tars-20201231

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 2020

For the transition period from _______ to _______

Commission File Number 012-34567

TARSUS PHARMACEUTICALS, INC.

(Exact name of Registrant as specified in its charter)

(Address of principal executive offices) (Zip Code)

(949) 409-9820

(Registrant's telephone number, including area code)

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

Title of each class Trading Symbol Name of each exchange on which registered

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

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

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

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

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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐

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

Large accelerated filer ☐ Accelerated filer ☐

Non-accelerated filer ☒ Smaller reporting company ☒

Emerging growth company ☒

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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

The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant, based on the closing price of the registrant’s common stock as reported by the Nasdaq Global Select Market on October 16, 2020, was approximately $312 million. The registrant has elected to use October 16, 2020 as the calculation date, which was the initial trading date of the registrant’s common stock on the Nasdaq Global Select Market, because on June 30, 2020 (the last business day of the registrant’s second fiscal quarter), the registrant was a privately-held company. Shares of common stock held by each executive officer, director, and holder of 5% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of March 19, 2021, the number of outstanding shares of the registrant’s common stock, par value $0.0001 per share, was 20,503,096.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the information called for by Part III of this Annual Report on Form 10-K is hereby incorporated by reference to portions of the registrant’s definitive proxy statement for its 2021 annual meeting of stockholders, which will be filed with the Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year ended December 31, 2020.

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TABLE OF CONTENTS

Part I 1

Item 1. Business 5

Item 1A. Risk Factors 45

Item 1B. Unresolved Staff Comments 101

Item 2. Properties 101

Item 3. Legal Proceedings 101

Item 4. Mine Safety Disclosures 101

Item 6. Selected Financial Data 103

Item 8. Financial Statements and Supplementary Data 116

Item 9A. Controls and Procedures 142

Item 9B. Other Information 142

Item 10. Directors, Executive Officers and Corporate Governance 143

Item 11. Executive Compensation 143

Item 14. Principal Accounting Fees and Services 143

Item 15. Exhibits, Financial Statement Schedules 144

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). All statements other than statements of historical facts contained in this Annual Report on Form 10-K, including statements regarding our future results of operations and financial position, business strategy, product candidates, planned preclinical studies and clinical trials, results of clinical trials, research and development costs, regulatory approvals, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that are in some cases beyond our control and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

•the likelihood of our clinical trials demonstrating safety and efficacy of our product candidates, and other positive results;

•the timing and progress of our current clinical trials and timing of initiation of our future clinical trials, and the reporting of data from our current and future trials;

•our plans relating to the clinical development of our current and future product candidates, including the size, number and disease areas to be evaluated;

•the prevalence of Demodex blepharitis and the size of the market opportunity for our product candidates;

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

•our plans relating to commercializing our product candidates, if approved, including sales strategy;

•the impact of COVID-19 on our business and operations;

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

•our estimates of the number of patients in the United States or globally, as applicable, who suffer from Demodex blepharitis, Meibomian Gland Disease, rosacea, Lyme disease and malaria and the number of patients that will enroll in our clinical trials;

•the beneficial characteristics, safety, efficacy, therapeutic effects and potential advantages of our product candidates;

•the timing or likelihood of regulatory filings and approval for our product candidates;

•our ability to obtain and maintain regulatory approval of our product candidates and our product candidates to meet existing or future regulatory standards;

•our plans relating to the further development and manufacturing of our product candidates, including additional indications for which we may pursue;

•our ability to identify additional products, product candidates or technologies with significant commercial potential that are consistent with our commercial objectives;

•the expected potential benefits of strategic collaborations with third parties (including, for example, the receipt of payments, achievement and timing of milestones under license agreements, and the ability of our third party collaborators to commercialize our product candidates in the territories under license) and our ability to attract collaborators with development, regulatory and commercialization expertise;

•existing regulations and regulatory developments in the United States and other jurisdictions;

•our plans and ability to obtain or protect intellectual property rights, including extensions of existing patent terms where available;

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•our continued reliance on third parties to conduct additional clinical trials of our product candidates, and for the manufacture of our product candidates for preclinical studies and clinical trials;

•the need to hire additional personnel, in particular sales personnel, and our ability to attract and retain such personnel;

•the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

•our financial performance;

•the sufficiency of our existing capital resources to fund our future operating expenses and capital expenditure requirements;

•our competitive position;

•our expectations regarding the period during which we will qualify as an emerging growth company under the JOBS Act; and

•our anticipated use of our existing resources and the proceeds from our Initial Public Offering.

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations and growth prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this Annual Report on Form 10-K and are subject to a number of risks, uncertainties and assumptions described in the section titled “Risk Factors” and elsewhere in this Annual Report on Form 10-K. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements after the date of this Annual Report on Form 10-K, whether as a result of any new information, future events or otherwise.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Annual Report on Form 10-K, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.

Unless the context otherwise requires, all references in this Annual Report on Form 10-K to the “Company”, “we,” “us,” “our,” “Tarsus” and “Tarsus Pharmaceuticals” refer to Tarsus Pharmaceuticals, Inc. We primarily conduct our business activities as Tarsus Pharmaceuticals.

***

Tarsus Pharmaceuticals, Tarsus, and Tarsus Pharmaceuticals, Inc., our logo and other registered or common law trade names, trademarks or service markets of Tarsus appearing in this report are the property of the Company. This report contains additional trade names, trademarks and service marks of other companies that are the property of their respective owners. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies. Solely for convenience, our trade names, trademarks and service marks referred to in this report appear without the ®, TM or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trade names, trademarks and service marks.

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SUMMARY OF RISKS ASSOCIATED WITH OUR BUSINESS

We face risks and uncertainties associated with our business, many of which are beyond our control. Some of the more significant risks associated with our business include the following:

•We are a late clinical-stage biopharmaceutical company with limited operating history. We have incurred significant losses and negative cash flows from operations since our inception and anticipate that we will continue to incur significant expenses and losses for the foreseeable future.

•We may need to obtain additional funding to complete the development and any commercialization of our product candidates, if approved. If we are unable to raise this necessary capital when needed, we would be forced to delay, reduce or eliminate our product development programs, commercialization efforts or other operations.

•We are heavily dependent on the success of our lead product candidate, TP-03 for the treatment of Demodex blepharitis.

•The COVID-19 pandemic, which began in late 2019 and has spread worldwide, may continue to affect our ability to initiate and complete preclinical studies and clinical trials, disrupt regulatory activities, disrupt our manufacturing and supply chain or have other adverse effects on our business and operations.

•Even if TP-03 or any other product candidate that we develop receives marketing approval, we may not be successful in educating eye care physician ("ECPs"), and the market about the need for treatments specifically for Demodex blepharitis and or other diseases or conditions targeted by our product candidates, and TP-03 or other product candidates that we may develop may fail to achieve market acceptance by ECPs, other healthcare providers and patients, or adequate formulary coverage, pricing or reimbursement by third-party payors and others in the medical community, and the market opportunity for these products may be smaller than we estimate.

•The development and commercialization of our products, including our lead product candidate, TP-03 for the potential treatment of Demodex blepharitis and Meibomian Gland Disease ("MGD"), TP-04 for the potential treatment of rosacea and TP-05 for potential Lyme prophylaxis and community malaria reduction, is dependent on intellectual property we license from Elanco Tiergesundheit AG ("Elanco"). If we breach our agreements with Elanco or the agreements are terminated, we could lose license rights that are important to our business. Furthermore, some of our revenue is dependent on receipt of payments and achievement and timing of milestones under the terms of our out-license agreement with LianBio Ophthalmology Limited ("LianBio"), granting exclusive commercial rights of TP-03 for the treatment of Demodex blepharitis and MGD within the People's Republic of China, Macau, Hong Kong, and Taiwan (the "Territory"). Adverse effects on our business could occur if LianBio is not able to make payments, achieve milestones, and/or successfully commercialize TP-03 in the Territory.

•We will need to develop and expand our company and we may encounter difficulties in managing our growth, which could disrupt our operations.

•The sizes of the market opportunity for our product candidates, particularly TP-03 for the treatment of Demodex blepharitis and MGD, have not been established with precision and may be smaller than we estimate, possibly materially. If our estimates of the sizes overestimate these markets, our sales growth may be adversely affected. We may also not be able to grow the markets for our product candidates as intended or at all.

•Clinical drug development involves a lengthy and expensive process with uncertain timelines and uncertain outcomes, and results of earlier studies and trials may not be predictive of future results.

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

•We rely on third parties to conduct our clinical trials and perform some of our research and preclinical studies.

•If we are unable to obtain and maintain sufficient intellectual property protection for our product candidates, or if the scope of the intellectual property protection is not sufficiently broad, our competitors could develop and

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commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be adversely affected.

•Patent terms may be inadequate to protect our competitive position on our product candidates and preclinical programs for an adequate amount of time.

•The concentration of our stock ownership will likely limit your ability to influence corporate matters, including the ability to influence the outcome of director elections and other matters requiring stockholder approval.

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PART I

Item 1. Business

Overview

We are a late clinical-stage biopharmaceutical company focused on the development and commercialization of therapeutic candidates to address large market opportunities, initially in ophthalmic conditions, where there are limited treatment alternatives. Our lead product candidate, TP-03, is a novel therapeutic in Phase 2b/3 that is being developed for the treatment of blepharitis caused by the infestation of Demodex mites, which is referred to as Demodex blepharitis. Blepharitis (“Blephar” is a reference to eyelid and “itis” is a reference to inflammation) is a condition characterized by inflammation of the eyelid margin, redness and ocular irritation, including a specific type of eyelash dandruff called collarettes in Demodex blepharitis. The healthy interaction of the eyelid and the surface of the eyeball is crucial to ocular health. Poorly controlled and progressive blepharitis can lead to worsening of corneal damage over time and, in extreme cases, blindness.

According to published studies, there are an estimated 20 million patients in the United States who suffer from blepharitis, with approximately 45% or nine million of cases caused by Demodex infestation. Further, the possible number of Demodex blepharitis cases may be as high as approximately 25 million, based on our internal research indicating approximately 58% of patients presenting to eye care clinics have collarettes and a published study estimating that at least 45 million people annually visit an eye care clinic.

We believe that TP-03 has the potential to be the first FDA-approved therapeutic for the treatment of Demodex blepharitis and become the standard of care. The active pharmaceutical ingredient ("API") of TP-03, lotilaner, is designed to paralyze and eradicate mites and other parasites through the inhibition of parasite-specific gamma-aminobutyric acid-gated chloride ("GABA-Cl") channels.

To date, we have completed four Phase 2 trials for TP-03 in Demodex blepharitis, all of which met their primary, secondary and/or exploratory endpoints, as applicable, and during which TP-03 was well tolerated. Our Phase 2b/3 trial, Saturn-1, commenced in September 2020. We expect to begin our Phase 3 trial, Saturn-2, in the second quarter of 2021, both with primary and secondary endpoints consistent with those of our Europa and Io Phase 2 trials. If successful, we expect the Saturn-1 and Saturn-2 trials to support our submission of a new drug application ("NDA") with the United States Food and Drug Administration ("FDA") for TP-03 for the treatment of Demodex blepharitis.

In December 2020 we had a Type C meeting with the FDA for TP-03. This meeting confirmed our planned NDA pathway with respect to the data and information required in our forthcoming NDA filing. Furthermore, we intend to pursue marketing authorizations in jurisdictions outside the United States, including Europe and Japan.

On March 26, 2021, we executed an out-license agreement with LianBio Ophthalmology Limited ("LianBio"), granting exclusive commercial rights of TP-03 for the treatment of Demodex blepharitis and MGD within the People’s Republic of China, Macau, Hong Kong, and Taiwan (the "Territory"). We are contractually entitled to receive (i) an aggregate $25 million by June 30, 2021, (ii) regulatory and sales milestone receipts totaling $75 million and $100 million, respectively, (iii) tiered royalties in the low double-digits on the net sales of TP-03 within the Territory, and (iv) a minority interest in LianBio that vests upon the achievement of certain clinical and regulatory milestones.

We intend to further advance our pipeline with lotilaner API to address several diseases across therapeutic categories in human medicine, including eye care, dermatology, and other diseases. These targeted diseases with high unmet medical need currently include MGD, rosacea, Lyme disease, and malaria.

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The following pipeline chart presents our wholly-owned product candidates and clinical development status:

Figure 1: Pipeline Chart

Blepharitis: Market Overview

Blepharitis is a common, chronic ophthalmic condition characterized by inflammation of the eyelid margin, redness and ocular irritation. It is also a progressive disease that often manifests with more severe symptoms if left untreated, such as blurring of vision, missing eyelashes, corneal damage and, in extreme cases, blindness. According to published studies, an estimated 20 million patients suffer from blepharitis in the United States, and there is growing recognition within the ophthalmic community about Demodex mites as an underlying cause of blepharitis. Demodex mites are the most common ectoparasite found on humans. Demodex mites potentially cause approximately 45%, or approximately nine million, of blepharitis cases in the United States and we believe that the number of Demodex blepharitis patients in the United States may be as high as approximately 25 million based on our internal research indicating approximately 58% of patients presenting to eye care clinics have collarettes and a published study estimating that at least 45 million people annually visit an eye care clinic. In addition, there is growing awareness among ECPs of a specific type of debris found at the base of the eyelashes, known as collarettes, or cylindrical dandruff, which are highly correlated with Demodex infestation. Collarettes are composed of partially digested epithelial cells, mite waste products and eggs among other things and can be easily diagnosed by ECPs with a standard eye examination. Demodex blepharitis increases progressively with aging, which is the main risk factor for the condition. These aging patients commonly present to the offices of ECPs for other ophthalmic conditions besides blepharitis, such as cataract surgery and contact lens discomfort. Accordingly, we believe that there is significant opportunity to increase the diagnosis rate of Demodex blepharitis through ECP and patient education that encourages examination of the condition in standard practice.

Despite the high prevalence of patients with Demodex blepharitis and growing awareness of the condition amongst ECPs, there are no FDA-approved therapeutics for the treatment of blepharitis or for Demodex blepharitis. Although we believe blepharitis and Demodex blepharitis are significantly underdiagnosed conditions, with limited treatment alternatives, there are already an estimated 2.1 million annual blepharitis diagnoses in the United States with blepharitis classified per the International Classification of Diseases, Tenth Revision, Clinical Modification ("ICD-10-CM"). Demodex blepharitis is

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currently treated with a variety of over the counter remedies such as tea tree oil, lid wipes and artificial tears, as well as off-label prescription products, which often show sub-optimal efficacy, are poorly tolerated and lead to significant irritation and dissatisfaction for patients, and do not eradicate the Demodex mites.

We have conducted epidemiology and market research on the prevalence of blepharitis and potential adoption of TP-03. Our research indicates approximately 58% of patients presenting to ECP offices have collarettes and, based on Gao (2005), all patients with collarettes were also found to have Demodex. This further validates the accessible opportunity to increase diagnosis rates among patients. In addition, our market research suggests the potential for a high level of adoption of TP-03, if approved. In our surveys, we interviewed 50 ECPs, 96% of whom indicated they would prescribe TP-03 as a first-line treatment for Demodex blepharitis after exposure to the TP-03 target product profile. See the section titled “Market Opportunity in Blepharitis—Our Market Research Studies and Surveys” for more information regarding our surveys. Further, patients continue to have underlying risk of Demodex infestation, so there could be a recurrence based on the presence of Demodex mites in the skin even after eradication of Demodex mites from the eyelid. Our Phase 2 data from the Mars and Jupiter clinical trials followed patients to one year after treatment and showed meaningful recurrence of Demodex blepharitis within six to nine months, which increased considerably one year after treatment. We believe this data suggests TP-03, if approved, may be used on a chronic, intermittent basis in Demodex blepharitis.

We believe the blepharitis market has the potential to be analogous to other ophthalmic markets that grew significantly once there was a product to address the large, latent demand for an effective therapy, such as dry eye. For example, another ocular surface disease, dry eye, had no approved therapeutic for the condition until 2003. With the approval of a therapeutic to treat dry eye in 2003 and concurrent ECP and patient education, the diagnosis rate increased by approximately 12 times, growing from 500,000 annual diagnoses in 2003 to over six million annual diagnoses in 2015. Annual diagnoses rates have been maintained at similar levels since 2015. Blepharitis already has 2.1 million diagnoses per year with blepharitis classified per the ICD-10-CM, despite no approved therapies to help with market awareness, but we believe there is potential for significant market expansion. The markets may be analogous because both Demodex blepharitis and dry eye are diseases that affect the front of the eye, are treated by ECPs, can cause an inflamed ocular surface or eyelids and have similar patient demographics. The potential market for Demodex blepharitis, however, may not be analogous to the market for dry eye due to differences in symptoms, regulatory approval and market dynamics and certain other factors. See “Risk Factors – Risk Related to Development and Commercialization of Our Product Candidates—The market for blepharitis and Demodex blepharitis may be not be similar to the market for dry eye.” for additional information and risks related to the comparison of the Demodex blepharitis market to that of dry eye.

We believe there is a significant opportunity to increase the diagnosis rate of Demodex blepharitis and build a significant new market with the approval of a safe and effective therapeutic alternative that addresses the underlying cause of the condition.

Our Approach: TP-03

We are developing TP-03, formulated as an eye drop, which we believe, if approved, has the potential to become the standard of care for Demodex blepharitis. TP-03 is a novel therapeutic based on the drug, lotilaner, which is designed to paralyze and eradicate mites and other parasites through the inhibition of parasite-specific GABA-Cl channels.

We have completed four Phase 2 clinical trials to date, along with one additional ex vivo study. Key efficacy endpoints for our Mars and Jupiter clinical trials included collarette grade and mite density and key efficacy endpoints for our Io and Europa clinical trials included collarette cure rate based on collarette grade, which we refer to herein as collarette cure rate, and mite eradication rate. TP-03 met its primary, secondary and/or exploratory endpoints, as applicable, in such trials, and showed statistically significant cure and eradication rates in our two most recent trials, Io and Europa. TP-03 was generally well tolerated throughout these trials. The Phase 2a Mars trial was a smaller single arm trial evaluating the safety and efficacy of TP-03 with a 28-day twice per day, or BID, dosing regimen, with exploratory endpoints including collarette grade and mite density. We utilized the data from the exploratory endpoints to determine collarette cure rate, defined as 10 or fewer collarettes, and mite eradication rate, defined as zero mites per lash. Both collarette cure and mite eradication rates were assessed at 28 days, which were 86% and 57%, respectively.

The Phase 2b Jupiter trial was a larger randomized, controlled double-blind trial with mite density and collarette grade as primary and secondary endpoints, respectively. Similarly to the Mars trial, we utilized the collarette grade and mite density data to determine collarette cure and mite eradication rates, which were both defined consistently with those used in the Mars trial. The efficacy observed in the Jupiter trial appeared consistent with the Mars trial, with a collarette cure rate of 88%, and mite eradication rate of 66%, which were statistically significant compared to the vehicle control. We subsequently conducted the Io Phase 2a and Europa Phase 2b trials to evaluate the safety and efficacy of TP-03 formulation for the treatment of Demodex blepharitis. The design of the Io trial took into account feedback from the FDA, and accordingly we defined collarette cure rate as a more stringent standard of two or fewer collarettes on the eyelid, with a treatment duration of 42 days.

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In the Io trial, we utilized for the first time in clinical trials the formulation of TP-03 that is expected to support our NDA submission for Demodex blepharitis. The change in formulation consisted of replacing LAK with sorbate as the preservative as well as adding a chelating agent. The key differences between the Io and Europa trials, were that Io was a smaller single-arm trial, while Europa was a slightly larger randomized vehicle-controlled trial. The endpoints achieved in Io and Europa were consistent across both trials, with a collarette cure rate of 72% and 80%, respectively, and a mite eradication rate of 78% and 73%, respectively. The achievement of primary, secondary and/or exploratory endpoints, as applicable, in such trials, and safety results across our comprehensive Phase 2 program provided us with the basis to design and initiate our pivotal Phase 2b/3 and Phase 3 clinical trials for TP-03 for the treatment of Demodex blepharitis.

We plan to evaluate TP-03 in two pivotal registration trials, referred to as Saturn-1 and Saturn-2. Saturn-1 is a Phase 2b/3, randomized, controlled, double-blind trial to evaluate the safety and efficacy of TP-03 that is expected to enroll at least 350 Demodex blepharitis patients in multiple centers in the United States. Saturn-1 commenced in September 2020 and top-line data is expected in 2021, subject to the impact of the ongoing COVID-19 pandemic. Saturn-2, our confirmatory Phase 3 randomized, controlled, double-blind trial, has a highly comparable design to that of Saturn-1 and is also expected to enroll approximately 350 Demodex blepharitis patients. Enrollment of Saturn-2 is expected to begin in 2021, subject to the impact of the ongoing COVID-19 pandemic.

In connection with our IND application, we have received a “no-objection” letter from the FDA regarding the trial design for Saturn-1. The trial design for Saturn-2 is highly comparable to that of Saturn-1 and we expect to update the IND protocol prior to commencing Saturn-2. We expect these trials to support the potential submission of an NDA for TP-03 for the treatment of Demodex blepharitis. In December 2020 we had a Type C meeting with the FDA; this meeting confirmed our planned NDA pathway with respect to the data and information required in our forthcoming NDA filing.

We also intend to explore the therapeutic potential of TP-03 for a second ophthalmic condition, MGD, commonly characterized in part by a widespread clogging of the meibomian glands that can result in tear film deficiency, and is one of the leading causes of dry eye disease. There are no FDA-approved therapeutics for MGD. In the United States, MGD prevalence has been found to be approximately two-thirds of the estimated 34 million dry eye patient population. One species of Demodex mite, Demodex brevis, is known to infest the meibomian gland, and clinical signs of MGD have been shown to be correlated with infestation of Demodex brevis. While dry eye is a multi-factorial disease, TP-03 is designed to relieve some of the key elements of MGD by virtue of causing the death of the Demodex brevis mites.

Our Approach: TP-04 and TP-05

We are also developing additional clinical-stage product candidates with lotilaner. These include TP-04 for the potential treatment of rosacea as well as TP-05 for potential Lyme prophylaxis and community malaria reduction.

Rosacea is a chronic skin disease characterized by facial redness, inflammatory lesions, burning and stinging, which can flare up in response to certain triggers such as sun exposure or emotional stress. According to the U.S. National Rosacea Society, approximately 16 million people in the United States are affected by rosacea and a study estimates rosacea prevalence can represent up to 5.4% of the global population. We intend to develop TP-04 as a topical formulation, and we plan to initiate a Phase 1/2 trial of TP-04 outside the United States, for the treatment of rosacea in 2021. We initiated preclinical studies to select Phase 1/2 formulation for TP-04.

Lyme disease is the most common vector-borne disease in the United States, caused by infection of Borrelia bacteria following bite by a tick vector. Estimates of annual cases of Lyme disease in the United States range from approximately 300,000 to 400,000. Malaria is one of the world’s highest unmet public health needs, with approximately 228 million cases and more than 400,000 deaths caused by malaria worldwide. We are developing TP-05 as an oral formulation that is designed as a prophylactic drug against Lyme disease to eradicate the tick before it can transmit the Borrelia bacteria. Further, we believe TP-05 also has the potential to significantly reduce malaria transmission through reducing the lifespan of mosquitos that transmit malaria. This may in turn provide herd protection against the spread of malaria. TP-05 is not intended to treat the disease, but to limit its transmission. We have obtained FDA feedback in a pre-IND meeting and plan to submit an IND and initiate a Phase 1/2 trial of TP-05 for Lyme disease in 2021. For malaria, we may conduct the Phase 1/2 trial outside of the United States.

Our Strategy

Our goal is to transform the treatment of Demodex blepharitis with a first ever FDA approved pharmaceutical therapeutic, and to develop our pipeline of innovative therapies that target certain parasite-mediated diseases with large market opportunities. We intend to achieve these goals by pursuing the following key strategic objectives:

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Blepharitis Overview

Blepharitis

Ocular surface disease represents a broad category of disease that affects at least 35 million people in the United States. The ocular surface comprises the cornea, conjunctiva, eyelids and lacrimal glands and as such any diseases in these structures can be classified as ocular surface disease. Common ocular surface diseases include dry eye disease, ocular allergy, blepharitis and MGD. Almost all of the ocular surface diseases are associated with eye redness and ocular surface inflammation and in some cases conjunctival and/or lid edema. Patients often present with multiple ocular surface diseases and the symptoms have significant overlap, leading to frequent misdiagnosis of the various conditions.

Blepharitis is a common chronic ophthalmic condition characterized by inflammation of the eyelid margin, redness and ocular irritation and is primarily diagnosed and treated by ECPs, including ophthalmologists and optometrists. Based on published studies, an estimated 20 million patients suffer from blepharitis in the United States. Typical signs and symptoms of blepharitis include debris on the eyelashes, redness of eye and eyelid, missing or misdirected eyelashes, blurring of vision, irritation, itchiness and ocular discomfort. It is challenging to manage, recurs frequently, and its progression can lead to scarring of the eyelid, loss of proper eyelid and tear-film function, eyelid and lash abnormalities, inflammation of the conjunctiva and surrounding skin, suboptimal surgical outcomes, corneal damage, and in extreme cases, blindness. Further, approximately 67% of cataract patients have Demodex infestation, which can increase the risk for both infection after cataract and refractive surgery. Therefore, treating Demodex blepharitis may improve patient satisfaction with cataract and refractive surgery. Additionally, the primary reason people stop wearing contact lenses is discomfort and blepharitis has been shown to cause contact lens intolerance. Therefore, treating Demodex blepharitis may reduce contact lens intolerance. We believe these benefits may lead to better vision and an improved quality of life for patients.

Multiple factors can cause blepharitis, including infestation by Demodex mites, bacterial infection, clogging of the meibomian glands and seborrheic dermatitis.

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The following image shows eyelids with blepharitis:

Figure 2: Eyelids With Blepharitis

Demodex Blepharitis

Demodex infestation is a major cause of blepharitis, implicated in approximately 45% of blepharitis cases, or approximately nine million patients. We estimate that the number of Demodex blepharitis patients in the United States may be as high as approximately 25 million based on our internal research indicating approximately 58% of patients presenting to eye care clinics have collarettes and a published study estimating that at least 45 million people annually visit an eye care clinic. These blepharitis cases are referred to Demodex blepharitis. Demodex mites are the most common ectoparasite found on humans and are more likely to cause infestation and disease with aging. Demodex blepharitis typically presents bilaterally in patients with the condition. There are two species of Demodex, folliculorum and brevis, that live on the skin of the face and eyelids. Demodexfolliculorum, which is commonly found in the follicle, is the more common sub-species of mite that causes Demodex blepharitis.

The key clinical sign of Demodex blepharitis is a specific type of eyelid debris known as the collarette, which is also sometimes referred to as cylindrical dandruff or waxy scurf. Collarettes are composed of partially digested epithelial cells, mite waste products and eggs among other things and can be easily diagnosed by ECPs with a standard eye examination known as the slit lamp examination. Other bothersome signs and symptoms of Demodex blepharitis that lead to further disease progression include missing or misdirected eyelashes, crusting, redness of the lid margin, inflammation of the lid margin, inflammation of the conjunctiva and/or inflammation of the cornea, also known as blepharoconjunctivitis and blepharokeratitis. Demodex blepharitis is a progressive disease that often manifests with more severe signs and symptoms if left untreated, such as blurring of vision, missing eyelashes, corneal damage and, in extreme cases, blindness. Furthermore, Demodex blepharitis can negatively impact quality of life and create an emotional burden for individuals with the condition.

The following figures demonstrate how Demodex folliculorum mites enter and reside in the eyelash follicles:

Figure 3:Demodex folliculorumMites Entering and Residing in Eyelash Follicles

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Demodex infestation can lead to Demodex blepharitis in three main ways:

As mites scratch and feed on the skin, the partially digested epithelial cells, keratin, mite waste and eggs combine to form collarettes. These collarettes are typically found at the base of the lash but can migrate away as the hair shaft grows.

The following figure shows collarettes at the base of an eye lash:

Figure 4: Collarettes Are the Pathognomonic Sign of Demodex Blepharitis

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A study conducted by Gao et al. (Gao et al. (2005): High Prevalence of Demodex in Eyelashes with Cylindrical Dandruff. Invst Ophth and Vis Sci, September 2005, Vol. 46, No. 3089-3094.) confirmed the pathognomonic relationship of the collarette to Demodex infestation. The study included 55 patients seen at the Ocular Surface Center in Miami, Florida to determine the prevalence of Demodex in eyelashes with collarettes. All patients underwent a routine, complete eye examination and external photography. Patients were divided into three main groups: those with collarettes; those without collarettes and who had been using daily lid scrubs for a full year; and those without collarettes who were not performing the daily lid scrubs. As illustrated in the figure below, 100% (n=32) of patients with at least one collarette had Demodex present. Those patients without collarettes were divided into two groups; patients who were using lid scrubs for a full year and those who were not. Only 7% (n=15) of patients without collarettes and who were not performing the daily lid scrubs had Demodex, while 50% (n=8) of those subjects without collarettes, but who were using daily lid scrubs with shampoo for a full year, had Demodex infestation, implying that hygiene alone did not eradicate the mites. All 55 patients were seen at one location and may not be representative of the United States population.

The following figure shows that 100% of patients with at least one collarette had Demodex infestation:

Figure 5: 100% of Patients With at Least One Collarette Had Demodex Infestation

Demodex blepharitis can be easily diagnosed by ECPs with the standard eye examination, the slit lamp examination, by confirming the presence of collarettes. The slit lamp examination is routinely performed by ECPs as part of standard practice during a customary eye examination, so diagnosing Demodex blepharitis via presence of collarettes would not involve any additional equipment, training or workflow alterations on the part of the ECP.

Market Opportunity in Blepharitis

According to published studies, there are an estimated 20 million patients in the United States who suffer from blepharitis, with approximately 45%, or approximately nine million, of cases caused by Demodex infestation. Further, we estimate that the number of Demodex blepharitis cases in the United States may be as high as approximately 25 million based on our internal research indicating approximately 58% of patients presenting to eye care clinics have collarettes and a published study estimating that at least 45 million people annually visit an eye care clinic. Despite the high prevalence of patients with Demodex blepharitis and growing awareness of the condition amongst ECPs, there are no FDA-approved therapeutics for the treatment of blepharitis or for Demodex blepharitis. Although we believe blepharitis and Demodex blepharitis are significantly underdiagnosed conditions, with limited treatment alternatives, there are already an estimated 2.1 million annual blepharitis diagnoses in the United States with blepharitis classified per the ICD-10-CM.

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Our Market Research Studies and Surveys

Our market research studies include an ECP survey of 50 ECPs, or the ECP Survey, that we commissioned and which was conducted in 2019 and 2020 to generally determine market awareness and current management of Demodex blepharitis and introduce a hypothetical TP-03 product profile. Twenty ECPs were interviewed in 2019 and 30 ECPs were interviewed in 2020. ECPs were chosen based on a random sample of ophthalmologists and optometrists nationwide that had sufficient exposure to blepharitis patients to provide a representative sample of ECPs who see and manage blepharitis patients, and would potentially be in a position to prescribe TP-03 if it were approved and available. The ECP Survey generally asked ECPs questions regarding their patient base and also introduced the TP-03 product profile to them. The ECP Survey showed that 44% of all diagnosed patients were over the age of 65, and 57% of diagnosed patients were female. Distribution of diagnoses across race and income metrics was approximately proportional to that of the United States population, implying little correlation of the condition with socioeconomic status. The ECP Survey also showed that in April through May of 2020, the number of blepharitis patients in the eye care clinic, which represented 60% of the total patients, was approaching the level of dry eye patients, which represented approximately 65% of the total patients. We believe this demonstrates that the market size for blepharitis may be similar to the market size of dry eye and that both are common in the eye care clinics, which informs us on the potential to increase diagnoses through ECP education. As the population of the United States continues to age, we believe this disease will become more prevalent. While we believe the ECP survey provides insight to the potential market size of Demodex patients, since it was a random sampling of ECPs nationwide that had sufficient exposure to blepharitis patients, the sample size of ECPs and corresponding potential patient population was relatively small and the number of blepharitis patients may not be comparable to the number of dry eye patients. The patients may have had overlapping diagnoses but the ECP Survey did not measure any such potential overlap.

The following figures show that according to the ECP Survey, the number of blepharitis diagnoses approached the number of dry eye diagnoses. This trend is also supported by independent epidemiology studies:

Figures 6 and 7: Blepharitis Diagnoses Approaching Number of Dry Eye Diagnoses

Additionally, the ECP Survey obtained feedback on a hypothetical TP-03 product profile, based on the Mars and Jupiter clinical trial data. In the ECP Survey, a total of 25 ophthalmologists and 25 optometrists were educated on the pathognomonic relationship of collarettes to Demodex blepharitis and exposed to the Mars and Jupiter clinical trial data. After exposure, ECPs were asked their intent to prescribe TP-03 if it were available for their patients presenting with Demodex blepharitis as indicated by collarettes. In these studies, 48 of 50 (96%) ECPs indicated that they would prescribe TP-03 as first-line treatment, and 2 of 50 (4%) indicated that they would prescribe it as second-line treatment. No ECPs indicated that they would prescribe TP-03 as third line or not prescribe TP-03.

The following figure shows that 96% of the surveyed ECPs indicated they would prescribe TP-03 as a first-line treatment:

Figure 8: 96% of Surveyed ECPs Indicated Prescribing Intention TP-03 as First-Line Treatment

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We also sponsored a separate market research survey of 50 patients with blepharitis symptoms, where the presence of “eye crust” on eye lashes was noted as a primary symptom. These patients were randomly selected nationwide and not chosen in connection with the identity of his or her ECP. The individuals with blepharitis symptoms were educated on collarettes and that Demodex mites cause collarettes, and provided with a description of a hypothetical product with the target profile of TP-03, which can potentially eradicate Demodex mites in the eyelid and eliminate collarettes in a majority of patients. After considering the target product profile, the individuals with blepharitis symptoms were asked how likely they were to visit a doctor and ask about whether a product such as TP-03 would be right for them (on a scale of 1-7). Forty-six of 50 (92%) of the individuals with blepharitis symptoms indicated a likelihood to visit a doctor and ask about a product with a target profile of TP-03, and 32 of 50 (64%) indicated a response of “definitely would.” Two of 50 (4%) of the individuals with blepharitis symptoms indicated that they “may or may not,” and two of 50 (4%) of the individuals with blepharitis symptoms indicated that they “definitely would not.”

The following figure shows the results of this survey:

Figure 9: 92% of Individuals with Blepharitis Symptoms Indicated Likelihood To Inquire About a TP-03-Type Product

We believe that blepharitis is underdiagnosed due to the lack of an approved treatment and associated patient and physician education, and the lack of awareness of the role of Demodex mites in the disease process. The ECP Survey showed that only 10-15% of ECPs were aware that collarettes are highly correlated with Demodex infestation. Despite the current lack of awareness by ECPs, we believe that the ocular surface disease marketplace is highly responsive to education of both the ECP and the patient. For example, as a result of ECP and patient education, the dry eye market grew significantly once there was a product to address the large, latent demand for an effective therapy. Dry eye had no approved therapeutic until 2003. Once a therapeutic was approved, the diagnosis rate increased by approximately 12 times, growing from 500,000 annual diagnoses in 2003 to over six million annual diagnoses by 2015. Annual diagnoses rates have been maintained at similar levels since 2015. We believe the Demodex blepharitis and dry eye markets may be analogous because both Demodex blepharitis and dry eye are diseases that affect the front of the eye, are treated by ECPs, can cause an inflamed ocular surface or eyelids and have similar patient demographics. The potential market for Demodex blepharitis, however, may not be analogous to the market for dry eye

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due to differences in symptoms, regulatory approval and market dynamics and other factors. See “Risk Factors—Risk Related to Development and Commercialization of Our Product Candidates—The market for blepharitis and Demodex blepharitis may be not be similar to the market for dry eye” for additional information and risks related to the comparison of the Demodex blepharitis market to that of dry eye.

The following figure shows the annual diagnoses of dry eye disease prior to and after and the launch of an approved therapy for dry eye, with the 2.1 million diagnoses for blepharitis in 2019 shown on the plot for reference:

Figure 10: Dry Eye Diagnoses Per Year

Demodex mites have been implicated in approximately 45% of all blepharitis cases in a meta-analysis of 11 studies consisting of an aggregate of 4,741 patients with blepharitis. The incidence of Demodex blepharitis increases progressively with aging, which is the main risk factor for the condition, with the majority of people over the age of 60 having been shown to have the disease.

Our market research studies also included an epidemiological evaluation we conducted of 1,121 consecutive patients in eight ophthalmology and optometry practices conducted in 2020 (the "Patient Epidemiology Survey"), which showed that 58% of all patients entering the practices had collarettes and all patients entering practices with collarettes were also found to have Demodex blepharitis. By comparison, 20% of those same 1,121 patients were currently on a prescription therapeutic for dry eye disease (Restasis or Xiidra). Additionally, 13% of the 1,121 patients presented with collarettes and were also on a prescription therapeutic for dry eye at the same time. The clinics in the Patient Epidemiology Survey were geographically diverse and represented both high and low dry eye prescription rates. Each practice was required to enroll between 100 and 180 consecutive patients. The clinic with the lowest prevalence demonstrated 29% of consecutive patients had collarettes, and the clinic with the highest prevalence demonstrated 76% of consecutive patients had collarettes.

The following figure shows the prevalence of collarettes and prevalence distribution by clinic, from the Patient Epidemiology Survey:

Figures 11 and 12: Prevalence of Collarettes

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We believe the data has demonstrated that there is a significant population for blepharitis, and for Demodex blepharitis more specifically, since the number of patients with collarettes exceeded by almost three times the number of patients on a prescription therapeutic for dry eye disease. While there is overlap between the number of patients with collarettes and the number of patients with dry eye and the number of patients with dry eye is most likely higher than the number of patients currently on a prescription for dry eye, and we believe the data shows a potential significant population for Demodex blepharitis. We also believe the data illustrates a significant opportunity to increase the diagnosis rate of Demodex blepharitis by educating ECPs on the high correlation of the presence of collarette to Demodex blepharitis in order for ECPs to incorporate the examination of the condition into standard practice.

Over the past several years, an increasing number of clinical studies on Demodex have been published in the context of ocular surface disease, with more than half of these studies published in the last four years. We believe this shows an increased understanding of the importance of Demodex in the scientific ophthalmic community and represents an important step in educating ECPs about Demodex blepharitis.

Current Treatment Options and Their Limitations

Despite the high prevalence of patients with Demodex blepharitis and growing awareness of the condition amongst ECPs, there are no FDA-approved therapeutics for the treatment of blepharitis or for Demodex blepharitis. Demodex blepharitis is currently treated with a variety of over the counter remedies such as tea tree oil, lid wipes and artificial tears, as well as off-label prescription products for dry eye.

These approaches have significant limitations, including:

Our Approach: Treating Demodex Mites, a Root Cause of Disease

To address these limitations and high unmet need for effectively treating Demodex blepharitis, we are developing TP-03, formulated as an eye drop, which we believe, if approved, has the potential to become the standard of care for Demodex blepharitis. TP-03 is a novel therapeutic based on the drug, lotilaner, which is designed to paralyze and eradicate mites and other parasites through the inhibition of parasite-specific GABA-Cl channels. To date, TP-03 has successfully met the primary, secondary and/or exploratory, endpoints, as applicable, in each of the four completed Phase 2 trials. TP-03 was generally well tolerated throughout these trials. As a result, we believe that TP-03 has the potential to be the first ever approved therapeutic for Demodex blepharitis.

The following figure summarizes the key advantages of TP-03:

Figure 13: Summary of TP-03 Key Advantages

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Commercial Strategy for Demodex Blepharitis Launch

If approved, we plan to commercialize TP-03 in the United States with a focused, specialty sales force, direct-to-consumer, or DTC, campaign, and ECP education campaigns with key opinion leaders, and professional associations. In our work with key opinion leaders and various associations to increase Demodex blepharitis awareness and education, we plan to highlight prevalence, impact, and simplicity of diagnosis of Demodex blepharitis. Our goal is to educate ECPs about the prevalence of Demodex blepharitis and the safety and efficacy of our products. In addition to educating ECPs, we believe that patient awareness and identification is important and plan to increase awareness through education and marketing efforts directed toward patients.

TP-03 Eye Drops – Mechanism of Action

The following figures show the intended paralysis of mites in the hair follicle by TP-03 administration:

Figure 14: Progression of TP-03 Application, Mite Paralysis and Eradication

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Clinical Development Program

We have completed four Phase 2 clinical trials to date, along with one additional ex vivo study. The table below summarizes completed and planned clinical investigations evaluating TP-03 for Demodex blepharitis. We plan to evaluate TP-03 in two pivotal registration trials, referred to as Saturn-1 and Saturn-2. Saturn-1 is a Phase 2b/3, randomized, controlled, double-blind trial to evaluate the safety and efficacy of TP-03 is expected to enroll at least 350 Demodex blepharitis patients in multiple centers in the United States. We commenced Saturn-1 in September 2020 and top-line data is expected in 2021, subject to the impact of the ongoing COVID-19 pandemic. Saturn-2, our confirmatory Phase 3 randomized, controlled, double-blind trial, has a highly comparable design to that of Saturn-1 and is also expected to enroll approximately 350 Demodex blepharitis patients. Enrollment of Saturn-2 is expected to begin in 2021, subject to the impact of the ongoing COVID-19 pandemic. In connection with our IND application, we have received a “no-objection” letter from the FDA regarding the trial design for Saturn-1. The trial design for Saturn-2 is highly comparable to that of Saturn-1 and we expect to update the IND protocol prior to commencing Saturn-2. We expect these trial results to support the potential submission of an NDA for TP-03 for the treatment of Demodex blepharitis.

The following figure shows our completed and planned investigations evaluating TP-03 for Demodex blepharitis:

Figure 15: Completed and Planned Investigations Evaluating TP-03 for Demodex Blepharitis

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* The Mars and Jupiter trials used collarette grade as an endpoint, which has been translated into a collarette cure (defined as <10 collarettes). This is different from the collarette cure (defined as <2 collarettes) endpoint used in Io, Europa, Saturn-1 and the planned Saturn-2 trials. The Mars and Jupiter trials also used mite density as an endpoint, which is different from mite eradication. Mite density is translated into mite eradication, which is defined as zero mites per lash consistently throughout trials.

** Primary endpoint in Io, Europa, Saturn-1 and intended in Saturn-2 is collarette cure based on collarette grade.

† In connection with our IND application, a no-objection letter was received from the FDA regarding the trial design of the Saturn-1 trial.

†† Saturn-2 design is highly comparable to that of Saturn-1 with respect to which the FDA raised “no-objection” and we expect to update the IND protocol prior to commencing Saturn-2.

TP-03 is a presentation of lotilaner, the API, formulated into a topical eye drop formulation. Only one dose strength of TP-03, 0.25% lotilaner solution was used across all clinical trials and studies.

A statistically significant outcome for primary efficacy endpoints is typically one of the requirements for FDA approval of a product. A statistically significant outcome indicates that the probability of the outcome occurring at random is less than the pre-established allowed error level, frequently set at 0.05 (or 1 in 20).

Mercury Study

The Mercury preclinical study was an ex vivo study of the efficacy of TP-03 in causing the paralysis and death of Demodex mites performed at a single center in the United States in 2019 through 2020. Mites were collected following lash plucking at a single center in the United States. Mites were placed in small wells and submersed in a drop of either TP-03 (pilot formulation) or a vehicle control (formulation with no active ingredient). The ex vivo efficacy results of the Mercury study show that 100% of mites subjected to the pilot formulation of TP-03 were dead within 24 hours and more than 70% of mites subjected to the formulation with no active ingredient were still viable after four days of observation.

The following figure presents the efficacy results on Demodex mite survival probability over time, with the shaded regions representing the 95% confidence interval for each of the two groups:

Figure 16: Mercury StudyEx VivoEfficacy Results

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Mars Phase 2a Single-Arm Clinical Trial

Mars was a Phase 2a single-arm clinical trial which evaluated the safety and efficacy of TP-03 for the treatment of Demodex blepharitis completed in 2019 in Mexico City, Mexico at a well-established site for ocular therapy trials. Subjects were treated with TP-03 (pilot formulation) BID for 28 days and followed to 90 days (62 days post-treatment). A total of 18 subjects were enrolled in the trial, with 15 patients receiving treatment beyond Day 1. Fourteen of the 15 subjects who received treatment completed the trial through Day 28. Twelve of the 15 subjects continued through 90 days (62 days post-treatment) and three subjects did not continue the trial after Day 28. In data described below, one subject was lost to follow-up after Day 2, one subject missed the Day 7 visit and one subject missed the Day 14 visit.

Exploratory endpoints included collarette grading score and mite density, as assessed by microscopic evaluation of plucked lashes. As this was an exploratory Phase 2a trial, no primary or secondary endpoints were pre-specified. We utilized the data from the exploratory endpoints to determine collarette cure and mite eradication rates. We defined collarette cure as collarette count of 10 or fewer, consistent with prior studies in the field. We defined mite eradication as zero mites per lash.

The following figure illustrates representative photos of two Mars subjects at baseline and Day 28 who exhibited a collarette cure:

Figure 17: Two Mars Trial Subjects at Baseline and Day 28 Who Exhibited a Collarette Cure

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The proportion of subjects who exhibited a collarette cure was statistically significant compared to baseline by Day 14 with 54% of subjects (7 of 13 subjects, p < 0.05) exhibiting a cure, at Day 28 with 86% of subjects (12 of 14 subjects, p < 0.05) exhibiting a cure, and post-treatment at Day 60 with 83% of subjects (10 of 12 subjects, p < 0.05) exhibiting a cure and at Day 90 with 83% of subjects (10 of 12 subjects, p < 0.05) exhibiting a cure.

The proportion of subjects who exhibited mite eradication was statistically significant compared to baseline at Day 14 with 31% of subjects (4 of 13 subjects, p < 0.05) exhibiting eradication, at Day 28 with 57% of subjects (8 of 14 subjects, p < 0.05) exhibiting eradication, and post-treatment at Day 60 with 50% of subjects (6 of 12 subjects, p < 0.05) exhibiting eradication and Day 90 with 83% of subjects (10 of 12 subjects, p < 0.05) exhibiting eradication.

The following figure shows the data for each visit day:

Figures 18 and 19: Mars Phase 2a Trial Collarette Cure and Mite Eradication Rates

There were no adverse events reported and TP-03 was well tolerated. No subjects discontinued the trial due to adverse events.

Jupiter Phase 2b Trial

Jupiter was a Phase 2b randomized, controlled, double-blind trial which evaluated the safety and efficacy of TP-03 for the treatment of Demodex blepharitis completed in 2019 in Mexico City, Mexico at a well-established site for ocular therapy trials. Subjects were treated with either TP-03 (pilot formulation) or with a vehicle control BID for 28 days. Subjects

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were followed to 90 days (62 days post-treatment) to evaluate post-treatment duration of effect. The primary endpoint was mite density for the treatment group as compared to the mite density for the vehicle control group at Day 28 and the secondary endpoint was collarette grade as compared to the collarette grade for the vehicle control group at Day 28. We utilized the collarette grading and mite density data to determine collarette cure and mite eradication rates. The definitions of collarette cure and mite eradication in the Jupiter trial were consistent with those used in the Mars trial. A total of 60 subjects were enrolled in the trial, with 51 subjects receiving treatment through Day 28 and 49 subjects completing the trial through Day 90.

The proportion of subjects who exhibited a collarette cure was statistically significant for TP-03 compared to vehicle control at Day 14 (78% vs. 44% subjects, p = 0.020), Day 28 (88% vs. 22%, p < 0.001) and post-treatment at Day 60 (95% vs. 26%, p < 0.001) and Day 90 (96% vs. 15%, p < 0.001).

The proportion of subjects who exhibited mite eradication was statistically significant for TP-03 compared to vehicle control at Day 14 (35% vs. 4% subjects, p = 0.009), Day 28 (67% vs. 26%, p = 0.005) and post-treatment at Day 60 (85% vs. 7%, p < 0.001) and Day 90 (68% vs. 19%, p = 0.001).

The following figures show the collarette cure and mite eradication rates for each visit day:

Figures 20 and 21: Jupiter Trial Collarette Cure and Mite Eradication Rates

There were no serious adverse events reported and TP-03 was well tolerated. Any adverse events were not related to treatment and no subjects discontinued the trial due to adverse events.

Trials With Updated Protocol and Formulation Designed to Support Pivotal Trials

Io Phase 2a Trial

Io was a Phase 2a single-arm trial which evaluated the safety and efficacy of TP-03 for the treatment of Demodex blepharitis completed in 2020 in Mexico City, Mexico at a well-established site for ocular therapy trials. The design of the Io trial took into account feedback from the FDA, and accordingly we subsequently defined collarette cure rate as a more stringent standard of less than or equal to two collarettes on the eyelid. The definition of mite eradication, defined as zero mites per lash, remained consistent with that of the Mars and Jupiter trials. In the Io trial we also utilized for the first time in clinical trials the formulation of TP-03 which is expected to support our NDA submission for Demodex blepharitis. The Io trial design, as well as the formulation of TP-03 utilized, are consistent with the design and formulation to be utilized in our Saturn-1 Phase 2b/3 trial. The primary efficacy endpoint was the proportion of patients experiencing a cure based on collarette grade, or collarette cure, at Day 42. The secondary endpoint was the mite eradication rate at Day 42. A total of 18 subjects were enrolled in the trial, all of whom were crossed over from the vehicle control group of the Jupiter trial. In data described below, three subjects missed the Day 7 visit, one subject missed the Day 14 visit and one subject missed the Day 28 visit.

The proportion of subjects who exhibited a collarette cure was statistically significant for TP-03 compared to baseline by Day 14 with 29% of subjects (5 of 17 subjects, p < 0.05), at Day 28 with 71% of subjects (12 of 17 subjects, p < 0.05) and at Day 42 with 72% of subjects (13 of 18 subjects, p < 0.05).

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The proportion of subjects who exhibited mite eradication was statistically significant for TP-03 compared to baseline by Day 14 with 47% of subjects (8 of 17 subjects, p < 0.05), at Day 28 with 59% of subjects (10 of 17 subjects, p < 0.05) and at Day 42 with 78% of subjects (14 of 18 subjects, p < 0.05).

The following figures present the collarette cure and mite eradication rates for each visit day:

Figures 22 and 23: Io Trial Collarette Cure and Mite Eradication Rates

All 18 subjects completed the trial through Day 42 of dosing. There were no serious adverse events reported and TP-03 was well tolerated. No subjects discontinued the trial due to adverse events. The most common adverse event included mild transient burning after administration for less than 10 seconds.

The following table provides a summary of treatment emergent adverse events for the trial:

Figure 24: Summary of Treatment Emergent Adverse Events

Europa Phase 2b Trial

Europa was a Phase 2b randomized, controlled, double-blind trial, which evaluated the safety and efficacy of TP-03 for the treatment of Demodex blepharitis completed in 2020 in Mexico City, Mexico at a well-established site for ocular therapy trials. Like the Io trial, the Europa trial was designed with the same protocols and formulation as will be utilized in our Saturn-1 Phase 2b/3 trial. Subjects were treated with either TP-03 or with a vehicle control BID for 42 days. A total of 54 subjects were enrolled in the trial with 34 subjects completing the trial through Day 42.

The primary efficacy endpoint was the proportion of patients experiencing a cure based on collarette grade of two or fewer collarettes on the eyelid, or collarette cure, as compared to the vehicle control, at Day 42. Secondary efficacy endpoints included (1) mite eradication compared to vehicle control (defined as zero mites per lash) at Day 42, and (2) a composite cure rate of collarette cure and zero lid erythema (redness) compared to vehicle control. Subjects were also asked to rate the comfort of the trial eye drop at Day 42.

The proportion of subjects who exhibited a collarette cure was statistically significant for TP-03 compared to vehicle control at Day 28 (72% vs 11% subjects, p < 0.001) and Day 42 (80% vs. 16%, p < 0.001).

The proportion of subjects who exhibited a mite eradication was statistically significant for TP-03 compared to vehicle control at Day 28 (56% vs 11% subjects, p = 0.006) and Day 42 (73% vs. 21%, p = 0.003).

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The following figures show the collarette cure and mite eradication rates for each visit day:

Figures 25 and 26: Europa Trial Collarette Cure and Mite Eradication Rates

As provided in the figures below, the proportion of subjects who exhibited composite cure rate of zero lid erythema combined with collarette cure was statistically significant for TP-03 compared to vehicle control at Day 28 (67% vs 11% subjects, p < 0.001) and Day 42 (73% vs. 11%, p < 0.001).

The following figure shows data for each visit day:

Figure 27: Composite Cure Rate was Statistically Significant for TP-03 Compared to Vehicle Control

The figure below shows how subjects rated drop comfort at each visit in each of the active and vehicle control groups. The bars shows the percentage of patients who rated the drop as either “very comfortable,” “slightly comfortable” or “neither comfortable or uncomfortable” in both the active and vehicle control groups for each visit day. There was only one subject, in the vehicle group, that rated the drop as “very uncomfortable” and only at Days 14 and 28. All other subjects that did not rate the drop as “very comfortable”, “slightly comfortable” or “neither comfortable or uncomfortable” rated the drop as “slightly uncomfortable.” At Day 7, the drop was rated as “slightly uncomfortable” by 6/22 (27.3%) in the active group, 2/20 (10.0%) in the vehicle control group and 8/42 (19.0%) overall.

The following figure shows the drop comfort ratings at each visit day:

Figure 28: Comfort Ratings

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No subjects discontinued the trial due to an adverse event and TP-03 was well tolerated. All adverse events were mild in severity.

The following table provides a summary of treatment related or possibly related adverse events for the trial:

Figure 29: No Subjects Discontinued Europa Trial Due to Adverse Event

TP-03 Safety Profile From Phase 2 Clinical Trials

Our Phase 2 trial data indicates that TP-03 was well tolerated with no significant adverse events leading to treatment discontinuation across the four trials. A total of 82 subjects have received one or more doses of TP-03 and have had at least one follow-up visit; while 52 subjects received the vehicle control. Only nine subjects treated with TP-03 had treatment-related adverse events, versus one subject treated with the vehicle control. The most common treatment-related adverse events, or TRAEs, reported were burning after administration, which was reported in seven subjects (8.5%) receiving TP-03 versus one subject (1.9%) receiving the vehicle control. Other TRAEs reported for subjects treated with TP-03 were blurred vision in two subjects (2.4%), dysgeusia in one subject (1.2%), and instillation site erythema in one subject (1.2%); with no corresponding TRAEs reported in subjects treated with vehicle.

Adverse events deemed unrelated to treatment occurred in five subjects treated with TP-03, with diarrhea reported in two subjects (2.4%), hypertension reported in one subject (1.2%), cataract operation reported in one subject (1.2%), and pharyngotonsillitis reported in one subject (1.2%).

For subjects treated with the vehicle control, the six subjects reported adverse events unrelated to treatment, which consisted of diarrhea in three subjects (5.7%) and viral upper respiratory tract infection in three subjects (5.7%).

Furthermore, there was little or no change in mean corrected distance visual acuity across all four trials, and only one subject treated with TP-03 showed a worsening of 0.22 logMAR from baseline to Day 28 in the left eye. This subject did not return for their follow-up visit on Day 42. Intraocular pressure was recorded in the Mars, Jupiter and Europa trials, and there were only minor reported changes observed in both the active and the vehicle control. The most common clinically significant slit lamp examination finding was an increase from baseline in corneal staining. The increases in staining were typically transient, occurring at only a single visit, and, in the controlled trials, occurred more often in subjects treated with the vehicle control versus subjects treated with TP-03. The only other slit lamp examination finding was conjunctival hyperemia in one subject receiving TP-03 at Day 7 and one subject receiving the vehicle control at Day 14.

Disease Recurrence Following End of Treatment Course

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Subjects from the Mars and active arm of the Jupiter trials were followed for one year after enrollment. Combined interim data for recurrence of clinical grade Demodex blepharitis was defined as a collarette score of two or more, and mite density of one or more per lash. The data show a persistent treatment effect of TP-03 for six months or greater for collarette score, with meaningful recurrence of collarettes occurring after six months with the recurrence increasing considerably one year after treatment. Mites recurred more quickly than collarettes, consistent with collarettes being composed of mite byproducts. Subsequent to initial treatment, we believe that TP-03 may be utilized by patients and ECPs for intermittent re-treatment based on the disease recurrence observed.

Ongoing and Planned Pivotal Trials

Saturn-1 and Saturn-2 Trials

Saturn-1 is a randomized, controlled, double-blind Phase 2b/3 trial. In September 2020, commenced the trial to evaluate the safety and efficacy of TP-03 for the treatment of Demodex blepharitis in multiple centers in the United States. Target enrollment for the trial is at least 350 subjects, enrolled 1:1 between a BID dose of TP-03 and a vehicle control. Saturn-1 is designed for subjects to receive treatment for 42 days and be subsequently followed for safety under a separate protocol for one year. The primary efficacy endpoint is proportion of subjects with cure based on a collarette grade of zero (< 2) at Day 43. The two secondary endpoints are (1) proportion of subjects with Demodex eradication (zero mites per lash) at Day 43 and (2) proportion of subjects with a composite of collarette and erythema cure at Day 43 (collarette grade of zero combined with erythema score of zero). Top-line data for Saturn-1 is anticipated in 2021, subject to the impact of the ongoing COVID-19 pandemic.

Saturn-2 is designed to be a confirmatory Phase 3 trial that we plan to initiate promptly after completing enrollment in Saturn-1. It is a randomized, controlled, double-blind trial to evaluate the safety and efficacy of TP-03 for the treatment of Demodex blepharitis in multiple centers in the Unites States. Target enrollment for the trial is approximately 350 subjects, enrolled 1:1 between a BID dose TP-03 arm and a vehicle control. Saturn-2 is designed for subjects to be followed for 43 days and receive treatment for 42 days. The primary efficacy endpoint is proportion of subjects with cure based on a collarette grade of zero at Day 43. The two secondary endpoints are (1) proportion of subjects with Demodex eradication (zero mites per lash) at Day 43 and (2) proportion of subjects with a composite of collarette and erythema cure at Day 43 (collarette grade of zero combined with erythema score of zero). Enrollment of Saturn-2 is expected to begin in 2021, subject to the impact of the ongoing COVID-19 pandemic.

The protocol, including the subject inclusion and exclusion criteria and endpoints, and formulation are designed to be consistent with those of our Io and Europa Phase 2 trials. We have received a “no-objection” letter from the FDA regarding the trial design for Saturn-1 and Saturn-2 has a highly comparable design to that of Saturn-1. We expect that the data form the Saturn-1 and Saturn-2 trials will support our NDA filing for TP-03 in Demodex blepharitis. Prior to submitting an NDA, we plan to perform a clinical pharmacokinetic study for TP-03 to support our NDA submission for Demodex blepharitis, and the FDA is recommending we perform carcinogenicity testing as well as embryofetal development studies in a second species. While we have factored these recommendations into our timeline and expenses, any adverse results, or any additional or similar requirements or recommendations from the FDA could cause delay in obtaining regulatory approval and increased costs.

Development of TP-03 for Meibomian Gland Disease

Beyond Demodex blepharitis, we intend to explore the clinical potential for TP-03 in MGD, a chronic abnormality of the meibomian glands. MGD is commonly characterized in part by a widespread clogging of the meibomian glands that can result in tear film deficiency, and is one of the leading causes of dry eye disease. In the United States, MGD prevalence has been found to be approximately two-thirds of the estimated 34 million dry eye patient population. One species of Demodex mite, Demodex brevis, is known to infest the meibomian gland, and clinical signs of MGD have been shown to be correlated with Demodex brevis infestation. While dry eye is a multi-factorial disease, TP-03 is designed to relieve some of the key elements associated with MGD by virtue of causing the death of the Demodex brevis mites.

There are no FDA-approved therapeutics for MGD. MGD is currently treated with a variety of over-the-counter remedies such as tea tree oil, lid wipes and artificial tears, as well as off-label prescription products for dry eye. MGD is also treated with in-office device procedures for gland expression (de-clogging) by an ECP. Despite these existing treatments, there is still a significant and unmet need for an effective prescription therapeutic in MGD.

The following figures show a representation of Demodex mites infesting the meibomian gland:

Figure 30: Demodex Mites Infesting the Meibomian Gland

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Our Additional Product Candidates

TP-04 Topical Formulation for the Treatment of Rosacea

Rosacea

Rosacea is a chronic skin disease characterized by facial redness, inflammatory lesions, burning and stinging, which can flare up in response to certain triggers such as sun exposure or emotional stress. According to the U.S. National Rosacea Society, approximately 16 million people in the United States are affected by rosacea and a study estimates rosacea prevalence can represent up to 5.4% of the global population. There are two phenotypes for rosacea: patients who present with papulopustular rosacea, or PPR, and patients who do not (non-PPR), with approximately 55% of patients presenting with the PPR phenotype and 45% presenting with the non-PPR phenotype. According to primary research we conducted of dermatologists, of patients who are being treated with topicals for rosacea, an estimated 18% of overall rosacea patients are seeking treatments, with PPR patients generally more likely to seek treatment given the noticeable symptoms.

The cause of rosacea remains unclear but there is increasing evidence that Demodex mites play a role in the disease. Studies have found a correlation between Demodex infestation and rosacea, with a higher density of Demodex mites found in the skin of rosacea patients than in controls. A proposed theory suggests that the bacillus oleronius bacteria has a pathogenic role, contributing to skin inflammation and the signs and symptoms of rosacea; these bacteria are also known to be sensitive to the antibiotics typically prescribed to treat rosacea. Meanwhile, Demodex mites have been shown to carry bacillus oleronius in their digestive tracts, suggesting that Demodex may contribute to rosacea by being a transporter for the bacteria that causes the disease. Furthering that point, there is evidence to suggest that bacillus oleronius forms a symbiotic relationship with Demodex, and that both species must be present in order to cause the signs and symptoms of rosacea. Other bacteria such as staphylococcus epidermidis, also carried by Demodex mites, may play a role in the disease as well. In fact, Soolantra, the current standard of care for rosacea, has an anti-parasitic and Demodex targeting mechanism, suggesting that the clearance of Demodex plays a role in resolving the signs of symptoms of rosacea.

Current Treatment Options and Their Limitations

Rosacea is currently treated through topical anti-parasitic creams like ivermectin and other topicals including azelaic acid, and antibiotics like metronidazole, as well as other mechanisms such as alpha agonists. An estimated 50% of rosacea patients are on at least one prescription topical treatment. The current standard of care, Soolantra, is a branded anti-parasitic drug composed of 1% ivermectin cream, which targets Demodex mites but is only modestly effective, takes 8 to 12 weeks to show efficacy and is expensive at around approximately $500 wholesale acquisition cost, or WAC, for a 30-day supply.

Other treatments in development include Sol-Gel’s Epsolay, a topical cream containing 5% encapsulated benzoyl peroxide, and Foamix’s FMX103, a topical foam containing 1.5% minocycline, for the treatment of Subtype II rosacea,

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characterized by small, dome-shaped erythematous papules that resemble acne but are associated with burning and stinging sensations.

While current treatments address the symptoms of the disease by reducing redness and decreasing papules and pustules, for the majority of patients, complete clearance of these features is not currently achievable and there still exists an unmet medical need.

Our Approach, TP-04 Topical Formulation for Rosacea

To address this unmet need in the rosacea market, lotilaner is being developed as a topical dermatology product, TP-04, initially for the treatment of PPR. It is designed to be active after topical administration in skin with no systemic activity. Lotilaner’s mechanism of targeting and killing Demodex mites has been established through our preclinical study and clinical trials evaluating TP-03 in Demodex blepharitis, which is why we believe it may be effective in another Demodex driven condition. We believe we can improve upon existing treatments in the market, like Soolantra, with an API that is potentially more effective (longer half-life, more lipophilic, greater therapeutic window). We believe a longer half-life is expected to lead to a more durable and long-lasting treatment and that more lipophilicity is expected to provide better bioavailability in the sebum in the follicle and sebaceous glands where mites reside, thus increasing the opportunity to target and eradicate mites and a greater therapeutic window. We further believe there is potential for TP-04 to be evaluated in combination with topical anti-inflammatory agents or vasoconstrictors.

We have initiated the preclinical studies for TP-04. We intend to leverage systemic preclinical data from our TP-03 program (such as embryofetal development studies, genotoxicity studies and safety pharmacology studies, and augment with additional dermal preclinical studies such as in vitro skin permeation and penetration studies, dermal toxicology and dermal pharmacodynamics testing we intend to conduct) to identify a lead formulation that maximizes dermal levels of TP-04 and which we believe can compare favorably to Soolantra. We may need to address this approach with the FDA if we were to conduct a clinical trial in the United States and if the FDA rejected our use of data from these preclinical studies, it could cause delay in any trial we conduct in the United States for TP-04. We plan to evaluate whether TP-04 is safe and effective at treating the symptoms of PPR in a Phase 1/2 trial outside the United States, which is expected to begin enrollment in 2021. Prior to commencing clinical trials in the United States for TP-04, we will need to obtain an IND from the FDA.

TP-05 Oral Formulation for the Prophylactic Protection against Lyme Disease

Lyme Disease

Lyme disease is the most common vector-borne disease in the United States, caused by infection of Borrelia bacteria following bite by a tick vector, predominantly ticks of the Ixodes genus (namely Ixodes scapularis in the United States). Estimates of annual cases of Lyme disease in the United States range from approximately 300,000 to 400,000, with many cases being misdiagnosed or diagnosed late. According to 2018 data from the U.S. Centers for Disease Control, or CDC, in 2018, over 30 million people in the United States are at risk of contracting Lyme disease, with over 20 million of those people residing in states that have a “high incidence” of Lyme disease per the CDC; and the geographic footprint of Lyme disease carrying ticks is expanding. Lyme disease occurs most commonly in geographical areas where the Ixodes scapularis tick is prevalent, namely in the Northeast of the United States. Lyme disease also occurs in certain parts of Europe, typically resulting from a different Ixodes species vector.

The mechanism of Lyme disease infection is well understood. Borrelia bacteria colonizes the salivary glands of the ticks, and the infected saliva is transmitted to the human host when a tick attaches to a person for feeding. The probability of Borrelia transmission, and therefore the risk of Lyme disease, increases with the duration of the tick’s attachment. Borrelia is rarely transferred during the first or even second day of feeding but transfers quite efficiently during and after the third day of feeding. This window from the time of bite to the time of transmission offers an opportunity for intervention to prevent Lyme disease.

Lyme disease can be a serious condition that may affect multiple bodily systems and produce a broad range of symptoms. Early symptoms include a localized rash, fever and fatigue. More severe, sometimes chronic, symptoms may evolve as the infection spreads, including fever, muscle and joint pain, peripheral and central neurological deficits and lymphocytic meningitis. Lyme disease can be successfully treated with oral antibiotics when diagnosed sufficiently early, but chronic symptoms can commonly persist beyond antibiotic treatment.

Current Lyme Prophylaxis Options and Their Limitations

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Lyme disease is currently prevented through behavior modification – avoiding areas where ticks are prevalent, wearing clothing which minimizes tick exposure, using insect repellants, and physically removing ticks that have attached. With the exception of removing attached ticks, none of these approaches prevents the transmission of Borrelia post-bite.

Moreover, there are currently no FDA-approved therapeutics for the prevention of Lyme disease. A vaccine for Lyme disease, LYMERix, was developed and launched by SmithKline Beecham in 1999. Approximately 1.5 million doses of the vaccine were sold in 1999, but the product was quickly pulled from the market following negative press and class action litigation claiming a dangerous side effect profile. We are aware of a second vaccine currently under development by Valneva for Lyme disease, VLA-15.

There is significant unmet need for a safe, effective and easy to use prophylactic for at-risk individuals in Lyme disease.

Our Approach, TP-05 Oral Formulation for the Prophylactic Protection against Lyme Disease

Since Borrelia is usually transferred during the second or third day following a tick bite, our approach is to eradicate the tick before it can transmit the bacteria. To do this, we are developing TP-05 as an oral formulation of lotilaner. We are targeting 30 days of prophylactic protection against Lyme disease with a single oral dose of TP-05. Given that lotilaner was developed specifically, in part, to eradicate ticks with systemic administration to companion animals, the pharmacology of lotilaner in Lyme prophylaxis is well understood. Similar to its mechanism against Demodex, lotilaner is a potent non-competitive antagonist of tick GABA-Cl channels. Antagonism of these channels in ticks induces paralysis and eventual death. The high preference for insect and arachnid GABA-Cl channels over mammalian channels promotes the safety profile of the molecule. Extensive preclinical systemic toxicology and safety pharmacology studies have been performed by third parties to date and support advancing TP-05 into clinical development. Lotilaner has a long, approximate 30-day systemic half-life in dogs, which we believe could provide for a convenient monthly administration.

We have identified a lead formulation of TP-05 for Phase 1/2 trials. For TP-05 and its use in Lyme prophylaxis, we intend to leverage oral systemic preclinical data from our TP-03 program (embryofetal development studies and safety pharmacology studies) as well as third-party oral systemic preclinical studies, such as 28-day and 13-week rat toxicology studies, eight-month dog toxicology studies, and systemic genetoxicity studies. These preclinical studies use the same route of administration (oral) and cover the dose range intended for clinical studies, but whereas the preclinical studies used a gavage administration, we intend to administer TP-05 in humans via a tablet or capsule. TP-05 is a presentation of lotilaner, which is the same as the Elanco API but formulated into a tablet. We obtained rights to these studies through the All Human Uses Elanco Agreement and we are not currently planning to conduct any additional preclinical studies to support our Phase 1/2 clinical trial. We had a successful pre-IND meeting with the FDA in February 2021 and gained agreement on our proposed Phase1 study design. We plan to file an IND in the US in the second quarter of 2021 and, subject to FDA approval of the IND, we intend to initiate our Phase 1 trials to evaluate safety and pharmacokinetics of TP-05 from single ascending dose (SAD) and multiple ascending dose (MAD) studies in normal healthy volunteers.

Malaria

Malaria is one of the world’s highest unmet public health needs, with approximately 228 million cases and more than 400,000 deaths caused by malaria worldwide in 2018 alone. The disease is caused by several species of plasmodium, a parasite transmitted to humans by a mosquito vector. Symptoms and outcomes include fever, vomiting, fatigue, seizure, coma and death. The disease is widespread in tropical and subtropical regions near the equator, with sub-Saharan Africa, parts of Asia and parts of Latin America impacted the most. The majority of deaths occur in Africa.

There has been a massive years-long effort to combat malaria using a variety of techniques, including administration of multiple types of prophylactic and therapeutic drugs, insecticide spraying and mosquito nets. While worldwide rates of malaria have dropped over the last two decades, meaningful reduction in malaria rates has stalled since approximately 2015. It is widely hoped that new vector control and prophylactic modalities will play an important role in further reducing the burden of the disease.

Our Approach, TP-05 Oral Formulation, Long-acting Endectocide for Community Malaria Reduction

The malaria community, including, the World Health Organization, Medicines for Malaria Venture, Bill and Melinda Gates Foundation and others, has called for the development of a long-acting endectocide, or antiparasitic drug active against endoparasites such as plasmodium, for the control and reduction of malaria in endemic regions. An endectocide for malaria is a drug taken by a person that causes the death or incapacity of a mosquito before it can infect another person. Field studies and modeling have shown that reducing the lifespan of the mosquitos may significantly reduce malaria transmission. With mass drug administration, which is a common approach for other anti-malarial medications, a community could attain

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herd protection against spread of malaria using an endectocide. For instance, a modeling study on mosquito populations published in PNAS in 2018 (the "PNAS Study"), showed that mass administration of an isoxazoline endectocide could reduce community malaria rates by as much as 65% with administration to just 30% of a community’s population.

The pharmacology of isoxazoline endectocides in malaria control is well understood. Similar to its mechanism against Demodex and ticks, the isoxazoline endectocides are potent non-competitive antagonists of GABA-Cl channels in mosquitos. Furthermore, according to the PNAS Study, the isoxazoline endectocides showed significant ability to cause the death of various disease carrying mosquito vectors that were fed drug-supplemented human blood in a membrane feeding assay. Additional transmission modeling in the PNAS Study of these isoxazolines on malaria incidence, which assumed a 90-day efficacy period, translated to survival of less than 1% of mosquitos. We believe our treatment concept of the oral administration of TP-05 to a human population may likewise lead to the death of blood-fed insect vectors and a decline in disease transmission. This is based on the relatively long half-life of lotilaner, an isoxazoline endectocide, which has been demonstrated in preclinical studies. However, modeling studies may not be accurate representations of malaria transmission in human populations and the efficacy of lotilaner or TP-05 to cause the death of mosquitos and reduced transmission rates has not been tested in human populations.

For TP-05 and its use in malaria community reduction, we intend to leverage oral systemic preclinical data from our TP-03 program (embryofetal development studies and safety pharmacology studies), as well as third-party oral systemic preclinical studies, such as 28-day and 13-week rat toxicology studies, eight-month dog toxicology studies, and systemic genetoxicity studies. These preclinical studies use the same route of administration (oral) and cover the dose range intended for clinical studies, but whereas the preclinical studies used a gavage administration, we intend to administer TP-05 in humans via a tablet or capsule. We obtained rights to these studies through the All Human Uses Elanco Agreement and we will not conduct any additional preclinical studies to support our Phase 1/2 clinical trial. We intend to evaluate whether TP-05 is safe and effective at eradicating mosquitos in a planned Phase 1/2 trial, which may be conducted outside the United States.

Chemistry, Manufacturing and Controls

We do not currently own or operate and currently have no plans to establish facilities for manufacturing, storing, distributing or testing our product candidates. We rely and expect to continue to rely for the foreseeable future on CMOs to manufacture and supply our preclinical and clinical materials to be used during the development of our product candidates. We have assembled a team of employees and consultants to oversee our technical quality and CMOs.

The product candidate TP-03 is a presentation of lotilaner, the API, formulated into a topical eye drop formulation. Only one dose strength of TP-03 is currently being developed, 0.25% lotilaner solution. Since TP-03 is an anti-infective, only one strength, at the maximum level that be formulated (0.25%), is required to be evaluated clinically.

We believe that our supply of TP-03 is sufficient to complete Saturn-1, and that our supply of cGMP lotilaner is sufficient to complete Saturn-2. We believe that the existing capacity of our current API supplier will be sufficient to support commercial scale-up, validation and commercial launch activities if TP-03 is approved. Our current supplier currently manufactures cGMP lotilaner at multiple geographically distinct facilities.

Although we have relied on a single supplier for both non-clinical and clinical supply for lotilaner under cGMP protocols and a single CMO to manufacture TP-03 and to perform analytical testing services, it is our intent to identify and qualify additional manufacturers to provide lotilaner and drug product manufacturing and analytical testing services, if possible, prior to submission of our NDA for TP-03. The drug product manufacturing is a compounding and aseptic filling operation that we believe could be transferred to additional CMOs as necessary. We are evaluating a supplier for TP-04 topical formulation for rosacea and have identified a supplier for TP-05 oral formulation for Phase 1/2 trials for Lyme disease and malaria.

Our third-party service providers, our third-party supply chain providers, their facilities and the TP-03 used in our clinical trials or for commercial sale are required to be in compliance with the requirements of cGMP. The cGMP regulations govern manufacturing processes and procedures, including requirements relating to organization of personnel, buildings and facilities, equipment, control of components and packaging containers and closures, production and process controls, packaging and labeling controls, holding and distribution, laboratory controls, records and reports, and returned or salvaged products. Product candidates used in late-stage clinical trials must be manufactured in accordance with cGMP requirements and manufacturing specifications and processes must satisfy FDA or other authorities’ requirements before any product is approved and before we can manufacture commercial products. Our third-party manufacturers are also subject to periodic inspections of facilities by the FDA and other authorities, including procedures and operations used in the testing and manufacture of TP-03 to assess compliance with applicable regulations. Our failure, or the failure of our third-party providers and supply chain providers, to comply with such statutory and regulatory requirements could subject us to possible legal or regulatory action, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, suspension of production, warning letters, the seizure or recall of products, operating restrictions and criminal prosecutions.

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Any of these actions could have a material impact on clinical supplies of TP-03 or our other product candidates. Contract manufacturers at times encounter difficulties involving production yields, quality control and quality assurance, as well as shortages of qualified personnel.

Competition

The biotechnology and pharmaceutical industries are characterized by rapid technological advancement, significant competition and an emphasis on intellectual property. We face potential competition from many different sources, including major and specialty pharmaceutical and biotechnology companies, academic research institutions, governmental agencies and public and private research institutions. Any product candidates that we successfully develop and commercialize will compete with existing approaches and new therapies that may become available in the future. We believe that the key competitive factors affecting the success of any of our product candidates will include efficacy, combinability, safety profile, convenience, cost, level of promotional activity devoted to them and intellectual property protection.

While there are no currently available on-label prescription pharmaceutical treatments available for the treatment of blepharitis or Demodex blepharitis specifically, a number of other treatments are currently available for the treatment of blepharitis in the United States. Current treatments for blepharitis in the United States include over the counter and off-label remedies such as tea tree oil, lid wipes and artificial tears. We are aware of other companies developing prescription therapies for blepharitis, including Azura Ophthalmics, Aperta Biosciences, LLC, Eyevance Pharmaceuticals, Formosa Pharmaceuticals, Inc., Hovione Scientia, Nicox SA, Novaliq GmbH, Premark Pharma and Quorum Innovations. To our knowledge, Aperta Biosciences, LLC is the only company currently focused on Demodex blepharitis and Nicox SA and Premark Pharma are the only companies with blepharitis programs that have completed Phase 2 trials.

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

Sales and Marketing

In light of our stage of development, we have not yet established a commercial organization or distribution capabilities. If TP-03 receives marketing approval, we plan to commercialize TP-03 in the United States by developing our own sales organization targeting a subset of the approximately 25,000 prescribing ECPs in the United States. Throughout our commercialization efforts, we intend to educate ECPs on Demodex blepharitis and how to diagnose it with a simple slit lamp examination. Given the importance of increasing awareness and educating patients with blepharitis, we also anticipate deploying focused DTC marketing campaigns for TP-03. We expect to conduct most of the buildout of this organization following NDA submission and approval of TP-03, if obtained.

Outside the United States, we intend to further develop commercialization strategies for TP-03, which may include collaborations with other companies. On March 26, 2021, we executed an out-license agreement with LianBio Ophthalmology Limited, granting exclusive commercial rights of TP-03 for the treatment of Demodex blepharitis and MGD within The People’s Republic of China, Macau, Hong Kong, and Taiwan. We are contractually entitled to receive (i) an aggregate $25 million by June 30, 2021, (ii) regulatory and sales milestone receipts totaling $75 million and $100 million, respectively, (iii) tiered royalties in the low double-digits on the net sales of TP-03 within this greater China territory, and (iv) a minority interest in LianBio that vests upon the achievement of certain clinical and regulatory milestones.

Intellectual Property

We protect our intellectual property rights and proprietary technology with a combination of patent rights that we own or license in certain fields of use, trademark rights, confidentiality procedures and contractual provisions. We seek not only to protect our intellectual property rights and proprietary technology in select key global markets, but also to supplement our intellectual property portfolio with new filings and applications to enhance such protection and support commercialization of current and future product candidates. To that end, we continue to seek protection for our technological innovations and branding efforts by filing new patent and trademark applications when and where appropriate. In the normal course of business, we intend to pursue, when possible, composition, method of use, dosing and formulation patent protection, as well as manufacturing and drug development processes and technology.

The term of individual patents varies depending upon the date of filing of the patent application, the date of patent issuance, and the legal term of patents in the countries in which they are obtained. Generally, patents issued for applications

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filed in the United States are effective for 20 years from the earliest effective filing date. In addition, in certain instances, a patent term can be extended to restore a portion of the term effectively lost as a result of the FDA regulatory review period. The restoration period cannot be longer than five years and the total patent term, including the restoration period, must not exceed 14 years following FDA approval. The duration of patents outside of the United States varies in accordance with provisions of applicable local law, but typically is also 20 years from the earliest effective filing date.

Our patent portfolio includes a combination of issued patents and pending patent applications licensed from third parties, as well as those assigned solely to us based on our ongoing development activities. The patents and applications in our portfolio can be categorized as related to TP-03, TP-04, TP-05 or future pipeline product candidates and alternative technologies. Some of our issued patents and patent applications are exclusively licensed to us in therapeutic fields of use from Elanco. The patents and patent applications owned by or licensed to us worldwide include approximately 37 issued patents and approximately 25 pending patent applications.

We in-license certain of such patents and patent applications from Elanco. These patents and patent applications relate to lotilaner and are issued or pending in, for example, the United States, Australia, Brazil, Canada, Chile, China, several European territories, India, Japan, Mexico, New Zealand, the Russian Federation, and Taiwan. The licensed-in portfolio includes approximately 36 issued patents and approximately 4 pending patent applications; the issued patents and at least some of the pending patent applications include composition of matter claims. The estimated natural expiration date of the issued in-licensed patents is approximately 2029 with a potential extension until 2032.

Approximately 18 of our owned patents and pending patent applications include treatment and composition of matter claims which relate to our TP-03 product candidate with respect to our lead indication (e.g., isoxazoline parasiticides for the treatment of Demodex blepharitis), as well as other conditions. These pending patent applications include applications in the United States, Australia, Brazil, Canada, China, Europe, Hong Kong, Israel, India, Japan, South Korea, Mexico, New Zealand, the Russian Federation, South Africa, and the Patent Cooperation Treaty (PCT). We received an issuance on one of our owned pending patent applications with treatment claims, U.S. Pat. No. 10,835,517, on November 17, 2020. The estimated natural expiration date of this issued patent is 2038, and if additional patents issue on these pending applications of ours, the estimated natural expiration dates are between approximately 2038 and 2040.

While estimated expiration dates and descriptions of patents and patent applications are listed above, the actual protection afforded by a patent varies on a product-by-product basis, from country-to-country, and depends upon many factors, including the type of patent, the scope of its coverage, patent term adjustments, the availability of regulatory-related extensions, disclaimers, the availability of legal remedies in a particular country, and the validity and enforceability of the patent.

Our continuing research and development activities, technical expertise and contractual arrangements supplement our existing intellectual property protection and help us maintain our competitive position, and we rely on trade secrets to protect our proprietary information and technologies, especially where we do not believe patent protection is appropriate or obtainable, or where such patents would be difficult to enforce. In order to maintain such trade secrets and other proprietary information, we rely in part on confidentiality agreements with our employees, consultants, contractors, outside scientific collaborators and other advisors.

We also protect our brand through trademark rights. We are the registered owner of six U.S. pending trademark applications. In order to supplement the protection of our brand, we also own at least one registered internet domain name.

License Agreements

Eye and Derm Elanco Agreement

In January 2019, we entered into the Eye and Derm Elanco Agreement granting us an exclusive, worldwide, sublicensable license to certain intellectual property for the development, marketing, and commercialization of lotilaner for the treatment, palliation, prevention or cure of any eye or skin disease or condition in humans. We are obligated to use commercially reasonable efforts to develop and commercialize products comprising lotilaner and must achieve certain developmental milestones within specified achievement deadlines. If we fail to meet these obligations, Elanco has the right to terminate the Eye and Derm Elanco Agreement. We utilize the intellectual property licensed under the Eye and Derm Elanco Agreement in our TP-03 and TP-04 product candidates. We are permitted to have certain third parties manufacture lotilaner for us and, upon Elanco consent, additional third parties.

We made an upfront payment of $1.0 million to Elanco at contract execution, which we recorded within “research and development” expense within our statements of operations for the year ended December 31, 2019. In accordance with the terms of the Eye and Derm Elanco Agreement, we are obligated to make further payments to Elanco upon our achievement of various clinical milestones up to an aggregate maximum of $6.0 million and various sales milestones up to an aggregate

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maximum of $79.0 million. If we receive payments from sublicensees, we are obligated to pay Elanco a variable percentage beginning in the low double-digits of such proceeds and decreasing after certain milestones are met, except for sublicense revenue generated after achieving regulatory approval for the use of lotilaner to treat or cure any eye or skin disease or condition in humans. We owe Elanco tiered royalties during the royalty term in the mid-to-high single digits on our future net sales and those of our sublicensees. The royalty term for any licensed product in a given country commences on the date of first commercial sale of such licensed product and ends on the latest of (i) expiration of the last-to-expire of the licensed patents which has at least one valid claim, (ii) the expiration of regulatory exclusivity and (iii) ten years after the first commercial sale of such licensed product in such country. The Eye and Derm Elanco Agreement shall expire on a licensed product-by-licensed product and country-by-country basis upon the expiration of the applicable royalty term with respect to such licensed product in such country. The achievement deadlines for eye-related diligence milestones range between 18 months after contract execution to six years after contract execution. The achievement deadlines for dermatological diligence milestones range between 24 months after contract execution to nine years after contract execution.

Either party may terminate the Eye and Derm Elanco Agreement upon a material breach by the other party, solely in the country pertaining to such breach, that is not cured within 60 days after receiving written notice thereof. If we fail to comply with our development obligations under the Eye and Derm Elanco Agreement, and fail to remedy such failure or cure such breach within 60 days, Elanco will have the right to terminate the Eye and Derm Elanco Agreement. If we fail to meet any diligence milestones by the achievement deadlines set forth in the Eye and Derm Elanco Agreement for any reason other than those outside of our reasonable control, and such milestones remain unmet for 120 days after Elanco notifies us thereof, Elanco may terminate the Eye and Derm Elanco Agreement. If we fail to meet certain dermatological milestones by the achievement deadlines set forth in the Eye and Derm Elanco Agreement for any reasons other than those outside of our reasonable control, and such milestones remain unmet for 120 days after Elanco notifies us thereof, Elanco may limit our field of use under the Eye and Derm Elanco Agreement to the treatment, palliation, prevention or cure of eye diseases or conditions in humans only. If Elanco terminates the Eye and Derm Elanco Agreement for our failure to achieve a development milestone by the specified achievement deadline, then we must grant Elanco a non-exclusive, sublicensable, royalty free license to our patents and know-how relating to lotilaner to develop, manufacture and commercialize lotilaner and any licensed products for the treatment, palliation, prevention or cure of any eye or skin disease or condition in humans. Elanco may also terminate the Eye and Derm Elanco Agreement if we, our affiliates or sublicensees initiate proceedings to oppose Elanco’s licensed patents and such proceeding is not withdrawn within 30 days of Elanco providing notice to us; provided that Elanco may not terminate the Eye and Derm Elanco Agreement for a challenge by a sublicensee if we terminate the sublicense with such sublicensee within such 30 day period.

Under the terms of the Eye and Derm Elanco Agreement, we grant to Elanco a worldwide, sublicensable, royalty-free, perpetual license to our patents related to lotilaner and the licensed products and to our know-how to research, develop, make and commercialize lotilaner and the licensed products for all applications in non-human animals, agricultural application, seed treatment applications and urban pest applications related to structural, turf, lawns and gardens. We also grant Elanco an exclusive royalty-free, perpetual license to any intellectual property we conceive from our use of lotilaner applications in non-human animals, agricultural applications, seed treatment applications and urban pest applications related to structural, turf, lawns and gardens.

Elanco retains the sole responsibility to prosecute the patents they license to us and has the first right to enforce the licensed intellectual property against third parties in the licensed field of use but cannot settle or dispose of any such action without our written consent.

All Human Uses Elanco Agreement

In September 2020, we entered into the All Human Uses Elanco Agreement granting us an exclusive, worldwide, sublicensable license to certain intellectual property for the development, marketing, and commercialization of lotilaner for all applications in humans other than the treatment, palliation, prevention or cure of any eye or skin disease or condition. We are obligated to use commercially reasonable efforts to develop and commercialize products comprising lotilaner and must achieve certain developmental milestones within specified achievement deadlines. If we fail to meet these obligations, Elanco has the right to terminate the All Human Uses Elanco Agreement. We utilize the intellectual property licensed under the All Human Uses Elanco Agreement in our TP-05 product candidates. We are permitted to have certain third parties manufacture lotilaner for us and, upon Elanco consent, additional third parties.

Pursuant to the terms of the All Human Uses Elanco Agreement, we issued 1,652,346 shares of our common stock to Elanco, which we recorded within “research and development” expense within our statements of operations for the year ended December 31, 2020. We are also obligated to issue Elanco an additional 187,500 shares of our common stock in the second quarter of 2021 to maintain the All Human Uses Elanco Agreement. In accordance with the terms of this agreement, we are obligated to make further payments to Elanco upon our achievement of various clinical milestones up to an aggregate maximum of $4.5 million and various sales milestones up to an aggregate maximum of $77.0 million. We may owe further

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sales milestone payments to Elanco for sales in certain countries. If we receive payments from sublicensees, we are obligated to pay Elanco a variable percentage beginning in the low double-digits of such proceeds and decreasing after certain milestones are met, except for sublicense revenue generated after achieving regulatory approval for the use of lotilaner to applications in humans other than to treat or cure any eye or skin disease or condition. We owe Elanco tiered royalties during the royalty term in the mid-to-high single digits on our future net sales and those of our sublicensees. The royalty term for any licensed product in a given country commences on the date of first commercial sale of such licensed product and ends on the latest of (a) expiration of the last-to-expire of the licensed patents which has at least one valid claim, (b) the expiration of regulatory exclusivity, and (c) ten years after the first commercial sale of such licensed product in such country. The All Human Uses Elanco Agreement shall expire on a licensed product-by-licensed product and country-by-country basis upon the expiration of the applicable royalty term with respect to such licensed product in such country. The achievement deadlines for diligence milestones range between 24 months after contract execution to six years after contract execution.

Either party may terminate the All Human Uses Elanco Agreement upon a material breach by the other party, solely in the country pertaining to such breach, that is not cured within 60 days after receiving written notice from the other party. If we fail to comply with our development obligations under the All Human Uses Elanco Agreement, and fail to remedy such failure or cure such breach within 60 days, Elanco will have the right to terminate the All Human Uses Elanco Agreement. If we fail to meet any diligence milestones by the achievement deadlines set forth in the All Human Uses Elanco Agreement for any reason other than those outside of our reasonable control, and such milestones remain unmet for 120 days after Elanco notifies us of the failure to meet such diligence milestone, Elanco may terminate the All Human Uses Elanco Agreement. If Elanco terminates the All Human Uses Elanco Agreement for our failure to achieve a development milestone by the specified achievement deadline, then we must grant Elanco a non-exclusive, sublicensable, royalty free license to our patents and know-how relating to lotilaner to develop, manufacture and commercialize lotilaner and any licensed products for all applications in humans other than the treatment, palliation, prevention or cure of any eye or skin disease or condition. Elanco may also terminate the All Human Uses Elanco Agreement if we, our affiliates or sublicensees initiate proceedings to oppose Elanco’s licensed patents and such proceeding is not withdrawn within 30 days of Elanco providing notice to us; provided that Elanco may not terminate the All Human Uses Elanco Agreement for a challenge by a sublicensee if we terminate the sublicense with such sublicensee within such 30 day period.

Under the terms of the All Human Uses Elanco Agreement, we grant to Elanco a non-exclusive worldwide, sublicensable, royalty-free, perpetual license to our patents related to lotilaner and the licensed products and to our know-how to research, develop, make and commercialize lotilaner and the licensed products for all applications in non-human animals, agricultural applications, seed treatment applications and urban pest applications related to structural, turf, lawns and gardens. We also grant to Elanco an exclusive, royalty-free, perpetual license to any intellectual property we conceive from our use of lotilaner for all applications in non-human animals, agricultural applications, seed treatment applications and urban pest applications related to structural, turf, lawns and gardens.

LianBio Agreement

On March 26, 2021, we entered into a development and license agreement (the “LianBio Agreement”) with LianBio, pursuant to which, among other things, we licensed the product rights for the development and commercialization of TP-03 (lotilaner ophthalmic solution, 0.25%) in the People’s Republic of China, Hong Kong, Macau, and Taiwan (the “Territory”) for the treatment of Demodex blepharitis and Meibomian Gland Disease.

Under the terms of the LianBio Agreement, we are entitled to an upfront payment of $15.0 million within fifteen (15) days of signing with an additional unconditional payment of $10.0 million within 45 days of signing. We will be eligible to receive development and commercialization milestone payments of up to $75.0 million and $100.0 million, respectively, as well as tiered mid-to-high-teen royalties on the sale of TP-03 in the Territory. We also received a warrant to purchase ordinary shares of LianBio, which will vest upon the achievement of certain development and commercialization milestones. The warrant will be exercisable at the fair market value at the time of issuance. The term of the LianBio Agreement will expire upon the expiration of the royalty term in the Territory, unless earlier terminated. LianBio may also terminate the LianBio Agreement for any reason upon ninety (90) days’ prior notice to us. The foregoing summary of the LianBio Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the LianBio Agreement, which will be filed as an exhibit to our Quarterly Report on form 10-Q for the quarter ended March 31, 2021.

Government Regulation

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Government authorities in the United States at the federal, state and local level and in other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of drug products such as those we are developing. Generally, before a new drug can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific for each regulatory authority, submitted for review and approved by the regulatory authority. We will be required to navigate the various preclinical, clinical and commercial approval requirements of the governing regulatory agencies of the countries in which we wish to conduct studies or trials or seek approval of our product candidates. The processes for obtaining regulatory approvals in the United States and other countries, as appropriate, along with subsequent compliance with appropriate federal, state, local and foreign statutes and regulations, require the expenditure of substantial time and resources.

United States Drug Regulation

In the United States, we are subject to extensive regulation by the FDA, which regulates drugs under the Federal Food, Drug, and Cosmetic Act (the "FDCA"), and its implementing regulations. FDA approval is required before any new unapproved drug or dosage form, including a new use of a previously approved drug, can be marketed in the United States. Drugs also are subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. or foreign requirements at any time during the product development process, approval process or post-marketing may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’ refusal to approve pending NDAs, withdrawal of an approval, imposition of a clinical hold, issuance of warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on our business, market acceptance of our products, and our reputation.

Our product candidates are considered small molecule drugs and must be approved by the FDA through the NDA process before they may be legally marketed in the United States. The process generally involves the following:

• submission to the FDA of an NDA;

• payment of user fees for FDA review of the NDA;

The data required to support an NDA are generated in two distinct developmental stages: preclinical and clinical. The preclinical and clinical testing and approval process can take many years and the actual time required to obtain approval, if any, may vary substantially based upon the type, complexity and novelty of the product or condition being treated.

Preclinical Studies and IND Submission

Before testing any drug product candidate in humans, the product candidate must undergo rigorous preclinical testing. The preclinical developmental stage generally involves laboratory evaluations of drug chemistry, formulation and

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stability, as well as in vitro and animal studies to assess the potential for adverse events and in some cases to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations for certain safety/toxicology studies. An IND is a request for authorization from the FDA to administer an investigational product to humans, and must become effective before human clinical trials may begin in the United States.

An IND sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical studies, among other things, to the FDA as part of an IND. Some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may continue after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA and clinical trials may proceed under such IND at such time, unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials and places the trial on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence. A separate submission to an existing IND must also be made for each successive clinical trial conducted during product development along with any subsequent changes to the investigational plan.

Clinical Trials

The clinical stage of development involves the administration of the investigational product to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s control, in accordance with GCP requirements, which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria and the parameters to be used to monitor subject safety and assess efficacy. Each protocol, and any subsequent amendments to the protocol, must be submitted to the FDA as part of the IND. Furthermore, each clinical trial must be reviewed and approved by an IRB for each institution at which the clinical trial will be conducted to ensure that the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical trial subject or his or her legal representative, and must monitor the clinical trial until completed. There also are requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries, including the website maintained by the U.S. National Institutes of Health, ClinicalTrials.gov.

A sponsor who wishes to conduct a clinical trial outside of the United States may, but need not, obtain FDA authorization to conduct the clinical trial under an IND. If a foreign clinical trial is not conducted under an IND, the sponsor may still submit data from the clinical trial to the FDA in support of an NDA. The FDA may agree to accept a well-designed and well-conducted foreign clinical trial not conducted under an IND if the trial was conducted in accordance with GCP requirements and the FDA is able to validate the data through an onsite inspection, if deemed necessary, and the practice of medicine in the foreign country is consistent with the United States.

Clinical trials in the United States generally are conducted in three sequential phases, known as Phase 1, Phase 2 and Phase 3. Although the phases are usually conducted sequentially, they may overlap or be combined.

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Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA.

Progress reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA and written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the drug, findings from animal or in vitro testing that suggest a significant risk for human subjects and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol.

Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds,including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.

NDA Review and Marketing Approval

Following completion of clinical trials, data are analyzed to assess whether the investigational product is safe and effective for the proposed indicated use or uses. The results of preclinical studies and clinical trials are then submitted to the FDA as part of an NDA, along with proposed labeling, chemistry and manufacturing information, and other information in a request for approval to market the drug for one or more specified indications. The application must include both negative and ambiguous results of preclinical studies and clinical trials, as well as positive findings. Data may come from company-sponsored clinical trials intended to test the safety and efficacy of a product’s use or from a number of alternative sources, including studies initiated by investigators. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the investigational product to the satisfaction of FDA. FDA approval of an NDA must be obtained before a drug may be marketed in the United States.

Under the Prescription Drug User Fee Act, or "PDUFA", as amended, each NDA must be accompanied by an application user fee. FDA adjusts the PDUFA user fees on an annual basis. PDUFA also imposes an annual program fee for each marketed human drug. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a qualifying small business. Additionally, no user fees are assessed on NDAs for products designated as orphan drugs, unless the product NDA also includes a non-orphan indication.

The FDA reviews all submitted NDAs before it accepts them for filing to determine if they are sufficiently complete to permit a substantive review, and the FDA may request additional information rather than accepting the NDA for filing. The FDA must make a decision on accepting an NDA for filing within 60 days of receipt. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA. Under PDUFA, the FDA has agreed to certain performance goals in the review of NDAs through a two-tiered classification system, standard review and priority review. According to PDUFA performance goals, the FDA endeavors to review applications subject to standard review within ten months, whereas the FDA’s goal is to review priority review applications within six months, depending on whether the drug is a new molecular entity. The FDA does not always meet its PDUFA goal dates for standard and priority NDAs, and the review process is often extended by FDA requests for additional information or clarification.

The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting them for filing, to determine whether they are sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA reviews an NDA to determine, among other things, whether the drug is safe and effective and whether the facility in which it is manufactured, processed, packaged or held meets standards designed to assure the product’s continued safety, quality and purity.

In addition, under the Pediatric Research Equity Act of 2003 as amended and reauthorized, certain NDAs or supplements to an NDA must contain data that are adequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements.

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Before approving an NDA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether they comply with cGMP requirements. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. The FDA also may audit data from clinical trials to ensure compliance with GCP requirements.

The FDA generally accepts data from foreign clinical trials in support of an NDA if the trials were conducted under an IND. If a foreign clinical trial is not conducted under an IND, the FDA nevertheless may accept the data in support of an NDA if the study was conducted in accordance with GCP requirements and the FDA is able to validate the data through an on-site inspection, if deemed necessary. Although the FDA generally requests that marketing applications be supported by some data from domestic clinical studies, the FDA may accept foreign data as the sole basis for marketing approval if (1) the foreign data are applicable to the U.S. population and U.S. medical practice, (2) the studies were performed by clinical investigators with recognized competence, and (3) the data may be considered valid without the need for an on-site inspection or, if the FDA considers the inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means.

Additionally, the FDA may refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions, if any. The FDA is not bound by recommendations of an advisory committee, but it considers such recommendations when making decisions on approval. The FDA also closely analyzes the clinical trial data, which could result in extensive discussions between the FDA and the applicant during the review process.

After the FDA evaluates an NDA, it will issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications and potentially subject to other requirements. A Complete Response Letter indicates that the review cycle of the application is complete and the application will not be approved in its present form. A Complete Response Letter usually describes all of the specific deficiencies in the NDA identified by the FDA. The Complete Response Letter may require additional clinical data, including the potential requirement to conduct additional pivotal Phase 3 clinical trial(s) and/or other significant and time-consuming requirements related to clinical trials, or to conduct additional preclinical studies or manufacturing changes. If a Complete Response Letter is issued, the applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may decide that the NDA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data.

Post-Approval Requirements

Following approval of a new product, the product is subject to continuing regulation by the FDA, including, among other things, requirements relating to facility registration and drug listing monitoring and record keeping, periodic reporting, product sampling and distribution, advertising and promotion, and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual user fee requirements for any marketed products and the establishments at which such products are manufactured, as well as new application fees for supplemental applications with clinical data. The FDA strictly regulates marketing, labeling, advertising and promotion of drugs, including after they are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label.

Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not market or promote such uses. Prescription drug promotional materials must be submitted to the FDA in conjunction with their first use or first publication.

The FDA may also place other conditions on approvals including the requirement for REMS, to assure the safe use of the product. If the FDA concludes that a REMS is needed, the NDA sponsor must submit a proposed REMS. The FDA will not approve the FDA without an approved REMS, if required. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of products. Product approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following initial marketing.

FDA regulations require that products be manufactured in specific approved facilities and in accordance with cGMP regulations. We rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of our products in accordance with cGMP regulations. These manufacturers must comply with cGMP regulations that require, among other things, quality control and quality assurance, the maintenance of records and documentation, and the

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obligation to investigate and correct any deviations from cGMP. Manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP requirements and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance. The discovery of violative conditions, including failure to conform to cGMP regulations, could result in enforcement actions, and the discovery of problems with a product after approval may result in restrictions on a product, its manufacturer or the NDA holder, including recalls.

The FDA may withdraw approval of a product if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Corrective action could delay drug distribution and require significant time and financial expenditures. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical studies to assess new safety risks or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:

• fines, warning letters, or holds on post-approval clinical trials;

• suspension or revocation of product approvals;

• injunctions or the imposition of civil or criminal penalties.

Other Regulatory Matters

Pharmaceutical companies are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which they conduct their business. Manufacturing, sales, promotion and other activities following product approval are subject to regulation by numerous regulatory authorities in the United States in addition to the FDA, including CMS, other divisions of the Department of Health and Human Services, the Department of Justice, the Drug Enforcement Administration, the Consumer Product Safety Commission, the Federal Trade Commission, the Occupational Safety & Health Administration, the Environmental Protection Agency, and state and local governments. For example, in the United States, sales, marketing and scientific and educational programs also must comply with state and federal fraud and abuse laws, false claims laws, transparency laws, government price reporting, and health information privacy and security laws. These laws include the following:

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Additionally, California recently enacted legislation that has been dubbed the first “GDPR-like” law in the United States. CCPA creates new individual privacy rights for consumers (as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households. The CCPA went into effect on January 1, 2020 and requires covered companies to provide new disclosures to California consumers, provide such consumers new ways to opt-out of certain sales of personal information, and allow for a new cause of action for data breaches. The CCPA could impact our business activities depending on how it is interpreted and exemplifies the vulnerability of our business to not only cyber threats but also the evolving regulatory environment related to personal data and protected health information.

Products must meet applicable child-resistant packaging requirements under the U.S. Poison Prevention Packaging Act. Manufacturing, sales, promotion and other activities also are potentially subject to federal and state consumer protection and unfair competition laws.

The distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage and security requirements intended to prevent the unauthorized sale of pharmaceutical products.

We may also be subject to 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, as well as state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, marketing expenditures or drug pricing. In addition, we may be subject to state and local laws that require the registration of pharmaceutical sales representatives.

The failure to comply with any of these laws or regulatory requirements subjects firms to possible legal or regulatory action. Depending on the circumstances, failure to meet applicable regulatory requirements can result in significant civil, criminal and administrative penalties, including damages, fines, disgorgement, individual imprisonment, exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, compliance oversight and reporting obligations, contractual damages, reputational harm, diminished profits and future earnings, injunctions, requests for recall, seizure of products, total or partial suspension of production, denial or withdrawal of product approvals or refusal to allow a firm to enter into supply contracts, including government contracts.

Equivalent, and similarly detailed, obligations will apply to the conduct of clinical trials in third countries including the EU.

United States Patent-Term Restoration and Marketing Exclusivity

Depending upon the timing, duration and specifics of FDA approval of any future product candidates, some of our U.S. patents may be eligible for limited patent term extension under the Hatch-Waxman Act. The Hatch-Waxman Act permits restoration of the patent term of up to five years as compensation for patent term lost during product development and FDA regulatory review process. Patent-term restoration, however, cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent-term restoration period is generally one-half the time between the

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effective date of an IND or the issue date of the patent, whichever is later, and the submission date of an NDA plus the time between the submission date of an NDA or the issue date of the patent, whichever is later, and the approval of that application, except that the review period is reduced by any time during which the applicant failed to exercise due diligence. Only one patent applicable to an approved drug is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we may apply for restoration of patent term for our currently owned or licensed patents to add patent life beyond its current expiration date, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant NDA.

TARS US Equity

TARS · 10-K · period ended 2020-12-31

Item 1. Business

TARS US Equity☆

TARS · 10-K · period ended 2020-12-31

Item 1. Business

TARS US Equity