals.

Stock-based compensation

The Company accounts for stock-based compensation expense related to employee stock options, restricted stock and employee stock purchase plan rights by estimating the fair value on the date of grant.

We estimate the fair value of stock option awards to employees and non-employees using the Black-Scholes option pricing model, which requires the input of highly subjective assumptions, including (a) the risk-free interest rate, (b) the expected volatility of our stock, (c) the expected term of the award, and (d) the expected dividend yield. Due to the lack of an adequate history of a public market for the trading of our common stock and a lack of adequate company-specific historical and implied volatility data, we have based our estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. For these analyses, we have selected companies with comparable characteristics to ours, including enterprise value, risk profiles, and position within the industry, and with historical share price information sufficient to meet the expected life of the stock-based awards. We compute the historical volatility data using the daily close prices for the selected companies’ shares during the equivalent period of the calculated expected term of our stock-based awards. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our common stock price becomes available. We have estimated the expected life of our employee stock options using the “simplified” method, whereby the expected life equals the average of the vesting term and the original contractual term of the option. The risk-free interest rates for periods within the expected life of the option are based on the yields of zero-coupon U.S. treasury securities. See Note 6 of the Notes to the Financial Statements for additional information.

RESULTS OF OPERATIONS

Comparison of the three months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019

The following table summarizes our results of operations for the three months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 (in thousands):

Three Months Ended
September 30,
2017 2016 Change
Research and development $ 9,159
$ 8,729
$ 430
General and administrative 3,090
3,607
(517 )
Other income (expense), net (8 ) 109
(117 )



	Three Months Ended June 30,
	2020			2019		Change
Collaboration revenue	$	3,392		$	—	$	3,392
Research and development expense	17,634			10,743		6,891
General and administrative expense	3,969			3,525		444
Other income (expense), net	(95		)	721		(816		)

Collaboration revenue

Collaboration revenue was $3.4 million for the three months ended June 30, 2020. Our collaboration revenue is generated from our ongoing collaboration with Mundipharma, and generally consists of reimbursements for global development expenses.

Research and development expenses

Research and development expenses were ~~$9.2~~$17.6 million for the three months ended ~~September~~June 30, ~~2017 compared to $8.7~~2020 and $10.7 million for the three months ended ~~September~~June 30, ~~2016.~~2019. The ~~majority of the~~ increase in research and development ~~expense~~expenses is primarily due to higher clinical expenses associated with the rezafungin ~~STRIVE study. Increases in rezafungin expenses were partially offset by decreases in CD101 topical expenses due to the discontinuation of that program in February 2017.~~clinical trials and increased spend on our Cloudbreak antiviral platform.

General and administrative expenses

General and administrative expenses were ~~$3.1~~$4.0 million for the three months ended ~~September~~June 30, ~~2017~~2020 and ~~$3.6~~$3.5 million for the three months ended ~~September~~June 30, ~~2016.~~2019. The ~~decrease~~increase in general and administrative expenses ~~was~~is primarily ~~related~~due to ~~lower market research costs~~higher consulting expenses and ~~lower~~ legal ~~fees for~~expenses associated with securing intellectual property ~~matters.~~rights.

Other ~~Income (Expense)~~income (expense)

Other expense during the three month period ended ~~September~~June 30, ~~2017~~2020 related primarily to interest expense ~~incurred~~in connection with our loan from Pacific Western Bank. Other income during the three month period ended June 30, 2019 related primarily to the change in the fair value of the contingent forward purchase obligations and interest income generated from cash held in interest-bearing investments, partially offset by interest expense in connection with our loan from Pacific Western Bank.

Comparison of the six months ended June 30, 2020 and 2019

The following table summarizes our results of operations for the six months ended June 30, 2020 and 2019 (in thousands):



	Six Months Ended June 30,
	2020			2019		Change
Collaboration revenue	$	5,922		$	—	$	5,922
Research and development expense	30,630			23,412		7,218
General and administrative expense	8,064			7,260		804
Other income (expense), net	(73		)	564		(637		)

Collaboration revenue

Collaboration revenue was $5.9 million for the sixmonths ended June 30, 2020. Our collaboration revenue is generated from our ongoing collaboration with Mundipharma, and generally consists of reimbursements for global development expenses.

Research and development expenses

Research and development expenses were $30.6 million for the six months ended June 30, 2020 and $23.4 million for the six months ended June 30, 2019. The increase in research and development expenses is primarily due to higher clinical expenses associated with the rezafungin clinical trials and increased spend on our Cloudbreak antiviral platform.

General and administrative expenses

General and administrative expenses were $8.1 million for the sixmonths ended June 30, 2020 and $7.3 million for the sixmonths ended June 30, 2019. The increase in general and administrative expenses is primarily due to higher consulting expenses and legal expenses associated with securing intellectual property rights.

Other income (expense)

Other expense during the six months ended June 30, 2020 related primarily to interest expense in connection with our loan from Pacific Western Bank, ~~which was~~ partially offset by interest income generated from cash held in interest-bearing investments. Other income during the ~~three month period~~six months ended ~~September~~June 30, ~~2016~~2019 related primarily to the change in the fair value of the contingent forward purchase obligation and income generated from cash held in interest-bearing ~~investments.~~

~~Comparison~~ ~~of the nine months ended September 30, 2017 and 2016~~

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

Nine Months Ended
September 30,
2017 2016 Change
Research and development $ 32,593
$ 24,389
$ 8,204
General and administrative 9,669
9,694
(25 )
Other income (expense), net (38 ) 312
(350 )

~~Research and development expenses~~

Research and development expenses were $32.6 million for the nine months ended September 30, 2017 compared to $24.4 million for the nine months ended September 30, 2016. The majority of the increase in research and development expense is due to higher clinical expenses associated with the rezafungin STRIVE study. Increases in rezafungin expenses wereinvestments, partially offset by ~~decreases in CD101 topical expenses due to the discontinuation of that program in February 2017.~~

~~Other Income (Expense)~~

~~Other expense during the nine month period ended September 30, 2017 related to~~ interest expense ~~incurred~~ in connection with our loan from Pacific Western Bank which was offset by income generated from cash held in interest-bearing investments. Other income during the nine month period ended September 30, 2016 related to income generated from cash held in interest-bearing investments. Bank.

LIQUIDITY AND CAPITAL RESOURCES

~~Since~~We have incurred significant losses and negative cash flows from operations since our ~~inception through October 31, 2017,~~inception. As of June 30, 2020, we ~~have received $208.8~~had an accumulated deficit of $295.4 million ~~in gross proceeds~~and we expect to continue to incur significant losses for the foreseeable future. We expect our research and development and general and administrative expenses to continue to be substantial for the foreseeable future and, as a result, we will need additional capital to fund our operations, ~~primarily~~which we may obtain through ~~private placements of convertible preferred stock, convertible notes, our initial public offering, our entry into a~~equity, debt ~~facility in October 2016~~or other financing structures, or through collaborations, strategic alliances or licensing arrangements with ~~Pacific Western Bank, our October 2016 public offering of common stock and our October 2017 private placement of common stock.~~third parties, or through receiving government and/or charitable grants or contracts.

As of ~~September~~June 30, ~~2017,~~2020, we had ~~$54.3~~$64.1 million in cash, ~~and~~ cash equivalents and ~~$9.9 million in short term investments.~~restricted cash. The following table shows a summary of our cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 (in thousands):


	Nine Months Ended September 30,						Six Months Ended June 30,
	2017			2016			2020			2019
Net cash provided by (used in):
Operating activities	$	(40,418	)	$	(28,045	)	$	(29,200	)	$	(29,954	)
Investing activities	9,254			(9,904		)	(132		)	(35		)
Financing activities	73			9			33,149			—
Net decrease in cash and cash equivalents	$	(31,091	)	$	(37,940	)
Net increase (decrease) in cash, cash equivalents, and restricted cash							$	3,817		$	(29,989	)

Operating activities

Net cash used in operating activities was ~~$40.4~~$29.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020, compared to ~~$28.0~~$30.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016. The increase in net cash~~2019. Cash used in operating activities was ~~attributable~~ primarily ~~to our net loss of $42.3 million for the nine months ended September 30, 2017 compared~~attributable to a net loss of ~~$33.8~~$32.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2020 and $30.1 million for the six months ended June 30, 2019. For all periods presented, the primary use of cash was to fund research and development activities for our product candidates, which activities and uses of cash we expect to continue to increase for the foreseeable future.

Investing activities

Our primary investing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 consisted of purchases of property and maturities of short-term investments. For the nine months ended September 30, 2017 and 2016, we received proceeds of $19.3 million and $60.0 million, respectively, from the maturity of short-term investments. We purchased approximately $9.9 million and $69.6 million of short-term investments during the nine months ended September 30, 2017 and 2016, respectively.equipment.

Financing activities

Net cash provided by financing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016~~2020 primarily consisted of ~~cash received~~net proceeds of $29.2 million from the sale of 6,639,307 shares of common stock and 531,288 shares of Series X Convertible Preferred Stock pursuant to the exercise of subscription rights issued in our rights offering. During the six months ended June 30, 2020, we also sold 1,334,369 shares of our common stock ~~options.~~under our controlled equity sales agreement with Cantor Fitzgerald & Co for net proceeds of approximately $4.7 million, after deducting placement agent fees.

Operating Capital Requirements

To continue to fund operations, we will need to raise additional capital. We may obtain additional financing in the future through the issuance of our common stock, through other equity or debt financings, through government funding or through collaborations or partnerships with other companies. We may not be able to raise additional capital on terms acceptable to us, or at all, and any failure to raise capital as and when needed could compromise our ability to execute on our business plan. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts, ~~or to~~ make reductions in spending, extend payment terms with suppliers, or liquidate or grant rights to assets where possible or suspend or curtail planned programs. As a result of the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. If equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive. Any of these actions could materially harm our business, results of operations and future prospects.

Management performed an analysis of ~~the Company's~~our ability to continue as a going concern. We believe, based on our current operating plans, that our existing cash, cash equivalents and ~~marketable securities, access to capital under our~~restricted cash, Loan Agreement with Pacific Western Bank, ~~net proceeds from our October 2017 private placement of common stock, reimbursements under our CARB-X Subaward Agreement~~ and anticipated interest income will not be sufficient to fund our operating expenses and capital expenditure requirements through at least the next twelve months. ~~However,~~

We have developed a plan to implement cost cutting measures to reduce our working capital requirements if an adequate level of financing is not secured. The plan includes the delay of certain development activities, a delay in hiring and a reduction of other discretionary expenditures that are within our control. Any of the actions contemplated by the implementation of this plan, if required, could have an adverse impact on our ability to achieve certain of our planned objectives during 2020, and thus, materially harm our business. Furthermore, successful implementation of the plan does not alleviate the conditions surrounding management’s assessment of the existence of substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year following the date that these financial statements are issued. Our ability to successfully transition to profitability will be dependent upon achieving a level of product sales adequate to support our cost structure. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.

~~CONTRACTUAL OBLIGATIONS AND COMMITMENTS~~

There have been no material changes, outside of the ordinary course of business, in our outstanding contractual obligations from those disclosed within “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as contained in our Annual Report.

~~Off-Balance Sheet Arrangements~~OFF-BALANCE SHEET ARRANGEMENTS

As of ~~September~~June 30, ~~2017,~~2020, we did not have any off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~The primary objectives of our investment activities~~As a smaller reporting company, we are not required to ensure liquidity and to preserve principal while at the same time maximizing the income we receive from our cash and cash equivalents without significantly increasing risk. Additionally, we established guidelines regarding approved investments and maturities of investments, which are designed to maintain safety and liquidity.

The market risk inherent in our financial instruments and in our financial position is the potential loss arising from adverse changes in interest rates. We generally hold our cash in checking and savings accounts and invest excess capital in money market funds, certificates of deposit, corporate debt, and commercial paper. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. To minimize our exposure to adverse shifts in interest rates, we invest in short-term securities and ensure that the maximum average maturity of our investments does not exceeded 12 months. If a 10% change in interest rates had occurred on September 30, 2017,provide information typically disclosed under this ~~change would not have had a significant impact on the fair value of our investment portfolio as of that date.~~item.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal 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 provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

As of ~~September~~June 30, ~~2017,~~2020, we carried out an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial 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 the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of ~~September~~June 30, ~~2017.~~2020.

Changes in Internal Control over Financial Reporting

An evaluation was also performed under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, of any change in our internal control over financial reporting that occurred during our last fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. That evaluation did not identify any change in our internal control over financial reporting that occurred during our latest fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

You should carefully consider the following risk factors, as well as the other information in this report, before deciding whether to purchase, hold or sell shares of our common stock. The occurrence of any of the following 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 and those we may make from time to time. When evaluating our business, you should consider all of the factors described as well as the other information in our Annual Report, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The risk factors set forth below that are marked with an asterisk (*) contain changes to the similarly titled risk factors included in Item 1A of our Annual Report. If any of the following risks actually occurs, our business, financial condition, results of operations and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price of our common stock would likely decline and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.

Risks Related to the COVID-19 Pandemic

*Our operations, business and financial results have been and could continue to be adversely impacted by the current public health pandemic related to COVID-19.

In January 2020, the World Health Organization, or WHO, announced a global health emergency because of a new strain of novel coronavirus known as COVID-19 and, in March 2020, the WHO declared the COVID-19 outbreak a pandemic, or the COVID-19 pandemic. The COVID-19 pandemic has resulted in significant governmental measures being implemented to control the spread of the virus, including quarantines, travel restrictions and business interruptions and shutdowns. These precautions have disrupted our business operations and prospects. For example, we have experienced, and expect to continue to experience, trial site activation and enrollment delays for the ReSTORE and ReSPECT clinical trials due to facility restrictions, quarantines, travel restrictions and other precautions. The COVID-19 outbreak and mitigation measures also have had and may continue to have an adverse impact on global economic conditions which could impair our ability to raise capital when needed. While the disruption from COVID-19 has had and we expect it to continue to have an adverse effect on our business, financial condition and results of operations, we are unable to predict the extent or nature of these impacts at this time. In addition, to the extent the ongoing COVID-19 outbreak continues to adversely affect our business, financial condition, results of operations and growth prospects, it may also have the effect of heightening many of the other risks and uncertainties described elsewhere in this "Risk Factors" section.

Risks Related to Drug Discovery, Development and Commercialization

*We depend heavily on the success of rezafungin, currently in Phase 3 clinical development, and we also are very early in our development efforts from our Cloudbreak program, neither of which may ~~not~~ be successful.

We ~~have completed~~are currently conducting one Phase 1 and two Phase 13 clinical trials of ~~rezafungin, and we are currently enrolling a Phase 2 clinical trial of rezafungin in candidemia and invasive candidiasis.~~rezafungin. We are also conducting preclinical studies of ~~CD201 and~~AVCs in our ~~antibody-drug conjugates~~Cloudbreak program for viral infections. Our assumptions about why rezafungin is worthy of continued development, as well as our assumptions about the market for rezafungin or any potential products from our Cloudbreak program, ~~for infections caused~~are based on data primarily collected by ~~multidrug-resistant Gram-negative pathogens. Because of the early stage of our development efforts, the~~other companies. The timing and costs of ~~the~~our preclinical and clinical development programs, the likelihood of marketing approval for rezafungin, and the regulatory paths ~~we will follow and~~for marketing ~~approvals~~approval for products from our Cloudbreak program remain uncertain. Our ability to generate product revenue, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of our ~~early-stage~~ product candidates. The success of rezafungin and any other product candidates we may develop will depend on many factors, including the following:

the impact of the COVID-19 pandemic on our operations;

our ability to secure adequate additional funding;

agreement with regulatory authorities on study design and other requirements for study initiation;

successful completion of preclinical studies;

successful enrollment in, and completion of, clinical trials;

demonstrating safety and efficacy;

receipt of marketing approvals from applicable regulatory authorities;

establishing clinical and commercial manufacturing capabilities or making arrangements with third-party manufacturers;

obtaining and maintaining patent and trade secret protection and non-patent exclusivity for our product candidates and technologies;

launching commercial sales of the product candidates if and when ~~approved, whether alone or selectively in collaboration with others;~~approved;

acceptance of the product candidates, if and when approved, by patients, the medical community and third-party ~~payers;~~payors;

effectively competing with other therapies;

a continued acceptable safety profile of the products following approval; and

enforcing and defending intellectual property rights and claims.

If we do not timely enroll the ReSTORE and ReSPECT Phase 3 clinical trials, or if we are unable to secure additional funding, we will not be able to complete the Phase 3 clinical development plans for rezafungin. If we do not accomplish one or more of ~~these~~any of the other goals in a timely manner, or at all, we could experience significant delays or an inability to successfully complete the development of and commercialize our product candidates, which would harm our business.

*If we experience delays or difficulties in enrolling patients in the ReSTORE or ReSPECT clinical trials, our timing to complete the rezafungin clinical development program, and therefore our receipt of necessary regulatory approvals, could be delayed or prevented.

We may not be able to complete the ReSTORE or ReSPECT clinical trials if we are unable to identify and enroll a sufficient number of eligible patients, as required by the FDA or similar regulatory authorities outside the United States, or if we do not believe that the number of patients required by such regulatory authorities can be enrolled in a reasonable timeframe.

Our rezafungin Phase 3 clinical development program is a global program and, as such, our ability to timely enroll the ReSTORE and ReSPECT clinical trials may be affected by many different factors specific to those global localities, such as, delays in our receipt of approval to commence our Phase 3 clinical trials in a particular country from applicable regulatory authorities and ethics committees, timely completion of clinical trial site initiation within each country, delays in local importation and receipt of necessary clinical trial supplies, and our ongoing compliance with local regulations, which may change during the course of the clinical trial. In addition, the ReSTORE and ReSPECT clinical trials are heavily reliant on third-party contractors, including contractors that import clinical trial materials, and contract research organizations that conduct and monitor our clinical trials, and interact with regional or local regulators and ethics committees on our behalf. If we experience significant difficulties with any of our key contractors such that we determine it is in the best interests of the clinical trials to replace a key contractor, this could result in a significant delay in enrollment.

Additionally, timely enrollment in the ReSTORE and ReSPECT trials is reliant on global clinical trial sites, most of which have been adversely affected by the COVID-19 global pandemic. For example, clinical trial sites located in the United States and Asia, including China and South Korea, are an important part of our ReSTORE clinical trial and clinical trial sites located in Europe are an important part of both the ReSTORE and ReSPECT trials. All of these regions have been heavily impacted by the COVID-19 coronavirus. Some factors from the COVID-19 coronavirus outbreak that have adversely affected enrollment in our Phase 3 trials include:

the diversion of healthcare resources away from the conduct of clinical trial matters to focus on pandemic concerns, including the attention of infectious disease physicians serving as our clinical trial investigators, hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

limitations imposed by hospitals serving as our clinical trial sites that prohibit entry on hospital premises by persons other than those supporting the hospital's COVID-19 efforts;

limitations on travel that interrupt key trial activities, such as clinical trial site initiations and monitoring;

interruption in global shipping affecting the transport of clinical trial materials, such as investigational drug product and comparator drugs used in our trials; and

employee furlough days that delay necessary interactions with local regulators, ethics committees and other important agencies and contractors.

These and other factors arising from the COVID-19 coronavirus could worsen in countries that are already afflicted with the virus or could continue to spread to additional countries, each of which may further adversely impact our Phase 3 trials. The global outbreak of the COVID-19 coronavirus continues to evolve and the conduct of our Phase 3 trials may continue to be adversely affected, despite efforts to mitigate this impact.

In addition, some of our competitors may have onoing or new clinical trials for product candidates that would treat the same indications as rezafungin, or be used in the same patients and, therefore, patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates. Patient enrollment may also be affected by other factors, including:

eligibility criteria, including regional or local practices that place additional limitations on patient eligibility;

availability, safety and efficacy of approved medications or other investigational medications being studied clinically for the disease under investigation;

perceived risks and benefits of rezafungin;

efforts to facilitate timely enrollment in clinical trials;

reluctance of physicians to encourage patient participation in clinical trials;

the ability to monitor patients adequately during and after treatment;

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

delays or failures in maintaining an adequate supply of quality drug product for use in clinical trials; and

changing treatment patterns that may reduce the burden of disease which rezfungin addresses.

Our inability to enroll and retain a sufficient number of patients in a reasonable timeframe may require us to abandon the entire rezafungin Phase 3 clinical development program or terminate one of our Phase 3 clinical trials. Enrollment delays in ReSTORE or ReSPECT will result in increased development costs, which could cause the value of our company to decline and could limit our ability to obtain necessary additional financing.

*If clinical trials for rezafungin or any other product candidates are delayed, terminated or suspended, or fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities, ~~or do not otherwise produce positive results,~~ we may incur additional costs, or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A delay in starting or completing our clinical trials would materially impact our timelines and our ability to complete development of our product candidates in a timely manner or at all. For example, our entire rezafungin clinical development program has been severely impacted by the effects of the COVID-19 global pandemic. Additionally, our ability to complete our rezafungin Phase 3 development program is dependent on our ability to secure adequate additional funding.

A failure of one or more clinical trials could occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a particular clinical trial do not necessarily predict final results of that trial.

For example, although ~~blinded data from a subset~~the STRIVE Phase 2 clinical trial met its primary objectives related to tolerability and safety of ~~approximately the first half of the total number of patients to be enrolled~~rezafungin in the ~~STRIVE study showed that the overall~~treatment of candidemia and invasive candidiasis, this does not guarantee success in our ReSTORE Phase 3 clinical response rate on the primary endpoint of investigator's assessment of cure at day 14 is trending higher, and the 30-day all-cause mortality rate is trending lower, than the respective response rates of caspofungin from prior pivotaltrial for treatment, nor does it indicate whether our planned ReSPECT Phase 3 clinical trials, and that the blinded safety assessment of this patient subset suggested that all doses in the study are well tolerated to date, these results are subject to change once the full, unblinded data set is analyzed and reported by us. Because these are blinded data, we have no way of knowing whether there is a treatment effect in any of the treatment arms on either an absolute basis or relative to any of the other treatment arms. Further, this is a discrete study that is in no way related to or dependent upon any prior clinical study of caspofungin, so it is unclear how any historical outcome rate from any such prior study would relate to outcomes from this study. In addition, these results represent a small sample size, and interim data from clinical trials are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data becomes available. Preliminary interim data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary interim data we analyzed. For all of the above reasons, undue reliance should nottrial for prophylaxis will be ~~placed on preliminary blinded interim data, and such data should be viewed with caution until the final unblinded data are available.~~successful.

Moreover, preclinical and clinical data are often susceptible to multiple interpretations and analyses. 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. For example, the historically observed high rate of correlation for clinical efficacy for ~~antifungals, antibacterials and other~~ anti-infectives based on preclinical data may not apply for our current or future product candidates, and any of the potential benefits that we anticipate for human clinical use may not be realized.

We do not know whether either ReSTORE or ReSPECT will be completed on schedule or at all. We are currently experiencing significant delays in these trials arising from the COVID-19 global pandemic. We may experience numerous other unforeseen events ~~during,~~that could delay or ~~as a result of,~~prevent our ability to commence or complete our clinical trials, ~~that~~which could then delay or prevent our ability to receive marketing approval or commercialize our product candidates, ~~including that:~~including:

regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial on our expected timeline, or at all, or conduct a clinical trial at a prospective trial site or in a given country;

regulators may disagree with our interpretation of preclinical data, which may impact our ability to commence our trials on our expected timeline or at all;

regulators may require that trials or studies be conducted, or sized or otherwise designed in ways, that were unforeseen in order to begin planned studies or to obtain marketing authorization;

we may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites;

clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials, modify planned clinical trial designs or abandon product development programs;

the number of patients required for clinical trials of our product candidates may be larger than we anticipate;

enrollment in these clinical trials may be slower than we anticipate, clinical sites may drop out of our clinical trials or participants may drop out of these clinical trials at a higher rate than we anticipate;

our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;

regulators, or institutional review boards or the data safety monitoring board assembled by us to oversee our rezafungin clinical trials may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks due to serious and unexpected side effects;

the cost of clinical trials of our product candidates may be greater than we anticipate;

the FDA or comparable foreign regulatory authorities could require that we perform more studies than, or evaluate clinical endpoints other than, those that we currently expect; ~~and~~

the supply of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be delayed or insufficient, or the quality of such materials may be ~~inadequate.~~inadequate; and

we may be required to delay or terminate studies due to financial constraints.

We plan to conduct an interim futility analysis for our ReSPECT Phase 3 clinical trial for prophylaxis after primary endpoint data is available for approximately 50% of the total subjects we intend to enroll. The futility analysis will be conducted based on conditional power. If the conditional power is below a pre-specified cutoff for both primary endpoints, the study may be stopped for futility.

We are also in discussions with regulatory authorities about the final trial design of, and other matters related to, our ReSPECT Phase 3 clinical trial for prophylaxis. These discussions and potential design changes could lead to delays in the completion of the ReSPECT trial.

If we are required to conduct additional clinical trials, or other tests of our product candidates beyond those that we currently contemplate, if we are unable to complete clinical trials of our product candidates or other tests successfully or in

a timely manner, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:

be delayed in obtaining marketing approval for our product candidates;

not obtain marketing approval 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, including boxed warnings;

be subject to additional post-marketing testing requirements;

be subject to significant restrictions on reimbursement from public and/or private ~~payers;~~payors; or

have the product removed from the market after obtaining marketing approval.

Product development costs will also increase if we experience delays in testing or in receiving marketing approvals. We do not know whether any clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates, could allow our competitors to bring products to market before we do, could increase competition from generics of the same class, and could impair our ability to successfully commercialize our product candidates, any of which may harm our business and results of operations.

*We may not be successful in our efforts to use and expand our Cloudbreak immunotherapy platform to build a pipeline of product candidates.

An important element of our strategy is to use and expand our Cloudbreak immunotherapy platform to build a pipeline of development candidates and progress these through clinical development for the treatment of a wide variety of infectious diseases, including bacterial, fungal and/or viral infections. In September 2016, we selected a lead Cloudbreak development candidate, CD201, which is a novel, bispecific antimicrobial immunotherapy being developed for the treatment of multidrug-resistant Gram-negative bacterial infections, including those caused by pathogens harboring the ~~mcr-1~~ gene. We are also studying a number of antibody-drug conjugates for multidrug-resistant Gram-negative bacterial infections, but we have not yet identified any other development candidates from the Cloudbreak platform. CD201, antibody-drug conjugates and other molecules we are working on and other potential development candidates that we identify may not be suitable for clinical development, including as a result of being shown to have insufficient efficacy, harmful side effects or other characteristics that indicate that they are unlikely to receive marketing approval and achieve market acceptance. If we do not continue to successfully develop and eventually commercialize products based on our Cloudbreak immunotherapy platform, our ability to obtain product revenues in future periods could be limited, which could result in significant harm to our financial position and adversely affect our stock price.

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

We may not be able to initiate or continue clinical trials for our product candidates if we are unable to identify and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or analogous regulatory authorities outside the United States, or if we do not believe that the number of patients required by such regulatory agencies in any clinical trial can be enrolled in a reasonable timeframe. In addition, some of our competitors may have ongoing or new clinical trials for product candidates that would treat the same indications as our product candidates or be used in the same patients, and therefore patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates. Patient enrollment is also affected by other factors, including:

~~severity of the disease under investigation;~~

~~availability, safety and efficacy of approved medications or other investigational medications being studied clinically for the disease under investigation;~~

~~eligibility criteria for the trial in question;~~

~~perceived risks and benefits of the product candidate under study;~~

~~efforts to facilitate timely enrollment in clinical trials;~~

~~reluctance of physicians to encourage patient participation in clinical trials;~~

~~the ability to monitor patients adequately during and after treatment;~~

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

~~delays or failures in maintaining an adequate supply of quality drug product for use in clinical trials; and~~

~~changing treatment patterns that may reduce the burden of disease which our product candidates address.~~

Our inability to enroll a sufficient number of patients for our clinical trials, or to enroll such patients in a timely manner, would result in significant delays or may require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs for our product candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing.

*If serious adverse effects or unexpected characteristics of our product candidates are identified during development, we may need to abandon or limit our development of some or all of our product candidates.

~~All of our programs are in preclinical development or are in early stages of clinical development and their risk of failure is high. It~~Because it is impossible to predict when or if any of our product candidates will prove effective or safe in humans or will receive marketing ~~approval.~~approval, the risk of each of our programs is high. If our product candidates are associated with undesirable side effects or have characteristics that are unexpected, we may need to abandon their development or limit development to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. For example, the pharmacokinetic properties, such as a longer half-life or less frequent dosing regimen, that differentiate rezafungin from other echinocandins could have side effects that we have not anticipated and the consequences of such side effects could be more severe than have been seen with other echinocandins that have shorter half-lives or more frequent dosing regimens, or are dosed at lower concentrations than we expect for rezafungin.

Further, the treatment advantages that we are predicting for rezafungin, such as lower healthcare costs resulting from an ability to administer rezafungin once-weekly or the predicted ability of rezafungin to be effective against resistant strains of fungal pathogens, may not be realized. For ~~CD201 or~~ our ~~antibody-drug conjugates,~~AVCs, the bispecific mechanism of action, including the use of the immune system, may lead to side effects that are not anticipated based on the preclinical work we have conducted to date.

In the biotechnology industry, many agents that initially show promise in early stage testing may later be found to cause side effects that prevent further development of the agents. In addition, ~~fungal and bacterial~~ infections can occur in patients with co-morbidities and weakened immune systems, and there may be adverse events and deaths in our clinical trials that are attributable to factors other than investigational use of our product candidates.

*We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

We have limited financial resources. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential than opportunities we pursue. For example, ~~because~~ we believe that an NDA filing for rezafungin for prophylaxis can be supported by one Phase 3 trial in prophylaxis, together with the data from our ~~planned~~ Phase 3 clinical trial in the treatment of candidemia and invasive candidiasis and the remainder of our rezafungin treatment program, however, if financial constraints require us to choose between our planned rezafungin treatment and prophylaxis programs, we ~~would likely~~may be required to choose our treatment program and forego or delay our prophylaxis program.

Recently, in support of the global effort to identify effective therapeutics to treat and prevent the COVID-19 coronavirus and stem the current global pandemic, we have expended financial resources to identify AVCs which may be effective in this area. Our resource allocation decisions may not result in us identifying valuable products or may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target ~~market~~markets for a particular product candidate or opportunity, we may relinquish valuable rights to that product candidate or opportunity through 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 opportunity.

*Even if any of our product candidates receive marketing approval, they may fail to achieve the degree of market acceptance by physicians, patients, third-party ~~payers~~payors and others in the medical community necessary for commercial success.

If any of our product candidates receive marketing approval, they may nonetheless fail to gain sufficient market acceptance by hospitals and hospital pharmacies, physicians, patients, third-party ~~payers~~payors and others in the medical community for us to achieve commercial success. If our product candidates do not achieve an adequate level of acceptance, we may not generate sufficient product revenue to become profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:

the efficacy and potential advantages compared to alternative therapies;

the size of the markets in the countries in which approvals are obtained;

terms, limitations or warnings contained in any labeling approved by the FDA or other regulatory ~~agency;~~authority;

our ability to offer any approved products for sale at competitive prices;

convenience and ease of administration compared to alternative treatments;

the willingness of the target patient population to try new therapies or dosing regimens;

the willingness of physicians to prescribe these therapies and, in the case of rezafungin, transition to a once-weekly dosing regimen from traditional once-daily dosing;

the strength of marketing and distribution support;

the success of competing products and the marketing efforts of our competitors;

sufficient third-party payor coverage and adequate reimbursement; and

the prevalence and severity of any side effects.

*If, in the future, we are unable to establish sales and marketing capabilities or to selectively enter into agreements with third parties to sell and market our product candidates, we may not be successful in commercializing our product candidates, if and when they are approved.

We do not have a sales or marketing ~~infrastructure and have no experience in the sale, marketing or distribution of pharmaceutical products.~~infrastructure. To achieve commercial success for any approved product, we must either develop a sales and marketing organization or outsource these functions to third parties.

There are risks involved both with establishing our own sales and marketing capabilities and with 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 reposition our sales and marketing personnel.

Factors that may inhibit our efforts to commercialize our product candidates 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 to achieve adequate numbers of prescriptions for any future products; and

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

If we enter into arrangements with third parties to perform sales, marketing and distribution services, our product revenue or the profitability of these product revenues to us may be lower than if we were to market and sell any products 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 may have little control over such third parties and any of them may fail to market and sell our products effectively, including by failing to devote the necessary resources and attention. 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 face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

The development and commercialization of new drug products is highly competitive. We face competition with respect to our current product candidates, and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. Regulatory incentives to develop drugs for treatment of infectious diseases have increased interest and activity in this area and will lead to increased competition for clinical investigators and clinical trial subjects, as well as for future prescriptions, if any of our product candidates are successfully developed and approved. There are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of products for the treatment of the indications on which we are focusing our product development efforts. Some of these competitive products and therapies are based on scientific approaches that are the same as or similar to our approach and others are based on entirely different approaches. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.

~~Rezafungin~~We expect that rezafungin will primarily compete with certain antifungal classes ~~for the treatment and prevention~~ of ~~systemic fungal infections such as candidemia and invasive candidiasis,~~drugs, which include polyenes, azoles and echinocandins. Approved branded echinocandin antifungal therapies ~~finclude~~include Cancidas (caspofungin, marketed by Merck & Co.), Eraxis (anidulafungin, marketed by

Pfizer, Inc.), and Mycamine (micafungin, marketed by Astellas Pharma US, Inc.). ~~There may~~We expect that there will be generics of all of the current echinocandins available at the time of rezafungin market approval, which will create added competition. In addition, there are other generic products approved for candidemia, marketed by companies such as Baxter Healthcare Corporation, Mylan Inc. and Glenmark Generics Inc.,

among others. In addition to approved therapies, we expect that rezafungin will compete with product candidates that we are aware of in clinical development by third parties, such as SCY-078, ~~(being~~being developed by Scynexis, Inc.).

~~CD201 or~~We expect that if we are successful in developing influenza product candidates identified through our ~~antibody-drug conjugates~~Cloudbreak antiviral program, such product candidates will compete against approved and investigational agents for the treatment or prevention of ~~bacterial infections.~~viral influenza infections, including neurominidase inhibitors such as Tamiflu, Relenza and Peramivir, and endonuclease inhibitors such as Xofluza. We may develop other product candidates ~~from~~through our Cloudbreak ~~immunotherapy~~antiviral platform for the treatment or prevention of other invasive ~~bacterial, fungal~~viral infections, such as the human immunodeficiency virus, or ~~viral infections.~~HIV, the respiratory syncytial virus, or RSV, and CoV. We are aware of a number of approved and investigational therapies in these ~~areas.~~areas also.

Our competitors may develop products that are more effective, safer, more convenient or less costly than any that we are developing or that would render our product candidates obsolete or non-competitive. Our competitors may also obtain marketing approval from the FDA or other regulatory authorities for their products sooner than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market.

Many of our competitors have significantly greater name recognition, financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These same competitors may invent technology that competes with our ~~CD101~~rezafungin program or our Cloudbreak ~~immunotherapy~~antiviral platform.

These third parties may compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient enrollment for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

*Interim, topline and preliminary data from our clinical trials 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 interim, preliminary or topline data from our clinical studies, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analysis of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline 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 fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, topline data should be viewed with caution until the final data are available. From time to time, we may also disclose interim data from our clinical studies. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects. For example, we plan to conduct an interim futility analysis after primary endpoint data is available for approximately 50% of the subjects that we intend to enroll in the ReSPECT Phase 3 clinical trial. There can be no guarantee that a favorable futility analysis will result in a favorable final result at the completion of the clinical trial.

Further, others, including regulatory authorities, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the 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 the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular drug, drug candidate or our business. If the topline data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition.

Even if we are able to commercialize any product candidates, these products may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which would harm our business.

The regulations that govern marketing approvals, pricing, coverage and reimbursement for new drugs vary widely from country to country. In the United States, new and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product-licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial marketing approval is granted. As a result, we might obtain marketing approval for a drug in a particular country but then be subject to price regulations that delay its commercial launch, possibly for lengthy time periods, and negatively impact the revenue we are able to generate from the sale of the drug in that country. Adverse pricing limitations may hinder our ability to commercialize and generate revenue from one or more product candidates, even if our product candidates obtain marketing approval.

Our ability to commercialize any product candidates successfully also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government health programs, private health insurers, integrated delivery networks and other third-party ~~payers.~~payors. Third-party ~~payers~~payors decide which medications they will pay for and establish reimbursement levels. A significant trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party ~~payers~~payors have attempted to control costs by limiting coverage and the amount of payment for particular medications. Increasingly, third-party ~~payers~~payors are requiring that drug companies provide predetermined discounts from list prices and are challenging the prices charged for medical products. Coverage and reimbursement may not be available for any product that we commercialize and, if reimbursement is available, the level of reimbursement may not be sufficient for commercial success. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If coverage and reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval.

There may be significant delays in obtaining coverage and adequate reimbursement for newly approved products, and coverage may be more limited than the purposes for which the product is approved by the FDA or similar regulatory authorities outside the United States. Moreover, eligibility for coverage and reimbursement does not imply that any product will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Coverage and reimbursement rates may vary according to the use of the drug and the medical circumstances under which it is used may be based on reimbursement levels already set for lower cost products

or procedures or may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private ~~payers~~payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Commercial third-party ~~payers~~payors often rely upon Medicare coverage policies and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and profitable payment rates from both government-funded programs and private ~~payers~~payors for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize our approved products and our overall financial condition.

Product liability lawsuits against us could cause us to incur substantial liabilities and could limit the commercialization of any product candidates we may develop.

We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and we will face an even greater risk if we commercially sell any products that receive marketing approval. If we cannot successfully defend ourselves against claims that our product candidates caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

decreased demand for any product candidates that we may develop;

injury to our reputation and significant negative media attention;

withdrawal of clinical trial participants;

significant costs and distraction of management to defend any related litigation;

the initiation of investigations by regulatory bodies;

substantial monetary awards to trial participants or patients;

loss of revenue;

product recalls, withdrawals or labeling, marketing or promotional restrictions; and

the inability to commercialize any products we may develop.

Although we have product liability insurance for our clinical trials, such insurance may not be adequate to cover all liabilities that we may incur. We anticipate that we will need to increase our insurance coverage as we continue or expand our clinical trials and if we successfully commercialize any products. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological and radioactive 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 in our workplace, including those resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, chemical, hazardous or radioactive materials.

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.

*We may not be successful in our efforts to identify, discover, ~~in-license or acquire~~and develop potential product ~~candidates.~~candidates through our Cloudbreak antiviral platform or otherwise.

~~In September 2016,~~Through our Cloudbreak antiviral platform, we ~~selected a~~are developing AVCs for the treatment and prevention of viral infections, including influenza, HIV, RSV and CoV. We have nominated the AVC CD377 as our lead Cloudbreak development candidate ~~CD201, which is a novel, bispecific antimicrobial immunotherapy being developed~~ for ~~the treatment of multidrug-resistant bacterial infections, including those~~

~~caused by pathogens harboring the~~ ~~mcr-1~~ ~~gene. We are also working on antibody-drug conjugate and other approaches, but we have not yet identified any other development candidates from the Cloudbreak platform.~~influenza. Our Cloudbreak ~~immunotherapy~~antiviral platform ~~and other drug discovery efforts~~ may not be successful in identifying additional ~~molecules~~AVCs that could be developed as drug therapies. ~~Our research programs~~In addition, our Cloudbreak antiviral platform may initially show promise in identifying ~~such~~ potential product candidates, yet fail to yield product candidates for clinical development for a number of reasons. In particular, our research methodology used may not be successful in identifying compounds with sufficient potency, bioavailability or efficacy to be potential product candidates. In addition, our potential product candidates may, on further study, be shown to have harmful side effects or other negative characteristics.

Research programs to identify new product candidates require substantial technical ~~financial~~expertise and human resources. For example, we have limited experience with the use of the Cloudbreak platform applied to viral pathogens. A failure to optimize our expertise using the Cloudbreak platform for the development of our Cloudbreak antiviral program may limit our ability to successfully advance this program and identify future product candidates. Research programs to identify new product candidates also require substantial financial resources. We may choose to ~~focus~~expend our ~~efforts and~~financial resources on potential product candidates that ultimately prove to be unsuccessful. For example, in response to the immediate global pandemic crisis, we have expended financial resources to identify therapeutics to treat or prevent the COVID-19 coronavirus, and we may be unsuccessful in identifying such an AVC. If we are unable to identify ~~in-license or acquire suitable compounds~~successful product candidates from our Cloudbreak antiviral platform for preclinical and clinical development, we will have spent financial resources on programs that did not ~~be able to~~yield viable products and therefore generate product revenue, which would harm our financial position and adversely impact our stock price.

Risks Related to Our Financial Position and Need for Additional Capital

*We need substantial additional funding to complete the development of rezafungin and to advance our Cloudbreak program.

In connection with the preparation of our financial statements for the period ended June 30, 2020, we performed an analysis of our ability to continue as a going concern. We believe, based on our current business plan, that our existing cash and cash equivalents will not be sufficient to fund our obligations for the next twelve months. Our ability to continue to fund the development of rezafungin through completion of our planned Phase 3 trials depends on our ability to obtain additional funding. Our ability to advance our Cloudbreak program is also dependent on our ability to obtain additional funding.

On September 3, 2019, we entered into a collaboration and development agreement for rezafungin with Mundipharma Medical Company, the Mundipharma Collaboration, pursuant to which we granted Mundipharma exclusive commercialization rights to rezafungin outside the U.S. and Japan in exchange for a $30 million upfront payment, near-term funding to support the global Phase 3 ReSTORE and ReSPECT trials, and the potential to receive development, regulatory and commercial milestone payments and double-digit royalties on product net sales. The Mundipharma Collaboration requires, among other things, that we complete the rezafungin development program. Our ability to meet our development obligations under the rezafungin collaboration depends on our ability to obtain additional funding.

There can be no assurance that additional funds will be available from any source or, if available, will be available on terms that are acceptable to us. There can also be no assurance that additional funds will be available to us without first obtaining the approval of our stockholders, which can be a difficult and lengthy process with an uncertain outcome.

Even if we raise additional capital, our expenses may increase in connection with our ongoing activities beyond what is currently expected. Our future capital requirements will depend on many factors, including:

the ongoing effect of the COVID-19 global pandemic and the resulting impact on our rezafungin phase 3 clinical development program;

the costs and timing to complete our Phase 3 ReSTORE and Phase 3 ReSPECT clinical trials;

the costs, timing and outcome of any regulatory review of rezafungin or future development candidates;

our ability to establish and maintain collaborations, when and if necessary, on favorable terms, if at all;

the costs and timing of commercialization activities, including manufacturing, marketing, sales and distribution, for rezafungin or any future product candidates that receive marketing approval;

the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

the scope, progress, results and costs of drug discovery, preclinical development, manufacturing development, laboratory testing and clinical trials for our product candidates, for the Cloudbreak antiviral platform; and

the extent to which we acquire or in-license other product candidates and technologies.

Identifying potential development candidates and conducting preclinical studies, manufacturing development and clinical trials are time consuming, expensive and uncertain processes that take years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales for any of our current or future product candidates. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenue, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if at all.

Accordingly, we need substantial additional funding in connection with our continuing operations and to achieve our goals. As of June 30, 2020, we had cash, cash equivalents, and restricted cash of $64.1 million.

As a result of the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have recently experienced extreme volatility and disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. If the equity and credit markets continue to deteriorate, it may make any additional debt or equity financing more difficult, more costly and more dilutive.

If we are unable to raise additional capital on attractive terms or at all, we may be forced to delay, reduce or eliminate our development programs, including our Cloudbreak program, be unable to continue the development of rezafungin, complete the ReSTORE and ReSPECT Phase 3 clinical trials and meet our development obligations under the Mundipharma collaboration and/or be forced to make reductions in spending, extend payment terms with suppliers, and/or

liquidate or grant rights to assets where possible. Any of these actions could materially harm our business, results of operations and future prospects.

*Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity, debt or other financing structures, receipt of payments under the Mundipharma collaboration agreement, as well as potentially entering into other collaborations, strategic alliances or licensing arrangements with third parties or receiving government and/or charitable grants or contracts. In November 2018, we entered into a new controlled equity offering sales agreement with Cantor Fitzgerald & Co. with an aggregate offering price of up to $35 million and, other than the Mundipharma collaboration, it is our only current committed external source of funds, subject to the fulfillment of specified conditions.

In September 2019, we issued $9.0 million of our common stock to Mundipharma in connection with entering into the Mundipharma Collaboration Agreement. In February 2020, we issued $30.0 million of our common stock and Series X Preferred Stock upon the closing of a rights offering. To the extent that we raise additional capital through the sale of equity or convertible debt securities, like the sale of our common stock to Munipharma, the sale of our common stock and Series X Preferred Stock issued in our rights offering or the sale of common stock under our controlled equity offering sales agreement, your ownership interest will be diluted and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. 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 and may be secured by all or a portion of our assets.

If we raise funds by entering into collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. On September 3, 2019, we licensed all rights to rezafungin outside of the United States and Japan to Mundipharma Medical Company in exchange for certain payments and royalties on net sales. We may need to enter into similar agreements with other third parties for the development and commercialization of rezafungin outside of the Mundipharma territory, or for the development of AVCs identified from our Cloudbreak program, which may require we relinquish valuable rights to these products.

If we raise funds through government grants and contracts, we may be subject to restrictions on our operations or certain unfavorable terms. United States government grants and contracts, if available, typically contain unfavorable termination provisions and are subject to audit and modification by the government at its sole discretion, which will subject us to additional risks. If we receive a United States government grant or contract, we would be required to comply with numerous laws and regulations relating to the formation, administration and performance of the grant or contract, which can make it more difficult for us to retain our rights under such grant or contract and result in increased costs.

If we are unable to raise additional funds through equity, debt or other financing structures, or through collaborations, strategic alliances or licensing arrangements with third parties, or through receiving government and/or charitable grants or contracts, we may be required to delay, reduce or terminate our rezafungin development program, including our ReSTORE and ReSPECT Phase 3 clinical trials, be unable to meet our development obligations under the Mundipharma collaboration, and be unable to continue advancing the Cloudbreak program or be forced to grant rights in the Cloudbreak program that we would otherwise prefer to retain for ourselves.

The terms of our term loan facility place restrictions on our operating and financial flexibility, and failure to comply with covenants or to satisfy certain conditions of the agreement governing the debt facility may result in acceleration of our repayment obligations and foreclosure on our pledged assets, which could significantly harm our liquidity, financial condition, operating results, business and prospects and cause the price of our common stock to decline.

In October 2016, we entered into a loan and security agreement with Pacific Western, or the Loan Agreement, as amended in June 2018, July 2018 and November 2019 under which we borrowed $10.0 million, subject to certain terms and conditions set forth therein.

The outstanding principal balance under the Loan Agreement is secured by a security interest in substantially all of our assets, other than intellectual property, which is subject to a double negative pledge. The Loan Agreement requires us to comply with a number of customary affirmative and restrictive covenants, including covenants that limit our ability to, among other things: transfer any part of our business or property; merge or consolidate with another entity or otherwise experience a change in control, incur additional indebtedness, encumber the collateral securing the loan, declare or pay any cash dividend or make distributions on our capital stock, repurchase or redeem any class of stock or other equity

interest, acquire, own or make investments, and make certain capitalized expenditures over a specified threshold, in each case subject to exceptions.

The Loan Agreement also includes standard events of default, including a provision that Pacific Western could declare an event of default upon the occurrence of any event that it interprets as having a material adverse effect on (i) our operations, business or financial condition and subsidiaries taken as a whole; (ii) our ability to perform or pay the secured obligations under the Loan Agreement and related agreements; or (iii) the collateral pledged to Pacific Western under the Loan Agreement. Upon such determination, Pacific Western could declare all obligations under the Loan Agreement immediately due and payable. In November 2019, we entered into an amendment to the Loan Agreement that requires we maintain the cash value of the amounts borrowed on hand in our bank account, and a failure to comply with this obligation will also constitute an event of default and allow Pacific Western to declare all obligations immediately due and payable.

In connection with the audit of our 2019 financial statements, we received an unqualified auditor opinion with a going concern explanatory paragraph. Pacific Western may determine that the underlying circumstances resulting in the receipt of a going concern explanatory note in the auditor opinion for our 2019 financial statements either on their own, or together with contemporaneous events or circumstances, such as a failure to timely secure additional funding, constitute a material adverse effect upon our business, operations, properties, assets, or financial condition or upon our ability to perform or pay the secured obligations under the Loan Agreement.

Additionally, Pacific Western may determine that the occurrence of adverse results or delays in any clinical study or the denial, delay or limitation of approval of or taking of any other regulatory action by the FDA or another governmental entity may also constitute a material adverse effect upon our business, operations, properties, assets, or financial condition or upon our ability to perform or pay the secured obligations under the Loan Agreement, either on its own or together with contemporaneous events or circumstances, such as our status regarding going concern or a failure to timely secure additional funding.

The Loan Agreement also requires us to timely deliver certain financial statements, reports, and certificates including a requirement to provide audited annual financial statements together with an unqualified audit opinion or a qualified opinion only for going concern so long as our investors provide additional equity as needed or if Pacific Western otherwise provides its consent in writing.

If we default under the facility, Pacific Western may accelerate all of our repayment obligations. At such time, we may not have enough available cash or be able to raise additional funds on satisfactory terms, if at all, through equity or debt financings to repay our indebtedness at the time any such repayment is required. If we are unable to access funds to meet those obligations or to renegotiate the Loan Agreement, Pacific Western could take control of and may sell our pledged assets. In such an event, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts or grant to others rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. If our assets were liquidated, Pacific Western’s right to repayment would be senior to the rights of our stockholders to receive any proceeds from the liquidation. Any declaration by Pacific Western of an event of default could significantly harm our liquidity, financial condition, operating results, business, and prospects and cause the price of our common stock to decline.

We may incur additional indebtedness in the future. The debt instruments governing such indebtedness may contain provisions that are as, or more, restrictive than the provisions governing our existing indebtedness under the Loan Agreement. If we are unable to repay, refinance or restructure our indebtedness when payment is due, the lenders could proceed against the collateral or force us into bankruptcy or liquidation.

*We have incurred significant operating losses since our inception, and we anticipate that we will continue to incur substantial operating losses for the foreseeable future. We may never achieve or maintain profitability.

Since our inception, we have incurred significant operating losses. Our net losses were $32.8 million and $30.1 million for the six month periods ended June 30, 2020 and 2019, respectively. As of June 30, 2020, we had an accumulated deficit of $295.4 million. To date, we have financed our operations primarily through sale of our stock in public offerings and private placements, through borrowings under loan facilities, and through payments received in connection with the Mundipharma Collaboration. We have devoted substantially all of our financial resources and efforts to research and development. We are currently conducting the ReSTORE and ReSPECT Phase 3 clinical trials of rezafungin, Phase 1 and non-clinical studies of rezafungin, and preclinical studies of our AVCs. We expect that it will be many years, if ever, before we receive regulatory approval and have a product candidate available for commercialization. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase substantially if and as we:

submit INDs to the FDA and equivalent filings to other regulatory authorities, and seek approval of our clinical protocols by institutional review boards, or IRBs, at clinical trial sites;

continue to advance rezafungin through clinical development;

continue the preclinical development of our AVCs from our Cloudbreak antiviral platform or otherwise, and advance one or more of such product candidates into clinical trials;

seek marketing approvals for rezafungin and other product candidates;

establish or contract for a sales, marketing and distribution infrastructure to commercialize any product candidates for which we obtain marketing approval;

maintain, expand and enforce our intellectual property portfolio;

hire additional manufacturing, clinical, regulatory, quality assurance and scientific personnel;

add operational, financial and management systems and personnel, including personnel to support product development; and

acquire or in-license other product candidates and technologies.

To become and remain profitable, we must develop and eventually commercialize one or more products with significant market potential. This will require us to be successful in a range of challenging activities, including completing preclinical studies and clinical trials of our product candidates, obtaining marketing approval for these product candidates, manufacturing, marketing and selling those product candidates for which we may obtain marketing approval, and satisfying any post-marketing requirements. We may never succeed in these activities and, even if we do, may never generate revenue that is significant or large enough to achieve profitability. Our failure to become and remain profitable would decrease our value and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.

*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. A severe or prolonged economic downturn, such as the recent global financial crisis, could result in a variety of risks to our business, including our ability to raise additional capital when needed on acceptable terms, if at all. This is particularly true in Europe, which is undergoing a continued severe economic crisis. A weak or declining economy could also strain our suppliers, 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.

The withdrawal of the United Kingdom, or the U.K., from the EU, commonly referred to as "Brexit," may adversely impact our ability to obtain regulatory approvals of our current or future products in the U.K or the EU, result in restrictions or imposition of taxes and duties for importing our products into the EU, and may require us to incur additional expenses in order to develop, manufacture and commercialize our products in the U.K. or the EU.

In January 2020, the U.K. and EU entered into a withdrawal agreement pursuant to which the U.K. formally withdrew from the EU on January 31, 2020. Following such withdrawal, the U.K. entered into a transition period scheduled to end on December 31, 2020, or the Transition Period. During the transition period, the U.K. will remain subject to EU law and maintain access to the EU single market and to the global trade deals negotiated by the EU on behalf of its members. There remains substantial uncertainty surrounding the ultimate impact of Brexit and any associated transition period.

The ultimate effects of Brexit will depend on any agreements the U.K. makes to retain access to EU markets, either during the Transition Period or more permanently. These outcomes could disrupt the markets we serve and the tax jurisdictions in which we operate and create uncertainty and challenges (particularly in the near term) with respect to trading relationships between our U.K. subsidiary and other EU nations. Remaining EU member countries may also seek to make it more difficult for us to trade effectively or competitively in those regions.

Since a significant proportion of the regulatory framework in the U.K. is derived from European Union directives and regulations, Brexit could materially change the regulatory regime applicable to our operations and those of our collaborators, including with respect to potential future marketing authorizations for our current and future products. Although during the Transition Period European Union rules will continue to apply, Brexit may lead to legal uncertainty and potentially divergent laws and regulations between the U.K. and the EU as the U.K. determines which EU laws to replicate or replace. We cannot predict whether or not ~~in-licensed~~the U.K. will significantly alter its current laws and regulations in respect of the pharmaceutical industry and, if so, what impact any such ~~compounds.~~alteration would have on us or our business.

Further, there is considerable uncertainty resulting from a lack of precedent and the complexity of the U.K. and EU’s intertwined legal regimes as to how Brexit will impact the life sciences industry in Europe, including with respect to ongoing or future clinical trials. The impact will largely depend on the model and means by which the U.K.’s relationship with the EU is governed post Brexit. For example, following Brexit, the U.K. will no longer be covered by the centralized

procedures for obtaining EU-wide marketing authorization from the EMA and, unless a specific agreement is entered into, a separate process for authorization of drug products, including our product candidates, will be required in the U.K., the potential process for which is currently unclear. Brexit may adversely affect and delay our ability to commercialize, market and sell our product candidates in the U.K. Brexit may also result in a reduction of funding to the EMA if the U.K. no longer makes financial contributions to European institutions, such as the EMA. If U.K. funding is so reduced, it could create delays in the EMA issuing regulatory approvals for our product candidates and, accordingly, have a material adverse effect on our business, financial condition, results or prospects.

Moreover, there is currently considerable uncertainty in relation to U.K. financial and banking markets in the U.K. following the Transition Period. Furthermore, the U.K. is likely to lose the benefits of global trade agreements negotiated by the European Union on behalf of its members, which may result in increased trade barriers and could make it more difficult for us and our collaborators to do business in the U.K. In addition, currency exchange rates for the British Pound and the Euro with respect to each other and the U.S. dollar have already been affected by Brexit. Should this foreign exchange volatility continue, it could cause volatility in our quarterly financial results. In any event, we cannot predict to what extent these changes will impact our business or results of operations, or our or our collaborators’ ability to continue to conduct operations in Europe or our ability to build and maintain a commercial infrastructure in Europe.

Further, as a result of the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have recently experienced extreme volatility and disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. If the equity and credit markets continue to deteriorate, it may make any additional debt or equity financing more difficult, more costly and more dilutive.

Our short operating history may make it difficult for you to evaluate the success of our business to date and assess our future viability.

We were founded in December 2012 and our operations to date have been limited to organizing and staffing our company, business planning, raising capital, developing our technology, identifying potential development and product candidates, and undertaking preclinical studies and conducting clinical trials. We have not yet demonstrated our ability to successfully complete large-scale, pivotal clinical trials required for regulatory approval of our product candidates, obtain marketing approvals, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful commercialization. Typically, it takes many years to develop one new product from the time it is discovered to when it is commercially available. Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had a longer operating history or if we had product candidates in advanced clinical trials.

In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors that may alter or delay our plans. We will need to continue to transition from a company with a research focus to a company capable of supporting late-stage development activities and, if a product candidate is approved, a company with commercial activities. We may not be successful in any step of such a transition.

Risks Related to Our Dependence on Third Parties

*We are dependent on our collaboration partner to provide funding to continue the development of rezafungin, and for the commercialization of rezafungin outside of the United States and Japan. If the collaboration is not successful, we may not be able to complete the development of rezafungin or capitalize on the full market potential for rezafungin.

On September 3, 2019, we licensed the rights to rezafungin outside of the U.S. and Japan to Mundipharma Medical Company, a large international pharmaceutical company. Our ability to complete the development of rezafungin is dependent, in part, on funds provided by Mundipharma. Additionally, our ability to receive payments from this arrangement will depend on Mundipharma’s ability to successfully commercialize rezafungin in its territory.

The Mundipharma Collaboration poses many risks to us, including that our collaborator, Mundipharma:

has significant discretion in determining the efforts and resources it will apply to commercializing rezafungin in its territory, and may not commit sufficient resources to the marketing and distribution of rezafungin;

may terminate the collaboration agreement at will;

may be subject to changes in key personnel or strategic focus, have limited available funding or be subject to other external factors diverting resources or creates competing priorities, all of which could negatively impact the commercialization of rezafungin in its territory;

may independently develop, or develop with third parties, products that compete directly or indirectly with rezafungin if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;

may use our intellectual property or proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property rights or proprietary information or expose us to potential litigation;

may not agree with certain development decisions resulting in the delay or termination of the program, or that result in costly litigation or arbitration that diverts management attention and resources;

could be involved in a business combination and the continued pursuit and emphasis on rezafungin could be delayed, diminished or terminated; and

could be financially impacted by the COVID-19 pandemic.

If our ability to generate revenue under the Mundipharma Collaboration is adversely impacted by these or any other risks, our right to receive additional payments from the Mundipharma Collaboration, including our share of the revenues generated by net sales of rezafungin, if approved, could be insufficient to allow us to complete the rezafungin development program including the ReSTORE and ReSPECT Phase 3 clinical trials, to achieve or maintain profitability or may result in rezafungin being less valuable to us than if we had not entered into the Collaboration.

We may seek to selectively establish other collaborations and, if we are unable to establish them on commercially reasonable terms or at all, we may have to alter our research, clinical development and commercialization plans.

We may seek to collaborate with other pharmaceutical and biotechnology companies to advance the Cloudbreak program, or for the completion of development and commercialization of rezafungin in the U.S. and Japan. We may also seek funding from government grants or contracts to advance the Cloudbreak program. We cannot be certain that we will be successful in completing any such collaboration or obtaining any such government grants or contracts, or completing any of them on commercially reasonable terms.

We face significant competition in seeking appropriate pharmaceutical or biotech collaborators. Whether we reach a definitive agreement for a collaboration will depend, among other things, on the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors.

Those factors may include:

the design or results of preclinical studies, CMC development activities or clinical trials;

the likelihood of approval by the FDA or similar regulatory authorities outside the United States;

the potential market for the product candidate in the territories that are the subject of the collaboration;

the costs and complexities of manufacturing and delivering such product candidate to patients;

the potential of competing products;

the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge; and

industry and market conditions generally.

The collaborator may also consider alternative product candidates for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate.

We also face significant competition for government grants and contracts for the Cloudbreak program, and there can be no assurances that such funding would be available to us if and when needed, or at all. For instance, government funding may be available only at certain phases of research and development, such as only after Phase 1 clinical trials have been completed. In order to advance the Cloudbreak Program, we will need to obtain significant funding to complete IND-enabling studies, manufacturing development and Phase 1 clinical trials. Government grants and contracts may not be available to fund our activities at this earlier phase of the research and development process.

*We intend to continue to rely on third parties to conduct our clinical trials and to conduct some aspects of our research and preclinical testing and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials, research or testing.

We currently rely and expect to continue to rely on third parties, such as contract research organizations, contract manufacturers of clinical supplies, clinical data management organizations, medical institutions and clinical investigators,

to conduct our clinical trials and to conduct some aspects of our research and preclinical testing. ~~Any~~Many of these third parties may terminate their engagements with us at any time. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our studies in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates. Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. If we need to enter into alternative arrangements, it would delay our product development activities.

Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our responsibilities. For example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA and other international regulatory ~~agencies~~authorities require us to comply with standards, commonly referred to as Good Clinical Practices, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. We also are required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database, available at www.clinicaltrials.gov, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

In addition, the ability of these third parties to conduct certain of their operations, including monitoring of clinical sites, may be limited by the COVID-19 pandemic, and to the extent that such third parties are unable to fulfil their contractual obligations as a result of the COVID-19 pandemic or government orders in response to the pandemic, we may have limited or no recourse under the terms of our contractual agreements with such third parties. Further, if any of the third parties with whom we engage were to experience shutdowns or other substantial disruptions due to the COVID-19 pandemic, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively affected, which could have a material adverse impact on our business and our results of operation and financial condition.

*We have no experience manufacturing product candidates on a clinical or commercial scale and will be dependent on third parties for the manufacture of our product candidates. If we experience problems with any of these third parties, they could delay clinical development or marketing approval of our product candidates or our ability to sell any approved products.

We do not have any manufacturing facilities. We currently rely, and expect to continue to rely, on third-party manufacturers for the manufacture of our product candidates for preclinical studies and clinical trials, and for commercial supply of any of these product candidates ~~for which~~should we obtain marketing approval.

We may be unable to establish agreements with third-party manufacturers for preclinical, clinical or commercial supply on terms favorable to us, or at all. Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:

reliance on the third party for regulatory compliance and quality assurance;

the possible breach of the manufacturing agreement by the third party, including the inability to supply sufficient quantities or to meet quality standards or timelines; and

the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.

Third-party manufacturers may not be able to comply with current U.S. Good Manufacturing Practice requirements, or cGMPs, or similar regulatory requirements outside the United States. Our failure, or the failure of our third-party

manufacturers, to comply with cGMPs or other applicable regulations, even if such failures do not relate specifically to our product candidates or approved products, could result in sanctions being imposed on us or the manufacturers, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates, operating restrictions and criminal prosecutions, any of which could adversely affect supplies of our product candidates and harm our business and results of operations.

Any product that we ~~may~~ develop may compete with other product candidates and products for access to these manufacturing facilities. There are a limited number of manufacturers that operate under cGMPs and that might be capable of manufacturing for us.

Any performance failure on the part of our existing or future manufacturers, including a failure that may not relate specifically to our product candidate or approved product or a failure due to the COVID-19 pandemic, could delay clinical development or marketing approval or adversely impact our ability to generate commercial sales. If any one of our current contract manufacturers cannot perform as agreed, we may be required to replace that manufacturer. Some of our third-party manufacturers which we use for the supply of materials for product candidates or other materials necessary to

manufacture product to conduct preclinical tests and clinical trials are located in countries affected by COVID-19, and should they experience disruptions, such as temporary closures or suspension of services, we would likely experience delays in advancing these tests and trials.

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

We currently rely, and expect to continue to rely, on third parties to release, label, store and distribute drug supplies for our clinical trials. Any performance failure on the part of these third parties, including a failure that may not relate specifically to our product candidate or approved product, could delay or otherwise adversely impact clinical development or marketing approval of our product candidates or commercialization of our drugs, producing additional losses and depriving us of potential revenue.

Moreover, our manufacturers and suppliers may experience difficulties related to their overall businesses and financial stability, which could result in delays or interruptions of supply of our product candidates or approved products.

We do not have alternate manufacturing plans in place at this time. If we need to change to other manufacturers, the FDA and comparable foreign regulators may have to approve these manufacturers’ facilities and processes prior to our use, which would require new testing and compliance inspections. In addition, the new manufacturers would have to be educated in or independently develop the processes necessary for production. This would result in delays and costs, and in the case of approved products, the potential loss of revenue.

We may seek to selectively establish collaborations, and, if we are unable to establish them on commercially reasonable terms or at all, we may have to alter our development and commercialization plans.

Our drug development programs and the potential commercialization of our product candidates will require substantial additional cash to fund expenses. For some of our product candidates, we may decide to collaborate with other pharmaceutical and biotechnology companies for the development and potential commercialization of those product candidates. We do not currently have any such collaborations.

We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors.

~~Those factors may include:~~

~~the design or results of preclinical studies or clinical trials;~~

~~the likelihood of approval by the FDA or similar regulatory authorities outside the United States;~~

~~the potential market for the subject product candidate;~~

~~the costs and complexities of manufacturing and delivering such product candidate to patients;~~

~~the potential of competing products;~~

~~the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge; and~~

~~industry and market conditions generally.~~

To the extent we enter into any collaborations, we may depend on collaborators for the development and commercialization of our product candidates. If those collaborations are not successful, we may not be able to capitalize on the market potential of our product candidates.

We may selectively seek third-party collaborators for the development and commercialization of our product candidates. Our likely potential collaborators include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. We do not currently have any such arrangements and if we enter into any such arrangements with any third parties in the future, we will likely have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product candidates. Our ability to generate revenue from these arrangements will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements.

~~Collaborations involving our product candidates pose many risks to us, including that:~~

~~collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations;~~

collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborator’s strategic focus or available funding or external factors such as an acquisition that diverts resources or creates competing priorities;

collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;

collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates or products if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;

~~a collaborator with marketing and distribution rights to one or more product candidates or products may not commit sufficient resources to the marketing and distribution of such drugs;~~

collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property rights or proprietary information or expose us to potential litigation;

disputes may arise between the collaborators and us that result in the delay or termination of the research, development or commercialization of our product candidates or products or that result in costly litigation or arbitration that diverts management attention and resources;

~~we may lose certain valuable rights under circumstances identified in our collaboration agreements if we undergo a change of control;~~

~~collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates;~~

~~collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner, or at all; and~~

if a future collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our product development or commercialization program under such collaboration could be delayed, diminished or terminated.

If our ability to generate revenue under any of our collaboration agreements is adversely impacted by any of these risks, our share of the revenues generated by the product, if approved, under the terms of the collaboration could be insufficient to allow us to achieve or maintain profitability, or the product may be less valuable to us than if we had not entered into the collaboration.

Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters

*If we are unable to take full advantage of regulatory programs designed to expedite drug development or provide other incentives, our development programs may be adversely impacted.

There are a number of incentive programs administered by the FDA and other regulatory bodies to facilitate development of drugs in areas of unmet medical need. ~~Rezafungin received~~In the ~~designations as~~United States, rezafungin has been designated a Qualified Infectious Disease Product, or QIDP, a fast track product, and, with respect to the indication for treatment of candidemia and invasive candidiasis, rezafungin has also been designated as an orphan ~~drug~~drug. Rezafungin also received QIPD and fast track designation in the U.S. for the ~~treatment~~prevention of ~~candidemia and~~ invasive

~~candidiasis.~~ ~~We are planning~~ fungal infections in adults undergoing allogeneic bone marrow transplantation. Our collaboration partner plans to seek ~~QIDP, fast track and~~designation as an orphan drug ~~designations~~in Europe for ~~rezafungin for~~the prophylaxis ~~as well.~~indication and the treatment indication. Our product candidates may not qualify for, or maintain, designations under these or other similar incentive ~~programs under any of~~programs. For example, rezafungin has not received orphan drug designation in the ~~FDA’s existing or future programs to expedite drug development in areas of unmet medical need.~~U.S. for the prevention indication. Our inability to fully take advantage of these incentive programs may require us to run larger trials, incur delays, lose opportunities that may not otherwise be available to us, lose marketing exclusivity for which we would otherwise be eligible and incur greater expense in the development of our product candidates.

*If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize, or will be delayed in commercializing, our product candidates and our ability to generate revenue will be impaired.

Our product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture, release, safety, efficacy, regulatory filings, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and other regulatory ~~agencies~~authorities in the United States and by comparable authorities in other countries. For example, in order to commence clinical trials of our product candidates in the United States, we must file an IND and obtain FDA agreement to proceed. The FDA may place our development program on clinical hold and require further preclinical testing prior to allowing our clinical trials to proceed.

We must obtain marketing approval in each jurisdiction in which we market our products. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product candidate. We have not submitted a marketing application or received approval to market any of our product candidates from regulatory authorities in any jurisdiction. We have only limited experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third-party contract research organizations to assist us in this process. Securing regulatory approval requires the submission of extensive preclinical and clinical data and supporting information to the various regulatory authorities for each indication to establish the product candidate’s safety and efficacy. Securing regulatory approval also requires the submission of information about the product manufacturing process, testing and release and inspection of manufacturing facilities and personnel by the relevant regulatory authority. Our product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side

effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use.

The process of obtaining marketing approvals, both in the United States and elsewhere, is expensive, may take many years and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. We cannot assure you that we will ever obtain any marketing approvals in any jurisdiction. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations or changes in regulatory review for each submitted product application may cause delays in the approval or rejection of an application. The FDA and comparable authorities in other countries have substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinical or other studies, changes in the manufacturing process or facilities or clinical trials. Moreover, approval by the FDA or an equivalent foreign authority does not ensure approval by regulatory authorities in any other countries or jurisdictions, but a failure to obtain marketing approval in one jurisdiction may adversely impact the likelihood of approval in other jurisdictions. In addition, varying interpretations of the data obtained from preclinical testing, manufacturing and product testing and clinical trials could delay, limit or prevent marketing approval of a product candidate. Additionally, any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.

*The COVID-19 pandemic could also potentially affect the business of the FDA and comparable authorities in other countries, which could result in delays in meetings related to planned clinical trials and ultimately of reviews and approvals of our product candidates.

Any product candidate for which we obtain marketing approval could be subject to marketing restrictions or withdrawal from the market and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products.

Any product candidate for which we obtain marketing approval, along with the manufacturing processes and facilities, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of promotional materials and safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements for product facilities, quality assurance and corresponding maintenance of records and documents and requirements regarding the distribution of samples to physicians and related recordkeeping. Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval or contain requirements for costly post-marketing testing and

surveillance to monitor the safety or efficacy of the medicine. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure that they are marketed only for the approved indications and in accordance with the provisions of the approved labeling. However, companies may share truthful and not misleading information that is otherwise consistent with the product’s FDA approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding off-label use and if we do not comply with these restrictions, we may be subject to enforcement actions.

In addition, later discovery of previously unknown problems with our products, manufacturers or manufacturing processes and facilities or failure to comply with regulatory requirements, may result in, among other things:

restrictions on such products, manufacturers or manufacturing processes or facilities;

restrictions on the labeling, marketing, distribution or use of a product;

requirements to conduct post-approval clinical trials, other studies or other post-approval commitments;

warning or untitled letters;

withdrawal of the products from the market;

refusal to approve pending applications or supplements to approved applications that we submit;

recall of products;

fines, restitution or disgorgement of profits or revenue;

suspension or withdrawal of marketing approvals;

refusal to permit the import or export of our products;

product seizure; and

injunctions or the imposition of civil or criminal penalties.

*Our relationships with customers, health care professionals and third-party ~~payers will~~payors may be subject to applicable healthcare laws, which could expose us to penalties, including administrative, civil or criminal penalties, damages, fines, imprisonment, exclusion from participation in federal healthcare programs such as Medicare and Medicaid, reputational harm, the curtailment or restructuring of our operations and diminished future profits and earnings.

Healthcare professionals and third-party ~~payers~~payors will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our current and future arrangements with customers, healthcare professionals and third-party ~~payers~~payors may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we conduct research, market, sell and distribute our medicines for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the following, among others:

the federal healthcare anti-kickback statute, which prohibits persons and entities from, among other things, knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, 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 under federal and state healthcare programs such as Medicare and Medicaid;

the federal false claims laws, which impose criminal and civil penalties, including civil whistleblower or qui tam actions under the federal ~~Civil~~civil False Claims Act, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;

the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, which imposes criminal and civil liability for, among other things, executing a scheme to defraud any healthcare benefit program and also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

the federal false statements statute enacted under HIPAA, which prohibits 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;

the federal transparency requirements under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the Affordable Care Act, which require, among other things, certain manufacturers of drugs, devices, biologics and medical supplies to report annually to ~~the Department of Health and Human Services~~CMS information related to ~~physician~~ payments to physicians, as defined by such law, and other transfers of value and physician ownership and investment interests; and

analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to our business activities, including sales or marketing arrangements and claims involving healthcare items or services including, in some states, those reimbursed by non-governmental third-party ~~payers,~~payors, including private insurers, ~~and~~ some state laws which require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments or other transfers of value provided to physicians and other health care providers and entities, marketing expenditures, or ~~marketing expenditures.~~drug pricing, state and local laws that require the registration of pharmaceutical sales representatives, and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

As of May 25, 2018, the EU General Data Protection Regulation 2016/679, or GDPR replaced the EU General Data Protection Regulation with respect to the processing of personal data in the European Union. The GDPR imposes many requirements for controllers and processors of personal data, including, for example, higher standards for obtaining consent from individuals to process their personal data, more robust disclosures to individuals and a strengthened individual data rights regime, shortened timelines for data breach notifications, limitations on retention and secondary use of information, increased requirements pertaining to health data and pseudonymised (i.e., key-coded) data and additional obligations when we contract third-party processors in connection with the processing of the personal data. The GDPR allows EU member states to make additional laws and regulations further limiting the processing of genetic, biometric or health data. Failure to comply with the requirements of GDPR and the applicable national data protection laws of the EU member states may result in fines of up to €20,000,000 or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, and other administrative penalties. The GDPR includes more stringent operational requirements for processors and controllers of personal data and creates additional rights for data subjects. Additionally, in June 2016, United Kingdom voters approved an exit from the EU, commonly referred to as “Brexit,” which could also lead to further legislative and regulatory changes. In March 2017, the United Kingdom began the process to

leave the EU by April 2019. While the Data Protection Act of 2018, that “implements” and complements the GDPR has achieved Royal Assent on May 23, 2018 and is now effective in the United Kingdom, it is still unclear whether transfer of data from the EEA to the United Kingdom will remain lawful under GDPR. We may incur liabilities, expenses, costs, and other operational losses under GDPR and applicable EU Member States and the United Kingdom privacy laws in connection with any measures we take to comply with them.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. Interpretations of standards of compliance under these laws and regulations are rapidly changing and subject to varying interpretations and it is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other laws that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, reputational harm, imprisonment, additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws and the curtailment or restructuring of our operations, any of which could diminish our future profits or earnings. If any of the physicians or other providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

We are dependent on information technology systems, infrastructure and data, which exposes us to data security risks.

We are dependent upon our own or third-party information technology systems, infrastructure and data, including mobile technologies, to operate our business. The multitude and complexity of our computer systems may make them vulnerable to service interruption or destruction, disruption of data integrity, malicious intrusion, or random attacks. Likewise, data privacy or security incidents or breaches by employees or others may pose a risk that sensitive data, including our intellectual property, trade secrets or personal information of our employees, patients, customers or other business partners may be exposed to unauthorized persons or to the public. Cyber-attacks are increasing in their frequency, sophistication and intensity. Cyber-attacks could include the deployment of harmful malware, denial-of-service, social engineering and other means to affect service reliability and threaten data confidentiality, integrity and availability. Our business partners face similar risks and any security breach of their systems could adversely affect our security posture. A security breach or privacy violation that leads to disclosure or modification of or prevents access to patient information, including personally identifiable information or protected health information, could harm our reputation, compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us to mandatory corrective action, require us to verify the correctness of database contents and otherwise subject us to litigation or other liability under laws and regulations that protect personal data, any of which could disrupt our business and/or result in increased costs or loss of revenue. Moreover, the prevalent use of mobile devices that access confidential information increases the risk of data security breaches, which could lead to the loss of confidential information, trade secrets or other intellectual property. While we have invested, and continue to invest, in the protection of our data and information technology infrastructure, there can be no assurance that our efforts will prevent service interruptions, or identify breaches in our systems, that could adversely affect our business and operations and/or result in the loss of critical or sensitive information, which could result in financial, legal, business or reputational harm to us. In addition, our liability insurance may not be sufficient in type or amount to cover us against claims related to security breaches, cyber-attacks and other related breaches.

*We are subject to extensive laws and regulations related to data privacy, and our failure to comply with these laws and regulations could harm our business.

We are subject to laws and regulations governing data privacy and the protection of personal information. These laws and regulations govern our processing of personal data, including the collection, access, use, analysis, modification, storage, transfer, security breach notification, destruction and disposal of personal data. There are foreign and state law versions of these laws and regulations to which we are currently and/or may in the future, be subject. For example, the collection and use of personal data in the EU is governed by the GDPR. The GDPR, which is wide-ranging in scope, imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, the security and confidentiality of the personal data, data breach notification and the use of third party processors in connection with the processing of personal data. The GDPR also imposes strict rules on the transfer of personal data out of the EU to the United States, provides an enforcement authority and imposes large monetary penalties for noncompliance. The GDPR requirements apply not only to third-party transactions, but also to transfers of information within our company, including employee information. The GDPR and similar data privacy laws of other jurisdictions place significant responsibilities on us and create potential liability in relation to personal data that we or our third party service providers process, including in clinical trials conducted in the United States and EU. In addition, we expect that there will continue to be new proposed laws, regulations and industry standards relating to privacy and data

protection in the United States, the EU and other jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business.

We are subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws and anti-money laundering laws and regulations. Compliance with these legal standards could impair our ability to compete in domestic and international markets. We can face criminal liability and other serious consequences for violations, which can harm our business.

We are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls, the U.S. Foreign Corrupt Practices Act of 1977, as amended, or FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act and other state and national anti-bribery and anti-money laundering laws in the countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors, and other collaborators from authorizing, promising, offering or providing, directly or indirectly, improper payments or anything else of value to recipients in the public or private sector. We may engage third parties for clinical trials outside of the United States, to sell our products abroad once we enter a commercialization phase and/or to obtain necessary permits, licenses, patent registrations, and other regulatory approvals. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities and other organizations. We can be held liable for the corrupt or other illegal activities of our employees, agents, contractors and other collaborators, even if we do not explicitly authorize or have actual knowledge of such activities. Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences.

*Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain.

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system, including cost-containment measures, that could reduce or limit coverage and reimbursement for newly approved drugs, prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product candidates for which we obtain marketing approval.

For example, in March 2010, President Obama signed into law the Affordable Care Act, a sweeping law intended to, among other things, broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. The Affordable Care Act and subsequent regulations revised the definition of “average manufacturer price” for reporting purposes, which could increase the amount of Medicaid drug rebates to states. Further, the law ~~imposes~~imposed a significant annual fee on companies that manufacture or import branded prescription drug products. Substantial new provisions affecting compliance have also been enacted, which may affect our business practices with healthcare practitioners. ~~Since its enactment there have been~~There remain judicial and Congressional challenges to certain aspects of the Affordable Care Act, as well as efforts by the Trump administration to repeal and replace certain aspects of the Affordable Care Act and we expect ~~there will be additional~~such challenges to continue. Since January 2017, President Trump has signed several Executive Orders and ~~amendments~~other directives designed to itdelay the implementation of certain provisions of the Affordable Care Act or otherwise circumvent some of the requirements for health insurance mandated by the Affordable Care Act. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the Affordable Care Act. While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the Affordable Care Act have been enacted. Legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act, or Tax Act, includes a provision which repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the Affordable Care Act on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” Further, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the Affordable Care Act's mandated "Cadillac" tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminates the health insurer tax. The Bipartisan Budget Act of 2018, or the BBA, among other things, amended the Affordable Care Act, effective January 1, 2019, to close the coverage gap in most Medicare drug plans and also increased, effective January 1, 2019, the percentage that a drug manufacturer must discount the cost of prescription drugs from 50 percent to 70 percent. In 2018, CMS published a new final rule permitting further collections and payments to and from certain Affordable Care Act qualified health plans and health insurance issuers under the Affordable Care Act risk adjustment program in response to the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment. On December 14, 2018, a Texas U.S. District Court Judge ruled that the Affordable Care Act is unconstitutional in its entirety because the "individual mandate" was repealed by Congress as part of the Tax Act. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that the

individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the Affordable Care Act are invalid as well. On March 2, 2020, the United States Supreme Court granted the petitions for writs of certiorari to review this case, and has allotted one hour for oral arguments, which are expected to occur in the ~~future.~~ fall of 2020. It is unclear how such litigation and other efforts to repeal and replace the Affordable Care Act will impact the Affordable Care Act and our business. We cannot predict the ultimate content, timing or effect of healthcare reform legislation or regulation or the impact of potential legislation or regulation on us.

Although the full effect of the Affordable Care Act remains uncertain, the law appears likely to continue the pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs.

Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products.

Further, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. In August 2011, the President signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee did not achieve a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering the legislation’s automatic reduction to several government programs. This includes reductions to Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013 and, due to subsequent legislative amendments, including the BBA, will remain in effect through 2030 unless additional congressional action is taken. The Coronavirus Aid, Relief and Economic Security Act, or CARES Act, which was signed into law in March 2020 and is designed to provide financial support and resources to individuals and businesses affected by the COVID-19 pandemic, suspended the 2% Medicare sequester from May 1, 2020 through December 31, 2020, and extended the sequester by one year, through 2030. Additionally, in January 2013, the President signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

In addition, there have been several recent Congressional inquiries and proposed ~~bills~~and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for drug products. At the federal level, the Trump administration’s budget proposal for fiscal year 2021 includes a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. Further, the Trump administration released a “Blueprint,” or plan, to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products, and reduce the out of pocket costs of drug products paid by consumers. The U.S. Department of Health and Human Services, or HHS, has solicited feedback on some of these measures and has implemented others under its existing authority. On July 24, 2020, President Trump announced four executive orders related to prescription drug pricing that attempt to implement several of the administration’s proposals, including a policy that would tie Medicare Part B drug prices to international drug prices; one that directs HHS to finalize the Canadian drug importation proposed rule previously issued by HHS and makes other changes allowing for personal importation of drugs from Canada; one that directs HHS to finalize the rulemaking process on modifying the anti-kickback law safe harbors for plans, pharmacies, and pharmaceutical benefit managers; and one that reduces costs of insulin and epipens to patients of federally qualified health centers. While some of these and other proposed measures may require additional authorization to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

We expect that additional healthcare reform measures will be adopted within and outside the United States in the future, any of which could add difficulty to the regulatory approval processes for our product candidates or limit the amounts that governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures. The continuing efforts of third-party payors to contain or reduce costs of healthcare may adversely affect the demand for any drug products for which we may obtain regulatory approval, our ability to set a price that we believe is fair for our products, our ability to obtain coverage and reimbursement approval for

a product, our ability to generate revenues and achieve or maintain profitability and the level of taxes that we are required to pay.

Risks Related to Our Intellectual Property

*If our efforts to protect the proprietary nature of the intellectual property related to rezafungin, our Cloudbreak compounds or our other product candidates or compounds are not adequate, we may not be able to compete effectively in our markets.

We rely upon a combination of patents, trademarks, trade secret protection and confidentiality agreements to protect the intellectual property related to rezafungin and our other product candidates and compounds. Any involuntary disclosure to or misappropriation by third parties of our proprietary information could enable competitors to quickly duplicate or surpass our technological achievements, thus eroding our competitive position in our markets.

The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain and our commercial success will depend on our ability to obtain patents and maintain adequate protection for rezafungin, ~~CD201,~~ our ~~antibody-drug conjugates~~AVCs and other compounds and product candidates in the United States and other countries. We currently hold issued U.S. utility and foreign patents and multiple pending U.S. utility patent applications, pending U.S. provisional patent applications and pending international, foreign national and regional counterpart patent applications covering various aspects of rezafungin ~~CD201, our antibody-drug conjugates~~ and our ~~Cloudbreak immunotherapy platform, and other technology.~~AVCs. The patent applications may fail to result in issued patents in the United States or in foreign countries or jurisdictions. Even if the applications do successfully issue, third parties may challenge the patents.

Further, the existing and/or future patents, if any, may be too narrow to prevent third parties from developing or designing around these patents. If the sufficiency of the breadth or strength of protection provided by the patent and patent applications we own with respect to rezafungin ~~CD20~~ or our ~~antibody-drug conjugates~~AVCs or the patents we pursue related to any of our other product candidates or compounds is threatened, it could dissuade companies from collaborating with us to develop and threaten our ability to commercialize the product candidates or compounds. Further, if we encounter delays in our clinical trials, the period of time during which we could market our product candidates under patent protection would be reduced, although a patent term extension or supplementary protection certificate having varied scope may be available in certain jurisdictions to compensate for some of the lost patent term. In addition, we do not know whether:

we were the first to make the inventions covered by each of our pending patent applications or our issued patents;

we were the first to file patent applications for these inventions;

others will independently develop similar or alternative technologies or duplicate any of our technologies;

any of our pending patent applications will result in issued patents;

any of our patents, once issued, will be valid or enforceable or will issue with claims sufficient to protect our products, or will be challenged by third parties;

any patents issued to us will provide us with any competitive advantages;

we will develop additional proprietary technologies that are patentable; or

the patents of others will have an adverse effect on our business.

In addition, patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. In September 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted and may also affect patent litigation. The United States Patent and Trademark Office, or USPTO, ~~recently~~ developed new 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, only became effective in March 2013. 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, financial condition and prospects.

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 in one or more jurisdictions, inventions for which patents are difficult to enforce and any other elements of our drug discovery program that involve proprietary know-how, information and technology that is not covered by patents. Although we require all of our employees, consultants, advisers and third parties who have access to our proprietary know-how, information and technology to enter into confidentiality agreements,

we cannot be certain that this know-how, information and technology will not be disclosed or used in an unauthorized

manner or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.

There also may be challenges or other disputes concerning the inventorship, ownership or right to use our intellectual property. For example, our consultants and advisors may have obligations to assign certain inventions and/or know-how that they develop to third-party entities in certain instances, and these third parties may challenge our ownership or other rights to our intellectual property, which would adversely affect our business.

An inability to obtain, enforce and defend patents covering our proprietary technologies would materially and adversely affect our business prospects and financial condition. Further, the laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States. We may encounter significant problems in protecting, enforcing and defending our intellectual property both in the United States and abroad. If we are unable to prevent unauthorized material disclosure of the intellectual property related to our technologies to third parties or are otherwise unable to protect, enforce or defend our intellectual property, we will not be able to establish or, if established, maintain a competitive advantage in our markets, which could materially adversely affect our business, operating results and financial condition.

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 and/or applications will be due to be paid to the USPTO and various foreign or jurisdictional governmental patent agencies in several stages over the lifetime of the patents and/or applications. We have systems in place to remind us to pay these fees, and we employ an outside firm to pay these fees due to foreign patent agencies. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process.

We employ reputable 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 noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. Such noncompliance events are outside of our direct control for (1) non-U.S. patents and patent applications owned by us and, (2) if applicable in the future, patents and patent applications licensed to us by another entity. In such an event, our competitors might be able to enter the market, which would have a material adverse effect on our business.

*Third-party claims of intellectual property infringement may prevent or delay our drug discovery and development efforts.

Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents with claims to materials, methods of manufacture or methods ~~for~~of treatment related to the use or manufacture of rezafungin, ~~CD201,~~ our ~~antibody-drug conjugates~~AVCs and/or our other product candidates or compounds. ~~Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties.~~ If any third-party patents were held by a court of competent jurisdiction to cover the ~~CD101, CD201~~rezafungin or ~~antibody-drug conjugate~~AVC manufacturing process, any molecules formed during these processes or the final products or any use thereof, the holders of any such patents may be able to block our ability to commercialize the product unless we obtained a license under the applicable patent or patents or until such patents expire. These same issues and risks arise in connection with any other product candidates we develop as well. We cannot predict whether we would be able to obtain a license on commercially reasonable terms, or at all. Any inability to obtain such a license under the applicable patents on commercially reasonable terms, or at all, would have a material adverse effect on our ability to commercialize the affected product until such patents expire.

In addition, third parties may obtain patents in the future and claim that our product candidates and/or the use of our technologies infringes upon these patents. Furthermore, 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 management and other 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 in the case of willful infringement, obtain one or more licenses from third parties, pay royalties and/or redesign our infringing products, which may be impossible and/or require substantial time and monetary expenditure. In addition, even in the

absence of litigation, we may need to obtain licenses from third parties to advance our research or allow

commercialization of one or more of our product candidates. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, or at all. In that event, we would not be able to further develop and commercialize such product candidates, which could harm our business significantly.

*We may be required to file lawsuits or take other actions to protect or enforce our patents, which could be expensive, time consuming and unsuccessful.

Competitors may infringe our current or future patents. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that one or more of our asserted patents is not valid or is unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that 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, held unenforceable or interpreted narrowly and could put our patent applications at risk of not issuing. Pursuit of these claims would involve substantial litigation expense and would be a substantial diversion of management and other employee resources from our business.

Interference proceedings or derivative proceedings provoked by third parties or brought by the USPTO may be necessary to determine the entitlement to patent protection with respect to our patents or patent applications. An unfavorable outcome could result in a loss of our patent rights and could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms, or at all. Litigation or patent office proceedings may result in a decision adverse to our interests and, even if we are successful, may result in substantial costs and distract our management and other employees. We may not be able to prevent misappropriation of our trade secrets or confidential information, particularly in countries where the laws or legal process may not protect those rights as fully as in the United States.

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

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

If we initiate legal proceedings against a third party to enforce a patent covering one of our product candidates or our technologies, the defendant could counterclaim that the patent covering our product candidate or our technology, as applicable, is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace and there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent. 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 or our technologies. The outcome following legal assertions of invalidity and/or unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art ~~and~~or that prior art that was cited during prosecution, but not relied on by the patent examiner, will not be revisited. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection directed to our product candidates or technologies. Such a loss of patent rights could have a material adverse impact on our business.

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

As is the case with other pharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the pharmaceutical industry involve both technological and legal complexity, and are therefore costly, time-consuming and inherently uncertain. In addition, the United States has implemented wide-ranging patent reform legislation, including patent office administrative proceedings that offer broad opportunities to third parties to challenge issued patents. 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. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, the USPTO and foreign governmental bodies and tribunals, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that

we might obtain in the future. For example, in Assoc. for Molecular Pathology v. Myriad Genetics, Inc., the U.S. Supreme Court held in 2013 that certain claims to DNA molecules are not patentable and lower courts have since been applying this case in the context of other types of biological subject matter. We cannot predict how future decisions by the courts, the U.S. Congress, the USPTO or foreign governmental bodies or tribunals may impact the value of our patent rights.

*We have limited foreign intellectual property rights and may not be able to protect our intellectual property rights throughout the world.

We have limited intellectual property rights outside the United States. 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 and legal processes of some foreign countries do not protect intellectual property 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 patents to develop their own products and further, may export otherwise infringing products to territories where we have patents 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 in foreign jurisdictions. The legal systems of certain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property, particularly those relating to pharmaceutical 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 any of 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. The requirements for patentability may differ in certain countries, particularly developing countries. Furthermore, generic drug manufacturers or other competitors may challenge the scope, validity or enforceability of any of our current or future patents, requiring us to engage in complex, lengthy and costly litigation or other proceedings. Certain countries in Europe and developing countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In those countries, we may have limited remedies if any of our patents are infringed or if we are compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. 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.

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

Our trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potential partners or customers in our markets of interest. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively and our business may be adversely affected.

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

We have received confidential and proprietary information from third parties. In addition, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors, and academic or research institutions. We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of these third parties or our employees’ former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial cost and be a distraction to our management and employees.

*Provisions in our contract with the Trustees of Boston University, or BU, relating to the Combating Antibiotic Resistant Bacteria Accelerator, or CARB-X, program, may affect our intellectual property rights.

Certain of our activities relating to our CD201 program are subject to reimbursement under our Cost Reimbursement Research Subaward Agreement, or the CARB-X Subaward Agreement, with the Trustees of Boston University. We may also seek to include activities relating to our antibody-drug conjugates under this agreement. CARB-X is funded by the U.S. Biomedical Advanced Research and Development Authority, or BARDA, and the Wellcome Trust, or Wellcome, a global charitable foundation. When new technologies are developed with U.S. government funding, the government obtains certain rights in any resulting patents, including the right to a nonexclusive license authorizing the government to

use the invention. These rights may permit the government to disclose our confidential information to third parties and to exercise “march-in” rights to use or allow third parties to use our patented technology. The government can exercise its march-in rights if it determines that action is necessary because we fail to achieve practical application of the U.S. government-funded technology, because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations, or to give preference to U.S. industry. In addition, U.S. government-funded inventions must be reported to the government, U.S. government funding must be disclosed in any resulting patent applications, and our rights in such inventions may be subject to certain requirements to manufacture products in the U.S.

In addition, subject to such march-in rights, if we have not exploited or further developed intellectual property rights relating to the product candidates subject to reimbursement under the CARB-X program by the date that is five years after the end of the activities funded by CARB-X under the CARB-X Subaward Agreement in any country, Wellcome will have the option to take responsibility for the exclusive commercialization and exploitation of such intellectual property rights in such country. In such event, such intellectual property rights relating to such country will be assigned to Wellcome, and Wellcome will share revenues and equity holdings relating to such exploitation with us on a 50%/50% basis, net of Wellcome’s related costs. In the event we license such intellectual property rights to a third party prior to the exercise of such option rights by Wellcome, such option rights shall terminate, provided that the third party license agreement contains a requirement for the licensee to use diligent efforts to exploit such intellectual property rights, with a reversion right to us in the event of a violation of such diligence requirement, and provided that Wellcome has approved such third party license agreement in writing.

If the U.S. government or Wellcome takes any of these actions with respect to our intellectual property rights, we may be unable to obtain a significant commercial advantage from our intellectual property, and our potential revenue opportunities could be limited substantially.

Risks Related to U.S. Government Contracts and Grants

*If we are unable to generate revenues from partnerships, government funding or other sources of funding, we may be forced to suspend or terminate one or more of our Cloudbreak programs.

In order to continue our Cloudbreak programs, we will need to seek funding from partnerships, the government or other sources of funding. There can be no assurances that we will be able to obtain funding from partnerships, or enter into new contracts with the United States government or obtain other sources of funding to support any program resulting from our Cloudbreak antiviral platform. The process of completing a partnership or obtaining government contracts is lengthy and uncertain and we will have to compete with other companies and institutions in each instance. Further, with respect to government contracting, changes in government budgets and agendas may result in a decreased and de-prioritized emphasis on supporting the discovery and development of anti-infective products. If we cannot obtain or maintain government or other funding for our Cloudbreak programs, we may be forced to discontinue those programs.

Our use of government funding adds uncertainty to our research and commercialization efforts and may impose requirements that increase our costs.

Contracts funded by the U.S. government and its agencies ~~including our CARB-X Subaward Agreement,~~ include provisions that reflect the government’s substantial rights and remedies, many of which are not typically found in commercial contracts, including powers of the government to:

terminate agreements, in whole or in part, for any reason or no reason;

reduce or modify the government’s obligations under such agreements without the consent of the other party;

claim rights, including intellectual property rights, in products and data developed under such agreements;

audit contract-related costs and fees, including allocated indirect costs;

suspend the contractor from receiving new contracts pending resolution of alleged violations of procurement laws or regulations;

impose U.S. manufacturing requirements for products that embody inventions conceived or first reduced to practice under such agreements;

suspend or debar the contractor from doing future business with the government;

control and potentially prohibit the export of products; and

pursue criminal or civil remedies under the Federal Civil Monetary Penalties Act and the ~~Federal Civil~~federal civil False Claims Act and similar remedy provisions specific to government agreements.

In addition, government contracts contain additional requirements that may increase our costs of doing business, reduce our profits and expose us to liability for failure to comply with these terms and conditions. These requirements include, for example:

specialized accounting systems unique to government contracts;

mandatory financial audits and potential liability for price adjustments or recoupment of government funds after such funds have been spent;

public disclosures of certain contract information, which may enable competitors to gain insights into our research program; and

mandatory socioeconomic compliance requirements, including labor standards, anti-human-trafficking, non-discrimination, and affirmative action programs and environmental compliance requirements.

If we fail to maintain compliance with these requirements, we may be subject to potential liability and to termination of our contracts.

*If we do not receive allChanges in funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal functions on which the operation of our business may rely, which could negatively impact our business.

The ability of the ~~funds under~~FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result.

In addition, government funding of the SEC and other government agencies on which our ~~CARB-X Subaward Agreement or are unable to generate additional revenues from additional contracts, we~~operations may ~~be forced to suspend or terminate one or more of our preclinical programs.~~

~~A substantial amount of our ongoing~~rely, including those that fund research and development activities ~~relating~~is subject to ~~our CD201 program~~the political process, which is ~~expected~~inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be ~~derived from~~reviewed and/or approved by necessary government agencies, which would adversely affect our ~~CARB-X Subaward Agreement. We may also seek~~business. For example, over the last several years, including beginning on December 22, 2018 and ending on January 25, 2019, the U.S. government has shut down several times and certain regulatory authorities, such as the FDA and the SEC, have had to ~~include activities relating~~furlough critical FDA, SEC and other government employees and stop critical activities. If repeated or prolonged government shutdowns occur, it could significantly impact the ability of the FDA to timely review and process our ~~antibody-drug conjugates under this agreement. There can be no assurances that this contract will~~regulatory submissions, which could have a material adverse effect on our business. Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue ~~or that we will be able to enter into new contracts with the United States government or other sources of funding to support these programs, or any other program resulting from~~ our Cloudbreak platform. The process of obtaining government contracts is lengthy and uncertain and we will have to compete with other companies and institutions for each contract. Further, changes in government budgets and agendas may result in a decreased and de-prioritized emphasis on supporting the discovery and development of anti-infective products. If we cannot obtain or maintain government or other funding for our programs, we may be forced to discontinue those programs.operations.

*Our business is subject to audit by the U.S. government ~~under our CARB-X Subaward Agreement,~~ and a negative audit could adversely affect our business.

United States government agencies routinely audit and investigate government contractors and recipients of Federal grants. These agencies review a contractor’s performance under its contracts, cost structure and compliance with applicable laws, regulations and standards. ~~BU also has the right to audit our activities under our CARB-X Subaward Agreement.~~

Government agencies also review the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation and management information systems. Any costs found to be improperly allocated to a specific contract will not be reimbursed, while such costs already reimbursed must be refunded.

If an audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including:

~~Termination~~termination of contracts;

~~Forfeiture~~forfeiture of profits;

~~Suspension~~suspension of payments;

~~Fines;~~fines; and

~~Suspension~~suspension or prohibition from conducting business with the United States government.

In addition, we could suffer serious reputational harm if allegations of impropriety were made against us, which could cause our stock price to decrease.

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

We must comply with numerous laws and regulations relating to the formation, administration and performance of government contracts, which can make it more difficult for us to retain our rights under our ~~CARB-X Subaward Agreement.~~government grant contracts. These laws and regulations affect how we conduct business with government agencies. Among the most significant government contracting regulations that affect our business are:

the Federal Acquisition Regulations, or FAR, and agency-specific regulations supplemental to the FAR, which comprehensively regulate the procurement, formation, administration and performance of government contracts;

business ethics and public integrity obligations, which govern conflicts of interest and the hiring of former government employees, restrict the granting of gratuities and funding of lobbying activities and include other requirements such as the Anti-Kickback Statute and Foreign Corrupt Practices Act;

export and import control laws and regulations; and

laws, regulations and executive orders restricting the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data.

Any changes in applicable laws and regulations could restrict our ability to ~~maintain our existing CARB-X Subaward Agreement and~~ obtain new contracts, which could limit our ability to conduct our business and materially adversely affect our results of operations.

Risks ~~Related to Our Financial Position and Need for Additional Capital~~

*We are an early stage biotechnology company that has incurred significant operating losses since our inception, and we anticipate that we will continue to incur substantial operating losses for the foreseeable future. We may never achieve or maintain profitability.

Since our inception, we have incurred significant operating losses. Our net loss was $42.3 million and $33.8 million for the nine month periods ended September 30, 2017 and 2016, respectively. As of September 30, 2017, we had an accumulated deficit of $136.0 million. To date, we have financed our operations primarily through private placements of convertible preferred stock and convertible notes, our initial public offering of our common stock, or our IPO, our October 2016 term loan facility with Pacific Western Bank, or Pacific Western, our October 2016 follow-on public offering of common stock and our October 2017 private placement of common stock. We have devoted substantially all of our financial resources and efforts to research and development. We are currently enrolling a Phase 2 clinical trial of rezafungin and conducting preclinical studies of CD201 and our antibody-drug conjugates. We expect that it will be many years, if ever, before we receive regulatory approval and have a product candidate available for commercialization. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase substantially if and as we:

~~submit INDs to the FDA and equivalent filings to other regulatory authorities, and seek approval of our clinical protocols by institutional review boards, or IRBs, at clinical trial sites;~~

~~advance rezafungin through clinical development;~~

continue the preclinical development of CD201, our antibody-drug conjugates or any other product candidates from our Cloudbreak immunotherapy platform or otherwise, and advance one or more of such product candidates into clinical trials;

~~seek marketing approvals for our product candidates;~~

~~establish or contract for a sales, marketing and distribution infrastructure to commercialize any product candidates for which we obtain marketing approval;~~

~~maintain, expand and enforce our intellectual property portfolio;~~

~~hire additional manufacturing, clinical, regulatory, quality assurance and scientific personnel;~~

~~add operational, financial and management information systems and personnel, including personnel to support product development; and~~

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

To become and remain profitable, we must develop and eventually commercialize one or more products with significant market potential. This will require us to be successful in a range of challenging activities, including completing preclinical studies and clinical trials of our product candidates, obtaining marketing approval for these product candidates, manufacturing, marketing and selling those product candidates for which we may obtain marketing approval, and satisfying any post-marketing requirements. We may never succeed in these activities and, even if we do, may never generate revenue that is significant or large enough to achieve profitability. Our failure to become and remain profitable would decrease the value of the company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.

*We will need substantial additional funding to advance the development of our product candidates. If we are unable to raise capital when needed, we would be forced to delay, reduce or eliminate our drug development and discovery programs or commercialization efforts.

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, initiate clinical trials of and seek marketing approval for our product candidates. 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 of the approved product. Furthermore, we expect to incur additional costs associated with operating as a public company. Our future capital requirements will depend on many factors, including:

~~the scope, progress, results and costs of drug discovery, preclinical development, laboratory testing and clinical trials for our product candidates and Cloudbreak platform;~~

~~the costs, timing and outcome of any regulatory review of our product candidates;~~

~~the costs and timing of commercialization activities, including manufacturing, marketing, sales and distribution, for any product candidates that receive marketing approval;~~

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

~~our ability to establish and maintain collaborations, when and if necessary, on favorable terms, if at all; and~~

~~the extent to which we acquire or in-license other product candidates and technologies.~~

Identifying potential development candidates and conducting preclinical studies and clinical trials are time consuming, expensive and uncertain processes that take years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales for any of our current or future product candidates. In addition, our product candidates, if approved, may not achieve commercial success.

~~Our commercial revenue, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if at all.~~

Accordingly, we will need substantial additional funding in connection with our continuing operations and to achieve our goals. Since December 6, 2012 (inception) through September 30, 2017, our operations have been financed primarily by gross proceeds of approximately $188.8 million from the issuance of convertible debt securities, the sale of shares of convertible preferred stock, the sale of shares of our common stock in our IPO, our October 2016 term loan facility with Pacific Western, and our October 2016 follow-on public offering of common stock . As of September 30, 2017, we had cash, cash equivalents, and short-term investments of $64.2 million, which does not include the net proceeds of approximately $19.0 million from our October 2017 private placement of common stock. Based on our current operating plans, we expect that our existing cash, cash equivalents and marketable securities and anticipated interest income will enable us to fund our operating expenses and capital expenditure requirements through at least the next twelve months. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts, or to make reductions in spending, extend payment terms with suppliers, or liquidate or grant rights to assets where possible, or suspend or curtail planned programs.

Any of these actions could materially harm our business, results of operations and future prospects. Adequate additional financing may not be available to us on acceptable terms, or at all. In addition, we may seek additional financing due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our operating plans.

*Raising ~~additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.~~

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity and debt financings, as well as potentially entering into collaborations, strategic alliances and licensing arrangements or receiving government and/or charitable grants or contracts. Other than our controlled equity sales agreement with Cantor Fitzgerald & Co., our term loan facility with Pacific Western and our CARB-X Subaward Agreement, each of which is subject to the fulfillment of specified conditions, we do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. 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, and may be secured by all or a portion of our assets. There can be no assurances that we will be able to enter into contracts with or receive grants from the United States government or charitable organizations to support our programs. The process of obtaining grants and contracts is lengthy and uncertain and we will have to compete with other companies and institutions for each grant or contract. United States government grants and contracts typically contain unfavorable termination provisions and are subject to audit and modification by the government at its sole discretion, which will subject us to additional risks. If we receive a United States government grant or contract, we would be required to comply with numerous laws and regulations relating to the formation, administration and performance of the grant or contract, which can make it more difficult for us to retain our rights under such grant or contract and result in increased costs. If we raise funds by entering into collaborations, strategic alliances or licensing arrangements with third parties, or by receiving charitable grants, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or through collaborations, strategic alliances, licensing arrangements or government or charitable programs when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

~~Our short operating history may make it difficult for you to evaluate the success of our business to date and assess our future viability.~~

We were founded in December 2012 and our operations to date have been limited to organizing and staffing our company, business planning, raising capital, developing our technology, identifying potential development and product candidates, undertaking preclinical studies and conducting clinical trials. We have not yet demonstrated our ability to successfully complete large-scale, pivotal clinical trials required for regulatory approval of our product candidates, obtain marketing approvals, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful commercialization. Typically, it takes many years to develop one new product from the time it is discovered to when it is commercially available. Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had a longer operating history or if we had product candidates in advanced clinical trials.

In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors that may alter or delay our plans. We will need to continue to transition from a company with a research focus to a company capable of supporting development activities and, if a product candidate is approved, a company with commercial activities. We may not be successful in any step of such a transition.

*The terms of our term loan facility place restrictions on our operating and financial flexibility, and failure to comply with covenants or to satisfy certain conditions of the agreement governing the debt facility may result in acceleration of our repayment obligations and foreclosure on our pledged assets, which could significantly harm our liquidity, financial condition, operating results, business and prospects and cause the price of our common stock to decline.

In October 2016, we entered into a loan and security agreement with Pacific Western, or the loan agreement, under which we borrowed $10.0 million and may borrow up to an additional $10.0 million on or prior to October 3, 2018, subject to certain terms and conditions set forth therein, including our achievement of certain milestones.

The outstanding principal balance under the loan agreement is secured by a security interest in substantially all of our assets, other than intellectual property, which is subject to a double negative pledge. The loan agreement requires us to comply with a number of customary affirmative and restrictive covenants, including covenants that limit our ability to, among other things: transfer any part of our business or property; merge or consolidate with another entity or otherwise experience a change in control; incur additional indebtedness; encumber the collateral securing the loan; declare or pay any cash dividend or make distributions on our capital stock; repurchase or redeem any class of stock or other equity interest; acquire, own or make investments; and make certain capitalized expenditures over a specified threshold, in each case subject to exceptions. In addition, the loan agreement contains an operating covenant, which requires us to achieve positive data from a Phase 2 clinical trial of CD101 Topical or rezafungin on or before March 31, 2018. Subsequent operating covenants will be reset in 2018. The loan agreement also includes standard events of default, including a provision that Pacific Western could declare an event of default upon the occurrence of any event that it interprets as having a material adverse effect on (i) our operations, business or financial condition and subsidiaries taken as a whole; (ii) our ability to perform or pay the secured obligations under the loan agreement and related agreements; or (iii) the collateral pledged to Pacific Western under the loan agreement. Upon such determination, Pacific Western could declare all obligations under the loan agreement immediately due and payable. Although, in and of itself, the occurrence of adverse results or delays in any clinical study or the denial, delay or limitation of approval of or taking of any other regulatory action by the FDA or another governmental entity will not constitute a material adverse effect under the loan agreement, Pacific Western may determine that such an event together with contemporaneous events or circumstances constitutes a material adverse effect upon our business, operations, properties, assets, or financial condition or upon our ability to perform or pay the secured obligations under the loan agreement. If we default under the facility, Pacific Western may accelerate all of our repayment obligations. At such time, we may not have enough available cash or be able to raise additional funds on satisfactory terms, if at all, through equity or debt financings to repay our indebtedness at the time any such repayment is required. If we are unable to access funds to meet those obligations or to renegotiate the loan agreement, Pacific Western could take control of and may sell our pledged assets. In such an event, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts or grant to others rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. If our assets were liquidated, Pacific Western’s right to repayment would be senior to the rights of our stockholders to receive any proceeds from the liquidation. Any declaration by Pacific Western of an event of default could significantly harm our liquidity, financial condition, operating results, business, and prospects and cause the price of our common stock to decline.

We may incur additional indebtedness in the future. The debt instruments governing such indebtedness may contain provisions that are as, or more, restrictive than the provisions governing our existing indebtedness under the loan agreement. If we are unable to repay, refinance or restructure our indebtedness when payment is due, the lenders could proceed against the collateral or force us into bankruptcy or liquidation.

~~Risks~~ Related to Employee Matters and Managing Growth

*Our ability to manage our business operations, to execute our strategic plan and to recruit talented employees may be adversely impacted by COVID-19.

Since early March 2020, we have taken temporary precautionary measures intended to help minimize the risk of COVID-19 to our employees and their families, including temporarily moving to working remotely for all personnel other than those supporting laboratory operations. We have suspended non-essential travel worldwide for our employees and convene company meetings virtually. Further measures may be taken as the COVID-19 outbreak continues. These measures could negatively affect our business. For instance, remote work may disrupt our operations, limit our ability to interact with and effectively manage our third-party manufacturers CROs or current and planned clinical trial sites. The measures taken now or in the future to contain the COVID-19 pandemic could negatively affect our ability to recruit and engage new employees and contractors necessary to the successful operation of our business.

Our future success depends on our ability to retain our senior management team and to attract, retain and motivate qualified personnel.

We are highly dependent upon our senior management team, as well as the other principal members of our research and development teams. All of our executive officers are employed “at will,” meaning we or they may terminate the employment relationship at any time. We do not maintain “key person” insurance for ~~our Chief Executive Officer but not for~~ any of our ~~other~~ executives or employees. The loss of the services of any of these persons could impede the achievement of our research, development and commercialization objectives.

Recruiting and retaining qualified scientific, clinical, manufacturing, regulatory, quality assurance and sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisers, including scientific, regulatory, quality assurance and clinical advisers, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisers may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.

We expect to expand our operations, and may encounter difficulties in managing our growth, which could disrupt our business.

We expect to expand the scope of our operations, particularly in the areas of drug development, manufacturing, clinical, regulatory affairs, quality assurance and sales and marketing. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. We may not be able to effectively manage the expected expansion of our operations or recruit and train additional qualified personnel. Moreover, the expected expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

We may engage in acquisitions that could disrupt our business, cause dilution to our stockholders or reduce our financial resources.

In the future, we may enter into transactions to acquire other businesses, products or technologies and our ability to do so successfully is unproven. If we do identify suitable candidates, we may not be able to make such acquisitions on favorable terms, or at all. Any acquisitions we make may fail to strengthen our competitive position and these transactions may be viewed negatively by customers or investors. We may decide to incur debt in connection with an acquisition or issue our common stock or other equity securities to the stockholders of the acquired company, which would reduce the percentage ownership of our existing stockholders. We could incur losses resulting from undiscovered liabilities of the acquired business that are not covered by the indemnification we may obtain from the seller. In addition, we may not be able to successfully integrate the acquired personnel, technologies and operations into our existing business in an effective, timely and non-disruptive manner. Acquisitions may also divert management attention from day-to-day responsibilities, increase our expenses and reduce our cash available for operations and other uses. We cannot predict the number, timing or size of future acquisitions or the effect that any such transactions might have on our operating results.

Risks Related to Ownership of our Common Stock

*The price of our stock may be volatile, and you could lose all or part of your investment.

The trading price of our common stock is ~~likely to be~~ highly volatile and ~~could be~~ subject to wide fluctuations in response to various factors, some of which are beyond our control, including limited trading volume. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this report, these factors include:

changes in the market valuations of similar companies;

the commencement, timing, enrollment or results of the current and planned clinical trials of our product candidates or any future clinical trials we may conduct, or changes in the development status of our product candidates;

any delay in our regulatory filings for our product candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter, "complete response" letter, or a request for additional information;

adverse results, suspensions, terminations or delays in pre-clinical or clinical trials;

our decision to initiate a clinical trial, not to initiate a clinical trial, or to terminate an existing clinical trial or development program;

adverse regulatory decisions, including failure to receive regulatory approval of our product candidates;

the impact of the COVID-19 pandemic on our business and industry as well as the global economy;

changes in laws or regulations applicable to our products, including but not limited to requirements for approvals;

changes in the structure of healthcare payment systems or limitations on the ability of hospitals and outpatient treatment centers to receive adequate reimbursement for the purchase and use of our products;

adverse developments concerning our contract manufacturers;

our inability to obtain adequate product supply for any approved product or inability to do so at acceptable prices or acceptable quality;

our inability to establish collaborations, if needed;

our failure to commercialize our product ~~candidates;~~candidates successfully, or at all;

additions or departures of key scientific or management personnel;

unanticipated serious safety concerns related to the use of our product candidates;

the introduction of new products or services offered by us or our competitors;

announcements of significant acquisitions, strategic partnerships, joint ventures, government grants or contracts or capital commitments by us or our competitors;

our ability to effectively manage our growth;

the size and growth of our fungal infection, bacterial infection or other target markets;

our ability to successfully enter new markets or develop additional product candidates;

actual or anticipated variations in quarterly operating results;

our cash position and our ability to raise additional capital and the manner and terms on which we raise ~~it;~~it, and the expectation of future fundraising activities by us;

our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;

publication of research reports or other media coverage about us or our industry or our therapeutic approaches in particular or positive or negative recommendations or withdrawal of research coverage by securities analysts;

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

overall performance of the equity markets;

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

the trading volume of our common stock;

changes in accounting practices;

ineffectiveness of our internal controls;

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

significant lawsuits, including patent or stockholder litigation;

general political and economic conditions; and

other events or factors, many of which are beyond our control.

In addition, the stock market in general, and The ~~NASDAQ~~Nasdaq Global Market, ~~and~~ pharmaceutical companies and companies in the anti-infective sector in particular, have experienced extreme price and volume fluctuations that may or may not have ~~often~~ been ~~unrelated~~related or ~~disproportionate~~proportionate to the operating performance of these ~~companies.~~companies or their product potential. Broad market and industry factors, such as the COVID-19 pandemic and actions taken to slow its spread, may negatively affect the market price of our common stock, regardless of our actual operating performance. You may not realize any return on your investment in us and may lose some or all of your investment. In the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of a company’s securities. This type of litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources, which would harm our business, operating results or financial condition.

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

We currently 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.

Our principal stockholders and management own a significant percentage of our stock and are able to exert significant control over matters subject to stockholder approval.

Our executive officers, directors and 5% stockholders and their affiliates currently beneficially own a significant percentage of our outstanding voting stock. These stockholders have the ability to influence us through this ownership position. These stockholders may be able to determine all matters requiring stockholder approval. For example, these stockholders 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 feel 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, or the JOBS Act, enacted in April 2012. 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 of 2002, as amended, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding nonbinding advisory votes on executive compensation and stockholder approval of any golden parachute payments not previously approved. We ~~could~~will be an emerging growth company ~~through 2020, although circumstances could cause us to lose that status earlier. We will remain an emerging growth company~~ until ~~the earlier of (a)~~ December 31, 2020, (b) the last day of the fiscal year in which we have total annual gross revenue of at least $1 billion, (c) the last day of the fiscal year in which we are deemed to be a large accelerated filer, which requires the market value of our common stock that is held by non-affiliates to exceed $700 million as of the prior June 30th, and (d) the date on which we have issued more than $1 billion in non-convertible debt during the prior three-year period.2020.

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. As a result, changes in rules of U.S. generally accepted accounting principles or their interpretation, the adoption of new guidance or the application of existing guidance to changes in our business could significantly affect our financial position and results of operations.

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

As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. We are subject to the reporting requirements of the Securities Exchange Act of 1934, which require, among other things, that we file with the Securities and Exchange Commission, or the SEC, annual, quarterly and current reports with respect to our business and financial condition. In addition, the Sarbanes-Oxley Act, as well as rules subsequently adopted by the SEC and The ~~NASDAQ~~Nasdaq Global Market to implement provisions of the Sarbanes-Oxley Act, impose

significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Further, in July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank 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 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 intend 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 political environment and the 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.

We expect the rules and regulations applicable to public companies to continue to result in substantial legal and financial compliance costs and to make some activities more time-consuming and costly. If these requirements divert the attention of our management and personnel from other business concerns, they could have a material adverse effect on our

business, financial condition and results of operations. These costs could decrease our net income or increase our net loss and may require us to reduce costs in other areas of our business or increase the prices of our products or services. For example, these rules and regulations could make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain the same or similar coverage. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

*Sales of a substantial number of shares of our common stock by our existing stockholders in the public market could cause our stock price to fall.

If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the trading price of our common stock could decline. We had ~~16,865,737~~42,019,195 shares of common stock outstanding as of ~~September~~June 30, ~~2017, which does not include the 3,360,000 shares we issued in our October 2017 private placement of common stock.~~2020. We are unable to predict the effect that sales may have on the prevailing market price of our common stock.

Sales of our common stock by current stockholders may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate and may make it more difficult for you to sell shares of our common stock. In addition, shares of common stock that are either issuable upon the exercise of outstanding options or warrants or reserved for future issuance under our employee benefit plans will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules and Rule 144 and Rule 701 under the Securities Act. If these additional shares of common stock are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline.

Certain holders of our securities are entitled to rights with respect to the registration of their shares under the Securities Act. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares held by affiliates, as defined in Rule 144 under the Securities Act. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock.

Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.

We ~~expect~~believe, based on our current business plan, that ~~significant~~our existing cash and cash equivalents will not be sufficient to fund our obligations for the twelve months following the filing of this report. Significant additional capital ~~may~~will be needed ~~in the future~~ to continue our operations as currently planned, ~~operations,~~ including conducting clinical trials, commercialization efforts, expanded research and development activities and costs associated with operating as a public company. To raise capital, we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities, ~~investors may be materially diluted by subsequent sales, and~~ new investors could gain rights, preferences and privileges senior to our existing ~~stockholders.~~stockholders and our existing stockholders may be materially diluted by such subsequent sales.

Pursuant to our 2015 Equity Incentive Plan, or the 2015 EIP, our management is authorized to grant stock options to our employees, directors and consultants. The number of shares of our common stock reserved for issuance under the 2015 EIP will automatically increase on January 1 of each year through and including January 1, 2025, by 4% of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year or a lesser number of shares determined by our board of directors. Additionally, the number of shares of our common stock reserved for

issuance under our 2015 Employee Stock Purchase Plan, or the ESPP, will automatically increase on January 1 of each year through and including January 1, 2025, by the lesser of 1% of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year or 490,336 shares. Unless our board of directors elects not to increase the number of shares available for future grant each year under the 2015 EIP and the ESPP, our stockholders may experience additional dilution, which could cause our stock price to fall.

*We have broad discretion in the use of working capital and may not use it effectively.

Our management ~~will have~~has broad discretion in the application of our working capital. Because of the number and variability of factors that ~~will~~ determine our use of our working capital, its ultimate use may vary substantially from its currently intended use. Our management might not apply our working capital in ways that ultimately increase the value of your investment. We expect to use our working capital to fund research and development activities and general operating expenses. The failure by our management to apply this working capital effectively could harm our business. Pending its use, we may invest our working capital in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our stockholders. If we do not invest or apply our working capital in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.

~~Anti-takeover~~Anti-takeover provisions under our charter documents and Delaware law could delay or prevent a change of control which could limit the market price of our common stock and may prevent or frustrate attempts by our stockholders to replace or remove our current management.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent a change of control of our company or changes in our board of directors that our stockholders might consider favorable. Some of these provisions include:

a board of directors divided into three classes serving staggered three-year terms, such that not all members of the board will be elected at one time;

a prohibition on stockholder action through written consent, which requires that all stockholder actions be taken at a meeting of our stockholders;

a requirement that special meetings of stockholders be called only by the chairman of the board of directors, the chief executive officer or by a majority of the total number of authorized directors;

advance notice requirements for stockholder proposals and nominations for election to our board of directors;

a requirement that no member of our board of directors may be removed from office by our stockholders except for cause and, in addition to any other vote required by law, upon the approval of not less than two-thirds of all outstanding shares of our voting stock then entitled to vote in the election of directors;

a requirement of approval of not less than two-thirds of all outstanding shares of our voting stock to amend any bylaws by stockholder action or to amend specific provisions of our certificate of incorporation; and

the authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder approval and which preferred stock may include rights superior to the rights of the holders of common stock.

In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporate Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These anti-takeover provisions and other provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors and could also delay or impede a merger, tender offer or proxy contest involving our company. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing or cause us to take other corporate actions you desire. Any delay or prevention of a change of control transaction or changes in our board of directors could cause the market price of our common stock to decline.

~~Because~~ ~~we have an even number of members of our board of directors, deadlocks may occur in our board of directors’ decision-making process, which may delay or prevent critical decisions from being made.~~

Since we currently have an even number of directors, deadlocks may occur when such directors disagree on a particular decision or course of action. Our amended and restated certificate of incorporation and amended and restated bylaws do not contain any mechanisms for resolving potential deadlocks. While our directors are under a duty to act in the best interest of our company, any deadlocks may impede the further development of our business in that such deadlocks may delay or prevent critical decisions regarding our development.

Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all 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 is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us

arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our bylaws; or any action asserting a claim against us that is 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 Exchange Act, or any claim for which the federal courts have exclusive jurisdiction. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving such action in other jurisdictions, all of which could adversely affect our business and financial condition.

While the Delaware courts have determined that exclusive choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.

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

Under the Tax Act, as modified by the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, unused U.S. federal net operating losses generated in tax years beginning after December 31, 2017, will not expire and may be carried forward indefinitely, but the deductibility of such federal net operating losses in taxable years beginning after December 31, 2020, is limited to 80% of taxable income. It is uncertain if and to what extent various states will conform to the Tax Act or the CARES Act. In addition, 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 and other pre-change tax attributes to offset its post-change income may be limited. As a result of ~~our most recent private placement, our IPO, our October 2016 follow-on public offering of common stock~~capital raising and other transactions that have occurred since our inception in 2012, we may or may not have experienced an “ownership change.” We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As of December 31, ~~2016,~~2019, we had U.S. net operating loss carryforwards of approximately ~~$79.5~~$214.6 million, portions of which will begin to expire in 2033, and which could be limited if we experience an “ownership change.” In addition, at the state level, there may be periods during which the use of net operating loss carryforwards is suspended or otherwise limited. For example, California recently imposed limits on the usability of California state net operating losses to offset taxable income in tax years beginning after 2019 and before 2023.

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

Despite the implementation of security measures, our internal computer systems and those of our contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we have not experienced any such system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and we may incur substantial costs to attempt to recover or reproduce the data. If any disruption or security breach resulted in a loss of or damage to our data or applications or inappropriate disclosure of confidential or proprietary information, we could incur liability and/or the further development of our product candidates could be delayed.

*Our operations are vulnerable to interruption by natural disasters, power loss, terrorist activity, public health crisis, pandemic diseases and other events beyond our control, the occurrence of which could materially harm our business.

Businesses located in California have, in the past, been subject to electrical blackouts as a result of a shortage of available electrical power and any future blackouts could disrupt our operations. We are also vulnerable to a major earthquake, wildfire, inclement weather and other natural and man-made disasters and public health crisis and pandemic diseases, such as coronavirus, and we have not undertaken a systematic analysis of the potential consequences to our business as a result of any such natural disaster, public health crisis or pandemic diseases and do not have an applicable recovery plan in place. In addition, if any of our third-party contract manufacturers are affected by natural disasters, such as earthquakes, power shortages or outages, floods, wildfire, public health crises, such as pandemics and epidemics, terrorism or other events outside of our control, our business and operating results could suffer. For example, as a result of the COVID-19 pandemic, we have experienced significant disruptions in the conduct of our clinical trials and our general business operations as the result of various federal, state and local stay-at-home, shelter-in-place and quarantine measures. We carry only limited business interruption insurance that would compensate us for actual losses from interruption of our business that may occur and any losses or damages incurred by us in excess of insured amounts could cause our business to materially suffer.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~Use of Proceeds~~None.

On April 14, 2015, our Registration Statements on Form S-1 (file Nos. 333-202740 and 333-203414) were declared effective by the SEC for our initial public offering of common stock, which was completed on April 20, 2015.

There has been no material change in the expected use of the net proceeds from our initial public offering as described in our final prospectus filed with the SEC. Through September 30, 2017, we used $41.7 million of the net proceeds from the offering to fund ongoing research and development activities and ~~general operating expenses~~. We intend to use the remaining proceeds to fund our ongoing and future clinical development of rezafungin; the preclinical development, IND-enabling studies and early clinical trials of CD201, our antibody-drug conjugates and/or any other Cloudbreak development candidates; research and discovery efforts related to the expansion of our Cloudbreak immunotherapy platform; and working capital, including general operating expenses. Pending such uses, we plan to continue investing the unused proceeds from this offering in short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY ~~DISCLOSURE~~DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS



Exhibit		Description

3.1(1)		Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect.

3.2(1)		Amended and Restated Bylaws of the Registrant, as currently in effect.

3.3(4)		Certificate of Designation of Preferences, Rights and Limitations of Series X Convertible Preferred Stock.

4.1(2)		Form of Common Stock Certificate of the Registrant.

~~4.2(2)~~		~~Second Amended and Restated Investor Rights Agreement, by and among the Registrant and certain of its stockholders, dated February 10, 2015.~~

~~4.3(3)~~4.2(3)		Form of Warrant to Purchase Common Stock issued to Pacific Western Bank.

4.3(4)		Form of Common Stock Purchase Warrant for First Private Placement.

4.4		Description of the Registrant's Securities.

31.1		Certification of the Principal Executive Officer pursuant to Rule 13a-14(A) promulgated under the Securities Exchange Act of 1934.

31.2		Certification of the Principal Financial Officer pursuant to Rule 13a-14(A) promulgated under the Securities Exchange Act of 1934.

32.1		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 and Rule 13a-14(B) promulgated under the Securities Exchange Act of 1934.

32.2		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 and Rule 13a-14(B) promulgated under the Securities Exchange Act of 1934.

101.INS		XBRL Instance Document.

101.SCH		XBRL Taxonomy Extension Schema Document.

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.



(1)	Incorporated by reference to the Registrant’s Current Report on Form 8-K, filed on April 24, 2015.
(2)	Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-202740), as amended, originally filed with the SEC on March 13, 2015.
(3)	Incorporated by reference to the Registrant's Current Report on Form 8-K, filed on October 3, 2016.
(4)	Incorporated by reference to the Registrant's Current Report on Form 8-K, filed on May 21, 2018.

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.



	Cidara Therapeutics, Inc.

Date: ~~November 8, 2017~~August 13, 2020	By:	/s/ Jeffrey Stein, Ph.D.
		Jeffrey Stein, Ph.D.
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: ~~November 8, 2017~~August 13, 2020	By:	/s/ ~~Matthew Onaitis~~James Levine
		~~Matthew Onaitis~~James Levine
		Chief Financial Officer ~~and General Counsel~~
		(Principal Financial Officer and Principal Accounting Officer)

5168



As of September 30, 2017	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Corporate debt	$	9,877	$	—	$	(1	)	$	9,876
Total	$	9,877	$	—	$	(1	)	$	9,876

As of December 31, 2016	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Commercial paper	$	19,253	$	1	$	(2	)	$	19,252
Total	$	19,253	$	1	$	(2	)	$	19,252