vyne-20211231

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2021

FOR THE TRANSITION PERIOD FROM ___ TO ___.

Commission File Number 001-38356

VYNE THERAPEUTICS INC.

(Exact name of registrant as specified in its charter)

520 U.S. Highway 22, Suite 204

Bridgewater, New Jersey08807

(Address of principal executive offices, including zip code)

(800) 775-7936

(Registrant’s telephone number, including area code)

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

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

Common Stock, par value $0.0001 VYNE The Nasdaq Stock Market LLC

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐No☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 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 ☐

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 and post 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 Exchange Act Rule 12b-2).

Yes ☐ No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates was $155.4 million, computed by reference to the last sales price reported by the Nasdaq Global Select Market as of June 30, 2021. 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 2, 2022, there were 56,165,599 shares of the registrant's Common Stock, par value $0.0001 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

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VYNE THERAPEUTICS INC.

FORM 10-K

TABLE OF CONTENTS

Page No.

PART I

ITEM 1. Business 7

ITEM 1A. Risk Factors 26

ITEM 1B. Unresolved Staff Comments 58

ITEM 2. Properties 58

ITEM 3. Legal Proceedings 58

ITEM 4. Mine Safety Disclosures 58

PART II

ITEM 6. [Reserved] 59

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 71

ITEM 8. Financial Statements and Supplementary Data 71

ITEM 9A. Controls and Procedures 72

ITEM 9B. Other Information 72

ITEM 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections 72

PART III

ITEM 10. Directors, Executive Officers and Corporate Governance 73

ITEM 11. Executive Compensation 78

ITEM 14. Principal Accountant Fees and Services 87

PART IV

ITEM 15. Exhibits and Financial Statement Schedules 89

Signatures 92

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SUMMARY OF THE MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS

Our business is subject to numerous risks and uncertainties that you should be aware of in evaluating our business. These risks include, but are not limited to, the following:

•Our business is dependent on the successful development of FMX114 and our BET inhibitor product candidates;

•We will need substantial additional funding to fund our operations, and there is substantial doubt about our ability to continue as a going concern. We could also be forced to delay, reduce or terminate our research and development activities which would have a material adverse effect on our financial condition;

•Risks and uncertainties related to the development of new chemical entities;

•We may encounter delays in enrolling patients and successfully completing clinical trials for our product candidates, and may even be prevented from commencing such trials due to factors that are largely beyond our control;

•Clinical drug development is very expensive, time-consuming and uncertain. Our clinical trials may fail to adequately demonstrate the safety and efficacy of our current or any future product candidates, which could prevent or delay regulatory approval and commercialization;

•We may be unable to develop a lead molecule for the VYN202 program and exercise our option to license the applicable BET inhibitor compounds from In4Derm;

•Our clinical trials may fail to demonstrate the safety and efficacy of our drug candidates, or serious adverse or unacceptable side effects may be identified during the development of our drug candidates, which could result in the abandonment or limitation of the development of our drug candidates or prevent or delay our ability to pursue strategic alternatives for our drug candidates;

•Results obtained in non-clinical studies and completed clinical trials may not predict success in later clinical trials;

•Topline and preliminary data from our clinical trials that we announce or publish from time to time may change as additional data become available and are subject to audit and verification procedures that could result in material changes in the final data;

•We have a limited history as a clinical-stage biopharmaceutical company developing drug candidates for immuno-inflammatory conditions, which may make it difficult to assess our future viability;

•We may spend our limited resources to pursue a particular drug candidate or indication and fail to capitalize on drug candidates or indications that may be more profitable or for which there is a greater likelihood of success;

•We are subject to various risks and uncertainties arising out of the completed divestiture of our commercial business;

•We have not obtained regulatory approvals to market our other pipeline product candidates, and we may be delayed in obtaining or fail to obtain such regulatory approvals and to commercialize these product candidates;

•Our failure to successfully in-license, acquire, develop and market additional product candidates or approved products could impair our ability to grow our business and execute our strategy;

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•We intend to in-license and acquire product candidates or engage in other strategic transactions, which could impact our liquidity, increase our expenses and present significant distractions to our management;

•We may decide not to continue developing any of our product candidates at any time during development or of any of our products after approval, which would reduce or eliminate our potential return on investment for those product candidates or products;

•Our business has been adversely impacted and could continue to be adversely affected by the evolving and ongoing COVID-19 global pandemic in regions where we or third parties on which we rely have manufacturing facilities, clinical trial sites or other business operations. The COVID-19 pandemic could adversely affect our operations, including at ourclinical trial sites, as well as the business or operations of our manufacturers, contract research organizations or other third parties with whom we conduct business;

•We are subject to various U.S. federal, state, local and foreign health care fraud and abuse laws, including anti-kickback, self-referral, false claims and fraud laws, health information privacy and security, and transparency laws, and any violations by us of such laws could result in substantial penalties or other consequences including criminal sanctions, civil penalties, contractual damages, reputational harm, and diminished profits and future earnings. Additionally, any challenge to or investigation into our practices under these laws could cause adverse publicity and be costly to respond to, and thus could harm our business;

•Legislative or regulatory healthcare reforms in the United States may make it more difficult and costly for us to obtain regulatory clearance or approval of our product candidates and to produce, market, and distribute our products after clearance or approval is obtained; and

•The trading price of the shares of our common stock is volatile, and stockholders could incur substantial losses.

The summary risk factors described above should be read together with the text of the full risk factors, in the section entitled “Risk Factors” in Part I, Item 1.A. and the other information set forth in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes, as well as in other documents that we file with the SEC. The risks summarized above or described in full later in this report are not the only risks that we face. Additional risks and uncertainties not precisely known to us, or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, results of operations and future growth prospects.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 21E the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical facts contained in this Annual Report on Form 10-K are statements that could be deemed forward-looking statements reflecting the current beliefs and expectations of management with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These statements are often identified by the use of words such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would,” “until,” “if” and similar expressions or variations.

These forward-looking statements include, but are not limited to, statements regarding the following matters:

•our ability to successfully execute our business strategy, including our ability to successfully develop our bromodomain and extra-terminal domain ("BET") inhibitor platform for immuno-inflammatory conditions;

•our pursuit of, and ability to successfully identify and execute, strategic transactions;

•our ability to select a lead candidate and exercise our option with respect to an oral BET inhibitor under the terms of the Evaluation and Option Agreement with In4Derm Limited;

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•our ability to raise substantial additional financing to fund our operations and continue as a going concern;

•our ability to enroll patients and successfully complete, and receive favorable results in, clinical trials for our product candidates;

•estimates of our expenses, capital requirements, our needs for additional financing and our ability to obtain additional capital on acceptable terms or at all;

•the timing of commencement of future preclinical studies and clinical trials;

•the potential market size of treatments for any diseases and market adoption of our products, if approved or cleared for commercial use, by physicians and patients;

• risks and uncertainties arising out of the completed divestiture of our commercial business;

•disruptions related to COVID-19 on our ability to initiate and retain patients in our clinical trials and progress preclinical studies and the ability of our suppliers to manufacture and provide materials for our product candidates;

•our ability to create and or license in intellectual property and the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and programs, including the projected terms of patent protection;

•the regulatory approval process for our product candidates, including any delay or failure in obtaining requisite approvals;

•developments and projections relating to our competitors and the markets in which we compete, including competing drugs and therapies, particularly if we are unable to receive exclusivity;

•our ability to comply with various regulations applicable to our business, including continued listing rules imposed by Nasdaq;

•our ability to successfully challenge intellectual property claimed by others;

•our intentions and our ability to establish collaborations or obtain additional funding;

•our ability to attract and retain key scientific or management personnel;

•our defense of any future litigation that may be initiated against us;

•our expectations regarding licensing, business transactions and strategic operations; and

•our future financial performance and liquidity.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Annual Report on Form 10-K. Forward-looking statements involve known and unknown risks, uncertainties and other factors that 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. We discuss these risks in greater detail in the section entitled “Risk Factors” in Part I, Item IA and elsewhere in this Annual Report on Form 10-K as well as our other filings made with the SEC. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Annual Report on Form 10-K. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

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PART I

ITEM 1 - BUSINESS

Overview

We are a biopharmaceutical company focused on developing proprietary, innovative and differentiated therapies for the treatment of immuno-inflammatory conditions. Our most advanced product candidate, FMX114, which is in Phase 2a, is being evaluated for the potential treatment of mild-to-moderate atopic dermatitis (“AD”). We are also in the preclinical stages of developing products containing Bromodomain and Extra-Terminal Domain (or “BET”) inhibitor compounds. Our initial BET inhibitor candidate in development is VYN201, a locally administered pan-BET inhibitor, which we are exploring in various immuno-inflammatory diseases, including skin diseases. In addition, we continue to explore opportunistic transactions that may enhance our pipeline portfolio, as well as support our current operations and fund our future growth.

In 2020, we commercially launched two dermatology products, AMZEEQ (minocycline) topical foam, 4%, and ZILXI (minocycline) topical foam, 1.5%, that we developed in-house using our proprietary molecule stabilizing technology (MST) platform and clinical development capabilities. Following a review of our business in the first half of 2021, including the revenues we had received from these commercial products, the market environment for specialty pharmaceutical companies and the potential for biopharmaceutical companies with novel immuno-inflammatory pipelines, we determined to divest our commercial dermatology business and refocus our strategic efforts and resources toward advancing our pipeline and development platform for products to treat immuno-inflammatory conditions. See "—Divestiture of Minocycline Business" and“Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Company Overview” for further discussion regarding the sale of our MST franchise, including AMZEEQ, ZILXI, and FCD105, to Journey Medical Corporation.

Immuno-Inflammatory Disease

Our therapies are being evaluated for their potential to target inflammatory/autoimmune disease (which we refer to “immuno-inflammatory diseases”). These immune system disorders are caused by the immune system having too much activation or too little inhibition. There are dozens of known types of immuno-inflammatory diseases, many of which are severely debilitating and/or life threatening. Our therapeutic goal in immuno-inflammatory disease is to deliver a potent anti-inflammatory response while minimizing systemic side effects.

Our most advanced product candidate, FMX114, is being evaluated for the potential treatment of mild-to-moderate AD. AD is a chronic immune-mediated disease that is characterized by the appearance of dry, red, and itchy skin. FMX114 is being developed to address both the source and cause of inflammation in AD by developing a distinct combination gel formulation of tofacitinib, a Janus kinase inhibitor (“JAK”), aimed at reducing inflammation by inhibiting cytokine release from inflammatory cells, and fingolimod, a Sphingosine 1-phosphate receptor modulator, which approaches the reduction of inflammation by inhibiting migration of inflammatory cells, and in addition may also directly support skin barrier recovery. See “—Our Portfolio of Product Candidates—FMX114 for Mild-to-Moderate Atopic Dermatitis” for additional information regarding our FMX114 program.

In addition, in August 2021, we entered into a transaction with In4Derm Limited ("In4Derm") providing us with exclusive worldwide rights to research, develop and commercialize products containing BET inhibitors for the treatment of any disease, disorder or condition in humans. Through our access to this library of new chemical BET inhibitor compounds (our “InhiBETTM platform”), we plan to develop BET inhibitor product candidates in various modes of administration and for a diverse set of indications. Based on preclinical data generated to date, we believe therapeutics generated by our InhiBETTM

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platform have the potential to provide patient benefit in a broad range of immune system disorders. Accordingly, we have chosen to focus our initial efforts for this platform on select therapeutic areas with unmet medical needs in immuno-inflammatory disease.

BET proteins play a key role in regulating gene transcription via epigenetic interactions (“reading”), and recent research has determined a key role for these BET proteins in regulating B cell and T cell activation and subsequent inflammatory processes. As epigenetic readers, BET proteins regulate the recruitment of transcriptional factors that are key to the production of several pro-inflammatory cytokines. Inhibiting BET proteins blocks cytokine transcription and therefore may have significant therapeutic potential across a wide variety of immuno-inflammatory/fibrotic and myeloproliferative neoplastic disorders.

Our initial BET inhibitor candidate in development is VYN201, which was developed using the InhiBETTM platform and is a locally administered pan-bromodomain, or pan-BD, BET inhibitor. It is a first-in-class “soft” pan-BD BET inhibitor that is designed to address diseases involving multiple, diverse inflammatory cell signaling pathways. Through our license with In4Derm, we are developing VYN201 for local administration for various immuno-inflammatory diseases, including skin diseases. Based on preclinical data to date, we believe VYN201 has the potential to deliver a potent, localized anti-inflammatory effectto the affected area and be rapidly cleared through the body’s metabolic process.

As part of our partnership with In4Derm, we also have an exclusive option to license In4Derm’s highly selective bromodomain 2 BET inhibitors for oral administration. We believe bromodomain 2 selective oral BET inhibitors may present as more conveniently-administered non-biologic treatment options for both acute control and chronic management of immuno-inflammatory indications, where the damaging effects of unrestricted inflammatory signaling activity is common.

Our Strategy

We intend to execute on our strategy, including the following:

Develop our combination product candidate, FMX114. FMX114 is our proprietary investigational combination gel formulation of tofacitinib and fingolimod and is being developed to address both the source and cause of inflammation in AD. We believe FMX114 has the potential to be the first topical combination product for the treatment of AD and is the first topical product in clinical development that utilizes the sphingosine 1-phosphate receptor modulation mode of action. We expect to receive topline results from our Phase 2a study evaluating the safety and efficacy of FMX114 for mild-to-moderate AD in the second quarter of 2022.

Establish our InhiBETTM BET inhibitor platform as a proprietary product development vehicle. By leveraging our proven drug development and clinical development capabilities and strong network of discovery and preclinical science partners, we intend to discover and develop BET inhibitor product candidates in various modes of administration and for a diverse set of indications. Our goal is to capitalize on these strengths and establish InhiBETTM as a proprietary product development vehicle.

Maximize the value of our pipeline and platform via potential partnering activities. We believe our pipeline is unique and has broad utility. For example, based on our preclinical efforts to date, we believe VYN201 has the potential to be developed for a variety of immuno-inflammatory indications and multiple modes of administration. We intend to continue to leverage our existing pipeline and platform to actively explore and evaluate potential value-creating partnering opportunities.

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Expand our product candidate portfolio and pipeline through in‐licensing or acquisitions of additional product candidates or technologies. In addition to developing product candidates organically within our organization, we may in‐license or acquire product candidates from third parties by leveraging our business development capabilities. With a goal of building a well‐balanced and diversified portfolio, we assess a variety of factors for potential product candidates and technologies. Our criteria for possible acquisition or in-licensing opportunities includes rationale for addressing the disease, likelihood of regulatory approval, commercial viability, intellectual property protection, prospects for favorable pricing and reimbursement and competition. We intend to continue to be opportunistic in our business development activities to achieve our long-term strategic goals.

Our Portfolio of Product Candidates

FMX114 for Mild-to-Moderate Atopic Dermatitis

Overview

In March 2021, we announced development plans for FMX114 for the potential treatment of mild-to-moderate AD. FMX114 is a fixed combination of tofacitinib and fingolimod. Tofacitnib reduces inflammation intracellularly by inhibiting cytokine release from inflammatory cells. Fingolimod reduces inflammation by inhibiting migration of inflammatory cells and may directly support upregulation of filaggrin. By combining tofacitinib and fingolimod in a topical gel formulation, FMX114 attempts to address both the source and cause of inflammation in AD and support skin barrier recovery.

Preclinical Data

FMX114 was evaluated in a well-known preclinical model in which dorsal depilated BALB-C mice were dosed with 100μl topical dinitrochlorobenzene ("DNCB") solution to induce a type 2 inflammatory response in the skin with AD-like pathology. There was a 32-day induction phase followed by seven days of both DNCB and investigational drug concomitant treatment. Two doses of FMX114 (0.6% tofacitinib + 0.01% fingolimod and 0.3% tofacitinib + 0.02% fingolimod) were compared with tofacitinib monotherapy, fingolimod monotherapy, triamcinolone (steroid) 0.1%, and DNCB control. Key findings from the study include the following:

•Treatment with FMX114 0.6% tofacitinib + 0.01% fingolimod combination gel resulted in an 89% reduction in the modified atopic dermatitis index score (mADI) relative to the DNCB control group at day 7.

•Both FMX114 doses had comparable efficacy to triamcinolone 0.1% cream, a product widely used in the treatment of AD.

•Animal body weight was also evaluated to help determine tolerance to treatment. At day 7:

◦In both FMX114 treatment groups, the animals experienced body weight gains comparable to DNCB negative control and vehicle-treated healthy control animal groups.

◦Animals treated with triamcinolone 0.1% cream lost approximately 21% of their body weight compared to the animals treated with FMX114.

Phase 1b /2a Study

In October 2021, we enrolled the first patient in our Phase 1b/2a clinical trial evaluating FMX114 for the treatment of mild-to-moderate AD. After considering the Food and Drug Administration's (the "FDA") recent review of the oral JAK inhibitor class for the treatment of several systemic autoimmune diseases, we believe it was important to characterize the preliminary safety and pharmacokinetic profile of FMX114 before advancing to the Phase 2a portion of the study. On January 19, 2022, we announced the Phase 1b data showing that systemic bioavailability of tofacitinib and fingolimod in topical formulation was substantially lower when compared to their oral equivalents. Specifically, the mean plasma Cmax of tofacitinib calculated on treatment day 1 and day 14 were approximately 50-fold and 1500-fold lower, respectively, when compared to the equivalent data for the lowest commercially available adult oral dose of tofacitinib (XELJANZ 5mg BD) and the pharmacokinetics of fingolimod and active metabolite, fingolimod 1-phosphate, could not be determined as all whole blood concentrations were below the assay LLOQ (0.08ng/ml for both analytes).

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We expect to receive topline results from our Phase 2a study evaluating the safety and efficacy of FMX114 for mild-to-moderate AD in the second quarter of 2022.

Market Opportunity

AD is a skin disorder that causes long-term inflammation of the skin, resulting in itchy, red, swollen and cracked skin. Onset can occur at any age, but is more common in infants and children. Of the approximately 30 million people diagnosed with AD in the United States, approximately 19 million are characterized as mild-to-moderate disease severity. In 2019, 7.1 million patients used prescription medication to treat AD, with topical glucocorticosteroids accounting for 8 of the 10 highest prescribed topical products for AD. We believe FMX114, if approved, can provide an attractive treatment option for physicians and patients by demonstrating efficacy that is comparable to that of a glucocorticosteroid with an improved safety profile.

InhiBETTM BET Inhibitor Platform

As a result of our partnership with In4Derm, we have exclusive worldwide rights to research, develop and commercialize products containing certain BET inhibitor compounds for the treatment of any disease, disorder or condition in humans. See "—Development and License Agreements—In4Derm License Agreements." Utilizing our InhiBETTM platform and through our preclinical activities, we are evaluating the impact that BET inhibitor compounds have on regulating pro-inflammatory cytokines. Based on this evaluation, we are targeting indications whose pathogenesis is linked to the proliferation of these specific cytokines, and we are developing formulations designed to maximize the anti-inflammatory effect of the drug while minimizing any potential safety concerns. Through our InhiBETTM product development platform, we believe we can demonstrate the potential utility of these BET inhibitor compounds and develop therapies for a variety of immuno-inflammatory conditions.

VYN201 - Locally Administered Pan-BD BET Inhibitor

Our initial BET inhibitor candidate in development is VYN201. VYN201 was developed using the InhiBETTM platform and is a locally administered pan-BD BET inhibitor. It is a first-in-class “soft” pan-BD BET inhibitor that is being developed to address diseases involving multiple, diverse inflammatory cell signaling pathways. Our goal with the VYN201 program is to develop a therapy that delivers a potent, localized anti-inflammatory effect and is rapidly cleared through the body’s metabolic process so as to avoid systemic absorption.

To date, we have conducted several preclinical models which have demonstrated VYN201's anti-fibrotic activity and the ability to significantly reduce the expression of certain cytokines relevant to certain autoimmune diseases. Based on such data, we believe VYN201 has the potential to be highly versatile by serving as a locally acting therapy with low systemic exposure. We are continuing to evaluate VYN201 in a variety of preclinical models and will announce an initial indication for VYN201 following such evaluation.

The following summarizes preclinical data received to date for the VYN201 program:

Th17 Inflammation Model

In October 2021, we announced preclinical data showing that VYN201 significantly reduced the expression of several key pro-inflammatory cytokines relevant to Th17-mediated autoimmune diseases in an animal model and an ex vivo human tissue study. The pathogenesis of many autoimmune diseases is linked to the proliferation and activity of Th17 cells.

VYN201 was evaluated in a well-established preclinical model in which dorsal depilated mice were topically dosed with imiquimod cream to induce a Th17 inflammation pathology over a 7-day induction phase. A further 7-day treatment phase evaluated three doses of VYN201 (0.001%, 0.01% and 0.1% concentrations) compared to a class 1 super-potent glucocorticosteroid product positive control (clobetasol propionate 0.05% cream) and vehicle control. Further, an imiquimod-naive control group (healthy control group) was included for VYN201 vehicle treatment. Key findings from the study include:

•A dose-dependent improvement in the signs and symptoms of inflammation was observed for VYN201 treatment groups.

◦Treatment with VYN201 0.1% resulted in a 94% reduction in the composite inflammation severity score of erythema and scaling, relative to the vehicle control group at treatment day 7.

◦Animals treated with VYN201 0.1% experienced a reduction in inflammation comparable to those treated with the class 1 super-potent glucocorticosteroid clobetasol propionate 0.05% cream.

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◦Corresponding dose-dependent reductions were observed across all treatment groups in Th17-relevant cytokine biomarkers of inflammation, including IL-1β, IL-17, IL-6, IL-36 and TNFα for VYN201-treated animals.

•Treatment with VYN201 at all concentrations appeared well-tolerated based on the following observations:

◦Animals treated with VYN201 continued to gain body weight in a similar manner to the healthy control group, whereas animals treated with clobetasol propionate cream 0.05% had a mean body weight loss of approximately 17% compared to the animals treated with VYN201 0.1%.

◦Animals treated with VYN201 had no evidence of dermal tolerance issues, consistent with the healthy control group, whereas animals treated with clobetasol propionate 0.05% cream had significant skin atrophy as evidenced by deep wrinkling and rhytides (fine wrinkles), marked dermal translucency and loss of elasticity.

Fibrotic Tissue Model

In November 2021, we announced preclinical data showing that VYN201 demonstrated improvements in reducing fibrotic tissue mass and overall skin repair outcomes with no negative impact on healing time. In the preclinical study, duplicate identical skin incisions were induced on the flanks of hairless mice under anesthesia. The animals were topically dosed once daily with either 100mg VYN201 vehicle, VYN201 1%, or a hydroalcoholic gel (a negative control known to delay healing) until each lesion had completely healed. Key findings from the study include:

•As early as treatment day 5, and consistent with the vehicle control, animals treated with VYN201 1% had a statistically significant decrease (improvement) in global external lesion severity score, a comprehensive evaluation of length, width, swelling and visibility of lesions, compared to those treated with hydroalcoholic gel.

•Consistent with the vehicle control, lesions treated with VYN201 1% completely healed (mean time to heal: 15.5 days) approximately 5 days earlier compared to those treated with hydroalcoholic gel (mean time to heal: 21 days).

•Animals treated with VYN201 1% had a significantly lower global internal lesion severity score than those treated with VYN201 vehicle or hydroalcoholic gel, indicative of an improved internal lesion outcome and a positive effect on reducing the formation of fibrotic tissue mass in the lesion bed.

•By the end of treatment, healed lesions treated with VYN201 1% appeared less visually distinct and more macular in nature with an improved overall aesthetic outcome compared to the other treatments.

•VYN201 vehicle and VYN201 1% appeared to be well-tolerated both within the lesion sites, based on the absence of irritation, and in general throughout the treatment period.

Vitiligo Model

In March 2022, we announced positive preclinical data in an ex vivo skin model of vitiligo. In the preclinical model, VYN201 reduced the expression of key pro-inflammatory biomarkers relevant to the pathogenesis of vitiligo, and demonstrated marked reduction in melanocyte loss. The objectives of this study were to evaluate the potential of VYN201 to (i) reduce Matrix Metalloproteinase-9 (“MMP-9”) secretion (reducing the secretion of MMP-9 allows for melanocyte stabilization and limits loss of melanocytes/depigmentation in vitiligo); (ii) reduce soluble adhesion molecule, E-cadherin (soluble E-cadherin is a biomarker of melanocyte loss due to degradation of matrix-bound E-cadherin by MMP-92); (iii) minimize the loss of melanocytes by assessing melanin pigment content and (iv) affect the expression of genes commonly associated with melanogenesis (melanin synthesis, melanosome maturation and transport). Key findings from the study include:

•VYN201 produced a dose dependent reduction in MMP-9 and soluble E-cadherin:

◦Applications with VYN201 at each of the 0.1% and 1% concentrations resulted in statistically significant reductions in MMP-9 when compared to vehicle, with a 94.7% reduction in secreted MMP-9 for the VYN201 1% treatment (p<0.0001).

◦Applications with VYN201 at each of the 0.1% and 1% concentrations resulted in statistically significant reductions in the release of soluble E-cadherin relative to vehicle, with a 32.6% reduction in soluble E-cadherin for the VYN201 1% concentration (p<0.01).

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◦VYN201 0.1% and 1% were both numerically superior to topical ruxolitinib cream, 1.5% in reducing the secretion of MMP-9 and soluble E-cadherin.

•VYN201 at each of the 0.1% and 1% concentrations substantially reduced the loss of melanin pigment in the basal layers of skin:

◦Quantified melanin levels for VYN201 1% treated skin cultures were approximately 10-fold higher as compared to VYN201 vehicle treated skin cultures (p=0.03).

•VYN201 positively impacted the expression of several genes implicated in the pathogenesis of vitiligo:

◦VYN201 0.1% and 1% resulted in a statistically significant reduction in the expression of inflammatory cytokines IL1-α and IL1-β relative to vehicle (VYN201 1%, p<0.0005). These cytokines are well recognized as significant contributors to inflammation in vitiligo and their over-expression correlates with disease progression.

◦VYN201 significantly upregulated the WNT signaling pathway at the 0.1% and 1% concentrations relative to vehicle, with a 10-fold increase observed at the 1% concentration (p<0.01). The WNT family of proteins and its signaling pathway is recognized as an important indicator of melanocyte regeneration.

VYN202 - Selective BET Inhibitor

VYN202 is exploring multiple BET inhibitor compounds that are highly selective for bromodomain 2 ("BD2"). By selectively inhibiting BD2, we believe VYN202 could have a more targeted anti-inflammatory effect with an improved benefit/risk profile. We are diligently working with In4Derm to develop a lead molecule for the VYN202 program. Once a lead candidate has been selected, we intend to exercise our option with respect to these BET inhibitor compounds and commence an IND-enabling preclinical safety program. See "—Development and License Agreements—In4Derm License Agreements."

Divestiture of Minocycline Business

On January 12, 2022, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Journey Medical Corporation (“Journey”) pursuant to which we divested our Molecule Stabilizing Technology ("MST") franchise, including AMZEEQ, ZILXI, and FCD105, to Journey (the “Sale”). Journey acquired, among other things, the intellectual property related to the MST assets, inventory as of closing, and our rights and obligations under the license agreement with respect to the greater China territory. In addition, Journey agreed to assume certain liabilities, including, among others, those arising from ourpatent infringement suit initiated against Padagis Israel Pharmaceuticals Ltd. The Sale was consummated concurrently with the execution of the Purchase Agreement.

Pursuant to the Purchase Agreement, we received an upfront payment of $20.0 million and we are entitled to an additional $5.0 million on the one-year anniversary of the closing of the transaction. We are also eligible to receive sales milestone payments of up to $450.0 million in the aggregate upon the achievement of specified levels of net sales on a product-by-product basis, beginning with annual net sales exceeding $100,000,000 (with products covered in three categories (1) AMZEEQ (and certain modifications), (2) ZILXI (and certain modifications), and (3) FCD105 and other products covered by the patents being transferred, including certain modifications). In addition, we are entitled to receive certain payments from any licensing or sublicensing of the assets by Journey outside of the United States.

The Purchase Agreement includes customary representations and warranties, as well as indemnification rights for breaches of representations, warranties, and covenants, as well as certain other matters, subject to customary deductibles, caps, and other limitations.

Manufacturing

We currently contract with third party manufacturers for all of our required raw materials, active ingredients and finished products for our preclinical research and clinical trials for our product candidates. We currently have no plans to establish our own manufacturing capabilities and plan to continue to rely on third-party manufacturers for any future trials of our product candidates.

We, together with our contract manufacturing organizations, or CMOs, have developed the validation processes, methods, tests and/or controls suitable for the manufacturing of our product candidates and for defining their properties. Development stage

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quantities of any products that we develop need to be manufactured in facilities, and by processes, that comply with the requirements of the FDA and the regulatory agencies of other jurisdictions in which we may seek approval. We require all of our CMOs to comply with these requirements and currently employ internal and external resources to manage our manufacturing contractors. The relevant manufacturers of our product candidates for our current preclinical and clinical trials have advised us that they are compliant with both the FDA’s Good Laboratory Practices, or GLP, and cGMP.

Development and License Agreements

In4Derm License Agreements

On April 30, 2021, we entered into an Evaluation and Option Agreement (the “Option Agreement”) with In4Derm. In4Derm is a spin-out of the University of Dundee’s School of Life Sciences and has discovered and is developing proprietary BET inhibitors for the treatment of immunology and oncology conditions. Pursuant to the Option Agreement, In4Derm granted us an exclusive option to obtain certain exclusive worldwide rights to research, develop and commercialize products containing In4Derm’s BET inhibitor compounds for the treatment of any disease, disorder or condition in humans. Pursuant to the Option Agreement, we agreed to use commercially reasonable efforts to stabilize, develop and manufacture a product with a pan-BD BET inhibitor as its active ingredient and In4Derm agreed to provide a mutually agreed data package and select an NCE development candidate from its highly selective BET inhibitor compounds (the "Oral BETi Compounds"). The Company paid a $1.0 million non-refundable cash payment to In4Derm upon execution of the Option Agreement, 50% of which was to be used by In4Derm in the development of the Oral BETi Compounds.

Locally Administered Pan-BD BET Inhibitor Program (VYN201)

On August 6, 2021, we exercised our option with respect to the VYN201 program and, on August 9, 2021, the parties entered into a License Agreement (the “License Agreement”) granting VYNE a worldwide, exclusive license that is sublicensable through multiple tiers to exploit certain of In4Derm’s pan-BD BET inhibitor compounds. We have the sole responsibility for development, regulatory, marketing and commercialization activities to be conducted for the licensed products at our sole cost and discretion. We are required to use commercially reasonable efforts to develop and, if approved, commercialize such products. Pursuant to the License Agreement, a joint development committee consisting of one representative from each party reviews the progress of the development plan for the licensed products. Pursuant to the License Agreement, we may develop a product that contains or incorporates a specific BET inhibitor, whether alone or in combination with other active ingredients, in any form, formulation, presentation, or dosage, and for any mode of administration.

We made a $0.5 million cash payment to In4Derm in connection with entering into the License Agreement. Pursuant to the License Agreement, we have agreed to make cash payments of up to an aggregate of $15.75 million upon the achievement of specified clinical development and regulatory approval milestones with respect to each licensed product in the U.S. In4Derm is entitled to additional milestones upon the achievement of regulatory approvals in certain jurisdictions outside the U.S. In addition, with respect to any products we commercialize under the License Agreement, we will pay tiered royalties to In4Derm on net sales of such licensed products by us, our affiliates, or sublicensees, of 5%, 7.5% and 10% based on tiered annual net sales bands subject to specified reductions. We are obligated to pay royalties until the later of (1) the tenth anniversary of the first commercial sale of the relevant licensed product, (2) the expiration of the last valid claim of the licensed patent rights covering such licensed product in such country and (3) the expiration of regulatory exclusivity for the relevant licensed product in the relevant country, on a licensed product-by-licensed product and country-by-country basis.

Selective BET Inhibitor Program (VYN202)

Under the terms of the Option Agreement, we can exercise our option with respect to the Oral BETi Compounds at any time until it expires upon the earlier of (i) 14 days following the delivery of an agreed data package and selection of a lead NCE candidate by In4Derm and (ii) June 30, 2022. We expect to exercise our option following the selection of a lead candidate for the program. Upon exercise of the option, the parties will sign a license agreement (the “Oral License Agreement”) and we will pay In4Derm a $4.0 million cash payment. The Oral License Agreement will include cash payments payable to In4Derm of up to an aggregate of $43.75 million upon the achievement of specified clinical development and regulatory approval milestones with respect to each licensed oral product in the U.S. In4Derm is entitled to additional milestones upon the achievement of regulatory approvals in certain jurisdictions outside the U.S. In addition, with respect to any products we commercialize under the Oral License Agreement, we will pay tiered royalties to In4Derm on net sales of such licensed products by us, our affiliates, or sublicensees, of 5%, 7.5% and 10% based on tiered annual net sales bands subject to specified reductions.

LEO Pharma A/S for Finacea® Foam

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In September 2015, Bayer HealthCare AG, or Bayer, began selling in the United States a product branded Finacea® Foam, based on our legacy foam technology. Finacea is a prescription topical drug which was developed through a collaboration between Foamix and Bayer. Bayer sold the product to LEO Pharma A/S ("LEO") in 2018. Pursuant to our license agreement with LEO for Finacea, we are entitled to receive royalties on net sales of Finacea. In 2021, we received (or became entitled to receive) a total of $0.9 million in royalties from sales of Finacea from LEO.

Additional Research and Development

For the fiscal years ended December 31, 2021 and 2020, our research and development expenses totaled $25.0 million and $43.5 million, respectively. In the ordinary course of business, we enter into agreements with third parties such as contract research organizations, or CROs, medical institutions, clinical investigators and contract laboratories, to conduct our clinical trials and aspects of our research and preclinical testing. These CROs and other third parties provide us with project management, monitoring, regulatory consulting and investigative services, and their fees are part of our research and development expenses.

Intellectual Property

Our intellectual property and proprietary technology are essential to the development of our pipeline product candidates. We are committed to protecting our intellectual property rights, core technologies and other know-how, through a combination of patents, trademarks, domain names, trade dress, trade secrets, copyrights, non-disclosure and confidentiality agreements, common interest agreements to protect privileged confidential information, licenses, assignments of invention and other contractual arrangements with our employees, scientific advisors, consultants, partners, suppliers, customers and others. Such agreements and rights may however be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets and other proprietary and confidential information may otherwise become known or be independently discovered by competitors. To the extent that our employees, scientific advisors, consultants, partners or other contractors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

Our success will also depend at least in part on not infringing the proprietary rights of third parties. While we are diligent in our efforts to investigate proprietary rights of third parties, no search is completely exhaustive. For example, a relevant patent or published application could escape detection because of unusual terminology or use of terminology that is still evolving in developing technological fields. Also, databases used in the searches may not be entirely complete. It is uncertain whether the issuance of any third party patent would require us to alter our development strategies, alter our processes, obtain licenses or cease certain activities. Our breach of any license agreements or failure to obtain a license to proprietary rights that we may require to develop our current and future drugs may have a material adverse impact on us. If third parties prepare and file patent applications in the United States that also claim technology to which we have rights, we may have to participate in interference or other proceedings in the United States Patent and Trademark Office, or USPTO, to determine priority of invention. We may also have to participate in court proceedings or arbitration to defend and assert our rights. See "Item 1A. Risk Factors—Risks Related to Our Intellectual Property."

We have various pending patent applications related to our FMX114 and VYN201 product candidates. We have PCT applications in relation to FMX114. Our patent portfolio in relation to our BETi programs includes pending compound and composition patent applications in various jurisdictions worldwide, owned or licensed by us. Subject to filing a non-provisional, the PCT's being filed nationally, and the pending patent applications being granted and payments of the appropriate maintenance fees, the patent applications related to FMX114 will expire in 2040 and 2041 and the patent applications in relation to VYN201 will expire in 2040 and 2042.

In addition, in connection with our legacy business, we have various granted patents worldwide owned or licensed by us related to pharmaceutical compositions and their uses, including various foam-based platforms, various gel-based platforms, and other technology.

Patents extend for varying periods according to the date of patent filing or grant and the legal term of patents in various countries where patent protection is obtained. The actual protection afforded by a patent, which can vary from country to country, depends on the type of patent, the scope of its coverage and the availability of legal remedies in the country. In most countries in which we file, the patent term is 20 years from the earliest date of filing a non-provisional patent application. In the United States, a patent term may be shortened if a patent is terminally disclaimed over another patent or as a result of delays in patent prosecution by the patentee, and a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the USPTO in granting a patent or by patent term extension, which compensates a patentee for delays at the FDA. The patent term of a European patent is 20 years from its filing date; however, unlike in the United States, the European patent does not grant patent term adjustments. The European Union does have a compensation

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program similar to patent term extension called supplementary patent certificate that would effectively extend patent protection for up to five years.

Competition

Our drug development activities face, and will continue to face, intense competition from organizations such as pharmaceutical and biotechnology companies, as well as academic and research institutions and government agencies. Our drug development activities also face, and may continue to face, governmental actions designed to promote generic drug competition and lower prices. Any product candidate that we successfully develop and commercialize will compete with existing treatments, including those that may have achieved broad market acceptance, and any new treatment that may become available in the future.

Many of the companies against which we are competing, or against which we may compete in the future, have significantly greater financial resources and expertise in research and development, manufacturing, and preclinical and clinical development 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 subject registration for clinical trials, as well as in acquiring technologies complementary to, or that may be necessary for, our development programs.

With respect to FMX114 as a potential treatment of mild-to-moderate AD, there are several different therapies in the AD market, including prescription products and OTC products. Our primary competitors for this program include topical therapies such as Eucrisa, marketed by Pfizer Inc.; Opzelura, marketed by Incyte Corporation; and generic and branded versions of low to mid-potency steroids such as hydrocortisone and betamethasone. In addition, there are several prescription product candidates under development that could potentially be used to treat AD, including but not limited to: topical tapinarof and topical cerdulatinib, both under development by Dermavant Sciences, Inc., topical delgocitinib, under development by LEO Pharma A/S and Japan Tobacco, Inc. (approved as Corectim in Japan), topical difamilast ointment, under development by Medimetriks/Otsuka Pharma, oral PF-04965842, under development by Pfizer Inc., and injectable lebrikizumab, under development by Eli Lilly and Company.

While we have not yet identified an initial indication for VYN201, there is intense competition for the treatment of immuno-inflammatory conditions, including indications we are currently evaluating. VYN201, if approved, will compete with existing treatments and new treatments that may become available in the future.

The commercial opportunity for our drug candidates, if approved, could be reduced or eliminated if our competitors develop and commercialize drugs that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any drug we may develop. Our competitors also may obtain FDA or other regulatory approval for their drug candidates more rapidly than us, which could result in our competitors establishing a strong market position before our drug candidates are able to enter the market.

Government Regulation

Our business is subject to extensive government regulation. Regulation by governmental authorities in the United States and other jurisdictions is a significant factor in our research and development activities.

Product approval process in the United States

Review and approval of drugs

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA and implementing regulations. In general, new drug products require the submission of a NDA and approval thereof by the FDA prior to being marketed in the United States. 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. requirements at any time during the product development process, approval process or after approval may subject an applicant to a variety of administrative or judicial sanctions and enforcement actions brought by the FDA, the Department of Justice or other governmental entities. Possible sanctions may include the FDA’s refusal to approve pending NDAs, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement and civil or criminal penalties.

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The process required by the FDA prior to marketing and distributing a new drug product in the United States generally involves the following:

•completion of laboratory tests, animal studies and formulation studies in compliance with the FDA’s Good Laboratory Practices, or GLP, or other applicable regulations;

•submission to the FDA of an application for an investigational new drug application, or IND, which must become effective before human clinical trials may begin;

•approval by an independent institutional review board, or IRB, at each clinical site before each trial may be initiated at that site;

•performance of adequate and well-controlled human clinical trials in accordance with Good Clinical Practice, or GCP, requirements to establish the safety and efficacy of the proposed drug for its intended use;

•preparation and submission to the FDA of a NDA or supplemental NDA;

•satisfactory completion of an FDA advisory committee review, if applicable;

•satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product or components thereof are produced, to assess compliance with current Good Manufacturing Good Practices, or cGMP, and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity;

•satisfactory completion of FDA audits of clinical trial sites and the sponsor’s clinical trial records to assure compliance with GCPs and the integrity of the clinical data;

•payment of user fees and FDA review and approval of the NDA; and

•compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy, or REMS, and the potential requirement to conduct post-approval studies.

Preclinical studies

Preclinical studies include laboratory evaluation, as well as animal studies to assess the potential safety and efficacy of the product candidate. Preclinical safety tests must be conducted in compliance with the FDA’s GLP regulations. The results of the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND which must become effective before clinical trials may be commenced.

Clinical trials in support of an NDA

Clinical trials involve the administration of an investigational product to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical trial. Clinical trials are conducted under written trial protocols detailing, among other things, the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. An IND becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to a proposed clinical trial 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.

In addition, an IRB representing each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct continuing review and reapprove the trial at least annually. The IRB must review and approve, among other things, the trial protocol and informed consent information to be provided to trial subjects. An IRB must operate in compliance with FDA regulations. Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health for public dissemination on their ClinicalTrials.gov website.

Clinical trials are typically conducted in three sequential phases, which, in some cases, may overlap or be combined:

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•Phase I:The drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness and to determine optimal dosage.

•Phase II: The drug is administered to a limited patient population to identify possible short-term adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.

•Phase III: The drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product.

Submission of a NDA to the FDA

The results of the preclinical studies and clinical trials, together with other detailed information, including information on the manufacture, control and composition of the product, are submitted to the FDA as part of a NDA requesting approval to market the product candidate for a proposed indication. Under the Prescription Drug User Fee Act, or PDUFA, as amended, applicants are required to pay fees to the FDA for reviewing an NDA. These user fees, as well as the annual fees required for commercial manufacturing establishments and for approved products, can be substantial. Each NDA submitted to the FDA for approval is reviewed for administrative completeness and reviewability within 60 days following submission of the application. If found complete, the FDA will “file” the NDA, thus triggering a full review of the application. The FDA may refuse to file any NDA that it deems incomplete or not properly reviewable at the time of submission.

Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA has agreed to certain performance goals in the review of NDAs. Most applications for standard review drug products are reviewed within ten to twelve months; most NDAs for priority review drugs are reviewed in six to eight months. The review process for both standard and priority review may be extended by FDA for three additional months to consider certain late-submitted information, or information intended to clarify information already provided in the submission. 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.

Before approving a NDA, the FDA may inspect the facilities at which the product is manufactured or facilities that are significantly involved in the product development and distribution process, and will not approve the product unless cGMP compliance is satisfactory at such facilities. The FDA may deny approval of a NDA if applicable statutory or regulatory criteria are not satisfied, or it may require additional testing or information, which can delay the approval process. FDA approval of any application may include many delays or may never be granted. If a product is approved, the approval will specify the indicated uses for which the product may be marketed in the United States pursuant to that NDA, may require that warning statements be included in the product labeling, may require that additional studies or trials be conducted following approval as a condition of the approval, may impose restrictions and conditions on product distribution, prescribing or dispensing in the form of risk evaluation and mitigation strategies ("REMS"), or may impose other limitations. After evaluating the NDA and all related information, including any advisory committee recommendation, if applicable, and inspection reports regarding the manufacturing facilities and clinical trial sites, the FDA will issue an approval letter or a complete response letter. A complete response letter generally outlines the deficiencies in the submission and contains a statement of specific conditions that must be met in order to secure final approval of the NDA and may require additional clinical or non-clinical testing in a resubmission to the NDA in order for the FDA to reconsider the application. FDA has committed to reviewing such submissions in two or six months depending on the type of information included in the resubmission. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If and when those conditions have been met to the FDA’s satisfaction, the FDA will typically issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.

Even if the FDA approves a product, it may limit the approved indications for use of the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution and use restrictions or other risk management mechanisms under a REMS, which can materially affect the potential market and profitability of the product.

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Once a product is approved, marketing the product for other indicated uses or making certain manufacturing or other changes requires FDA review and approval of a supplemental NDA or a new NDA, which may require additional clinical data and review fees. In addition, further post-marketing testing and surveillance to monitor the safety or efficacy of a product may be required. Also, product approvals may be withdrawn if compliance with regulatory standards is not maintained or if safety or manufacturing problems occur at any time following approval. In addition, new government requirements may be established that could delay or prevent regulatory approval of our product candidates under development.

Special FDA Expedited Review and Approval Programs

The FDA has various programs, including Fast Track designation, Breakthrough Therapy designation, Accelerated Approval, and Priority Review, which are intended to expedite or simplify the process for the development and FDA review of drugs that are intended for the treatment of serious or life-threatening diseases or conditions and demonstrate the potential to address unmet medical needs. The purpose of these programs is to provide important new drugs to patients earlier than under standard FDA review procedures.

Under the fast track program, the sponsor of a new drug candidate may request that FDA designate the drug candidate for a specific indication as a fast track drug concurrent with, or after, the filing of the IND for the drug candidate. Fast track designation provides opportunities for frequent interactions with the FDA review team to expedite development and review of the product. FDA may initiate review of sections of a fast track drug’s NDA before the application is complete. This rolling review is available if the applicant provides, and FDA approves, a schedule for the submission of the remaining information and the applicant pays applicable user fees. However, FDA’s time period goal for reviewing an application does not begin until the last section of the NDA is submitted.

In addition, a sponsor can request breakthrough therapy designation for a drug if it is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. Drugs designated as breakthrough therapies are eligible for intensive guidance from FDA on an efficient drug development program, organizational commitment to the development and review of the product including involvement of senior managers, and, like fast track products, are also eligible for rolling review of the NDA. Both fast track and breakthrough therapy products are also eligible for accelerated approval and/or priority review, if relevant criteria are met.

Under the FDA’s accelerated approval regulations, the FDA may approve a drug for a serious or life-threatening illness that provides meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments.

In clinical trials, a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes for a direct measurement of how a patient feels, functions, or survives. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. A drug candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, will allow FDA to withdraw the drug from the market on an expedited basis. All promotional materials for drug candidates approved under accelerated approval regulations are subject to prior review by FDA.

Once a NDA is submitted for a product intended to treat a serious condition, the FDA may assign a priority review designation if FDA determines that the product, if approved, would provide a significant improvement in safety or effectiveness. A priority review means that the goal for the FDA to review an application is six months, rather than the standard review of ten months under current PDUFA guidelines. Under the current PDUFA agreement, for NDAs for new molecular entities, these six- and ten- month review periods are measured from the 60-day filing date rather than the receipt date, which typically adds approximately two months to the timeline for review from the date of submission. Most products that are eligible for fast track and/or breakthrough therapy designation are also likely to be considered appropriate to request and potentially receive a priority review. Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. In addition, the manufacturer of an investigational drug for a serious or life-threatening disease is required to make available, such as by posting on its website, its policy on responding to requests for expanded access. Furthermore, fast track designation, breakthrough therapy designation, accelerated approval and priority review do not change the standards for approval and may not ultimately expedite the development or approval process.

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The Hatch-Waxman Act

Section 505 of the FDCA describes three types of applications that may be submitted to request marketing authorization for a new drug. A 505(b)(1) NDA is an application that contains full reports of investigations of safety and effectiveness. The Hatch-Waxman Act created two additional marketing pathways under Sections 505(j) and 505(b)(2) of the FDCA. Section 505(j) establishes an abbreviated approval process for generic versions of approved drug products through the submission of an abbreviated new drug application, or ANDA. An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the branded reference drug and has been shown to be bioequivalent to the branded reference drug. ANDA applicants are required to conduct bioequivalence testing to confirm chemical and therapeutic equivalence to the branded reference drug. Generic versions of drugs can often be substituted by pharmacists under prescriptions written for the branded reference drug.

In addition, an applicant may submit a NDA under Section 505(b)(2) of the FDCA. Section 505(b)(2) was enacted as part of the Hatch-Waxman Amendments and permits the filing of a NDA where at least some of the information required for approval comes from FDA’s conclusions of safety or efficacy from studies or trials not conducted by or for the applicant, and for which the applicant has not received a right of reference. If the 505(b)(2) applicant can establish that reliance on the FDA’s previous findings of safety and effectiveness is scientifically appropriate, it may eliminate the need to conduct certain preclinical studies or clinical trials of the new product. The FDA may also require companies to perform additional studies or measurements, including clinical trials, to support the change from the approved reference, or “listed” drug. The FDA may then approve the new product candidate for all, or some, of the label indications for which the reference drug has been approved, as well as for any new indication sought by the 505(b)(2) applicant.

Notwithstanding the approval of many products by the FDA pursuant to Section 505(b)(2), over the last few years, some pharmaceutical companies and others have objected to the FDA’s interpretation of Section 505(b)(2). If the FDA changes its interpretation of Section 505(b)(2), or if the FDA’s interpretation is successfully challenged in court, this could delay or even prevent the FDA from approving any Section 505(b)(2) NDA that we submit.

The Orange Book

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

To the extent that a Section 505(b)(2) NDA relies on clinical trials conducted for a previously approved drug product or the FDA’s prior findings of safety and effectiveness for a previously approved drug product, the Section 505(b)(2) applicant must submit patent certifications in its Section 505(b)(2) application with respect to any patents for the previously approved product on which the applicant’s application relies that are listed in the Orange Book. Specifically, the applicant must certify for each listed patent that, in relevant part, (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired, but will expire on a particular date and approval is not sought until after patent expiration; or (iv) the listed patent is invalid, unenforceable or will not be infringed by the proposed new product.

A certification that the new product will not infringe the previously approved product’s listed patent or that such patent is invalid or unenforceable is known as a Paragraph IV certification. If the applicant does not challenge one or more listed patents through a Paragraph IV certification, the FDA will not approve the Section 505(b)(2) NDA application until all the listed patents claiming the referenced product have expired. Further, the FDA will also not approve, as applicable, a Section 505(b)(2) NDA application until any non-patent exclusivity, such as, for example, five-year exclusivity for obtaining approval of a new chemical entity, three-year exclusivity for an approval based on new clinical trials, and additional 6 months pediatric exclusivity if applicable, listed in the Orange Book for the referenced product, has expired. If a generic drug product is ready for approval before the expiration of any patents or exclusivities accorded to the reference listed drug product, the FDA issues a tentative approval letter to the applicant. The tentative approval letter details the circumstances associated with the tentative approval.

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The FDA delays final approval of the generic drug product until all patent or exclusivity issues have been resolved. A tentative approval does not allow the applicant to market the generic drug product.

If the Section 505(b)(2) NDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the owner of the referenced NDA for the previously approved product and relevant patent holders within 20 days after the Section 505(b)(2) NDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement suit against the Section 505(b)(2) applicant. Under the FDCA, the filing of a patent infringement lawsuit within 45 days of receipt of the notification regarding a Paragraph IV certification automatically prevents the FDA from approving the Section 505(b)(2) NDA until the earliest to occur of 30 months beginning on the date the patent holder receives notice, expiration of the patent, settlement of the lawsuit, or until a court deems the patent unenforceable, invalid or not infringed. Even if a patent infringement claim is not brought within the 45-day period, a patent infringement claim may be brought under traditional patent law, but it does not invoke the 30-month stay.

Moreover, in cases where a Section 505(b)(2) application containing a Paragraph IV certification is submitted after the fourth year of a previously approved drug’s five-year exclusivity period and the patent holder brings suit within 45 days of notice of certification, the 30-month period is automatically extended to prevent approval of the Section 505(b)(2) application until the date that is seven and one-half years after approval of the previously approved reference product. The court also has the ability to shorten or lengthen either the 30 month or the seven and one-half year period if either party is found not to be reasonably cooperating in expediting the litigation.

Marketing Exclusivity

In addition to patent protections applicable to a listed drug, a Section 505(b)(1) application and a 505(b)(2) application may be subject to periods of statutory market exclusivity afforded to an approved new drug. Statutory market exclusivity provides the holder of an approved NDA limited protection from new competition in the marketplace for the innovation represented by its approved drug product, and precludes approval of certain 505(b)(2) and abbreviated new drug applications (ANDAs) referencing the approved drug product for prescribed periods of time. Exclusivity is available for new chemical entities, as well as for significant changes in already approved drug products, such as a new indication or new use. FDA may refuse to approve a Section 505(b)(2) or ANDA application that is referencing a previously approved drug product to the extent that the drug product is subject to market exclusivity. Upon NDA approval of a new chemical entity or NCE, which is a drug that contains no active moiety that has been approved either alone or in combination by the FDA in any other NDA, that drug receives five years of marketing exclusivity and during which time the FDA cannot receive any ANDA or 505(b)(2) application seeking approval of a drug that references a version of the NCE drug, except that such applications may be submitted after 4 years if they contain a certification of patent invalidity or noninfringement. Certain approvals granted for change(s) to a drug resulting from new clinical studies that were “essential to approval,” such as a new dosage form, strength, route of administration, dosing regimen or indication, are associated with a three-year period of exclusivity. During this three-year exclusivity, the FDA cannot approve an ANDA or 505(b)(2) application that includes the change(s). Such applicants must also demonstrate “a significant new use” such as a new indication for a previously approved drug, and not just refinements in labeling related to previously approved uses, in order to qualify for the three-year exclusivity.

Post-approval requirements

Any drug products for which we receive FDA approval will be subject to continuing regulation by the FDA. Certain requirements include, inter alia, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information on an annual basis or more frequently for specific events, product sampling and distribution requirements, complying with certain electronic records and signature requirements and complying with FDA promotion and advertising requirements. These promotion and advertising requirements include, among others, standards for direct-to-consumer advertising, prohibitions against promoting drugs for uses or patient populations that are not described in the drug’s approved labeling, known as “off-label use,” and other promotional activities, such as those considered to be false or misleading. Failure to comply with FDA requirements can have negative consequences, including the immediate discontinuation of noncomplying materials, adverse publicity, enforcement letters from the FDA, mandated corrective advertising or communications with doctors, and civil or criminal penalties. Such enforcement may also lead to scrutiny and enforcement by other government and regulatory bodies.

Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not encourage, market or promote such off-label uses. As a result, “off-label promotion” has formed the basis for litigation under the Federal False Claims Act, or FCA, violations of which are subject to significant civil fines and penalties. In addition, under the federal Physician Payments Sunshine Act, manufacturers of certain prescription products are required to disclose annually to the Centers for Medicaid and Medicare Services, or CMS payments or transfers of value made to “covered recipients” and teaching

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hospitals, and ownership or investment interests held by covered recipients and their immediate family members. Reportable payments and transfers of value may be direct or indirect, in cash or kind, for any reason, and are required to be disclosed even if the transfers are not related to an approved product. Failure to comply with the Physician Payments Sunshine Act could result in penalties up to $1.15 million per year.

The manufacturing of any of our product candidates, if approved, will be required to comply with applicable FDA manufacturing requirements contained in the FDA’s cGMP regulations. The FDA’s cGMP regulations require, among other things, quality control and quality assurance, as well as the corresponding maintenance of comprehensive records and documentation. Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are also required to register their establishments and list any products they make with the FDA and to comply with related requirements in certain states. These entities are further subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance.

Discovery of problems with a product after approval may result in serious and extensive restrictions or other consequences for a product, manufacturer or holder of an approved NDA, as well as lead to potential market disruptions. These restrictions or consequences may include untitled or warning letters, recalls, suspension of a product until the FDA is assured that quality standards can be met, and continuing oversight of manufacturing by the FDA under a “consent decree,” which frequently includes the imposition of costs and continuing inspections over a period of many years, as well as possible withdrawal of the product from the market. In addition, changes to the manufacturing process generally require prior FDA approval before being implemented. Other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.

The FDA also may require post-marketing testing, or Phase IV testing, as well as REMS to monitor the effects of an approved product or place conditions on an approval that could otherwise restrict the distribution or use of approved products.

Pediatric trials and exclusivity

Even when not pursuing a pediatric indication, under the Pediatric Research Equity Act of 2003, an NDA or supplement thereto must contain data that are adequate to assess the safety and effectiveness of the drug product 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. With enactment of the Food and Drug Administration Safety and Innovation Act, or the FDASIA, in 2012, sponsors must also submit pediatric trial plans prior to the assessment data. Those plans must contain an outline of the proposed pediatric trials the applicant plans to conduct, including trial objectives and design, any deferral or waiver requests, and other information required by regulation. The applicant, the FDA, and the FDA’s internal review committee must then review the information submitted, consult with each other, and agree upon a final plan. The FDA or the applicant may request an amendment to the plan at any time.

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. Additional requirements and procedures relating to deferral requests and requests for extension of deferrals are contained in the FDASIA.

Separately, in the event the FDA makes a written request for pediatric data relating to a drug product, an NDA sponsor who submits such data may be entitled to pediatric exclusivity. Pediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted, provides for the attachment of an additional 6 months of marketing protection to the term of any existing regulatory exclusivity, including the non-patent and orphan exclusivity.

Patent term restoration and extension

A patent claiming a new drug product may be eligible for a limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, generally referred to as the “Hatch-Waxman Act,” which permits an extension of the term of a patent for up to five years to compensate patent holders for marketing time lost while developing the product and awaiting government approval during the FDA regulatory review. The basis for the patent extension is the regulatory review period, which is basically composed of two parts, a testing phase and an approval phase, less a reduction, if any, in either part for a period time where there was a finding of lack of due diligence. The restoration period granted can be up to one-half the time between the effective date of an IND and the submission date of an NDA (testing phase), plus the time between the submission date of an NDA and the ultimate approval date (approval phase). Patent term extension cannot be used to extend the remaining term of a patent past a total of 14 years from the product’s approval date. In other words, the total maximum patent life for the product with the patent extension cannot exceed 14 years from the products approval date, which amounts to 14 years of

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potential marketing time. Only one patent applicable to an approved drug product may be extended, and the application for the extension must be submitted prior to the expiration of the patent in question and within 60 days of FDA approval. A patent that covers multiple drugs for which approval is sought can only be extended in connection with one of the approvals and the scope of the extended patent is limited to the approved drug. The USPTO reviews and approves the application for any patent term extension in consultation with the FDA. The term of a patent which claims a human drug product, a method of using the product, or a method of manufacturing the product may potentially be extended if it satisfies the various conditions including that it is the first permitted commercial marketing or use of the drug.

Review and approval of drug products outside the United States

In addition to regulations in the United States, we are subject to a variety of foreign regulations governing manufacturing, clinical trials, commercial sales and distribution of our future products. Whether or not we obtain FDA approval for a product candidate, we must obtain approval by the comparable regulatory authorities of foreign countries before commencing clinical trials or marketing in those countries. The approval process varies from country to country and can be subject to uncertainties, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.

Regulation in the European Economic Area

In the European Economic Area, or EEA, which is composed of the Member States of the European Union plus Norway, Iceland and Liechtenstein, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA.

There are two types of MAs:

•The Community MA, which is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal Products for Human Use, or CHMP, of the European Medicines Agency, or EMA, and which is valid throughout the entire territory of the EEA. The Centralized Procedure is mandatory for certain types of products, such as biotechnology medicinal products, orphan medicinal products and medicinal products that contain a new active substance indicated for the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and viral diseases. The Centralized Procedure is optional for products containing a new active substance not yet authorized in the EEA, or for products that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the EU. Under the Centralized Procedure the maximum timeframe for the evaluation of a marketing authorization application, or MAA, is 210 days (excluding clock stops, when additional written or oral information is to be provided by the applicant in response to questions asked by the CHMP). Accelerated evaluation might be granted by the CHMP in exceptional cases, when the authorization of a medicinal product is of major interest from the point of view of public health and in particular from the viewpoint of therapeutic innovation. Under the accelerated procedure the standard 210 days review period is reduced to 150 days.

•National MAs, which are issued by the competent authorities of the Member States of the EEA and only cover their respective territory, are available for products not falling within the mandatory scope of the Centralized Procedure. Where a product has already been authorized for marketing in a Member State of the EEA, this National MA can be recognized in another Member State through the Mutual Recognition Procedure. If the product has not received a National MA in any Member State at the time of application, it can be approved simultaneously in various Member States through the Decentralized Procedure.

Prior to obtaining an MA in the EEA, applicants have to demonstrate compliance with all measures included in a Pediatric Investigation Plan, or PIP, approved by the EEA regulatory agency, covering all subsets of the pediatric population, unless the EEA regulatory agency has granted (1) a product-specific waiver, (2) a class waiver or (3) a deferral for one or more of the measures included in the PIP.

In the EEA, upon receiving a MA, new chemical entities generally receive eight years of data exclusivity and an additional two years of market exclusivity. If granted, data exclusivity prevents regulatory authorities in the EEA from referencing the innovator’s data to assess a generic application. During the additional two-year period of market exclusivity, a generic marketing authorization can be submitted, and the innovator’s data may be referenced, but no generic product can be marketed until the expiration of the market exclusivity. However, there is no guarantee that a product will be considered by the EEA regulatory agencies to be a new chemical entity, and products may not qualify for data exclusivity.

Pharmaceutical coverage, pricing and reimbursement

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Significant uncertainty exists as to the coverage and reimbursement status of any product and any product candidates for which we obtain regulatory approval. In the United States and other markets, sales of any product, and any product candidates for which we receive regulatory approval for commercial sale, will depend in part on the availability of coverage and adequate reimbursement from third party payors. Third party payors include government health administrative authorities, managed care providers, private health insurers and other organizations. The process for determining whether a payor will provide coverage for a drug product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the drug product. Third party payors may limit coverage to specific drug products on an approved list, or formulary, which might not include all of the FDA-approved drug products for a particular indication.

Third party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. A payor may not consider a product to be medically necessary or cost-effective. Moreover, a payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved, or that other payors will similarly provide similar coverage for the product. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.

CMS administers the Medicaid drug rebate program, in which pharmaceutical manufacturers pay quarterly rebates to each state Medicaid agency. Generally, for branded prescription drugs marketed under NDAs, manufacturers are required to rebate the greater of 23.1% of the average manufacturer price or the difference between such price and the best price during a specified period. An additional rebate for products marketed under NDAs is payable if the average manufacturer price increases at a rate higher than inflation, and other methodologies apply to new formulations of existing drugs. In addition, the Affordable Care Act (the "ACA") revised certain definitions used for purposes of calculating the rebates, including the definition of “average manufacturer price.” Various state Medicaid programs have implemented voluntary supplemental drug rebate programs that may provide states with additional manufacturer rebates in exchange for preferred status on a state’s formulary or for patient populations that are not included in the traditional Medicaid drug benefit coverage.

In the European Union, pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after a reimbursement price has been agreed. Some countries may require the completion of additional studies or trials that compare the cost-effectiveness of a particular drug candidate to currently available therapies. For example, the European Union provides options for its member states to restrict the range of drug products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. European Union member states may approve a specific price for a drug product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug product on the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure on health care costs in general, and particularly on prescription drugs, has become intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced markets exert competitive pressure that may reduce pricing within a country. Any country that has price controls or reimbursement limitations for drug products may not allow favorable reimbursement and pricing arrangements.

Healthcare laws and regulations

In March 2010, the then President of the United States signed one of the most significant healthcare reform measures in decades. The ACA substantially changed the way healthcare is financed by both governmental and private insurers, and significantly impacted the pharmaceutical industry. This comprehensive legislative overhaul was expected to extend coverage to approximately 36 million previously uninsured Americans. The ACA's individual mandate was repealed by Congress in The Tax Cuts and Jobs Act of 2017, or the Tax Act, tax reform bill that was signed into law in December 2017 and became effective January 1, 2019. On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas ruled that the individual mandate is a critical and inseverable feature of the ACA, and because it was repealed as part of the Tax Act, the remaining provisions of the ACA are invalid as well. In December 2019, the U.S. Court of Appeals for the Fifth Circuit upheld the lower court decision, which was then appealed to the U.S. Supreme Court. On June 17, 2021, the U.S. Supreme Court held that state and individual plaintiffs did not have standing to challenge the individual mandate provision of the ACA; in so holding, the Supreme Court did not consider larger constitutional questions about the validity of this provision or the validity of the ACA in its entirety. It is unclear how this decision, subsequent appeals, if any, and other efforts to modify, repeal and replace the ACA will impact the ACA.

The ACA requires the pharmaceutical industry to share in the costs of reform by increasing Medicaid rebates and expanding Medicaid rebates to cover Medicaid managed care programs, among other things. The ACA also includes funding of pharmaceutical costs for Medicare patients in excess of the prescription drug coverage limit and below the catastrophic coverage threshold. The Bipartisan Budget Act of 2018, or the BBA, among other things, amends the ACA, effective January 1, 2019, to close this gap, also known as the “donut hole”. Additionally, an excise tax was levied against certain branded

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pharmaceutical products. The Administration is expected to evaluate drug pricing and the Medicare parts B and D programs in terms of legislative or policy changes in the current session of Congress.

Healthcare providers, physicians and third party payors play a primary role in the recommendation and prescription of drug products that are granted marketing approval. Arrangements with healthcare providers, third party payors and other customers are subject to broadly applicable fraud and abuse and other healthcare laws and regulations. Such restrictions under applicable federal and state healthcare laws and regulations include the following:

•the federal healthcare Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare or Medicaid. The term “remuneration” has been broadly interpreted to include anything of value, including cash, improper discounts, and free or reduced price items and services. The intent standard under the federal Anti-Kickback Statute was amended by ACA to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. Moreover, under the ACA, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil FCA. Additionally, many states have similar laws that apply to their state health care programs as well as private payors. Violations of the federal or state anti-kickback laws can result in exclusion from federal and state health care programs and substantial civil and criminal penalties. The previous U.S. presidential administration issued final rules in late 2020 that, among other things, made changes to certain Anti-Kickback safe harbors; however, implementation of these rules has been and may continue to be affected by a regulatory freeze announced by the current administration in January 2021 and litigation challenging these rules;

•the federal civil and criminal false claims laws and civil monetary penalties laws, including the federal FCA, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, false, fictitious or fraudulent claims for payment from Medicare, Medicaid or other federal healthcare programs, and knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to avoid, decrease or conceal an obligation to pay money to the federal government. Even where pharmaceutical companies do not submit claims directly to payors, they can be held liable under these laws if they are deemed to “cause” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers, promoting a product off-label, marketing products of sub-standard quality, or paying a kickback that results in a claim for items or services. In addition, activities relating to the reporting of wholesaler or estimated retail prices for pharmaceutical products, the reporting of prices used to calculate Medicaid rebate information and other information affecting federal, state and third-party reimbursement for such products, and the sale and marketing of such products, are subject to scrutiny under this law. Private individuals or whistleblowers can bring FCA “qui tam” actions on behalf of the government and may share in amounts recovered. Proof of intent to deceive is not required to establish liability under the civil False Claims Act;

•the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for, among other things, executing or attempting to execute a scheme to defraud any healthcare benefit program, including any third party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statements or representations, or making false statements relating to healthcare benefits, items, or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation;

•HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, which imposes privacy, security, transmission and breach reporting obligations, including mandatory contractual terms, with respect to individually identifiable health information including PHI, upon “covered entities” subject to the law, such as health plans, healthcare clearinghouses and certain healthcare providers, and their respective business associates that perform services on their behalf that involve individually identifiable health information, including PHI. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. Other federal and state laws, such as the Federal Trade Commission Act, also impose requirements with respect to individuals' personal information;

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•the federal Physician Payments Sunshine Act requires certain manufacturers of prescription drugs, devices and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to annually report to CMS information related to payments and other transfers of value to physicians, dentists, optometrists, podiatrists, chiropractors and teaching hospitals, and ownership and investment interests held by physicians and their immediate family members. In addition, Section 6004 of the ACA requires annual reporting of information about drug samples that manufacturers and authorized distributors provide to physicians; and

•analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply more broadly than their U.S. federal analogues, such as to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third party payors, including private insurers; state laws that require drug companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state and local laws that require the licensure of sales representatives; state laws that require drug manufacturers to report information related to drug pricing or payments and other transfers of value to healthcare providers or marketing expenditures and pricing information; data privacy and security laws and regulations in foreign jurisdictions that may be more stringent than those in the United States (such as the European Union, which adopted the General Data Protection Regulation, or GDPR, which became effective in May 2018); state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts; and state laws related to insurance fraud in the case of claims involving private insurers.

If our operations are found to be in violation of any of the healthcare laws or regulations described above or any other healthcare regulations that apply to us, we may be subject to penalties, including administrative, civil and criminal penalties, damages, fines, disgorgement, exclusion from participation in government healthcare programs, such as Medicare and Medicaid, imprisonment, additional reporting obligations and oversight if we become subject to a corporate integrity agreement or consent decree, reputational harm, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and pursue our strategy.

Environmental, Health and Safety Matters

We are subject to extensive environmental, health and safety laws and regulations in a number of jurisdictions, primarily Israel, governing, among other things, (i) the use, storage, registration, handling, emission and disposal of chemicals, waste materials and sewage; and (ii) chemical, air, water and ground contamination, air emissions and the cleanup of contaminated sites, including any contamination that results from spills due to our failure to properly dispose of chemicals, waste materials and sewage. Our operations at our research and development facility in Israel use chemicals and produce waste materials and sewage. Our activities require permits from various governmental authorities including, local municipal authorities, the Ministry of Environmental Protection and the Ministry of Health. The Ministry of Environmental Protection and the Ministry of Health, local authorities and the municipal water and sewage company conduct periodic inspections in order to review and ensure our compliance with the various regulations.

These laws, regulations and permits could potentially require the expenditure by us of significant amounts for compliance or remediation. If we fail to comply with such laws, regulations or permits, we may be subject to fines and other civil, administrative or criminal sanctions, including the revocation of permits and licenses necessary to continue our business activities. In addition, we may be required to pay damages or civil judgments in respect of third party claims, including those relating to personal injury (including exposure to hazardous substances we use, store, handle, transport, manufacture or dispose of), property damage or contribution claims. Some environmental, health and safety laws allow for strict, joint and several liability for remediation costs, regardless of comparative fault. We may be identified as a responsible party under such laws. Such developments could have a material adverse effect on our business, financial condition and results of operations.

In addition, laws and regulations relating to environmental, health and safety matters are often subject to change. In the event of any changes or new laws or regulations, we could be subject to new compliance measures or to penalties for activities which were previously permitted. For instance, Israeli regulations were promulgated in 2011 relating to the discharge of industrial sewage into the sewer system. These regulations establish new and potentially significant fees for discharging forbidden or irregular sewage into the sewage system.

The operations of our subcontractors and suppliers are also subject to various Israeli and foreign laws and regulations relating to environmental, health and safety matters, and their failure to comply with such laws and regulations could have a material adverse effect on our business and reputation, result in an interruption or delay in the development or manufacture of our product candidates, or increase the costs for the development or manufacture of our product candidates.

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Human Capital

As of December 31, 2021, we had a total of 28 employees comprising 14 females and 14 males, all of whom are full-time employees. As of such date, 14 employees were primarily engaged in research and development activities. We believe our internal R&D capabilities coupled with our third-party R&D consultants are well positioned to execute our pipeline strategy in a cost effective manner. None of our employees are represented by a labor union, and we consider our employee relations to be good. We value the importance of retention, growth and development of our employees and we believe we offer competitive compensation (including salary, incentive bonus, and equity) and benefits packages.

We strive to foster a corporate culture built on communication and transparency. We hold annual company-wide trainings and hold regular company-wide meetings where management communicates notable corporate developments to Company employees. We are also focused on understanding our diversity and inclusion strengths and opportunities and executing on a strategy to support further progress. We will continue to promote a work environment that is based on the fundamental principles of human dignity, equality and mutual respect.

Financial and Segment Information

We operate our business as a single segment, as defined by generally accepted accounting principles. Our financial information is included in the consolidated financial statements and the related notes.

Corporate Information

We were incorporated in October 2011 as a Delaware corporation under the name Tigercat Pharma, Inc. We changed our name to VYNE Therapeutics Inc. in September 2020, following the merger (the "Merger") between Foamix Pharmaceuticals Ltd. ("Foamix") and Menlo Therapeutics Inc. ("Menlo") in March 2020.

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the "Securities Act") and as modified by the JOBS Act and a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements, such as the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, and certain reduced or scaled disclosure requirements available to smaller reporting companies.

Our principal executive offices are located at 520 U.S. Highway 22, Suite 204, Bridgewater, NJ 08807. Our website is www.vynetherapeutics.com.We may use our website to comply with disclosure obligations under Regulation FD. Therefore, investors should monitor our website in addition to following its press releases, filings with the SEC, public conference calls, and webcasts.

ITEM 1A-RISK FACTORS

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

You should carefully consider the following factors and other information in this annual report. If any of the negative events referred to below occur, our business, financial condition and results of operations could suffer. In any such case, the trading price of our common stock could decline.

Risks Related to Development of Our Product Candidates

Our business is dependent on the successful development of FMX114 and our BET inhibitor product candidates.

In January 2022, we divested our commercial business in order to focus our efforts and resources on drug development. Our development pipeline currently includes our Phase 2a asset FMX114 for the treatment of mild-to-moderate AD and preclinical candidates VYN201 and VYN202 which we are developing to treat immuno-inflammatory diseases. The success of our business is dependent on our successful development and/or our ability to pursue strategic initiatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize, these product candidates.

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Our ability to successfully progress these candidates may be hampered for many reasons, including:

•a product candidate may in a clinical trial be shown to have harmful side effects or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria;

•competitors may develop alternatives that render our product candidates obsolete or less attractive;

•product candidates we develop may nevertheless be covered by third parties’ patents or other proprietary rights;

•a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all;

•a product candidate may not be accepted as safe and effective by patients, the medical community or third party payors, if applicable;

•creation of intellectual property rights, such as patents, which are necessary to protect our interests in a product candidate, can be challenging in relation to pharmaceutical formulations and their uses with known active pharmaceutical ingredients and generally used combinations of inactive ingredients approved by the FDA;

•intellectual property rights, such as patents, which are necessary to protect our interests in a product candidate, may be difficult to obtain or unobtainable or if obtained may be difficult to enforce or unenforceable;

•intellectual property rights, such as patents, may fail to provide adequate protection, may be challenged and one or more claims may be revoked or the patent may be held to be invalid; and

•intellectual property rights of third parties may potentially block our entry into certain markets, or make such entry economically impracticable.

Furthermore, VYN201 and VYN202 are very early stage programs. VYN201 is being evaluated in preclinical animal models and has not yet been administered to humans and VYN202 is still in lead candidate selection. The development of these NCEs carries even greater risk and a higher probability of failure. Our failure to successfully develop our drug candidates will have a material adverse effect on our business and financial condition.

We may encounter delays in completing clinical trials for our product candidates and may even be prevented from commencing such trials due to factors that are largely beyond our control.

We have in the past experienced and may in the future experience delays in completing clinical trials and in commencing future clinical trials, including due to reasons associated with COVID-19. For example, we have experienced delays in enrolling patients in our Phase 2a clinical trial evaluating FMX114 for the treatment of AD due to COVID-19 related issues. We rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials. While we have agreements governing the committed activities of our CROs, we have limited influence over their actual performance. A failure of one or more of our clinical trials can occur at any time during the clinical trial process. Clinical trials can be delayed or aborted for a variety of other reasons, including delay or failure to:

•obtain regulatory approval to commence a trial;

•reach agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which may be subject to extensive negotiation and vary significantly among different CROs and trial sites;

•obtain IRB approval at each site;

•enlist suitable patients to participate in a trial;

•have patients complete a trial or return for post-treatment follow-up;

•ensure clinical sites observe trial protocol or continue to participate in a trial;

•address any patient safety concerns that arise during the course of a trial;

•address any conflicts with new or existing laws or regulations;

•add a sufficient number of clinical trial sites; or

•manufacture sufficient quantities of the product candidate for use in clinical trials.

Patient enrollment is also a significant factor in the timing of clinical trials and is affected by many factors, including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to available alternatives, including any new drugs or treatments that may be approved for the indications we are investigating.

We may also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by the trial’s data safety monitoring board, or by the FDA. Such authorities may suspend or terminate one or more of our clinical trials due to a number of factors, including our failure to conduct the clinical trial in accordance with relevant regulatory requirements or clinical protocols, inspection of the clinical trial operations or trial site by the FDA resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a

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benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

If we experience delays in carrying out or completing any clinical trial of our product candidates, the commercial prospects of our product candidates may be harmed, and our ability to generate product revenues from any of these product candidates will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may significantly harm our business and financial condition. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

Clinical drug development is very expensive, time-consuming and uncertain. Our clinical trials may fail to adequately demonstrate the safety and efficacy of our current or any future product candidates, which could prevent or delay regulatory approval and commercialization.

Clinical drug development is very expensive, time-consuming and difficult to design and implement, and its outcome is inherently uncertain, particularly as it relates to NCEs. Before obtaining regulatory approval for the commercial sale of a product candidate, we must demonstrate through clinical trials that a product candidate is both safe and effective for use in the target indication. Most product candidates that commence clinical trials are never approved by regulatory authorities for commercialization. The clinical trials for these product candidates may take significantly longer than expected to complete. In addition, we, any partner with which we may in the future collaborate, the FDA, an institutional review board (“IRB”) or other regulatory authorities, including state and local agencies and counterpart agencies in foreign countries, may suspend, delay, require modifications to or terminate our clinical trials at any time, for various reasons, including:

•lack of effectiveness of any product candidate during clinical trials or the failure of a product candidate to meet specified endpoints;

•discovery of serious or unexpected side effects experienced by study participants, toxicities or other safety issues;

•slower than expected rates of subject recruitment and patient enrollment in clinical trials resulting from numerous factors, including COVID-19 or the prevalence of clinical trials for our competitors for their product candidates treating the same indication;

•difficulty in retaining subjects who have initiated participation in a clinical trial but may withdraw at any time due to adverse side effects from the therapy, insufficient efficacy, fatigue with the clinical trial process or for any other reason;

•difficulty in obtaining IRB approval for studies to be conducted at each site;

•delays in manufacturing or obtaining, or inability to manufacture or obtain, sufficient quantities of materials for use in clinical trials;

•inadequacy of or changes in our manufacturing process or the product formulation or method of delivery;

•changes in applicable laws, regulations and regulatory policies;

•delays or failure in reaching agreement on acceptable terms in clinical trial contracts or protocols with prospective contract research organizations (“CROs”), clinical trial sites and other third-party contractors;

•inability to add a sufficient number of clinical trial sites;

•uncertainty regarding proper dosing;

•failure of our CROs or other third-party contractors to comply with contractual and regulatory requirements or to perform their services in a timely or acceptable manner;

•failure by us, our employees, our CROs or their employees or any partner with which we may collaborate or their employees to comply with applicable FDA or other regulatory requirements relating to the conduct of clinical trials or the handling, storage, security and recordkeeping for drug and biologic products;

•scheduling conflicts with participating clinicians and clinical institutions;

•failure to design appropriate clinical trial protocols;

•inability or unwillingness of medical investigators to follow our clinical protocols;

•difficulty in maintaining contact with subjects during or after treatment, which may result in incomplete data; and

•insufficient data to support regulatory approval.

If we experience delays in the completion of, or if we terminate, any of our future clinical trials, our business, financial condition, operating results and prospects would be adversely affected.

New chemical entities may require more time and resources for development, testing and regulatory approval.

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Our BET inhibitor program is in the early stages of development, involves a novel therapeutic approach and new chemical entities, requires significant further research and development and regulatory approvals and is subject to the risks of failure inherent in the development of products based on innovative approaches. New chemical entities derived from our InhiBET platform are molecules that have not previously been approved and marketed as therapeutics, unlike FMX114 which includes active pharmaceutical ingredients whose safety and efficacy have previously been established which we aim to improve through a new formulation. As a result, the product candidates from our InhiBET platform may face greater risk of unanticipated safety issues or other side-effects, or may not demonstrate efficacy. Further, the regulatory pathway for our new chemical entities may be more demanding than that for FMX114, for which we may be able to leverage existing data under Section 505(b)(2) of the Food, Drug, and Cosmetic Act to reduce development risk, time and cost.

We may be unable to develop a lead molecule for the VYN202 program and exercise our option to license the applicable BET inhibitor compounds from In4Derm.

As discussed in "Item 1. Business—Development and License Agreements—In4Derm Licensing Agreements," under the terms of the Option Agreement, our option to exercise our rights with respect to In4Derm's highly selective BET inhibitor compounds expires upon the earlier of (i) 14 days following the delivery of an agreed data package and selection of a lead NCE candidate and (ii) June 30, 2022. We are currently working with In4Derm to develop a lead molecule for the VYN202 program. However, we may be unable to develop a viable lead molecule in a timely manner or at all. If we are unable to develop a lead candidate for the VYN202 program, we may not exercise our option with respect to In4Derm's BET inhibitor compounds suitable for oral administration which could cause us to terminate the program and would have a material adverse effect on our ability to execute our strategy of enhancing our pipeline.

Our clinical trials may fail to demonstrate the safety and efficacy of our drug candidates, or serious adverse or unacceptable side effects may be identified during the development of our drug candidates, which could result in the abandonment or limitation of the development of our drug candidates or prevent or delay our ability to pursue strategic alternatives for our drug candidates.

If our drug candidates are associated with side effects in preclinical studies and/or clinical trials or have characteristics that are unexpected, our development costs could increase or we may need to abandon development activities or limit development to more narrow uses in which the side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. The FDA or an IRB may also require that we suspend, discontinue, or limit our clinical trials based on safety information. Such findings could result in regulatory authorities failing to provide marketing authorization for our drug candidates. Many drug candidates that initially showed promise in early stage testing have later been found to cause side effects that prevented further development of the drug candidate.

Before any potential third-party partners can obtain marketing approvals for the commercial sale of our drug candidates, we must demonstrate through lengthy, complex and expensive preclinical testing and clinical trials that our drug candidates are both safe and effective for use in each target indication, and failures can occur at any stage of testing. Additionally, if we or others identify undesirable side effects caused by our drugs, a number of potentially significant negative consequences could result, including:

•we may need to abandon the development or limit the further development of our drug candidates, including in various populations and for certain indications;

•we could be sued and held liable for harm caused to patients;

•our reputation may suffer;

•regulatory authorities may withdraw approval to market such product;

•regulatory authorities may require additional warnings on the product labeling;

•a medication guide outlining the risks of such side effects for distribution to patients may be required; and

•our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates would be harmed.

Any of these events could prevent us from pursuing strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize the particular drug candidate and could significantly harm our business, results of operations and prospects.

Results obtained in non-clinical studies and completed clinical trials may not predict success in later clinical trials.

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Success in non-clinical testing, such as testing for VYN201 and FMX114, and early clinical trials does not ensure that later clinical trials will be successful, and any other clinical trials that we may conduct may not demonstrate consistent or adequate efficacy and safety to obtain regulatory approval to market our product candidates in any indication. We and other companies in the biopharmaceutical industry have frequently suffered significant setbacks in later clinical trials, even after achieving promising results in earlier non-clinical studies or clinical trials. Phase III clinical trials often produce unsatisfactory results even though prior clinical trials were successful. Any of these events could prevent us from pursuing strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize a particular drug candidate and could significantly harm our business, results of operations and prospects.

Topline and preliminary data from our clinical trials that we announce or publish from time to time may change as additional data become available and are subject to audit and verification procedures that could result in material changes in the final data.

We may publicly disclose topline or preliminary data from our clinical trials which are based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a complete analysis of all data related to the trial. We also make certain assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline or preliminary results that we report may differ from future results of the same trials, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. Accordingly, topline and preliminary data should not be considered complete and should be viewed with caution until the final data are available. We may also disclose interim data from our clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as subject enrollment continues and more subject data become available. Adverse differences between interim, topline or preliminary data and final data could significantly harm our reputation and business prospects. Further, disclosure of interim, topline or preliminary data by us or by our competitors could result in volatility in the price of our common stock.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the potential of the particular program, the likelihood of marketing approval or commercialization of the particular drug candidate, any approved product, and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is derived from information that is typically extensive, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular program, drug candidate or our business.

If the interim, topline or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our drug candidates may be harmed, which could harm our business, operating results, prospects or financial condition.

We have a limited history as a clinical-stage biopharmaceutical company developing drug candidates for immuno-inflammatory conditions, which may make it difficult to assess our future viability.

Prior to the Company's announcement on August 12, 2021, our operations over the last several years has been largely focused on raising capital, undertaking preclinical studies and conducting clinical trials, and commercializing minocycline-based products for dermatology. Since announcing that we would be divesting our commercial business, we have been conducting preclinical studies evaluating VYN201 in a range of immuno-inflammatory conditions and considering initial indications for the program. Our team has limited experience in developing drugs for the treatment of immuno-inflammatory conditions. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer history of being a clinical-stage biopharmaceutical company focused on developing drugs in this area. We may also encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors in achieving our business objectives.

We may spend our limited resources to pursue a particular drug candidate or indication and fail to capitalize on drug candidates or indications that may be more profitable or for which there is a greater likelihood of success.

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As of the date of this report, we have not determined which indication(s) to pursue for VYN201 or VYN202. Following the completion of our preclinical analyses, we intend to select the initial indication(s) for these programs. Because we have limited financial and management resources, we may be required to focus on specific indications. As a result, we may forego or delay pursuit of opportunities with other drug candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial drugs or profitable market opportunities. Our spending on current and future development programs and drug candidates for specific indications may not yield any commercially viable drugs. If we do not accurately evaluate the commercial potential or target market for a particular drug candidate, we may relinquish valuable rights to that drug candidate through partnerships, licensing or other arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such drug candidate.

We have not obtained regulatory approvals to market our other pipeline product candidates, and we may be delayed in obtaining or fail to obtain such regulatory approvals and to commercialize these product candidates.

The process of developing, obtaining regulatory approval for and commercializing our other product candidates is long, complex, costly and uncertain, and delays or failure can occur at any stage. Furthermore, the research, testing, manufacturing, labeling, marketing, sale and distribution of drugs are subject to extensive and rigorous regulation by the FDA. We are not permitted to market any of our product candidates in the United States until we receive approval of the applicable NDA from the FDA. To gain approval of an NDA or other equivalent regulatory approval, we must provide the FDA with clinical data and other information that demonstrates the continued safety and efficacy of the product for the intended indication.

Even if we believe our clinical trials were successful, the FDA may require that we conduct additional clinical, nonclinical, manufacturing, validation or drug product quality studies and submit that data before considering or reconsidering any NDA we may submit. Depending on the extent of these additional studies, approval of any applications that we submit may be significantly delayed or may require us to expend more resources than we have available. It is also possible that additional studies we conduct may not be considered sufficient by the FDA to provide regulatory approval.

If any of these outcomes occur, we would not receive approval for our other product candidates and may need to discontinue the development of such product candidates.

Our business has been adversely impacted and could continue to be adversely affected by the evolving and ongoing COVID-19 global pandemic in regions where we or third parties on which we rely have manufacturing facilities, clinical trial sites or other business operations. The COVID-19 pandemic could adversely affect our operations, including at our clinical trial sites, as well as the business or operations of our manufacturers, contract research organizations or other third parties with whom we conduct business.

Our business has been adversely affected by the effects of the COVID-19 pandemic, which has resulted in a variety of restrictions in order to reduce the spread of the disease, which, among other things, direct businesses and governmental agencies to cease non-essential operations at physical locations, prohibit certain non-essential gatherings, and order cessation of non-essential travel. For example, enrollment and other operations related to our ongoing Phase 1b/2a clinical trial for FMX114 in Australia have been impacted by the COVID-19 pandemic and restrictions imposed by Australian authorities. In addition, some of our third-party preclinical science partners and manufacturers which we use for the supply of materials for our drug candidates or other materials necessary to manufacture drug product to conduct preclinical studies and clinical trials are located in countries affected by COVID-19, and should they experience disruptions, such as temporary closures or suspension of services, we would likely experience delays in advancing these studies and trials. Any delay in the development of our product candidates could have a material adverse effect on our business and results of operations.

Even if our product candidates receive marketing approval, we may continue to face future developmental and regulatory difficulties. In addition, we are subject to government regulations and we may experience delays in obtaining required regulatory approvals to market our proposed product candidates.

Even if we receive approval of any regulatory filing for our product candidates, the FDA may grant approval contingent on the performance of additional costly post-approval clinical trials or REMS to monitor the safety or efficacy of the product, which could negatively impact us by reducing revenues or increasing expenses, and cause the product not to be commercially viable. Absence of long-term safety data may further limit the approved uses of products.

The FDA may also approve our product candidates for a more limited indication or a narrower patient population than we originally requested, or may not approve the labeling that we believe is necessary or desirable for the successful commercialization of our product candidates. Furthermore, any such approved product will remain subject to extensive

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regulatory requirements, including requirements relating to manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion, distribution and recordkeeping.

If we fail to comply with the regulatory requirements of the FDA, or if we discover previously unknown problems with any approved commercial products, manufacturers or manufacturing processes, we could be subject to administrative or judicially imposed sanctions or other setbacks, which could require us to take corrective actions, including to:

•suspend or impose restrictions on operations, including costly new manufacturing requirements;

•refuse to approve pending applications or supplements to applications;

•suspend any ongoing clinical trials;

•suspend or withdraw marketing approval;

•seek an injunction or impose civil or criminal penalties or monetary fines;

•seize or detain products;

•ban or restrict imports and exports;

•issue warning letters or untitled letters;

•suspend or impose restrictions on operations, including costly new manufacturing requirements; or

•refuse to approve pending applications or supplements to applications.

In addition, various aspects of our operations are subject to federal, state or local laws, rules and regulations, any of which may change from time to time. Costs arising out of any regulatory developments could be time-consuming and expensive and could divert management resources and attention and, consequently, could adversely affect our business operations and financial performance.

We expect to rely on third parties to conduct, supervise and monitor our clinical studies, and if these third parties perform in an unsatisfactory manner, it may harm our business.

We also rely on medical institutions, clinical investigators, contract laboratories, collaborative partners and other third parties, such as CROs, to assist us in conducting our clinical trials for our other product candidates. While we will have agreements governing their activities, we will have limited influence over their actual performance. We will control only certain aspects of our CROs’ activities. Nevertheless, we will be responsible for ensuring that each of our clinical studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities.

We and our CROs are required to comply with the FDA’s and other regulatory authorities’ good clinical practices, or GCPs, for conducting, recording and reporting the results of clinical studies to assure that the data and reported results are credible and accurate, and that the rights, integrity and confidentiality of clinical study participants are protected. If we or our CROs fail to comply with applicable GCPs, the clinical data generated in our future clinical studies may be deemed unreliable and the FDA and other regulatory authorities may require us to perform additional clinical studies before approving any marketing applications.

If the third parties or consultants that assist us in conducting our clinical trials do not perform their contractual duties or obligations, experience work stoppages, do not meet expected deadlines, terminate their agreements with us or need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical trial protocols or GCPs, or for any other reason, we may need to conduct additional clinical trials or enter into new arrangements with alternative third parties, which could be difficult, costly or impossible, and our clinical trials may be extended, delayed or terminated or may need to be repeated. If any of the foregoing were to occur, we may not be able to obtain, or may be delayed in obtaining, regulatory approval for the product candidates being tested in such trials, and will not be able to, or may be delayed in our efforts to, successfully commercialize these product candidates.

Changes in methods of drug candidate manufacturing or formulation may result in additional costs or delay.

As drug candidates are developed through preclinical studies to late-stage clinical trials towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods and formulation, are altered in an effort to optimize processes and results. Such modifications carry the risk that they will not achieve these intended objectives, and may also require additional testing, FDA notification or FDA approval. Any of these changes could cause our drug candidates to perform differently and affect the results of planned clinical trials or other future clinical trials conducted with the altered materials. This could delay completion of clinical trials, require the conduct of bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of our drug

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candidates and jeopardize our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our drug candidates.

Other Risks Related to Our Business and Financial Operations

We will need substantial additional funding to fund our operations, and there is substantial doubt about our ability to continue as a going concern. We could also be forced to delay, reduce or terminate our research and development activities which would have a material adverse effect on our financial condition.

VYNE US Equity

VYNE · 10-K · period ended 2021-12-31

ITEM 1 - BUSINESS

ITEM 1A-RISK FACTORS

VYNE US Equity☆

VYNE · 10-K · period ended 2021-12-31

ITEM 1 - BUSINESS

ITEM 1A-RISK FACTORS

VYNE US Equity