arct-10k_20201231.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2020

Commission File Number 001-38942

ARCTURUS THERAPEUTICS HOLDINGS INC.

(Exact name of Registrant as specified in its Charter)

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (858) 900-2660

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

Title of each class Trading Symbol(s) Name of each exchange on which registered

Common Stock, par value $0.001 per share ARCT The Nasdaq Stock Market LLC

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

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

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

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

Indicate by check mark whether the Registrant has submitted electronically 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☒No☐

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

Large accelerated filer ☒ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

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

Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes☒No☐

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

The aggregate market value of the common equity held by non-affiliates of the Registrant, based on the closing price of the common stock on The Nasdaq Stock Market on June 30, 2020 was $701.4 million.

As of February 24, 2021, the registrant had 26,280,275 shares of voting common stock outstanding.

DocumentsIncorporated by Reference: Certain portions of the registrant’s definitive Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K.

Table of Contents

Page

PART I

Item 1. Business 3

Item 1A. Risk Factors 33

Item 1B. Unresolved Staff Comments 69

Item 2. Properties 69

Item 3. Legal Proceedings 69

Item 4. Mine Safety Disclosures 69

PART II

Item 6. Selected Financial Data 70

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 79

Item 8. Financial Statements and Supplementary Data 79

Item 9A. Controls and Procedures 79

Item 9B. Other Information 82

PART III

Item 10. Directors, Executive Officers and Corporate Governance 83

Item 11. Executive Compensation 83

Item 14. Principal Accounting Fees and Services 83

PART IV

Item 15. Exhibits, Financial Statement Schedules 84

Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K, or this Annual Report, and the documents incorporated by reference herein may contain “forward-looking statements” within the meaning of the federal securities laws made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth below under Part I, Item 3.D, “Risk Factors” in this annual report. Except as required by law, we assume no obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise. These statements, which represent our current expectations or beliefs concerning various future events, may contain words such as “may,” “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate” or other words indicating future results, though not all forward-looking statements necessarily contain these identifying words. Such statements may include, but are not limited to, statements concerning the following:

• our ability to obtain and deploy funding for our operations;

• our ability to continue as a going concern;

• our plans to research, develop and commercialize our product candidates;

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

• regulatory developments in the United States and foreign countries;

• the performance of our third-party suppliers and manufacturers;

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

Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or performance to differ materially from those projected. These statements are only current predictions and are subject to known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. In addition, historic results of scientific research, preclinical and clinical trials do not guarantee that future research or trials will suggest the same conclusions, nor that historic results referred to herein will be interpreted the same in light of additional research, preclinical and clinical trial results. The forward-looking statements contained in this annual report are subject to risks and uncertainties, including those discussed in our other filings with the United States Securities and Exchange Commission, or the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

References to Arcturus

In this Annual Report on Form 10-K, unless otherwise stated or the context otherwise indicates, references to the “Company,” “Arcturus,” “we,” “our” and “us” mean Arcturus Therapeutics Holdings Inc. and its consolidated subsidiaries from and after the effective time of the Redomiciliation (as defined below) and, prior to that time, to our predecessor, Arcturus Therapeutics Ltd.

Trademarks and Tradenames

The Arcturus logo and other trademarks of Arcturus appearing in this Annual Report on Form 10-K are the property of Arcturus. All other trademarks, service marks and trade names in this Annual Report on Form 10-K are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this report may appear without the ® or TM symbols.

Market Data and Forecasts

Unless otherwise indicated, information in this Annual Report on Form 10-K concerning economic conditions, our industry, and our markets, including our general expectations and competitive position, market opportunity and market size, is based on a variety of sources, including information from independent industry analysts and publications, as well as our own estimates and research.

Our estimates are derived from industry and general publications, studies and surveys conducted by third-parties, as well as data from our own internal research. These publications, studies and surveys generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information, and we have not independently verified industry data from such third-party sources. While we believe our internal research is reliable and that our internal estimates are reasonable, such research has not been verified by any independent source and our internal estimates are based on our good faith beliefs as of the respective dates of such estimates. We are responsible for all of the disclosure in this Annual Report on Form 10-K.

PART I

Item 1. Business

Overview

We are a global clinical-stage messenger RNA medicines company focused on the development of infectious disease vaccines and significant opportunities within liver and respiratory rare diseases. In addition to our messenger RNA (“mRNA”) platform, our proprietary lipid nanoparticle (“LNP”) delivery system, LUNAR, has the potential to enable multiple nucleic acid medicines, and our proprietary Self-Transcribing and Replicating RNA (“STARR”) technology has the potential to provide longer-lasting RNA and sustained protein expression.

We are leveraging our proprietary platform relating to LUNAR and our nucleic acid technologies to develop and advance a pipeline of mRNA-based vaccines and therapeutics for infectious diseases and rare genetic disorders with significant unmet medical needs. Our key proprietary technology has the potential to address the major hurdles in RNA development, namely the effective and safe delivery of RNA therapeutics to disease-relevant target tissues. We believe the versatility of our platform to target multiple tissues, its compatibility with various nucleic acid therapeutics, and our expertise in developing scalable manufacturing processes puts us in a leading position to deliver on the next generation of nucleic acid medicines.

We are a clinical stage company with the commencement of clinical trials in two of our programs and further expanded our pipeline with the initiation of our COVID-19 and flu vaccine programs. We continued to progress our existing pipeline and collaborations, and have, with our manufacturing partners, manufactured current good manufacturing practice (“cGMP”) batches yielding significant quantities of clinical trial materials for ARCT-810 (LUNAR-OTC) and ARCT-021 (LUNAR-COV19 Vaccine), which includes lyophilized vaccine.

We intend to advance ARCT-021(LUNAR-COV19 Vaccine) into Phase 3 and to request Emergency Use Authorization (“EUA”), commence a Phase 2 multiple-dose study of ARCT-810 in OTC-deficient patients in mid-2021, file an Investigational New Drug (“IND”) or Clinical Trial Application (“CTA”) for a first in human study in Q4 2021 for ARCT-032 (LUNAR-CF), and evaluate in preclinical studies the efficacy and safety of a seasonal influenza vaccine. We are focused on expanding our portfolio of internally-owned and partnered programs to advance our clinical and preclinical candidates in a timely and cost-effective manner.

The Company was founded in 2013 as Arcturus Therapeutics, Inc., and we have maintained our principal executive offices in San Diego, California since that time. In November 2017, Alcobra Ltd., an Israeli limited company, merged with our company, changed its name to Arcturus Therapeutics Ltd. (“Arcturus Israel”), and commenced trading on Nasdaq under the symbol “ARCT.” On June 17, 2019, we redomiciled to the United States (the “Redomiciliation”) and changed our name to Arcturus Therapeutics Holdings Inc.

Recent Business Development Activities

In March 2020, we partnered with Duke-NUS Medical School to develop a COVID-19 vaccine for the Singapore Economic Development Board (“EDB”) based on the Company’s STARR Technology and designated the vaccine candidate LUNAR-COV19 (ARCT-021). Duke-NUS Medical School is a graduate entry medical school in Singapore, established in 2005 through a partnership between Duke University School of Medicine and the National University of Singapore (“NUS”).

On March 4, 2020, we were awarded a grant of S$14.0 million (approximately US$10.0 million using the exchange rate at the time the grant contract was entered into) from the EDB to support the co-development of ARCT-021 with Duke-NUS Medical School. In exchange for the grant, we agreed to supply ARCT-021 to the EDB for use within Singapore and we retained the right to sell and market ARCT-021 outside of Singapore. We have agreed to pay Duke-NUS Medical School a low single digit royalty based on annual net sales of the vaccine in markets or jurisdictions outside of Singapore.

On August 17, 2020, we entered into a definitive Supply Agreement (the “Supply Agreement”) with the Israeli Ministry of Health (“MOH”) which provides for the supply of ARCT-021 to the MOH. The MOH has elected to reserve delivery by us of doses of ARCT-021 for an initial 500,000 vaccinations (the “Initial Reserve Doses”). The Supply Agreement also provides the MOH with the right to elect, in its discretion, to purchase additional doses of ARCT-021 upon notice to us prior to specified dates at specified purchase prices. On October 14, 2020, we received a non-refundable first reserve payment of $12.5 million from the MOH. This payment serves as partial

payment for the Initial Reserve Doses.The Supply Agreement is described more fully below in the section titled “Other Material Agreements.”

On October 2, 2020, we were awarded a grant from the EDB to support the further development of our LUNAR-COV19 vaccine candidate. The grant provides for up to S$9.3 million (approximately US$6.7 million) to support the development of the vaccine candidate. The grant is payable in two installments upon the achievement of certain milestones related to the progress of the development of the vaccine candidate. The Company received the first installment of approximately $3.6 million in the fourth quarter of 2020.

In November 2020, we announced a manufacturing support agreement with the EDB that includes a limited recourse loan of up to S$62.1 million, which was subsequently borrowed in full during January 2021 in an amount equivalent to $46.6 million. The manufacturing support agreement is described more fully below in the section titled “Other Material Agreements.”

In February 2021, we entered into an exclusive license agreement with Alexion Pharmaceuticals, Inc. (“Alexion”) pursuant to which Alexion granted to us an exclusive, worldwide license to exploit certain specified Alexion patents. The exclusive license agreement is described more fully below in the section titled “Other Material Agreements.”

Nucleic Acid Medicines and an Introduction to Arcturus’ Platform Technologies

Nucleic Acid Medicines

Nucleic acid medicines have the potential to treat diseases caused by genetic mutations, including diseases that cannot be treated by conventional drugs, such as small molecules and biologics. Some of these medicines function by providing the means for producing a deficient yet vital protein in vivo. Within a cell, DNA carries the blueprint, in the form of genes, from which all proteins necessary for life are encoded. Each gene’s code is transcribed into a nucleic acid molecule called mRNA, which informs the cell’s own machinery how to organize amino acid building blocks to make one or more proteins needed for normal biological function.

Nucleic acid therapeutics represent a significant advancement in targeted medicines and several of this class of therapeutics are being developed by public and private companies. These therapies have three general objectives:

Brief Introduction to our LUNAR® and STARRTM Technology Platforms

LUNAR®

A key challenge for nucleic acid medicines is the safe and effective delivery of the nucleic acid molecule. We have developed a novel lipid-mediated delivery system called LUNAR. LUNAR is a multi-component drug delivery system that incorporates a mixture of novel biodegradable lipids. Lipids are molecules that contain hydrocarbons and make up the building blocks of the structure and function of living cells. Examples of lipids include fats, oils, waxes, certain vitamins (such as A, D, E and K), hormones and most of the cell membrane that is not made up of protein. LUNAR is designed to address technical challenges facing the delivery of nucleic acid medicines into cells. We continue to expand our library of proprietary lipids, with over 200 to date. Our preclinical studies have shown that formulations can be customized for the indication and target cell type of interest, and we have also demonstrated that our formulation process is scalable and reproducible. Our LUNAR platform is described in more detail below.

STARRTM

Our STARR technology platform combines self-replicating RNA with our lipid-mediated delivery system, LUNAR, into a single solution to produce proteins inside the human body. The STARR technology has the potential to generate a protective immune response or drive therapeutic protein expression to potentially prevent against or

treat a variety of diseases. Self-replicating RNA-based prophylactic vaccines developed with STARR have the potential to trigger rapid and prolonged antigen expression within host cells resulting in protective immunity against infectious pathogens. We believe this combination of LUNAR and STARR technology may provide lower dose requirements due to superior immune response, sustained protein expression compared to non-self-replicating RNA-based vaccines and potentially enable us to produce vaccines more quickly and simply. Our STARR platform is described in more detail below.

Our Development Programs

Arcturus’ Internal Programs Pipeline

Vaccines to Prevent Infectious Disease

According to the National Foundation for Infectious Diseases in a typical year, over 50,000 people die each year due to vaccine-preventable diseases in the United States alone. According to the Centers for Disease Control and Prevention, influenza and pneumonia cases alone approach this number of deaths each year. With the SARS-CoV-2 pandemic, more than 500,000 US citizens have died of COVID alone. Outbreaks of new infectious diseases, and the rise of variants to existing viruses, create demand for new and novel approaches to producing vaccines in a more cost effective and quicker manner.

The current pandemic has highlighted the efficacy, safety, and rapidity in which nucleic acid medicines can be used to vaccinate vulnerable populations. We are a leader in self-amplifying mRNA vaccine development. In 2020, we progressed the rapid development of a self-amplifying mRNA vaccine to the Coronavirus that showed favorable safety and immunogenicity in Phase 1/2 trials after a single dose and have begun dosing in a Phase 2 trial. Other pharmaceutical companies are clinically investigating self-amplifying mRNA SARS-CoV-2 vaccines as well, including GSK (Phase 1), and Pfizer (Phase 1). We have also expanded our vaccine program to include seasonal influenza with a goal of beginning safety and immunogenicity trials in humans during the 2021/2022 influenza season.

Out internal programs include our LUNAR-COV19 and LUNAR-FLU vaccine programs as further described below. The recent coronavirus pandemic has proven that mRNA vaccines can be highly efficacious and nimble, allowing for adjustments in antigenic sequences in record time.

ARCT-021 (LUNAR-COV19 Vaccine)

Coronaviruses are a family of viruses that can lead to respiratory illness, including Middle East Respiratory Syndrome (MERS-CoV) and Severe Acute Respiratory Syndrome (SARS-CoV). Coronaviruses are transmitted between animals and people and can evolve into strains not previously identified in humans. On January 7, 2020, a novel coronavirus was identified as the cause of pneumonia cases in Wuhan City, Hubei Province of China. On February 11, 2020, the World Health Organization announced the official name for the disease caused by SARS-CoV-2 virus (2019 novel coronavirus outbreak) as coronavirus disease 2019, commonly abbreviated as COVID-19. The spread of COVID-19 has resulted in more than two million disease-related deaths across the globe.

Swift alert by health authorities and broad measures to contain the virus have not been entirely successful. The development of effective vaccines and swift implementation of vaccinationswill be key in stopping the spreadof the COVID-19 pandemic. Recent EUAs for COVID-19 vaccines from other companies have been backed by data from clinical trials supporting vaccine efficacy. Durability of COVID-19 vaccines, including capability to prevent disease covered by SARS-CoV-2 variants, is an important consideration.We expect both humoral and cellular immunogenicity to play a key role in providing durable and broad protection against COVID-19 and its variants.

Our COVID-19 vaccine candidate, ARCT-021, developed in conjunction with Duke-NUS Medical School, is based on our STARR technology platform. The vaccine is designed to promote immune responses to the spike protein of the SARS-CoV-2 virus, which is the critical part of the virus that allows infection to occur.

We have commenced dosing with the ARCT-021 candidate in three clinical trials: one first-in-human Phase 1/2 study (ARCT-021-01), one open label extension study to the same study (ARCT-021-02), and a Phase 2 study (ARCT-021-04).

The first of these studies (ARCT-021-01) was a randomized, blinded, placebo-controlled study exploring single and two-dose regimens of ARCT-021 (dose range: 1 to 10 μg ARCT-021 single dose, 3 to 5 μg ARCT-021 two dose) in younger and older healthy adults. This study enrolled participants in a series of cohorts based on participant age, intended ARCT-021 dose for study, and based on one or two-dose administrations. The study has completed enrollment of 106 participants, and some of these participants have transitioned to the ARCT-021-02 study, which is actively enrolling and is expected to complete in 2022. An interim analysis was perfomed based on unaudited data from the single dose cohorts and the 5μg two-dose older and younger adult cohorts. At the time of the analysis all included participants had completed at least 28 days after their last dose of study vaccine.

The interim analysis data from the ARCT-021-01 study were submitted to the Singaporean Health Science Authority (“HSA”) and the US FDA prior to approval to initiate enrollment in the Phase 2 study (ARCT-021-04).

Key findings from the ARCT-021-01 interim analysis include: primarily mild-to-moderate adverse events following vaccination in younger and older adults, no vaccine-related serious adverse events, dose-related increases in binding antibody responses after single dose administration in younger and older adults at all doses evaluated, demonstration of neutralizing antibody responses after single dose administration in younger and older adults that fell within the range of titers from COVID-19 convalescent antibody responses measured on the same assay (PRNT50), and Th1- biased T cell activation following single dose administration in younger and older adults.

The Phase 2 study (ARCT-021-04) is a randomized, placebo-controlled study designed to evaluate the safety and immunogenicity of three different dosing schedules in a broader population of healthy younger and older adults. The doses and schedules for additional exploration include: 5 μg ARCT-021, two dose regimen and 7.5 μg ARCT-021, as one- and two-dose regimens. We have dosed over 500 participants across the United States and Singapore.

The next planned clinical study is the Phase 3, placebo-controlled efficacy study of ARCT-021 (ARCT-021-05). We are presently preparing to advance with a 5 μg single dose regimen, to be confirmed based on pending Phase 2 data. We expect that this study will initiate enrollment in Q2 2021 and will be executed in several countries with significant SARS-CoV-2 outbreaks. Based on study recruitment and occurrence of COVID-19 cases in enrolled participants, we expect data establishing vaccine efficacy to prevent COVID-19 to be available in the latter part of 2021 and expect to analyze and submit an application seeking an EUA in one or more jurisdictions based on this data. We plan for the study to continue execution into 2022, at which point we expect to use the data to seek full licensure of the ARCT-021 study.

Preclinical Challenge Studies

ARCT-021 Significantly Effective in Challenge Models

ARCT-021 was shown to be significantly effective in a virus challenge study in the human ACE2 transgenic mouse model. The single dose provided complete protection from SARS-CoV-2 infection and death, compared to control mice which experienced 100% mortality.

Transgenic mice expressing a human ACE2 receptor received a single vaccination of either 2 μg or 10 μg of ARCT-021 RNA. Mice were challenged with a lethal dose of SARS-CoV-2 clinical isolate 28 days after vaccination. 100% of vaccinated by at both doses survived for at least 14 days after challenge whereas unvaccinated mice died by day 7. The vaccinated mice showed absolutely no clinical signs up to day 14 post challenge which was the study termination date.

In September 2020, a rhesus macaque immunogenicity and a SARS-CoV-2 virus challenge study sponsored by the National Institutes of Health(“NIH”) and the National Institute of Allergy and Infectious Diseases was initiated. Non-human primates were immunized with either a single injection of 20 μg or 40 μg RNA dose, or two injections of a 5 μg or 20 μg RNA dose administered 28 days apart, and challenged with SARS-CoV-2 virus 42 days post single vaccination and 14 days post boost vaccination. A single vaccination of 20 μg RNA dose yielded a >1,000 fold reduction in virus in the lungs. Two injections of 5 μg reduced virus infection by >5,000 fold and virus was undetectable in non-human primates after two injections of 20 μg RNA. The amount of virus in the lungs from bronchioalveolar lavage vs. RNA dose is shown in the figure below.

The results showed that a single administration of ARCT-021 was significantly effective in the primate model (macaque); vaccinated macaques show substantial (3.30 log lower) reduction in median lung viral titers.

T Lymphocyte Mediated Immunity Is the Major Contributor to Protective Immunity Against Virus Challenge in Transgenic Mouse Model

Human ACE2 receptor transgenic mice were vaccinated with a single 1 μg dose and challenged with sublethal virus load 21 days post vaccination. In one treatment group, B lymphocytes, responsible for producing virus neutralizing antibodies, were depleted three days prior to vaccination. In a second group, T lymphocytes, responsible for killing cells infected with virus, were depleted three days prior to virus challenge. In a third group, B cells were depleted 3 days prior to vaccination and T cells were depleted three days prior to virus challenge. The above figure shows that no virus was detected in the lungs of mice depeted of B cells, marked as 100%, whereas mice depleted of T cells had an equivalent amount of virus as mice with depleted B cells and T cells, demonstrating that ARCT-021 induced cell mediated immunity plays a major role in conveying protective immunity against SARS-CoV-2 infection.

Studies have shown T cells to be more durable (approximately six times longer-lasting) than antibodies (Bert, et al. Nature, 2020). In another study performed by Public Health England, T cell counts of thousands of frontline workers were monitored for four months. High T cell activities significantly correlated (p =0.0006) with protection from COVID-19 infection even when no antibodies against SARS-CoV-2 could be detected.

mRNA platforms have the advantage of being able to more nimbly adapt to new viral strains. We are closely evaluating COVID-19 variants, especially those strains that appear to evade the neutralizing antibodies to the original Wuhan strain such as the South African variant (B.1.351). A study in non-human primates conducted by Dan Barouch (et al) of Harvard Medical School found that T-cell responses are important for COVID-19 vaccines, and in particular for strains that evade the neutralizing antibodies to the original Wuhan strain. As shown above, ARCT-021 has shown robust cellular immunity, and we will gain a better understanding of ARCT-021’s coverage of COVID-19 variants as we continue to collect clinical data.

LUNAR-FLU

Influenza is estimated to cause one billion infections globally every year and hundreds of thousands of deaths, especially in the elderly and individuals with underlying medical conditions. In many regions, influenza is seasonal, with infections peaking during November through April in the Northern Hemisphere and May through September in the Southern Hemisphere. Year-round surveillance by the World Health Organization in collaboration with various national health agencies informs WHO recommendations on the strains of influenza most likely to spread during the upcoming influenza season. National health agencies (such as the U.S. Food and Drug Administration (“FDA”)) then make the final decision of which strains should be covered by vaccines licensed in their country.

Our LUNAR-FLU program has the objective of producing a safe and effective seasonal vaccine candidate with significant advantages over the traditional egg-based inactivated quadrivalent vaccine. Inaccurate predictions of circulating influenza strains as well as mutations due to adaptation in egg-grown vaccines can substantially reduce efficacy on a year-to-year basis.

We believe the ability of mRNA platforms to nimbly adapt to new viral strains should help improve efficacy. Also, mRNA vaccines do not face the challenge from mutations common to egg-grown vaccines.

LUNAR-FLU candidates will be evaluated preclinically in 2021 to support the goal of IND/CTA submission in the first half of 2022.

Rare Disease Medicines in Development

The Orphan Drug Act defines a rare disease as a disease or condition affecting fewer than 200,000 individuals in the United States. According to the NIH, there are approximately 7,000 such diseases, that together affect nearly 30 million people in the United States. The European Union defines a rare disease as having a prevalence of fewer than 5 in 10,000 people. Collectively, these disorders affect between six and seven percent of the population in the developed world.

There is a pressing need for new medicines for rare diseases as few of the 7,000 rare diseases have approved treatments. Biopharmaceutical industry researchers are making great progress in the fight against rare diseases as innovative science has opened new opportunities. There have been incredible advances in the development of medicines to treat patients with rare diseases as researchers uncover the molecular and genomic drivers of many conditions. More than 770 medicines have been approved by the FDA since the enactment of the Orphan Drug Act in 1983 and more than 800 medicines are currently in clinical development. Despite recent progress, there is still much more work to be done.

Developing medicines to treat rare diseases presents scientific and operational challenges. We believe our technology provides an excellent platform to address genetically inherited rare diseases, and we are focusing on development of medicines to treat people with rare respiratory and liver diseases who currently have limited or no treatment options.

ARCT-810 (LUNAR-OTC)

The LUNAR-OTC development program addresses ornithine transcarbamylase (“OTC”) deficiency, a rare, genetic disease caused by mutations in the OTC gene that lead to dysfunctional or deficient OTC levels.

OTC deficiency causes the body to accumulate ammonia, which is neurotoxic and harmful to the liver. OTC deficiency is the most common of the urea cycle disorders, a group of inherited metabolic disorders that make it difficult for affected patients to remove toxic waste products as proteins are broken down. OTC deficiency is a life-threatening genetic disease. OTC is a critical enzyme in the urea cycle, which takes place in liver cells, and converts ammonia to urea. This conversion does not occur properly in patients with OTC deficiency and ammonia accumulates in their blood, acting as a neurotoxin and liver toxin. High ammonia levels in the blood can cause severe symptoms including vomiting, headaches, coma and death. OTC deficiency is an inherited disease that can cause developmental problems, seizures and death in newborn babies. It is an X-linked disorder, and consequently more common in males. Patients with less severe symptoms may present later in life, as adults. Currently no cure exists for OTC deficiency, apart from liver transplant; however, this treatment comes with significant risk of complications such as organ rejection, and transplant recipients must take immunosuppressant drugs for the rest of their lives. Current standard of care for OTC patients is a low-protein diet, dietary supplements and ammonia scavengers to try and prevent accumulation of ammonia. Life-threatening episodes of high ammonia levels can occur, requiring treatment with dialysis or hemofiltration. These treatments do not address the underlying cause of disease and there remains a high unmet need for an effective treatment.

Our LUNAR-OTC development candidate, ARCT-810, uses our LUNAR platform to deliver normal OTC mRNA into liver cells, where OTC is produced and functions, to produce normal functioning OTC with possible disease-modifying effects. Our LUNAR-OTC approach has the potential to treat the underlying defect that causes the debilitating symptoms of OTC deficiency, rather than mitigating symptoms by sequestering ammonia. LUNAR-OTC has received orphan drug designation from the FDA for treatment of OTC deficiency. Worldwide development and commercialization rights to ARCT-810 are entirely held by Arcturus.

Preclinical data in OTC deficiency murine models has demonstrated that dosing of LUNAR-OTC results in robust OTC protein expression and activity, thereby improving ureagenesis, reducing plasma ammonia and increasing survival. We submitted an IND application to the FDA for a Phase 1b study in patients with OTC deficiency, and an additional CTA for a Phase 1 study in healthy volunteers was approved by the New Zealand Medicines and Medical Devices Safety Authority. In April 2020, we announced that we were deemed allowed to proceed with the studies.

In November 2020, the last dose cohort completed the Phase 1, double-blind, placebo-controlled, single-dose, dose-escalation study of ARCT-810 in healthy volunteers. In this study, ARCT-810 demonstrated favorable safety, tolerability and PK profiles.

A Phase 1b study in OTC-deficient patients in the United States opened for enrollment, with dosing initiated in the first subject in December 2020. The trial will enroll approximately 12 patients and is designed to assess safety, tolerability and pharmacokinetics, as well as various exploratory biomarkers of drug activity. The trial currently consists of nine sites in the United States. We have received approval from Health Canada to conduct the trial in Canada and are working with sites in Canada in preparation for enrollment. We intend to commence a Phase 2 multiple-dose study of ARCT-810 in OTC-deficient patients in mid-2021.

ARCT-032 (LUNAR-CF)

The LUNAR-CF program addresses cystic fibrosis lung disease, a progressive lung disease caused by mutations in the cystic fibrosis transmembrane conductance regulator (“CFTR”) gene. In December 2020, we announced the selection and advancement of ARCT-032 as a development candidate for treatment of cystic fibrosis. ARCT-032 uses our LUNAR platform to deliver codon-optimized CFTR mRNA into airway epithelial cells. This allows airway cells to produce functional CFTR protein using their native translational machinery and protein trafficking pathways. This approach has the potential to treat the underlying defect that causes CF lung disease,

regardless of what mutation type a patient has. The Cystic Fibrosis Foundation (“CFF”) has recognized the potential of the LUNAR-CF program and has partnered with us to develop this important therapy.ARCT-032 represents the first LUNAR-based mRNA therapeutic that will be delivered by the inhaled route, offering direct delivery to the affected airways with the potential to restore functional CFTR. We received encouraging pre-IND feedback on our proposed non-clinical and clinical development program in January 2021. We anticipate filing a CTA for a first in human study in Q4 2021.

According to the NIH, cystic fibrosis is the most common rare disease in the world, with an estimated 30,000 diagnosed cases in the United States and 85,000 worldwide. Approximately 1,000 people are newly-diagnosed with cystic fibrosis each year. Cystic fibrosis is caused by one of 2,000 known mutations in the CFTR gene, which have been grouped into several different classes based on the mechanism of how they cause reduction in the production and/or function of the CFTR protein.

The CFTR protein is a cAMP-activated transmembrane protein that controls chloride and bicarbonate flow and is critical for lung homeostasis. When CFTR is not present in the membrane or does not function properly, there is a deficit in the release of chloride and bicarbonate anions into the airways, and an associated increase of sodium uptake by the cells, thus dehydrating the airway surfaces and causing accumulation of a thick mucus layer. This mucus causes clogging of the airways, a negative impact on breathing quality, and decreases the clearance of pathogens which accumulate in the airways, causing chronic infections, exaggerated inflammation, structural airway damage, and other serious complications not only related to the lung but to other organs such as pancreas and liver. The median lifespan of CF patients in the United States is <40 years, and the cause of death is usually lung-related.

The daily standard-of-care for CF lung disease includes palliative treatments meant to treat existing lung disease and prevent the progression of the disease. These treatments include aerosolized mucolytics, antibiotics, and airway clearance techniques that are time-consuming and represent a significant treatment burden for people with CF. Many CF patients ultimately suffer from a critical decline in lung function and require lung transplants.

The FDA has approved several CFTR modulator therapies (Kalydeco, Orkambi, Symdeko, and Trikafta) that assist the mutant CFTR protein to reach the cell membrane and/or increase functional ion channel activity. The CFTR modulators, while effective in some patients, are mutation-specific and therefore are not effective in all people with CF. Other treatments are required to target Class I mutations (no CFTR produced; approximately 10% of CF cases worldwide), and people who are intolerant or have poor response to CFTR modulator therapies. We are focusing our LUNAR-CF program on these groups of patients, as they currently have the highest unmet need for CF therapies.

We presented data that demonstrated the significant potential for LUNAR-CF as a disease-modifying treatment at The American Society for Gene and Cell Therapy Conference in May 2020, and the North American Cystic Fibrosis Conference in October 2020. The data presented demonstrated that (i) aerosolized LUNAR-mRNA formulation properties are optimal for lung therapeutics, (ii) codon optimized mRNAs produce a functional protein that can generate chloride channel activity in FRT cells, and can also restore chloride channel activity (measured by nasal potential difference) in a Class I CFTR-knockout mouse model, and (iii) aerosolized LUNAR can efficiently deliver mRNA to epithelial airways across species, including rodents and non-rodents (ferrets, non-human primates). Taken together, these data demonstrate the proof of principle to validate LUNAR-CF, as we continue investigating various aspects of LUNAR-CF in several disease models of CF.

LUNAR construct with mRNA of CRE protein efficiently transduces epithelial airways in a non-rodent model (Ferret)

In ferret, a 0.6 mg/ml dose of a LUNAR construct loaded with mRNA of the CRE protein was delivered to the airways of the ROSA26TG model. Upon CRE-recombination, a robust conversion of the TdTomato (red) into EGFP (green) was observed by immunohistochemistry analysis of the ferret lungs. Panels A and B show large and small airways, respectively. Boxed area in EGFP (green) images show high magnification of the highly efficient delivery into ferret airways. DAPI is shown as counterstaining.

Aerosolized LUNAR construct with Tdtomato mRNA efficiently delivers to epithelial airways in Non-human Primates (NPHs)

In NHP, a 1 mg/ml dose of a LUNAR construct loaded with TdTomato mRNA was aerosolized using a face mask exposure system. A robust expression of TdTomato protein was observed by immunohistochemistry analysis of the NHP lungs. The panel shows detailed TdTomato staining in bronchial epithelial cells across different lung levels.

Platform Technology Overview

Current Technologies and Limitations

mRNA therapeutics offer an attractive promise that other RNA medicines cannot provide – to increase the production of a protein in the body that is either defective or expressed at low levels to improve symptoms of a genetic disease without interacting with the patient’s genetic code. The promise of mRNA therapies is only beginning to be realized with the approval of the first two mRNA vaccine therapies in 2020. Developers of mRNA therapies should strive to improve ways to address the following hurdles:

• inefficient translation into the therapeutic protein;

• short duration of effect of the mRNA medicine; and

• tolerability issues associated with therapeutic RNAs.

The first-generation lipid nanoparticle technology used to deliver mRNA therapeutics is also limited by their propensity to cause immune responses. This decreases the tolerability of the medicine. Many of these delivery systems biodegrade slowly, which causes accumulation of these lipids in cells upon repeat dosing. Each of these aspects of current lipid nanoparticle delivery systems is expected to ultimately limit the utility and therapeutic reach of the RNA therapies they deliver.

Arcturus aims to mitigate the immune response and tolerability issues associated with the LNP mRNA delivery with the development of both less immunogenic mRNAs and more rapidly biodegradable lipids. The Company has developed processes for the scale up of LNP-mRNA therapeutics to support clinical development. As described below, Arcturus’ lipid-mediated delivery platform is designed to address many of the technical issues encountered to date for this very promising area of RNA medicines.

Our Delivery Solutions

Our LUNAR lipid-mediated delivery technology includes a diverse, growing library of over 200 proprietary lipids that we are rationally designing to be versatile, maximizing potential efficacy and improving tolerability of a diverse selection of nucleic acids, target cell types and routes of administration. A key feature of our LUNAR lipids is their biodegradability, decreasing the undesired effects caused by lipid accumulation that are associated with tolerability issues present in other lipid-mediated RNA medicine delivery platforms. Our experienced team continues to innovate in the area of producing LUNAR lipid formulated nucleic acid product candidates in a scalable and highly reproducible manner, reducing the costs of goods for the therapies in our pipeline.

In addition to our LUNAR lipid-mediated delivery technology, we believe we have created innovative, proprietary advancements in producing mRNA medicines, including improvements that increase purity, scalability, efficiency in production times, and adaptability to different mRNA modification strategies. We strive to use these proprietary innovations to benefit each mRNA medicine in our pipeline.

We continue to invest in our LUNAR lipid-mediated delivery of mRNA (encoding CRISPR, TALEN, zinc finger proteins, and meganucleases), siRNA, DNA, microRNA, and antisense oligonucleotide technology platforms to improve their efficacy and safety profile, further expanding their applications. This investment has led to key innovations ensuring optimal characteristics of our LUNAR formulated drug product candidates are attained, which we believe sets us apart from other nucleic acid therapeutics and lipid-mediated delivery platforms. As such, we consider ourselves a leader in systemically administered mRNA therapeutics.

Key Attributes of Our LUNAR Lipid-Mediated Delivery Technology

We have designed our LUNAR lipid-mediated delivery platform to address major challenges with nucleic acid medicine delivery, including transfection efficiency, adverse immune reactions and liver damage. See below for a graphic representation of our LUNAR formulation, where blue spheres represent polyethylene glycol lipids and the orange, darker orange, and yellow spheres represent the proprietary “ATX” lipid excipient and other structural components (phospholipid and cholesterol).

Graphic of LUNAR

LUNAR formulations are a multi-component, lipid-mediated drug delivery system that utilizes our proprietary lipids, called ATX lipids. Each of our ATX lipids contains an amino head group and a biodegradable lipid backbone. The amino head group is a key chemical component of the ATX lipid, making it pH-sensitive and providing it distinct advantages as a component of our LUNAR formulation. At acidic pH, ATX lipids are positively charged, facilitating interaction with the negatively charged nucleic acid, thereby enabling LUNAR particle formation. At physiological pH (e.g., pH 7.4), LUNAR formulations are neutrally charged, reducing the toxicity often seen with permanently positively-charged lipid-mediated delivery technology. Upon uptake into a cell by endocytosis (a process that forms a cellular structure called an endosome around the LUNAR formulated nucleic acid therapeutic), the amino head group again becomes positively charged, disrupting the endosome and the LUNAR particle, and releasing the nucleic acid therapeutic into the cell.

The disruption of the LUNAR particle also releases the components of the formulation into the cell, where the ATX lipid is degraded by enzymes in the cell allowing for the lipids to be cleared from the cell. We designed the ATX lipid to be rapidly biodegradable by engineering chemical structural components, called esters, into the ATX backbone that are sensitive to cellular enzymes, called esterases. This degradation prevents ATX lipids from accumulating inside the cell and causing toxicity.

Biodegradable, highly optimized for each cell type

LUNAR-platform development

The Company’s development of its LUNAR platform is focused on continuous innovation and advancement in the following areas:

Through the above efforts, our versatile LUNAR platform continues to drive internal and partner programs.

LUNAR compatibility with nucleic acids of various size

We have generated a growing library of over 200 proprietary ATX lipids. ATX lipids are rationally designed to fit the application and vary depending on the target cell type and route of administration. We perform extensive formulation screening for each nucleic acid therapeutic candidate to determine the optimal ATX lipid and LUNAR composition for the particular nucleic acid therapeutic candidate, the desired route of administration and target cell type. We have demonstrated high encapsulating efficiency when formulating a wide range of nucleic acid sizes, 20 to 12,000 nucleotides in length (figure below, left), and particle size was within the acceptable range to maximize targeting and efficacy (figure below, right).

LUNAR Biodegradability

Although all ATX lipids are designed with biodegradable ester bonds in their backbone, one of the key platform learnings is the understanding of the relationship between positioning of these ester bonds and their clearance profile in vivo. In vitro and in vivo screening assays are utilized in our LUNAR screening cascade to enable ranking of ATX lipids based on their esterase susceptibility. These new assays have enabled a more rigorous selection of ATX lipids. New ATX lipids with optimal biodegradability and potency continue to be identified and further characterized for potential application to upcoming therapeutic and vaccines programs.

LUNAR Scalability and Reproducibility

We have demonstrated scalability and reproducibility of LUNAR. Multiple non-GMP and GMP batches of mRNA drug substance have been successfully produced from 0.5 to 30 gram scales with equivalent yield and purity.

Additionally, we have demonstrated scalability of our LUNAR-mRNA platform from milligram to multigram scales. LUNAR-mRNA batches have been successfully produced at scales from 0.1 to 15 grams while retaining key physicochemical attributes of particles.

Lyophilization Process Advantages Over Conventional Frozen Liquid

We have engaged in focused efforts to develop lyophilized LUNAR formulations, in order to mitigate challenges associated with cold chain logistics of a -70°C frozen product. A lyophilized product allows for simpler handling, such as no dry ice at point of care and lower risk of degradation from uncontrolled temperature fluctuations.

The results of these efforts have yielded a lyophilized version of ARCT-021 that maintains key quality attributes of the frozen liquid equivalent. We are collecting stability data at -20°C, 2-8°C, and room temperature.

Targeting Capabilities

As proof of concept for augmenting LUNAR targeting capabilities for specific tissues and even cell types within those tissues, we are developing LUNAR formulations containing a propriety hepatocyte targeting agent. Traditional lipid nanoparticle mediated delivery to hepatocytes occurs via uptake via the low-density lipoprotein receptor (“LDLR”). To evaluate this targeting agent, we ran studies in a mouse model that is LDLR deficient. Only the LUNAR formulations with this targeting agent were able to deliver mRNA to the hepatocytes, as compared to LUNAR formulations that did not contain the targeting agent. Based on this promising data, we are expanding these platform development efforts.

Our Proprietary mRNA and Protein Design Technology

The mRNA programs in our pipeline are benefited by our in-house expertise in protein and mRNA design, which helps us address many of the known challenges that face the viability of mRNA therapeutics today. We have identified several design elements of mRNA compounds that provide improved translation (conversion from mRNA to protein) of our mRNA therapeutics, including untranslated regions derived from species that have not previously been combined with human mRNA sequences. This platform technology is applicable to many different human mRNA sequences that we are currently approaching in our discovery efforts. We are able to engineer human protein sequences to increase the half-life of the proteins produced by our mRNA therapies and can more efficiently direct specific types of proteins to certain cellular structures of interest. These innovations are broadly applicable to several programs that are part of our mRNA discovery efforts.

In addition to these platform technologies, we have developed a proprietary tool to aid our team in the efficient design and development of new mRNA drug candidates. Our mRNA Design Suite is a cloud-based software suite with a collection of proprietary bioinformatic algorithms aimed at achieving highly improved potency

of a drug substance through optimization of mRNA sequences. The algorithms were developed in house through the integration of experimentally validated optimization processes. Through multi-layered in silico QC pipelines, mRNA Design Suite promptly generates high-quality and error-free sequences accompanied by various statistics. Additionally, mRNA Design Suite seamlessly interacts with our plasmid/mRNA production database to accelerate the process from mRNA design to gene synthesis, cloning, and mRNA production.

Our STARR mRNA Technology

STARR is designed to increase the amount and duration of protein antigen expression compared to conventional mRNA. This is achieved by constructing an RNA that encodes for a replicon and a pathogenic protein antigen. The replicon segment encodes for genes derived from an alpha-virus, specifically Venezuela Equine Encephalitis Virus, that is responsible for amplifying the production of the pathogenic protein antigen mRNA. These are non-structural viral proteins, meaning they are not included in any virus particle and are completely incapable of producing any virus. However, upon translation they produce multiple copies of the pathogenic protein antigen which increases production of the protein. In addition, during the course of protein antigen mRNA replication, a short-lived double-stranded RNA intermediate is produced which activates the innate immune system. This activation transitions to an adaptive immune response resulting in the specific programming of the immune system, both neutralizing antibody production and T lymphocyte activation, which are important in preventing pathogen infection. The activation of the innate immune system by the double-stranded RNA intermediate serves as a self-adjuvanting feature, thus eliminating the need for the addition of an adjuvant to the vaccine.

An example of generating a protected immune response is shown in the graphic below. The self-replicating RNA-based therapeutic vaccine triggers rapid and prolonged antigen expression within host cells resulting in protective immunity against infectious pathogens. We believe the combination of LUNAR and STARR technology could provide lower dose requirements due to superior immune response and sustained protein expression as compared to non-self-replicating RNA-based vaccines. We believe this may enable us to simplify and increase the speed of vaccine production.

Our Unlocked Nucleic Acid (UNA) Oligomer Chemistry

UNAs are RNA analogues in which the C2’-C3’ bond of the ribose ring is absent (figure below). UNA chemistry technology can potentially be applied to multiple types of RNA medicines including mRNA, siRNA, microRNA and guide RNAs for gene editing. One or more UNAs can be positioned strategically along a nucleic acid strand to manipulate the chemical properties of the molecule.

RNA structure compared with UNA structure

UNAs can potentially improve the efficiency and specificity of siRNA-mediated protein suppression.

siRNAs are short double-stranded RNA molecules. Once inside the cell, they become part of the RNA-induced silencing complex (“RISC”) and are split into two single siRNA strands. One of these strands stays with RISC and binds to any mRNA with a complementary sequence. If the wrong siRNA strand stays with RISC, it can bind to different mRNAs than the target mRNA and therefore inhibit translation of other proteins. This is an undesired off-target effect and is one of the major barriers to developing effective siRNA medicines. Incorporating a single UNA into siRNA molecules can make one of the strands preferentially bind to RISC, which improves specificity. Additionally, incorporation of UNA modifications can reduce susceptibility of the siRNA to nuclease degradation, which improves the efficiency of siRNA-mediated protein suppression.

We own a comprehensive suite of UNA technology patents for therapeutic and reagent use, enabling us to operate freely and to independently pursue nucleic acid therapeutic candidates incorporating this technology. We are also actively pursuing other novel chemistry technologies with the aim of overcoming the development and therapeutic challenges of nucleic acid medicines. Our goal is to expand our nucleic acid technology portfolio and strengthen our ability to develop safer and more effective nucleic acid therapeutic candidates.

Supply and Manufacturing

We have built out robust manufacturing capabilities designed to meet global supply needs for clinical trials and future commercialization, with a network of established contract manufacturing organizations (“CMOs”) for producing critical raw materials, drug substance, and finished and packaged drug product. We have developed, and continue to dedicate resources to advance, our sophisticated manufacturing know-how, including with respect to formulation of lipid nanoparticles, which improves manufacturing efficiency and capacity. We are strategically exploring options to build our internal manufacturing capabilities for drug substance and finished drug product.

To date, we have manufactured and supplied gram quantities of drug substance, scaled up finished drug products through our CMOs for preclinical and clinical studies. For the near future, we expect to continue to rely on third-party CMOs for the supply of drug substance and finished drug product for our current product candidates, including to support the launch of our first commercial products.

Our CMOs are compliant with cGMPs and other rules and regulations prescribed by foreign regulatory authorities. We believe we have established sufficient manufacturing capacity through our CMOs to meet our current internal research, development and potential commercial needs, as well as our obligations under existing agreements with our partners. Additionally, we continue to evaluate relationships with additional suppliers to increase overall capacity and diversify our supply chain.

Collaboration Arrangements

In addition to our internal development programs, we have a number of development partnerships structured where we work to discover mRNA or siRNA therapeutic candidates formulated for our LUNAR lipid-mediated delivery system. Among other collaboration agreements,

Janssen Agreement

On October 18, 2017, we entered into a Research Collaboration and License Agreement with Janssen (the “Janssen Agreement”) to collaborate on developing candidates for treating HBV with RNA therapeutics. Under the Janssen Agreement, Janssen and the Company will carry out their respective research obligations pursuant to agreed-upon joint research plans, and we may not engage in HBV-related research independent of the Janssen Agreement.

The Janssen Agreement provides that Janssen will develop the candidates licensed pursuant to the agreement, obtain certain regulatory approvals, and commercialize products containing the development candidates. Under the Janssen Agreement, both parties granted each other certain non-exclusive, royalty-free licenses to conduct the research covered by the agreement.

Under the Janssen Agreement, Janssen paid us an upfront fee of $7.7 million. On a development candidate-by-development candidate basis, Janssen will pay us certain development milestone payments of up to $56.5 million for each of the first two products to treat HBV and in each indication for which Janssen exercises its option to license certain therapeutics from us. In addition, on a research program-by-research program basis, Janssen will pay us between $20 million and $40 million in multiple sales milestone payments if they achieve certain annual net sales milestones in the first calendar year in which such milestones are achieved. Janssen will also pay between $1 million and $5 million in option exercise fees, with the precise amount depending on when Janssen exercises its license option. In addition, Janssen will pay royalties on annual net sales of licensed products up to a mid-single digit percentage, subject to (i) reduction on a country-by-country and licensed-product-by-licensed-product basis and (ii) certain events, such as expiration of program patents.

The Janssen Agreement will terminate when no further royalty payments on any licensed products are payable. Janssen may terminate the Janssen Agreement at any time on a licensed product-by-licensed product and country-by-country basis, or in its entirety, in each case upon 60 days’ written notice.

Ultragenyx Agreement

On October 26, 2015, we entered into a Research Collaboration and License Agreement with Ultragenyx, which was later amended on October 17, 2017 and April 20, 2018 (as amended, the “Ultragenyx Agreement”). Ultragenyx initially selected two development targets, including Glycogen Storage Disease Type III, and the parties initially agreed to a list of eight additional reserved rare disease targets which Ultragenyx has an exclusive option to

select for collaborative development. The Ultragenyx Agreement provides for an exclusivity period, during which Ultragenyx may substitute a reserved target for a selected target, in which case such reserved target will be deemed an additional target and will preclude an additional reserved target in place of the newly reserved target. Further, during the exclusivity period, Ultragenyx may replace a reserved target with a proposed new target, subject to certain conditions, including whether we have the ability to partner with respect to such new target.

Under the Ultragenyx Agreement, we have granted Ultragenyx exclusivity (i) with respect to development targets, to the development and commercialization of products containing nucleic acid technology, and (ii) with respect to reserved targets and subject to the right of first negotiation described below, the development and commercialization of any product containing nucleic acid products or utilizing LUNAR lipid-mediated delivery technology.

During the reserved target exclusivity period and with respect to reserved targets, Ultragenyx has a right of first negotiation for any nucleic acid product utilizing LUNAR lipid-delivery technology with respect to such reserved targets. These restrictions terminate upon expiration of the reserved target exclusivity period for each target, which may be extended on a reserved target-by-reserved target basis upon payment of an exclusivity extension fee.

Following the reserved target exclusivity period and on a reserved target-by-reserved target basis, Ultragenyx has an exclusive right of first negotiation to obtain an exclusive license to exploit RNA products with respect to such reserved target. If we have not entered into an agreement with Ultragenyx by the time its exclusive right of first negotiation expires, its rights with respect to such reserved target terminate and we may grant a license or enter into an arrangement with a third-party with respect to such reserved target.

Under the Ultragenyx Agreement, we have granted Ultragenyx a co-exclusive, royalty-free, sublicensable license of our technology for conducting collaborative development of development targets, compounds and products. The license remains in effect for a specified option period based upon achievement of milestones with respect to development targets and reserved targets, and development of compounds and products with respect to such development targets and reserved targets. If Ultragenyx exercises its option with respect to a development target and we enter into a license with them, it will receive an exclusive, royalty bearing, sublicensable (subject to certain limitations) license to our technology to exploit compounds and products with respect to such development target.

For development targets and reserved targets that revert to us (“Discontinued Targets”), Ultragenyx will grant us an exclusive, worldwide, perpetual license to all technology developed pursuant to the Ultragenyx Agreement with respect to such Discontinued Targets. We will pay Ultragenyx royalties on net sales related to Discontinued Targets on a country-by-country basis until the expiration of the last valid claim, product-specific patents or patent rights covering such Discontinued Targets that we have licensed from Ultragenyx. The amount of any such royalties will depend on the state of development of the subject Discontinued Target and will be a low-single digit percentage.

In connection with the execution of the Ultragenyx Agreement, Ultragenyx paid us an upfront fee of $10 million. We are entitled to certain additional payments (i) for costs we incur in connection with our activities under agreed-upon collaborative development plans, and (ii) if Ultragenyx exercises its option to select additional reserved rare disease targets for collaborative development. For each development target for which Ultragenyx exercises this option, it will pay us a one-time option exercise fee, which will vary depending on the total number of development targets for which it has exercised such option. The option exercise fee is subject to reduction if a development target does not utilize certain of our patented RNA-delivery technology or nucleic acid chemistry technology.

Ultragenyx will also pay us certain milestone payments with respect to clinical/regulatory development (not to exceed $49 million per development target), and commercialization (not to exceed $90 million per development target), in each case subject to reduction if the relevant development program does not utilize technology covered by certain of our patents.

During the applicable royalty term, Ultragenyx will also pay royalties as a percentage of net sales (not to exceed 10%) on a product-by-product and country-by-country basis.

The Ultragenyx Agreement provides that each party owns any intellectual property that it develops independently, and that any intellectual property developed jointly on behalf of both parties will be owned jointly, provided that (i) Ultragenyx will own all collaboration technology that specifically relates to (i) the composition or

formulation of a particular compound or product, or (ii) any method of using, making or administering a particular compound or product, and (ii) we will own all improvements to LUNAR lipid-mediated delivery technology and/or UNA oligomer chemistry.

Unless terminated earlier, the Ultragenyx Agreement expires upon the expiration of the last-to-expire royalty term for any product, on a development target-by-development target basis. Upon expiration with respect to a particular development target, our license of technology to Ultragenyx to exploit products with respect to the relevant development target will become fully paid-up, irrevocable and exclusive. On a target-by-target basis, Ultragenyx has the right to terminate for convenience upon 60 days’ written notice.

On June 18, 2019, we expanded our collaboration with Ultragenyx and entered into a third amendment (the “Third Amendment”) to the Ultragenyx Agreement. Pursuant to the Third Amendment, the total number of targets was increased from 10 to 12, and we granted Ultragenyx exclusivity to development targets for four years at no additional cost. In connection with the Third Amendment, Ultragenyx purchased 2.4 million shares of our common stock for $24.0 million and made a one-time upfront payment of $6.0 million. Ultragenyx also received a two-year option to purchase an additional 600,000 shares of our common stock at a price of $16.00 per share.

Additionally, until the later of (i) the first anniversary of the closing date or (ii) the date on which Ultragenyx beneficially owns less than 8.0% of the total voting power of the Company, at each annual shareholders’ meeting or any shareholders’ meeting at which board members are to be elected, we must nominate one director designated by Ultragenyx (the “Ultragenyx Designee”). Additionally, the Ultragenyx Designee is required to be appointed to all board committees (subject to applicable Nasdaq rules). Ultragenyx also has the right to have its designee attend board meetings as a non-voting observer. Karah Parschauer, the Executive Vice President and Corporate Counsel of Ultragenyx, joined the board in June 2019 as the Ultragenyx Designee.

On June 18, 2019, we entered into an Equity Purchase Agreement with Ultragenyx. Pursuant to this agreement, we granted Ultragenyx a two-year option to purchase up to 600,000 additional shares of our common stock at a price of $16.00 per share. On May 20, 2020, Ultragenyx completed the exercise of this option to purchase an additional 600,000 shares of common stock in accordance with the terms of the agreement. The issuance of the additional 600,000 shares closed on May 20, 2020.

CureVac Agreement

On January 1, 2018, we entered into a Development and Option Agreement with CureVac, which was amended on May 3, 2018 and later restated on September 28, 2018 (as amended and restated, the “Development and Option Agreement”). Under the terms of the Development and Option Agreement, CureVac and Arcturus agreed to conduct joint preclinical development programs and we granted CureVac a license to develop and commercialize certain products incorporating certain of our technology (the “Arcturus LMD Technology”) and CureVac technology. The products subject to the Development and Option Agreement relate to certain targets to be identified during the term of the agreement. In consideration for the rights granted under the Development and Option Agreement, we received an upfront fee from CureVac.

In connection with the Development and Option Agreement, we granted CureVac a worldwide, non-exclusive, sublicensable license to use the Arcturus LMD Technology for the purpose of conducting research and preclinical development activities, subject to certain limitations. In addition, CureVac granted to us a worldwide, non-exclusive license to its mRNA technology to the extent necessary for us to execute the activities contemplated by the Development and Option Agreement. Subject to certain restrictions, the Company and CureVac each have an undivided one-half interest in the patents and know-how developed jointly during the course of the Development and Option Agreement. The amended and restatement of the Development and Option Agreement provided for (i) an increase in the number of targets available to CureVac and (ii) agreed-upon license forms to be executed upon selection of targets by CureVac.

Subject to certain limitations, CureVac may designate certain targets as reserved targets. To the extent a reserved target is only available on a non-exclusive basis, CureVac may elect to enter into a non-exclusive license agreement on a pre-negotiated form to be executed upon identification of the relevant target. CureVac is required to pay us a fee for any license (exclusive or non-exclusive), the amount of which depends on whether the target involves a rare or non-rare disease. Each development program with CureVac is subject to the terms of a work plan, pursuant to which the Company and CureVac will work to develop certain products.

Pursuant to the form of license agreement, if CureVac achieves all development and commercialization milestones with respect to the licensed product developed for an identified target, it is required to (i) pay certain development and regulatory approval milestones, the amount of which depends on whether the target involves a rare or non-rare disease, and (ii) royalties in a low-single digit percentage on the net sales of each product subject to a license agreement on a country-by-country and product-by-product basis. Such royalties are subject to reduction for third-party payments with respect to licensed products or if there is no valid claim under the licensed patents, but may not fall below a specified percentage if the licensed product during the royalty term is not covered by a licensed patent. Further, if within 24 months after the license agreement effective date, CureVac grants a sublicense to a third party for the development and commercialization of the licensed products, then CureVac will pay us a single-digit percentage of the total sublicense income that it receives to the extent that such income exceeds (i) the fee paid by CureVac under the Development and Option Agreement to identify a target for such license agreement and (ii) the milestone payments paid by CureVac under such license agreement. The fees, milestones and royalty payments for a non-exclusive license are 50% of the corresponding payments for an exclusive license.

The Development and Option Agreement had an initial term of eight years, unless earlier terminated or extended in accordance with its terms. Within 60 days prior to the expiration of the initial term, CureVac has the option to extend the initial term of the agreement on an annual basis for up to a total of three successive years upon payment of an annual non-refundable extension fee. CureVac has the right to terminate the agreement in full or on a program-by-program basis (i) upon a material breach by us that is not cured within a certain period, (ii) upon a change in control of Arcturus, or (iii) without cause upon 60 days’ notice to us. We have the right to terminate the agreement upon material breach by CureVac that is not cured within a certain period. Upon termination, all licenses granted under the Development and Option Agreement will terminate, but any license agreement entered into pursuant upon the identification of a target will remain in effect.

On February 11, 2019, we announced the termination of our obligations to CureVac for the preclinical development of ARCT-810, effective August 4, 2019, and the re-assumption of our worldwide rights thereto. On July 24, 2019, the Company and CureVac entered into an amendment to the Development and Option Agreement, pursuant to which we agreed to (i) shorten the time period during which CureVac may select potential targets to be licensed from the Company from eight years to four years, and (ii) reduce the overall number of maximum targets to be reserved and licensed to 10 targets. Additionally, we canceled our related Co-Development and Co-Commercialization agreement for developing and commercializing ARCT-810.

Other Collaboration Agreements

On December 6, 2016, we entered into a Research Agreement (as amended, the “Takeda Agreement”) with Takeda. Under the Takeda Agreement, we conducted a joint research program (the “Research Program”) with Takeda to discover siRNA medicines for the treatment of NASH. The program involved development of siRNA compounds formulated in LUNAR lipid-mediated delivery technology for in vivo studies. Pursuant to the Takeda Agreement, Takeda had a non-exclusive, worldwide sublicensable license to our technology until December 20, 2018 (the “Research Term”) for the purpose of conducting the Research Program. We also agreed not to engage in any research or development activities involving LUNAR and UNA oligomers for any NASH targets involved in the Research Program for two years after the Research Term.

On March 8, 2019, we entered into a subsequent Research Agreement with Takeda, which was subsequently amended on June 3, 2019 (as amended, the “New Takeda Agreement”). Under the New Takeda Agreement, Takeda received a non-exclusive, worldwide, sublicensable license to certain of our technology, including mRNA compounds formulated for LUNAR lipid-mediated delivery technology, for the purpose of conducting a joint research program on additional targets in in vitro and in vivo models of liver diseases (including NASH). Both Arcturus and Takeda have agreed not to participate in other research, internally or with a third party, on therapeutic mRNA molecules designed to express the selected targets. We also granted Takeda an exclusive option to negotiate a license to the product candidates determined to be of potential relevance as a result of the joint research program. The option lasts for a certain period of time following the delivery of the results of the research program. Funds remaining from the Takeda Agreement will be transferred to cover our activities under the New Takeda Agreement. If any remaining funds are unspent or uncommitted for expenditure upon completion of the current research program, then we will retain such funds.

We have a Research Collaboration and License Agreement with Providence Therapeutics Inc. (the “Providence Agreement”). The Providence Agreement provides for collaborative efforts to identify and optimize microRNA modulators or mimetics for the treatment of neoplastic diseases. In April 2017, the Providence

Agreement was amended to include mRNA for the treatment of neoplastic disease. In July 2018, the Providence Agreement was amended and restated to cover brain neoplasms, breast neoplasms and ovarian neoplasms.

Additionally, we have a Research and Nonexclusive License Agreement with Synthetic Genomics, Inc. (“Synthetic Genomics”), pursuant to which we granted Synthetic Genomics a nonexclusive, worldwide license to use our LUNAR lipid-mediated delivery to research, develop, manufacture and commercialize vaccines, but expressly excluding diagnosis, prophylaxis and treatment of respiratory disease viruses other than influenza. During 2019 Synthetic Genomics exercised its right to sublicence the LUNAR technology subject to the license to certain third parties.

Other Material Agreements

Protiva Agreement

On August 9, 2013, we entered into a Patent Assignment and License Agreement with Marina Biotech, Inc. (“Marina”), pursuant to which Marina assigned to us certain intellectual property, including patents, inventions and information related to UNA oligonucleotide therapeutics, as well as Marina’s rights and obligations under a License Agreement (the “Protiva Agreement”) with Protiva Biotherapeutics Inc. (“Protiva”), a wholly-owned subsidiary of Arbutus Biopharma Corporation. The intellectual property licensed from Marina is a significant component of our UNA oligomer chemistry platform. As partial consideration for the assignment from Marina, we granted Marina a royalty-free, fully-paid, irrevocable, worldwide, non-exclusive license to use the inventions, ideas and information embodied in the assigned patents to develop, make, use and sell chemical compounds intended for human and animal therapeutic uses (including certain rights to sublicense in connection with continuing research, development and/or commercialization). We also paid an upfront fee to Marina and agreed to maintain the assigned patents in certain countries.

Under the assigned Protiva Agreement, we granted Protiva a non-exclusive, irrevocable, perpetual, worldwide license with certain rights to sublicense (in connection with continuing research, development and/or commercialization) to exploit our patents, know-how and inventions relating to our technology for purposes of the development of human therapeutics. Upon achievement of certain development milestones with respect to each Protiva product directed to a specific gene target, Protiva will pay us milestone payments with an aggregate value of up to $3.25 million for each such product and target. If Protiva instead sublicenses the commercialization rights for a Protiva product, then it will pay us a percentage of sublicense revenues it receives from sublicensees, the amount of which payment depends on the development stage of such Protiva product at the time of sublicense. In addition, Protiva will pay us royalties on net sales of Protiva products during the royalty term. The royalties depend on the type of product and are on a country-by-country basis. For licensed Protiva products, royalties will be paid in a low single digit percentage on net sales for such product, subject to reduction on net sales in the event there is no patent coverage or generic products are introduced with respect to such product. A royalty reduction will apply if Protiva is required to license third party intellectual property to commercialize such product, subject to a cap on such reductions.

The Protiva Agreement for a particular Protiva product in a particular country will expire on a country-by-country basis upon the earlier of (i) the expiration of the royalty term for such product in such country, or (ii) the end of the calendar quarter in which sales in such country of generic products exceed sales of Protiva products in such country by a certain amount. Unless earlier terminated by its terms, the Protiva Agreement will expire in its entirety upon expiration of the last royalty term for any of our patents with respect to which Protiva has a license under the agreement. Protiva may terminate the Protiva Agreement for convenience in its entirety, or for a particular country or countries, upon ninety days’ prior written notice to us.

Alexion License Agreement

On February 17, 2021, we entered into an exclusive license agreement with Alexion Pharmaceuticals, Inc. (“Alexion”) pursuant to which Alexion granted to Arcturus Therapeutics, Inc. an exclusive, worldwide license to exploit certain specified Alexion patents. In accordance with the terms of the license agreement, and in exchange for the license, we issued 74,713 shares of our common stock to Alexion on February 19, 2021, which number of shares was based on a price of $66.92 per share. The price was determined based on the volume weighted average closing price of the Company’s common stock on The NASDAQ Global Market for the thirty trading days ending on February 17, 2021.

Cystic Fibrosis Foundation Agreement

On May 16, 2017, pursuant to a Development Program Letter Agreement (the “CFF Agreement”), CFF awarded us approximately $3.1 million to fund a development program to identify lead CFTR mRNA sequences and LUNAR formulations, demonstrate tolerability of LUNAR CFTR mRNA, and demonstrate translatability of aerosolized LUNAR (the “CFF Agreement”). The award will be received according to a milestone schedule and unused funds will be retained by CFF. We will use commercially reasonable efforts to conduct the development program and develop the product thereafter. The award includes a grant of rights to CFF know-how to assist us to research, develop, commercialize, make or otherwise exploit a product.

If the award results in a successful commercialized product, we will pay CFF (i) royalties on sales of the product up to a maximum of a single-digit multiple of the total award amount actually paid to us by CFF, and (ii) thereafter, a single-digit percentage of annual net sales. Further, in the event of a license, sale or other transfer of the product or our development program technology (including a change of control transaction), we will pay CFF a percentage of such license, sale of transfer payments actually received by us or our shareholders (subject to a royalty cap).

Pursuant to CFF’s interruption license right under the CFF Agreement, if we fail to use commercially reasonable efforts to develop a product for a certain time period before the first commercial sale of such product, CFF may, upon written notice and our failure to effectively deny or cure such interruption (as set forth in the CFF Agreement), exercise certain rights pursuant to procedures set forth in the CFF Agreement. CFF’s rights include, in certain cases, payments from us to CFF, or the grant of an exclusive (even as to us), worldwide license to CFF under our development program technology solely to the extent necessary to manufacture, have manufactured, license, use, sell, offer to sell, and support the product in the field of treatment of cystic fibrosis and other pulmonary diseases.

All inventions, data, know-how, information, results, analyses and other intellectual property rights resulting from the development program will be owned by us, and subject to certain exceptions, CFF has assigned and transferred to us all of its right, title, and interest in and to all inventions and other intellectual property resulting from the development program.

Either party may terminate the CFF Agreement for cause (e.g., material breach by the other party of its covenants or obligations).

On August 1, 2019, the Company and CFF amended the CFF Agreement. Pursuant to the amendment, (i) CFF will increase the amount it will award to advance LUNAR-CF to $15.0 million from approximately $3.2 million, (ii) the Company will provide $5.0 million in matching funds for remaining budgeted costs, (iii) the related disbursement schedule from CFF to us will be modified such that (a) $4.0 million was disbursed upon execution of the amendment, (b) $2.0 million will be disbursed within 30 days of the first day of each of January, April, July and October 2020 upon us invoicing CFF to meet project goals, and (c) the last payment of $3.0 million less the prior award previously paid out (approximately $2.3 million) will be disbursed upon us invoicing CFF to meet good manufacturing practices and submitting an IND application. The funds received from CFF will be recognized as contra research and development expense in proportion to the percentage covered by CFF of the overall budget.

Singapore Economic Development Board

On March 4, 2020, we were awarded a grant from the EDB to support the co-development of ARCT-021 with Duke-NUS Medical School. In exchange for the grant, we agreed to supply ARCT-021 to the EDB for use within Singapore and we retained the right to sell and market ARCT-021 outside of Singapore. We have agreed to pay Duke-NUS Medical School a low single digit royalty based on annual net sales of the vaccine in markets or jurisdictions outside of Singapore.

On October 2, 2020, we were awarded a grant from the EDB to support the further development of our LUNAR-COV19 vaccine candidate. The Grant provides for up to S$9.3 million (approximately US$6.7 million) to support the development of the vaccine candidate. The Grant is payable in two installments upon the achievement of certain milestones related to the progress of the development of the vaccine candidate. We received the first installment of approximately $3.6 million in the fourth quarter of 2020.

On November 7, 2020, we entered into a Manufacturing Support Agreement (the “Support Agreement”) with the EDB pursuant to which they agreed to make a term loan of up to S$62.1 million (subject to adjustment based on exchange rates) to the Company, subject to the satisfaction of customary deliveries, to support the development of

the LUNAR-COV19 vaccine candidate (the “Singapore Loan”). We elected to borrow the full amount available under the Support Agreement of S$62.1 million,or $46.6 million as a result of applicable exchange rates, on January 29, 2021. Subject to certain exceptions, the Singapore Loan is a limited recourse loan that is intended to be repaid solely through a royalty payment on sales of the LUNAR-COV19 vaccine candidate, with a portion of the proceeds on all such vaccine sales being applied on a quarterly basis to prepay outstanding principal and interest under the Singapore Loan. However, all unpaid principal and interest under the Singapore Loan will be due and payable five years after draw date, if net sales of the LUNAR-COV19 vaccine exceed a certain minimum threshold during this five year period or the Company obtains clearance to sell the vaccine in specified jurisdictions. Unpaid principal and interest under the Singapore Loan will also become due and payable upon an event of default under the Support Agreement. If any portion of the Singapore Loan is required to be forgiven pursuant to the terms of the Support Agreement, the EDB has the right to take ownership of certain raw materials and equipment that were purchased by the Company with proceeds of the Singapore Loan (the “Specified Assets”) and entered into a security agreement for the benefit of the EDB to provide that repayment of the Singapore Loan and related obligations are secured by a lien on the Specified Assets.

Israel Supply Agreement

On August 17, 2020, our wholly owned subsidiary entered into a definitive Supply Agreement (the “Supply Agreement”) with the Israeli MOH which provides for the supply of LUNAR-COV19 to the MOH. The MOH has elected to reserve delivery by us of doses of LUNAR-COV19 for an initial 500,000 vaccinations (the “Initial Reserve Doses”). The Supply Agreement also provides the MOH with the right to elect, in its discretion, to purchase additional doses of LUNAR-COV19 upon notice to us prior to specified dates at specified purchase prices. On October 14, 2020, we received a non-refundable first reserve payment of $12.5 million from the MOH. This first reserve payment is associated with a specified clinical trial milestone and was provided after a data review process during which the MOH had access to material preclinical and clinical data for our LUNAR-COV19 vaccine candidate.

Intellectual Property

Our business success depends in part on our ability to obtain and maintain intellectual property protection for our proprietary technologies, inventions and know-how, and on our ability to operate without infringing on the proprietary rights of others. We strive to protect our intellectual property through a combination of patents, trademarks, trade secrets, licensing agreements and confidentiality agreements with employees, advisors, consultants and contractors.

We rely on continuing technological innovation to strengthen our proprietary position in the field of nucleic acid medicines. Therefore, we plan to continue to file patent applications in jurisdictions around the world as we discover and develop novel nucleic acid technology platforms and novel nucleic acid therapeutic candidates. We cannot guarantee that future applications will be issued.

Our Patent Portfolio

As of March 1, 2021, we are the sole owner of over 209 patents and pending patent applications including 33 U.S. patents, 29 pending U.S. patent applications, 7 pending international applications under Patent Cooperation Treaty (“PCT”), 68 foreign patents and 72 pending foreign patent applications. The claims of these patents and pending applications include compositions of matter, methods of use, manufacturing process and drug product formulations. These claims cover the use of our core platform technologies including the use of LUNAR and lipid components to deliver nucleic acids, the use of UNA oligomers for therapeutics and reagents, the use of LNA oligomers for therapeutics, specific nucleic acid modalities for treating disease, as well as our proprietary technology regarding the design, manufacture, and purification of nucleic acids for use in therapy. Claims also cover the composition of matter, formulation, and use of our therapeutic candidates to prevent and/or treat target diseases including OTC deficiency, CF, HBV, and COVID-19. Our issued patents are expected to expire between 2028 and 2038, without taking into account any possible patent term extensions.

Our patent portfolio includes the following patents and pending patent applications for LUNAR, UNA and the use of LNA in certain RNA medicines:

Patent Terms

The term of individual patents depends on the countries in which they are obtained. The patent term is 20 years from the earliest effective date of filing a non-provisional patent application in most of the countries in which we file.

Under the Drug Price Competition and Patent Term Restoration Act (also known as the Hatch-Waxman Act), U.S. patent holders can apply for a patent term extension to compensate for the patent term lost during the FDA regulatory review process. Patent extension is only available for patents covering FDA-approved drugs. The extension can be up to five years beyond the original expiration date of the patent and cannot extend a patent term for longer than 14 years from the date of product approval. Only one patent extension is granted per approved drug. Similar provisions may be available in foreign jurisdictions including Europe. We intend to apply for patent term extensions where possible.

Trade Secrets

We also rely on trade secrets to protect our product candidates. Our commercial success also depends in part on our non-infringement of the patents or proprietary rights of third parties. For a more comprehensive discussion of the risks related to our intellectual property, please see Item 1A “Risk Factors” – “Risks Related to Our Intellectual Property.”

The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions.

Our success depends in part on our ability to:

• preserve trade secrets;

• prevent third parties from infringing upon our proprietary rights; and

Certain Risks to Intellectual Property

We also protect our proprietary technology and processes, in part, by confidentiality and invention assignment agreements with our employees, consultants, scientific advisors and other contractors. These agreements may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our employees, consultants, scientific advisors or other contractors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

Product Approval and Government Regulation

Government authorities in the United States, at the federal, state and local level, and other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of products such as those we are developing. Any product candidate that we develop must be approved by the FDA before it may be legally marketed in the United States and by the appropriate foreign regulatory agency before it may be legally marketed in foreign countries.

U.S. Drug Development Process

In the United States, the development, manufacturing, and marketing of human drugs and vaccines are subject to extensive regulation. The FDA regulates drugs under the Federal Food, Drug and Cosmetic Act (“FDCA”) and implementing regulations, and biological products, including vaccines, under provisions of the FDCA and the Public Health Service Act. Drugs and vaccines are also subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to administrative or judicial civil or criminal sanctions. FDA sanctions could include refusal to approve pending applications, withdrawal of an approval, clinical hold, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, debarment, restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The process required by the FDA before a drug or biological product may be marketed in the United States generally involves the following:

• FDA review and approval of the NDA or BLA.

The lengthy process of seeking required approvals and the continuing need for compliance with applicable statutes and regulations require the expenditure of substantial resources and approvals are inherently uncertain.

Before testing any compounds with potential therapeutic value in humans, the drug candidate enters the preclinical study stage. Preclinical tests, also referred to as nonclinical studies, include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and activity of the drug candidate. The conduct of the preclinical tests must comply with federal regulations and requirements including GLP. The sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA imposes a clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The FDA may also impose clinical holds on a drug candidate at any time before or during clinical trials due to safety concerns or non-compliance. Accordingly, we

cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin, or that, once begun, issues will not arise that suspend or terminate such trial.

Clinical trials involve the administration of the drug candidate to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s direct control. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject safety. Each protocol must be submitted to the FDA as part of the IND. Clinical trials must be conducted in accordance with the FDA’s regulations comprising the good clinical practices requirements. Further, each clinical trial must be reviewed and approved by an independent institutional review board (“IRB”) at or servicing each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed consent that must be signed by each clinical trial subject or his or her legal representative and provide oversight for the clinical trial until completed.

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

Post-approval clinical trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These clinical trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication.

Annual progress reports detailing the results of the clinical trials must be submitted to the FDA and written IND safety reports must be promptly submitted to the FDA and the investigators for serious and unexpected adverse events or any finding from tests in laboratory animals that suggests a significant risk for human subjects. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA or the sponsor or its data safety monitoring board may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.

Concurrently with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final drug. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.

U.S. review and approval processes

The results of product development, nonclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling and other relevant information are submitted to the FDA as part of an NDA or BLA requesting approval to market the product. The submission of an NDA or BLA is subject to the payment of substantial user fees; a waiver of such fees may be obtained under certain limited circumstances.

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

The FDA reviews all NDAs or BLAs submitted to determine if they are substantially complete before it accepts them for filing. If the FDA determines that an NDA or BLA is incomplete or is found to be non-navigable, the filing may be refused and must be re-submitted for consideration. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA or BLA. Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act (“PDUFA”), the FDA has 10 months from acceptance of filing in which to complete its initial review of a standard NDA or BLA and respond to the applicant, and six months from acceptance of filing for a priority NDA or BLA. The FDA does not always meet its PDUFA goal dates. The review process and the PDUFA goal date may be extended by three months or longer if the FDA requests or the NDA or BLA sponsor otherwise provides additional information or clarification regarding information already provided in the submission before the PDUFA goal date.

After the NDA or BLA submission is accepted for filing, the FDA reviews the NDA or BLA to determine, among other things, whether the proposed product is safe and effective for its intended use, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’s identity, strength, quality and purity. The FDA may refer applications for novel drug or biological products or drug or biological products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. During the drug approval process, the FDA also will determine whether a risk evaluation and mitigation strategy (“REMS”) is necessary to assure the safe use of the drug. If the FDA concludes a REMS is needed, the sponsor of the NDA or BLA must submit a proposed REMS; the FDA will not approve the NDA or BLA without a REMS, if required.

Before approving an NDA or BLA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. The FDA requires vaccine manufacturers to submit data supporting the demonstration of consistency between manufacturing batches, or lots. The FDA works together with vaccine manufacturers to develop a lot release protocol, the tests conducted on each lot of vaccine post-approval. Additionally, before approving an NDA or BLA, the FDA will typically inspect the sponsor and one or more clinical sites to assure that the clinical trials were conducted in compliance with IND study requirements. If the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable it will outline the deficiencies in the submission and often will request additional testing or information.

The NDA or BLA review and approval process is lengthy and difficult and the FDA may refuse to approve an NDA or BLA if the applicable regulatory criteria are not satisfied or may require additional clinical data or other data and information. Even if such data and information is submitted, the FDA may ultimately decide that the NDA or BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data. The FDA will issue a complete response letter if the agency decides not to approve the NDA or BLA. The complete response letter usually describes all of the specific deficiencies in the NDA or BLA identified by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical trials. Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition for approval. If a complete response letter is issued, the applicant may either submit new information, addressing all of the deficiencies identified in the letter, or withdraw the application.

If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. In addition, the FDA may require post marketing clinical trials, sometimes referred to as Phase 4

clinical trials, which are designed to further assess a product’s safety and effectiveness and may require testing and surveillance programs to monitor the safety of approved products that have been commercialized.

EUA Approval

The Commissioner of the FDA, under delegated authority from the Secretary of the U.S. Department of Health and Human Services (“DHHS”) may, under certain circumstances, issue an EUA that would permit the use of an unapproved drug product or unapproved use of an approved drug product. Before an EUA may be issued, the Secretary must declare an emergency based on one of the following grounds:

In order to be the subject of an EUA, the FDA Commissioner must conclude that, based on the totality of scientific evidence available, it is reasonable to believe that the product may be effective in diagnosing, treating or preventing a disease attributable to the agents described above, that the product’s potential benefits outweigh its potential risks and that there is no adequate approved alternative to the product.

Although an EUA cannot be issued until after an emergency has been declared by the Secretary of DHHS, the FDA strongly encourages an entity with a possible candidate product, particularly one at an advanced stage of development, to contact the FDA center responsible for the candidate product before a determination of actual or potential emergency. Such an entity may submit a request for consideration that includes data to demonstrate that, based on the totality of scientific evidence available, it is reasonable to believe that the product may be effective in diagnosing, treating, or preventing the serious or life-threatening disease or condition. This is called a pre-EUA submission and its purpose is to allow FDA review considering that during an emergency, the time available for the submission and review of an EUA request may be severely limited.

Post-approval requirements

Any drug or biological products for which we or our strategic alliance partners receive FDA approvals are subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and distribution requirements, complying with certain electronic records and signature requirements and complying with FDA promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, promoting drugs for uses or in patient populations that are not described in the drug’s approved labeling (known as “off-label use”), industry-sponsored scientific and educational activities, and promotional activities involving the internet. Failure to comply with FDA requirements can have negative consequences, including adverse publicity, enforcement letters from the FDA, mandated corrective advertising or communications with doctors, and civil or criminal penalties. Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not market or promote such off-label uses.

Manufacturers of our product candidates are required to comply with applicable FDA manufacturing requirements contained in the FDA’s cGMP regulations. cGMP regulations require among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation. Following approval, the FDA continues to monitor vaccine quality through real-time monitoring of lots by requiring manufacturers to submit certain information for each vaccine lot. Vaccine manufacturers may only distribute a lot following release by the FDA. Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. Discovery of problems with a product after approval may result in

restrictions on a product, manufacturer, or holder of an approved NDA or BLA, including withdrawal of the product from the market. In addition, changes to the manufacturing process generally require prior FDA approval before being implemented and other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.

Regulation in Europe and Other Regions

In addition to regulations in the United States, we and our strategic alliance partners are subject to a variety of regulations in other jurisdictions governing, among other things, clinical trials and any commercial sales and distribution of our products.

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

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

To obtain regulatory approval of an investigational drug or biological product under European Union regulatory systems, we or our strategic alliance partners must submit a marketing authorization application. The application in the United States is similar to that required in the European Union, with the exception of, among other things, country-specific document requirements.

For other countries outside of the European Union, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, again, the clinical trials are conducted in accordance with GCPs and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.

Competition

Our Business in General

We believe that our scientific knowledge and expertise in nucleic acid-based therapies provide us with competitive advantages over the various companies and other entities that are attempting to develop similar treatments. However, we face competition at the technology platform and therapeutic indication levels from both large and small biopharmaceutical companies, academic institutions, governmental agencies and public and private research institutions. Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

Our success will be based in part upon our ability to identify, develop and manage a portfolio of product candidates that are safer and more effective than competing products in the treatment of our targeted patients. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, are more convenient or are less expensive than any products we may develop.

We are aware of several other companies that are working to develop nucleic acid medicines, including gene therapy, gene editing, mRNA, siRNA, and antisense therapeutics. Many of these companies, such as the newly formed Genevant, are also developing nucleic acid delivery platforms which compete with LUNAR technology.

Below we have included what we believe to be the competitive landscape for certain of the medicines that we currently have in development.

ARCT-021 (LUNAR-COV19 Vaccine)

We consider the following medicines as competitors or future competitors to ARCT-021.

Drug Company Drug Description Phase Administration/Dosing Number of Doses

mRNA-1273 Moderna mRNA-based Vaccine Phase 3 and EUA i.m. 2(1)

NVX-CoV2373 Novavax Recombinant nanoparticle technology Phase 3 i.m. 2

(1)Comirnaty (Pfizer, BioNTech, Fosun Pharma) is a two-dose regimen at 30 μg per dose. mRNA-1273 (Moderna) is a two-dose regimen at 100 μg per dose. In our current Phase 2 trial for ARCT-021, we are exploring the following doses and regimens: 5 μg ARCT-021, two dose regimen and 7.5 μg ARCT-021, as one- and two-dose regimens.

Despite the receipt of emergency use approval (EUA) by several of our competitors for their COVID-19 vaccine, we believe there are significant commercial opportunities globally.

ARCT-810 (LUNAR-OTC)

We consider the following medicines as competitors or future competitors to ARCT-810.

Drug Company Drug Description Phase Administration/Dosing

ARCT-032 (LUNAR-CF)

We consider the following medicines as competitors or future competitors to ARCT-032.

Drug Company Drug Description Phase Administration/Dosing

MRT5005 Translate Bio CFTR-encoded mRNA Phase 1/2 Weekly or daily inhalation

Employees

As of December 31, 2020, we had 118 employees, all of which were full-time. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to be good.

Available Information

Our Internet address is www.arcturusrx.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statements, and all amendments thereto, are available free of charge on our Internet website. These reports are posted on our website as soon as reasonably practicable after they are electronically filed with the SEC. The public may read and copy any materials that we file with the SEC electronically through the SEC website (www.sec.gov). The information contained on the SEC’s website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered to be part thereof.

Item 1A. Risk Factors

In conducting our business, we face many risks that may interfere with our business objectives. Some of these risks could materially and adversely affect our business, financial condition and results of operations. In particular, we are subject to various risks resulting from inherent unknowns and uncertainties in the drug development process, as well as changing economic, political, industry, regulatory, business and financial conditions. The risks and uncertainties described below are not the only ones we face.

You should carefully consider the following factors and other information in this annual report before you decide to invest in our common stock. If any of the negative events referred to below occur, our business, financial condition and results of operations could suffer. In any such case, the trading price of our common stock could decline, and you may lose all or part of your investment.

Risk Factor Summary

The following is a summary of certain important factors that may make an investment in our company speculative or risky. You should carefully consider the fuller risk factor disclosure set forth in this Annual Report, in addition to the other information herein, including the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes.

We have a limited operating history, have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.

We have never generated any revenue from product sales, have generated only limited revenue since inception, and may never be profitable.

The recent coronavirus outbreak has caused interruptions or delays of our business plan and may have a significant adverse effect on our business.

We may need to seek and secure significant funding through financings or from other sources to complete Phase 3 studies of ARCT-021, our LUNAR-COV19 vaccine candidate.

If we are unable to generate successful results in our Phase 2 clinical trial for ARCT-021, our LUNAR-COV19 vaccine candidate, or experience significant delays in doing so, or are unable to develop a vaccine that does not require a booster shot, we may be unable to market and sell a COVID-19 vaccine.

There is significant competition in the development of a vaccine against COVID-19, and many of our competitors have substantially greater financial, scientific and other resources than us.

We are relying on advance purchase commitments of ARCT-021, our LUNAR-COV19 vaccine candidate, from certain foreign governmental agencies.

Our ability to produce a successful vaccine may be curtailed by one or more government actions or interventions, which may be more likely during a global health crisis such as COVID-19.

Our business may be harmed if we are unable to generate successful and timely clinical trials for our product candidates.

The approach we are taking to discover and develop drugs is novel and may never lead to marketable products.

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

We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates if our clinical trials are not successful.

We may find it difficult to identify and enroll patients in our clinical studies due to the rollout of competing vaccines for COVID-19. In addition, the rollout of competing vaccines for COVID-19 may make it more difficult for us to achieve approval of certain clinical trial designs for our LUNAR-COV19 vaccine. Difficulty in enrolling patients, or in seeking approval for certain clinical trial designs could delay or prevent clinical studies of certain of our product candidates.

Any of our product candidates may cause undesirable side effects or have other properties impacting safety that could delay or prevent their regulatory approval or limit the scope of any approved label or market acceptance.

Even if we complete the necessary preclinical studies and clinical trials, we cannot predict whether or when we will obtain regulatory approval to commercialize a product candidate.

Even if we obtain regulatory approval for a product candidate, we will still face extensive regulatory requirements and our products may face future development and regulatory difficulties.

We may fail to capitalize on programs or product candidates that may be more profitable or for which there is a greater likelihood of success than a particular program where we allocate resources.

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

If certain third-party alliances are unsuccessful or are terminated, we may be unable to commercialize certain product candidates and we may be unable to generate revenues from our development programs.

Certain agreements with our alliance partners may impair or prevent entirely our ability to generate revenues from the development, manufacture and commercialization of certain product candidates.

We rely on third-party manufacturers to produce the supply of our product candidates, and we intend to rely on third parties to produce future clinical supplies of product candidates.

We rely on limited sources of supply for the drug substance of product candidates and any disruption in the chain of supply may cause a delay in developing and commercializing these product candidates.

Manufacturing issues may arise that could increase product and regulatory approval costs or delay commercialization.

If we are unable to obtain or protect intellectual property rights related to our future products and product candidates, we may not be able to compete effectively in our markets.

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

We could lose license rights that are important to our business for failure to comply with such agreements under which we license intellectual property.

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

If our alliance partners are unable or unwilling to perform in accordance with the terms of our agreements, our potential to generate future revenue from these programs would be significantly reduced

If we are unable to obtain regulatory approvals for a manufacturing facility for ARCT-021, our LUNAR-COV19 vaccine candidate, we may experience delays in product development, clinical trials, regulatory approval and commercial distribution.

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

The commercial success of our product candidates will depend upon the acceptance of these product candidates by the medical community, including physicians, patients and healthcare payors.

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 revenues.

If we obtain approval to commercialize any approved products outside of the United States, a variety of risks associated with international operations could materially adversely affect our business.

Coverage and adequate reimbursement may not be available for our product candidates, if approved.

We face potential product liability, and, if successful claims are brought against us, we may incur substantial liability and costs.

RISKS RELATED TO OUR FINANCIAL CONDITION AND NEED FOR ADDITIONAL CAPITAL

We have a limited operating history, have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.

We are a global clinical-stage messenger RNA medicines company with a limited operating history. Since inception, our operations have been primarily limited to acquiring and licensing intellectual property rights, developing our nucleic acid product platform, undertaking basic research around nucleic acid targets and conducting studies for our initial programs. We have not yet obtained regulatory approval for any product candidates. Consequently, any predictions about our future success or viability, or any evaluation of our business and prospects, may not be accurate.

We have incurred losses in each year since our inception. Our net losses were $72.1 million and $26.0 million for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, we had an accumulated deficit of $143.8 million.

We have devoted most of our financial resources to research and development, including our preclinical and clinical development activities. To date, we have funded our operations primarily through upfront payments, research funding and milestone payments from strategic alliances and collaborations, and through the sale of equity and convertible securities. We expect to continue to incur substantial and increased expenses, losses and negative cash flows as we expand our development activities and advance our programs. If our product candidates are not successfully developed or commercialized, including because of a lack of capital, or if we do not generate enough revenue following marketing approval, we will not achieve profitability and our business may fail. Even if we or our strategic alliance partners successfully obtain regulatory approval to market a product candidate, our revenues will also depend upon the size of any markets in which our product candidates have received market approval and our ability to achieve sufficient market acceptance and adequate market share for our products.

We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. The net losses we incur may fluctuate significantly from quarter to quarter. We anticipate that our expenses will increase substantially if and as we:

• seek to identify additional targets and product candidates;

• acquire or in-license other products and technologies;

• advance product candidates into clinical trials;

• maintain, expand and protect our intellectual property portfolio;

We have never generated any revenue from product sales, have generated only limited revenue since inception, and may never be profitable.

Our ability to generate revenue and achieve profitability depends on our ability, alone or with strategic alliance partners, to successfully complete the development of, obtain the necessary regulatory approvals for and commercialize our product candidates. Our ability to generate revenues from product sales depends heavily on our success in:

• completing our research and development of product candidates;

• maintaining, protecting and expanding our intellectual property portfolio; and

• attracting, hiring and retaining qualified personnel.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to predict the timing or amount of increased expenses and when we will be able to achieve or maintain profitability, if ever. In addition, our expenses could increase beyond expectations if we are required by the FDA, or other foreign regulatory agencies to perform studies and trials in addition to those that we currently anticipate.

Even if one or more of the product candidates that we independently develop is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved product. Even if we are able to generate revenues from the sale of any approved products, we may not become profitable and may need to obtain additional funding to continue operations.

The recent coronavirus outbreak has caused interruptions or delays of our business plan and may have a significant adverse effect on our business.

In December 2019, a strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China, and on March 12, 2020, the World Health Organization declared COVID-19 to be a pandemic. In an effort to contain and mitigate the spread of COVID-19, many countries, including the United States, Canada and China, have imposed unprecedented restrictions on travel, quarantines, and other public health safety measures. The extent to which the pandemic may impact our business will depend on future developments, which are highly uncertain and cannot be predicted, but the development of clinical supply materials have been and will continue to be delayed and enrollment of patients in our study for ARCT-810 (LUNAR-OTC) and ARCT-021 (LUNAR-COV19 Vaccine) may be delayed or suspended, as hospitals and clinics in areas where we are conducting trials shift resources to cope with the COVID-19 pandemic and may limit access or close clinical facilities due to the COVID-19 pandemic. Additionally, if our trial participants are unable to travel to our clinical study sites as a result of quarantines or other restrictions resulting from the COVID-19 pandemic, we may experience higher drop-out rates or delays in our clinical studies.

Government-imposed quarantines and restrictions may also require us to temporarily suspend or terminate activity at our clinical sites. Furthermore, if we determine that our trial participants may suffer from exposure to COVID-19 as a result of their participation in our clinical trials, we may voluntarily terminate certain clinical sites as a safety measure until we reasonably believe that the likelihood of exposure has subsided. As a result, our expected development timelines for our product candidates may be negatively impacted. We cannot predict the ultimate continued impact of the COVID-19 pandemic as consequences of such an event are highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, our clinical studies or as a whole; however, the COVID-19 outbreak may materially disrupt or delay our business operations, further divert the attention and efforts of the medical community to coping with COVID-19, disrupt the marketplace in which we operate, and/or have a material adverse effect on our operations.

Notwithstanding the ongoing rollout of vaccines, it will still take a substantial amount of time to produce, distribute and administer the vaccines worldwide and, as a result, to achieve broad protection of the global population. It is also still unclear if the vaccines will enable adequate protection, as (i) some vaccinated individuals

may still become ill or transmit the virus, (ii) there are individuals who may refuse to be vaccinated or who cannot be vaccinated due to pre-existing conditions, (iii) it is unclear how long the vaccine protection will last, and (iv) genetic mutations of the virus may have an impact on the efficacy of available vaccines.

Moreover, the various precautionary measures taken by many governmental authorities around the world in order to limit the spread of the coronavirus has had and may continue to have an adverse effect on the global markets and global economy generally, including on the availability and pricing of employees, resources, materials, manufacturing and delivery efforts and other aspects of the global economy. There have been business closures and a substantial reduction in economic activity in countries that have had significant outbreaks of COVID-19. Significant uncertainty remains as to the potential impact of the COVID-19 pandemic on the global economy as a whole. It is currently not possible to predict how long the pandemic will last or the time that it will take for economic activity to return to prior levels. The COVID-19 pandemic could materially disrupt our business and operations, interrupt our sources of supply, hamper our ability to raise additional funds or sell our securities, or continue to slow down the overall economy.

We expect that we will need to raise additional capital, which may not be available on acceptable terms, or at all.

Developing pharmaceutical products, including conducting studies and clinical trials, is expensive. We expect our research and development expenses to substantially increase in connection with our ongoing activities, particularly as we advance our product candidates towards or through clinical trials. We may need to raise additional capital to support our operations and such funding may not be available to us on acceptable terms, or at all. As of December 31, 2020, we had unrestricted cash and cash equivalents of $462.9 million. We cannot provide assurances that our plans will not change or that changed circumstances will not result in the depletion of our capital resources more rapidly than we currently anticipate. For example, our trials may encounter technical or other difficulties. Additionally, our strategic alliance partners may not elect to pursue the development and commercialization of any of our product candidates that are subject to their respective strategic alliance agreements with us. Any of these events may increase our development costs more than we expect. In order to support our long-term plans, we may need to raise additional capital or otherwise obtain funding through additional strategic alliances if we choose to initiate preclinical or clinical trials for new product candidates other than programs currently partnered. In any event, we will require additional capital to obtain regulatory approval for, and to commercialize, future product candidates.

A significant portion of our current cash balance of $462.9 million along with the $46.6 million from the Singapore Loan is expected to be utilized during fiscal year 2021 to fund (i) the Phase 2 trial and anticipated Phase 3 trial of our current LUNAR-COV19 vaccine candidate, (ii) the continued Phase 1 trial and anticipated Phase 2 trial of ARCT-810, our LUNAR-OTC candidate, (iii) advancing our new LUNAR-FLU program toward submission of an IND, and (iv) other programs and administrative costs.

The Phase 3 trial of our LUNAR-COV19 vaccine candidate is expected to be primarily or exclusively funded through our cash reserves. If we achieve EUA approval to market our LUNAR-COV19 vaccine candidate, we will need to raise additional funds through equity transactions, additional debt or prepayments from potential customers, among other options, to fund commercialization of LUNAR-COV19.

Any additional fundraising efforts may divert our management from our day-to-day activities, which may adversely affect our ability to develop and commercialize future product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. If we are unable to raise additional capital when required or on acceptable terms, we may be required to:

If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we will be prevented from pursuing development and commercialization efforts, which will have a material adverse effect on our business, operating results and prospects.

We will need to seek and secure significant funding through financings or from other sources to complete Phase 3 studies of ARCT-021, our LUNAR-COV19 vaccine candidate.

As of December 31, 2020, we had approximately $463.0 million in cash and cash equivalents. We expect that our existing cash and cash equivalents will be sufficient to fund our current operations through at least the next twelve months. If we have encouraging results from our current trial, we will need to seek additional funds sooner than planned, through public or private equity or debt financings, structured financings, government or other third-party funding, sales of assets, marketing and distribution arrangements, other collaborations and licensing arrangements, or a combination of these approaches. We will require additional capital to obtain regulatory approval for, and to commercialize ARCT-021.

We are exposed to interest rate risk, including under our loan agreements.

We are exposed to market risk from changes in interest rates. Exposure to interest rate risk results from our debt obligations, including the Loan Agreement entered into on October 12, 2018 by our wholly-owned subsidiary, Arcturus Therapeutics, Inc., with Western Alliance Bank (the “Western Loan Agreement”). The Western Loan Agreement bears a variable interest rate of 1.25% above the prime rate published by the western edition of the Wall Street Journal. As of December 31, 2020, we had $15.1 million outstanding under the Western Loan Agreement. If we were to experience a 10% adverse change in the prime rate referenced above, the annual effect such change would have on our statement of operations, based on the amount we had outstanding as of December 31, 2020, under the Western Loan Agreement, would be approximately $26,000.

Additionally, on November 7, 2020, we entered into a Manufacturing Support Agreement with the EDB. Pursuant to the Manufacturing Support Agreement, the EDB agreed to make a term loan of up to S$62.1 million, subject to the satisfaction of customary deliveries, to support the manufacture of the LUNAR-COV19 vaccine candidate (the “Singapore Loan”). The Singapore Loan accrues interest at a rate of 4% per annum calculated on a daily basis. We elected to borrow the full amount available under the Support Agreement of S$62.1 million, or $46.6 million, as a result of applicable exchange rates, on January 29, 2021.

Our indebtedness could materially and adversely affect our business, financial condition and results of operations.

Agreements with our lenders, including with Western Alliance Bank, create several limitations on us, including but not limited to:

Our ability to comply with these covenants in future periods will depend on our financial and operating performance, which in turn will be subject to economic conditions and to financial, market and competitive factors, many of which are beyond our control. Any of these factors or others described in the Western Loan Agreement could materially and adversely affect our business, financial condition and results of operations.

Our debt contains customary default clauses, a breach of which may result in acceleration of the repayment of some or all of this debt.

The Western Loan Agreement contains customary default clauses. In the event we were to default on our obligations under our debt and were unable to cure or obtain a waiver of such default, the repayment of our debt may be accelerated. If such acceleration were to occur, we would be required to secure alternative sources of equity or debt financing to be able to repay the debt. Alternative financing may not be available on terms satisfactory to us, or at all. New debt financing may require the cooperation and agreement of our existing lenders. If acceptable alternative financing were unavailable, we would have to consider alternatives to fund the repayment of the debt, which could materially and adversely affect our business, financial condition and results of operations.

RISKS RELATED TO THE DISCOVERY AND DEVELOPMENT OF PRODUCT CANDIDATES

We recently commenced a Phase 2 clinical trial for our COVID-19 vaccine candidate, ARCT-021. If we are unable to generate successful results, experience significant delays in doing so, or are unable to develop a vaccine that does not require a booster shot, we may be unable to market and sell a COVID-19 vaccine.

We recently commenced a Phase 2 trial of ARCT-021 and expect to commence a Phase 3 trial in the second quarter of 2021. We anticipate that the Phase 3 trial will continue through 2021, and we plan to continue to monitor subjects in the Phase 3 trial into 2022 (whether or not we receive emergency use authorization for ARCT-021 during 2021). We will need to identify additional funding sources to continue the Phase 3 trial. The data received to date, although providing sufficient information to allow us to proceed further is not complete enough to provide conclusive evidence with respect to safety and potential efficacy of ARCT-021. Our IND application to proceed with our Phase 2 clinical study was accepted by the HSA in December 2020, and by the FDA in January 2021. We are positioned to manufacture finished doses of ARCT-021 in the first quarter of 2021 for stockpiling purposes. Clinical trial results are inherently uncertain, and a significant portion of our success and business prospects depend on the progress of this program. Our failure to demonstrate safety or obtain positive clinical trial results, inability to meet the expected timeline for release of data for this trial, or failure to successfully develop a single-dose vaccine that does not require a booster shot could have an adverse effect on our business operations and financial condition. Furthermore, we will not have a detailed understanding of the efficacy of ARCT-021 until infection of a sufficient number of subjects in the placebo group of a Phase 3 clinical trial, enrollment for which may be delayed by rollout of competing vaccines for COVID-19, competing clinical trials and the refusal of certain countries’ regulatory authorities to allow placebo-controlled trials for COVID-19 vaccine candidates. If our data is not positive or inconclusive, we may not be able to continue our studies or identify additional funding to continue the studies. No assurance can be given that the results of the trials will produce adequate results to allow us to commence or continue expected trials or that that adequate efficacy will be demonstrated such that ARCT-021 will be a viable commercial product.

There is significant competition in the development of a vaccine against COVID-19, and many of our competitors have substantially greater financial, scientific and other resources than us, and are further along in the development of their COVID-19 vaccine candidates.

A large number of vaccine manufacturers, academic institutions and other organizations currently have programs to develop COVID-19 vaccine candidates and may be further along in development of their vaccine candidates. While we are not aware of all of our competitors’ efforts, there are reports that Johnson & Johnson/Janssen, Pfizer, GlaxoSmithKline, Moderna, Sanofi, Inovio, AstraZeneca and many other companies are all in various stages of developing vaccine candidates against COVID-19. In particular, Pfizer, Moderna and Johnson & Johnson have received emergency use authorization from the FDA for their COVID-19 vaccines and are already commercializing them and have vaccinated millions of people.

Despite funding provided to us to date, many of our competitors pursuing vaccine candidates have significantly greater product candidate development, manufacturing and marketing resources than we do. Larger pharmaceutical and biotechnology companies have extensive experience in clinical testing and obtaining regulatory approval for their products, and may have the resources to heavily invest to accelerate discovery and development of their vaccine candidates. Our business could be materially and adversely affected by our competitors commercialization of their vaccines before we complete development and seek approval for our vaccine candidate; if they develop and commercialize one or more COVID-19 vaccines that are safer, more effective, have fewer or less severe side effects, have broader market acceptance, are more convenient or are less expensive than any vaccine candidate that we may develop; or if we are unable to achieve a competitive advantage by successfully developing a single-dose vaccine that does not require a booster shot. Furthermore, if any competitors are successful in producing a more efficacious vaccine or other treatment for COVID-19, or if any competitors are able to manufacture and distribute any such vaccines or treatments with greater efficiency, there may be a diversion of potential governmental and other funding away from us and toward such other parties.

We are relying on advance purchase commitments of ARCT-021, our LUNAR-COV19 vaccine candidate, from certain foreign governmental agencies.

Although we have previously raised capital to support the development and manufacture of our LUNAR-COV19 vaccine, we must also secure additional funding through contractual arrangements with third parties. We may be unable to enter into such arrangements on favorable terms, or at all, which would adversely affect our ability to develop, manufacture and distribute a potential vaccine.

Our ability to produce a successful vaccine may be curtailed by one or more government actions or interventions, which may be more likely during a global health crisis such as COVID-19.

Given the significant global impact of the COVID-19 pandemic, it is possible that one or more government entities may take actions that directly or indirectly have the effect of diminishing some of our rights or opportunities with respect to LUNAR-COV19 and the economic value of a COVID-19 vaccine to us could be limited. In the United States, the Defense Production Act of 1950, as amended (the “Defense Production Act”) gives the U.S. government rights and authorities that may directly or indirectly diminish our own rights or opportunities with respect to LUNAR-COV19 and the economic value of a COVID-19 vaccine to us could be limited. Our third-party service providers may be impacted by government entities potentially invoking the Defense Production Act or other potential restrictions to all or a portion of services they might otherwise offer. Government entities imposing restrictions or limitations on our third-party service providers may require us to obtain alternative service sources for LUNAR-COV19. If we are unable to timely enter into alternative arrangements, or if such alternative arrangements are not available on satisfactory terms, we will experience delays in the development or production of LUNAR-COV19, increased expenses, and delays in potential distribution or commercialization of LUNAR-COV19, if approved.

Preclinical and clinical studies of our product candidates may not be successful. If we are unable to generate successful results from preclinical and clinical studies of our product candidates, or experience significant delays in doing so, our business may be materially harmed.

We have no products approved for commercial marketing and all of our product candidates are in preclinical or clinical development. Other than our LUNAR-COV19 vaccine candidate and LUNAR-OTC, none of our product candidates have ever been tested in a human subject. Our ability to achieve and sustain profitability depends on obtaining regulatory approvals for and, if approved, successfully commercializing our product candidates, either alone or with third parties. Before obtaining regulatory approval for the commercial distribution of our product candidates, we or an existing or future collaborator must conduct extensive preclinical studies and clinical trials to demonstrate the safety and efficacy of our product candidates.

The success of our product candidates will depend on several factors, including the following:

• receipt of marketing approvals from applicable regulatory authorities;

If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully complete the development or commercialization of our product candidates, which would materially harm our business.

The approach we are taking to discover and develop drugs is novel and may never lead to marketable products.

ARCT US Equity

ARCT · 10-K · period ended 2020-12-31

Item 1. Business

Item 1A. Risk Factors

ARCT US Equity☆

ARCT · 10-K · period ended 2020-12-31

Item 1. Business

Item 1A. Risk Factors

ARCT US Equity