CALC US Equity☆

10-K

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2022

OR

Commission File Number 001-39538

GRAYBUG VISION, INC.

(Exact name of Registrant as specified in its Charter)

274 Redwood Shores Parkway, P.O. Box 144

Redwood City, CA94065

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (650) 487-2805

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

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

Common Stock, par value $0.0001 per share GRAY The Nasdaq Global Market

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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ 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. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

As of June 30, 2022, the last business day of the Registrant’s most recently completed second fiscal quarter the aggregate market value of common stock held by non-affiliates of the Registrant computed by reference to the closing price of the Registrant’s common stock on June 30, 2022 was approximately $13.0 million. Shares of common stock held by each executive officer, director and their affiliated holders have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of shares of the Registrant’s common stock outstanding as of March 3, 2023 was 21,997,030.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Definitive Proxy Statement relating to the 2022 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent stated herein. The Definitive Proxy Statement will be filed within 120 days of the Registrant’s fiscal year ended December 31, 2022. Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as part of this Form 10-K.

Table of Contents

Page

PART I

Item 1. Business 4

Item 1A. Risk Factors 19

Item 1B. Unresolved Staff Comments 62

Item 2. Properties 62

Item 3. Legal Proceedings 62

Item 4. Mine Safety Disclosures 62

PART II

Item 6. [Reserved] 64

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 75

Item 8. Financial Statements and Supplementary Data 76

Item 9A. Controls and Procedures 100

Item 9B. Other Information 100

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 100

PART III

Item 10. Directors, Executive Officers and Corporate Governance 101

Item 11. Executive Compensation 101

Item 14. Principal Accountant Fees and Services 101

PART IV

Item 15. Exhibits, Financial Statement Schedules 102

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements, other than statements of historical facts contained in this Annual Report on Form 10-K, including statements regarding our proposed merger, divestiture of assets, future financial condition, and objectives of management for future operations, are forward-looking statements. In some cases you can identify these statements by forward-looking words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect” or the negative or plural of these words or similar expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

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the timing and consummation of our proposed merger;

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the potential of divesting or licensing our remaining technologies and product candidates; and

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our ability to fund our working capital needs in the event that we do not consummate our proposed merger.

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. We discuss many of these risks in greater detail under the heading “Risk Factors” and elsewhere in this Annual Report on Form 10-K. You should not rely upon forward-looking statements as predictions of future events. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risks and uncertainties.

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, after the date of this report, we are under no duty to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise.

PART I

Item 1. Business.

To conserve our cash resources, we have substantially reduced our workforce and have reduced our research and development activities. On June 28, 2022 we announced that our board of directors would conduct a comprehensive review of strategic alternatives focused on maximizing shareholder value. Prior to this announcement, we had devoted substantially all our resources to conducting research and development on our product candidates and raising capital.

Prior to the completion of that strategic review, our most advanced programs were GB-102 for the treatment of wet age-related macular degeneration, which had completed Phase 2 clinical trials, and GB-401 for the treatment of glaucoma, which had not yet been studied in humans. On August 11, 2022, we announced that all clinical development of GB-102, GB-401, and GB-501, a gene therapy program that we acquired in March 2022, had been put on hold to conserve capital pending the outcome of our strategic review. On August 18, 2022, our board of directors approved certain strategic, operational and organizational steps for the Company including both the termination of all activities relating to our GB-102 and GB-401 programs and certain cost-reduction initiatives, including a reduction in our workforce by 71%. While clinical development of GB-501 remains on hold, preclinical work is still proceeding.

On October 3, 2022, we provided written notification to Johns Hopkins University (“JHU”) of our decision to terminate our exclusive license agreement to all licensed patent rights owned by JHU that were relevant to our GB-102 program. On November 10, 2022, we entered into an agreement with Mireca Medicines GmbH (“Mireca”) to assign certain intellectual property and revert all rights to our GB-601 preclinical program for retinitis pigmentosa, Stargardt Disease, and Leber congenital amaurosis back to Mireca, thereby terminating our involvement in that program.

To assist with evaluating strategic alternatives to maximize stockholder value, our board of directors engaged Piper Sandler & Co.to help explore the available strategic alternatives, including possible mergers and business combinations, a sale of part or all of our assets, and collaboration and licensing arrangements. On November 21, 2022, we and CalciMedica, Inc. (“CalciMedica”) announced the signing of an Agreement and Plan of Merger and Reorganization, dated November 21, 2022, as may be amended from time to time (the “Merger Agreement”). Upon the terms and subject to the satisfaction of the conditions described in the Merger Agreement, including approval of the transaction by our stockholders, our wholly owned subsidiary will be merged with and into CalciMedica, with CalciMedica surviving the Merger as a wholly-owned subsidiary of Graybug Vision (the “Merger”).

Although we have entered into the Merger Agreement and intend to consummate the Merger, there is no assurance that we will be able to successfully consummate the proposed Merger on a timely basis, or at all. If, for any reason, the Merger is not completed, we will reconsider our strategic alternatives and could pursue one or more of the following courses of action to reduce our current expenditures:

We are continuing the preclinical development of our two remaining programs: GB-501, a gene therapy delivered via a recombinant adeno-associated virus (“AAV”) vector to treat corneal clouding caused by mucopolysaccharidosis type 1 (“MPS1”), and GB-701, a novel and potent small-molecule complement factor B inhibitor being developed to target the complement pathway as a potential treatment for geographic atrophy (“GA”). As GB-501 is a biologic, it will not require, nor benefit from, our drug delivery technologies as it is administered via an intrastromal injection into the cornea. GB-701 is a new chemical entity currently being developed in collaboration with Insilico Medicine, a clinical-stage, end-to-end artificial intelligence (“AI”)-drug discovery company. As a small molecule that is targeted to treat a chronic disease, GB-701 will likely require a sustained delivery technology.

Overview

We have historically been a clinical-stage biopharmaceutical company focused on developing transformative medicines for the treatment of diseases of the retina and optic nerve. On June 28, 2022, we announced that our board of directors would conduct a comprehensive review of strategic alternatives focused on maximizing shareholder value. As part of this review of strategic alternatives,

we explored the potential for an acquisition, company sale, merger, divestiture of assets, private placement of equity securities, and other strategic transactions. Prior to this announcement, we had devoted substantially all our resources to conducting research and development and raising capital.

After conducting a broad and rigorous search for strategic partners who could fund the clinical development of our most advanced programs, GB-102 for the treatment of wet age-related macular degeneration and GB-401 for glaucoma, we concluded that we did not have sufficient capital to pursue further clinical development of either program on our own, nor did we believe that we had the ability to raise sufficient additional capital to do so. Between October 2021 and August 2022, we contacted 38 parties to solicit interest in licensing or partnering GB-102, and 11 parties to solicit interest in licensing GB-401, but received only one proposal, and it was on terms that were not acceptable to us. As a result, on August 18, 2022, our board of directors approved a restructuring plan, which included the termination of all activities related to GB-102 and GB-401, as well as certain cost-reduction initiatives, including a 71% reduction in our workforce. On October 3, 2022, we provided written notification to Johns Hopkins University (“JHU”) of our decision to terminate our exclusive license agreement to all licensed patent rights owned by JHU that were relevant to our GB-102 program. On November 10, 2022, we entered into an agreement with Mireca Medicines GmbH (“Mireca”) to assign certain intellectual property and revert all rights to our GB-601 preclinical program for retinitis pigmentosa, Stargardt Disease, and Leber congenital amaurosis back to Mireca, thereby terminating our involvement in that program. On November 21, 2022, we announced that we had entered into a definitive merger agreement with CalciMedica, Inc. (“CalciMedica”) to combine our companies in an all-stock transaction, subject to shareholder approval.

We are continuing the preclinical development of our two remaining programs: GB-501, a gene therapy delivered via a recombinant adeno-associated virus (“AAV”) vector to treat corneal clouding caused by mucopolysaccharidosis type 1 (“MPS1”), and GB-701, a novel and potent small-molecule complement factor B inhibitor being developed to target the complement pathway as a potential treatment for geographic atrophy (“GA”). As GB-501 is a biologic, it will not require, nor benefit from, our drug delivery technologies as it is administered via an intrastromal injection into the cornea. GB-701 is a new chemical entity currently being developed in collaboration with Insilico Medicine, a clinical-stage, end-to-end artificial intelligence (“AI”)-drug discovery company. As a small molecule that is targeted to treat a chronic disease, GB-701 will likely require a sustained delivery technology.

Our pipeline

The following chart summarizes the status and development plan for the two product candidates remaining in our pipeline. We own worldwide rights to each of these programs.

Our proprietary technologies

Our proprietary technologies are designed to allow sustained delivery of pharmacologic agents to the eye in a well-tolerated and controlled manner to achieve extended duration of effectiveness. Our proprietary technologies utilize microparticle depot and implant formulations each containing biodegradable polymers such as poly (lactic-co-glycolic acid) (“PLGA”).

The microparticles are engineered to carry a hydrophilic coating such as polyethylene glycol (“PEG”) that helps eliminate or minimize inflammation typically associated with intraocular administration of conventional PLGA microparticles. Our preclinical studies and Phase 1, 2a, and 2b clinical trials provided preliminary evidence that our microparticles are well-tolerated in the eye.

Furthermore, our microparticles are designed to aggregate after intravitreal injection upon exposure to the vitreous fluid at body temperature to form a depot near the bottom of the eye, outside of the visual axis. Our biodegradable microparticles then gradually

release the active ingredient at a rate dependent on the composition of the polymers and biodegrade into lactic acid, glycolic acid and PEG that are naturally cleared from the body.

Some molecules, due to their physicochemical properties, are difficult to integrate into polymer formulations and deliver in a controlled manner. For that purpose, we have developed a proprietary prodrug technology to enable sustained delivery of these therapeutics. Our research and development team has developed our product candidates with different pharmacologic agents using this prodrug technology. For example, we had been developing GB-401 using this approach until that program was terminated in August 2022.

We have also developed intravitreally-injected implant formulations containing biodegradable polymers such as poly (lactic-co-glycolic acid) (“PLGA”) in the form of a rod. Our implants are designed to be injected near the bottom of the eye and are expected to remain in place due to their geometry and the structure of the vitreous humor.

With the acquisition of RainBio, Inc. in March 2022, we acquired exclusive rights to a gene therapy technology for our GB-501 program that is based on a recombinant adeno-associated virus (“rAAV”) vector and is designed to deliver a functional copy of the gene that encodes alpha-L-iduronidase (“IDUA”). IDUA is an enzyme that breaks down intracellular and extracellular glycosaminoglycans (“GAGs”) and can be administered directly to the cornea of Mucopolysaccharidosis Type 1 patients (“MPS1”) with a single injection.

Our remaining programs, GB-501 and GB-701

Our most advanced product candidate, GB-501, is a gene therapy delivered via an adeno-associated virus (“AAV”) vector to treat corneal clouding caused by mucopolysaccharidosis type 1 (“MPS1”) a rare genetic disorder characterized by an abnormal build-up of glycosaminoglycans (“GAGs”) in the body's cells. We acquired all rights to this product candidate in March 2022, including an exclusive license from the University of North Carolina (“UNC”) to the gene sequence required to produce an enzyme called alpha-L-iduronidase (“IDUA”) which is essential for the breakdown of GAGs. In patients suffering from MPS1, IDUA production in the cornea is insufficient to eliminate naturally occurring GAGs, which accumulate over time to the point that the cornea becomes opaque, rendering the patient

functionally blind. We anticipate that the direct injection of GB-501 into the cornea of MPS1 patients may result in the production of IDUA and the corresponding reduction of GAGs within the cornea, thereby mitigating or resolving the loss of vision caused by GAG accumulation.

In studies using a canine model of MPS1 with early and advanced corneal disease, a single intrastromal injection of research-grade GB-501 was well-tolerated at all administered doses. The eyes with advanced disease demonstrated resolution of corneal clouding as early as one week post-injection, followed by sustained corneal transparency until the experimental endpoint. We have engaged a leading contract development and manufacturing organization (“CDMO”) to produce Good Manufacturing Practices (“GMP”) material, with the goal of being ready for human clinical trials in 2024.

Our other remaining program, GB-701, is a discovery-stage small molecule program targeting the treatment of geographic atrophy (“GA”). In 2021, we formed a strategic partnership with Insilico Medicine, a clinical-stage, end-to-end artificial intelligence (“AI”)-drug discovery company to develop a family of novel and potent small-molecule complement factor B inhibitors targeting the complement pathway as a potential treatment for GA. Discovery work is progressing, but we do not anticipate having a product candidate ready for preclinical development until after 2023. We anticipate that one or more of our drug delivery technologies will be required to deliver such a factor B inhibitor on a sustained basis to effectively treat GA.

Our executive leadership team

We are led by a team of experienced pharmaceutical industry executives with significant experience in ophthalmology:

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Frederic Guerard, Pharm.D., our Chief Executive Officer, has 20 years of leadership, strategic and commercial pharmaceutical experience, including as Worldwide Business Franchise Head of Ophthalmology at Novartis AG and Global Franchise Head of Pharmaceuticals at Alcon Laboratories, Inc.

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Parisa Zamiri, M.D., Ph.D., our Chief Medical Officer, is an ophthalmologist and was previously Vice President, Global Head of Clinical Development and Therapeutic Area Head for Ophthalmology at Novartis AG.

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Robert S. Breuil, our Chief Financial Officer, has over 20 years of experience in the biopharmaceutical and drug delivery industries, and previously served as Chief Financial Officer of Corium, Inc. and Codexis, Inc.

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Bettina Maunz, our Chief People Officer, has over 20 years of experience across the pharmaceutical, biotechnology, and medical device industries, and previously served as VP, Group Head of Enterprise Communications at Novartis AG.

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Ming Yang, Ph.D., our Senior Vice President of R&D, has over 20 years of R&D experience in developing novel therapeutics and drug delivery systems, including past experience at Genentech focused on ocular drug delivery.

Commercialization

We currently have no sales, marketing, or commercial product distribution capabilities. We intend to secure a partner to fund and complete development of all our remaining programs and, if approved, commercialize them.

Competition

The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. While we believe that our technologies, knowledge, experience and scientific resources provide us with competitive advantages, we face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, generic drug companies, academic institutions and governmental agencies and public and private research institutions. Any product candidates that we successfully develop will compete with existing therapies and new therapies that may become available in the future.

Many of our competitors have significantly greater financial and human resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved products than we do. Smaller and other early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These organizations compete with us and our potential strategic partners for recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient enrollment for clinical trials, as well as in acquiring products, product candidates, or other technologies complementary to our programs.

The key competitive factors affecting the success of GB-501, if approved, are likely to be its efficacy, safety, and availability of coverage and reimbursement from government and other third-party payors. The method of administration of GB-501, intrastromal injection, is commonly used to administer ophthalmic drugs for the treatment of fungal diseases and is generally accepted by patients facing the prospect of severe visual loss or blindness. However, a therapy that offers a less invasive method of administration might have a competitive advantage over one administered by intrastromal injection, depending on the relative efficacy, safety, and durability

of the other method of administration. There are currently several systemic treatments for MPS1, but none of them are reported to effectively resolve the corneal clouding that GB-501 is intended to treat. If a new systemic treatment that also resolves corneal clouding is developed and approved, the market opportunity for GB-501 could be greatly reduced or even eliminated.

Manufacturing

We have neither large-scale manufacturing facilities nor personnel, other than personnel who manage our CDMO relationship. We currently rely, and expect to continue to rely, for the next few years, on third parties for the manufacture of all components of our product candidates undergoing preclinical and clinical testing. We are relying on a leading CDMO to establish small-volume GMP manufacturing capability to support a future clinical trial of GB-501.

Our GB-701 drug candidate is a family of small molecules that are manufactured in synthetic processes from base materials. We expect to continue to develop product candidates that can be produced cost-effectively at CDMO facilities. We anticipate that these arrangements will be sufficient for the manufacture of our product candidates until such time that a future strategic partner, if any, decides that it should establish its own large-scale manufacturing facility and it becomes operational.

We anticipate that we will continue to rely on CDMOs for all aspects of the drug manufacturing process, such as filling and labelling of our products for commercial sale and the manufacture of material. While we believe that having control over the whole manufacturing process would allow us to reduce cycle times, increase the robustness and consistency of the process and reduce cost of goods for commercial production, we also believe that we are unlikely to have or gain access to sufficient capital to invest in a dedicated manufacturing facility.

Intellectual property

Our commercial success depends in part on our ability to obtain and maintain proprietary protection for our therapeutic products for ocular diseases, which include our novel microparticle aggregation technologies, to deliver therapeutically active agents. We also seek to protect our proprietary methods of treatment using our delivery technologies for ocular diseases, alone and in combination with other therapeutic agents. In addition, we seek protection on manufacturing processes for our aggregating microparticles, and dosing regimens and formulations for the ocular administration of our products. Our success also depends on our ability to operate without infringing on the proprietary rights of others and to prevent others from infringing our proprietary rights.

Our policy is to seek to protect our proprietary position by filing, purchasing, or exclusively in-licensing U.S. and foreign patent applications covering our proprietary technologies, active pharmaceutical ingredients, inventions, and improvements that are important to the development and implementation of our business. If our proposed Merger fails to close, we may need to seek patent term adjustments, restorations, and/or patent term extensions where applicable in the United States, Europe and other jurisdictions. We also rely on trade secrets, know-how, continuing technological innovation, and potential in-licensing opportunities to develop and maintain our proprietary position. Additionally, we expect to benefit, where appropriate, from statutory frameworks in the United States, Europe, and other countries that provide a period of regulatory data exclusivity to compensate for the time required for regulatory approval of our drug products.

As part of our comprehensive review of strategic alternatives announced in June 2022, we began the process of reducing our patent filing footprint that covers our GB-102 and GB-401 programs outside the U.S., including the abandonment of certain patents and patent applications in certain non-U.S. jurisdictions. Following this reduction, we are the sole owner of eleven patent families covering our products, active pharmaceutical ingredients, and proprietary aggregating microparticle technology, which include composition of matter, methods of use, and processes of manufacture, as described in more detail below. Our owned patent estate as of December 31, 2022, on a worldwide basis, includes over 60 granted or pending patent applications with nine granted U.S. patents, one allowed U.S. patent application, 11 pending U.S. non-provisional applications, one pending international patent application filed under the Patent Cooperation Treaty and more than 40 pending patent applications that have entered the national phase of prosecution in countries outside the United States.

We have exclusively licensed one patent family from the University of North Carolina relating to our GB-501 product candidate. The patent family contains one granted U.S. patent, one pending U.S. patent application, and 13 pending or allowed applications in countries outside the United States.

We had previously licensed five patent families on an exclusive basis from Johns Hopkins University (“JHU”) described below, and had granted an exclusive sublicense to Kala Pharmaceuticals, Inc. (“Kala”) solely in the area of delivery through a mucosal barrier for the five families licensed from JHU only. On October 3, 2022, we terminated all of our exclusive licenses from JHU.

We had previously acquired two patent families and licensed one patent family from Mireca Medicines GmbH (“Mireca”) a private company, for the treatment of disorders of the ear and eye, including retinitis pigmentosa, Stargardt Disease, and Leber congenital amaurosis. The two patent families that we acquired had also been licensed back to the private company for their use in non-overlapping therapeutic areas. On November 10, 2022, we entered into a termination and assignment agreement with Mireca that terminated our rights to their patent and assigned to Mireca the two patent families that we had previously acquired as well as additional intellectual property that we had developed in exchange for a release of all future financial obligations.

We continually assess and refine our intellectual property strategies as we develop new technologies and product candidates. We plan to file additional patent applications based on our intellectual property strategies where appropriate, including where we seek to adapt to competition or to improve business opportunities. Further, we plan to file patent applications, as we consider appropriate under the circumstances, to protect new technologies that we develop. Our patent filing strategy generally includes seeking patent protection in the United States, the European Union and China (which may include Macau and Hong Kong) and may in addition seek protection in countries where we believe such protection is likely to be useful, including one or more of Argentina, Australia, Brazil, Canada, countries of the Gulf Cooperation Council, India, Israel, Japan, Mexico, Russia and Taiwan.

The exclusivity terms of our patents depend upon the laws of the countries in which they are obtained. In the countries in which we currently file, the patent term is 20 years from the earliest date of filing of a non-provisional patent application. The term of a U.S. patent may be extended to compensate for the time required to obtain regulatory approval to sell a drug, which is referred to as a patent term extension, or by delays encountered during patent prosecution that are caused by the United States Patent and Trademark Office (“USPTO”) which is referred to as patent term adjustment. For example, the Hatch-Waxman Act permits a patent term extension for new chemical entity drugs approved by the United States Food and Drug Administration (“FDA”) of up to five years beyond the expiration of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review and diligence during the review process. Patent term extensions in the United States cannot extend the term of a patent beyond a total of 14 years from the date of product approval, and only one patent covering an approved drug or its method of use may be extended. A similar kind of patent extension, referred to as a Supplementary Protection Certificate, is available in Europe. Legal frameworks are also available in certain other jurisdictions to extend the term of a patent. We currently do not intend to seek patent term extensions on any of our issued patents in jurisdictions in which we have a qualifying patent and the extension is available, as they all relate to programs that we have terminated.

Our pending applications on additional methods of use of our former clinical candidates, should we find a buyer and such patents issue, will expire in 2039. If we are able to find one or more buyers for our patent estate covering our terminated programs, or if our planned Merger fails to close, we may need to file additional applications on aspects of our innovations that may have patent terms that extend beyond these dates. However, any of our patents, including patents that we or our assignees may rely on to protect the market for approved products, may be held invalid or unenforceable by a court of final jurisdiction. Alternatively, we or our assignees may decide that it is in our interest to settle a litigation in a manner that affects the term or enforceability of our patent. Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may diminish our or our assignees’ ability to protect our inventions and enforce such intellectual property rights. Accordingly, we cannot predict the breadth or enforceability of claims that have been or may be granted on our patents or on third-party patents. The biotechnology and pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual property rights. Our ability to obtain and maintain our proprietary position for our technologies and novel therapeutic agents will depend on our success in enforcing the claims that have been granted or may be granted. We do not know whether any of the pending patent applications that we have filed or may file or license from third parties will result in the issuance of any additional patents. The issued patents that we own or may receive in the future may be challenged, invalidated or circumvented, and the rights granted under any issued patents may not provide us with sufficient protection or competitive advantages against competitors with similar technology. Furthermore, our competitors may be able to independently develop and commercialize drugs with similar mechanisms of action and/or duplicate our methods of treatments or strategies without infringing our patents. Because of the extensive time required for clinical development and regulatory review of a drug we may develop, it is possible that, before any of our drugs can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of any such patent.

Government regulation

Government authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, and import and export of pharmaceutical products. The processes for obtaining regulatory approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.

FDA approval process

In the United States, pharmaceutical products are subject to extensive regulation by the FDA under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and other federal and state statutes and regulations. The failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending New Drug Applications (“NDAs”) or Biologics License Applications (“BLA”) warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution.

Pharmaceutical product development for a new product or certain changes to an approved product in the U.S. typically involves preclinical laboratory and animal tests, the submission to the FDA of an IND, which must become effective before clinical testing may commence, and adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug for each indication for which FDA approval is sought. Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required may vary substantially based upon the type, complexity and novelty of the product or disease.

Preclinical tests include laboratory evaluation of product chemistry, formulation and toxicity, as well as animal trials to assess the characteristics and potential safety and efficacy of the product. The conduct of the preclinical tests must comply with federal regulations and requirements, including good laboratory practices (“GLP”). The results of preclinical testing are submitted to the FDA as part of an IND along with other information, including information about product chemistry, manufacturing and controls (“CMC”) and a proposed clinical trial protocol. Long-term preclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue after the IND is submitted. A 30-day waiting period after the submission of each IND is required prior to the commencement of clinical testing in humans.

If the FDA has neither commented on nor questioned the IND within this 30-day period, the clinical trial proposed in the IND may begin. Clinical trials involve the administration of the investigational new drug to healthy volunteers or patients under the supervision of a qualified investigator. Clinical trials must be conducted: (i) in compliance with federal regulations; (ii) in compliance with good clinical practice (“GCP”), an international standard meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators and monitors; as well as (iii) under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. Each protocol involving testing on U.S. patients and subsequent protocol amendments must be submitted to the FDA as part of the IND.

The FDA may order the temporary, or permanent, discontinuation of a clinical trial at any time, or impose other sanctions, if it believes that the clinical trial either is not being conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients. The study protocol and informed consent information for patients in clinical trials must also be submitted to an institutional review board (“IRB”) for approval. An IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRB’s requirements, or may impose other conditions.

Clinical trials to support NDAs for marketing approval are typically conducted in three sequential phases, but the phases may overlap. In Phase 1, the initial introduction of the drug into healthy human subjects or patients, the drug is tested to assess metabolism, pharmacokinetics, pharmacological actions, side effects associated with increasing doses, and, if possible, early evidence of effectiveness. Phase 2 usually involves trials in a limited patient population to determine the effectiveness of the drug for a particular indication, dosage tolerance, and optimum dosage, and to identify common adverse effects and safety risks. If a drug demonstrates evidence of effectiveness and an acceptable safety profile in Phase 2 evaluations, Phase 3 trials are undertaken to obtain the additional information about clinical efficacy and safety in a larger number of patients, typically at geographically dispersed clinical trial sites, to permit the FDA to evaluate the overall benefit-risk relationship of the drug and to provide adequate information for the labeling of the drug. In most cases, the FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the efficacy of the drug. A single Phase 3 trial may be sufficient in rare instances, including (1) where the study is a large multicenter trial demonstrating internal consistency and a statistically very persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or prevention of a disease with a potentially serious outcome, and confirmation of the result in a second trial would be practically or ethically impossible, (2) when in conjunction with other confirmatory evidence, or (3) in the case of ultra-rare diseases, such as MPS1, with a sufficiently clear clinical trial result.

The manufacturer of an investigational drug in a Phase 2 or 3 clinical trial for a serious or life-threatening disease is required to disclose, such as by posting on its website, its policy on evaluating and responding to requests for expanded access to such investigational drug.

After completion of the required clinical testing, an NDA (or BLA, if it pertains to a biologic such as GB-501) is prepared and submitted to the FDA. FDA approval of the NDA is required before marketing of the product may begin in the U.S. The NDA must include the results of all preclinical, clinical and other testing and a compilation of data relating to the product’s pharmacology, chemistry, manufacture and controls. The cost of preparing and submitting an NDA is substantial. Furthermore, under the Prescription Drug User Fee Act (“PDUFA”) the submission of most NDAs is additionally subject to a substantial application user fee, and the applicant under an approved NDA is also subject to an annual program fee for each prescription product. These fees are typically increased annually.

The FDA has 60 days from its receipt of an NDA to determine whether the application will be filed based on the agency’s threshold determination that it is sufficiently complete to permit substantive review. Once the submission is filed, the FDA begins an in-depth review. Under PDUFA, the FDA has agreed to certain performance goals in the review of NDAs to encourage timeliness. NDAs for most standard review drug products are reviewed within twelve months from submission of NDAs for new molecular entities (“NMEs”) and within ten months from submission of NDAs for non-NMEs. Priority review can be applied to drugs that FDA determines offer major advances in treatment or provide a treatment where no adequate therapy exists. NDAs for most priority review drug products are reviewed within eight months from submission of NDAs for NMEs and within six months from submission of NDAs for non-NMEs. The review process for both standard and priority review may be extended by the FDA for three additional months to consider certain late-submitted information or information intended to clarify information already provided in the submission.

The FDA may also refer applications for novel drug products, or drug products that present difficult questions of safety or efficacy, to an outside 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. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations.

Before approving an NDA, FDA will typically inspect one or more clinical sites to assure compliance with GCP. Additionally, the FDA will inspect the facility or the facilities at which the drug is manufactured. The FDA will not approve the product unless compliance with current good manufacturing practices (“cGMP”) is satisfactory and the NDA contains data that provide substantial evidence that the drug is safe and effective in the indication studied.

After the FDA evaluates the NDA and the manufacturing facilities, it issues either an approval letter or a complete response letter. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing, or information, in order for the FDA to reconsider the application. The applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application. If, or when, those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. As a condition of NDA approval, the FDA may require a risk evaluation and mitigation strategy (“REMS”) to help ensure that the benefits of the drug outweigh the potential risks. REMS can include medication guides, communication plans for healthcare professionals, and elements to assure safe use (“ETASU”). ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring and the use of patient registries. The requirement for a REMS can materially affect the potential market and profitability of the drug. Moreover, product approval may require substantial post-approval testing and surveillance to monitor the drug’s safety or efficacy. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing.

Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing. Changes to some of the conditions established in an approved application, including changes in indications, labeling or manufacturing processes or facilities, require submission and FDA approval of a new NDA or NDA supplement before the change can be implemented. An NDA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing NDA supplements as it does in reviewing NDAs.

Disclosure of clinical trial information

Sponsors of clinical trials of FDA regulated products, including drugs, are required to register and disclose certain clinical trial information in the ClinicalTrials.gov database. Information related to the product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to discuss the results of their clinical trials after completion. Disclosure of the results of these trials can be delayed in certain circumstances for up to two years after the date of completion of the trial. Competitors may use this publicly available information to gain knowledge regarding the progress of development programs.

Pediatric information

Under the Pediatric Research Equity Act (“PREA”) NDAs or supplements to NDAs 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 drug is safe and effective. The FDA may grant full or partial waivers, or deferrals, for submission of data. With certain exceptions, PREA does not apply to any drug for an indication for which orphan designation has been granted.

The Best Pharmaceuticals for Children Act (“BPCA”) provides NDA holders a six-month extension of any exclusivity—patent or nonpatent—for a drug if certain conditions are met. Conditions for exclusivity include the FDA’s determination that information

relating to the use of a new drug in the pediatric population may produce health benefits in that population, the FDA making a written request for pediatric studies, and the applicant agreeing to perform, and reporting on, the requested studies within the statutory timeframe. Applications under the BPCA are treated as priority applications, with all of the benefits that designation confers.

The target population for our GB-501 product candidate is primarily children.

Post-approval requirements

Once an NDA is approved, a product will be subject to certain post-approval requirements, including, among other things, record-keeping requirements, providing the FDA with updated safety information, product sampling and distribution requirements, and promotion and advertising requirements. For instance, the FDA closely regulates the post-approval marketing and promotion of drugs, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet. Drugs may be marketed or promoted only for the approved indications and in accordance with the provisions of the approved labeling.

Adverse event reporting and submission of periodic reports are required following FDA approval of an NDA. The FDA also may require post-marketing testing, known as Phase 4 testing, REMS and surveillance to monitor the effects of an approved product (the “FDA”) may place conditions on an approval that could restrict the distribution or use of the product. In addition, quality control, drug manufacture, packaging and labeling procedures must continue to conform to current good manufacturing practices after approval. Drug manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state agencies. Registration with the FDA subjects entities to periodic unannounced inspections by the FDA, during which the Agency inspects manufacturing facilities to assess compliance with current good manufacturing practices. Accordingly, manufacturers must continue to expend time, money and effort in the areas of production and quality-control to maintain compliance with current good manufacturing practices. Regulatory authorities may withdraw product approvals, request product recalls or take other administrative or judicial enforcement actions if a company fails to comply with regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered.

The Hatch-Waxman Amendments

Orange Book listing

In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent whose claims cover the applicant’s product. Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be referenced by potential generic competitors in support of approval of an abbreviated new drug application (“ANDA”). An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug and has been shown through bioequivalence testing to be therapeutically equivalent to the listed drug. Other than the requirement for bioequivalence testing, ANDA applicants are not required to conduct, or submit results of, preclinical or clinical tests to prove the safety or effectiveness of their drug product. Drugs approved in this way are commonly referred to as “generic equivalents” to the listed drug and can often be substituted by pharmacists under prescriptions written for the original listed drug pursuant to each state’s laws on drug substitution.

The ANDA applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA’s Orange Book. Specifically, the applicant must certify that (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the new product. The ANDA applicant may also elect to submit a section viii statement certifying that its proposed ANDA label does not contain (or carve out) any language regarding the patented method-of-use rather than certify to a listed method-of-use patent. A recent opinion from the United States Court of Appeals for the Federal Circuit, however, held that a generic manufacturer launching a product with a patented method-of-use carve out may, nonetheless, still be liable for patent infringement by inducement based on certain information in the label and external information such as press releases and product catalogues. GlaxoSmithKline LLC v. Teva Pharms. USA, Inc., 7 F.4th 1320 ‎‎(Fed. Cir. 2021) reh’g denied, en banc, GlaxoSmithKline LLC v. Teva Pharms. USA, Inc., 2022 U.S. App. LEXIS 3812 (Fed. Cir., Feb. 11, 2022).

If the applicant does not challenge the listed patents, the ANDA application will not be approved until all the listed patents claiming the referenced product have expired. A certification that the new product will not infringe the already approved product’s listed patents, or that such patents are invalid, is called a Paragraph IV certification. If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV

certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months, expiration of the patent, settlement of the lawsuit or a decision in the infringement case that is favorable to the ANDA applicant.

The ANDA application also will not be approved until any applicable non-patent exclusivity listed in the Orange Book for the referenced product has expired.

Exclusivity

Upon NDA approval of a new chemical entity (“NCE”) which is a drug that contains no active moiety that has been approved by the FDA in any other NDA, that drug receives five years of marketing exclusivity during which the FDA may not receive any ANDA seeking approval of a generic version of that drug. An ANDA may be submitted one year before NCE exclusivity expires if a Paragraph IV certification is filed. If there is no listed patent in the Orange Book, there may not be a Paragraph IV certification, and, thus, no ANDA may be filed before the expiration of the exclusivity period. Certain changes to a drug, such as the addition of a new indication to the package insert, can be the subject of a three-year period of exclusivity if the application contains reports of new clinical investigations (other than bioavailability studies) conducted or sponsored by the sponsor that were essential to approval of the application. The FDA cannot approve an ANDA for a generic drug that includes the change during the period of exclusivity.

Patent term extension

After NDA approval, owners of relevant drug patents may apply for up to a five-year patent extension. The allowable patent term extension is calculated as half of the drug’s testing phase (the time between IND application and NDA submission) and all of the review phase (the time between NDA submission and approval up to a maximum of five years). The time can be shortened if the FDA determines that the applicant did not pursue development or approval with due diligence. The total patent term after the extension may not exceed 14 years, and only one patent can be extended. For patents that might expire during the application phase, the patent owner may request an interim patent extension. An interim patent extension increases the patent term by one year and may be renewed up to four times. For each interim patent extension granted, the post-approval patent extension is reduced by one year. The director of the United States Patent and Trademark Office must determine that approval of the drug covered by the patent for which a patent extension is being sought is likely. Interim patent extensions are not available for a drug for which an NDA has not been submitted.

Hatch-Waxman patent certification and the 30-month stay

Upon approval of an NDA or a supplement thereto, NDA sponsors are required to list with the FDA each patent with claims that cover the applicant’s product or an approved method of using the product. Each of the patents listed by the NDA sponsor is published in the Orange Book. When an ANDA applicant files its application with the FDA, the applicant is required to certify to the FDA concerning any patents listed for the reference product in the Orange Book, except for patents covering methods of use for which the ANDA applicant is not seeking approval. To the extent that the Section 505(b)(2) applicant is relying on studies conducted for an already approved product, the applicant is required to certify to the FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an ANDA applicant would.

Specifically, the applicant must certify with respect to each patent that:

•

the required patent information has not been filed;

•

the listed patent has expired;

•

the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or

•

the listed patent is invalid, unenforceable or will not be infringed by the new product.

A certification that the new product will not infringe the already approved product’s listed patents or that such patents are invalid or unenforceable is called a Paragraph IV certification. If the applicant does not challenge the listed patents or indicates that it is not seeking approval of a patented method of use, the application will not be approved until all the listed patents claiming the referenced product have expired (other than method of use patents involving indications for which the applicant is not seeking approval).

If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days after the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months after the receipt of the Paragraph IV notice, expiration of the patent or a decision in the infringement case that is favorable to the ANDA applicant.

To the extent that the Section 505(b)(2) applicant is relying on studies conducted for an already approved product, the applicant is required to certify to the FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an ANDA applicant would. As a result, approval of a Section 505(b)(2) NDA can be stalled until all the listed patents claiming the referenced product have expired, until any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the referenced product has expired, and, in the case of a Paragraph IV certification and subsequent patent infringement suit, until the earlier of 30 months, settlement of the lawsuit or a decision in the infringement case that is favorable to the Section 505(b)(2) applicant.

Section 505(b)(2) NDAs

NDAs for most new drug products are based on two full clinical studies which must contain substantial evidence of the safety and efficacy of the proposed new product for the proposed use. These applications are submitted under Section 505(b)(1) of the FDCA. The FDA is, however, authorized to approve an alternative type of NDA under Section 505(b)(2) of the FDCA. This type of application enables the applicant in certain circumstances to rely, in part, on the FDA’s prior findings in approving a similar product or published literature in support of its application. A Section 505(b)(2) NDA may provide an alternate path to FDA approval for a new or improved formulation, a new route of administration or a new use of a previously approved product.

Specifically, Section 505(b)(2) applies to NDAs for a drug for which the investigations made to show whether or not the drug is safe for use and effective in use and relied upon by the applicant for approval of the application “were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted.” If the Section 505(b)(2) applicant can establish that reliance on the FDA’s prior findings of safety and/or effectiveness is scientifically appropriate, it may eliminate the need to conduct certain preclinical or clinical studies of the new product. The FDA may also require companies to perform additional studies or measurements to support the change from the approved product. The FDA may then approve the new product candidate for all, or some, of the indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant.

Thus, Section 505(b)(2) authorizes the FDA to approve an NDA based on safety and effectiveness data that were not developed by the applicant. NDAs filed under Section 505(b)(2) may provide an alternate and potentially more expeditious pathway to FDA approval for new or improved formulations or new uses of previously approved products. If the 505(b)(2) applicant can establish that reliance on the FDA’s previous approval is scientifically appropriate, the applicant may eliminate the need to conduct certain preclinical or clinical studies of the new product. The FDA may also require companies to perform additional studies or measurements to support the change from the approved product. The FDA may then approve the new drug candidate for all or some of the label indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant.

To the extent that the Section 505(b)(2) applicant is relying on the FDA’s prior findings of safety or effectiveness for an already approved product, the applicant is required to certify to the FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an ANDA applicant would. Thus, approval of a Section 505(b)(2) NDA can be stalled until all the listed patents claiming the referenced product have expired, until any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the referenced product has expired, and, in the case of a Paragraph IV certification and subsequent patent infringement suit, until the earlier of 30 months, settlement of the lawsuit or a decision in the infringement case that is favorable to the Section 505(b)(2) applicant.

Neither of our remaining product candidates are likely to be eligible for approval via the 505(b)(2) regulatory pathway.

Biologics License Application

The FDA regulates biological products, including but not limited to, gene therapies, differently than it does small molecule drug therapies. The assessment of biological products is performed through the Center for Biologics Evaluation and Research (“CBER”) at the FDA. For GB-501 to receive marketing approval from the FDA, a Biologics License Application (“BLA”) will be required. The BLA concentrates on the unique characteristics and manufacturing processes of the biological products as biological products are much more complex than small molecule drug compounds. Biological products comprise large and complex protein structures that are primarily derived from living material, including human, animal, and microorganisms. An NDA for a small molecule needs to show that the drug is “safe and effective,” while the BLA is required to ensure that the licensed biological product has demonstrated “safety, purity, and potency.” The clinical trial requirements to demonstrate safety, tolerability and efficacy of the drug product are similar for both the NDA and BLA.

Other U.S. healthcare laws and compliance requirements

In the United States, pharmaceutical company activities are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including but not limited to, the Centers for Medicare & Medicaid Services (“CMS”) other divisions of the U.S. Department of Health and Human Services (e.g., the Office of Inspector General), the U.S. Department of Justice (“DOJ”) and individual U.S. Attorney offices within the DOJ, and state and local governments. For example, sales, marketing and scientific/educational grant programs may have to comply with the anti-fraud and abuse provisions of the Social Security Act, the federal false claims laws, the privacy and security provisions of the Health Insurance Portability and Accountability Act (“HIPAA”) and similar state laws, each as amended.

The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering, recommending or arranging for the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term remuneration has been interpreted broadly to include anything of value. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and/or formulary managers on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. The exceptions and safe harbors are drawn narrowly and practices that involve remuneration that may be alleged to be intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances. Practices may not in all cases meet all of the criteria for protection under a statutory exception or regulatory safe harbor.

Additionally, the intent standard under the Anti-Kickback Statute was amended by the Patient Protection and Affordable Care Act (“ACA”) to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the ACA codified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act (discussed below).

The civil monetary penalties statute imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.

Federal false claims laws, including the federal civil False Claims Act, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to, or approval by, the federal government or knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property presented to the U.S. government. In addition, manufacturers can be held liable under the civil False Claims Act even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims. Pharmaceutical and other healthcare companies have been prosecuted under these laws for, among other things, allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of the product for unapproved, and thus generally non-reimbursable, uses and purportedly concealing price concessions in the pricing information submitted to the government for government priced reporting purposes.

HIPAA created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

Also, many states have similar fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.

Data privacy and security regulations by both the federal government and the states in which business is conducted may also be applicable. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”) and its implementing regulations, imposes requirements on certain types of people and entities relating to the privacy, security and transmission of individually identifiable health information. HIPAA requires covered entities to limit the use and transmission of individually identifiable health information. HIPAA requires covered entities to limit the use and disclosure of protected health information to specifically authorized situations and requires covered entities to implement security measures to protect health information that they

maintain in electronic form. Among other things, HITECH made HIPAA’s security standards directly applicable to business associates, independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

Additionally, the federal Physician Payments Sunshine Act within the ACA, and its implementing regulations, require that certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) report annually information related to certain payments or other transfers of value made or distributed to physicians and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate family members. The reported information is made publicly available on a searchable website. Failure to submit required information may result in civil monetary penalties.

Commercial distribution of products requires compliance with state laws that require the registration of manufacturers and wholesale distributors of drug products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers or distributors have no place of business within the state. Some states also impose requirements on manufacturers and distributors to establish the pedigree of product in the chain of distribution, including some states that require manufacturers and others to adopt new technology capable of tracking and tracing product as it moves through the distribution chain. Several states have enacted legislation requiring pharmaceutical and biotechnology companies to establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities, and/or register their sales representatives, as well as to prohibit pharmacies and other healthcare entities from providing certain physician prescribing data to pharmaceutical and biotechnology companies for use in sales and marketing, and to prohibit certain other sales and marketing practices. Sales and marketing activities are also potentially subject to federal and state consumer protection and unfair competition laws.

Violation of any of the federal and state healthcare laws described above or any other governmental regulations may result in penalties, including without limitation, civil, criminal and/or administrative penalties, damages, fines, disgorgement, exclusion from participation in government programs, such as Medicare and Medicaid, injunctions, private “qui tam” actions brought by individual whistleblowers in the name of the government, refusal to enter into government contracts, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings.

Pharmaceutical insurance coverage and health care reform

In the United States and markets in other countries, patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated health care costs. Significant uncertainty exists as to the coverage and reimbursement status of products approved by the FDA and other government authorities. Thus, even if a product candidate is approved, sales of the product will depend, in part, on the extent to which third-party payors, including government health programs in the United States such as Medicare and Medicaid, commercial health insurers and managed care organizations, provide coverage and establish adequate reimbursement levels for, the product. The process for determining whether a payor will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the product once coverage is approved. Third-party payors are increasingly challenging the prices charged, examining the medical necessity and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs. Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the approved products for a particular indication.

In order to secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to the costs required to obtain FDA or other comparable marketing approvals. Nonetheless, product candidates may not be considered medically necessary or cost effective. A decision by a third-party payor not to cover a product could reduce physician utilization once the product is approved and have a material adverse effect on sales, results of operations and financial condition. Additionally, a payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage and reimbursement for the product, and the level of coverage and reimbursement can differ significantly from payor to payor.

MPS1 is a rare disease, which we believe has fewer than 1,500 patients currently in the United States, with fewer than 50 new patients diagnosed every year. In order to substantiate the significant investment that will be required to conduct human clinical trials and gain approval in the United States, the price of this therapy may need to exceed $250,000 per patient in 2022 dollars. Even though

the total cost to treat all patients would be fraction of the total cost of treating many other diseases, the cost per therapy may be judged to be prohibitive by individual payors.

The containment of health care costs also has become a priority of federal, state and foreign governments and the prices of products have been a focus in this effort. Governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit a company’s revenue generated from the sale of any approved products. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which a company or its collaborators receive marketing approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

Healthcare reforms that have been adopted, and that may be adopted in the future, could result in further reductions in coverage and levels of reimbursement for pharmaceutical products, increases in rebates payable under U.S. government rebate programs and additional downward pressure on pharmaceutical product prices. On September 9, 2021, the Biden administration published a wide-ranging list of policy proposals, most of which would need to be carried out by Congress, to reduce drug prices and drug payment. The Department of Health and Human Services (“HHS”) plan includes, among other reform measures, proposals to lower prescription drug prices, including by allowing Medicare to negotiate prices and disincentivizing price increases, and to support market changes that strengthen supply chains, promote biosimilars and generic drugs, and increase price transparency. Many similar proposals, including the plans to give Medicare Part D authority to negotiate drug prices, require drug manufacturers to pay rebates on drugs whose prices increase greater than the rate of inflation, and cap out-of-pocket costs, have already been included in policy statements and legislation currently being considered by Congress. It is unclear to what extent these and other statutory, regulatory, and administrative initiatives will be enacted and implemented.

In March 2010, the United States Congress enacted the ACA, which, among other things, include changes to the coverage and payment for drug products under government health care programs.

There have been executive, legislative and judicial efforts to modify, repeal, replace, or otherwise invalidate all, or certain aspects, of the ACA. For example, the Tax Cuts and Jobs Act of 2017 included, among other things, a provision that repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” In June 2021, the U.S. Supreme Court held that plaintiffs did not have standing to challenge constitutionality of the individual mandate. It is unclear whether there may be other efforts to challenge, repeal or replace the ACA. Further, prior to the Supreme Court ruling, on January 28, 2021, President Biden issued an executive order to initiate a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace, which began on February 15, 2021 and closed on August 15, 2021. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. We are continuing to monitor any changes to the ACA that, in turn, may potentially impact our business in the future. We cannot predict the ultimate content, timing or effect of any healthcare reform legislation or other healthcare measures on our business.

Other legislative changes have been proposed and adopted in the United States since the ACA was enacted to reduce healthcare expenditures, including aggregate reductions of Medicare payments to providers up to 2% per fiscal year, which went into effect in April 2013 and will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic, unless additional Congressional action is taken. The Medicare reductions phase back in starting with a 1% reduction in effect from April 1, 2022 to June 30, 2022 before increasing to the full 2% reduction. Moreover, the American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

Recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare, and reform government program reimbursement methodologies for drug products. By way of example, in December 2020, CMS issued a final rule implementing significant manufacturer price reporting changes under the Medicaid Drug Rebate Program, including regulations that affect manufacturer-sponsored patient assistance programs subject to pharmacy benefit manager accumulator programs and Best Price reporting related to certain value-based purchasing arrangements. On September 9, 2021, the Biden Administration published a wide-ranging list of policy proposals, most of which would need to be carried out by Congress, to reduce drug prices and drug payment. The HHS plan includes, among other reform measures, proposals to (1) give Medicare authority to directly negotiate drug prices with manufacturers, (2) authorize HHS to negotiate Medicaid supplemental rebates on behalf of states, (3) allow employer-based, ACA marketplace and commercial health insurance plans to access Medicare negotiated

drug prices, (4) place a cap on out-of-pocket costs for Medicare Part D beneficiaries and redistribute a higher proportion of drug costs to Part D and manufacturers, (5) mandate purchase of the least costly-alternative and to institute value-based or outcomes-based pricing arrangements, (6) disincentivize drug price increases, (7) facilitate approval and prescription of biosimilar and generic drugs, (8) increase drug pricing transparency, (9) prohibit certain types of rebates to pharmacy benefit managers, and (10) develop drug pricing models by tying price to outcomes. Many similar proposals, including the plans to give Medicare authority to negotiate drug prices and cap out-of-pocket costs, have already been included in policy statements and legislation currently being considered by Congress. It is unclear to what extent new statutory, regulatory, and administrative initiatives will be enacted and implemented. Additional state and federal healthcare reform measures will likely be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for such product candidates or additional pricing pressures.

Finally, in the European Union, similar political, economic and regulatory developments may affect our ability to profitably commercialize our product candidates, if approved. In addition to continuing pressure on prices and cost containment measures, legislative developments at the European Union or member state level may result in significant additional requirements or obstacles that may increase our operating costs. The delivery of healthcare in the European Union, including the establishment and operation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than European Union, law and policy. National governments and health service providers have different priorities and approaches to the delivery of healthcare and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary constraints in most European Union member states have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever-increasing European Union and national regulatory burdens on those wishing to develop and market products, this could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to commercialize our product candidates, if approved. In markets outside of the United States and the European Union, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings.

Employees and Human Capital Resources

As of December 31, 2022, we had 8 full time employees, all in the United States, 3 of whom have an M.D. or Ph.D. None of our employees are represented by a labor union or covered by collective bargaining agreements, and we believe our relationship with our employees is good.

Our current human capital resources objectives include retaining and incentivizing our existing employees. The principal purposes of our equity incentive and cash-based performance bonus plans have been to attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation awards.

Properties and Facilities

Our principal executive office was located in Redwood City, California, and consisted of 2,560 square feet of office space under a lease which expired in January 2023. We had used this facility for operations and administrative purposes, but now all of our employees work remotely. We also have a facility located in Baltimore, Maryland, which consists of 15,649 square feet of office and laboratory space under a lease which expires in June 2023. We used the Maryland facility for our internal research and development activities until it was decommissioned in October 2022. We rely on third-party contract development and manufacturing organizations for both of our remaining product candidates and believe that their facilities and capabilities are adequate to meet our needs for the foreseeable future.

Corporate Information

We were incorporated in Delaware in May 2011. Our website is www.graybug.vision. We are subject to the informational requirements of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) and file or furnish reports, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Exchange Act, proxy statements and other information with the SEC. We make copies of these reports and other information available free of charge through our website as soon as reasonably practicable after we file or furnish them with the SEC. The SEC maintains a website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. The information contained on the websites referenced in this Annual Report is not incorporated by reference into this filing, and the website addresses are provided only as inactive textual references.

Item 1A. Risk Factors.

RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information contained in this Annual Report on Form 10-K, including our financial statements and the related notes and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding to invest in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect us. We cannot assure you that any of the events discussed below will not occur. If any of the following risks actually occur, our business, prospects, operating results and financial condition could suffer materially. Additionally, to the extent the ongoing COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks incorporated by reference or set forth below. In such event, the trading price of our common stock could decline and you might lose all or part of your investment.

Summary of Risk Factors

An investment in our common stock involves various risks, and prospective investors are urged to carefully consider the matters discussed in the section titled “Risk Factors” prior to making an investment in our common stock. These risks include, but are not limited to, the following:

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If the proposed merger with CalciMedica is not consummated, our business could suffer materially and our stock price could decline.

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If we do not successfully consummate the merger or another strategic transaction, then our Board may decide to pursue a dissolution and liquidation under Delaware law. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities, and it is possible that shareholders would receive significantly less than the current market value of their shares.

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Our net cash may be less than $18 million at the closing of the merger, which would cause a condition to CalciMedica’s obligation to consummate the merger to fail to be satisfied and may result in the termination of the merger agreement.

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Some of our officers and directors have conflicts of interest that may influence them to support or approve the merger.

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The merger may be completed even though material adverse changes may result from the announcement of the merger, industry-wide changes and other causes.

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We are a clinical-stage biopharmaceutical company with no products approved. We have incurred significant losses since inception, and we expect to incur continued and increasing losses over the next several years and may never achieve or maintain profitability.

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We will need substantial additional funding to support our operations and pursue our growth strategy. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

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

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Our approach to the treatment of retinal diseases is unproven, and we do not know whether we will be able to successfully develop any products.

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If we do not successfully consummate the merger or another strategic transaction, we will depend heavily on the success of our product candidates. Clinical trials of our product candidates may not be successful. If we are unable to successfully complete clinical development of, and obtain marketing approvals for, our product candidates, or experience significant delays in doing so, or if after obtaining marketing approvals, we fail to commercialize these product candidates, our business will be materially harmed.

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We have not yet successfully initiated or completed any Phase 3 clinical trials nor commercialized any pharmaceutical products, which may make it difficult to evaluate our future prospects.

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If clinical trials of GB-501 or any other product candidate that we develop fail to demonstrate safety and efficacy to the satisfaction of the FDA, the EMA or other regulatory authorities or do not otherwise produce favorable results, we may

incur additional costs or experience delays in completing, or ultimately be delayed or unable to complete, the development and commercialization of such product candidate.

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The ongoing COVID-19 pandemic may, directly or indirectly, adversely affect our business, results of operations and financial condition.

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Gene therapy is an emerging field of drug development that poses many scientific and other risks, which makes it difficult to predict the time and cost of product candidate development and subsequently obtaining regulatory approval.

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We have no prior experience with gene therapy, the sourcing or manufacturing of gene therapy products and components, or the conduct of clinical trials of such products.

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Our business and operations would suffer in the event of computer system failures or security breaches.

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We could potentially contract with third parties for the production of our product candidates. This could increase the risk that we will not have sufficient quantities of our product candidates or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.

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The manufacture of our product development candidates requires outsourced, custom manufacturing and we may encounter difficulties in production, particularly with respect to formulation, process development or scaling up of our manufacturing capabilities. If we, or our contract manufacturing organizations (“CMOs”) encounter such difficulties, our ability to provide supply of our product candidates for preclinical studies, clinical trials or our products for patients, if approved, could be delayed or stopped, or we may be unable to maintain a commercially viable cost structure.

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Gene therapies are novel, complex and difficult to manufacture. We could experience manufacturing problems that result in delays in our development or commercialization programs or otherwise harm our business.

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We have no experience manufacturing any of our product candidates at a commercial scale. We, or our CMOs, may be unable to successfully scale up manufacturing of our product candidates in sufficient quality and quantity, which would delay or prevent us from developing our product candidates and commercializing approved products, if any.

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Our products may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success, and the market opportunity for these products may be smaller than we estimate.

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If our patent position does not adequately protect our product candidates, others could compete against us more directly, which would harm our business.

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Patents filed by our licensor, University of North Carolina at Chapel Hill (“UNC”) may have been discovered through government funded programs and thus may be subject to federal regulations such as “march-in” rights, certain reporting requirements and a preference for U.S.-based companies. Compliance with such regulations may limit our exclusive rights, and limit our ability to contract with non-U.S. manufacturers.

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We may be required, or choose, to suspend, repeat or terminate our clinical trials if they are not conducted in accordance with regulatory requirements, the results are negative or inconclusive, the trials are not well-designed, or research participants experience adverse safety outcomes.

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If we are not able to obtain required regulatory approvals, we will not be able to commercialize our product candidates and our ability to generate significant revenue will be materially impaired. The regulatory approval process is expensive, time-consuming and uncertain. As a result, we cannot predict when or if we, or any collaborators we may have in the future, will obtain regulatory approval to commercialize our product candidates.

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

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The market price of our stock has been and may continue to be volatile, and you could lose all or part of your investment.

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If our stock price does not meet Nasdaq’s minimum bid requirement, it could become subject to delisting.

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

Risks Related to the Proposed Merger with CalciMedica, Inc.

If the proposed merger with CalciMedica is not consummated, our business could suffer materially and our stock price could decline.

The consummation of the proposed merger with CalciMedica is subject to a number of closing conditions, including the approval by our stockholders, approval by Nasdaq of our application for initial listing of our common stock in connection with the merger, and other customary closing conditions. We are targeting a closing of the transaction in the first quarter of 2023.

If the proposed merger is not consummated, we may be subject to a number of material risks, and our business and stock price could be adversely affected, as follows:

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We have incurred and expect to continue to incur significant expenses related to the proposed merger with CalciMedica even if the merger is not consummated.

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The merger agreement contains covenants relating to our solicitation of competing acquisition proposals and the conduct of our business between the date of signing the merger agreement and the closing of the merger. As a result, significant business decisions and transactions before the closing of the merger are restricted or prohibited. Accordingly, we may be unable to pursue business opportunities that would otherwise be in our best interest as a standalone company. If the merger agreement is terminated after we have invested significant time and resources in the transaction process, we will have a limited ability to continue our current operations without obtaining additional financing to fund our operations.

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We could be obligated to pay CalciMedica a $1 million or $1.5 million termination fee in connection with the termination of the merger agreement, depending on the reason for the termination.

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We could be obligated to pay CalciMedica $250,000 or $1 million for expense reimbursement in connection with the termination of the merger agreement, depending on the reason for the termination.

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Our collaborators and other business partners and investors in general may view a failure to consummate the merger as a poor reflection on our business or prospects.

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Some of our suppliers, collaborators and other business partners may seek to change or terminate their relationships with us as a result of the proposed merger.

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As a result of the proposed merger, current and prospective employees could experience uncertainty about their future roles within the combined company. This uncertainty may adversely affect our ability to retain our key employees, who may seek other employment opportunities. Additionally, pursuant to the merger agreement, all Graybug employees will be terminated effective as of the closing.

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Our management team may be distracted from day-to-day operations as a result of the proposed merger.

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The market price of our common stock may decline to the extent that the current market price reflects a market assumption that the proposed merger will be completed.

In addition, if the merger agreement is terminated and our Board determines to seek another business combination, we may not be able to find a third party willing to provide equivalent or more attractive consideration than the value to be provided by each party in the merger. In such circumstances, our Board may elect to, among other things, divest all or a portion of our business, or take the steps necessary to liquidate all of our business and assets, and in either such case, the consideration that we receive may be less attractive than the consideration to be received by us pursuant to the merger agreement.

If the proposed merger with CalciMedica is not consummated, CalciMedica may not be able to repay amounts we have loaned to them.

Our loans to CalciMedica are in the form of unsecured promissory notes (the “Notes”), so we have no preference ahead of CalciMedica’s other lenders and creditors. In the event that the Merger Agreement is terminated, whether as a result of our shareholders voting against the Merger, the acceptance by our Board of a Superior Offer, the passage of the End Date before the Merger closes, or other reasons, CalciMedica may not be able to repay the Notes in a timely fashion, if at all.

If we do not successfully consummate the merger or another strategic transaction, then our Board may decide to pursue a dissolution and liquidation. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities.

There can be no assurance that the merger will be completed. If the merger is not completed, our Board may decide to pursue a dissolution and liquidation of Graybug. In such an event, the amount of cash available for distribution to Graybug’s stockholders will depend heavily on the timing of such decision and, as with the passage of time, the amount of cash available for distribution will be reduced as we continue to fund our operations. The amount of cash available for distribution would also be reduced if we are required to pay a termination fee to CalciMedica pursuant to the merger agreement. In addition, if our Board were to approve and recommend, and our stockholders were to approve, a dissolution and liquidation of Graybug, we would be required under Delaware corporate law to pay our outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to our stockholders. As a result of this requirement, a portion of our assets may need to be reserved pending the resolution of such obligations, and the timing of any such resolution is uncertain. In addition, we may be subject to litigation or other claims related to a dissolution and our liquidation. If a dissolution and liquidation were pursued, our Board, in consultation with our advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of our common stock could lose all or a significant portion of their investment in the event of a liquidation, dissolution or winding up of Graybug.

Our net cash may be less than $18 million at the closing of the merger, which would cause a condition to CalciMedica’s obligation to consummate the merger to fail to be satisfied and may result in the termination of the merger agreement.

We are required to have a net cash balance of at least $18 million at the closing of the merger as a condition to CalciMedica’s obligation to consummate the merger. For purposes of the merger agreement, net cash is subject to certain reductions, including, without limitation, short- and long-term liabilities accrued and any unpaid change of control payments or severance, termination, accrued paid time off, retention or similar payments at closing. In the event that our net cash falls below this threshold, a condition to the CalciMedica’s obligation to consummate the merger will fail to be satisfied and CalciMedica will have the right to terminate the merger agreement at an outside date of May 21, 2023 (subject to extension as provided in the merger agreement) if our net cash continues to be lower than the $18 million threshold.

Some of our officers and directors have conflicts of interest that may influence them to support or approve the merger.

Our officers and directors participate in arrangements that provide them with interests in the merger that are different from yours, including, among others, their continued service as a director of the combined company, retention and severance benefits, the acceleration of option and restricted stock unit vesting, and continued indemnification. These interests, among others, may influence the officers and directors of Graybug to support or approve the merger.

The merger may be completed even though material adverse changes may result from the announcement of the merger, industry-wide changes and other causes.

In general, either CalciMedica or us can refuse to complete the merger if there is a material adverse change affecting the other party between November 21, 2022, the date of the merger agreement, and the closing. However, some types of changes do not permit either party to refuse to complete the merger, even if such changes would have a material adverse effect on us or CalciMedica, to the extent they resulted from the following:

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general business or economic conditions generally affecting the industry in which either company or their subsidiaries operate;

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acts of war, the outbreak or escalation of armed hostilities, acts of terrorism, earthquakes, wildfires, hurricanes or other natural disasters, health emergencies, including pandemics (including COVID-19 and any evolutions or mutations thereof) and related or associated epidemics, disease outbreaks or quarantine restrictions;

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changes in financial, banking or securities markets;

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any change in, or any compliance with or action taken for the purpose of complying with, any law or GAAP (or interpretations of any law or GAAP);

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the announcement of the merger agreement or the pendency of the contemplated transactions;

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the taking of any action required to be taken by the merger agreement, except in each case with respect to the first three bullets above, to the extent disproportionately affecting either company and its subsidiaries, taken as a whole, relative to other similarly situated companies in the industries in which either company or its subsidiaries operate, as applicable;

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our potential asset dispositions under the merger agreement;

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any reduction in the amount of our or our subsidiaries’ cash and cash equivalents as a result of expenditures made by us or our subsidiaries related to our wind-down activities or our subsidiaries associated with the termination of our research and development activities (including the termination of ongoing contractual obligations relating to our or our subsidiaries’ current products or product candidates);

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our or our subsidiaries’ failure, taken as a whole, to meet internal or analysts’ expectations or projections or the results of operations of us and our subsidiaries, taken as a whole; or

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any change in the stock price or trading volume of our common stock (it being understood, however, that any effect causing or contributing to any change in stock price or trading volume of our common stock may be taken into account in determining whether a material adverse effect has occurred, unless such effects are otherwise excepted from this definition).

If adverse changes occur but CalciMedica and we must still complete the merger, the combined company’s stock price may suffer.

The market price of the combined company’s common stock may decline as a result of the merger.

The market price of the combined company’s common stock may decline as a result of the merger for a number of reasons including if:

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the combined company does not achieve the perceived benefits of the merger as rapidly or to the extent anticipated by financial or industry analysts;

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the effect of the merger on the combined company’s business and prospects is not consistent with the expectations of financial or industry analysts; or

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investors react negatively to the effect on the combined company’s business and prospects from the merger.

Our stockholders may not realize a benefit from the merger commensurate with the ownership dilution they will experience in connection with the merger.

If the combined company is unable to realize the strategic and financial benefits currently anticipated from the merger, our stockholders will have experienced substantial dilution of their ownership interest without receiving any commensurate benefit. Significant management attention and resources will be required to integrate the two companies. Delays in this process could adversely affect the combined company’s business, financial results, financial condition and stock price following the merger.

During the pendency of the merger, we may not be able to enter into a business combination with another party and will be subject to contractual limitations on certain actions because of restrictions in the merger agreement.

Covenants in the merger agreement impede our ability and the ability of CalciMedica to make acquisitions or complete other transactions that are not in the ordinary course of business pending completion of the merger. As a result, if the merger is not completed, the parties may be at a disadvantage to their competitors. In addition, while the merger agreement is in effect and subject to limited exceptions, each party is prohibited from soliciting, initiating, encouraging, inducing or facilitating the communication, making, submission or announcement of certain acquisition inquiries or acquisition proposals or taking any action that could reasonably be expected to lead to certain acquisition inquiries or acquisition proposal, such as certain acquisitions of our common stock, a tender offers for our common stock, and mergers or other business combinations. Such prohibited transactions could otherwise be favorable to our stockholders.

Because the lack of a public market for CalciMedica common stock makes it difficult to evaluate the fairness of the merger, CalciMedica’s stockholders may receive consideration in the merger that is greater than or less than the fair market value of CalciMedica common stock.

The outstanding share capital of CalciMedica is privately held and is not traded in any public market. The lack of a public market makes it extremely difficult to determine the fair market value of CalciMedica. Since the percentage of our equity to be issued to CalciMedica’s stockholders was determined based on negotiations between the parties, it is possible that the value of our common stock to be issued in connection with the merger will be greater than the fair market value of CalciMedica. Alternatively, it is possible that the value of the shares of our common stock to be issued in connection with the merger will be less than the fair market value of CalciMedica.

The combined company will incur significant transaction costs as a result of the merger, including investment banking, legal and accounting fees. In addition, the combined company will incur significant consolidation and integration expenses which cannot be accurately estimated at this time. These costs could include the possible relocation of certain operations from Redwood, California to other offices of the combined company as well as costs associated with terminating existing office leases and the loss of benefits of certain favorable office leases. Actual transaction costs may substantially exceed CalciMedica’s estimates and may have an adverse effect on the combined company’s financial condition and operating results.

CalciMedica may not consummate its private placement or may fail to receive the minimum private placement proceeds of $10.0 million, which could put financial strain on CalciMedica’s ability to consummate the merger as planned.

The closing of the private placement is expected to occur immediately prior to the closing of the merger and is subject to certain closing conditions, including the requirement that the private placement investors purchase at least $10.0 million shares of CalciMedica common stock, as specified in CalciMedica’s securities purchase agreement. While the private placement investors have agreed to purchase an aggregate of $10.3 million shares of CalciMedica common stock, there can be no assurances that such purchases will occur. In the event that the private placement is not consummated, CalciMedica may have to look for alternative sources of funding to consummate the merger, including additional capital raising or credit financing transactions that may delay or derail the planned timeline of the merger and entail further transaction costs.

Failure of the merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code could harm the combined company.

The parties intend for the merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, as amended. Certain requirements must be met for the merger to qualify as a Section 368(a) reorganization. If such requirements are not satisfied, CalciMedica’s stockholders could be subject to tax liability.

The merger is expected to result in a limitation on our ability to utilize our net operating loss carryforwards.

Under Section 382 of the Internal Revenue Code, use of our net operating loss carryforwards (“NOLs”) will be limited if we experience an “ownership change.” For these purposes, an ownership change generally occurs where the aggregate stock ownership of one or more stockholders or groups of stockholders who own at least 5% of a corporation’s stock increases by more than 50 percentage points over its lowest ownership percentage within a specified testing period. We expect to experience an ownership change as a result of the merger, and therefore our ability to utilize our NOLs and certain credit carryforwards remaining at the effective time will be

limited. The annual limitation will be determined by the fair market value of our common stock outstanding prior to the ownership change, multiplied by the applicable federal rate. Limitations imposed on our ability to utilize NOLs could cause U.S. federal and state income taxes to be paid earlier than they would be paid if such limitations were not in effect and could cause such NOLs to expire unused, in each case reducing or eliminating the benefit of such NOLs.

Certain of our stockholders could attempt to influence changes which could adversely affect our operations, financial condition and the value of our common stock.

Our stockholders may from time to time seek to acquire a controlling stake in Graybug, engage in proxy solicitations, advance stockholder proposals or otherwise attempt to effect changes. Campaigns by stockholders to effect changes at publicly-traded companies are sometimes led by investors seeking to increase short-term stockholder value through actions such as financial restructuring, increased debt, special dividends, stock repurchases or sales of assets or the entire company. Responding to proxy contests and other actions by activist stockholders can be costly and time-consuming, and could disrupt our operations and divert the attention of our Board and senior management from the pursuit of the proposed merger transaction. These actions could adversely affect our operations, financial condition, our ability to consummate the merger and the value of our common stock.

We and CalciMedica may become involved in securities litigation or stockholder derivative litigation in connection with the merger, and this could divert the attention of CalciMedica’s or our management and harm the combined company’s business, and insurance coverage may not be sufficient to cover all related costs and damages.

Securities litigation or stockholder derivative litigation frequently follows the announcement of certain significant business transactions, such as the sale of a business division or announcement of a business combination transaction. Since the filing of our proxy statement on form PREM 14A on December 14, 2022, four lawsuits have been filed in federal courts against Graybug and the Graybug Board: Bushansky v. Graybug Vision, Inc., et al., 3:22-cv-09131 (N.D. Cal.), Connelly v. Graybug Vision, Inc., et al., 3:23-cv-00028 (N.D. Cal.), Plumlyv. Graybug Vision, Inc., et al., 1:23-cv-00169 (D. Del.), and Franchi v. Graybug Vision, Inc., et al., 1:23-cv-1390 (S.D.N.Y) (collectively, the “Stockholder Litigation”). In addition, nine purported stockholders of Graybug sent demand letters regarding the proxy statement (the “Demand Letters”). Further details regarding the Stockholder Litigation and the Demand Letters are set forth below in Item 3 “Legal Proceedings”. We and CalciMedica may become involved in this type of litigation in connection with the merger again in the future, and the combined company may become involved in this type of litigation in the future. Litigation often is expensive and diverts management’s attention and resources, which could adversely affect the business of us, CalciMedica and the combined company.

Failure to complete the merger may result in us paying a termination fee or expenses to CalciMedica and could harm the price of our common stock and our future business and operations.

If the merger is not completed and the merger agreement is terminated under certain circumstances, we may be required to pay CalciMedica a termination fee of either $1 million or $1.5 million and/or an expense reimbursement of up to $1 million. Even if a termination fee or expense reimbursement is not payable in connection with a termination of the merger agreement, we will have incurred significant fees and expenses, which must be paid whether or not the merger is completed. Further, if the merger is not completed, it could significantly harm the market price of our common stock.

The exchange ratio is not adjustable based on the market price of our common stock so the merger consideration at the closing may have greater or lesser value than the market price at the time the merger agreement was signed.

Under the terms of the merger agreement, at the effective time of the merger, each share of CalciMedica capital stock (excluding shares held as treasury stock by CalciMedica or held or owned by us, the merger subsidiary or any subsidiary of us or CalciMedica and dissenting shares), after giving effect to (i) CalciMedica’s preferred stock conversion, (ii) CalciMedica warrant exercises and (iii) the conversion of CalciMedica’s convertible notes, will be converted solely into the right to receive a number of validly issued, fully paid and nonassessable shares of our common stock equal to the exchange ratio, which will be calculated based on the total number of shares outstanding of our common stock and CalciMedica common stock immediately prior to the effective time of the merger, in each case, on a fully-diluted basis using the treasury stock method and excluding out-of-the-money options and warrants, and based on our net cash as of the closing of the merger. Immediately following the effective time of the merger, CalciMedica’s equity holders are expected to own or hold rights to acquire 71.4% of the combined company and our equity holders are expected to own or hold rights to acquire 28.6% of the combined company, in each case, on a fully-diluted basis using the treasury stock method and excluding out-of-the-money options and warrants, and subject to certain assumptions, including, but not limited to, (a) our net cash as of the closing of the merger being $25 million, (b) a closing date of February 15, 2023, and (c) CalciMedica issuing approximately 20.5 million shares of common stock in the private placement. The post-closing equity split is subject to certain adjustments including based on our net cash at closing, the closing date, the number of shares of CalciMedica’s common stock issued in the private placement and to account for the effect of a reverse stock split. As a result, these ownership percentages may be adjusted upward or downward due to such adjustments and as a result, our stockholders could own less of the combined company than expected.

Any changes in the market price of our common stock before the completion of the merger will not affect the number of shares of our common stock issuable to CalciMedica’s stockholders pursuant to the merger agreement. Therefore, if before the completion of the merger the market price of our common stock declines from the market price on the date of the merger agreement, then CalciMedica’s stockholders could receive merger consideration with substantially lower value than the value of such merger consideration on the date

of the merger agreement. Similarly, if before the completion of the merger the market price of our common stock increases from the market price of our common stock on the date of the merger agreement, then CalciMedica’s stockholders could receive merger consideration with substantially greater value than the value of such merger consideration on the date of the merger agreement. The merger agreement does not include a price-based termination right. Because the exchange ratio does not adjust as a result of changes in the market price of our common stock, for each one percentage point change in the market price of our common stock, there is a corresponding one percentage point rise or decline, respectively, in the value of the total merger consideration payable to CalciMedica’s stockholders pursuant to the merger agreement.

Certain provisions of the merger agreement may discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the merger agreement.

The terms of the merger agreement prohibit each of us and CalciMedica from soliciting alternative takeover proposals or cooperating with persons making unsolicited takeover proposals, except in limited circumstances when, among other things, our Board determines in good faith after consultation with outside financial advisors and outside legal counsel that an unsolicited alternative takeover proposal is or is reasonably likely to result in a superior takeover proposal, and that failure to cooperate with the proponent of the proposal could be reasonably likely to be inconsistent with our Board’s fiduciary duties.

If the conditions to the merger are not met, the merger may not occur.

Even if the share issuances and amended and restated certificate of incorporation to effect the reverse stock split are approved by our stockholders, specified conditions must be satisfied or waived to complete the merger. These conditions are set forth in the merger agreement. We cannot assure you that all of the conditions will be satisfied or waived. If the conditions are not satisfied or waived, the merger will not occur or will be delayed, and we and CalciMedica each may lose some or all of the intended benefits of the merger.

Risks Related to Our Financial Position and Need for Additional Capital

We have historically been a clinical-stage biopharmaceutical company with no products approved. We have incurred significant losses since inception, and, if the merger fails to close, we would expect to incur continued and increasing losses over the next several years and may never achieve or maintain profitability.

Since inception, we have incurred significant operating losses. Our net loss was $35.6 million and $35.8 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, we had an accumulated deficit of $204.8 million. To date, we have financed our operations primarily through private placements of convertible preferred stock and convertible promissory notes and the issuance of common stock upon our initial public offering (“IPO”). We have devoted substantially all of our financial resources and efforts to research and development, including preclinical studies and clinical trials and general and administrative costs to support such efforts. If the merger fails to close, we expect to continue to incur significant expenses and operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. We expect to continue to incur substantial and increasing losses before we can consummate the merger.

Based on our current operating plan, which would be superseded if the merger closes, we would expect to continue to incur significant and increasingly higher expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase substantially if and as we:

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conduct pre-clinical activities in connection with the clinical development of our most advanced product candidate, GB-501;

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commence clinical trials of our product candidate GB-501;

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continue the research and development of GB-701;

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seek to identify and develop, or enter into strategic partnerships or collaborations to develop, additional product candidates;

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seek marketing approvals for any of our product candidates that successfully complete clinical development;

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develop and expand our sales, marketing and distribution capabilities for any of our product candidates for which we obtain marketing approval;

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scale up our manufacturing processes and capabilities or, in the future, establish and operate a manufacturing facility, to support sales of our product candidates, our ongoing clinical trials of our product candidates and commercialization of any of our product candidates for which we obtain marketing approval;

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maintain, expand and protect our intellectual property portfolio;

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expand our operational, financial and management systems and personnel, including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a public company;

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increase our product liability and clinical trial insurance coverage as we expand our clinical trials and commercialization efforts; and

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explore and review a range of strategic alternatives for our company.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Our expenses will increase if:

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we are required by the FDA, the European Medicines Agency (the “EMA”) or any additional international regulatory agency to perform trials or studies in addition to those currently expected;

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there are any delays in receipt of regulatory clearances or approvals to begin our planned clinical programs; or

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there are any delays in enrollment of patients in or completing our clinical trials or the development of our product candidates.

We have no product sales. We do not expect sales of any product candidate for several years. For us to become profitable, we will need to succeed in developing and commercializing products. This will require us to be successful in a range of challenging activities, including:

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successfully completing clinical development of our product candidates, which may require establishing one or more strategic partnerships;

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obtaining marketing approval for these product candidates;

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manufacturing at commercial scale and selling and distributing those products for which we obtain marketing approval;

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achieving an adequate level of market acceptance of and obtaining and maintaining coverage and adequate reimbursement from third-party payors for our products, which may require establishing a strategic partnership; and

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protecting our rights to our intellectual property portfolio.

We may never succeed in these activities and may never generate revenue that is sufficient or great enough to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would reduce the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or even continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.

We will need substantial additional funding to support our operations. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs.

We incurred losses from operations and had negative cash flows from operating activities for the years ended December 31, 2022 and 2021, and our accumulated deficit as of December 31, 2022 is $204.8 million. Based on our current operating plan, we would expect to devote substantial financial resources to our ongoing and planned activities, particularly as we conduct pre-clinical studies or clinical trials for GB-501, preclinical studies or clinical trials for GB-701, and seek marketing approval for any such product candidate for which we obtain favorable clinical results. Significant financial resources would be required to conduct research and development and to potentially seek regulatory approval for our current product candidates. In addition, substantial financial resources would be required to commercialize our products, if approved, including product manufacturing, sales, marketing and distribution for any of our product candidates for which marketing approval is obtained. Accordingly, substantial additional funding would be required to support our continuing and planned operations. If we are unable to raise or otherwise access capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.

As of December 31, 2022, we had cash, cash equivalents and short-term investments of $39.1 million, which, based on our current operating plan, we believe is sufficient to fund our operations beyond the next 12 months. Our future funding requirements will depend on many factors, including:

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the scope, progress, costs and outcome of the clinical trials of our product candidates, in particular GB-501;

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the scope, progress, costs and outcome of preclinical development and clinical trials of GB-701;

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the costs, timing and outcome of regulatory review of our product candidates by the FDA, the EMA or other regulatory authorities;

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the costs of manufacturing, sales, marketing, distribution and other commercialization efforts with respect to any products for which we obtain marketing approval;

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subject to receipt of marketing approval, revenue received from product sales;

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our headcount growth and associated costs as we would need to expand our research and development and establish a commercial infrastructure;

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the extent to which we choose to establish collaboration, distribution or other marketing arrangements for our products and product candidates;

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the effect of competing technological and market developments;

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

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the extent to which we acquire or invest in other businesses, products and technologies; and

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the impact of the COVID-19 pandemic.

Conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete. We may never generate the necessary data or results required to obtain regulatory approval of products with the market potential sufficient to enable us to achieve profitability. We would not expect to generate sales of any commercial product for several years, if at all. Accordingly, we believe that we would need to obtain substantial additional financing to achieve our current business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans.

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

We are an early-stage company. Our operations to date have been limited to organizing and staffing our company, acquiring rights to intellectual property, business planning, raising capital, developing our technology, identifying potential product candidates, undertaking preclinical studies and clinical trials and manufacturing initial quantities of our products and product candidates. Consequently, any predictions you make about our future success or viability in the absence of the merger may not be as accurate as they could be if we had a longer operating history.

In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. If the merger fails to close, we would need to transition from a company with a research and development focus to a company capable of supporting commercial activities. We may not be successful in such a transition.

We expect our financial condition and operating results to continue to fluctuate significantly from quarter-to-quarter and year-to-year due to a variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any quarterly or annual period as an indication of future operating performance.

Risks Related to Product Development, Regulatory Approval and Commercialization

Our approaches to the treatment of retinal and corneal diseases are unproven, and we do not know whether we will be able to successfully develop any products.

GB-501 is a gene therapy that has never been tested in humans and is designed to be a single intrastromal injection. There are currently no FDA-approved therapies that treat corneal diseases with a single gene therapy treatment. If the merger fails to close, our future success currently depends on the successful development of product candidates, primarily GB-501, based on this novel therapeutic approach. We have not yet demonstrated efficacy and safety for GB-501 or GB-701 in a pivotal trial or obtained marketing approval of any product candidate. GB-501 may not demonstrate in patients any or all of the therapeutic benefits we believe it may possess. If we are unsuccessful in our development efforts, we may not be able to advance the development of GB-501 or any other product candidate, commercialize products, raise capital, expand our business or continue our operations.

If the merger fails to close, we would depend heavily on the success of our product candidates. Clinical trials of our product candidates may not be successful. If we are unable to successfully complete clinical development of, and obtain marketing approvals for, our product candidates, or experience significant delays in doing so, or if after obtaining marketing approvals, we fail to commercialize these product candidates, our business will be materially harmed.

We have devoted a significant portion of our financial resources and business efforts to the development of our product candidates for diseases and conditions of the eye. In particular, we have historically invested substantial resources to complete the development of GB-102 for wet AMD, a program that we terminated in August 2022. We cannot accurately predict when or if any of our ocular disease product candidates will prove effective or safe in humans or whether these product candidates will receive marketing approval. Our ability to generate product revenues sufficient to achieve profitability will depend heavily on obtaining marketing approval for, and commercialization of, GB-501.

The success of GB-501 and GB-701 will depend on many factors, including:

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successful completion of preclinical studies and clinical trials that demonstrate to the satisfaction of the FDA, the EMA or comparable foreign regulatory authorities that our product candidates are safe and effective for any of their proposed indications;

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our ability to raise additional capital to fund future clinical trials for GB-501;

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acceptance of our products, if and when approved, by patients, the medical community and third-party payors;

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effectively competing with other therapies;

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applying for and receiving marketing approvals from applicable regulatory authorities for our product candidates;

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scaling up our manufacturing processes and capabilities to support additional or larger clinical trials of our product candidates and commercialization of any of our product candidates for which we obtain marketing approval;

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developing, validating and maintaining a commercially viable manufacturing process that is compliant with current good manufacturing practices;

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maintaining a continued acceptable safety profile of our products following approval;

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obtaining and maintaining coverage and adequate reimbursement from third-party payors;

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developing and expanding our sales, marketing and distribution capabilities and launching commercial sales of our product candidates, if and when approved, whether alone or in collaboration with others;

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minimizing and managing any delay or disruption to our ongoing or planned clinical trials, and any adverse impacts to the U.S. and global market for pharmaceutical products, including as a result of the ongoing COVID-19 pandemic;

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obtaining and maintaining patent and trade secret protection and regulatory exclusivity; and

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protecting our rights in our intellectual property portfolio.

If the merger fails to close and 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 commercialize our product candidates, which would materially harm our business.

We have not yet initiated or completed any Phase 3 clinical trials nor commercialized any pharmaceutical products, which may make it difficult to evaluate our future prospects.

Our operations to date have been limited to financing and staffing our company, developing our technology and conducting preclinical research and Phase 1 and Phase 2 clinical trials for our product candidates. We have not yet demonstrated an ability to initiate or complete Phase 3 clinical trials, obtain marketing approvals, manufacture a commercial-scale product or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by clinical-stage biopharmaceutical companies such as ours. Any predictions made about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing pharmaceutical products.

If the merger fails to close, we may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors in achieving our business objectives. We would eventually need to transition from a company with a development focus to a company capable of supporting commercial activities. We may not be successful in such a transition.

If clinical trials of GB-501 or any other product candidate that we develop fail to demonstrate safety and efficacy to the satisfaction of the FDA, the EMA or other regulatory authorities or do not otherwise produce favorable results, we may incur additional costs or experience delays in completing, or ultimately be delayed or unable to complete, the development and commercialization of such product candidate.

Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, including GB-501, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing.

GB-501 has not yet been tested in humans, and because it is a gene therapy, it cannot be tested in healthy volunteers, so the first time it will be tested on humans will be in a Phase 3 clinical trial. In addition, because mucopolysaccharidosis type 1 (“MPS1”) is a rare disease, the number of patients enrolled in the Phase 3 clinical trial will be very small, making it difficult to predict whether the favorable results from such a trial will be repeatable in the larger patient population. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.

Even if the results of future Phase 3 clinical trials are positive, we may have to commit substantial time and additional resources to conducting further preclinical studies and clinical trials before obtaining FDA approval for any of our drug candidates.

If serious adverse or unacceptable side effects are identified during the development of GB-501 or any other product candidates that we may develop, we may need to abandon or limit our development of such product candidates.

If GB-501 or any of our other product candidates are associated with serious adverse events (“SAEs”) or other undesirable side effects in clinical trials or have characteristics that are unexpected, we may need to abandon their development or limit development to more narrow uses or subpopulations in which the SAEs, undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective.

There are potential side effects that are related to ocular injection procedures, including intrastromal injections. These side effects are shared by any treatment that uses injection as a means of delivering medication. These can include conjunctival hemorrhage, punctate keratitis, eye pain, conjunctival hyperemia, intraocular pressure rise, intraocular inflammation, retinal detachment and endophthalmitis.

Clinical trials by their nature utilize a sample of the potential patient population. However, with a limited number of patients and limited duration of exposure, rare and severe side effects of our product candidates may only be uncovered when a significantly larger number of patients are exposed to the product. If safety problems occur or are identified after one of our products reaches the market, the FDA, the EMA or other regulatory authorities may require that we amend the labeling of our product, recall our product or even withdraw approval for our product.

Moreover, with regard to GB-501, additional or unexpected adverse side effects could develop, as gene therapy is still a relatively new approach to disease treatment. There also is the potential risk of delayed adverse events following exposure to gene therapy products due to persistent biologic activity of the genetic material or other components of products used to carry the genetic material. Possible adverse side effects that could occur with treatment with gene therapy products include an immunologic reaction early after administration which, while not necessarily adverse to the patient’s health, could substantially limit the effectiveness of the treatment.

Gene therapy is an emerging field of drug development, which makes it difficult to predict the time and cost of product candidate development and subsequently obtaining regulatory approval. Currently, only a limited number of gene therapy products have been approved in the United States and in foreign countries.

The future success of GB-501, a recombinant AAV gene therapy designed to treat corneal clouding caused by MPS1, depends on the successful development of this novel therapeutic approach. The regulatory requirements that govern any novel gene therapy product candidates we develop are not entirely clear and are subject to change. The clinical study requirements of the FDA and the criteria regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of the potential products. The regulatory approval process for novel product candidates such as ours may be more expensive and take longer than for other, better known or extensively studied product candidates. Further, as we are developing novel treatments for diseases in which there is little clinical experience with new endpoints and methodologies, there is heightened risk that the FDA or comparable foreign regulatory bodies may not consider the clinical trial endpoints to provide clinically meaningful results, and the resulting clinical data and results may be more difficult to analyze. To date, only a limited number of gene therapy products have been approved in the United States and foreign countries, which makes it difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for our product candidates in the United States or other jurisdictions. Further, approvals by any ex-U.S. regulatory agency may not be indicative of what the FDA may require for approval, or vice versa.

Gene therapy is an emerging field of drug development that poses many scientific and other risks. Our lack of experience with gene therapy and the limited patient populations for our newly acquired gene therapy programs may limit our ability to be successful or may delay our development efforts.

Gene therapy is an emerging field of drug development with only a small number of gene replacement therapies having received FDA approval to date. GB-501 is our first gene therapy program, and it is based entirely on technology that we acquired in March 2022 through our purchase of RainBio, Inc. (“RainBio”). We did not acquire any employees or manufacturing assets from RainBio, only the intellectual property rights that RainBio had in-licensed as well as the preclinical data that they had generated. We did not acquire any raw materials or finished drug product. We will need to rely entirely on third-party providers for all aspects of process development, manufacturing, and analytical methods for GB-501. We have no prior experience with any of these specialty providers, so we may not be able to negotiate acceptable supply terms, including pricing or timing of delivery, if at all.

As a result, there are several areas of drug development risk, including translational science, manufacturing processes and materials, safety concerns, regulatory pathway and clinical trial design and execution, which pose particular uncertainty for our gene therapy program given the relatively limited development history of, and our limited prior experience with, gene therapies. Furthermore, the medical community's understanding of the genetic causes of many diseases continues to evolve and further research may change the medical community's views on what therapies and approaches are most effective for addressing certain diseases.