Annual Statements Open main menu

Applied Molecular Transport Inc. - Annual Report: 2022 (Form 10-K)

Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________________________
FORM 10-K
_________________________________________________________________
(Mark One)
xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM                      TO
Commission File Number -001-39306
_________________________________________________________________
APPLIED MOLECULAR TRANSPORT INC.
(Exact name of Registrant as specified in its Charter)
_________________________________________________________________
Delaware81-4481426
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
450 East Jamie Court
South San Francisco, California
94080
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: 650-392-0420
_________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareAMTIThe Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No x
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 x No o
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes x No o
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 fileroAccelerated filero
Non-accelerated filerxSmaller reporting companyx
Emerging growth companyo
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. o
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. o
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the Registrant as of June 30, 2022 was $60.3 million, based on the closing price of the shares of common stock on The Nasdaq Global Select Market as of that date.
The number of shares of Registrant’s Common Stock outstanding as of March 2, 2023 was 39,200,952.
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the Registrant’s definitive Proxy Statement to be filed in connection with the Registrant’s 2023 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. Such definitive Proxy Statement will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 of the Registrant’s fiscal year ended December 31, 2022.


Table of Contents
Table of Contents
Page


Table of Contents
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (Annual Report) contains forward-looking statements. All statements other than statements of historical facts contained in this Annual Report, including statements regarding our future results of operations and financial position, business strategy, product candidates, planned preclinical studies and clinical trials, results of clinical trials, research and development costs, regulatory approvals, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that are in some cases beyond our control and may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “believe,” “estimate,” “predict,” “potential,” “seek,” “aim,” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Annual Report include, but are not limited to, statements about:
the ability of our clinical trials to demonstrate safety and efficacy of our product candidates, and other positive results;
our ability to advance product candidates into and successfully complete clinical trials;
the beneficial characteristics, safety, efficacy, and therapeutic effects of our product candidates;
our ability to obtain and maintain regulatory approval of our product candidates and the timing or likelihood of regulatory filings and approvals, including our expectation to seek special designations, such as orphan drug designation, for our product candidates for various diseases;
the sufficiency of our existing cash, cash equivalents, and investments to fund our future operating expenses and capital expenditure requirements;
the progress and focus of our current and future preclinical studies, clinical trials, and our research programs, and the reporting of data from those preclinical studies, clinical trials and programs;
expectations relating to the timing of the provision of updates on, data readouts for, and completion of our clinical trials;
our ability to further develop and expand our platform technology;
our ability to continue as a going concern;
the capabilities of our technology including our ability to develop therapies to treat autoimmune, inflammatory, metabolic, respiratory and other diseases;
our ability to utilize our technology platform to generate and advance additional product candidates;
our plans relating to commercializing our product candidates, if approved;
the expected potential benefits of strategic transactions, partnerships or collaborations with third parties and our ability to attract collaborators with development, regulatory and commercialization expertise;
the implementation of our strategic plans for our business and product candidates;
our estimates of the number of patients in the United States who suffer from the diseases we target and the number of patients that will enroll in our clinical trials;
the size of the market opportunity for our product candidates in each of the diseases we target;
the success of competing therapies that are or may become available;
our plans relating to the further development and manufacturing of our product candidates, including additional indications for which we may pursue;
existing regulations and regulatory developments in the United States and other jurisdictions;
our potential and ability to successfully manufacture and supply our product candidates for clinical trials and for commercial use, if approved;
our continued reliance on third parties to conduct additional clinical trials of our product candidates, and for the manufacture of our product candidates;
our plans and ability to obtain or protect intellectual property rights, including extensions of existing patent terms where available;
1

Table of Contents
the scope of protection we are able to establish and maintain for intellectual property rights, including our technology platform and product candidates;
our ability to retain the continued service of our key personnel and to identify, hire, and then retain additional qualified personnel;
the accuracy of our estimates regarding expenses, future revenue, capital requirements, and needs for additional financing;
our financial performance;
our expectations regarding the impact of the COVID-19 pandemic and geopolitical events on our business;
developments relating to our competitors and our industry, including competing product candidates and therapies; and
our anticipated use of our existing cash, cash equivalents, and investments.
We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations, and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this Annual Report and are subject to a number of risks, uncertainties, and assumptions described in the section titled “Risk Factors” and elsewhere in this Annual Report. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, or otherwise.
In addition, statements such as “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Annual Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.
2

Table of Contents
PART I
Item 1. Business.
Overview
We are a clinical-stage biopharmaceutical company leveraging our proprietary technology platform to design and develop a pipeline of novel oral biologic product candidates. Our proprietary technology platform allows us to exploit existing natural cellular trafficking pathways to facilitate the active transport of diverse therapeutic payloads across epithelial barriers, such as the intestinal epithelium (IE) and the respiratory epithelium (RE). Active transport is an efficient mechanism that uses the cell’s own machinery to transport materials across epithelial barriers. We believe that our ability to exploit this mechanism is a key differentiator of our approach. We currently have two oral biologics in clinical development. Our most advanced product candidate, AMT-101, has completed a Phase 2 clinical trial in patients with chronic pouchitis and is in Phase 2 development for patients with rheumatoid arthritis (RA). Our second product candidate, AMT-126 is in Phase 1 development for diseases related to IE barrier function defects.
As of December 31, 2022, we had cash and cash equivalents of $61.1 million. Based on our available cash resources, there is substantial doubt about our ability to continue as a going concern within one year after the date the financial statements included in this Annual Report on Form 10-K are issued. If we are unable to obtain additional funding, we will be forced to delay, reduce in scope or eliminate some of our research and development programs, including related clinical trials and operating expenses, potentially delaying the time to market for, or preventing the marketing of, any of our product candidates, which could adversely affect our business prospects and our ability to continue operations, and would have a negative impact on our financial condition and our ability to pursue our business strategies. If we are unable to continue as a going concern, we may have to cease operations and liquidate our assets. We may receive less than the value at which those assets are carried on our audited financial statements, and it is likely that investors will lose all or a part of their investment. The report from our independent registered public accounting firm issued in connection with this Annual Report on Form 10-K contains statements expressing substantial doubt about our ability to continue as a going concern. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide funding to us on commercially reasonable terms, if at all. To the extent that money is raised through the sale of our securities, the issuance of those securities could result in dilution to our existing security holders. If we raise money through debt financing or bank loans, we may be required to secure the financing with some or all our business assets, which could be sold or retained by the creditor should we default on our payment obligations. If we fail to raise sufficient funds, we will likely need to curtail or cease operations.
We are developing oral biologic product candidates in patient-friendly dosage forms that are designed for either targeting local gastrointestinal (GI) tissue or entering systemic circulation to precisely address the relevant biology of a disease. We are building a portfolio of oral product candidates based on our technology platform including our most advanced product candidate, AMT-101, a gastrointestinal-selective oral fusion of interleukin 10 (IL-10) and our proprietary carrier molecule that has been designed for active transport across the IE barrier into local gastrointestinal (GI) tissue. IL-10 is a potent immunomodulatory cytokine that is known to be the master regulator of immune homeostasis, including within GI mucosal tissue. We have designed AMT-101 to cross the IE barrier, but not enter the bloodstream, which we believe may offer significant efficacy and safety benefits compared to systemic IL-10 administration.
In 2022, we released top-line results from the Phase 2 LOMBARD clinical trial and Phase 2 MARKET clinical trial for our lead product candidate, AMT-101, which failed to meet its primary efficacy endpoints. We also completed our FILLMORE clinical trial as a monotherapy in patients with chronic pouchitis in 2022. Additionally, based on the observation that AMT-101 can impact systemic markers of inflammation, we are conducting our CASTRO clinical trial evaluating the combination of AMT-101 and anti-TNFα therapy in patients with active RA who have had an inadequate response to anti-TNFα monotherapy.
Our second product candidate, AMT-126, is a GI-selective oral fusion of IL-22 and our proprietary carrier molecule currently in development for diseases related to IE barrier function defects. IL-22 is a cytokine that repairs functional and structural defects of the IE barrier and induces microbial defense. AMT-126 is designed to act locally on the epithelial cells of the intestinal tissue, thereby repairing the IE barrier and supporting mucosal healing, potentially translating into clinically meaningful improvements in a broad range of GI-focused, peripheral inflammatory and other diseases. While previous clinical trials conducted by others in the field with systemic rhIL-22 demonstrated efficacy in UC, significant toxicities associated with systemic administration have been observed. We have designed AMT-126 to cross the IE barrier, but not enter the bloodstream, which we believe may offer significant efficacy and safety benefits compared to systemic rhIL-22 administration.
We completed a Phase 1a clinical trial for AMT-126 in 2022 and are evaluating next steps for the clinical program.
3

Table of Contents
We are developing biologic product candidates in patient-friendly dosage forms that are designed for either targeting local tissue or entering systemic circulation to precisely address the relevant biology of a disease. Our technology platform enables us to design and develop various oral and respiratory biologic therapeutic modalities, such as peptides, proteins, full-length antibodies, antibody fragments, and ribonucleic acid (RNA) therapeutics, with potentially significant advantages over existing marketed and development-stage drugs.
Our Pipeline and Research Programs
We are leveraging our proprietary technology platform to design and develop a pipeline of oral biologic product candidates with differentiated profiles designed to address autoimmune, inflammatory, metabolic, and other diseases, as shown below. While our most advanced product candidates, AMT-101 and AMT-126, are novel, oral biologic therapeutics to treat autoimmune and inflammatory diseases, any disease which can be treated with an oral or respiratory biologic therapeutic is conceivably a candidate for our technology. All of our early research programs have been on hold since our strategic focus announcement in May 2022. We own intellectual property rights to our technology platform and hold worldwide rights to all of our product candidates.
Our pipeline chart is shown below in Figure 1.
Figure 1. Our Pipeline and Research Programs
Our Pipeline
amti-20221231_g1.jpg
AMT-101
AMT-101 is a GI-selective oral fusion of rhIL-10 and our proprietary carrier molecule. IL-10 is an immunomodulatory cytokine that is known to be the master regulator of GI mucosal homeostasis. While previous clinical trials conducted by others in the field with systemic rhIL-10 demonstrated efficacy in Crohn’s disease, significant toxicities associated with systemic administration prevented further development. We have designed AMT-101 to cross the IE barrier while not entering the bloodstream, thereby targeting the drug directly at the site of action of the underlying biology of the disease in the GI tissue and, therefore, potentially avoiding the side effects observed with systemic administration.
By design, AMT-101 is actively transported through the IE barrier into the GI tissue. In 2022, we released top-line results from the Phase 2 LOMBARD clinical trial and Phase 2 MARKET clinical trial for AMT-101, which failed to meet its primary efficacy endpoints. In November 2022, the U.S. Food and Drug Administration (FDA) cleared our investigational new drug
4

Table of Contents
(IND) application for oral AMT-101 for the treatment of patients with chronic pouchitis. In addition, based on the observation that AMT-101 can impact systemic markers of inflammation, we are conducting our CASTRO trial evaluating the combination of AMT-101 and anti-TNFα therapy in patients with active RA who have had an inadequate response to anti-TNFα monotherapy.
AMT-126
AMT-126 is a GI-selective oral fusion of rhIL-22 and our proprietary carrier molecule currently in development for diseases related to IE barrier function defects. IL-22 is a cytokine that repairs functional and structural defects of the IE barrier and induces microbial defense. AMT-126 is designed to act locally on the epithelial cells of the intestinal tissue, thereby repairing the IE barrier and supporting mucosal healing, potentially translating into clinically meaningful improvements in a broad range of GI-focused, peripheral inflammatory and other diseases. We believe that our GI-selective AMT-126 may be safer than systemically administered treatments, because AMT-126 is designed to not enter a patient’s bloodstream, therefore avoiding the potential adverse events observed with other previously systemically administered rhIL-22 candidates.
In preclinical development, AMT-126 demonstrated activity in animal models of intestinal inflammation, as well as the induction of markers associated with the repair of IE barrier function defects. The localization of AMT-126 in GI tissue has been further demonstrated in several preclinical studies. Despite being localized to the GI tissue, we have observed in animal models that AMT-126 can also impact systemic markers of inflammation.
By targeting AMT-126 to the IE barrier, we believe our therapy may translate to clinically meaningful reductions in disease activity. As a locally targeted, GI-selective biologic therapeutic, AMT-126 has the potential to address IE barrier function defects linked to a wide array of diseases, including celiac disease, a disease with no approved therapies, UC, Graft-versus-Host Disease (GVHD), and a number of peripheral diseases secondary to GI dysfunction, such as psoriatic arthritis (PsA) and other spondyloarthropathies (SpA). We completed a Phase 1a clinical trial for AMT-126 in 2022 and are evaluating next steps for the clinical program.
Research Programs
Our technology platform is enabling the generation of a pipeline of earlier-stage oral product candidates spanning multiple therapeutic areas that can either be targeted to GI tissue or released into blood for broader systemic exposure. While our most advanced product candidates, AMT-101 and AMT-126, are novel, oral biologic therapeutics to treat autoimmune and inflammatory diseases, any disease which can be treated with an oral or respiratory biologic therapeutic is conceivably a candidate for our technology. All of our early research programs have been on hold since our strategic focus announcement in May 2022.
Our Team
We are led by a management team with substantial scientific, drug development, and commercialization experience across relevant disciplines including epithelial biology, immunology, gastroenterology, hepatology, clinical development, protein science and engineering, translational science and biomarker development, peptide chemistry, formulation development, manufacturing, and quality. Our executives have held successful and diverse roles leading research, clinical development, strategy, corporate development and operational functions at large biopharmaceutical companies, venture-backed start-ups, public biotechnology companies, and academia having worked at companies such as Genentech, Inc. (now a member of Roche Holding Ltd.), Amgen Inc., Novartis AG, Gilead Sciences, Inc., Boehringer Ingelheim International GmbH, and Kythera Biopharmaceuticals, Inc. We were founded by our Chief Executive Officer, Tahir Mahmood, Ph.D., and our former Chief Scientific Officer, Randall Mrsny, Ph.D., who have extensive backgrounds in epithelial biology, biopharmaceutical technologies, and delivery of pharmaceutical products. Members of our leadership team have been involved in the discovery, development, manufacturing and commercialization of multiple marketed products across various therapeutic areas. Our leadership is complemented by a team of researchers and biologics development experts, the majority of whom hold Ph.D., M.D., or other graduate degrees.
Our Proprietary Oral Biologics Technology Platform
Shortcomings of Current Biologic Therapeutics
Biologic therapeutics provide enormous therapeutic potential because of their high specificity, potency, and ability to target disease-modifying pathways. However, since the IE is a robust natural barrier for the absorption of proteins and peptides, it is difficult to deliver biologic therapeutics orally. Therefore, the systemic, injection or infusion, route is the primary route of administration for biologic therapeutics. The IE barrier represents a significant challenge for drug developers.
5

Table of Contents
The gut is the primary site of convergence of several core biology axes that impact virtually every organ system, including immunological, endocrine and neural. At any given time, over 70% of an individual’s immune system resides in the lamina propria, which is the target-rich tissue of the intestinal tract. However, the currently marketed biologic therapeutics are only able to efficiently access these key biological pathways if the therapeutics are delivered in high doses systemically. Large doses of systemically injected therapeutics could lead to toxicities because they will reach not only the targeted tissue, but also other tissues in the body.
Our Technology Platform for Oral Biologics
We have identified a series of trafficking pathways that are used by microbes to actively transfer proteins across the IE barrier. By leveraging the natural pathways and proteins, we have demonstrated that it is possible to actively transport biologic therapeutics across the IE barrier by oral administration in animals and humans.
Cholix is a protein secreted by Vibrio cholerae that translocates across the IE barrier of the intestine. We have identified the protein sequences along the cholix molecule responsible for trafficking across the IE barrier and targeting immune cells in the GI tissue. This mechanism is based on active, receptor-mediated processes that naturally transport proteins. Our proprietary technology platform creates a fusion protein containing engineered protein translocation sequences of cholix (the AMT carrier) and any protein of interest, which we refer to as the therapeutic payload, to create a novel biologic that can be transported across the IE barrier. Trafficking across IE cells is an active transport process involving uptake at the luminal surface, movement of vesicles through the cells, and release at the basal surface, that utilize dynamic interactions with endogenous elements of the cell.
Figure 2 illustrates the distinction between our proprietary active transport approach and that of traditional passive diffusion approaches.
Figure 2. Distinction between our proprietary active transport approach and passive diffusion
amti-20221231_g2.jpg
6

Table of Contents
Figure 3 illustrates our ability to leverage the translocation mechanism of cholix and either actively target the biologic therapeutics to the GI tissue or enter into systemic circulation to precisely address the relevant biology of a disease.
Figure 3. Targeting oral biologic therapeutics to different locations depending on disease biology
amti-20221231_g3.jpg
Advantages of our Technology Platform
Our technology platform establishes a new paradigm to orally deliver biologic therapeutics. We believe that AMT-101 has demonstrated clinical proof of concept for our technology platform by enabling the active transport and rapid absorption of an orally-administered biologic therapeutic. We believe that our technology offers several advantages:
amti-20221231_g4.jpg
Active transport across the IE barrier: Most strategies that have tried to deliver biologic therapeutics orally have focused on passive diffusion across the IE barrier or the use of permeation enhancers to open tight junctions in order to increase permeability through paracellular spaces. In contrast, our technology actively transports the payload through the cell in a receptor and vesicular-mediated process which is beneficial because of the higher transport efficiency and ability to apply our technology to a wide range of therapeutic modalities. All of our product candidates, including AMT-101 and AMT-126, are actively transported.
Flexibility of therapeutic modalities: We have demonstrated our ability to deliver peptides, proteins, full-length antibodies, antibody fragments, and RNA therapeutics using our technology platform. This diversity of payloads increases the number of therapeutic opportunities where our technology can be deployed. Our current programs capitalize on the breadth of our technology which includes proteins (AMT-101, AMT-126 and hGH), peptides (GLP-1 and GLP-2), and full-length antibodies.
7

Table of Contents
Targeting local GI tissue or entering into systemic circulation: When designing our product candidates, we can target the therapeutic payload to the lamina propria of the local GI tissue. This is particularly beneficial for immunology and GI disorders because the intestinal tissue is the largest immune organ in the body, housing greater than 70% of the body’s immune cells. Our most advanced product candidates, AMT-101 and AMT-126, are designed to target the local GI tissue. Alternatively, we can design our product candidates to enter into the bloodstream for systemic exposure after crossing the IE barrier. For example, we have designed our research-stage hGH program for systemic exposure and have demonstrated in multiple preclinical models that hGH can enter systemic circulation using our technology platform. The flexibility of our technology platform allows us to target diseases localized to the GI tissue or diseases where having the product circulating systemically is critical.
Rapid uptake in the intestinal tract: We have demonstrated in vivo that the translocation of a biologic therapeutic coupled to the AMT carrier can occur rapidly and the protein can be localized in the submucosal space within 20 minutes. All of our product candidates are rapidly absorbed by the intestinal tract within 10 to 30 minutes after exposure to the epithelial surface.
Ease of biologic therapeutic production: Our product candidates are conveniently synthesized recombinantly using standard bacterial or mammalian manufacturing processes. This allows us to employ traditional expression and optimization strategies to produce the therapeutic protein. Alternatively, if a product candidate contains a payload with non-natural amino acids and/or chemical modifications, we can produce the AMT carrier recombinantly and chemically conjugate the modified payload to create the product candidate.
Beyond the active transport capabilities of our proprietary technology platform, we also utilize several other technologies to ensure our products are protected in the GI environment and released at the appropriate location of the intestine. We have employed enteric coating techniques using off the shelf polymers and excipients that are considered safe for use by regulatory authorities. Our product candidates can be released at various points in the intestine for optimal uptake such as at the terminal ileum, which is part of the small bowel, or along the colon. In a scintigraphy trial in human subjects, we evaluated the release profile of various formulations using capsules of our enteric-coated formulations where we used a radiolabeled tracer instead of active drug product. As shown in Figure 4, the formulated capsule remained intact until it reached the terminal ileum, where it began to dissolve and release its contents. We have developed other formulations that allow our product candidates to be released at various other regions along the GI tract.
Figure 4. Human intestinal tract scintigraphy images demonstrating GI transit and location-specific release of our proprietary formulated capsule
amti-20221231_g5.jpg
The outlined regions in the two images to the left (2.3 and 2.5 hours) represent the stomach, whereas the outlined regions in the two images to the right (3.5 and 5.5 hours) represent the colon. This demonstrates in the clinic our ability to target drug to a desired location along the GI tract.
Our ability to deliver biologic therapeutics with our oral technology platform provides several potential advantages over systemically administered biologics and oral products that are also GI-selective. These attributes are designed to achieve the following benefits:
Improving Efficacy: Our oral biologic therapeutics provide significant therapeutic potential because of their high potency and ability to locally target the GI tract and access key biological pathways. In contrast to our oral technology platform, systemically administered biologics often cannot achieve the appropriate therapeutic dose levels because of dose-limiting toxicities.
8

Table of Contents
Improving Safety: GI-selective products may have safety advantages relative to systemically administered drugs because the biologic payload has minimal exposure to systemic circulation. In contrast, systemically administered drugs result in undesirably high levels of drugs in tissues which were not intended to be targeted. By minimizing off-target safety liabilities, our product candidates have the potential to be used in a more versatile manner, either as a single agent or in combination with other therapies. We believe that in light of current events caused by pandemic infection, there is a heightened need for non-systemic, locally-acting immunomodulators that are distinct from immuno-suppressive drugs.
More Patient-Friendly: When compared to systemically administered biologics delivered by injection or infusion, we expect oral dosage forms to enhance compliance and quality of life of patients and caregivers.
Our Product Candidates: AMT-101 and AMT-126
We have leveraged our proprietary technology platform to design and develop a pipeline of oral biologic product candidates with differentiated profiles designed to address autoimmune, inflammatory, metabolic, and other diseases. AMT-101 is a GI-selective oral fusion of our proprietary carrier molecule and rhIL-10. AMT-126 is a GI-selective oral fusion of our proprietary carrier molecule and rhIL-22.
AMT-101: Our Oral GI-Selective IL-10 Fusion Protein
Our most advanced product candidate, AMT-101, is a recombinant fusion of rhIL-10 and the engineered protein translocation sequences of cholix. In 2022, we released top-line results from the Phase 2 LOMBARD clinical trial and Phase 2 MARKET clinical trial for AMT-101, which failed to meet its primary efficacy endpoints. We have completed the FILLMORE Phase 2 clinical trial as a monotherapy in patients with chronic pouchitis. Additionally, based on the observation that AMT-101 can impact systemic markers of inflammation, we have initiated and dosed patients in the CASTRO Phase 2 clinical trial evaluating the combination of AMT-101 and anti-TNFα therapy in patients with active RA who have had an inadequate response to anti-TNFα monotherapy. Oral AMT-101 is designed to act locally in the intestinal lamina propria tissue to modulate immune pathways along GI tissue and control inflammation, resulting in clinical and symptomatic improvement. We believe oral AMT-101 may have safety advantages compared to systemically administered treatments, including prior clinical evaluation of rhIL-10, because AMT-101 is designed to not enter a patient’s bloodstream. Targeted localization of AMT-101 to the GI tissue lamina propria is expected to translate into clinically meaningful reductions in inflammation and disease activity. Figure 5 below shows the molecular structure of AMT-101.
Figure 5. Molecular Structure of AMT-101
amti-20221231_g6.jpg
Overview of IL-10 Biology
IL-10 is a potent immunomodulatory cytokine that is known to be the master regulator of GI mucosal tissue immune homeostasis. IL-10 regulates the activation and effector function of multiple innate and adaptive immune cells and upregulates cytokine inhibitors (e.g., soluble TNF-receptor and IL-1Ra). The binding of IL-10 to its receptor activates the IL-10/JAK1/STAT3 cascade, a key pathway in modulating inflammation, where phosphorylated STAT3 homodimers translocate to the nucleus to activate the expression of target genes to promote cellular protection, survival, and proliferation.
Preclinical and Translational Science Support for Treatment of IBD with IL-10
Support for the use of rhIL-10 in the treatment of IBD has been reinforced by the preclinical studies in IL-10 knockout mice in which the absence of IL-10 leads to spontaneous signs of intestinal inflammation as early as three weeks of age. The symptoms
9

Table of Contents
progress into chronic transmural inflammation of the large and small bowels that resemble Crohn’s disease, which can be alleviated with IL-10 treatment.
IL-10 has been identified in human genome wide-association preclinical studies as being associated with risk factors for IBD, further demonstrating the genetic contribution to disease pathogenesis. Moreover, polymorphisms in the IL-10 receptor and loss-of-function mutations in IL-10 or the IL-10 receptor are associated with early onset of disease for UC and Crohn’s disease, respectively.
Clinical Support for Treatment of IBD with IL-10
rhIL-10 has been evaluated as a systemically administered agent in clinical trials in healthy volunteers and patients with IBD. Prior clinical trials with rhIL-10 in Crohn’s disease demonstrated a trend towards clinical improvement. However, systemically administered rhIL-10 treatment was associated with adverse events and loss of response at higher doses. Certain clinical trials exhibited induction of severe anemia and thrombocytopenia believed to have been caused by broad systemic exposure of rhIL-10. In addition to the observed toxicities, systemically administered rhIL-10 is thought to have resulted in intestinal IL-10 concentrations that were insufficient to down-regulate inflammation. We believe that IL-10 targeted to the local site of inflammation may offer optimal therapeutic benefit and avoid the safety issues observed in systemic administration.
Potential Benefits and Positioning of AMT-101, Our IL-10 Program
We believe AMT-101 has the potential to offer clinical benefits in GI diseases, as well as in peripheral inflammatory indications such as RA. We have initially developed AMT-101 for chronic pouchitis and will further explore the potential clinical benefits of AMT-101 for other GI diseases. We have completed a Phase 2 clinical trial as a monotherapy for chronic pouchitis, and an orphan GI inflammatory disease with no approved therapies.
IL-10 is a potent immunomodulator that has shown preliminary efficacy in Crohn’s disease patients when administered systemically, though with serious adverse events caused by the systemic exposure of rhIL-10. Oral AMT-101 has the potential to unlock the full therapeutic potential of rhIL-10 therapy because it is actively transported to immunomodulatory pathways in the local GI tissue and is designed to not enter a patient’s bloodstream, so it is not expected to have the safety issues of previous systemic rhIL-10 therapies.
Due to its potentially attractive safety profile and immunomodulatory mechanism, AMT-101 has an opportunity to potentially be used as a single agent or in combination with other therapies for IBD and other inflammatory diseases. Furthermore, we have initiated a Phase 2 clinical study in patients with RA as the evidence of immunomodulatory effects observed in the peripheral circulation in our Phase 1 clinical trial in healthy volunteers and patients with active UC suggests that AMT-101 has the potential to be used beyond GI disorders in peripheral inflammatory indications.
AMT-101 is formulated to be available in a convenient, oral, once-a-day tablet.
Market Opportunity—Chronic Pouchitis
In patients who have had a colectomy for refractory UC disease, ileal pouch-anal anastomosis (IPAA) is a common procedure to create a pouch for patients’ stool. Patients who have an IPAA typically have four to eight bowel movements per day, but the most common complication among patients who have undergone an IPAA is pouchitis, an idiopathic chronic inflammatory condition. It is estimated that approximately 50-60% of patients who have undergone IPAA surgery for UC will develop at least one episode of pouchitis in the next decade. Pouchitis leads to increased stool frequency and liquidity, cramping, urgency, fecal incontinence, and occasional rectal bleeding. It has been estimated that approximately 30,000 to 45,000 patients have pouchitis in the United States.
While the majority of patients with acute pouchitis respond well to a short course of antibiotics, some patients develop chronic and refractory disease that requires long-term non-antibiotic therapy. Currently, there are no therapies approved for pouchitis and chronic refractory patients will be treated with budesonide, anti-inflammatory drugs (mesalamine, sulfasalazine), or immunosuppressive drugs (other steroids or anti-TNFα). There is a significant unmet medical need to develop products for patients who develop severe chronic pouchitis.
Summary of Our AMT-101 Data
Through our Phase 1 and Phase 2 clinical trials, we have observed that AMT-101 acts on the local immunological pathways along the GI tissue. Importantly, AMT-101 did not enter the bloodstream. We believe that AMT-101 has demonstrated PoC for our technology platform by enabling the active transport and rapid absorption of an orally-administered biologic therapeutic.
10

Table of Contents
Summary of Our AMT-101 Clinical Data
AMT-101 Phase 1a/b Clinical Trial
The AMT-101 Phase 1a/1b was a double-blinded clinical trial that evaluated the safety and efficacy of orally administered AMT-101 monotherapy, first in a single ascending dose (SAD) trial in healthy volunteers followed by a multiple ascending dose (MAD) study over 14 days in patients with active ulcerative colitis. In the Phase 1a SAD study, a wide range of doses were tested: 1 mg, 3 mg, 10 mg, 30 mg, 60 mg, and 120 mg. Healthy volunteers were randomized 4:2 active to placebo for the single oral administration. Overall, AMT-101 appeared well tolerated with only 3 mild adverse events and no serious adverse events (SAEs). The Phase 1b MAD trial randomized UC patients in a 3:1 active to placebo manner for treatment over 14 days. MAD doses of 1 mg, 3 mg, 10 mg, and 30 mg were tested. Overall, AMT-101 appeared well tolerated with no SAEs or early terminations. To understand pharmacodynamic effect in a UC patient population, clinically validated biomarkers of fecal calprotectin (FC) and c-reactive protein (CRP) were evaluated to measure percentage change from baseline. Overall, mean reductions of both FC and CRP occurred in the 1 mg, 3 mg, and 10 mg doses with placebo adjusted FC and CRP reduction in the 3 mg dose of approximately 27% and 10%, respectively. These observations, along with exploratory central-read histologic tissue evaluation utilizing the Geboes scoring system formed the basis for the selection of 3 mg and 10 mg as doses to advance to further Phase 2 testing.
AMT-101 Phase 2 Clinical Trials
FILLMORE
FILLMORE was a Phase 2 double-blinded clinical trial that evaluated the safety and efficacy of orally administered AMT-101 monotherapy, over 12 weeks, in patients with chronic pouchitis. The FILLMORE trial randomized 22 patients to 3 mg or 10 mg of oral AMT-101. The clinical trial was designed to measure two key pre-specified efficacy endpoints: 1) symptomatic improvement, as measured by stool frequency response, and 2) histologic healing, as measured by central read. On the first measure, results from the trial demonstrated that 36.4% (8/22) of patients achieved stool frequency response, defined as a reduction of ≥ 3 stools and ≥ 30% from baseline, OR ≤ post-colectomy normal. On the second measure, 22.7% (5/22) of patients met the pre-specified histologic healing response of Geboes score ≤ 3.1, an objective assessment of disease improvement. FILLMORE patients had a median baseline Geboes score of 5.1, representing severe pouchitis with ulceration and tissue destruction. Both dosage groups demonstrated histologic healing response. Combined results of stool frequency response across both arms was 36.4% (8/22) and combined rates of histologic response was 22.7% (5/22). AMT-101 appeared well tolerated.
MARKET
MARKET was a Phase 2 clinical trial in patients with moderate to severe ulcerative colitis in which 51 patients were randomized to adalimumab alone or the combination of adalimumab + 3 mg AMT-101 for 8 weeks. Overall, the combination arm achieved a clinical remission rate of 31.8% (7/22) versus 33.3% (9/27) in the adalimumab alone arm. Although the combination arm did not exhibit superiority over adalimumab alone, AMT-101 appeared well tolerated.
LOMBARD
LOMBARD was a 12 week Phase 2a clinical trial in patients with moderate to severe ulcerative colitis in which 105 patients were randomized in a 2:1 ratio to 3 mg AMT-101 versus placebo. Overall rates of clinical remission, the key efficacy endpoint were 17.1% (12/70) in the AMT-101 arm versus 20.0% (7/35) in the placebo arm. Although AMT-101 failed to meet its primary efficacy endpoints, AMT-101 appeared well tolerated.
AMT-101 Phase 2 Clinical Program
We are conducting a Phase 2 clinical program for AMT-101 that includes our FILLMORE trial as a monotherapy in patients with chronic pouchitis. Additionally, based on the observation that AMT-101 can impact systemic markers of inflammation, we are conducting our CASTRO trial evaluating the combination of AMT-101 and anti-TNFα therapy in patients with active rheumatoid arthritis (RA) who have had an inadequate response to anti-TNFα monotherapy.
Figure 6 provides additional information related to our Phase 2 clinical trials for AMT-101.

11

Table of Contents
Figure 6. Phase 2 clinical trials for AMT-101amti-20221231_g7.jpg
amti-20221231_g8.jpg


12

Table of Contents
amti-20221231_g9.jpg
AMT-126: Our Oral GI-Selective IL-22 Fusion Protein
Our second product candidate, AMT-126, is a GI-selective oral fusion of rhIL-22 and our proprietary carrier molecule currently in development for diseases related to GI tissue barrier function defects. IL-22 is a cytokine that repairs functional and structural defects of the IE barrier and induces microbial defense. AMT-126 is designed to act locally on the epithelial cells of the intestinal tissue, thereby repairing the IE barrier and supporting mucosal healing, potentially translating into clinically meaningful improvements in a broad range of GI-focused, peripheral inflammatory and other diseases. We believe AMT-126 may have safety advantages relative to systemically administered IBD treatments, including prior clinical evaluation of rhIL-22, because AMT-101 is designed to stay in the GI tissue and not enter a patient’s bloodstream.
In preclinical development, AMT-126 demonstrated activity in animal models of intestinal inflammation, as well as induction of local tissue and systemic effects associated with the repair of IE barrier function defects. The localization of AMT-126 in GI tissue has been further demonstrated in NHP preclinical studies. As a locally targeted, GI-selective biologic therapeutic, AMT-126 has the potential to address IE barrier function defects linked to a wide array of diseases, including celiac disease, a disease with no approved medicines, UC, and a number of peripheral diseases secondary to GI dysfunction, such as psoriatic arthritis (PsA) and other spondyloarthropathies (SpA). We have initiated a Phase 1 clinical trial for AMT-126 similar to that which we conducted with AMT-101 including a Phase 1a single ascending dose in healthy volunteers to be followed by a Phase 1b multiple ascending dose in healthy patients with an indication associated with intestinal barrier defects.
13

Table of Contents
Figure 7 shows the molecular structure of AMT-126.
Figure 7. Molecular structure of AMT-126
amti-20221231_g10.jpg
The Role of IL-22 Biology in IE Barrier Function Defect Correction
IL-22 is a cytokine that repairs functional and structural defects of the IE barrier and induces microbial defense by counteracting inflammasome-driven IE barrier function defects. IL-22 also functions to promote cell proliferation, block apoptosis, and support wound healing. While IL-22 can have a variety of actions on the structural and functional properties of the intestine, the most critical action related to health and disease relates to maintenance of the IE barrier. For example, in celiac disease, gliadin-induced IE barrier function defects of the small intestine appear to be correlated with a reduction of IL-22 in a NHP model. In addition, depletion of IL-22-producing CD4+ cells is correlated with active disease in UC models.
Potential Benefits of AMT-126, Our IL-22 Program
We believe AMT-126 may have a profile that will make it compelling to develop for IE barrier function defects linked to a wide array of diseases including celiac disease, UC and others. IL-22 has a mechanism of action that is directed at disturbances in the IE barrier function, which is central to these diseases. There are currently no approved therapies focused on the repair of IE barrier function.
We have designed AMT-126 to act locally on the GI tissue while avoiding entering the patient’s bloodstream, which we believe will mitigate previously reported adverse effects associated with systemic IL-22 treatments.
Due to its potentially attractive safety profile and complementary mechanism of action with those of anti-inflammatory products, we believe AMT-126 has the potential to be used as a single agent or in combination with anti-inflammatory products.
AMT-126 will be formulated to be available in a convenient, once daily, oral dosage form.
Summary of Our AMT-126 Preclinical Data
AMT-126 Shows Highly Comparable Bioactivity to rhIL-22 in Established Models of In Vitro Pharmacology
AMT-126 was evaluated to determine in vitro bioactivity. As shown in Figure 8, IL-22 receptor dimerization and STAT3 activation confirmed ligand-dependent activation of the IL-22 signaling pathway that was highly comparable to multiple sources of rhIL-22. Furthermore, the AMT carrier by itself demonstrated no bioactivity.
14

Table of Contents
Figure 8. AMT-126 induced IL-22 receptor dimerization and STAT3 activation in vitro bioactivity assays
amti-20221231_g11.jpg
Oral AMT-126 Shows Efficacy in a Murine Dextran Sulphate Sodium (DSS) Induced Model of UC
In a murine DSS-induced UC model to assess the activity of oral AMT-126, oral dosing of AMT-126 reduced DSS-induced weight loss and fecal hemoccult, and improved stool consistency during the course of the clinical trial.
Figure 9. Oral AMT-126 demonstrated efficacy in a murine model of disease (DSS)
amti-20221231_g12.jpg
Oral AMT-126 Shows Systemic Pharmacological Effects with Low Systemic Exposures
AMT-126 was administered by oral capsules in a non-disease NHP model and, by design, showed minimal (pg/ml) levels in the systemic circulation. Although AMT-126 is intended to stay in the GI tissue, we observed systemic induction of Reg3A and IL-1Ra (Figure 10). This effect demonstrates the ability of oral GI-selective AMT-126 to induce effects along GI tissue that impact both local and systemic biology, but without meaningful systemic exposure. We believe oral AMT-126, as a gut selective therapy, could have the same, if not greater, efficacy as systemic IL-22, but may also have an enhanced safety profile due to minimal systemic levels of IL-22. Furthermore, the systemic induction of IL-1Ra suggests a broader role for oral GI-selective AMT-126 in peripheral diseases secondary to GI dysfunction.
Figure 10. Oral AMT-126 Shows Systemic Pharmacological Effects with Low Systemic Exposures in Non-Human Primates
amti-20221231_g13.jpg
15

Table of Contents
AMT-126 Phase 1 Clinical Programs
We completed the Phase 1a clinical trial for AMT-126 in 2022 and are evaluating next steps for the clinical program.
Research Programs
Our technology platform is enabling the generation of a pipeline of earlier-stage oral product candidates spanning multiple therapeutic areas that can either be targeted to GI tissue or released into blood for broader systemic exposure. While our most advanced product candidates, AMT-101 and AMT-126, are novel, oral biologic therapeutics to treat autoimmune and inflammatory diseases, any disease which can be treated with an oral or respiratory biologic therapeutic is conceivably a candidate for our technology.
All of our early research programs have been on hold since our strategic focus announcement in May 2022.
Manufacturing
We believe that developing our own manufacturing capacity and capability is important to limit our reliance on contract manufacturers, protect our trade secrets and intellectual property, and improve our manufacturing processes. We have spent and continue to spend significant resources developing our current manufacturing processes, capabilities, and know-how. We have commissioned our new GMP manufacturing facility located in South San Francisco where we now manufacture clinical drug supply. We have successfully manufactured clinical supply at our previous GMP facility also located in South San Francisco. We will also continue to rely on third-party current good manufacturing practice (cGMP) manufacturers for certain manufacturing steps of our product candidates for clinical supply. We have established non-exclusive relationships with several contract manufacturers, for the manufacturing of various intermediates and finished product candidates. We have personnel with significant technical, manufacturing, analytical, quality, regulatory, cGMP, and project management experience to execute our internal manufacturing capabilities, oversee our third-party manufacturers, and to manage manufacturing and quality data and information for regulatory compliance purposes.
Commercialization Plan
We do not currently have any approved drugs and we do not expect to have any approved drugs in the near term. Therefore, we have no sales, marketing, or commercial product distribution capabilities and have no experience as a company in marketing drugs. When, and if any of our product candidates are approved for commercialization, we intend to develop a commercialization infrastructure for those products in the United States, Europe, Asia, and potentially in certain other key markets. We may also rely on partnerships to provide commercialization infrastructure, including sales and marketing and commercial distribution.
Competition
The pharmaceutical and biotechnology industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on intellectual property. We face potential competition from many different sources, including major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, universities and other academic institutions, government agencies, and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for the research, development, manufacturing, and commercialization of therapies aimed at treating autoimmune, inflammatory, metabolic, and other diseases. Any product candidates that we successfully develop and commercialize will compete with current therapies and new therapies that may become available in the future.
In particular, with respect to our most advanced product candidates, AMT-101 and AMT-126, we compete against companies that produce injectable biologic therapeutics such as AbbVie Inc., Amgen Inc., Bristol-Myers Squibb Co., Eli Lilly and Co., Janssen Pharmaceuticals, Inc., Merck Sharp & Dohme Corp., Roche Holding Ltd., Prometheus Biosciences, Inc., and Takeda Pharmaceutical Company Ltd., as well as companies that produce oral products such as Abivax SA, Amgen Inc., Bristol-Myers Squibb Co., Dice Therapeutics Inc, Galapagos NV, Gilead Sciences, Inc., Landos Biopharma, Inc., Morphic Holding, Inc., Pfizer Inc., Protagonist Therapeutics, Inc., and Ventyx Biosciences, Inc.
We are not aware of any other company or organization that has developed a FDA-approved oral biologic, other than peptides. However, we are aware of other companies developing oral biologic drug candidates using their own technology platform.
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, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved drugs than we do. Mergers and acquisitions in the pharmaceutical,
16

Table of Contents
biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. 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, establishing clinical trial sites and enrolling subjects for our clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.
We could see a reduction or elimination of our commercial opportunity if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we or our collaborators may develop, including if competitors develop a safer and/or more effective oral biologic technology platform. Our competitors also may obtain FDA or foreign regulatory approval for their products more rapidly than we may obtain approval for product candidates, which could result in our competitors establishing a strong market position before we or our collaborators are able to enter the market. The key competitive factors affecting the success of all our product candidates, if approved, are likely to be their efficacy, safety, convenience, price, the effectiveness of companion diagnostics, if required, the level of biosimilar or generic competition and the availability of reimbursement from government and other third-party payors.
Intellectual Property
Our success depends in part on our ability to obtain and maintain proprietary protection for our product candidates, technology and know-how, to operate without infringing the proprietary rights of others and to prevent others from infringing our proprietary rights. Our strategy is to seek to protect our proprietary position by, among other methods, pursuing and obtaining patent protection in the United States and in jurisdictions outside of the United States related to our proprietary technology, inventions, improvements, and product candidates that are important to the development and implementation of our business. Our patent portfolio is intended to cover our product candidates and related components, their methods of use and processes for their manufacture, and any other inventions that are commercially important to our business. We also rely on trademarks as well as trade secret protection of our confidential information and know-how relating to our proprietary technology platform, and product candidates. We believe that we have substantial know-how and trade secrets relating to our technology and product candidates.
As of February 10, 2023, our patent portfolio includes patents and patent applications related to our technology platform and our product candidates. In total, our patent portfolio includes 125 U.S. and foreign issued patents and over 130 other pending patent applications. Foreign patents are granted in the following jurisdictions: Europe (validated in Germany, France, United Kingdom, Belgium, Switzerland, Spain, Greece, Ireland, Italy, Netherlands, Sweden, Norway, Austria, Denmark, Finland, Hungary, Poland, Portugal, Turkey, Cyprus, Czech Republic, Luxembourg, Slovakia, and Slovenia), Brazil, Canada, China, Israel, Australia, Hong Kong, Japan, Philippines, South Korea, Mexico, Russia, South Africa, and India. The technology platform filings include 96 issued patents and at least 70 pending applications. Certain platform filings are expected to expire as early as 2031. Other filings directed to platform technology are expected to expire as early as 2039.
In addition to platform filings, we have filings directed to specific product candidates. For our product candidates, we generally pursue multilayered patent protection covering the composition of matter including the sequence of the product candidates, the formulations of the product candidates, and/or the functional characteristics of the product candidates. In addition to composition of matter coverage, we also generally pursue claims directed to methods of making, and methods of use of the product candidates. Filings specific to AMT-101 and AMT-126 are expected to expire in 2040 or 2039.
Government Regulation
The FDA and other regulatory authorities at federal, state and local levels, as well as in foreign countries, extensively regulate, among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring and post-approval reporting of biologics such as those we are developing. We, along with third-party contractors, will be required to navigate the various preclinical, clinical and commercial approval requirements of the governing regulatory authorities of the countries in which we wish to conduct preclinical studies or seek approval or licensure of our product candidates.
U.S. Biologics Regulation
The process required by the FDA before biologic product candidates may be marketed in the United States generally involves the following:
completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s current Good Laboratory Practices regulation;
17

Table of Contents
submission to the FDA of an IND, which must become effective before clinical trials may begin and must be updated annually or when significant changes are made;
approval by an independent IRB or ethics committee at each clinical site before the trial is commenced;
performance of adequate and well-controlled human clinical trials to establish the safety, purity and potency of the proposed biologic product candidate for its intended purpose;
preparation of and submission to the FDA of a biologics license application (BLA) after completion of all pivotal clinical trials;
satisfactory completion of an FDA Advisory Committee review, if applicable;
a determination by the FDA within 60 days of its receipt of a BLA to file the application for review;
satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed product is produced to assess compliance with cGMP and to assure that the facilities, methods and controls are adequate to preserve the biological product’s continued safety, purity and potency, and of selected clinical investigation sites to assess compliance with current good clinical practices (cGCP); and
FDA review and approval of a BLA to permit commercial marketing of the product for particular indications for use in the United States.
Preclinical and Clinical Development
Prior to beginning the first clinical trial with a product candidate, we must submit an IND to the FDA. An IND is a request for authorization from the FDA to administer an investigational new drug product to humans. The central focus of an IND submission is on the general investigational plan and the protocol or protocols for preclinical studies and clinical trials. The IND also includes results of preclinical animal and in vitro studies assessing the toxicology, pharmacokinetics, pharmacology and pharmacodynamic characteristics of the product, chemistry, manufacturing and controls information, and any available human data or literature to support the use of the investigational product. An IND must become effective before human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day period, raises safety concerns or questions about the proposed clinical trial. In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an IND therefore may or may not result in FDA authorization to begin a clinical trial.
Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with cGCP, which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development and for any subsequent protocol amendments. Furthermore, an independent IRB for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial begins at that site and must monitor the clinical trial until completed. Regulatory authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the clinical trial is unlikely to meet its stated objectives. Some preclinical studies also include oversight by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board, which provides authorization for whether or not a clinical trial may move forward at designated check points based on access to certain data from the clinical trial and may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. There are also requirements governing the reporting of ongoing preclinical studies and clinical trials and clinical trial results to public registries.
For purposes of BLA approval, human clinical trials are typically conducted in three sequential phases that may overlap.
Phase 1. The investigational product is initially introduced into healthy human subjects or patients with the target disease or condition. These clinical trials are designed to test the safety, dosage tolerance, absorption, metabolism and distribution of the investigational product in humans, to identify possible side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness.
Phase 2. The investigational product is administered to a limited patient population with a specified disease or condition to evaluate the preliminary efficacy, optimal dosages and dosing schedule and to identify possible adverse side effects and safety risks. We expect to conduct four Phase 2 clinical trials to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.
18

Table of Contents
Phase 3. The investigational product is administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval.
In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the product. These so-called Phase 4 clinical trials may be made a condition to approval of the BLA. Concurrent with clinical trials, companies may complete additional preclinical animal studies and develop additional information about the biological characteristics of the product candidate and must finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality, purity, and potency of the final product. Additionally, appropriate packaging must be selected and tested. Stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.
Since March 2020, the FDA has issued various COVID-19 related guidance documents for sponsors and manufacturers, including guidance documents regarding conducting clinical trials during the pandemic, Good Manufacturing Practices, remote interactive evaluations of drug manufacturing and bioresearch monitoring facilities, and drug product manufacturing and supply chain inspections, among others. The ultimate impact of the COVID-19 pandemic on our business operations is uncertain and subject to change and will depend on future developments, including new regulatory requirements and changes to existing regulations. Recently, President Biden announced that the administration intends to end the COVID-19 national and public health emergencies on May 11, 2023. The full impact of the termination of the public health emergencies on FDA and other regulatory policies and operations is unclear.
BLA Submission and Review
Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development, preclinical studies and clinical trials are submitted to the FDA as part of a BLA requesting approval to market the product for one or more indications. The BLA must include all relevant data available from pertinent preclinical studies and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls, and proposed labeling, among other things. The submission of a BLA requires payment of a substantial application user fee to the FDA, unless a waiver or exemption applies.
Once a BLA has been submitted, the FDA’s goal is to review standard applications within ten months after it accepts the application for filing, or, if the application qualifies for priority review, six months after the FDA accepts the application for filing. In both standard and priority reviews, the review process is often significantly extended by FDA requests for additional information or clarification. The FDA reviews a BLA to determine, among other things, whether a product is safe, pure, and potent and the facility in which it is manufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency. The FDA may convene an advisory committee to provide clinical insight on application review questions. Before approving a BLA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites to assure compliance with cGCP. If the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
After the FDA evaluates a BLA and conducts inspections of manufacturing facilities where the investigational product and/or its drug substance will be produced, the FDA may issue an approval letter or a Complete Response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A Complete Response letter will describe all of the deficiencies that the FDA has identified in the BLA, except that where the FDA determines that the data supporting the application are inadequate to support approval, the FDA may issue the Complete Response letter without first conducting required inspections, testing submitted product lots and/or reviewing proposed labeling. In issuing the Complete Response letter, the FDA may recommend actions that the applicant might take to place the BLA in condition for approval, including requests for additional information or clarification. The FDA may delay or refuse approval of a BLA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product.
19

Table of Contents
If regulatory approval of a product is granted, such approval will be granted for particular indications and may entail limitations on the indicated uses for which such product may be marketed. For example, the FDA may approve the BLA with a Risk Evaluation and Mitigation Strategy (REMS) to ensure the benefits of the product outweigh its risks. A REMS is a safety strategy to manage a known or potential serious risk associated with a product and to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing requirements is not maintained or if problems occur after the product reaches the marketplace. The FDA may require one or more Phase 4 post-market clinical trials and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization and may limit further marketing of the product based on the results of these post-marketing clinical trials.
Expedited Development and Review Programs
The FDA offers a number of expedited development and review programs for qualifying product candidates. The fast track program is intended to expedite or facilitate the process for reviewing new products that meet certain criteria. Specifically, new products are eligible for fast track designation if they are intended to treat patients with a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. Fast track designation applies to the combination of the product and the specific indication for which it is being studied. The sponsor of a fast track product has opportunities for frequent interactions with the review team during product development and, once a BLA is submitted, the product may be eligible for priority review. A fast track product may also be eligible for rolling review, where the FDA may consider for review sections of the BLA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the BLA, the FDA agrees to accept sections of the BLA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the BLA.
A product intended to treat patients with a serious or life-threatening disease or condition may also be eligible for breakthrough therapy designation to expedite its development and review. A product can receive breakthrough therapy designation if preliminary clinical evidence indicates that the product, alone or in combination with one or more other drugs or biologics, may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The designation includes all of the fast track program features, as well as more intensive FDA interaction and guidance beginning as early as Phase 1 and an organizational commitment to expedite the development and review of the product, including involvement of senior managers.
Any marketing application for a biologic submitted to the FDA for approval, including a product with a fast track designation and/or breakthrough therapy designation, may be eligible for other types of FDA programs intended to expedite the FDA review and approval process, such as priority review and accelerated approval. A product is eligible for priority review if it has the potential to provide a significant improvement in the treatment, diagnosis or prevention of a serious disease or condition. For original BLAs, priority review designation means the FDA’s goal is to take action on the marketing application within six months of the 60-day filing date (as compared to ten months under standard review).
Additionally, products studied for their safety and effectiveness in treating patients with serious or life-threatening diseases or conditions may receive accelerated approval upon a determination that the product has an effect on 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. As a condition of accelerated approval, the FDA will generally require the sponsor to perform adequate and well-controlled post-marketing clinical trials to verify and describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product. In December 2022, the Consolidated Appropriations Act, 2023, including the Food and Drug Omnibus Reform Act (FDORA), was signed into law. FDORA made several changes to the FDA’s authorities and its regulatory framework, including, among other changes, reforms to the accelerated approval pathway, such as requiring the FDA to specify conditions for post-approval study requirements and setting forth procedures for the FDA to withdraw a product on an expedited basis for non-compliance with post-approval requirements.
Fast track designation, breakthrough therapy designation, priority review and RMAT designation do not change the standards for approval but may expedite the development or approval process. 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.
20

Table of Contents
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat patients with a rare disease or condition, which is a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States for which there is no reasonable expectation that the cost of developing and making available in the United States a drug or biologic for this type of disease or condition will be recovered from sales in the United States for that drug or biologic. Orphan drug designation must be requested before submitting a BLA. In November 2022, AMT-101 was granted orphan drug designation in patients with pouchitis. After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. The orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review or approval process.
If a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug exclusive approval (or exclusivity), which means that the FDA may not approve any other applications, including a full BLA, to market the same biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or if the FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated. Orphan drug exclusivity does not prevent the FDA from approving a different drug or biologic for the same disease or condition, or the same drug or biologic for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the BLA application fee.
A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition.
In Catalyst Pharms., Inc. v. Becerra, 14 F.4th 1299 (11th Cir. 2021), the court disagreed with the FDA’s longstanding position that the orphan drug exclusivity only applies to the approved use or indication within an eligible disease. In particular, the circuit court held that the orphan-drug exclusivity for Catalyst’s drug blocked FDA’s approval of another drug for all uses or indications within the same orphan-designated disease, or Lambert-Eaton myasthenic syndrome (LEMS), even though Catalyst’s drug was approved at that time only for use in the treatment of LEMS in adults. Accordingly, the court ordered the FDA to set aside the approval of a drug indicated for LEMS in children. This decision created uncertainty in the application of the orphan drug exclusivity. On January 24, 2023, the FDA published a notice in the Federal Register to clarify that while the agency complies with the court’s order in Catalyst, FDA intends to continue to apply its longstanding interpretation of the regulations to matters outside of the scope of the Catalyst order – that is, the agency will continue tying the scope of orphan-drug exclusivity to the uses or indications for which a drug is approved, which permits other sponsors to obtain approval of a drug for new uses or indications within the same orphan designated disease or condition that have not yet been approved. It is unclear how future litigation, legislation, agency decisions, and administrative actions will impact the scope of the orphan drug exclusivity.
Post-approval Requirements
Any products manufactured or distributed by us pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to cGMP, quality controls, record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing user fee requirements, under which the FDA assesses an annual program fee for each product identified in an approved BLA. Biologic manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.
The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market clinical
21

Table of Contents
trials to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:
restrictions on the marketing or manufacturing of a product, complete withdrawal of the product from the market or product recalls;
fines, warning letters or holds on post-approval clinical trials;
refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of existing product approvals;
product seizure or detention, or refusal of the FDA to permit the import or export of products;
consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs;
mandated modification of promotional materials and labeling and the issuance of corrective information;
the issuance of safety alerts, Dear Healthcare Provider letters, press releases and other communications containing warnings or other safety information about the product; or
injunctions or the imposition of civil or criminal penalties.
The FDA closely regulates the marketing, labeling, advertising and promotion of biologics. A company can make only those claims relating to safety and efficacy, purity and potency that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising, potential civil and criminal penalties, government investigation, and/or debarment or exclusion from participation in federal health care programs. Physicians may prescribe legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the practice of medicine by physicians or their choice of treatments. The FDA does, however, regulate manufacturer’s communications on the subject of off-label use of their products.
Biosimilars and Reference Product Exclusivity
The ACA includes a subtitle called the BPCIA, which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-approved reference biological product. To date, a number of biosimilars have been licensed under the BPCIA, and numerous biosimilars have been approved in Europe. The FDA has issued several guidance documents outlining an approach to review and approval of biosimilars.
Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency and that the biological product is highly similar to the reference product notwithstanding minor differences in clinically inactive components, which can be demonstrated through comparative analytical studies, animal studies, and a clinical trial or studies. Interchangeability requires that a product is biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product in any given patient or that it can be substituted for the reference product without the intervention of a health care provider who prescribed the reference product, and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic. Complexities associated with the larger, and often more complex, structures of biological products, as well as the processes by which such products are manufactured, pose significant hurdles to implementation of the abbreviated approval pathway that are still being worked out by the FDA.
Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing that applicant’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product. The BPCIA also created certain exclusivity periods for biosimilars
22

Table of Contents
approved as interchangeable products. At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law.
The BPCIA is complex and continues to be interpreted and implemented by the FDA. In addition, government proposals have sought to reduce the 12-year reference product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. As a result, the ultimate impact and implementation of the BPCIA are subject to significant uncertainty.
Other Healthcare Laws and Compliance Requirements
Pharmaceutical companies are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which they conduct their business. Such laws include, without limitation: the federal Anti-Kickback Statute, the federal False Claims Act, the Sunshine Act, the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, and similar foreign, federal and state fraud and abuse, transparency, and health information privacy and security laws.
The federal Anti-Kickback Statute prohibits, among other things, persons and entities from knowingly and willfully soliciting, receiving, offering or paying remuneration, to induce, or in return for, either the referral of an individual, or the purchase or recommendation of an item or service for which payment may be made under any federal healthcare program. The term remuneration has been interpreted broadly to include anything of value, including stock options. The federal Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers and formulary managers, among others, on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, but they are drawn narrowly and require strict compliance in order to offer protection. Our activities, including our engagement of consultants, may be alleged to be intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of an applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the federal Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all relevant facts and circumstances. Our practices may not in all cases meet all of the criteria for protection under a statutory exception or regulatory safe harbor. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, a claim including items or services resulting from a violation of the federal Anti-Kickback Statute, can result in a false or fraudulent claim for purposes of the federal False Claims Act.
Civil and criminal false claims laws, including the federal False Claims Act, which can be enforced through civil whistleblower or qui tam actions, and civil monetary penalty laws prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment to the federal government, including federal healthcare programs, that are false or fraudulent. For example, the federal False Claims Act prohibits any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to the federal government or knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government. A claim includes “any request or demand” for money or property presented to the U.S. government. Pharmaceutical and other healthcare companies have been prosecuted under these laws for, among other things, allegedly providing free products or other illegal kickbacks to customers to induce customers to refer or use the companies’ products over competitors’ products or alternative treatments that were billed to federal healthcare programs for reimbursement for the products.
The U.S. federal Physician Payments Sunshine Act requires applicable manufacturers of covered prescription drugs, devices, biologics or medical supplies subject to FDA approval or clearance for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to annually report to the Centers for Medicare & Medicaid Services (CMS) information related to certain payments and other transfers of value made in the previous year to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician healthcare professionals (such as physician assistants and nurse practitioners, among others), teaching hospitals, and information regarding ownership and investment interests held by physicians and their immediate family members.
HIPAA created additional federal criminal statutes that prohibit, among other things, executing a scheme to defraud any healthcare benefit program, including private third-party payors, and making false statements relating to healthcare matters. In addition, HIPAA, as amended the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their implementing regulations, impose certain requirements on HIPAA covered entities, which include certain healthcare providers, healthcare clearinghouses, and health plans, as well as individuals and entities, known as business associates, that provide services for or on behalf of the covered entities that involve individually identifiable health information, relating to the privacy, security, and transmission of individually identifiable health information.
23

Table of Contents
We are also subject to additional similar U.S. state and foreign law equivalents of each of the above federal laws, which, in some cases, differ from each other in significant ways, and may not have the same effect, thus complicating compliance efforts. For example, we may be subject to state and foreign anti-kickback and false claims laws that may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, or that apply regardless of payor; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; state and local laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; state laws that require the reporting of information related to drug pricing; state and local laws requiring the registration of pharmaceutical sales representatives; and state and foreign laws governing the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
In the event of any actual or alleged failure to comply with any of these or other laws or regulations, we may face investigations and other proceedings by governmental authorities and claims and litigation by private parties in certain circumstances. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply, or if we settle any claims or proceedings relating to any such laws or regulations, we may be subject to fines, penalties or other liabilities, including, without limitation, significant civil, criminal and administrative penalties, damages, fines, exclusion from participating in government-funded healthcare programs, such as Medicare and Medicaid or similar programs in other countries or jurisdictions, government investigations, consent decrees, corporate integrity agreements, integrity oversight and reporting obligations to resolve allegations of non-compliance, disgorgement, imprisonment, contractual damages, reputational harm, diminished profits and market share, and the curtailment or restructuring of our operations.
Coverage and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any pharmaceutical or biological product for which we obtain regulatory approval. Sales of any product, if approved, depend, in part, on the extent to which such product will be covered by third-party payors, such as federal, state, and foreign government healthcare programs, commercial insurance and managed healthcare organizations, and the level of reimbursement, if any, for such product by third-party payors. Decisions regarding whether to cover any of our product candidates, if approved, the extent of coverage and amount of reimbursement to be provided are made on a plan-by-plan basis. Further, no uniform policy for coverage and reimbursement exists in the United States, and coverage and reimbursement can differ significantly from payor to payor. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own coverage policy, formulary, and reimbursement rates, but also have their own methods and approval process apart from Medicare determinations. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific, clinical, and/or cost-effectiveness support for the use of our product candidates to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.
For products administered under the supervision of a physician, obtaining coverage and adequate reimbursement may be particularly difficult because of the higher prices often associated with such drugs. Additionally, separate reimbursement for the product itself or the treatment or procedure in which the product is used may not be available, which may impact physician utilization.
In addition, the U.S. government, state legislatures, and foreign governments have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products. Third-party payors are increasingly challenging the prices charged for medical products and services, examining the medical necessity and reviewing the cost effectiveness of pharmaceutical or biological products, medical devices and medical services, in addition to questioning safety and efficacy. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit sales of any product that receives approval. Decreases in third-party reimbursement for any product or a decision by a third-party not to cover a product could reduce physician usage and patient demand for the product.
Healthcare Reform
The United States and some foreign jurisdictions are considering or have enacted a number of reform proposals to change the healthcare system. There is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by federal and state legislative initiatives, including those designed to limit the pricing, coverage, and reimbursement of pharmaceutical and biopharmaceutical products, especially under government-funded health care programs, and increased governmental control of drug pricing.
24

Table of Contents
The ACA, which was enacted in March 2010, substantially changed the way healthcare is financed by both governmental and private insurers in the United States, and significantly affected the pharmaceutical industry. The ACA contains a number of provisions of particular import to the pharmaceutical and biotechnology industries, including, but not limited to, those governing enrollment in federal healthcare programs, a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, a new licensure framework for follow on biologic products, and annual fees based on pharmaceutical companies’ share of sales to federal health care programs. There have been executive, legislative and judicial challenges to certain aspects of the ACA since its enactment. For example, the Tax Cuts and Jobs Act of 2017 (Tax Act) was enacted, which, among other things, removed penalties for not complying with ACA’s individual mandate to carry health insurance, effective January 1, 2019. On December 14, 2018, a Texas District Court Judge ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the Tax Act, the remaining provisions of the ACA are invalid as well. However, in June 2021 the U.S. Supreme Court held that Texas and other challengers had no legal standing to challenge the ACA, dismissing the case on procedural grounds without specifically ruling on the constitutionality of the ACA. Thus, the ACA will remain in effect in its current form. It is possible that the ACA will be subject to judicial or Congressional challenges in the future. It is unclear how future challenges to the ACA and healthcare measures promulgated by the Biden administration will impact the ACA, our business, financial condition and results of operations.
On January 28, 2021, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through May 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. Complying with any new legislation or reversing changes implemented under the ACA could be time-intensive and expensive, resulting in a material adverse effect on our business.
Other legislative changes have been proposed and adopted since the ACA was enacted, including aggregate reductions of Medicare payments to providers of 2% per fiscal year and reduced payments to several types of Medicare providers. These reductions went into effect in April 2013 and will remain in effect through 2031, with the exception of a temporary suspension implemented under various COVID-19 relief legislation from May 1, 2020 through March 31, 2022, unless additional action is taken by Congress. Under current legislation, the actual reduction in Medicare payments can vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester.
Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.
For example, under the American Rescue Plan Act of 2021, effective January 1, 2024, the statutory cap on Medicaid Drug Rebate Program rebates that manufacturers pay to state Medicaid programs will be eliminated. Elimination of this cap may require pharmaceutical manufacturers to pay more in rebates than it receives on the sale of products, which could have a material impact on our business. In August 2022, Congress passed the Inflation Reduction Act of 2022, which includes prescription drug provisions that have significant implications for the pharmaceutical industry and Medicare beneficiaries, including allowing the federal government to negotiate a maximum fair price for certain high-priced single source Medicare drugs, imposing penalties and excise tax for manufacturers that fail to comply with the drug price negotiation requirements, requiring inflation rebates for all Medicare Part B and Part D drugs, with limited exceptions, if their drug prices increase faster than inflation, and redesigning Medicare Part D to reduce out-of-pocket prescription drug costs for beneficiaries, among other changes. The impact of these regulations and any future healthcare measures and agency rules implemented by the government on us and the pharmaceutical industry as a whole is unclear. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our product candidates if approved.
At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. For example, a number of states are considering or have recently enacted state drug price transparency and reporting laws that could substantially increase our compliance burdens and expose us to greater liability under such state laws once we begin commercialization after obtaining regulatory approval for any of our products.
25

Table of Contents
Human Capital
Employees
As of December 31, 2022, we had 79 full-time employees. None of our employees are represented by a labor union or covered by collective bargaining agreements, and we believe our relationship with our employees is good.
Diversity & Inclusion
We are committed to creating and maintaining a workplace free from discrimination or harassment on the basis of color, race, sex, national origin, ethnicity, religion, age, disability, sexual orientation, gender identification or expression or any other status protected by applicable law. Our management team and employees are expected to exhibit and promote honest, ethical and respectful conduct in the workplace. All of our employees must adhere to a code of conduct that sets standards for appropriate behavior and we have implemented specific policies designed to prevent, identify, report and stop any type of discrimination and harassment. Our recruitment, hiring, development, training, compensation and advancement at our company is based on qualifications, performance, skills and experience without regard to gender, race and ethnicity.
Competitive Pay & Benefits and Pay Equity
We strive to provide competitive and robust compensation and benefits programs that help meet the varying needs of our employees, and we are committed to pay equity, based on gender or race/ethnicity. Our total rewards package includes competitive pay, comprehensive healthcare benefits package for employees, family medical leave and flexible work schedules. In addition, we offer every full-time employee, both exempt and non-exempt, the benefit of equity ownership in the company through stock option grants, restricted stock unit grants, and our employee stock purchase plan. We offer a 401(k) plan and we match employee contributions up to a certain limit.
Employee Development & Training
The competition for talent in our industry and in the San Francisco Bay Area where our headquarters is located is significant. As a result, our commitment to investing in human capital is of critical importance to ensure our ability to attract, develop and maintain key talent to support our business.
We emphasize employee development and training. We have a performance development review process in which managers provide regular feedback to assist with the development of our employees, including the use of individual plans to assist with career development.
Safety
The safety, health and wellness of our employees is a top priority. In response to COVID-19, we have implemented safety protocols, including limiting on-site activities to essential staff during periods of increased regional COVID-19 infection rates, routine screening for employees and others visiting the site, contact tracing and appropriate protocols to address any known exposures, increased cleaning procedures and readily available hand sanitizer stations, and additional controls based on case rates and local requirements including the wearing of masks and for social distancing. These protocols are designed to maintain the health and safety of our employees and comply with health and safety standards as required by federal, state and local government agencies, taking into consideration guidelines of the Centers for Disease Control and Prevention and other public health authorities.
Available Information
We may use our website (https://www.appliedmt.com), press releases, public conference calls and public webcasts as means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Information contained on, or that can be accessed through, our website or any website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered to be part of this Annual Report on Form 10-K unless expressly noted.
Our Annual Reports on Form 10‑K, Quarterly Reports on Form 10‑Q, Current Reports on Form 8‑K, proxy and information statements and amendments to reports filed pursuant to Sections 13(a), and 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act) are filed with the U.S. Securities and Exchange Commission (SEC). We are subject to the informational requirements of the Exchange Act and file or furnish reports, proxy statements and other information with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. Such documents and other information filed by us with the SEC are available free of charge on the Investor section of our website when such reports are available on the SEC’s website.
26

Table of Contents
Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this Annual Report on Form 10-K, including our financial statements and the related notes and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations, growth prospects or stock price. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.
Risk Factors Summary
Investing in shares of our common stock involves a high degree of risk because our business is subject to numerous risks and uncertainties, as fully described below. The principal factors and uncertainties that make investing in shares of our common stock risky include, among others:
Certain of our clinical trials have failed to demonstrate evidence of efficacy for one indication of one of our product candidates, and we may have other clinical trials that fail to demonstrate evidence of the safety and efficacy of our product candidates which would prevent, delay, or limit the scope of regulatory approval and commercialization;
There is substantial doubt about our ability to continue as a going concern;
We could be delisted from The Nasdaq Global Select Market;
We will need to obtain substantial additional capital to finance our operations;
We are early in our development efforts, have a limited operating history, and no products approved for commercial sale;
We have incurred significant net losses in each period since inception, and we expect to continue to incur net losses for the foreseeable future;
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates;
We may not be successful in our efforts to use and expand our technology platform to build a pipeline of oral biologic product candidates;
COVID-19 or other future public health crises could adversely impact our business, including our ongoing and planned clinical trials and preclinical studies;
Research and development related to novel biological therapeutics is inherently risky and our business is heavily dependent on the successful development of our product candidates, which are in preclinical and the early stages of clinical development;
We may encounter delays in our preclinical studies or clinical trials, or may not be able to conduct or complete our preclinical studies or clinical trials on the timelines we expect;
We have conducted clinical trials for AMT-101 and AMT-126 outside of the United States, and continue to conduct such clinical trials for AMT-101, and geopolitical events such as the conflict between Russia and Ukraine has and may continue to delay the completion of certain of our clinical trials and increase costs associated with such clinical trials;
We may be unable to obtain U.S. or foreign regulatory approval for our product candidates and, as a result, may be unable to commercialize our product candidates;
Preliminary data from our clinical trials that we announce or publish from time to time may change as additional patient data become available and are subject to verification procedures that could result in material changes in the final data or clinical conclusions;
Our success depends on our ability to protect our intellectual property as well as operate without infringing on the rights of third parties;
We are highly dependent on our key personnel and if we are not successful in attracting, motivating, and retaining highly qualified personnel, we may not be able to successfully implement our business strategy;
We may in the future engage in strategic transactions, acquisitions, collaborations, or partnerships, which may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, require us to relinquish rights to certain of our technologies or products that we would otherwise seek to develop or commercialize ourselves, and subject us to other risks;
27

Table of Contents
The manufacturing of our product candidates is complex. We and our third-party manufacturers may encounter difficulties in production. If we encounter any such difficulties, our ability to supply our product candidates for clinical trials or, if approved, for commercial sale, could be delayed or halted entirely; and
The market price of our common stock may be volatile, which could result in substantial losses for investors.
Risks Related to Our Business, Financial Condition, and Capital Requirements
Our preclinical studies and clinical trials have failed to demonstrate evidence of the safety and efficacy of our product candidates, which could prevent, delay, or limit the scope of regulatory approval and commercialization.
Before obtaining regulatory approvals for the commercial sale of any of our product candidates, we must demonstrate through lengthy, complex, and expensive preclinical studies and clinical trials that our product candidates are both safe and effective for use in each target indication. Each product candidate must demonstrate an adequate risk versus benefit profile in its intended patient population and for its intended use.
Preclinical studies and clinical testing are expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the preclinical studies or clinical trial process. The results of preclinical studies of our product candidates may not be predictive of the results of early-stage or later-stage clinical trials, and results of early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. The results of clinical trials in one set of patients or disease indications may not be predictive of those obtained in another. In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including variability in the purity or potency of different batches of the same product candidate, changes in clinical trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the dosing regimen, and other aspects of the clinical trial protocols and the rate of dropout among clinical trial participants. Open-label extension studies may also extend the timing and cost of a clinical development program substantially. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy profile despite having progressed through preclinical studies and initial clinical trials. For example, our lead product candidate, AMT-101, failed to meet its primary efficacy endpoints in our Phase 2 LOMBARD clinical trial and our Phase 2 MARKET clinical trial. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable safety issues, notwithstanding promising results in earlier clinical trials. Most product candidates that begin clinical trials are never approved by regulatory authorities for commercialization.
We have limited experience in designing clinical trials and may be unable to design and execute a clinical trial to support marketing approval. We cannot be certain that our current clinical trials or any other future clinical trials will be successful, as evidenced by the results in our Phase 2 LOMBARD and Phase 2 MARKET clinical trials for AMT-101. Additionally, any safety concerns observed in any one of our clinical trials in our targeted indications could limit the prospects for regulatory approval of our product candidates in those and other indications, which could have a material adverse effect on our business, financial condition, and results of operations.
In addition, even if such clinical trials are successfully completed, we cannot guarantee that the FDA or foreign regulatory authorities will interpret the results as we do, and more clinical trials could be required before we submit our product candidates for approval. To the extent that the results of the clinical trials are not satisfactory to the FDA or foreign regulatory authorities to advance a product candidate to the next phase of clinical development or for support of a marketing application, we may be required to expend significant resources, which may not be available to us, to conduct additional clinical trials in support of potential approval of our product candidates. Even if regulatory approval is secured for any of our product candidates, the terms of such approval may limit the scope and use of our product candidates, which may also limit its commercial potential.
There is substantial doubt as to our ability to continue as a going concern. If we do not receive additional funding, we may have to curtail or cease operations.
As of December 31, 2022, we had cash and cash equivalents of $61.1 million. Based on our available cash resources, management has concluded that there is substantial doubt about our ability to continue as a going concern within one year after the date the financial statements included in this Annual Report on Form 10-K are issued. If we are unable to obtain additional funding, we will be forced to delay, reduce in scope or eliminate some of our research and development programs, including related clinical trials and operating expenses, potentially delaying the time to market for, or preventing the marketing of, any of our product candidates, which could adversely affect our business prospects and our ability to continue operations, and would have a negative impact on our financial condition and our ability to pursue our business strategies. If we are unable to continue as a going concern, we may have to cease operations and liquidate our assets. We may receive less than the value at which those assets are carried on our audited financial statements, and it is likely that investors will lose all or a part of their investment.
28

Table of Contents
The report from our independent registered public accounting firm issued in connection with this Annual Report on Form 10-K contains statements expressing substantial doubt about our ability to continue as a going concern. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide funding to us on commercially reasonable terms, if at all. To the extent that money is raised through the sale of our securities, the issuance of those securities could result in dilution to our existing security holders. If we raise money through debt financing or bank loans, we may be required to secure the financing with some or all our business assets, which could be sold or retained by the creditor should we default on our payment obligations. If we fail to raise sufficient funds, we will likely need to curtail or cease operations.
We will need to obtain substantial additional capital to finance our operations. A failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce, or terminate our research and drug development programs, future commercialization efforts, product development, or other operations.
Developing biologic therapeutics, including conducting preclinical studies and clinical trials, is a very time-consuming, expensive, and uncertain process that takes years to complete. Our operations have required substantial amounts of cash since inception, and we expect to continue to incur expenses in connection with our ongoing activities and operating losses for the foreseeable future. To date, we have financed our operations primarily through the sale of equity securities. Developing our product candidates and conducting clinical trials for the treatment of autoimmune, inflammatory, metabolic, and other diseases will require substantial amounts of capital. We will also require a significant amount of capital to commercialize any approved products. Even if one or more of the product candidates that we develop is approved for commercial sale, we anticipate incurring significant costs associated with sales, marketing, manufacturing and distribution activities. Furthermore, other unanticipated costs may also arise.
On March 11, 2022, we filed a final shelf registration statement on Form S-3 which allows us to undertake various offerings. In addition, on January 27, 2022, we entered into a Sales Agreement with SVB Securities LLC and JMP Securities LLC, as our sales agents (Agents), pursuant to which we may offer and sell from time to time through the Agents up to $150.0 million in shares of our common stock through an “at-the-market” program (ATM facility). For so long as our non-affiliate public float does not exceed $75 million, the amount of securities that we may sell pursuant to registration statements on Form S-3 will be limited to the equivalent of one-third of our public float, which will limit our ability to raise capital. As of December 31, 2022, we had not yet sold any shares of common stock under the ATM facility. We will require additional capital for the further development and, if approved, commercialization of our product candidates. Our future funding requirements will depend on many factors, including but not limited to:
the initiation, scope, rate of progress, results and cost of our preclinical studies, clinical trials, and other related activities for our product candidates;
the costs associated with manufacturing our products, including expanding our own manufacturing facilities and establishing commercial supplies and sales, marketing, and distribution capabilities which could be impacted by increasing inflation;
the timing and cost of capital expenditures to support our research, development, and manufacturing efforts;
the number and characteristics of other product candidates that we pursue;
the costs, timing, and outcome of seeking and obtaining FDA and non-U.S. regulatory approvals;
our ability to maintain, expand, and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make in connection with the licensing, filing, defense, and enforcement of any patents or other intellectual property rights;
the timing, receipt, and amount of sales from our potential products;
our need and ability to hire additional management, scientific, technical, business, and medical personnel;
the effect of competing products that may limit market penetration of our products;
the economic and other terms, timing, and success of any collaboration, licensing, or other arrangements into which we may enter in the future, including any product development or other operation obligations we may have under these agreements and the timing of receipt of any milestone or royalty payments under these agreements;
the compliance and administrative costs associated with being a public company; and
the extent to which we divest, acquire or invest in businesses, products, or technologies, although we currently have no commitments or agreements establishing any of these types of transactions.
To the extent that we raise additional capital through the sale of equity or convertible debt securities or to the extent that we may issue equity securities in connection with a strategic transaction, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing, if available, may involve agreements that include the issuance of warrants or covenants limiting or
29

Table of Contents
restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If we raise funds through collaborations, strategic alliances, licensing arrangements with strategic partners, or asset sales, we may have to relinquish valuable rights to our technologies, intellectual property, future revenue streams, research programs, product candidates, and infrastructure, or grant licenses on terms that may not be favorable to us. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.
Additional capital may not be available when we need it, on terms acceptable to us or at all and will be dependent on, among other factors, clinical trial results from AMT-101. We have no committed source of additional capital and recently, capital markets have been particularly volatile and our stock price has declined. If adequate capital is not available to us on a timely basis or on acceptable terms, we may be required to significantly delay, scale back, or discontinue our research and development programs or the commercialization of any product candidates, if approved, or be unable to continue or expand our operations, or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition, results of operations, and prospects, and cause the price of our common stock to decline.
We could be delisted from Nasdaq, which would seriously harm the liquidity of our stock and our ability to raise capital.
On February 8, 2023, we received a notice from The Nasdaq Stock Market LLC (“Nasdaq”) notifying us that, for the last 30 consecutive business days, the closing bid price for our common stock listed on Nasdaq has been below the minimum $1.00 per share required for continued listing on the Nasdaq Global Select Market pursuant to Nasdaq Listing Rule 5450(a)(1) (the “Bid Price Requirement”).
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been provided a period of 180 calendar days, or until August 7, 2023, to regain compliance with the Bid Price Requirement. If at any time before August 7, 2023, the bid price of our common stock closes at a $1.00 per share or more for a minimum of 10 consecutive business days, Nasdaq will provide written notification to us that we have regained compliance with the Bid Price Requirement. In the event we do not regain compliance with the Bid Price Requirement by August 7, 2023, we may be afforded an additional 180-day compliance period, provided we demonstrate that we meet all other applicable standards for initial listing on the Nasdaq Capital Market, except the Bid Price Requirement. If we do not regain compliance with the Bid Price Requirement by the end of the second compliance period, or if our stock trades for less than $0.10 for ten consecutive trading days during either of the compliance periods, our stock will be subject to delisting.
We intend to monitor the closing bid price of our common stock and may, if appropriate, consider available options to regain compliance with the Bid Price Requirement, including initiating a reverse stock split. However, there can be no assurance that we will be able to regain compliance with the Bid Price Requirement or will otherwise be in compliance with other Nasdaq Listing Rules.
We are early in our development efforts, have a limited operating history and have no products approved for commercial sale, which makes it difficult to evaluate our current business and predict our future success and viability.
We are an early clinical-stage biopharmaceutical company with a limited operating history upon which you can evaluate our business and prospects.
We have no products approved for commercial sale and have not generated any revenue from product sales. We are developing a novel technology platform which is an unproven and highly uncertain undertaking and involves a substantial degree of risk. While we have conducted a number of Phase 2 clinical trials (one of which is still ongoing) for AMT-101 and have conducted a Phase 1a clinical trial of AMT-126, we have not initiated clinical trials for any of our other product candidates. To date, we have not obtained marketing approval for any product candidates, manufactured a commercial scale product or arranged for a third-party to do so on our behalf, or conducted sales and marketing activities necessary for successful product commercialization. Our limited operating history as a company makes any assessment of our future success and viability subject to significant uncertainty.
We will incur expenses and encounter difficulties, complications, delays, and other known and unknown factors and risks frequently experienced by clinical-stage biopharmaceutical companies in rapidly evolving fields, and we have not yet demonstrated an ability to successfully overcome such risks and difficulties. We also may need to transition from a company with a research and development focus to a company capable of supporting commercial activities. We have not yet demonstrated an ability to successfully overcome such risks and difficulties, or to make such a transition. If we do not adequately address these risks and difficulties or successfully make such a transition, our business will suffer.
30

Table of Contents
We have incurred significant net losses in each period since inception, and we expect to continue to incur net losses for the foreseeable future.
We have incurred net losses in each reporting period since our inception, including net losses of $126.3 million and $100.3 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, we had an accumulated deficit of $366.0 million.
We have invested significant financial resources in research and development activities, including for our preclinical and clinical product candidates. We have not generated any revenue from product sales to date and we do not expect to generate revenue from product sales for several years, if at all. The amount of our future net losses will depend, in part, on the level of our future expenditures and revenue. Moreover, our net losses may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance.
We expect to continue to incur expenses and operating losses for the foreseeable future. We anticipate that we will continue to incur expenses if and as we:
continue our research and discovery activities;
continue the development of our proprietary technology platform;
progress our current and any future product candidates through preclinical and clinical development;
initiate and conduct additional preclinical studies, clinical trials, or other studies for our product candidates;
work with our CDMOs to manufacture our product candidates for our clinical trials;
operate our manufacturing operations at our facility located in South San Francisco;
change or add additional contract manufacturers or suppliers;
seek regulatory approvals and marketing authorizations for our product candidates;
establish sales, marketing, and distribution infrastructure to commercialize any products for which we obtain approval;
take steps to seek protection of our intellectual property and defend our intellectual property against challenges from third parties;
obtain, expand, maintain, protect, and enforce our intellectual property portfolio;
pursue any licensing or collaboration opportunities;
attract, hire, and retain qualified personnel including clinical, scientific, management, and administrative personnel;
provide additional internal infrastructure to support our continued research and development operations and any planned commercialization efforts in the future;
experience increased expenses as a result of increasing inflation;
experience any delays or encounter other issues related to our operations including as a result of the conflict between Russia and Ukraine;
implement operations, financial, and management information systems;
meet the requirements and demands of being a public company, including incurring expenses associated with efforts to raise money in the public financial markets; and
defend against any product liability claims or other lawsuits related to our products or operations.
Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity, working capital, and our ability to fund our development efforts and achieve and maintain profitability. In any particular period, our operating results could be below the expectations of securities analysts or investors, which could cause our stock price to decline.
We have historically financed our operations primarily through private placements of our convertible preferred stock and the sale of common stock in public equity issuances, such as our IPO in June 2020 and our follow-on equity offering in April 2021. In addition, on January 27, 2022, we entered into a Sales Agreement with the Agents, pursuant to which we may offer and sell from time to time through the Agents up to $150.0 million in shares of our common stock through an ATM facility. For so long as our non-affiliate public float does not exceed $75 million, the amount of securities that we may sell pursuant to registration statements on Form S-3 will be limited to the equivalent of one-third of our public float, which will limit our ability to raise
31

Table of Contents
capital. As of December 31, 2022, we have not yet sold any shares of common stock under the ATM facility. We may seek to raise capital through debt financings, private or public convertible debt financings, private or public equity financings, license agreements, collaborative agreements or other arrangements with other companies, asset sales, or other sources of financing. There can be no assurance that such financing will be available or will be at terms acceptable to us. If adequate funds are not available, we may be required to reduce operating expenses, delay or reduce the scope of our development efforts, obtain funds through arrangements with others that may require us to relinquish rights to certain of our technologies or products that we would otherwise seek to develop or commercialize ourselves, or cease operations.
Developing biologic therapeutics is a highly uncertain undertaking and involves a substantial degree of risk.
We have no products approved for commercial sale. To obtain revenue from the sales of our products that are significant or large enough to achieve profitability, we must succeed, either alone or with third parties, in developing, obtaining regulatory approval for, manufacturing, and marketing approved products with significant commercial success. Our ability to generate revenue and achieve profitability depends on many factors, including:
initiating, enrolling patients in and completing clinical trials of product candidates on a timely basis;
completing research and preclinical and clinical development of our product candidates;
obtaining specialty raw materials for use in production of our product candidates;
obtaining regulatory approvals and marketing authorizations for product candidates for which we successfully complete clinical development and clinical trials;
satisfying any post-marketing approval commitments required by applicable regulatory authorities;
developing sustainable, consistent, time-sensitive, and scalable manufacturing processes for our product candidates, either by ourselves or with third-party manufacturers, and obtaining regulatory approvals for such processes, as well as establishing and maintaining commercially viable supply relationships with third parties that can provide adequate products and services to support clinical activities and commercial demand of our products;
identifying, assessing, acquiring, and/or developing new product candidates or technologies;
launching and successfully commercializing products for which we have obtained regulatory and marketing approval by establishing a sales, marketing, and distribution infrastructure;
obtaining and maintaining an adequate price for our products, both in the United States and in foreign countries where our products are commercialized;
obtaining coverage and adequate reimbursement for our products from payors and patients’ willingness to pay in the absence of such coverage and adequate reimbursement;
obtaining market, patient, and medical community acceptance of our products as viable treatment options;
addressing any competing technological and market developments;
obtaining additional funding to develop, and potentially manufacture and commercialize our product candidates;
maintaining, protecting, expanding, and enforcing our portfolio of intellectual property rights, including patents, trade secrets, and know-how;
attracting, hiring, and retaining qualified personnel; and
negotiating favorable terms in any collaboration, licensing, or other arrangements which we may pursue.
Because of the numerous risks and uncertainties associated with developing biologic therapeutics, we are unable to predict the timing or amount of our expenses, or when we will be able to generate any meaningful revenue or achieve or maintain profitability, if ever. In addition, our expenses could increase beyond our current expectations if we are required by the FDA or foreign regulatory authorities, to perform studies in addition to those that we currently anticipate, or if there are any delays in any of our clinical trials or the development of any of our product candidates. Even if one or more of our product candidates is approved for commercial sale, we anticipate incurring significant costs associated with launching and commercializing any approved product candidate and ongoing compliance efforts.
We may not be successful in our efforts to use and expand our proprietary technology platform to build a pipeline of biologic product candidates.
A key element of our strategy is to leverage our technology platform to expand our pipeline of biologic product candidates and in order to do so, we must continue to invest in our platform and development capabilities. Although our research and development
32

Table of Contents
efforts to date have resulted in a pipeline of oral product candidates, these product candidates may not be safe or effective in the indications that we pursue. For example, we previously announced that certain trials investigating the use of AMT-101 to treat ulcerative colitis failed to achieve their primary endpoint. In addition, although we expect that our platform will allow us to develop a diverse pipeline of product candidates across multiple therapeutic areas and modalities, we may not prove to be successful at doing so. Furthermore, we may also find that the uses of our platform are limited because alternative uses of our biologic therapeutics prove not to be safe or effective. Even if we are successful in continuing to build our pipeline, the potential product candidates that we identify may not be suitable for clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval or achieve market acceptance. Even after approval, if we cannot successfully develop or commercialize our products, or if serious adverse events are discovered after commercialization, we will not be able to generate any product revenue, which would adversely affect business.
We have limited resources and are currently focusing our efforts on developing AMT-101 for particular indications and advancing our clinical trials. As a result, we may fail to capitalize on other indications or product candidates that may ultimately have proven to be more profitable.
We have limited resources and may not be able to simultaneously develop multiple product candidates in multiple therapeutic areas. For example, we are currently focused on developing our most advanced product candidate, which is AMT-101, for the treatment of pouchitis. In addition, we continue to evaluate next steps for the AMT-126 clinical program, and have paused development of our respiratory product candidate. Our goal is to focus on AMT-101 in the near term, and later expand the therapeutic and commercial potential of our targets and product candidates to additional indications to maximize value and increase our probability of success. Due to the significant resources required for the development of our product candidates, we must focus on specific product candidates and decide which product candidates to pursue and advance and the amount of resources to allocate to each. Our decisions concerning the allocation of research, development, collaboration, management, and financial resources toward particular product candidates or indications may not lead to the development of any viable commercial product and may divert resources away from better opportunities. If we make incorrect determinations regarding the viability or market potential of any of our product candidates or misread trends in immunology and inflammation, gastroenterology, and metabolic diseases, or the biopharmaceutical industry as a whole, our business, financial condition and results of operations could be materially adversely affected. As a result, we may fail to maximize profitability on our product candidates, capitalize on viable commercial products or profitable market opportunities, be required to forego or delay pursuit of opportunities with other product candidates or other indications that may later prove to have greater commercial potential than those we choose to pursue, or relinquish valuable rights to such product candidates through collaboration, licensing, or other royalty arrangements in cases in which it would have been advantageous for us to invest additional resources to retain sole development and commercialization rights.
We expect to rely on third parties to conduct our clinical trials and some aspects of our research and preclinical studies, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such clinical trials, research, or testing.
We currently rely and expect to continue to rely on third parties, such as contract research organizations (CROs), contract development and manufacturing organizations (CDMOs), medical institutions, academic institutions, and clinical investigators to conduct some aspects of our research and preclinical studies and our clinical trials. Any of these third parties may terminate their engagements with us or be unable to fulfill their contractual obligations for any reason including the COVID-19 pandemic or the conflict between Russia and Ukraine. For example, as a result of ongoing COVID-19 research and global supply chain issues, there has been limited availability for certain resources required to conduct some of our preclinical studies and clinical trials, which has resulted in and may continue to result in longer lead times, increased costs, and delays in completing preclinical studies and clinical trials. If we need to enter into alternative arrangements or are unable to find suitable alternative arrangements, it would delay our product development activities.
Our reliance on third parties for research and development activities reduces our control over these activities but does not relieve us of our responsibilities. For example, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the clinical trial. Moreover, the FDA requires us to comply with current good clinical practices (cGCP) for conducting, recording, and reporting the results of clinical trials to assure that data and reported results are credible, reproducible, and accurate and that the rights, integrity, and confidentiality of clinical trial participants are protected. We also are required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database within certain timeframes. Failure to do so can result in fines, adverse publicity, and civil and criminal sanctions.
If third parties do not successfully carry out their contractual duties, meet expected deadlines, or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we may be unable to complete, or may be delayed in
33

Table of Contents
completing, our preclinical studies or our clinical trials, and we will not be able to obtain, or may be delayed in obtaining, marketing approvals for any product candidates we may develop and will not be able to, or may be delayed in our efforts to, successfully commercialize our medicines. For example, completion of our Phase 2 MARKET combination clinical trial of oral AMT-101 with anti-TNFα in moderate-to-severe ulcerative colitis patients was delayed because we increased total enrollment from 30 patients to 51 patients due to an imbalance in the clinical trial’s planned 1:1 randomization. In addition, the ongoing conflict between Russia and Ukraine impacted our CROs, CDMOs and clinical investigators’ ability to conduct our LOMBARD clinical trial in Ukraine, Russia and other Eastern European countries, and the continued conflict may also impact future clinical trials. This could negatively impact the completion of our clinical trials and/or analyses of clinical results, which could materially harm our business.
We also expect to rely on other third parties to store and distribute supplies for our clinical trials. Any performance failure on the part of our distributors, including with the shipment of any supplies for our clinical trials, could delay clinical development or marketing approval of any product candidates we may develop or commercialization of our medicines, producing additional losses and depriving us of potential product revenue.
The manufacturing of our product candidates is complex. We and our third-party manufacturers may encounter difficulties in production. If we encounter any such difficulties, our ability to supply our product candidates for clinical trials or, if approved, for commercial sale, could be delayed or halted entirely.
Manufacturing of biologic therapeutics is a complex process and represents a critical path to creating biologic product candidates and a key component of our long-term success. We have spent significant resources to develop our current manufacturing capabilities, processes and know-how to produce sufficient supply of our product candidates. While we previously qualified a manufacturing facility located in South San Francisco, we have now relocated the manufacturing equipment to a new facility in our new corporate headquarters in South San Francisco. Qualifying our new manufacturing facility is time intensive and costly and we may experience difficulties associated with the transition, including as a result of the COVID-19 pandemic. Although we have successfully manufactured certain preclinical and clinical supply at our previously qualified manufacturing facility, we may encounter difficulties.
We will continue to rely on third-party manufacturers to execute certain steps in the manufacturing of our product candidates. The facilities used by our contract manufactures to manufacture our product candidates are subject to various regulatory requirements and may be subject to the inspection of FDA or other regulatory authorities. We do not control the manufacturing process of, and are dependent on, our contract manufacturing partners for compliance with the regulatory requirements, known as cGMPs. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or comparable regulatory authorities in foreign jurisdictions, we may not be able to rely on their manufacturing facilities for the manufacture of our product candidates. In addition, we have limited control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance, and qualified personnel. If the FDA or a comparable foreign regulatory authority finds these facilities inadequate for the manufacture of our product candidates or if such facilities are subject to enforcement action in the future or are otherwise inadequate, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates.
The process of manufacturing our product candidates is extremely susceptible to product loss due to contamination, equipment failure or improper installation or operation of equipment, vendor or operator error, inconsistency in yields, variability in product characteristics, and difficulties in scaling the production process. We have experienced in the past situations in which a contract manufacturer has failed to successfully complete a scheduled manufacturing run as a result of their manufacturing process errors or deviations from the product specifications. We also have experienced in the past situations in which we failed to successfully complete a schedule manufacturing run at our primary manufacturing site. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects and other supply disruptions. If microbial, viral, or other contaminants are discovered in our product candidates or in the manufacturing facilities in which our product candidates are made, we may have to quarantine impacted manufacturing lots pending an impact assessment, or such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination.
Any adverse developments affecting manufacturing operations for our product candidates, if any are approved, may result in shipment delays, inventory shortages, lot failures, product withdrawals or recalls, or other interruptions in the supply of our products. We may also have to take inventory write-offs and incur other charges and expenses for products that fail to meet specifications, undertake costly remediation efforts or seek more costly manufacturing alternatives. Furthermore, it is too early to estimate our cost of goods sold. The actual cost to manufacture our product candidates could be greater than we expect because we are early in our development efforts and our platform is based on a novel therapeutic approach. Failure to develop our own
34

Table of Contents
manufacturing capacity may hamper our ability to further process improvement, maintain quality control, limit our reliance on contract manufacturers, and protect our trade secrets and other intellectual property.
We currently rely on third-party manufacturers to produce our product candidates. Any failure by a third-party manufacturer to produce acceptable product candidates for us pursuant to our specifications and regulatory standards may delay or impair our ability to initiate or complete our clinical trials, obtain and maintain regulatory approvals or commercialize approved products.
We currently have limited internal manufacturing experience and personnel. While our internal manufacturing facility allows for the manufacture of product candidates, we do not currently have the infrastructure or internal capability to manufacture our product candidates for commercialization purposes. We expect to continue to rely on third parties for certain manufacturing operations of our product candidates for preclinical studies and clinical trials, in compliance with applicable regulatory and quality standards, including cGMP, and may do so for the commercial manufacture of some or all of our product candidates, if approved. If we are unable to arrange for and maintain third-party manufacturing sources that are capable of meeting regulatory standards, or fail to do so on commercially reasonable terms, we may not be able to successfully produce sufficient supply of product candidate or we may be delayed in doing so. If we were to experience an unexpected loss of supply of our product candidates, for any reason, whether as a result of manufacturing, supply, logistics, or storage issues, the COVID-19 pandemic, or otherwise, we could experience delays, disruptions, suspensions, or terminations of, or be required to restart or repeat, any pending or ongoing clinical trials. Such failure or substantial delay or loss of supply could materially harm our business.
Reliance on third-party manufacturers entails risks including:
the possible failure of the third-party to manufacture our product candidates according to our schedule, or at all, including if our third-party contractors give greater priority to the supply of other products over our product candidates or otherwise do not satisfactorily perform according to the terms of the agreements between us and them;
reliance on the third-party for regulatory compliance and quality control and assurance and failure of the third-party to comply with regulatory requirements;
the possibility of breach of the manufacturing agreement by the third-party because of factors beyond our control (including a failure to manufacture our product candidates in accordance with our product specifications);
the possible mislabeling of clinical supplies, potentially resulting in the wrong dose amounts being supplied or active drug or placebo not being properly identified;
the possibility of clinical supplies not being delivered to clinical sites on time, leading to clinical trial interruptions, or of product candidate supplies not being distributed to commercial vendors in a timely manner;
the possible misappropriation of our proprietary information, including our trade secrets and know-how; and
the possibility of termination or nonrenewal of the agreement by the third-party at a time that is costly or damaging to us.
In addition, the FDA, European Medicines Agency (EMA), and other regulatory authorities require that our product candidates be manufactured according to cGMP and similar foreign standards. Pharmaceutical manufacturers and their subcontractors are required to register their facilities or products manufactured at the time of submission of the marketing application and then annually thereafter with the FDA and certain state and foreign agencies. They are also subject to periodic unannounced inspections by the FDA, state, and other foreign authorities. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain marketing approval for or market our product candidates, if approved. Any subsequent discovery of problems with a product, or a manufacturing or laboratory facility used by us or our strategic partners, may result in sanctions being imposed on us, including fines, injunctions, civil penalties, restrictions on the product or on the manufacturing or laboratory facility, including license revocation, marketed product recall, suspension of manufacturing, product seizure, voluntary withdrawal of the product from the market, operating restrictions, or criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates and harm our business and results of operations.
We may have little to no control regarding the occurrence of third-party manufacturer incidents. Any failure by our third-party manufacturers to comply with cGMP or failure to scale up manufacturing processes, including any failure to deliver sufficient quantities of product candidates in a timely manner, would lead to a delay in, or failure to seek or obtain, regulatory approval of any of our product candidates. Furthermore, any change in manufacturer of our product candidates or approved products, if any, would require new regulatory approvals, which could delay completion of clinical trials or disrupt commercial supply of approved products.
35

Table of Contents
Our current and anticipated future dependence upon others for the manufacture of our product candidates may adversely affect our future profit margins and our ability to commercialize any product candidates that receive marketing approval on a timely and competitive basis.
In some cases, the technical skills or technology required to manufacture our product candidates may be unique or proprietary to the original manufacturer, we may have difficulty transferring such skills or technology to another third-party and a feasible alternative may not exist. These factors would increase our reliance on such manufacturer or require us to obtain a license from such manufacturer in order to have another third-party manufacture our product candidates. If we are required to change manufacturers for any reason, we will be required to verify that the new manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations and guidelines. The delays associated with the verification of a new manufacturer could negatively affect our ability to develop product candidates in a timely manner or within budget.
We depend on third-party suppliers for key raw materials used in our manufacturing processes, and the loss of these third-party suppliers or their inability to supply us with adequate raw materials could harm our business.
We rely on third-party suppliers for the raw materials required for the production of our product candidates. Our dependence on these third-party suppliers and the challenges we may face in obtaining adequate supplies of raw materials involve several risks, including delays as a result of COVID-19, the United Kingdom’s (UK) withdrawal from the European Union (Brexit) and recent global supply chain disruptions, limited control over pricing, availability, quality and delivery schedules. For example, as a result of Brexit, the movement of goods between the UK and the remaining member states of the EU are subject to additional inspections and documentation checks. As a result, we have experienced delays in our supply chain.
As a small company, our negotiating leverage is limited, and we are likely to get lower priority than our competitors who are larger than we are. We do not have long-term supply agreements, and we purchase our required supplies on a development manufacturing services agreement or purchase order basis. We cannot be certain that our suppliers will continue to provide us with the quantities of these raw materials that we require or satisfy our anticipated specifications and quality requirements. Any supply interruption in limited or sole sourced raw materials could materially harm our ability to manufacture our product candidates until a new source of supply, if any, could be identified and qualified. We may be unable to find a sufficient alternative supply in a reasonable time or on commercially reasonable terms. Any performance failure on the part of our suppliers could delay the development and potential commercialization of our product candidates, including limiting supplies necessary for clinical trials and regulatory approvals, which would have a material adverse effect on our business.
The COVID-19 pandemic, and actions taken to mitigate the spread of the virus, has impacted and could continue to adversely impact our business including our ongoing and planned clinical trials and preclinical studies.
While significant progress has been made to address the COVID-19 pandemic, with multiple vaccines and treatment options now available, the World Health Organization continues to classify COVID-19 as a pandemic and a public health emergency of international concern. The emergence of new variants has resulted in periodic surges in infection rates around the world and a cycle of fluctuating public health restrictions designed to mitigate the spread of the virus. The extent to which the COVID-19 pandemic, or any other widespread public health crisis, impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, such as the spread or emergence of new variants, the duration and severity of surges in outbreaks, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease and to address its impact, including on financial markets or otherwise. As a result of the COVID-19 pandemic, we have experienced and could experience future disruptions that could severely impact our business, current and planned clinical trials and preclinical studies, including:
delays or difficulties in enrolling and retaining participants, particularly subjects who are at a higher risk of severe illness or death from COVID-19, and in recruiting clinical site investigators and clinical site staff;
challenges related to ongoing and increased operational expenses related to the COVID-19 pandemic. For example, we have incurred additional expenses by increasing the number of clinical trial sites for certain clinical trials to mitigate the impact of COVID-19 on patient enrollment rates;
difficulties interpreting data from our clinical trials due to the possible effects of COVID-19 on patients;
diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of clinical trials;
interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others or interruption of clinical trial subject visits and clinical trial procedures, which may impact the integrity of subject data and clinical trial endpoints;
36

Table of Contents
limitations in resources, including our employees and consultants, that would otherwise be focused on the conduct of our business or our current or planned clinical trials or preclinical studies, including because of sickness, the desire to avoid contact with large groups of people or restrictions on movement or access to our facility as a result of government-imposed “shelter in place” or similar working restrictions;
interruptions, difficulties or delays arising in our existing operations and company culture as a result of some of our employees working remotely, including those hired during the COVID-19 pandemic;
increased cybersecurity risks resulting from some of our employees working remotely;
delays in receiving approval from regulatory authorities to initiate our clinical trials;
interruptions in preclinical studies due to restricted or limited operations at CROs conducting such preclinical studies;
interruptions or delays in the operations of the FDA or other regulatory authorities, or the prioritization by such regulatory authorities of COVID-19 treatments, which may impact our review and approval timelines;
refusal of the FDA to accept data from clinical trials in affected geographies outside the United States;
delays in receiving the supplies, materials and services needed to conduct clinical trials and preclinical studies;
changes in regulations as part of a response to the COVID-19 pandemic which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs or require us to discontinue clinical trials altogether;
interruptions or delays to our pipeline and research programs, and incurrence of additional costs as a result of any delays or adjustments; and
delays in necessary interactions with regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or furlough of government or contractor personnel.
Further, as a result of the COVID-19 pandemic, the extent and length of which is uncertain, we have and may continue to develop and implement additional clinical trial policies and procedures designed to help protect trial participants from the COVID-19 virus, which may include using telemedicine visits, remote monitoring of patients and clinical sites, and measures to ensure that data from clinical trials that may be disrupted as a result of the pandemic are collected pursuant to the trial protocol and consistent with cGCP, with any material protocol deviation reviewed and approved by the site Institutional Review Board (IRB). Patients who may miss scheduled appointments, any interruption in trial drug supply, or other consequence that may result in incomplete data being generated during a trial as a result of the pandemic must be adequately documented and justified. Since March 2020, the FDA has issued various COVID-19 related guidance documents for sponsors and manufacturers, including guidance regarding conducting clinical trials during the pandemic, good manufacturing practice considerations, manufacturing, supply chain, and inspections, among others.
While the extent of the impact of the COVID-19 pandemic and current and future regulatory policies and requirements on our business and financial results are uncertain, a continued and prolonged public health crisis such as the COVID-19 pandemic could have a material negative impact on our business, financial condition, and operating results. Recently, President Biden announced that the administration intends to end the COVID-19 national and public health emergencies on May 11, 2023. The full impact of the termination of the public health emergencies on FDA and other regulatory policies and operations are unclear.
To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
As of December 31, 2022, we had federal net operating loss carryforwards of $278.8 million. Of this amount, $13.3 million was generated before January 1, 2018 and will begin to expire in 2036. Federal net operating losses of $265.5 million generated after December 31, 2017 will carryforward indefinitely. As of December 31, 2022, we had state net operating loss carryforwards of $69.5 million, which will begin to expire in 2036. Realization of these NOLs depends on future income, and there is a risk that our existing NOLs could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our operating results.
Under Sections 382 and 383 of the United States Internal Revenue Code of 1986, as amended (the Code), if a corporation undergoes an “ownership change” (generally defined as a greater than 50-percentage-point cumulative change (by value) in the equity ownership of certain stockholders over a rolling three-year period), the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change taxable income or taxes may be limited. We completed an analysis under Section 382 through December 31, 2020 and concluded we had experienced an ownership change in the past.
37

Table of Contents
However, the ownership change did not result in a limitation that would materially reduce the total amount of net operating loss carryforwards and credits that can be utilized. Net operating loss and tax credit carryforwards generated during the years ended December 31, 2021 and 2022 may be subject to an annual limitation under Section 382. We believe we may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which are outside our control.
Changes in our effective tax rate or tax liability may have an adverse effect on our operating results.
Our effective tax rate and the amount of our taxable income could be adversely affected by several factors, many of which are outside of our control, including:
changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates;
changes in tax laws, rates, tax treaties, and regulations or the interpretation of them;
changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business;
changes to the financial accounting rules for income tax;
the tax effects of acquisitions;
the outcome of current and future tax audits, examinations, or administrative appeals; and
limitations or adverse findings regarding our ability to do business in some jurisdictions.
For example, the United States has recently enacted the Inflation Reduction Act, which, among other changes, imposes a 1% excise tax on certain stock buybacks and a 15% alternative minimum tax on adjusted financial statement income. Any of these developments or changes in federal, state, or international tax laws or tax rulings could adversely affect our effective tax rate and our operating results.
Risks Related to the Discovery, Development, and Commercialization of Our Product Candidates
Research and development related to novel biologic therapeutics is inherently risky. Our business is heavily dependent on the successful development of our product candidates, which are in preclinical and the early stages of clinical development. We cannot give any assurance that any of our product candidates will receive regulatory or marketing approval, which is necessary before they can be commercialized.
Our oral biologic product candidates’ use of active transport to translocate through the IE and RE barriers is a novel therapeutic approach. Our active transport approach differs from current biologics and peptides and is unproven. We are at the early stages of development of our product candidates. Our future success is dependent on our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize our product candidates, and we may fail to do so for many reasons, including the following:
our product candidates may not successfully complete preclinical studies or clinical trials;
a product candidate may on further study 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;
we may not have sufficient resources to complete development of a product candidate;
our competitors may develop therapeutics that render our product candidates obsolete or less attractive;
the product candidates that we develop may not be sufficiently covered by intellectual property for which we hold exclusive rights;
the product candidates that we develop may be covered by third parties’ patents or other intellectual property or exclusive rights;
the market for a product candidate may change so that the continued development of that product candidate is no longer reasonable or commercially attractive;
a product candidate may not be capable of being produced in development and commercial quantities at an acceptable cost, or at all;
the product candidates that we develop may be novel and therefore, not accepted by the medical community;
38

Table of Contents
if a product candidate obtains regulatory approval, we may be unable to establish sales and marketing capabilities, or successfully market such approved product candidate, to gain market acceptance; and
a product candidate may not be accepted as safe and effective by patients, the medical community, or third-party payors, if applicable.
If any of these events occur, we may be forced to abandon our development efforts for one or more product candidates, which would have a material adverse effect on our business and could potentially cause us to cease operations.
We may not be successful in our efforts to further develop our current product candidates. We are not permitted to market or promote any of our product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receive such regulatory approval for any of our product candidates. Each of our product candidates are in the early stages of development and will require significant additional clinical development, management of preclinical, clinical, and manufacturing activities, regulatory approval, adequate manufacturing supply, a commercial organization, and significant marketing efforts before we generate any revenue from product sales, if at all.
We have never completed a clinical development program. In 2022, we released top-line results from the Phase 2 LOMBARD clinical trial and Phase 2 MARKET clinical trial for AMT-101, which failed to meet its primary efficacy endpoints. We are currently focused on developing AMT-101 and are evaluating next steps for the AMT-126 clinical program. In addition, we have paused development activities on our respiratory product candidate. None of our product candidates have advanced into late-stage development and it may be years before any such clinical trial is initiated, if at all. Further, we cannot be certain that any of our product candidates will be successful in clinical trials. We may in the future advance product candidates into clinical trials and terminate such clinical trials prior to their completion.
If any of our product candidates successfully complete clinical trials, we generally plan to seek regulatory approval to market our product candidates in the United States, the European Union, and in additional foreign countries where we believe there is a viable commercial opportunity. We have never commenced, compiled or applied for regulatory approval to market any product candidate. We may never receive regulatory approval to market any product candidates even if such product candidates successfully complete clinical trials, which would adversely affect our viability. To obtain regulatory approval in countries outside of the United States, we must comply with numerous and varying regulatory requirements of such other countries regarding safety, efficacy, manufacturing and controls, clinical trials, commercial sales, pricing, and distribution of our product candidates. Even if we are successful in obtaining approval in one jurisdiction, we cannot ensure that we will obtain approval in any other jurisdictions. If we are unable to obtain approval for our product candidates in multiple jurisdictions, our business, financial condition, results of operations, and our prospects could be negatively affected.
Even if we receive regulatory approval to market any of our product candidates, we cannot assure you that any such product candidate will be successfully commercialized, widely accepted in the marketplace or more effective than other commercially available alternatives.
Investment in biopharmaceutical product development involves significant risk that any product candidate will fail to demonstrate adequate efficacy or an acceptable safety profile, gain regulatory approval, and become commercially viable. We cannot provide any assurance that we will be able to successfully advance any of our product candidates through the development process or, if approved, successfully commercialize any of our product candidates.
We may encounter delays in our preclinical studies or clinical trials, or may not be able to conduct or complete our preclinical studies or clinical trials on the timelines we expect, if at all.
Preclinical studies and clinical testing are expensive, time consuming, and subject to uncertainty. We cannot guarantee that any preclinical studies and clinical trials will be conducted as planned or completed on schedule, if at all. We cannot be sure that submission of an Investigational New Drug (IND) application or a Clinical Trial Application (CTA) will result in the FDA, EMA, or other regulatory authority, as applicable, allowing clinical trials to begin in a timely manner, if at all. Moreover, even if these preclinical studies or clinical trials begin, issues may arise that could suspend or terminate such preclinical studies or clinical trials. A failure of one or more preclinical studies or clinical trials can occur at any stage of testing, and our future preclinical studies or clinical trials may not be successful. Events that may prevent successful or timely initiation or completion of preclinical studies or clinical trials include:
inability to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation or continuation of clinical trials;
delays in confirming target engagement, biomarkers, patient selection, or other relevant criteria to be utilized in preclinical and clinical product candidate development;
39

Table of Contents
delays in reaching a consensus with regulatory authorities on clinical trial design;
delays in reaching agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites;
delays in identifying, recruiting, and training suitable clinical investigators;
delays in obtaining required IRB approval at each clinical trial site;
imposition of a temporary or permanent clinical hold by regulatory authorities for a number of reasons, including:
after review of an IND or amendment, CTA or amendment, or equivalent application or amendment;
as a result of a new safety finding that presents unreasonable risk to clinical trial participants;
a negative finding from an inspection of our clinical trial operations or trial sites; or
the finding that the investigational protocol or plan is clearly deficient to meet its stated objectives;
delays in identifying, recruiting, and enrolling suitable patients to participate in our clinical trials, and delays caused by patients withdrawing from clinical trials, or failing to return for post-treatment follow-up;
difficulty collaborating with patient groups and investigators;
failure by our CROs, other third parties, or us to adhere to clinical trial requirements;
failure to perform in accordance with the FDA’s or any other regulatory authority’s cGCP requirements, or applicable EMA or other regulatory guidelines in other countries;
occurrence of adverse events associated with the product candidate that are viewed to outweigh its potential benefits;
changes in regulatory requirements and guidance that require amending or submitting new clinical protocols;
changes in the standard of care on which a clinical development plan was based, which may require new or additional clinical trials;
the cost of clinical trials of our product candidates being greater than we anticipate;
health epidemics such as the COVID-19 pandemic;
geopolitical events such as the conflict between Russia and Ukraine;
preclinical studies or clinical trials of our product candidates producing negative or inconclusive results, which may result in our deciding, or regulators requiring us, to conduct additional clinical trials or abandon product development programs; and
delays in manufacturing, testing, releasing, validating, transporting, or importing/exporting sufficient stable quantities of our product candidates for use in preclinical studies or clinical trials or the inability to do any of the foregoing.
Any inability to successfully initiate or complete preclinical studies or clinical trials could result in additional costs to us or impair our ability to generate revenue. In addition, if we make manufacturing or formulation changes to our product candidates, we may be required, or we may elect, to conduct additional preclinical studies to bridge our modified product candidates to earlier versions. Preclinical studies or clinical trial delays could also shorten any periods during which our products have patent protection and may allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.
We have experienced in the past situations in which a contract manufacturer has failed to successfully complete a scheduled manufacturing run as a result of their manufacturing process errors or deviations from the product specifications. We also have experienced in the past situations in which we failed to successfully complete a schedule manufacturing run at our primary manufacturing site. These situations have the potential to cause delays in timelines and increases in development costs.
We could also encounter delays if a preclinical study or clinical trial is suspended or terminated by us, by the data safety monitoring board for such clinical trial or by the FDA, EMA, or any other regulatory authority, or if the IRBs of the institutions in which such clinical trials are being conducted suspend or terminate the participation of their clinical investigators and sites subject to their review. Such authorities may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA, EMA, or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative actions, or lack of adequate funding to continue the clinical trial.
40

Table of Contents
We may in the future terminate our clinical trials prior to their completion, which could adversely affect our business.
Delays in the completion of any preclinical study or clinical trial of our product candidates will increase our costs, slow down our product candidate development and approval process, and delay, or potentially jeopardize our ability to commence product sales and generate revenue. 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.
If we do not achieve our projected development goals in the timeframes we announce and expect, our stock price may decline.
From time to time, we estimate the timing of the anticipated accomplishment of various scientific, clinical, regulatory and other product development goals, which we sometimes refer to as milestones. These milestones may include the commencement or completion of scientific studies and clinical trials, the public release of clinical data, and the submission of regulatory filings. From time to time, we may publicly announce the expected timing of some of these milestones. All of these milestones are and will be based on numerous assumptions. The actual timing of these milestones can vary dramatically compared to our estimates, in some cases for reasons beyond our control. For example, we have previously updated our anticipated timelines for milestones for our clinical trials that were publicly announced. If we do not meet milestones as publicly announced, our stock price may decline.
We may encounter difficulties enrolling patients or healthy volunteers in our clinical trials, and our clinical development activities could thereby be delayed or otherwise adversely affected.
The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the clinical trial until its conclusion. We have experienced and may experience difficulties in patient enrollment in our clinical trials for a variety of reasons, including:
the patient eligibility criteria defined in the protocol;
the size of the clinical trial population required for analysis of the clinical trial’s primary endpoints;
the proximity of patients to a clinical trial site;
the design of the clinical trial;
our ability to recruit clinical trial investigators with the appropriate competencies and experience;
competing clinical trials, including our own clinical trials, for similar therapies or targeting patient populations meeting our patient eligibility criteria;
clinicians’ and patients’ perceptions as to the potential advantages and side effects of the product candidate being studied in relation to other available therapies and product candidates;
our ability to obtain and maintain patient consents;
health epidemics such as the COVID-19 pandemic. For example, there has been an increase in infections from COVID-19 variants which has impacted patient recruitment at certain of our clinical trial sites and could result in increased costs and delays;
the risk that patients enrolled in clinical trials will not complete such clinical trials, for any reason; and
geopolitical events such as the conflict between Russia and Ukraine.
We may also need to increase our planned enrollment for clinical trials. For example, we increased total enrollment from 30 patients to 51 patients due to an imbalance in the clinical trial’s planned 1:1 randomization for the Phase 2 MARKET combination clinical trial of oral AMT-101 with anti-TNFα in moderate-to-severe ulcerative colitis patients. In addition, the size and nature of the patient populations of the indications for which we are targeting may present difficulties or delays in enrollment due to factors such as being orphan disease populations or competition for patients with other clinical trials. For example, we are aware of multiple clinical trials in UC being conducted by competitors, and certain of our ongoing clinical trials are competing for the same patient population, both of which may make it difficult for us to enroll sufficient patients.
We face significant competition and if our competitors develop and market technologies or products that are more effective, safer or less expensive than our product candidates, our commercial opportunities will be negatively impacted.
The development and commercialization of biologic therapeutics is highly competitive and subject to rapid and significant technological change. We are currently developing biologic therapeutics that will compete with other drugs and therapies that currently exist or are being developed in the segments of the pharmaceutical, biotechnology, and other related markets that develop treatments for autoimmune, inflammatory, metabolic, and other diseases. The pharmaceutical and biotechnology
41

Table of Contents
industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on intellectual property. Any product candidates that we successfully develop and commercialize will compete with current therapies and new therapies that may become available in the future.
We have competitors both in the United States and internationally, including major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, universities, academic institutions, government agencies, and other public and private research organizations that conduct research, seek patent protection, and establish collaborative arrangements for the research, development, manufacturing, and commercialization of therapies aimed at treating autoimmune, inflammatory, metabolic, and other diseases. Many of our competitors have significantly greater financial, manufacturing, marketing, technical and human resources and commercial expertise than we do. Large pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining regulatory approvals, recruiting patients and in manufacturing biologic therapeutics. These companies also have significantly greater research and marketing capabilities than we do. Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make our product candidates obsolete. As a result of all of these factors, our competitors may succeed in obtaining patent protection or FDA or other regulatory approval or discovering, developing and commercializing products in our field before we do.
In particular, with respect to our most advanced product candidates, AMT-101 and AMT-126, we compete against companies that produce injectable biologic therapeutics such as AbbVie Inc., Amgen Inc., Bristol-Myers Squibb Co., Eli Lilly and Co., Janssen Pharmaceuticals, Inc., Merck Sharp & Dohme Corp., Roche Holding Ltd., Prometheus Biosciences, Inc., Takeda Pharmaceutical Company Ltd., as well as companies that produce oral products such as Abivax SA, Amgen Inc., Bristol-Myers Squibb Co., Dice Therapeutics Inc., Galapagos NV, Gilead Sciences, Inc., Landos Biopharma, Inc., Morphic Holding, Inc., Pfizer Inc., Protagonist Therapeutics, Inc., and Ventyx Biosciences, Inc.
We are not aware of any other company or organization that has developed an FDA-approved oral biologic, other than peptides. However, we are aware of other companies developing oral biologic product candidates using their own technology platform.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than the products that we may develop. Our competitors also may obtain FDA or foreign regulatory approval for their products more rapidly than we may obtain approval for our product candidates, which could result in our competitors establishing a strong market position before we are able to enter the market.
Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. 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, establishing clinical trial sites and patient registration for clinical trials, and retaining third-party manufacturing resources, as well as in acquiring technologies complementary to, or necessary for, our product candidates. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient, or are less expensive than any products that we may develop. Our competitors also may obtain FDA, EMA, or other regulatory approval for their products more rapidly than we may obtain approval for ours and may obtain orphan drug exclusivity from the FDA for indications our product candidates are targeting, which could result in our competitors establishing a strong market position before we are able to enter the market. If we fail to stay at the forefront of technological change, we may be unable to compete effectively. Technological advances or products developed by our competitors may render our technologies or product candidates obsolete, less competitive or not economical.
In addition, we could face litigation or other proceedings with respect to the scope, ownership, validity, and/or enforceability of our patents relating to our competitors’ products and our competitors may allege that our products infringe, misappropriate, or otherwise violate their intellectual property. The availability of our competitors’ products could limit the demand, and the price we are able to charge, for any products that we may develop and commercialize.
Our product candidates may face competition sooner than anticipated.
Even if we are successful in achieving regulatory approval to commercialize a product candidate ahead of our competitors, our product candidates may face competition from biosimilar products or alternative therapies. In the United States, our product candidates are regulated by the FDA as biologic products and we intend to seek approval for these product candidates pursuant to the Biologics License Application (BLA) pathway. The Biologics Price Competition and Innovation Act of 2009 (BPCIA) created an abbreviated pathway for the approval of biosimilar and interchangeable biologic products. The abbreviated regulatory
42

Table of Contents
pathway establishes legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an existing brand product. Under the BPCIA, an application for a biosimilar product cannot be approved by the FDA until 12 years after the original branded product was approved under a BLA. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it is uncertain when such processes intended to implement BPCIA may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our product candidates.
We believe that any of our product candidates approved as a biologic product under a BLA should qualify for the 12-year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider our product candidates to be reference products for competing products, potentially creating the opportunity for generic competition sooner than anticipated. Moreover, the extent to which a biosimilar product, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biologic products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing. In addition, a competitor could decide to forego the biosimilar approval path and submit a full BLA after completing its own preclinical studies and clinical trials. In such cases, any exclusivity to which we may be eligible under the BPCIA would not prevent the competitor from marketing its product as soon as it is approved.
In Europe, the European Commission has granted marketing authorizations for several biosimilar products pursuant to a set of general and product class-specific guidelines for biosimilar approvals issued over the past few years. In Europe, a competitor may reference data supporting approval of an innovative biological product but will not be able to get it on the market until 10 years after the time of approval of the innovative product. This 10-year marketing exclusivity period will be extended to 11 years if, during the first eight of those 10 years, the marketing authorization holder obtains an approval for one or more new therapeutic indications that bring significant clinical benefits compared with existing therapies. In addition, companies may be developing biosimilar products in other countries that could compete with our products, if approved.
If competitors are able to obtain marketing approval for biosimilars referencing our product candidates, if approved, such products may become subject to competition from such biosimilars, with the attendant competitive pressure and potential adverse consequences. Such competitive products may be able to immediately compete with us in each indication for which our product candidates may have received approval.
Even if any product candidates we develop receive marketing approval, our product candidates may not achieve adequate market acceptance by physicians, patients, healthcare payors, and others in the medical community necessary for commercial success.
The commercial success of any of our product candidates will depend upon its degree of market acceptance by physicians, patients, third-party payors, and others in the medical community. Even if any product candidates we may develop receive marketing approval, they may nonetheless fail to gain sufficient market acceptance by physicians, patients, healthcare payors, and others in the medical community. The degree of market acceptance of any product candidates we may develop, if approved for commercial sale, will depend on a number of factors, including:
the efficacy and safety of such product candidates as demonstrated in clinical trials and published in peer-review journals or presented at medical conferences;
the potential and perceived advantages compared to alternative treatments;
the ability to offer our products for sale at competitive prices;
sufficient third-party coverage or adequate reimbursement and patients’ willingness to pay in the absence of such coverage and adequate reimbursement;
the ability to offer appropriate patient access programs, such as co-pay assistance;
the extent to which physicians recommend our products to their patients;
convenience and ease of dosing and administration compared to alternative treatments;
the clinical indications for which the product candidate is approved by FDA, EMA, or other regulatory authorities;
product labeling or product insert requirements of the FDA, EMA, or other comparable foreign regulatory authorities, including any limitations, contraindications, or warnings contained in a product’s approved labeling;
restrictions on how the product is distributed;
the timing of market introduction of competitive products;
43

Table of Contents
publicity concerning our products or competing products and treatments;
the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
the strength and effectiveness of sales and marketing and distribution efforts; and
the prevalence and severity of any side effects.
If any product candidates we develop do not achieve an adequate level of acceptance, we may not generate or derive sufficient revenue from that product candidate and our financial results could be negatively impacted.
If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market any product candidates we may develop, we may not be successful in commercializing those product candidates if and when they are approved.
We do not have a sales or marketing infrastructure and have no experience in the sale, marketing, or distribution of biologic therapeutics. To achieve commercial success for any approved product for which we retain sales and marketing responsibilities, we must either develop a sales and marketing organization or outsource these functions to third parties. In the future, we may choose to build a focused sales, marketing, and commercial support infrastructure to sell, or participate in sales activities for some of our product candidates if and when they are approved.
There are risks involved with both establishing our own commercial capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force or reimbursement specialists is expensive and time consuming and could delay any product launch. If the commercial launch of a product for which we recruit a sales force and establish marketing and other commercialization capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our commercialization personnel.
Factors that may inhibit our efforts to commercialize any approved product on our own include:
our inability to recruit and retain adequate numbers of effective sales, marketing, reimbursement, customer service, medical affairs, and other support personnel;
the inability of sales personnel to obtain access to physicians or educate adequate numbers of physicians on the benefits of prescribing any future approved products;
our inability to obtain coverage and adequate reimbursement for our products from payors;
the inability to price our products at a sufficient price point to ensure an adequate and attractive level of profitability;
restricted or closed distribution channels that make it difficult to distribute our products to segments of the patient population; and
unforeseen costs and expenses associated with creating an independent commercialization organization.
If we enter into arrangements with third parties to perform sales, marketing, commercial support, and distribution services, our product revenue or the profitability of product revenue may be lower than if we were to market and sell any products we may develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to commercialize our product candidates or may be unable to do so on terms that are favorable to us. We may have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If we do not establish commercialization capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates, if approved.
If the market opportunities for any product that we develop are smaller than we believe they are, our revenue may be adversely affected and our business may suffer.
Our projections of both the number of people who have the diseases we may be targeting, as well as the subset of people with these health issues who have the potential to benefit from treatment with our technology platform and investigational medicines, and any product candidates, are based on our beliefs and estimates. These estimates have been derived from a variety of sources, including scientific literature, surveys of clinics, patient foundations, or market research, and may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these diseases and health issues. The potentially addressable patient population for our investigational medicines may be limited or may not be amenable to treatment with our technology platform or investigational medicines. Even if we obtain significant market share for our products, if approved, if the potential target populations are small, we may never achieve profitability without obtaining regulatory approval for additional indications.
44

Table of Contents
Risks Related to Regulatory Approval and Other Legal Compliance Matters
We may be unable to obtain U.S. or foreign regulatory approval for our product candidates and, as a result, may be unable to commercialize our product candidates.
The time required to obtain approval by the FDA, EMA, and comparable foreign regulatory authorities is unpredictable, typically takes many years following the commencement of clinical trials, and depends upon numerous factors, including the type, complexity, and novelty of the product candidates involved. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions, which may cause delays in the approval or the decision not to approve an application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical studies, clinical trials, or other studies. We have not submitted for, or obtained regulatory approval for any product candidate, and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval.
Applications for our product candidates could fail to receive regulatory approval in an initial or subsequent indication for many reasons, including but not limited to the following:
the FDA, EMA, or comparable foreign regulatory authorities may disagree with the design, implementation, or results of our clinical trials;
the FDA, EMA, or comparable foreign regulatory authorities may determine that our product candidates are not safe and effective, only moderately effective or have undesirable or unintended side effects, toxicities, or other characteristics that preclude our further development of our product candidates or our obtaining marketing approval or prevent or limit commercial use;
the population studied in the clinical program may not be sufficiently broad or representative to assure efficacy and safety in the full population for which we seek approval;
we may be unable to demonstrate to the FDA, EMA, or comparable foreign regulatory authorities that a product candidate’s risk-benefit ratio for a proposed indication is acceptable, particularly when compared to the standard of care;
the FDA, EMA, or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;
the data collected from clinical trials of our product candidates may not be sufficient to support the submission of a new drug application (NDA), BLA, or other submission or to obtain regulatory approval in the United States or elsewhere;
the FDA, EMA, or comparable foreign regulatory authorities may fail to approve our manufacturing processes, test procedures, and specifications, or facilities, and those of third-party manufacturers with which we contract for clinical and commercial supplies; and
the approval policies or regulations of the FDA, EMA, or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
This lengthy approval process, as well as the unpredictability of the results of clinical trials, may result in our failing to obtain regulatory approval to market any of our product candidates, which would significantly harm our business, results of operations, and prospects.
The FDA, EMA and comparable foreign regulatory authorities have limited experience with our technology platform and we are not aware of any similar technology platform which has been approved by the FDA, EMA or comparable foreign regulatory authorities, which may increase the complexity, uncertainty and length of the regulatory approval process for our product candidates. For example, since the scientific evidence to support the feasibility of developing our product candidates and discovery programs is both preliminary and limited, the FDA may require us to provide additional data to support our regulatory applications. Moreover, advancing our novel oral biologic product candidates creates other significant challenges for us, including educating medical personnel regarding a novel technology platform and its potential efficacy and safety benefits.
Further, the ability of the FDA or other regulatory agencies to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, government shutdowns including as a result of the COVID-19 pandemic, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In response to the COVID-19 public health emergency, since March 2020 when foreign and domestic inspections of facilities were largely placed on hold, the FDA has worked to resume normal operations. In 2020 and 2021, a number of companies announced receipt of complete response letters
45

Table of Contents
due to the FDA’s inability to complete required inspections for their applications. While the FDA has largely caught up with domestic preapproval inspections, it continues to work through its backlog of foreign inspections.
In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. If a prolonged government shutdown or other disruption occurs, including due to travel restrictions, foreign COVID-19 related policies, staffing shortages, or if global health or other concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities in a timely manner, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, in our operations as a public company, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.
We may never receive approval to market and commercialize any product candidate. Even if we obtain regulatory approval, the approval may be for targets, disease indications or patient populations that are not as broad as we intended or desired or may require labeling that includes significant use or distribution restrictions or safety warnings. We may be subject to post-marketing testing requirements to maintain regulatory approval. In addition, upon obtaining any marketing approvals, we may have difficulty in establishing the necessary sales and marketing capabilities to gain market acceptance.
If any of our product candidates prove to be ineffective, unsafe or commercially unviable, our entire pipeline could have little, if any, value, and it may prove to be difficult or impossible to finance the further development of our pipeline. Any of these events would have a material and adverse effect on our business, financial condition, results of operations, and prospects.
Our product candidates may cause undesirable side effects or have other properties that could halt their clinical development, prevent their regulatory approval, limit their commercial potential, or result in significant negative consequences.
Adverse events or other undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay, or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA, EMA, or other comparable foreign regulatory authorities. AMT-101 is a GI-selective oral fusion of IL-10, and previous clinical trials conducted by others in the field with systemic IL-10 showed significant toxicities that prevented further development. AMT-126 is a GI-selective oral fusion of IL-22, and in current clinical trials conducted by others in the field with systemic IL-22, toxicities and adverse events have been observed.
Side effects could affect patient recruitment, the ability of enrolled patients to complete the clinical trial, and/or result in potential product liability claims. We are required to maintain product liability insurance pursuant to certain of our development and commercialization agreements. We may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. A successful product liability claim or series of claims brought against us could adversely affect our results of operations, business, and reputation. In addition, regardless of merit or eventual outcome, product liability claims may result in impairment of our business reputation, withdrawal of clinical trial participants, costs due to related litigation, distraction of management’s attention from our primary business, initiation of investigations by regulators, substantial monetary awards to patients or other claimants, the inability to commercialize our product candidates, and decreased demand for our product candidates, if approved for commercial sale.
Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects or adverse events caused by such products, a number of potentially significant negative consequences could result, including but not limited to:
regulatory authorities may withdraw approvals of such product and cause us to recall our products;
regulatory authorities may require additional warnings on the label;
we may be required to change the way the product is administered or conduct additional clinical trials or post-approval studies;
we may be required to create a risk evaluation and mitigation strategy plan, which could include a medication guide outlining the risks of such side effects for distribution to patients, a communication plan for healthcare providers, and/or other elements, such as boxed warning on the packaging, to assure safe use;
we could be sued and held liable for harm caused to patients; and
our reputation may suffer.
46

Table of Contents
Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, financial condition, results of operations, and prospects.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our products.
We face an inherent risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk when and if we commercialize any products. For example, we may be sued if our products cause or are perceived to cause injury or are found to be otherwise unsuitable during clinical testing, manufacturing, marketing, or sale post-approval. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability, or a breach of warranties. Claims could also be asserted under state consumer protection laws. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit testing and commercialization of our products. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
decreased or interrupted demand for our products;
injury to our reputation;
withdrawal of clinical trial participants and inability to continue clinical trials;
initiation of investigations by regulators;
costs to defend the related litigation;
a diversion of management’s time and our resources;
substantial monetary awards to clinical trial participants or patients;
product recalls, withdrawals or labeling, marketing, or promotional restrictions;
loss of revenue;
exhaustion of any available insurance and our capital resources; and
the inability to commercialize any products.
Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop. Our insurance policies may have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Even if our agreements with any future corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate should any claim arise.
Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.
If we succeed in developing any products, we intend to market them in the United States as well as the European Union and other foreign jurisdictions. In order to market and sell our products in other jurisdictions, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements.
Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, but a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA or EMA grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing, and promotion of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including additional preclinical studies or clinical trials as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.
Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties, and costs for us and could delay or prevent the introduction of our products in certain countries. If we or any partner
47

Table of Contents
we work with fail to comply with the regulatory requirements in international markets or fail to receive applicable marketing approvals, our target market will be reduced, and our ability to realize the full market potential of our product candidates will be harmed.
Coverage and reimbursement decisions by third-party payors may have an adverse effect on pricing and market acceptance. If reimbursement is not available or is not sufficient for our products, it is less likely that our products will be widely used.
Even if our product candidates are approved for sale by the appropriate regulatory authorities, market acceptance and sales of these products will depend on coverage and reimbursement policies and may be affected by future healthcare reform measures. Third-party payors, such as government healthcare programs, private health insurers and health maintenance organizations, decide what therapies they will cover and establish the level of reimbursement for such therapies. We cannot be certain that coverage and reimbursement will be available or adequate for any products that we develop. If coverage and adequate reimbursement is not available or is available on a limited basis, we may not be able to successfully commercialize any of our product candidates, if approved.
There may be significant delays in obtaining coverage and reimbursement for newly approved therapies, and coverage may be more limited than the purposes for which the therapy is approved by the FDA, EMA or other regulatory authorities. Moreover, eligibility for coverage and reimbursement does not imply that a therapy will be paid for in all cases or at a rate that is commensurate with our product pricing that covers our costs, including research, development, manufacturing, sale and distribution expenses. Interim reimbursement levels for new therapies, if applicable, may also be insufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the therapy and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost therapies and may be incorporated into existing payments for other services. Further, no uniform policy for coverage and reimbursement exists in the United States, and coverage and reimbursement can differ significantly from payor to payor. Net prices for therapies may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future change to laws that presently restrict imports of therapies from countries where they may be sold at lower prices than in the United States. Our inability to promptly obtain coverage and adequate reimbursement from third-party payors, including both government-funded and private payors, for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.
We have conducted clinical trials for AMT-101 and AMT-126 outside of the United States, and continue to conduct such clinical trials for AMT-101, and we may do so for our other product candidates, which exposes us to additional risks. For example, the FDA, EMA, and applicable foreign regulatory authorities may not accept data from such clinical trials, in which case our development plans will be delayed, which could materially harm our business.
We have conducted our Phase 2 clinical trials for AMT-101 and our Phase 1 clinical trial for AMT-126 in countries outside of the United States, and we continue to conduct such clinical trials for AMT-101. We also plan to conduct additional future clinical trials outside the United States. The acceptance of clinical trial data from clinical trials conducted outside the United States by the FDA, EMA, or applicable foreign regulatory authority may be subject to certain conditions. In cases where data from foreign clinical trials are intended to serve as the basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of foreign data alone unless (i) the data are applicable to the United States population and United States medical practice; and (ii) the clinical trials were performed by clinical investigators of recognized competence and pursuant to cGCP regulations. Additionally, the FDA’s clinical trial requirements, including sufficient size of patient populations and statistical powering, must be met. Many foreign regulatory bodies have similar approval requirements. In addition, such foreign clinical trials would be subject to the applicable local laws of the foreign jurisdictions where the clinical trials are conducted. There can be no assurance that the FDA, EMA, or any applicable foreign regulatory authority will accept data from clinical trials conducted outside their applicable jurisdiction. If the FDA, EMA, or any applicable foreign regulatory authority does not accept such data, it would result in the need for additional clinical trials, which would be costly and time-consuming and delay aspects of our business plan, and which may result in our product candidates not receiving approval or clearance for commercialization in the applicable jurisdiction.
Conducting clinical trials outside the United States also exposes us to additional risks, including risks associated with:
additional foreign regulatory requirements;
foreign exchange fluctuations;
increased supply chain complexity, including compliance with foreign manufacturing, customs, shipment and storage requirements and regulations;
regional differences in medical practice and clinical trial research;
48

Table of Contents
diminished protection of intellectual property in some countries; and
interruptions or delays in our clinical trials resulting from geopolitical events such as war or terrorism including the conflict between Russia and Ukraine.
For example, currently there is a conflict between Russia and Ukraine. Our AMT-101 Phase 2 LOMBARD and AMT-101 Phase 2 MARKET clinical trials included clinical trial sites located in Ukraine, Russia, and other Eastern European countries, and this conflict impacted our ability to conduct these clinical trials. We may conduct future clinical trials in Ukraine, Russia and other Eastern European countries, and the conflict may impact our ability to timely and successfully complete such clinical trials. This could negatively impact the completion of our clinical trials and/or analyses of clinical results or result in increased costs, all of which could materially impact our ability to obtain regulatory approval for our product candidates and harm our business.
Also, recent and potential global supply chain disruptions and geopolitical events may impact our ability to manufacture and deliver clinical trial drug supply to our clinical trial sites, particularly those outside the United States. If we or our contractors are unable to deliver sufficient quantities of a study product candidate, the completion of our clinical trials may be delayed, which could materially harm our business.
In addition to U.S. regulatory requirements, we are also subject to regulation by foreign regulatory authorities, ethics committees, and other governmental entities with respect to clinical trials we conduct or sponsor outside of the U.S. For example, the EU Clinical Trials Regulation (CTR) became applicable on January 31, 2022, repealing the EU Clinical Trials Directive. The implementation of the CTR also includes the implementation of the Clinical Trials Information System, a new clinical trial portal and database that will be maintained by the EMA in collaboration with the European Commission and the EU Member States. Complying with changes in regulatory requirements can incur additional costs, delay our clinical development plans, or expose us to greater liability if we are slow or unable to adapt to changes in existing requirements or new requirements or policies governing our business operations, including our clinical trials.
Further, Brexit and uncertainty in the regulatory framework as well as future legislation in the UK, European Union, and other jurisdictions can lead to disruption in the execution of international multi-center clinical trials, the monitoring of adverse events through pharmacovigilance programs, the evaluation of the benefit-risk profiles of new medicinal products, and determination of marketing authorization across different jurisdictions. Uncertainty in the regulatory framework could also result in disruption to the supply and distribution as well as the import/export of active pharmaceutical ingredients and finished product candidates. Such a disruption could create supply difficulties for ongoing clinical trials. The cumulative effects of the disruption to the regulatory framework, uncertainty in future regulation, and changes to existing regulations may increase our development lead time to marketing authorization and commercialization of products in the European Union and/or the UK and increase our costs. We cannot predict the impact of such changes and future regulation on our business or the results of our operations.
Preliminary data from our clinical trials that we announce or publish from time to time may change as additional patient data become available and are subject to verification procedures that could result in material changes in the final data or clinical conclusions.
From time to time, we may publicly disclose preliminary data from our clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or clinical trial such as data from our clinical trials of AMT-101 and AMT-126. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the preliminary results that we report may differ from future results of the same preclinical studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Preliminary 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.
Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular product candidate, our ability to advance a product candidate to the next phase of clinical development, the approvability or commercialization of the particular product candidate or product, and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular drug, product candidate or our business. If the preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition.
49

Table of Contents
Even if we obtain regulatory approval for a product candidate, our products will remain subject to extensive regulatory scrutiny.
If any of our product candidates are approved, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies, and submission of safety, efficacy, and other post-market information, including both federal and state requirements in the United States and requirements of comparable foreign regulatory authorities.
Manufacturers and manufacturers’ facilities are required to comply with extensive requirements imposed by the FDA, EMA, and comparable foreign regulatory authorities, including ensuring that quality control and manufacturing procedures conform to cGMP regulations. As such, we and our contract manufacturers will be subject to continual review and inspections to assess compliance with cGMP and adherence to commitments made in any NDA, BLA, or marketing authorization application (MAA). Accordingly, we and others with whom we work must continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, and quality control.
Any regulatory approvals that we receive for our product candidates will be subject to limitations on the approved indicated uses for which the product may be marketed and promoted or to the conditions of approval (including the requirement to implement a risk evaluation and mitigation strategy), or contain requirements for potentially costly post-marketing testing. We will be required to report certain adverse reactions and production problems, if any, to the FDA, EMA, and comparable foreign regulatory authorities. The FDA and other agencies, including the Department of Justice, closely regulate and monitor the post-approval marketing and promotion of products to ensure that they are manufactured, marketed, and distributed only for the approved indications and in accordance with the provisions of the approved labeling. We will have to comply with requirements concerning advertising and promotion for our products. Promotional communications with respect to biologic therapeutics are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved label. As such, we may not promote our products for indications or uses for which they do not have approval, commonly referred to as “off-label uses.” The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label may be subject to significant liability. However, physicians may, in their independent medical judgment, prescribe legally available products for off-label uses. The FDA does not regulate the behavior of physicians in their choice of treatments, but the FDA does restrict manufacturer communications on the subject of off-label use of their products. The holder of an approved NDA, BLA, or MAA must submit new or supplemental applications and obtain approval for certain changes to the approved product, product labeling, or manufacturing process. We could also be asked to conduct post-marketing clinical trials to verify the safety and efficacy of our products in general or in specific patient subsets. If original marketing approval was obtained via the accelerated approval pathway, we could be required to conduct a successful post-marketing clinical trial to confirm clinical benefit for our products. An unsuccessful post-marketing clinical trial or failure to complete such a clinical trial could result in the withdrawal of marketing approval. In December 2022, the Consolidated Appropriations Act, 2023, including the Food and Drug Omnibus Reform Act (FDORA), was signed into law. FDORA made several changes to the FDA’s authorities and its regulatory framework, including, among other changes, reforms to the accelerated approval pathway, such as requiring the FDA to specify conditions for post-approval study requirements and setting forth procedures for the FDA to withdraw a product on an expedited basis for non-compliance with post-approval requirements.
If a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of a product, such regulatory agency may impose restrictions on that product or us, including requiring withdrawal of the product from the market. If we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may, among other things:
issue warning letters that would result in adverse publicity;
impose civil or criminal penalties;
suspend or withdraw regulatory approvals;
suspend any of our ongoing clinical trials;
refuse to approve pending applications or supplements to approved applications submitted by us;
impose restrictions on our operations, including closing our manufacturing facility or our contract manufacturers’ facilities;
seize or detain products; or
require a product recall.
50

Table of Contents
Any government investigation of alleged violations of law could require us to expend significant time and resources in response, and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenue from our products. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected.
We have sought and may again seek orphan drug designation for one or more of our product candidates, but we may be unable to obtain such designations or to maintain the benefits associated with orphan drug status, including market exclusivity, which may cause our revenue, if any, to be reduced.
We sought and, in November 2022, received orphan drug designation for AMT-101 in patients with pouchitis. In the future, we may seek orphan drug designations for one or more of our product candidates, but may be unable to obtain an orphan drug designation for any additional product candidates. Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, defined as a disease or condition with a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States when there is no reasonable expectation that the cost of developing and making available the drug or biologic in the United States will be recovered from sales in the United States for that drug or biologic. Orphan drug designation must be requested before submitting an NDA or BLA. In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages, and user-fee waivers. After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
If a product that has orphan drug designation subsequently receives the first FDA approval for a particular active ingredient for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other NDA or BLA applications to market the same drug or biologic for the same indication for seven years, except in limited circumstances such as a showing of clinical superiority to the product with orphan exclusivity or if FDA finds that the holder of the orphan exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan product to meet the needs of patients with the disease or condition for which the drug was designated. Furthermore, the FDA can waive orphan exclusivity if we are unable to manufacture sufficient supply of our product.
In Catalyst Pharms., Inc. v. Becerra, 14 F.4th 1299 (11th Cir. 2021), the court disagreed with the FDA’s longstanding position that the orphan drug exclusivity only applies to the approved use or indication within an eligible disease. This decision created uncertainty in the application of the orphan drug exclusivity. On January 24, 2023, the FDA published a notice in the Federal Register to clarify that while the agency complies with the court’s order in Catalyst, FDA intends to continue to apply its longstanding interpretation of the regulations to matters outside of the scope of the Catalyst order – that is, the agency will continue tying the scope of orphan-drug exclusivity to the uses or indications for which a drug is approved, which permits other sponsors to obtain approval of a drug for new uses or indications within the same orphan designated disease or condition that have not yet been approved. It is unclear how future litigation, legislation, agency decisions, and administrative actions will impact the scope of the orphan drug exclusivity.
A breakthrough therapy designation or Fast Track designation by the FDA for a drug may not lead to a faster development or regulatory review or approval process, and it would not increase the likelihood that the drug will receive marketing approval.
In the future, we may seek a breakthrough therapy designation for one or more of our investigational medicines. A breakthrough therapy is defined as a drug that 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. For drugs that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the clinical trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Drugs designated as breakthrough therapies by the FDA are also eligible for priority review if supported by clinical data at the time of the submission of the biologics license application.
Designation as a breakthrough therapy is at the discretion of the FDA. Accordingly, even if we believe that one of our investigational medicines meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a breakthrough therapy designation for a drug may not result in a faster development process, review, or approval compared to drugs considered for approval under conventional FDA procedures and it would not assure ultimate approval by the FDA. In addition, even if one or more of our investigational medicines qualify as breakthrough therapies, the FDA may later decide that the investigational medicine no longer meets the conditions for qualification, or it may decide that the time period for FDA review or approval will not be shortened.
51

Table of Contents
We may seek Fast Track designation for some of our investigational medicines. If a therapy is intended for the treatment of a serious or life-threatening condition and the therapy demonstrates the potential to address significant unmet medical needs for this condition, the drug sponsor may apply for Fast Track designation. The FDA has broad discretion whether or not to grant this designation, and even if we believe a particular investigational medicine is eligible for this designation, we cannot assure you that the FDA would decide to grant it. Even if we do receive Fast Track designation, we may not experience a faster development process, review, or approval compared to conventional FDA procedures. If our clinical development program does not continue to meet the criteria for Fast Track designation, or if our clinical trials are delayed, suspended, or terminated, or put on clinical hold due to unexpected adverse events or issues with clinical supply, we will not receive the benefits associated with the Fast Track program. Furthermore, Fast Track designation and priority review do not change the standards for approval. The FDA may withdraw Fast Track designation if it believes that the designation is no longer supported by data from our clinical development program. Fast Track designation alone does not guarantee qualification for the FDA’s priority review procedures.
Current and future legislation may increase the difficulty and cost for us to commercialize our product candidates, if approved, and affect the prices we may obtain.
Third-party payors, whether domestic or foreign, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In both the United States and certain foreign jurisdictions, there have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal, and state levels directed at containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations, and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:
the demand for our product candidates, if we obtain regulatory approval;
our ability to receive or set a price that we believe is fair for our products;
our ability to generate revenue and achieve or maintain profitability;
the level of taxes that we are required to pay; and
the availability of capital.
In March 2010, the Patient Protection and Affordable Care Act (ACA) was enacted, which includes measures that have significantly changed the way healthcare is financed by both governmental and private insurers. The ACA continues to significantly impact the United States’ pharmaceutical industry. Since its enactment, there have been executive, judicial and Congressional challenges to certain aspects of the ACA. In June 2021, the United States Supreme Court held that Texas and other challengers had no legal standing to challenge the ACA, dismissing the case without specifically ruling on the constitutionality of the ACA. Accordingly, the ACA remains in effect in its current form. On January 28, 2021, President Biden issued an executive order instructing certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including, among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is unclear how this Supreme Court decision, future litigation, and healthcare measures promulgated by the current administration will impact the ACA, our business, financial condition and results of operations. Complying with any new legislation or reversing changes implemented under the ACA could be time-intensive and expensive, resulting in a material adverse effect on our business.
In addition, other legislative changes have been proposed and adopted since the ACA was enacted. These changes include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the Budget Control Act of 2011, which began in 2013 and will remain in effect through 2031, with the exception of a temporary suspension implemented under various COVID-19 relief legislation from May 1, 2020 through March 31, 2022, unless additional Congressional action is taken. Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% in the final fiscal year of the sequester.
Moreover, there has recently been heightened governmental scrutiny over the manner in which drug manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.
Under the American Rescue Plan Act of 2021, effective January 1, 2024, the statutory cap on Medicaid Drug Rebate Program rebates that manufacturers pay to state Medicaid programs will be eliminated. Elimination of this cap may require pharmaceutical manufacturers to pay more in rebates than they receive on the sale of products, which could have a material impact on our business. In July 2021, the current administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at increasing competition for prescription drugs. In response to this
52

Table of Contents
executive order, the U.S. Department of Health and Human Services (HHS) released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and potential legislative policies that Congress could pursue to advance these principles. In August 2022, Congress passed the Inflation Reduction Act of 2022, which includes prescription drug provisions that have significant implications for the pharmaceutical industry and Medicare beneficiaries, including allowing the federal government to negotiate a maximum fair price for certain high-priced single source Medicare drugs, imposing penalties and excise tax for manufacturers that fail to comply with the drug price negotiation requirements, requiring inflation rebates for all Medicare Part B and Part D drugs, with limited exceptions, if their drug prices increase faster than inflation, and redesigning Medicare Part D to reduce out-of-pocket prescription drug costs for beneficiaries, among other changes. The impact of these legislative, executive, and administrative actions and any future healthcare measures and agency rules implemented by the current administration on us and the biopharmaceutical industry as a whole is unclear. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our product candidates if approved.
At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. A number of states are considering or have recently enacted state drug price transparency and reporting laws that could substantially increase our compliance burdens and expose us to greater liability under such state laws once we begin commercialization if we obtain regulatory approval for any of our products. We are unable to predict the future course of federal or state healthcare legislation in the United States directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. These and any further changes in the law or regulatory framework that reduce our revenue or increase our costs could also have a material and adverse effect on our business, financial condition and results of operations.
We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, lower reimbursement, and new payment methodologies. This could lower the price that we receive for any approved product. Any denial in coverage or reduction in reimbursement from Medicare or other government-funded programs may result in a similar denial or reduction in payments from private payors, which may prevent us from being able to generate sufficient revenue, attain profitability, or commercialize our product candidates, if approved.
In the European Union, similar political, economic and regulatory developments may affect our ability to profitably commercialize our current or any future products. In addition to continuing pressure on prices and cost containment measures, legislative developments at the European Union or member state level may result in significant additional requirements or obstacles that may increase our operating costs. In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies. Our future products, if any, might not be considered medically reasonable and necessary for a specific indication or cost-effective by third-party payors, an adequate level of reimbursement might not be available for such products and third-party payors’ reimbursement policies might adversely affect our ability to sell any future products profitably.
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for biologic therapeutics. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-approval testing and other requirements.
We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, our product candidates may lose any marketing approval that may have been obtained and we may not achieve or sustain profitability, which would adversely affect our business. Further, it is possible that additional governmental action is taken in response to the COVID-19 pandemic.
53

Table of Contents
Our employees, independent contractors, consultants, commercial partners, and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
We are exposed to the risk of fraud, misconduct, or other illegal activity by our employees, independent contractors, consultants, commercial partners, and vendors. Misconduct by these parties could include intentional, reckless, and negligent conduct that fails to:
comply with the laws of the FDA, EMA, and other comparable foreign regulatory authorities;
provide true, complete, and accurate information to the FDA, EMA, and other comparable foreign regulatory authorities;
comply with manufacturing standards we have established;
comply with healthcare fraud and abuse laws in the United States and similar foreign fraudulent misconduct laws; or
report financial information or data accurately or to disclose unauthorized activities to us.
If we obtain FDA approval of any of our product candidates and begin commercializing those products in the United States, our potential exposure under such laws will increase significantly, and our costs associated with compliance with such laws are also likely to increase. In particular, research, sales, marketing, education, and other business arrangements in the healthcare industry are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing, and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, educating, marketing and promotion, sales and commission, certain customer incentive programs, and other business arrangements generally. Activities subject to these laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation. We have adopted a code of business conduct and ethics, but it is not always possible to identify and deter misconduct by employees and third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.
If we fail to comply with healthcare laws, we could face substantial penalties and our business, operations, and financial conditions could be adversely affected.
If we obtain FDA approval for any of our product candidates and begin commercializing those products in the United States, our operations will be subject to various federal and state fraud and abuse laws. The laws that we are currently subject to or which we may become subject to if we obtain FDA approval of any of our product candidates, and which may impact our operations include the following:
The federal Anti-Kickback Statute which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering, or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an individual, or the purchase, lease, order, or recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.
Federal civil and criminal false claims laws, including the False Claims Act, which can be enforced through civil “qui tam” or “whistleblower” actions, and civil monetary penalty laws, impose criminal and civil penalties against individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid, or other third-party payors that are false or fraudulent or knowingly making a false statement to improperly avoid, decrease, or conceal an obligation to pay money to the federal government. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of these statutes or specific intent to violate them in order to have committed a violation.
The federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing, or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters.
54

Table of Contents
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH) and their respective implementing regulations, impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses and their respective business associates and covered subcontractors that perform services for them that involve the use, or disclosure of, individually identifiable health information, relating to the privacy, security, and transmission of individually identifiable health information.
The federal Physician Payment Sunshine Act, created under the ACA, and its implementing regulations, require applicable manufacturers of drugs, devices, biologicals, and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the HHS under the Open Payments Program, information related to certain payments and other transfers of value made in the previous year to covered recipients, including physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician healthcare professionals (such as physician assistants and nurse practitioners) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. The information reported annually is publicly available on a searchable website.
Analogous state and foreign laws and regulations, such as state and foreign anti-kickback and false claims laws, may apply to pharmaceutical business practices, including but not limited to, research, distribution, sales and marketing arrangements, as well as submitting claims involving healthcare items or services reimbursed by any third-party payor, including commercial insurers.
State laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines, and the relevant compliance guidance promulgated by the federal government that otherwise restricts payments that may be made to healthcare providers and other potential referral sources.
State and local laws that require drug manufacturers to file reports with states regarding pricing and marketing information, such as the tracking and reporting of gifts, compensation and other remuneration, and items of value provided to healthcare professionals and entities.
State and local laws that require the registration of pharmaceutical sales representatives.
State and foreign laws that govern the privacy and security of personal information (including health information) in certain circumstances. These include, but are not limited to, the EU General Data Protection Regulation, and the California Consumer Privacy Act, as amended and expanded by the California Privacy Rights Act, each of which is discussed below. Many of these laws governing the privacy and security of personal information differ from each other in significant ways and may not have the same effects or obligations, thus complicating compliance efforts.
In addition, we are subject to federal and state consumer protection and unfair competition laws that broadly regulate marketplace activities and activities that potentially harm consumers.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could, despite our efforts to comply, be subject to challenge under one or more of such laws. Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs. It is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations, or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant civil, criminal, and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid, and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations. In addition, the approval and commercialization of any of our product candidates outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.
If we or any contract manufacturers and suppliers we engage fail to comply with environmental, health, and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on our business.
We and any contract manufacturers and suppliers we engage are subject to numerous federal, state, and local environmental, health, and safety laws, regulations, and permitting requirements, including those governing laboratory procedures; the generation, handling, use, storage, treatment, and disposal of hazardous and regulated materials and wastes; the emission and discharge of hazardous materials into the ground, air, and water; and employee health and safety. Our operations involve the use of hazardous and flammable materials, including chemicals and biological and radioactive materials. Our operations also produce hazardous waste. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the
55

Table of Contents
risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. Under certain environmental laws, we could be held responsible for costs relating to any contamination at our current or past facilities and at third-party facilities. We also could incur significant costs associated with civil or criminal fines and penalties.
Compliance with applicable environmental laws and regulations may be expensive, and current or future environmental laws and regulations may impair our research, product development, and manufacturing efforts. In addition, we cannot entirely eliminate the risk of accidental injury or contamination from these materials or wastes. Although we maintain workers’ compensation insurance to cover us for costs we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not carry specific biological or hazardous waste insurance coverage, and our property, casualty, and general liability insurance policies only provide limited coverage. Accordingly, in the event of contamination or injury, we could be held liable for damages or be penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Our business activities may be subject to the Foreign Corrupt Practices Act (FCPA) and similar anti-bribery and anti-corruption laws, as well as U.S. and certain foreign export controls, trade sanctions, and import laws and regulations. We can face criminal liability and other serious consequences for violations, which can harm our business.
Our business activities may be subject to the FCPA and similar anti-bribery or anti-corruption laws, regulations or rules of other countries in which we operate. These laws generally prohibit companies and their employees and third-party business partners, representatives and agents from engaging in corruption and bribery, including offering, promising, giving, or authorizing the provision of anything of value, either directly or indirectly, to a government official or commercial party in order to influence official action, direct business to any person, gain any improper advantage, or obtain or retain business. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. Our business is heavily regulated and therefore involves significant interaction with government officials, including officials of non-U.S. governments. Additionally, in many countries, healthcare providers are employed by the government, and the purchasers of biopharmaceuticals are government entities; therefore, our dealings with these providers and purchasers are subject to regulation and such healthcare providers and employees of such purchasers may be considered “foreign officials” as defined in the FCPA. Recently, the SEC and Department of Justice have increased their FCPA enforcement activities with respect to biotechnology companies. In addition to our own employees, we leverage third parties to conduct our business abroad, such as managing our clinical trials and obtaining government licenses and approvals. We and our third-party business partners, representatives and agents may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and we may be held liable for the corrupt or other illegal activities of our employees, our third-party business partners, representatives and agents, even if we do not explicitly authorize such activities. There is no certainty that our employees or the employees of our third-party business partners, representatives and agents will comply with all applicable laws and regulations, particularly given the high level of complexity of these laws. Violations of these laws and regulations could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, debarment from U.S. and other government contracts, substantial diversion of management’s attention, significant legal fees and fines, severe criminal or civil sanctions against us, our officers, or our employees, disgorgement, and other sanctions and remedial measures, and prohibitions on the conduct of our business. Any such violations could include prohibitions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, and our business, prospects, operating results, financial condition and stock price.
In addition, our products may be subject to U.S. and foreign export controls, trade sanctions and import laws and regulations. Governmental regulation of the import or export of our products, or our failure to obtain any required import or export authorization for our products, when applicable, could harm our business. Furthermore, U.S. export control laws and economic sanctions prohibit the provision of certain products and services to countries, governments, and persons targeted by U.S. sanctions. For example, U.S. sanctions that have been or may be imposed as a result of the conflict between Russia and Ukraine may impact our ability to continue activities at clinical trial sites within regions covered by such sanctions. If we fail to comply with export and import regulations and such economic sanctions, penalties could be imposed, including fines and/or denial of certain export privileges.
Data collection under European and U.S. laws is governed by restrictive regulations addressing the collection, use, processing and, in the case of Europe, cross-border transfer, of personal information.
We may collect, process, use or transfer personal information from individuals located in the European Union (EU) and UK in connection with our business, including in connection with conducting clinical trials in the EU and UK. Additionally, if any of our product candidates are approved, we may seek to commercialize those products in the EU and UK. The collection and use of
56

Table of Contents
personal health data in the EU and UK are governed by laws, regulations, and directives, including the General Data Protection Regulation (EU) 2016/679 (GDPR) and a UK version of the GDPR (combining the GDPR and the UK’s Data Protection Act 2018). This legislation imposes requirements relating to having legal bases for processing personal information relating to identifiable individuals and transferring such information outside of the European Economic Area (EEA), in the case of the GDPR, and the UK, including to the United States, providing details to those individuals regarding the processing of their personal information, keeping personal information secure, having data processing agreements with third parties who process personal information, responding to individuals’ requests to exercise their rights in respect of their personal information, reporting security breaches involving personal data to the competent national data protection authority and affected individuals, appointing data protection officers, conducting data protection impact assessments and record-keeping. This legislation imposes significant responsibilities and liabilities in relation to personal data that we process, and we may be required to put in place additional mechanisms ensuring compliance. In particular, with respect to cross-border transfers of personal data, judicial and regulatory developments in the EU have created uncertainty. In a decision issued by the Court of Justice of the European Union (CJEU) on July 16, 2020, the CJEU invalidated one mechanism for cross-border personal data transfer, the EU-U.S. Privacy Shield, and imposed additional obligations on companies, including us, relying on standard contractual clauses (SCCs) issued by the European Commission for cross-border personal data transfers. The European Commission released new SCCs designed to address the CJEU concerns on June 4, 2021. On February 2, 2022, the United Kingdom’s Information Commissioner’s Office issued new standard contractual clauses (UK SCCs) to support personal data transfers out of the UK. We have undertaken certain efforts to conform transfers of personal data from the EEA and UK to the United States to our understanding of current regulatory obligations and guidance of data protection authorities, but the CJEU’s decision, the revised SCCs and UK SCCs, regulatory guidance and opinions, and other developments relating to cross-border data transfer may require us to implement additional contractual and technical safeguards for any personal data transferred out of the EEA and UK, which may increase compliance costs, lead to increased regulatory scrutiny or liability, may require additional contractual negotiations, and may adversely impact our business, financial condition and operating results. Any actual or alleged failure to comply with the requirements of the GDPR or other laws, regulations, and directives of the member states of the EU and UK may result in substantial fines, other administrative penalties and civil claims being brought against us, which could have a material adverse effect on our business, financial condition and results of operations.
In addition, U.S. states are adopting new laws or amending existing laws and regulations, requiring attention to frequently changing regulatory requirements applicable to data related to individuals. For example, California has enacted the California Consumer Privacy Act (CCPA), which took effect on January 1, 2020 and has been dubbed the first “GDPR-like” law in the United States. The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used by requiring covered companies to provide new disclosures to California consumers (as that term is broadly defined and which can include any of our current or future employees who may be California residents or any other California residents whose data we collect or process) and provide such residents new ways to opt out of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. As we expand our operations and clinical trials (both preclinical or clinical), the CCPA may increase our compliance costs and potential liability. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the United States.
Additionally, a new privacy law, the California Privacy Rights Act (CPRA), was approved by California voters in the election on November 3, 2020. The CPRA creates obligations relating to consumer data as of January 1, 2022, with enforcement anticipated to begin July 1, 2023. The CPRA modifies the CCPA significantly, potentially resulting in further uncertainty and requiring us to incur additional costs and expenses in an effort to comply. Additionally, other U.S. states continue to propose, and in certain cases adopt, privacy-focused legislation such as Colorado, Virginia, Utah, and Connecticut. Aspects of these state laws remain unclear, resulting in further uncertainty and potentially requiring us to modify our data practices and policies and to incur substantial additional costs and expenses in an effort to comply. Additionally, the U.S. federal government is contemplating federal privacy legislation.
Laws, regulations, and directives relating to privacy and data security are not consistent across jurisdictions, and they may impose conflicting or uncertain obligations. Compliance with laws, regulations, and directives is a rigorous, costly, and time-intensive process, and we may find it necessary or appropriate to put in place additional mechanisms ensuring compliance with new and changing data protection obligations. Actual or alleged noncompliance with any such laws, regulations, and directives may lead to regulatory investigations, enforcement actions and other proceedings, claims, and litigation, with the potential for significant fines, penalties, and other liabilities in the event of actual or alleged noncompliance. Any of these could adversely affect our business, financial condition and results of operations.
57

Table of Contents
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain patent protection for any product candidates we develop, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize any product candidates we may develop may be adversely affected.
Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our proprietary product candidates and other technologies we may develop. We seek to protect our proprietary position by filing patent applications in the United States and abroad relating to our core programs and product candidates, as well as other technologies that are important to our business. We have filed or intend to file patent applications on aspects of our technology and core product candidates; however, there can be no assurance that such patent applications will issue as granted patents around the world. The requirements for patentability differ in certain countries, and certain countries have heightened requirements for patentability. Furthermore, in some cases, we have only filed provisional patent applications on certain aspects of our technology and product candidates and each of these provisional patent applications is not eligible to become an issued patent until, among other things, we file a non-provisional patent application within 12 months of the filing date of the applicable provisional patent application. Any failure to file a non-provisional patent application within this timeline could cause us to lose the ability to obtain patent protection for the inventions disclosed in the associated provisional patent applications. Furthermore, in some cases, we may not be able to obtain issued claims covering compositions relating to our core programs and product candidates, as well as other technologies that are important to our business, and instead may need to rely on filing patent applications with claims covering a method of use and/or method of manufacture for protection of such core programs, product candidates, and other technologies. Any changes we make to our product candidates to cause them to have what we view as more advantageous properties may not be covered by our existing patents and patent applications, and we may be required to file new applications and/or seek other forms of protection for any such altered product candidates. There can be no assurance that we would be able to secure patent protection that would adequately cover altered product candidates. There can be no assurance that any such patent applications will issue as granted patents, and even if they do issue, such patent claims may be insufficient to prevent third parties, such as our competitors, from utilizing our technology. Any failure to obtain or maintain patent protection with respect to our core programs and product candidates could have a material adverse effect on our business, financial condition, results of operations, and prospects.
If the scope of any patent protection we obtain is not sufficiently broad, or if we lose any of our patent protection, our ability to prevent our competitors from commercializing similar or identical technology and product candidates would be adversely affected.
The patent position of biopharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has been the subject of much litigation in recent years. As a result, the issuance, scope, validity, enforceability, and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect our product candidates or other technologies or which effectively prevent others from commercializing competitive technologies and product candidates.
Moreover, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance. Patent applications we own currently or that in the future issue as patents may not be issued in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us, or otherwise provide us with any competitive advantage. Any patents to which we have rights may be challenged, narrowed, circumvented, or invalidated by third parties. Consequently, we do not know whether product candidates or other technologies will be protectable or remain protected by valid and enforceable patents. Our competitors or other third parties may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner which could materially adversely affect our business, financial condition, results of operations, and prospects.
The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability, and our patents may be challenged in the courts or patent offices in the United States and abroad. We may be subject to a third-party pre-issuance submission of prior art to the United States Patent and Trademark Office (USPTO) or post-issuance become involved in opposition, derivation, revocation, reexamination, post-grant and inter partes review, or interference proceedings or other similar proceedings challenging our patent rights. An adverse determination in any such submission, proceeding, or litigation could reduce the scope of, or invalidate or render unenforceable, such patent rights, allow third parties to commercialize our product candidates or other technologies and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. Moreover, we may have to participate in interference proceedings declared by the USPTO to determine priority of invention or in post-grant challenge proceedings, such as post-grant review at the USPTO or oppositions in a foreign patent office, that challenge our priority of invention or other features of patentability with respect to our patents and patent applications. Such challenges may result in loss of patent rights, loss of exclusivity, or in patent claims being narrowed, invalidated, or held unenforceable, which could limit our ability to stop others
58

Table of Contents
from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our product candidates and other technologies. Such proceedings also may result in substantial cost and require significant time from our scientists and management, even if the eventual outcome is favorable to us. If we are unsuccessful in any such proceeding or other priority or inventorship dispute, we may be required to obtain licenses from third parties, including parties involved in any such interference proceedings or other priority or inventorship disputes. Such licenses may not be available on commercially reasonable terms or at all, or may be non-exclusive. If we are unable to obtain and maintain such licenses, we may need to cease the development, manufacture, and commercialization of one or more of the product candidates we may develop. Termination of these licenses or reduction or elimination of our rights under these licenses may result in our having to negotiate new or reinstated agreements with less favorable terms, or cause us to lose our rights under these licenses, including our rights to important intellectual property or technology. The loss of exclusivity or the narrowing of our owned and licensed patent claims could limit our ability to stop others from using or commercializing similar or identical technology and products.
In addition, given the amount of time required for the development, testing, and regulatory review of new product candidates, patents protecting such product candidates might expire before or shortly after such product candidates are commercialized. As a result, our intellectual property may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
Some of our patents and patent applications may in the future be co-owned with third parties. In addition, future collaborators or licensors may co-own their patents and patent applications with other third parties with whom we do not have a direct relationship. Our rights to certain of these patents and patent applications may be dependent, in part, on inter-institutional or other operating agreements between the joint owners of such patents and patent applications, who are not parties to our license agreements. If our future collaborators or licensors do not have exclusive control of the grant of licenses under any such third-party co-owners’ interest in such patents or patent applications or we are otherwise unable to secure such exclusive rights, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products and technology to the extent such products and technology are not also covered by our intellectual property. In addition, we may need the cooperation of any such co-owners of our patents in order to enforce such patents against third parties, and such cooperation may not be provided to us. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.
If we are unable to obtain licenses from third parties on commercially reasonable terms or fail to comply with our obligations under such agreements, our business could be harmed.
It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our products, in which case we would be required to obtain a license from these third parties. If we are unable to license such technology, or if we are forced to license such technology, on unfavorable terms, our business could be materially harmed. If we are unable to obtain a necessary license, we may be unable to develop or commercialize the affected product candidates, which could materially harm our business, and the third parties owning such intellectual property rights could seek either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us.
If we fail to comply with our obligations under our license agreements, our counterparties may have the right to terminate these agreements, in which event we might not be able to develop, manufacture or market, or may be forced to cease developing, manufacturing or marketing, any product that is covered by these agreements or may face other penalties under such agreements. Such an occurrence could materially adversely affect the value of the product candidate being developed under any such agreement. Termination of these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new or reinstated agreements with less favorable terms, cause us to lose our rights under these agreements, including our rights to important intellectual property or technology, or impede, delay or prohibit the further development or commercialization of one or more product candidates that rely on such agreements.
Our rights to develop and commercialize our product candidates may be subject, in part, to the terms and conditions of agreements with others.
Agreements we may enter into in the future may not provide exclusive rights to use certain intellectual property and technology retained by the collaborator in all relevant fields of use and in all territories in which we may wish to develop or commercialize our technology and products in the future. As a result, we may not be able to prevent competitors or other third parties from developing and commercializing competitive products that utilize technology retained by such collaborators to the extent such products are not also covered by our intellectual property.
In addition, subject to the terms of any such agreements, we may not have the right to control the preparation, filing, prosecution, and maintenance, and we may not have the right to control the enforcement and defense of certain patents and patent applications
59

Table of Contents
retained by the collaborator and provided to us under a limited license. We cannot be certain that patents and patent applications that are controlled by future collaborators will be prepared, filed, prosecuted, maintained, enforced, and defended in a manner consistent with the best interests of our business. If our collaborators fail to prosecute, maintain, enforce, and defend such patents, or lose rights to those patents or patent applications, the limited rights we have licensed may be reduced or eliminated, our right to develop and commercialize any of our product candidates that are subject of such licensed rights could be adversely affected, and we may have a reduced ability to prevent competitors from making, using, and selling competing products. In addition, even where we have the right to control patent prosecution of patents and patent applications we have licensed to and from future collaborators, we may still be adversely affected or prejudiced by actions or inactions of future collaborators that took place prior to the date upon which we assumed control over patent prosecution.
We may enter into agreements with future collaborators to option or license certain intellectual property and may need to obtain additional intellectual property rights from others to advance our research or allow commercialization of product candidates we may develop. We may be unable to obtain additional intellectual property rights at a reasonable cost or on reasonable terms, if at all. In that event, we may be required to expend significant time and resources to redesign our technology, product candidates, or the methods for manufacturing them or to develop or license replacement technology, all of which may not be feasible on a technical or commercial basis. If we are unable to do so, we may be unable to develop or commercialize the affected product candidates, which could harm our business, financial condition, results of operations, and prospects significantly. We cannot provide any assurances that third-party patents do not exist which might be enforced against our current technology, manufacturing methods, product candidates, or future methods or products resulting in either an injunction prohibiting our manufacture or future sales, or, with respect to our future sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties, which could be significant.
Furthermore, our or our future collaborators’ patents may be subject to a reservation of rights by one or more third parties. The U.S. government may have certain rights to resulting intellectual property. When new technologies are developed with U.S. government funding, the U.S. government generally obtains certain rights in any resulting patents, including a non-exclusive license authorizing the U.S. government to use the invention or to have others use the invention on its behalf. The U.S. government’s rights may also permit it to disclose the funded inventions and technology to third parties and to exercise march-in rights to use or allow third parties to use the technology developed using U.S. government funding. The U.S. government may exercise its march-in rights if it determines that action is necessary because we fail to achieve the practical application of the government funded technology, or because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations, or to give preference to U.S. industry. In addition, our rights in such inventions may be subject to certain requirements to manufacture products embodying such inventions in facilities in the United States in certain circumstances and if this requirement is not waived. Any exercise by the U.S. government of such rights or by any third-party of its reserved rights could have a material adverse effect on our competitive position, business, financial condition, results of operations, and prospects.
If we fail to comply with our obligations in agreements under which we option or license intellectual property rights from future collaborators or licensors or otherwise experience disruptions to our business relationships with future collaborators or licensors, we could lose intellectual property rights that are important to our business.
We may enter into agreements with future collaborators that impose various economic, development, diligence, commercialization, and other obligations on us. Such collaboration agreements may also require us to meet development timelines, or to exercise commercially reasonable efforts to develop and commercialize licensed products. Our future collaborators might conclude that we have materially breached our obligations under such agreements and might therefore terminate or seek damages under the agreements, thereby removing or limiting our ability to develop and commercialize products and technology covered by these agreements. Termination of these agreements could cause us to lose the rights to certain patents or other intellectual property, or the underlying patents could fail to provide the intended exclusivity, and competitors or other third parties may have the freedom to seek regulatory approval of, and to market, products similar to or identical to ours and we may be required to cease our development and commercialization of certain of our product candidates. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.
Moreover, disputes may arise regarding intellectual property subject to a collaboration agreement, including:
the scope of the option or license rights granted under the agreement and other interpretation-related issues;
the extent to which our technology and processes infringe on intellectual property of the collaborator that is not subject to the option or license rights granted under the agreement;
the sublicensing of patent and other rights under our collaborative development relationships;
60

Table of Contents
our diligence obligations under the agreement and what activities satisfy those diligence obligations;
the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our collaborators and us and our other partners; and
the priority of invention of patented technology.
We may enter into agreements to option or license intellectual property or technology from third parties that are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of operations, and prospects. Moreover, if disputes over intellectual property that we have optioned or licensed prevent or impair our ability to maintain such arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates, which could have a material adverse effect on our business, financial conditions, results of operations, and prospects.
We may not be able to protect our intellectual property and proprietary rights throughout the world.
Filing, prosecuting, and defending patents on our product candidates and other technologies in all countries throughout the world would be prohibitively expensive, and the laws of foreign countries may not protect our rights to the same extent as the laws of the United States.
Consequently, we may not be able to prevent third parties from using our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products, and, further, may export otherwise infringing products to territories where we have patent protection but enforcement is not as strong as that in the United States. These products may compete with our products, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our intellectual property and proprietary rights generally. Proceedings to enforce our intellectual property and proprietary rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property and proprietary rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our future collaborators or licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations, and prospects may be adversely affected.
Issued patents covering our product candidates and other technologies could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States or abroad.
If we initiated legal proceedings against a third party to enforce a patent covering our product candidates or other technologies, the defendant could counterclaim that such patent is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. Third parties may raise claims challenging the validity or enforceability of our patents before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post-grant review, inter partes review, interference proceedings, derivation proceedings, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in the revocation of, cancellation of, or amendment to our patents in such a way that they no longer cover our
61

Table of Contents
product candidates or other technologies or may result in a change in inventorship which could impact our exclusive ownership of a patent. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a third party were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates or other technologies. Such a loss of patent protection would have a material adverse impact on our business, financial condition, results of operations, and prospects.
Third-party claims of intellectual property infringement, misappropriation, or other violation against us may prevent or delay the development and commercialization of our product candidates and other technologies.
The fields of designing and developing treatments for immunology, inflammation, and metabolic diseases are highly competitive and dynamic. In addition, while research and development that is taking place by several companies, including us and our competitors in oral biologic therapeutics, the technology used in our product candidates is still in development and no products utilizing similar technology have yet reached the market. As such, it is difficult to conclusively assess our freedom to operate without infringing on third-party rights. This could lead to significant intellectual property related litigation and proceedings relating to our, and other third party, intellectual property and proprietary rights in the future.
Our commercial success depends in part on our ability to develop, manufacture, market, and sell any product candidates that we develop and to use our proprietary technologies without infringing, misappropriating, and otherwise violating the patents and other intellectual property rights of third parties. There is a substantial amount of complex litigation involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, as well as administrative proceedings for challenging patents, including interference, post-grant review, inter partes review, derivation proceedings, and reexamination proceedings before the USPTO or oppositions and other comparable proceedings in foreign jurisdictions. We may become party to, or threatened with, such actions in the future, regardless of their merit.
Numerous U.S. and foreign issued patents and pending patent applications owned by third parties exist in the fields in which we are developing our product candidates. We cannot assure you that our product candidates and other technologies that we have developed, are developing or may develop in the future will not infringe existing or future patents owned by third parties. We may not be aware of patents that have already been issued and that a third party, for example, a competitor in the fields in which we are developing product candidates, and other technologies might assert are infringed by our current or future product candidates or other technologies, including claims to compositions, formulations, methods of manufacture or methods of use or treatment that cover our product candidates or other technologies. It is also possible that patents owned by third parties of which we are aware, but which we do not believe are relevant to our product candidates or other technologies, could be found to be infringed by our product candidates or other technologies. In addition, because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates or other technologies may infringe.
Third parties may have patents or obtain patents in the future and claim that the manufacture, use, or sale of our product candidates or other technologies infringes upon these patents. In the event that any third-party claims that we infringe their patents or that we are otherwise employing their proprietary technology without authorization and initiates litigation against us, even if we believe such claims are without merit, a court of competent jurisdiction could hold that such patents are valid, enforceable and infringed by our product candidates or other technologies. In this case, the holders of such patents may be able to block our ability to commercialize the applicable product candidate or technology unless we obtain a license under the applicable patents, or until such patents expire or are finally determined to be held invalid or unenforceable. Such a license may not be available on commercially reasonable terms or at all. Even if we are able to obtain a license, the license would likely obligate us to pay license fees or royalties or both, and the rights granted to us might be nonexclusive, which could result in our competitors gaining access to the same intellectual property. If we are unable to obtain a necessary license to a third-party patent on commercially reasonable terms, we may be unable to commercialize our product candidates or other technologies, or such commercialization efforts may be significantly delayed, which could in turn significantly harm our business.
Defense of infringement claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of management and other employee resources from our business, and may impact our reputation. In the event of a successful claim of infringement against us, we may be enjoined from further developing or commercializing our infringing product candidates or other technologies. In addition, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties, and/or redesign our infringing product candidates or technologies, which may be impossible or require substantial time and monetary expenditure. In that event, we would be unable to further develop and commercialize our product candidates or other technologies, which could harm our business significantly.
62

Table of Contents
Engaging in litigation to defend against third parties alleging that we have infringed, misappropriated, or otherwise violated their patents or other intellectual property rights is very expensive, particularly for a company of our size, and time-consuming. Some of our competitors may be able to sustain the costs of litigation or administrative proceedings more effectively than we can because of greater financial resources. Patent litigation and other proceedings may also absorb significant management time. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings against us could impair our ability to compete in the marketplace. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and prospects.
We may become involved in lawsuits to protect or enforce our patents and other intellectual property rights, which could be expensive, time consuming, and unsuccessful.
Competitors may infringe our patents or we may be required to defend against claims of infringement. In addition, our patents may become involved in inventorship, priority, or validity disputes. To counter or defend against such claims can be expensive and time consuming. In an infringement proceeding, a court may decide that a patent in which we have an interest is invalid or unenforceable, the other party’s use of our patented technology falls under the safe harbor to patent infringement under 35 U.S.C. §271(e)(1), or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
Patent terms may be inadequate to protect our competitive position on our products and services for an adequate amount of time.
Patents have a limited lifespan. In the United States and abroad, if all maintenance fees/annuity fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest non-provisional filing date. The protection a patent affords is limited. Even if patents covering our products are obtained, once the patent life has expired, we may be open to competition from competitive products. Given the amount of time required for the development, testing, and regulatory review of new products, patents protecting such products might expire before or shortly after such products are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.
We may be subject to claims that former employees or other third parties have an interest in our patents, trade secrets, or other intellectual property as an inventor or co-inventor. For example, our Co-Founder, Dr. Randall Mrsny, was an employee of both our company and the University of Bath and currently remains an employee of the University of Bath, and as such, we must ensure that we own our intellectual property that was conceived or developed by Dr. Mrsny while he was our employee and that he is under obligation to assign to our company. We may have inventorship or ownership disputes arise from conflicting obligations of our founders, employees, consultants, or others who are involved in developing our product candidates or other technologies, such as with the University of Bath. Litigation may be necessary to defend against any claims challenging inventorship or ownership of our patents, trade secrets, or other intellectual property. If the defense of any such claims fails, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to our product candidates and other technologies. Even if we are successful in defending against any such claims, litigation could result in substantial costs and be a distraction to management and other employees. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and prospects.
63

Table of Contents
If we do not obtain patent term extension and data exclusivity for any product candidates we may develop, our business may be materially harmed.
Depending upon the timing, duration, and specifics of any FDA marketing approval of any product candidates we may develop, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984 (Hatch-Waxman Act). The Hatch-Waxman Act permits a patent term extension of up to five years as compensation for patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent may be extended and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. Similar extensions as compensation for patent term lost during regulatory review processes are also available in certain foreign countries and territories, such as in Europe under a Supplementary Patent Certificate. However, we may not be granted an extension in the United States and/or foreign countries and territories because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is shorter than what we request, our competitors may obtain approval of competing products following our patent expiration, and our business, financial condition, results of operations, and prospects could be materially harmed.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patents for our product candidates and other technologies, we also rely on trade secrets and confidentiality agreements to protect our unpatented know-how, technology, and other proprietary information and to maintain our competitive position. We consider trade secrets and know-how to be one of our primary sources of intellectual property. Trade secrets and know-how can be difficult to protect. We expect our trade secrets and know-how to over time be disseminated within the industry through independent development, the publication of journal articles describing the methodology, and the movement of personnel from academic to industry scientific positions.
While we seek to protect these trade secrets and other proprietary technology, we cannot guarantee that we have entered into non-disclosure, confidentiality, invention, or patent assignment agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes. Despite our efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor or other third party, our competitive position would be materially and adversely harmed.
If any of our patent applications do not issue as patents in any jurisdiction, we may not be able to compete effectively.
Changes in either the patent laws or their interpretation in the United States and other countries may diminish our ability to protect our inventions, obtain, maintain, and enforce our intellectual property rights and, more generally, could affect the value of our intellectual property or narrow the scope of our patents with respect to our product candidates. With respect to our intellectual property related to our product candidates, we cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient protection from competitors or other third parties.
The patent prosecution process is expensive, time-consuming, and complex, and we may not be able to file, prosecute, maintain, enforce, or license all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output in time to obtain patent protection. We may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the rights to patents licensed to third parties. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. Any parties who enter into nondisclosure and confidentiality agreements with us who have access to confidential or patentable aspects of our research and development output, such as our employees, CROs, CDMOs, consultants, advisors, and other third parties, may breach the agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection. In addition, our ability to obtain and maintain valid and enforceable patents depends on whether the differences between our inventions and the prior art allow our inventions to be patentable over the prior art. Furthermore, publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after
64

Table of Contents
filing, or in some cases not at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in any of our patents or pending patent applications, or that we were the first to file for patent protection of such inventions.
Intellectual property rights do not necessarily address all potential threats.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For example:
others may be able to make products that are similar to our product candidates or utilize similar technology but that are not covered by the claims of the patents that we license or may own;
others may be able to develop a platform that is similar to, or better than, ours in a way that is not covered by the claims of our patents;
we, or our future licensors or collaborators, might not have been the first to make the inventions covered by the issued patent or pending patent application that we license or own now or in the future;
we, or our future licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions;
others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our owned or licensed intellectual property rights;
it is possible that our current or future pending owned or licensed patent applications will not lead to issued patents;
issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties;
our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;
we may not develop additional proprietary technologies that are patentable;
the patents of others may harm our business; and
we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third-party may subsequently file a patent covering such intellectual property.
Should any of these events occur, it or they could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on patents and applications will be due to be paid to the USPTO and various government patent agencies outside of the United States over the lifetime of our owned or licensed patents and applications. The USPTO and various non-U.S. government agencies require compliance with several procedural, documentary, fee payment, and other similar provisions during the patent application process. There are situations, however, in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in a partial or complete loss of patent rights in the relevant jurisdiction. In such an event, potential competitors might be able to enter the market with similar or identical products or technology, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Changes in patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products.
Changes in either the patent laws or interpretation of the patent laws in the United States or other jurisdictions could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. Assuming that other requirements for patentability are met, prior to March 16, 2013, in the United States, the first to invent the claimed invention was entitled to the patent, while outside the United States, the first to file a patent application was entitled to the patent. On or after March 16, 2013, under the Leahy-Smith America Invents Act (America Invents Act) enacted on September 16, 2011, the United States transitioned to a first inventor to file system in which, assuming that other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. A third-party that files a patent application in the USPTO on
65

Table of Contents
or after March 16, 2013, but before us could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by such third party. This will require us to be cognizant going forward of the time from invention to filing of a patent application. Since patent applications in the United States and most other countries are confidential for a period of time after filing or until issuance, we cannot be certain that we were the first to either (i) file any patent application related to our product candidates or other technologies or (ii) invent any of the inventions claimed in our patents or patent applications.
The America Invents Act also includes a number of significant changes that affect the way patent applications will be prosecuted and also may affect patent litigation. These include allowing third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, inter partes review, and derivation proceedings. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in United States federal courts necessary to invalidate a patent claim, a third-party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third-party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third-party as a defendant in a district court action. Therefore, the America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
In addition, the patent positions of companies in the development and commercialization of biopharmaceuticals are particularly uncertain. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the validity and enforceability of patents, once obtained. Depending on future actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could have a material adverse effect on our existing patent portfolio and our ability to protect and enforce our intellectual property in the future.
U.S. government sanctions on Russia and Russian government decrees in response thereto, may prevent us from obtaining, maintaining and/or enforcing our intellectual property rights in Russia.
The U.S. government has enacted a myriad of new sanctions through executive orders that prohibit U.S. companies from engaging in a wide range of activities with numerous government-related and private entities and individuals in Russia. Although the U.S. government has now authorized certain intellectual property-related transactions in Russia, including the filing and prosecution of any application to obtain a patent, trademark, or copyright, as well as the payment of renewal and maintenance fees, the sanctions on Russia may still impede our ability to file, prosecute, and maintain patents or other intellectual property rights in Russia. For example, the sanctions may make it difficult or impossible to pay for third-party intermediaries who facilitate and/or advise us regarding obtaining, maintaining and/or enforcing our intellectual property rights in Russia, which could result in a loss or lapse of patent rights. In addition, the Russian government has decreed that owners of Russian patents from designated “unfriendly” countries, which includes the U.S., will not be entitled to any compensation for use of their patents. This may prevent us from enforcing our Russian patents against Russian entities or individuals who are infringing our patents in Russia. Thus, even if a Russian patent can be maintained, it may not be possible to enforce the patent until the decree and/or sanctions are lifted.
We may be subject to claims that our employees, consultants, or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own intellectual property.
Many of our employees, consultants, and advisors are currently or were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors and potential competitors. Although we try to ensure that our employees, consultants, and advisors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these individuals have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual’s current or former employer. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.
In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership
66

Table of Contents
of what we regard as our intellectual property. Such claims could have a material adverse effect on our business, financial condition, results of operations, and prospects.
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.
Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented, or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential partners or customers in our markets of interest. At times, competitors or other third parties may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected. Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely affect our business, financial condition, results of operations, and prospects. In addition, opposition or cancellation proceedings may be filed against our trademark applications and registrations, and our trademarks may not survive such proceedings. In certain countries outside of the United States, trademark registration is required to enforce trademark rights. If we do not secure registrations for our trademarks, we may encounter more difficulty in enforcing them against third parties than we otherwise would.
Risks Related to Our Operations
We are highly dependent on our key personnel, and if we are not successful in attracting, motivating, and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.
Our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon our ability to attract, motivate, and retain highly qualified managerial, scientific, and clinical development personnel. We are highly dependent on our management and our scientific, technical, business, and medical personnel. We have had to reduce our workforce in the past and we may need to reduce our workforce again. The loss of the services provided by any of our executive officers, other key employees, and other scientific and medical advisors, and our inability to find suitable replacements, could result in delays in the development of our product candidates and harm our business. Additionally, the COVID-19 pandemic and/or the highly competitive job market has interfered with our ability to hire or retain personnel and we have been required to increase our compensation and incentive packages, and be more flexible in allowing personnel to work remotely from other cities to attract and retain personnel.
We conduct our operations at our facility in South San Francisco, California, in a region that is headquarters to many other biopharmaceutical companies and many academic and research institutions. To succeed, we must recruit, retain, manage and motivate qualified clinical, scientific, manufacturing, and sales and marketing personnel, and we face significant competition for experienced personnel. In addition, we will need to expand and effectively manage our managerial, operational, financial, development and other resources in order to successfully pursue our research, development and commercialization efforts for our existing and future product candidates. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited talent pool in our industry due to the breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize products. Competition for skilled personnel is intense and the turnover rate can be high, which may limit our ability to hire and retain highly qualified personnel on acceptable terms or at all. We expect that we may need to recruit talent from outside of our region, and doing so may be costly and difficult.
Many of the other biotechnology companies that we compete against for qualified personnel have greater financial and other resources, different risk profiles and a longer history in the industry than we do. They also may provide more diverse opportunities and better prospects for career advancement. Some of these characteristics may be more appealing to high-quality candidates than what we can offer. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition to competition for personnel, the San Francisco Bay Area in particular is characterized by a high cost of living. We could in the future have difficulty attracting experienced personnel to our company and may be required to expend significant financial resources in our employee recruitment and retention efforts. To induce valuable employees to remain at our company, in addition to salary and cash incentives, we have provided equity grants that vest over time. The value to employees of these equity grants that vest over time have been and may continue to be significantly affected by movements in our stock price that are beyond our control, and may at any time be insufficient to counteract more lucrative offers from other companies or require us to pay additional compensation to employees to incentivize them to join or stay with us. Although we have employment agreements with our key employees, these employment agreements provide for at-will employment, which means that any of our employees could leave our employment at any time, with or without notice. If we
67

Table of Contents
are unable to attract and incentivize quality personnel on acceptable terms, or at all, it may cause our business and operating results to suffer.
Future strategic transactions, partnerships and collaborations may be important to us. We will face significant competition in seeking new strategic partners.
We have limited capabilities for manufacturing and do not yet have any capability for sales, marketing or distribution. For some of our product candidates, we may in the future determine to collaborate with strategic partners for the development and potential commercialization of therapeutic products. The competition for strategic partners is intense. Our ability to reach a definitive agreement will depend, among other things, upon our assessment of the strategic partner’s resources and expertise, the terms and conditions of the proposed transaction, partnership or collaboration and the proposed strategic partner’s evaluation of a number of factors. These factors may include the design or results of clinical trials, the likelihood of approval by the FDA or comparable foreign regulatory authorities, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally. The strategic partner may also consider alternative product candidates or technologies for similar indications that may be available for collaboration and whether such collaboration could be more attractive than the one with us for our product candidate.
Strategic transactions are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future strategic partners. Even if we are successful in entering into a strategic transaction, the terms and conditions of that transaction may restrict us from entering into future agreements with other potential collaborators.
If we are unable to reach agreements with suitable strategic partners on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a product candidate or reduce or delay one or more of our other development programs. If we elect to fund and undertake development or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all. If we fail to enter into strategic transactions, partnerships or collaborations, and we do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our product candidates or bring them to market or continue to develop our technology platform and our business may be materially and adversely affected. Any transaction may be on terms that are not optimal for us, and we may not be able to maintain any new transaction if, for example, development or approval of a product candidate is delayed, sales of an approved product candidate do not meet expectations or the partner terminates the collaboration. Any such collaboration, or other strategic transaction, may require us to incur non-recurring or other charges, and increase our near- and long-term expenditures and pose significant integration or implementation challenges or disrupt our management or business. Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, any transactions that we do complete may be subject to the foregoing or other risks and have a material and adverse effect on our business, financial condition, results of operations, and prospects. Conversely, any failure to enter any collaboration or other strategic transaction that would be beneficial to us could delay the development and potential commercialization of our product candidates and have a negative impact on the competitiveness of any product candidate that reaches the market.
If we are unable to maintain future strategic partnerships or enter into strategic transactions or collaborations, our business could be adversely affected.
Any future strategic partnerships we enter into may pose a number of risks, including the following:
we may not be able to enter into critical strategic partnerships or enter them on favorable terms;
strategic partners have significant discretion in determining the effort and resources that they will apply to such a partnership, and they may not perform their obligations as agreed or expected;
strategic partners may not pursue development and commercialization of any product candidates that achieve regulatory approval or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the partners’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities;
strategic partners may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;
68

Table of Contents
strategic partners could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates if the strategic partners believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than our product candidates;
product candidates discovered in collaboration with us may be viewed by our strategic partners as competitive with their own product candidates or products, which may cause strategic partners to cease to devote resources to the commercialization of our product candidates;
a strategic partner with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of such product candidates;
disagreements with strategic partners, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of product candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive;
strategic partners may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation;
strategic partners may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; and
strategic partnerships may be terminated for the convenience of the partner and, if terminated, we could be required to raise additional capital to pursue further development or commercialization of the applicable product candidates.
We may in the future engage in strategic transactions, acquisitions, collaborations, or partnerships, which may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, require us to relinquish rights to certain of our technologies or product candidates that we would otherwise seek to develop or commercialize ourselves, and subject us to other risks.
We may engage in various strategic transactions, acquisitions, collaborations, and partnerships in the future, including licensing, acquiring or selling complementary products, intellectual property rights, technologies, or businesses. Any strategic transaction, acquisition, collaboration, or partnership may entail numerous risks, including:
increased operating expenses and cash requirements;
volatility with respect to the financial reporting related to such arrangements;
assumption of indebtedness or contingent liabilities;
issuance of our equity securities which would result in dilution to our stockholders;
assimilation of operations, intellectual property, products, and product candidates of an acquired company, including difficulties associated with integrating new personnel;
relinquishment of rights to certain of our technologies or product candidates as a result of transaction structures that we would otherwise seek to develop or commercialize ourselves;
diversion of our management’s attention from our existing product programs and initiatives in pursuing such an acquisition or strategic partnership;
retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;
risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or product candidates and regulatory approvals;
our inability to generate revenue from acquired intellectual property, technology, and/or products sufficient to meet our objectives or even to offset the associated transaction and maintenance costs; and
because our product candidates are all based on the same proprietary technology platform, decisions made by a strategic partner, such as decisions regarding regulatory strategy or reimbursements, could negatively impact our other products or product candidates that are outside the scope of the strategic partnership.
In addition, if we undertake such a transaction, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses, and acquire intangible assets that could result in significant future amortization expense.
69

Table of Contents
Any legal proceedings or claims against us could be costly and time-consuming to defend and could harm our reputation regardless of the outcome.
We may in the future become subject to legal proceedings and claims that arise in the ordinary course of business, including intellectual property, product liability, employment, class action, whistleblower and other litigation claims, and governmental and other regulatory investigations and proceedings. In March 2023, we implemented a reduction in force and the attendant layoffs increased the risk of claims being made by or on behalf of affected employees. Such matters can be time-consuming, divert management’s attention and resources, cause us to incur significant expenses or liability, or require us to change our business practices. In addition, the expense of litigation and the timing of this expense from period to period are difficult to estimate, subject to change, and could adversely affect our financial condition and results of operations. Because of the potential risks, expenses, and uncertainties of litigation, we may, from time to time, settle disputes, even where we have meritorious claims or defenses, by agreeing to settlement agreements. Any of the foregoing could adversely affect our business, financial condition, and results of operations.
Our business is subject to economic, political, regulatory, and other risks associated with international operations.
Our business is subject to risks associated with conducting business internationally. Some of our CDMOs are located outside the United States. Accordingly, our future results could be harmed by a variety of factors, including:
economic weakness, including inflation, or political instability in certain non-U.S. economies and markets. For example, inflationary pressures have increased and could increase costs for our clinical trials;
differing and changing regulatory requirements in non-U.S. countries, including drug pricing and reimbursement requirements;
challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States;
difficulties in compliance with non-U.S. laws and regulations;
changes in non-U.S. regulations and customs, tariffs, and trade barriers;
changes in non-U.S. currency exchange rates and currency controls;
changes in a specific country’s or region’s political or economic environment;
trade protection measures, import or export licensing requirements, or other restrictive actions by U.S. or non-U.S. governments;
negative consequences from changes in tax laws;
compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad;
workforce uncertainty in countries where labor unrest is more common than in the United States;
difficulties associated with staffing and managing international operations, including differing labor relations;
potential liability under the FCPA, U.K. Bribery Act, or comparable foreign laws; and
business interruptions resulting from geopolitical actions, including war and terrorism, natural disasters including earthquakes, typhoons, floods, and fires, or outbreaks of health epidemics such as the COVID-19 pandemic.
These and other risks associated with our planned international operations may materially adversely affect our ability to attain profitable operations.
Inflation in the global economy could negatively impact our business and results of operations.
General inflation in the United States, Europe and other geographies has risen to levels not experienced in recent decades. General inflation, including rising prices for our clinical trial drug supply, CROs, CDMOs and rising salaries negatively impact our business by increasing our operating expenses. To the extent general inflation results in rising interest rates and has other adverse effects on the market, it may adversely affect our business, financial condition and results of operations.
Our internal computer systems, or those used by our CROs or other contractors or consultants, may fail or suffer other breakdowns, cyberattacks, or information security breaches or incidents that could compromise the confidentiality, integrity, and availability of such systems and data, and affect our reputation.
Despite the implementation of security measures, our internal computer systems and those of our future CROs and other contractors may be vulnerable to damage, compromise, disruption and unauthorized access owing to a variety of causes,
70

Table of Contents
including system malfunction, natural disasters, terrorism, war and telecommunication and electrical failure, and inadvertent or intentional actions by our employees, CROs and other contractors, and/or other third parties, or cyber-attacks by malicious third parties. As the cyber-threat landscape evolves, such cyberattacks are growing in frequency, sophistication, and intensity, and are becoming increasingly difficult to detect. Such attacks could include the use of key loggers or other harmful and virulent malware, including ransomware or other denials of service, and can be deployed through malicious websites, the use of social engineering, and/or other means. These risks may increase as a result of COVID-19, owing to an increase in our and our CROs’ and other contractors’ personnel working remotely or utilizing personal devices. Additionally, cybersecurity researchers have observed increased cyberattack activity, and warned of heightened risks of cyberattacks, in connection with the conflict between Russia and Ukraine. If a breakdown, disruption, cyberattack, or other information security breach or security incident were to occur and cause interruptions in our operations or loss, corruption, or unavailability of data, or if any of the foregoing were perceived to have occurred, it could subject us to claims, proceedings, or other liabilities and may result in a material disruption of our development programs and our business operations, which could lead to significant delays or setbacks in our research and other further development and commercialization of our product candidates. For example, the loss of clinical trial data from completed, ongoing, or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Furthermore, disruptions of, or security breaches or other incidents of, our information technology systems or those of our future CROs and other contractors and consultants could result in the loss, misappropriation, and/or unauthorized access, use, or disclosure or dissemination of, or the prevention of access to, data (including trade secrets or other confidential information, intellectual property, proprietary business information, and personal information), which could result in financial, legal, business, and reputational harm to us. For example, any such event that leads to loss, damage, or unavailability of, or unauthorized access to, or use, alteration, or disclosure or dissemination of, personal information or other data we or our contractors or consultants process or maintain, including personal information regarding clinical trial subjects or employees, could harm our reputation directly, compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us to mandatory corrective action, and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information, which could result in significant legal and financial exposure and reputational damages that could potentially have an adverse effect on our business.
We also rely on third parties to manufacture our product candidates, and similar events relating to their information technology systems could also have a material adverse effect on our business. There can be no assurance that we, our CROs or other contractors, or our business counterparts will be successful in efforts to detect, prevent, or fully recover systems or data, including data or information that we process or maintain or that is processed or maintained by our CROs, other contractors, or business counterparts, from all breakdowns, service interruptions, or attacks on, or breaches or incidents of systems that could adversely affect our business and operations and/or result in the loss, corruption, or unavailability of data or other information, or inappropriate disclosure or dissemination of any such information, or events or circumstances leading to the perception that any of these have occurred, which could result in financial, legal, business, or reputational harm to us, including claims, litigation, governmental investigations and proceedings, and fines, penalties, and other liabilities. Further, notification and follow-up actions related to a security incident could impact our reputation and cause us to incur significant costs, including legal expenses and remediation costs. We expect to incur significant costs in an effort to detect and prevent security breaches and incidents, and we may face increased costs and requirements to expend substantial resources in the event of an actual or perceived security breach or other security incident.
The insurance we maintain may not be adequate to compensate us for the potential losses arising from any such disruption in or, failure or security breach or incident of or impacting, our systems or third-party systems where information important to our business operations or commercial development is stored. In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all. Further, our insurance may not cover all claims made against us and could have high deductibles in any event, and defending a suit, regardless of its merit, could be costly and divert management attention.
Risks Related to Ownership of Our Common Stock
The market price of our common stock has been volatile, which could result in substantial losses for investors.
The trading price of our common stock has been and may continue to be highly volatile and subject to wide fluctuation in response to various factors, some of which are beyond our control. Some of the factors that may cause the market price of our common stock to fluctuate include:
our ability to successfully raise capital and continue as a going concern;
our ability to meet the minimum standards required for remaining listed on The Nasdaq Global Select Market;
the degree of trading liquidity in our common shares;
future sales of our common stock by us, our insiders, or other stockholders;
71

Table of Contents
the success of existing or new competitive products or technologies;
the timing and results of preclinical studies and clinical trials for our current product candidates and any future product candidates that we may develop;
failure or discontinuation of any of our product development and research programs;
results of preclinical studies, clinical trials, or regulatory approvals of product candidates of our competitors, or announcements about new research programs or product candidates of our competitors;
regulatory or legal developments in the United States and other countries;
developments or disputes concerning patent applications, issued patents, or other proprietary rights;
the recruitment or departure of key personnel;
the level of expenses related to any of our research programs, clinical development programs, or product candidates that we may develop;
the results of our efforts to develop additional product candidates or products;
actual or anticipated changes in estimates as to financial results, development timelines, or recommendations by securities analysts;
announcement or expectation of additional financing efforts;
variations in our financial results or those of companies that are perceived to be similar to us;
changes in estimates or recommendations by securities analysts, if any, that cover our stock;
changes in the structure of healthcare payment systems;
market conditions in the pharmaceutical and biotechnology sectors;
general economic, industry, political, and market conditions, including the impact of the COVID-19 pandemic; and
the other factors described in this “Risk Factors” section.
On February 8, 2023, we received a notice from The Nasdaq Stock Market LLC notifying us that, for the last 30 consecutive business days, the closing bid price for our common stock listed on Nasdaq has been below the minimum $1.00 per share required for continued listing on The Nasdaq Global Select Market pursuant to Nasdaq Listing Rule 5450(a)(1) (the “Bid Price Requirement”). We have a period of 180 calendar days, or until August 7, 2023, to regain compliance with the Bid Price Requirement. If we fail to regain compliance with the Bid Price Requirement, our stock will be delisted from The Nasdaq Global Select Market. Any such delisting from The Nasdaq Stock Market LLC that causes our shares of common stock to trade on the over-the-counter market could also cause the market price of our common stock to fluctuate further. In addition, in recent years, the stock market in general, and the market for pharmaceutical and biotechnology companies in particular, has experienced significant price and volume fluctuations that have often been unrelated or disproportionate to changes in the operating performance of the companies whose stock is experiencing those price and volume fluctuations. Broad market and industry factors may seriously affect the market price of our common stock, regardless of our actual operating performance. Following periods of such volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Because of the potential volatility of our stock price, we may become the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and resources from our business, which could seriously harm our business.
An active trading market of our common stock may not be sustained.
Prior to the closing of our IPO in June 2020, there was no public trading market for our common stock. Although our common stock is listed on The Nasdaq Global Select Market, the market for our shares has demonstrated varying levels of trading activity and high levels of price volatility. We cannot predict the prices at which our common stock will trade. It is possible that in one or more future periods our results of operations and progression of our product pipeline may not meet the expectations of public market analysts and investors, and, as a result of these and other factors, the price of our common stock may fall. For example, as discussed under the heading “Risk Factors – The market price of our common stock has been volatile, which could result in substantial losses for investors,” we received a written notice from Nasdaq notifying us that we had not been in compliance with Nasdaq’s minimum bid price requirement.
72

Table of Contents
If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our stock, the price of our stock could decline.
The trading market for our common stock relies in part on the research and reports that industry or financial analysts publish about us or our business. If one or more of the analysts covering our business downgrade their evaluations of our stock or if we fail to meet their operating results estimates for us, the price of our stock could decline. If one or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline.
Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.
Sales of a substantial number of shares of our common stock in the public market could occur at any time. On March 11, 2022, we filed a final shelf registration statement on Form S-3 which allows us to undertake various offerings. In addition, on January 27, 2022, we entered into a Sales Agreement with the Agents pursuant to which we may offer and sell from time to time through the Agents up to $150.0 million in shares of our common stock through the ATM facility. As of December 31, 2022, the Company had not yet sold any shares of common stock under the ATM facility. If we or our stockholders sell, or the market perceives that our stockholders intend to sell, substantial amount of our common stock in the public market, the market price of our common stock could decline significantly.
Moreover, certain holders of shares of our common stock have rights, subject to conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. Registration of these shares under the Securities Act of 1933, as amended (Securities Act) would result in the shares becoming freely tradeable in the public market, subject to the restrictions of Rule 144 in the case of our affiliates. If any of these additional shares are sold, or if it is perceived that they will be sold, in the public market, the market price of our common stock could decline.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.
We have in the past and may in the future seek additional capital through a combination of public and private equity offerings, debt financings, strategic partnerships and alliances, and licensing arrangements. For example, on April 6, 2021, we completed a follow-on offering and issued 2,875,000 shares of our common stock at a price of $42.00 per share. In addition, on March 11, 2022, we filed a final shelf registration statement on Form S-3 which allows us to undertake various offerings. In addition, on January 27, 2022, we entered into a Sales Agreement with the Agents pursuant to which we may offer and sell from time to time through the Agents up to $150.0 million in shares of our common stock through the ATM facility. As of December 31, 2022, we have not yet sold any shares of common stock under the ATM facility. We, and indirectly, our stockholders, will bear the cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future offerings. To the extent that we raise additional capital through the sale of equity or debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. The incurrence of indebtedness would result in increased fixed payment obligations and could involve restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell, or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, any future collaborations we enter into with third parties may provide capital in the near term but limit our potential cash flow and revenue in the future. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms unfavorable to us.
Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.
As of December 31, 2022, our executive officers, directors, holders of 5% or more of our capital stock and their respective affiliates beneficially owned approximately 57% of our voting stock. As a result, this group of stockholders, if they act together, will have the ability to control us through this ownership position. These stockholders may be able to determine all matters requiring stockholder approval. For example, these stockholders may be able to control elections of directors, amendments of our organizational documents or approval of any merger, sale of assets or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders. The interests of this group of stockholders may not always coincide with your interests or the interests of other stockholders and they may act in a manner that advances their best interests and not necessarily those of other stockholders, including seeking a premium value for their common stock, which might affect the prevailing market price for our common stock.
73

Table of Contents
We have incurred and will continue to incur increased costs and management resources as a result of operating as a public company.
We have incurred and will continue to incur significant increased costs and management resources as a result of operating as a public company. We have incurred and will continue to incur significant legal, accounting, compliance and other expenses as a public company. Our management and other personnel need to devote a substantial amount of time and incur significant expense in connection with compliance initiatives. For example, as a public company, we must adopt additional internal controls and disclosure controls and procedures and have retained a transfer agent and adopted an insider trading policy. As a public company, we bear all of the internal and external costs of preparing and distributing periodic public reports in compliance with our obligations under the securities laws.
In addition, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act (SOX), and the related rules and regulations implemented by the SEC and Nasdaq have and will continue to increase legal and financial compliance costs and make some compliance activities more challenging and time-consuming.
We have invested and will continue to invest additional resources to comply with evolving laws, regulations and standards, and this investment will result in increased general and administrative expenses and may divert management’s time and attention from our other business activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us, and our business may be harmed. In connection with our initial public offering, we increased our directors’ and officers’ insurance coverage, which substantially increased our insurance cost. In the future, it may be more expensive or more difficult for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.
If we are unable to maintain effective internal controls, our business, financial position, and results of operations could be adversely affected.
As a public company, we are subject to reporting and other obligations under the Securities Exchange Act of 1934, as amended (Exchange Act), including the requirements of SOX Section 404, which require annual management assessments of the effectiveness of our internal control over financial reporting.
The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation to meet the detailed standards under the rules. During the course of its testing, our management may identify material weaknesses or deficiencies which may not be remedied in time to meet the deadline imposed by SOX. These reporting and other obligations place significant demands on our management and administrative and operational resources, including accounting resources.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. However, we have in the past and may in the future identify material weaknesses or significant deficiencies in internal control over financial reporting. Under standards established by the Public Company Accounting Oversight Board (PCAOB), a deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or personnel, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis. We cannot assure you that there will not be additional material weaknesses or significant deficiencies that our independent registered public accounting firm or we will identify.
If we are unable to successfully maintain internal control over financial reporting, or identify any additional material weaknesses, the accuracy and timing of our financial reporting may be adversely affected. In addition, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, when required, investors may lose confidence in the accuracy and completeness of our financial reports, we may face restricted access to the capital markets, and our stock price may be materially adversely affected. Moreover, we could become subject to investigations by regulatory authorities, which could require additional financial and management resources.
74

Table of Contents
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
As a public company, we are subject to the periodic reporting requirements of the Exchange Act. We designed our disclosure controls and procedures to reasonably assure that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include the fact that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.
Delaware law and provisions in our amended and restated certificate of incorporation and bylaws might discourage, delay, or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our common stock.
Provisions in our amended and restated certificate of incorporation and bylaws may discourage, delay, or prevent a merger, acquisition, or other change in control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares of our common stock. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. Therefore, these provisions could adversely affect the price of our common stock. Among other things, our charter documents:
establish that our board of directors is divided into three classes, Class I, Class II, and Class III, with each class serving staggered three-year terms;
provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;
provide that our directors may only be removed for cause;
eliminate cumulative voting in the election of directors;
authorize our board of directors to issues shares of preferred stock and determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval;
provide our board of directors with the exclusive right to elect a director to fill a vacancy or newly created directorship;
permit stockholders to only take actions at a duly called annual or special meeting and not by written consent;
prohibit stockholders from calling a special meeting of stockholders;
require that stockholders give advance notice to nominate directors or submit proposals for consideration at stockholder meetings;
authorize our board of directors, by a majority vote, to amend the bylaws; and
require the affirmative vote of at least 66 2/3% or more of the outstanding shares of common stock to amend many of the provisions described above.
In addition, Section 203 of the General Corporation Law of the State of Delaware (DGCL), prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.
Any provision of our amended and restated certificate of incorporation, amended and restated bylaws, or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our common stock.
Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our amended and restated bylaws provide that, unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the exclusive forum for (i) any derivative action or proceeding brought on behalf of us, (ii) any action
75

Table of Contents
asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders, (iii) any action arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws (as either may be amended from time to time), or (iv) any action asserting a claim governed by the internal affairs doctrine, except, in each case, (A) any claim as to which such court determines that there is an indispensable party not subject to the jurisdiction of such court (and the indispensable party does not consent to the personal jurisdiction of such court within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than such court, or (C) for which such court does not have subject matter jurisdiction.
These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, employees, control persons, underwriters, or agents, which may discourage lawsuits against us and our directors, employees, control persons, underwriters, or agents. Additionally, a court could determine that the exclusive forum provision is unenforceable, and our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. If a court were to find these provisions of our amended and restated bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition, or results of operations.
General Risk Factors
Changes in interpretation or application of generally accepted accounting principles may adversely affect our operating results.
We prepare our financial statements to conform to accounting principles generally accepted in the United States (GAAP). These principles are subject to interpretation by the Financial Accounting Standards Board, American Institute of Certified Public Accountants, the PCAOB, the SEC and various other regulatory or accounting bodies. A change in interpretations of, or our application of, these principles can have a significant effect on our reported results and may even affect our reporting of transactions completed before a change is announced. Additionally, as we are required to adopt new accounting standards, our methods of accounting for certain items may change, which could cause our results of operations to fluctuate from period to period.
Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.
Our operations, and those of our CROs, CDMOs, suppliers, and other contractors and consultants, could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical or health epidemics, and other natural or man-made disasters or business interruptions, for which we are partly uninsured. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. We rely on third-party manufacturers to produce and process our product candidates. Our ability to obtain clinical supplies of our product candidates could be disrupted if the operations of these suppliers are affected by a man-made or natural disaster or other business interruption.
The majority of our operations including our corporate headquarters and manufacturing operations are located in a facility in South San Francisco, California. Damage or extended periods of interruption to our corporate, development, research, or manufacturing facility due to fire, natural disaster, power loss, communications failure, unauthorized entry, or other events could cause us to cease or delay development of some or all of our product candidates. Although we maintain property damage and business interruption insurance coverage on our facility, our insurance might not cover all losses under such circumstances and our business may be seriously harmed by such delays and interruption.
We do not expect to pay any dividends for the foreseeable future. Investors may never obtain a return on their investment.
You should not rely on an investment in our common stock to provide dividend income. We do not anticipate that we will pay any dividends to holders of our common stock in the foreseeable future. Instead, we plan to retain any earnings to maintain and expand our existing operations. In addition, any future credit facility may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any return on their investment. As a result, investors seeking cash dividends should not purchase our common stock.
Item 1B. Unresolved Staff Comments.
None.
76

Table of Contents
Item 2. Properties.
Our corporate headquarters is located in South San Francisco, California, where we lease 84,321 square feet of laboratory, manufacturing, warehouse and office space pursuant to a lease agreement that expires in October 2029. We also lease approximately 20,000 square feet of additional warehouse space in South San Francisco, California pursuant to a lease agreement that expires in July 2029.
We believe that these facilities will be adequate for our near-term needs. If required, we believe that suitable additional or alternative space would be available in the future on commercially reasonable terms.
Item 3. Legal Proceedings.
From time to time, we may become involved in litigation or other legal proceedings arising in the ordinary course of our business. We are not currently, and were not during the year ended December 31, 2022, a party to any litigation or legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business and, to the best of management’s knowledge, no such litigation is currently pending or threatened. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors.
Item 4. Mine Safety Disclosures.
None.
77

Table of Contents
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information for Common Stock
Our common stock trades under the symbol “AMTI” on The Nasdaq Global Select Market and has been publicly traded since June 5, 2020. Prior to that date, there was no public market for our common stock.
Holders of Our Common Stock
As of March 2, 2023, there were approximately 10 holders of record of our common stock, although there are a substantially greater number of “beneficial owners,” whose shares are held of record by banks, brokers and other financial institutions in “nominee” or “street” name.
Dividend Policy
We have never declared or paid any dividends on our common stock. We anticipate that we will retain all of our future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future. Any future determination to declare or pay dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend upon, among other factors, our results of operations, financial condition, contractual restrictions, capital requirements, general business conditions and other factors that our board of directors may deem relevant. Our future ability to pay cash dividends on our capital stock may be limited by the terms of any future debt or preferred securities.
Use of Proceeds from Follow-On Offering
On April 6, 2021, the Company completed a follow-on offering and issued 2,875,000 shares of its common stock, including 375,000 shares of common stock issued in connection with the full exercise by the underwriters of their options to purchase additional shares of common stock at a price of $42.00 per share. The aggregate gross proceeds from the follow-on offering were $120.8 million. After deducting underwriting discounts and commissions of $7.2 million and deferred offering costs of $0.8 million, the net proceeds from the follow-on offering were approximately $112.8 million.
There has been no material change in the planned use of proceeds in our follow-on offering as described in our final prospectus filed with the SEC on April 1, 2021 pursuant to Rule 424(b)(4). We invested the funds received in interest-bearing investment-grade securities.
Item 6. [Reserved]
78

Table of Contents
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties, including those described in the section titled “Special Note Regarding Forward Looking Statements.” Our actual results and the timing of selected events could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth under the section titled “Risk Factors” included elsewhere in this report.
Overview
We are a clinical-stage biopharmaceutical company leveraging our proprietary technology platform to design and develop a pipeline of novel oral biologic product candidates. Our proprietary technology platform allows us to exploit existing natural cellular trafficking pathways to facilitate the active transport of diverse therapeutic payloads across epithelial barriers, such as the intestinal epithelium (IE) and the respiratory epithelium (RE). Active transport is an efficient mechanism that uses the cell’s own machinery to transport materials across epithelial barriers. We believe that our ability to exploit this mechanism is a key differentiator of our approach. We currently have two oral biologics in clinical development. Our most advanced product candidate, AMT-101, has completed a Phase 2 clinical trial in patients with chronic pouchitis and is in Phase 2 development for patients with rheumatoid arthritis (RA). Our second product candidate, AMT-126, is in Phase 1 development for diseases related to IE barrier function defects.
As of December 31, 2022, we had cash and cash equivalents of $61.1 million. Based on our available cash resources, there is substantial doubt about our ability to continue as a going concern within one year after the date the financial statements included in this Annual Report on Form 10-K are issued. If we are unable to obtain additional funding, we will be forced to delay, reduce in scope or eliminate some of our research and development programs, including related clinical trials and operating expenses, potentially delaying the time to market for, or preventing the marketing of, any of our product candidates, which could adversely affect our business prospects and our ability to continue operations, and would have a negative impact on our financial condition and our ability to pursue our business strategies. If we are unable to continue as a going concern, we may have to cease operations and liquidate our assets. We may receive less than the value at which those assets are carried on our audited financial statements, and it is likely that investors will lose all or a part of their investment. The report from our independent registered public accounting firm issued in connection with this Annual Report on Form 10-K contains statements expressing substantial doubt about our ability to continue as a going concern. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide funding to us on commercially reasonable terms, if at all. To the extent that money is raised through the sale of our securities, the issuance of those securities could result in dilution to our existing security holders. If we raise money through debt financing or bank loans, we may be required to secure the financing with some or all our business assets, which could be sold or retained by the creditor should we default on our payment obligations. If we fail to raise sufficient funds, we will likely need to curtail or cease operations.
We are developing oral biologic product candidates in patient-friendly dosage forms that are designed for either targeting local gastrointestinal (GI) tissue or entering systemic circulation to precisely address the relevant biology of a disease. We are building a portfolio of oral product candidates based on our technology platform including our most advanced product candidate, AMT-101, a gastrointestinal-selective oral fusion of interleukin 10 (IL-10) and our proprietary carrier molecule that has been designed for active transport across the IE barrier into local gastrointestinal (GI) tissue. IL-10 is a potent immunomodulatory cytokine that is known to be the master regulator of immune homeostasis, including within GI mucosal tissue. We have designed AMT-101 to cross the IE barrier, but not enter the bloodstream, which we believe may offer significant efficacy and safety benefits compared to systemic IL-10 administration.
Since the date of our incorporation in Delaware on November 21, 2016, we have devoted substantial resources to research and development activities, including research activities such as drug discovery, preclinical studies, and clinical trials as well as development activities such as the manufacturing of clinical and research material, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these operations.
For information regarding our product candidates and clinical trial programs, refer to “Overview” within Part I, Item 1. Business in this Annual Report on Form 10-K.
We do not currently have any products approved for sale, and we have not generated any revenue from product sales. Our ability to generate product revenue sufficient to achieve profitability, if ever, will depend on the successful development of one or more of our product candidates which we expect will take a number of years. Given our stage of development, we have not yet established a commercial organization or distribution capabilities. We intend to build a commercial infrastructure to support sales
79

Table of Contents
of our product candidates. We expect to manage sales, marketing and distribution through internal resources and third-party relationships. While we may commit significant financial and management resources to commercial activities, we may also consider collaborating with one or more pharmaceutical companies to enhance our commercial capabilities.
Manufacturing of protein therapeutics is a complex process and represents a critical path to creating oral biologic therapeutics and a key component of our long-term success. We have spent significant resources to date on developing our current manufacturing processes and know-how to produce sufficient supply and optimize functionality. We now manufacture clinical supply at our new facility located in South San Francisco. While we have successfully manufactured clinical supply at our internal facility, we may need to scale our manufacturing operations to manufacture sufficient quantity needed to advance any of our product candidates in preclinical studies and clinical trials. Accordingly, we will be required to make significant investments to expand our manufacturing facilities in the future, and our efforts to scale our internal manufacturing capabilities are subject to risks.
In addition, despite having our in-house manufacturing facility, we expect to continue to rely on third parties for the manufacture of our product candidates for preclinical and clinical testing, as well as for commercial manufacture if any of our product candidates obtain marketing approval. We also rely, and expect to continue to rely, on third parties to package, label, store and distribute our product candidates, as well as for our commercial products if marketing approval is obtained. We believe that this strategy allows us to maintain a more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment and personnel while also enabling us to focus our expertise and resources on the development of our product candidates.
Strategic Plan Announcement

In May 2022, we implemented a strategic plan to focus the business on our clinical program for AMT-101 (Strategic Plan). The Strategic Plan is intended to preserve capital, ensuring that we are appropriately resourced to advance AMT-101 through key development milestones.

Under the Strategic Plan, we reduced our then current workforce by approximately 40%. Impacted employees were eligible to receive severance benefits and company-funded COBRA premiums, contingent upon an impacted employee’s execution (and non-revocation) of a customary separation agreement, which included a general release of claims against us.

In connection with the Strategic Plan, we recognized restructuring charges of approximately $3.8 million for the year ended December 31, 2022. These restructuring charges were primarily related to severance payments and other employee-related separation costs of $3.3 million, contract termination fees of $0.5 million, a lease termination fee of $0.3 million, impairment of property and equipment of $0.1 million and insignificant legal expenses, partially offset by a $0.4 million reduction in stock-based compensation expense as a result of applying modification accounting for accelerated vesting of RSUs. As of December 31, 2022, accrued contract termination fees of $0.4 million remained unpaid and are expected to be paid within one year.
COVID-19 and Current Economic Environment
Our financial results could be affected by the COVID-19 pandemic in various ways. As a result of the COVID-19 pandemic, we have experienced and could experience disruptions that could severely impact our business, current and planned clinical trials and preclinical studies. For example, the COVID-19 pandemic could result in delays to our clinical trials and preclinical studies for numerous reasons including difficulties in enrolling patients or healthy volunteers, diversion of healthcare resources away from the conduct of clinical trials, delays in receiving regulatory authorities to initiate clinical trials, and delays in receiving supplies to conduct clinical trials and preclinical studies. Moreover, there has been an increase in infections from COVID-19 variants which has impacted patient recruitment at certain of our clinical trial sites and could result in increased costs and delays. In addition, as a result of ongoing COVID-19 research and the current global supply chain issues, there is currently limited availability for certain resources required to conduct some of our preclinical studies and clinical trials, which may result in longer lead times, increased costs, and delays in completing preclinical studies and clinical trials. As a result, research and development expenses and general and administrative expenses may vary significantly if there is an increased impact from COVID-19 on the costs and timing associated with the conduct of the clinical trial and other related business activities.

We are carefully monitoring the pandemic and the potential length and depth of the resulting economic impact on our financial condition, including our cash flows and results of operations. We intend to continue to execute on our strategic plans and operational initiatives during the COVID-19 pandemic. However, the extent to which the COVID-19 pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted. Accordingly, management is carefully monitoring the impact of the COVID-19 pandemic on our business. As of December 31, 2022, we were not aware of any significant contingencies and no estimates were recorded on our financial statements related to COVID-19.
80

Table of Contents

The extent of the ongoing impact of macroeconomic events on our business and on global economic activity is uncertain and the related financial impact cannot be reasonably estimated with any certainty at this time, although the impacts are expected to continue and may significantly affect our business. We expect that the impacts on our business will continue through this period of economic uncertainty as supply chain issues, inflation and other factors continue to worsen or emerge. Accordingly, management is carefully evaluating our liquidity position, communicating with and monitoring the actions of our suppliers and continuing to review our near-term operating expenses as the uncertainty related to these factors continues to unfold. The risks related to our business, including further discussion of the impact and possible future impacts of the COVID-19 pandemic and current economic conditions on our business, are further described in the section titled “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.
Components of Results of Operations
Revenue
We have not generated any revenue from product sales or otherwise and do not expect to generate any revenue for the foreseeable future.
Operating Expenses
We classify operating expenses into two main categories: (i) research and development expenses and (ii) general and administrative expenses.
Research and Development Expenses
Our research and development expenses consist primarily of external and internal expenses incurred in connection with our research activities and development programs.
These expenses include, but are not limited to:
External expenses, consisting of:
clinical trials—expenses associated with CROs for managing and conducting clinical trials and sample analysis;
materials—expenses associated with laboratory supplies and other materials;
preclinical studies—expenses associated with preclinical studies performed by vendors;
contract manufacturing—expenses associated with manufacturing clinical trial materials including under agreements with CDMOs and other vendors; and
other research and development—expenses associated with consulting and other external expenses.
Internal expenses, consisting of:
personnel—personnel expenses including salaries, bonuses, benefits, and stock-based compensation expense; and
equipment, depreciation, and facility—expenses associated with service and repair of equipment, equipment depreciation, and allocated facility costs for research and development occupied space.
To date, the vast majority of these expenses have been incurred to advance our most advanced product candidate, AMT-101. We expect that significant additional spending will be required to progress AMT-101 through the remainder of the clinical development phases. These expenses will primarily consist of expenses for the administration of clinical trials as well as manufacturing costs for clinical material supply.
In addition, we have incurred minimal expenses in connection with our second product candidate, AMT-126, including expenses for internal animal studies and preclinical studies performed at contract research organizations. We expect that significant additional spending will be required as we progress AMT-126 through clinical trials. We have also incurred minimal expenses to expand our development pipeline and for general discovery research. We expect spending for these early-stage research and development activities to increase for the foreseeable future. We deploy our personnel, equipment, and facility resources across all our research and development activities.
81

Table of Contents
Research and development expenses are recognized as they are incurred. If deposits are required by external vendors, the non-current portion of the deposit is included as a prepaid expense until the related services are provided.
At this time, we cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. We expect our research and development expenses to increase significantly in the foreseeable future as we continue to invest in research and development activities related to developing our product candidates, as our product candidates advance into later stages of development, as we begin to conduct larger clinical trials, as we seek regulatory approvals for any product candidates that successfully complete clinical trials, and incur expenses associated with hiring additional personnel to support our research and development efforts. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, the successful development of our product candidates is highly uncertain, and we may never succeed in achieving regulatory approval for any of our product candidates.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation expense) for personnel in executive, finance, accounting, corporate development, and other administrative functions. General and administrative expenses also include legal fees, professional fees paid for accounting, auditing, consulting, tax, and investor relations services, insurance costs, and facility costs not otherwise included in research and development expenses, and public company expenses such as costs associated with compliance with the rules and regulations of the SEC and those of Nasdaq.
We expect that our general and administrative expenses will continue to increase significantly in the foreseeable future as additional administrative personnel and services are required to manage these functions of a public company and as our pipeline of product candidates expands.
Interest Income, Net and Other Expense, Net
Interest income, net consists of interest income earned on our cash and cash equivalents, net of interest expense on our finance leases. Other expense, net primarily consists of gains and losses resulting from foreign currency denominated transactions with foreign vendors.
Results of Operations
A discussion regarding our financial condition and results of operations for the year ended December 31, 2022 compared to the year ended December 2021 is presented below. A discussion regarding our financial condition and results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the SEC on February 24, 2022.
Comparison of the Years Ended December 31, 2022 and 2021
Year Ended December 31,
(in thousands)20222021Change
Operating expenses:
Research and development$89,826 $71,448 $18,378 
General and administrative37,393 29,341 8,052 
Total operating expenses127,219 100,789 26,430 
Loss from operations(127,219)(100,789)(26,430)
Interest income, net898 626 272 
Other expense, net(4)(124)120 
Net loss$(126,325)$(100,287)$(26,038)
Research and Development Expenses
Research and development expenses increased by $18.4 million for the year ended December 31, 2022 compared to the year ended December 31, 2021. The following table sets forth the primary external and internal research and development expenses for the periods indicated (in thousands):
82

Table of Contents
Year Ended December 31,
20222021Change
External expenses:
Clinical trials$18,866 $16,558 $2,308 
Materials8,497 6,852 1,645 
Preclinical studies4,870 2,975 1,895 
Other research and development8,124 2,021 6,103 
Contract manufacturing1,718 1,699 19 
Internal expenses:
Personnel33,483 29,159 4,324 
Equipment depreciation and facilities14,268 12,184 2,084 
Total research and development expenses$89,826 $71,448 $18,378 
The overall increase in research and development expenses was primarily driven by external costs for CROs, CMOs, consultants and laboratory supplies related to the advancement of our product candidates through preclinical studies and clinical trials as our FILLMORE, LOMBARD and MARKET clinical trials reported top-line data during 2022. The increase in internal costs was primarily due to an increase of $4.3 million in personnel-related expenses, including a $2.6 million increase related to employee separation costs related to our Strategic Plan, which was implemented in May 2022, as well as an increase in stock-based compensation expense. In addition, increased lease expense associated with our new corporate headquarters, which we fully occupied in October 2021, as well as depreciation for our research and development equipment also contributed to the increase in internal costs.
General and Administrative Expenses
General and administrative expenses increased by $8.1 million for the year ended December 31, 2022 compared to the year ended December 31, 2021. The increase in general and administrative expenses was primarily due to an increase of $6.2 million in personnel-related expenses, including an increase of $4.2 million in stock-based compensation expense and $0.7 million of employee separation costs related to our Strategic Plan. The remaining increase was primarily attributable to increased lease expense associated with our new corporate headquarters, which we fully occupied in October 2021.
Interest Income, Net
Interest income, net increased by $0.3 million during the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to higher interest rate yields on our money market funds, which invests all of its assets in direct obligations of the U.S. Treasury.
Liquidity and Capital Resources
As of December 31, 2022, we had approximately $61.1 million in cash and cash equivalents. Based on our available cash resources, there is substantial doubt about our ability to continue as a going concern within one year after the date the financial statements included in this Annual Report on Form 10-K are issued. If we are unable to obtain additional funding, we will be forced to delay, reduce in scope or eliminate some of our research and development programs, including related clinical trials and operating expenses, potentially delaying the time to market for, or preventing the marketing of, any of our product candidates, which could adversely affect our business prospects and our ability to continue operations, and would have a negative impact on our financial condition and our ability to pursue our business strategies. If we are unable to continue as a going concern, we may have to cease operations and liquidate our assets. We may receive less than the value at which those assets are carried on our audited financial statements, and it is likely that investors will lose all or a part of their investment. The report from our independent registered public accounting firm issued in connection with this Annual Report on Form 10-K contains statements expressing substantial doubt about our ability to continue as a going concern. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide funding to us on commercially reasonable terms, if at all. To the extent that money is raised through the sale of our securities, the issuance of those securities could result in dilution to our existing security holders. If we raise money through debt financing or bank loans, we may be required to secure the financing with some
83

Table of Contents
or all our business assets, which could be sold or retained by the creditor should we default on our payment obligations. If we fail to raise sufficient funds, we will likely need to curtail or cease operations.
We have invested significant financial resources in research and development activities and have historically financed our operations primarily through the private placements of convertible preferred stock and the issuance of common stock upon the completion of our IPO. We completed our IPO in June 2020 and received net proceeds of approximately $160.6 million after deducting underwriting discounts and commissions and offering costs, net of offering costs of $0.2 million paid in 2019. On April 6, 2021, we completed a follow-on offering and received net proceeds of approximately $112.8 million after deducting underwriting discounts and commissions and offering costs.
In January 2022, we entered into a Sales Agreement with SVB Securities LLC and JMP Securities LLC, as our sales agents (Agents), pursuant to which we may offer and sell from time to time through the Agents up to $150.0 million in shares of our common stock through an “at-the-market” program (ATM Facility). The shares will be offered and sold pursuant to our shelf registration statement on Form S-3 (File No. 333-263501) and the final prospectus supplement, which was filed on March 11, 2022. For so long as our non-affiliate public float does not exceed $75 million, the amount of securities that we may sell pursuant to registration statements on Form S-3 will be limited to the equivalent of one-third of our public float, which will limit our ability to raise capital. As of December 31, 2022, we have not yet sold any shares under the ATM facility.

Summary Statement of Cash Flows
The following table sets forth the primary sources and uses of cash, cash equivalents, and restricted cash for the periods indicated (in thousands):
Year Ended December 31,
202220212020
Net cash used in operating activities$(93,900)$(82,609)$(58,894)
Net cash (used in) provided by investing activities(4,152)122,206 (109,286)
Net cash (used in) provided by financing activities(733)115,298 161,296 
Net (decrease) increase in cash, cash equivalents and restricted cash$(98,785)$154,895 $(6,884)
Cash Used in Operating Activities
For the year ended December 31, 2022, net cash used in operating activities of $93.9 million reflected a net loss of $126.3 million, a net change of $2.3 million in our net operating assets and liabilities, partially offset by aggregate non-cash charges of $34.7 million. The net change in our operating assets and liabilities was primarily due to decreases of $6.9 million in operating lease liabilities, partially offset by decreases of $4.9 million in prepaids and other current and non-current assets. The non-cash charges primarily consisted of stock-based compensation expense of $23.2 million, non-cash operating lease expense of $8.3 million and depreciation and amortization expense of $3.1 million.
For the year ended December 31, 2021, net cash used in operating activities of $82.6 million reflected a net loss of $100.3 million, a net change of $6.6 million in our net operating assets and liabilities, partially offset by $24.3 million in non-cash charges. The net change in our operating assets and liabilities was primarily due to decreases of $5.6 million in prepaid expenses and other current assets and $3.6 million in operating lease liabilities, partially offset by increases of $2.4 million in accounts payable and accrued expenses and $0.2 million in other liabilities. The non-cash charges primarily consisted of stock-based compensation expense of $16.7 million, non-cash operating lease expense of $4.4 million and depreciation and amortization expenses of $3.2 million.
Cash Provided by or Used in Investing Activities
For the year ended December 31, 2022, cash used in investing activities was $4.2 million, consisting of purchases of property and equipment.
For the year ended December 31, 2021, cash provided by investing activities was $122.2 million related primarily to the sales and maturities of investments of $124.1 million, partially offset by the purchase of property and equipment of $1.9 million.
84

Table of Contents
Cash Provided by Financing Activities
For the year ended December 31, 2022, cash used by financing activities was $0.7 million, consisting primarily of payments of issuance costs related to our ATM facility of $0.9 million and principal payments for finance lease liabilities of $0.2 million, offset by proceeds received from the issuance of common stock under our employee stock purchase plan of $0.3 million and proceeds received from stock option exercises of $0.1 million.
For the year ended December 31, 2021, cash provided by financing activities was $115.3 million, consisting primarily of net proceeds from the follow-on offering of $113.5 million, proceeds received from the stock option exercises of $2.1 million, and proceeds from issuance of common stock from employee stock purchase plan of $0.6 million. These proceeds were partially offset by payments for issuance costs related to the follow-on offering of $0.7 million and principal payments for finance lease liabilities of $0.2 million.
Material Cash Requirements from Contractual Obligations
Our material cash requirements from known contractual obligations as of December 31, 2022 consisted of operating lease liabilities including our lease of approximately 84,321 square feet of space in South San Francisco, California for a lease term ending in September 2029. For additional information regarding the terms of our operating leases, see Note 5 to the financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
Future Funding Requirements and Going Concern
Management has concluded that there is substantial doubt about our ability to continue as a going concern within one year after the date the financial statements included in this Annual Report on Form 10-K are issued. Our primary uses of cash are to fund our operations, which consist primarily of research and development expenses related to our programs, and to a lesser extent, general and administrative expenses. We expect to continue to incur expenses and operating losses for the foreseeable future in connection with our ongoing activities, if and as we:
advance product candidates through preclinical studies and clinical trials;
pursue regulatory approval of product candidates;
continue to invest in our technology platform;
seek marketing approvals for any product candidates that successfully complete clinical trials;
implement operational, financial and management information systems;
hire additional personnel;
build out and expand our in-house manufacturing capabilities;
continue to operate as a public company;
expand our pipeline of product candidates;
obtain, maintain, expand, and protect our intellectual property portfolio; and
establish a sales, marketing, and distribution infrastructure to commercialize any product candidate for which we may obtain marketing approval and related commercial manufacturing build-out.
Our future funding requirements, both short-term and long-term, will depend on many factors, including:
the progress, costs, trial design, results of and timing of our various clinical trials of our product candidates;
the progress, costs and results of our research pipeline;
the willingness of the U.S. Food and Drug Administration (FDA), European Medicines Agency (EMA), or other regulatory authorities to accept our product candidates, as well as data from our completed and planned clinical trials and preclinical studies and other work, as the basis for review and approval of our product candidates for various indications;
the outcome, costs and timing of seeking and obtaining FDA, EMA, and any other regulatory approvals;
the number and characteristics of product candidates that we pursue;
our ability to manufacture sufficient quantities of our product candidates;
our need to expand our research and development activities;
85

Table of Contents
the costs associated with manufacturing our product candidates, including building-out and expanding our own manufacturing facilities, and establishing commercial supplies and sales, marketing, and distribution capabilities;
the costs associated with securing and establishing commercialization;
the costs of acquiring, licensing, or investing in businesses, product candidates, and technologies;
our ability to maintain, expand, and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense, and enforcement of any patents or other intellectual property rights;
our need and ability to retain key management and hire scientific, technical, business, and medical personnel;
the effect of competing drugs and product candidates and other market developments;
the timing, receipt, and amount of sales from our potential products;
our need to implement additional internal systems and infrastructure, including financial and reporting systems;
the economic and other terms, timing of and success of any collaboration, licensing or other arrangements which we may enter in the future;
the potential effects of inflation on our business operations;
the volatility of our share price and our ability to maintain our listing on The Nasdaq Stock Market LLC; and
the potential effects of the COVID-19 pandemic on our business operations.
If we raise additional funds by issuing equity securities, our stockholders will experience dilution, which could be significant given the recent trading prices for our common stock. If we raise additional capital through debt financing, we may be subject to covenants that restrict our operations including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments, and engage in certain merger, consolidation or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. In addition, our ability to raise additional capital may be adversely impacted by worsening global macroeconomic conditions and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from various factors, including the ongoing COVID-19 pandemic and the conflict between Russia and Ukraine.
We do not currently have any products approved for sale, and we have not generated any revenue from product sales. We have incurred net losses in each reporting period since inception, including net losses of $126.3 million and $100.3 million for the years ended December 31, 2022 and 2021, respectively, resulting in an accumulated deficit of $366.0 million at December 31, 2022. We anticipate we will continue to incur net losses for the foreseeable future.
We will need to obtain substantial additional funding in connection with our continuing operations. Without additional funding, our current liquidity is not sufficient to fund our projected operating requirements for a twelve-month period. If we are unable to obtain sufficient funds on acceptable terms when needed, we may be required to reduce operating expenses, delay or reduce the scope of our development efforts, obtain funds through arrangements with others that may require us to relinquish rights to certain of our technologies or products that we would otherwise seek to develop or commercialize, or cease operations.
Critical Accounting Estimates
Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
The economic uncertainty in the current environment caused by the COVID-19 pandemic could limit our ability to accurately make and evaluate our estimates and judgments. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
While our significant accounting policies are described in the notes to our financial statements appearing elsewhere in this Annual Report, we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial results.
86

Table of Contents
Research and Development Expenses
Research and development expenses are charged to expense as incurred. Research and development expenses include personnel and labor costs related to clinical trials, preclinical studies, contract manufacturing and facilities for laboratory space used for research and development activities.
Accrued Research and Development Expenses
We accrue for estimated costs of research, preclinical studies, clinical trials, and manufacturing development services performed but not yet invoiced and such accruals are included within accrued expenses which are significant components of research and development expenses. A substantial portion of our ongoing research and development activities is conducted by third-party service providers including CROs and CDMOs. Our contracts, amendments thereto, statements of work and change orders with the CROs and CDMOs generally include fees such as initiation fees, reservation fees, costs related to animal studies and safety tests, verification run costs, materials and reagents expenses, and taxes. Payments made to third parties under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and are expensed as services are rendered. The financial terms of these arrangements are subject to negotiations, which vary from contract to contract and may result in the timing of payments that do not match the periods over which materials or services are provided to us under such contracts. We accrue the costs incurred under agreements with these third-parties and/or adjust the prepaid expenses based on estimates of work completed in accordance with the respective agreements. We determine the estimated costs through information obtained from third-party providers as to the progress, or stage of completion or actual timeline (start-date and end-date) of the services and the agreed-upon fees to be paid for such services and corroboration with internal personnel responsible for oversight of the research and development activities.
If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust accrued expenses or prepaid expenses accordingly, which impact research and development expenses. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to our prior estimates of research and development expenses.
Stock-Based Compensation Expense
We account for stock-based compensation expense by measuring and recognizing compensation expense for stock options and restricted stock units (RSUs) granted to employees based on estimated grant-date fair values. We use the straight-line method to allocate compensation cost to reporting periods over the requisite service period, which is generally the vesting period. We recognize actual forfeitures by reducing the stock-based compensation expense in the same period as the forfeitures occur.
We estimate the fair value of stock option awards using the Black-Scholes option-pricing valuation model. The Black-Scholes model requires the input of subjective assumptions, including the expected term, expected volatility, risk-free interest rate, and expected dividend yield, which are described in greater detail below. The assumptions for expected term and expected volatility are the two assumptions that significantly affect the grant date fair value. The expected dividend yield and risk-free interest rate are not significant to the calculation of fair value.
Expected term—The expected term of the option awards represents the period of time between the grant date of the option awards and the date the option awards are either exercised, converted or canceled. We used the simplified method as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. Under the simplified method, the expected term equals the average of the vesting term and the original contractual term of the option award.
Expected volatility—The expected stock price volatility for option awards granted prior to the fourth quarter of 2022 was determined based on an average of the historical volatilities of the common stock of several peer companies with characteristics that are similar to us. The peer companies were chosen based on their similar size, stage in the life cycle or area of specialty. Beginning in the fourth quarter of 2022, we used a blended volatility estimate consisting of our own historical stock price volatility (as we had at least two years of historical stock price data) supplemented by historical volatilities of peer companies such that the time period over which historical volatility data used was at least equal to the expected term of the option award.
Expected dividend yield—We have never paid dividends on our common stock and have no plans to pay dividends on our common stock in the foreseeable future. Therefore, we used an expected dividend yield of zero.
Risk-free interest rate—The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the option award.
87

Table of Contents
The fair value of RSUs is measured on the grant date based on the closing fair market value of our common stock.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risk related to changes in interest rates. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our cash equivalents are in the form of money market funds that invest only in direct U.S. government treasury obligations. However, because of the short-term nature of the duration of our portfolio and the low-risk profile of such investments, we believe an immediate 10% change in market interest rates would not be expected to have a material impact on the fair market value of our money market funds or on our financial condition or results of operations.
Item 8. Financial Statements and Supplementary Data.
The financial statements and related financial statement schedules required to be filed are listed in Part IV, Item 15 of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, our principal executive officer and principal financial officer, respectively, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that as of such date our disclosure controls and procedures were effective at a reasonable assurance level (a) to ensure that information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (b) to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of December 31, 2022, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d–15(f) of the Exchange Act. Under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the guidelines established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) 2013.
Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2022.
As a non-accelerated filer, we are not required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act.
88

Table of Contents
Changes in Internal Control over Financial Reporting
During the quarter ended December 31, 2022, there were no changes in our internal controls over financial reporting (as defined in Rules 13a‑15(d) and 15d‑15(d) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None.
89

Table of Contents
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Information responsive to this item is incorporated herein by reference to our definitive Proxy Statement with respect to our 2023 Annual Meeting of Stockholders, to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
Item 11. Executive Compensation.
Information responsive to this item is incorporated herein by reference to our definitive Proxy Statement with respect to our 2023 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information responsive to this item is incorporated herein by reference to our definitive Proxy Statement with respect to our 2023 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information responsive to this item is incorporated herein by reference to our definitive Proxy Statement with respect to our 2023 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
Item 14. Principal Accounting Fees and Services.
Information responsive to this item is incorporated herein by reference to our definitive Proxy Statement with respect to our 2023 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
90

Table of Contents
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a)The following documents are filed as a part of this Annual Report:
(1)Financial Statements:
F-2
F-4
F-5
F-6
F-8
F-9
(2)Financial Statement Schedules:
All financial statement schedules have been omitted because they are not applicable, not required or the information required is shown in the financial statements or the notes thereto.
(3)Exhibits:
The list of exhibits filed with this Annual Report on Form 10-K is set forth in the Exhibit Index preceding the signature page and is incorporated herein by reference or filed with this Annual Report, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).
91

Table of Contents
Item 16. Form 10-K Summary
None.
Exhibit Index
Incorporated by Reference
Exhibit
Number
Exhibit DescriptionFormFile No.ExhibitFiling Date
1.18-K001-393061.1January 28, 2022
3.18-K001-393063.1June 9, 2020
3.28-K001-393063.2June 9, 2020
4.1S-1333-2384644.1May 18, 2020
4.2S-1333-2384644.2May 18, 2020
4.310-K001-393064.3February 24, 2022
10.1+S-1333-23846410.1May 18, 2020
10.2+S-1333-23846410.2May 18, 2020
10.3+S-1333-23846410.3May 18, 2020
10.4+10-K001-3930610.4February 24, 2022
10.5+10-K001-3930610.5March 19, 2021
10.6+S-1/A333-23846410.6June 1, 2020
10.7+8-K001-3930610.1March 4, 2022
10.8+S-1/A333-23846410.7June 1, 2020
10.9+S-1/A333-23846410.15June 1, 2020
10.10+S-1/A333-23846410.8June 1, 2020
10.11+S-1/A333-23846410.9June 1, 2020
92

Table of Contents
10.12+10-Q001-3930610.10August 4, 2022
10.13+S-1/A333-23846410.12June 1, 2020
10.14+S-1/A333-23846410.13June 1, 2020
10.15+10-K001-3930610.15March 19, 2021
10.16+8-K001-3930610.1January 27, 2022
10.17S-1333-23846410.12May 18, 2020
10.188-K001-3930610.1February 10, 2021
23.1Filed herewith
24.1
31.1Filed herewith
31.2Filed herewith
32.1†Furnished herewith
32.2†Furnished herewith
101.INSXBRL Instance DocumentFiled herewith
101.SCHXBRL Taxonomy Extension Schema DocumentFiled herewith
101.CALXBRL Taxonomy Extension Calculation Linkbase DocumentFiled herewith
101.DEFXBRL Taxonomy Extension Definition Linkbase DocumentFiled herewith
101.LABXBRL Taxonomy Extension Label Linkbase DocumentFiled herewith
93

Table of Contents
101.PREXBRL Taxonomy Extension Presentation Linkbase DocumentFiled herewith
104.0Cover Page Interactive File (formatted as Inline XBRL and contained in Exhibit 101)Filed herewith
+Indicates management contract or compensatory plan.
#Portions of this exhibit have been omitted in accordance with Item 601(b)(10)(iv) of Regulation S-K.
† The certifications attached as Exhibits 32.1 and 32.2 that accompany this Annual Report are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report, irrespective of any general incorporation language contained in such filing.
94

Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Applied Molecular Transport Inc.
Date: March 9, 2023
By:/s/ Tahir Mahmood
Tahir Mahmood, Ph.D.
Co-Founder and Chief Executive Officer
Date: March 9, 2023
By:/s/ Brandon Hants
Brandon Hants
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Tahir Mahmood and Brandon Hants and each of them as his or her true and lawful attorneys-in-fact and agents, each with the full power of substitution, for him or her in his or her name, place or stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that said attorneys-in-fact and agents, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
NameTitleDate
/s/ Tahir MahmoodCo-Founder, Chief Executive Officer and Director (Principal Executive Officer)March 9, 2023
Tahir Mahmood, Ph.D.
/s/ Brandon HantsChief Financial Officer (Principal Financial and Accounting Officer)March 9, 2023
Brandon Hants
/s/ Charlene BanardDirectorMarch 9, 2023
Charlene Banard
/s/ David LamondDirectorMarch 9, 2023
David Lamond
/s/ Holly SchachnerDirectorMarch 9, 2023
Holly Schachner, M.D.
/s/ John SmitherDirectorMarch 9, 2023
John Smither
/s/ Aaron VanDevenderDirectorMarch 9, 2023
Aaron VanDevender, Ph.D.
95

Table of Contents
APPLIED MOLECULAR TRANSPORT INC.
INDEX TO FINANCIAL STATEMENTS
F-2
F-4
F-5
F-6
F-8
F-9
F-1

Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Applied Molecular Transport Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Applied Molecular Transport Inc. (the “Company”) as of December 31, 2022 and 2021, the related statements of operations and comprehensive loss, stockholders’ equity and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred a net loss, accumulated deficit, and cash outflows from operations that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Accrued and Prepaid Expenses - Accrued and Prepaid Research and Development Expenses - Refer to Note 2 and Note 4 to the financial statements
Critical Audit Matter Description
The Company accrues for estimated costs of research, preclinical studies, clinical trials, and manufacturing development services performed but not yet invoiced and such accruals are included within accrued expenses. A substantial portion of the Company’s ongoing research and development activities is conducted by third-party service providers. Payments made to third parties under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and are expensed as services are rendered. The financial terms of these arrangements vary from contract to contract and may result in the timing of payments that do not match the periods over which materials or services are provided to the Company under such contracts.
F-2

Table of Contents
The Company accrues the costs incurred under agreements with these third parties and/or adjusts the prepaid expenses based on estimates of work completed in accordance with the respective agreements. The Company determines the estimated costs through information obtained from third-party providers as to the progress, stage of completion or actual timeline of the services and the agreed-upon fees to be paid for such services and corroboration with internal personnel responsible for the oversight of the research and development activities. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company adjusts accrued expenses or prepaid expenses accordingly, which impact research and development expenses. As of December 31, 2022, accrued and prepaid research and development expenses were $3.5 million and $1.2 million, respectively.
Given the significant judgments made by management in evaluating the information obtained from internal personnel and third-parties to estimate the progress, stage of completion, and actual timeline of the services, auditing the Company’s accrued and prepaid research and development expenses was especially challenging and required an increased extent of auditor effort.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to accrued and prepaid research and development expenses included the following, among others:
We evaluated publicly available information (such as press releases and investor presentations) and board of directors’ materials regarding the status of research, pre-clinical studies, clinical trials, and manufacturing development services.
We made selections of amounts recognized as research and development expense as well as those recognized as accrued and prepaid research and development expenses to evaluate management’s estimate of the third-party’s progress and performed the following procedures:
Performed corroborating inquiries with Company personnel responsible for the oversight of the research and development activities.
Inspected the related agreements, as well as amendments thereto, statements of work, change orders, or other supporting documentation (such as communications between the Company and third-parties) and agreed key provisions including timeline, financial terms, and fees, to the Company’s estimation of expenses incurred to date.
Obtained the listing of all contracts and open purchase orders related to research and development expenses to evaluate the completeness of accrued and prepaid research and development expenses.
Independently confirmed progress of clinical tasks performed, and the related costs incurred to date.
Inspected invoices, and related payments thereto, and agreed the amounts and timing of the payment to the Company’s analysis of accrued and prepaid research and development expenses.
Evaluated management’s judgments compared to the evidence obtained.
/s/ Deloitte & Touche LLP
San Francisco, California
March 9, 2023
We have served as the Company’s auditor since 2019.
F-3

Table of Contents
APPLIED MOLECULAR TRANSPORT INC.
Balance Sheets
(in thousands, except share and per share amounts)
December 31,
20222021
Assets
Current assets:
Cash and cash equivalents$61,145 $159,821 
Prepaid expenses2,688 6,685 
Other current assets186 594 
Total current assets64,019 167,100 
Property and equipment, net8,183 6,998 
Operating lease right-of-use assets33,222 38,142 
Finance lease right-of-use assets584 652 
Restricted cash916 1,025 
Other assets522 121 
Total assets$107,446 $214,038 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$1,583 $2,211 
Accrued expenses8,660 8,226 
Lease liabilities, operating lease - current4,639 3,584 
Lease liabilities, finance lease - current205 237 
Total current liabilities15,087 14,258 
Lease liabilities, operating lease31,228 35,785 
Lease liabilities, finance lease49 167 
Other liabilities244 241 
Total liabilities46,608 50,451 
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, $0.0001 par value: 50,000,000 shares authorized; none issued and outstanding
— — 
Common stock, $0.0001 par value: 450,000,000 shares authorized; 39,181,801 and 38,619,957 shares issued and outstanding as of December 31, 2022 and 2021, respectively
Additional paid-in capital426,804 403,228 
Accumulated deficit(365,970)(239,645)
Total stockholders’ equity60,838 163,587 
Total liabilities and stockholders’ equity$107,446 $214,038 
The accompanying notes are an integral part of these financial statements.
F-4

Table of Contents
APPLIED MOLECULAR TRANSPORT INC.
Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)
Year Ended December 31,
202220212020
Operating expenses:
Research and development$89,826 $71,448 $53,936 
General and administrative37,393 29,341 12,746 
Total operating expenses127,219 100,789 66,682 
Loss from operations(127,219)(100,789)(66,682)
Interest income, net898 626 229 
Other expense, net(4)(124)(111)
Net loss$(126,325)$(100,287)$(66,564)
Net loss per share, basic and diluted$(3.25)$(2.67)$(2.91)
Weighted-average shares of common stock outstanding, basic and diluted
38,837,00137,591,50522,878,325
Comprehensive loss:
Net loss$(126,325)$(100,287)$(66,564)
Other comprehensive income (loss):
Net unrealized (losses) gains on investments— (27)33 
Amounts recognized for net realized gain included in net loss— — (19)
Total comprehensive loss$(126,325)$(100,314)$(66,550)
The accompanying notes are an integral part of these financial statements.
F-5

Table of Contents
APPLIED MOLECULAR TRANSPORT INC.
Statements of Stockholders’ Equity
(in thousands, except share amounts)
Convertible Preferred Stock Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Total
Stockholders’
Equity
Series A Series B Series C
Shares Amount Shares Amount Shares Amount SharesAmount
Balance as of December 31, 20195,157,213$32,826 3,992,919$30,921 4,816,160$41,868 7,360,738$$1,078 $13 $(72,794)$(71,702)
Conversion of convertible preferred stock into common stock(5,157,213)(32,826)(3,992,919)(30,921)(4,816,160)(41,868)13,966,292105,614 — — 105,615 
Issuance of common stock upon initial public offering, net of underwriters’ commission and issuance costs of $16,477
— — — 12,650,000160,622 — — 160,623 
Exercise of common stock options— — — 1,144,330630 — — 631 
Stock-based compensation expense— — — — 3,056 — — 3,056 
Other comprehensive income— — — — — 14 — 14 
Net loss— — — — — — (66,564)(66,564)
Balance as of December 31, 2020$— $— $— 35,121,360$$271,000 $27 $(139,358)$131,673 
The accompanying notes are an integral part of these financial statements.
F-6

Table of Contents
APPLIED MOLECULAR TRANSPORT INC.
Statements of Stockholders’ Equity, continued
(in thousands, except share amounts)
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance as of December 31, 202035,121,360$271,000 $27 $(139,358)$131,673 
Issuance of common stock upon follow-on offering, net of underwriters' commission and issuance costs of $7,947
2,875,000— 112,801 — — 112,801 
Issuance of common stock from employee stock purchase plan28,258— 607 — — 607 
Exercise of common stock options595,339— 2,122 — — 2,122 
Stock-based compensation expense— 16,698 — — 16,698 
Other comprehensive loss— — (27)— (27)
Net loss— — — (100,287)(100,287)
Balance as of December 31, 202138,619,957$$403,228 $— $(239,645)$163,587 
Issuance of common stock from employee stock purchase plan150,369— 311 — — 311 
Exercise of common stock options53,709— 98 — — 98 
Issuance of common stock upon vesting of restricted stock units357,766— — — — — 
Stock-based compensation expense— 23,167 — — 23,167 
Net loss— — — (126,325)(126,325)
Balance as of December 31, 202239,181,801$$426,804 $— $(365,970)$60,838 
The accompanying notes are an integral part of these financial statements.
F-7

Table of Contents
APPLIED MOLECULAR TRANSPORT INC.
Statements of Cash Flows
(in thousands)
Year Ended December 31,
202220212020
Operating activities
Net loss$(126,325)$(100,287)$(66,564)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense23,167 16,698 3,056 
Depreciation and amortization3,128 3,251 1,842 
Non-cash operating lease expense8,294 4,363 — 
Loss on impairment of property and equipment80 — — 
(Gain) loss on disposal of property and equipment(1)74 
Net accretion of discounts on investments— (71)(116)
Changes in operating assets and liabilities:
Prepaid expenses3,997 (5,374)(779)
Other current assets1,252 (273)(315)
Other assets(401)505 
Accounts payable(645)(1,557)840 
Accrued expenses427 3,983 2,647 
Operating lease liabilities(6,876)(3,663)— 
Other liabilities241 (12)
Net cash used in operating activities(93,900)(82,609)(58,894)
Investing activities
Proceeds from sales and maturities of investments— 124,070 84,236 
Purchases of property and equipment(4,152)(1,864)(5,315)
Purchases of investments— — (188,207)
Net cash (used in) provided by investing activities(4,152)122,206 (109,286)
Financing activities
Proceeds from follow-on offering, net of underwriters' commission— 113,505 — 
Proceeds from exercise of common stock options98 2,122 631 
Proceeds from issuance of common stock from employee stock purchase plan311 607 — 
Principal payments on finance leases(266)(232)(90)
Proceeds from issuance of common stock upon initial public offering, net of underwriters' commission— — 164,703 
Payments for financing and offering costs(876)(704)(3,948)
Net cash (used in) provided by financing activities(733)115,298 161,296 
Net (decrease) increase in cash, cash equivalents and restricted cash(98,785)154,895 (6,884)
Cash, cash equivalents and restricted cash beginning of year160,846 5,951 12,835 
Cash, cash equivalents and restricted cash end of year$62,061 $160,846 $5,951 
Supplemental cash flow data:
Cash paid for interest on finance leases$27 $32 $14 
Supplemental disclosure of non-cash investing and financing activities:
Property and equipment included in accrued expenses and accounts payable$23 $664 $506 
Conversion of convertible preferred stock into common stock$— $— $105,615 
Equipment acquired through capital lease$— $— $626 
The accompanying notes are an integral part of these financial statements.
F-8

Table of Contents
APPLIED MOLECULAR TRANSPORT INC.
Notes to the Financial Statements
1. Organization and Principal Activities
Business Description
Applied Molecular Transport Inc. (the Company) is a clinical-stage biopharmaceutical company leveraging its proprietary technology platform to design and develop a pipeline of novel oral biologic product candidates. The Company’s principal operations are in the United States with its headquarters in South San Francisco, California.
Since the date of incorporation in Delaware on November 21, 2016, the Company has devoted substantial resources to research and development activities, including research activities such as drug discovery, preclinical studies, and clinical trials as well as development activities such as the manufacturing of clinical and research material, establishing and maintaining an intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these operations.
Liquidity and Substantial Doubt about Going Concern
The Company has incurred net losses in each reporting period since inception, including net losses of $126.3 million and $100.3 million for the years ended December 31, 2022 and 2021, respectively, resulting in an accumulated deficit of $366.0 million at December 31, 2022. As of December 31, 2022, the Company had approximately $61.1 million in cash and cash equivalents and anticipates it will continue to incur net losses for the foreseeable future. Without additional funding, the Company’s current liquidity is not sufficient to fund its projected operating requirements for a twelve-month period. Based upon the foregoing, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.
The financial statements as of December 31, 2022 have been prepared under the assumption that the Company will continue as a going concern, which contemplates continuity of operations, the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company’s ability to continue as a going concern is dependent upon its ability to obtain additional capital, reduce expenditures and/or execute on its business plan. The financial statements as of December 31, 2022 do not include any adjustments that might result from the outcome of this uncertainty.
The Company has invested significant financial resources in research and development activities and has historically financed its operations primarily through private placements of convertible preferred stock and the sale of common stock in public equity issuances, such as an IPO in June 2020 and a follow-on equity offering in April 2021. The Company plans to secure additional capital through a combination of public or private equity offerings, debt financings, licensing arrangements, collaboration agreements or other arrangements with other companies, asset sales, or other sources of financing. There can be no assurance that such financing will be available or will be at terms acceptable to the Company. If the Company is unable to obtain sufficient funds on acceptable terms when needed, the Company may be required to reduce operating expenses, delay or reduce the scope of its development efforts, obtain funds through arrangements with others that may require the Company to relinquish rights to certain of its technologies or products that the Company would otherwise seek to develop or commercialize, or cease operations.
In January 2022, the Company entered into a Sales Agreement with SVB Securities LLC and JMP Securities LLC, as the Company’s sales agents (Agents), pursuant to which the Company may offer and sell from time to time through the Agents up to $150.0 million in shares of the Company’s common stock through an “at-the-market” program (ATM Facility). The shares will be offered and sold pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-263501) and the final prospectus supplement, which was filed on March 11, 2022. For so long as the Company’s non-affiliate public float does not exceed $75 million, the amount of securities that the Company may sell pursuant to registration statements on Form S-3 will be limited to the equivalent of one-third of its public float, which will limit its ability to raise capital. As of December 31, 2022, the Company has not yet sold any shares under the ATM facility.
Strategic Plan Announcement

In May 2022, the Company implemented a strategic plan to focus the business on its clinical program for AMT-101 (Strategic Plan). The Strategic Plan is intended to preserve capital, ensuring that the Company is appropriately resourced to advance AMT-101 through key development milestones.
Under the Strategic Plan, the Company reduced its then current workforce by approximately 40%. Impacted employees were eligible to receive severance benefits and company-funded COBRA premiums, contingent upon an impacted employee’s
F-9

Table of Contents
execution (and non-revocation) of a customary separation agreement, which included a general release of claims against the Company.

In connection with the Strategic Plan, the Company recognized restructuring charges of approximately $3.8 million for the year ended December 31, 2022. These restructuring charges were primarily related to severance payments and other employee-related separation costs of $3.3 million, contract termination fees of $0.5 million, a lease termination fee of $0.3 million, impairment of property and equipment of $0.1 million and insignificant legal expenses, partially offset by a $0.4 million reduction in stock-based compensation expense as a result of applying modification accounting for accelerated vesting of RSUs. As of December 31, 2022, accrued contract termination fees of $0.4 million remained unpaid and are expected to be paid within one year.
Risks and Uncertainties
The COVID-19 virus has spread extensively throughout the world, resulting in the World Health Organization characterizing COVID-19 as a pandemic. While significant progress in addressing the pandemic has been made with multiple vaccines and treatment options now available, the emergence of highly transmissible variants of the virus have resulted in periodic surges in infection rates around the world and a cycle of fluctuating public health restrictions designed to mitigate the spread of the virus. The extent to which the COVID-19 pandemic impacts the Company’s business will depend on future developments, which are highly uncertain and cannot be predicted, such as the spread or emergence of new variants, the duration and severity of surges in outbreaks, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease and to address its impact, including on financial markets or otherwise. The Company continues to have a hybrid work environment with a majority of the Company’s workforce either working exclusively from home or working from home for part of their work week. The Company’s financial results could be affected by the COVID-19 pandemic in various ways. As a result of the COVID-19 pandemic, the Company has experienced and could experience disruptions that could severely impact the Company’s business, current and planned critical trials and preclinical studies. For example, the COVID-19 pandemic could result in delays to the Company’s clinical trials and preclinical studies for numerous reasons including difficulties in enrolling patients or healthy volunteers, diversion of healthcare resources away from the conduct of clinical trials, delays in receiving regulatory authorities to initiate clinical trials, and delays in receiving supplies to conduct clinical trials and preclinical studies. There has also been an increase in infections from COVID-19 variants which has impacted patient recruitment at certain of the Company’s clinical trial sites and could result in increased costs and delays. In addition, as a result of ongoing COVID-19 research and the current global supply chain issues, there is currently limited availability for certain resources required to conduct some of the Company’s preclinical studies and clinical trials, which may result in longer lead times, increased costs, and delays in completing preclinical studies and clinical trials. As a result, research and development expenses and general and administrative expenses may vary significantly if there is an increased impact from COVID-19 on the costs and timing associated with the conduct of the clinical trial and other related business activities. The Company is carefully monitoring the pandemic and the potential length and depth of the resulting economic impact on the Company’s financial condition and results of operations as of December 31, 2022.

In addition, currently there is a conflict between Russia and Ukraine. Certain of the Company’s completed clinical trials included clinical trial sites located in Ukraine, Russia, and other Eastern European countries. The Board of Directors of the Company (Board of Directors) is receiving management reports and discusses with management at board meetings macro-economic and geopolitical developments, including the conflict between Russia and Ukraine and the impact on the Company’s personnel, cybersecurity, sanctions and the Company’s clinical trial sites located in the region so that the Company can be prepared to react to new developments as they arise. This conflict has and may continue to impact the Company’s ability to conduct certain of its clinical trials in Ukraine, Russia and other Eastern European countries. This could negatively impact the completion of the Company’s clinical trials and/or analyses of clinical results or result in increased costs, all of which could materially harm the Company’s business. The Board of Directors is monitoring and continues to assess and monitor risks related to the conflict between Russia and Ukraine.

The extent of the ongoing impact of macroeconomic events on the Company’s business and on global economic activity is uncertain and the related financial impact cannot be reasonably estimated with any certainty at this time, although the impacts are expected to continue and may significantly affect the Company’s business. The Company expects that the impacts on its business will continue through this period of economic uncertainty as supply chain issues, inflation and other factors continue to worsen or emerge. Accordingly, management is carefully evaluating its liquidity position, communicating with and monitoring the actions of its suppliers and continuing to review its near-term operating expenses as the uncertainty related to these factors continues to unfold. The risks related to the Company’s business, including further discussion of the impact and possible future impacts of the COVID-19 pandemic and current economic conditions on the Company’s business, are further described in the section titled “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.
F-10

Table of Contents
2. Summary of Significant Accounting Policies
Basis of Presentation
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP).
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company bases its estimates on historical experience and market-specific or other relevant assumptions that it believes are reasonable under the circumstances. Assets and liabilities reported in the Company’s balance sheets and expenses and income reported are affected by estimates and assumptions, which are used for, but are not limited to, recording research and development expenses and related accruals, and determining the fair value of stock options for stock-based compensation expense. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of the COVID-19 pandemic. Actual results could differ from such estimates or assumptions.
Concentration of Credit Risk and Other Risks and Uncertainties
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains bank deposits in federally insured financial institutions and these deposits may exceed federally insured limits. The Company is exposed to credit risk in the event of default by the financial institutions holding its cash to the extent recorded in the balance sheets. The Company’s cash equivalents consist of money market funds that invests all of its assets in direct obligations of the U.S. Treasury. Although the fund invests in U.S. government obligations, an investment in such funds is neither insured nor guaranteed by the U.S. government. The Company has not experienced any losses on its deposits of cash or holdings of money market funds. The Company is subject to a number of risks similar to other clinical-stage biopharmaceutical companies, including, but not limited to, the need to obtain adequate additional funding, possible failure of current or future preclinical studies or clinical trials, its reliance on third parties to conduct its clinical trials, the need to obtain regulatory and marketing approvals for its product candidates, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of the Company’s product candidates, protection of its proprietary technology, and the need to secure and maintain adequate manufacturing arrangements with third parties or develop internal manufacturing capabilities. The Company’s product candidates will require approval from the U.S. Food and Drug Administration (FDA) and/or comparable foreign regulatory agencies prior to commercialization in their respective jurisdictions. If the Company does not successfully commercialize or partner any of its product candidates, it will be unable to generate product revenue or achieve profitability.
Operating Segment
The Company operates and manages its business as one reportable and operating segment, which is the business of designing and developing a pipeline of novel oral biologic product candidates. The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for allocating and evaluating financial performance.
Cash and Cash Equivalents
Cash and cash equivalents are held in accounts at financial institutions. Such deposits have and will continue to exceed federally insured limits in the foreseeable future. The Company considers all highly liquid investments purchased with original maturities of 90 days or less from the purchase date to be cash equivalents. Cash equivalents consist of amounts invested in money market funds exclusively composed of U.S. government obligations.
Restricted Cash
As of December 31, 2022, the Company had $0.9 million in restricted cash, which was classified as long-term on the Company’s balance sheets. The restricted cash was attributable to a letter of credit issued by the Company in connection with the operating lease for the Company’s headquarters (See Note 5). The letter of credit will expire 90 days after the expiration of the lease in 2029.

For the year ended December 31, 2022, the Company collected its $0.1 million letter of credit associated with the expiration of an operating lease.
F-11

Table of Contents
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the statements of cash flows for the periods indicated (in thousands):
December 31,
20222021
Cash and cash equivalents$61,145 $159,821 
Restricted cash916 1,025 
Total cash, cash equivalents and restricted cash$62,061 $160,846 
Property and Equipment, Net
Property and equipment are presented at cost, net of accumulated depreciation. Depreciation is recorded using the straight-line method. Depreciation begins at the time the asset is placed in service. Maintenance and repairs are charged to expense as incurred and costs of major replacement or improvement are capitalized. The Company’s estimated useful lives of its property and equipment are as follows:
Laboratory and manufacturing equipment5 years
Computer and office equipment3 years
Leasehold improvementsShorter of remaining lease
term or estimated useful life
Impairment of Long-Lived Assets
The Company evaluates the carrying amount of its long-lived assets whenever events or changes in circumstances indicate that the assets may not be recoverable. An impairment loss is recognized when the remaining book value of an asset is not recoverable. There were no material impairments of long-lived assets during the years ended December 31, 2022, 2021 and 2020.
Leases
In February 2016, the Financial Accounting Standards Board (FASB) issued an Accounting Standard Update (ASU) No. 2016-02, Leases (Topic 842), and its associated amendments, that established a right-of-use (ROU) model that requires a lessee to recognize an ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months and disclose key information about leasing arrangements. The Company adopted Topic 842 on January 1, 2021 using the modified retrospective approach. Leases have been classified as either finance or operating, with classification affecting the pattern and classification of expense recognition in the statements of operations and comprehensive loss.
At the inception of an arrangement, the Company determines if an arrangement is, or contains, a lease based on the facts and circumstances present in that arrangement. Lease classification, recognition, and measurement are then determined at the lease commencement date. For arrangements that contain a lease, the Company (i) identifies lease and non-lease components, (ii) determines the consideration in the contract, (iii) determines whether the lease is an operating or finance lease; and (iv) recognizes lease ROU assets and liabilities. Lease liabilities and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. Accordingly, the Company uses the incremental borrowing rate based on the information available at the lease commencement date, which represents an internally developed rate that would be incurred to borrow, on a collateralized basis, over a similar term, an amount equal to the lease payments in a similar economic environment. Building improvements continue to be capitalized as leasehold improvements and are included in property and equipment, net in the balance sheets.
Most leases include options to renew and/or terminate the lease, which can impact the lease term. The exercise of these options is at the Company’s discretion. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.
The Company has operating leases for its corporate offices, laboratory, manufacturing and warehouse facilities. Fixed lease payments on operating leases are recognized as lease expense over the expected term of the lease on a straight-line basis. The Company’s real estate operating leases require payment of common area maintenance, real estate taxes, and insurance. These components are recognized as variable lease expense in the period in which the obligation is incurred. As these costs are generally variable in nature, they are not included in the measurement of the operating lease ROU asset and related lease liability. Fixed and variable lease expense on operating leases is recognized within operating expenses within the Company’s statements of operations and comprehensive loss. Sublease income is recognized on a straight-line basis over the sublease term and is recorded net against the head lease expense.
F-12

Table of Contents
The Company has various finance leases for laboratory and manufacturing equipment. Interest expense from fixed payments on finance leases is recognized using the effective interest method. Finance lease ROU asset amortization and interest expense are recorded within operating expenses and interest income, net, respectively, within the Company’s statements of operations and comprehensive loss.
The Company has elected the short-term lease exemption and, therefore, does not recognize an ROU asset or corresponding liability for lease arrangements with an original term of 12 months or less.
Research and Development Expenses
Research and development expenses are charged to expense as incurred. Research and development expenses include personnel costs related to research and development activities, materials costs, external clinical drug product manufacturing costs, outside services costs, repair, maintenance and depreciation costs for research and development equipment, as well as facility costs for laboratory space used for research and development activities.
The Company accrues for estimated costs of research, preclinical studies, clinical trials, and manufacturing development services performed but not yet invoiced and such accruals are included within accrued expenses which are significant components of research and development expenses. A substantial portion of the Company’s ongoing research and development activities is conducted by third-party service providers including contract research organizations (CROs) and contract development and manufacturing organizations (CDMOs). The Company’s contracts, amendments thereto, statements of work and change orders with the CROs and CDMOs generally include fees such as initiation fees, reservation fees, costs related to animal studies and safety tests, verification run costs, materials and reagents expenses, and taxes. Payments made to third parties under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and are expensed as services are rendered. The financial terms of these arrangements are subject to negotiations, which vary from contract to contract and may result in the timing of payments that do not match the periods over which materials or services are provided to the Company under such contracts. The Company accrues the costs incurred under agreements with these third parties and/or adjusts the prepaid expenses based on estimates of work completed in accordance with the respective agreements. The Company determines the estimated costs through information obtained from third-party providers as to the progress, stage of completion or actual timeline (start-date and end-date) of the services and the agreed-upon fees to be paid for such services and corroboration with internal personnel responsible for the oversight of the research and development activities.
If the actual timing of the performance of services or the level of effort varies from the estimate, the Company adjusts accrued expenses or prepaid expenses accordingly, which impact research and development expenses. Although the Company does not expect its estimates to be materially different from amounts actually incurred, the Company’s understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to the Company’s prior estimates of research and development expenses.
Stock-Based Compensation Expense
The Company maintains both an equity incentive plan and an employee stock purchase plan (ESPP) as long-term incentives for its employees, consultants, and non-employee directors. Under the equity incentive plan, the Company is authorized to grant various equity-based incentives including stock options and restricted stock units (RSUs). The ESPP provides for 24-month offering periods and each offering period may contain up to four six-month purchase periods. The ESPP allows employees to purchase shares of the Company’s common stock each purchase period based on a percentage of their compensation subject to certain limits.

The Company accounts for stock-based compensation expense by measuring and recognizing compensation expense for all share-based payments made to employees and non-employees based on estimated grant-date fair values. The grant-date fair values for options and RSUs are recorded as stock-based compensation expense on a straight-line basis over the grantee’s requisite service period, which is generally over a four-year period, subject to continuing service. The grant-date fair values for purchase rights granted under the ESPP are recorded as stock-based compensation expense on a straight-line basis over the applicable offering period. Actual forfeitures of unvested equity awards are recognized as they occur by reversing any expense previously recorded for the award.

The Company estimates the fair value of stock options granted to employees and non-employees using the Black-Scholes model. The Company estimates the fair value of purchase rights granted under the ESPP for an offering period using the Black-Scholes model. The Black-Scholes model requires the input of subjective assumptions, including expected volatility, expected dividend yield, expected term and the risk-free rate of return.
F-13

Table of Contents
Income Taxes
The Company accounts for income taxes using the asset and liability method. The objective of the asset and liability method is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the income tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled.
Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss and tax credit carryforwards. The Company records net deferred tax assets to the extent these assets will more likely than not be realized. In making such determination, all available positive and negative evidence are considered, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial performance. Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts expected to be realized.
As of December 31, 2022 and 2021, a full valuation allowance has been established to offset the net deferred tax assets due to the uncertainties surrounding the Company’s ability to generate future taxable income to realize these assets. In the event the Company determines that it would be able to realize all or a portion of its deferred income tax assets in the future, it would make an adjustment to the valuation allowance which would reduce the provision for income taxes in the period in which the adjustments are determined.
Tax benefits related to uncertain tax positions are recognized when it is more likely than not that a tax position will be sustained during an audit. It is the Company’s policy to classify interest and penalties related to unrecognized tax benefits as a component of income tax expense.
Fair Value of Financial Instruments
The Company’s financial instruments, including cash, restricted cash, other current assets, accounts payable and accrued expenses are carried at cost which approximates their fair value because of the short-term nature of these financial instruments. See Note 3 for cash equivalents, which are carried at fair value on a recurring basis.
Comprehensive Loss
Comprehensive loss includes net loss and other comprehensive income (loss) for the period. Other comprehensive income (loss) consists of unrealized gains on investments and amounts recognized for net realized gain included in net loss.
Deferred Offering Costs
Deferred offering costs, which consist of direct incremental legal, consulting, banking and accounting fees relating to anticipated equity offerings, are capitalized and will be offset against proceeds upon the consummation of the offerings within stockholders’ equity. In the event an anticipated offering is terminated or significantly delayed, deferred offering costs will be immediately expensed as part of general and administrative expenses. There were no capitalized deferred offering costs recorded on the balance sheets as of December 31, 2022 and 2021.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded if and when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption.
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842) that requires a lessee to recognize leases of greater than 12 months on the balance sheet and disclose key information about leasing arrangements.
The Company adopted the new standard on January 1, 2021 using the modified retrospective approach. The Company has elected to apply the transition method that allows companies to continue applying the guidance under the lease standard in effect
F-14

Table of Contents
at that time in the comparative periods presented in the financial statements and recognize a cumulative-effect adjustment to the opening balance of accumulated deficit on the date of adoption. The Company has lease agreements that contain both lease components (for example fixed rent payments) and non-lease components (for example, common-area maintenance costs), and has elected to combine lease and non-lease components for all classes of assets. The Company also elected the package of practical expedients available for existing contracts, which permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. Lastly, the Company elected a practical expedient to use hindsight in determining the lease term for all its leases.
Results for reporting periods beginning after January 1, 2021 are presented under the new standard, while prior period amounts have not been adjusted and continue to be reported under the accounting standards in effect for the prior period. Upon adoption of the new lease standard on January 1, 2021, the Company capitalized operating lease ROU assets of $6.0 million, with opening adjustments of $0.5 million related to deferred rent existing as of the transition date, and $6.5 million of operating lease liabilities, within the Company’s balance sheets. There was no impact to the finance lease ROU asset and the finance lease liabilities upon adoption. In connection with operating and finance leases, there was no impact to the accumulated deficit upon the adoption of the new standard on January 1, 2021.
In October 2020, the FASB issued ASU 2020-10, Codification Improvements. The guidance contains improvements to the Codification by ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to financial statements is codified in the Disclosure Section of the Codification. The guidance also contains Codifications that are varied in nature and may affect the application of the guidance in cases in which the original guidance may have been unclear. The Company adopted the new standard on January 1, 2021. The adoption did not have a material impact on the Company’s financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 eliminates certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. This ASU also includes guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. ASU 2019-12 is effective for annual and interim periods in fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company adopted this ASU effective January 1, 2020 on a prospective basis. The adoption did not have a material impact on the Company’s financial statements.
In August 2018, the FASB issued ASU 2018-13, Disclosure Framework (Topic 820) – Changes to the Disclosure Requirements for Fair Value Measurement, which amended Accounting Standards Codification 820, Fair Value Measurement. This standard modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The Company adopted this ASU effective January 1, 2020. The adoption did not have a material impact on the Company’s financial statements and related disclosures.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. The measurement of current expected credit losses (CECL) is based on historical experience, current conditions, and reasonable and supportable forecasts that affect collectability. ASU 2016-13 also eliminates the concept of “other-than-temporary” impairment when evaluating available-for-sale debt securities and instead focuses on determining whether any impairment is a result of a credit loss or other factors. An entity will recognize an allowance for credit losses on available-for-sale debt securities rather than an other-than-temporary impairment that reduces the cost basis of the investment. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years. Early adoption is permitted. The Company elected to early adopt ASU 2016-13 effective January 1, 2020. The adoption did not have a material impact on the Company’s financial statements.
3. Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, or an exit price, in the principal or most advantageous market for that asset or liability in an orderly transaction between market participants on the measurement date. Fair value measurement establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value.
The Company determined the fair value of financial assets and liabilities using the fair value hierarchy that describes three levels of inputs that may be used to measure fair value, as follows:
Level 1—Quoted prices in active markets for identical assets and liabilities;
F-15

Table of Contents
Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
As of December 31, 2022 and 2021, money market funds were the only financial instrument measured and recorded at fair value on a recurring basis on the Company’s balance sheets. Money market funds were recorded within cash and cash equivalents. The following tables present money market funds at their level within the fair value hierarchy for the periods indicated (in thousands):
December 31, 2022
Fair Value Hierarchy Level
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
Cash equivalents:
Money market funds
Level 1$40,729 $— $— $40,729 
December 31, 2021
Fair Value Hierarchy Level
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
Cash equivalents:
Money market funds
Level 1$159,010 $— $— $159,010 
4. Balance Sheet Components
Prepaid Expenses
Prepaid clinical expenses were $1.2 million and $5.2 million as of December 31, 2022 and 2021, respectively. As of December 31, 2022 and 2021, prepaid expenses also consisted of amounts for insurance and other services.
Property and Equipment, Net
Property and equipment, net, consisted of the following (in thousands):
December 31,
20222021
Laboratory and manufacturing equipment$11,421 $9,375 
Leasehold improvements5,246 2,607 
Construction in progress72 870 
Computer and office equipment491 293 
17,230 13,145 
Accumulated depreciation(9,047)(6,147)
Total property and equipment, net$8,183 $6,998 
Depreciation was $2.9 million, $3.1 million and $1.8 million for the years ended December 31, 2022, 2021 and 2020, respectively.
There were insignificant disposals during the years ended December 31, 2022, 2021 and 2020.
F-16

Table of Contents
Accrued Expenses
Accrued expenses consisted of the following (in thousands):
December 31,
20222021
Compensation expenses$3,985 $3,636 
Research and development expenses3,508 2,917 
Professional services728 881 
Property and equipment215 
Other432 577 
Total accrued expenses$8,660 $8,226 
Accrued research and development expenses were primarily related to clinical trials, preclinical studies, contract manufacturing and materials.
5. Leases
Operating Leases
The Company has operating leases for its corporate offices, laboratory, and manufacturing and warehouse facilities. The leases include renewal options to extend the lease term, which were not included in the measurement of the right-of-use asset and the associated lease liability as it was not reasonably certain that the Company would exercise the options.
In February 2021, the Company entered into an operating lease for its headquarters comprising 84,321 of rentable square feet of office, laboratory and manufacturing space in South San Francisco, California (HQ Lease), delivered in two phases. In July 2021, the Company began occupying a portion of the building and in October 2021, the Company occupied the remaining portion. The lease expires in October 2029 with options to renew for two five-year terms each. The HQ Lease has escalating rent payments and includes an abatement period in which the Company was not required to remit monthly rent payments until October 2021. Under the terms of the HQ Lease, the Company was required to provide the landlord with a letter of credit in the amount of $0.9 million (See Note 2).
In connection with implementing the Strategic Plan to preserve capital, in July 2022, the Company entered into an agreement to sublease approximately 22,000 rentable square feet of space in its headquarters. The sublease agreement has a term of 30 months from the commencement date of August 1, 2022 and provides that the Company will receive monthly base rent amounts escalating over the term of the sublease plus reimbursement of the subtenant’s proportionate share of operating expenses. The subtenant was not provided any renewal or extension options. The Company’s future sublease income exceeded the amount required to be paid to the Company’s landlord for the subleased space for the term of the sublease. As such, no impairment of the related ROU asset or leasehold improvements was warranted.
In December 2016, the Company entered into an operating lease for approximately 18,748 rentable square feet of office and laboratory space in South San Francisco, California, which previously served as the Company’s headquarters. The lease expires in August 2024 with options to renew for two three-year terms each. In September 2021, the Company entered into a sublease of its former headquarters facility in which the rental period was co-terminus with the term of the head lease. The subtenant was not provided any renewal or extension options. The Company received a security deposit of approximately $0.2 million which was classified as non-current other assets on the balance sheets. The Company’s future sublease income exceeded the amount required to be paid to the Company’s landlord for the subleased space and no impairment of the related ROU asset or leasehold improvements was warranted.
In September 2020, the Company entered into an operating lease for approximately 4,000 rentable square feet of warehouse space in South San Francisco, California, which was amended to approximately 20,000 rentable square feet in July 2021. The lease expires in July 2029 with an option to renew for an additional two-year term. The landlord provided the Company with a tenant improvement allowance of $0.3 million, which was received in September 2022. The Company included the landlord incentive in the measurement of the initial operating lease liability, which was reflected as a reduction to the initial ROU asset.
F-17

Table of Contents
Finance Leases
The Company has various finance lease agreements for laboratory and manufacturing equipment. The terms of the Company’s finance leases generally range from three to five years and are typically secured by the underlying equipment. The portion of the future payments designated as principal repayments were classified as finance lease liabilities on the Company’s balance sheets.
The following table summarizes components of lease expense for the periods indicated (in thousands):
Classification in Statements of Operations and Comprehensive LossYear Ended December 31
Component of lease expense20222021
Operating lease expenseOperating expenses$8,293 $4,363 
Finance lease expense:
Amortization of right-of-use assetsOperating expenses217 192 
Interest on lease liabilitiesInterest income, net27 32 
Variable lease expenseOperating expenses2,260 947 
Short-term lease expenseOperating expenses81 33 
Sublease incomeOperating expenses(2,446)— 
Total lease expense$8,432 $5,567 
Total rent expense for operating leases was $2.0 million for the year ended December 31, 2020, which was recorded under the previous lease accounting standard, ASC 840.
The following table summarizes supplemental cash flow information for the periods indicated (in thousands):
Year Ended December 31
20222021
Cash paid for amounts included in measurement of liabilities:
Operating cash outflows from operating leases$6,876 $3,663 
Operating cash outflows from finance leases27 32 
Financing cash outflows from finance leases266 232 
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases1,384 35,554 
Finance leases148 — 
The following table summarizes maturities of lease liabilities and sublease income as of December 31, 2022 (in thousands):
Operating Leases Sublease IncomeFinance Leases
2023$7,867 $(3,327)$216 
20247,577 (2,898)45 
20256,717 (158)
20266,898 — — 
20277,082 — — 
Thereafter12,704 — — 
Total lease payments48,845 $(6,383)269 
Less: Interest or imputed interest(12,978)(15)
Total discounted lease liabilities35,867 254 
Less: Lease liabilities, current(4,639)(205)
Lease liabilities, non-current$31,228 $49 
F-18

Table of Contents
The following table summarizes weighted-average remaining lease terms and discount rates:
December 31, 2022December 31, 2021
Operating Leases Finance Leases Operating LeasesFinance Leases
Weighted-average remaining lease term (years)6.31.26.81.6
Weighted-average discount rate10.4 %7.8 %9.7 %5.9 %
6. Stockholders’ Equity
Initial Public Offering
On June 4, 2020, the Company’s registration statement on Form S-1 (File No. 333-238464) relating to its initial public offering (IPO) of common stock became effective. The IPO closed on June 9, 2020 at which time the Company issued an aggregate of 12,650,000 shares of its common stock at a price of $14.00 per share which included 1,650,000 shares of common stock issued in connection with the full exercise by the underwriters of their option to purchase additional shares of common stock. In addition, immediately prior to the closing of the IPO, all outstanding shares of the Company’s convertible preferred stock automatically converted into 13,966,292 shares of common stock. The aggregate offering price for shares sold in the IPO was $177.1 million. After deducting underwriting discounts and commissions of $12.4 million and offering costs paid by the Company of $4.1 million, the net proceeds from the offering were approximately $160.6 million, net of offering costs of $0.2 million paid in 2019.
Follow-On Offering
On April 6, 2021, the Company completed a follow-on offering and issued 2,875,000 shares of its common stock, including 375,000 shares of common stock issued in connection with the full exercise by the underwriters of their options to purchase additional shares of common stock at a price of $42.00 per share. The aggregate gross proceeds from the follow-on offering were $120.8 million. After deducting underwriting discounts and commissions of $7.2 million and deferred offering costs of $0.8 million, the net proceeds from the follow-on offering were approximately $112.8 million.
Convertible Preferred Stock
Upon closing of the IPO, all outstanding shares of the Company’s convertible preferred stock automatically converted into 13,966,292 shares of common stock and the related carrying value was reclassified to common stock and additional paid-in capital.
Preferred Stock
After conversion of the above mentioned convertible preferred stock into common stock upon closing of the IPO, the Company has the authority to issue 50,000,000 shares of preferred stock with a par value of $0.0001 per share. There were no shares of preferred stock outstanding as of December 31, 2022 and 2021, respectively.
Common Stock
As of December 31, 2022 and 2021, the Company was authorized to issue 450,000,000 shares of common stock with a par value of $0.0001 per share. Common stockholders are entitled to dividends if and when declared by the Company’s board of directors. The holder of each share of common stock is entitled to one vote. Since inception, no dividends have been declared or paid by the Company.
Common stock reserved for future issuance consisted of the following:
December 31,
202220212020
Stock options outstanding5,369,8084,442,8643,506,599
RSUs outstanding531,366717,440
Shares available for future grants under equity incentive plans4,654,9222,876,2703,369,246
Shares available for issuance under ESPP872,792636,962314,006
11,428,8888,673,5367,189,851
F-19

Table of Contents
7. Stock-Based Compensation Expense
2015 Equity Incentive Plan
In 2015, prior to the Company’s conversion to a C-corporation, the Board of Directors of its predecessor entity adopted its 2015 Equity Incentive Plan (the 2015 Plan). Following the adoption of its 2016 Equity Incentive Plan (the 2016 Plan), no awards were granted under its 2015 Plan. The Company’s 2015 Plan allowed it to provide stock options not intended to be qualified as incentive stock options within the meaning of Section 422 of the Code and restricted stock unit awards to its employees, directors and consultants.
In connection with its 2016 conversion to a C-corporation, each outstanding stock option agreement under the 2015 Plan was assumed by it and converted into stock options covering shares of its common stock rather than Class B common stock of its predecessor entity. Except with respect to the shares underlying such options, no other terms were amended with respect to such stock option agreements. The Company’s 2015 Plan was terminated in 2020; however, shares subject to awards granted under the 2015 Plan continue to be governed by the 2015 Plan.
2016 Equity Incentive Plan
The Company adopted the 2016 Plan which provided for the granting of incentive stock options (ISO), nonstatutory stock options (NSO) and restricted shares to employees, directors, and consultants. Under the 2016 Plan, the Company issued stock options to its employees and consultants.
Options under the 2016 Plan could have been granted for periods of up to 10 years and at prices no less than 100% of the estimated fair value of the underlying shares of common stock on the date of grant as determined by the Board of Directors provided that the exercise price of an ISO and NSO granted to a 10% stockholder shall not be less than 110% of the estimated fair value of the shares on the date of grant. The 2016 Plan required that options be exercised no later than 10 years after the grant. Options granted to employees generally vest ratably on a monthly basis over four years, subject to cliff vesting restrictions.
In March 2020, the Company reserved for issuance of 1,250,000 shares of common stock pursuant to the 2016 plan. The Company’s 2016 Plan was terminated subsequent to its IPO in June 2020; however, shares subject to awards granted under the 2016 Plan continue to be governed by the 2016 Plan. During 2020, 576,670 previously authorized and unissued shares from the 2015 plan and the 2016 plan expired.
2020 Equity Incentive Plan
The Company’s 2020 Equity Incentive Plan (2020 Plan) provides for the granting of ISOs, NSOs, restricted stock, restricted stock units, stock appreciation rights, performance units, and performance shares to employees, directors, and consultants. The Company initially reserved for issuance 3,768,075 shares of common stock pursuant to the 2020 Plan. Shares subject to awards granted under the 2015 Plan or 2016 Plan were added to the available shares in the 2020 Plan. Shares subject to awards granted under the 2015 Plan and 2016 Plan that are repurchased by, or forfeited to, the Company will also be available for issuance under the 2020 Plan. As of December 31, 2022, 3,654,922 shares of common stock remained available for future issuance under the 2020 Plan.
Since the date of incorporation and through December 31, 2022, the Company issued stock options and restricted stock units (“RSUs”) to its employees and consultants. Generally, stock options and restricted stock unit awards vest over a four-year period, subject to continuing service.
Option awards granted under the 2020 Plan have a contractual term of up to 10 years with exercise prices no less than 100% of the estimated fair value of the underlying shares of common stock on the date of grant as determined by the Board of Directors provided that the exercise price of an ISO and NSO granted to a 10% stockholder shall not be less than 110% of the estimated fair value of the shares on the date of grant.
2022 Inducement Equity Incentive Plan

The Company’s 2022 Inducement Equity Incentive Plan (2022 Inducement Plan) adopted in March 2022 reserved 1,000,000 shares of the Company’s common stock pursuant to equity awards granted under the 2022 Inducement Plan. The Inducement Plan provides for the grant of equity-based awards, including nonstatutory stock options, restricted stock units, restricted stock, stock appreciation rights, performance shares and performance stock units, and its terms are substantially similar to the Company’s 2020 Plan. In accordance with the Nasdaq Listing Rules, awards under the Inducement Plan may only be made to individuals not previously employees or non-employee directors of the Company (or following such individuals’ bona fide period of non-employment with the Company), as an inducement material to the individuals’ entry into employment with the
F-20

Table of Contents
Company, or, to the extent permitted by the Nasdaq Listing Rules, in connection with a merger or acquisition. As of December 31, 2022, 1,000,000 shares of common stock remained available for future issuance under the 2022 Inducement Plan.
2020 Employee Stock Purchase Plan
The Company’s 2020 Employee Stock Purchase Plan (ESPP) has two components: a component that is intended to qualify as an “employee stock purchase plan” under Section 423 of the Code (the 423 Component) and a component that is not intended to qualify (the Non-423 Component). The ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15% of their eligible compensation. At the end of each offering period, employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s common stock at the beginning of the offering period or at the end of each applicable purchase period.
Subject to adjustment for certain capitalization events, 314,006 shares of the Company’s common stock were initially available for purchase upon adoption of the ESPP. Under the ESPP, the annual share increase pursuant to the evergreen provision is determined based on the least of (i) 628,012 shares, (ii) 1% of the Company’s common stock outstanding as of December 31 of the immediately preceding year, or (iii) such number of shares as determined by the Company’s Board of Directors. As of December 31, 2022, 872,792 shares of common stock remained available for future issuance under the ESPP. For the years ended December 31, 2022 and 2021, the Company recognized $0.3 million and $0.3 million in stock-based compensation expense related to the ESPP, respectively. For the year ended December 31, 2020, no stock-based compensation expense was recognized for ESPP.
Accelerated RSU Vesting under Strategic Plan

In connection with the Strategic Plan, the Company accelerated vesting from the original vesting date of June 1, 2022 to May 16, 2022 for certain employees. Vesting was accelerated for a total of 43,711 RSUs for 30 employees. The Company accounted for the acceleration of vesting as a Type III (improbable-to-probable) modification because the RSUs were not expected to vest under the original terms of the award. As a result of the modification, the Company reversed previously recognized stock-based compensation expense and recognized compensation cost for the modified award based on the modification date fair value of the awards, which was lower than the original grant date fair value. This resulted in a reduction in stock-based compensation of $0.4 million for the year ended December 31, 2022.
Stock-Based Compensation Expense Allocation
The following table summarizes the components of stock-based compensation expense recognized in the Company’s statements of operations and comprehensive loss for the periods indicated (in thousands):
Year Ended December 31,
202220212020
Research and development$10,842 $8,596 $1,943 
General and administrative12,325 8,102 1,113 
Total stock-based compensation expense$23,167 $16,698 $3,056 
F-21

Table of Contents
Stock Options Activity
The following summarizes stock option activity:
Options
Outstanding
Number of
Shares
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Life
(In Years)
Aggregate
Intrinsic
Value
(In Thousands)
Outstanding as of December 31, 20192,143,368$1.22 7.3$10,555 
Granted2,598,3197.82 
Exercised(1,144,330)0.55 
Cancelled(90,758)3.43 
Outstanding as of December 31, 20203,506,5996.27 8.885,975 
Granted2,026,97649.49 
Exercised(595,339)3.57 
Cancelled(495,372)21.69 
Outstanding as of December 31, 20214,442,86424.63 8.422,850 
Granted2,625,0187.55 
Exercised(53,709)1.83 
Cancelled(1,644,365)22.12 
Outstanding as of December 31, 20225,369,808$17.28 7.6$11 
Exercisable as of December 31, 20222,557,181$17.08 6.4$11 
Weighted-average grant-date fair value of options granted during the years ended December 31, 2022, 2021 and 2020 was $5.36 per share, $32.05 per share and $5.88 per share, respectively. The aggregate intrinsic value of stock option exercises during the years ended December 31, 2022, 2021 and 2020 was $0.3 million, $20.8 million and $29.5 million, respectively.
As of December 31, 2022, the total unrecognized stock-based compensation expense related to stock options was $31.5 million, which is expected to be recognized over a weighted-average period of approximately 2.5 years.
Valuation of Equity Awards
The Company estimated the fair value of option awards using the Black-Scholes option pricing model. The fair value of employee and non-employee stock options is being amortized on the straight-line basis over the requisite service period of the awards.
This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate. These assumptions include the following:
Expected term—The expected term of the option awards represents the period of time between the grant date of the option awards and the date the option awards are either exercised, converted or canceled. The Company used the simplified method as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. Under the simplified method, the expected term equals the average of the vesting term and the original contractual term of the option award.
Expected volatility—The expected stock price volatility for option awards granted prior to the fourth quarter of 2022 was determined based on an average of the historical volatilities of the common stock of several peer companies with characteristics similar to those of the Company. The peer companies were chosen based on their similar size, stage in the life cycle or area of specialty. Beginning in the fourth quarter of 2022, the Company used a blended volatility estimate consisting of its own historical stock price volatility (as the Company had at least two years of historical stock price data) supplemented by historical volatilities of peer companies such that the time period over which historical volatility data used was at least equal to the expected term of the option award.
Expected dividend yield—The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock in the foreseeable future. Therefore, the Company used an expected dividend yield of zero.
F-22

Table of Contents
Risk-free interest rate—The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the option award.
The Company’s weighted-average assumptions used in the Black-Scholes option pricing model for option awards granted during the years ended December 31, 2022, 2021 and 2020 were as follows:
Year Ended December 31,
202220212020
Expected term (years)6.06.16.1
Expected volatility83.3 %73.9 %75.6 %
Expected dividend yield
Risk-free interest rate2.1 %1.0 %0.6 %
The fair value of RSUs is measured on the grant date based on the closing fair market value of the Company’s common stock.
Restricted Stock Units Activity
The following summarizes restricted stock unit activity:
Number of SharesWeighted-Average Grant Date Fair Value per Share
Unvested and outstanding as of December 31, 2020$— 
Granted717,440$14.54 
Vested$— 
Cancelled$— 
Unvested and outstanding as of December 31, 2021717,440$14.54 
Granted465,372$7.21 
Vested(357,766)$13.10 
Cancelled(293,680)$12.67 
Unvested and outstanding as of December 31, 2022531,366$10.12 
The aggregate fair value of restricted stock units that vested during the year ended December 31, 2022 was $0.8 million, which represents the market value of the Company’s common stock on the date that the restricted stock units vested. No restricted stock units vested in the years ended December 31, 2021 and 2020. As of December 31, 2022, the total unrecognized stock-based compensation expense related to unvested restricted stock units was $5.0 million, which is expected to be recognized over a weighted-average period of approximately 2.2 years.
8. Commitments and Contingencies
Contingencies
From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business. The Company was not subject to any material legal proceedings during the years ended December 31, 2022, 2021 and 2020, and no material legal proceedings are subsequently outstanding or pending.
Indemnification
In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. As permitted under Delaware law and in accordance with its bylaws, the Company indemnifies its officers and directors for certain events or occurrences while the officer or director is or was serving in such capacity. The Company is also party to indemnification agreements with its officers and directors. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments that the Company could be required to make under these provisions is not determinable. The Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company is not currently aware of any indemnification claims. The Company also maintains
F-23

Table of Contents
director and officer insurance, which may cover certain liabilities arising from our obligation to indemnify our directors and officers. Accordingly, the Company has not recorded any liabilities for these indemnification rights and agreements as of December 31, 2022 and 2021.
9. Income Taxes
For the years ended December 31, 2022, 2021 and 2020, no provision for income taxes has been made due to net operating losses incurred in each year. The Company maintains a full valuation allowance against its net deferred tax assets due to the uncertainty regarding the realization of such assets. The Company’s historical operating losses were generated in the United States.
The effective income tax rate of the Company’s provision for income taxes differed from the federal statutory rate as follows:
Year Ended December 31,
202220212020
Statutory income tax rate21.0 %21.0 %21.0 %
Stock-based compensation expense(2.9)2.2 8.2 
State income tax1.2 2.1 1.2 
Tax credits1.7 2.0 1.8 
Other(0.1)(0.8)— 
Valuation allowance(20.9)(26.5)(32.2)
Total effective income tax rate— %— %— %
Significant components of deferred tax assets for federal and state income taxes were as follows (in thousands):
December 31,
20222021
Deferred tax assets:
Federal and state net operating loss carryforwards$63,653 $58,025 
Tax credit carryforwards13,403 9,874 
Capitalized research expenditures15,448 — 
Lease liabilities7,539 8,274 
Stock-based compensation expense3,312 2,129 
Accrued expenses903 728 
Other202 135 
Total deferred tax assets104,460 79,165 
Deferred tax liabilities:  
Right-of-use assets(6,983)(8,016)
Total deferred tax liabilities(6,983)(8,016)
Valuation allowance(97,477)(71,149)
Net deferred tax assets$— $— 
Under the Tax Cuts and Jobs Act of 2017, research and development costs are no longer fully deductible in the year incurred for tax years beginning on or after January 1, 2022. Instead, taxpayers are required to amortize such expenditures over five years if incurred in the U.S. and over fifteen years if incurred in a foreign jurisdiction. The mandatory capitalization requirement increased the Company’s deferred tax assets before valuation allowance, but had no impact on cash tax liabilities.
Realization of future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Due to the Company’s history of operating losses, the Company believes recognizing deferred tax assets is currently not more likely than not to be realized and, accordingly, have provided a full valuation allowance against its net deferred tax assets. For the years ended December 31, 2022 and 2021, the net increase in the valuation allowance was $26.3 million and $26.6 million, respectively.
F-24

Table of Contents
As of December 31, 2022, the Company had federal net operating loss carryforwards of $278.8 million. Of this amount, $13.3 million was generated before January 1, 2018 and will begin to expire in 2036. Federal net operating losses of $265.5 million generated after December 31, 2017 will carryforward indefinitely. As of December 31, 2022, the Company had state net operating loss carryforwards of $69.5 million, which will begin to expire in 2036.
As of December 31, 2022, the Company had federal general business credits from research and development expenses totaling $10.9 million, as well as state research and development credits of $7.5 million. The federal credits will begin to expire in 2037, if not utilized. The state research and development tax credits can be carried forward indefinitely.
The net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. In addition, under Sections 382 and 383 of the United States Internal Revenue Code of 1986, as amended (the Code), if a corporation undergoes an “ownership change” (generally defined as a greater than 50-perentage-point cumulative change (by value) in the equity ownership of certain stockholders over a rolling three-year period), the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change taxable income or taxes may be limited. The Company completed an analysis under Section 382 through December 31, 2020 and concluded the Company had experienced an ownership change in the past. However, it did not result in a limitation that would materially reduce the total amount of net operating loss carryforwards and credits that can be utilized. Net operating loss and tax credit carryforwards generated during the years ended December 31, 2021 and 2022 may be subject to an annual limitation under Section 382.
The Company files U.S. federal and state tax returns with varying statutes of limitations. Due to net operating loss and credit carryforwards, all of the tax years since the date of incorporation through the 2022 tax year remain subject to examination by the U.S. federal and some state authorities. The actual amount of any taxes due could vary significantly depending on the ultimate timing and nature of any settlement.
Uncertain Tax Benefits
The Company uses the “more likely than not” criterion for recognizing the income tax benefit of uncertain income tax positions and establishing measurement criteria for income tax benefits. It is reasonably possible that certain unrecognized tax benefits may increase or decrease within the next 12 months as of December 31, 2022 due to tax examination changes, settlement activities, expirations of statute of limitations, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities. The Company does not anticipate any significant changes to unrecognized tax benefits over the next 12 months as of December 31, 2022.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits was as follows (in thousands):
Year Ended December 31,
202220212020
Gross unrecognized tax benefit as of January 1$2,579 $1,499 $1,012 
Additions for tax positions taken in the current year927 1,080 626 
Reductions for tax positions taken in the current year— — (139)
Additions for tax positions taken in prior years— — — 
Gross unrecognized tax benefit as of December 31$3,506 $2,579 $1,499 
None of the unrecognized tax benefits at December 31, 2022 or December 31, 2021 would affect the effective tax rate due to the Company’s full valuation allowance. During the years ended December 31, 2022, 2021 and 2020, no interest or penalties were required to be recognized relating to unrecognized tax benefits. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.
F-25

Table of Contents
10. Net Loss Per Share
The following table sets forth the computation of the basic and diluted net loss per share for the periods indicated (except share and per share amounts):
Year Ended December 31,
202220212020
Numerator:
Net loss$(126,325)$(100,287)$(66,564)
Denominator:
Weighted-average shares of common stock outstanding used in the calculation of basic and diluted net loss per share38,837,00137,591,50522,878,325
Net loss per share, basic and diluted$(3.25)$(2.67)$(2.91)
Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods as the inclusion of any common stock equivalents outstanding would have been anti-dilutive. Potentially dilutive common stock equivalents outstanding that were not included in the diluted per share calculations were as follows:
December 31,
202220212020
Stock options outstanding5,369,8084,442,8643,506,599
RSUs outstanding531,366717,440
Total5,901,1745,160,3043,506,599
11. Subsequent Events
In March 2023, the board of directors of the Company approved a reduction in force intended to preserve the Company’s current cash resources. The Company will reduce its workforce by approximately 21% of its current employees, or 16 employees, resulting in a total of 61 remaining full-time employees.
The Company currently estimates that it will incur one-time cash charges of approximately $1.8 million consisting of customary separation benefits, including severance payments, payments to cover premiums for continuation of healthcare coverage for a limited period, and other benefits. The Company expects that the one-time cash charges will be incurred in the first quarter of 2023, and that the reduction in force will be substantially complete by the end of the second quarter of 2023. The Company may also incur other charges or cash expenditures not currently contemplated due to events that may occur as a result of, or associated with, the workforce reduction or retention efforts.

F-26