AXLA

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______________________________________________________________________________

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

OR

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

FOR THE TRANSITION PERIOD FROM _ TO _            

______________________________________________________________________________

Delaware			26-3321056
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
840 Memorial Drive Cambridge, Massachusetts (Address of principal executive offices)			02139 (Zip Code)
(857) 320-2200 (Registrant’s telephone number, including area code)

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

Title of each class			Trading Symbol			Name of each exchange on which registered
Common Stock, $0.001 par value per share			AXLA			The Nasdaq Global Market

Large accelerated filer			☐			Accelerated filer			☐
Non-accelerated filer			☒			Smaller reporting company			☒
						Emerging growth company			☒

•the benefits of our product candidates to health and/or disease and their commercial potential;

•the success, cost and timing of our product development activities, including statements regarding the timing of initiation and completion of preclinical studies, Clinical Studies or Clinical Trials and related preparatory work, and the timing of the availability of the results of these preclinical studies, Clinical Studies and Clinical Trials, including our IND submissions and Clinical Trials for AXA1125 and AXA1665;

•our ability to use our research platform to design new product candidates with desirable biological activity;

•our ability to obtain and maintain regulatory approval or find alternate regulatory commercialization pathways from the FDA, the European Medicines Agency, or the EMA, and other comparable regulatory authorities for our product candidates, and any related restrictions, limitations or warnings in the label of an approved product candidate;

•our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates, development platform and the type of such protection;

•our ability and the potential to successfully manufacture our product candidates for preclinical studies, Clinical Studies and Clinical Trials and for commercial use, if approved;

•the size and growth potential of the markets for our product candidates and our ability to serve those markets, either alone or in combination with others;

•the rate and degree of market acceptance of our product candidates, if approved;

•regulatory developments in the United States and foreign countries;

•our ability to enter into a collaboration, partnership, or other agreement with a third party on reasonable terms or at all to develop one or more product candidates or commercialize any of our product candidates, if approved;

•our ability to secure sufficient manufacturing and supply chain capacity;

•the success of competing products or therapies that are or may become available;

•our ability to attract and retain key scientific, management or other necessary personnel;

•our estimates regarding expenses for both product development and as a public company, future revenue, capital requirements and needs for additional financing;

•the potential for faults in our internal controls;

•the effect of the COVID-19 pandemic on any of the foregoing; and

•other risks and uncertainties, including those discussed in Part II, Item 1A, Risk Factors in this Quarterly Report.

SUMMARY OF MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS

•We have incurred net losses in every year since our inception and anticipate that we will continue to incur net losses in the future.

•We will require additional capital to fund our operations and if we fail to obtain necessary financing, we will not be able to complete development and commercialization of our product candidates.

•Substantial doubt exists as to our ability to continue as a going concern.

•Clinical development is a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of any product candidates, which could impair our ability to fund our operations or obtain financing on acceptable terms, or at all.

•Any use of our product candidates to support and maintain homeostasis, which helps support normal structures and functions of the body, or to modulate dysregulated metabolism is a novel approach and negative perception of any product candidates that we develop could adversely affect our ability to conduct our business, obtain regulatory approvals or identify alternate regulatory pathways, to the extent required by applicable laws, to market such product candidates.

•We face significant competition from other healthcare companies, and our operating results will suffer if we fail to compete effectively.

•If we lose key management personnel, or if we are unable to recruit additional highly skilled personnel, our ability to identify and develop new or next generation product candidates will be impaired, could result in loss of markets or market share and could make us less competitive.

•COVID-19 may materially and adversely affect our business and our financial results.

•Regulatory requirements for development of our product candidates as drugs or as non-drug products are uncertain and evolving. Should we choose to develop any product candidate in parallel for more than one indication, the results from a Clinical Study or Clinical Trial in one indication, particularly any observation of a serious adverse event, may impact the Clinical Study or Clinical Studies or Clinical Trial or Clinical Trials in another indication. Changes in these laws, including our ability to conduct Clinical Studies or Clinical Trials, or the current interpretation or application of these laws, or conflicts between us and the FDA on the applicability or interpretation of applicable laws, would have a significant adverse impact on our ability to develop and commercialize our products.

•If we are unable to obtain and maintain patent protection for any product candidates we develop or for our development platform or other technologies, our competitors could develop and commercialize products or technology similar or identical to ours, and our ability to successfully commercialize any product candidates we may develop, and our technology may be adversely affected.

•We rely on third parties to conduct our Clinical Studies and Clinical Trials, and to assist us in meeting the regulatory requirements applicable to the development and marketing of our products. If these third parties do not successfully carry out their contractual duties or meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize any potential product candidates.

•Our product candidates require precise, high-quality manufacturing capabilities. If any of our third-party manufacturers encounter difficulties in manufacturing our product candidates, our ability to provide supply of our product candidates for Clinical Studies or Clinical Trials, or for future commercial supply of products we bring to market under applicable regulatory requirements and approvals, could be delayed or terminated, or we may be unable to maintain a commercially viable cost structure.

•The trading price of our stock is highly volatile.

TABLE OF CONTENTS

						Page
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)						5
			Condensed Consolidated Balance Sheets			5
			Condensed Consolidated Statements of Operations and Comprehensive Loss			6
			Condensed Consolidated Statements of Cash Flows			7
			Condensed Consolidated Statements of Stockholders’ Equity			8
			Notes to Unaudited Condensed Consolidated Financial Statements			10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations						25
Item 3. Quantitative and Qualitative Disclosure About Market Risk						38
Item 4. Controls and Procedures						38
PART II. OTHER INFORMATION
Item 1. Legal Proceedings						40
Item 1A. Risk Factors						40
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						106
Item 3. Defaults Upon Senior Securities						106
Item 4. Mine Safety Disclosures						106
Item 5. Other Information						106
Item 6. Exhibits						107
SIGNATURES						108

			As of
			June 30, 2022						December 31, 2021
Assets
Current assets:
Cash and cash equivalents			$	34,077					$	23,574
Marketable securities			10,323						31,474
Prepaid expenses and other current assets			1,744						1,598
Total current assets			46,144						56,646
Property and equipment, net			937						870
Operating lease right-of-use asset			2,686						—
Other assets			211						211
Total assets			$	49,978					$	57,727
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable			$	3,995					$	4,301
Accrued expenses and other current liabilities			8,216						5,849
Current portion of long-term debt			3,467						—
Operating lease liability			1,497						—
Total current liabilities			17,175						10,150
Long-term debt, net of current portion and discount			21,701						25,070
Operating lease liability, net of current portion			1,391						—
Other liabilities			413						499
Total liabilities			40,680						35,719
Commitments and contingencies (Note 10)			—						—
Stockholders' equity:
Common stock, $0.001 par value; 150,000,000 shares authorized, 53,058,369 and 39,605,701 shares issued and 52,639,388 and 39,186,720 shares outstanding at June 30, 2022 and December 31, 2021, respectively			53						40
Additional paid-in capital			386,897						359,261
Treasury stock, 418,981 shares at cost			—						—
Accumulated other comprehensive loss			(66)						(52)
Accumulated deficit			(377,586)						(337,241)
Total stockholders' equity			9,298						22,008
Total liabilities and stockholders' equity			$	49,978					$	57,727

			Three Months Ended June 30,												Six Months Ended June 30,
			2022						2021						2022						2021
Operating expenses:
Research and development			$	16,866					$	10,298					$	30,410					$	20,538
General and administrative			3,753						4,946						8,539						9,202
Total operating expenses			20,619						15,244						38,949						29,740
Loss from operations			(20,619)						(15,244)						(38,949)						(29,740)
Other income (expense):
Interest income			65						48						87						83
Interest expense			(752)						(734)						(1,456)						(1,462)
Other expense			—						(5)						(27)						(5)
Total other income (expense), net			(687)						(691)						(1,396)						(1,384)
Net loss			$	(21,306)					$	(15,935)					$	(40,345)					$	(31,124)
Net loss per share, basic and diluted			$	(0.40)					$	(0.42)					$	(0.86)					$	(0.83)
Weighted average common shares outstanding, basic and diluted			52,616,279						37,732,196						47,052,105						37,692,398
Comprehensive loss:
Net loss			$	(21,306)					$	(15,935)					$	(40,345)					$	(31,124)
Other comprehensive income (loss):
Unrealized gains (losses) on marketable securities			4						18						(14)						25
Comprehensive loss			$	(21,302)					$	(15,917)					$	(40,359)					$	(31,099)

(in thousands)

			Six Months Ended June 30,
			2022						2021
Cash flows from operating activities:
Net loss			$	(40,345)					$	(31,124)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			159						132
Stock-based compensation			2,103						3,105
Non-cash interest expense			263						325
Non-cash lease expense			(26)						—
Other non-cash items			163						419
Changes in current assets and liabilities:
Prepaid expenses and other current assets			(146)						424
Accounts payable			(137)						36
Accrued expenses and other current liabilities			2,437						(1,684)
Net cash used in operating activities			(35,529)						(28,367)
Cash flows from investing activities:
Purchases of property and equipment			(202)						(296)
Purchases of marketable securities			—						(23,234)
Proceeds from sales and maturities of marketable securities			20,974						13,576
Net cash provided by (used in) investing activities			20,772						(9,954)
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs			25,456						578
Offering costs paid			(193)						—
Proceeds from exercise of common stock options and ESPP			90						140
Repayments of the principal portion of finance lease			(93)						(47)
Net cash provided by financing activities			25,260						671
Net increase (decrease) in cash and cash equivalents			10,503						(37,650)
Cash and cash equivalents, beginning of period			23,574						71,590
Cash and cash equivalents, end of period			$	34,077					$	33,940
Supplemental cash flow information:
Cash paid for interest			$	1,200					$	1,137
Supplemental disclosure of non-cash activities:
Obtaining a right-of-use asset in exchange for an operating lease liability			$	3,340					$	—
Purchases of property and equipment included in accounts payable			$	26					$	17
Offering costs incurred but unpaid at period end			$	—					$	53
Property and equipment acquired through a capital lease			$	—					$	534

			Three and Six Months Ended June 30, 2021
			Common stock												Additional paid-in capital						Accumulated other comprehensive  income (loss)						Accumulated deficit						Total stockholders’ equity
			Shares						Par value
BALANCE - January 1, 2021			38,022,273						$	38					$	347,990					$	(34)					$	(272,613)					$	75,381
Costs incurred for the issuance of common stock															4																		4
Exercise of common stock options			27,143						—						27																		27
Vesting of restricted stock units			60,000						—						—																		—
Stock-based compensation															1,428																		1,428
Unrealized gain on marketable securities																					7												7
Net loss																											(15,189)						(15,189)
BALANCE - March 31, 2021			38,109,416						$	38					$	349,449					$	(27)					$	(287,802)					$	61,658
Issuance of common stock, net of issuance costs of $71			126,527						1						555																		556
Exercise of common stock options			3,257						—						6																		6
Vesting of restricted stock units			4,604						—						—																		—
Issuance of common stock related to ESPP			30,465						—						107																		107
Stock-based compensation															1,677																		1,677
Unrealized gain on marketable securities																					18												18
Net loss																											(15,935)						(15,935)
BALANCE - June 30, 2021			38,274,269						$	39					$	351,794					$	(9)					$	(303,737)					$	48,087

			Three and Six Months Ended June 30, 2022
			Common stock												Additional paid-in capital						Accumulated other comprehensive  income (loss)						Accumulated deficit						Total stockholders’ equity
			Shares						Par value
BALANCE - January 1, 2022			39,605,701						$	40					$	359,261					$	(52)					$	(337,241)					$	22,008
Issuance of common stock, net of issuance costs of $222,639			13,321,602						13						25,413																		25,426
Exercise of common stock options			8,499						—						6																		6
Vesting of restricted stock units			59,019						—						—																		—
Stock-based compensation															1,509																		1,509
Unrealized loss on marketable securities																					(18)												(18)
Net loss																											(19,039)						(19,039)
BALANCE - March 31, 2022			52,994,821						$	53					$	386,189					$	(70)					$	(356,280)					$	29,892
Costs incurred for the issuance of common stock			—						—						30																		30
Exercise of common stock options																																	—
Vesting of restricted stock units			5,797						—						—																		—
Issuance of common stock related to ESPP			57,751						—						84																		84
Stock-based compensation															594																		594
Unrealized gain on marketable securities																					4												4
Net loss																											(21,306)						(21,306)
BALANCE - June 30, 2022			53,058,369						$	53					$	386,897					$	(66)					$	(377,586)					$	9,298

Furthermore, the accompanying condensed consolidated financial statements are unaudited and certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. On January 1, 2022, the Company adopted ASU No. 2016-02, Leases (Topic 842) and the related accounting policies. Other than the adoption of Topic 842, there were no material changes to the Company's significant accounting policies and estimates as reported in its Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 30, 2022. The unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements as of and for the year ended December 31, 2021. The accompanying interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of June 30, 2022, the results of its operations for the three and six months ended June 30, 2022 and 2021, its cash flows for the six months ended June 30, 2022 and 2021, and its statements of stockholders’ equity for the three and six months ended June 30, 2022 and 2021.

•Level 1 — Quoted prices in active markets for identical assets or liabilities.

•Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

•Level 3 — Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), as amended by various subsequently issued ASUs. The standard requires lessees to recognize an operating lease with a term greater than one year on their balance sheets as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments. Under the standard, disclosures are required to enable financial statement users to assess the amount, timing, and uncertainty of cash flows arising from the leases. Companies are also required to recognize and measure leases existing at, or entered into after, the adoption date using a modified retrospective approach, with certain practical expedients available. Comparative periods prior to adoption have not been retrospectively adjusted.

Effective January 1, 2022, the Company adopted ASU 2016-02, using the required modified retrospective approach and utilizing January 1, 2022 as its date of initial application. As a result, prior periods are presented in accordance with the previous guidance in ASC 840, Leases (Topic 840).

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326). The new standard adjusts the accounting for assets held at amortized cost basis, including marketable securities accounted for as available-for-sale. The standard eliminates the probable initial recognition threshold and requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. The Company is required to adopt this standard effective January 1, 2023 and the Company is evaluating the impact the guidance will have on its condensed consolidated financial statements.

			June 30, 2022
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Estimated Fair Value
Corporate obligations			$	10,388					$	—					$	(66)					$	10,322

			December 31, 2021
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Estimated Fair Value
Corporate obligations			$	31,526					$	—					$	(52)					$	31,474

Contractual Maturities						June 30, 2022						December 31, 2021
Mature in one year or less						$	10,322					$	28,220
Mature in two years or less						—						3,254
Total						$	10,322					$	31,474

			Fair Value Measurements at June 30, 2022 using:
			Level 1						Level 2						Level 3						Total
Assets:
Cash equivalents:
Money market funds			$	31,577					$	—					$	—					$	31,577
Marketable securities:
Corporate obligations			—						10,322						—						10,322
Total			$	31,577					$	10,322					$	—					$	41,899

			Fair Value Measurements at December 31, 2021 using:
			Level 1						Level 2						Level 3						Total
Assets:
Cash equivalents:
Money market funds			$	23,021					$	—					$	—					$	23,021
Marketable securities:
Corporate obligations			—						31,474						—						31,474
Total			$	23,021					$	31,474					$	—					$	54,495

			June 30, 2022						December 31, 2021
Laboratory equipment			$	3,564					$	3,426
Leasehold improvements			564						564
Office and computer equipment			236						148
Furniture and fixtures			122						122
Property and equipment			4,486						4,260
Less: accumulated depreciation and amortization			(3,549)						(3,390)
Property and equipment, net			$	937					$	870

			June 30, 2022						December 31, 2021
Accrued employee compensation and benefits			$	2,516					$	3,005
Accrued external research and development expenses			4,870						2,000
Accrued professional fees			650						601
Other			180						243
Total accrued expenses and other current liabilities			$	8,216					$	5,849

			June 30, 2022						December 31, 2021
Principal amount of long-term debt			$	26,000					$	26,000
Debt discount			(175)						(196)
Deferred financing fees			(657)						(734)
Current portion of long-term debt			(3,467)						—
Long-term debt, net of current portion and discount			$	21,701					$	25,070

The term loans under the New Loan and Security Agreement will accrue interest at an annual rate equal to 8.60% plus the greater of (a) the thirty (30) day U.S. Dollar LIBOR rate and (b) 0.10%, payable monthly in arrears. The interest rate was 9.72% as of June 30, 2022. The monthly principal payments of $0.6 million will be paid over a period of 45 months beginning in January 2023 through the final maturity date of September 1, 2026. Per the New Loan and Security Agreement, the date on which repayment of principal commences can be further extended to July 2023 and January 2024, provided we satisfy certain equity related conditions. The term loans are also subject to a prepayment fee of 3.00% if prepayment occurs within the first year subsequent to September 2, 2021, 2.00% in the second year and 1.00% in the third year through final maturity.

Year Ending December 31,
2022			$	—
2023			6,933
2024			6,933
2025			6,934
2026			5,200
			$	26,000

			Three Months Ended June 30,												Six Months Ended June 30,
			2022						2021						2022						2021
Research and development			$	275					$	440					$	841					$	850
General and administrative			319						1,237						1,262						2,255
Total stock-based compensation expense			$	594					$	1,677					$	2,103					$	3,105

			Three Months Ended June 30,												Six Months Ended June 30,
			2022						2021						2022						2021
Risk-free interest rate			2.89		%				1.03		%				2.01		%				0.82		%
Expected option life (in years)			5.75						5.92						6.08						6.00
Expected dividend yield			—		%				—		%				—		%				—		%
Expected volatility			95.3		%				96.5		%				91.9		%				97.0		%

			Number of Shares						Weighted Average Exercise Price						Weighted Average Remaining Life (in Years)						Intrinsic Value (in thousands)
Outstanding as of January 1, 2022			6,197,288						$	5.72
Granted			2,154,259						1.86
Exercised			(8,499)						0.72
Canceled			(552,714)						4.58
Outstanding as of June 30, 2022			7,790,334						$	4.74					7.52						$	865
Exercisable as of June 30, 2022			4,133,540						$	6.14					5.98						$	167
Vested or expected to vest as of June 30, 2022			7,465,334						$	4.67					7.12						$	735

			Number of Shares						Weighted Average Grant Date Fair Value per Share
Outstanding as of January 1, 2022			275,350						$	4.15
Granted			47,059						1.70
Vested			(64,816)						4.56
Forfeited			(75,000)						3.13
Outstanding as of June 30, 2022			182,593						$	3.80

Basic and diluted net loss per share attributable to common stockholders was calculated as follows (in thousands, except share and per share amounts):

			Three Months Ended June 30,												Six Months Ended June 30,
			2022						2021						2022						2021
Numerator:
Net loss			$	(21,306)					$	(15,935)					$	(40,345)					$	(31,124)
Denominator:
Weighted average common shares outstanding, basic and diluted			52,616,279						37,732,196						47,052,105						37,692,398
Net loss per share, basic and diluted			$	(0.40)					$	(0.42)					$	(0.86)					$	(0.83)

			Six Months Ended June 30,
			2022						2021
Options to purchase common stock			7,790,334						6,135,310
Unvested restricted stock units			182,593						357,513
Shares issuable under employee stock purchase plan			65,790						8,280
			8,038,717						6,501,103

Operating leases			Three Months Ended June 30, 2022						Six Months Ended June 30, 2022
Lease cost
Operating lease cost			$	401					$	803
Variable lease cost			160						353
Total lease cost			$	561					$	1,156
Other information
Operating cash flows used for operating leases			$	578					$	1,181
Weighted average remaining lease term (years)			1.8						1.8
Weighted average discount rate (percentage)			9.0		%				9.0		%

			As of
Maturity of lease liabilities			June 30, 2022						December 31, 2021
2022			$	844					$	1,672
2023			1,722						1,722
2024			580						580
Total future minimum lease payments			$	3,146					$	3,974
Less: imputed interest			(258)
Total lease liability			$	2,888
Reported as:
Operating lease liability			$	1,497
Operating lease liability, net of current portion			1,391
Total lease liability			$	2,888

The following discussion of the financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report and the audited financial statements and notes included in our Annual Report on Form 10-K, filed with the SEC on March 30, 2022. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. We caution you that forward-looking statements are not guarantees of future performance, and that our actual results of operations, financial condition and liquidity, and the developments in our business and the industry in which we operate, may differ materially from the results discussed or projected in the forward-looking statements contained in this Quarterly Report. We discuss risks and other factors that we believe could cause or contribute to these potential differences elsewhere in this Quarterly Report, including under Part I, Item 1A. “Risk Factors” and under “Special Note Regarding Forward-Looking Statements.” In addition, even if our results of operations, financial condition and liquidity, and the developments in our business and the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, they may not be predictive of results or developments in future periods. We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the SEC to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

As of June 30, 2022, we had cash, cash equivalents and marketable securities of $44.4 million. We are required to comply with an unrestricted minimum cash level of $20.0 million in accordance with our loan and security agreement with SLR Investment Corp. until certain clinical trial data conditions are met, and there is a risk that we may be unable to remain in compliance with those financial covenants in the future in which case the debt may become immediately due and payable. Based on our current operating plan, we believe that we have sufficient cash, cash equivalents and marketable securities to fund our operations into the first quarter of 2023, provided that, if we are unable to satisfy the financial covenants contained in our loan and security agreement with SLR Investment Corp., and SLR Investment Corp. seeks immediate repayment of our loan in full, we believe that our cash, cash equivalents and marketable securities will be sufficient to fund our operations into the fourth quarter of 2022. We do not have sufficient cash, cash equivalents and marketable securities to support current operations through a full 12 months from the issuance date of this Quarterly Report on Form 10-Q. We will need substantial additional funding to continue development of our current and potential future pipeline candidates. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt re-financings, collaboration agreements, strategic alliances and licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all, including as a result of market volatility following the COVID-19 pandemic. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates or delay our pursuit of potential in-licenses or acquisitions. Further, inflation may affect our use of capital resources by increasing our cost of labor and clinical trial expenses. We also intend to continue to evaluate options to refinance our outstanding debt with SLR Investment Corp. The amounts involved in any such transactions, individually or in the aggregate, may be material. These factors individually and collectively raise substantial doubt about our ability to continue as a going concern.

AXA1125 is currently being developed as an oral product candidate for the treatment of NASH. In 2021, our IND for this candidate was cleared by the FDA, enabling us to proceed directly into a global Phase 2b Clinical Trial that was initiated in the second quarter of 2021. We branded this global trial EMMPACT based on the potential for AXA1125, an EMM composition, to deliver meaningful, multifactorial clinical benefits to patients with NASH. Based on AXA1125’s differentiated, multi-targeted design and data from our earlier Clinical Studies, we believe this candidate holds the potential, if approved, to serve as a first-line NASH monotherapy for both adult and pediatric patients and be used in combination with other agents if required.

AXA1125 is also currently being developed as a product candidate for the treatment of Long COVID. In October 2021, we announced that our Clinical Trial Authorisation application, or CTA, for this candidate was cleared by the Medicines and Healthcare products Regulatory Agency, or MHRA, in the United Kingdom, enabling us to proceed directly into a Phase 2a Clinical Trial, which was initiated in the fourth quarter of 2021. Based on AXA1125’s differentiated, multi-targeted design and data from our earlier Clinical Studies, we believe this candidate holds the potential, if approved, to serve as a first-line Long COVID therapy for patients.

The Phase 2a trial’s primary endpoint was change in phosphocreatine (PCr) recovery time, as measured by 31-phosphorus magnetic resonance spectroscopy (MRS), from baseline to Day 28 as an assessment of improvement of mitochondrial function within the skeletal muscle. PCr recovery time is a well-established and highly sensitive measure that has been strongly correlated with the 6-minute walk test (6MWT), a functional measure that has been used as a registrational endpoint in several other diseases in which fatigue and muscle weakness play a central role. Key secondary endpoints include lactate levels, a 6MWT, patient reported fatigue scores assessed by the Chalder Fatigue Questionnaire (CFQ-11), and safety and tolerability. The CFQ-11 is a validated patient reported outcome measure of fatigue that has been used in measuring patient impact in fatigue states such as chronic fatigue syndrome. The Clinical Trial was conducted with researchers at Oxford University’s Radcliffe Department of Medicine in the United Kingdom.

AXA1665 is a product candidate for the reduction in risk of OHE recurrence in adult patients with liver cirrhosis. In 2021, we announced that our IND for this candidate was cleared by the FDA, enabling us to proceed directly into a Phase 2 Clinical Trial, which was initiated in the second quarter of 2021. We have branded the Phase 2 trial EMMPOWER based on the potential for AXA1665, an EMM composition, to help patients, physicians and other caregivers overcome significant challenges associated with cirrhosis and OHE. Based on AXA1665’s differentiated, multi-targeted design and data gathered to date, we believe this candidate holds the potential to reduce OHE events and improve the quality of life for cirrhotic patients.

•direct external research and development expenses, including fees, reimbursed materials and other costs paid to consultants, contractors, contract manufacturing organizations, or CMOs, and clinical research organizations, or CROs, in connection with our clinical and preclinical development and manufacturing activities;

•employee-related expenses, including salaries, related benefits and stock-based compensation expense for employees engaged in research and development functions;

•expenses incurred in connection with the preclinical and clinical development of our product candidates, including any Clinical Studies, Clinical Trials and other research programs, including under agreements with third parties, such as consultants, contractors and CROs;

•the cost of developing and scaling our manufacturing process and manufacturing products for use in our preclinical studies, Clinical Studies and Clinical Trials, including under agreements with third parties, such as consultants, contractors and CMOs;

•patent-related costs incurred in connection with filing and prosecuting patent applications; and

•facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities and insurance.

			Three Months Ended June 30,
			2022						2021						Change
Operating expenses:
Research and development			$	16,866					$	10,298					$	6,568
General and administrative			3,753						4,946						(1,193)
Total operating expenses			20,619						15,244						5,375
Loss from operations			(20,619)						(15,244)						(5,375)
Other income (expense):
Other income (expense), net			(687)						(691)						4
Total other income (expense), net			(687)						(691)						4
Net loss			$	(21,306)					$	(15,935)					$	(5,371)

			Three Months Ended June 30,
			2022						2021						Change
Salary and benefits-related			$	4,263					$	3,437					$	826
Clinical research and outside services			11,414						5,729						5,685
Facility-related and other			1,189						1,132						57
Total research and development expenses			$	16,866					$	10,298					$	6,568

			Three Months Ended June 30,
			2022						2021						Change
Salary and benefits-related			$	2,051					$	3,193					$	(1,142)
Other contract services and outside costs			1,470						1,464						6
Facility-related and other			232						289						(57)
Total general and administrative expenses			$	3,753					$	4,946					$	(1,193)

			Six Months Ended June 30,
			2022						2021						Change
Operating expenses:
Research and development			$	30,410					$	20,538					$	9,872
General and administrative			8,539						9,202						(663)
Total operating expenses			38,949						29,740						9,209
Loss from operations			(38,949)						(29,740)						(9,209)
Other income (expense):
Other income (expense), net			(1,396)						(1,384)						(12)
Total other income (expense), net			(1,396)						(1,384)						(12)
Net loss			$	(40,345)					$	(31,124)					$	(9,221)

			Six Months Ended June 30,
			2022						2021						Change
Salary and benefits-related			$	8,445					$	6,789					$	1,656
Clinical research and outside services			19,685						11,149						8,536
Facility-related and other			2,280						2,600						(320)
Total research and development expenses			$	30,410					$	20,538					$	9,872

			Six Months Ended June 30,
			2022						2021						Change
Salary and benefits-related			$	5,055					$	5,857					$	(802)
Other contract services and outside costs			2,984						2,756						228
Facility-related and other			500						589						(89)
Total general and administrative expenses			$	8,539					$	9,202					$	(663)

•On March 16, 2022, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional purchasers and certain directors and officers of the Company named therein. Pursuant to the Purchase Agreement, we sold and issued an aggregate of 13,089,002 shares of common stock, at a purchase price of $1.91 per share in a registered direct offering for net proceeds of approximately $24.8 million after deducting estimated offering expenses payable by us.

•From time to time, we may offer and sell shares of our common stock having an aggregate offering price of up to $35.0 million through SVB Leerink LLC, acting as our agent (the “ATM Offering”). Cumulative through June 30, 2022, we have sold an aggregate of 3,285,308 shares of common stock under the ATM Offering for net cash proceeds of $14.7 million after deducting commissions and expenses of $0.9 million. During the six months ended June 30, 2022, we issued 232,600 shares of our common stock in a series of sales under the ATM Offering for aggregate net proceeds of $0.6 million after deducting nominal commissions and expenses.

			Six Months Ended June 30,
			2022						2021
Cash used in operating activities			$	(35,529)					$	(28,367)
Cash provided by (used in) investing activities			20,772						(9,954)
Cash provided by financing activities			25,260						671
Net increase (decrease) in cash and cash equivalents			$	10,503					$	(37,650)

Our management's discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates, if any, will be reflected in the financial statements prospectively from the date of change in estimates. On January 1, 2022, we adopted ASU 2016-02, Leases (Topic 842) and the related accounting policies. Other than the adoption of the lease standard, there were no material changes to our critical accounting policies as reported in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 30, 2022.

•conduct preclinical studies, Clinical Studies, and for those product candidates that we elect to develop as therapeutics, Clinical Trials or their equivalent in non-U.S. jurisdictions;

•incur setbacks or delays to the initiation or completion of preclinical studies, product development, Clinical Studies and/or Clinical Trials due to the COVID-19 pandemic;

•further develop our proprietary human-focused product development platform;

•continue to develop our current product candidates as well as additional product candidates;

•maintain, expand and protect our intellectual property portfolio;

•hire or contract additional clinical, scientific, manufacturing, quality and commercial personnel to support our product research, development and commercialization efforts;

•continue to develop, scale and validate a manufacturing process and specifications for our product candidates, including under requirements for drug development;

•incur any disruption or delays to the supply of our product candidates due to the COVID-19 pandemic;

•continue to establish in-house manufacturing capabilities for our research and product development efforts;

•establish a commercial manufacturing source and secure supply chain capacity sufficient to provide preclinical study material, Clinical Study material, Clinical Trial material for any product candidate we elect to develop as a drug product candidate under an IND or non-U.S. equivalent, and commercial quantities of any product candidates that we may commercialize as drug or non-drug products, following receipt of any necessary approvals or authorizations;

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

•seek various non-drug product marketing pathways and, if applicable, drug regulatory authorizations;

•establish a sales, marketing and distribution infrastructure to commercialize any product candidates for which we may obtain regulatory approval or identify an alternate regulatory pathway to market; and

•add operational, compliance, financial and management information systems and personnel to support our operations as a public company.

As of June 30, 2022, we had cash, cash equivalents and marketable securities of $44.4 million, and an accumulated deficit of $377.6 million. We believe that we will require additional working capital to fund our planned operations through a full 12 months from the issuance date of this Quarterly Report on Form 10-Q. In March 2022, we sold common stock through a registered direct offering for net proceeds of approximately $24.8 million after deducting estimated offering expenses payable by us. Additional funding will be necessary beyond this point to continue to fund our research and development activities. We are required to comply with an unrestricted minimum cash level in accordance with our loan and security agreement with SLR Investment Corp. until certain clinical trial data conditions are met, and there is a risk that we may be unable to remain in compliance with those financial covenants in the future in which case the debt may become immediately due and payable. Our plans to alleviate our financing requirements include, among other things, pursuing the sale of our common stock and funding through the establishment of a collaboration(s) with a potential partner(s) to further advance our product pipeline, none of which can be guaranteed or are entirely within our control. If we are unable to alleviate our financing requirements via these means, we could be forced to discontinue some of our operations or develop and implement a plan to further extend payables, reduce overhead or scale back our current operating plan until sufficient additional capital is raised to support further operations. These factors individually and collectively raise substantial doubt about our ability to continue as a going concern, and; therefore, it may be more difficult for us to attract investors. Unless we are able to raise additional capital to finance our operations, our long-term business plan may not be accomplished, and we may be forced to cease, reduce, or delay operations.

Our operations have consumed substantial amounts of cash since inception. We expect to continue to spend substantial amounts for our current and future programs: to conduct further research and development, preclinical studies, Clinical Studies and/or Clinical Trials for any product candidates we elect to develop as a drug product candidate under an IND or non-U.S. equivalent; to validate the manufacturing process and specifications for our product candidates; to seek regulatory approvals for or identify alternate regulatory pathways to market for our product candidates; and to launch and commercialize any products for which we receive regulatory approval or identify an alternate regulatory pathway to market, including potentially building our own commercial organization. As of June 30, 2022, we had $44.4 million of cash, cash equivalents and marketable securities. Based on our current operating plan, we believe that our existing cash, cash equivalents and marketable securities balance is not sufficient to fund our operating expenses, capital expenditure requirements and loan and security agreement obligations through at least the next 12 months following the filing date of this Quarterly Report on Form 10-Q. Our future capital requirements and the period for which our existing resources will support our operations may vary significantly from our expectations, and we will in any event require additional capital in order to complete clinical development of any of our current product candidates. Our monthly spending levels will vary based on new and ongoing development and corporate activities. Because the length of time and activities associated with development of our product candidates is highly uncertain, we are unable to estimate the actual funds we will require for development and any approved marketing and commercialization activities. Our future funding requirements, both near- and long-term, will depend on many factors, including, but not limited to:

•our decisions regarding the development path under which we will develop our product candidates (e.g., either continuing to develop a product candidate as a non-drug product, or initiating development as drug product candidate under an IND or non-U.S. equivalent);

•the initiation, progress, timing, costs and results of preclinical studies, Clinical Studies, Clinical Trials, and any need to conduct additional studies as may be required by a regulatory authority, including additional studies that may be required by a regulatory authority in order to allow the initiation of Clinical Trials under an IND or the non-U.S. equivalent for any of our product candidates;

•any clinical development plans we establish for these product candidates;

•any setbacks or delays to the initiation or completion of preclinical studies, Clinical Studies and/or Clinical Trials due to the COVID-19 pandemic;

•further development of our development platform and supporting infrastructure;

•the number and characteristics of product candidates that we develop or may in-license;

•the terms of any partnership or collaboration agreements we may choose to initiate or conclude;

•the outcome, timing and cost of meeting regulatory requirements established by the FDA, any other regulatory authorities in the United States, and, when applicable, comparable foreign regulatory authorities, such as the EMA;

•the effect of changes in regulations or policy relating to the development and commercialization of our product candidates by the FDA, any other regulatory authorities in the United States and, when applicable, other comparable foreign regulatory authorities, such as the EMA;

•the cost of establishing, maintaining and overseeing a system to ensure our ongoing and planned Clinical Trials are compliant with Good Clinical Practice, or GCP;

•the costs of establishing, maintaining and overseeing a quality system compliant with current Good Manufacturing Practice, or cGMP, and other quality standards applicable to non-drug and drug product development and a supply chain for the development and manufacture of our product candidates;

•any disruption or delays to the supply of our product candidates due to the COVID-19 pandemic;

•the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us related to our product candidates or our development platform, or other technologies;

•the effect of competing technological and market developments;

•the cost and timing of establishing, expanding and scaling compliance programs related to our activities and product candidate development and commercialization and related legal activities, including defense of any potential litigation against us;

•the cost and timing of establishing, expanding and scaling of manufacturing capabilities, or contracting with third parties for access to such capabilities; and

•the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval or identify alternate regulatory pathways in regions where we choose to commercialize our products.

To obtain the requisite regulatory approvals to commercialize any of our product candidates that we decide to develop as a drug product candidate, such as AXA1125, we must demonstrate through extensive preclinical studies and Clinical Trials that our product candidates are safe and effective in humans for their intended use. Clinical Studies to commercialize non-drug products also require a significant financial investment to generate data that supports claims about effects on normal structure and function of the body we may make for such products and establish their safety and tolerability. Clinical testing is expensive, difficult to design and implement and can take many years to complete, and its outcome is inherently uncertain. We may be unable to establish, where applicable, endpoints, dose levels and regimens or bioanalytical assay methods that applicable regulatory authorities would consider clinically meaningful or legally permissible. Results from preclinical studies, Clinical Studies, or Clinical Trials may demonstrate that our product candidates are not safe, not tolerable or have unanticipated impacts on the normal structure and function of the body and could result in data showing one or more product candidates to have harmful or problematic side effects or toxicities. Should we choose to develop any product candidate in parallel for more than one indication, the results from a Clinical Study or Clinical Trial in one indication, particularly any observation of a serious adverse event, may impact the Clinical Study or Clinical Studies or Clinical Trial or Clinical Trials in another indication. A Clinical Study or Clinical Trial can fail at any stage of testing. Additionally, our Clinical Studies, Clinical Trials or other preclinical studies may not result in data that supports intended claims for our product candidates. For example, Clinical Trial results may show any drug product candidate to be less effective than expected (e.g., a Clinical Trial could fail to meet its primary endpoint(s)) or have unacceptable side effects or toxicities. The outcome of preclinical studies, Clinical Studies and early Clinical Trials may not be predictive of the success of later preclinical studies, Clinical Studies and/or Clinical Trials, and interim results of these studies or trials do not necessarily predict final results. Interim and preliminary data are subject to the risk that one or more of the outcomes may materially change as subject enrollment continues, more subject data become available and as the study is completed. Preliminary or top-line data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim and preliminary data should be viewed with caution until the final data are available. Material inconsistencies between preliminary or interim data and final data could significantly harm our business prospects. Further, differences in trial design between Clinical Studies and early-stage Clinical Trials and later-stage Clinical Trials make it difficult to extrapolate from the results of Clinical Studies and earlier Clinical Trials to the results from later Clinical Trials. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and Clinical Trials have nonetheless failed to obtain marketing approval of their product candidates, or have data that supports desirable marketing claims even where marketing approval is not required. Successful completion of Clinical Trials is a prerequisite to submitting a new drug application, or NDA, to the FDA, or its equivalent in other jurisdictions such as a marketing authorization application to the EMA, for each product candidate targeting therapeutic indication(s) and, consequently, a pre-requisite for the ultimate approval and commercial marketing of any product candidate for therapeutic indication(s).

•unforeseen events or events over which we have little to no control, such as the COVID-19 pandemic, can cause execution delays for our Clinical Studies or Clinical Trials;

•issues related to the quality, completeness and interpretability of our data that could result in significant delays or additional costs and impact development plans for our product candidates;

•we may be unable to generate sufficient preclinical, toxicology or other in vivo or in vitro data to support the initiation of Clinical Trials for therapeutic indications for any drug product candidates or the marketing of our products as non-drug products;

•results from one Clinical Study or Clinical Trial, particularly observation of a serious adverse event, may impact the other Clinical Study or Clinical Studies or Clinical Trial or Clinical Trials of the same product candidate;

•the FDA may not allow us to use data from our Clinical Studies to support a late-phase IND Clinical Trial or an IND Clinical Trial of any phase for a product candidate we decide to develop as a drug product candidate instead of a non-drug product candidate;

•the FDA or other regulatory authorities may disagree with the design, implementation or results of our Clinical Studies or Clinical Trials, which may delay or prevent us from pursuing certain regulatory pathways for product developments, or require us to submit additional data such as long-term toxicology studies or impose other requirements before permitting us to initiate or complete a Clinical Trial of any phase. For example, the FDA could require that we terminate a Clinical Study for a product candidate and continue such study only under an IND, and we may not be able to obtain such an IND, or we may be subject to an enforcement action for conducting a Clinical Study not under an IND;

•regulatory authorities, IRBs or ethics committees may not authorize us or our investigators to commence or conduct a Clinical Study or Clinical Trial at a prospective study or trial site or may request early termination of a Clinical Study or Clinical Trial;

•we may experience delays in reaching, or fail to reach, agreement on acceptable terms with prospective study or trial sites and prospective contract research organizations, or CROs, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and study or trial sites;

•preclinical studies, Clinical Studies or Clinical Trials of any of our product candidates may produce negative or inconclusive results and we may need to conduct additional preclinical studies, Clinical Studies, Clinical Trials or any other studies, or we may decide to abandon product development programs;

•the number of subjects or patients required for Clinical Studies or Clinical Trials of any of our product candidates may be larger than we anticipate, or we may fail to execute the Clinical Studies or Clinical Trials as a result of slow enrollment, subjects dropping out of the Clinical Studies or Clinical Trials or other factors, including some which are out of our control, such as COVID-19, length of time to achieve clinical endpoints, additional time requirements for data analysis, or an inability to validate the manufacturing process or to achieve cGMP compliance for our product candidates;

•we may need to add new or additional Clinical Study or Clinical Trial sites for various reasons, for example, our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all, or may deviate from the Clinical Study or Clinical Trial protocol or stop providing services for the study or trial, which may require that we add new clinical study or trial sites or investigators;

•the cost of preclinical studies, Clinical Studies, Clinical Trials or any other studies of any product candidates may be more than we anticipate or more than our available financial resources; and

•the supply or quality of our product candidates or other materials necessary to conduct Clinical Studies and Clinical Trials, for which we expect to continue to rely on third party manufacturers and suppliers, may be insufficient or inadequate and may not achieve compliance with applicable cGMP and other quality standards applicable to drug or non-drug product development for various reasons including any potential failure of our oversight of their services or any potential inability of such third parties to successfully execute services in compliance with applicable rules and regulations.

We could also encounter delays if a preclinical study, Clinical Study or Clinical Trial is suspended or terminated for any reason. A suspension or termination may be imposed due to a number of factors, including failure to conduct the Clinical Study or Clinical Trial in accordance with regulatory requirements or our clinical protocols, inspection of the Clinical Study or Clinical Trial operations or trial site by the FDA, comparable foreign regulatory authorities or IRB resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, including death of a study subject, failure to demonstrate a benefit from using a product or treatment, failure to establish or achieve clinically meaningful or legally permissible endpoints, changes in governmental regulations or administrative actions or lack of adequate funding to continue the Clinical Study or Clinical Trial. Many of the factors that cause, or lead to, a delay in the commencement or completion of Clinical Studies or Clinical Trials may also ultimately lead to the denial of regulatory approval of our product candidates for therapeutic indications, where applicable, or the failure to meet applicable regulatory requirements to support and commercialize non-drug products. Further, the FDA or comparable foreign regulatory authorities may change the requirements for regulatory approval of a drug even after they have reviewed and commented on the design for our preclinical studies, Clinical Studies or Clinical Trials.

•the severity of the disease or condition under investigation in the case of a Clinical Trial conducted under an IND or non-U.S. equivalent for a drug product candidate;

•the subject or patient eligibility and exclusion criteria defined in the protocol;

•the size of the study subject or patient population required for analysis of the primary endpoint(s) of the Clinical Study or Clinical Trial;

•the proximity of subjects or patients to study and trial sites;

•the design of the Clinical Study or Clinical Trial;

•our ability to recruit investigators with the appropriate competencies and experience;

•clinicians', subjects' or patients' perceptions as to the potential advantages and risks of the product candidate being studied in relation to other available drugs or non-drug products, as applicable;

•the efforts to facilitate timely enrollment in Clinical Studies or Clinical Trials;

•the subject or patient referral practices of physicians;

•the ability to monitor subjects or patients adequately during and after study product administration;

•our ability to obtain and maintain subject and patient consents;

•factors we may not be able to control, such as potential pandemics that may limit subject, principal investigator or staff and clinical site availability (e.g. the COVID-19 pandemic); and

•the risk that subjects or patients enrolled in Clinical Studies or Clinical Trials will drop out of the Clinical Studies or Clinical Trials before completion.

•inability to bring a product candidate to the market;

•decreased demand for and decline in the price charged for our products;

•damage to our reputation;

•withdrawal of Clinical Study or Clinical Trial subjects or patients and inability to enroll future subjects or patients or continue Clinical Studies or Clinical Trials;

•initiation of investigations by regulatory authorities or other regulatory action;

•costs to defend the related litigation;

•diversion of management's time and our resources;

•substantial monetary awards to subjects or patients;

•product recalls, withdrawals or labeling, packaging, marketing or promotional modifications or restrictions;

•loss of revenue;

•exhaustion of any available insurance and our capital resources;

•the inability to commercialize any product candidates via any regulatory pathway; and

•decline in our share price.

•successful enrollment in, and completion of, preclinical studies, Clinical Studies and Clinical Trials with positive results;

•clearance of INDs or non-U.S. equivalents for Clinical Trials for product candidates that we decide to develop as drug product candidates;

•receipt of regulatory approvals from applicable regulatory authorities for drug product candidates or, alternatively, compliance with regulatory requirements applicable to non-drug products;

•overcoming any delays or interruptions to our supply chain, Clinical Studies or Clinical Trials as a result of the COVID-19 pandemic;

•obtaining and maintaining patent and trade secret protection and regulatory exclusivity, as available, for our product candidates;

•establishing cGMP-compliant supply and commercial manufacturing operations or making arrangements with cGMP-compliant third-party manufacturers for supply and commercial manufacturing;

•launching commercial sales of our products, if and when approved, whether alone or in collaboration with others;

•entering into new collaborations throughout the development process as appropriate, from preclinical studies through to commercialization;

•acceptance of our products, if and when approved or launched for commercialization under applicable regulations, by patients, consumers, the medical community and third-party payors;

•effectively competing with other drugs and non-drug products, depending on the development pathway that we choose for a product candidate;

•obtaining and maintaining coverage and adequate reimbursement by third-party payors, including government payors, for our product candidates developed as drug products, if approved by the FDA;

•protecting our rights in our intellectual property portfolio;

•operating without infringing or violating the valid and enforceable patents or other intellectual property of third parties;

•achieving and remaining in compliance with applicable laws and regulations that apply to the research, development and commercialization of our product candidates and having productive interactions and positive regulatory decisions that lead to successful product commercialization;

•maintaining a continued acceptable safety profile of the products following approval or commercialization; and

•maintaining and growing an organization of scientists and businesspeople who can develop and commercialize our products and technology.

•efficacy (for any drug product candidate), safety and potential advantages compared to alternative products;

•the labeled uses or limitations for use, including age limitations or contraindications, for our product candidates compared to alternative products;

•convenience and ease of administration compared to alternative products;

•the willingness of the target patient or consumer population to try new drug product candidates or non-drug products, respectively;

•the willingness of physicians to prescribe our drug product candidates to patients;

•the willingness of healthcare professionals to recommend our non-drug products to consumers;

•public perception of new drugs and non-drug products, including our product candidates;

•the strength of marketing and distribution support;

•any impacts to market health as a result of COVID-19;

•the ability for us to partner in the manufacturing and distribution of these products;

•the ability to offer our products, if approved, as applicable, for sale at competitive prices;

•the ability to obtain sufficient third-party insurance coverage and adequate reimbursement, as applicable depending on the development path we pursue; and

•the prevalence and severity of any side effects.

•identifying, recruiting, compensating, integrating, maintaining and motivating additional employees;

•managing our internal research and development efforts effectively, including identification of clinical candidates, scaling our manufacturing process and navigating product candidate clinical development and the FDA’s, or other comparable regulatory agency’s, review process for our product candidates; and

•improving our operational, financial and management controls, reporting systems and procedures.

•differing regulatory requirements in foreign countries;

•unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements;

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

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

•foreign taxes, including withholding of payroll taxes;

•foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country;

•difficulties staffing and managing foreign operations;

•workforce uncertainty in countries where labor unrest is more common than in the United States;

•potential liability under the Foreign Corrupt Practices Act, or FCPA, or comparable foreign regulations;

•challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States;

•production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

•business interruptions resulting from geopolitical actions, including war and terrorism.

We have a history of cumulative losses and anticipate that we will continue to incur significant losses in the foreseeable future; thus, we do not know whether or when we will generate taxable income necessary to utilize our net operating losses, or NOLs, or research and development tax credit carryforwards. As of December 31, 2021, we had U.S. federal and state net operating loss, or NOL, carryforwards of $302.2 million and $294.3 million, respectively. These amounts begin to expire in 2030. The federal net operating losses generated in 2018 and 2019 can be carried forward indefinitely. As of December 31, 2021, we also had U.S. federal and state research and development tax credit carryforwards of $8.6 million and $2.9 million, respectively, both of which expire at various dates through 2041. These net operating loss and tax credit carryforwards could expire unused and be unavailable to offset future taxable income or tax liabilities, respectively.

As widely reported, global credit and financial markets have experienced extreme volatility and disruptions in the past, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. In addition, the current military conflict between Russia and Ukraine could disrupt or otherwise adversely impact our operations and those of third parties upon which we rely. Related sanctions, export controls or other actions that may be initiated by nations including the U.S., the European Union or Russia (e.g., potential cyberattacks, disruption of energy flows, etc.), which could adversely affect our business and/or our supply chain, our CROs, CMOs and other third parties with which we conduct business. There can be no assurance that future volatility, disruption or deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions. If the current equity and credit markets continue to be volatile or are disrupted or deteriorate, including as a result of COVID-19 or the military conflict between Russia and Ukraine, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon clinical development plans. In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive these difficult economic times, which could directly affect our ability to attain our operating goals on schedule and on budget.

•food and drug laws, including FDA regulations;

•laws related to product labeling;

•advertising and marketing laws and practices;

•laws and programs restricting the sale and advertising of certain product candidates;

•laws and programs aimed at regulating, restricting or eliminating ingredients present in certain of our product candidates;

•increased regulatory scrutiny of, and increased litigation involving, product claims and concerns regarding the actual or possible effects or side effects of ingredients in, or attributes of, certain of our product candidates;

•state and federal consumer protection and disclosure laws;

•changes in law due to unforeseen events such as COVID-19 that may result in additional costs or disruptions in our operations, such as the Families First Coronavirus Response Act, or local government orders or restrictions which could limit our business operations;

•laws related to the approval framework for generic drugs; and

•increased sponsor or company obligations under privacy laws such as the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, and GDPR.

•the FDA or comparable foreign regulatory authorities may disagree with the design, including study population, dose level, dose regimen, efficacy endpoints and bioanalytical assay methods, or implementation of our Clinical Trials;

•we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a drug candidate is safe and effective for its proposed indication;

•the results of our Clinical Trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;

•we may be unable to demonstrate that a product candidate's clinical and other benefits outweigh its safety risks;

•the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies, Clinical Studies or Clinical Trials;

•the data collected from our Clinical Studies and Clinical Trials for our product candidates may not be sufficient to support the submission of an NDA or other submission or to obtain regulatory approval in the United States or elsewhere;

•the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and

•the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.

Even if we receive regulatory approval of any drug product candidates, we will be subject to ongoing regulatory compliance obligations or continued regulatory review, which may result in significant additional expense. Additionally, any of our product candidates, if approved or commercialized, could be subject to labeling and other restrictions and market withdrawal and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our product candidates.

•in the case of drug product candidates, revisions to the approved labeling to add new safety information and required regulatory submissions; imposition of post-market studies or Clinical Trials to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program;

•restrictions on the marketing or manufacturing of our products, withdrawal of the product from the market or voluntary or mandatory product recalls;

•re-labeling or re-packaging;

•fines, warning or untitled enforcement letters or holds on Clinical Trials;

•refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation of license approvals;

•product seizure or detention or refusal to permit the import or export of our product candidates; and

•injunctions or the imposition of civil or criminal penalties.

•the demand for any of our product candidates, if approved;

•the ability to set a price that we believe is fair for any of our product candidates, if approved;

•our ability to generate revenues and achieve or maintain profitability;

•the level of taxes that we are required to pay; and

•the availability of capital.

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and patents that we own may be challenged in the courts or patent offices in the United States and abroad. We may be subject to a third party preissuance submission of prior art to the USPTO or to foreign patent authorities or become involved in opposition, derivation, revocation, reexamination, post-grant and inter partes review or interference proceedings or other similar proceedings challenging our owned patent rights. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate or render unenforceable, our owned patent rights, allow third parties to commercialize our product candidates, development platform or other technologies and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. Moreover, we may have to participate in interference proceedings declared by the USPTO to determine priority of invention or in post-grant challenge proceedings, such as inter partes reviews, post-grant reviews or derivation proceedings at the USPTO or oppositions in a foreign patent office, that challenge our priority of invention or other features of patentability with respect to our owned patents and patent applications. Such challenges may result in loss of patent rights, loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our product candidates, development platform and other technologies. Such proceedings also may result in substantial cost and require significant time from our scientists and management, even if the eventual outcome is favorable to us.

The America Invents Act also includes a number of significant changes that affect the way patent applications will be prosecuted and also may affect patent litigation. These include allowing third party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, inter partes review and derivation proceedings. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in United States federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. Therefore, the America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our owned patent applications and the enforcement or defense of our owned issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

From time-to-time the U.S. Supreme Court, other federal courts, the U.S. Congress or the USPTO, may change the standards of patentability and any such changes could have a negative impact on our business. For instance, on June 13, 2013, in Association for Molecular Pathology v. Myriad Genetics, the Supreme Court held that a naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated. The Supreme Court did not address the patentability of any innovative method claims involving the manipulation of isolated genes. On January 7, 2019, the USPTO released guidance entitled "2019 Revised Subject Matter Eligibility Guidance." This memorandum provides guidelines for the USPTO's new examination procedure for subject matter eligibility under 35 U.S.C. §101 for claims embracing natural products or natural principles. Although the guidelines do not have the force of law, patent examiners have been instructed to follow them. Some aspects of our technology involve processes or molecules that may be subject to this evolving standard and we cannot guarantee that any of our pending process claims will be patent eligible, or issued claims will remain patent eligible, as a result of such evolving standards. Changes in either the patent laws or in interpretations of patent laws in the United States or other countries could weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. We cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents. We may not develop additional proprietary products, methods and technologies that are patentable.

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