10-K

gray-10k_20201231.htm

10-K

gray-10k_20201231.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2020

Commission File Number 001-39538

GRAYBUG VISION, INC.

(Exact name of Registrant as specified in its Charter)

275 Shoreline Drive, Suite 450

Redwood City, CA 94065

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (650) 487-2800

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. ☐

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, 2020, the last business day of the Registrant’s most recently completed second fiscal quarter, the Registrant was a privately-held company and there was no established public market for the Registrant’s common stock. The Registrant’s common stock began trading on The Nasdaq Global Market on September 25, 2020. 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 September 25, 2020 was approximately $120.2 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 February 26, 2021 was 21,043,984.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Definitive Proxy Statement relating to the 2021 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, 2020. 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 33

Item 1B. Unresolved Staff Comments 73

Item 2. Properties 73

Item 3. Legal Proceedings 74

Item 4. Mine Safety Disclosures 74

PART II

Item 6. Selected Financial Data 76

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 86

Item 8. Financial Statements and Supplementary Data 87

Item 9A. Controls and Procedures 112

Item 9B. Other Information 112

PART III

Item 10. Directors, Executive Officers and Corporate Governance 113

Item 11. Executive Compensation 113

Item 14. Principal Accountant Fees and Services 113

PART IV

Item 15. Exhibits, Financial Statement Schedules 114

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 future financial condition, business strategy and plans, 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:

• our ability to fund our working capital needs;

• our ability to develop and commercialize our product candidates;

• the strength and breadth of our patent portfolio;

• the potential for receipt of additional milestone payments;

• expected timing of our clinical trials;

• our ability to extend our operating capital.

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.

We obtained industry, market and competitive position data in this report from our own internal estimates and research as well as from industry and general publications and research surveys and studies conducted by third parties. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such information or estimates.

PART I

Item 1. Business.

Overview

We are a clinical-stage biopharmaceutical company focused on developing transformative medicines for the treatment of diseases of the retina and optic nerve. Our novel proprietary technologies are designed to release drugs in ocular tissue at a controlled rate for up to 12 months in order to improve patient compliance, reduce healthcare burdens and, ultimately, deliver better clinical outcomes. Our lead product candidate, GB-102, is an intravitreal injection of a microparticle depot formulation of sunitinib, a potent inhibitor of neovascular growth and permeability, which are leading causes of retinal disease. We are developing GB-102 as a once-every-six months intravitreal injection for the treatment of wet age-related macular degeneration, or wet AMD, and diabetic macular edema, or DME. In our Phase 1/2a clinical trial, GB-102 administered as a single 1 mg dose was well-tolerated in wet AMD patients and demonstrated durable clinical evidence of disease control of at least six months in approximately 88% of patients in this cohort. We then advanced GB-102 into a dose-ranging, controlled and masked safety and efficacy Phase 2b clinical trial in patients with wet AMD. Of the 56 patients enrolled in our Phase 2b clinical trial, 50 patients completed their 12-month treatment phase, while the remaining six withdrew for reasons unrelated to their treatment. Furthermore, 28 of the 50 patients who completed their Month 12 visit were eligible and agreed to continue clinical monitoring in a six-month monitoring extension of the trial. The goal of this six-month extension period is to observe further durability of GB-102 in wet AMD patients. We expect to report topline data from the Phase 2b clinical trial in March of 2021. We are also using our proprietary technologies to develop GB-103, a once-a-year formulation of GB-102, for the treatment of diabetic retinopathy, or DR, as well as GB-401, an intravitreally injectable depot formulation of a beta-adrenergic blocking agent prodrug with a dosing regimen of once every six months or longer for the treatment of primary open-angle glaucoma, or POAG. We believe that our product candidates could significantly improve clinical outcomes versus the respective standards of care for several ocular diseases.

Age-related macular degeneration, or AMD, is a chronic, progressive disease, a leading cause of vision loss in the elderly and estimated to affect approximately 15 million people in North America. The disease prevalence is approximately 85 to 90% nonexudative, or dry, AMD and 10 to 15% wet AMD. The therapeutic market for wet AMD in 2019 was estimated to be $7.9 billion worldwide and has historically grown by approximately 8% as a consequence of an aging population and the lack of preventative measures.

There is no cure for wet AMD. To maintain vision, patients must receive frequent intravitreal injections, up to 12 times per year, with short-acting anti-vascular endothelial growth factor, or VEGF, agents. Although the use of anti-VEGF treatments has revolutionized visual outcomes for patients, the need for frequent injection visits combined with the increasing prevalence of this disease puts an enormous pressure on healthcare systems and represents a severe burden for patients, caregivers and physicians. These dynamics often lead to a reduced frequency of treatment and result in suboptimal visual outcomes in real-world practice.

Damage to the retina as a result of DR includes a number of vision-threatening complications, such as DME, and has been an important cause of acquired vision loss in the young and middle-age adult population. It is estimated that the number of patients with DR will increase globally to over 190 million by 2030. One-third of DR patients over 40 years of age in the United States are at risk of developing vision-threatening complications, including DME. DME is the second largest market for anti-VEGF therapies, accounting for approximately $3.7 billion of sales worldwide and approximately $1.8 billion in the United States in 2019. Multiple clinical trials have shown that anti-VEGFs are also beneficial for the treatment of patients with DR but without DME; however, the need for frequent injections and follow-up for this often asymptomatic population leads to inadequate compliance and suboptimal clinical benefit.

GB-102 is designed to provide pan-VEGF inhibition for six months or longer while minimizing fluctuations in retinal thickness in between treatments, which is emerging as predictive of visual outcomes. We believe durable and sustained drug delivery of a single dose offered by GB-102 could provide improved visual outcomes for patients with wet AMD and DME, better patient quality-of-life and reduced disease-monitoring requirements.

GB-103, a longer-acting formulation of sunitinib, is designed to maintain therapeutic drug levels in the retinal tissue for up to 12 months following a single intravitreal injection. This potentially longer duration of clinical benefit and consequently less frequent need for intravitreal injections may be more conducive to maintaining a typically asymptomatic patient with DR on an effective anti-VEGF therapy regimen. If approved, GB-103 could provide a paradigm shift in the treatment of patients with DR who are currently managed either by observation alone, pan-retinal laser photocoagulation or, in rare instances, with short-acting anti-VEGF injections.

Glaucoma is an optic neuropathy that is characterized by the progressive degeneration of the optic nerve that leads to visual impairment. It is a leading cause of irreversible vision loss that is projected to affect approximately 76 million people worldwide in 2020, including approximately 2.7 million people in the United States. The most common type of glaucoma is POAG, which is characterized by an increase in intraocular pressure, or IOP, because fluid, which is continuously generated by cells inside the front of the eye, cannot drain properly. The global POAG therapeutics market is estimated to reach approximately $3.8 billion in 2026, of which the United States represents approximately $2.9 billion.

The most common treatment options for glaucoma are topical eye drops, which must be administered daily, or invasive medical procedures. Topical eye drops can lower IOP and have been shown to both delay and prevent the progressive degeneration associated with POAG. However, these medications must be administered up to four times per day, and approximately 30% of patients often require more than one class of drug to control IOP. It is estimated that approximately 50% of patients stop using their glaucoma medications in the first six months post-diagnosis due to various reasons, including forgetfulness, lack of disease awareness and/or cost, thus leading to uncontrolled IOP and progressive loss of peripheral vision. Laser-based or surgical treatments to permanently reduce IOP are invasive and achievement of IOP targets may require multiple surgeries.

Our third product candidate, GB-401, is an intravitreally administered, proprietary formulation of a beta-adrenergic beta-blocker prodrug designed to provide a controlled release of the active drug to maintain a reduced IOP for six months or longer after a single injection, thus addressing the patient compliance problem and improving outcomes. If approved, GB-401 could represent a significant paradigm shift in the way physicians treat POAG.

Our pipeline

The following chart summarizes the status and development plan for the product candidates in our pipeline. We own worldwide rights to each of our 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 depot formulations of microparticles containing biodegradable polymers such as poly(lactic-co-glycolic acid), or PLGA. The microparticles are engineered to carry a hydrophilic coating such as polyethylene glycol, or PEG, that helps eliminate or minimize inflammation typically associated with intraocular administration of conventional PLGA microparticles. Our preclinical studies and Phase 1/2a clinical trial 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 encapsulate 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 these prodrug technologies. For example, GB-401 has been developed using this approach.

Our lead program GB-102

We are developing our lead product candidate, GB-102, as a once-every-six months intravitreally delivered microparticle depot formulation of sunitinib for the treatment of wet AMD and DME. Sunitinib is a pan-VEGF inhibitor (VEGF-A, B, C and D). We believe that GB-102 is differentiated from the current standard of care, which requires more frequent dosing, up to 12 times per year, and primarily targets one neovascular pathway (VEGF-A).

Phase 1/2a and 2b clinical trials of GB-102 in wet AMD. GB-102 has been evaluated in multiple Phase 1/2 trials to assess its safety, tolerability, durability and pharmacodynamic effects, as well as to identify the optimal dose. In January 2019, we completed our Phase 1/2a ADAGIO clinical trial of GB-102 in 32 patients with wet AMD that previously received at least three anti-VEGF injections, which we refer to as our ADAGIO trial. This trial met its primary endpoint of safety and tolerability. No ocular serious adverse event, or SAE, or dose-limiting toxicity was reported, and the majority of patients had no drug-related adverse events, or AEs. The most common AE was the presence of medication in the anterior chamber. These AEs were reversible and with no long-term consequences. In this trial, 88% of patients who were previously treated with an average of eight injections annually were able to maintain stable central retinal thickness and visual acuity for six months or more with a single injection of 1 mg of GB-102.

Based on the data from the ADAGIO trial, we initiated the Phase 2b ALTISSIMO clinical trial in September 2019 to evaluate an improved product that would minimize the presence of medication within the anterior chamber. This trial was designed to compare two doses of GB-102 (1 or 2 mg) administered every six months to aflibercept administered every two months in up to 56 patients with anti-VEGF-responsive wet AMD. On the basis of a safety analysis of the Phase 2a clinical trial of GB-102 in ME, described below, and the interim safety data in the ALTISSIMO trial, we terminated the development of the GB-102 2 mg dose in all of our clinical trial programs. The primary endpoint of the ALTISSIMO trial is to determine time-to-additional anti-VEGF supportive therapy. Of the 56 patients originally enrolled in the study, 50 completed the 12-month treatment phase and six withdrew for reasons unrelated to their treatment. Furthermore, 28 of the 50 patients who completed their Month 12 ALTISSIMO visit continued masked clinical monitoring until the point at which they require additional supportive therapy, up to a maximum of six months. ALTISSIMO topline results are expected in March of 2021. If successful, we plan to advance two pivotal clinical trials in wet AMD in the second half of 2021.

Phase 2a clinical trial of GB-102 in ME secondary to various diseases, including DME and central or branch Retinal Vein Occlusion, or RVO. In September 2019, we initiated a Phase 2a clinical trial of GB-102 in 21 patients with ME secondary to DME and branch or central RVO. This trial was designed to be a six-month, single injection, multicenter, open-label, parallel arm trial with a primary end-point of safety and tolerability of two dose levels of GB-102 (1 and 2 mg) in patients with ME secondary to DME or RVO who had been previously treated with anti-VEGFs. All patients have completed the study and the final safety analysis has been performed. An interim data analysis from the ALTISSIMO and ME trials identified 1 mg of GB-102 as the optimal dose for future clinical trials. We intend to conduct a Phase 2b trial in patients with DME in the second half of 2021.

Additional pipeline programs

GB-103 is designed to be a once-a-year intravitreally delivered formulation of sunitinib, and has the potential to become an important therapy for patients with DR. Our Phase 1/2a clinical trial with GB-103 in patients with DR is planned to initiate in the first half of 2022.

We are also applying our proprietary technologies to develop GB-401, a depot formulation of a beta-adrenergic receptor inhibitor, designed to be injected once every six months to reduce IOP in POAG patients. We expect to submit an investigational new drug application, or IND, for GB-401 and initiate a dose-escalating Phase 1/2a clinical trial of GB-401 in patients with POAG in the second half of 2021.

We believe our proprietary technologies will allow us to develop other novel therapeutics, either alone or in combination, that can achieve extended durations of effectiveness and, thus improve the care and quality of life for patients with chronic diseases and disorders of the eye.

Our executive leadership team

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

We have raised approximately $134 million of capital in gross proceeds from a group of leading life sciences investors, including Deerfield Management, OrbiMed Advisors, a fund managed by Blackstone Life Sciences, Hatteras Venture Partners, CBC Group (formerly known as C-Bridge Capital) and Crown Venture Fund.

Wet AMD

Wet AMD is a common ocular disease caused by the growth of abnormal blood vessels under the central portion of the retina, or macula. This growth is triggered by VEGF, a protein produced by cells that stimulates the formation of new abnormal blood vessels, a process called neovascularization, and induces vascular permeability, leading to leakage and swelling of the retina. Anti-VEGF treatment has been shown to improve vision in patients with wet AMD when compared to either no treatment or laser alone.

According to the American Academy of Ophthalmology, it is estimated that 15 million people in North America have AMD. The prevalence of the disease is approximately 85 to 90% nonexudative, or dry, AMD and 10 to 15% wet AMD. As a greater percentage of Americans are living well beyond 60 years of age, more patients will become visually impaired from AMD than from glaucoma and diabetic retinopathy combined. Early intervention is essential to treat wet AMD; without treatment, vision rapidly declines. The figure below illustrates the primary effects of wet AMD.

Our market opportunity in wet AMD

In 2019, annual anti-VEGF sales reported for the treatment of retinal diseases exceeded $11 billion in 2019 globally. We believe a substantial majority of these sales were in connection with the treatment of wet AMD and DR. Avastin is also used off-label in approximately 60% of the wet AMD patients in the United States, therefore the potential therapeutic market is greater than reported. The wet AMD market has historically grown by approximately 8% as a consequence of an aging population and lack of preventative procedures.

Despite the significant benefits of existing therapeutic options, the need for frequent intravitreal injections is burdensome for both patients and retinal specialists. Retinal practitioners surveyed by the American Society of Retinal Specialists responded that their three greatest unmet needs are availability of long-acting sustained drug delivery, therapies that reduce treatment burden and new treatment mechanisms of action. According to a 2019 study of patient interviews in the United States, France and Australia, the factors affecting adherence from the patient perspective included the psychological burden of repeated intravitreal injections, the time burden of both treatment and monitoring visits for both patients and caregivers, which could take up to 12 hours per visit including travel time.

In clinical trials, intravitreal injections of anti-VEGF drugs resulted in significant gains in visual acuity for patients with retinal diseases. However, in settings outside of clinical trials, patients often receive less frequent injections than in clinical trial settings. Long-term observational studies in the United States, Europe and Japan have demonstrated that many patients with wet AMD lose visual acuity due to the challenges associated with receiving anti-VEGF injections at an optimal frequency.

The diagram below shows the declining visual acuity, or VA, results over four years after the first anti-VEGF injection in patients with wet AMD in the United States.

Most recently, it was shown that fluctuations between injections in retinal thickness in eyes receiving treatment for wet AMD is adversely associated with visual outcomes.

Diabetic retinopathy and diabetic macular edema

DR, which includes DME, is the leading cause of acquired vision loss in the young and middle-age adult population. Of an estimated 463 million people with diabetes mellitus, or DM, worldwide, approximately one-third have signs of DR and of these, a further one-third of DR is vision-threatening DR, including DME. Approximately 30 million people in the United States have diabetes, 10 million of whom suffer from DR, including 1.5 million with DME. DME affects central vision and can lead to a decline in vision ranging from slight visual blurring to blindness, substantially affecting independence and quality of life. If left untreated, DME is the most common cause of vision loss in patients with DR. The graph below illustrates the primary effects of DME compared to a healthy eye.

Our market opportunity in DR and DME

DME is the second largest market for anti-VEGF therapies, accounting for approximately $3.7 billion of sales worldwide and approximately $1.8 billion in the United States in 2019. It is estimated that there are three times as many DR patients as there are DME patients, which illustrates the commercial attractiveness of the DR indication for which short-acting anti-VEGFs have been recently approved. Multiple trials have shown that anti-VEGFs are also beneficial for the treatment of DR without DME; however, the need for frequent injections and follow-up in this often asymptomatic population leads to inadequate compliance and subsequent vision loss.

Our product candidates

GB-102

GB-102 is a potent small molecule multiple receptor tyrosine kinase inhibitor sunitinib malate, or sunitinib, formulated in our proprietary microparticles designed to be administered intravitreally every six months. Prior to administration, GB-102 is suspended in a buffered diluent and injected intravitreally similar to the standard in clinical practice with anti-VEGFs. Sunitinib is gradually released from the microparticle formulation into the vitreous chamber and is designed to sustain therapeutic drug levels in the ocular tissues for up to six months. Sunitinib also has a high binding affinity to the natural melanin pigment granules in the retina that allows the retinal pigmented epithelium, or RPE, to serve as a potential secondary drug reservoir and extend duration of action.

Sunitinib is an orally administered treatment for advanced renal, gastric and pancreatic malignancies that was originally approved in 2006. Oral sunitinib has demonstrated efficacy in murine laser choroidal neovascularization, or CNV, models and in wet AMD patients for the treatment of their cancers. However, because of a boxed warning related to hepatotoxicity for cancer indications, oral sunitinib has not been used for retinal indications. There are no reported cases of retinal toxicities in patients receiving continuous oral sunitinib for up to six years for the management of primary malignancies. In our preclinical and clinical studies, we have demonstrated that there are no detectable levels of sunitinib in the plasma after intravitreal injections of GB-102. Sunitinib’s mechanism of action is the inhibition of receptor tyrosine kinases, specifically of VEGF receptors 1, 2 and 3, blocking all VEGF signals, including VEGF-A, -B, -C and -D and placental growth factor, or PlGF, which are ligands implicated in pathologic neovascularization in patients with wet AMD. Moreover, sunitinib is a DLK-inhibitor, which may result in a neuroprotective effect.

Our clinical trials

Phase 1/2a trial of GB-102 in patients with wet AMD

In January 2019, we completed our Phase 1/2a clinical trial of GB-102 in patients with wet AMD, or our ADAGIO trial. This trial enrolled patients with wet AMD diagnosed less than 18 months prior to enrollment who had received at least three prior injections of any anti-VEGF treatment and demonstrated a response to anti-VEGF treatment, defined as physician-reported improvement in vision or reduction in macular thickness. Eligible patients received a single injection of GB-102 and were followed for eight months. Monthly assessments included adverse events, best-corrected visual acuity, or BCVA, using the Early Treatment of Diabetic Retinopathy Study, or ETDRS, protocol letter score, central sub-field thickness, or CST, slit-lamp biomicroscopy, dilated fundoscopy and plasma blood samples to detect systemic levels of sunitinib. Patients were eligible for supportive anti-VEGF treatment if any of the following criteria were met: ≥ 10 letter loss in BCVA (ETDRS) with new or increasing intra- or sub-retinal fluid judged to be the cause in the reduction in BCVA; an increase of ≥ 75 μm in CST from baseline; new onset vitreous hemorrhage.

In the ADAGIO trial, GB-102 met its primary endpoint of safety and tolerability with no ocular SAEs or dose limiting toxicities. Our data demonstrated that for patients who required an average of eight injections per year to control their disease, a single injection of GB-102 at various doses was able to maintain their central retinal thickness and visual acuity for six months or more, while significantly reducing the frequency of injection. The overall best performing dose was the 1 mg, which controlled the disease in seven out of eight patients for six months, and in four out of eight patients beyond eight months.

Since the most commonly reported ocular AE was presence of medication in the anterior chamber, we optimized the manufacturing process for GB-102 to enhance its binding affinity thus improving its ability to aggregate post injection. This optimized version is being used for subsequent trials.

Phase 2 clinical trials

Phase 2a trial of GB-102 in ME secondary to DME or RVO. In September 2019, we initiated a Phase 2a clinical trial of GB-102 in 21 patients with ME secondary to DME and RVO. This trial was designed to be a six-month, single injection, multicenter, open-label, parallel arm trial with a primary endpoint of safety and tolerability of two dose levels of GB-102 (1 and 2 mg).

Six centers in the United States enrolled 21 patients (n=10 DME; n=5 BRVO; n=6 CRVO) who had received at least three prior injections of anti-VEGF and shown at least some response within the last 24 months. In addition to the primary safety and tolerability endpoints noted above, secondary endpoints of the ME study were pharmacodynamics measures including mean change from baseline in BCVA (ETDRS), mean change from baseline in CST (SD-OCT), and time to rescue treatment. As the focus of the ME trial was safety, disease control was not a requirement at enrollment, and patient eligibility was not verified by independent third parties. On average, at enrollment, patients required eight injections per year to control their disease. Eligible patients received GB-102 (1 or 2 mg) at day 1 and were followed monthly.

Table below represents the baseline demographic of patients in the ME study.

There were no drug related non-ocular AEs in the trial. The 1 mg dose met its primary endpoint of safety and tolerability with seven out of ten patients demonstrating no adverse events. One patient had only vitreous floaters and one patient had vitreous floaters, medication present in the vitreous, and reduction in vision. The other AEs occurred in a single patient with medication present in the anterior chamber. The 2 mg dose was associated with medication present in the anterior chamber of five out of 11 patients. The majority of AEs occurred in these patients. Two SAEs were reported in a single patient (severe vision loss due to presence of medication in the anterior chamber and corneal edema as a result of wash-out of the anterior chamber). On the basis of an interim analysis performed at month 3 in the ME trial, it was determined that the 1 mg dose was well-tolerated. We believe that the number of microparticles injected in the 2 mg dose (approximately 2 million) were too many to allow adequate aggregation. The graphic below, photographed using wide field color fundus photography, represents an example of progression of the GB-102 1 mg depot throughout the six-month observation period.

Table below represents the drug-related adverse events reported in the ME trial.

These results provided additional support for the potential advancement of GB-102 1 mg dose into pivotal trials.

Phase 2b trial of GB-102 in patients with wet AMD. We initiated the Phase 2b ALTISSIMO trial in September 2019 and expect to report topline data from the 12-month treatment phase in March of 2021. ALTISSIMO is a 12-month, multicenter, prospective, double-masked, randomized (3:3:2), 3-parallel arm trial comparing two doses of GB-102 (1 and 2 mg) administered every six months to aflibercept administered every two months in patients with anti-VEGF-responsive wet AMD.

Similar to the population in the ADAGIO trial, key eligibility criteria include patients with wet AMD diagnosed less than 18 months prior to enrollment, who had received at least three prior injections of any anti-VEGF and demonstrated response to anti-VEGF treatment, defined as physician-reported reduction in macular thickness. In addition, those patients received an anti-VEGF injection within 21 days of screening. Eligible patients will receive either GB-102 (1 or 2 mg) or aflibercept at day one and will be followed monthly for 12 consecutive months. Monthly assessments include adverse events, BCVA, CST, complete ophthalmic examination, wide-field fundus photography and plasma blood samples to detect systemic levels of sunitinib.

Patients will be eligible for additional anti-VEGF supportive therapy (aflibercept) if they meet the following prespecified criteria:

• Decrease in BCVA (any of the following criteria):

• Increase in CST (any of the following criteria):

• ≥ 100 μm compared with the lowest on-study CST measurement (μm).

We initially designed the ALTISSIMO trial to enroll 160 patients and initiated the trial in September 2019. In December 2019, we voluntarily paused enrollment as a precautionary measure following the report of a single patient experiencing SAEs with the 2 mg dose in the Phase 2a trial of GB-102 in ME patients, as noted in the table above. Interim safety analyses of the macular edema trial demonstrated that five out of 11 patients in the 2 mg dose had medication in the anterior chamber as compared to one patient in the 1 mg dose. We then performed an ad-hoc interim safety analysis of ALTISSIMO in February 2020. In order to preserve data integrity, trial personnel including investigators, patients, study technicians and reading center remained masked at all times. No drug related SAEs were reported in ALTISSIMO. Presence of medication in the anterior chamber was reported in four patients in the GB-102 2 mg dose group and one patient in the 1 mg dose group.

Based on the number of patients in the 2 mg dose group who had medication in the anterior chamber in our ME and the ALTISSIMO trials, we decided to terminate the development of the GB-102 2 mg dose in all of our clinical trial programs. In addition, we capped enrollment in the ALTISSIMO trial at 56 patients as we had sufficient patients to explore repeat dosing with the GB-102 1 mg dose. We amended the protocol of the ALTISSIMO trial to ensure the GB-102 1 mg dose is used for re-dosing of all patients on GB-102 at month six, regardless of their original dose assignment. Finally, following discussions with the FDA, we shifted the primary endpoint—median time to first additional anti-VEGF supportive therapy—from month ten to month 12. On the basis of a safety analysis of the ME trial and interim safety data in the ALTISSIMO trial, we terminated the development of the GB-102 2 mg dose in all of our clinical trial programs and amended the protocol of the ALTISSIMO trial.

The revised ALTISSIMO trial design is provided in the figure below:

In December 2020, the last of 50 patients completed the 12-month treatment phase of ALTISSIMO, while 6 patients withdrew for reasons unrelated to their treatment. Furthermore, 28 of the 50 patients who completed their Month 12 visit were eligible and agreed to continue masked clinical monitoring until the point at which they require additional supportive therapy, up to a maximum of six months. The results of the ADAGIO and ALTISSIMO trials, together with published clinical data in wet AMD, will inform the trial design of pivotal Phase 3 trials. We plan to initiate a Phase 2b trial in DME in the second half of 2021.

GB-103: Potential for once-per year dosing of sunitinib in DR

GB-103 is intended to be a longer-acting version of GB-102 with the potential to maintain therapeutic drug levels in the retinal tissue for up to 12 months from a single intravitreal injection. We believe that GB-103’s potential 12-month durability and reduction in frequency of injections could significantly improve the standard of care for DR patients.

We are in the process of optimizing our GB-103 formulation, which will inform the timing and design of the clinical development program to explore indications in DR. The development of GB-103 will also be informed by the extended duration of treatment that is achievable through GB-102. We are currently conducting IND enabling activities and plan to initiate a Phase 1/2a trial in the first half of 2022.

GB-401

Disease overview

Glaucoma is an optic neuropathy that is characterized by the progressive degeneration of the optic nerve, leading to visual impairment, and is a leading cause of irreversible vision loss worldwide. POAG is the most common type of glaucoma.

Though the specific mechanism of neuronal damage in POAG has not been fully identified, progressive visual field loss is associated with increased IOP. Chronically elevated IOP can lead to neuronal degeneration and retinal ganglion cell death with resulting disruption of the visual pathway. Increased IOP is caused by the over-production of the clear fluid in the eye behind the cornea, or aqueous humor, and/or decreased drainage of the aqueous humor from the eye. Currently approved topical eye drops can lower IOP by either decreasing aqueous humor production and/or enhancing aqueous humor drainage when used as directed by a physician. These

medications must be administered up to four times per day, and it is estimated that approximately 30% of patients often require more than one medication.

As shown in the figure below, in the healthy eye, the ciliary body produces fluid that circulates through the pupil and drains in the corner, or the angle, of the eye where the cornea and iris meet. In POAG, pressure in the eye can increase if there is increased fluid production and/or decreased drainage in the angle leading to elevated IOP. Chronically elevated IOP can lead to neuronal degeneration and retinal ganglion cell death with resulting disruption of the visual pathway.

Market overview

Glaucoma is a leading cause of irreversible vision loss affecting approximately 76 million people worldwide in 2020, including approximately 2.7 million people in the United States. The global POAG therapeutics market is estimated to reach approximately $3.8 billion in 2026, of which the United States represents approximately $2.9 billion.

Various drug classes for glaucoma therapy include prostaglandin analogs, or PGAs, beta-blockers, alpha-adrenergic agonists, carbonic anhydrase inhibitors, rho-kinase inhibitors, combination drugs and others. PGAs are preferred as first-line therapy for glaucoma due to their effectiveness in reducing IOP, once-daily dosing and reduced side effects as compared to other therapies. The PGA segment accounted for a market share of approximately 50% in the United States in 2018 and is expected to remain dominant until meaningfully superior agents are developed and approved. The second most prescribed class of drops is beta-blockers, however with a less favorable systemic side effect profile, including decreased heart rate, slowed breathing rate and decreased blood pressure.

A number of procedures have been developed to treat patients whose disease has significantly progressed. These include laser or surgical treatments reserved for patients for whom other measures have failed.

Unmet need

Importance of greater compliance in glaucoma is considered a large unmet need. It is estimated that approximately 50% of patients stop taking their glaucoma medications within the first six months of treatment initiation due to various reasons, including forgetfulness, lack of disease awareness and/or cost. Poor adherence to glaucoma medication regimens has been documented in numerous independent studies, particularly in patients on two or more prescription eye drops. Additionally, studies show that more than 30% of patients often require more than one medication.

Furthermore, because glaucoma progresses slowly and causes few symptoms, patients often do not adhere to their medication regimens as prescribed until the disease has progressed to the point of significant vision loss. As a result, despite the availability of medication to treat glaucoma, progressive visual loss and blindness still often occur. According to a 2015 analysis published in the Translational Vision Science & Technology Journal, 15% to 20% of glaucoma patients progress to blindness within 15 to 20 years of diagnosis.

Our goal is to provide sustained reduction of elevated IOP associated with POAG to increase compliance for patients and improve the medical management of glaucoma. For patients, our goal is to eliminate the need for daily eye drops required to manage elevated IOP. For physicians, our goal is to design a long-acting IOP-lowering treatment that can be administered in the office through intravitreal injections, ensuring patient compliance for up to six months.

Our solution

GB-401 has the potential to reduce elevated IOP for at least six months. GB-401 is an inactive new chemical entity, or NCE, prodrug of a beta-adrenergic receptor inhibitor, or beta-blocker, formulated with our proprietary microparticle technologies for controlled release and is designed to be administered intravitreally once every six months. Upon exposure to water under physiologic conditions, the prodrug is released from the polymer and is converted into the active beta-blocker by hydrolysis. The polymer biodegrades into normal metabolic by-products of lactic and glycolic acid and is naturally cleared from the eye.

GB-401 is designed to provide controlled drug release with minimal burst effects that can result in potential systemic exposure of the beta-blocker. The figure below illustrates sustained in vitro drug release from GB-401 for 180 days at 37° C without a burst effect.

Beta-blockers have been used as the comparative control for the approval of topical agents for IOP reduction, including PGAs, carbonic anhydrase inhibitors, rho-kinase inhibitors and alpha-adrenergic receptor agonists. Beta-blockers must be administered twice daily and often produce systemic exposure which can lead to decreases in heart rate, blood pressure and respiratory function. Though prostaglandins are the leading class of agents used to reduce IOP, evidence suggests that continuous exposure may lead to loss of IOP reduction effects that may be due to receptor fatigue from continuous stimulation, as well as poor compliance due to topical side effects.

We believe that GB-401 has the potential to provide sustained reduction in IOP for at least six months, thus eliminating the need for frequent patient-instilled eye drops. GB-401 could also improve tolerability by reducing ocular hyperemia (red eyes due to irritation) and sunken eye (reduction in peri-orbital fat), which are common side effects for PGAs and rho-kinase inhibitors, while eliminating systemic drug exposure. Therefore, we believe our proprietary beta-blocker technology represents a validated but differentiated pharmacological approach.

Our future development plans

We plan to pursue clinical development for GB-401 under a 505(b)(2) regulatory pathway, which obviates the need to conduct repeat preclinical toxicology and safety studies. We intend to rely in part on the FDA’s prior findings for the previously approved active pharmaceutical ingredient, or API, as well as relevant publications, and to conduct additional GLP toxicology studies with GB-401, to support the GB-401 IND and any future 505(b)(2) NDA. At the time of NDA submission, we expect to provide the FDA with all required nonclinical elements in the NDA either directly through original studies, published literature, and the FDA’s prior findings as reflected in the approved labeling for the previously approved API which contains the same API as GB-401. We plan to initiate a first-in-human, multicenter, open-label, sequential escalating dose-cohorts Phase 1/2a clinical trial evaluating the safety, tolerability and pharmacodynamic effects of a single intravitreal injection of GB-401 with POAG in the second half of 2021. The primary endpoint will be the occurrence of ocular and non-ocular adverse events. Secondary endpoints will include pharmacodynamic evaluation of IOP. In pursuing the 505(b)(2) pathway, we expect to rely upon this Phase 1/2 clinical trial, as well as two Phase 3 trials, which we currently envision as multi-center, randomized, double-blind trials with dosing once every 6 months in patients with POAG or ocular hypertension,

with approximately 350 to 600 participants per trial. The final Phase 3 trial designs and sample sizes will be determined based upon our ongoing discussions with the FDA and the results of the Phase 1/2a trial.

Commercialization

We currently have no sales, marketing or commercial product distribution capabilities. We intend to start developing commercialization capabilities after the data read-out from the ALTISSIMO trial in patients with wet AMD in March of 2021.

If GB-102 receives regulatory approval, we plan to commercialize it in the United States with our own specialty sales force. We believe that retinal specialists in the United States, who perform most of the medical procedures involving diseases of the back of the eye, are sufficiently concentrated that we expect to be able to effectively promote GB-102 to these specialists with our own sales and marketing group. We expect to use a variety of types of collaboration, distribution and other marketing arrangements with one or more parties to commercialize GB-102 in markets outside the United States.

If GB-401 receives marketing approval, we plan to commercialize it in the United States with our own specialty sales force. Similar to GB-102, we will explore a variety of types of collaboration, distribution and other marketing arrangements with one or more third parties in markets outside the United States.

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 and commercialize 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 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-102, if approved, are likely to be its efficacy, safety, method and frequency of administration, on-mechanism durability of therapeutic effect, convenience, price, level of generic competition and availability of coverage and reimbursement from government and other third-party payors. The method of administration of GB-102, intravitreal injection, is commonly used to administer ophthalmic drugs for the treatment of severe disease 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 intravitreal injection, depending on the relative efficacy, safety and durability of the other method of administration.

The current standard of care for wet AMD and DME is monotherapy administration of anti-VEGF drugs, principally Avastin, Lucentis and Eylea, which are well-established therapies and are widely accepted by physicians, patients and third-party payors, as well as Beovu, the most recently approved anti-VEGF drug. There are also several product candidates in late-stage development, including those being developed by F. Hoffmann-La Roche AG, Kodiak Sciences Inc., Chengdu Kanghong Pharmaceutical Group Co., Ltd. and Opthea Limited. Physicians, patients and third-party payors may not accept the addition of GB-102 to their current treatment regimens for a variety of potential reasons, including:

• if they do not wish to incur the additional cost, if any, of GB-102;

• if sufficient coverage and reimbursement are not available; and

• if they do not perceive GB-102 to have a favorable risk-benefit profile.

We are developing GB-102 as an alternative to existing anti-VEGF drugs, including Avastin, Lucentis, Eylea and Beovu. Accordingly, GB-102 would directly compete with these therapies. While we believe GB-102 will compete favorably with existing anti-VEGF drugs, future approved standalone or combination therapies for wet AMD with demonstrated improved efficacy over GB-102 or currently marketed therapies with a favorable safety profile and any of the following characteristics might pose a significant competitive threat to us:

• a mechanism of action that does not involve VEGF;

• a method of administration that effectively avoids intravitreal injection; and

Our commercial opportunity could be reduced or eliminated if one or more of our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. An anti-VEGF gene therapy product might substantially reduce the number and frequency of intravitreal injections when treating wet AMD and DME, making GBV-102 unattractive to physicians and patients. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. In addition, our ability to compete may be affected because in many cases insurers or other third-party payors seek to encourage the use of generic products.

We expect that product candidates currently in clinical development, or that could enter clinical development in the near future, could represent competition, if approved. These product candidates may provide efficacy, safety, convenience and other benefits that are not provided by currently marketed therapies. Because there are a variety of means to treat wet AMD and DME, our patents and other proprietary protections for GB-102 will not prevent development or commercialization of product candidates that are different from GB-102.

Manufacturing

We do not have any manufacturing facilities or personnel, other than personnel who manage our CMO relationships. We currently rely, and expect to continue to rely, for the next few years, on third parties for the manufacture of our product candidates undergoing preclinical testing and clinical testing.

All of our drug candidates include small molecules and are manufactured in synthetic processes from base materials. We purchase the active pharmaceutical ingredient, or API, from a reliable source and we believe that our manufacturing process is amenable to scale-up and does not currently require unusual equipment. We expect to continue to develop product candidates that can be produced cost-effectively at contract manufacturing facilities. We anticipate that these arrangements will be sufficient for the manufacture of our product candidates until our planned manufacturing facility is established and operational.

Although we plan to establish our own manufacturing facility, we may continue to rely on CMOs for parts of the process, such as filling and labelling of our products for commercial sale. By establishing our own manufacturing facility, we expect to minimize or eliminate our reliance on CMOs. We believe that having control over the whole manufacturing process will 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 having a dedicated manufacturing facility will allow us to optimize commercial-scale processes.

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 technology, to deliver known active agents such as sunitinib as well as our novel prodrugs such as that in GB-401. We also seek to protect our proprietary methods of treatment using our microparticles for ocular disease, alone and in combination with other therapeutic agents. In addition, we seek protection on processes for the production of our aggregating microparticles, and dosing regimens and formulations for the ocular administration of our microparticles. 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 or exclusively licensing U.S. and foreign patent applications covering our proprietary technologies, inventions and improvements that are important to the development and implementation of our business. In addition, we currently plan 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.

We are the sole owner of ten patent families covering our products 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, 2020, on a worldwide basis, includes 90 granted or pending patent applications with eight granted U.S. patents, eight pending U.S. non-provisional applications, one pending U.S. provisional application, two pending international patent applications filed under the Patent Cooperation Treaty and 71 pending patent applications that have entered the national phase of prosecution in countries outside the United States.

We have exclusively licensed five patent families from Johns Hopkins University, or JHU, described below, and have granted an exclusive sublicense to Kala Pharmaceuticals, Inc., or Kala, solely in the area of delivery through a mucosal barrier for the five families licensed from JHU only. Our patent estate exclusively licensed from JHU as of December 31, 2020, on a worldwide basis, includes 51 granted or pending patent applications with eight granted U.S. patents, five pending U.S. non-provisional applications and 38 pending or granted patents that have entered the national phase of prosecution in countries outside the United States.

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, referred to as a patent term extension, or by delays encountered during patent prosecution that are caused by the PTO, referred to as patent term adjustment. For example, the Hatch-Waxman Act permits a patent term extension for FDA-approved new chemical entity drugs 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 intend to seek patent term extensions on any of our issued patents in any jurisdiction where we have a qualifying patent and the extension is available; however, there is no guarantee that the applicable regulatory authorities, including the FDA in the United States, will agree with our assessment of whether such extensions should be granted, and even if granted, the length of such extensions. Further, even if our patent is extended, the patent, including the extended portion of the patent, may be held invalid or unenforceable by a court of final jurisdiction in the United States or a foreign country.

Current issued patents and patent applications covering the composition of matter for our present clinical candidates GB-102 and GB-103 will expire on dates ranging from 2031 to 2039, if the applications are issued and held valid by a court of final jurisdiction if challenged. Current issued patents and patent applications covering our clinical candidate GB-401 will also expire on dates ranging from 2031 to 2041, if the applications are issued and held valid if challenged. Our pending applications on additional methods of use of our clinical candidates, should they issue, will expire in 2039. We plan 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 may rely on to protect our market for approved products, may be held invalid or unenforceable by a court of final jurisdiction. Alternatively, we 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 ability to protect our inventions and enforce our 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 microparticle technologies and novel prodrugs will depend on our success in enforcing the claims that have been granted or may grant. 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.

GB-102 and GB-103 patent coverage

Patents solely owned by us

We own a first patent family that generally describes our proprietary surface modifying microparticle technology that allows the microparticles to remain separate prior to in vivo administration and then aggregate in vivo into at least one microparticle of at least 500 microns that provides controlled drug delivery. Alternatively, the microparticle can be aggregated into an implant that is used in the eye. This family consists of one issued U.S. Patent (US 10,441,548) and two pending U.S. applications (US 2020/0000734 and US 2020/0000735) covering the GB-102 and GB-103 aggregating microparticle composition-of-matter and their pharmaceutical compositions. Several pending corresponding patent applications cover methods of use of these aggregated microparticles and their processes of manufacture. This patent family is now also in the national stage of prosecution in Australia, Brazil, Canada, China, Eurasia, Europe, Hong Kong, Israel, India, Japan and Mexico. The expected year of expiration for these composition-of-matter patents, where issued, valid and enforceable, is 2036, without regard to any extensions, adjustments or restorations of term that may be available under national law.

We also own a second patent family that cover additional microparticle formulations and methods of manufacture, including for example suspensions of GB-102 or GB-103 and lyophilized solid GB-102 or GB-103 that have been treated to remove adhered air or gas. It consists of two U.S. applications, US 2018/0326078 and US 2020/0230246, and is currently in the national phase of prosecution in Australia, Bahrain, Brazil, Canada, China, Europe, Israel, India, Japan, Kuwait, Mexico, Oman, Russia, Qatar, Saudi Arabia and the United Arab Emirates, that The expected year of expiration for this patent family, if issued, valid and enforceable, is 2038, without regard to any extensions, adjustments or restorations of term that may be available under U.S. or other national laws.

We own a third patent family that discloses coordinated control of a number of processing factors that result in a significantly harder or more durable aggregated microparticle, and which may be used in the process of manufacture of our GB-102 or GB-103 products. This family includes one international application filed under the Patent Cooperation Treaty, PCT/US19/61859 (which we intend to file in the United States and other selected foreign countries on or before the deadline to do so), one patent application filed in Taiwan and one patent application filed in Argentina. The expected year of expiration for this patent family, if issued, valid and enforceable, is 2039, without regard to any extensions, adjustments or restorations of term that may be available under U.S. or other national laws.

In addition, we own a fourth patent family that discloses various processes for the manufacture of our aggregating microparticles that can be used to manufacture GB-102 or GB-103. The family includes one U.S. application. This patent family is now also in the national stage of prosecution in Australia, Canada, China, Europe, Japan, and Russia. The expected year of expiration for this patent family, if issued, valid and enforceable, is 2039, without regard to any extensions, adjustments or restorations of term that may be available under U.S. or other national laws.

Patent Filings Exclusively Licensed from JHU

We have exclusively licensed from JHU a first patent family that claims microparticles with a hydrophobic polymeric core (such as PLGA or PLA or a combination of both PLGA and PLA) and a hydrophilic coating (such as PLGA permanently linked to polyethylene glycol) to reduce inflammation for intraocular injections and their methods of use. This patent family includes four U.S. Patents (US 8,889,193; US 9,566,242; US 9,937,130; and US 10,369,107). This patent family also currently includes one pending U.S. application, US 2019/0321297, as well as corresponding patent applications Europe and Canada. The expected year of expiration for this patent family, where issued, valid and enforceable, is 2031, without regard to any extensions, adjustments or restorations of term that may be available under national law.

We have also exclusively licensed from JHU a second patent family, which covers sunitinib-encapsulated polymeric microparticles, including GB-102 and GB-103, and their use as therapeutic compositions to treat disorders of the eye. This patent family currently includes two U.S. pending applications, US 2017/0273901 and US 2019/0275001 and is also pending in Australia, Brazil, Canada, China, Europe, Hong Kong, India, Israel, Japan, Mexico, Oman, Qatar, Russia, Saudi Arabia and United Arab Emirates. The application has been allowed in Australia, Canada, and Russia. The expected year of expiration for this patent family, where issued, valid and enforceable, is 2035, without regard to any extensions, adjustments or restorations of term that may be available under national law.

A third patent family exclusively licensed from JHU discloses method for reducing neuronal damage in the eye that includes administration of a sustained release formulation of dual leucine kinase inhibitor in a polymeric particle, and wherein the dual leucine kinase inhibitor may be sunitinib. This family consists of one issued U.S. Patent, US 10,525,034, one pending U.S. application, US

2020/0147044, and corresponding applications in Europe, China, Japan and Hong Kong. The application has been allowed in Japan. The expected year of expiration for this patent family, where issued, valid and enforceable, is 2035, without regard to any extensions, adjustments or restorations of term that may be available under national law.

GB-401 patent coverage

We own a fifth patent family that describes the composition of matter of a range of proprietary prodrugs, one of which is a prodrug of a beta-adrenergic receptor inhibitor that is in GB-401. This patent family provides the basis for compound (new chemical entity), pharmaceutical compositions and methods of use of these prodrugs. The family includes one pending U.S. patent application, US 2020/0031783, and corresponding applications in Australia, Bahrain, Brazil, Canada, China, Europe, Hong Kong, Israel, India, Japan, Kuwait, Mexico, Oman, Russia, Qatar, Saudi Arabia and the United Arab Emirates. The expected year of expiration for these composition-of-matter patents, where issued, valid and enforceable, is 2038, without regard to any extensions, adjustments or restorations of term that may be available under national law.

We own a sixth patent family that consists of a U.S. provisional application that describes microparticles and implants with high-drug loadings of GB-401. This family includes one provisional application and the expected year of expiration for this patent family, if issued, valid and enforceable, is 2041, without regard to any extensions, adjustments or restorations of terms that may be available under U.S. or other national laws.

The four patent families that we solely own described above covering GB-102 and GB-103 also cover aggregating microparticles that encapsulate GB-401, pharmaceutical compositions of these aggregating microparticles, and methods of use. Therefore, we have six patent families that cover GB-401 as a compound and in an aggregating microparticle, and their uses and manufacture.

In addition, the first patent family exclusively licensed from JHU described above that describes polymeric microparticles has claims that cover GB-401, pharmaceutical compositions of these microparticles, and methods of use.

Patent filings that cover additional novel prodrugs, compositions, uses and manufacture

Patent filings solely owned by us

We also own several patent families that cover additional novel prodrugs, pharmaceutical compositions and methods of use in the area of ocular therapy. We may or may not develop these inventions to commercial products, and we have the possibility to license undeveloped technologies to other entities where advantageous to us.

The seventh patent family owned by us covers an extensive number of novel prodrugs, including prodrugs of sunitinib, timolol, brinzolamide and dorzolamide, pharmaceutical compositions, and methods of use for ocular therapy. The family includes seven granted U.S. Patents (US 9,808,531; US 9,956,302; US 10,098,965; US 10,111,964; US 10,117,950; US 10,159,747; and US 10,485,876) and is currently pending in Australia, Brazil, Canada, China, Eurasia, Europe, Hong Kong, Israel, India, Japan and Mexico. The expected year of expiration for these composition-of-matter patents, where issued, valid and enforceable, is 2036, without regard to any extensions, adjustments or restorations of term that may be available under national law.

The eighth patent family covers prodrug derivatives of ethacrynic acid, timolol, brinzolamide and pharmaceutical compositions, and methods of use for ocular disorders, including the lowering of intraocular pressure. The patent family includes one U.S. pending application (US 2020/0308162) and corresponding applications in Australia, Canada, China, Europe, Japan and Russia. The expected year of expiration for these composition-of-matter patents, where issued, valid and enforceable, is 2038, without regard to any extensions, adjustments or restorations of term that may be available under national law.

The ninth patent family covers novel prodrugs of loop diuretics, pharmaceutical compositions, and methods of use for ocular disorders, including the lowering of intraocular pressure. This family includes one U.S. application. The expected year of expiration for this composition-of-matter patent, where issued, valid and enforceable, is 2039, without regard to any extensions, adjustments or restorations of term that may be available under national law.

Our tenth patent family includes one international application filed under the Patent Cooperation Treaty, PCT/US19/53513 and one patent application filed in Taiwan that covers additional novel prodrugs of sunitinib, brinzolamide, and dorzolamide, pharmaceutical compositions, and methods of use for ocular disorders. The expected year of expiration for these composition-of-matter patents, where issued, valid and enforceable, is 2039, without regard to any extensions, adjustments or restorations of term that may be available under national law.

Patent filings exclusively licensed from JHU

We have exclusively licensed a fourth patent family from JHU that covers hydrophobic-hydrophilic copolymers of HIF-1 inhibitors, pharmaceutical compositions, and method of use for ocular therapeutics. This patent family includes two granted U.S. Patents (US 8,962,577 and US 9,950,072) and corresponding applications in Australia, Canada, China, Eurasia, Europe, Hong Kong and Japan. These applications have granted in Australia, Canada, China, Eurasia, and Japan. The expected year of expiration for these composition-of-matter patents, where issued, valid and enforceable, is 2033, without regard to any extensions, adjustments or restorations of term that may be available under national law.

We have in addition exclusively licensed from JHU a fifth patent family that covers hydrophobic-hydrophilic copolymers of non-HIF active agents for ocular therapy, pharmaceutical compositions, and method of use. The family includes one granted U.S. Patent (US 10,159,743) and one pending U.S. application (US 2019/0070302) as well as corresponding granted patents in Australia, Canada, China, Eurasia, Europe, Hong Kong and Japan. The expected year of expiration for these composition-of-matter patents, where issued, valid and enforceable, is 2033, without regard to any extensions, adjustments or restorations of term that may be available under national law.

License agreements

Johns Hopkins University

In June 2011, we entered into an Exclusive License Agreement with JHU, which has been amended from time to time, which we refer to as the JHU Agreement. Pursuant to the JHU Agreement, JHU granted us an exclusive, worldwide, sublicensable license to three patent families to research, develop, make, use and sell products and provide services in any field, and a non-exclusive license to use specified know-how and materials with a provision that JHU will not grant a license to know how and materials to any other commercial entity. The JHU first patent family describes microparticles with a hydrophobic polymeric core (such as PLGA or PLA or a combination of both PLGA and PLA) and a hydrophilic coating (such as PLGA permanently linked to polyethylene glycol) to reduce inflammation for intraocular injections and their methods of use, which technology is incorporated into our GB-102, GB-103 and GB-401 product candidates. The JHU licensed fourth and fifth patent families cover potential future technologies. See “Intellectual Property” above for additional description of the JHU patent families.

In September 2015, the JHU Agreement was amended to include the JHU second patent family which covers sunitinib-encapsulated polymeric microparticles, including GB-102 and GB-103, and their use as therapeutic compositions to treat disorders of the eye. Under the terms of the amended JHU Agreement, we paid a one-time, non-refundable upfront fee, with a remaining amount to be paid upon the occurrence of certain events. We also agreed to pay an additional one-time, non-refundable fee of $100,000 on the occurrence of the first commercial sale of a product falling under the claims of a patent in the second patent family.

In April 2016, the JHU Agreement was further amended to include a third patent family which discloses a method for reducing neuronal damage in the eye that includes administration of a sustained release formulation of a dual leucine kinase inhibitor in a polymeric particle, and wherein the dual leucine kinase inhibitor may be sunitinib, and thus is relevant to both our GB-102 and GB-103 product candidates. Under the terms of the amended JHU Agreement, we paid a one-time, non-refundable upfront fee, and a milestone payment for the grant of the first patent. We also agreed to use our best efforts to develop a licensed product under the third patent family and enter into a Phase I clinical trial on or before April 2019, and to have cumulatively spent several million dollars on research and development within six years of execution of the amendment.

Upon execution of the JHU Agreement in 2011, we paid JHU an upfront license fee in the low tens of thousands of dollars and issued to JHU a low single digit percentage of our equity interests as of such date. We have also reimbursed JHU for the prosecution and maintenance costs incurred by JHU for the licensed patent rights prior to our entering into the JHU Agreement, and we are responsible for all of the ongoing costs relating to the prosecution and maintenance of the JHU patent rights licensed to us. We also agreed to pay minimum annual royalties in the tens of thousands of dollars per year until the first commercial sale of a licensed product or service.

The JHU Agreement further requires single digit running royalties on our annual net sales, which may be reduced by 50% of any payments we make to third parties for freedom to operate, up to a maximum credit of 50% of the running royalty rate otherwise due to JHU. Royalties must be paid on products that fall within a patent claim of an issued and unexpired patent or a pending patent application that has not been finally rejected or is pending for less than seven years. We also must pay developmental milestones for achieving certain clinical progression events, ranging from tens of thousands to hundreds of thousand dollars per event, which in the aggregate, total less than $2 million per product. Under the JHU Agreement, prior to the Kala Agreement renegotiation described below, we were responsible for paying each developmental milestone payment for the first three products to achieve such milestone, and milestones for the second and third products are reduced by 50%. We further agreed to pay a percentage of any sublicense consideration we receive. Once commercial, we expect ongoing royalties on sales to be in the low single digits.

The JHU Agreement will remain effective until (i) the later of the expiration date of the last-to-expire patents covered under the JHU Agreement or 20 years from the effective date; (ii) the termination by either party upon the bankruptcy or uncured breach of the other party or (iii) if we terminate the JHU Agreement, with a 90-day notification period. We may terminate the entire agreement or on a patent by patent basis if desired, subject to the 90-day notification period.

Kala Pharmaceuticals

A dispute arose between us, JHU and Kala, over rights licensed to us and Kala by JHU. In October 2014, we entered into a Settlement and License Agreement, or the Kala Agreement, with Kala and JHU, which settled all pending disputes and amended our and Kala’s existing license agreements with JHU and created new rights and obligations among the parties.

Under the Kala Agreement, each of Kala and us provided the other with a royalty-free, exclusive sublicense with respect to certain intellectual property rights granted by JHU in limited fields of use. Specifically, we provided Kala with an exclusive sublicense for the use of a particle with specific characteristics for delivery of a biologically active material through mucus, mucin or a mucosal barrier (provided that such delivery does not involve administration via injection to the eye), or the Kala Field of Use, and Kala provided us with an exclusive sublicense to the use of a particle with specific characteristics for delivery of a biologically active material to the eye via injection (excluding such use of any particle comprising or consisting of loteprednol etabonate). Kala also agreed not to use a particle with those specific characteristics that include sunitinib in the Kala Field of Use under the license from us or JHU. Neither we nor Kala owe JHU any payments under its existing JHU agreement with respect to the sublicenses granted to the other. Both we and Kala hold rights to sublicense our respective rights in connection with a future collaboration arrangement and subject to any such sublicensee being bound by the applicable terms of the Kala Agreement.

Under the Kala Agreement, JHU agreed to a number of financial concessions to both us and Kala. The payments under the existing JHU agreements were modified by reducing all milestones and minimum annual royalties by 25%, including the development milestone payments due for the first licensed product; the development milestone payments due for the first license product were each extended by one year; development milestone payments for the second and third licensed products were eliminated; and the commercial milestone payments for the first commercial sale of a licensed product were reduced by 50% in the United States. New sales-based milestones were added for the second and third licensed products. Upon the second licensed product under the JHU Agreement reaching a certain level of sales or receiving sublicense royalty income, we are required to pay $100,000 plus the amounts of the eliminated development milestones and reduced first commercial sale milestone. For the third licensed product, on reaching the same level of sales or receiving sublicense royalty income, we are required to pay $150,000 plus the amounts of the eliminated development milestones and reduced first commercial sale milestone. In addition, we, Kala and JHU released each other from any liability or claims known to Kala and us as of the Kala Agreement and arising out of the actions leading to, and related to the subject of, the Kala Agreement.

The Kala Agreement will expire upon the expiration of all the patent rights that are the subject of the Kala Agreement. We may terminate one or more of the licenses or sublicenses granted to us in the Kala Agreement on a country-by-country basis for convenience upon 30 days’ prior written notice to Kala. We or Kala may terminate one or more the sublicenses granted to the other party under the JHU patent rights if the other party, or its employees, officers, directors, agents or representatives, takes certain steps to oppose, attempt to invalidate or prevent the issuance of any of the patent rights directly licensed to the terminating party by JHU.

AffaMed Therapeutics

In July 2019, we entered into a letter agreement with AffaMed Project Limited, or AffaMed, in connection with their purchase of our Series C preferred stock, which we refer to as the AffaMed Letter. Under the AffaMed Letter, we granted AffaMed a right of first negotiation, or the Option, to enter into a license agreement to exclusively develop, register and commercialize GB-102 solely in the territories of China, Hong Kong, Taiwan, Macau and South Korea. The Option expires upon the earlier of (i) July 31, 2021 and (ii) 60 days after we provide top line data from the Phase 2b trial for GB-102. If AffaMed does not exercise the Option, we will have no further obligation to AffaMed to license rights to GB-102.

The AffaMed Letter provides AffaMed with an initial 30-day period to propose terms for such a license which, if such terms are approved by a majority of our board of directors (excluding the director appointed by AffaMed), shall lead to a 60-day exclusive negotiation period. During this period of up to 90 days, we are prohibited from soliciting, initiating, encouraging or assisting the submission of any other proposal, negotiation or offer for the development, registration and commercialization of GB-102 in China, Hong Kong, Taiwan, Macau or South Korea.

We will enter into a license agreement for such services with AffaMed if approved by a majority of the members of our board of directors, excluding the director appointed by AffaMed, during the exclusive negotiation period. If our board of directors does not approve AffaMed’s proposed terms under the Option following good faith negotiations and following a further 10 business day period of discussion if requested by AffaMed, we have the right to enter into an alternative license agreement with any third party for such services. If AffaMed does not exercise its Option, we have the right to enter into an alternative license agreement with a different party.

The AffaMed Letter does not limit our ability to develop, register and commercialize GB-102 in territories other than China, Hong Kong, Taiwan, Macau and South Korea.

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 FDA under the Federal Food, Drug, and Cosmetic Act, or 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 NDAs, 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 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. The results of preclinical testing are submitted to FDA as part of an IND along with other information, including information about product chemistry, manufacturing and controls, 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 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, or 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 FDA as part of the IND.

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, or 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 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, 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 impossibleor (2) when in conjunction with other confirmatory evidence.

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 is prepared and submitted to 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, or 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.

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, FDA begins an in-depth review. Under PDUFA, 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, or NMEs, and 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 six months from submission of NDAs for non-NMEs. The review process for both standard and priority review may be extended by FDA for three additional months to consider certain late-submitted information or information intended to clarify information already provided in the submission.

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. 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, FDA will inspect the facility or the facilities at which the drug is manufactured. FDA will not approve the product unless compliance with current good manufacturing practices is satisfactory and the NDA contains data that provide substantial evidence that the drug is safe and effective in the indication studied.

After 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 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 FDA’s satisfaction in a resubmission of the NDA, FDA will issue an approval letter. 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, FDA may require a risk evaluation and mitigation strategy, or 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, or 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 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, or 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. 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, or 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 FDA’s determination that information relating to the use of a new drug in the pediatric population may produce health benefits in that population, 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.

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, 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. FDA also may require post-marketing testing, known as Phase 4 testing, REMS and surveillance to monitor the effects of an approved product, or 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 FDA and certain state agencies. Registration with FDA subjects entities to periodic unannounced inspections by 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, or 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.

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. 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, or NCE, which is a drug that contains no active moiety that has been approved by FDA in any other NDA, that drug receives five years of marketing exclusivity during which 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. 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 FDA determines that the applicant did not pursue 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;

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.

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, or 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, or 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, or 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, or 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, or 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.Beginning calendar year 2021, manufacturers must collect information regarding payments and other transfers of value to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and certified nurse-midwives for reporting in 2022. The reported information is made publicly available on a searchable website.

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.

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.

There have been a number of federal and state proposals during the last few years regarding the pricing of pharmaceutical and biopharmaceutical products, limiting coverage and reimbursement for drugs and biologics and other medical products, government control and other changes to the health care system in the United States.

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. Among the provisions of the ACA of importance to our potential product candidates are:

• expanded the types of entities eligible for the 340B drug discount program;

There have been legislative and judicial efforts to modify, repeal, replace, or otherwise invalidate all, or certain aspects of, the ACA, including measures taken during the Trump administration. For example, the Tax Cuts and Jobs Act of 2017 was enacted and 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 November 2020, the U.S. Supreme Court held oral arguments on the Fifth Circuit U.S. Court of Appeals decision that held that the individual mandate is unconstitutional. It is unclear when a decision will be made or how the Supreme Court will rule. It is also unclear how such litigation and other efforts to repeal and replace the ACA will impact the ACA and our business.

Additionally, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on certain high cost employer-sponsored insurance plans and the medical device excise tax on non-exempt medical devices, and effective January 1, 2021, also eliminates the health insurer tax. Further, the Bipartisan Budget Act of 2018, or the BBA, among other things, amended the ACA, effective January 1, 2019, to increase from 50% to 70% the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.” In addition, CMS published a final rule that would give states greater marketplaces, which may have the effect of relaxing essential health benefits required under the ACA for plans sold through such marketplaces. There has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent 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 products. At the federal level, the Trump administration’s budget proposals for fiscal year 2021 included a 135 billion allowance to support legislative proposals seeking to reduce drug process, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower cost generic and biosimilar drugs. In particular, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that seek to implement several of the administration’s proposals. FDA also released a final rule in September 2020 providing guidance for states to build and submit importation plans for drugs from Canada. The Trump and Biden administrations both issued executive orders intended to favor government procurement from domestic manufacturers. In addition, the Trump administration issued an executive order specifically aimed at the procurement of pharmaceutical products, which instructed the federal government to develop a list of “essential” medicines and then buy those and other medical supplies that are manufactured, including the manufacture of the API, in the United States. It is unclear whether this executive order or something similar will be implemented by the Biden Administration.

Further, in November 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. The CMS also issued an interim final rule implementing President Trump’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021. On December 28, 2020, the United

States District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule. 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. It is unclear to what extent these new regulations will be implemented and to what extent these regulations or any future legislation or regulations by the Biden administration will have on our business, including our ability to generate revenue and achieve profitability. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Any reduction in reimbursement from Medicare and other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent the generation revenue, attainment of profitability or commercialization of products. In addition, it is possible that there will be further legislation or regulation that could harm the business, financial condition and results of operations.

Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This included 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 unless additional Congressional action is taken. The Coronavirus Aid, Relief, and Economic Security Act, or the, CARES Act, which was signed into law in March 2020 and is designed to provide financial support and resources to individuals and business affected by the COVID-19 pandemic, suspended the 2% Medicare sequester from May 1, 2020 through December 31, 2020, and extended sequester by one year, through 2030. The Consolidated Appropriations Act, 2021 extended the suspension of the 2% Medicare sequester through March 31, 2021. 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.

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, 2020, we had 31 full time employees, all in the United States, nine 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 human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees. The principal purposes of our equity incentive and cash-based performance bonus plans are 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 is located in Redwood City, California, and consists of approximately 6,000 square feet of office space under a lease which expires in August 2021. We use this facility for operations and administrative purposes. We also have facilities located in Baltimore, Maryland. The Maryland facility consists of approximately 8,500 square feet of office and laboratory space under

a lease which expires in June 2023. We use the Maryland facility for our internal research and development activities. We believe that our facilities are adequate to meet our needs for the foreseeable future.

Legal proceedings

From time to time, we may be involved in legal proceedings arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, in the opinion of management, would have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity and reputational harm, and other factors.

Corporate Information

We were incorporated in Delaware in May 2011 and our principal executive office is located in Redwood City, California. Our website is www.graybug.vision. We are subject to the informational requirements of the Securities and Exchange Act of 1934, as amended, or 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 following risks and all of the other information contained in this Annual Report on Form 10-K, including our financial statements and related notes and the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before investing 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:

Risks Related to Our Financial Position and Need For Additional Capital

We are a clinical-stage biopharmaceutical company with a limited operating history and 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.

Since inception, we have incurred significant operating losses. Our net loss was $27.5 million and $37.0 million for the years ended December 31, 2020 and 2019. As of December 31, 2020 and 2019, we had an accumulated deficit of $133.4 million and $105.8 million, respectively. 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 the Company’s 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. 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. Our independent registered public accounting firm included an explanatory paragraph in their audit report on our financial statements as of and for the years ended December 31, 2020 and 2019 stating that our recurring losses from operations and negative cash flows since inception and our need to raise additional funding to finance our operations raise substantial doubt about our ability to continue as a going concern.

We 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:

• commence clinical trials of our product candidates GB-401 and GB-103;

• continue the research and development of other product candidates;

• seek to identify and develop additional product candidates;

• maintain, expand and protect our intellectual property portfolio;

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:

We have no product sales. We do not expect sales of any product candidate in the near future. 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:

• obtaining marketing approval for these product candidates;

• 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 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.

We expect to devote substantial financial resources to our ongoing and planned activities, particularly as we conduct clinical trials for our wet AMD product candidates, in particular, late-stage clinical trials for GB-102, preclinical studies and clinical trials for our other product candidates, and seek marketing approval for any such product candidate for which we obtain favorable clinical results. We also expect to devote significant financial resources to conducting research and development and potentially seeking regulatory approval for our other product candidates. In addition, we plan to devote substantial financial resources to our commercialization efforts, including product manufacturing, sales, marketing and distribution for any of our product candidates for which we obtain marketing approval. Accordingly, we will need to obtain substantial additional funding in connection with our continuing and planned operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.

Our independent registered public accounting firm included an explanatory paragraph in their audit report on the financial statements and related notes as of and for the years ended December 31, 2020 and 2019 stating that our recurring losses from operations and negative cash flows since inception and our need to raise additional funding to finance our operations raise substantial doubt about our ability to continue as a going concern. See “Our recurring losses and negative cash flows have raised substantial doubt regarding our ability to continue as a going concern, and the report of our independent registered public accounting firm for the year ended December 31, 2020 includes an explanatory paragraph indicating the conditions that raise substantial doubt about our ability to continue as a going concern” below for additional information.

As of December 31, 2020, we had cash and cash equivalents of $33.4 million and short-term investments of $61.6 million, which we believe is insufficient to fund our operations as currently planned for the next 12 months. Our future funding requirements will depend on many factors, including:

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

• the effect of competing technological and market developments;

• 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 do not expect to generate sales of any commercial product for several years, if at all. Accordingly, we may need to obtain substantial additional financing to achieve our 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 recurring losses and negative cash flows have raised substantial doubt regarding our ability to continue as a going concern, and the report of our independent registered public accounting firm for the year ended December 31, 2020 includes an explanatory paragraph indicating the conditions that raise substantial doubt about our ability to continue as a going concern.

CALC US Equity

CALC · 10-K · period ended 2020-12-31

Item 1. Business.

Item 1A. Risk Factors.

CALC US Equity☆

CALC · 10-K · period ended 2020-12-31

Item 1. Business.

Item 1A. Risk Factors.

CALC US Equity