# EDGAR Filing Document

**Accession Number:** 0001831828
**File Stem:** 0000950170-23-011016
**Filing Date:** 2023-3
**Character Count:** 342992
**Document Hash:** 5a41786d715f2801e5c63bf5dc8a1743
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000950170-23-011016.hdr.sgml**: 20230330

**ACCESSION NUMBER**: 0000950170-23-011016

**CONFORMED SUBMISSION TYPE**: ARS

**PUBLIC DOCUMENT COUNT**: 1

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230330

**DATE AS OF CHANGE**: 20230330

**EFFECTIVENESS DATE**: 20230330

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Vera Therapeutics, Inc.
- **CENTRAL INDEX KEY:** 0001831828
- **STANDARD INDUSTRIAL CLASSIFICATION:** PHARMACEUTICAL PREPARATIONS [2834]
- **IRS NUMBER:** 812744449
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** ARS
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-40407
- **FILM NUMBER:** 23781596

**BUSINESS ADDRESS:**
- **STREET 1:** 8000 MARINA BOULEVARD, SUITE 120
- **CITY:** BRISBANE
- **STATE:** CA
- **ZIP:** 94005
- **BUSINESS PHONE:** 650-770-0077

**MAIL ADDRESS:**
- **STREET 1:** 8000 MARINA BOULEVARD, SUITE 120
- **CITY:** BRISBANE
- **STATE:** CA
- **ZIP:** 94005

### Attached PDF Documents

**Attachment 1:** `vera-10k-2022_ars.pdf`

# **UNITED STATES**
**SECURITIES AND EXCHANGE COMMISSION**

Washington, D.C. 20549

# **FORM 10-K**

(Mark One)

☑ **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

For the fiscal year ended December 31, 2022

OR

☐ **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM**

Commission file number 001-40407

# **Vera Therapeutics, Inc.**

(Exact name of registrant as specified in its charter)

**Delaware**

(State or other jurisdiction of
incorporation or organization)

**8000 Marina Boulevard, Suite 120**

**Brisbane, California**

(Address of principal executive offices)

**81-2744449**

(I.R.S. Employer
Identification No.)

**94005**

(Zip Code)

**Registrant's telephone number, including area code: (650) 770-0077**

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

| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| --- | --- | --- |
| Class A common stock, $0.001 par value per share | VERA | The Nasdaq Stock Market LLC |

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☑

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ NO ☑

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

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

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

| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| --- | --- | --- | --- |
| Non-accelerated filer | ☑ | Smaller reporting company | ☑ |
| Emerging growth company | ☑ |  |  |

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

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

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. ☐

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). ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☑

The aggregate market value of the Registrant's Class A common stock held by non-affiliates of the Registrant as of June 30, 2022, the last business day of the Registrant's most recently completed second fiscal quarter, was approximately $163.2 million based on the closing price of the Registrant's Class A common stock on the Nasdaq Global Select Market of $13.61 per share.

As of March 23, 2023, the registrant had 44,261,109 shares of Class A common stock, $0.001 par value per share, and no shares of Class B common stock, $0.001 par value per share, outstanding.

# **DOCUMENTS INCORPORATED BY REFERENCE**

Portions of the Registrant's definitive proxy statement for its 2023 Annual Meeting of Stockholders, which the Registrant intends to file pursuant to Regulation 14A with the Securities and Exchange Commission not later than 120 days after the Registrant's fiscal year ended December 31, 2022, are incorporated by reference into Part III of this Annual Report on Form 10-K.

---

# Table of Contents

|  | Page |
| --- | --- |
| SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS | ii |
| SUMMARY OF RISKS ASSOCIATED WITH OUR BUSINESS | iii |
| PART I |  |
| Item 1. Business | 1 |
| Item 1A. Risk Factors | 44 |
| Item 1B. Unresolved Staff Comments | 94 |
| Item 2. Properties | 94 |
| Item 3. Legal Proceedings | 94 |
| Item 4. Mine Safety Disclosures | 94 |
| PART II |  |
| Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 95 |
| Item 6. Reserved | 95 |
| Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations | 96 |
| Item 7A. Quantitative and Qualitative Disclosures About Market Risk | 105 |
| Item 8. Financial Statements and Supplementary Data | 105 |
| Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | 130 |
| Item 9A. Controls and Procedures | 130 |
| Item 9B. Other Information | 130 |
| Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 131 |
| PART III |  |
| Item 10. Directors, Executive Officers and Corporate Governance | 132 |
| Item 11. Executive Compensation | 132 |
| Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 132 |
| Item 13. Certain Relationships and Related Transactions, and Director Independence | 132 |
| Item 14. Principal Accountant Fees and Services | 132 |
| PART IV |  |
| Item 15. Exhibit and Financial Statement Schedules | 133 |
| Item 16. Form 10-K Summary | 133 |

i

# SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (the Annual Report) may contain “forward-looking statements” within the meaning of the federal securities laws made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part I, Item 1A, “Risk Factors” in this Annual Report. Except as required by law, we assume no obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise. These statements, which represent our current expectations or beliefs concerning various future events, may contain words such as “may,” “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate” or other words indicating future results, though not all forward-looking statements necessarily contain these identifying words. Such statements may include, but are not limited to, statements concerning the following:

- • our financial performance;
- • the sufficiency of our existing cash to fund our future operating expenses and capital expenditure requirements;
- • the accuracy of our estimates regarding expenses, future revenue, capital requirements, and needs for additional financing;
- • the scope, progress, results and costs of developing our product candidates and conducting nonclinical studies and clinical trials;
- • the timing and costs involved in obtaining and maintaining regulatory approval of our product candidates and the timing or likelihood of regulatory filings and approvals, including our expectation to seek special designations for our product candidates for various diseases;
- • our plans relating to commercializing our product candidates, if approved, including the geographic areas of focus and our ability to grow a sales team;
- • the ability to license additional intellectual property relating to any future product candidates and to comply with our existing license agreements;
- • the impact of unfavorable geopolitical and macroeconomic conditions on our business and operations;
- • the implementation of our strategic plans for our business and current product candidates or any other product candidates we may develop;
- • the size of the market opportunity for our product candidates in each of the diseases we target;
- • our reliance on third parties to conduct nonclinical research activities, and for the manufacture of our product candidates;
- • the beneficial characteristics, safety, efficacy and therapeutic effects of our product candidates;
- • our estimates of the number of patients in the United States who suffer from the diseases we target and the number of subjects that will enroll in our clinical trials;
- • the progress and focus of our current and future clinical trials, and the reporting of data from those trials;
- • our ability to advance product candidates into and successfully complete clinical trials;
- • the ability of our clinical trials to demonstrate the safety and efficacy of our product candidates, and other positive results;
- • the success of competing therapies that are or may become available;
- • developments relating to our competitors and our industry, including competing product candidates and therapies;

ii

- our plans relating to the further development and manufacturing of our product candidates, including additional indications that 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;
- the rate and degree of market acceptance of our product candidates, as well as the pricing and reimbursement of our product candidates, 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 and protect intellectual property rights;
- the scope of protection we are able to establish and maintain for intellectual property rights, including atacicept, MAU868 and any other product candidates we may develop;
- our ability to retain the continued service of our key personnel and to identify, hire, and then retain additional qualified personnel; and
- our expectations regarding the period during which we will qualify as an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (JOBS Act) and as a smaller reporting company under the Securities Exchange Act of 1934, as amended (Exchange Act).

Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. You should be aware that the occurrence of any of the events discussed under Part I, Item 1A, “Risk Factors” and elsewhere in this Annual Report could substantially harm our business, results of operations and financial condition and that if any of these events occurs, the trading price of our common stock could decline and you could lose all or a part of the value of your shares of our common stock.

The cautionary statements made in this Annual Report are intended to be applicable to all related forward-looking statements wherever they may appear in this Annual Report. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report. Except as required by law, we assume no obligation to update our forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, whether as a result of new information, future events or otherwise.

### SUMMARY OF RISKS ASSOCIATED WITH OUR BUSINESS

An investment in shares of our Class A common stock involves a high degree of risk. Below is a list of some of the material risks associated with our business. This summary does not address all of the risks that we face. Additional discussion of the risks listed in this summary, as well as other risks that we face, are set forth under Part I, Item 1A, “Risk Factors” in this Annual Report.

- We have not completed any clinical trials for our lead product candidate, atacicept, and have no products approved for commercial sale, which may make it difficult to evaluate our current business and predict our future success and viability.
- We will require substantial additional capital to finance our operations. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce and/or eliminate one or more of our research and drug development programs of our product candidates or future commercialization efforts.
- We have incurred net losses since inception, and we expect to continue to incur net losses for the foreseeable future. In addition, we may be unable to continue as a going concern over the long-term.

iii

- • We are substantially dependent on the success of our product candidates, atacicept and MAU868, which are currently in the clinical development stage. If we are unable to complete development of, obtain regulatory approval for and commercialize our product candidates in one or more indications and in a timely manner, our business, financial condition, results of operations and prospects will be significantly harmed.
- • Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside our control, including difficulties in identifying patients with immunoglobulin A nephropathy (IgAN), the availability of competitive products, and significant competition for recruiting patients in clinical trials.
- • The incidence and prevalence for target patient populations of atacicept in specific indications are based on estimates and third-party sources. If the market opportunities for atacicept, or any future product candidate we may develop, if and when approved, are smaller than we estimate or if any approval that we obtain is based on a narrower definition of the patient population, our revenue and ability to achieve profitability might be materially and adversely affected.
- • Interim, initial, “top-line” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.
- • We face significant competition, which may result in others discovering, developing or commercializing products before or more successfully than us.
- • Changes in methods of manufacturing or formulation of our product candidates may result in additional costs or delays.
- • Our product candidates may cause significant adverse events, toxicities or other undesirable side effects when used alone or in combination with other approved products or investigational new drugs that may result in a safety profile that could inhibit regulatory approval, prevent market acceptance, limit their commercial potential or result in significant negative consequences.
- • Even if any product candidate we develop receives regulatory approval, it could be subject to significant post-marketing regulatory requirements and will be subject to continued regulatory oversight.
- • Biosimilars to our product candidates may provide competition sooner than anticipated.
- • Unfavorable geopolitical and global economic conditions could adversely affect our business, financial condition and results of operations.
- • Our success depends on our ability to protect our intellectual property and our proprietary technologies. If we or our potential licensors, licensees, or collaborators are unable to obtain or maintain patent protection with respect to our product candidates, proprietary technologies and their uses, our business, financial condition, results of operations and prospects could be significantly harmed.
- • The terms of our loan agreement place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business.
- • Our success is highly dependent on our ability to attract and retain highly skilled executive officers and employees and key consultants.
- • We have never commercialized a product candidate before and may lack the necessary expertise, personnel and resources to successfully commercialize any products on our own or together with suitable collaborators.
- • If we breach our license agreement (Ares Agreement) with Ares Trading S.A. (Ares), an affiliate of Merck KGaA, Darmstadt, Germany, related to atacicept, or the license agreement with Novartis International Pharmaceutical AG (Novartis) related to MAU868, we could lose the ability to continue the development and commercialization of atacicept or MAU868, respectively.

iv

- • We may be required to make significant payments under our license agreements related to atacicept and MAU868.
- • 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 product candidates would be adversely affected.
- • Patent terms may be inadequate to protect our competitive position on atacicept, MAU868 or any future product candidates we may develop for an adequate amount of time.
- • We rely, and expect to continue to rely, on third parties, including independent clinical investigators and contract research organizations (CROs), to conduct certain aspects of our nonclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties, comply with applicable regulatory requirements or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize atacicept, MAU868 or future product candidates we may develop and our business, financial condition, results of operations and prospects could be significantly harmed.
- • The manufacture of drugs is complex and our third-party manufacturers may encounter difficulties in production. If any of our third-party manufacturers encounter such difficulties, our ability to provide adequate supply of our product candidates for clinical trials or our product for patients, if approved, could be delayed or prevented.
- • If we engage in future acquisitions or strategic partnerships, this may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.
- • The price of our Class A common stock may be volatile, and you could lose all or part of your investment.
- • If we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our Class A common stock.
- • Our principal stockholders and management own a significant percentage of our outstanding voting stock and will be able to exert significant control over matters subject to stockholder approval.
- • Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
- • We may be subject to securities litigation, which is expensive and could divert management attention.

v

# PART I

## Item 1. Business.

### Overview

We are a late clinical-stage biotechnology company focused on developing and commercializing transformative treatments for patients with serious immunological diseases. Our lead product candidate, atacicept, is a self-administered fusion protein that blocks both B lymphocyte stimulator (BLyS) and a proliferation-inducing ligand (APRIL) with best-in-class potential for the treatment of IgA nephropathy (IgAN). The Phase 2b ORIGIN clinical trial evaluating the safety and efficacy of atacicept in patients with IgAN completed enrollment in mid-2022 and reported positive 24-week topline results in January 2023. Atacicept met its primary endpoint at 24 weeks, achieved statistical significance in the 150 mg dose group, and showed a trend towards deeper reductions in proteinuria with available data at 36 weeks, for which full results will read out in the second quarter of 2023. Additionally, atacicept's safety profile was comparable to placebo. The trial will remain blinded through 36 weeks, after which all patients will roll onto the open label portion of the study and receive atacicept 150 mg through 96 weeks. We plan to advance atacicept 150 mg in a pivotal Phase 3 clinical trial in IgAN in the second quarter of 2023. We also are planning a Phase 3 clinical trial of atacicept in lupus nephritis (LN), a severe renal manifestation of systemic lupus erythematosus (SLE), based on feedback from the FDA's review of clinical results in a Phase 2 clinical trial of atacicept in SLE patients with high disease activity (HDA). In December 2021, we obtained worldwide, exclusive development and commercial rights to MAU868, a potentially first-in-class monoclonal antibody to treat reactivated BK virus (BKV) infections. MAU868 is a clinical-stage neutralizing monoclonal antibody that is directed against BKV, a polyoma virus that can have devastating consequences in certain settings such as kidney transplant and hematopoietic stem cell transplant (HSCT). In final results from the Phase 2 clinical trial of MAU868 versus placebo in BK viremia among kidney transplant recipients, MAU868 was shown to be well tolerated and demonstrated a clinically meaningful BKV antiviral activity through 36 weeks. We believe that our current pipeline programs leverage the deep expertise of our team and have strong commercial synergies. We hold global developmental and commercial rights to all of our pipeline molecules.

In January 2023, we announced our plan to prioritize and focus our current resources on the advancement of atacicept in IgAN into a pivotal Phase 3 trial. As a result, we are delaying enrollment in the pivotal Phase 3 trial for LN and commitment of resources to the MAU868 program.

### *Atacicept in IgAN*

IgAN is a serious and progressive autoimmune disease of the kidney that is driven by the production of immunogenic galactose-deficient IgA1 (Gd-IgA1), which is associated with increased risk of kidney-related morbidity and mortality. We estimate there are approximately 126,000 biopsy-confirmed IgAN patients in the United States, 136,000 in the European Union, and 130,000 in Japan. Up to 50% of patients diagnosed with IgAN develop end-stage renal disease (ESRD) within 20 years from initial diagnosis, requiring dialysis or kidney transplant. ESRD causes considerable morbidity and impact on patients' lives and represents a significant health economic burden, which was estimated to be $49.2 billion in the United States in 2018. Despite this high level of morbidity, only two treatments have been approved for this indication: TARPEYOTM (developed by Calliditas Therapeutics AB under the name Nefecon), a recently approved reformulated steroid, and FILSPARITM (developed by Travere Therapeutics under the name sparsentan), a recently approved dual endothelin angiotensin receptor antagonist. The current standard of care continues to consist of off-label use of renin-angiotensin-aldosterone system (RAAS) inhibitors, including angiotensin-converting enzyme (ACE) inhibitors and angiotensin II receptor blockers (ARBs), and potentially steroids. We estimate the U.S. market opportunity for novel therapeutics in IgAN is approximately $4.0 billion to $8.0 billion annually, based on the disease prevalence and the segment of IgAN patients at high risk of progressing to ESRD. In Europe and Japan, we estimate the annual market opportunity for novel IgAN therapeutics to be $1.0 billion and $600 million, respectively.

Atacicept is a fusion protein self-administered as a subcutaneous injection once weekly that blocks both BLyS and APRIL, which stimulate B cells and plasma cells to produce autoantibodies contributing to certain autoimmune diseases. We believe that atacicept's mechanism has the potential to drive clinical success by measures designed to assess efficacy in IgAN and other immunologic diseases. BLyS inhibition has been clinically and commercially validated through the approval of Benlysta (belimumab) in both SLE and LN. Preclinical and clinical evidence support that atacicept's mechanism of dual inhibition of BLyS and APRIL may provide improved clinical outcomes, measured by endpoints designed to assess efficacy, compared to inhibiting either signal alone. Atacicept has the potential to be the first disease-modifying therapy for IgAN due to its ability to act on core pathophysiology processes. As reported in a Phase 2a clinical trial of 16 patients conducted by Merck KGaA, Darmstadt, Germany, atacicept is the first and only molecule in development to demonstrate a 60% reduction in serum Gd-IgA1, which is central to the pathogenesis of IgAN, in a randomized controlled study in IgAN patients.

We have worldwide, exclusive rights to atacicept from Ares, an affiliate of Merck KGaA, Darmstadt, Germany, pursuant to the Ares Agreement, which advanced atacicept in randomized, double-blind, placebo-controlled clinical trials for several autoimmune diseases in over 1,500 patients, in which it was well tolerated. In IgAN, Merck KGaA, Darmstadt, Germany, conducted a randomized, double-blind, placebo-controlled Phase 2a trial known as JANUS. Results from the JANUS trial showed a dose-dependent effect of

1

atacicept 25 mg and 75 mg weekly on serum Gd-IgA1, proteinuria, and key biomarkers, including serum Ig levels. As reported at the American Society of Nephrology (ASN) conference in 2022, atacicept is also the first known therapeutic in IgAN to show reduction in all first three hits of disease pathogenesis-serum Gd-IgA1, anti-Gd-IgA1, and immune complex levels.

We are conducting a multinational, randomized, double-blind, placebo-controlled Phase 2b clinical trial in IgAN, which we refer to as ORIGIN. The ORIGIN trial is evaluating three subcutaneous weekly doses of atacicept (25 mg, 75 mg and 150 mg) and their impact on the reduction of proteinuria as the primary endpoint. A significant reduction in proteinuria, as measured by urine protein: creatinine ratio (UPCR) in a 24-hour urine collection, is associated with improved renal outcomes in patients with IgAN. UPCR is a surrogate endpoint endorsed by the FDA for primary glomerular diseases associated with significant proteinuria, including IgAN. The ORIGIN trial is powered to demonstrate a statistically significant difference between atacicept and placebo in decrease of proteinuria. Given the FDA's recent approval of TARPEYO, we believe this validates the use of proteinuria as a surrogate for accelerated approval. Secondary endpoints include the difference in kidney function between treated and placebo patients as measured by estimated glomerular filtration rate (eGFR) and reduction in Gd-IgA1. We completed enrollment of the Phase 2b ORIGIN trial in mid-2022, enrolling a total of 116 patients at multiple global sites. In January 2023, we announced that atacicept met the primary endpoint: the pooled 75 mg and 150 mg arms achieved a statistically significant reduction in proteinuria versus placebo at 24 weeks. In a prespecified per-protocol (PP) analysis, a blinded third-party CRO identified patients with protocol deviations that potentially confounded proteinuria measure. In the PP population excluding these patients, atacicept 150 mg achieved a 41% mean reduction in proteinuria versus baseline, resulting in a statistically significant 34% placebo-adjusted reduction. Available data show a trend towards deeper reductions in proteinuria at 36 weeks for patients on atacicept, for which full results will read out in the second quarter of 2023. Atacicept was well tolerated, and its safety profile in IgAN patients was also comparable to placebo. The ORIGIN trial will remain blinded through 36 weeks, after which all patients will roll onto the open label portion of the trial and receive atacicept 150 mg through 96 weeks, allowing for the evaluation of long-term safety and durability of response of atacicept in IgAN.

We plan to advance atacicept into a pivotal Phase 3 trial in the second quarter of 2023, using the same formulation of the 150 mg dose. Phase 2b learnings will inform the Phase 3 study design and management to ensure a de-risked trial that accurately assesses treatment efficacy. With the ongoing data from the Phase 2b trial through 2024 and Phase 3 topline results expected in the first half of 2025, if positive, we expect to submit a biologics license application (BLA) for atacicept in IgAN to the FDA in the second half of 2025.

### *Atacicept in LN*

Based on feedback from the FDA's review of clinical results in a Phase 2 clinical trial of atacicept in HDA SLE patients, we are planning a Phase 3 clinical trial of atacicept as a potential treatment for patients with LN, a severe renal manifestation of SLE. We estimate that there are approximately 120,000 LN patients in the United States, 70,000 in the European Union, and 21,000 in Japan. We estimate the market for novel LN therapeutics annually to be approximately $2.0 to $5.0 billion, $600 million and $200 million in United States, Europe and Japan, respectively. Significant unmet need for improved efficacy persists for these patients despite the recent approval of the first two LN-specific therapies. Fewer than half of patients treated for LN have a complete response to therapy, and among patients without a complete response, over half will have non-functioning kidneys within five years. Benlysta (belimumab), a BlyS-only inhibitor, is one of the two therapies approved for patients with LN. Both BlyS and APRIL levels are increased in patients with SLE, suggesting that dual inhibition by atacicept may be more potent than blocking BlyS alone and has the benefit of targeting plasma cells in addition to B cells. Merck KGaA, Darmstadt, Germany previously initiated a randomized, double-blind, placebo-controlled Phase 2/3 clinical trial of atacicept in LN, the APRIL-LN trial, evaluating the efficacy and safety of atacicept 150 mg twice weekly for four weeks-then weekly-in patients with active LN. However, this trial was terminated early due to three patients developing hypogammaglobulinemia with induction therapy (mycophenolate mofetil (MMF) and corticosteroids (CS)) which continued to worsen when initiating atacicept and subsequently two patients developed pneumonia. In prior Phase 2 clinical trials of atacicept in SLE also conducted by Merck KGaA, Darmstadt, Germany, despite missing its primary endpoint in the broader SLE study population, atacicept achieved positive clinical data on multiple measures within the pre-specified patient segment with HDA (defined as Systemic Lupus Erythematosus Disease Activity Index 2000 [SLEDAI-2K] ≥10 at screening), including reduction of renal flares, which we believe supports atacicept's applicability in LN. Because both preclinical and clinical evidence suggest atacicept's dual inhibition of BlyS and APRIL may provide improved clinical outcomes, measured by endpoints designed to assess efficacy, compared to inhibiting either signal alone, we believe there is a strong rationale to conduct a clinical trial of atacicept in LN.

Our Phase 3, randomized, parallel-group, double-blind, placebo-controlled, multicenter, multinational study will evaluate the efficacy and safety of atacicept vs placebo in patients with LN. The clinical trial consists of a 104-week double blind treatment period, followed by a 52-week open label treatment period and a 26-week safety follow-up period. The trial will assess once weekly subcutaneous injections of 150 mg atacicept versus placebo. The primary endpoint is complete renal response at 52 weeks.

### *MAU868 in BK viremia among kidney transplant recipients*

We are developing MAU868 as a potential treatment for reactivated BK infection in kidney transplant recipients. While up to 90% of healthy adults have been infected with BKV at some point in their lives, it remains latent in everyone except severely immunocompromised populations such as kidney transplant recipients. BKV is a polyoma virus that can cause BKV nephropathy (BKVN), a condition in which BK infection, typically first identified as BK viremia, triggers inflammation, which then progresses to

2

fibrosis and tubular injury; BKVN is a leading cause of allograft loss. Currently, there are no approved treatment options for BK viremia or BKVN. We estimate that approximately 80,000 kidney transplants are conducted globally each year, with approximately 20,000 in the United States, 20,000 in Europe, 1,500 in Japan, and 10,000 in China. Approximately 15% of kidney transplant recipients develop BK viremia; 3-4% of kidney transplant recipients develop BKVN. We estimate the market for a novel agent to treat reactivated BK infection in kidney transplant recipients to be a large commercial opportunity worldwide. We believe that MAU868 has the potential to become standard of care for the treatment of reactivated BK infection in order to prevent devastating consequences following kidney transplantation such as BKVN and graft loss.

At ASN 2022, final results from the Phase 2 clinical trial of MAU868 versus placebo showed that MAU868 was well tolerated and demonstrated clinically meaningful reductions in BK antiviral activity through 36 weeks in kidney transplant patients with BK viremia.

### MAU868 in BK cystitis among HSCT patients

We are exploring the development of MAU868 to treat BKV cystitis in HSCT patients. Patients undergoing HSCT are at risk for BKV reactivation due to immunodeficiency; in this setting, BK reactivation and subsequent viruria and viremia can lead to cystitis, including hemorrhagic cystitis. Cystitis is characterized by dysuria, urgency, and/or frequency, while hemorrhagic cystitis indicates the presence of microscopic or gross hematuria. Both BKV cystitis and hemorrhagic cystitis are associated with high patient morbidity and prolonged hospitalization, yet there are no approved treatment options. An estimated 50,000 allogeneic HSCTs are conducted globally each year, with approximately 10,000 in the United States, 16,000 in Europe, 3,500 in Japan, and 2,500 in China. An estimated 57,000 autologous HSCTs are conducted globally each year, with approximately 17,000 in the United States, 27,000 in Europe, 2,500 in Japan, and 1,800 in China. Approximately 15% of allogeneic recipients and 5% of autologous recipients develop BK cystitis, including hemorrhagic cystitis. We believe that MAU868 may represent an important future treatment option for these patients.

### Our business principles and strategy

Our goal is to develop and commercialize transformative treatments for patients suffering from severe immunological diseases. We believe the successful translation of biomedical science into innovative therapeutic products for patients with immunological diseases will enable outsized growth over the next decade and beyond. Specifically, our strategy is based on the following business principles:

- **Develop disease-modifying medicines to improve patients' lives.** Our team seeks to bring transformative medical products to patients with severe immunological diseases, who often receive steroids for treatment. The non-specific immunologic effect of steroids, with known acute and chronic side effects, presents an important opportunity for innovation. We aim to develop and commercialize disease-modifying drugs that target the source of disease, minimize side effects, and have high potential to meaningfully change standard medical care and improve patients' lives.
- **Establish clear line-of-sight to successful products.** We apply our deep drug development experience, scientific rigor, and disciplined decision making to establish clear line-of-sight along the full spectrum of drug development. We pursue biologic targets, product candidates, and disease indications with a de-risked profile and capital-efficient development pathway, and optimize for high probability of clinical, regulatory, and commercial success.
- **Build a leading biotech company that delivers innovative medicines to patients.** We believe our team's expertise and our business culture are fundamental to our success. Our Research and Development team is led by experienced drug development executives with proven track records in clinical and commercial development who have led or been involved in the approvals of more than 12 medicines from leading companies, including Gilead Sciences and Genentech. We leverage our team's know-how with additional outsourced resources and enable focused clinical development of our product candidates with the goal of improving patients' lives.

These principles have guided us to the successful in-licensing of atacicept from Ares and obtaining the rights to MAU868 from Amplyx, in each case with worldwide rights for development and commercialization in all indications. We take a gated-capital raise approach and scale product candidate investment and exposure in close step with key development milestones to ensure high return on development costs.

The near- and long-term objectives to achieve our goal include:

- **Complete global development of atacicept in IgAN.** We reported positive 24-week topline results from the ORIGIN Phase 2b clinical trial in January 2023, will report results from 36-week data in the second quarter of 2023, and plan to initiate a pivotal Phase 3 clinical trial in the second quarter of 2023.
- **Complete global development of atacicept in LN.** We are planning a Phase 3 clinical trial of atacicept as a potential treatment for patients with LN. LN is a frequent but devastating complication of SLE. The FDA approval of the anti-BLyS antibody, Benlysta (belimumab), provides clinical and regulatory precedent upon which to build our program. We believe

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that atacicept could offer a significant efficacy advantage for LN patients with its dual anti-BLyS and anti-APRIL mechanism.

- **Complete global development of MAU868 in BK viremia in kidney transplant recipients and explore treatment of BK cystitis in HSCT patients.** We reported final results from our Phase 2 clinical trial in kidney transplant recipients in 2022. Pending alignment with regulatory authorities, we plan to initiate a Phase 2b or Phase 3 clinical trial.
- **Build and scale organizational capabilities to support commercialization of atacicept and MAU868.** Under the leadership of our experienced management team, we have begun building a specialized commercial organization with deep launch experience in nephrology, B-cell, autoimmune, and transplant therapeutics, to launch atacicept and MAU868 in the United States and other key markets, if approved.
- **Explore additional disease areas where atacicept holds significant therapeutic promise.** By targeting BLyS and APRIL, atacicept's ability to reduce disease-causing autoantibodies may provide clinical benefit. We intend to explore additional immunologic diseases where BLyS and APRIL are abnormally elevated, or where autoantibodies play an important role.
- **Expand our pipeline by acquiring or in-licensing product candidates for immunologic diseases with unmet needs.** We believe our expertise and track record will enable us to identify and acquire or in-license additional product candidates that represent opportunities to expand the potential value of our pipeline. We will leverage our lean clinical development operation to bring to market additional product candidates to address immunologic diseases.

## Management team

We were founded and are led by a team of experienced drug development professionals who have proven track records in clinical and commercial development and have led or been involved in the approvals of 10 medicines from Gilead Sciences, Inc. (Gilead) and Genentech, Inc. (Genentech), including numerous drugs within Gilead's multi-billion-dollar blockbuster HIV and HCV franchises. Our President and Chief Executive Officer, Marshall Fordyce, M.D., brings more than 15 years of experience leading teams in clinical translation, development, and commercialization of new treatments. Earlier in his career, Dr. Fordyce served as Gilead's Senior Director of Clinical Research where he contributed to seven new drug approvals and served as project lead for Gilead's tenofovir alafenamide development program that led to five commercial products, including Genvoya and Descovy, which collectively generated over $12.0 billion in worldwide sales in 2019. Our senior management team also includes: Chief Financial Officer, Sean Grant, who was previously Vice President, Corporate Strategy and Business Development at CareDx, Inc. and Vice President in the Global Healthcare Investment Banking Division at Citigroup where he specialized in public and private capital raising as well as M&A, and executed a broad range of transactions for many of the world's leading life sciences companies; Chief Medical Officer, Celia Lin, M.D., who joined from Genentech and was previously at Amgen Inc., where she led Phase 3 global trial execution in various therapeutic areas, as well as a regulatory filing in an orphan disease; Chief Development Officer, Joanne Curley, Ph.D., who was formerly head of Portfolio Management at Gilead; Chief Business Officer, Lauren Frenz, who held positions of increasing responsibility within Gilead's commercial organization; Senior Vice President, Development Operations, Tom Doan, who was formerly Executive Director of Clinical Operations and Therapeutic Area Head of Inflammation and Respiratory at Gilead; Senior Vice President and Head of Product Development and Manufacturing, Neeraj Pakala, PhD, MBA, who served most recently as the VP of Product Development and Manufacturing at Aimmune Therapeutics (acquired by Nestlé), and prior to Aimmune, spent six years at Alexza Pharmaceuticals culminating as their Executive Director of Manufacturing and Engineering; and Senior Vice President, Finance and Chief Accounting Officer, Joseph Young, who was formerly Senior Vice President, Finance and Treasurer at Plexxikon Inc.

## Intellectual property

As of December 31, 2022, our licensed patent portfolio related to atacicept contains approximately seven issued U.S. patents, one pending U.S. patent application, as well as foreign counterparts of a subset of these patents and pending U.S. patent application in several foreign countries, including countries within the European Patent Convention, the Eurasian Patent Organization, and Taiwan. Because atacicept is a biologic, marketing approval would also provide 12 years of market exclusivity from the approval date of a BLA in the United States. Additionally, we plan to seek orphan drug designation for atacicept in IgAN from the FDA and European Medicines Agency (EMA), which would allow us to obtain regulatory exclusivity protection from the approval date for seven years in the United States and ten years in the European Union. Our licensed patent portfolio covering MAU868 includes three issued U.S. patents, a pending U.S. patent application, as well as certain foreign counterparts of a subset of these patents and pending U.S. patent application, in Australia, China, Mexico, Japan, Europe and Canada. The pending U.S. application and foreign counterpart applications are co-owned by Novartis.

## Atacicept in IgAN

We are developing atacicept as a potential treatment for patients with IgAN, a serious and progressive autoimmune disease of the kidney with a high unmet medical need and limited treatment options available. Up to 50% of confirmed IgAN patients progress to ESRD, requiring dialysis or kidney transplant. ESRD causes significant morbidity and impact on patients' lives and represents a

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significant health economic burden estimated to be over $40 billion annually in the United States. Despite this high level of morbidity, the current standard of care consists of off-label use of RAAS inhibitors, including ACE inhibitors and ARBs, and potentially steroids. IgAN is driven by the production of pathogenic Gd-IgA1, and patients with elevated Gd-IgA1 are at increased risk of kidney-related morbidity and mortality. As reported in the Phase 2a JANUS trial, atacicept is the first molecule in development to demonstrate a 60% or greater reduction in serum Gd-IgA1 in IgAN patients, suggesting atacicept targets the source of disease in these patients. Based on these encouraging results, we are conducting the randomized, double-blind, placebo-controlled Phase 2b ORIGIN trial to further evaluate the efficacy and safety of atacicept in patients with IgAN. We reported positive topline results in January 2023, and we plan to initiate a pivotal Phase 3 clinical trial in the second quarter of 2023. We believe that atacicept has the potential to be the best-in-class and the leading B cell-targeted therapy for IgAN.

### Pathophysiology of IgAN

The IgA antibody plays a key role in the immune system by protecting the body from foreign substances such as bacteria and viruses. Patients with IgAN produce elevated levels of Gd-IgA1. This abnormal glycosylation pattern of IgA1 is of central importance to the disease etiology.

As shown in Figure 1 below, a multi-step process leads to the ultimate development of progressive renal injury.

Figure 1: IgAN pathophysiology-overview

![img-0.jpeg](img-0.jpeg)

(1) B cells, which mature into plasma cells, are abnormally primed in the Peyer's patch region of the ileum of the intestines, potentially due to a combination of genetic predisposition and environmental, bacterial or dietary factors. BLyS promotes B cell maturation and survival, increasing the number of disease-causing B cells.
(2) APRIL, a factor important for plasma cell survival, becomes upregulated, resulting in increased numbers of disease-causing plasma cells.
(3) APRIL increases the number of plasma cells and increases antibody class switching, a mechanism that changes cells' production from one immunoglobulin to another, causing an increase in the production of immunogenic Gd-IgA1.
(4) The Gd-IgA1 antibodies are immunogenic when found in the systemic circulation, which triggers autoantibodies, or antibodies created by the body in response to a constituent of its own tissue.
(5) Autoantibodies against Gd-IgA1 lead to the formation of pathogenic immune complexes, or clusters of antibodies.
(6) Pathogenic immune complexes are deposited, become trapped in the kidney's glomeruli, and initiate an inflammatory response that damages the membranes, resulting in protein and blood leaking into the urine.

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(7) As the glomeruli are destroyed, the kidney's ability to remove waste products from the blood is reduced, which can result in potentially life-threatening complications that lead to the need for dialysis or kidney transplant in many patients.

### Gd-IgA1 is central to the pathogenesis of IgAN

Gd-IgA1 is a subclass of IgA antibodies that lack units of galactose, a type of sugar, at the O-linked glycans of their hinge region, as shown in Figure 2 below. The hinge region is a stretch of amino acids in the IgA antibody. Circulating immune complex-containing Gd-IgA1 proteins have been shown to be the target antigens for IgG antibodies with specificity for the hinge region.

Figure 2: Components of Gd-IgA1

![img-1.jpeg](img-1.jpeg)

A histopathological hallmark of IgAN is deposition of Gd-IgA1 in the glomerular mesangium, either alone or in combination with IgG and/or IgM. Sampling of the serum of patients with IgAN has confirmed the presence of elevated levels of circulating immune complex-containing Gd-IgA1.

Clinical trials of patients with IgAN have correlated higher serum levels of Gd-IgA1 with greater severity of IgAN disease, suggesting that reduction in serum Gd-IgA1 may slow disease progression. Compared with healthy subjects, patients with IgAN have an increased proportion of Gd-IgA1 O-glycoforms in the serum. As published in Kidney International, in a prospective study of 275 patients with IgAN, higher serum levels of aberrantly glycosylated IgA1 demonstrated correlation with a higher likelihood of developing progressive renal failure, as shown in Figure 3 below. A separate clinical trial of patients with IgAN of varying severity found that higher titers of autoantibodies specific for Gd-IgA1 corresponded to both absolute renal risk score and risk of ESRD or death.

Figure 3: Renal survival by serum Gd-IgA1 quartiles in IgAN patients

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![img-2.jpeg](img-2.jpeg)

In addition, high serum APRIL levels correlate with increased expression of serum Gd-IgA1 in IgAN patients and high serum BLyS levels are associated with more severe clinical features, as well as more severe histopathological features. For these reasons, we believe a fusion protein that blocks both BLyS and APRIL, which has the potential to reduce serum Gd-IgA1, would address the upstream source of IgAN, and represent the first disease-modifying approach for IgAN.

#### *Disease burden, diagnosis, and predictors of disease progression*

IgAN is a rare disease in the United States and European Union and is also the predominant cause of primary glomerulonephritis. Patients with IgAN are diagnosed throughout life, but most commonly in the second and third decades. There are three common ways in which patients present:

- 40-50% present with one or more episodes of gross (visible) hematuria, often linked to an upper respiratory tract infection.
- 30-40% present with microscopic hematuria and mild proteinuria, which is detected in a routine physical or during chronic kidney disease evaluation.
- Less than 10% present with either nephrotic syndrome or an acute, rapidly progressive glomerulonephritis with symptoms including edema, hypertension, renal insufficiency, and hematuria.

Once IgAN is suspected based on clinical history and laboratory data, kidney biopsy, which is the gold standard for IgAN diagnosis, is performed.

#### *IgAN market opportunity*

We estimate there are approximately 126,000 biopsy-confirmed IgAN patients in the United States, 136,000 in the European Union, and 130,000 in Japan, and that growth in the diagnosed prevalent population is due to overall population growth. Underlying genetic differences may contribute to the significantly higher rate in Japan. As therapies become commercially available, however, an increase in diagnosis rate or longer time to progression, due to better treatments, may increase the diagnosed population over time.

We estimate the U.S. market opportunity for novel therapeutics in IgAN is approximately $4.0 billion to $8.0 billion annually, based on the prevalence of the disease in the United States and the segment of IgAN patients at high risk of progressing to ESRD. In Europe and Japan, we estimate the annual market opportunity for novel IgAN therapeutics to be $1.0 billion and $600 million, respectively.

#### *Current standard of care for IgAN patients*

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Despite the high unmet medical need in IgAN, there are limited treatment options available. The following two general approaches are typically employed for the treatment of patients with IgAN:

- Non-specific measures to slow progression, including blood pressure control, and in patients with proteinuria, RAAS inhibitors, including ACE inhibitors or ARBs.
- Steroids with or without other immunosuppressive agents to non-specifically reduce inflammation as a result of immune complex deposition in the glomeruli.

Treatment is selected based on perceived risk of progressive kidney disease, and clinical measures such as hematuria, proteinuria, and eGFR are used to monitor patients while on treatment. The current standard of care is seen as insufficient by physicians and patients; these treatment approaches have limited clinical efficacy and are not well tolerated. Approximately 50% of patients fail to achieve controlled UPCR on ACE inhibitors, ARBS, or steroids. The use of steroids may cause significant side effects, including serious infections, high blood pressure, weight gain, diabetes, and osteoporosis. As such, there is a high unmet medical need for targeted therapies that impact the underlying disease pathophysiology and more tolerable, steroid-sparing treatment options for IgAN patients.

### Emerging therapies in development

There are two agents approved for the treatment of IgAN and there are several treatments in clinical development. The multistep IgAN pathogenesis hypothesis offers potential target points and approaches for therapeutic intervention. Most therapeutic candidates in clinical development have employed various approaches to target inflammation and the downstream effects. Atacicept is the first agent in development for IgAN that has demonstrated a 60% reduction of Gd-IgA1, the upstream source of IgAN pathogenesis.

These agents can be grouped mechanistically into the following categories: glucocorticoid receptor agonists, endothelin receptor antagonists (ERAs), complement inhibitors, B-cell modulators, and a variety of other approaches that are earlier in development.

Glucocorticoid receptor agonists. Glucocorticoid receptor agonists are a well-known class of molecules that have broad anti-inflammatory effects, and well-established acute and chronic side effects. Though reduction in the risk of eGFR decline was shown in clinical trials, there is no consensus on whether glucocorticoids may improve renal survival. The glucocorticoid, budesonide, has been reformulated to concentrate steroid effects locally on the gut mucosa, theoretically suppressing the abnormal B-cell activity and reducing systemic steroid toxicity. Currently in a Phase 3 clinical trial in IgAN, reformulated budesonide has demonstrated statistically meaningful reduction of proteinuria, though systemic steroid side effects have been observed in prior clinical trials and the ongoing Phase 3 clinical trial.

ERAs. Aberrant endothelin signaling is implicated in structural podocyte changes and increased mesangial proliferation in chronic kidney diseases, including IgAN. ERAs block endothelin-induced cell proliferation and hence may reduce renal perfusion pressure and proteinuria. Since this mechanism of action works downstream of disease-related immune activities, it is not expected to reduce Gd-IgA1 or the resulting immune complexes that cause the disease. Several ERAs, which have previously been approved for the treatment of pulmonary arterial hypertension and erectile dysfunction and make use of a vasodilatory effect, are currently in Phase 3 development and have been shown to reduce proteinuria in patients with IgAN. However, ERAs have been associated with edema, significant liver toxicity and increased risk of heart failure.

Complement inhibitors. Increased complement activation is commonly observed in patients with IgAN. It is hypothesized that immune-complex deposition in glomeruli may contribute to complement activation, though the exact mechanism is not well understood. Several agents that inhibit complement activation are in clinical development for IgAN. Modest reduction of proteinuria has been observed in early clinical trials. As complement inhibition works downstream of immune complex formation, these agents are not expected to impact the upstream cause of disease and reduce Gd-IgA1 or the resulting immune complexes that cause inflammation and complement activation in the kidney.

B-cell modulators. B-cell modulators, including atacicept, are an important category of emerging therapies for IgAN. The disease-causing Gd-IgA1 is predominantly produced by B cells and plasma cells. Therefore, control of B-cell activation may reduce production of Gd-IgA1 and the downstream formation of autoantibodies and immune complexes. Preclinical models have shown that dual inhibition of BLyS and APRIL offers improved suppression of B-cell activities than blocking BLyS or APRIL alone. Atacicept blocks both BLyS and APRIL and has shown substantial reduction (60%) in Gd-IgA1. We believe that dual inhibition may also confer a potential dosing advantage versus APRIL-only inhibition.

### Our solution: Atacicept

Atacicept is a fusion protein that blocks both BLyS and APRIL, which play key roles in the upstream pathway that causes IgAN, and is dosed once weekly via a 1-mL subcutaneous injection. As a result, we believe atacicept has the potential to be the first disease-modifying therapy for IgAN. Through an integrated analysis of randomized, double-blind, placebo-controlled clinical trials in multiple autoimmune diseases with over 1,500 patients to date, atacicept has a well-characterized clinical safety profile. In a Phase 2a clinical trial in patients with IgAN, atacicept substantially reduced Gd-IgA1 and demonstrated a clinically meaningful reduction in proteinuria

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and stable eGFR parameters at week 24. We completed enrollment of patients in the Phase 2b ORIGIN trial in 2022, and we reported positive topline results in January 2023.

### Our approach to IgAN: Reducing Gd-IgA1, the source of autoantibodies

Atacicept is a fully humanized fusion protein that impacts the B-cell pathway, which has well characterized implications in immunologic diseases. Specifically, as shown in Figure 4 below, atacicept contains the soluble transmembrane activator and CAML interactor (TACI) receptor that binds to the cytokines BLyS and APRIL. These cytokines are members of the tumor necrosis factor family that promote B-cell survival and autoantibody production associated with IgAN and other immunologic diseases. Dual blockade of BLyS and APRIL by TACI has been shown to be more potent than blocking BLyS alone or APRIL alone and has the benefit of targeting long-lived plasma cells, in addition to B cells, thus reducing autoantibody production, including Gd-IgA1, IgA, IgG and IgM. Therefore, atacicept's mechanism acts directly on the source of IgAN, which we believe will significantly mitigate the downstream effects of the disease.

Figure 4: Atacicept blocks both BLyS and APRIL

![img-3.jpeg](img-3.jpeg)

Atacicept: Potential to address the core processes underlying IgAN pathogenesis

Atacicept's specific actions on IgAN disease pathogenesis are shown in Figure 5 below.

Figure 5: Atacicept impact on IgAN pathogenesis

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![img-4.jpeg](img-4.jpeg)

(1) Atacicept blocks BLyS, a factor important for B cell survival and maturation, resulting in reduced numbers of disease-causing B cells.
(2) Atacicept blocks APRIL, a factor important for plasma cell survival, resulting in reduced numbers of disease-causing plasma cells.
(3) Reductions in plasma cells and in antibody class switching to IgA reduce production of immunogenic Gd-IgA1.
(4) Reductions in B cells, plasma cells, and Gd-IgA1 work together to reduce production of autoantibodies to Gd-IgA1.
(5) Therefore, formation of pathogenic immune complexes is greatly reduced.
(6) This in turn, reduces immune complex deposition in glomeruli and reduces complement activation.
(7) Ultimately, progressive renal injury is reduced, which we believe will significantly lower the morbidity and mortality associated with IgAN.

Atacicept's disease-modifying mechanism addresses the upstream processes that cause IgAN, while most other molecules in development act downstream. Therefore, we believe that the clinical outcomes of atacicept, measured by endpoints designed to assess efficacy and durability, will be favorable over competitors, with a demonstrated tolerability profile. Once weekly 1 mL subcutaneous dosing also provides an attractive target product profile for patients.

### Atacicept in IgAN: clinical development

Atacicept was the subject of a collaboration agreement between Ares and ZymoGenetics, Inc. in 2001, and was licensed on an exclusive basis to Ares in 2008. It was advanced by Merck KGaA, Darmstadt, Germany, in clinical trials for several autoimmune diseases, including rheumatoid arthritis (RA), multiple sclerosis, SLE, and IgAN, and in totality studied in double-blind placebo-controlled clinical trials in over 1,500 patients to date. Safety, tolerability, pharmacokinetics, pharmacodynamics, and clinical efficacy of the weekly 25 mg, 75 mg and 150 mg doses administered subcutaneously have been studied.

Atacicept is being studied in the Phase 2b ORIGIN clinical trial, a multinational, 36-week randomized, placebo-controlled, double-blind trial, with a 60-week open label extension.

On January 3, 2023, and January 30, 2023, Vera reported positive week 24 primary results and shared the following results:

- Atacicept met its primary endpoint with a statistically significant reduction in proteinuria in the pooled 75/150 mg arms versus placebo
- In a prespecified per-protocol (PP) analysis, a blinded third-party CRO identified patients with protocol deviations that potentially confounded proteinuria measure. In the PP population excluding these patients, atacicept 150 mg achieved a 41%

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mean reduction in proteinuria versus baseline, resulting in a statistically significant 34% placebo-adjusted reduction (p=0.025) at an early week 24 timepoint

- There was a trend towards deepening reductions in proteinuria at week 36 with available data in patients on atacicept.
- eGFR was stable through week 24 for all patients on atacicept
- Atacicept was well tolerated, and its safety profile in IgAN patients was comparable to placebo
- There was a 60% reduction in Gd-IgA1 at week 24 with atacicept 150 mg

Based on these Phase 2b ORIGIN trial results, the atacicept 150 mg dose was selected for a forthcoming Phase 3 clinical trial, which we expect to initiate in the second quarter of 2023. We will use the same formulation as the Phase 2b trial, while incorporating learnings from Phase 2b subgroup analyses to design a de-risked Phase 3 trial that accurately assesses treatment efficacy while minimizing potential confounders for proteinuria measure.

# Atacicept safety and tolerability profile: Integrated analysis

Though there was a limited number of patients in the JANUS trial, in an integrated safety analysis of clinical trials in multiple indications with over 1,500 patients in a number of indications, atacicept was well tolerated, shown in Figure 6 below. Serious treatment-emergent adverse events (TEAEs) reported in the highest proportions were those in infections and infestations (placebo 3.9% versus atacicept 4.4%), musculoskeletal and connective tissue disorders (placebo 1.9% versus atacicept 1.3%), and nervous system disorders (placebo 2.1% versus atacicept 1.2%). The most frequently reported TEAE was pneumonia (placebo 1.2% versus atacicept 1.3%). We believe that this large and established data set is a competitive advantage for atacicept versus other approved and emerging therapies in development, many of which lack extensive safety data.

Figure 6. Integrated safety analysis: Summary of treatment-emergent adverse events > 5% in any arm, by dose

| Patients, % | Placebo n=483 | Atacicept 25 mg n=429 | Atacicept 75 mg n=384 | Atacicept 150 mg n=572 | All Atacicept n=1085 | Overall n=1568 |
| --- | --- | --- | --- | --- | --- | --- |
| Infections and infestations | 211 (43.7) | 43 (33.3) | 180 (46.9) | 281 (49.1) | 504 (46.5) | 715 (45.6) |
| General disorders and administration site conditions | 100 (20.7) | 42 (32.6) | 145 (37.8) | 201 (35.1) | 388 (35.8) | 488 (31.1) |
| Gastrointestinal disorders | 97 (20.1) | 20 (15.5) | 98 (25.5) | 129 (22.6) | 247 (22.8) | 344 (21.9) |
| Nervous system disorders | 92 (19.0) | 28 (21.7) | 83 (21.6) | 100 (17.5) | 211 (19.4) | 303 (19.3) |
| Musculoskeletal and connective tissue disorders | 86 (17.8) | 21 (16.3) | 70 (18.2) | 105 (18.4) | 196 (18.1) | 282 (18.0) |
| Respiratory, thoracic and mediastinal disorders | 50 (10.4) | 7 (5.4) | 45 (11.7) | 66 (11.5) | 118 (10.9) | 168 (10.7) |
| Serious TEAE | 51 (18.9) | 15 (30.0) | 51 (23.9) | 61 (21.8) | 127 (23.4) | 178 (21.9) |

The safety profile of atacicept 25 mg, 75 mg and 150 mg has been characterized in healthy subjects and patients with RA, multiple sclerosis, optic neuritis, SLE, and B-cell malignancies, and is considered acceptable in IgAN. Over 1,940 individuals have been enrolled in 22 clinical trials, of which over 1,425 individuals have received at least one dose of atacicept. In the three Phase 2/3 clinical trials, 590 patients with SLE and 11 patients with IgAN have received at least one dose of atacicept.

We believe the benefit-risk balance of atacicept to be favorable for further development in IgAN and certain additional autoimmune diseases, and we intend to explore additional immunologic diseases where BLyS and APRIL are abnormally elevated, or where autoantibodies play an important role.

# Ongoing phase 2b ORIGIN clinical trial design

ORIGIN, our ongoing Phase 2b randomized, double-blind, placebo-controlled, dose-ranging trial, will evaluate the efficacy and safety of atacicept in patients with IgAN. The clinical trial consists of a 36-week double-blind treatment period, followed by a 60-week open-label treatment period and a 26-week safety follow-up period. The trial assesses multiple doses (25 mg, 75 mg and 150 mg) of once weekly 1-mL subcutaneous injections of atacicept versus placebo on impact of renal function as measured by proteinuria. The primary endpoint is change from baseline in UPCR at 24 weeks based on 24-hour urine collection, with a secondary endpoint of UPCR at 36 weeks. Other endpoints include change from baseline in UPCR at 12, 48, and 96 weeks, change from baseline in eGFR at 12, 24, 36, 48, and 96 weeks, change from baseline in IgA, IgG, IgM, C3, C4, and Gd-IgA1 levels at 12, 24, 36, 48, and 96 weeks, number of

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participants with adverse events during the double-blind treatment period through 36 weeks, and the serum concentration of atacicept through study completion.

**Figure 7. Phase 2b ORIGIN trial design**

![img-5.jpeg](img-5.jpeg)

UPCR is an accepted surrogate primary endpoint for clinical trials in IgAN, which allows for a faster path to commercialization than rate of change/slope in eGFR, which is measured after two years. The recommendation for usage of this surrogate endpoint was put forward by the ASN, partnering with the FDA under the auspices of the Kidney Health Initiative, and the EMA, and has now been implemented in five Phase 3 clinical trials in IgAN and in the two FDA approvals granted. Accelerated and/or conditional approval may be granted on the UPCR endpoint, with full approval to be granted upon longer-term data demonstrating stabilization of eGFR with treatment.

In mid-2022 we completed enrollment of the Phase 2b ORIGIN trial, enrolling a total of 116 patients at multiple global sites. In January 2023, we announced positive topline 24-week results. Atacicept met the primary endpoint: the pooled 75 mg and 150 mg arms achieved a statistically significant reduction in proteinuria versus placebo at 24 weeks. In a prespecified PP analysis, a blinded third-party CRO identified patients with protocol deviations that potentially confounded proteinuria measure. In the PP population excluding these patients, atacicept 150 mg achieved a 41% mean reduction in proteinuria versus baseline, resulting in a statistically significant 34% placebo-adjusted reduction ($p=0.025$) at an early week 24 timepoint. Available data show a trend towards deeper reductions in proteinuria with atacicept at 36 weeks, for which full results will read out in the second quarter of 2023. eGFR was stable through week 24 for all patients on atacicept. The 150 mg dose achieved a 60% reduction in Gd-IgA1 at week 24. Atacicept was well tolerated, and its safety profile in IgAN patients was also comparable to placebo. Treatment will remain blinded through 36 weeks, after which all patients will roll onto the open label portion of the study and receive atacicept 150 mg through 96 weeks, providing the opportunity to assess long-term safety of atacicept in patients with IgAN.

We plan to advance atacicept 150 mg into a pivotal Phase 3 trial in the second quarter of 2023, using the same formulation from the Phase 2b trial and learnings from the Phase 2b subgroup analyses to design a de-risked Phase 3 trial that accurately assesses treatment efficacy while minimizing potential confounders for proteinuria measure. With the ongoing data from the Phase 2b trial through 2024 and Phase 3 topline results expected in the first half of 2025, if positive, we expect to submit a BLA for atacicept in IgAN to the FDA in the second half of 2025.

#### **Atacicept in LN: A severe renal manifestation of SLE**

Based on discussions with the FDA following the review of Phase 2 data in SLE, we are planning a Phase 3 clinical trial of atacicept as a potential treatment for patients with LN, a severe renal manifestation of SLE. We estimate that there are approximately 120,000 LN patients in the United States, 70,000 in the European Union, and 21,000 in Japan. Significant unmet need for improved efficacy persists for these patients despite the recent approval of the first two LN-specific therapies. Fewer than half of patients treated for LN have a complete response to therapy, and among patients without a complete response, over half will have non-functioning kidneys within five years. Benlysta (belimumab), a BLYs-only inhibitor, is one of the two therapies approved for patients with LN. Both BLYs and APRIL levels are increased in patients with SLE, suggesting that dual inhibition by atacicept may be more potent than blocking BLYs alone and has the benefit of targeting plasma cells in addition to B cells. Merck KGaA, Darmstadt, Germany previously initiated a randomized, double-blind, placebo-controlled Phase 2/3 clinical trial of atacicept in LN, the APRIL-LN trial, aimed to evaluate the efficacy and safety of atacicept at 150 mg twice weekly for four weeks-then weekly-in patients with active LN. However, this trial was terminated early due to three patients developing hypogammaglobulinemia with induction therapy (MMF and CS) which continued to worsen when initiating atacicept and subsequently two patients developed pneumonia. In prior Phase 2 clinical

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trials of atacicept in SLE also conducted by Merck KGaA, Darmstadt, Germany, despite missing its primary endpoint of improved SLE responder index 4 (SRI-4) at week 24, in the broader SLE study population, atacicept achieved positive clinical data on multiple measures within the prespecified HDA patient segment, including reduction of renal flares, which we believe supports atacicept's applicability in LN. Because both preclinical and clinical evidence suggests atacicept's dual inhibition of BLyS and APRIL may provide improved clinical outcomes, measured by endpoints designed to assess efficacy, compared to inhibiting either signal alone, we believe there is a strong rationale to conduct a clinical trial of atacicept in LN.

### Pathophysiology of LN

LN is a severe renal manifestation of SLE (also referred to as lupus). SLE is a chronic and disabling autoimmune disease in which the body's own immune system attacks itself. SLE predominantly affects women and is more prevalent in women of color. When LN is diagnosed in a patient, mortality risk dramatically increases.

LN pathogenesis involves a variety of disease-causing mechanisms, including the formation of immune deposits within the kidneys that are primarily due to anti-double stranded DNA (anti-dsDNA) antibodies, which atacicept has been shown to reduce in a dose-dependent manner. However, there are also instances in which induction of LN by anti-dsDNA may not require immune complex formation-autoreactive plasma cells in the kidney may be another cause of nephritis. Certain genes and genetic factors may also predispose patients.

### LN disease burden and diagnosis

LN has a strong influence on morbidity and mortality within SLE, with up to 26% of patients progressing to ESRD within 15 to 20 years from initial diagnosis. LN is characterized by abnormal proteinuria, hematuria, and impaired kidney function.

Diagnosed SLE patients are routinely monitored by rheumatologists, who will refer to nephrologists upon suspicion of renal manifestations. In the United States and European Union, LN patients without a prior SLE diagnosis will typically first present to a primary care physician (U.S.) or internist (EU) with hematuria or proteinuria before ultimate referral to a nephrologist. For confirmatory diagnosis, nephrologists perform renal biopsy-of which the results are analyzed to determine histologic class and relevant treatment course.

LN patients are segmented in Classes I-VI based on histopathology and degree of renal impairment, and this classification drives treatment decisions. Class I, or Minimal mesangial LN, is rarely diagnosed as these patients have normal urinalysis and therefore biopsy is not typically performed. Class II, Mesangial proliferative LN, refers to microscopic hematuria and/or proteinuria. Patients with Class III, or Focal LN, tend to have both hematuria and proteinuria, and may have hypertension, decreased eGFR, and nephrotic syndrome. Class IV, or Diffuse LN, is the most commonly diagnosed and severe form of LN, with patients exhibiting hematuria, proteinuria, nephrotic syndrome, hypertension, and decreased eGFR. Patients with Class V, or lupus membranous nephropathy, tend to have nephrotic syndrome, and may have microscopic hematuria and hypertension, but normal UPCR. Class VI, or advanced sclerosing LN, refers to a slow progression of kidney dysfunction correlated with proteinuria.

As shown in Figure 8 below, LN typically develops early in the disease course, though the rate of SLE patients who develop LN increases over time.

Figure 8: LN progression

![img-6.jpeg](img-6.jpeg)

### LN market opportunity

According to the Centers for Disease Control and Prevention, there are approximately 322,000 people living with SLE in the United States.

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Approximately half of individuals living with SLE develop LN within 15 years of their initial diagnosis, as shown in Figure 8 above.

We estimate that there are approximately 120,000 LN patients in the United States, 70,000 in the European Union, and 21,000 in Japan at present. In the United States, higher prevalence rates occur in the heterogeneous population, as both SLE and LN occur more frequently among non-White patients-with the highest frequency of LN occurring in Black and Hispanic populations after adjustment for socioeconomic factors. In all three geographies, women account for the majority of LN cases.

Based on primary market research with physicians and payors and extensive secondary research, we estimate the market for novel LN therapeutics annually to be approximately $2.0 to $5.0 billion, $600 million and $200 million in United States, Europe and Japan, respectively.

### Current standard of care for LN patients

Current LN treatment is largely cyclical, with induction versus maintenance therapy dictated by the severity of disease and frequency of flares. Treatment is driven by histologic class and can be influenced by the treatments that the patient has been on since SLE diagnosis. Class I and II LN do not generally need LN-specific treatment. Within Class III-V, patients tend to receive induction therapy for approximately one year to achieve complete or partial remission. Induction therapy for Class III-IV patients include several immunosuppressive agents, such as MMF ± CS or cyclophosphamide (CYC) ± CS in the first line of treatment, switching to either CYC or MMF in the second line, whichever was not administered first line. Third line induction therapy has generally consisted of rituximab for Class III-V patients. For induction therapy of Class V LN patients, patients typically receive MMF ± steroids in the first line, a calcineurin inhibitor in the second line, and rituximab for third line. Maintenance therapy, which typically consists of MMF, azathioprine (AZA), or hydroxychloroquine (HCQ), is typically prescribed to well controlled patients after any line of induction to reduce flares. Immunosuppressive therapy is unlikely to be beneficial for Class VI, or advanced sclerosing LN.

Patients on maintenance still experience flares approximately every year, resulting in cycling back to induction therapy. Many of the therapies used in the treatment paradigm today have limited efficacy and poor tolerability profiles-and therefore there is significant unmet need for safe and specific therapies that have a direct impact on LN disease activity without a high risk of infection.

### Recently approved and emerging therapies in development

Until recently, there were no approved therapies for the treatment of LN. In December 2020, the FDA approved Benlysta (belimumab), an anti-BLyS antibody, for treatment of adult patients with active LN who are receiving standard therapy. In January 2021, the FDA approved Lupkynis (voclosporin), a calcineurin inhibitor, to be used in combination with a background immunosuppressive therapy regimen for adult patients with active LN. Clinical guidelines on how these two medicines may be incorporated into standard of care remain to be updated. In addition to Benlysta (belimumab) and Lupkynis (voclosporin), there are several other cytokine inhibitors and complement inhibitors in development for LN.

B-cell Modulators. Benlysta (belimumab) is an anti-BLyS antibody, belonging to the class of B-cell modulators. Within the B-cell modulator class, there is a desire for different mechanisms to target the complex pathophysiology of LN. The results shared to date for these agents reveal statistically significant efficacy, but complete response rates are only achieved in fewer than 50% of the patients studied.

Calcineurin Inhibition. Lupkynis (voclosporin) is a calcineurin inhibitor, a mechanism which has been commonly used in generic form as induction therapy for Class V patients. Calcineurin inhibition has been shown to reduce cytokine activation of T-cells and protect against proteinuria, however it may pose serious infection risks and nephrotoxicity is a known class effect.

Cytokine Inhibitors. The other cytokine inhibitors under investigation offer blockade of key pro-inflammatory cytokines (IL17A, IL23, Type 1 IFNs) involved in the pathogenesis of LN, however, they are early in their development.

Complement Pathway Inhibitors. Complement pathway inhibitors are also early in their development, but unlikely to be disease-modifying, since complement activation is one result of the inflammation caused by immune-complex deposition in the kidneys, downstream of key steps in disease pathophysiology.

### Our solution: Atacicept

Targeting both BLyS and APRIL is key to reduce autoantibodies produced by B cells and plasma cells in LN.

Autoantibodies play a large role in the pathogenesis of LN. Autoantibodies target tissue or form immune complexes, leading to tissue and organ damage. Both short-lived and long-lived plasma cells are responsible for generating high levels of autoantibodies in LN.

Short-lived plasma blasts are the main B cell effector subset dependent on activation of various B cell receptors such as TACI, B cell maturation agent (BCMA) and BLyS. Therefore, B cell blocking agents such as Rituxan (rituximab; anti-CD20) and Benlysta (belimumab; anti-BLyS) can reduce short-lived plasma cells and the resulting autoantibody production.

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Long-lived plasma cells are in bone marrow and inflammatory tissue niches, and form antibodies in the absence of B-cell activation. Inflammatory tissue has high levels of BLyS and APRIL, which serve to maintain long-lived plasma cells. Inhibiting APRIL blocks long-lived nonproliferating plasma cell activities to further reduce autoantibody formations in LN.

Atacicept contains the soluble TACI receptor that binds to the cytokines BLyS and APRIL and prevents their interaction with TACI, BCMA and BLyS receptors (BLyS-R is also known as B cell activating factor receptor or BAFF-R). Atacicept thus inhibits survival of immature and mature B cells and antibody-producing plasma cells and prevents immunoglobulin class switching. In contrast to a range of available biologics directed at B cells only, we believe atacicept has a prompt and marked effect on antibody production by inhibiting both short-lived and long-lived plasma cells.

Preclinical evidence indicates that dual inhibition of BLyS and APRIL is superior to either BLyS or APRIL alone. Animal models of kidney disease have confirmed that atacicept reduces plasma cell numbers and reduces autoantibodies more effectively than BLyS and APRIL antibodies given individually. In a mouse model of collagen-induced arthritis, soluble atacicept inhibited development of collagen-specific antibodies and reduced the incidence of the disease better than BLyS (also known as BAFF) agents alone. In a mouse model of SLE, soluble atacicept decreased the number of B cells, increased survival time and reduced severity of disease symptoms. Furthermore, in a mouse model of SLE, atacicept administered after onset of autoimmunity decreased the number of bone marrow plasma cells and slowed down further formation of autoantibodies. Atacicept prevented renal damage during a 12-week treatment period regardless of autoantibody levels, while the BLyS-only inhibitor did not. Atacicept also decreased established plasma cells in an immunization model better than single inhibitors of BLyS or APRIL.

In patients with active SLE, targeting BLyS and APRIL with atacicept appears to have improved clinical outcomes, measured by endpoints designed to assess efficacy, compared to BLyS alone (Benlysta [belimumab]). While atacicept and Benlysta (belimumab) have not been studied head-to-head in clinical trials, each has been studied in similar populations of patients with SLE, and results of a Phase 2 clinical trial of 150 mg of atacicept compared favorably to published reports on changes in SLE responder index (SRI-4) of belimumab. In a Phase 2 clinical trial of atacicept, the magnitude of efficacy as measured by the difference between treatment and placebo in SRI-4 at 24 weeks was approximately 39% (25% placebo, 64% atacicept 75 mg, 65% atacicept 150 mg, both p=0.005). For Benlysta (belimumab), in a Phase 3 clinical trial of SLE patients, a published analysis of patients with HDA and serologically active disease, clinical efficacy for Benlysta (belimumab) 10 mg/kg showed a difference between treatment and placebo in SRI-4 at 24 weeks of approximately 12%.

Figure 9: Evidence for atacicept performance in SLE

![img-0.jpeg](img-0.jpeg)

![img-1.jpeg](img-1.jpeg)

Atacicept consistently demonstrated improved clinical outcomes, measured by endpoints designed to assess efficacy, versus placebo in SLE patients with HDA (SLEDAI-2K ≥10) across additional clinical measures, and consistently across all SRI cut-offs, as well as using the separate clinical assessment, British Isles Lupus Assessment Group (BILAG)-based Combined Lupus Assessment (BICLA). In the HDA population in ADDRESS II, the BICLA delta at week 24 was 20% (atacicept 150 mg 49%, placebo 29.2%, p=0.035), which compares very favorably to BICLA data from other late-stage SLE clinical trials, such as anifrolumab (week 24 BICLA in 16%). We believe that based on these results, an improved clinical benefit may be observed in patients with LN.

Prior clinical development of atacicept in LN

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Merck KGaA, Darmstadt, Germany conducted a randomized, double-blind, placebo-controlled Phase 2/3 clinical trial of atacicept in LN, the APRIL-LN trial, aimed to evaluate the efficacy and safety of atacicept in patients with active LN. As per trial protocol, patients initiated high-dose CS (the lesser of 0.8 mg/kg/day or 60 mg/day prednisone) and MMF (1 g daily, increased by 1 g/day each week to 3 g daily) at the time of screening (day -14). From day 1, atacicept (150 mg, subcutaneously, twice weekly for four weeks, then weekly) was initiated with MMF along with a tapered dose of CS.

Four of the six enrolled LN patients developed decreases in serum IgG levels following the initiation of MMF and CS in the setting of significant proteinuria, which are contributing factors of hypogammaglobulinemia. After initiation of atacicept, serum IgG levels further declined; two patients developed severe hypogammaglobulinemia, defined as IgG <3 g/L, and pneumonia. These two patients recovered after treatment discontinuation and received antibiotics therapy. This trial was terminated. Based on the detailed assessment of results from this trial, plans to develop atacicept for the treatment of LN will explore alternatives to the induction regimen studied previously, including not dosing atacicept 150 mg twice weekly; clearly defining the dosing regimen for CS and MMF; and closely monitoring immunoglobulin levels during induction therapy.

### Evaluation of safety and efficacy profile of atacicept in SLE

Atacicept 75 mg and 150 mg, dosed once per week with subcutaneous auto-injection, have demonstrated improved clinical outcomes, measured by endpoints designed to assess efficacy, in patients with SLE in the Phase 2 APRIL-SLE and ADDRESS II trials. In these trials, autoantibody titers were significantly reduced, and prespecified and post hoc analyses revealed prevention of flare and reduction of active disease with atacicept treatment, despite the fact that the primary endpoints in these trials were not met.

In ADDRESS II, SLE patients with HDA (SLEDAI-2K ≥10) had an increase in SRI-6 response, attainment of low disease activity (LDA), or SLEDAI-2K ≤2, and a reduction of the risk of a first new severe flare (defined by SLEDAI Flare Index [SFI] or by BILAG A) when treated with atacicept 150 mg. Furthermore, the 024 long-term extension (LTE) trial showed durability of these effects through a median duration of treatment of 96 weeks.

Following the release of the HDA data, Merck KGaA, Darmstadt, Germany pursued the planning and initiation of a global Phase 3 registrational program for atacicept 150 mg once per week in SLE. This program, including two large Phase 3 randomized placebo-controlled trials of atacicept 150 mg compared to placebo, were reviewed by FDA via end-of-phase-2 communication and scientific advice communication with EMA, prior to Merck KGaA, Darmstadt, Germany terminating the SLE program and the IgAN program for business strategy reasons.

### Phase 2 clinical trial in patients with SLE for 24 weeks

ADDRESS II, a Phase 2b SLE trial of 306 patients, evaluated the efficacy and safety of atacicept at two subcutaneous doses (150 mg and 75 mg) versus placebo over the course of 24 weeks, with an LTE arm continuing an additional 96 weeks.

Atacicept demonstrated consistent reductions in IgG, IgA, and IgM serum levels, and reductions in anti-dsDNA antibodies, as well as improvements in serum C3 and C4 levels, as shown in Figure 10 below.

Figure 10: Atacicept impact on key biomarkers in the phase 2 ADDRESS II trial

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![img-2.jpeg](img-2.jpeg)

Though atacicept missed its primary endpoint of SRI-6 reduction versus placebo in all comers, in a prespecified analysis of HDA patients, which comprised approximately half of those enrolled, atacicept 150 mg showed improved clinical outcomes, measured by multiple endpoints designed to assess efficacy, including a 26% improvement (p=0.005) in SRI-6 versus placebo, flare risk reduction, and serologic marker normalization. SRI-6 response is defined as ≥6-point reduction in the SELENA-SLEDAI score, no new BILAG A organ domain score or two new BILAG B organ domain scores, and no worsening (<0.30-point increase) in Physician's Global Assessment score.

**Figure 11: SRI-6 response among HDA patients in the phase 2 ADDRESS II trial**

![img-3.jpeg](img-3.jpeg)

Also, among this HDA patient segment, significantly more patients on the atacicept 150 mg arm reached LDA, as measured by SLEDAI-2K ≤2, as shown in Figure 12 below.

**Figure 12: HDA patients reaching LDA in the phase 2 ADDRESS II trial**

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![img-4.jpeg](img-4.jpeg)

Furthermore, Figure 13 below demonstrates the durable clinical outcomes observed in the HDA segment: more patients reached LDA by multiple measures at both week 24 and week 48. Significantly more patients treated with atacicept 150 mg once weekly versus placebo demonstrated clinical improvement (as shown by SRI-6), achieved LDA, and remission.

Figure 13: Durable clinical outcomes observed in HDA patients in the phase 2 ADDRESS II trial

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![img-5.jpeg](img-5.jpeg)

HDA, high disease activity; LDA, low disease activity; LLDAS, lupus low disease activity state; SRI, SLE responder index. *p<0.05 vs placebo; **p<0.01 vs placebo.

We believe that the clinical outcomes, measured by multiple endpoints designed to assess efficacy within the HDA segment of the SLE population in the ADDRESS II trial-and a favorable tolerability profile observed in ADDRESS II, as well as the integrated safety analysis in over 1,500 patients-provide the foundation of our rationale for developing atacicept further in LN, a severe renal manifestation of SLE.

### *Planned phase 3 clinical trial design*

Our Phase 3, randomized, parallel-group, double-blind, placebo-controlled, multicenter, multinational study will evaluate the efficacy and safety of atacicept vs placebo in patients with LN. The clinical trial consists of a 104-week double blind treatment period, followed by a 52-week open label treatment period and a 26-week safety follow-up period. The trial, as shown in Figure 14 below, will assess atacicept 150 mg once weekly subcutaneous injections versus placebo. The primary endpoint is complete renal response at 52 weeks.

**Figure 14: Planned phase 3 clinical trial design**

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![img-6.jpeg](img-6.jpeg)

### MAU868 in reactivated BK infection among kidney transplant recipients

We are developing MAU868 as a potential treatment for reactivated BK infection in kidney transplant recipients. While up to 90% of healthy adults have been infected with BKV at some point in their lives, it remains latent in everyone except severely immunocompromised populations such as kidney transplant recipients. There are approximately 80,000 kidney transplants annually worldwide, with approximately 20,000 in the United States. Approximately 225,000 kidney allograft recipients are living in the United States. Waitlists to receive kidneys are long: approximately 3-5 years and 75,000 people long in the United States. Up to 12% of transplants per year are re-transplants, which further limits organ availability for new patients. BKV is a polyoma virus that is tropic to the kidney and bladder tissue and can reactivate with the immunosuppression required for kidney transplant. This reactivation can cause BKVN, a condition in which BK infection, typically first identified as BK viremia, triggers inflammation, which then progresses to renal fibrosis and tubular injury; as shown in Figure 15, BKVN is a leading cause of allograft loss, a devastating outcome for kidney transplant recipients.

**Figure 15: Graft survival (%) in kidney transplant patients is worse with BKVN**

![img-7.jpeg](img-7.jpeg)

Currently, there are no approved treatment options for BK viremia or BKVN. We shared full Cohort 1 and Cohort 2 results in 2022 from the Phase 2 trial conducted by Amplyx, and plan to initiate a Phase 2b or Phase 3 clinical trial, pending alignment with regulatory authorities. We believe that MAU868 has the potential to become standard of care for the treatment of BK viremia in order to prevent devastating consequences such as BKVN.

### *Pathophysiology of BK virus in kidney transplant*

BKV has a worldwide seroprevalence of up to 90%. Primary BK infection is typically acquired during childhood, after which the virus establishes lifelong infection in the kidney and bladder tissue. Most people do not experience any known adverse effects from either primary or persistent infection. Control of infection is dependent on CD4+ and CD8+ T cell immunity, which immunosuppressants can displace. In the setting of kidney transplant and related immunosuppression, latent virus can be reactivated or new virus can be transmitted via the donor kidney. BKV reactivation is marked first by viruria-or detection of virus in the urine, and then viremia-detection of viral DNA in the blood, and most commonly occurs within the first year of transplant.

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Viremia typically occurs in 15% of kidney transplant recipients, after which BKVN may occur. Approximately 3-4% of kidney transplant recipients develop BKVN.

### BKVN disease burden and diagnosis

BKVN may lead to allograft injury and in some cases, allograft loss. Up to 24-60% of all graft losses are due to BKV-associated disease. The average cost of a kidney transplant in the United States is over $440,000. Pre-transplant, recipients are typically on dialysis, for which the cost is approximately $90,000 per year; there is an approximate 450% increase in annual medical cost to treat transplant recipients who experience graft loss.

Most institutions monitor for BK in both the urine, through PCR and urinalysis, and plasma, via PCR. It is common practice to screen kidney transplant recipients for BK viremia via PCR test monthly in the first six months post-transplant and then every three months until two years post-transplant, after which patients are typically screened annually. Also, at any sign of allograft dysfunction, physicians will test for BK viremia. Viral load levels >1000 copies/mL are considered positive for BK viremia, and levels >10,000 copies/mL are considered presumptive BKVN. Kidney allograft biopsy is considered the gold standard for diagnosing BKVN. Late diagnosis of BKV can lead to irreversible renal function decline and poor treatment outcomes.

### Kidney transplant market opportunity

An estimated 80,000 kidney transplants are conducted globally each year, with approximately 20,000 in the United States, 20,000 in Europe, 1,500 in Japan, and 10,000 in China. Approximately 225,000 kidney allograft recipients are living in the United States. Waitlists to receive kidneys are long: 3-5 years and 75,000 people deep in the United States. Up to 12% of transplants per year are re-transplants, which further limits organ availability for new patients. Approximately 15% of kidney transplant recipients develop BK viremia. Patients can be risk stratified for BK viremia based on the degree of immunosuppression employed, which is related to the degree of human leukocyte antigen (HLA) match between the graft and recipient; the greater the mismatch, the more intense immunosuppression required, which increases the risk of BKV reactivation.

We estimate the market for a novel agent to treat reactivated BK infection in kidney transplant recipients to be a large commercial opportunity. We believe that MAU868 has the potential to become standard of care for the treatment of reactivated BK infection in order to prevent devastating consequences following kidney transplantation such as BKVN and graft loss.

### Current standard of care for kidney transplant patients with BK viremia

Currently, there is no approved treatment specific to BKV. Upon detection of BK viremia, physicians' first line of defense is to reduce immunosuppression with the goal of restoring CD4+ and CD8+ T cell immunity without causing acute rejection. Initial modification will typically consist of lowering MMF by 50% followed by a reduction in tacrolimus by 50%. If no improvement is observed, use of MMF and tacrolimus will be stopped and dose of prednisone will be increased. Other agents such as intravenous immunoglobulin (IVIG), leflunomide, and cidofovir, are occasionally used-but all have limited data and both leflunomide and cidofovir have serious safety concerns. After development of BKVN, patients have limited options and may continue to receive antivirals or IVIG. Physicians are not satisfied with current treatment options for BKV and highlight that there is a significant unmet need for a viable therapy.

### Emerging therapies in development

Despite the high level of unmet need in treating BK viremia and preventing devastating consequences, there is limited development in the space. There is only one alternate industry-sponsored program in clinical development: Allovir's posoleucel (formerly known as ALVR-105 and Viralym-M), a multi-virus specific T-cell therapy, which is currently being evaluated in a Phase 2 clinical trial. While this approach may have the potential to treat BKV and other opportunistic infections, logistics and distribution are likely to render this approach less feasible than a monoclonal antibody, for instance. Therefore, posoleucel may be reserved for second line of therapy and/or treatment of presumptive BKVN rather than BK viremia.

### Our solution: MAU868 / scientific rationale

MAU868 is a human monoclonal antibody (IgG1/1 isotype subclass) directed against the major viral capsid protein of BKV, VP1, which is essential for binding to and infection of new cells, as shown in Figure 16. MAU868 neutralizes all four serotypes of BKV at sub-nanomolar concentrations and has a high barrier to resistance in vitro (resistant isolates of BKV were not selected in vitro at any of the concentrations of MAU868 investigated). MAU868 is being developed for the treatment of BKV disease in kidney transplant recipients (BKV nephropathy) and being considered for HSCT recipients (BKV-associated hemorrhagic cystitis). MAU868 also has neutralizing activity in vitro against the closely related JC virus, the cause of progressive multifocal leukoencephalopathy.

Figure 16: MAU868 blocks BK virion binding

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![img-8.jpeg](img-8.jpeg)

### *Clinical development of MAU868*

#### *Phase 1*

A first-in-human, randomized, blinded, placebo-controlled, single ascending dose study to assess the safety, tolerability, and pharmacokinetics of MAU868 following IV or SC administration to healthy adult subjects was performed. Administration of up to 100 mg/kg MAU868 IV and 3 mg/kg MAU868 SC were safe and well tolerated. No deaths or serious adverse events were reported, and there were no adverse events that led to the discontinuation of the drug or the study.

#### *Ongoing phase 2*

A Phase 2 randomized, double-blind, placebo-controlled clinical trial designed to assess the safety, tolerability, and efficacy of MAU868 for the treatment of allograft-threatening BKV infection in kidney (or kidney-pancreas) transplant recipients is ongoing. Up to 36 patients with BK viremia will participate in 1 of 3 sequential cohorts. As shown in Figure 17, each cohort was designed to randomize approximately 12 patients (8 to MAU868 and 4 to placebo), for which Cohort 1 (1350 mg IV approximately every 28 days for a total of 4 doses) and Cohort 2 (6750 mg IV on Day 1, 1350 mg IV every 28 days for 3 additional doses) have completed dosing.

The primary objective of the clinical trial is to assess the safety and tolerability of MAU868, with secondary objectives to assess the impact of MAU868 on BKV related outcomes. MAU868 has been shown in an interim analysis of week 12 data from Cohorts 1 and 2 to be well-tolerated and showed a greater proportion of patients with decrease in BK plasma viral load versus placebo.

At ASN 2022, final results from the Phase 2 clinical trial of MAU868 versus placebo showed that MAU868 was well tolerated and demonstrated clinically meaningful reductions in BK antiviral activity through 36 weeks in kidney transplant patients with BK viremia.

**Figure 17: MAU868 phase 2 clinical trial design**

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![img-9.jpeg](img-9.jpeg)

#### *Future clinical trials*

We plan to initiate a Phase 2b or Phase 3 clinical trial.

#### **MAU868 in BKV cystitis among HSCT recipients**

We are exploring development of MAU868 to treat BKV cystitis in HSCT patients. Patients undergoing HSCT are at risk for BKV reactivation due to immunodeficiency; in this setting, BK reactivation and subsequent viruria and viremia can lead to cystitis, including hemorrhagic cystitis. Cystitis is characterized by dysuria, urgency, and/or frequency, while hemorrhagic cystitis indicates the presence of microscopic or gross hematuria. Both BKV cystitis and hemorrhagic cystitis are associated with high patient morbidity and prolonged hospitalization, yet there are no approved treatment options. We believe that MAU868 may represent an important future treatment option for these patients.

#### *Pathophysiology of BK virus reactivation in HSCT*

HSCT patients, particularly those who have received allogeneic transplants, are at high risk of various infectious diseases due to immunodeficiency. During the early post-engraftment period, BKV is a common cause of hemorrhagic cystitis. Patients are at highest risk for BKV cystitis three to six weeks following HSCT. Myeloablative conditioning regimen in the setting of human leukocyte antigen (HLA) mismatch is a particular risk factor for BK reactivation. Viruria occurs in approximately half of allogeneic and less than 10% of autologous HSCT recipients. BK viremia > 10,000 copies/mL has been shown to be predictive of renal and urologic outcomes in HSCT patients.

#### *BKV cystitis disease burden and diagnosis*

Moderate to severe BKV cystitis may occur prior to discharge and prolong hospital stay and/or result in readmission to the hospital if already discharged. Currently HSCT patients are not routinely monitored for BKV reactivation given the lack of treatments available. BKV testing and monitoring is initiated only in patients who become symptomatic and present with cystitis symptoms, which may emerge several weeks or months following engraftment. Patients who are symptomatic would then be monitored for BKV via urine and/or blood testing monthly for six months, and then at longer intervals. BK viruria alone is not concerning unless the viral load is rapidly accelerating; BKV viremia is more concerning and may trigger physicians to actively treat the cystitis symptoms. In our market research, physicians estimate that 15% of allogeneic HSCT patients and approximately 5% of autologous HSCT patients develop BKV cystitis, including hemorrhagic cystitis.

#### *HSCT market opportunity*

The primary addressable patient segment initially is for the treatment of symptomatic BKV cystitis, including hemorrhagic cystitis. Other potential segments may include prophylaxis in high-risk patients and treatment of BK viremia. BK viremia is not currently screened for until symptoms of cystitis occur, but this is likely to change once physicians have an effective treatment available.

An estimated 50,000 allogeneic HSCTs are conducted globally each year, with approximately 10,000 in the United States, 16,000 in Europe, 3,500 in Japan, and 2,500 in China. An estimated 57,000 autologous HSCTs are conducted globally each year, with approximately 17,000 in the United States, 27,000 in Europe, 2,500 in Japan, and 1,800 in China. Approximately 15% of allogeneic recipients and 5% of autologous recipients develop BK cystitis, including hemorrhagic cystitis.

#### *Current standard of care for BKV cystitis in HSCT patients*

Upon diagnosis of BKV-associated cystitis, physicians consider reducing immunosuppression-with initial modification typically consisting of lowering MMF by 50% or modifying the tacrolimus dose. This reduction of immunosuppression must be balanced with

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consideration for increased risk of acute Graft versus Host Disease (GvHD). Antivirals such as low-dose cidofovir and leflunomide as well as IVIG are used in patients whose BKV does not resolve after a reduction of immunosuppression, or in patients where reduction in immunosuppression is viewed as too high risk (i.e., instances of HLA mismatch or prior history of GvHD). However, there is not robust clinical trial evidence supporting use of these agents in this setting. Symptomatic treatments for severe bleeding due to hematuria include red blood cell transfusions, bladder embolization or cystectomy. For HSCT patients, physicians' primary concerns are acute GvHD and cytomegalovirus (CMV) reactivation moreso than BKV, though they continue to view BKV cystitis as an area of high unmet need.

### ***Emerging therapies in development***

There is limited clinical development of new agents targeting BKV in the HSCT setting. Allovir's posoleucel (formerly known as ALVR-105 and Viralym-M), a multi-virus specific T-cell therapy, is currently in a Phase 3 clinical trial for the treatment of virus-associated hemorrhagic cystitis. This therapy has the potential to treat six viral pathogens: BKV, CMV, adenovirus, Epstein-Barr virus, human herpesvirus 6 and JC virus, and therefore may have utility when physicians are concerned about multiple viral reactivations. Posoleucel is also in two Phase 2 clinical trials: one in kidney transplant recipients with BK viremia and another in multi-virus prevention following allogeneic HSCT.

We believe that MAU868 may represent an important future treatment option for HSCT patients with BKV cystitis and that its relative ease of distribution and administration may provide a competitive advantage over other emerging therapies.

### **Exclusive license agreement with Ares Trading S.A.**

On October 29, 2020, we entered into the Ares Agreement with Ares, an affiliate of Merck KGaA, Darmstadt, Germany, pursuant to which Ares granted us an exclusive worldwide license to certain patents and related know-how to research, develop, manufacture, use and commercialize therapeutic products containing atacicept or any other compound that is covered by a claim of such licensed patents. Pursuant to the Ares Agreement, Ares also transferred inventory of licensed product to us for use in our clinical development of atacicept.

Per the Ares Agreement, we have obligations to use commercially reasonable efforts to develop at least one licensed product, to launch at least one licensed product in a major market country within a specified time frame after receiving marketing approval for such product and to maintain sufficient resources to manufacture and supply licensed products to meet the market demand in each country for which a licensed product has received marketing approval.

In consideration for the rights granted under the Ares Agreement, we issued 22,171,553 shares of our Series C redeemable convertible preferred stock to Ares at the time of the initial closing of our Series C redeemable convertible preferred stock financing in October 2020, representing ownership of approximately 10% on a fully diluted basis. As additional consideration under the Ares Agreement, we paid Ares $25.0 million upon delivery and initiation of the transfer of specified information and supply of drug product and drug substance and we are required to pay Ares aggregate milestone payments of up to $176.5 million upon the achievement of specified BLA filing or regulatory approvals in the United States, Europe and Japan (the first of which consists of a $15.0 million payment upon filing of the BLA), and aggregate milestone payments of up to $515.0 million upon the achievement of specified commercial milestones. Commencing on the first commercial sale of licensed products, we are obligated to pay tiered royalties of low double-digit to mid-teen percentages on annual net sales of the products covered by the license. Our obligation to pay royalties will expire on a licensed product-by-licensed product and country-by-country basis until the latest of (i) 15 years after the first commercial sale of such licensed product in such country; (ii) the expiration of the last valid claim of a licensed patent that covers such licensed product in, or its use, importation or manufacture with respect to, such country; and (iii) expiration of all applicable regulatory exclusivity periods in such country with respect to such licensed product. In the event we sublicense our rights under the Ares Agreement, we are obligated to pay Ares a percentage ranging from the mid single-digit to the low double-digits of specified sublicensing income received.

The term of the Ares Agreement will expire on a licensed product-by-licensed product and country-by-country basis upon the expiration of our obligation to pay royalties to Ares with respect to such licensed product in such country. We have the right to terminate the Ares Agreement at will upon a specified notice period, provided that such termination is not within two years of the effective date of the Ares Agreement. Ares has the right to terminate the Ares Agreement in the event we challenge the validity of the licensed patents. Additionally, either party can terminate the Ares Agreement for the other party's uncured material breach or bankruptcy.

### **Asset purchase agreement with Amplyx and exclusive license with Novartis**

On December 16, 2021, we entered into an asset purchase agreement (the Amplyx Agreement) with Amplyx, a wholly-owned subsidiary of Pfizer.

Pursuant to the terms of the Amplyx Agreement, we acquired all of Amplyx's right, title and interest in and to certain assets of Amplyx related to MAU868, a monoclonal antibody that was under development by Amplyx for the treatment of BKV infections (the Purchased Assets). The Purchased Assets include an investigational new drug application filed with the U.S. Food and Drug

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Administration, patents, contracts, including the Novartis License, chemical and biological materials, and development and regulatory files, documentation, data, results and other electronic records related to MAU868. We also assumed certain liabilities of Amplyx arising out of the Purchased Assets. We and Amplyx have made customary representations and warranties and agreed to customary covenants in the Amplyx Agreement. Subject to certain limitations, each of we and Amplyx has also agreed to indemnify the other for breaches of representations and warranties and other specified matters.

In partial consideration for the Asset Acquisition, we made an upfront initial payment of $5.0 million to Amplyx. In addition, we are also obligated to make certain milestone payments to Amplyx in an aggregate amount of up to $7.0 million based on certain regulatory milestones. Further, we are required to pay Amplyx low single digit percentage royalties based on net sales on a country-by-country and product-by-product basis.

MAU868 is subject to the Novartis License, which was assigned to us by Amplyx. Pursuant to the terms of the Novartis License, we obtained a worldwide, exclusive license from Novartis to develop, manufacture and commercialize MAU868, subject to certain retained rights for research and development by Novartis, provided that Novartis may not develop or sell products incorporating monoclonal antibody targeting BKV and treating BKV disease within a certain period. We will be solely responsible for all research, development, regulatory, manufacturing and commercialization activities of MAU868. Pursuant to the Novartis License, we are obligated to make certain milestone payments to Novartis in an aggregate amount of up to $69.0 million based on certain clinical development, regulatory and sales milestones. Further, we are required to pay Novartis mid- to high-single digit percentage royalties based on net sales on a country-by-country and product-by-product basis. Unless terminated earlier, the Novartis License will remain in effect with respect to each MAU868 product until the expiration of the royalty term for such product. We may terminate the Novartis License for convenience with 60 days' prior written notice. We or Novartis may terminate the Novartis License for the other party's uncured material breach. Novartis may terminate the Novartis License for our insolvency. Upon termination, any license granted by Novartis to us will terminate.

## Intellectual property

Our success depends in part upon our ability to protect our core technology and intellectual property. To protect our intellectual property rights, we rely on patents, trademarks, copyrights and trade secret laws, confidentiality procedures, and employee disclosure and invention assignment agreements. Our intellectual property is critical to our business and we strive to protect it through a variety of approaches, including by obtaining and maintaining patent protection in the United States and internationally for our product candidate, and other inventions that are important to our business. For our product candidates, we generally intend to pursue patent protection covering compositions of matter, including new formulations, methods of making and methods of use. As we continue the development of our product candidates, we intend to identify additional means of obtaining patent protection that would potentially enhance commercial success, including through claims covering additional methods of use.

As of December 31, 2022, we have licensed, including pursuant to sublicenses, from Ares, an affiliate of Merck KGaA, Darmstadt, Germany, a patent portfolio related to atacicept that contains approximately seven issued U.S. patents, as well as certain foreign counterparts of a subset of these patents in foreign countries, including Australia, Brazil, Canada, China, Hong Kong, Israel, India, Japan, Mexico, Singapore, South Korea, South Africa, and countries within the European Patent Convention and the Eurasian Patent Organization. The issued patents include claims covering methods of purifying atacicept, formulations and various methods of treatment, and are expected to expire between 2027 and 2029, without considering any patent term extension.

There is also a pending U.S. application as well as certain foreign counterparts directed to treatment of IgAN and proteinuria. Patents that issue in this family are expected to expire in 2041.

Because atacicept is a biologic, marketing approval would also provide 12 years of market exclusivity from the approval date of a BLA in the United States. We are currently seeking orphan drug designation for atacicept in IgAN from the FDA and EMA, which, if secured, would provide seven and ten years, in the United States and European Union, respectively, of regulatory exclusivity protection from the approval date.

As of December 31, 2022, our patent portfolio licensed from Novartis and covering MAU868 includes three issued U.S. patents with claims covering the composition of matter of MAU868, and methods of neutralizing BKV or JC virus as well as methods of treating or reducing the likelihood of BKV or JC virus associated disorders. The U.S. patents are expected to expire in 2036. Corresponding foreign counterparts are granted in Australia, China, Japan, Mexico, Macau and Taiwan, and pending in other jurisdictions such as Canada, Mexico, Europe, Israel and Japan. The foreign patents are expected to expire in 2036.

In addition, an application co-owned with and licensed from Novartis that is directed to dosing regimens for MAU868 is pending as a U.S. application as well as certain foreign counterparts. Patents that issue in this family are expected to expire in 2041.

In addition to patents, we may rely upon unpatented trade secrets and know-how and continuing technological innovation to develop and maintain our competitive position. However, trade secrets and know-how can be difficult to protect. We seek to protect our proprietary information, in part, by executing confidentiality agreements with our collaborators and scientific advisors, and non-solicitation, confidentiality, and invention assignment agreements with our employees and consultants. We have also executed agreements requiring assignment of inventions with selected scientific advisors and collaborators. The confidentiality agreements we

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enter into are designed to protect our proprietary information and the agreements or clauses requiring assignment of inventions to us are designed to grant us ownership of technologies that are developed through our relationship with the respective counterparty. We cannot guarantee, however, that we have executed such agreements with all applicable counterparties, such agreements will not be breached, or that these agreements will afford us adequate protection of our intellectual property and proprietary rights. For more information, see “Risk factors-Risks related to our intellectual property.”

Furthermore, we seek trademark protection in the United States and internationally where available and when we deem appropriate.

## Manufacturing and supply

We manage a number of external CMOs to develop and manufacture our product candidates.

Atacicept is a fully humanized fusion protein that impacts the B-cell pathway, which has well characterized implications in immunologic diseases. The human IgG1-Fc was modified to reduce the Fc binding to the C1q component of complement and the interaction with Fc receptors.

Atacicept is manufactured following cGMPs using a process that is similar to that used routinely for production of monoclonal antibodies.

The atacicept drug product is available as a ready-to-use injection solution in a prefilled syringe (PFS) at strengths of 25 mg/mL, 75 mg/mL, or 150 mg/mL of trial drug. Each atacicept PFS is designed to deliver a 1 mL solution of drug product. All formulation components are pharmacopeia grade. An atacicept prefilled syringe/autoinjector combination is in late-stage development and will be introduced into future clinical trials when appropriate.

The Ares Agreement includes the transfer of all existing inventory of atacicept drug substance and drug product, for our use in planned and future clinical trials.

We acquired approximately 35,000 PFS of atacicept, representing all three strengths, 25 mg, 75 mg and 150 mg, of atacicept and approximately 25,000 PFS of placebo, as part of the Ares Agreement. This drug product was used to initiate the Phase 2b ORIGIN trial. Additionally, we acquired 6 kg of atacicept drug substance which has subsequently been converted into drug product to supply both the ongoing Phase 2b ORIGIN trial and to support our future clinical trials through the first quarter of 2026.

MAU868 is an IgG1 monoclonal antibody that binds to BKV protein VP1. It is manufactured according to cGMP using a high expression CHO cell and a standard antibody manufacturing process that is completely free from animal or human derived raw materials. The MAU868 manufacturing supply chain is fully established using contract manufacturing organizations with contracts that are assignable to Vera Therapeutics

The fully formulated MAU868 drug product is provided as a 3 mL fill in a 6 mL vial which can be combined with multiple vials to prepare infusions at different dosage strengths for use in clinical trials. The drug product formulation is composed of MAU868 as the active substance, a buffering agent, and both a sugar and a surfactant as stabilizing agents.

The Amplyx Agreement includes the transfer of all existing inventory and work-in-process of MAU868 drug product for use in clinical trials. This includes 2,777 unlabeled vials and work-in-process expected to yield approximately 5,300 vials with release targeted for March 2022. These materials will support both the completion of the ongoing Phase 2 clinical trial and initiation of a future clinical trial.

## Commercialization plans

### Atacicept

We estimate the market opportunity for novel therapeutics in IgAN across the United States, Europe and Japan to be approximately $5.6 billion to $9.6 billion annually, based on our assumptions, secondary research, and primary market research with physicians and payors. In order to capitalize on this opportunity, we plan to build a specialty commercial infrastructure focused on IgAN, engaging treating physicians, including nephrologists, educating and engaging patients, and ensuring market access for patients.

For novel therapeutics in LN, we estimate the market opportunity across the United States, Europe and Japan to be $2.8 billion to $5.8 billion annually, based on a similar methodology. If we receive regulatory approval for atacicept in both IgAN and LN, we plan to assess call point overlap for the two indications and selectively build out our future commercial infrastructure to address any gaps to optimize our coverage of LN treating physicians. We also plan to build out LN-specific patient and market access programs, leveraging synergies where possible.

Through the Ares Agreement, we were granted worldwide rights to the development and commercialization of atacicept in all indications. We intend to commercialize atacicept ourselves in the United States and other key markets, if approved. Within certain ex-U.S. markets, we may consider strategic collaborations to facilitate commercialization.

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## **MAU868**

We plan to develop MAU868 for the treatment of BK viremia in kidney transplant as an initial indication, which has strong commercial synergies with our plans for atacicept. We believe that the prescribing physicians for MAU868 in renal transplant, if approved, will be a subset of the IgAN treating physicians, and plan to conduct an assessment of call point overlap. The launch of this indication, if prior to the atacicept launch, would require a smaller specialty commercial infrastructure build focused on educating and engaging treating physicians, including transplant nephrologists, partnering with kidney transplant organizations, and ensuring market access for patients. If prior to the atacicept launch, we would plan to leverage this infrastructure for eventual atacicept sales and marketing activities.

Through the Amplyx Agreement, we obtained worldwide rights to the development and commercialization of MAU868 in all indications.

Similar to our plans with atacicept, we intend to commercialize MAU868 ourselves in the United States and other key markets, if approved.

We also may consider strategic collaborations to facilitate commercialization in certain ex-U.S. markets.

## **Competition**

The biotechnology and pharmaceutical industries are characterized by rapidly changing technologies, significant competition and a strong emphasis on intellectual property. This is also true for the development and commercialization of treatments for immunologic diseases. Though we believe that our focus, experienced team, scientific knowledge, and intellectual property provide us with competitive advantages, we face competition from a number of sources, including large and small biopharmaceutical companies, universities, and other research institutions.

Many of our competitors have significantly greater financial, technical, human and other resources than we do and may be better equipped to develop, manufacture and market technologically superior products. In addition, many of these competitors have significantly greater experience than we have in undertaking nonclinical studies and human clinical trials of new pharmaceutical products and in obtaining regulatory approvals of human therapeutic products. Accordingly, our competitors may succeed in obtaining FDA approval for superior products. Many of our competitors have established distribution channels for the commercialization of their products, whereas we have no such channel or capabilities. In addition, many competitors have greater name recognition and more extensive collaborative relationships. 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.

Our competitors may obtain regulatory approval of their products more rapidly than we do or may obtain patent protection or other intellectual property rights that limit our ability to develop or commercialize our product candidates or any future product candidates. Our competitors may also develop drugs that are more effective, more convenient, more widely used and less costly or have a better safety profile than our products and these competitors may also be more successful than we are in manufacturing and marketing their products. If we are unable to compete effectively against these companies, then we may not be able to commercialize our product candidates or any future product candidates or achieve a competitive position in the market. This would adversely affect our ability to generate revenue. Our competitors also compete with us in recruiting and retaining qualified scientific, management and commercial personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

## ***Atacicept in IgAN***

Despite a high level of morbidity for IgAN, the current standard of care consists of off-label use of RAAS inhibitors, including ACE inhibitors and ARBs, and potentially steroids. Atacicept, if and when approved and successfully commercialized, may compete with these existing approaches and with any new therapies that may become available in the future. Sodium-glucose cotransporter-2 (SGLT2) inhibitors, including AstraZeneca plc's (AstraZeneca) Farxiga, which is approved for chronic kidney disease, is becoming the standard-of-care in some geographies including the United States. Among emerging therapies, we consider our most direct competitors with respect to atacicept in IgAN to be approved products: the reformulated steroid from Calliditas Therapeutics AB, and endothelin and angiotensin II receptor antagonist from Travere Therapeutics, Inc.; programs in Phase 3 clinical development: Visterra Inc., Otsuka Pharmaceutical Co., Ltd., Novartis, Omeros Corporation, Alnylam Pharmaceuticals Inc., and Chinook Therapeutics Inc.; and the following companies with programs in Phase 2 of clinical development: Chinook Therapeutics Inc., Reata Pharmaceuticals, Inc., RemeGen Co., Ltd., Ionis Pharmaceuticals, Inc., AstraZeneca, and DiaMedica Therapeutics, Inc.

## ***Atacicept in LN***

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In LN, prior to December 2020, there had been no approved therapies, and the standard-of-care has consisted of a number of non-specific therapies, including MMF, steroids, CYC, rituximab, calcineurin inhibitors, AZA, and HCQ, dependent on class of disease and whether a patient was cycling through the induction or maintenance phase of therapy. Paradigms are evolving with the FDA approvals of GlaxoSmithKline plc's Benlysta (belimumab) and Aurinia Pharmaceuticals Inc.'s Lupkynis (voclosporin), both of which we consider to be direct competitors. Our competitors include: Roche Holding AG and Novartis Pharmaceuticals Corporation, each of which have programs in Phase 3 clinical development; and BeiGene Ltd., Janssen Pharmaceuticals, Inc., AstraZeneca, Alexion Pharmaceuticals Inc. (Alexion), Omeros Corporation, Kezar Life Science Inc., Bristol Myers Squibb, Boehringer, and Novartis Pharmaceuticals Corporation, each of which have programs in Phase 2 clinical development.

#### **MAU868**

There are currently no anti-BKV therapies approved, either in the kidney transplant or HSCT setting. The standard of care in both settings is to reduce immunosuppression as a first line, and potentially to offer IVIG in kidney transplant recipients or antivirals with limited clinical evidence, including leflunomide and cidofovir, in either setting. There are few industry-sponsored programs in development for these indications; we consider our most direct competitor to be Allovir's multi-virus specific T-cell therapy, posoleucel, which is in a Phase 2 clinical trial for BK viremia in kidney transplant recipients, a Phase 3 clinical trial for treatment of virus-associated cystitis, and a Phase 2 clinical trial in multi-virus prevention following allogeneic HSCT.

#### **Government regulation**

Government authorities in the United States at the federal, state and local level and in other countries and jurisdictions, including the European Union, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of drug and biological products, such as our investigational medicines and any future investigational medicines. Generally, before a new drug or biologic can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific for each regulatory authority, submitted for review and approved by the regulatory authority.

#### **Regulatory approval in the United States**

In the United States, pharmaceutical products are subject to extensive regulation by the FDA. The Federal Food, Drug and Cosmetic Act (FDCA), and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products. Biological products used for the prevention, treatment or cure of a disease or condition of a human being are subject to regulation under the FDCA, except the section of the FDCA that governs the approval of a new drug application (NDA). Biological products are approved, or licensed, for marketing under provisions of the Public Health Service Act (PHSA) via a BLA. The application process and requirements for approval of BLAs for originator biological products are similar to those for NDAs for new chemical entities, and biologics are associated with similar approval risks and costs as drugs. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as clinical hold, FDA refusal to approve pending NDAs or BLAs, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, and criminal prosecution.

Our investigational medicines and any future investigational medicines must be approved by the FDA pursuant to a BLA before they may be legally marketed in the United States. The process generally involves the following:

- completion of extensive preclinical laboratory and animal studies in accordance with applicable regulations, including studies conducted in accordance with good laboratory practices (GLP) requirements;
- submission to the FDA of an Investigational New Drug Application (IND), which must become effective before human clinical trials may begin;
- approval of the protocol and related documents by an IRB or independent ethics committee at each clinical trial site before each clinical trial may be commenced;
- performance of adequate and well controlled human clinical trials in accordance with applicable IND regulations, GCP requirements and other clinical trial-related regulations to establish the safety and efficacy of the investigational product for each proposed indication;
- preparation of and submission to the FDA of a BLA for marketing approval that includes sufficient evidence of establishing the safety, purity, and potency of the proposed biological product for its intended indication, including from results of nonclinical testing and clinical trials;
- payment of any user fees for FDA review of the BLA;

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- • a determination by the FDA within 60 days of its receipt of a BLA to accept the filing for review;
- • satisfactory completion of one or more FDA pre-approval inspections of the manufacturing facility or facilities where the biologic, or components thereof, will be produced to assess compliance with current cGMP requirements to assure that the facilities, methods and controls are adequate to preserve the biologic's identity, strength, quality and purity;
- • satisfactory completion of any potential FDA audits of the clinical trial sites that generated the data in support of the BLA to assure compliance with GCPs and integrity of the clinical data;
- • potential FDA audit of the nonclinical study and clinical trial sites that generated the data in support of the BLA;
- • FDA review and approval of the BLA, including consideration of the views of any FDA advisory committee; and
- • compliance with any post-approval requirements, including a REMS, where applicable, and post-approval studies required by the FDA as a condition of approval.

The preclinical and clinical testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for our product candidates will be granted on a timely basis, or at all.

### *Preclinical studies*

Before testing any biological product candidates in humans, the product candidate must undergo rigorous preclinical testing. Preclinical studies include laboratory evaluation of product chemistry and formulation, as well as in vitro and animal studies to assess the potential for adverse events and in some cases to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations for safety/toxicology studies.

Prior to beginning the first clinical trial with a product candidate in the United States, an IND must be submitted to the FDA and the FDA must allow the IND to proceed. An IND is an exemption from the FDCA that allows an unapproved product candidate to be shipped in interstate commerce for use in an investigational clinical trial and a request for FDA allowance that such investigational product may be administered to humans in connection with such trial. Such authorization must be secured prior to interstate shipment and administration. In support of a request for an IND, applicants must submit a protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. An IND sponsor must also submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among other things, to the FDA as part of an IND. Some long-term preclinical testing may continue after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials and places the trial on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.

### *Clinical trials*

The clinical stage of development involves the administration of the investigational product to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor's control. Clinical trials must be conducted: (i) in compliance with federal regulations; (ii) in compliance with GCPs, an international standard meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators and monitors; as well as (iii) under protocols detailing, among other things, the objectives of the trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated in the trial. Each protocol involving testing on U.S. patients and subsequent protocol amendments must be submitted to the FDA as part of the IND.

Furthermore, each clinical trial must be reviewed and approved by an IRB for each institution at which the clinical trial will be conducted to ensure that the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed. An IRB must operate in compliance with FDA regulations. An IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is not being conducted in accordance with the IRB's requirements or if the product candidate has been associated with unexpected serious harm to patients.

Some trials are overseen by an independent group of qualified experts organized by the trial sponsor, known as a data safety monitoring board or committee (DSMB). This group provides authorization as to whether or not a trial may move forward at designated check points based on access that only the group maintains to available data from the study.

There also are requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries. Information about certain clinical trials, including clinical trial results, must be submitted within specific timeframes for publication on the www.clinicaltrials.gov website. Information related to the product, patient population, phase of investigation, clinical

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trial sites and investigators and other aspects of the clinical trial is then made public as part of the registration. Disclosure of the results of these clinical trials can be delayed in certain circumstances for up to two years after the date of completion of the trial.

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

Clinical trials are generally conducted in three sequential phases, known as Phase 1, Phase 2 and Phase 3:

- Phase 1 clinical trials generally involve a small number of healthy volunteers or disease-affected patients who are initially exposed to a single dose and then multiple doses of the product candidate. The primary purpose of these clinical trials is to assess the metabolism, pharmacokinetics, pharmacologic action, side effect tolerability, safety of the product candidate, and, if possible, early evidence of effectiveness.
- Phase 2 clinical trials generally involve studies in disease-affected patients to evaluate proof of concept and/or determine the dosing regimen(s) for subsequent investigations. At the same time, safety and further pharmacokinetic and pharmacodynamic information is collected, possible adverse effects and safety risks are identified, and a preliminary evaluation of efficacy is conducted.
- Phase 3 clinical trials generally involve a large number of patients at multiple sites and are designed to provide the data necessary to demonstrate the effectiveness of the product for its intended use, its safety in use and to establish the overall benefit/risk relationship of the product and provide an adequate basis for product labeling. In most cases, the FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the efficacy of the biologic.

These Phases may overlap or be combined. For example, a Phase 1/2 clinical trial may contain both a dose-escalation stage and a dose-expansion stage, the latter of which may confirm tolerability at the recommended dose for expansion in future clinical trials.

A single Phase 3 or Phase 2 trial with other confirmatory evidence may be sufficient in rare instances to provide substantial evidence of effectiveness (generally subject to the requirement of additional post-approval studies).

In some cases, FDA may require, or firms may voluntary pursue, post-approval clinical trials, sometimes referred to as Phase 4 clinical trials, after initial marketing approval. These clinical trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up.

During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, and clinical trial investigators. Annual progress reports detailing the results of the clinical trials must be submitted to the FDA. Written IND safety reports must be promptly submitted to the FDA and the investigators for serious and unexpected adverse events, any findings from other studies, tests in laboratory animals or in vitro testing that suggest a significant risk for human subjects, or any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendar days after the sponsor determines that the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within seven calendar days after the sponsor's initial receipt of the information.

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

Concurrent with clinical trials, companies usually complete additional animal studies and also must develop additional information about the chemistry and physical characteristics of the drug or biologic as well as 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 and, among other things, companies must develop methods for testing the identity, strength, quality, potency and purity of the final product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the investigational medicines do not undergo unacceptable deterioration over their shelf life.

#### *FDA review processes*

Following completion of the clinical trials, the results of preclinical studies and clinical trials are submitted to the FDA as part of a BLA, along with proposed labeling, chemistry and manufacturing information to ensure product quality and other relevant data. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the investigational product to the satisfaction of the FDA. FDA approval of a BLA must be obtained before a biologic or drug may be marketed in the United States.

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The cost of preparing and submitting a BLA is substantial. Under the Prescription Drug User Fee Act (PDUFA), each BLA must be accompanied by a substantial user fee. The FDA adjusts the PDUFA user fees on an annual basis. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business. Additionally, no user fees are assessed on BLAs for products designated as orphan drugs, unless the product also includes a non-orphan indication. The applicant under an approved BLA is also subject to an annual program fee.

Within 60 days following submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete before the FDA accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and may request additional information. In this event, the BLA must be resubmitted with the additional information. The resubmitted application also is subject to review to determine if it is substantially complete before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth review of the BLA. The FDA reviews the BLA to determine, among other things, whether the proposed product is safe, pure and potent, for its intended use, and whether the product is being manufactured in accordance with cGMP to ensure its continued safety, purity and potency.

Under the goals and policies agreed to by the FDA under PDUFA, the FDA has 10 months, from the filing date, in which to complete its initial review of an original BLA for a new molecular entity and respond to the applicant, and six months from the filing date of an original BLA designated for priority review. The review process for both standard and priority review may be extended by the FDA for three additional months to consider certain late-submitted information, or information intended to clarify information already provided in the submission. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs, and the review process can be extended by FDA requests for additional information or clarification.

Before approving a BLA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether they comply with cGMP requirements. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications.

The FDA also may audit data from clinical trials to ensure compliance with GCP requirements and the integrity of the data supporting safety and efficacy. Additionally, the FDA may refer applications for novel products or products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions, if any. The FDA is not bound by recommendations of an advisory committee, but it generally follows such recommendations when making decisions on approval. The FDA likely will reanalyze the clinical trial data, which could result in extensive discussions between the FDA and the applicant during the review process.

After the FDA evaluates a BLA, it will issue either an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the biologic with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application will not be approved in its present form. A Complete Response Letter generally outlines the deficiencies in the BLA and may require additional clinical data, additional pivotal clinical trial(s) and/or other significant and time-consuming requirements related to clinical trials, preclinical studies or manufacturing in order for FDA to reconsider the application. If a Complete Response Letter is issued, the applicant may either resubmit the BLA, addressing all of the deficiencies identified in the letter, or withdraw the application or request an opportunity for a hearing. The FDA has committed to reviewing such resubmissions in two or six months, depending on the type of information included. Even if such data and information are submitted, the FDA may decide that the BLA does not satisfy the criteria for approval.

If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, including to subpopulations of patients, which could restrict the commercial value of the product. Furthermore, as a condition of BLA approval, the FDA may require a REMS to help ensure that the benefits of the biologic outweigh the potential risks to patients. A REMS can include medication guides, communication plans for healthcare professionals and elements to assure a product's safe use (ETASU). An ETASU can include, but is not limited to, special training or certification for prescribing or dispensing the product, dispensing the product only under certain circumstances, special monitoring and the use of patient-specific registries. The requirement for a REMS can materially affect the potential market and profitability of the product. Moreover, the FDA may require substantial post-approval testing and surveillance to monitor the product's safety or efficacy.

### ***Orphan drug designation***

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biological product intended to treat a rare disease or condition, which is generally 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 but for which there is no reasonable expectation that the cost of developing and making the product for this type of disease or condition will be recovered from sales of the product in the United States.

Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation on its own does not convey any advantage in or shorten the duration of the regulatory review and approval process.

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If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications to market the same product for the same indication for seven years from the date of such approval, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity by means of greater effectiveness, greater safety, or providing a major contribution to patient care, or in instances of drug supply issues. 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. Orphan drug exclusivity may be lost if the FDA later determines that the request for designation was materially defective. Further, competitors may receive approval of either a different product for the same indication or the same product for a different indication. In the latter case, because healthcare professionals are free to prescribe products for off-label uses, the competitor's product could be used for the orphan indication despite another product's orphan exclusivity.

### *Expedited development and review programs*

The FDA is authorized to designate certain products for expedited review if they are intended to address an unmet medical need in the treatment of a serious or life-threatening disease or condition.

Fast track designation may be granted for products that are intended to treat a serious or life-threatening disease or condition for which there is no effective treatment and preclinical or clinical data demonstrate the potential to address unmet medical needs for the condition. Fast track designation applies to both the product and the specific indication for which it is being studied. The sponsor of a new biologic candidate can request the FDA to designate the candidate for a specific indication for fast track status concurrent with, or after, the submission of the IND for the candidate. The FDA must determine if the biologic candidate qualifies for fast track designation within 60 days of receipt of the sponsor's request. For fast track products, sponsors may have greater interactions with the FDA and the FDA may initiate review of sections of a fast track product's BLA before the application is complete. This 'rolling review' is available if the FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a fast track product may be effective. The sponsor must also provide, and the FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay applicable user fees. Any product submitted to the FDA for marketing, including under a fast track program, may be eligible for other types of FDA programs intended to expedite development and review, such as priority review and accelerated approval.

Breakthrough therapy designation may be granted for products that are intended, alone or in combination with one or more other products, to treat a serious or life-threatening condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over currently approved therapies on one or more clinically significant endpoints. Under the breakthrough therapy program, the sponsor of a new biologic candidate may request that the FDA designate the candidate for a specific indication as a breakthrough therapy concurrent with, or after, the submission of the IND for the biologic candidate. The FDA must determine if the biological product qualifies for breakthrough therapy designation within 60 days of receipt of the sponsor's request. The FDA may take certain actions with respect to breakthrough therapies, including holding meetings with the sponsor throughout the development process, providing timely advice to the product sponsor regarding development and approval, involving more senior staff in the review process, assigning a cross-disciplinary project lead for the review team and taking other steps to design the clinical trials in an efficient manner.

Priority review may be granted for products that are intended to treat a serious or life-threatening condition and, if approved, would provide a significant improvement in safety and effectiveness compared to available therapies. The FDA will attempt to direct additional resources to the evaluation of an application designated for priority review in an effort to facilitate the review. Under priority review, the FDA's goal is to review an application in six months once it is filed, compared to ten months for a standard review. Priority review designation does not change the standard for approval or the quality of evidence necessary to support approval.

Accelerated approval may be granted for products that are intended to treat a serious or life-threatening condition and that generally provide a meaningful therapeutic advantage to patients over existing treatments. A product eligible for accelerated approval may be approved on the basis of either a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. In clinical trials, a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes for a direct measurement of how a patient feels, functions or survives. The accelerated approval pathway is most often used in settings in which the course of a disease is long, and an extended period of time is required to measure the intended clinical benefit of a product, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. Use of the accelerated approval pathway entails submission of a BLA with the surrogate or intermediate clinical endpoint data while continuing to conduct the trial(s) to completion and is contingent on a sponsor's agreement to complete and/or conduct additional post-approval confirmatory studies to verify and describe the product's clinical benefit. These confirmatory trials must be completed with due diligence and, in some cases, the FDA may require that the trial be designed, initiated and/or fully enrolled prior to approval. Failure to conduct required post-approval studies, or to confirm a clinical benefit during post-marketing studies, would allow the FDA to withdraw the product from the market on an expedited basis. All promotional materials for product candidates approved under accelerated regulations are subject to prior review by the FDA.

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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 the time period for FDA review or approval may not be shortened. Furthermore, fast track designation, breakthrough therapy designation, priority review and accelerated approval do not change the standards for approval, but may expedite the development or approval process.

### ***Additional controls for biologics***

To help reduce the increased risk of the introduction of adventitious agents, the PHSA emphasizes the importance of manufacturing controls for products whose attributes cannot be precisely defined. The PHSA also provides authority to the FDA to immediately suspend licenses in situations where there exists a danger to public health, to prepare or procure products in the event of shortages and critical public health needs, and to authorize the creation and enforcement of regulations to prevent the introduction or spread of communicable diseases in the United States and between states.

After a BLA is approved, the product may also be subject to official lot release as a condition of approval. As part of the manufacturing process, the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution. If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to the FDA together with a release protocol showing a summary of the history of manufacture of the lot and the results of all of the manufacturer's tests performed on the lot. The FDA may also perform certain confirmatory tests on lots of some products, such as viral vaccines, before releasing the lots for distribution by the manufacturer. In addition, the FDA conducts laboratory research related to the regulatory standards on the safety, purity, potency and effectiveness of biological products. As with drugs, after approval of biologics, manufacturers must address any safety issues that arise, are subject to recalls or a halt in manufacturing, and are subject to periodic inspection after approval.

### ***Combination products***

A combination product is a product comprised of two or more regulated components, e.g., drug and medical device, that are physically combined and produced as a single entity, packaged together in a single package, or packaged separately but intended to be labeled for use together. Atacicept in a prefilled autoinjector would be such a combination of therapeutic and delivery device.

FDA is divided into various branches, or Centers, by product type. Different Centers typically review drug, biologic, or device applications. In order to review an application for a combination product, FDA must decide which Center should be responsible for the review. FDA regulations require that FDA determine the combination product's primary mode of action, or PMOA, which is the single mode of a combination product that provides the most important therapeutic action of the combination product. The Center that regulates that portion of the product that generates the PMOA becomes the lead evaluator. If there are two independent modes of action, neither of which is subordinate to the other, FDA makes a determination as to which Center to assign the product based on consistency with other combination products raising similar types of safety and effectiveness questions or to the Center with the most expertise in evaluating the most significant safety and effectiveness questions raised by the combination product. When evaluating an application, a lead Center may consult other Centers but still retain complete reviewing authority, or it may collaborate with another Center, by which the Center assigns review of a specific section of the application to another Center, delegating its review authority for that section. Typically, FDA requires a single marketing application submitted to the Center selected to be the lead evaluator, although the agency has the discretion to require separate applications to more than one Center. We believe that our prefilled autoinjector would have a biologic PMOA.

### ***Pediatric information***

Under the Pediatric Research Equity Act (PREA), BLAs or supplements to BLAs must contain data to assess the safety and effectiveness of the biological product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the biological product is safe and effective. The FDA may grant full or partial waivers, or deferrals, for submission of data. Unless otherwise required by regulation, PREA generally does not apply to any biological product for an indication for which orphan designation has been granted.

The Best Pharmaceuticals for Children Act (BPCA) provides a six-month extension of any exclusivity-patent or non-patent-for a biologic if certain conditions are met. Conditions for exclusivity include the FDA's determination that information relating to the use of a new biologic in the pediatric population may produce health benefits in that population, FDA making a written request for pediatric studies, and the applicant agreeing to perform, and reporting on, the requested studies within the statutory timeframe. Applications under the BPCA are treated as priority applications, with all of the benefits that designation confers.

### ***Post-approval requirements***

Once a BLA is approved, a product will be subject to certain post-approval requirements. For instance, the FDA closely regulates the post-approval marketing and promotion of biologics, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the Internet. Biologics may be marketed only for the approved indications and in a manner consistent with the provisions of the approved labeling. Although

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physicians may prescribe products for off-label uses as the FDA and other regulatory agencies do not regulate a physician's choice of drug treatment made in the physician's independent medical judgment, they do restrict promotional communications from companies or their sales force with respect to off-label uses of products for which marketing clearance has not been issued. Companies may only share truthful and not misleading information that is otherwise consistent with a product's FDA approved labeling.

Adverse event reporting and submission of periodic safety summary reports is required following FDA approval of a BLA. The FDA also may require post-marketing testing, known as Phase 4 testing, REMS, and surveillance to monitor the effects of an approved product, or the FDA may place conditions on an approval that could restrict the distribution or use of the product. In addition, quality control, biological product manufacture, packaging and labeling procedures must continue to conform to cGMPs after approval. Biologic manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state agencies. Registration with the FDA subjects entities to periodic unannounced inspections by the FDA, during which the agency inspects a biologic product's manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money and effort in the areas of production and quality-control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with required regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered.

Once an approval is granted, the FDA may withdraw the 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 studies or clinical trials to assess new safety risks or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:

- restrictions on the marketing or manufacturing of the product, suspension of the approval, complete withdrawal of the product from the market or product recalls;
- fines, warning or other enforcement-related letters or holds on post-approval clinical trials;
- refusal of the FDA to approve pending BLAs or supplements to approved BLAs, or suspension or revocation of product license approvals;
- product seizure or detention, or refusal to permit the import or export of products; or
- injunctions or the imposition of civil or criminal penalties.

### *U.S. marketing exclusivity*

The BPCIA created an abbreviated approval pathway for biological products shown to be biosimilar to, or interchangeable with, an FDA-licensed reference biological product. Biosimilarity, which requires that the biological product be highly similar to the reference product notwithstanding minor differences in clinically inactive components and that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity and potency, can be shown through analytical studies, animal studies and a clinical trial or trials. Interchangeability requires that a biological product be biosimilar to the reference product and that the product can be expected to produce the same clinical results as the reference product in any given patient and, for products administered multiple times to an individual, that the product and the reference product 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 biological product without such alternation or switch.

A reference biological product is granted 12 years of data exclusivity from the time of first licensure of the product and the FDA will not accept an application for a biosimilar or interchangeable product based on the reference biological product until four years after the date of first licensure of the reference product. "First licensure" typically means the initial date the particular product at issue was licensed in the United States. Date of first licensure does not include the date of licensure of (and a new period of exclusivity is not available for) a biological product if the licensure is for a supplement for the biological product or for a subsequent application by the same sponsor or manufacturer of the biological product (or licensor, predecessor in interest or other related entity) for a change (not including a modification to the structure of the biological product) that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device or strength, or for a modification to the structure of the biological product that does not result in a change in safety, purity or potency.

### *Regulatory approval in the European Union*

The EMA is a decentralized scientific agency of the European Union. It coordinates the evaluation and monitoring of centrally authorized medicinal products. It is responsible for the scientific evaluation of applications for EU marketing authorizations, as well as the development of technical guidance and the provision of scientific advice to sponsors. The EMA decentralizes its scientific assessment of medicines by working through a network of about 4,500 experts throughout the European Union, nominated by the Member States. The EMA draws on resources of over 40 national competent authorities of European Union Member States.

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The process regarding approval of medicinal products in the European Union follows roughly the same lines as in the United States and likewise generally involves satisfactorily completing each of the following:

- • preclinical laboratory tests, animal studies and formulation studies all performed in accordance with the applicable EU Good Laboratory Practice regulations;
- • submission to the relevant national competent authorities of a clinical trial application (CTA) for each trial in humans, which must be approved by such national authorities and at least one independent ethics committee before the trial may begin in each country where patient enrollment is planned;
- • performance of adequate and well-controlled clinical trials to establish the safety and efficacy of the product for each proposed indication;
- • submission to the relevant competent authorities of a marketing authorization application (MAA) which includes the data supporting safety and efficacy as well as detailed information on the manufacture and composition of the product in clinical development and proposed labelling;
- • satisfactory completion of an inspection by the relevant national authorities of the manufacturing facility or facilities, including those of third parties, at which the product is produced to assess compliance with strictly enforced cGMP;
- • potential audits of the non-clinical and clinical trial sites that generated the data in support of the MAA; and
- • review and approval by the relevant competent authority of the MAA before any commercial marketing, sale or shipment of the product.

### *Preclinical studies*

Preclinical tests include laboratory evaluations of product chemistry, formulation and stability, as well as studies to evaluate toxicity in animal studies, in order to assess the quality and potential safety and efficacy of the product. The conduct of the preclinical tests and formulation of the compounds for testing must comply with the relevant international, E.U. and national legislation, regulations and guidelines. The results of the preclinical tests, together with relevant manufacturing information and analytical data, are submitted as part of the CTA.

### *Clinical trials*

Clinical Trials Regulation (EU) No 536/2014 is an authorization procedure based on a single submission via a single E.U. portal, an assessment procedure leading to a single decision, as well as transparency requirements (the proactive publication of clinical trial data in the E.U. database).

Manufacturing and import into the E.U. of investigational medicinal products for use in clinical trials is subject to the holding of appropriate authorizations and must be carried out in accordance with cGMP.

### *Review and approval*

Authorization to market a product in the European Economic Area (EEA), comprising the European Union Member States plus Norway, Iceland and Liechtenstein, proceeds under one of four procedures: a centralized authorization procedure, a mutual recognition procedure, a decentralized procedure or a national procedure. Since our products by their virtue of being antibody-based biologics fall under the centralized procedure, only this procedure will be described here.

Certain drugs, including medicinal products developed by means of biotechnological processes, must be approved via the centralized authorization procedure for marketing authorization. The centralized procedure is also mandatory for orphan medicinal products, advanced-therapy medicinal products (i.e. gene-therapy, somatic cell -therapy or tissue-engineered medicines) and medicinal products containing a new active substance indicated for the treatment of HIV, AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and other immune dysfunctions and viral diseases. The centralized procedure is optional for products containing a new active substance not yet authorized in the EEA, or for products that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health. A successful application under the centralized authorization procedure results in a marketing authorization from the European Commission, which is automatically valid throughout the EEA. The other European Economic Area member states (namely Norway, Iceland and Liechtenstein) are also obligated to recognize the European Commission decision. The EMA and the European Commission administer the centralized authorization procedure.

Under the centralized authorization procedure, the Committee for Medicinal Products for Human Use (CHMP) serves as the scientific committee that renders opinions about the safety, efficacy and quality of human medicinal products on behalf of the EMA. The CHMP is composed of experts nominated by each member state's national drug authority, with one of them appointed to act as Rapporteur for the co-ordination of the evaluation with the possible assistance of a further member of the CHMP acting as a Co-Rapporteur. After approval, the Rapporteur(s) continue to monitor the product throughout its life cycle. The CHMP is required to issue

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an opinion within 210 days of receipt of a valid application, though the clock is stopped if it is necessary to ask the applicant for clarification or further supporting data. Clock stops may extend the timeframe of evaluation of a marketing authorization application considerably beyond 210 days. The process is complex and involves extensive consultation with the regulatory authorities of Member States and a number of experts. Once the procedure is completed, a European Public Assessment Report is produced. If the CHMP concludes that the quality, safety and efficacy of the medicinal product is sufficiently proven, it adopts a positive opinion. The CHMP's opinion is sent to the European Commission, which uses the opinion as the basis for its decision whether or not to grant a marketing authorization. The European Commission's decision is issued within 67 days of receipt of the CHMP's recommendation. If the opinion is negative, information is given as to the grounds on which this conclusion was reached

After a drug has been authorized and launched, it is a condition of maintaining the marketing authorization that all aspects relating to its quality, safety and efficacy must be kept under review. Sanctions may be imposed for failure to adhere to the conditions of the marketing authorization. In extreme cases, the authorization may be revoked, resulting in withdrawal of the product from sale.

Now that the UK (which comprises Great Britain and Northern Ireland) has left the EU, Great Britain will no longer be covered by centralized MAs (under the Northern Irish Protocol, centralized MAs will continue to be recognized in Northern Ireland). All medicinal products with a current centralized MA were automatically converted to Great Britain MAs on January 1, 2021. For a period of two years from January 1, 2021, the Medicines and Healthcare products Regulatory Agency (MHRA), the UK medicines regulator, may rely on a decision taken by the European Commission on the approval of a new marketing authorization in the centralized procedure, in order to more quickly grant a new Great Britain MA. A separate application will, however, still be required.

### *Conditional approval and accelerated assessment*

As per Article 14(7) of Regulation (EC) 726/2004, a medicine that would fulfill an unmet medical need may, if its immediate availability is in the interest of public health, be granted a conditional marketing authorization on the basis of less complete clinical data than are normally required, subject to specific obligations with defined timelines being imposed on the authorization holder. The list of these obligations shall be made publicly accessible. In order for a conditional marketing authorization to be granted, the CHMP must find that all of the following criteria are met: (i) the benefit-risk balance of the medicine is positive; (ii) it is likely that the applicant will be able to provide comprehensive data post-authorization; (iii) the medicine fulfils an unmet medical need; and (iv) the benefit of the medicine's immediate availability to patients is greater than the risk inherent in the fact that additional data are still required. Such an authorization shall be valid for one year, on a renewable basis.

When an application is submitted for a marketing authorization in respect of a drug for human use which is of major interest from the point of view of public health and in particular from the viewpoint of therapeutic innovation, the applicant may request an accelerated assessment procedure pursuant to Article 14(9) of Regulation (EC) 726/2004. Under the accelerated assessment procedure, the CHMP is required to issue an opinion within 150 days of receipt of a valid application, subject to clock stops, but it is possible that the CHMP may revert to the standard time limit for the centralized procedure if it determines that the application is no longer appropriate to conduct an accelerated assessment. We believe that some of the disease indications in which our product candidates are currently being or may be developed in the future qualify for this provision, and we will take advantage of this provision as appropriate.

### *Period of authorization and renewals*

A marketing authorization is initially valid for five years and may then be renewed on the basis of a re-evaluation of the risk-benefit balance by the EMA or by the national competent authority of the authorizing Member State (where the centralized procedure is not used). To this end, the marketing authorization holder shall provide the EMA or the competent authority with a version of the file in respect of quality, safety and efficacy, including all variants introduced since the marketing authorization was granted, at least six months before expiry of the initial five year period. Once renewed, the marketing authorization shall be valid for an unlimited period, unless the European Commission or the relevant national competent authority decides, on justified grounds relating to pharmacovigilance, to proceed with one additional five-year renewal. Any authorization which is not followed by the actual placing of the drug on the EEA market (if the centralized procedure is used) or on the market of the authorizing Member State (if the centralized procedure is not used) within three years after authorization shall cease to be valid (the so-called sunset clause).

Without prejudice to the law on the protection of industrial and commercial property, marketing authorizations for innovative medicinal products benefit from an 8+2+1 year period of regulatory protection. This regime consists of a regulatory data protection period of eight years plus a concurrent market exclusivity of 10 years plus an additional market exclusivity of one further year if, during the first eight years of those 10 years, the marketing approval holder obtains an approval for one or more new therapeutic indications which, during the scientific evaluation prior to their approval, are determined to bring a significant clinical benefit in comparison with existing therapies. Under the current rules, a third party making a generic or biosimilar application may not reference the preclinical and clinical data of the reference product until the expiry of eight years after first approval of the reference product, and the third party may only market a generic or biosimilar version of the reference product after 10 (or 11) years have lapsed since the first authorization of the reference product.

### *Orphan drug designation*

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Regulation (EC) 141/2000 states that a drug shall be designated as an orphan drug if its sponsor can establish (i) that it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (ii) either such condition affects not more than five in 10,000 persons in the European Union when the application is made, or, without incentives, it is unlikely that the marketing of the drug in the European Union would generate sufficient return to justify the necessary investment in its development; and (iii) that there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question that has been authorized in the European Union or, if such method exists, the drug will be of significant benefit to those affected by that condition.

Regulation (EC) 847/2000 sets out provisions for the implementation of the criteria for the designation of orphan drugs. An application for designation as an orphan product can be made any time prior to the filing of an application for approval to market the product. Marketing authorization for an orphan drug leads to a 10-year period of market exclusivity, which means that no similar medicinal product can be authorized in the same indication. A “similar medicinal product” is defined as a medicinal product containing a similar active substance or substances as contained in an authorized orphan medicinal product, and which is intended for the same therapeutic indication. This period may, however, be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan drug designation, for example because the product is sufficiently profitable not to justify continued market exclusivity. In addition, derogation from market exclusivity may be granted on an individual basis in very select cases, such as with consent from the marketing authorization holder, inability to supply sufficient quantities of the authorized product or demonstration of “clinically relevant superiority” by a similar medicinal product. Medicinal products designated as orphan drugs pursuant to Regulation (EC) 141/2000 are eligible for incentives made available by the European Union and by the Member States to support research into, and the development and availability of, orphan drugs.

If the MAA of a medicinal product designated as an orphan drug pursuant to Regulation (EC) 141/2000 includes the results of all studies conducted in compliance with an agreed pediatric investigation plan, and a corresponding statement is subsequently included in the marketing authorization granted, the 10-year period of market exclusivity will be extended to 12 years.

### ***European and United Kingdom data collection and processing***

The collection, receipt, storage, generation, transfer, access, protection, securing, disposal, transmittal, sharing, use, disclosure and other processing (commonly referred to as processing) of health-related and other personal information about clinical trials participants and other individuals in Europe is governed by the European Union’s General Data Protection Regulation (GDPR and in the UK, is governed by the European Union (Withdrawal) Act 2018 and the UK Data Protection Act 2018 (UK GDPR)). The GDPR and UK GDPR require companies to, among other things, give detailed disclosures about how they are processing personal information; ensure any consents relied on to process personal information (including special categories of personal information, such as health information) meet the stricter GDPR requirements; contractually impose data protection measures on vendors entrusted with personal information; maintain adequate data security measures; notify regulators and affected individuals of certain data breaches; meet extensive privacy governance and documentation requirements; honor individuals’ data protection rights, including their rights to access, correct and delete their personal information; and refrain from transferring personal information from Europe or the UK to most other countries unless specific safeguards can be implemented. Companies that violate the GDPR or UK GDPR can face private litigation, prohibitions on data processing and heavy fines. Complying with the GDPR and UK GDPR may be costly and require us to limit our activities in Europe. If our efforts to comply are not successful, we may face litigation, reputational harm, significant penalties and other liabilities.

### ***Marketing***

Much like the Anti-Kickback Statute prohibition in the United States, as described below, the provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products is also prohibited in the EU. The provision of benefits or advantages to induce or reward improper performance generally is governed by the national anti-bribery laws of European Union member states and the Bribery Act 2010 in the UK. Infringement of these laws could result in substantial fines and imprisonment. EU Directive 2001/83/EC, which is the EU Directive governing medicinal products for human use, further provides that, where medicinal products are being promoted to persons qualified to prescribe or supply them, no gifts, pecuniary advantages or benefits in kind may be supplied, offered or promised to such persons unless they are inexpensive and relevant to the practice of medicine or pharmacy. This provision has been transposed into the Human Medicines Regulations 2012 and so remains applicable in the UK despite its departure from the EU.

Payments made to physicians in certain European Union member states must be publicly disclosed. Moreover, agreements with physicians often must be the subject of prior notification and approval by the physician’s employer, his or her competent professional organization and/or the regulatory authorities of the individual European Union member states. These requirements are provided in the national laws, industry codes or professional codes of conduct, applicable in the European Union member states. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment.

### ***Brexit and the regulatory framework in the United Kingdom***

In June 2016, the electorate in the UK voted in favor of leaving the EU (commonly referred to as Brexit). Thereafter, in March 2017, the country formally notified the EU of its intention to withdraw pursuant to Article 50 of the Lisbon Treaty and the UK formally

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left the EU on January 31, 2020. A transition period began on February 1, 2020, during which EU pharmaceutical law remained applicable to the UK, which ended on December 31, 2020. Since the regulatory framework in the UK covering the quality, safety and efficacy of medicinal products, clinical trials, marketing authorization, commercial sales and distribution of medicinal products is derived from EU Directives and Regulations, Brexit could materially impact the future regulatory regime which applies to products and the approval of product candidates in the UK, as UK legislation now has the potential to diverge from EU legislation. It remains to be seen how Brexit will impact regulatory requirements for product candidates and products in the UK in the long-term. The MHRA, the UK medicines and medical devices regulator, has recently published detailed guidance for industry and organizations to follow from January 1, 2021 now the transition period is over, which will be updated as the UK's regulatory position on medicinal products evolves over time.

### *International regulation*

In addition to regulations in the United States and Europe, a variety of foreign regulations govern clinical trials, commercial sales and distribution of product candidates. The approval process varies from country to country and the time to approval may be longer or shorter than that required for FDA or European Commission approval.

### **Other healthcare laws and regulations and legislative reform**

#### *Healthcare laws and regulations*

Healthcare providers and third-party payors will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our operations, including any arrangements with healthcare providers, third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws that may affect the business or financial arrangements and relationships through which we conduct research and would market, sell and distribute our products. The healthcare laws that may affect our ability to operate include, but are not limited to:

- The federal Anti-Kickback Statute, which prohibits any person or entity from, among other things, knowingly and willfully soliciting, receiving, offering or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of an item or service reimbursable, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs. The term "remuneration" has been broadly interpreted to include anything of value. The federal Anti-Kickback Statute has also been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other hand. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, but the exceptions and safe harbors are drawn narrowly and require strict compliance in order to offer protection. Additionally, the intent standard under the federal Anti-Kickback Statute was amended by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, Affordable Care Act), to a stricter standard such that 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. Further, the Affordable Care Act codified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act.
- Federal civil and criminal false claims laws, such as the False Claims Act, which can be enforced by private citizens through civil qui tam actions, and civil monetary penalty laws prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, false, fictitious or fraudulent claims for payment of federal funds, and knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to avoid, decrease or conceal an obligation to pay money to the federal government. For example, pharmaceutical companies have been prosecuted under the False Claims Act in connection with their alleged off-label promotion of drugs, purportedly concealing price concessions in the pricing information submitted to the government for government price reporting purposes, and allegedly providing free product to customers with the expectation that the customers would bill federal healthcare programs for the product. In addition, 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. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes "any request or demand" for money or property presented to the U.S. government. In addition, manufacturers can be held liable under the False Claims Act even when they do not submit claims directly to government payors if they are deemed to "cause" the submission of false or fraudulent claims.
- The federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), among other things, imposes criminal liability for executing or attempting to execute a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and creates federal criminal laws that prohibit knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or

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representation, or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items or services.

- HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH), and their implementing regulations, which impose privacy, security and data breach reporting obligations with respect to individually identifiable health information upon entities subject to the law, such as health plans, healthcare clearinghouses and certain healthcare providers, known as covered entities, and their respective business associates and subcontractors that perform services for them that involve individually identifiable health information. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in U.S. federal courts to enforce HIPAA laws and seek attorneys' fees and costs associated with pursuing federal civil actions.
- Federal and state consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers.
- The federal transparency requirements under the Physician Payments Sunshine Act, created under the Affordable Care Act, which requires, among other things, certain manufacturers of drugs, devices, biologics and medical supplies reimbursed under Medicare, Medicaid, or the Children's Health Insurance Program to report annually to the Centers for Medicare & Medicaid Services (CMS) information related to payments and other transfers of value provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other health care professionals (such as physician assistants and nurse practitioners) and teaching hospitals, as well as information regarding ownership and investment interests held by physicians and their immediate family members.
- State and foreign laws that are analogous to each of the above federal laws, such as anti-kickback and false claims laws, that may impose similar or more prohibitive restrictions, and may apply to items or services reimbursed by non-governmental third-party payors, including private insurers.
- State and foreign laws that require pharmaceutical companies to implement compliance programs, comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or to track and report gifts, compensation and other remuneration provided to physicians and other healthcare providers; state laws that require the reporting of marketing expenditures or drug pricing, including information pertaining to and justifying price increases; state and local laws that require the registration of pharmaceutical sales representatives; state laws that prohibit various marketing-related activities, such as the provision of certain kinds of gifts or meals; state laws that require the posting of information relating to clinical trials and their outcomes; and other federal, state and foreign laws that govern the privacy and security of health information or personal information in certain circumstances, including state health information privacy and data breach notification laws which govern the processing of health-related and other personal information, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus requiring additional compliance efforts.

If our operations are found to be in violation of any of these laws or any other current or future healthcare laws that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, contractual damages, reputational harm, diminished profits and future earnings, additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations, any of which could substantially disrupt our operations. Although effective compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, these risks cannot be entirely eliminated. Any action against us for an alleged or suspected violation could cause us to incur significant legal expenses and could divert our management's attention from the operation of our business, even if our defense is successful. In addition, if any of the physicians or other healthcare providers or entities with whom we expect to do business is found not to be in compliance with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

### *Legislative reform*

We operate in a highly regulated industry, and new laws, regulations and judicial decisions, or new interpretations of existing laws, regulations and decisions, related to healthcare availability, the method of delivery and payment for healthcare products and services could negatively affect our business, financial condition and prospects. There is significant interest in promoting healthcare reforms, and it is likely that federal and state legislatures within the United States and the governments of other countries will continue to consider changes to existing healthcare legislation.

For example, the United States and state governments continue to propose and pass legislation designed to reduce the cost of healthcare. In 2010, the U.S. Congress enacted the Affordable Care Act, which included changes to the coverage and reimbursement of drug products under government healthcare programs such as:

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- • increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program;
- • established a branded prescription drug fee that pharmaceutical manufacturers of certain branded prescription drugs must pay to the federal government;
- • expanded the list of covered entities eligible to participate in the 340B drug pricing program by adding new entities to the program;
- • established a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer's outpatient drugs to be covered under Medicare Part D;
- • extended manufacturers' Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;
- • expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers' Medicaid rebate liability;
- • created a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for certain drugs and biologics, including our product candidates, that are inhaled, infused, instilled, implanted or injected;
- • established a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;
- • established a Center for Medicare and Medicaid Innovation at the CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending; and
- • created a licensure framework for follow-on biologic products.

There have been executive, judicial and congressional challenges to certain aspects of the Affordable Care Act as well as efforts to repeal or replace certain aspects of the Affordable Care Act. For example, on June 17, 2021 the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the Affordable Care Act is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Prior to the U.S. Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the Affordable Care Act marketplace. The executive order also instructed 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 Affordable Care Act. In addition, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (the IRA) into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and creating a new manufacturer discount program. It is possible that the Affordable Care Act will be subject to judicial or Congressional challenges in the future. It is unclear how such challenges and the healthcare reform measures of the Biden administration will impact the Affordable Care Act.

In addition, there have been and continue to be a number of initiatives at the United States federal and state levels that seek to reduce healthcare costs. In 2011, the U.S. Congress enacted the Budget Control Act, which included provisions intended to reduce the federal deficit. The Budget Control Act resulted in the imposition of 2% reductions in Medicare payments to providers beginning in 2013 and, due to subsequent legislative amendments to the statute, including the Infrastructure Investment and Jobs Act, will remain in effect through 2031, absent additional congressional action. 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 this sequester. Additionally, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024. If government spending is further reduced, anticipated budgetary shortfalls may also impact the ability of relevant agencies, such as the FDA, to continue to function at current levels, which may impact the ability of relevant agencies to timely review and approve research and development, manufacturing and marketing activities, which may delay our ability to develop, market and sell any product candidates we may develop. In addition, any significant spending reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs that may be implemented, or any significant taxes or fees that may be imposed on us, as part of any broader deficit reduction effort or legislative replacement to the Budget Control Act, could have an adverse impact on our anticipated product revenues.

Furthermore, there has 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 legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient assistance programs and reform government program reimbursement methodologies for drug products. At the federal level, in July 2021, the Biden administration

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released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, 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 sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles. In addition, the IRA, among other things, (i) directs HHS to negotiate the price of certain high-expenditure, single-source drugs and biologics covered under Medicare, and subject drug manufacturers to civil monetary penalties and a potential excise tax by offering a price that is not equal to or less than the negotiated “maximum fair price” for such drugs and biologics under the law, and (ii) imposes rebates with respect to certain drugs and biologics covered under Medicare Part B or Medicare Part D to penalize price increases that outpace inflation. The IRA permits HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. These provisions will take effect progressively starting in fiscal year 2023, although they may be subject to legal challenges. It is currently unclear how the IRA will be implemented but is likely to have a significant impact on the pharmaceutical industry. Further, the Biden administration released an additional executive order on October 14, 2022, directing HHS to submit a report on how the Center for Medicare and Medicaid Innovation can be further leveraged to test new models for lowering drug costs for Medicare and Medicaid beneficiaries. It is unclear whether this executive order or similar policy initiatives will be implemented in the future. Individual states in the United States have also become increasingly active in passing legislation and implementing 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. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. It is difficult to predict the future legislative landscape in healthcare and the effect on our business, results of operations, financial condition and prospects. However, we expect that additional state and federal healthcare reform measures will be adopted in the future, particularly in light of the new presidential administration.

### *Environmental, health and safety laws and regulations*

We and our third-party contractors are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the use, generation, manufacture, distribution, storage, handling, treatment, remediation and disposal of hazardous materials and wastes. Hazardous chemicals, including flammable and biological materials, are involved in certain aspects of our business, and we cannot eliminate the risk of injury or contamination from the use, generation, manufacture, distribution, storage, handling, treatment or disposal of hazardous materials and wastes. In particular, our product candidates use PBDs, which are highly potent cytotoxins that require special handling by our and our contractors’ staff. In the event of contamination or injury, or failure to comply with environmental, health and safety laws and regulations, we could be held liable for any resulting damages, fines and penalties associated with such liability could exceed our assets and resources. Environmental, health and safety laws and regulations are becoming increasingly more stringent. We may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations.

### *Pharmaceutical coverage, pricing and reimbursement*

The availability and extent of coverage and adequate reimbursement by governmental and private third-party payors are essential for most patients to be able to afford expensive medical treatments. In both domestic and foreign markets, sales of our product candidates will depend substantially on the extent to which the costs of our product candidates will be covered by third-party payors, such as government health programs, commercial insurance and managed healthcare organizations. These third-party payors decide which products will be covered and establish reimbursement levels for those products.

Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a product is:

- a covered benefit under its health plan;
- safe, effective and medically necessary;
- appropriate for the specific patient;
- cost-effective; and
- neither experimental nor investigational.

Obtaining coverage approval and reimbursement for a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our products to the payor. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement at a satisfactory level. If coverage and adequate reimbursement of our future products, if any, are unavailable or limited in scope or amount, such as may result where alternative or generic treatments are available, we may be unable to achieve or sustain profitability. Adverse

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coverage and reimbursement limitations may hinder our ability to recoup our investment in our product candidates, even if such product candidates obtain regulatory approval.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. There is no uniform policy for coverage and reimbursement in the United States and, as a result, coverage and reimbursement can differ significantly from payor to payor. In the United States, the principal decisions about reimbursement for new medicines are typically made by the CMS, which decides whether and to what extent a new medicine will be covered and reimbursed under Medicare. Private payors often, but not always, follow the CMS’s decisions regarding coverage and reimbursement. It is difficult to predict what third-party payors will decide with respect to coverage and reimbursement for fundamentally novel products such as ours, as there is no body of established practices and precedents for these new products. Further, one payor’s determination to provide coverage and adequate reimbursement for a product does not assure that other payors will also provide coverage and adequate reimbursement for that product. We may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of our product candidates. There can be no assurance that our product candidates will be considered medically necessary or cost-effective. Therefore, it is possible that any of our product candidates, even if approved, may not be covered by third-party payors or the reimbursement limit may be so restrictive that we cannot commercialize the product candidates profitably.

Reimbursement agencies in Europe may be more restrictive than payors in the United States. In Europe, pricing and reimbursement schemes vary widely from country to country. For example, some countries provide that products may be marketed only after an agreement on reimbursement price has been reached. Such pricing negotiations with governmental authorities can take considerable time after receipt of marketing approval for a product. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Other countries require the completion of additional health technology assessments that compare the cost-effectiveness of a particular product candidate to currently available therapies. In addition, the European Union provides options for its member states to restrict the range of products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. European Union member states may approve a specific price for a product, may adopt a system of direct or indirect controls on the profitability of the company placing the product on the market or monitor and control prescription volumes and issue guidance to physicians to limit prescriptions. Reference pricing used by various European Union member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. Furthermore, many countries in the European Union have increased the amount of discounts required on pharmaceutical products, and these efforts could continue as countries attempt to manage healthcare expenditures, especially in light of the severe fiscal and debt crises experienced by many countries in the European Union. The downward pressure on healthcare costs in general, and prescription products in particular, has become increasingly intense. As a result, there are increasingly higher barriers to entry for new products. There can be no assurance that any country that has reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products, if approved in those countries. Accordingly, the reimbursement for any products in Europe may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits.

Furthermore, the containment of healthcare costs has become a priority of foreign and domestic governments as well as private third-party payors. The prices of drugs have been a focus in this effort. Governments and private third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications, which could affect our ability to sell our product candidates profitably. We also expect to experience pricing pressures due to the trend towards managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. These and other cost-control initiatives could cause us to decrease the price we might establish for products, which could result in lower-than-anticipated product revenues. In addition, the publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If pricing is set at unsatisfactory levels or if coverage and adequate reimbursement of our products is unavailable or limited in scope or amount, our revenues and the potential profitability of our product candidates in those countries would be negatively affected.

## Employees and human capital resources

As of December 31, 2022, we had a total of 46 full-time employees. We employ physicians, professionals in research and development, clinical, regulatory, manufacturing, marketing, finance and legal and other functions that are important to our business. We are not a party to any collective bargaining agreements. We use temporary workers such as consultants and advisors in certain instances when we think it is in the best interests of our business.

Attracting, developing, and retaining highly qualified individuals are key to our success. To do so, we believe we offer competitive compensation packages-inclusive of base salary, bonus, and equity, and benefits. We also sought to establish a values-based culture centered around our core values of collaboration, accountability, and empathy for patients to enhance the working environment for our current employees and to attract our desired candidates.

## Facilities

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We are occupying 9,885 square feet of office space at 8000 Marina Boulevard in Brisbane, California though November 2024. We also have leased 24,606 square feet of office and lab space at 170 Harbor Way in South San Francisco, California. This space is currently subleased through the term of the lease, ending September 2025.

### **Legal proceedings**

From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not currently a party to any material legal proceedings. Regardless of outcome, such proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained.

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## Item 1A. Risk Factors.

*Our business involves significant risks, some of which are described below. You should carefully consider the risks and uncertainties described below, together with all of the other information contained in this Annual Report, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and the related notes. If any of the following risks actually occur, it could harm our business, prospects, operating results and financial condition and future prospects. In such event, the market price of our Class A common stock could decline and you could 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. This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in this Annual Report.*

### Risks related to our financial position and need for additional capital

*We have not completed any clinical trials for our lead product candidate, atacicept, and have no products approved for commercial sale, which may make it difficult to evaluate our current business and predict our future success and viability.*

We are a late clinical-stage biotechnology company and we have no products approved for commercial sale, have not generated any revenue from product sales and have incurred losses since inception. To date, we have devoted substantially all of our resources and efforts to organizing and staffing our company, business planning, executing partnerships, raising capital, acquiring, developing and securing our technology and product candidates, completing the Phase 2b clinical trial of atacicept in patients with IgAN and planning the Phase 3 clinical trial of atacicept in patients with LN, supporting clinical development of MAU868 and manufacturing atacicept and MAU868 clinical drug supply. We have not yet demonstrated our ability to successfully complete any clinical trials with respect to our product candidates, obtain marketing approvals, manufacture a commercial-scale product or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. As a result, it may be more difficult to accurately predict our future success or viability than it could be if we had a longer operating history.

In addition, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors and risks frequently experienced by late-stage biotechnology companies in rapidly evolving fields. We may face difficulty transitioning from a company with a research focus to a company capable of successfully executing drug development activities and supporting commercial operations. If we do not adequately address these risks and difficulties or successfully make such a transition, our business, financial condition, results of operations and prospects will be significantly harmed.

*We will require substantial additional capital to finance our operations. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce and/or eliminate one or more of our research and drug development programs of our product candidates or future commercialization efforts.*

Developing treatments for immunological and inflammatory diseases, including conducting nonclinical studies and clinical trials, is a very time-consuming, expensive and uncertain process that takes years to complete. Our operations have consumed substantial amounts of cash since inception, and we expect our expenses will increase in connection with our ongoing activities, particularly as we continue to conduct clinical trials of, and seek marketing approval for, our product candidates. We anticipate incurring significant costs associated with the development of our product candidates. Our expenses could increase beyond expectations if we are required by the FDA, or any comparable foreign regulatory authority to perform clinical trials or nonclinical studies in addition to those that we currently anticipate. Other unanticipated costs may also arise. In addition, if we obtain marketing approval for atacicept or MAU868, we expect to incur significant commercialization expenses related to drug sales, marketing, manufacturing and distribution. Because the design and outcome of our planned and anticipated clinical trials are highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of any product candidate we develop. We also will continue to incur costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in order to maintain our continuing operations.

As of December 31, 2022, we had $114.7 million in cash, cash equivalents and marketable securities. In December 2021, we entered into the Loan Agreement with Oxford, as amended in November 2022, providing us with up to $25.0 million of borrowing capacity, after $5.0 million was funded at closing of the Loan Agreement in December 2021, and $20.0 million was funded in November 2022. We expect that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operations for at least the next 12 months subsequent to the issuance date of the financial statements appearing elsewhere in this Annual Report. Our estimate is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned. Moreover, it is particularly difficult to estimate with certainty our future expenses given the dynamic nature of our business and the macroeconomic and geopolitical environment generally. We anticipate that our expenses will increase substantially if, and as, we:

- continue our ongoing and planned research and development of atacicept for the treatment of IgAN and LN;

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- • initiate or continue nonclinical studies and clinical trials for atacicept, MAU868 and any additional product candidates that we may pursue in the future;
- • continue our ongoing and planned research and development of MAU868 for the treatment of BKV viremia in kidney transplant recipients and other indications;
- • seek regulatory approvals for any product candidates that successfully complete clinical trials;
- • continue to scale up external manufacturing capacity with the aim of securing sufficient quantities to meet our capacity requirements for clinical trials and potential commercialization;
- • establish a sales, marketing and distribution infrastructure to commercialize any approved product candidates and related additional commercial manufacturing costs;
- • develop, maintain, expand, protect and enforce our intellectual property portfolio, including patents, trade secrets, and know-how;
- • acquire, develop or in-license other product candidates and technologies and further expand our clinical product pipeline;
- • attract, develop and retain additional clinical, scientific, quality control, and manufacturing management and administrative personnel;
- • add clinical, operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts; and
- • incur additional legal, accounting, investor relations and other expenses associated with operating as a public company.

Advancing the development of atacicept, MAU868 and any future product candidates we may develop will require a significant amount of capital. Our working capital and available credit will not be sufficient to fund all of the activities that are necessary to complete the development of our product candidates through approval and commercial launch.

In January 2023, we announced our plan to prioritize and focus our current resources on the advancement of atacicept in IgAN into a pivotal Phase 3 trial. As a result, we are delaying enrollment in the pivotal Phase 3 trial for LN and commitment of resources to the MAU868 program.

We will be required to obtain further funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources, which may dilute our stockholders or restrict our operating activities. Adequate additional financing may not be available to us on acceptable terms, or at all. Adverse geopolitical and macroeconomic developments, such as the recent and potential future disruptions in access to bank deposits and lending commitments due to bank failures, the ongoing military conflict between Russia and Ukraine and related sanctions, actual and anticipated changes in interest rates, economic inflation and the responses by central banking authorities to control such inflation, and ongoing effects of the COVID-19 pandemic, could affect our ability to access capital as and when needed. Our failure to raise capital as and when needed or on acceptable terms would have a negative impact on our financial condition and our ability to pursue our business strategy, and we may have to delay, reduce the scope of, suspend or eliminate one or more of our research-stage programs, clinical trials or future commercialization efforts.

*We have incurred net losses since inception, and we expect to continue to incur net losses for the foreseeable future. In addition, we may be unable to continue as a going concern over the long-term.*

We have incurred net losses in each reporting period since the commencement of our operations and have not generated any revenue from product sales to date. We had net losses of $89.1 million and $32.6 million for the years ended December 31, 2022 and 2021, respectively. We had an accumulated deficit of $213.1 million as of December 31, 2022. Our losses have resulted principally from expenses incurred in research and development and from management and administrative costs and other expenses that we have incurred while building our business infrastructure, a significant portion of which were incurred resulting from our efforts to develop gamma-PNA chemistry and triplex gene editing for therapeutic use, which we discontinued in September 2020. Our product candidates are in clinical trials. As a result, we expect that it will be several years, if ever, before we have a commercialized product and generate revenue from product sales. Even if we succeed in receiving marketing approval for and commercializing our product candidates in one of our lead indications, we expect that we will continue to incur substantial research and development and other expenses as we continue the clinical development programs for our product candidates in other indications.

We expect to continue to incur increased expenses and operating losses for the foreseeable future as we continue our research and development efforts and seek to obtain regulatory approval for our product candidates. The net losses we incur may fluctuate significantly from quarter to quarter such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses have had, and will continue to have, an adverse effect on our working

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capital. 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 incurred losses and negative cash flows from operations. As a development stage company, we expect to incur significant and increasing losses until regulatory approval is granted for our product candidates. Regulatory approval is not guaranteed and may never be obtained. As a result, these conditions raise substantial doubt about our ability to continue as a going concern over the long-term.

# ***We have never generated revenue from product sales and may never be profitable.***

Our ability to generate revenue from product sales and achieve profitability depends on our ability, alone or with our collaboration partners, to successfully complete the development of, and obtain the regulatory approvals necessary to commercialize, atacicept, MAU868 and any future product candidates we may develop. We do not anticipate generating revenue from product sales for the next several years, if ever. Our ability to generate revenue from product sales depends heavily on our and our current and potential future collaborators' success in:

- • completing clinical development of product candidates and programs and identifying and developing new product candidates;
- • seeking and obtaining marketing approvals for any product candidates that we develop;
- • launching and commercializing product candidates for which we obtain marketing approval by establishing a sales force, marketing, medical affairs and distribution infrastructure or, alternatively, collaborating with a commercialization partner;
- • achieving adequate access and reimbursement by government and third-party payors for product candidates that we develop;
- • establishing and maintaining supply and manufacturing relationships with third parties that can provide adequate, in both amount and quality, products and services to support clinical development and the market demand for product candidates that we develop, if approved;
- • obtaining market acceptance of product candidates that we develop as viable treatment options;
- • addressing any competing technological and market developments;
- • maintaining our rights under our existing license agreement with Ares, Novartis and any similar agreements we may enter into in the future;
- • negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter and performing our obligations in such collaborations;
- • maintaining, protecting, enforcing and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how;
- • defending against third-party interference, infringement or other intellectual property-related claims, if any; and
- • attracting, developing and retaining qualified personnel.

Even if atacicept, MAU868, or any future product candidate that we may develop is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved product candidate. Our expenses could increase beyond expectations if we are required by the FDA or comparable foreign regulatory authorities to perform clinical trials or nonclinical studies in addition to those that we currently anticipate. Even if we are able to generate revenue from the sale of any approved products, we may not be able to reach or sustain profitability, and may need to obtain additional funding to continue operations.

# ***The terms of our loan agreement place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business.***

The Loan Agreement provides us with up to $25.0 million of borrowing capacity, after $5.0 million was funded at closing of the Loan Agreement in December 2021 and $20.0 million was funded in November 2022. Our overall leverage and certain obligations and affirmative and negative covenants contained in the related documentation could adversely affect our financial health and business and future operations by limiting our ability to, among other things, satisfy our obligations under the Loan Agreement, refinance our debt on terms acceptable to us or at all, plan for and adjust to changing business, industry and market conditions, use our available cash flow to fund future acquisitions and make dividend payments, and obtain additional financing for working capital, to fund growth or for general corporate purposes, even when necessary to maintain adequate liquidity.

If we default under the Loan Agreement, Oxford may accelerate all of our repayment obligations and exercise all of their rights and remedies under the Loan Agreement and applicable law, potentially requiring us to renegotiate our agreement on terms less favorable to us. Further, if we are liquidated, the lenders' right to repayment would be senior to the rights of the holders of our Class A

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common stock to receive any proceeds from the liquidation. Oxford could declare a default upon the occurrence of customary events of default, including events that they interpret as a material adverse change as delineated in the Loan Agreement, payment defaults or breaches of certain affirmative or negative covenants, thereby requiring us to repay the loan immediately. Any declaration by the lender of an event of default could significantly harm our business and prospects and could cause the price of our Class A common stock to decline. Additionally, if we raise any additional debt financing, the terms of such additional debt could further restrict our operating and financial flexibility.

### **Risks related to the discovery, development and commercialization of our product candidates**

*We are substantially dependent on the success of our product candidates, atacicept and MAU868, which are currently in the clinical development stage. If we are unable to complete development of, obtain regulatory approval for and commercialize our product candidates in one or more indications and in a timely manner, our business, financial condition, results of operations and prospects will be significantly harmed.*

Our future success is heavily dependent on our ability to timely complete clinical trials, obtain marketing approval for and successfully commercialize our product candidates. We expect that a substantial portion of our efforts and expenses over the next several years will be devoted to the development of atacicept in our ongoing clinical trials of atacicept in patients with IgAN and LN, as well as our efforts to evaluate atacicept in MAU868 in kidney transplant recipients. In the near-term, we plan to prioritize and focus our current resources on the advancement of atacicept in IgAN into a pivotal Phase 3 trial. As a result, we are delaying enrollment in the pivotal Phase 3 trial for LN and any commitment of resources to the MAU868 program.

We plan to invest significant efforts and financial resources in the research and development of our product candidates, which will require additional clinical development, evaluation of clinical, nonclinical and manufacturing activities, marketing approval from government regulators, and significant marketing efforts before we can generate any revenues from product sales. We are not permitted to market or promote our product candidates before we receive marketing approval from the FDA and comparable foreign regulatory authorities, and we may never receive such marketing approvals. Should our planned clinical development of atacicept in patients with IgAN and LN or MAU868 in kidney transplant recipients fail to be completed in a timely manner or at all, we will need to rely on clinical development of atacicept or MAU868 in additional indications, which will require more time and resources to obtain regulatory approval and proceed with commercialization, and may ultimately be unsuccessful. We cannot assure you that our planned clinical development programs for our product candidates will be completed in a timely manner, or at all, or that we will be able to obtain approval for atacicept or MAU868 from the FDA or comparable foreign regulatory authorities. If we are unable to complete development of, obtain regulatory approval for and commercialize our product candidates in one or more indications and in a timely manner, our business, financial condition, results of operations and prospects will be significantly harmed.

*Clinical development is a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results. Failure can occur at any stage of clinical development. We have never completed a clinical trial or submitted a BLA to the FDA or similar drug approval filings to comparable foreign authorities. If we are ultimately unable to obtain regulatory approval for our product candidates, we will be unable to generate product revenue and our business, financial condition, results of operations and prospects will be significantly harmed.*

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of nonclinical studies and early clinical trials may not be predictive of the results of subsequent clinical trials. We have a limited operating history and to date have not demonstrated our ability to complete large scale clinical trials.

Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through nonclinical studies and initial clinical trials. For example, atacicept has been the subject of clinical trials by prior sponsors, including a Phase 2 trial in SLE, that missed its primary endpoint in the overall study population. In the future, clinical trial failures may result from a multitude of factors including flaws in trial design, dose selection, placebo effect and patient enrollment criteria. A number of companies in the biotechnology industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Based upon negative or inconclusive results, we or any potential future collaborator may decide, or regulators may require us, to conduct additional clinical trials or nonclinical studies. In addition, data obtained from trials and studies are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may delay, limit or prevent regulatory approval. Any future delays or abandonment could harm our business, financial condition, results of operations and prospects.

Even if our clinical trials are completed as planned, we cannot be certain that their results will support our proposed indications.

Our future clinical trials may not be successful. If any product candidate is found to be unsafe or lack efficacy, we will not be able to obtain regulatory approval for it and our business, financial condition, results of operations and prospects may be significantly harmed. In some instances, there can be significant variability in safety and/or efficacy results between different trials of the same product candidate due to numerous factors, including changes in trial protocols, differences in composition of the patient populations,

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adherence to the dosing regimen and other trial protocols and the dropout rate among clinical trial participants. Patients treated with our product candidates may also be undergoing surgical, radiation and chemotherapy treatments and may be using other approved products or investigational new drugs, which can cause side effects or adverse events that are unrelated to our product candidates. As a result, assessments of efficacy can vary widely for a particular patient, and from patient to patient and site to site within a clinical trial. This subjectivity can increase the uncertainty of, and adversely impact, our clinical trial outcomes. We do not know whether any clinical trials we may conduct will demonstrate consistent or adequate efficacy and safety sufficient to obtain marketing approval to market our product candidates.

We do not know whether our clinical trials will demonstrate consistent or adequate efficacy and safety to obtain regulatory approval to market our product candidates. Most product candidates that begin clinical trials are never approved by regulatory authorities for commercialization. If we are unable to bring our product candidates to market, our ability to create long-term shareholder value will be limited.

In addition, we may rely in part on nonclinical, clinical and quality data generated by CROs and other third parties for regulatory submissions. While we have or will have agreements governing these third parties' services, we have limited influence over their actual performance. If these third parties do not make data available to us, or, if applicable, make regulatory submissions in a timely manner, our development programs may be significantly delayed, and we may need to conduct additional studies or collect additional data independently. In either case, our development costs would increase.

Moreover, nonclinical and clinical data are often susceptible to varying interpretations and analyses and many companies that believed their product candidates performed satisfactorily in nonclinical studies and clinical trials nonetheless failed to obtain FDA or comparable foreign regulatory authority approval. We cannot guarantee that the FDA or foreign regulatory authorities will interpret trial results as we do, and more trials could be required before we are able to submit an application seeking approval of our product candidates. To the extent that the results of the trials are not satisfactory to the FDA or foreign regulatory authorities for support of a marketing application, we may be required to expend significant resources, which may not be available to us, to conduct additional trials in support of potential approval of our product candidates. Even if regulatory approval is secured, the terms of such approval may limit the scope and use, which may also limit commercial potential. Furthermore, the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval, which may lead to the FDA or comparable foreign regulatory authorities delaying, limiting or denying approval of a product candidate.

*Delays in clinical trials are common and have many causes, and any delay could result in increased costs to us and jeopardize or delay our ability to obtain regulatory approval and commence product sales.*

We may experience delays in clinical trials of our product candidates. Our planned clinical trials may not begin on time, have an effective design, enroll a sufficient number of patients, or be completed on schedule, if at all. Our clinical trials can be delayed for a variety of reasons, including delays related to:

- • the FDA or comparable foreign regulatory authorities disagreeing as to the design or implementation of our clinical trials;
- • obtaining regulatory authorizations to commence a trial or reaching a consensus with regulatory authorities on trial design;
- • any failure or delay in reaching an agreement with CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
- • obtaining approval from one or more institutional review boards (IRBs);
- • IRBs refusing to approve, suspending or terminating the trial at an investigational site, precluding enrollment of additional subjects, or withdrawing their approval of the trial;
- • changes to clinical trial protocol;
- • clinical sites deviating from trial protocol or dropping out of a trial;
- • study conduct issues, which could confound the clinical endpoints and/or data;
- • manufacturing sufficient quantities of clinical trial material to supply the clinical trials;
- • subjects failing to enroll or remain in our trial at the rate we expect, or failing to return for post-treatment follow-up;
- • delays in enrollment due to low prevalence or incidence rates of subjects with the applicable disease;
- • delays in enrollment by subjects, or completion of the trial by subjects, or delays in manufacturing due to the continuing effects of the COVID-19 pandemic;
- • delays in enrollment due to a shift in our prioritization and dedication of resources towards other product candidates or indications;

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- subjects choosing an alternative treatment or participating in competing clinical trials;
- lack of adequate funding to continue the clinical trial;
- subjects experiencing severe or unexpected drug-related adverse effects;
- regulatory authorities imposing a clinical hold;
- occurrence of serious adverse events in trials of the same class of agents conducted by other companies;
- shutdowns, either temporarily or permanently, of any facility manufacturing our product candidates or any of their components, including by order from the FDA or comparable foreign regulatory authorities due to violations of current good manufacturing practice (cGMP), regulations or other applicable requirements;
- third-party clinical investigators losing the licenses or permits necessary to perform our clinical trials, not performing our clinical trials on our anticipated schedule or consistent with the clinical trial protocol, good clinical practices (GCP) or other regulatory requirements;
- third-party contractors not performing data collection or analysis in a timely or accurate manner; or
- third-party contractors becoming debarred or suspended or otherwise penalized by the FDA or other government or regulatory authorities for violations of regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or all of the data produced by such contractors in support of our marketing applications.

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

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

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

Any delays in our clinical trials that occur as a result could shorten any period during which we may have the exclusive right to commercialize atacicept, MAU868 or any other product candidates and our competitors may be able to bring products to market before we do, and the commercial viability of atacicept, MAU868 or other product candidates could be significantly reduced. Any of these occurrences may significantly harm our business, financial condition, results of operations and prospects.

*Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside our control, including difficulties in identifying patients with IgAN and LN, the availability of competitive products, and significant competition for recruiting patients in clinical trials.*

Identifying and qualifying patients to participate in our clinical trials is critical to our success. We may encounter delays in enrolling, or be unable to enroll, a sufficient number of patients to complete any of our clinical trials, and even once enrolled we may be unable to retain a sufficient number of patients to complete any of our trials. In particular, as a result of the inherent difficulties in diagnosing IgAN, the availability of competitive products such as TARPEYO and FILSPARI, and the significant competition for recruiting the limited number of patients who have the diseases for which our product candidates are being developed, there may be delays in enrolling the patients we need to complete clinical trials on a timely basis, or at all. Although we have engaged certain third-party investigators to assist with patient enrollment, there can be no assurance that we will be able to maintain our relationships with such third parties or that such third parties will be successful in helping us identify patients.

Factors that may generally affect patient enrollment include:

- the size and nature of the patient population;
- the number and location of clinical sites we enroll;
- competition with other companies for clinical sites or patients;
- the drug background and clinical experience (e.g., safety profile, risk/benefit assessment, mechanism of action, known proof of concept);
- the eligibility and exclusion criteria for the trial;

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- the design of the clinical trial;
- inability to obtain and maintain patient consents;
- risk that enrolled participants will drop out before completion;
- a shift in our prioritization and dedication of resources towards other product candidates or indications; and
- competing clinical trials and clinicians' and patients' perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating.

In addition, if any significant adverse events or other side effects are observed in any of our future clinical trials or other sponsor development programs of similar mechanism of action that may result in a drug class effect, it may make it more difficult for us to recruit patients to our clinical trials and patients may drop out of our trials, or we may be required to abandon the trials or our development efforts of one or more product candidates altogether. Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays, which would increase our costs and have an adverse effect on our company.

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

We have limited financial and human resources. In January 2023, we announced our plan to prioritize and focus our current resources on the advancement of atacicept in IgAN into a pivotal Phase 3 trial. As a result, we are delaying enrollment in the pivotal Phase 3 trial for LN and are any commitment of resources to the MAU868 program. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

We may develop atacicept, MAU868 and potentially future product candidates, in combination with other therapies, which exposes us to additional risks.

We may develop atacicept, MAU868 and future product candidates in combination with one or more currently approved therapies. Even if atacicept, MAU868 or any product candidate we develop, were to receive marketing approval or be commercialized for use in combination with other existing therapies, we would continue to be subject to the risks that the FDA or similar regulatory authorities outside of the United States could revoke approval of the therapy used in combination with our product candidate or that safety, efficacy, manufacturing or supply issues could arise with these existing therapies. This could result in our own products being removed from the market or being less successful commercially.

We may also evaluate atacicept, MAU868 or any other future product candidates in combination with one or more other therapies that have not yet been approved for marketing by the FDA or similar regulatory authorities outside of the United States. We will not be able to market and sell atacicept, MAU868 or any product candidate we develop in combination with any such unapproved therapies that do not ultimately obtain marketing approval. If the FDA or similar regulatory authorities outside of the United States do not approve these other drugs or revoke their approval of, or if safety, efficacy, manufacturing, or supply issues arise with, the drugs we choose to evaluate in combination with atacicept, MAU868 or any other product candidate we develop, we may be unable to obtain approval of or market atacicept, MAU868 or any other product candidate we develop.

The incidence and prevalence for target patient populations of our product candidates in specific indications are based on estimates and third-party sources. If the market opportunities for atacicept, MAU868 or any future product candidate we may develop, if and when approved, are smaller than we estimate or if any approval that we obtain is based on a narrower definition of the patient population, our revenue and ability to achieve profitability might be materially and adversely affected.

Periodically, we make estimates regarding the incidence and prevalence of target patient populations for particular diseases based on various third-party sources and internally generated analysis and use such estimates in making decisions regarding our drug development strategy, including acquiring or in-licensing product candidates and determining indications on which to focus in nonclinical or clinical trials.

The incidence and prevalence for target patient populations of our product candidates in specific indications are based on estimates and third-party sources. These estimates may be inaccurate or based on imprecise data. For example, the total addressable market opportunity will depend on, among other things, acceptance of our drugs by the medical community and patient access, drug pricing and reimbursement. The number of patients in the addressable markets may turn out to be lower than expected, patients may not be otherwise amenable to treatment with our drugs, or new patients may become increasingly difficult to identify or gain access to. If the market opportunities for atacicept, MAU868, or any future product candidate we may develop, if and when approved, are smaller than

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we estimate or if any approval that we obtain is based on a narrower definition of the patient population, our revenue and ability to achieve and sustain profitability might be materially and adversely affected.

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

From time to time, we may publicly disclose preliminary or top-line data from our nonclinical studies and 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 trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the top-line or preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Top-line 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. As a result, top-line data should be viewed with caution until the final data are available.

From time to time, we may also disclose interim data from our clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available or as patients from our clinical trials continue other treatments for their disease. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects. Further, disclosure of interim data by us or by our competitors could result in volatility in the price of our Class A common stock.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of our particular program, the approvability or commercialization of our 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 material or otherwise appropriate information to include in our disclosure.

If the interim, top-line, or 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 significantly harm our business, financial condition, results of operations and prospects.

*We face significant competition, which may result in others discovering, developing or commercializing products before or more successfully than us.*

The biotechnology industry is intensely competitive and subject to rapid and significant technological change. Our competitors include multinational pharmaceutical companies, specialized biotechnology companies and universities and other research institutions. The current standard-of-care for IgAN consists of treatment with RAAS inhibitors, (ACE inhibitors or ARBs), to control blood pressure, or steroids with or without other immunosuppressive agents to non-specifically reduce inflammation. SGLT2 inhibitors, including AstraZeneca’s Farxiga, which is approved for chronic kidney disease, is becoming the standard-of-care in some geographies including the United States. Among emerging therapies, we consider our most direct competitors with respect to atacicept in IgAN to be approved products: the reformulated steroid from Calliditas Therapeutics AB, and endothelin and angiotensin II receptor antagonist from Travere Therapeutics, Inc.; programs in Phase 3 clinical development: Visterra Inc., Otsuka Pharmaceutical Co., Ltd., Novartis Pharmaceuticals Corporation, Omeros Corporation, and Chinook Therapeutics Inc.; and the following companies with programs in Phase 2 of clinical development: Chinook Therapeutics Inc., Reata Pharmaceuticals, Inc., RemeGen Co., Ltd., Ionis Pharmaceuticals, Inc., AstraZeneca, and DiaMedica Therapeutics, Inc.

In LN, prior to December 2020, there had been no approved therapies, and the standard-of-care has consisted of a number of non-specific therapies, including MMF, steroids, cyclophosphamide, rituximab, calcineurin inhibitors, azathioprine, and hydroxychloroquine, dependent on class of disease and whether a patient was cycling through the induction or maintenance phase of therapy. Paradigms are evolving with the FDA approvals of GlaxoSmithKline plc’s Benlysta (belimumab) and Aurinia Pharmaceuticals Inc.’s Lupkynis (voclosporin), both of which we consider to be direct competitors. Our competitors include: Roche Holding AG, Novartis Pharmaceuticals Corporation, and RemeGen Co., Ltd., each of which have programs in Phase 3 clinical development; and BeiGene Ltd., Janssen Pharmaceuticals, Inc., AstraZeneca, Alexion, Omeros Corporation, Kezar Life Science Inc., Bristol Myers Squibb, Boehringer, and Novartis Pharmaceuticals Corporation, each of which have programs in Phase 2 clinical development.

In the kidney transplant or HSCT setting, there are currently no anti-BKV therapies approved. The standard of care in both settings is to reduce immunosuppression as a first line, and potentially to offer intravenous immune globulin (IVIG) in kidney transplant recipients or antivirals with limited clinical evidence, including leflunomide and cidofovir, in either setting. There are few industry sponsored programs in development for these indications; for example, Memo Therapeutics AG’s MTX-005, a monoclonal antibody targeting BKV has recently commenced Phase I clinical trials. Additionally, Allovir’s multi-virus specific T-cell therapy, Posoleucel is

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in a Phase 2 clinical trial for BK viremia in kidney transplant recipients, a Phase 3 clinical trial for treatment of virus-associated cystitis, and a Phase 2 clinical trial in multi-virus prevention following allogeneic HSCT.

Many of our competitors have significantly greater financial, technical, human and other resources than we do and may be better equipped to develop, manufacture and market technologically superior products. In addition, many of these competitors have significantly greater experience than we have in undertaking nonclinical studies and human clinical trials of new pharmaceutical products and in obtaining regulatory approvals of human therapeutic products. Accordingly, our competitors may succeed in obtaining FDA approval for superior products. Many of our competitors have established distribution channels for the commercialization of their products, whereas we have no such channel or capabilities. In addition, many competitors have greater name recognition and more extensive collaborative relationships. 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.

Our competitors may obtain regulatory approval of their products more rapidly than we do or may obtain patent protection or other intellectual property rights that limit our ability to develop or commercialize our product candidates or any future product candidates. Our competitors may also develop drugs that are more effective, more convenient, more widely used and less costly or have a better safety profile than our products and these competitors may also be more successful than we are in manufacturing and marketing their products. If we are unable to compete effectively against these companies, then we may not be able to commercialize our product candidates or any future product candidates or achieve a competitive position in the market. This would adversely affect our ability to generate revenue. Our competitors also compete with us in recruiting and retaining qualified scientific, management and commercial personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

#### ***Changes in methods of manufacturing or formulation of our product candidates may result in additional costs or delays.***

As our product candidates progress through preclinical to late-stage clinical trials to marketing approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods and formulation, and manufacturing sites are altered along the way in an effort to optimize yield, manufacturing batch size, minimize costs and achieve consistent quality and results. Such changes carry the risk that they will not achieve these intended objectives. Any of these changes could cause our product candidates to perform differently and affect the results of planned clinical trials or other future clinical trials conducted with the altered materials. This could delay completion of clinical trials, require the conduct of bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of our product candidates and jeopardize our ability to commercialize our product candidates, if approved, and generate revenue.

#### **Risks related to regulatory approval and other legal compliance matters**

*The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business, financial condition, results of operations and prospects will be significantly harmed.*

The time required to obtain approval by the FDA and comparable foreign authorities typically takes many years following the commencement of clinical trials. 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.

Applications for atacicept or MAU868 could fail to receive regulatory approval for many reasons, including the following:

- • the FDA or comparable foreign regulatory authorities may disagree with the design, implementation or results of our clinical trials;
- • the FDA or comparable foreign regulatory authorities may determine that our product candidate is not safe and effective, only moderately effective or have undesirable or unintended side effects, toxicities or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use;
- • the population studied in the clinical trial may not be sufficiently broad or representative to assure efficacy and safety in the full population for which we seek approval, resulting in a restrictive label and limiting commercial use;
- • the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from nonclinical studies or clinical trials;
- • the data collected from clinical trials may not be sufficient to support the submission of a BLA, or other submission or to obtain regulatory approval in the United States or elsewhere;
- • we may be unable to demonstrate to the FDA or comparable foreign regulatory authorities that the risk-benefit ratio for our proposed indication is acceptable;

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- the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes, test procedures and specifications or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and
- the approval policies or regulations of the FDA 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 our product candidates, which would significantly harm our business, financial condition, results of operations and prospects.

In addition, even if we obtain approval of our product candidates for a lead indication, regulatory authorities may not approve them for other indications, may impose significant limitations in the form of narrow indications, warnings, or a Risk Evaluation and Mitigation Strategy (REMS). Certain regulatory authorities may grant approval contingent on the performance of costly post-marketing clinical trials or may approve them with a label that does not include the labeling claims necessary or desirable for successful commercialization of our product candidates. In addition, if we are unable to obtain regulatory approval, or if regulatory approval results in a limited label, our business, financial condition, results of operation and prospects will be significantly harmed.

*Even if approved, our product candidates may not achieve adequate market acceptance among physicians, patients, healthcare payors and others in the medical community necessary for commercial success.*

Even if our product candidates receive regulatory approval, they may not gain adequate market acceptance among physicians, patients, healthcare payors and others in the medical community. The degree of market acceptance of any of our product candidates would depend on a number of factors, including:

- the efficacy and safety profile as demonstrated in clinical trials compared to alternative treatments;
- the timing of market introduction of the product candidate as well as competitive products, such as TARPEYO and FILSPARI;
- the clinical indications for which the product candidate is approved;
- restrictions on use, such as boxed warnings or contraindications in labeling, or a REMS, if any, which may not be required of alternative treatments and competitor products;
- the potential and perceived advantages of product candidates over alternative treatments;
- the cost of treatment in relation to alternative treatments;
- our pricing and the availability of coverage and adequate reimbursement by third-party payors, including government authorities;
- the availability of atacicept or MAU868 for use as a combination therapy;
- relative convenience and ease of administration;
- the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
- the effectiveness of sales and marketing efforts;
- inclusion or exclusion of our product candidates from treatment guidelines established by various physician groups;
- unfavorable publicity relating to our product candidates or similar approved products or product candidates in development by third parties; and
- the approval of other new therapies for the same indications.

Sales of medical products also depend on the willingness of physicians to prescribe the treatment, which is likely to be based on a determination by these physicians that the products are safe, therapeutically effective and accessible to patients. In addition, the inclusion or exclusion of products from treatment guidelines established by various physician groups and the viewpoints of influential physicians can affect the willingness of other physicians to prescribe the treatment. We cannot predict whether physicians, physicians' organizations, hospitals, other healthcare providers, government agencies or private insurers will determine that our product is safe, therapeutically effective and cost effective as compared with competing treatments. If any product candidate is approved but does not achieve an adequate level of acceptance by such parties, we may not generate or derive sufficient revenue from such product candidate and may not be able to achieve or sustain profitability.

*Our business entails a significant risk of product liability and if we are unable to obtain sufficient insurance coverage, such inability could significantly harm our business, financial condition, results of operations and prospects.*

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Our business exposes us to significant product liability risks inherent in the development, testing, manufacturing and marketing of therapeutic treatments. Product liability claims could delay or prevent completion of our development programs. If we succeed in marketing products, such claims could result in an FDA or other regulatory authority investigation of the safety and effectiveness of our product, our manufacturing processes and facilities or our marketing programs. FDA or other regulatory authority investigations could potentially lead to a recall of our product or more serious enforcement action, limitations on the approved indications for which it may be used or suspension or withdrawal of approvals. Regardless of the merits or eventual outcome, liability claims may also result in decreased demand for our product, injury to our reputation, costs to defend the related litigation, a diversion of management's time and our resources and substantial monetary awards to trial participants or patients. We currently have product liability insurance that we believe is appropriate for our stage of development and may need to obtain higher levels prior to marketing any product candidate, if approved. Any insurance we have or may obtain may not provide sufficient coverage against potential liabilities. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable to obtain sufficient insurance at a reasonable cost to protect us against losses caused by product liability claims that could significantly harm our business, financial condition, results of operations and prospects.

*Our product candidates may cause significant adverse events, toxicities or other undesirable side effects when used alone or in combination with other approved products or investigational new drugs that may result in a safety profile that could inhibit regulatory approval, prevent market acceptance, limit their commercial potential or result in significant negative consequences.*

As is the case with pharmaceuticals generally, it is likely that there may be side effects and adverse events associated with the use of atacicept, MAU868 or any future product candidates we may develop. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. 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 or comparable foreign regulatory authorities. For example, Merck KGaA, Darmstadt, Germany previously conducted APRIL-LN, a study aimed to evaluate the efficacy and safety of atacicept in patients with active LN, receiving newly initiated CS and MMF. Two weeks before the initiation of atacicept, significant decreases in immunoglobulin G (IgG) levels began unexpectedly with initiation of MMF and high-dose CS, and persisted upon initiation of atacicept, which led to trial termination. The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may significantly harm our business, financial condition, results of operations and prospects.

If product candidates we develop are associated with undesirable side effects or have unexpected characteristics in nonclinical studies or clinical trials when used alone or in combination with other approved products or investigational new drugs, we may need to interrupt, delay or abandon their development or limit development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Treatment-related side effects could also affect patient recruitment or the ability of enrolled subjects to complete a trial, or result in potential product liability claims. Any of these occurrences may prevent us from achieving or maintaining market acceptance of the affected product candidate and may significantly harm our business, financial condition, results of operations and prospects.

Patients in our ongoing and planned clinical trials may in the future suffer significant adverse events or other side effects not observed in our nonclinical studies or previous clinical trials. Our product candidates may be used as chronic therapies or be used in pediatric populations, for which safety concerns may be particularly scrutinized by regulatory agencies. In addition, if atacicept, MAU868 or any future product candidates we may develop, are used in combination with other therapies, atacicept, MAU868 or any future product candidates we may develop may exacerbate adverse events associated with the therapy and it may not be possible to determine whether it was caused by our product or the one with which it was combined. Patients treated with our product candidates may also be undergoing surgical, radiation, chemotherapy or other treatments, which can cause side effects or adverse events that are unrelated to our product candidates, but may still impact the success of our clinical trials. The inclusion of patients with advanced disease in our clinical trials may result in deaths or other adverse medical events due to other therapies or medications that such patients may be using or due to the gravity of such patients' illnesses.

If significant adverse events or other side effects are observed in any of our current or future clinical trials, we may have difficulty recruiting patients to the clinical trials, patients may drop out of our trials, or we may be required to abandon the trials or our development efforts of that product candidate altogether. We, the FDA, other comparable regulatory authorities or an IRB may suspend clinical trials of a product candidate at any time for various reasons, including a belief that subjects in such trials are being exposed to unacceptable health risks or adverse side effects. Some potential therapeutics developed in the biotechnology industry that initially showed therapeutic promise in early-stage trials have later been found to cause side effects that prevented their further development. Even if the side effects do not preclude the product candidate from obtaining or maintaining marketing approval, undesirable side effects may inhibit market acceptance due to its tolerability versus other therapies. Any of these developments could significantly harm our business, financial condition, results of operations and prospects.

Further, toxicities associated with our products not seen during clinical testing may also develop after any approval, if obtained, and lead to a requirement to conduct additional clinical safety trials, additional contraindications, warnings and precautions being added to the drug label, significant restrictions on the use of the product or the withdrawal of the product from the market. We cannot predict

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whether our product candidates will cause toxicities in humans that would preclude or lead to the revocation of regulatory approval based on nonclinical studies or early-stage clinical trials.

# ***Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval in other jurisdictions.***

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. For example, even if the FDA or other foreign regulatory authority grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the marketing approval of the product candidate in their countries. However, a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including additional nonclinical 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 product is also subject to approval.

Obtaining foreign regulatory approvals and establishing and maintaining compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our product in certain countries. If we or any future collaborator 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.

# ***Even if any product candidate we develop receives regulatory approval, it could be subject to significant post-marketing regulatory requirements and will be subject to continued regulatory oversight.***

Any regulatory approvals that we may receive for our product candidates will require the submission of reports to regulatory authorities and surveillance to monitor the safety and efficacy of the marketed product, may contain significant limitations related to use restrictions for specified age groups, warnings, precautions or contraindications, and may include burdensome post-approval study or risk management requirements. For example, the FDA may require a REMS in order to approve atacicept or MAU868, which could entail requirements for a medication guide, physician training and communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. In addition, if the FDA or applicable foreign regulatory authorities approve atacicept, MAU868 or any product candidate we develop in the future, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export and recordkeeping will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as on-going compliance with cGMPs and GCP for any clinical trials that we conduct post-approval. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic, unannounced inspections by the FDA and other regulatory authorities for compliance with cGMP regulations and standards. If we or a regulatory agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facilities where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing. In addition, failure to comply with FDA and other comparable foreign regulatory requirements may subject our company to administrative or judicially imposed sanctions, including:

- • delays in or the rejection of product approvals;
- • restrictions on our ability to conduct clinical trials, including full or partial clinical holds on ongoing or planned trials;
- • restrictions on the products, manufacturers or manufacturing process;
- • warning letters;
- • civil and criminal penalties;
- • injunctions;
- • suspension or withdrawal of regulatory approvals;
- • product seizures, detentions or import bans;
- • voluntary or mandatory product recalls and publicity requirements;
- • total or partial suspension of production; and
- • imposition of restrictions on operations, including costly new manufacturing requirements.

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The occurrence of any event or penalty described above may inhibit our ability to commercialize atacicept, MAU868, or any product candidate we may develop in the future, and generate revenue and could require us to expend significant time and resources in response and could generate negative publicity.

The FDA's and other regulatory authorities' policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of atacicept, MAU868 or any product candidate we may develop in the future. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, and we may not be able to achieve or sustain profitability.

We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. If these actions impose constraints on FDA's or foreign regulatory authorities' ability to engage in oversight and implementation activities in the normal course, it may significantly harm our business, financial condition, results of operations and prospects.

*We are currently seeking orphan drug designation for atacicept for the treatment of IgAN, but even if designated we may not ultimately realize the potential benefits of orphan drug designation.*

We are currently seeking orphan drug designation from the FDA for atacicept for the treatment of IgAN. We are required to provide evidence that IgAN meets the orphan criteria as specified by the FDA and the EMA. Under the Orphan Drug Act, the FDA may designate a drug product as an orphan drug if it is intended to treat a rare disease or condition, defined as a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States but where there is no reasonable expectation to recover the costs of developing and marketing a treatment drug in the United States. 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 application 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. However, orphan drug designation neither shortens the development time nor regulatory review time of a product candidate nor gives the candidate any advantage in the regulatory review or approval process.

In addition, if a product receives the first FDA approval for the indication for which it has orphan designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity or where the manufacturer is unable to assure sufficient product quantity for the orphan patient population. Exclusive marketing rights in the United States may also be unavailable if we or our collaborators seek approval for an indication broader than the orphan designated indication and may be lost if the FDA later determines that the request for designation was materially defective. Even if we obtain orphan drug designation, we may not be the first to obtain marketing approval for any particular orphan indication due to the uncertainties associated with developing pharmaceutical products. Further, even if we obtain orphan drug exclusivity for a product candidate, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is clinically superior in that it is safer, more effective, or makes a major contribution to patient care.

Similarly, in Europe, a medicinal product may receive orphan designation under Article 3 of Regulation (EC) 141/2000. This applies to products that are intended for a life-threatening or chronically debilitating condition and either (1) such condition affects no more than five in 10,000 persons in the EU when the application is made, or (2) the product, without the benefits derived from orphan status, would be unlikely to generate sufficient returns in the EU to justify the necessary investment in its development. Moreover, in order to obtain orphan designation in the EU it is necessary to demonstrate that there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the EU or, if such a method exists, the product will be of significant benefit to those affected by the condition. In the EU, orphan medicinal products are eligible for financial incentives such as reduction of fees or fee waivers and applicants can benefit from specific regulatory assistance and scientific advice. Products receiving orphan designation in the EU can receive 10 years of market exclusivity, during which time no "similar medicinal product" for the same indication may be placed on the market. A "similar medicinal product" is defined as a medicinal product containing a similar active substance or substances as contained in an authorized orphan medicinal product, and which is intended for the same therapeutic indication. An orphan product can also obtain an additional two years of market exclusivity in the EU for pediatric studies. However, the 10-year market exclusivity may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan designation-for example, if the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally, marketing authorization may be granted to a similar medicinal product for the same indication at any time if:

- the second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior;
- the first marketing authorization holder for the authorized product consents to a second orphan medicinal product application; or
- the marketing authorization holder for the authorized product cannot supply enough orphan medicinal product.

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If we do not receive or maintain orphan drug designation for atacicept for the treatment of IgAN, it could limit our ability to realize revenues.

*Even though MAU868 has Fast Track designation from FDA for the prevention of BK viremia in renal transplant and hematopoietic stem cell transplant, it may not lead to a faster development or regulatory review or approval process, and will not increase the likelihood that MAU868 will receive marketing approval.*

If a drug or biologic is intended for the treatment of a serious or life-threatening condition or disease, and nonclinical or clinical data demonstrate the potential to address an unmet medical need, the product may qualify for FDA Fast Track designation, for which sponsors must apply. The FDA has broad discretion whether or not to grant this designation. Although we have received Fast Track designation for the investigation of MAU868 for the prevention of BK viremia in renal transplant and hematopoietic stem cell transplant recipients, we may not experience a faster development process, review or approval compared to conventional FDA procedures. In addition, the FDA may withdraw Fast Track designation if it believes that the designation is no longer supported by data from our clinical development program.

*We may attempt to secure approval from the FDA or comparable foreign regulatory authorities through the use of accelerated approval pathways. If we are unable to obtain such approval, we may be required to conduct additional nonclinical studies or clinical trials beyond those that we contemplate, which could increase the expense of obtaining, and delay the receipt of, necessary marketing approvals. Even if we receive accelerated approval from the FDA or comparable foreign regulatory authorities, if our confirmatory trials do not verify clinical benefit, or if we do not comply with rigorous post-marketing requirements, the FDA or comparable foreign regulatory authorities may seek to withdraw any accelerated approval.*

We may in the future seek an accelerated approval for atacicept, MAU868 or future product candidates we may develop. For example, if the results from our Phase 3 trial of atacicept in patients with IgAN are positive, we may seek accelerated approval with the FDA based on this trial, which we may not be granted. Under the accelerated approval program, the FDA may grant accelerated approval to a product candidate designed to treat a serious or life-threatening condition that provides meaningful therapeutic benefit over available therapies upon a determination that the product candidate has an effect on a surrogate endpoint or intermediate clinical endpoint that is reasonably likely to predict clinical benefit. The FDA considers a clinical benefit to be a positive therapeutic effect that is clinically meaningful in the context of a given disease, such as irreversible morbidity or mortality. For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. For example, UPCR is an accepted surrogate primary endpoint for clinical trials in IgAN, which could allow for a faster path to commercialization than rate of change/slope in glomerular filtration rate (GFR). We may seek accelerated approval based on the UPCR endpoint. An intermediate clinical endpoint is a clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit. The accelerated approval pathway may be used in cases in which the advantage of a new drug over available therapy may not be a direct therapeutic advantage, but is a clinically important improvement from a patient and public health perspective. Use of the accelerated approval pathway would entail submission of a BLA under Subpart E of the FDA regulations with week 36 UPCR surrogate endpoint data while completing the Phase 3 trial to collect eGFR data to demonstrate improvement in kidney function. If granted, accelerated approval is usually contingent on the sponsor's agreement to complete ongoing trials and/or conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the drug's clinical benefit and to report regulatory to the FDA on progress on such trials. Additionally, unless and until converted to full approval at the time of satisfying the conditions of any accelerated approval letter, the sponsor must submit any promotional materials for the accelerated approval drug to FDA at least 30 days prior to use. Third-party payors may refuse to provide coverage or reimbursement for the drug until the confirmatory studies are complete. Additionally, if such post-approval studies fail to confirm the drug's clinical benefit, the FDA may withdraw its approval of the drug.

Prior to seeking accelerated approval for atacicept or MAU868, we intend to seek feedback from the FDA and will otherwise evaluate our ability to seek and receive accelerated approval. There can be no assurance that after our evaluation of the feedback and other factors we will decide to pursue or submit a BLA, for accelerated approval or any other form of expedited development, review or approval. Similarly, there can be no assurance that after subsequent FDA feedback we will continue to pursue or apply for accelerated approval or any other form of expedited development, review or approval, even if we initially decide to do so. Furthermore, if we decide to submit an application for accelerated approval or receive an expedited regulatory designation (e.g., breakthrough therapy designation) for atacicept, there can be no assurance that such submission or application will be accepted or that any expedited development, review or approval will be granted on a timely basis, or at all. The FDA or comparable foreign regulatory authorities could also require us to conduct further studies prior to considering our application or granting approval of any type. A failure to obtain accelerated approval or any other form of expedited development, review or approval for atacicept or MAU868 would result in a longer time period to commercialization of such product candidate, could increase the cost of development of atacicept or MAU868 and could harm our competitive position in the marketplace.

*Biosimilars to our product candidates may provide competition sooner than anticipated.*

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The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the Affordable Care Act), signed into law on March 23, 2010, includes a subtitle called the Biologics Price Competition and Innovation Act of 2009 (BPCIA), which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. 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 the sponsor's own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of their product. 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.

We believe that any of our product candidates approved as a biological 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. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.

If any approved products are subject to biosimilar competition sooner than we expect, we will face significant pricing pressure and our commercial opportunity will be limited.

*Any product candidate we develop may become subject to unfavorable third-party coverage and reimbursement practices, as well as pricing regulations.*

We intend to seek approval to market atacicept and MAU868 in both the United States, in the EU and in certain foreign jurisdictions. If we obtain approval in one or more foreign jurisdictions for atacicept or MAU868, we will be subject to rules and regulations in those jurisdictions. In some foreign countries, particularly those in the EU, the pricing of drugs is subject to governmental control and other market regulations which could put pressure on the pricing and usage of atacicept or MAU868. In these countries, pricing negotiations with governmental authorities can take considerable time after obtaining marketing approval of a product candidate. In addition, market acceptance and sales of a product candidate will depend significantly on the availability of adequate coverage and reimbursement from third-party payors for the product candidate and may be affected by existing and future healthcare reform measures.

The availability and extent of coverage and adequate reimbursement by third-party payors, including government health administration authorities, private health coverage insurers, managed care organizations and other third-party payors is essential for most patients to be able to afford expensive treatments. If we obtain marketing approval of a product candidate, sales of such product will depend substantially, both in the United States and internationally, on the extent to which the costs of the product will be covered and reimbursed by third-party payors. If reimbursement is not available, or is available only at inadequate levels, we may not be able to successfully commercialize any product candidates we develop. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize an adequate return on our investment. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not successfully commercialize any product candidate for which we obtain marketing approval.

There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved products. In the United States, for example, principal decisions about reimbursement for new products are typically made by the Centers for Medicare & Medicaid Services (CMS) an agency within the U.S. Department of Health and Human Services (HHS). CMS decides whether and to what extent a new product will be covered and reimbursed under Medicare, and private third-party payors often follow CMS's decisions regarding coverage and reimbursement to a substantial degree. However, one third-party payor's determination to provide coverage for a product candidate does not assure that other payors will also provide coverage for the product candidate. Moreover, eligibility for reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. As a result, the coverage determination process is often time-consuming and costly. This process will require us to provide scientific and clinical support for the use of our product to each third-party payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Factors payors consider in determining reimbursement are based on whether the product is:

- safe, effective and medically necessary;

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- neither experimental nor investigational.

A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Governmental payors, as well as other third-party payors, including pharmacy benefit managers, have attempted to control costs by limiting coverage and the amount of reimbursement for particular products and requiring substitutions of generic products and/or biosimilars. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Further, such payors are increasingly examining the medical necessity and reviewing the cost effectiveness of medical product candidates. There may be especially significant delays in obtaining coverage and reimbursement for newly approved drugs. Third-party payors may limit coverage to specific product candidates on an approved list, known as a formulary, which might not include all FDA-approved drugs for a particular indication. We may need to conduct expensive pharmaco-economic studies to demonstrate the medical necessity and cost effectiveness of our product. Nonetheless, atacicept, MAU868 or any future product candidates we may develop may not be considered medically necessary or cost effective. We cannot be sure that coverage and reimbursement will be available for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be.

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost containment initiatives in Europe, Canada and other countries has and will continue to put pressure on the pricing and usage of therapeutics such as atacicept, MAU868 or any future product candidates we may develop. In many countries, particularly the countries of the EU, medical product prices are subject to varying price control mechanisms as part of national health systems. In these countries, pricing negotiations with governmental authorities can take considerable time after a product receives marketing approval. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of atacicept, MAU868 or any future product candidates we may develop to other available therapies. In general, product prices under such systems are substantially lower than in the United States. Other countries allow companies to fix their own prices for products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for atacicept, MAU868 or any future product candidates we may develop. Accordingly, in markets outside the United States, the reimbursement for any product that we commercialize may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits.

If we are unable to establish or sustain coverage and adequate reimbursement for any product candidates that we commercialize from third-party payors, the adoption of those products and potential sales revenue would be adversely affected, which, in turn, could adversely affect the ability to market or sell those product candidates, if approved. Coverage policies and third-party payor reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for a product for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

#### ***We may face difficulties from changes to current regulations and future legislation.***

Existing regulatory policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of atacicept, MAU868 or any future product candidates we may develop. 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, we may lose any marketing approval that we may have obtained and we may not be able to achieve or sustain profitability.

For example, the Affordable Care Act was passed in March 2010, which, among other things, subjected biologic products to potential competition by lower-cost biosimilars; addressed 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; increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program; extended the Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations; subjected manufacturers to new annual fees and taxes for certain branded prescription drugs; created a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (increased to 70% pursuant to the Bipartisan Budget Act of 2018, effective as of January 1, 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer's outpatient drugs to be covered under Medicare Part D; and provided incentives to programs that increase the federal government's comparative effectiveness research.

Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain aspects of the Affordable Care Act. For example, on June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the Affordable Care Act is unconstitutional in its entirety because the 'individual mandate' was repealed by Congress. Moreover, prior to the U.S. Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a special

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enrollment period coverage through the Affordable Care Act marketplace, which began on February 15, 2021 and remained open through August 15, 2021. The executive order also instructed 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 Affordable Care Act. Further, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (IRA) into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in Affordable Care Act marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and through a newly established manufacturer discount program. It is possible that the Affordable Care Act will be subject to judicial or Congressional challenges in the future. It is also unclear how any healthcare reform measures of the Biden administration will affect the Affordable Care Act and our business.

In addition, other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. These changes include aggregate reductions to Medicare payments to providers of 2% per fiscal year pursuant to the Budget Control Act of 2011, which began in 2013, and due to subsequent legislative amendments to the statute, including the Bipartisan Budget Act of 2018 and the Infrastructure Investments and Jobs Act, will remain in effect until 2031, 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 this sequester. Additionally, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024. The American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These laws may result in additional reductions in Medicare and other healthcare funding, which could have an adverse effect on customers for our product candidates, if approved, and, accordingly, our financial operations. In addition, Congress is considering additional health reform measures.

Moreover, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. For example, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles. In addition, the IRA, among other things, (1) directs HHS to negotiate the price of certain single-source drugs and biologics covered under Medicare and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. These provisions will take effect progressively starting in fiscal year 2023, although they may be subject to legal challenges. It is currently unclear how the IRA will be implemented but is likely to have a significant impact on the pharmaceutical industry. Further, the Biden administration released an additional executive order on October 14, 2022, directing HHS to submit a report on how the Center for Medicare and Medicaid Innovation can be further leveraged to test new models for lowering drug costs for Medicare and Medicaid beneficiaries. It is unclear whether this executive order or similar policy initiatives will be implemented in the future. 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.

We expect that the Affordable Care Act, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, achieve and sustain profitability or commercialize atacicept, MAU868 or any future product candidates we may develop.

Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for biotechnology products. We cannot be sure whether additional legislative changes will be enacted, or whether FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of any product candidates we develop, may be. In addition, increased scrutiny by 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-marketing testing and other requirements.

In addition, FDA regulations and guidance may be revised or reinterpreted by the FDA in ways that may significantly affect our business and our products. Any new regulations or guidance, or revisions or reinterpretations of existing regulations or guidance, may impose additional costs or lengthen FDA review times for atacicept, MAU868 or future product candidates we may develop. We cannot determine how changes in regulations, statutes, policies, or interpretations when and if issued, enacted or adopted, may affect our business in the future. Such changes could, among other things, require:

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- additional clinical trials to be conducted prior to obtaining approval;
- changes to manufacturing methods;
- recalls, replacements, or discontinuance of one or more of our products; and
- additional recordkeeping.

Such changes would likely require substantial time and impose significant costs, or could reduce the potential commercial value of atacicept, MAU868 or future product candidates we may develop, and could materially harm our business and our financial results. In addition, delays in receipt of or failure to receive regulatory clearances or approvals for any other products would harm our business, financial condition, and results of operations.

Our relationships with healthcare professionals, clinical investigators, CROs and third party payors in connection with our current and future business activities may be subject to federal and state healthcare fraud and abuse laws, false claims laws, transparency laws, government price reporting, and health information privacy and security laws, which could expose us to, among other things, criminal sanctions, civil penalties, contractual damages, exclusion from governmental healthcare programs, reputational harm, administrative burdens and diminished profits and future earnings.

Healthcare providers and third-party payors play a primary role in the recommendation and prescription of our product candidates for which we obtain marketing approval. Our current and future arrangements with healthcare professionals, clinical investigators, CROs, third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we research, market, sell and distribute our product for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the following:

- the federal Anti-Kickback Statute prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it in order to have committed a violation. In addition, the government may assert that a claim including items or services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act;
- the federal false claims laws, including the civil False Claims Act, which can be enforced by private citizens through civil whistleblower or qui tam actions, and civil monetary penalties laws prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
- the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) prohibits, among other things, executing or attempting to execute a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;
- HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH) and their implementing regulations, also imposes obligations, including mandatory contractual terms, certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates and subcontractors that perform services for them that involve the use, or disclosure of, individually identifiable health information with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
- the federal Physician Payments Sunshine Act requires applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program, with specific exceptions, to annually report to CMS information regarding payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other health care professionals (such as physician assistants and nurse practitioners) and teaching hospitals, as well as information regarding ownership and investment interests held by physicians and their immediate family members; and
- analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers.

Some state laws require biotechnology companies to comply with the biotechnology industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information

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related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures. Some state laws require biotechnology companies to report information on the pricing of certain drug products. Some state and local laws require the registration of pharmaceutical sales representatives.

Much like the federal Anti-Kickback Statute prohibition in the United States, the provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products is also prohibited in the EU. The provision of benefits or advantages to induce or reward improper performance generally is governed by the national anti-bribery laws of EU Member States, and the Bribery Act 2010 in the United Kingdom (UK). Infringement of these laws could result in substantial fines and imprisonment. EU Directive 2001/83/EC, which is the EU Directive governing medicinal products for human use, further provides that, where medicinal products are being promoted to persons qualified to prescribe or supply them, no gifts, pecuniary advantages or benefits in kind may be supplied, offered or promised to such persons unless they are inexpensive and relevant to the practice of medicine or pharmacy. This provision has been transposed into the Human Medicines Regulations 2012 and so remains applicable in the UK despite its departure from the EU.

Payments made to physicians in certain EU Member States must be publicly disclosed. Moreover, agreements with physicians often must be the subject of prior notification and approval by the physician's employer, his or her competent professional organization and/or the regulatory authorities of the individual EU Member States. These requirements are provided in the national laws, industry codes or professional codes of conduct, applicable in the EU Member States. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment.

Efforts to ensure that our current and future business arrangements with third parties will comply with applicable healthcare laws and regulations will involve on-going substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, integrity oversight and reporting obligations, contractual damages, reputational harm, diminished profits and future earnings and the curtailment or restructuring of our operations. Defending against any such actions can be costly, time-consuming and may require significant financial and personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired. Further, if any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

*We are subject to stringent and evolving U.S. and foreign laws, regulations, rules, contractual obligations, policies and other obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions to our business operations; reputational harm; loss of revenue or profits; and other adverse business consequences.*

In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, processing) personal data and other sensitive information, including proprietary and confidential business information, trade secrets, intellectual property, information we collect about trial participants in connection with clinical trials, and sensitive third-party information (collectively, sensitive information). Our data processing activities subject us to numerous obligations relating to data privacy and security, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contractual obligations and other obligations that govern the processing of sensitive information by us and on our behalf.

Outside the United States, an increasing number of laws, regulations and industry standards apply to data privacy and security. For example, the European Union's General Data Protection Regulation, or EU GDPR and United Kingdom's GDPR, collectively GDPR, Canada's Personal Information Protection and Electronic Documents Act, or PIPEDA, Australia's Privacy Act, India's Information Technology Act, and South Korea's Personal Information Protection Act impose strict requirements to the processing of personal information, including clinical trials participants and other individuals. For instance, companies that violate the GDPR can face private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests, temporary or definitive prohibitions on data processing and other corrective actions, fines of up to the greater of 20 million Euros under the EU GDPR / 17.5 million pounds under the UK GDPR, or 4% of their worldwide annual revenue, whichever is higher.

In addition, we may be unable to transfer personal data from Europe and other jurisdictions to the United States or other countries due to data localization requirements or limitations on cross-border data flows. Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries. In particular, the European Economic Area, or EEA, and the UK have significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it believes are inadequate. Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border data transfer laws. Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the

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United States in compliance with law, such as the EEA and UK's standard contractual clauses, these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States. If there is no lawful manner for us to transfer personal data from the EEA, the UK, or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business. Some European regulators have ordered certain companies to suspend or permanently cease certain transfers of personal data to recipients outside Europe for allegedly violating the EU GDPR's cross-border data transfer limitations. Additionally, companies that transfer personal data to recipients outside of the EEA and/or UK to other jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators individual litigants and activist groups.

In the United States federal, state and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal information privacy laws, consumer protection laws (e.g. Section 5 of the Federal Trade Commission Act), other similar laws (e.g. wiretapping laws). For example, HIPAA, as amended by HITECH, imposes specific requirements relating to the privacy, security and transmission of individually identifiable health information. Additionally, the California Consumer Privacy Act of 2018, or CCPA, applies to personal information of consumers, business representatives, and employees, and requires covered businesses to provide specific disclosures in privacy notices and honor requests of California residents to exercise certain privacy rights. The CCPA also provides for civil penalties for noncompliance of up to $7,500 per violation and allows private litigants affected by certain data breaches to recover significant statutory damages. Although there are limited exemptions for clinical trial data under the CCPA, the CCPA increases compliance costs and potential liability with respect to other personal data we maintain about California residents. In addition, the California Privacy Rights Act of 2020, or CPRA, expands the CCPA's requirements, including by adding a new right for individuals to correct their personal information and establishing a new regulatory agency to implement and enforce the law. Other states, such as Virginia and Colorado, have also passed comprehensive privacy laws, and similar laws are being considered in several other states, as well as at the federal and local levels. These developments may further complicate compliance efforts, and increase legal risk and compliance costs for us and the third parties upon whom we rely.

In addition to data privacy and security laws, we are contractually subject to industry standards adopted by industry groups and may become directly subject to such obligations in the future. We are also bound by other contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful.

We also publish privacy policies, marketing materials, and other statements, such as compliance with certain certifications or self-regulatory principles, regarding data privacy and security. If these policies, materials, or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators, or other adverse consequences.

Our obligations related to data privacy and security are quickly changing, becoming increasingly stringent, and creating regulatory uncertainty. All of these evolving compliance and operational requirements impose significant costs that are likely to increase over time, may require us to modify our information processing practices and policies, divert resources from other initiatives and projects, including increased costs related to insurance, cybersecurity and information technology, and could restrict the way products and services involving data are offered, all of which could significantly harm our business, financial condition, results of operations and prospects.

Although we endeavor to comply with all applicable data privacy and security obligations, we may at times fail (or be perceived to have failed) to do so. Moreover, despite our efforts, our personnel or third party partners (such as contract research organizations and clinical trial sites) may fail (or be perceived to have failed) to comply with such obligations, which could negatively impact our business operations and compliance posture. For example, any failure by a third-party processor to comply with applicable law, regulations, or contractual obligations could result in adverse effects, including inability to operate our business and proceedings against us by governmental entities or others. If we fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences. These consequences may include, but are not limited to, government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-related claims); additional reporting requirements and/or oversight; bans on processing personal information; orders to destroy or not use personal information; and imprisonment of company officials. Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: interruptions or stoppages in our business operations (including, as relevant, clinical trials); inability to process sensitive information or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or revision or restructuring of our operations.

*If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could significantly harm our business, financial condition, results of operations or prospects.*

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of

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