10-Q 1 eigr-20230930.htm 10-Q eigr-20230930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to __________
Commission file number: 001-36183
Eiger BioPharmaceuticals, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware33-0971591
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
2155 Park Boulevard
Palo Alto, CA
94306
(Address of Principal Executive Offices)(Zip Code)
(650) 272-6138
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock (par value $0.001 per share)
EIGR
The Nasdaq Stock Market LLC
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, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated fileroAccelerated filero
Non-accelerated filerxSmaller reporting companyx
Emerging growth companyo
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of November 6, 2023, the number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 44,384,684.
Our independent registered public accounting firm is KPMG LLP, San Francisco, CA, Auditor ID: 185


EIGER BIOPHARMACEUTICALS, INC.
TABLE OF CONTENTS
Page No.
In this Quarterly Report on Form 10-Q, “we,” “our,” “us,” “Eiger,” and “the Company” refer to Eiger BioPharmaceuticals, Inc. Eiger, Eiger BioPharmaceuticals, the Eiger logo and other trade names, trademarks or service marks of Eiger are the property of Eiger BioPharmaceuticals, Inc. This Quarterly Report on Form 10-Q contains references to our trademarks and to trademarks belonging to other entities. Trade names, trademarks and service marks of other companies appearing in this Quarterly Report on Form 10-Q are the property of their respective holders. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by any other companies.


PART I. FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS
Eiger BioPharmaceuticals, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
September 30,
2023
December 31,
2022
(Unaudited)
Assets
Current assets:
Cash and cash equivalents$27,501 $25,798 
Short-term debt securities11,920 73,150 
Accounts receivable, net1,321 1,749 
Inventories, net1,105 2,853 
Prepaid expenses and other current assets12,777 13,985 
Total current assets54,624 117,535 
Property and equipment, net677 696 
Operating lease right-of-use assets209 561 
Other assets144 1,347 
Total assets$55,654 $120,139 
Liabilities and Stockholders’ (Deficit) Equity  
Current liabilities:  
Accounts payable$4,858 $8,975 
Accrued liabilities11,461 15,655 
Current portion of operating lease liabilities205 491 
Total current liabilities16,524 25,121 
Debt40,734 39,625 
Operating lease liabilities 83 
Total liabilities57,258 64,829 
Stockholders’ (deficit) equity:
Common stock44 44 
Additional paid-in capital497,140 492,759 
Accumulated other comprehensive loss(86)(300)
Accumulated deficit(498,702)(437,193)
Total stockholders’ (deficit) equity(1,604)55,310 
Total liabilities and stockholders’ (deficit) equity$55,654 $120,139 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3

Eiger BioPharmaceuticals, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except share and per share amounts)
Three Months Ended
September 30,
Nine Months Ended September 30,
2023202220232022
Product revenue, net$3,209 $4,024 $11,720 $10,038 
Other revenue  250 750 
Total revenue3,209 4,024 11,970 10,788 
Costs and operating expenses:
Cost of sales115 1,231 (77)1,492 
Research and development14,568 22,198 50,717 56,761 
Selling, general and administrative5,454 6,964 20,502 20,804 
Total costs and operating expenses20,137 30,393 71,142 79,057 
Loss from operations(16,928)(26,369)(59,172)(68,269)
Interest expense(1,412)(1,092)(4,040)(2,912)
Interest income485 347 1,856 613 
Other (expense) income, net(175)3 (149)(1,044)
Loss before provision for income taxes(18,030)(27,111)(61,505)(71,612)
Provision for income taxes  4 26 
Net loss$(18,030)$(27,111)$(61,509)$(71,638)
Net loss per common share:  
Basic and diluted$(0.41)$(0.62)$(1.39)$(1.76)
Weighted-average common shares outstanding:  
Basic and diluted44,320,164 44,010,553 44,254,711 40,806,581 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4

Eiger BioPharmaceuticals, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
(In thousands)
Three Months Ended
September 30,
Nine Months Ended September 30,
2023202220232022
Net loss$(18,030)$(27,111)$(61,509)$(71,638)
Other comprehensive loss:  
Unrealized gain (loss) on available-for-sale debt securities, net
26 141 186 (471)
Foreign currency translation adjustment52  27  
Comprehensive loss$(17,952)$(26,970)$(61,296)$(72,109)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5

Eiger BioPharmaceuticals, Inc.
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity
(Unaudited)
(In thousands, except share amounts)
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
(Deficit) Equity
SharesAmount
Balance at December 31, 202244,074,284 $44 $492,759 $(300)$(437,193)$55,310 
Issuance of common stock upon ESPP purchase29,986 — 41 — — 41 
Issuance of common stock upon release of restricted stock units and performance stock units192,147 — — — — — 
Stock-based compensation expense— — 2,542 — — 2,542 
Unrealized gain on available-for-sale debt securities, net— — — 167 — 167 
Cumulative translation adjustment— — — (37)— (37)
Net loss— — — — (22,784)(22,784)
Balance at March 31, 202344,296,417 44 495,342 (170)(459,977)35,239 
Stock-based compensation expense— — 745 — — 745 
Unrealized loss on available-for-sale debt securities, net— — — (7)— (7)
Cumulative translation adjustment— — — 13 — 13 
Net loss— — — — (20,695)(20,695)
Balance at June 30, 202344,296,417 44 496,087 (164)(480,672)15,295 
Issuance of common stock upon ESPP purchase21,700 — 15 — — 15 
Issuance of common stock upon release of restricted stock units and performance stock units66,567 — — — — — 
Stock-based compensation expense— — 1,038 — — 1,038 
Unrealized gain on available-for-sale debt securities, net
— — — 26 — 26 
Cumulative translation adjustment— — — 52 — 52 
Net loss— — — — (18,030)(18,030)
Balance at September 30, 202344,384,684 $44 $497,140 $(86)$(498,702)$(1,604)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6

Eiger BioPharmaceuticals, Inc.
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity
(Unaudited)
(In thousands, except share amounts)

Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
(Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance at December 31, 202134,568,821 $35 $412,930 $(149)$(340,417)$72,399 
Issuance of common stock upon offering at-the-market, net of $1,288 of commissions
5,841,786 6 45,604 — — 45,610 
Issuance of common stock upon exercise of stock options15,995 — 144 — — 144 
Vesting of common stock issued under Product Development Agreement— — 19 — — 19 
Issuance of common stock upon ESPP purchase18,130 — 64 — — 64 
Issuance of common stock upon release of restricted stock units85,106 — — — — — 
Stock-based compensation expense— — 2,047 — — 2,047 
Unrealized loss on available-for-sale debt securities, net— — — (373)— (373)
Net loss— — — — (22,643)(22,643)
Balance at March 31, 202240,529,838 41 460,808 (522)(363,060)97,267 
Issuance of common stock upon offering at-the-market, net of $716 of commissions and issuance costs
2,686,288 2 20,562 — — 20,564 
Issuance of common stock to lender749,053 1 4,999 — — 5,000 
Issuance of common stock upon exercise of stock options1,604 — 9 — — 9 
Stock-based compensation expense— — 2,208 — — 2,208 
Unrealized loss on available-for-sale debt securities, net— — — (239)— (239)
Net loss— — — — (21,884)(21,884)
Balance at June 30, 202243,966,783 44 488,586 (761)(384,944)102,925 
Issuance of common stock upon exercise of stock options3,512 — 27 — — 27 
Issuance of common stock upon ESPP purchase29,985 — 104 — — 104 
Issuance of common stock upon release of restricted stock units47,748 — — — — — 
Stock-based compensation expense— — 2,222 — — 2,222 
Unrealized gain on available-for-sale debt securities, net— — — 141 — 141 
Net loss— — — — (27,111)(27,111)
Balance at September 30, 202244,048,028 $44 $490,939 $(620)$(412,055)$78,308 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7

Eiger BioPharmaceuticals, Inc.
Condensed Consolidated Statements of Cash Flow
(Unaudited)
(In thousands)
Nine Months Ended
September 30,
20232022
Operating activities
Net loss$(61,509)$(71,638)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization218 219 
Inventory write down11 1,043 
Amortization of debt securities premiums and discounts(1,046)698 
Loss on extinguishment of debt 1,144 
Non-cash interest expense1,109 867 
Reduction in the carrying amount of right-of-use assets352 407 
Common stock issued under Product Development Agreement 19 
Stock-based compensation4,325 6,477 
Change in operating assets and liabilities:
Accounts receivable421 118 
Inventories2,263 (892)
Prepaid expenses and other current assets424 (2,181)
Other assets1,987 (616)
Accounts payable(4,157)2,722 
Accrued liabilities(4,623)1,315 
Operating lease liabilities(369)(465)
Net cash used in operating activities(60,594)(60,763)
Investing activities
Purchase of debt securities available-for-sale(19,388)(55,538)
Proceeds from maturities of debt securities available-for-sale81,850 43,489 
Purchase of property and equipment(233)(116)
Net cash provided by (used in) investing activities62,229 (12,165)
Financing activities
Issuance of common stock upon offering at-the-market, net of commissions 66,402 
Proceeds from issuance of common stock to lender 5,000 
Proceeds from issuance of common stock upon stock option exercises 180 
Proceeds from issuance of common stock upon ESPP purchase56 168 
Proceeds from debt 39,840 
Repayment of debt (33,277)
Payment of debt issuance costs (1,054)
Common stock offering costs(22)(244)
Net cash provided by financing activities34 77,015 
Effect of foreign exchange on cash and cash equivalents34  
Net increase in cash and cash equivalents
1,703 4,087 
Cash and cash equivalents at beginning of period25,798 22,221 
Cash and cash equivalents at end of period$27,501 $26,308 
Supplemental disclosure of cash flow information:
Interest paid$2,931 $2,038 
Income taxes paid$188 $43 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.







8


Eiger BioPharmaceuticals, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
1.    Description of Business
Eiger BioPharmaceuticals, Inc. (the Company or Eiger) was incorporated in the State of Delaware on November 6, 2008. Eiger is a commercial-stage biopharmaceutical company focused on the development of innovative therapies for rare metabolic diseases.
Eiger’s lead product candidate, avexitide, is a well-characterized, first-in-class glucagon-like peptide-1 (GLP-1) antagonist and is in development for the treatment of post-bariatric hypoglycemia (PBH) and other forms of hyperinsulinemic hypoglycemia (HH) arising after gastrointestinal surgeries. These disorders are characterized by exaggerated secretion of GLP-1 after meals, dysregulated secretion of insulin, followed by a rapid drop in blood sugar. Avexitide is the only drug in development for PBH with Breakthrough Therapy designation by the U.S. Food and Drug Administration (FDA). Avexitide is also in development for congenital hyperinsulinism (HI), an ultra-rare, life-threatening, pediatric disorder of persistent hypoglycemia that results in irreversible brain damage in up to 50% of children with the condition. Avexitide has completed Phase 2 for both PBH and HI, and Phase 3 study start-up activities for PBH have been initiated.
The FDA approved the Company’s first commercial product, Zokinvy® (lonafarnib), to reduce risk of mortality of Hutchinson-Gilford progeria syndrome (HGPS) and for treatment of processing-deficient progeroid laminopathies (PL), with either heterozygous LMNA mutation with progerin-like protein accumulation, or homozygous or compound heterozygous ZMPSTE24 mutations, on November 20, 2020. Collectively known as progeria, HGPS and PL are ultra-rare, fatal, genetic premature aging diseases that accelerate mortality in young patients. In July 2022, the Company announced that the European Commission (EC) granted marketing authorization (MA) under exceptional circumstances for Zokinvy through the centralized procedure. The EC's MA is valid in all 27 European Union (EU) member states plus Iceland, Liechtenstein, and Norway. In May 2022, the Pharmaceutical Division at the Ministry of Health of Israel granted regulatory approval for Zokinvy in Israel. In August 2022, the Medicine and Healthcare products Regulatory Agency (MHRA) granted approval in the UK.
The Company commercially launched Zokinvy in the U.S. in January 2021 and started to recognize product revenue in the first quarter of 2021. The first European sales were recognized in the fourth quarter of 2022.

In June 2023, the Company announced that it is focusing its clinical development efforts on advancing avexitide in HH indications, including PBH. The Company will continue to commercialize Zokinvy (lonafarnib) for the treatment of HGPS and processing-deficient PL. In addition, Eiger is evaluating strategic partnering options for its virology assets, lonafarnib and peginterferon lambda. In June 2023, the Company also announced that it has appointed David Apelian, MD, PhD, MBA, who has served as interim Chief Executive Officer (CEO) since December 2022, as the Company's next CEO.
The Company’s principal operations are based in Palo Alto, California, with subsidiaries in Delaware, Ireland, England and Wales. The Company operates in one segment.
Liquidity
As of September 30, 2023, the Company had $39.4 million of cash, cash equivalents and short-term securities, comprised of $27.5 million of cash and cash equivalents and $11.9 million of short-term debt securities available-for-sale. The Company had an accumulated deficit of $498.7 million as of September 30, 2023 and negative cash flows of $60.6 million from operating activities during the nine months ended September 30, 2023. As the Company continues to incur losses, its transition to profitability will depend on the successful development, approval, and commercialization of product candidates and on the achievement of sufficient revenues to support its cost structure. The Company may never achieve profitability, and until it does, the Company will need to continue to raise additional capital. Based on its recurring losses from operations incurred since inception, expectation of continuing operating losses and negative cash flows for the foreseeable future, need to raise additional capital to finance its future operations, and given the current cash, cash equivalents and short-term securities balance, the Company has concluded that there is substantial doubt regarding the Company’s ability to continue as a going concern beyond twelve months after the date that these condensed consolidated financial statements are issued.
9


The Company is evaluating potential options including the ability to raise additional capital and continues to evaluate potential strategic partnering options for its antiviral assets of lonafarnib for HDV and peginterferon lambda; however, there can be no assurance that any strategic transactions will occur or that the Company will be successful in raising additional capital. The Company has sources of liquidity available under an "at-the-market" equity financing facility with Jefferies LLC (the 2022 ATM Facility) and Tranche B of the Innovatus Loan as discussed in Note 6. The Company has no plans to draw upon Tranche B of the Innovatus Loan. The registration statement registering the offer and sale of shares pursuant to the 2022 ATM Facility is set to expire in December 2023, and there can be no assurance that we will be able to register future offers or sales under the 2022 ATM Facility. To the extent that the Company raises additional capital through the sale of equity, including pursuant to the 2022 ATM Facility and offerings of debt or other securities convertible into equity, stockholder ownership interest will be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect the rights of holders of our common stock. The Company has not raised any proceeds under the 2022 ATM Facility during 2023 and presently has no plans to raise any proceeds under the facility. As a result, the Company has concluded that management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the continuity of operations, the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
2.    Summary of Significant Accounting Policies
Basis of Presentation
The condensed consolidated financial statements include the accounts of Eiger BioPharmaceuticals, Inc. and its wholly owned subsidiaries, EBPI Merger Inc., EB Pharma LLC, Eiger BioPharmaceuticals Europe Limited, and EigerBio Europe Limited, have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and follow the requirements of the Securities and Exchange Commission (SEC) regarding interim financial reporting. All intercompany balances and transactions have been eliminated in consolidation. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 17, 2023.
Significant Accounting Policies
Other than impacted accounting policies related to the Company's adoption of current expected credit loss (CECL) as disclosed below, there have been no new or material changes to the significant accounting policies discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates. The Company bases its estimates on historical experience and on various other market-specific and relevant assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.
Concentrations of Risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents and investments. The Company’s cash is held by financial institutions in the United States and Ireland. Amounts on deposit may at times exceed federally insured limits. The Company is exposed to credit risk in the event of default by the financial institutions holding its cash, cash equivalents and investments and issuers of investments. The Company manages its credit risk by holding its cash, cash equivalents and investments in large financial institutions within the U.S and Ireland. In addition, the Company’s investment policy limits investments to certain types of instruments such as money market funds, debt securities issued by the U.S. government and its agencies, corporate debt securities, commercial paper as well as asset-backed securities, and places restrictions on the credit ratings, maturities and concentration by type and issuer. The Company has not experienced any losses on its deposits of cash, cash equivalents and



investments. The Company relies on one supply chain for each of its product candidates. If any of the single source suppliers in any of the supply chains fail to satisfy the Company’s requirements on a timely basis, the Company could suffer delays in its clinical development programs and activities which could adversely affect its operating results.
Two customers accounted for approximately 58 percent and 39 percent of the Company’s accounts receivable as of September 30, 2023. Two customers accounted for approximately 58 percent and 42 percent of the Company’s accounts receivable as of December 31, 2022. Two customers accounted for approximately 74 percent and 26 percent of product revenue during the three months ended September 30, 2023. Two customers accounted for approximately 76 percent and 23 percent of product revenue during the nine months ended September 30, 2023. One customer accounted for approximately 99 percent of product revenue during the three months ended September 30, 2022. One customer accounted for approximately 100 percent of product revenue during the nine months ended September 30, 2022.
Foreign Currency Exchange
Foreign Currency Transaction Risk
The foreign currency transaction risk relates to changes in exchange rates on monetary assets, liabilities, revenues and expenses held at Eiger BioPharmaceuticals Europe Limited. Gains and losses on foreign currency transactions result primarily from monetary assets, liabilities, revenues and expenses denominated in Euro. Aggregated transaction losses for the three and nine months ended September 30, 2023 were $0.2 million and $0.1 million, respectively. The Company expects the foreign currency gain/loss to continue to fluctuate as long as the Company continue to hold monetary assets and liabilities at its subsidiaries in Ireland and England and Wales. Market uncertainty could potentially lead to significant volatility with foreign currency exchange rates, which could result in additional foreign currency gain/loss.
Foreign Currency Translation Risk
The foreign currency translation risk relates to the translation of the foreign consolidated subsidiaries' assets, liabilities, revenues and expenses from the subsidiaries’ functional currency to the U.S. dollar at each reporting date. Fluctuations in exchange rates may impact the amount of assets, liabilities, revenues and expenses reported on the consolidated balance sheets and consolidated statements of operations. The financial statements of the Company’s foreign subsidiaries, which have a functional currency other than the U.S. dollar, are translated into U.S. dollars using a current exchange rate. Gains and losses resulting from this translation are recognized as a foreign currency translation adjustment within accumulated other comprehensive loss, which is a component of stockholders' (deficit) equity and comprehensive income (loss). Aggregate translation gain, net of tax, was $52,000 and $27,000 for the three months and nine months ended September 30, 2023, respectively. There were no translation gains or losses for the three and nine months ended September 30, 2022.
Debt Securities
All securities are short-term in nature and consist of debt securities classified as available-for-sale and have maturities greater than 90 days, but less than 365 days from the date of acquisition. The Company’s debt securities consist of available-for-sale securities that are classified as Level 2 because their value is based on valuations using significant inputs derived from, or corroborated by, observable market data. The Company evaluates, on a quarterly basis, its available-for-sale debt securities for potential impairment. For available-for-sale debt securities in an unrealized loss position, the Company assesses whether such declines are due to credit related factors such as changes to the rating of the security by a ratings agency, market conditions and supportable forecasts of economic and market conditions, among others. If the fair value of available-for-sale debt securities is less than the amortized cost basis, the Company assesses whether it has plans to sell the security or it is more likely than not it will be required to sell any available-for-sale debt security before recovery of its amortized cost basis. If either condition is met, the security’s amortized cost basis is written down to fair value and is recognized through other (expense) income, net. If neither condition is met, declines as a result of credit losses, if any, are recognized as an allowance for credit loss, limited to the amount of unrealized loss, through other (expense) income, net. Any portion of the unrealized loss that is not a result of a credit loss, is recognized in other comprehensive loss. The cost of available-for-sale securities sold is based on the specific-identification method. Realized gains and losses on the sale of debt securities are determined using the specific-identification method and recorded in other (expense) income, net.
Accounts Receivable
Accounts receivable represent amounts billed to the Company’s customers, net of an allowance for credit losses. Trade accounts receivable are recorded at invoiced amounts and do not bear interest. The allowance for credit losses reflects the Company’s best estimate of probable losses inherent in the receivable portfolio determined based on various factors,



including age of the outstanding invoice, credit quality of the customer, historical experience, current economic conditions, and management’s expectations of future economic conditions. The Company regularly reviews the adequacy of the allowance for credit losses by considering the age of each outstanding invoice and the collection history of each customer to determine the appropriate amount of allowance for credit losses.
The Company had no allowance for credit losses as of September 30, 2023 and December 31, 2022. The Company had no credit losses for the periods presented.
Recent Adopted Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Updates (ASU) No. 2016-13, Financial Instruments—Credit Losses (Topic 326). ASU 2016-13 requires an entity to utilize a new impairment model that requires measurement and recognition of expected credit losses for most financial assets and certain other instruments, including but not limited to available-for-sale debt securities. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses rather than as a direct write-down to the security. The new guidance requires the use of forward-looking expected credit loss models based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount, which may result in earlier recognition of credit losses under the new guidance. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which clarifies and corrects certain unintended applications of the guidance contained in each of the amended Topics. Additionally, in May 2019, the FASB issued ASU No. 2019-05, Financial Instruments – Credit Losses (Topic 326), which provides an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which deferred the effective date for ASU No. 2016-13 for smaller reporting companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted this guidance on a modified-retrospective basis effective January 1, 2023 and noted no material impact to the Company’s condensed consolidated financial statements.
3.    Fair Value Measurements
Fair value accounting is applied for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). As of September 30, 2023 and December 31, 2022, the carrying amount of cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued liabilities approximated their estimated fair value due to their relatively short maturities. Management believes the terms of its long-term debt reflect current market conditions for an instrument with similar terms and maturity, therefore the carrying value of the Company’s debt approximated its fair value.
There were no transfers into or out of Level 3 of the fair value hierarchy during the periods presented.



The following tables present the fair value hierarchy for assets and liabilities measured at fair value, and summarize the estimated value of the Company’s cash equivalents and debt securities and the gross unrealized holding gains and losses (in thousands):
September 30, 2023
LevelAmortized costUnrealized gainUnrealized loss Estimated Fair
Value
Cash equivalents:
Money market funds1$9,553 $— $— $9,553 
Total cash equivalents$9,553 $— $— $9,553 
Debt securities:    
U.S. government bonds2$11,934 $ $(14)$11,920 
Total debt securities$11,934 $ $(14)$11,920 
Classified as:
Cash equivalents1$9,553 
Short-term debt securities211,920 
$21,473 
December 31, 2022
LevelAmortized costUnrealized gainUnrealized lossEstimated Fair
Value
Cash equivalents:
Money market funds1$11,546 $— $— $11,546 
Commercial paper23,968 — — 3,968 
Total cash equivalents$15,514 $— $— $15,514 
Debt securities:
U.S. government bonds2$39,646 $3 $(86)$39,563 
Corporate debt securities228,759  (117)28,642 
Commercial paper24,945   4,945 
Total debt securities$73,350 $3 $(203)$73,150 
Classified as:
Cash equivalents1 & 2$15,514 
Short-term debt securities273,150 
$88,664 
Other than the debt balance as discussed in Note 6, there were no financial liabilities as of September 30, 2023 and December 31, 2022.
During the three and nine months ended September 30, 2023, the Company did not recognize any credit losses. The Company determined that the decline in fair value of debt securities was not due to credit-related factors, and no allowance for expected credit losses was recorded as of September 30, 2023. There were unrealized losses of $14,000 as of September 30, 2023, and no unrealized losses have been in the loss position for more than 12 months. However, the Company is planning to hold these securities until maturity and expects to recover the amortized cost basis.



4.    Balance Sheet Components
Inventories
Inventories consist of the following (in thousands):
September 30,
2023
December 31,
2022
Raw materials$517 $1,703 
Work-in-progress494 884 
Finished goods94 266 
Total inventories, net$1,105 $2,853 
The write downs of inventory were immaterial for the three and nine months ended September 30, 2023. The Company wrote down $1.0 million of inventory for the three and nine months ended September 30, 2022.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands):
September 30,
2023
December 31,
2022
Short term deposits$5,006 $4,542 
Prepaid research costs3,751 2,822 
Prepaid contract manufacturing costs1,659 3,542 
Prepaid insurance604 586 
Prepaid marketing122 753 
Other1,635 1,740 
Total prepaid expenses and other current assets$12,777 $13,985 
Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
September 30,
2023
December 31,
2022
Compensation and related benefits$3,600 $6,167 
Contract research costs3,688 4,188 
Product revenue reserves2,334 1,373 
Contract manufacturing costs922 2,101 
Legal fees 187 562 
Other730 1,264 
Total accrued liabilities$11,461 $15,655 
5.    Bristol-Meyers Squibb License Agreement
On April 20, 2016, the Company and Bristol-Myers Squibb Company (BMS) entered into a License Agreement (the BMS License Agreement) and a Common Stock Purchase Agreement (the BMS Purchase Agreement).
Under the BMS License Agreement, BMS granted the Company an exclusive, worldwide, license to research, develop, manufacture, and sell products containing PEG-interferon Lambda-1a (peginterferon lambda or the Licensed Product) for all therapeutic and diagnostic uses in humans and animals. The Company is responsible for the development and commercialization of the Licensed Product at its sole cost and expense. The Company paid BMS $2.0 million and issued 157,587 shares of its common stock at an aggregate fair value of $3.2 million in April 2016. The BMS License Agreement



also includes development and regulatory milestone payments totaling $61.0 million and commercial sales milestones of up to $128.0 million. The Company is obligated to pay BMS annual net sales royalties in the range of mid-single to mid-teens, depending on net sales levels. In fourth quarter of 2020, the Company recorded a $3.0 million milestone in research and development expense, triggered on successful demonstration of proof of concept, as defined by the BMS License Agreement, in a Phase 2 clinical trial. In March 2022, the Company recorded a $5.0 million milestone expense in research and development, which was related to the initiation of a Phase 3 clinical trial, as defined under the BMS License Agreement.
6.    Debt
Innovatus Term Loan
On June 1, 2022 (Closing Date), the Company entered into a term loan and security agreement (Innovatus Loan) with Innovatus Life Sciences Lending Fund I, LP (Innovatus), providing for up to $75.0 million funded in three tranches with a maturity date of August 31, 2027. The floating per annum interest rate of the Innovatus Loan is equal to the sum of (a) the greater of (i) the Prime Rate published in the Money Rates section of the Wall Street Journal (or any successor thereto) and (ii) 3.5%, plus (b) 3.75%; provided that, at the election of the Borrower, up to 2.25% of such rate shall be payable in-kind until the third anniversary of the closing date. The Company is required to make monthly interest-only payments through July 1, 2027, after which the Company is required to make monthly amortizing payments, with the remaining balance of the principal plus accrued and unpaid interest due at maturity. 2.25% of the interest is payable in-kind for the first three years of the term by increasing the principal balance. Prepayments of the loan, in whole or in part, will be subject to an early prepayment fee which ranges between 3% and 0% and declines each year until the third anniversary date of the Closing Date, after which no prepayment fee is required. The Company is also required to pay an exit fee upon any payment or prepayment equal to 6.5% of the aggregate principal amount of the tranches funded under the Innovatus Loan. The Innovatus Loan contains customary representations, warranties, events of default, including failure to pay amounts due, breaches of covenants and warranties, material adverse change events, certain cross defaults and judgements, and insolvency, and covenants of the Company and its subsidiaries, including a requirement to maintain a cash balance of not less than 5% of the aggregate principal amount of funded and outstanding loan terms at all times. Should the Company be unable to comply with these covenants or if the Company defaults on any portion of its outstanding borrowings, the lender can also impose a 5% penalty, restrict access to additional borrowings under the loan and security agreement, and accelerate the maturity of the debt to be immediately due and payable. The Company believes it is in compliance with the terms included with the Innovatus Loan. The Innovatus Loan is secured by perfected first priority liens on the Company's assets, including a commitment by the Company to not allow any liens to be placed upon the Company's intellectual property.
The Company was funded $40.0 million in June 2022 on the Closing Date under Tranche A. The remaining $35.0 million is divided into two tranches (Tranche B and Tranche C). The $17.5 million under each of Tranche B and Tranche C will be available for a period commencing on the later of (a) the first date that the Company achieves certain development and regulatory milestones applicable to each Tranche and (b) November 1, 2022. Both Tranche B and Tranche C draw periods end on the earlier of (a) June 30, 2024 or (b) an event of default. The Company is currently eligible to draw the $17.5 million under Tranche B, but has not done so as of September 30, 2023.
The Company identified a number of embedded derivatives that require bifurcation from the Innovatus Loan. These embedded features include mandatory prepayment upon an event of default or change in control and contingent rate increases. However, the fair value of these embedded features was deemed to be immaterial on the date of issuance. At each subsequent reporting period, the Company will reassess the fair value of the embedded features and will record a liability if the fair value of the features becomes material.
In connection with the issuance of the Innovatus Loan, the Company recorded a debt discount of $0.2 million and capitalized debt issuance costs of $1.1 million. The discount and issuance costs will be amortized over the life of the loan. Interest expense for the Innovatus Loan for the three and nine months ended September 30, 2023 was $1.4 million and $4.0 million, respectively, and is inclusive of non-cash amortization of the debt discount and debt issuance costs and accretion of final payment. The carrying amount of the Innovatus Loan approximates fair value. The effective interest rate for the Innovatus Loan was 13.84% as of September 30, 2023.
Additionally, in connection with entering into the Innovatus Loan, the Company entered into a Stock Purchase Agreement with Innovatus for the sale of common stock with an aggregate value of $5.0 million. On June 1, 2022, the Company issued



749,053 shares of common stock to Innovatus at a per share purchase price of $6.6751, the preceding five-day volume weighted average price per share.
A portion of the loan proceeds was used to repay in full the approximately $33.5 million of aggregate principal amount, unpaid interest, and exit fees in connection with loans outstanding owed to Oxford Finance LLC (the Oxford Loan) by the Company.
Oxford Term Loan
On June 1, 2022, upon entering into the Innovatus Loan, the Company repaid the Oxford Loan, including (i) the $30.0 million outstanding principal balances, (ii) $0.2 million in accrued and unpaid interest, and (iii) other final payments consisting of $3.3 million, for a total payment of $33.5 million. The Company recorded a loss of $1.1 million on early extinguishment of the debt related to the unamortized debt premium, discount, and cost of issuance, which was recognized as a component of other (expense) income, net in the condensed consolidated statement of operations.
The Company accounts for the amortization of the debt discount utilizing the effective interest method. Debt and unamortized discount balances are as follows (in thousands):
September 30,
2023
December 31,
2022
Face value of debt$41,218 $40,531 
Exit fee2,600 2,600 
Unamortized debt discount associated with exit fee, debt issuance costs and loan origination fees(3,084)(3,506)
Total debt, net$40,734 $39,625 
7.    Common Stock
The Company had reserved shares of common stock for issuance as follows:
September 30,
2023
December 31,
2022
Options issued and outstanding7,335,274 6,143,183 
Options available for future grants3,359,214 1,976,460 
Restricted and performance stock units outstanding219,562 641,407 
Shares available for issuance under ESPP736,371 788,057 
Shares available for issuance under 2021 Inducement Plan702,600 380,000 
Total12,353,021 9,929,107 
8.    Stock-Based Compensation
In June 2016, the Company’s Board of Directors adopted and in August 2016 the Company’s stockholders approved the Amended and Restated 2013 Equity Incentive Plan (Restated 2013 Plan). As of September 30, 2023, there were 3,359,214 shares available for grant under the Restated 2013 Plan.
During the second quarter of 2021, the Company approved the 2021 Inducement Plan to be used exclusively for grants of awards to individuals that were not previously employees or directors of the Company as a material inducement to such individuals’ entry into employment with the Company within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules. As of September 30, 2023, there were 702,600 shares remaining and available to be issued under the 2021 Inducement Plan.
Awards Modification
On February 6, 2023, the Company entered into a separation agreement and general release with David Cory, the Company's former President and CEO. Pursuant to the separation agreement, 50% of Mr. Cory's unvested equity awards were accelerated to vest on the date the separation agreement was executed. Additionally, the exercise period for Mr.



Cory's vested awards was extended, including his accelerated awards. The stock compensation recognized related to these modifications was $0 and $0.9 million for the three and nine months ended September 30, 2023, which is reflected in selling, general and administrative expenses.
Stock-Based Compensation Expense
Total stock-based compensation expense recognized was as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Research and development$650 $856 $2,001 $2,301 
Selling, general and administrative388 1,366 2,324 4,176 
Total$1,038 $2,222 $4,325 $6,477 
As of September 30, 2023, the total unrecognized compensation expense related to unvested options was $6.2 million, which the Company expects to recognize over an estimated weighted average period of 2.7 years.
9.    Income Taxes
The Company’s provision for income taxes was approximately $0 and $4,000 for the three and nine months ended September 30, 2023, respectively, with an effective tax rate of (0.01)% for the nine months ended September 30, 2023. The Company’s provision for income taxes was approximately $0 and $26,000 for the three and nine months ended September 30, 2022, respectively, with an effective tax rate of (0.04)% for the nine months ended September 30, 2022. The effective tax rate in each period differs from the U.S. statutory tax rate primarily due to the valuation allowances on the Company’s deferred tax assets as it is more likely than not that some or all of the Company’s deferred tax assets will not be realized. The tax expense recorded for the three and nine months ended September 30, 2023 relates to state taxes.
10.    Commitments and Contingencies
Lease Agreements
In October 2017, the Company entered into a non-cancelable operating facility lease agreement for 8,029 square feet of office space located at 2155 Park Boulevard in Palo Alto, California. The lease commenced on March 1, 2018 and was to expire in February 2023. The lease had a three-year renewal option prior to expiration. The lease included rent escalation clauses throughout the lease term. In October 2017, the Company provided a security deposit of $0.3 million. In February 2023, the Company amended the lease to extend the lease by one year with a one year renewal option. The extended lease commenced on March 1, 2023 and expires on February 28, 2024. The Company accounted for the amendment as a lease modification in accordance with ASC Topic 842. The Company also has additional operating leases that are included in its lease accounting but are not considered material for disclosure.
The maturities of the Company’s operating lease liabilities as of September 30, 2023 were as follows (in thousands):
Undiscounted lease paymentsSeptember 30, 2023
Remaining in 2023$124 
202484 
20251 
Total undiscounted payments209 
Less: imputed interest4 
Present value of future lease payments205 
Less: current portion of operating lease liabilities205 
Operating lease liabilities$ 
Rent expense recognized for the Company’s operating leases was $0.1 million for the three months ended September 30, 2023 and 2022, and $0.4 million for the nine months ended September 30, 2023 and 2022. Under the terms of the lease



agreements, the Company is also responsible for certain variable lease payments that are not included in the measurement of the lease liability. Variable lease payments for the operating leases were $23,000 for the three months ended September 30, 2023 and 2022, and $0.1 million for the nine months ended September 30, 2023 and 2022.
The operating cash outflows for the operating lease liabilities were $0.4 million and $0.5 million for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023 and December 31, 2022, the weighted-average remaining lease terms were 0.4 years and 1.2 years, and weighted-average discount rates were 12.81% and 12.82%, respectively.
Legal Matters
Schoen v. Eiger BioPharmaceuticals, Inc., et al., Case No. 22-cv-06985
On November 8, 2022 a putative securities class action complaint was filed in the United States District Court for the Northern District of California alleging that the company and two former executives violated Sections 10(b) and 20(a) of the Securities Exchange Act and SEC Rule 10b-5. The complaint alleged generally that between March 2021 and October 2022, material misstatements and omissions were made to shareholders regarding the TOGETHER study of peginterferon lambda for the treatment of COVID-19 as well as the likelihood of FDA approval of an Emergency Use Authorization for peginterferon lambda. The Court appointed a lead plaintiff on March 2, 2023. On April 10, 2023, the lead plaintiff filed a notice of voluntary dismissal without prejudice.
The Progeria Research Foundation, Inc. v. Eiger BioPharmaceuticals, Inc. Arbitration
On November 15, 2022, the Company received a demand for arbitration (Demand) from claimant The Progeria Research Foundation, Inc. (PRF) asserting two claims under a May 15, 2018 Collaboration and Supply Agreement (the PRF Collaboration Agreement) between the parties. PRF has alleged that the Company breached an obligation to supply quantities of a drug as requested by PRF. PRF also has a claim for declaratory relief regarding the grant of licenses under the PRF Collaboration Agreement. On January 18, 2023, the Company filed a response to the Demand denying PRF’s claims, contesting the arbitrability of PRF’s claim for declaratory relief, and asserting a counterclaim for declaratory relief related to the contractual provision underlying PRF’s original drug supply claim. To give the parties an opportunity to discuss a potential negotiated resolution of their dispute, the arbitration has been suspended through the end of 2023. As a result, all arbitration activities are now on hold, and the final hearing, originally scheduled for May 9 – 12, 2023, in Boston, Massachusetts, was cancelled.
11.    Net Loss Per Share
Basic net loss per share of common stock is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Since the Company was in a loss position for the three and nine months ended September 30, 2023 and 2022, diluted net loss per share is the same as basic net loss per share as the inclusion of all potential common shares outstanding would have been anti-dilutive. Dilutive potential common stock equivalents include the assumed exercise, vesting and issuance of employee stock awards using the treasury stock method.
The following table sets forth the outstanding potentially dilutive securities which have been excluded in the calculation of diluted net loss per share because including such securities would be anti-dilutive (in common stock equivalent shares):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Options to purchase common stock7,335,274 6,876,679 7,335,274 6,876,679 
Restricted and Performance stock units (unvested)219,562 753,356 219,562 753,356 
ESPP252,922 85,110 252,922 85,110 
Total7,807,758 7,715,145 7,807,758 7,715,145 
12.    Subsequent Events
In preparing the condensed consolidated financial statements as of September 30, 2023, the Company evaluated subsequent events for recognition and measurement purposes through the filing date of this Quarterly Report on Form 10-Q. The



Company concluded that no events or transactions have occurred that require disclosure in the accompanying condensed consolidated financial statements.



ITEM 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of Eiger BioPharmaceuticals, Inc.s (Eiger) financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and our consolidated financial statements and related notes thereto for the year ended December 31, 2022, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 17, 2023. This discussion and other parts of this report contain forward-looking statements that involve risks and uncertainties, such as our plans, objectives, expectations, intentions and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled “Risk Factors” included elsewhere in this report.
Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements In some cases, forward-looking statements are identified by words such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “could,” “potentially” or the negative of these terms or similar expressions. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to, among other things, our future plans, objectives, strategic partnering options for our virology assets, expectations, intentions, the potential for our programs, the timing of our clinical trials and financial performance and our ability to fund our planned operations, and the assumptions that underlie these statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q in Part II, Item 1A — “Risk Factors,” and elsewhere in this Quarterly Report on Form 10-Q. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. These statements, like all statements in this Quarterly Report on Form 10-Q, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments. We caution investors that our business and financial performance are subject to substantial risks and uncertainties.
Overview
In June 2023, in connection with an extensive portfolio prioritization review, we announced that the Company is focusing its clinical development efforts on advancing avexitide in hyperinsulinemic hypoglycemia (HH) indications. We will continue to commercialize Zokinvy for the treatment of Hutchinson-Gilford progeria syndrome (HGPS) and processing-deficient progeroid laminopathies (PL). In addition, we are evaluating strategic partnering options for our virology assets, lonafarnib and peginterferon lambda. During 2023, we have also undertaken certain cost savings initiatives, including a 43% reduction in workforce to date and efforts to reduce out-of-pocket spending related to our hepatitis delta (HDV) development program. In June 2023, we also announced that we had appointed David Apelian, MD, PhD, MBA, who had served as interim CEO since December 2022, as our next CEO.
Our lead product candidate, avexitide, is a well characterized, first-in-class glucagon-like peptide-1 (GLP-1) antagonist and is in development for the treatment of post-bariatric hypoglycemia (PBH) and other form of hyperinsulinemic hypoglycemia (HH) arising after gastrointestinal surgeries. These disorders are characterized by exaggerated secretion of GLP-1 after meals, dysregulated secretion of insulin, and a rapid drop in blood sugar. Avexitide is the only drug in development for PBH with Breakthrough Therapy designation by the U.S. Food and Drug Administration (FDA). Avexitide is also in development for congenital hyperinsulinism (HI), an ultra-rare, life-threatening, pediatric disorder of persistent hypoglycemia that results in irreversible brain damage in up to 50% of children with the condition. Avexitide has completed Phase 2 for both PBH and HI, and Phase 3 study start-up activities for PBH have been initiated. In connection with our Phase 3 start-up activities, we have observed low levels of product-related impurities in the finished drug product. Although not unusual for this class of compounds, we are working with our Contract Manufacturing Organizations (CMOs) to control these materials to ensure that an adequate supply of materials with a sufficient shelf-life can be released for Phase 3 studies.



On November 20, 2020, the FDA approved our first commercial product, Zokinvy, to reduce the risk of mortality of HGPS and for treatment of processing-deficient PL with either heterozygous LMNA mutation with progerin-like protein accumulation, or homozygous or compound heterozygous ZMPSTE24 mutations. Collectively known as progeria, these are ultra-rare and rapidly fatal genetic conditions of accelerated aging in children. On July 20, 2022, we announced that the EC granted MA under exceptional circumstances for Zokinvy for the treatment of progeria through the centralized procedure. The MA is valid for 5 years from date of authorization in all 27 EU member states plus Iceland, Liechtenstein, and Norway and is subject to annual reassessment of the benefit/risk profile based on the requirements set forth in the MA under exceptional circumstances. In May 2022, the Pharmaceutical Division at The Ministry of Health of Israel granted regulatory approval for Zokinvy in Israel. In August 2022, marketing authorization of Zokinvy was granted by the UK's Medicine and Healthcare products Regulatory Agency (MHRA) as part of the UK's European Commission Decision Reliance Procedure.
We commercially launched Zokinvy in the U.S. in January 2021 and in Europe in November 2022 and started to record product revenue in the first quarter of 2021. Our first European sales were recognized in the fourth quarter of 2022.
We continue to evaluate strategic partnering options for our virology assets: lonafarnib, a first-in-class, oral prenylation inhibitor, and peginterferon lambda, a potential first-in-class interferon.
For lonafarnib, in June 2023, we completed and reported end of study data from the single, pivotal Phase 3 D-LIVR study in patients with chronic HDV. The end of treatment Week 48 data demonstrated that the primary endpoint was achieved in both the oral and combination lonafarnib treatment arms. 24-week post-treatment data demonstrated that both lonafarnib arms showed a statistically significant difference in composite response rate compared to placebo. Our pre-New Drug Application (pre-NDA) meeting with FDA was supportive of a potential path to an NDA approval for both oral and combination lonafarnib regimens as finite therapies.
For peginterferon lambda, in September 2023, we announced our decision to discontinue the Phase 3 LIMT-2 study of peginterferon lambda in patients with chronic HDV. The decision was based on the recommendation of the Data Safety Monitoring Board (DSMB) for the study following its quarterly safety review. In a communication dated September 7, 2023, the DSMB recommended the discontinuation of the LIMT-2 study due to observations of four patients with hepatobiliary events that resulted in liver decompensation. Potential remains for peginterferon lambda for development in hepatitis B virus (HBV), respiratory diseases such as COVID-19 and influenza, as well as other virology indications.
We have historically incurred operating losses in each year since inception, and we expect to incur losses for the foreseeable future. We had a net loss of $18.0 million and $27.1 million for the three months ended September 30, 2023 and 2022, respectively. We had a net loss of $61.5 million and $71.6 million for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, we had an accumulated deficit of $498.7 million. Substantially all of our operating losses have resulted from expenses incurred in connection with our research and development programs and from selling, general and administrative costs associated with our operations.
We expect to incur significant expenses and increasing operating losses for at least the next several years as we initiate and continue the clinical development of, and seek regulatory approval for, and potentially commercialize our product candidates, which will require the addition of new personnel and upgrades to our information technology systems. We expect that our operating losses will fluctuate significantly from quarter to quarter and year to year due to timing of clinical development programs and efforts to achieve additional regulatory approvals. We have completed a program prioritization assessment and are executing on a strategy with a focus on enhancing long-term shareholder value.
Financial Operations Overview
Product Revenue, Net
Our product revenue, net consists of sales of Zokinvy for HGPS and processing-deficient PL in the United States and under a reimbursed early access program, or cohort ATU program, in France. In November 2022, sales of Zokinvy launched commercially in Europe through our wholly owned subsidiary in Ireland.
Cost of Sales
Cost of sales consists primarily of direct and indirect costs related to the manufacturing of Zokinvy for commercial sale, including third-party manufacturing costs, third party logistics costs, write down of inventories, and other period costs.



Research and Development Expenses
Research and development expenses represent costs incurred to conduct research and development, such as the development of our product candidates. We recognize all research and development costs as they are incurred. Research and development expenses consist primarily of the following:
expenses incurred under agreements with consultants, contract research organizations and clinical trial sites that conduct research and development activities on our behalf;
laboratory and vendor expenses related to the execution of clinical trials;
contract manufacturing expenses, primarily for the production of clinical trial supplies;
license fees associated with our license agreements; and
internal costs that are associated with activities performed by our research and development organization and generally benefit multiple programs. These costs are not separately allocated by product candidate. Unallocated internal research and development costs consist primarily of:
personnel costs, which include salaries, benefits and stock-based compensation expense;
allocated facilities and other expenses, which include expenses for rent and maintenance of facilities and depreciation expense; and
regulatory expenses and technology license fees related to development activities.
The largest component of our operating expenses has historically been the investment in clinical trials, including contract manufacturing arrangements, clinical trial material related costs and other research and development activities. However, we do not allocate internal research and development costs, such as salaries, benefits, stock-based compensation expense and indirect costs to product candidates on a program-specific basis. The following table shows our research and development expenses for the three and nine months ended September 30, 2023 and 2022 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Product candidates:
Avexitide$1,726 $3,254 $4,522 $6,976 
Lonafarnib4,826 6,877 18,968 19,385 
Peginterferon lambda4,080 6,964 12,835 17,359 
Internal research and development costs3,936 5,103 14,392 13,041 
Total research and development expense$14,568 $22,198 $50,717 $56,761 
We expect research and development expenses will continue to be significant and may increase in the future as we attempt to advance our product candidates into and through later stage clinical trials and pursue regulatory approvals, which will require a significant investment in regulatory support and contract manufacturing and clinical trial material related costs. In addition, in the future we may evaluate opportunities to acquire or in-license other product candidates and technologies, which may result in higher research and development expenses due to license fees and/or milestone payments.
The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in timely developing and achieving regulatory approval for our product candidates. The probability of success of our product candidates may be affected by numerous factors, including clinical data, competition, intellectual property rights, manufacturing capability and commercial viability. As a result, we are unable to determine the duration and completion costs of our development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates.



Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of personnel costs, allocated expenses, expenses for outside professional services, including legal, audit, accounting services, insurance costs and costs associated with being a public company, and commercial related expenses. Personnel costs consist of salaries, benefits and stock-based compensation. Allocated expenses consist of facilities and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation expense and other supplies. Our expenses include costs related to compliance with the rules and regulations of the SEC and Nasdaq, insurance, investor relations, banking fees and other administrative expenses and professional services. We expect our selling, general and administrative expenses to fluctuate in the future due to sales and marketing activities from the commercialization of our product candidates.
Interest Expense
Interest expense consists of interest on our long-term borrowings.
Interest Income
Interest income consists of interest earned on our investments in debt securities and cash equivalents.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities revenues, and expenses. On an ongoing basis, we evaluate these estimates and judgments. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenues and expenses that are not readily apparent from other sources. Actual results may differ materially from these estimates. There were no material changes to our critical accounting policies and estimates as disclosed in our 2022 Annual Report on Form 10-K filed with SEC on March 17, 2023.
Results of Operations
Comparison of the Three Months Ended September 30, 2023 and 2022
The following table summarizes results of operations for the three months ended September 30, 2023 and 2022 (in thousands):
Three Months Ended September 30,$
Change
%
Change
20232022
Product revenue, net$3,209 $4,024 $(815)(20)%
Total revenue3,209 4,024 (815)(20)%
Costs and operating expenses:
Cost of sales115 1,231 (1,116)(91)%
Research and development14,568 22,198 (7,630)(34)%
Selling, general and administrative5,454 6,964 (1,510)(22)%
Total costs and operating expenses20,137 30,393 (10,256)(34)%
Loss from operations(16,928)(26,369)9,441 (36)%
Interest expense(1,412)(1,092)(320)29 %
Interest income485 347 138 40 %
Other (expense) income, net(175)(178)*
Net loss$(18,030)$(27,111)$9,081 (33)%
*Percentage not meaningful.



Product revenue, net
Product revenue, net decreased by $0.8 million for the three months ended September 30, 2023 compared to the same period in 2022. The decrease was primarily due to a $1.6 million decrease in U.S. sales. It was partially offset by an increase of $0.8 million in France ATU sales compared to no such sales for the same period in 2022.
Cost of sales
Cost of sales decreased by $1.1 million for the three months ended September 30, 2023 compared to the same period in 2022. The decrease was primarily due to a non-conforming batch of inventory that was written off during the three months ended September 30, 2022.
Research and development expenses
Research and development expenses decreased by $7.6 million for the three months ended September 30, 2023 compared to the same period in 2022. The decrease was primarily due to a decrease of $6.0 million in clinical and contract manufacturing expenditures consisting of a $5.5 million decline in manufacturing costs for peginterferon lambda and avexitide and a $0.5 million decrease in clinical costs related to the LNF-011 study, a $1.1 million decrease in compensation and personnel related expense due to a decrease in headcount, and a $0.3 million decrease in outside services across programs including consulting and advisory services due to a decline in spending on peginterferon lambda programs.
Selling, general and administrative expenses
Selling, general and administrative expenses decreased by $1.5 million for the three months ended September 30, 2023 compared to the same period in 2022. The decrease was primarily due to a $1.0 million decrease in compensation and personnel related expense, including stock-based compensation, due to a decrease in headcount, and a $0.4 million decrease in outside services, including consulting, advisory and accounting services.
Interest expenses
Interest expense increased by $0.3 million for the three months ended September 30, 2023 compared to the same period in 2022. The increase was primarily due to an increase in the outstanding principal balance and increase in the effective interest rate of our Innovatus Loan entered into in June 2022.
Interest income
Interest income increased by $0.1 million for the three months ended September 30, 2023 compared to the same period in 2022. The increase was primarily due to an increase in interest rates.
Other (expense) income, net
Other (expense) income, net decreased by $0.2 million for the three months ended September 30, 2023 compared to the same period in 2022. The decrease was primarily due to foreign currency transaction loss from the significant volatility of the foreign currency exchange rates.



Comparison of the Nine Months Ended September 30, 2023 and 2022
The following table summarizes results of operations for the nine months ended September 30, 2023 and 2022 (in thousands):
Nine Months Ended September 30,$
Change
%
Change
20232022
Product revenue, net$11,720 $10,038 $1,682 17 %
Other revenue250 750 (500)(67)%
Total revenue11,970 10,788 1,182 11 %
Costs and operating expenses:
Cost of sales(77)1,492 (1,569)(105)%
Research and development50,717 56,761 (6,044)(11)%
Selling, general and administrative20,502 20,804 (302)(1)%
Total costs and operating expenses71,142 79,057 (7,915)(10)%
Loss from operations(59,172)(68,269)9,097 (13)%
Interest expense(4,040)(2,912)(1,128)39 %
Interest income1,856 613 1,243 203 %
Other (expense) income, net(149)(1,044)895 (86)%
Loss before provision for income taxes(61,505)(71,612)10,107 (14)%
Provision for income taxes26 (22)(85)%
Net loss$(61,509)$(71,638)$10,129 (14)%
Product revenue, net
Product revenue, net increased by $1.7 million for the nine months ended September 30, 2023 compared to the same period in 2022. The increase was primarily due to $1.3 million from product sales in Germany compared to no such sales for the same period in 2022 and an increase of $1.4 million in sales under the ATU program in France during the period. It was partially offset by a decrease of $1.1 million in U.S. sales.
Other revenue
Other revenue decreased by $0.5 million for the nine months ended September 30, 2023 compared to the same period in 2022. The decrease was primarily due to the timing of certain upfront payments received under the terms of the MDA with AnGes.
Cost of sales
Cost of sales decreased by $1.6 million for the nine months ended September 30, 2023 compared to the same period in 2022. The decrease was primarily due to a non-conforming batch of inventory that was written off during the nine months ended September 2022 and a reversal of an inventory accrual related to a non-conforming batch of product where we were notified in June 2023 that we were no longer obligated to pay for such product.
Research and development expenses
Research and development expenses decreased by $6.0 million for the nine months ended September 30, 2023 compared to the same period in 2022. The decrease was primarily due to a $5.0 million decrease in milestone expenses related to the Phase 3 LIMT-2 study of peginterferon lambda for HDV under our License Agreement with Bristol-Myers Squibb Company, which occurred in March 2022, a $1.8 million decrease in outside services across programs including consulting and advisory services due to a decline in spending on peginterferon lambda programs and a $0.3 million decrease in clinical and contract manufacturing expenditures. It was partially offset by a $0.7 million increase in compensation and personnel related expenses, including severance payouts for terminated employees, and a $0.3 million increase in regulatory expenses.



Selling, general and administrative expenses
Selling, general and administrative expenses decreased by $0.3 million for the nine months ended September 30, 2023 compared to the same period in 2022. The decrease was primarily due to a $0.9 million decrease in compensation and personnel related expense including stock-based compensation, due to a decrease in headcount and a $0.2 million decrease in sales and marketing. It was partially offset by a $0.8 million increase in outside services, including consulting, advisory and technical accounting services, as well as legal fees due to ongoing litigation and outsourced legal activities.
Interest expenses
Interest expense increased by $1.1 million for the nine months ended September 30, 2023 compared to the same period in 2022. The increase was primarily due to an increase in the outstanding principal balance and increase in the effective interest rate of our long-term borrowings related to the Innovatus Loan.
Interest income
Interest income increased by $1.2 million for the nine months ended September 30, 2023 compared to the same period in 2022. The increase was primarily due to an increase in interest rates.
Other (expense) income, net
Other (expense) income, net change of $0.9 million for the nine months ended September 30, 2023 compared to the same period in 2022. The decrease was primarily due to a loss on early extinguishment of the Oxford Loan in June 2022.
Provision for income taxes
Provision for income taxes decreased by $22,000 compared to the same period in 2022. The change was primarily due to tax expense related to state taxes.
Liquidity and Capital Resources
Sources of Liquidity
As of September 30, 2023, we had $39.4 million of cash, cash equivalents and short-term debt securities, comprised of $27.5 million of cash and cash equivalents and $11.9 million of short-term debt securities available-for-sale, and an accumulated deficit of $498.7 million.
On June 1, 2022, we entered into the Innovatus Loan with Innovatus, providing for up to $75.0 million funded in three tranches with a maturity date of August 31, 2027. We were funded $40.0 million in June 2022 at the closing, of which approximately $33.5 million was used to pay off loans outstanding under the Oxford Loan. We recorded a loss of $1.1 million on early extinguishment of the debt which was recognized as a component of Other (expense) income, net in the consolidated statement of operations and comprehensive loss. As part of the agreement with Innovatus, we are required to maintain a cash balance of not less than 5% of the aggregate principal amount of funded and outstanding term loans at all times. We are currently eligible to draw the $17.5 million under Tranche B, and have not done so as of September 30, 2023.
Additionally, in connection with entering into the Innovatus Loan, we entered into a Stock Purchase Agreement with Innovatus for the sale of common stock with an aggregate value of $5.0 million. On June 1, 2022, we issued 749,053 shares of common stock to Innovatus at a per share purchase price of $6.6751. Refer to Note 6 of our unaudited condensed consolidated financial statements included within Item 1 of this Quarterly Report on Form 10-Q for additional details.
On March 25, 2022, we entered into an Open Market Sale AgreementSM with Jefferies, pursuant to which we can sell up to a maximum of $50.0 million of our common stock in offerings that are deemed “at the market” offerings as defined in Rule 415 under the Securities Act, under Eiger’s currently effective shelf registration statement (the 2022 ATM Facility). In April 2022, we completed offerings from the 2022 ATM facility for a total of 2,686,288 shares of our common stock resulting in net proceeds of $20.8 million, after deducting commissions costs. No additional offerings have been completed since April 2022. As of September 30, 2023, there was approximately $28.7 million remaining under the 2022 ATM Facility for future issuance. We have not sold shares under the 2022 ATM Facility during 2023. The registration statement registering the offer and sale of shares pursuant to the 2022 ATM Facility is set to expire in December 2023, and there can be no assurance that we will be able to register future offers or sales under the 2022 ATM Facility. To the extent that the Company raises additional capital through the sale of equity, including pursuant to the 2022 ATM Facility and offerings of



debt or other securities convertible into equity, stockholder ownership interest will be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect the rights of holders of our common stock. In addition, based on our public float as of the filing of this Quarterly Report on Form 10-Q, we are only permitted to file a shelf registration statement subject to Instruction I.B.6 to Form S-3, which is referred to as the “baby shelf” rule. For so long as our public float is less than $75.0 million, we may not sell more than the equivalent of one-third of our public float during any 12 consecutive months pursuant to the baby shelf rules.
Based on our recurring losses from operations incurred since inception, expectation of continuing operating losses and negative cash flows for the foreseeable future, and need to raise additional capital to finance our future operations, management has concluded that there is substantial doubt regarding Eiger's ability to continue as a going concern beyond twelve months after the date that our condensed consolidated financial statements are issued.
Our primary uses of cash are to fund operating expenses, including research and development expenditures and selling, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in outstanding accounts payable and accrued expenses.
Future Funding Requirements
Prior to 2021, we had not generated any product revenue. We launched our first commercial product, Zokinvy, in January 2021. We expect our expenses to increase in connection with our ongoing development and manufacturing activities, particularly as we continue the research, development, manufacture and clinical trials of, and seek regulatory approval for our product candidates.
Our primary uses of capital are, and we expect will continue to be, funding the development of our avexitide product candidates, sales and marketing costs for commercialization of Zokinvy, compensation and related expenses, operational, manufacturing, financial, and management personnel, and costs associated with operating as a public company. We expect to incur substantial expenditures in the foreseeable future for the development and potential commercialization of our product candidates. We have reduced our workforce by 43% to date and have reduced out-of-pocket spending related to our HDV development program in an effort to extend our cash runway. We are actively seeking additional capital to fund losses from operations and capital funding needs through public or private equity offerings and/or debt financings, including through potential additional collaborations or strategic partnerships with other companies, or through a combination of the foregoing. As a result of economic conditions, general global economic uncertainty, political change and other factors, we do not know whether additional capital will be available when needed, or that, if available, we will be able to obtain additional capital on reasonable terms. If we are unable to raise additional capital due to the volatile global financial markets, general economic uncertainty or other factors, we may need to curtail planned development or commercialization activities. The sale of additional equity, including pursuant to the 2022 ATM Facility, or convertible debt could result in additional dilution to our stockholders. The incurrence of indebtedness would result in debt service obligations and could result in operating and financing covenants that would restrict our operations. We can provide no assurance that financing will be available in the amounts we need or on terms acceptable to us, if at all. If we are not able to secure adequate additional funding we may be forced to delay, make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. Any of these actions could materially harm our business.
Cash Flows
The following table summarizes our cash flows for the periods indicated (in thousands):
Nine Months Ended September 30,
20232022
Net cash used in operating activities$(60,594)$(60,763)
Net cash provided by (used in) investing activities
62,229 (12,165)
Net cash provided by financing activities34 77,015 
Effect of foreign exchange on cash and cash equivalents34 — 
Net increase in cash and cash equivalents
$1,703 $4,087 



Cash flows from operating activities
Cash used in operating activities for the nine months ended September 30, 2023 was $60.6 million, which primarily consisted of a net loss of $61.5 million, stock-based compensation expense of $4.3 million, non-cash interest expense of $1.1 million, amortization of debt securities discount of $1.0 million, reduction in the carrying amount of right-of-use assets of $0.4 million and depreciation and amortization of $0.2 million. Additionally, cash used in operating activities reflected changes in net operating assets due to a decrease of $8.8 million in accounts payable and accrued liabilities primarily due to the timing of payments, a decrease of $0.4 million in operating lease liabilities, partially offset by a decrease of $2.3 million in inventories, a decrease of $2.0 million in other assets, a decrease of $0.4 million in prepaid expenses and other current assets and a decrease of $0.4 million in accounts receivable.
Cash used in operating activities for the nine months ended September 30, 2022 was $60.8 million, which primarily consisted of a net loss of $71.6 million, stock-based compensation expense of $6.5 million, loss on extinguishment of long-term debt of $1.1 million, inventory write down of $1.0 million, non-cash interest expense of $0.9 million, amortization of debt securities discount of $0.7 million, amortization of operating lease right-of-use assets of $0.4 million and depreciation and amortization of $0.2 million. Additionally, cash used in operating activities reflected changes in net operating assets due to an increase of $4.1 million in accounts payable and accrued liabilities, primarily due to the timing of payments, and a decrease of $0.1 million in accounts receivable, partially offset by an increase of $2.2 million in prepaid expenses and other current assets, an increase of $0.9 million in inventories, an increase of $0.6 million in other assets, and a decrease of $0.5 million in operating lease liabilities.
Cash flows from investing activities
Cash provided by investing activities for the nine months ended September 30, 2023 was $62.2 million, primarily consisting of $81.9 million of proceeds from maturities of debt securities, which were partially offset by $19.4 million of purchases of debt securities and $0.2 million of purchases of property and equipment.
Cash used in investing activities for the nine months ended September 30, 2022 was $12.2 million, primarily consisting of $55.5 million of purchases of debt securities, which were partially offset by $43.5 million of proceeds from maturities of debt securities.
Cash flows from financing activities
Cash provided by financing activities for the nine months ended September 30, 2023 was $34,000, primarily consisting of $56,000 proceeds from issuance of common stock upon ESPP purchases, which were partially offset by $22,000 payment of common stock offering costs.
Cash provided by financing activities for the nine months ended September 30, 2022 was $77.0 million, which primarily consisted of $66.4 million of proceeds net of commissions from the issuance of common stock under the 2020 and 2022 ATM Facilities, $39.8 million of proceeds from debt, $5.0 million of proceeds from issuance of common stock to lender, $0.3 million proceeds from issuance of common stock upon stock option exercises and ESPP purchases, which were partially offset by the $33.3 million repayment of debt, $1.1 million payment of debt issuance costs and $0.2 million of common stock offering costs.
Contractual Obligations and Other Commitments
Our contractual obligations as of September 30, 2023 have not materially changed from what we presented in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 17, 2023.
ITEM 3.    Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.



ITEM 4.    Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We are responsible for maintaining disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Disclosure controls and procedures are controls and other procedures designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Based on our management’s evaluation (with the participation of our principal executive officer and our principal financial officer) of our disclosure controls and procedures as required by Rule 13a-15 under the Exchange Act, our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures were effective to achieve their stated purpose as of September 30, 2023, the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the nine months ended September 30, 2023 that have materially affected, or are 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 Quarterly Report on Form 10-Q, and in our other public filings. 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 Quarterly Report on Form 10-Q and those we may make from time to time. You should consider all of the risk factors described when evaluating our business.
Risk Factor Summary
Below is a summary of material factors that make an investment in our common stock speculative or risky. Importantly, this summary does not address all of the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks and uncertainties that we face, can be found under “Risk Factors” in Part II, Item 1A of this Quarterly Report. The below summary is qualified in its entirety by that more complete discussion of such risks and uncertainties. You should carefully consider the risks and uncertainties described under “Risk Factors” in Part II, Item 1A of this Quarterly Report as part of your evaluation of an investment in our common stock.
We are a commercial-stage biopharmaceutical company with multiple product candidates in clinical development and a limited operating history. We have incurred net losses each year since our inception. We have one U.S. Food and Drug Administration (FDA) and European Medicines Agency (EMA)-approved product for commercial sale, Zokinvy, and prior to 2021, have never generated any product revenue and may never be profitable.
We cannot give any assurance that we will generate data for our current lead product candidate avexitide or any other candidate sufficient to receive regulatory approval, and without regulatory approval we will not be able to market such products.
Prior to the approval of our NDA for Zokinvy to reduce the risk of mortality in HGPS, and for treatment of processing-deficient PL with either heterozygous LMNA mutation with progerin-like protein accumulation, or homozygous or compound heterozygous ZMPSTE24 mutations, we had not submitted an application for approval or obtained FDA approval for any product. We may not be able to obtain FDA approval of any future NDA or Biologics License Application (BLA) for our product candidates, which would prohibit commercialization.
Our business strategy is based upon obtaining and maintaining Orphan Drug designation for our product candidates. If we are unable to obtain or maintain Orphan Drug designation or regulatory approval, our business would be substantially harmed.
Our future success depends in part on our ability to attract, retain, and motivate qualified personnel.
Product development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies may not be predictive of future study results.
We rely on clinical studies of our product candidates in order to obtain regulatory approval. We may find it difficult to enroll patients in our clinical studies given the limited number of patients who have the diseases for which our product candidates are being studied.
If clinical studies of our product candidates fail to demonstrate safety, efficacy, purity and/or potency to the satisfaction of the FDA or similar regulatory authorities outside the United States 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.
We rely on third parties to conduct our clinical studies, manufacture our product candidates and perform other services. Our ability to obtain regulatory approval or commercialize our product candidates and our business could be impaired if these collaborations are unsuccessful.
If the market opportunities for our product candidates are smaller than we believe they are, we may not meet our revenue expectations. Because the patient populations in the market for our product candidates may be small, we



must be able to successfully identify patients and acquire a significant market share to achieve profitability and growth.
We face intense competition and rapid technological change and the possibility that our competitors may develop therapies that are similar, more advanced or more effective than ours.
We currently have limited marketing and sales capabilities for the commercialization of our product candidates.
Zokinvy sales reflect utilization of the product in the ultra-rare conditions of Hutchinson-Gilford progeria syndrome (HGPS) and processing-deficient progeroid laminopathies (PL) among a small number of patients, and thus sales volume may fluctuate over time due to the inherent mortality in these serious diseases.
The commercial success of any of our current or future product candidates will depend upon the degree of market acceptance by physicians, patients, third-party payors and others in the medical community. Sales of our products depend substantially on the extent to which the costs of our product candidates will be paid for or reimbursed by healthcare management organizations or government authorities or third-party payors.
We are currently conducting and will continue to conduct clinical trials for our product candidates outside the United States, which could expose us to risks that could have a material adverse effect on our business, including conflicts in the Middle East and risks in connection with the actions taken by the Russian Federation in Ukraine and surrounding areas.
We intend to rely on a combination of exclusivity from Orphan Drug designation and our patent rights for our product candidates. If we are unable to maintain exclusivity from the combination of these approaches, then our ability to compete effectively in our markets may be harmed.
The annual reassessment by the EMA of the risk-benefit balance for Zokinvy including information on the safe and effective use may not be positive, which could lead to a variation, suspension, revocation of our marketing authorization or requirement to fulfil additional specific obligations.
If we are unable to maintain effective proprietary rights for our product candidates, or if the scope of the intellectual property protection is not sufficiently broad, our competitors could develop and commercialize product candidates similar or identical to ours.
We may be unsuccessful in obtaining or maintaining necessary rights to our product candidates through acquisitions and in-licenses. If we fail to comply with obligations in the agreements under which we license intellectual property and other rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.
We may not be successful in any efforts to identify, license, discover, develop or commercialize additional product candidates.
Healthcare legislative reform measures may have a material adverse effect on our business and results of operations. If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs.
The proposals to revise the European legislation on pharmaceuticals lead to uncertainties over the regulatory framework that will be applicable to medicinal products in the EU, including orphan medicinal products.
We face potential product liability, and, if successful claims are brought against us, we may incur substantial liability and costs.
We are dependent upon information technology systems and any failure or security breach of such systems could result in a material disruption in the development of our product candidates or other business operations as well as result in statutory or contractual obligations or otherwise expose us to liability.
COVID-19 has and may continue to adversely affect our financial condition and our business as well as those of third parties on which we rely on significant manufacturing, clinical or other business operations.
If we fail to maintain or regain compliance with the listing standards of Nasdaq, our common stock may be delisted, which could have a material adverse effect on the liquidity of our common stock and our ability to raise additional capital.



Risks Related to our Financial Condition, Integration and Capital Requirements
We have incurred losses since our inception, have a limited operating history on which to assess our business, and anticipate that we will continue to incur significant losses for the foreseeable future. We will require substantial additional capital to achieve our goals.
We are a commercial-stage biopharmaceutical company with a limited operating history. We have incurred net losses in each year since our inception. For the three months ended September 30, 2023 and 2022, we reported a net loss of $18.0 million and $27.1 million, respectively. For the nine months ended September 30, 2023 and 2022, we reported a net loss of $61.5 million and $71.6 million, respectively. As of September 30, 2023, we had an accumulated deficit of $498.7 million. Our prior losses, combined with expected future losses, have had and may continue to have an adverse effect on our stockholders’ (deficit) equity and working capital.
Based on our recurring losses from operations incurred since inception, expectation of continuing operating losses and negative cash flows for the foreseeable future, and need to raise additional capital to finance our future operations, management has concluded that there is substantial doubt regarding Eiger's ability to continue as a going concern for beyond twelve months after the date that our condensed consolidated financial statements are issued. In addition, we may not be able to access a portion of our existing cash, cash equivalents and short-term securities due to market and other conditions. For example, on March 10, 2023, the Federal Deposit Insurance Corporation (FDIC) was appointed receiver of Silicon Valley Bank (SVB), where we maintain an operating account with a balance that exceeded the FDIC insurance limit. On March 12, 2023, the U.S. Treasury Department, the Federal Reserve and the FDIC jointly announced enabling actions that fully protect all depositors of SVB and that such depositors would have access to all of their funds starting March 13, 2023. On March 26, 2023, the FDIC announced that First Citizens BancShares would acquire the commercial banking business of SVB. Although the cash in our accounts at Silicon Valley Bank did not impact our operations, we cannot be certain that future market corrections or other conditions will not impact our ability to access our cash, cash equivalents and short-term securities. We continue to maintain an operating account at SVB and have begun measures to reduce our deposit concentration risk. If other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and short-term securities may be threatened.
In addition, we will continue to require substantial additional capital to continue our clinical development, manufacturing and regulatory approval efforts and potential commercialization activities. Accordingly, we will need to raise substantial additional capital to continue to fund our operations. The amounts and timing of our future funding requirements will depend on many factors, including our ability to achieve regulatory approval and the pace and results of our clinical development efforts. While we are actively seeking additional capital to fund losses from operations and capital funding needs through public or private equity offerings and/or debt financings, through potential additional collaborations or strategic partnerships with other companies, or through a combination of the foregoing, additional funds may not be available when we need them on terms that are favorable to us, or at all. Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on our financial condition and our ability to develop our product candidates.
We have devoted substantially all of our financial resources to identify, acquire, and develop our product candidates, including manufacturing of clinical supplies, conducting clinical studies and providing selling, general and administrative support for our operations. To date, we have financed our operations primarily through the sale of equity securities and debt facilities. The amount of our future net losses will depend, in part, on the rate of our future expenditures and our ability to obtain funding through equity or debt financings, strategic collaborations, or grants. Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. We expect losses to increase as we advance our clinical development programs in various clinical studies. We may need significant additional resources in order to aggressively move avexitide forward successfully based on the discussions with the FDA. It may be several years, if ever, before we complete pivotal clinical studies and have additional product candidates approved for commercialization. We expect to invest significant funds into our clinical candidates to advance these compounds to potential regulatory approval.
If we obtain regulatory approval to market one or more additional product candidates, our future revenue will depend upon the size of any markets in which our product candidates may receive approval, and our ability to achieve sufficient market acceptance, pricing, reimbursement from third-party payors, and adequate market share for our product candidates in those markets. Even if we obtain adequate market share for our product candidates, because the potential markets in which our product candidates may ultimately receive regulatory approval could be very small, we may never become profitable despite obtaining such market share and acceptance of our products. We have also agreed with The Progeria Research



Foundation to make Zokinvy available to progeria (HGPS and processing-deficient PL) patients under an expanded access program that may not result in payment to us. Future clinical trials of new therapies for progeria conducted by third parties may also result in patients converting from commercially reimbursed Zokinvy to product provided through clinical trials and result in lower revenues received by us.
We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future and our expenses will increase substantially if and as we:
continue the clinical development of our product candidate;
in-license or acquire additional product candidates;
undertake the scale up and commercial manufacturing or have manufactured our product candidate;
advance our programs into larger, more expensive clinical studies;
initiate additional nonclinical, clinical, or other studies for our product candidate;
commercialize and provide expanded access to Zokinvy for the treatment of HGPS and processing-deficient PL
identify and develop potential commercial opportunities, such as avexitide for PBH and HI;
seek regulatory and marketing approvals and reimbursement for our product candidate;
establish a sales, marketing, and distribution infrastructure to commercialize any products for which we may obtain marketing approval and market ourselves;
seek to identify, assess, acquire, and/or develop other product candidates;
make milestone, royalty or other payments under third-party license agreements;
develop and educate PBH and HI markets;
seek to maintain, protect, and expand our intellectual property portfolio;
seek to attract and retain skilled personnel;
create additional infrastructure to support our operations as a public company and our product development and planned future commercialization efforts; and experience any delays or encounter issues with the development and potential for regulatory approval of our clinical candidates such as safety issues, clinical trial accrual delays, longer follow-up for planned studies, additional major studies, or supportive studies necessary to support marketing approval.
Further, the net losses we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a representative indication of our future performance.
Prior to 2021, we never generated any product revenue and may never be profitable.
We have one product approved for commercialization in the U.S. and EU for two ultra-rare diseases. Zokinvy works to (i) reduce the risk of mortality in HGPS, and (ii) treat processing-deficient PL with either heterozygous LMNA mutation with progerin-like protein accumulation, or homozygous or compound heterozygous ZMPSTE24 mutations. Zokinvy was approved by the FDA in November 2020 and launched commercially in the U.S. in January 2021. In July 2022, our MAA for Zokinvy was approved by the EC, under the exceptional circumstances procedure. The MA is subject to the EMA’s continued review on an annual basis of new efficacy and safety information which may become available. Our ability to generate substantial revenue and achieve profitability depends on our ability to (i) obtain the regulatory and marketing approvals necessary to commercialize Zokinvy in foreign jurisdictions, alone or with strategic collaboration partners, and (ii) to successfully complete the development of, and obtain the regulatory and marketing approvals necessary to commercialize, more of our product candidates in the U.S. or foreign jurisdictions. We do not anticipate generating significant product revenue for the foreseeable future. Our ability to generate future product revenue depends heavily on our success in many areas, including, but not limited to:
completing research and development of our product candidates;
obtaining additional and maintaining current regulatory and marketing approvals for our product candidates;



manufacturing product candidates and establishing and maintaining supply and manufacturing relationships with third parties that meet regulatory requirements and our supply needs in sufficient quantities to meet market demand for our product candidates, if approved;
marketing, launching and commercializing product candidates for which we obtain regulatory and marketing approval, either directly or with a collaborator or distributor;
gaining market acceptance of our product candidates as treatment options;
addressing any competing products;
protecting and enforcing our intellectual property rights, including patents, trade secrets, and know-how;
negotiating favorable terms in and maintaining any collaboration, licensing, or other arrangements into which we may enter;
obtaining reimbursement or pricing for our product candidates that supports profitability; and
attracting, hiring, and retaining qualified personnel.
Even if we obtain additional product approvals for commercial sale, we anticipate incurring significant costs associated with commercializing any approved product candidate. Our current pipeline of product candidates has been in-licensed from third parties and we will have to develop or acquire manufacturing capabilities in order to continue development and potential commercialization of our product candidates. Additionally, if we are not able to generate sufficient revenue from the sale of any approved products, we may never become profitable.
Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights.
To the extent that we raise additional capital through the sale of equity, including pursuant to the 2022 ATM Facility, debt or other securities convertible into equity, stockholder ownership interest will be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect your rights as a common stockholder such as the Loan and Security Agreement we entered into with Innovatus Life Sciences Lending Fund I, LP (Innovatus) in June 2022 (the Innovatus Loan). The Innovatus Loan was a $75.0 million debt financing arrangement with Innovatus wherein we borrowed the first tranche of $40.0 million upon closing of the debt financing in June 2022. The Innovatus Loan is secured by perfected first priority liens on our assets. The Innovatus Loan includes customary events of default, including failure to pay amounts due, breaches of covenants and warranties, material adverse change events, certain cross defaults and judgments, and insolvency.
If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates or future revenue streams or grant licenses on terms that are not favorable to us. In addition, while we are seeking strategic partners for our virology assets, lonafarnib and peginterferon lambda, we may not be able to identify strategic partners, or enter into agreements on terms favorable to us, or at all. In addition, such transactions may require consents from third parties, which we may be unable to obtain. Further, our ability to raise additional capital may be adversely impacted by worsening global economic conditions and continuing disruptions to and volatility in the credit and financial markets in the U.S. and worldwide, including as a result of COVID-19. We cannot assure you that we will be able to obtain additional funding if and when necessary to fund our entire portfolio of product candidates to meet our projected plans. If we are unable to obtain funding on a timely basis, we may be required to delay or discontinue one or more of our development programs or the commercialization of any product candidates or be unable to expand our operations or otherwise capitalize on potential business opportunities, which could materially affect our business, financial condition, and results of operations.
Covenants in the Innovatus Loan restrict our business and operations in many ways, and if we do not effectively comply with our covenants, our financial conditions and results of operations could be adversely affected.
The Innovatus Loan provides for up to $75.0 million in term loans due on August 31, 2027, of which $40.7 million in principal is outstanding as of September 30, 2023. All of our current and future assets, secure our borrowings under the Innovatus Loan. The Innovatus Loan requires that we comply with certain covenants applicable to us, including among other things, covenants restricting dispositions, changes in business, management, ownership or business locations, mergers or acquisitions, indebtedness, encumbrances, distributions, investments, transactions with affiliates and subordinated debt, any of which could restrict our business and operations, particularly our ability to respond to changes in our business or to take specified actions to take advantage of certain business opportunities that may be presented to us.



Our failure to comply with any of the covenants could result in a default under the Innovatus Loan, which could permit the lenders to declare all or part of any outstanding borrowings to be immediately due and payable. If we are unable to repay those amounts, the lenders under the Innovatus Loan could proceed against the collateral granted to them to secure that debt, and our inability to use or dispose of those assets would seriously harm our business. In addition, should we be unable to comply with these covenants or if we default on any portion of our outstanding borrowings, the lenders can also impose a 5.0% penalty, restrict access to additional borrowings under the loan and security agreement, and accelerate the maturity of the debt. Any default under the Innovatus Loan would materially affect our liquidity and ability to fund our operations and complete our planned clinical trials and regulatory filings would be substantially impaired.
Risks Related to the Development of our Product Candidates
We are dependent on the success of our product candidates, which are in various stages of clinical development. Certain of our product candidates have produced results in academic settings to date or for other indications than those that we contemplate, and we cannot give any assurance that we will generate data for any of our product candidates sufficient to receive regulatory approval in our planned indications, which will be required before they can be commercialized.
To date, we have invested substantially all of our efforts and financial resources to identify, acquire, and develop our portfolio of product candidates. Our future success is dependent on our ability to further develop, obtain regulatory approvals for, and commercialize one or more of these product candidates. Our NDA for Zokinvy to reduce the risk of mortality in HGPS, and for treatment of processing-deficient progeroid laminopathies (PL) with either heterozygous LMNA mutation with progerin-like protein accumulation, or homozygous or compound heterozygous ZMPSTE24 mutations, was approved in November 2020. Prior to the U.S. Zokinvy commercial launch in 2021, we had not generated revenue from sales of any products and may never be able to develop or commercialize additional product candidates. In addition, we have a commitment to provide access to Zokinvy for patients with HGPS and PL with either heterozygous LMNA mutation with progerin-like protein accumulation, or homozygous or compound heterozygous ZMPSTE24 mutations, for no or minimal cost to those patients.
With respect to potential commercial products, we currently have one product candidate, avexitide, that has completed Phase 2 for PBH and HI. Phase 3 study start-up activities for avexitide in PBH have been initiated. It may be years before our studies are completed, and new studies are initiated, if at all.
We provide our geographically diverse clinical sites with good clinical practice protocols. We review and monitor the execution of our protocols at our various sites in an effort to understand those protocols are being followed. There can be no assurance that the data we develop for our product candidates in our planned indications will be sufficient or complete enough to obtain regulatory approval. Likewise, there can be no assurance that the data obtained from foreign clinical trial sites in studies not conducted under an investigational new drug, or IND, application will be accepted in support of an application for regulatory approval or authorization for use in the U.S. Similarly, data obtained from foreign clinical trial sites may not be accepted by other foreign regulatory authorities in support of an application for regulatory approval or authorization for use in these jurisdictions.We are not permitted to market or promote any of our product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receive such regulatory approval for any of our current product candidates. We cannot be certain that any of our product candidates will be successful in clinical studies or receive regulatory approval. Further, our product candidates may not receive regulatory approval even if they are successful in clinical studies. If we do not receive regulatory approvals for our product candidates, we may not be able to continue our operations.
We may not be able to obtain FDA approval of any future NDA or BLA for our product candidates.
The clinical development, manufacturing, labeling, packaging, storage, recordkeeping, advertising, promotion, export, import, marketing and distribution and other possible activities relating to lonafarnib, avexitide and any other product candidate that we may develop in the future are subject to extensive regulation in the United States. Prior to the approval of our NDA for Zokinvy to reduce the risk of mortality in HGPS, and for treatment of PL with either heterozygous LMNA mutation with progerin-like protein accumulation, or homozygous or compound heterozygous ZMPSTE24 mutations, we had not submitted an application for approval or obtained FDA approval for any product.
Approval of an NDA or a BLA is not guaranteed, and the approval process is an expensive and uncertain process that may take several years. The FDA and foreign regulatory entities also have substantial discretion in the approval process. The number and types of preclinical studies and clinical trials that will be required for approval varies depending on the product candidate, the disease or the condition that the product candidate is designed to target and the regulations applicable to any particular product candidate. Data are subject to varying interpretation and the FDA may not agree that our clinical data



support that any of our product candidates are safe and effective for the proposed therapeutic use. Despite the time and expense associated with preclinical studies and clinical trials, failure can occur at any stage, and we could encounter problems that require us to repeat or perform additional preclinical studies or clinical trials or generate additional chemistry, manufacturing and controls data, including product stability data. In previous studies, ECG abnormalities were observed in our lonafarnib program. In addition, our Phase 3 LIMT-2 study of peginterferon lambda in patients with chronic HDV was terminated due to observations of hepatobiliary events that resulted in liver decompensation. The decision was based on the recommendation of the study's Data Safety Monitoring Board and FDA following a safety review. The FDA and similar foreign authorities could delay, limit or deny approval of a product candidate, and may ultimately approve the product for narrower indications or with unfavorable labeling that would impede our commercialization of the product.
Approval procedures vary among countries and can involve additional product testing and additional administrative review periods, including obtaining reimbursement and pricing approval in select markets. The time required to obtain approval in other countries might differ from that required to obtain FDA approval. The regulatory approval process in other countries may include all of the risks associated with FDA approval as well as additional, presently unanticipated, risks. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others, including the risk that our product candidates may not be approved for all indications requested and that such approval may be subject to limitations on the indicated uses for which the product may be marketed.
Our business strategy is based upon obtaining and maintaining Orphan Drug designation for our products candidates, which is an uncertain process. The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming, and inherently unpredictable. If we are unable to obtain or maintain Orphan Drug designation or regulatory approval for our product candidates, our business would be substantially harmed.
Our approach to identifying and developing product candidates depends, in large part, on our ability to obtain and maintain Orphan Drug designation from regulatory authorities in major markets. Without the potential protection of this regulatory exclusivity upon approval, many of our product candidates would otherwise not justify investment. While we assess the potential for obtaining Orphan Drug designation at the time that we contemplate the acquisition of product candidates and we intend to timely file for such designation, there can be no assurance that we will obtain Orphan Drug designation or be able to successfully meet the regulatory requirements to maintain that designation with the planned clinical trials for our product candidates. Failure to obtain and maintain Orphan Drug designation would make our product candidates significantly less competitive and potentially not viable investments for further development. Although we currently have Orphan Drug designation for some of our product candidates in multiple targeted indications, failure to demonstrate significant benefit over existing approved products in pivotal clinical trials may lead to marketing approval but without qualifying for Orphan Drug protection in some regions, such as in Europe.
The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable, typically takes many years following the commencement of clinical studies and depends upon numerous factors. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions, which may cause delays in the approval or the decision not to approve an application. We have obtained U.S. and EMA regulatory approval for one product, Zokinvy, and it is possible that none of our current product candidates or any future product candidates we may seek to develop will ever obtain regulatory approval.
Future applications for our product candidates could fail to receive regulatory approval for many reasons, including but not limited to the following:
the FDA or comparable foreign regulatory authorities may disagree with the design, size or implementation of our clinical studies;
the population studied in the clinical program may not be sufficiently broad or representative to assure safety in the full population for which we seek approval;
the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from our development efforts;
the data collected from clinical studies of our product candidates may not be sufficient or complete or meet the regulatory requirements to support the submission of an NDA, BLA, or other submission or to obtain regulatory approval in the United States or foreign jurisdictions;



the FDA or comparable foreign regulatory authorities may find failures in our manufacturing processes, validation procedures and specifications, or facilities of our third-party manufacturers with which we contract for clinical and commercial supplies that may delay or limit our ability to obtain regulatory approval for our product candidates; and
the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our NDA, BLA or other submission insufficient for approval.
The lengthy and uncertain regulatory approval process, as well as the unpredictability of the results of clinical studies, may result in our failing to obtain additional regulatory approval to market any of our product candidates or to be significantly delayed from our expectations for potential approval, which would significantly harm our business, results of operations, and prospects. In addition, although we have obtained Orphan Drug designation for five of our development programs to date, there can be no assurance that the FDA or comparable foreign regulatory authorities will grant our similar status for our other proposed development indications or other product candidates in the future.
Although the FDA has granted Rare Pediatric Disease designation to avexitide for the treatment of congenital hyperinsulinism, NDA approval for this program may not meet the eligibility criteria for a priority review voucher.
Our avexitide compound has received Rare Pediatric Disease (RPD) designation from the FDA for the treatment of congenital hyperinsulinism (HI). The FDA defines a “rare pediatric disease” as a serious or life-threatening disease in which the serious or life-threatening manifestations primarily affect patients under the age of 18 years, that is, a disease or condition that affects fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 in the United States when there is no reasonable expectation that the cost of developing and making available the product in the United States will be recovered from sales in the United States for that drug or biological product. Specifically, under this program, a sponsor who receives an approval for a drug or biologic for a “rare pediatric disease” may qualify for a voucher that can be redeemed to receive a priority review of a subsequent marketing application for a different product. The sponsor of a rare pediatric disease product receiving a priority review voucher may transfer (including by sale) the voucher to another sponsor. The voucher may be further transferred any number of times before the voucher is used, as long as the sponsor making the transfer has not yet submitted the application. The FDA may also revoke any priority review voucher if the rare pediatric disease product for which the voucher was awarded is not marketed in the U.S. for at least 12 months following the date of approval. In addition, the priority review voucher is only awarded to an NCE, thus if a compound is approved first for an indication that is not a rare pediatric disease the compound may not be eligible to receive the voucher. While we obtained and sold the priority review voucher issued upon approval of Zokinvy to reduce the risk of mortality in HGPS, and for treatment of PL with either heterozygous LMNA mutation with progerin-like protein accumulation, or homozygous or compound heterozygous ZMPSTE24 mutations, there can be no assurance that we will be successful in obtaining approval for avexitide for the treatment of HI, or that a priority review voucher will be issued at the time of any such approval.
Congress has only authorized the Rare Pediatric Disease Priority Review Voucher Program until September 30, 2024. However, if a product candidate receives RPD designation before September 30, 2024, it is eligible to receive a voucher if it is approved before September 30, 2026. Avexitide may not be approved by that date, or at all, and, therefore, we may not be in a position to obtain a priority review voucher prior to expiration of the program, unless Congress further reauthorizes the program.
There is no assurance we will receive a rare pediatric disease priority review voucher. Also, although priority review vouchers may be sold or transferred to third parties, there is no guarantee that we will be able to realize any value if we were to sell a priority review voucher.
Although we have received Breakthrough Therapy designations, this may not lead to a faster development, regulatory review or approval process, and it does not increase the likelihood of receiving marketing approval in the United States.
We have received Breakthrough Therapy designation for avexitide for the treatment of PBH and HI. A Breakthrough Therapy is defined as a therapy that is intended, alone or in combination with one or more other therapies, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the therapy may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For therapies that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Therapies designated as breakthrough therapies by the FDA may also be eligible for priority review and accelerated approval.



Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. The Breakthrough Therapy designations we have obtained may not result in faster development processes, reviews or approvals compared to therapies considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, the FDA may later decide that any of our development programs no longer meet the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that the product no longer meets the conditions for qualification. Thus, even though we intend to seek Breakthrough Therapy designation for some or all of our future product candidates for the treatment of various conditions, there can be no assurance that we will receive any such Breakthrough Therapy designation.
We may submit an application for our product candidates under the Accelerated Approval Pathway. If we are unable to obtain approval or licensure of our product candidates through the Accelerated Approval Program in the United States, we may be required to conduct additional nonclinical and clinical studies and trials beyond those that we currently contemplate, which could increase the expense of obtaining, reduce the likelihood of obtaining and/or delay the timing of obtaining, necessary marketing approval. Even if we receive approval from the FDA through the Accelerated Approval Program, if any required confirmatory post-marketing trial does not verify clinical benefit, or if we do not comply with rigorous post-marketing requirements, the FDA may seek to withdraw the approval.
We may submit an NDA or BLA for our product candidates under the Accelerated Approval Pathway. If we are unable to obtain approval of our product candidates through the Accelerated Approval Program in the United States, we may be required to conduct additional nonclinical and clinical studies and trials beyond those that we currently contemplate, which could increase the expense of obtaining, reduce the likelihood of obtaining and/or delay the timing of obtaining, necessary marketing approval. Even if we receive approval from the FDA through the Accelerated Approval Program, if any required confirmatory post-marketing trial does not verify clinical benefit, or if we do not comply with rigorous post-marketing requirements, the FDA may seek to withdraw the approval.
For any approval to market a product, we must provide the FDA and foreign regulatory agencies with clinical data that adequately demonstrate the safety, efficacy, purity and/or potency of the product for the indication applied for in the NDA, BLA, or other respective regulatory filings. The Accelerated Approval Program is one of several approaches used by the FDA to make prescription drugs and biologics more rapidly available for the treatment of serious or life-threatening diseases. Section 506(c) of the Federal Food, Drug and Cosmetic Act (FDCA) provides that the FDA may grant accelerated approval to “a product for a serious or life-threatening condition upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments.” Approval through the Accelerated Approval Program is typically subject, however, to the requirement that the applicant conduct additional post-marketing clinical trials to verify and describe the product’s clinical benefit. Typically, clinical benefit is verified when post-marketing clinical trials show that the product provides a clinically meaningful positive therapeutic effect, that is, an effect on how a patient feels, functions, or survives. The FDA may require that these studies be underway prior to Accelerated Approval pursuant to the Food and Drug Omnibus Reform Act of 2022 (FDORA). If such confirmatory post-marketing trial fails to confirm the product’s clinical profile or risks and benefits, the FDA may withdraw its approval of the product. The FDA has broad discretion with regard to approval through the Accelerated Approval Program, and even if we believe that the Accelerated Approval Program is appropriate for our product candidates, we cannot assure you that the FDA will ultimately agree. The FDA may also change its policies with respect over Accelerated Approval over time. For example, in March 2023, the FDA announced the availability of draft guidance on “Clinical Trial Considerations to Support Accelerated Approval of Oncology Therapeutics,” in which the agency outlined, and invited public comment on, its “preferred approach” of randomized controlled trials, including those that provide for longer term follow-up that could fulfill a post-marketing requirement to verify clinical benefit. In that draft guidance, the FDA acknowledged that historically, single-arm trial designs and response endpoints have most commonly been used in oncology, but noted that such trials have limitations. Furthermore, even if we do obtain approval through the Accelerated Approval Program, we may not experience a faster development process, review or approval compared to conventional FDA procedures.
Our lonafarnib-based regimens for the treatment of HDV has completed Phase 3 studies with endpoints intended to support accelerated approval. The primary endpoint for the D-LIVR study, the Phase 3 study of lonafarnib-based regimens, is a composite of a > 2 log reduction in HDV RNA and ALT normalization at end of 48 weeks of treatment and is intended to support accelerated approval. The study endpoints were previously achieved in Phase 2 studies and are consistent with



FDA guidance on the development of treatments for HDV. While these proposed endpoints are designed to be consistent with FDA guidance, there is no assurance that approval will be granted on a timely basis, or at all. FDA may disagree that the design of, or results from, our studies support accelerated approval. Additionally, the FDA could require us to conduct further studies or trials prior to granting approval of any type, including by determining that approval through the Accelerated Approval Program is not appropriate and that our clinical trials may not be used to support approval through the conventional pathway. We might not be able to fulfill the FDA’s requirements in a timely manner, which would cause delays, or approval might not be granted because our submission is deemed incomplete by the FDA. There also can be no assurance that after subsequent FDA feedback we will continue to pursue approval through the Accelerated Approval Program. A failure to obtain approval through the Accelerated Approval Program could result in a longer time period to obtain approval of our product candidates, could increase the cost of their development, could delay our ability to commercialize our products and could significantly harm our financial position and competitive position in the marketplace.
Even if we receive approval for one or more of our product candidates through the Accelerated Approval Program, we will be subject to rigorous post-marketing requirements, possibly including the completion of one or more confirmatory post-marketing trials as the FDA may require, to verify the clinical benefit of the product, and submission to the FDA of all promotional materials prior to their dissemination. The FDA could seek to withdraw the approval for multiple reasons, including if we fail to conduct any required confirmatory post-marketing trial with due diligence, our confirmatory post-marketing trial does not confirm the predicted clinical benefit, other evidence shows that the product is not safe or effective under the conditions of use, or we disseminate promotional materials that are found by the FDA to be false and misleading.
Moreover, Congress has recently enacted potential changes to the Accelerated Approval Program that could impact our ability to obtain an Accelerated Approval, or increase the burdens associated with post marketing requirements in the event we do obtain an Accelerated Approval. In particular, FDA must specify certain conditions for required post approval studies for products that receive Accelerated Approval, which may include enrollment targets and milestones, including the target date for study completion, by the time the product is approved. FDA may also require post approval studies to be underway at the time of Accelerated Approval or within a specified time period following Accelerated Approval for such products.
Any delay in obtaining, or inability to obtain, approval through the Accelerated Approval Program, or any issues in maintaining approval granted under the Accelerated Approval Program, would delay or prevent commercialization of our products, and would materially adversely affect our business, financial condition, results of operations, cash flows and prospects
Product development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies may not be predictive of future study results.
Clinical testing is expensive and generally takes many years to complete, and the outcome is inherently uncertain. Failure can occur at any time during the clinical study process. The results of preclinical studies and early clinical studies of our product candidates may not be predictive of the results of larger, later-stage controlled clinical studies. Product candidates that have shown promising results in early-stage clinical studies may still suffer significant setbacks in subsequent clinical studies. Our clinical studies to date have been conducted on a small number of patients in limited numbers of clinical sites and in academic settings or for other indications. We will have to conduct larger, well-controlled studies in our proposed indications to verify the results obtained to date and to support any regulatory submissions for further clinical development. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical studies due to lack of efficacy or adverse safety profiles despite promising results in earlier, smaller clinical studies. Moreover, clinical data are often susceptible to varying interpretations and analyses. We do not know whether any Phase 2, Phase 3, or other clinical studies we have conducted or may conduct will demonstrate consistent or adequate safety, efficacy, purity and/or potency with respect to the proposed indication for use sufficient to obtain regulatory approval to receive regulatory approval or market our product candidates. For example, in September 2023, we announced our decision to discontinue the Phase 3 LIMT-2 study of peginterferon lambda in patients with chronic HDV. The decision was based on the recommendation of the Data Safety Monitoring Board (DSMB) for the study following its quarterly safety review. In a communication dated September 7, 2023, the DSMB recommended, and FDA agreed, to the discontinuation of the LIMT-2 study due to observations of four patients with hepatobiliary events that resulted in liver decompensation.



We may find it difficult to enroll patients in our clinical studies given the limited number of patients who have the diseases for which our product candidates are being studied. Difficulty in enrolling patients could delay or prevent clinical studies of our product candidates.
Identifying and qualifying patients to participate in clinical studies of our product candidates is essential to our success. The timing of our clinical studies depends in part on the rate at which we can recruit patients to participate in clinical trials of our product candidates, and we may experience delays in our clinical studies if we encounter difficulties in enrollment.
The eligibility criteria of our planned clinical studies may further limit the available eligible study participants as we expect to require that patients have specific characteristics that we can measure or meet the criteria to assure their conditions are appropriate for inclusion in our clinical studies. We may not be able to identify, recruit, and enroll a sufficient number of patients to complete our clinical studies in a timely manner because of the perceived risks and benefits of the product candidate under study, the availability and efficacy of competing therapies and clinical studies, and the willingness of physicians to participate in our planned clinical studies. For example, early in the COVID-19 pandemic, certain clinical study sites that were scheduled to open were delayed in activating and other sites suspended randomization of subjects for a period of time. Future restrictions could result in delays of our clinical trials. If patients are unwilling to participate in our clinical studies for any reason, the timeline for conducting studies and obtaining regulatory approval of our product candidates may be delayed.
FDA may also modify or enhance trial requirements which may affect enrollment. In August 2023, FDA published a guidance document, Informed Consent, Guidance for IRBs, Clinical Investigators, and Sponsors, which supersedes past guidance and finalizes draft guidance on informed consent. FDA’s new guidance presents evolving requirements for informed consent which may effect recruitment and retention of patients in clinical trials. Effects on recruitment and retention of patients may hinder or delay a clinical trial and could cause a significant setback to an applicable program.
If we experience delays in the completion of, or termination of, any clinical study of our product candidates, the commercial prospects of our product candidates could be harmed, and our ability to generate product revenue from any of these product candidates could be delayed or prevented. In addition, any delays in completing our clinical studies would likely increase our overall costs, impair product candidate development and jeopardize our ability to obtain regulatory approval relative to our current plans. Any of these occurrences may harm our business, financial condition, and prospects significantly.
Clinical studies are costly, time consuming and inherently risky, and we may fail to demonstrate safety, efficacy, purity and/or potency to the satisfaction of applicable regulatory authorities.
Clinical development is expensive, time consuming and involves significant risk. We cannot guarantee that any clinical studies will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical studies can occur at any stage of development. Events that may prevent successful or timely completion of clinical development include but are not limited to:
inability to generate satisfactory preclinical, toxicology, or other in vivo or in vitro data or diagnostics to support the initiation or continuation of clinical studies necessary for product approval;
delays in reaching agreement on acceptable terms with contract research organizations (CROs) and clinical study sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical study sites;
delays in obtaining required Institutional Review Board (IRB) approval at each clinical study site;
failure to permit the conduct of a study by regulatory authorities, after review of an investigational new drug (IND) or equivalent foreign application or amendment;
delays in recruiting qualified patients, or patients dropping out of, in our clinical studies;
feasibility of continuous trial execution in countries impacted by war, geopolitical conflict and other humanitarian crises, including conflicts in the Middle East;
failure by clinical sites or our CROs or other third parties to adhere to clinical study requirements or report complete findings;
failure to perform the clinical studies in accordance with the FDA’s good clinical practice (GCP) requirements, or applicable foreign regulatory guidelines;



occurrence of adverse events associated with our product candidates;
changes in regulatory requirements and guidance that require amending or submitting new clinical protocols;
the cost of clinical studies of our product candidates;
negative or inconclusive results from our clinical trials which may result in our deciding, or regulators requiring us, to conduct additional clinical studies or abandon development programs in other ongoing or planned indications for a product candidate; and
delays in reaching agreement on acceptable terms with third-party manufacturers and the time for manufacture of sufficient quantities of our product candidates for use in clinical studies.
Any inability to successfully complete clinical development and obtain regulatory approval could result in additional costs to us or impair our ability to generate revenue. Clinical study delays could also shorten any periods during which our products have patent protection and may allow competitors to develop and bring products to market before we do, which could impair our ability to obtain or maintain Orphan Drug designation exclusivity and to successfully commercialize our product candidates and may harm our business and results of operations.
The COVID-19 Public Health Emergency (PHE) expired in the U.S. and, while we intend to pursue similar temporary use authorizations in non-U.S. jurisdictions, we may not be able to receive such authorizations from foreign regulatory agencies. If we do receive a similar temporary use authorization, absent a full marketing authorization for that indication, our ability to sell our products may be limited.
Various regulatory pathways are available in jurisdictions outside the United States to make products available for emergency use. For example, regulatory authorities in certain EU Member States may temporarily authorize the distribution of an unauthorized drug in response to the suspected or confirmed spread of pathogenic agents such as the virus which is causing COVID-19. Obtaining such a temporary authorization is dependent upon a number of factors, which are not under our control. If such authorizations would be granted, they would only apply for a limited period of time. We might thus no longer be authorized to distribute our product under these authorizations if that time limit expired. The regulatory authorities in the EU or in other jurisdictions outside the U.S. may grant a conditional marketing authorization for medicinal products intended for the treatment of seriously debilitating or life-threatening diseases prior to the submission of comprehensive clinical data if that treatment is of major therapeutic advantage to the patients concerned or no other authorized treatment is available. In emergency situations, such a conditional marketing authorization may also be granted for these medicinal products where comprehensive preclinical or pharmaceutical data have not been supplied. These conditional marketing authorizations are subject to specific conditions (e.g., completing on-going studies or conducting new studies) which must be fulfilled within a timeline specified in the marketing authorization. These marketing authorizations are valid for a short period of time (e.g., one year) which can usually be renewed. If we would apply for such a conditional marketing authorization the regulatory authority concerned may reject our application because it considers that the benefit-risk balance of our product is not favorable or it judges it unlikely that we would be able to provide comprehensive data. If we would obtain such a conditional marketing authorization we may not be able to complete (timely) the studies which the regulatory authority imposed as a condition for the marketing authorization or the data collected in the course of these studies may indicate that our product does not have a favorable benefit-risk profile. As a result, we may not be able to continue distributing our product because the conditional marketing authorization has been revoked or not renewed, or the regulatory authority refused finally to grant a regular marketing authorization.
Regulatory authorities in the EU or other jurisdictions outside the EU may make a product available for compassionate reasons to a group of patients with a chronically or seriously debilitating disease or whose disease is considered to be life-threatening, and who cannot be treated satisfactorily with an authorized medicinal product provided that the product is subject of an application for marketing authorization or is undergoing clinical trials. If we would request a regulatory authority to make our product available to patient under these conditions the regulatory authority may reject our request if, for example, it considers that the patients concerned can be treated satisfactorily with other products that are already authorized.
Programs which make products available under the conditions mentioned above are usually authorized for a limited period of time (e.g., one year). Regulatory authorities may not renew expiring authorizations for these programs if we terminate prematurely a clinical trial with our product or decide not to submit or to withdraw an application for marketing authorization in the jurisdiction concerned. That may, for example, happen because pharmacovigilance data or other data collected during our clinical trials indicate that our product does not have the appropriate benefit-risk balance.



Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.
Our avexitide product candidate has been studied in over 70 PBH patients and 39 HI patients, and the most common adverse events are injection site bruising/reaction, headache, diarrhea, nausea and dizziness. There is no guarantee that additional or more severe side effects will not be identified through other clinical studies of avexitide.
Our lonafarnib product candidate has been studied in thousands of oncology patients, and the most common non-hematologic adverse events of any grade were gastrointestinal system disorders (nausea, anorexia, diarrhea and vomiting), weight loss, fatigue and rash. Use of Zokinvy to reduce the risk of mortality in HGPS, and for treatment of processing-deficient progeroid laminopathies with either heterozygous LMNA mutation with progerin-like protein accumulation, or homozygous or compound heterozygous ZMPSTE24 mutations, has been reported to cause ECG abnormalities, but these ECG abnormalities have not resulted in a risk of mortality for these patients. There is no guarantee that additional or more severe side effects or other properties will not be identified through other clinical studies of lonafarnib.
For example, in September 2023, we announced our decision to discontinue the Phase 3 LIMT-2 study of peginterferon lambda in patients with HDV. The decision was based on the recommendation of the Data Safety Monitoring Board (DSMB) for the study following its quarterly safety review. In a communication dated September 7, 2023, the DSMB recommended, and FDA agreed, to the discontinuation of the LIMT-2 study due to observations of four patients with hepatobiliary events that resulted in liver decompensation. There is no guarantee that additional or more severe side effects will not be identified through future clinical studies for other uses of peginterferon lambda. Undesirable side effects, other properties, and negative results for other indications may negatively impact the development and potential for approval of our product candidates for our proposed indications.
Additionally, even if one or more of our current product candidates receives marketing approval, and we or others later may identify undesirable side effects caused by such products, potentially significant negative consequences could result, including but not limited to:
regulatory authorities may withdraw approvals of such products;
regulatory authorities may require additional warnings on the label;
we may be required to create a Risk Evaluation and Mitigation Strategy (REMS) plan, which could include a medication guide outlining the risks of such side effects for distribution to patients, a communication plan for healthcare providers, and/or other elements to assure safe use;
we could be sued and held liable for harm caused to patients; and
our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of a product candidate, even if approved, and could significantly harm our business, results of operations, and prospects.
We are subject to ongoing regulatory requirements related to the U.S. and EU approvals of Zokinvy, and if we obtain additional regulatory approvals for a product candidate, we will be subject to additional ongoing regulatory requirements.
If our product candidates are approved, they will be subject to ongoing regulatory requirements with respect to manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies, and submission of safety, efficacy and other post-approval information, including both federal and state requirements in the United States and requirements of comparable foreign regulatory authorities.
Manufacturers and manufacturers’ facilities are required to continuously comply with FDA and comparable foreign regulatory authority requirements, including ensuring that quality control and manufacturing procedures conform to current Good Manufacturing Practices (cGMP) regulations and corresponding foreign regulatory manufacturing requirements. As such, we and our contract manufacturers will be subject to continual review and inspections to assess compliance with cGMP and adherence to commitments made in any NDA, BLA, or MAA.
Any regulatory approvals that we receive for our product candidates may be subject to limitations on the approved indicated uses for which the product candidate may be marketed or to the conditions of approval, or contain requirements



for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety, efficacy, purity and/or potency of the product candidate. We will be required to report certain adverse reactions and production problems, if any, to the FDA and comparable foreign regulatory authorities.
Any new legislation addressing product safety issues could result in delays in product development or commercialization, or increased costs to assure compliance. If our original marketing approval for a product candidate was obtained through an accelerated approval pathway, we could be required to conduct a successful post-marketing clinical study to confirm the clinical benefit for our products. An unsuccessful post-marketing study or failure to complete such a study could result in the withdrawal of marketing approval.
If a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing, or labeling of a product, the regulatory agency may impose restrictions on that product or us, including requiring withdrawal of the product from the market. If we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may, among other things:
issue warning letters;
impose civil or criminal penalties;
suspend or withdraw regulatory approval;
suspend any of our ongoing clinical studies;
refuse to approve pending applications or supplements to approved applications submitted by us;
impose restrictions on our operations, including closing our contract manufacturers’ facilities; or
require a product recall.
In addition, prescription drugs and biologics may be promoted only for the approved indications in accordance with the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label may be subject to significant liability. However, physicians may, in their independent medical judgment, prescribe legally available products for off-label uses. The FDA does not regulate the behavior of physicians in their choice of treatments, but the FDA does restrict manufacturer’s communications on the subject of off-label use of their products.
Any government investigation of alleged violations of law would be expected to require us to expend significant time and resources in response and could generate adverse publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to develop and commercialize our products and the value of us and our operating results would be adversely affected.
We rely on third parties to conduct our clinical studies, manufacture our product candidates and perform other services. If these third parties do not successfully perform and comply with regulatory requirements, we may not be able to successfully complete clinical development, obtain regulatory approval or commercialize our product candidates and our business could be substantially harmed.
We have relied upon and plan to continue to rely upon investigators and third-party CROs to conduct, monitor and manage our ongoing clinical programs. We rely on these parties for execution of clinical studies and manage and control only certain aspects of their activities. We remain responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory, and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities. We, our investigators, and our CROs and other vendors are required to comply with all applicable laws, regulations and guidelines, including those required by the FDA and comparable foreign regulatory authorities for all of our product candidates in clinical development. If we or any of our investigators, CROs or vendors fail to comply with applicable laws, regulations and guidelines, the results generated in our clinical studies may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional studies before approving our marketing applications. We cannot assure you that our CROs and other vendors will meet these requirements, or that upon inspection by any regulatory authority, such regulatory authority will determine that efforts, including any of our clinical studies, comply with applicable requirements. Our failure to comply with these laws, regulations and guidelines may require us to repeat clinical studies or conduct larger additional studies, which would be costly and delay the regulatory approval process.



If any of our relationships with investigators or third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs in a timely manner or do so on commercially reasonable terms. In addition, our CROs may not prioritize our clinical studies relative to those of other customers and any turnover in personnel or delays in the allocation of CRO employees by the CRO may negatively affect our clinical studies. If investigators or CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, our clinical studies may be delayed or terminated, and we may not be able to meet our current plans with respect to our product candidates. CROs may also involve higher costs than anticipated, which could negatively affect our financial condition and operations. In addition, we do not currently have, nor do we plan to establish, the capability to manufacture product candidates for use in the conduct of our clinical studies or in support of our commercialization of potential products, and we lack the resources and the capability to manufacture any of our product candidates on a clinical or commercial scale without the use of third-party manufacturers. We plan to rely on third-party manufacturers and their responsibilities will include purchasing from third-party suppliers the materials necessary to produce our product candidates for our clinical studies and regulatory approval. There are expected to be a limited number of suppliers for the active ingredients and other materials that we expect to use to manufacture our product candidates, and we may not be able to identify alternative suppliers to prevent a possible disruption of the manufacture of our product candidates for our clinical studies, and, if approved, ultimately for commercial sale. Although we generally do not expect to begin a clinical study unless we believe we have a sufficient supply of a product candidate to complete the study, any significant delay or discontinuity in the supply of a product candidate, or the active ingredient or other material components in the manufacture of the product candidate, could delay completion of our clinical studies and potential timing for regulatory approval of our product candidates, which would harm our business and results of operations. For example, in connection with Phase 3 start-up activities for avexitide, we observed low levels of product-related impurities in the finished drug product. Although not unusual for this class of compounds, we are working with our CMOs to control these impurities to a level agreed by FDA, and to ensure that an adequate supply of materials with a sufficient shelf-life can be released for Phase 3 studies. In the longer term, the impurities will be fully tox qualified to a higher level, and the product specifications will be updated to allow for a suitable commercial shelf-life.
With respect to our lonafarnib program, we procured an inventory of product from Merck to supply our initial clinical study needs. In 2016, we transferred the manufacturing of drug substance and drug product to our third-party contractors. The material used for ongoing progeria clinical studies, expanded access program, and commercial Zokinvy supply are sourced from CMOs. These same vendors are currently under development for commercial qualification. Materials used for our avexitide clinical trials are also sourced from CMOs. Our vendors have successfully made GMP batches for our clinical studies, however, our trials could be delayed if quality, stability, or other issues occur in relation to the manufacture of any unique batch. If these CMOs are not able to provide us with sufficient quantities of product for our clinical trials or in support of our commercialization of potential products on a timely basis, or at all, whether due to production shortages or other supply interruptions resulting from any delay, our clinical trials or regulatory approval may be delayed, or could impair our ability to generate revenue from the sale of such product candidate.
We rely and expect to continue to rely on third parties to manufacture our clinical product supplies, and if those third parties fail to obtain approval of government regulators, fail to provide us with sufficient quantities of product, or fail to do so at acceptable quality levels or prices our product candidates could be stopped, delayed, or made less profitable.
We do not currently have nor do we plan to acquire the infrastructure or capability internally to manufacture our clinical supplies for use in the conduct of our clinical trials, and we lack the resources and the capability to manufacture any of our product candidates on a clinical or commercial scale. We currently rely on outside vendors to source raw materials and manufacture our clinical supplies of our product candidates and plan to continue relying on third parties to manufacture our product candidates on a commercial scale, if approved.
The facilities used by our contract manufacturers to manufacture our product candidates will be subject to pre-approval inspection by the FDA that will be conducted after we submit our marketing applications to the FDA or comparable foreign regulatory authorities. We do not control the manufacturing process of, and are completely dependent on, our contract manufacturing partners for compliance with the regulatory requirements, known as cGMPs, for manufacture of our product candidates. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA, EMA or others, our future applications may not be approved by regulatory authorities, which would significantly delay our commercialization plans and increase our costs. We have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel, and in the past, we have experienced quality control issues with product manufactured by our contract manufacturers. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities,



which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.
We do not yet have sufficient information to reliably estimate the cost of the commercial manufacturing of our product candidates, and the actual cost to manufacture our product candidates could materially and adversely affect the commercial viability of our product candidates. As a result, we may not be able to develop additional commercially viable products.
In addition, our reliance on third-party manufacturers exposes us to the following additional risks:
We may be unable to identify manufacturers on acceptable terms or at all;
Our third-party manufacturers might be unable to timely formulate and manufacture our product or produce the quantity and quality required to meet our clinical and commercial needs, if any;
Contract manufacturers may not be able to execute our manufacturing procedures appropriately;
Our future contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required to supply our clinical trials or to successfully produce, store and distribute our products;
Manufacturers are subject to ongoing periodic unannounced inspection by the FDA and corresponding state agencies to ensure strict compliance with cGMP and other government regulations and corresponding foreign standards. We do not have control over third-party manufacturers’ compliance with these regulations and standards;
We may not own, or may have to share, the intellectual property rights to any improvements made by our third-party manufacturers in the manufacturing process for our product candidates; and
Our third-party manufacturers could breach or terminate their agreement with us.
Each of these risks could delay our clinical trials, the approval of any of our product candidates by the FDA or comparable foreign regulatory authorities or the commercialization of our product candidates or result in higher costs or deprive us of potential product revenue. In addition, we rely on third parties to perform release testing on our product candidates prior to delivery to patients. If these tests are not conducted appropriately and test data is not reliable, patients could be put at risk of serious harm and could result in product liability suits.
The manufacturing of medical products is complex and requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of biologic products often encounter difficulties in production, particularly in scaling up and validating initial production and absence of contamination. These problems include difficulties with production costs and yields, quality control, including stability of the product, quality assurance testing, operator error, shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. Furthermore, if contaminants are discovered in our supply of our product candidates or in the manufacturing facilities, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. We cannot assure you that any stability or other issues relating to the manufacture of our product candidates will not occur in the future. Additionally, our manufacturers may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If our manufacturers were to encounter any of these difficulties, or otherwise fail to comply with their contractual obligations, our ability to provide our product candidates to patients in clinical trials would be jeopardized. Any delay or interruption in the supply of clinical trial supplies could delay the completion of clinical trials, increase the costs associated with maintaining clinical trial programs and, depending upon the period of delay, require us to commence new clinical trials at additional expense or terminate clinical trials completely.
If the market opportunities for our product candidates are smaller than we believe they are, we may not meet our revenue expectations and, even assuming approval of a product candidate, our business may suffer. Because the patient populations in the market for our product candidates may be small, we must be able to successfully identify patients and acquire a significant market share to achieve profitability and growth.
We focus our product development principally on treatments for rare and ultra-rare diseases. Given the small number of patients who have the diseases that we are targeting, our eligible patient population and pricing estimates may differ significantly from the actual market addressable by our product candidate. Our projections of both the number of people who have these diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our product candidates, are based on our beliefs and estimates. These estimates have been derived from a



variety of sources, including the scientific literature, patient foundations, or market research, and may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these diseases. The number of patients may turn out to be lower than expected. For example, although we believe that data associated with avexitide are supportive of activity in PBH, there can be no assurance that our clinical trials will successfully address this condition. Likewise, the potentially addressable patient population for each of our product candidates may be limited or may not be amenable to treatment with our product candidates, and new patients may become increasingly difficult to identify or gain access to, which would adversely affect our results of operations and our business. Moreover, we expect that the sales of Zokinvy to patients with progeria will have limited profits given the ultra-rare nature of these diseases.
We face intense competition and rapid technological change and the possibility that our competitors may develop therapies that are similar, more advanced, or more effective than ours, which may adversely affect our financial condition and our ability to successfully commercialize our product candidates.
The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. We are currently aware of various existing therapies that may compete with our product candidates. For example, we have competitors both in the United States and internationally, including multinational pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies. Some of the pharmaceutical and biotechnology companies we expect to compete with include Recordati, MBX Bioscience, Vogenx, Zealand Pharmaceuticals, Rezolute, Hanmi Pharmaceutical, and Crinetics Pharmaceuticals as well as other smaller companies or biotechnology start-ups and large multinational pharmaceutical companies. Many of our competitors have substantially greater financial, technical, and other resources, such as larger research and development staff and experienced marketing and manufacturing organizations. Additional mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. As a result, these companies may obtain regulatory approval more rapidly than we are able to and may be more effective in selling and marketing their products as well. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring, or licensing on an exclusive basis, products that are more effective or less costly than any product candidate that we may develop, or achieve earlier patent protection, regulatory approval, product commercialization, and market penetration than we do. Additionally, technologies developed by our competitors may render our potential product candidates uneconomical or obsolete, and we may not be successful in marketing our product candidates against competitors.
Although we commercially launched Zokinvy following its FDA approval, we have limited marketing and sales experience outside the U.S. If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may be unable to generate any revenue.
Although certain of our employees may have marketed, launched and sold other pharmaceutical products in the U.S. in the past while employed at other companies, we have limited experience selling and marketing our product candidates outside the U.S.. To successfully commercialize Zokinvy and additional products that may result from our development programs, we will need to invest in and expand these capabilities, either on our own or with others, which would be expensive, difficult and time consuming. Any failure or delay in the timely development of our internal commercialization capabilities could adversely impact the potential for success of our products.
Further, given our, limited experience in marketing and selling biopharmaceutical products outside the U.S., we may rely on future collaborators to commercialize our products. If collaborators do not commit sufficient resources to commercialize our future products and we are unable to develop the necessary marketing and sales capabilities on our own, we will be unable to generate sufficient product revenue to sustain or grow our business. We may be competing with companies that currently have extensive and well-funded marketing and sales operations, in particular in the markets our product candidates are intended to address. Without appropriate capabilities, whether directly or through third-party collaborators, we may be unable to compete successfully against these more established companies. In addition, we have established an expanded access program in order to make Zokinvy available for patients with progeria, which requires additional resources and costs to support.



The commercial success of any of our current or future product candidates will depend upon the degree of market acceptance by physicians, patients, third-party payors, and others in the medical community.
Even with the approvals from the FDA and comparable foreign regulatory authorities, the commercial success of our products will depend in part on the health care providers, patients, and third-party payors accepting our product candidates as medically useful, cost-effective, and safe. Any product that we bring to the market may not gain market acceptance by physicians, patients, third-party payors and other health care providers. The degree of market acceptance of any of our products will depend on a number of factors, including without limitation:
the timing of our receipt of any marketing and commercialization licensures;
the terms of any licensures and the countries in which licensures are obtained;
the safety, efficacy, purity and/or potency of the product as demonstrated in clinical studies and potential advantages over competing treatments;
the prevalence and severity of the disease and any side effects;
the clinical indications for which approval is granted, including any limitations or warnings contained in a product’s approved labeling;
the convenience and ease of administration;
the cost of treatment;
the willingness of the patients and physicians to accept these therapies or any new methods of administration;
the marketing, sales and distribution support for the product;
the publicity concerning our products or competing products and treatments;
the success of our physician education programs;
availability of alternative effective treatments for the disease indications our product candidates are intended to treat and the relative risks, benefits and costs of those treatments; and
the pricing and availability of third-party insurance coverage and reimbursement.
Even if a product displays a favorable safety, efficacy, purity and/or potency profile upon approval, market acceptance of the product remains uncertain. Efforts to educate the medical community and third-party payors on the benefits of the products may require significant investment and resources and may never be successful. If our products fail to achieve an adequate level of acceptance by physicians, patients, third-party payors, and other health care providers, we will not be able to generate sufficient revenue to become or remain profitable.
Failure to obtain or maintain adequate reimbursement or insurance coverage for new or current products could limit our ability to market those products and decrease our ability to generate revenue.
We cannot be sure that reimbursement will be available for our products and, if coverage and reimbursement are available, what the level of reimbursement will be. Coverage may also be more limited than the indications for which the product is approved by the FDA or comparable foreign regulatory authorities. Reimbursement may impact the demand for, or the price of, our products.
The pricing, coverage and reimbursement of our products must be sufficient to support our commercial efforts and other development programs and the availability and adequacy of coverage and reimbursement by governmental and private payors are essential for most patients to be able to afford expensive treatments, particularly in Orphan Drug designated indications where the eligible patient population is small. Sales of our products will depend substantially, both domestically and abroad, on the extent to which the costs of our product candidates will be paid for or reimbursed by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or government authorities, private health insurers, and other third-party payors. If coverage and reimbursement are not available, or are available only in limited amounts, we may have to subsidize or provide products for free or we may not be able to successfully commercialize our products. For example, Zokinvy for patients with HGPS and processing-deficient PL is provided under an expanded access program may not result in reimbursement.
In addition, there is significant uncertainty related to the insurance coverage and reimbursement for newly approved products. In the United States, the principal decisions about coverage and reimbursement for new drugs are typically made



by the Centers for Medicare & Medicaid Services (CMS), an agency within the U.S. Department of Health and Human Services (HHS), as CMS decides whether and to what extent a new drug will be covered and reimbursed under Medicare. Private payors often follow the coverage reimbursement policies established by CMS to a substantial degree. It is difficult to predict what CMS and other payors will decide with respect to coverage for products such as ours and what reimbursement our products may receive.
The process for determining whether a third-party payor will provide coverage for a drug product typically is separate from the process for setting the price of a drug product or for establishing the reimbursement rate that the payor will pay for the drug product once coverage is approved. Third-party payors may limit coverage to specific drug products on an approved list, also known as a formulary, which might not include all of the FDA-approved drugs for a particular indication. A decision by a third-party payor not to cover Zokinvy or any of our product candidates once approved could reduce utilization of such products and have a material adverse effect on our sales, results of operations and financial condition. Moreover, a third-party payor’s decision to provide coverage for a drug product does not imply that adequate reimbursement will be available. Adequate third-party payor reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. Additionally, coverage and reimbursement for drug products can differ significantly from payor to payor. One third-party payor’s decision to cover a particular medical product or service does not ensure that other payors will also provide coverage for the medical product or service or will provide coverage at an adequate reimbursement rate. As a result, the coverage determination process will require us to provide scientific and clinical support for the use of our products to each payor separately and will be a time-consuming process.
Third-party payors are increasingly challenging the prices charged for medical products and services, examining the medical necessity and reviewing the cost-effectiveness of drug products and medical services, in addition to questioning safety and efficacy. If third-party payors do not consider our products to be cost-effective compared to other available therapies, they may not cover our products after FDA approval or, if they do, the level of payment may not be sufficient to allow us to sell our products at a profit. Additionally, coverage policies and third‑party reimbursement rates may change at any time. Therefore, even if favorable coverage and reimbursement status is attained for one or more of our products, less favorable coverage policies and reimbursement rates may be implemented in the future. If we are unable to obtain and maintain sufficient third‑party coverage and adequate reimbursement, the commercial success of our products may be greatly hindered and our financial condition and results of operations may be materially and adversely affected.
Outside the United States, international operations are generally subject to extensive governmental price controls and other price-restrictive regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada, and other countries has and will continue to put pressure on the pricing and usage of products. In many countries, the prices of products are subject to varying price control mechanisms as part of national health systems. Price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our products. Accordingly, in markets outside the United States, the potential revenue may be insufficient to generate commercially reasonable revenue and profits.
Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to limit or reduce healthcare costs may result in restrictions on coverage and the level of reimbursement for new products and, as a result, inadequate coverage or payment for our products.
In the EU, coverage and reimbursement status of our products, if approved, are provided for by the national laws of the EU Member States. In the EU, pricing and reimbursement schemes vary widely from Member State to Member State. Some Member States provide that products can only be effectively marketed after a reimbursement price has been agreed. Some Member States may require the completion of additional studies in order to compare the cost-effectiveness of a particular drug candidate to currently available therapies (so called health technology assessment, or HTA) in order to obtain reimbursement or pricing approval. EU Member States may approve a specific price for a product or it may instead adopt a system of direct or indirect controls on the profitability of the Company placing the product on the market. Other Member States may allow companies to fix their own prices for products, but monitor and control prescription volumes and issue guidance to physicians to limit prescriptions. Recently, many countries in the EU have increased the amount of discounts required on pharmaceuticals and these efforts could continue as countries attempt to manage healthcare expenditures, especially in light of the severe fiscal and debt crises experienced by many countries in the EU. The downward pressure on healthcare costs in general, particularly prescription drugs, has become intense. As a result, increasingly high barriers are being erected to the entry of new products. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various EU Member States, and parallel trade (arbitrage between low-priced and high-priced Member States), can further reduce prices. There can be no assurance that any country that has price controls or reimbursement limitations for



drug products will allow favorable reimbursement and pricing arrangements for any of our products, if approved in those countries.
We expect to experience pricing pressures in connection with products due to increased and continued efforts to limit or reduce healthcare spending. The downward pressure on healthcare costs in general, particularly prescription drugs, has and is expected to continue to increase in the future. As a result, profitability of our products may be more difficult to achieve even if they receive regulatory approval.
We intend to rely on a combination of exclusivity from Orphan Drug designation as well as patent rights for our product candidates and any future product candidates. If we are unable to obtain or maintain exclusivity from the combination of these approaches, we may not be able to compete effectively in our markets.
Our business strategy is to focus on product candidates for which Orphan Drug designation may be obtained in the major markets of the world. In addition, we rely or will rely upon a combination of patents, trade secret protection, and confidentiality agreements to protect the intellectual property related to our technologies and product candidates. Our success depends in large part on our and our licensors’ ability to obtain regulatory exclusivity and maintain patent and other intellectual property protection in the United States and in other countries with respect to our proprietary technology and products.
Under the Orphan Drug Act, the FDA may designate a product as an Orphan Drug if it is intended to treat a rare disease or condition, defined as a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the product will be recovered from sales in the United States. In the EU, the EMA’s Committee for Orphan Medicinal Products (COMP) grants Orphan Drug designation to promote the development of products that are intended for the diagnosis, prevention, or treatment of a life-threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the EU. Additionally, designation is granted for products intended for the diagnosis, prevention, or treatment of a life-threatening, seriously debilitating or serious and chronic condition when, without incentives, it is unlikely that sales of the drug in the EU would be sufficient to justify the necessary investment in developing the drug or biological product or where there is no satisfactory method of diagnosis, prevention, or treatment, or, if such a method exists, the medicine must be of significant benefit to those affected by the condition. In the United States, Orphan Drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages, and user-fee waivers. In addition, if a product receives the first FDA approval for the indication for which it has Orphan Drug designation, the product is entitled to Orphan Drug exclusivity, which means the FDA may not approve any other application to market the same product for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity or where the manufacturer is unable to assure sufficient product quantity.
Congress is considering updates to the Orphan Drug provisions of the FDCA in response to a recent decision by the U.S. Court of Appeals for the 11th Circuit. Any changes to the Orphan Drug provisions could change our opportunities for, or likelihood of success in obtaining, Orphan Drug exclusivity and would materially adversely affect our business, financial condition, results of operations, cash flows and prospects.
In the EU, Orphan Drug designation entitles a party to financial incentives such as reduction of fees or fee waivers and ten years of market exclusivity following drug or biological product approval. This period may be reduced to six years if the Orphan Drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity.
Because the extent and scope of patent protection for our products may in some cases be limited, Orphan Drug designation is especially important for our products for which Orphan Drug designation may be available. For eligible products, we plan to rely on the exclusivity period under the Orphan Drug Act to maintain a competitive position. If we do not obtain or maintain Orphan Drug exclusivity for our drug and biological products that do not have broad patent protection, our competitors may then sell the same drug to treat the same condition sooner than if we had obtained Orphan Drug exclusivity and our revenue will be reduced.
Even though we have Orphan Drug designations for each of our development programs in the United States and the EU, we may not be the first to obtain marketing approval for any particular orphan indication due to the uncertainties associated with developing pharmaceutical products. Further, even if we obtain Orphan Drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different products with different active



moieties can be approved for the same condition. Even after an Orphan Drug is approved, the FDA or EMA can subsequently approve the same product with the same active moiety for the same condition if the FDA or EMA concludes that the later product is safer, more effective, or makes a major contribution to patient care. Orphan Drug designation neither shortens the development time or regulatory review time of a product candidate nor gives the product candidate any advantage in the regulatory review or approval process.
We have sought to protect our proprietary position by filing patent applications in the United States and abroad related to our product candidates that are important to our business. This process is expensive and time consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain and involves complex legal and factual questions for which legal principles remain unsolved. The patent applications that we own or in-licensed may fail to result in issued patents with claims that cover our product candidates in the United States or in other foreign countries. There is no assurance that all potentially relevant prior art relating to our patents and patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue, and even if such patents cover our product candidates, third parties may challenge their validity, enforceability, or scope, which may result in such patents being narrowed, found unenforceable or invalidated. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property, provide exclusivity for our product candidates, or prevent others from designing around our claims. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.
We, independently or together with our licensors, have filed several patent applications covering various aspects of our product candidates. We cannot offer any assurances about which, if any, patents will issue, the breadth of any such patent or whether any issued patents will be found invalid and unenforceable or will be threatened by third parties. Any successful opposition to these patents or any other patents owned by or licensed to us after patent issuance could deprive us of rights necessary for the successful commercialization of any product candidates that we may develop. Further, if we encounter delays in regulatory approvals, the period of time during which we could market a product candidate under patent protection could be reduced. Although we have licensed a number of patents covering methods of use and certain compositions of matter, we do not have complete patent protection for our product candidates. For example, in connection with our arbitration with The Progeria Research Foundation, Inc. (PRF) asserting two claims under a May 15, 2018 Collaboration and Supply Agreement with PRF, PRF is indirectly challenging the validity of our in-license of certain patents covering the methods of treating HGPS and progeroid laminopathies. Likewise, most of the patents or applications covering products that we have licensed in from Stanford have limited protection outside of the United States. Therefore, a competitor could develop the same or similar product that may compete with our product candidate.
Certain of our product licenses are limited to specified indications or therapeutic areas which may result in the same compound being developed and commercialized by a third party whom we have no control over or rights against. This may result in safety data, pricing or off-label uses from that third party’s product that may negatively affect the development and commercialization of our product candidates. If we cannot obtain and maintain effective protection of exclusivity from our regulatory efforts and intellectual property rights, including patent protection, for our product candidates, we may not be able to compete effectively, and our business and results of operations would be harmed.
The annual reassessment by the EMA of the risk-benefit balance, including information on the safe and effective use, for Zokinvy may not be positive, leading to a variation, suspension, revocation of our MA or fulfillment of additional specific obligations.
On July 20, 2022, we announced that the EC granted an MA under the exceptional circumstances procedure for Zokinvy to treat patients aged 12 months and older with HGPS and PL. The EC authorization follows the positive opinion granted by the Committee for Medicinal Products for Human Use (CHMP) in May 2022 which found that the risk-benefit balance for Zokinvy is favorable to recommend the granting of a MA although the rarity of the disease means that it was not possible to obtain complete information on Zokinvy during the assessment process. As a result, the MA was issued under the



exceptional circumstances procedure and subject to the EMA’s continued review on an annual basis of new efficacy and safety information which may become available.
Under Article 14(8) Regulation (EC) No 726/2004, products for which the applicant can demonstrate that comprehensive data (in line with the requirements laid down in Annex I of Directive 2001/83/EC, as amended) cannot be provided (due to specific reasons foreseen in the legislation) might be eligible for marketing authorization under exceptional circumstances. This type of authorization is reviewed annually to reassess the risk-benefit balance. The fulfillment of any specific procedures/obligations imposed as part of the marketing authorization under exceptional circumstances is aimed at the provision of information on the safe and effective use of the product.
It is possible that the annual reassessment by the EMA of the risk-benefit balance including information on the safe and effective use for Zokinvy may not be positive. This could lead to the variation, suspension, revocation of our MA for Zokinvy in the EU, or lead to additional specific commitments or conditions being fulfilled.
We may not have sufficient patent term protections for our products to effectively protect our business.
Patents have a limited term. In the United States, the statutory expiration of a patent is generally 20 years after it is filed. Although various extensions may be available, the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired for a product, we may be open to competition from generic medications. In addition, upon issuance in the United States any patent term can be adjusted based on certain delays caused by the applicant(s) or the United States Patent and Trademark Office (USPTO). For example, a patent term can be reduced based on certain delays caused by the patent applicant during patent prosecution.
Patent term extensions under the Hatch-Waxman Act in the United States and under supplementary protection certificates in the EU may be available to extend the patent or data exclusivity terms of products. With respect to lonafarnib-based regimens, peginterferon lambda and avexitide, a substantial portion of the potential commercial opportunity will likely rely on patent term extensions, and we cannot provide any assurances that any such patent term extensions will be obtained and, if so, for how long. As a result, we may not be able to maintain exclusivity for our products for an extended period after regulatory approval, which would negatively impact our business and results of operations. If we do not have sufficient patent terms or regulatory exclusivity to protect our products, our business and results of operations will be adversely affected.
Patent laws and rule changes could increase the uncertainties and costs surrounding the prosecution