Item 1A. Risk Factors

You should carefully consider the following risk factors, together with the other information contained in this annual report on Form 10-K, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before making a decision to purchase or sell shares of our common stock. We cannot assure you that any of the events discussed in the risk factors below will not occur. These risks could have a material and adverse impact on our business, results of operations, financial condition and growth prospects. If that were to happen, the trading price of our common stock could decline. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations or financial condition. In this section, we first provide a summary of the more significant risks and uncertainties we face and then provide a full set of risk factors and discuss them in greater detail.

SUMMARY RISKS FACTORS

●

We have a limited operating history, have incurred significant operating losses since our inception and expect to incur significant losses for the foreseeable future;

●

We may never become profitable or, if we achieve profitability, we may not be able to sustain it;

●

We may require additional financing to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our commercialization activities, product development programs, or other operations;

●

Our Revenue Interest Financing Agreement could limit cash flow available for our operations and expose us to risks that could adversely affect our business, financial condition and results of operations;

●

We currently depend entirely on the success of VOQUEZNA, VOQUEZNA TRIPLE PAK and VOQEUZNA DUAL PAK, which were launched in the fourth quarter of 2023. If we are unable to successfully commercialize these products, or are unable to obtain regulatory approval for vonoprazan to treat heartburn associated with symptomatic Non-Erosive GERD, our business will be materially harmed;

●

Vonoprazan may not have favorable results in our future clinical trials, or receive additional regulatory approvals on a timely basis, if at all;

●

VOQUEZNA, VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK, and any future product candidates are subject to extensive regulation and compliance obligations, which is costly and time consuming, and such regulation may cause unanticipated delays or prevent the receipt of the required approvals to commercialize additional product candidates;

●

We may not be successful in our efforts to expand our pipeline by identifying additional indications and formulations for which to investigate vonoprazan in the future. We may expend our limited resources to pursue a particular indication or formulation for vonoprazan and fail to capitalize on product candidates, indications or formulations that may be more profitable or for which there is a greater likelihood of success;

●

We currently have limited experience as a company in commercializing products. We may lack the necessary expertise, personnel and resources to successfully commercialize any of our product candidates that have received or may receive regulatory approval, including VOQUEZNA;

●

We rely on third parties to conduct our preclinical and clinical trials and perform other tasks for us. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or comply with regulatory requirements, we may not be able to obtain additional regulatory approvals for or commercialize vonoprazan and our business could be harmed;

●

We currently engage third-party manufacturers for all of our clinical and commercial supplies. The loss of any of these suppliers, or any future single source suppliers, could harm our business;

●

We rely on the Takeda License to provide us rights to develop and commercialize vonoprazan in the United States, Europe, and Canada. If the license agreement is terminated, we would lose our rights to develop and commercialize vonoprazan;

●

If the scope of any patent protection or non-patent regulatory exclusivity we obtain is not sufficiently broad, or if we lose or fail to obtain any of our patent protection or non-patent regulatory exclusivity, our ability to prevent our competitors from commercializing similar or identical product candidates would be adversely affected;

●

The successful commercialization of VOQUEZNA, VOQUEZNA TRIPLE PAK and Voquezna Dual Pak will depend in part on the extent to which governmental authorities and health insurers establish coverage, adequate reimbursement levels and favorable pricing policies. Failure to obtain or maintain coverage and adequate reimbursement for our products could limit our ability to market those products successfully and decrease our ability to generate revenue;

●

If we fail to comply with reporting and payment obligations for VOQUEZNA, VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK under the Medicaid Drug Rebate Program or other governmental pricing programs, we could be subject to additional reimbursement requirements, penalties, sanctions and fines, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects;

●

We are subject to various foreign, federal, and state healthcare and privacy laws and regulations, and our failure to comply with these laws and regulations could harm our results of operations and financial condition;

●

We are highly dependent on the services of our key executives and personnel, and if we are not able to retain these members of our management or recruit additional management, clinical and commercial personnel, our business will suffer; and

●

The trading price of our securities is likely to be volatile, and purchasers of our securities could incur substantial losses.

Risks Related to Our Limited Operating History, Financial Position and Capital Requirements

We have a limited operating history as a commercial company, which may make it difficult to evaluate the success of our business to date and to assess our future viability.

Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk.

We received our first regulatory approvals in 2022, and prior to our commercialization of VOQUEZNA, VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK in the fourth quarter of 2023, we had not manufactured products on a commercial scale, or arranged for a third party to do so on our behalf or conducted sales and marketing activities necessary for successful commercialization. Consequently, predictions about our future success or viability may not be as accurate as they could be if we had a longer history of successfully developing and commercializing products. We expect our financial condition and operating results to continue to fluctuate from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. We have transitioned from a company with solely a clinical development focus to a company also undertaking commercial activities. We may encounter unforeseen expenses, difficulties, complications and delays, and may not be successful in such a transition.

We have incurred significant operating losses since inception and anticipate that we will continue to incur substantial operating losses for the foreseeable future and may never achieve or maintain profitability.

Since our inception, we have incurred significant operating losses. Our net loss was $201.6 million and $197.7 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $928.7 million. We expect to continue to incur expenses and operating losses for the foreseeable future. It could be several years, if ever, before VOQUEZNA, VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK or other product candidates, if approved, generate significant revenues to offset these expenses and operating losses. As a result, we are uncertain when or if we will achieve profitability and, if so, whether we will be able to sustain it. The net losses we incur may fluctuate significantly from quarter to quarter and year to year. We expect to continue to incur losses for the foreseeable future, and we anticipate these losses will increase substantially as we:

•

initiate, continue, or complete planned or ongoing clinical trials of vonoprazan, including related support activities;

•

make required milestone and royalty payments under license agreements by which we acquired rights to vonoprazan;

•

make required royalty payments under the Revenue Interest Financing Agreement, or RIFA, entered into in May 2022, as amended;

•

make required payments under the Loan and Security Agreement with Hercules Capital, Inc., entered into in September 2021, as amended;

•

initiate clinical trials for VOQUEZNA, vonoprazan or any future product candidates;

•

build a portfolio of product candidates through the acquisition or in-license of additional product candidates or technologies;

•

pursue regulatory approvals for new indications for vonoprazan and future product candidates that successfully complete clinical trials; and

•

incur additional legal, accounting and other expenses in connection with operating as a public company.

To become and remain profitable, we must successfully commercialize one or more product candidates with significant market potential. This will require us to be successful in manufacturing, marketing and selling our currently approved products, particularly VOQUEZNA, and any future product candidates for which we may obtain marketing approval and satisfying any post-marketing requirements. We are only in the early stages of many of these activities and, in some cases, have not yet commenced certain of these activities.

Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, continue our product development efforts, diversify our product candidate pipeline 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 require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations.

The development and commercialization of biopharmaceutical product candidates is capital-intensive. We expect our expenses to increase in connection with our ongoing activities, particularly as we continue to achieve product sales for VOQUEZNA and our other approved products and progress our Non-Erosive GERD development program. In addition, we are required to make milestone and royalty payments to Takeda, from whom we have in-licensed the rights to develop and commercialize vonoprazan in the United States, Europe, and Canada pursuant to the Takeda License. Furthermore, if and to the extent we seek to acquire or in-license additional product candidates in the future, we may be required to make significant upfront payments, milestone payments, and/or royalty payments. If we obtain additional regulatory approvals for vonoprazan or regulatory approval for any future product candidate, we also expect to incur significant additional commercialization expenses related to product manufacturing, marketing, sales and distribution. Because the outcome of any clinical trial is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of vonoprazan for additional populations, such

as patients with Non-Erosive GERD or EoE, or other product candidates. Accordingly, we will need to obtain substantial additional funding in connection with our continuing 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.

We believe that our existing cash and cash equivalents together with the drawdown of the remaining $160 million under our loan and security agreement, or the Loan Agreement, with Hercules Capital, or Hercules, are sufficient to fund operations for at least the next 12 months and, along with anticipated product revenues, will be sufficient to fund our operations through the end of 2026. In particular, we expect that these funds will allow us to finance the ongoing launch of VOQUEZNA, including for the treatment of heartburn associated with symptomatic Non-Erosive GERD, if approved, VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK, and complete the clinical development of vonoprazan as an as needed treatment for Non-Erosive GERD. We have based these estimates on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. Our operating plans and other demands on our cash resources may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements. 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. Attempting to secure additional financing may divert our management from our day-to-day activities, which may adversely affect our ability to develop vonoprazan or any future product candidates.

Our future capital requirements will depend on many factors, including:

•

the costs of sales and marketing activities in support of the commercial launch of VOQUEZNA, VOQUEZNA TRIPLE PAK, and VOQUEZNA DUAL PAK, or any future product candidate;

•

the initiation, type, number, scope, results, costs and timing of our clinical trials of vonoprazan, and preclinical studies or clinical trials of other potential product candidates we may choose to pursue in the future, including feedback received from regulatory authorities;

•

the costs and timing of manufacturing for vonoprazan or any future product candidates, including commercial scale manufacturing if any product candidate is approved;

•

the costs, timing and outcome of regulatory review of our NDA for vonoprazan for the treatment of heartburn associated with symptomatic Non-Erosive GERD, and the costs, timing and outcome of regulatory review of any future product candidates;

•

the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights;

•

our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company, including enhanced internal controls over financial reporting;

•

the costs associated with hiring additional personnel and consultants as our business grows particularly commercial personnel;

•

the timing and amount of the milestone or other payments we must make to Takeda and any future licensors;

•

our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payers and adequate market share and revenue for any approved products;

•

patients’ willingness to pay out-of-pocket for any approved products in the absence of coverage and/or adequate reimbursement from third-party payers;

•

the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements; and

•

the costs associated with any products or technologies that we may in-license or acquire.

Conducting clinical trials and preclinical studies is a time consuming, expensive, and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval of future product candidates. In addition, VOQUEZNA, VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK, or any future product candidate, may not achieve commercial success. Our commercial revenues will, for the foreseeable future, be derived exclusively from sales of products containing vonoprazan in the United States.

Accordingly, we will need to continue to rely on 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.

Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through equity offerings, our Loan Agreement with Hercules, our Revenue Interest Financing Agreement, other debt financings, or other capital sources, including potential collaborations, licenses and other similar arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Our Loan Agreement and our Revenue Interest Financing Agreement include, and any future debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring additional debt, making capital expenditures or declaring dividends. For example, our Loan Agreement with Hercules contains minimum cash financial covenants.

If we raise funds through future collaborations, licenses and other similar arrangements, we may have to relinquish valuable rights to our future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or that may reduce the value of our common stock.

Risks Related to Commercialization of VOQUEZNA, VOQUEZNA TRIPLE PAK, VOQUEZNA DUAL PAK and Any Future Product Candidates

We may lack the necessary expertise, personnel and resources to successfully commercialize VOQUEZNA, VOQUEZNA TRIPLE PAK, VOQUEZNA DUAL PAK, and any future product candidates that may receive regulatory approval, on our own or together with collaborators.

Until 2023, our operations were primarily limited to organizing and staffing our company, business planning, raising capital, acquiring the rights to, and undertaking clinical trials of, vonoprazan. Although we started developing marketing and distribution capabilities in 2021 in advance of the planned commercialization of VOQUEZNA, VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK, due to approval and launch delays, we did not hire our field force until late 2023. The success of the commercialization of our approved products in the United States and any of our future product candidates that may be approved by the FDA will depend on such marketing, sales and distribution capabilities. Factors that may affect our ability to commercialize our approved products and future product candidates successfully on our own include obtaining access to or persuading adequate numbers of physicians to prescribe our products. Building and maintaining a sales and marketing organization has required, and will continue to require, significant investment, and is time-consuming. Our sales and marketing organization may prove not to be effective. If we are unable to maintain effective sales and marketing capabilities for our approved products including VOQUEZNA, or to find suitable partners for such commercialization, we may have difficulties generating revenue from them.

Following receipt of regulatory approval, we are subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense.

With respect to VOQUEZNA, VOQUEZNA TRIPLE PAK, VOQUEZNA DUAL PAK, and any future product candidates, the FDA, EMA or other comparable regulatory authority may impose significant restrictions on a product’s indicated uses or marketing or impose ongoing requirements for potentially costly and time-consuming post-approval studies, post-market surveillance or clinical trials to monitor the safety and efficacy of the product. The FDA and comparable regulatory authorities may also require a REMS or similar risk management measures as a condition of approval of any future product candidates, which could include requirements for a

medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. In addition, for our approved products or future products that obtain approval, particularly following commercial launch of any such products, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export and recordkeeping for our products will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMPs and similar requirements and GCP requirements for any clinical trials that we conduct post-approval. Later discovery of previously unknown problems with our products, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:

•

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

•

restrictions on product distribution or use, or requirements to conduct post-marketing studies or clinical trials;

•

fines, restitutions, disgorgement of profits or revenues, warning letters, untitled letters or holds on clinical trials;

•

refusal by the FDA or comparable foreign regulatory authority to approve pending applications or supplements to approved applications filed by us or suspension or revocation of approvals;

•

product seizure or detention, or refusal to permit the import or export of our products; and

•

injunctions or the imposition of civil or criminal penalties.

The occurrence of any event or penalty described above may inhibit our ability to commercialize our current products and any future product candidates and generate revenue and could require us to expend significant time and resources in response and could generate negative publicity.

The FDA’s and other regulatory authorities’ policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of any future product candidates or additional indications for our current products. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, may be subject to enforcement action, and we may not achieve or sustain profitability.

Additionally, the EU pharmaceutical legislation is currently undergoing a complete review process, in the context of the Pharmaceutical Strategy for Europe initiative, launched by the European Commission in November 2020. The European Commission's proposal for revision of several legislative instruments related to medicinal products (potentially reducing the duration of regulatory data protection, revising the eligibility for expedited pathways, etc.) was published on April 26, 2023. The proposed revisions remain to be agreed and adopted by the European Parliament and European Council and the proposals may therefore be substantially revised before adoption, which is not anticipated before early 2026. The revisions may however have a significant impact on the pharmaceutical industry and our business in the long term.

The commercial success of our current products or any future product candidates will depend upon the degree of market acceptance of such product candidates by physicians, patients, healthcare payers and others in the medical community.

VOQUEZNA, VOQUEZNA TRIPLE PAK, VOQUEZNA DUAL PAK, and any future product candidates, if approved, may not be commercially successful. The commercial success of our current products or any future product candidates will depend significantly on the broad adoption and use of such product by physicians and patients for approved indications. The degree of market acceptance of our current products or any future products, if approved, will depend on a number of factors, including:

•

demonstration of clinical efficacy and safety compared to other more-established products;

•

the indications for which our current or any future product candidates are approved;

•

the limitation of our targeted patient population and other limitations or warnings contained in any FDA-approved labeling or comparable approved labeling;

•

acceptance of a new drug for the relevant indication by healthcare providers and their patients;

•

the pricing and cost-effectiveness of our products, as well as the cost of treatment with our products in relation to alternative treatments and therapies;

•

our ability to obtain and maintain sufficient third-party coverage and adequate reimbursement from government healthcare programs, including Medicare and Medicaid, private health insurers and other third-party payers;

•

the willingness of patients to pay all, or a portion of, out-of-pocket costs associated with our products in the absence of sufficient third-party coverage or adequate reimbursement;

•

any restrictions on the use of our products, and the prevalence and severity of any adverse effects;

•

potential product liability claims;

•

the timing of market introduction of our products as well as competitive drugs;

•

the effectiveness of our or any of our potential future collaborators’ sales and marketing strategies; and

•

unfavorable publicity relating to the product.

If our current products or any future product candidates, if approved, does not achieve an adequate level of acceptance by physicians, hospitals, healthcare payers or patients, we may not generate sufficient revenue from that product and may not become or remain profitable. Our efforts to educate the medical community and third-party payers regarding the benefits of our products may require significant resources and may never be successful.

Takeda has the right to develop and commercialize vonoprazan outside of the United States, Europe, and Canada and has received marketing approval for vonoprazan in numerous countries in Asia and Latin America as well as in Russia. We have little or no control over Takeda’s commercialization activities with respect to vonoprazan outside of our licensed territories even though those activities could impact our ability to successfully commercialize vonoprazan. For example, Takeda can make statements or use promotional materials with respect to vonoprazan outside of our licensed territories that are inconsistent with our positioning of the product in the United States, Europe, and Canada, and could sell vonoprazan in foreign countries at prices that are dramatically lower than the prices we would charge in our licensed territories. These activities and decisions, while occurring outside of our licensed territories, could harm our commercialization strategy. In addition, product recalls or safety issues with vonoprazan outside our licensed territories could result in serious damage to the brand and impair our ability to successfully market our products containing vonoprazan in our licensed territories.

The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. If we are found or alleged to have improperly promoted off-label uses, we may become subject to significant liability.

The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products such as our currently approved products, and any additional product candidates containing vonoprazan and any future product candidates, if approved. In particular, a product may not be promoted for uses that are not approved by the FDA or such other regulatory agencies as reflected in the product’s approved labeling. For example, the FDA has approved VOQUEZNA for the treatmentfor healing and maintenance of healing of all grades of erosive esophagitis and relief of heartburn associated with erosive esophagitis in adults and, in combination with either amoxicillin, or amoxicillin and clarithromycin, treatment of H. pylori infection in adults, and we are not currently permitted to promote this product for any other uses unless and until such uses are approved by the FDA. For any product for which we have obtained a marketing approval, however, physicians may nevertheless prescribe it to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may become subject to significant liability. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. If we cannot successfully manage the promotion of our current products or any product candidates, we could become subject to significant liability, which would materially adversely affect our business and financial condition.

The successful commercialization of our current products or any future product candidate, will depend in part on the extent to which governmental authorities and health insurers establish coverage, adequate reimbursement levels and favorable pricing

policies. Failure to obtain or maintain coverage and adequate reimbursement for our products could limit our ability to market those products and decrease our ability to generate revenue.

The availability of coverage and the adequacy of reimbursement by governmental healthcare programs, such as Medicare and Medicaid, private health insurers and other third-party payers are essential for most patients to be able to afford prescription medications such as VOQUEZNA, VOQUEZNA TRIPLE PAK, VOQUEZNA DUAL PAK or any future product candidates that may be approved. Our ability to achieve coverage and acceptable levels of reimbursement for our products by third-party payers will have an effect on our ability to successfully commercialize those products. Even if we obtain coverage for a given product by a third-party payer, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. We cannot be sure that coverage and reimbursement in the United States, the European Union, or elsewhere will be available for any product that we may develop, and any reimbursement that may become available may be decreased or eliminated in the future.

Third-party payers increasingly are challenging prices charged for pharmaceutical products and services, and many third-party payers may refuse to provide coverage and reimbursement for particular drugs when an equivalent generic drug or a less expensive therapy is available. It is possible that a third-party payer may consider our products as substitutable and only offer to reimburse patients for the less expensive product. Even if we are successful in demonstrating improved efficacy or improved convenience of administration with our products, pricing of existing drugs may limit the amount we will be able to charge for our products. These payers may deny or revoke the reimbursement status of a given product or establish prices for new or existing marketed products at levels that are too low to enable us to realize an appropriate return on our investment in product development. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our products and may not be able to obtain a satisfactory financial return on products that we may develop.

There is significant uncertainty related to third-party payer coverage and reimbursement of newly approved products. In the United States, third-party payers, including private and governmental payers, such as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs will be covered. Some third-party payers may require pre-approval of coverage for new or innovative devices or drug therapies before they will reimburse healthcare providers who use such therapies. It is difficult to predict at this time what third-party payers will decide with respect to the coverage and reimbursement for our products.

Obtaining and maintaining reimbursement status is time consuming, costly and uncertain. The Medicare and Medicaid programs increasingly are used as models for how private payers and other governmental payers develop their coverage and reimbursement policies for drugs. However, no uniform policy for coverage and reimbursement for products exists among third-party payers in the United States. Therefore, coverage and reimbursement for products can differ significantly from payer to payer. As a result, the coverage determination process will require us to provide scientific and clinical support for the use of our products to each payer separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases at short notice, and we believe that changes in these rules and regulations are likely.

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe and other countries has and will continue to put pressure on the pricing and usage of our products. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to fix their own prices for medical products but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our products. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits.

Moreover, increasing efforts by governmental and third-party payers in the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for our products. We expect to experience pricing pressures in connection with the sale of any of our products due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly

prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.

If we fail to comply with reporting and payment obligations under the Medicaid Drug Rebate Program or other governmental pricing programs, we could be subject to additional reimbursement requirements, penalties, sanctions and fines, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

We participate in various governmental programs, such as the Medicaid Drug Rebate Program, that impose extensive drug price reporting and payment obligations on pharmaceutical manufacturers.

Medicaid is a joint federal and state program that is administered by the states for low-income and disabled beneficiaries. Medicare is a federal program that is administered by the federal government covering individuals age 65 and over as well as those with certain disabilities. Under the Medicaid Drug Rebate Program, or MDRP, as a condition of having federal funds being made available to the states for covered outpatient drugs under Medicaid and, if applicable, Medicare Part B, pharmaceutical manufacturers must enter into an agreement with the Secretary of Health and Human Services to pay a rebate to state Medicaid programs for each unit of covered outpatient drug dispensed to a Medicaid beneficiary and paid for by the state Medicaid program. Medicaid drug rebates are based on pricing data that pharmaceutical manufacturers report on a monthly and quarterly basis to the U.S. Centers for Medicare & Medicaid Services, or CMS, which is the federal agency that administers the MDRP and Medicare programs. For the MDRP, these data include the average manufacturer price, or AMP, for each drug and, in the case of innovator products, the Best Price, or BP, which represents the lowest price available from the manufacturer to any entity in the United States in any pricing structure, calculated to include all applicable sales and associated rebates, discounts and other price concessions. If a manufacturer becomes aware that its MDRP government price reporting submission for a prior quarter was incorrect or has changed as a result of recalculation of the pricing data, the manufacturer must resubmit the corrected data for up to three years after those data originally were due. If a manufacturer fails to provide information timely or is found to have knowingly submitted false information to the government, the manufacturer may be subject to civil monetary penalties and other sanctions, including termination from the MDRP.

Federal law requires that any company that participates in the MDRP also participate in the Public Health Service’s 340B drug pricing program, or the 340B program, in order for federal funds to be available for the manufacturer’s drugs under Medicaid and, if applicable, Medicare Part B. The 340B program is administered by the Health Resources and Services Administration, or HRSA, and requires participating manufacturers to agree to charge statutorily defined covered entities no more than the 340B “ceiling price” for the manufacturer’s covered drugs used in an outpatient setting. These 340B covered entities include a variety of community health clinics and other entities that receive health services grants from the Public Health Service, as well as hospitals that serve a disproportionate share of low‐income patients. The 340B ceiling price is calculated using a statutory formula, which is based on the AMP and rebate amount for the covered outpatient drug as calculated under the MDRP. In general, products subject to Medicaid price reporting and rebate liability are also subject to the 340B ceiling price calculation and discount requirement. Manufacturers must report 340B ceiling prices to HRSA on a quarterly basis, and HRSA publishes them to 340B covered entities. HRSA has finalized regulations regarding the calculation of the 340B ceiling price and the imposition of civil monetary penalties on manufacturers that knowingly and intentionally overcharge covered entities for 340B‐eligible drugs. HRSA has also finalized an administrative dispute resolution process through which 340B covered entities may pursue claims against participating manufacturers for overcharges, and through which manufacturers may pursue claims against 340B covered entities for engaging in unlawful diversion or duplicate discounting of 340B drugs. In addition, legislation may be introduced that, if passed, would further expand the 340B program, such as adding further covered entities or requiring participating manufacturers to agree to provide 340B discounted pricing on drugs used in an inpatient setting.

In order to be eligible to have drug products paid for with federal funds under Medicaid and, if applicable, Medicare Part B, and purchased by certain federal agencies and grantees, a manufacturer must also participate in the U.S. Department of Veterans Affairs, or VA, Federal Supply Schedule, or FSS, pricing program. Under the VA/FSS program, a manufacturer must report the Non-Federal Average Manufacturer Price, or Non-FAMP, for its covered drugs to the VA and charge certain federal agencies no more than the Federal Ceiling Price, which is calculated based on Non-FAMP using a statutory formula. These federal agencies are the VA, the U.S. Department of Defense, the U.S. Coast Guard, and the U.S. Public Health Service (including the Indian Health Service). The manufacturer must also pay rebates on products purchased by military personnel and dependents through the TRICARE retail

pharmacy program. If a manufacturer participating in the FSS program fails to provide timely information or is found to have knowingly submitted false information, the manufacturer may be subject to civil monetary penalties.

Individual states continue to consider and have enacted legislation to limit the growth of healthcare costs, including the cost of prescription drugs and combination products. A number of states have either implemented or are considering implementation of drug price transparency legislation that may prevent or limit our ability to take price increases at certain rates or frequencies. Requirements under such laws include advance notice of planned price increases, reporting price increase amounts and factors considered by manufacturers in taking such increases, wholesale acquisition cost disclosure to prescribers, purchasers, and state agencies, and new product notice and reporting. Such legislation could limit the price or payment for certain drugs, and a number of states are authorized to impose civil monetary penalties or pursue other enforcement mechanisms against manufacturers who fail to comply with drug price transparency requirements, including the untimely, inaccurate, or incomplete reporting of drug pricing information. If we are found to have violated state law requirements, we may become subject to penalties or other enforcement mechanisms, which could have a material adverse effect on our business.

Pricing and rebate calculations vary across products and programs, are complex, and are often subject to interpretation by pharmaceutical manufacturers, governmental or regulatory agencies, and the courts, which can change and evolve over time. Such pricing calculations and reporting, along with any necessary restatements and recalculations, could increase costs for complying with the laws and regulations governing the MDRP and other governmental programs, and under the MDRP could result in an overage or underage in Medicaid rebate liability for past quarters. Price recalculations under the MDRP also may affect the ceiling price at which manufacturers are required to offer products under the 340B program. Civil monetary penalties can be applied if we are found to have knowingly submitted any false price or product information to the government, if we fail to submit the required price data on a timely basis, or if we are found to have charged 340B covered entities more than the statutorily mandated ceiling price. CMS could also terminate our Medicaid drug rebate agreement, in which case federal payments may not be available under Medicaid for our covered outpatient drugs. We cannot assure you that our submissions will not be found to be incomplete or incorrect.

We face significant competition, and if our competitors develop technologies or product candidates more rapidly than we do or their technologies are more effective, our ability to develop and successfully commercialize products may be adversely affected.

The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary and novel products and product candidates. Our competitors have developed, are developing or may develop products, product candidates and processes competitive with VOQUEZNA. Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future. We believe that a significant number of products are currently under development, and may become commercially available in the future, for the treatment of GI diseases for which we may attempt to develop vonoprazan or any future product candidates. Our competitors include larger and better funded pharmaceutical, biopharmaceutical, biotechnological and therapeutics companies. Moreover, we may also compete with universities and other research institutions who may be active in the indications we are targeting and could be in direct competition with us. We also compete with these organizations to recruit management, scientists and clinical development personnel, which could negatively affect our level of expertise and our ability to execute our business plan. We will also face competition in establishing clinical trial sites, enrolling patients for clinical trials and in identifying and in-licensing new product candidates. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

We expect that, for the treatment of H. pylori infection, healing and maintenance of all grades of erosive esophagitis and relief of heartburn associated with erosive esophagitis and, if approved, treatment of heartburn associated with symptomatic Non-Erosive GERD, VOQUEZNA will primarily compete with generic PPIs marketed by multiple pharmaceutical companies in both the prescription and OTC markets. In addition to generic PPI-based triple and quad therapies, we expect VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK will compete with Talicia, a co-formulated capsule comprising generic omeprazole, amoxicillin, and rifabutin for the treatment of H. pylori infection, launched in March 2020 by RedHill Biopharma Ltd.

We are aware of other PCABs in development in the United States, as well as a number of other PCABs in territories outside of the United States that if developed and approved in our territories may compete with vonoprazan. In the United States, Daewoong Pharmaceutical Co., Ltd., or Daewoong is looking for a strategic partner to advance the development of fexuprazan. In addition, Cinclus Pharma AG, or Cinclus, received QIDP designation for linaprazan glurate in combination with antibiotics for the treatment of

H. pylori infection, completed a Phase 2 dose selection study for Erosive GERD in November 2022, and plans to initiate a Phase 3 study in 2024 for the treatment of Erosive GERD. Finally, Sebela Pharmaceuticals, which acquired development and commercialization rights in United States and Canada to tegoprazan from HK inno.N, a South Korean company, has initiated two Phase 3 studies in the United States, one for Non-Erosive GERD and the other for healing and maintenance of healing of Erosive GERD. The earliest estimated completion date for these studies is during 2024. Outside the United States, in 2022 Daewoong launched fexuprazan in South Korea for the treatment of Erosive GERD under the brand name Fexuclue, has submitted applications for regulatory approval in additional countries in Asia and Latin America, and has out-licensed rights to develop fexuprazan in China to Shanghai Haini, a subsidiary of China’s Yangtze River Pharmaceutical Group. Also outside the United States, revaprazan is marketed by Yuhan Corporation in South Korea, and tegoprazan is co-marketed by HK inno.N and Boryung Corp. in South Korea, is also marketed in China, Indonesia, Mexico, Mongolia, Philippines and Singapore and is currently under health authority review in Argentina and Thailand as well as in development by RaQualia Pharma, Inc. in Japan and by Dr. Reddy’s in Russia. Additionally, Jeil Pharm has initiated a Phase 3 trial in South Korea of its PCAB candidate, JP-1366, in Erosive GERD, and Cinclus’ linaprazan glurate has completed a Phase 2 clinical trial in Europe. To our knowledge, none of these compounds have demonstrated superiority to PPIs in a Phase 3 clinical trial.

Additionally, we are aware of several clinical-stage PPIs in territories outside of the United States that if developed and approved in our licensed territories may compete with vonoprazan. These include Dexa Medica’s DLBS-2411, currently launched in the Philippines and in Phase 3 in Indonesia, Sihuan Pharmaceutical’s anaprazole, currently in Phase 3 in China, and Eisai’s azeloprazole, currently in a Phase 2 in China.

In July 2012, the Food and Drug Administration Safety and Innovation Act was passed, which included the Generating Antibiotic Incentives Now Act, or GAIN Act. The GAIN Act is intended to provide incentives for the development of new, qualified infectious disease products. In December 2016, the 21st Century Cures Act was passed, providing additional support for the development of new infectious disease products. These incentives may result in more competition in the market for new antibiotics and may cause pharmaceutical and biotechnology companies with more resources than we have to shift their efforts towards the development of product candidates that could be competitive with vonoprazan or any future product candidates.

Many of our competitors have significantly greater financial, technical, manufacturing, marketing, sales and supply resources or experience than we do. We will face competition for our current products and any future product candidates based on many different factors, including the safety and effectiveness of our products, the ease with which our products can be administered and the extent to which patients accept relatively new routes of administration, the scope of regulatory approvals for these products, the availability and cost of manufacturing, marketing and sales capabilities, price, reimbursement coverage and patent position. Competing products could present superior treatment alternatives, including by being more effective, safer, more convenient, less expensive or marketed and sold more effectively than any products we may develop. Competitive products may make any products we develop obsolete or noncompetitive before we recover the expense of developing and commercializing our current products or any future product candidates. If we are unable to compete effectively, our opportunity to generate revenue from the sale of our products we may develop, if approved, could be adversely affected.

If the market opportunities for VOQUEZNA, VOQUEZNA TRIPLE PAK, VOQUEZNA DUAL PAK, or any future product candidates are smaller than we believe they are, our revenue may be adversely affected, and our business may suffer.

The precise incidence and prevalence for all the conditions we aim to address with our current products or any future product candidates are unknown. Our projections of both the number of people who have these diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment of our current products or any future product candidates, are based on our beliefs and estimates. These estimates have been derived from a variety of sources, including the scientific literature, surveys of clinics or market research, and may prove to be incorrect. Further, new trials may change the estimated incidence or prevalence of these diseases. The total addressable market across indications for our current products and any future product candidates will ultimately depend upon, among other things, the diagnosis criteria included in the final label for each of product and any future product candidates approved for sale for these indications, the availability of alternative treatments and the safety, convenience, cost and efficacy of our current products and any future product candidates relative to such alternative treatments, acceptance by the medical community and patient access, drug pricing and reimbursement. The number of patients in the United States and other major markets and elsewhere may turn out to be lower than expected, patients may not be otherwise amenable to

treatment with our products or new patients may become increasingly difficult to identify or gain access to, all of which would adversely affect our results of operations and our business.

We have only recently built out our marketing, sales and distribution infrastructure. If our efforts in developing and maintaining sales, marketing and distribution capabilities are unsuccessful, or if we fail to achieve adequate pricing or reimbursement, we will not be successful in commercializing our current products or any future product candidates.

We have only recently expanded our marketing, sales and distribution capabilities in advance of the launch of VOQUEZNA, VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK. This expansion greatly increased our expenses and was very time consuming for management. We currently market, sell and distribute VOQUEZNA, VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK through our own sales and marketing organization. Our current sales force may not be sufficient in size and may not have adequate expertise in the medical markets we intend to target. Any deficiency in our sales, marketing and distribution capabilities or delay in the future development of such capabilities would adversely impact the commercialization of our products. To the extent that in the future we enter into any collaboration agreements with respect to marketing, sales or distribution for our current products and any future product candidates our product revenue may be lower than if we directly marketed or sold any approved products. We plan on entering into collaboration agreements with respect to marketing, sales and distribution of our products in Europe and Canada. Any revenue we receive in these markets will depend in whole or in part upon the efforts of these third-party collaborators, which may not be successful and are generally not within our control.

If we are unable to enter into these arrangements on acceptable terms or at all, we may not be able to successfully commercialize any approved products. If we are not successful in commercializing any approved products, either on our own or through collaborations with one or more third parties, our future product revenue will suffer, and we may incur significant additional losses.

Our future growth may depend, in part, on our ability to operate in foreign markets, particularly Europe and Canada, where we would be subject to additional regulatory burdens and other risks and uncertainties.

Our future growth may depend, in part, on our ability to develop and commercialize our current products and any future product candidates in foreign markets, particularly Europe and Canada. We are not permitted to market or promote vonoprazan and any future product candidates before we receive regulatory approval from applicable regulatory authorities in foreign markets, and we may never receive such regulatory approvals for vonoprazan or any future product candidates. To obtain separate regulatory approval in any other countries we must comply with numerous and varying regulatory requirements regarding safety and efficacy and governing, among other things, clinical trials, commercial sales, pricing and distribution of vonoprazan and any future product candidates. If we obtain regulatory approval of our current products and any future product candidates and ultimately commercialize our products in foreign markets, we would be subject to additional risks and uncertainties, including:

•

different regulatory requirements for approval of drugs in foreign countries;

•

reduced protection for intellectual property rights;

•

the existence of additional third-party patent rights of potential relevance to our business;

•

unexpected changes in tariffs, trade barriers and regulatory requirements;

•

economic weakness, including inflation, public health emergencies or political instability in particular foreign economies and markets;

•

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

•

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

•

foreign reimbursement, pricing and insurance regimes;

•

workforce uncertainty in countries where labor unrest is common;

•

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

•

business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires.

Risks Related to the Development and Regulatory Approval of Product Candidates

We depend entirely on the success of VOQUEZNA and other products containing vonoprazan. If we do not obtain regulatory approval for vonoprazan for the treatment of heartburn symptoms associated with Non-Erosive GERD, or if we do not successfully commercialize VOQUEZNA for Erosive GERD or, if approved, Non-Erosive GERD, or we experience significant delays in doing so, we may never become profitable.

We expect that a substantial portion of our efforts and expenses over the next few years will be devoted to the commercialization of vonoprazan and the development and regulatory approval of vonoprazan for additional indications; specifically, the ongoing review of the NDA for vonoprazan as a once-daily treatment of heartburn associated with symptomatic Non-Erosive GERD and the planned Phase 3 trial studying for vonoprazan as an as needed treatment for heartburn symptoms associated with Non-Erosive GERD. As a result, our business currently depends heavily on the successful development, regulatory approval and, if approved, commercialization of vonoprazan for this additional indication and dosing regimen. We cannot be certain that we will be able to submit or obtain approval for any additional NDA or NDA supplement, or sNDA, for vonoprazan within the timeframes we expect, that any NDAs or sNDAs we submit will be accepted by the FDA for filing in a timely manner or at all, or that any of our product candidates will receive regulatory approval or will be successfully commercialized even if they receive regulatory approval.

The testing, manufacturing, safety, efficacy, labeling, approval, sale, marketing and distribution of our product candidates are, and will remain, subject to comprehensive regulation by the FDA and similar foreign regulatory authorities. Before obtaining regulatory approvals for the commercial sale of any product candidate, we must demonstrate through preclinical studies and clinical trials that the product candidate is safe and effective for use in each target indication. Drug development is a long, expensive and uncertain process, and delay or failure can occur at any stage of any of our clinical trials. Failure to obtain regulatory approval for additional indications for vonoprazan or future product candidates in the United States will prevent us from commercializing and marketing vonoprazan for these indications or our product candidates. The success of vonoprazan for future indications and our product candidates will depend on several additional factors, including:

•

completing clinical trials that demonstrate their efficacy and safety;

•

receiving marketing approvals from applicable regulatory authorities;

•

completing any post-marketing studies required by applicable regulatory authorities;

•

maintaining adequate commercial manufacturing capabilities;

•

maintaining successful commercial sales, marketing and distribution operations;

•

the prevalence and severity of adverse events experienced with vonoprazan and our future product candidates;

•

acceptance of VOQUEZNA and our future product candidates by patients, the medical community and third-party payers;

•

a continued acceptable safety profile following approval;

•

obtaining and maintaining healthcare coverage and adequate reimbursement for VOQUEZNA and our future product candidates;

•

competing effectively with other therapies, including with respect to the sales and marketing of our product candidates, if approved; and

•

qualifying for, maintaining, enforcing and defending our intellectual property rights and claims.

Many of these factors are beyond our control, including the time needed to adequately complete clinical testing, the regulatory submission process, potential threats to our intellectual property rights and changes in the competitive landscape. It is possible that no new indications for vonoprazan and no future product candidates will ever obtain regulatory approval even if we expend substantial time and resources seeking such approval. If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully complete clinical trials, obtain regulatory approval or, if approved, commercialize additional vonoprazan indications or any other product candidates, which would materially harm our business, financial condition and results of operations.

Clinical drug development involves a lengthy and expensive process with an uncertain outcome,and the results of preclinical studies and early clinical trials are not necessarily predictive of future results.

Clinical drug development is expensive and can take many years to complete, and its outcome is inherently uncertain. Even if we believe the results of our clinical trials are positive, obtaining regulatory approval may not occur on a timely basis, if at all. The results from clinical trials or preclinical studies of a product candidate may not predict the results of later clinical trials of the product candidate, and interim results of a clinical trial are not necessarily indicative of final results. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy characteristics despite having progressed through preclinical studies and initial clinical trials. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in clinical development even after the product candidate achieved promising results in earlier clinical trials. The results of our trials may not be comparable to those achieved previously, whether as a result of differences in trial design, patient population or otherwise.

For example, in our Phase 3 clinical trial for the treatment of H. pylori infection, the vonoprazan dual therapy arm was not double-blinded because patients in this arm were administered amoxicillin three times daily, versus twice daily for the triple therapy regimens. Both triple therapy regimens were double-blinded. The inability to double-blind the dual therapy arm may impact how regulatory agencies or healthcare payers interpret such results. For example, the EMA has noted that it expects additional analyses of treatment compliance and drop-out rates in the dual therapy arm because it will not be double-blinded.

Further, in July 2019, we received scientific advice from the EMA on our Phase 3 clinical trial of vonoprazan in the healing and maintenance of healing of Erosive GERD. For the healing phase of the study, the EMA recommended that we include an endoscopy to assess healing at Week 4 in addition to the planned endoscopies at Week 2 and Week 8 because the summary of product characteristics for lansoprazole suggests four weeks of treatment to assess healing in Erosive GERD. We decided not to incorporate this change into the study design given the additional burden on study subjects to return for a third endoscopy in an eight-week period. This decision may impact the future summary of product characteristics for vonoprazan or may cause the EMA to require us to conduct additional clinical trials for vonoprazan to support marketing approval.

In addition, Takeda, a third party over which we have no control, has the right to develop and commercialize vonoprazan outside of the United States, Europe, and Canada. Takeda has marketing approval for vonoprazan in certain countries in Asia and Latin America, and Takeda has ongoing clinical trials of vonoprazan in certain indications that we are also pursuing. If such ongoing trials fail to meet their primary endpoints, have serious adverse events or encounter other problems, the development potential of vonoprazan could be materially and adversely affected. In addition, if serious adverse events or other problems occur with patients using vonoprazan marketed outside of our licensed territories, or if the results of ongoing or future clinical trials of vonoprazan conducted by Takeda or others generate negative results or results that conflict with the results of our clinical trials, the FDA or other regulatory authorities may delay, limit, or deny approval of vonoprazan, require us to conduct additional clinical trials as a condition to marketing approval, or withdraw their approval of vonoprazan or otherwise restrict our ability to market and sell vonoprazan, if approved. In addition, treating physicians may be less willing to prescribe vonoprazan due to concerns over such trial results or adverse events, which would limit our ability to commercialize vonoprazan.

In addition, the FDA’s and other regulatory authorities’ policies with respect to clinical trials may change and additional government regulations may be enacted. For instance, the regulatory landscape related to clinical trials in the EU recently evolved. The EU Clinical Trials Regulation, or CTR, which was adopted in April 2014 and repeals the EU Clinical Trials Directive, became applicable on January 31, 2022. While the EU Clinical Trials Directive required a separate clinical trial application, or CTA, to be submitted in each member state in which the clinical trial takes place, to both the competent national health authority and an independent ethics committee, the CTR introduces a centralized process and only requires the submission of a single application for multi-center trials. The CTR allows sponsors to make a single submission to both the competent authority and an ethics committee

in each member state, leading to a single decision per member state. The assessment procedure of the CTA has been harmonized as well, including a joint assessment by all member states concerned, and a separate assessment by each member state with respect to specific requirements related to its own territory, including ethics rules. Each member state’s decision is communicated to the sponsor via the centralized EU portal. Once the CTA is approved, clinical study development may proceed. The CTR foresees a three-year transition period. The extent to which ongoing and new clinical trials will be governed by the CTR varies. Clinical trials for which an application was submitted (i) prior to January 31, 2022 under the EU Clinical Trials Directive, or (ii) between January 31, 2022 and January 31, 2023 and for which the sponsor has opted for the application of the EU Clinical Trials Directive remain governed by said Directive until January 31, 2025. After this date, all clinical trials (including those which are ongoing) will become subject to the provisions of the CTR. Compliance with the CTR requirements by us and our third-party service providers, such as CROs, may impact our developments plans.

It is currently unclear to what extent the United Kingdom, or UK, will seek to align its regulations with the EU. The UK regulatory framework in relation to clinical trials is derived from existing EU legislation (as implemented into UK law, through secondary legislation). A decision by the UK not to closely align its regulations with the new approach that has been adopted in the EU may have an effect on the cost of conducting clinical trials in the UK as opposed to other countries.

For the foregoing reasons, our ongoing and future clinical trials and our efforts to obtain additional regulatory approvals for vonoprazan may not be successful. Further, any safety concerns observed in any one of our ongoing or future clinical trials for the targeted indications could limit the prospects for additional regulatory approvals of vonoprazan or any future product candidates in those and other indications, which could have a material adverse effect on our business, financial condition and results of operations.

Any difficulties or delays in the commencement or completion, or termination or suspension, of our ongoing or future clinical trials could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects.

Before obtaining marketing approvals from regulatory authorities for the sale of vonoprazan for additional indications or approval of any future product candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of vonoprazan in such new indication or of any future product candidates in humans. We do not know whether any ongoing studies will be completed on schedule, if at all, or if any future clinical trials will begin on time. The commencement and completion of clinical trials can be delayed for a number of reasons, including delays related to:

•

the FDA, EMA or comparable foreign regulatory authorities disagreeing as to the design or implementation of our clinical trials and reaching consensus among the FDA and EMA over the design of the same clinical trial;

•

any failure or delay in obtaining regulatory authorizations to commence a trial;

•

any failure or delay in reaching an agreement with contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

•

institutional review boards, or IRBs, or other reviewing bodies refusing to approve, suspending or terminating the trial at an investigational site, precluding enrollment of additional subjects, or withdrawing their approval of the trial;

•

changes to clinical trial protocols;

•

clinical sites deviating from trial protocols or dropping out of a trial;

•

manufacturing or obtaining sufficient quantities of vonoprazan and any future product candidates;

•

inability to obtain and deliver sufficient quantities of vonoprazan and any future product candidates to clinical sites;

•

subjects failing to enroll or remain in our trials at the rate we expect, or failing to return for post- treatment follow-up;

•

subjects choosing an alternative treatment for the indication for which we are developing vonoprazan and any future product candidates, or participating in competing clinical trials;

•

lack of adequate funding to continue the clinical trial;

•

subjects experiencing severe or unexpected drug-related adverse effects;

•

occurrence of serious adverse events in trials of the same class of agents conducted by other companies;

•

selection of clinical endpoints that require prolonged periods of clinical observation or analysis of the resulting data;

•

a facility manufacturing vonoprazan or any future product candidates or any of their components being ordered by the FDA or comparable foreign regulatory authorities to temporarily or permanently shut down due to violations of current good manufacturing, or cGMP, regulations or other applicable requirements, or infections or cross-contaminations of product candidates in the manufacturing process;

•

any changes to our manufacturing process that may be necessary or desired;

•

third-party clinical investigators losing the licenses or permits necessary to perform our clinical trials, not performing our clinical trials on our anticipated schedule or consistent with the clinical trial protocol, good clinical practices, or GCP, or other regulatory requirements;

•

third-party contractors not performing data collection or analysis in a timely or accurate manner; or

•

third-party contractors becoming debarred or suspended or otherwise penalized by the FDA or other government or regulatory authorities for violations of regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or all of the data produced by such contractors in support of our marketing applications.

We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted or by the FDA or comparable foreign regulatory authorities. The FDA or comparable foreign regulatory authorities may impose a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or comparable foreign regulatory authorities, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. In addition, changes in regulatory requirements and policies may occur, and we may need to amend clinical trial protocols to comply with these changes. Amendments may require us to resubmit our clinical trial protocols to IRBs for reexamination, which may impact the costs, timing, or successful completion of a clinical trial.

Further, conducting clinical trials in foreign countries, as we have done for vonoprazan and may do for any future product candidates, presents additional risks that may delay completion of our clinical trials. These risks include the failure of enrolled patients in foreign countries to adhere to clinical protocol as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, as well as political and economic risks relevant to such foreign countries.

Moreover, principal investigators for our clinical trials currently serve and may continue to serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA or comparable foreign regulatory authorities. The FDA or comparable foreign regulatory authority may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the clinical trial. The FDA or comparable foreign regulatory authority may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA or comparable foreign regulatory authority, as the case may be, and may ultimately lead to the denial of marketing approval of vonoprazan or any future product candidates.

If we experience delays in the completion of, or termination of, any clinical trial of vonoprazan or any future product candidates, the commercial prospects of vonoprazan and any future product candidates will be harmed, and our ability to generate product revenues from any of these product candidates will be delayed. Moreover, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues.

In addition, many of the factors that cause, or lead to, termination or suspension of, or a delay in the commencement or completion of, clinical trials may also ultimately lead to the denial of regulatory approval of a product candidate. We may make

formulation or manufacturing changes to vonoprazan or any future product candidates, in which case we may need to conduct additional preclinical studies to bridge our modified product candidates to earlier versions. Any delays to our clinical trials that occur as a result could shorten any period during which we may have the exclusive right to commercialize vonoprazan or any future product candidates and our competitors may be able to bring products to market before we do, and the commercial viability of vonoprazan and any future product candidates could be significantly reduced. Any of these occurrences may harm our business, financial condition, and prospects significantly.

We may find it difficult to enroll patients in our clinical trials. If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

We may not be able to initiate or continue clinical trials for vonoprazan or any future product candidates if we are unable to identify and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the United States. Subject enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility and exclusion criteria for the trial, the design of the clinical trial, the risk that enrolled patients will not complete a clinical trial, our ability to recruit clinical trial investigators with the appropriate competencies and experience, competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages and risks of the product candidate being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating as well as any drugs under development. We will be required to identify and enroll a sufficient number of patients for each of our clinical trials. Potential patients for any planned clinical trials may not be adequately diagnosed or identified with the diseases which we are targeting or may not meet the entry criteria for such trials. We also may encounter difficulties in identifying and enrolling patients with a stage of disease appropriate for our clinical trials and monitoring such patients adequately during and after treatment. We may not be able to initiate or continue clinical trials if we are unable to locate a sufficient number of eligible patients to participate in the clinical trials required by the FDA or comparable foreign regulatory authorities.

The timing of our clinical trials depends, in part, on the speed at which we can recruit patients to participate in our trials, as well as completion of required follow-up periods. The eligibility criteria of our clinical trials further limits the pool of available trial participants. If patients are unwilling to participate in our trials for any reason, including the existence of concurrent clinical trials for similar patient or the availability of approved therapies, or we otherwise have difficulty enrolling a sufficient number of patients, the timeline for recruiting patients, conducting trials and obtaining regulatory approval of vonoprazan and any future product candidates may be delayed. Our inability to enroll a sufficient number of patients for any of our future clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether.

Our assumptions used in determining expected clinical trial timelines may not be correct, and we may experience delays in enrollment, which would result in the delay of completion of such trials beyond our expected timelines.

Use of products or product candidates containing vonoprazan or any future product candidates could be associated with side effects, adverse events or other properties or safety risks, which could delay or preclude approval, cause us to suspend or discontinue clinical trials, abandon a product candidate, limit the commercial profile of an approved label or result in other significant negative consequences that could severely harm our business, prospects, operating results and financial condition.

As is the case with pharmaceuticals generally, it is likely that there may be side effects and adverse events associated with VOQUEZNA’s or vonoprazan’s or any future product candidates’ use. Results of our ongoing or future clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. Undesirable side effects caused by vonoprazan and any future product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or comparable foreign regulatory authorities. The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition, and prospects significantly.

Moreover, if vonoprazan or any other future product candidates are associated with undesirable side effects in clinical trials or have characteristics that are unexpected, we may elect to abandon their development or limit their development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more

acceptable from a risk-benefit perspective, which may limit the commercial expectations for the product candidate, if approved. We may also be required to modify our study plans based on findings in our clinical trials.

It is possible that as we continue to test vonoprazan and any future product candidates in our clinical trials, or as the use of VOQUEZNA and any future product candidates becomes more widespread following any regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in earlier trials, as well as conditions that did not occur or went undetected in previous trials, will be reported by patients. If any such side effects become known later in development or upon approval, such findings may harm our business, financial condition and prospects significantly. Further, if a serious safety issue is identified in connection with use of vonoprazan commercially or in third-party clinical trials in Asia or elsewhere, such issues may adversely affect the development potential of vonoprazan or result in regulatory authorities restricting our ability to develop vonoprazan for additional indications.

If any of our products that receives marketing approval, including VOQUEZNA, is discovered to cause undesirable side effects, a number of potentially significant negative consequences could result, including:

•

withdrawal, suspension or limitation by regulatory authorities of approvals of such product;

•

seizure of the product by regulatory authorities;

•

recall of the product or changes to the manner in which it is administered;

•

restrictions on the marketing of the product or the manufacturing process for any component thereof;

•

requirement by regulatory authorities of additional warnings on the label, such as a “black box” warning or contraindications;

•

requirement that we implement a REMS or create a medication guide outlining the risks of such side effects for distribution to patients;

•

commitment to expensive additional safety studies prior to approval or post-marketing studies required by regulatory authorities of such product;

•

the product may become less competitive;

•

initiation of regulatory investigations and government enforcement actions;

•

initiation of legal action against us to hold us liable for harm caused to patients; and

•

harm to our reputation and resulting harm to physician or patient acceptance of our products.

Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, financial condition, and results of operations.

Our current products and any future product candidates are subject to extensive regulation and compliance obligations that are costly and time consuming, and such regulation may cause unanticipated delays or prevent the receipt of the required approvals to commercialize vonoprazan for additional indications or any future product candidates.

The clinical development, manufacturing, labeling, storage, record-keeping, advertising, promotion, import, export, marketing and distribution of our current approved products, including VOQUEZNA, and any future product candidates are subject to extensive regulation by the FDA in the United States and by comparable foreign regulatory authorities in other foreign markets. In the United States, we are not permitted to market vonoprazan for additional indications or any future product candidates until we receive the necessary regulatory approval from the FDA and in the EU, we are not permitted to market any of our approved products or any future product candidates until we receive a marketing authorization from the European Commission or competent authorities of the EU member states. The process of obtaining regulatory approval is expensive, often takes many years following the commencement of clinical trials and can vary substantially based upon the type, complexity and novelty of the product candidates involved, as well as the target indications and patient population. The ability of the FDA and foreign regulatory authorities to review and approve new products can be affected by a variety of factors, including government budget and funding levels and the ability to hire and retain key personnel. In addition, approval policies or regulations may change, and the FDA and EMA and comparable

regulatory authorities have substantial discretion in the drug approval process, including the ability to delay, limit or deny approval of a product candidate for many reasons. Despite the time and expense invested in clinical development of product candidates, regulatory approval is never guaranteed. For example, in February 2023, we received complete response letters from the FDA relating to our Erosive GERD NDA and post approval supplement to our approved H. pylori NDAs. As a result, the approval of VOQUEZNA for treatment of Erosive GERD was delayed until November 2023, and our ability to launch VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK was delayed until October 2023.

Prior to obtaining approval to commercialize a product candidate in the United States or internationally, we must demonstrate with substantial evidence from adequate and well-controlled clinical trials, and to the satisfaction of the FDA or comparable foreign regulatory authorities, that such product candidates are safe and effective for their intended uses. Results from nonclinical studies and clinical trials can be interpreted in different ways. Even if we believe the nonclinical or clinical data for additional regulatory approvals for vonoprazan or for any future product candidates are promising, such data may not be sufficient to support approval by the FDA and comparable foreign regulatory authorities. The FDA or comparable foreign regulatory authorities, as the case may be, may also require us to conduct additional preclinical studies or clinical trials for vonoprazan or any future product candidates either prior to or post- approval, or may object to elements of our clinical development program.

The FDA, EMA or other comparable foreign regulatory authorities can delay, limit or deny approval of a product candidate for many reasons, including:

•

such authorities may disagree with the design or implementation of our clinical trials;

•

negative or ambiguous results from our clinical trials or results may not meet the level of statistical significance required by the FDA, EMA, or other comparable foreign regulatory agencies for approval;

•

serious and unexpected drug-related side effects may be experienced by participants in our clinical trials or in clinical trials conducted by Takeda or others outside of our licensed territories, or by patients using vonoprazan or drugs similar to vonoprazan;

•

the population studied in the clinical trial may not be sufficiently broad or representative to assure safety in the full population for which we seek approval;

•

such authorities may not accept clinical data from trials which are conducted at clinical facilities or in countries where the standard of care is potentially different from that of the United States;

•

we may be unable to demonstrate to the satisfaction of such authorities that a product candidate is safe and effective for its proposed indication and that a product candidate’s clinical and other benefits outweigh its safety risks;

•

such authorities may disagree with our interpretation of data from preclinical studies or clinical trials;

•

such authorities may not agree that the data collected from clinical trials of vonoprazan, including data collected from clinical trials conducted by Takeda and independent investigators outside of our licensed territories, and any future product candidates are acceptable or sufficient to support the submission of an NDA or other submission or to obtain regulatory approval, and such authorities may impose requirements for additional preclinical studies or clinical trials;

•

such authorities may disagree regarding the formulation, labeling and/or the specifications of vonoprazan and any future product candidates;

•

approval may be granted only for indications that are significantly more limited than what we apply for and/or with other significant restrictions on distribution and use;

•

such authorities may find deficiencies in the manufacturing processes or facilities of Evonik, Catalent, Sandoz, or any future third-party manufacturers with which we contract for clinical and commercial supplies;

•

regulations of such authorities may significantly change in a manner rendering our or any of our potential future collaborators’ clinical data insufficient for approval; or

•

such authorities may not accept a submission due to, among other reasons, the content or formatting of the submission.

With respect to foreign markets, approval procedures vary among countries and, in addition to the foregoing risks, may involve additional product testing, administrative review periods and agreements with pricing authorities. In addition, events raising questions about the safety of certain marketed pharmaceuticals may result in increased cautiousness by the FDA, EMA, and other comparable foreign regulatory authorities in reviewing new drugs based on safety, efficacy, or other regulatory considerations and may result in significant delays in obtaining regulatory approvals. Any delay in obtaining, or inability to obtain, applicable regulatory approvals would prevent us or any of our potential future collaborators from commercializing vonoprazan and any future product candidates.

Of the large number of drugs in development, only a small percentage successfully complete the FDA, EMA or foreign regulatory approval processes and are commercialized. The lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain additional regulatory approvals to market vonoprazan and any future product candidates, which would significantly harm our business, financial condition, results of operations and prospects.

With respect to our approvals in the U.S., the FDA has granted approvals, and may grant future approvals, with the requirement that we perform additional costly clinical trials including pediatric trials. Foreign regulatory authorities may also make their approvals contingent on similar requirements. The FDA or other comparable foreign regulatory authority also may approve a product candidate for a more limited indication or patient population than we originally requested, and the FDA or other comparable foreign regulatory authority may not approve the labeling that we believe is necessary or desirable for the successful commercialization of a product. Any delay in obtaining, or inability to obtain, additional regulatory approvals would delay or prevent commercialization of that indication or product candidate and would materially adversely impact our business and prospects.

We may not be successful in our efforts to expand our pipeline by identifying and successfully developing vonoprazan for additional indications and formulations. We may expend our limited resources to pursue a particular indication or formulation for vonoprazan and fail to capitalize on product candidates, indications or formulations that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we focus on specific indications and formulations for VOQUEZNA. As a result, we may fail to generate additional clinical development opportunities for vonoprazan for a number of reasons, including, vonoprazan may in certain indications, on further study, be shown to have harmful side effects, limited to no efficacy, or other characteristics that suggest it is unlikely to receive marketing approval and achieve market acceptance in such additional indications.

For example, we believe the rapid onset of acid suppression observed in clinical studies of vonoprazan may enable as needed use for the management of heartburn symptoms associated with Non-Erosive GERD. However, no proton pump inhibitor has received approval from the FDA for this dosing regimen. We may be incorrect in our belief regarding the potential of vonoprazan as an as needed treatment for Non-Erosive GERD and any future clinical trial we conduct studying as needed dosing of vonoprazan in Non-Erosive GERD patients may not succeed including as a result of our design and enrollment criteria.

Furthermore, research programs to identify additional indications for vonoprazan require substantial technical, financial and human resources. We may also pursue additional formulations and packaging for vonoprazan, such as orally disintegrating tablets and other oral dosage forms for patients with difficulty swallowing, and an intravenous formulation for in-hospital applications. However, we may not successfully develop these additional formulations for chemistry-related, stability-related or other reasons. If we do not accurately evaluate the commercial potential or target market for vonoprazan or any future product candidates, we may relinquish valuable rights to that product candidate through future collaborations, licenses and other similar arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

Additionally, we may pursue additional in-licenses or acquisitions of development-stage assets or programs, which entails additional risk to us. Identifying, selecting and acquiring promising product candidates requires substantial technical, financial and

human resources expertise. Efforts to do so may not result in the actual acquisition or license of a particular product candidate, potentially resulting in a diversion of our management’s time and the expenditure of our resources with no resulting benefit.

We enrolled patients in Europe in our Erosive GERD and H. pylori trials. Additionally, we may conduct future clinical trials outside of the United States. However, the FDA and other comparable foreign regulatory authorities may not accept data from such trials, in which case our development plans will be delayed, which could materially harm our business.

We enrolled patients in Europe in our Erosive GERD and H. pylori trials, and we may conduct one or more of our future clinical trials outside the United States. Although the FDA may accept data from clinical trials conducted outside the United States and not subject to an IND, acceptance of this data is subject to certain conditions imposed by the FDA. For example, where data from foreign clinical trials are intended to serve as the sole basis for marketing approval in the United States, the FDA will not approve the application on the basis of foreign data alone unless those data are applicable to the United States population and United States medical practice; the trials were performed by clinical investigators of recognized competence; and the data are considered valid without the need for an on-site inspection by the FDA or, if the FDA considers such an inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means. Similar requirements may apply in foreign jurisdictions.

For trials that are conducted only at sites outside of the United States and not subject to an IND, the FDA requires the clinical trial to have been conducted in accordance with GCP and the FDA must be able to validate the data from the clinical trial through an on-site inspection if it deems such inspection necessary. For such trials not subject to an IND, the FDA generally does not provide advance comment on the clinical protocols for the trials, and therefore there is an additional potential risk that the FDA could determine that the trial design or protocol for a non-United States clinical trial was inadequate, which could require us to conduct additional clinical trials. In addition, such foreign trials would be subject to the applicable local laws of the foreign regulatory agency and legal requirements where the trials are conducted. There can be no assurance the FDA will accept data from clinical trials conducted outside of the United States. If the FDA or comparable regulatory authority does not accept data from our clinical trials of vonoprazan and any future product candidates, it would likely result in the need for additional clinical trials, which would be costly and time consuming and delay or permanently halt our development of vonoprazan for additional indications and any future product candidates.

Conducting clinical trials outside the United States also exposes us to additional risks, including risks associated with:

•

additional foreign regulatory requirements;

•

foreign exchange fluctuations;

•

compliance with foreign manufacturing, customs, shipment and storage requirements;

•

cultural differences in medical practice and clinical research; and

•

diminished protection of intellectual property in some countries.

Interim, top-line and preliminary data from clinical trials that we or others announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we or others, such as Takeda, may publicly disclose preliminary or top-line data from clinical trials that are based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the top-line or preliminary results that we or others report may differ from future results of the same clinical trials, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Top-line and preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data previously published. As a result, top-line and preliminary data should be viewed with caution until the final data are available.

From time to time, we or others may also disclose interim data from clinical trials. Interim data from clinical trials are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data

become available. Adverse differences between preliminary, top-line or interim data and final data could significantly harm our business prospects.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular drug, drug candidate or our business. If the top-line data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, vonoprazan and any future product candidates may be harmed, which could harm our business, operating results, prospects, or financial condition.

Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new products and services from being developed or commercialized in a timely manner, which could negatively impact our business.

The ability of the FDA and other government agencies to review and approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory and policy changes, a government agency’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the government agency’s ability to perform routine functions. Average review times at the FDA and other government agencies have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies, such as the EMA, may also slow the time necessary for new drugs and or modifications to approved drugs or to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, the United States government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.

Separately, in response to the COVID-19 pandemic, the FDA postponed most inspections of domestic and foreign manufacturing facilities at various points. Even though the FDA has since resumed standard inspection operations, any resurgence of the virus or emergence of new variants may lead to further inspectional or administrative delays. If a prolonged government shutdown occurs, or if global health concerns hinder or prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

Risks Related to Our Reliance on Third Parties

Pursuant to the Takeda License, we have secured an exclusive license from Takeda to commercialize vonoprazan products using specified formulations for all human therapeutic uses in the United States, Europe, and Canada, and a non-exclusive license to develop and manufacture vonoprazan products anywhere in the world (subject to Takeda’s consent as to each country) for the purposes of commercializing the vonoprazan products in the United States, Europe, and Canada.

The Takeda License will continue until the expiration of the obligation to pay royalties in all countries and on all products, unless terminated earlier. We may terminate the Takeda License in its entirety without cause upon prior written notice. We and Takeda may terminate the Takeda License in the case of the other party’s insolvency or for the other party’s material uncured breach. Takeda may terminate the Takeda License in its entirety if we challenge the licensed patents, or if we assist any third party in challenging such patents. In addition, if any of the commercial milestones or other cash payments become due under the terms of the Takeda License, we may not have sufficient funds available to meet our obligations, which would allow Takeda to terminate the

Takeda License. If the license agreement is terminated, we would lose our rights to develop and commercialize products containing vonoprazan, which in turn would have a material adverse effect on our business, operating results and prospects.

We rely on third parties to conduct our clinical trials. Any failure by a third party to conduct the clinical trials according to GCPs and other requirements and in a timely manner may delay or prevent our ability to seek or obtain additional regulatory approvals for vonoprazan and regulatory approvals for any future product candidates.

We are dependent on third parties to conduct our preclinical and clinical trials. Specifically, we have used and relied on, and intend to continue to use and rely on, medical institutions, clinical investigators, CROs and consultants to conduct our clinical trials in accordance with our clinical protocols and regulatory requirements. These CROs, investigators and other third parties will play a significant role in the conduct and timing of these trials and subsequent collection and analysis of data. While we have agreements governing the activities of our third-party contractors, we have limited influence over their actual performance. Nevertheless, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on the CROs and other third parties does not relieve us of our regulatory responsibilities. We and our CROs are required to comply with GCP requirements, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for vonoprazan and any future product candidates that reach clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our CROs or trial sites fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable, and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. In addition, our clinical trials must be conducted with product produced under cGMP or similar regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

CROs, investigators or other third parties may not devote adequate time and resources to such trials or perform as contractually required. If any of these third parties fail to meet expected deadlines, adhere to our clinical protocols or meet regulatory requirements, or otherwise performs in a substandard manner, our clinical trials may be extended, delayed, or terminated. In addition, many of the third parties with whom we contract may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities that could harm our competitive position. In addition, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and may receive cash or equity compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, or the FDA or comparable regulatory authority concludes that the financial relationship may have affected the interpretation of the study, the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical trial itself may be jeopardized, which could result in the delay or rejection of any NDA or similar marketing application we submit by the FDA or by comparable regulatory authority. Any such delay or rejection could prevent us from commercializing vonoprazan for additional indications and any future product candidates.

If any of our relationships with these third parties terminate, we may not be able to enter into arrangements with alternative third parties or do so on commercially reasonable terms. Switching or adding additional CROs, investigators and other third parties involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, investigators and other third parties, we may encounter challenges or delays in the future and these delays or challenges may have a material adverse impact on our business, financial condition and prospects.

We currently rely on, and expect to rely on for the foreseeable future, Evonik and Catalent for the manufacture of vonoprazan drug substance and drug product for clinical development and commercial sale, and we expect to rely on Sandoz for commercial supplies of VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK and the amoxicillin and clarithromycin in those products. This reliance on third parties increases the risk that we will not have sufficient quantities of finished product which could delay, prevent or impair our development or commercialization efforts.

We do not own or operate manufacturing facilities and have no plans to build our own clinical or commercial scale manufacturing capabilities. We have entered into an agreement with Catalent for the supply of finished drug product, an agreement with Evonik for the supply of drug substance, and an agreement with Sandoz for commercial supply of amoxicillin, clarithromycin

and finished convenience packs containing VOQUEZNA and one or both of those antibiotics. As a result, we currently rely, and expect to continue to rely, on third parties for the manufacture of vonoprazan and supply of related raw materials for clinical development and commercial sale. If Catalent, Evonik or Sandoz fails to fulfill its obligations under its respective supply agreement, or if any of the vonoprazan drug product or drug substance supplied by Catalent or Evonik cannot be utilized due to quality or cGMP or similar concerns, adverse findings during regulatory inspections or other reasons, our development plans and commercialization of vonoprazan, if approved, could be significantly delayed or otherwise adversely affected. The facilities used by Catalent and Evonik to manufacture vonoprazan and by Sandoz to manufacture amoxicillin and clarithromycin and to package the antibiotics and vonoprazan must be approved by the FDA and foreign regulatory authority pursuant to inspections that may be conducted after we submit marketing authorizations to the FDA and comparable foreign regulatory authorities. We do not control the manufacturing process of, and are completely dependent on, Catalent, Evonik and Sandoz for compliance with applicable cGMP or similar requirements. If Catalent, Evonik, Sandoz, or any other third-party manufacturer we contract with in the future, cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, including requirements related to the manufacturing of high potency compounds, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we have no control over Catalent’s, Evonik’s, Sandoz’s, or any other third-party manufacturer’s ability to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve of facilities of the third-party manufacturer for the manufacture of vonoprazan or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to continue to develop, obtain additional regulatory approvals for or continue to market our current products.

Our failure, or Catalent’s, Evonik’s, Sandoz’s or any other third-party manufacturer’s failure, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products.

Our or Catalent’s, Evonik’s or Sandoz’s failure, or the failure of any future third-party manufacturer, to execute on our manufacturing requirements, to do so on commercially reasonable terms and comply with cGMP or similar foreign requirements, could adversely affect our business in a number of ways, including:

•

an inability to initiate and continue clinical trials of vonoprazan or any future product candidates;

•

delay in submitting regulatory applications, or receiving marketing approvals for new indications for vonoprazan or for any future product candidates;

•

subjecting third-party manufacturing facilities or our manufacturing facilities to additional inspections by regulatory authorities;

•

requirements to cease development or to recall batches of our current products and any future product candidates; and

•

an inability to meet commercial demands for our current products or any future product candidates.

Reliance on third-party manufacturers entails additional risks, including:

•

failure of third-party manufacturers to comply with regulatory requirements and maintain quality assurance;

•

breach of the manufacturing agreement by the third party;

•

failure to manufacture our product according to our specifications;

•

failure to manufacture our product according to our schedule or at all;

•

misappropriation of our proprietary information, including our trade secrets and know-how; and

•

termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.

Our current products, including VOQUEZNA, and any product candidates that we may develop, may compete with other product candidates and products for access to manufacturing facilities. Moreover, there may be a limited number of manufacturers that operate under cGMP or similar regulations and that might be capable of manufacturing for us.

Any performance failure on the part of Catalent, Evonik, Sandoz or any future manufacturers could delay clinical development or additional marketing approvals, and any related remedial measures may be costly or time consuming to implement. We do not currently have arrangements in place for redundant supply or a second source for all required raw materials used in the manufacture of our current products. If Catalent, Evonik, or Sandoz cannot perform as agreed, we may be required to replace them and we may be unable to replace them on a timely basis or at all. Further, Catalent, Evonik, Sandoz and any other third-party manufacturers we may use may experience manufacturing or shipping difficulties due to resource constraints or as a result of natural disasters, labor disputes, unstable political environments, or public health emergencies such as the COVID-19 pandemic or ongoing hostilities in the Ukraine and the Middle East. If Catalent, Evonik, Sandoz or other third-party manufacturers were to encounter any manufacturing or shipping difficulties or delays due to these factors, our ability to provide vonoprazan to patients in clinical trials, or to provide product for treatment of patients if approved, would be jeopardized.

Our current and anticipated future dependence upon others for the manufacture of our current products or any future product candidates or products may adversely affect our future profit margins and our ability to commercialize any products that receive marketing approval on a timely and competitive basis.

Our reliance on third parties, including Sandoz, Catalent and Evonik, requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.

Because we rely, and expect to continue to rely, on Sandoz, Catalent and Evonik to manufacture our current approved products and to perform quality testing, we must, at times, share our proprietary technology and confidential information, including trade secrets, with them. We seek to protect our proprietary technology, in part, by entering into confidentiality agreements, consulting agreements or other similar agreements with our advisors, employees and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are intentionally or inadvertently incorporated into the technology of others or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets and despite our efforts to protect our trade secrets, a competitor’s discovery of our proprietary technology and confidential information or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business, financial condition, results of operations and prospects.

We may seek to enter into collaborations, licenses and other similar arrangements and may not be successful in doing so, and even if we are, we may not realize the benefits of such relationships.

We may seek to enter into collaborations, joint ventures, licenses and other similar arrangements for the development or commercialization of our current products or any future product candidates due to, for example, capital costs required to develop or commercialize our current products or any future product candidates, or manufacturing constraints. We may not be successful in our efforts to establish such collaborations because, among other reasons, third parties may not view our current products or future product candidates as having the requisite potential to demonstrate safety and efficacy or significant commercial opportunity. In addition, we face significant competition in seeking appropriate strategic partners, and the negotiation process can be time consuming and complex. Further, any future collaboration agreements may restrict us from entering into additional agreements with potential collaborators. Following a strategic transaction or license, we may not achieve an economic benefit that justifies such transaction.

Even if we are successful in our efforts to establish such collaborations, the terms that we agree upon may not be favorable to us, and we may not be able to maintain such collaborations if, for example, development or approval of a product candidate is delayed, the safety of a product candidate is questioned or sales of an approved product candidate are unsatisfactory.

In addition, any potential future collaborations may be terminable by our strategic partners, and we may not be able adequately to protect our rights under these agreements. Furthermore, strategic partners may negotiate for certain rights to control

decisions regarding the development and commercialization of vonoprazan and any future product candidates and may not conduct those activities in the same manner as we do. Any termination of collaborations we enter into in the future, or any delay in entering into collaborations, could delay or impair the further development and commercialization of vonoprazan or the development and commercialization of any future product candidates and reduce their competitiveness if they reach the market, which could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Business Operations and Industry

Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide.

Our quarterly and annual operating results may fluctuate significantly, which makes it difficult for us to predict our future operating results. These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to:

•

the timing and cost of, and level of investment in, research, development, regulatory approval and commercialization activities relating to our current products, or any future product candidates, which may change from time to time;

•

coverage and reimbursement policies with respect to our current products, or any future product candidates, and potential future drugs that compete with such products, if approved;

•

the cost of manufacturing of our current products or any future product candidates, which may vary depending on the quantity of production and the terms of our agreements with Catalent, Evonik, Sandoz and any future third-party manufacturers;

•

business interruptions resulting from geopolitical actions, including war, such as the ongoing hostilities in the Ukraine or the Middle East, and terrorism, or natural disasters such as earthquakes, typhoons, floods and fires or public health emergencies or pandemics such as the COVID-19 pandemic;

•

the timing and amount of the milestone or other payments we will be required to pay to Takeda pursuant to the Takeda License;

•

expenditures that we may incur to acquire, develop or commercialize additional product candidates and technologies;

•

the level of demand for any approved products, which may vary significantly;

•

future accounting pronouncements or changes in our accounting policies; and

•

the timing and success or failure of additional clinical trials for vonoprazan or preclinical studies or clinical trials for any future product candidates or competing product candidates, or any other change in the competitive landscape of our industry, including consolidation among our competitors or partners.

The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance.

This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period. If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated revenue or earnings guidance we may provide.

Our business is subject to risks arising from epidemic diseases, such as the COVID-19 pandemic.

A public health pandemic, such as COVID-19, has the potential to impact worldwide economic activity and poses the risk that we or our employees, contractors, including our CROs, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities. In March 2020, due to efforts to combat the COVID-19 pandemic, we

announced a temporary pause in randomization of new patients in our Phase 3 trials and did not recommence randomizations in either trial until June 2020. While it is not possible at this time to estimate the full impact that a future public health pandemic could have on our business, measures taken by the governments of countries affected could, in addition to disrupting our commercial activities and clinical trials, disrupt the supply chain and the manufacture or shipment of drug substance and finished drug product of vonoprazan for use in our clinical trials or in commercial distribution, which could delay our ongoing clinical trials and increase development costs, or impair our ability to successfully commercialize our approved products, and in either case have a material adverse effect on our business, financial condition and results of operations. The COVID-19 pandemic and mitigation measures had an adverse impact on global economic conditions and mitigation measures regarding any future public health pandemic could have an adverse effect on our business and financial condition, including impairing our ability to raise capital when needed. The extent to which a future public health pandemic impacts our results will depend on future developments that are highly uncertain and cannot be predicted.

Our indebtedness may limit our flexibility in operating our business and adversely affect our financial health and competitive position, and all of our obligations under our indebtedness are secured by substantially all of our assets, excluding our intellectual property and certain other assets. If we default on these obligations, our lenders could foreclose on our assets.

In September 2021, we entered into, and in December 2023 we increased the amounts available under and extended the maturity date of, a Loan Agreement with Hercules. We borrowed $100 million at the inception of the Loan Agreement, $40 million in December 2023, and may be eligible to borrow up to an additional $160 million. All obligations under the Loan Agreement are secured by a first priority lien on substantially all of our assets, including intellectual property and certain other assets. As a result, if we default on any of our obligations under the Loan Agreement, Hercules could foreclose on its security interest and liquidate some or all of the collateral, which would harm our business, financial condition and results of operations and could require us to reduce or cease operations.

In order to service our current indebtedness and any additional indebtedness we may incur in the future, we need to generate cash from our operating activities or other financings. Our ability to generate cash is subject, in part, to our ability to successfully execute our business strategy, as well as general economic, financial, competitive, regulatory and other factors beyond our control. Our business may not be able to generate sufficient cash flow from operations, and future borrowings or other financings may not be available to us in an amount sufficient to enable us to service our indebtedness and fund our other liquidity needs. To the extent we are required to use cash from operations or the proceeds of any future financing to service our indebtedness instead of funding working capital or other general corporate purposes, we will be less able to plan for, or react to, changes in our business, industry and in the economy generally. This could place us at a competitive disadvantage compared to our competitors that have less indebtedness.

The Loan Agreement contains customary affirmative and negative covenants that limit our ability to engage in certain transactions that may be in our long-term best interest. The affirmative covenants include, among others, covenants requiring us to maintain certain levels of cash subject to a control agreement in favor of Hercules, and commencing on September 30, 2024, certain levels of trailing three-month net product revenue from the sale of VOQUEZNA and other products containing vonoprazan, deliver certain financial reports, maintain insurance coverage and satisfy certain requirements regarding our operating accounts. The negative covenants include, among others, limitations on our ability to incur additional indebtedness and liens, merge with other companies or consummate certain changes of control, acquire other companies, engage in new lines of business, make certain investments, pay dividends, transfer or dispose of assets, amend certain material agreements or enter into various specified transactions.

While we believe we are currently in compliance with the covenants contained in the Loan Agreement, we may breach these covenants in the future. Our ability to comply with these covenants may be affected by events and factors beyond our control. In the event that we breach one or more covenants, the lenders may choose to declare an event of default and require that we immediately repay all amounts outstanding under the applicable agreement, terminate any commitment to extend further credit and foreclose on the collateral. The occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations.

In May 2022, we entered into a Revenue Interest Financing Agreement with the Initial Investors pursuant to which we can receive up to $260.0 million in funding from the Initial Investors, and in October 2022, we entered into the Joinder Agreement under which we can receive up to $40 million from the Additional Investor, bringing the total funding available under the Revenue Interest Financing Agreement to up to $300 million. Under the terms of the Revenue Interest Financing Agreement and Joinder Agreement, we received $100 million at the initial closing and received an additional $175 million in November 2023 following FDA approval of vonoprazan for treatment of Erosive GERD. In addition, we are eligible for $25 million in additional funding for achievement of a sales milestone.

Under the Revenue Interest Financing Agreement, the investors are entitled to receive a 10% royalty on net sales of products containing vonoprazan. The royalty rate is subject to a step-down on net sales exceeding certain annual thresholds and if we receive FDA approval for vonoprazan for an indication relating to the treatment of heartburn associated with Non-Erosive GERD. The investors’ right to receive royalties on net sales will terminate when the investors have aggregate payments equal to 200% of the Investment Amount.

If the investors have not received aggregate payments of at least 100% of the Investment Amount by December 31, 2028, and at least 200% of the Investment Amount by December 31, 2037, each a Minimum Amount, then we will be obligated to make a cash payment to the investors in an amount sufficient to gross the investors up to the applicable Minimum Amount.

Pursuant to the Revenue Interest Financing Agreement, we also agreed to specified affirmative and negative covenants, including covenants to use commercially reasonable efforts to promote products containing vonoprazan in the United States and covenants requiring us to maintain certain levels of cash. The Revenue Interest Financing Agreement also contains representations and warranties, other covenants, indemnification obligations, and other provisions customary for transactions of this nature. In the event of an event of default under the Revenue Interest Financing Agreement, the investors may be entitled to foreclose on the pledged collateral which includes the applicable royalty under the Royalty Interest Financing Agreement from net sales of VOQUEZNA and other products containing vonoprazan.

Our future growth and ability to compete depends on retaining our key personnel and recruiting additional qualified personnel.

We are highly dependent on the management, commercial, development, clinical, and financial experience of our senior management. Although we have entered into employment agreements with our executive officers, each of them may terminate their employment with us at any time. We do not maintain “key person” insurance for any of our executives or employees. This lack of insurance means that we may not have adequate compensation for the loss of the services of these individuals. Competition for qualified personnel in the biopharmaceutical field is intense, and our future success depends upon our ability to attract, retain and motivate highly skilled commercial, scientific, technical and managerial employees. We face competition for personnel from other biopharmaceutical companies and other organizations. If our recruitment and retention efforts are unsuccessful in the future, it may be difficult for us to implement business strategy, which could harm our business. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating and implementing our development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract, retain and motivate necessary personnel to accomplish our business objectives, we may experience constraints that will significantly impede achievement of our commercial and development objectives, our ability to raise additional capital and our ability to implement our business strategy.

We have substantially increased the size of our organization over the past year, and we may encounter difficulties in managing our growth and expanding our operations successfully.

Our number of employees increased substantially in 2023 to prepare for the commercialization of VOQUEZNA, VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK. This expansion of our operations has resulted in a significant increase in our commercial organization, which may divert our management and business development resources from our clinical development group. To manage our recent growth and anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the

limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

We are subject to various foreign, federal, and state healthcare laws and regulations, and our failure to comply with these laws and regulations could harm our results of operations and financial condition.

Our business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payers, patient organizations and customers expose us to broadly applicable foreign, federal and state fraud and abuse and other healthcare laws and regulations. These laws may constrain the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell and distribute any products for which we obtain marketing approval. Such laws include, but are not limited to:

•

the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or providing any remuneration (including any kickback, bribe or certain rebates), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, or order, or arranging for or recommending the purchase, lease, or order of any good, facility, item or service, for which payment may be made, in whole or in part, under any U.S. federal healthcare program, such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it in order to have committed a violation;

•

the U.S. civil and criminal federal false claims laws, including the civil False Claims Act, which can be enforced through civil whistleblower or qui tam actions, and civil monetary penalties laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, to the federal government, claims for payment or approval that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly making or causing to be made a false statement to avoid, decrease or conceal an obligation to pay money to the U.S. federal government. In addition, the government may assert 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 False Claims Act;

•

the U.S. federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items or services. Similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the healthcare fraud statute implemented under HIPAA or specific intent to violate it in order to have committed a violation;

•

the U.S. federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to CMS, information related to certain payments and other “transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) , certain non-physician practitioners (physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists, anesthesiology assistants and certified nurse midwives)and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members; and

•

analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to our business practices, including but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payers, including private insurers, or by the patients themselves; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; and state laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information or which require tracking gifts and other remuneration and items of value provided to physicians, other healthcare providers and entities.

We may also be subject to additional regulation in the conduct of our business. For example, we may be subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, which prohibits, among other things, U.S. companies and their employees and agents from authorizing, promising, offering, or providing, directly or indirectly, corrupt or improper payments or anything else of value to foreign government officials, employees of public international organizations and foreign government owned or affiliated entities, candidates for foreign political office, and foreign political parties or officials thereof.

Ensuring that our internal operations and business arrangements with third parties comply with applicable healthcare laws and regulations could involve substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of the laws described above or any other governmental laws and regulations that may apply to us, we may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, exclusion from U.S. government funded healthcare programs, such as Medicare and Medicaid, or similar programs in other countries or jurisdictions, disgorgement, imprisonment, contractual damages, reputational harm, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, diminished profits and the curtailment or restructuring of our operations. Further, defending against any such actions can be costly, time consuming and may require significant financial and personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired. If any of the physicians or other providers or entities with whom we expect to do business are found not to be in compliance with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusion from government funded healthcare programs and imprisonment. If any of the above occur, it could adversely affect our ability to operate our business and our results of operations.

Enacted and future legislation and healthcare reform measures may increase the difficulty and cost for us to commercialize vonoprazan and any future product candidates and may affect the prices we may set.

In the United States and some foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes and proposed changes to the healthcare system, including cost-containment measures, that may reduce or limit coverage and reimbursement for newly approved drugs and affect our ability to profitably sell any product candidates for which we obtain marketing approval. In particular, there have been and continue to be a number of initiatives at the U.S. federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare.

For example, in March 2010, the Patient Protection and Affordable Care Act, the Affordable Care Act, was enacted in the United States, which substantially changed the way healthcare is financed by both governmental and private insurers, and significantly affected the pharmaceutical industry. Among other things, the Affordable Care Act includes:

•

an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, which is apportioned among these entities according to their market share in certain government healthcare programs;

•

a Medicare Part D coverage gap discount program, in which manufacturers must agree to offer point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;

•

an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the AMP for branded and generic drugs, respectively;

•

a methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;

•

an extension of a manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

•

expansion of the entities eligible for discounts under the 340B drug pharmaceutical pricing program;

•

a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research, along with funding for such research; and

•

establishment of a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.

Since its enactment, there have been judicial and political challenges to certain aspects of the Affordable Care Act. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the Affordable Care Act without specifically ruling on the constitutionality of the Affordable Care Act. Thus, the Affordable Care Act will remain in effect in its current form.

In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. For example, beginning April 1, 2013, Medicare payments to providers were reduced under the sequestration required by the Budget Control Act of 2011, which will remain in effect through 2032, unless additional Congressional action is taken. Additionally, on January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, 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. On March 11, 2021, the American Rescue Plan Act of 2021 was signed into law, which eliminates the statutory Medicaid drug rebate cap, beginning January 1, 2024. Previously, the rebate was capped at 100% of a drug’s AMP.

Further, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs. At the federal level, 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, and reform government program reimbursement methodologies for products.

PHAT US Equity

PHAT · 10-K · period ended 2023-12-31

Item 1A. Risk Factors

PHAT US Equity☆

PHAT · 10-K · period ended 2023-12-31

Item 1A. Risk Factors

PHAT US Equity