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Item 1A.Risk Factors

RISK FACTORS

Investing in our common stock involves a high degree of risk.

You should carefully consider the risks described below, as well as ~~all~~ other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes ~~thereto~~ and the section ~~entitled~~titled “Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations.~~Operations,” Ifbefore deciding whether to invest in our common stock. The occurrence of any of the ~~following risks occur,~~events or developments described below could harm our business, financial condition, ~~operating~~ results ~~prospects~~of operations, and ~~ability to accomplish our strategic objectives could be materially harmed. As a result,~~growth prospects. In such an event, the ~~trading~~market price of our common stock could ~~quickly~~ decline, ~~by a material amount,~~ and you ~~could~~may lose all or part of your investment.

Below is a summary of the principal factors that make an investment in our common stock speculative or risky. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may ~~also~~ impair our business operations and the market price of our common stock.

Risks Related to the Discovery, Development, and Commercialization of Our Product Candidates

~~Clinical~~

Since 2017, we have concentrated a substantial portion of our research and ~~Regulatory Risks~~development efforts on the treatment of Alzheimer’s disease, an area of research that has seen significant failure rates. Further, our product candidates are based on new scientific approaches and novel technology, which makes it difficult to predict the time and cost of product candidate development and likelihood of success.

We are heavily dependent on the success of simufilam, our product candidate which is still under development. If this product candidate does not receive regulatory approval, we will be unable to generate product revenue and our business will be harmed.

We have a limited operating history in our business targeting Alzheimer’s disease and no history of product approvals for commercial sale, which may make it difficult to evaluate our current business and predict our future success and viability.

We cannot give any assurance that any of our product candidates will receive regulatory approval, which is necessary before they can be commercialized.

There can be no assurance that results of smaller Phase 1 and Phase 2 clinical trials or open-label study with simufilam will be reproduced in our large Phase 3 studies that are required to demonstrate safety and efficacy in order to potentially receive regulatory approval.

We may encounter substantial delays in our clinical studies or may not be able to conduct or complete our clinical studies on the timelines we expect, if at all.

If physicians and patients do not accept and use our drugs, we will not achieve sufficient product revenues and our business will suffer.

Risks Related to Government Regulation and Other Legal Compliance Matters

Our ~~success depends in large part on receiving FDA~~financial condition and operating results could be adversely impacted by unfavorable results of legal proceedings, government investigations or allegations and other claims.

If we are ultimately unable to obtain regulatory approval for our product candidates, we will be unable to generate product revenue and our business will be substantially harmed.

Our ability to market and promote our product candidates will be determined and limited by FDA-approved labeling.

Our employees, independent contractors, consultants, commercial partners, and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

If we fail to comply with the complex federal, state, local and foreign laws and regulations that apply to our business, we could suffer severe consequences that could materially and adversely affect our operating results and financial condition.

Government agencies may establish and promulgate usage guidelines that could limit the use of our product candidates.

Risks Related to Our Intellectual Property

If we are unable to obtain and maintain sufficient patent protection for any product candidates we develop, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize any product candidates we may develop may be adversely affected.

U.S. intellectual property rights around diagnostic methods is a complex, evolving area of law and effective patent claims may not be available to us for our investigational diagnostic product candidate, SavaDx, in the United States.

Issued patents covering our product candidates and other technologies could be found invalid or unenforceable if challenged in court or before administrative bodies in the U.S. or abroad.

If we do not obtain patent term extension and data exclusivity for any product candidates we may develop, our business may be materially harmed.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be materially harmed.

Risks Related to Our Business and Operations

Our reputation and operations could be adversely impacted by allegations, regardless of their merits.

Our ability to continue to operate without any significant disruptions will, in part, depend on our ability to source raw materials and clinical supplies via our product supply chains.

The worldwide outbreak of the COVID-19 virus and associated mutations or variants may materially and adversely affect our business operations and our ability to conduct clinical studies.

Our reliance on third parties for both the supply and manufacture of materials for our product candidates carries the risk that we will not have sufficient quality or quantities of such materials or product candidates, or that such supply will not be available to us at an acceptable cost, which could delay, prevent, or impair our development or commercialization efforts.

We expect to grow the size and capabilities of our organization, including accessing new physical facilities, and we may experience difficulties in effectively managing this growth.

Ownership of our corporate headquarters and property leasing to third parties are subject to numerous risks and uncertainties.

Our internal computer systems, or those used by third parties on whom we rely, may fail or suffer other breakdowns, cyberattacks, or information security breaches that could compromise the confidentiality, integrity, and availability of such systems and data, result in material disruptions of our development programs and business operations, risk disclosure of confidential, financial, or proprietary information, and affect our reputation.

Our business involves environmental risks that may result in liability for us.

Business disruptions and lack of appropriate levels of commercial insurance could seriously harm our future revenue and financial condition and increase our costs and expenses.

Social media platforms present risks and challenges.

Risks Related to Financial Condition and Capital Requirements

We have incurred significant net losses in each period since our inception and anticipate that we will continue to incur net losses for the foreseeable future.

We have broad discretion in the use of the net proceeds from any of our financing transactions and may not use them effectively.

We have no product revenues and may never achieve revenues or profitability based on product revenues.

Risks Related to the Ownership of Our Common Stock

We do not know whether a sufficient market will continue to develop for our common stock or what the market price of our common stock will be, and, as a result, it may be difficult for investors to sell shares of our common stock.

The market price of our common stock has historically been highly volatile and we expect it to continue to be volatile, which could result in substantial losses for investors who purchase our shares.

If we are unable to maintain effective internal controls, our business, financial position, and results of operations could be adversely affected.

Anti-takeover provisions in our charter documents and Delaware law may prevent or delay removal of incumbent management or a change of control.

Changes in our ownership could limit our ability to utilize net operating loss carryforwards.

Risks Related to the Discovery, Development, and Commercialization of Our Product Candidates

Since 2017, we have concentrated a substantial portion of our research and development efforts on the treatment of Alzheimer’s disease, an area of research that has seen significant failure rates. Further, our product candidates are based on new scientific approaches and novel technology, which makes it difficult to predict the time and cost of product candidate development and likelihood of success.

Since 2017, we have concentrated a substantial portion of our research and development efforts on experimental methods for the treatment of Alzheimer’s disease. Prior efforts by biopharmaceutical companies to develop new treatments for Alzheimer’s disease have seen very limited clinical success. Since 2003, several large Phase 3 clinical studies in Alzheimer’s disease have been completed, yet no drug candidate has shown clear evidence of safety and clinical efficacy. There are no FDA-approved disease modifying therapeutics available for patients with Alzheimer’s disease. Notwithstanding these substantial challenges to date, we seek to improve brain health by addressing the neurodegeneration and neuroinflammation components of Alzheimer’s disease. Our lead drug candidate for Alzheimer’s disease is based on a new approach of stabilizing – but not removing – a critical protein in the brain. We cannot be certain that our novel technologies will lead to an approvable or marketable product. In addition, because FDA has limited comparators to evaluate our lead drug candidate, we could experience a longer than expected regulatory review process and increased development costs.

We are heavily dependent on the success of simufilam, our product ~~REMOXY.~~candidate which is still under development. If this product candidate does not receive regulatory approval, we will be unable to generate product revenue and our business may be harmed.

Since inception, we have not succeeded in getting regulatory approval for our product candidates and we may never do so. In recent years, we have invested a significant portion of our efforts and financial resources in the development of simufilam and, to a lesser extent, SavaDx, for the treatment and detection of Alzheimer’s disease, respectively. Our future success is substantially dependent on our ability to successfully complete clinical development and obtain regulatory approval for simufilam, which may never occur. We expect that a substantial portion of our efforts and expenditures over the next few years will be devoted to simufilam and, to a lesser extent, SavaDx. This will require additional clinical development, management of clinical and manufacturing activities, regulatory approval in one or more national jurisdictions and obtaining commercial-scale manufacturing supply. Substantial investment and significant efforts will be required before we can generate any revenues from any commercial sales. We cannot be certain that we will be able to successfully complete any of these activities.

We have a limited operating history in our business targeting Alzheimer’s disease and no history of product approvals for commercial sale, which may make it difficult to evaluate our current business and predict our future success and viability.

We are a clinical-stage biopharmaceutical company with a limited operating history in our business targeting Alzheimer’s disease. Since we commenced operations in 1998, we have had no product candidates approved for commercial sale and have not generated any revenue from product sales. Drug development is a highly uncertain undertaking and involves a substantial degree of risk. To date, we have not completed a pivotal clinical study involving Alzheimer’s disease, obtained marketing approval for any product candidates, or conducted sales and marketing activities necessary for successful product commercialization. Our long operating history as a company without product revenue makes any assessment of our future success and viability subject to significant uncertainty.

We will continue to encounter risks and difficulties frequently experienced by clinical-stage biopharmaceutical companies in rapidly evolving fields. We have not yet demonstrated an ability to successfully overcome such risks and difficulties. If we do not successfully address these risks and difficulties, our business, results of operations and financial condition will suffer materially.

We cannot give any assurance that any of our product candidates will receive regulatory approval, which is necessary before they can be commercialized.

To date, we have invested substantial effort and financial resources to identify, procure intellectual property for, and develop our programs in neurodegeneration, including conducting preclinical and clinical studies for our product candidates, simufilam and SavaDx, and providing general and administrative support for these operations. Our future success is dependent on our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize our product candidates, and we may fail to do so for many reasons, including the ~~development of~~ following:

our ~~lead~~ product ~~REMOXY. Despite these investments,~~ candidates may not successfully complete preclinical studies or clinical studies;

a product candidate may, on further study, be shown to have harmful side effects or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria;

our competitors may develop products that render our product candidates obsolete or less attractive;

the ~~REMOXY NDA received CRL from~~ product candidates that we develop may not be sufficiently covered by intellectual property;

the ~~FDA in 2008, 2011 and 2016 indicating our drug was not yet ready for approval. Collectively, these CRLs have resulted in long delays to~~ product ~~revenue; sudden, severe and prolonged drops in our stock price; loss of our initial competitive advantages in~~ candidates that we develop may be challenged by third parties’ patents or other intellectual property or exclusive rights;

the market for ~~abuse-deterrent opioid drugs;~~our product candidates may change so that the continued development of a product candidate is no longer reasonable or commercially attractive;

our product candidates may not be capable of being produced in commercial quantities at an acceptable cost, or at all;

if a product candidate obtains regulatory approval, we may be unable to establish sales and ~~dwindling cash balances. Accordingly,~~marketing capabilities, or successfully market such approved product candidate, to gain market acceptance; and

 a product candidate may not be accepted as safe, effective or useful by patients, the medical community or third-party payors, if applicable.

If any of these events occur, we may be forced to abandon our development efforts for a program or programs, which would have a material adverse effect on our business and could potentially cause us to cease operations.

We may not be successful in our efforts to further develop our product candidates. We are not permitted to market or promote any of our product candidates before we receive regulatory approval from FDA or comparable foreign regulatory authorities, and we may never receive such regulatory approval for any of our product candidates. SavaDx is in the early stages of development. Simufilam, our late-stage product candidate, will require significant additional clinical development, management of preclinical, clinical, and manufacturing activities, regulatory approval, adequate manufacturing supply, a commercial organization, and significant marketing efforts before we generate any revenue from product sales, if at all.

We have never completed a product development program in neurodegeneration. Further, we cannot ~~assure you~~be certain that any of our product candidates will be successful in clinical studies. We may in the future advance product candidates into clinical studies and terminate such studies prior to their completion.

If any of our product candidates successfully complete clinical studies, we may seek regulatory approval to market our product candidates in the U.S., Japan, Canada, the United Kingdom or the European Union, and in additional foreign countries where we believe there is a viable commercial opportunity. We may never receive regulatory approval to market any product candidates anywhere even if such product candidates successfully complete clinical studies, which would adversely affect our viability. To obtain regulatory approval in countries outside the U.S., we would need to comply with numerous and varying regulatory requirements of such other countries regarding safety, efficacy, manufacturing and controls, clinical studies, commercial sales, pricing, and distribution of our product candidates. Even if we are successful in obtaining approval in one jurisdiction, we cannot ensure that we will obtain approval in any other jurisdictions. If we are unable to obtain approval for our product candidates in multiple jurisdictions, our business, financial condition, results of operations, and our growth prospects could be negatively affected.

Even if we receive regulatory approval to market any of our product candidates, whether for the treatment or diagnosis of neurodegenerative diseases or other diseases, we cannot provide assurance that any such product candidate will be successfully commercialized, widely accepted in the marketplace or more effective than other commercially available alternatives.

Investment in biopharmaceutical product development involves significant risk that any product candidate will fail to demonstrate adequate efficacy or an acceptable safety profile, gain regulatory approval, and become commercially viable. We cannot provide any assurance that we will be able to successfully advance any of our product candidates through the development process or, if approved, successfully commercialize any of our product candidates.

There can be no assurance that results of smaller Phase 1 and Phase 2 clinical trials or open-label study with simufilam will be reproduced in our large Phase 3 studies that are required to demonstrate safety and efficacy in order to potentially receive ~~FDA~~regulatory approval.

Results of our Phase 1, Phase 2 and open-label safety studies with simufilam may not be predictive of the results of later-stage clinical trials. Simufilam may fail to show the desired safety and efficacy in later clinical trials despite having progressed through preclinical studies and initial clinical trials. Many companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. In addition, conclusions based on data from analyses of Phase 1 and Phase 2 clinical studies and open-label results may not be reproduced when implemented in large, well-controlled, randomized clinical trials. Even if our clinical trials for simufilam are completed as planned, we cannot be certain that their results will support the safety and efficacy sufficient to obtain regulatory approval.

We may encounter substantial delays in our clinical studies or may not be able to conduct or complete our clinical studies on the timelines we expect, if at all.

Clinical testing is expensive, time consuming, and subject to uncertainty. We cannot guarantee that any clinical studies will be conducted as planned, enroll patients as planned or be completed on schedule, if at all. Moreover, even after our studies begin, safety or other issues may arise that could suspend or terminate such clinical studies. A failure of one or more clinical studies can occur at any stage of testing, and our future clinical studies may not be successful. Events that may prevent successful or timely initiation or completion of clinical studies include:

inability to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation or continuation of clinical studies;

delays in confirming target engagement, patient selection, or other relevant biomarkers to be utilized in preclinical and clinical product candidate development;

delays in reaching a consensus with regulatory agencies on study design;

delays in reaching an agreement on acceptable terms with prospective and clinical study sites, the terms of which can be subject to extensive negotiation and may vary significantly among different clinical study sites;

delays in identifying and recruiting suitable clinical investigators;

delays in obtaining required IRB approval for ~~REMOXY,~~each clinical study site;

 a new safety finding that presents unreasonable risk to clinical study participants;

a negative finding from an inspection of our clinical research organization (CRO), clinical study operations or study sites; or

the finding that the investigational protocol or plan is deficient to meet its stated objectives;

delays in identifying, recruiting, and enrolling suitable patients to participate in our clinical studies, and delays caused by patients withdrawing from clinical studies, or failing to return for post-treatment follow-up;

delays caused by disease epidemics or pandemics, such as COVID-19;

difficulty collaborating with patient groups and investigators;

failure by our CRO or other third parties, or us to adhere to clinical study requirements;

failure to perform in accordance with FDA’s or any other regulatory authority’s Code of Good Clinical Practice (GCPs) requirements, or other regulatory guidelines in other countries;

occurrence of adverse events associated with the product candidate that are viewed to outweigh its potential benefits;

changes in regulatory requirements and guidance that require amending or submitting new clinical protocols;

changes in the standard of care on which a clinical development plan was based, which may require new or additional studies;

the cost of clinical studies of our product candidates being greater than we anticipate;

clinical studies of our product candidates producing negative or inconclusive results, which may result in our deciding, or regulators requiring us, to conduct additional clinical studies or abandon product development programs; and

delays in manufacturing, testing, releasing, validating, or importing/exporting sufficient stable quantities of our product candidates for use in clinical studies or the inability to do any of the foregoing.

Any inability to successfully initiate or complete clinical studies could result in additional costs to us or impair our ability to generate revenue. In addition, if we make manufacturing or formulation changes to our product candidates, we may be required to, or we may elect, to conduct additional studies to bridge our modified product candidates to earlier versions. Clinical study delays could also shorten any periods during which our products have patent protection and may allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize ~~this~~our product candidates and may harm our business and results of operations.

We may in the future advance product candidates into clinical studies and terminate such studies prior to their completion, which could adversely affect our business.

Delays in the completion of any clinical study of our product candidates will increase our costs, slow down our product candidate development and approval process and delay, or potentially jeopardize our ability to commence product sales and generate revenue. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical studies may also ultimately lead to the denial of regulatory approval of our product candidates.

The FDA or other regulatory agency may put a clinical hold on our clinical studies and our business will suffer.

A clinical hold is an order issued by FDA or other regulatory agency to suspend an ongoing clinical trial, typically due to newly identified deficiencies with our studies or our drug candidate. For example, we are aware that in 2022, FDA has placed clinical holds on drug candidates for Alzheimer’s disease from two competitors, Cortexzyme Inc. and Denali Therapeutics Inc. The grounds for imposition of a clinical hold are complex, variable and somewhat arbitrary. If FDA imposes a clinical hold on us, no new subjects may be enrolled and study subjects already in a study may be taken off our drug candidate unless treatment is specifically permitted by FDA in the interest of patient safety. If we ~~cannot do so,~~are issued a clinical hold, FDA will expect us to address the cited deficiencies and submit a detailed, written response. A clinical hold may require us to spend significant resources over many months to address the root causes of FDA’s concerns. We may not find and successfully address such root causes, which could adversely affect our business. Our response may not be adequate to lift such clinical hold, or we may disagree with FDA’s assessments of deficiencies. If we are ~~significantly delayed~~on clinical hold for 1 year or longer, the FDA may consider our IND for simufilam to fall into Inactive Status, which may result in ~~doing so,~~termination of the clinical program for simufilam. To the extent we are not successful in lifting an FDA clinical hold, our results of operations and business will be materially ~~harmed,~~adversely affected.

If physicians and patients do not accept and use our drugs, we will not achieve sufficient product revenues and our business will suffer.

Even if FDA approves our drugs, physicians and patients may not accept and use them. Acceptance and use of our drugs will depend on a number of factors including:

when the drug is launched into the market and related competition;

approved label claims;

perceptions by members of the healthcare community, including physicians, about the safety and effectiveness of our drugs;

perceptions by physicians regarding the cost-benefit of our product candidates;

published studies demonstrating the cost effectiveness of our drugs relative to competing products;

availability of reimbursement for our products from government or healthcare payers;

effectiveness of marketing and distribution efforts by us and other licensees and distributors.

Because we expect to rely on sales generated by our current lead product candidates for substantially all of our revenues for the foreseeable future, the failure of any of these drugs to find market acceptance would harm our business and could require us to seek additional financing.

We may not be successful in developing our product candidates in neurodegeneration.

Our product candidates in neurodegeneration are still in development and will take several more years to develop and must undergo extensive clinical and scientific validations.Even if we are successful in developing any of our product candidates through clinical and scientific validation, we may not be able to ~~survive as~~develop a ~~business.~~drug or a diagnostic that:

~~The FDA may not approve product labeling for REMOXY that would permit us to market~~meets applicable regulatory standards, in a timely manner or at all;

successfully competes with other technologies and ~~promote this drug in~~tests;

avoids infringing the ~~United States~~proprietary rights of others;

is adequately reimbursed by ~~describing their abuse-deterrent features.~~third-party payors;

~~There~~ can be no assurance that REMOXY will receive final FDA-approved product labeling that adequately describes its abuse deterrent features. We have invested substantial time and money conducting abuse deterrence studies to ensure that REMOXY complies with the FDA’s guidance regarding opioid abuse deterrence. If the FDA does not approve product labeling containing abuse deterrence claims for REMOXY, we will not be able to promote REMOXY based on its abuse deterrent features and may not be able to differentiate our drug from other opioid products containing the same active pharmaceutical ingredients. This would make REMOXY less competitive,performed at commercial levels or even un-competitive, in the market. Furthermore, the FDA’s April 2015 final guidance on abuse deterrent opioids expects sponsors to compare their formulations against approved abuse deterrent versions of the same opioid based on the relevant categories of testing. If the FDA decides that REMOXY is less resistant to manipulation than an approved product, our lead drug candidate may not be approvedat reasonable cost; or ~~may lack product labeling containing abuse deterrence claims~~

Even if REMOXY is approved for marketing with certain abuse-deterrence claims, the April 2015 final FDA guidance on abuse-deterrent opioids is not binding law and may be superseded or modified at any time. Also, if the FDA determines that our post-marketing data do not demonstrate that REMOXY’s abuse-deterrent properties do in fact result in reduction of abuse, or demonstrate a shift to routes of abuse that present a greater risk, the FDA may find that product labeling revisions are needed, and potentially may require the removal of any abuse-deterrence claims.

~~If we fail to obtain the necessary regulatory approvals, or if such approvals are limited, we and our collaborators will not be~~ ~~allowed~~ ~~to commercialize our drug candidates, and we will not generate product revenues.~~

Satisfaction of all regulatory requirements for commercialization of a drug candidate typically takes many years, is dependent upon the type, complexity and novelty of the drug candidate, and requires the expenditure of substantial resources for research and development. In December 2008, we received from the FDA a CRL for the REMOXY NDA. In this CRL, the FDA indicated that additional non-clinical data was required to support the approval of REMOXY. However, the FDA did not request or recommend additional clinical efficacy studies prior to approval. In March 2009, King Pharmaceuticals, Inc., or King, assumed sole responsibility for the regulatory approval of REMOXY. In December 2010, King resubmitted the NDA for REMOXY. In June 2011, we and Pfizer announced that King received a CRL from the FDA in response to King’s

resubmission of the REMOXY NDA. The FDA’s CRL raised concerns related to, among other matters, the Chemistry, Manufacturing, and Controls section of the NDA for REMOXY. Certain drug lots showed inconsistent release performance during ~~in vitro~~ testing. Pfizer completed work designed to address the June 2011 CRL. On April 21, 2015, we announced that we resumed responsibility for REMOXY under the terms of a letter agreement with Pfizer. The letter agreement was entered into within the scope of the previously disclosed provisions of the Collaboration Agreement between us and Pfizer relating to the return of REMOXY.

We believe Pfizer has now transferred to us its data, materials, capital equipment and other assets related to REMOXY. Pfizer and the FDA had discussed and agreed to a regulatory plan to refile the NDA for REMOXY. The FDA had agreed that we may follow this plan for the NDA for REMOXY.

In March 2016, we resubmitted to the FDA the NDA for REMOXY. In April 2016, the FDA determined that the NDA for REMOXY was sufficiently complete to permit a substantive review. On May 19, 2016, we announced that the FDA planned to hold an Advisory Committee meeting to review the NDA for REMOXY. ~~On July 1, 2016, we announced that the FDA had determined that an Advisory Committee meeting for REMOXY was unnecessary and would not be held.~~

~~In September 2016, we received~~ a ~~CRL~~ ~~from the FDA on the resubmission of NDA for REMOXY.~~ ~~The CRL informed us that the NDA for REMOXY could not be approved in its present form and specifies~~ ~~additional actions and data that are needed for drug approval. The CRL focuses on the abuse-deterrent properties of REMOXY and proposed drug labeling.~~

On February 13, 2017, we met with the FDA regarding REMOXY. During this meeting, we reached agreement with the FDA on a roadmap to resubmit the NDA for REMOXY. Final minutes of our FDA meeting confirmed two key requirements needed for the resubmission of the REMOXY NDA: a) to conduct a clinical abuse potential study via the intranasal route of abuse; and b) to conduct a non-clinical abuse potential study using household solvents.

During 2017, we conducted these mandated studies with REMOXY. In November 2017, we concluded a regulatory meeting with the FDA. The purpose of this pre-New Drug Application (NDA) meeting was to agree on submission requirements for the REMOXY NDA under 505(b)(2) of the Federal Food, Drug, and Cosmetic Act. We received comments and clarification from the FDA on the acceptability of the data to be included in the REMOXY NDA resubmission, including a recent intranasal study. All questions were addressed and summarized in official minutes of the meeting issued by the FDA. There are no discrepancies or requests for clarifications following receipt of final meeting minutes. As a result, we intend to resubmit the REMOXY NDA in Q1 2018 with Priority (six-month) Review.

~~There~~ can be ~~no assurance that~~successfully marketed.

To the FDA will approve an NDA for REMOXY or that the FDA will not require submission of additional clinical or non-clinical data. Obtaining data from such studies (even if completed) that is insufficient to support approval of REMOXY, or any adverse decisions by the FDA (including any decision by the FDA to require additional clinical or non-clinical data) may significantly delay or prevent the potential approval of REMOXY.

Our research and clinical approaches may not lead to drugs that the FDA considers safe for humans and effective for indicated uses we are studying. The FDA may require additional studies, in which case we or our collaborators would have to expend additional time and resources and would likely delay the date of potentially receiving regulatory approval. The approval process may also be delayed by changes in government regulation, future legislation or administrative action or changes in FDA policy that occur prior to or during our regulatory review. Delays in obtaining regulatory approvals would:

~~delay commercialization of, and product revenues from, our drug candidates; and~~

~~diminish the competitive advantages that we may have otherwise enjoyed, which would have an adverse effect on our operating results and financial condition.~~

Even if we or our collaborators comply with all FDA regulatory requirements, our drug candidates may never obtain regulatory approval. If we or our collaborators fail to obtain regulatory approval for any of our drug candidates we will have fewer commercial products, if any, and corresponding lower product revenues, if any. Even if our drug candidates receive regulatory approval, such approval may involve limitations on the indications and conditions of use or marketing claims for our products. Further, later discovery of previously unknown problems or adverse events could result in additional regulatory restrictions, including withdrawal of products. The FDA may also require us or our collaborators to commit to perform lengthy Phase IV post-approval clinical efficacy or safety studies. Our expending additional resources on such trials would have an adverse effect on our operating results and financial condition.

In jurisdictions outside the United States, we must receive marketing authorizations from the appropriate regulatory authorities before commercializing our drugs. Regulatory approval processes outside the United States generally include all of the aforementioned requirements and risks associated with FDA approval.

~~If we are unable to design, conduct and complete preclinical and clinical trials successfully, our drug candidates will not be able to receive regulatory approval.~~

In order to obtain FDA approval for any of our drug candidates, we must submit to the FDA an NDA that demonstrates with substantive evidence that the drug candidate is both safe and effective in humans for its intended use. This demonstration requires significant research and animal tests, which are referred to as preclinical studies, as well as human tests, which are referred to as clinical trials.

Preclinical studies may not provide results we believe are sufficient to support the filing of an IND. Success in early preclinical studies does not ensure success in later preclinical or clinical studies. The FDA may disagree with the design of our preclinical studies or our interpretations of data from preclinical studies. The FDA may not accept an IND for our product candidate and may require additional preclinical studies to support the filing of an IND.

Success in preclinical studies and early clinical trials does not ensure that later clinical trials will be successful. Results from Phase I clinical programs may not support moving a drug candidate to Phase II or Phase III clinical trials. Phase III clinical trials may not demonstrate the safety or efficacy of our drug candidates. Results of later clinical trials may not replicate the results of prior clinical trials and preclinical studies. Even if the results of Phase III clinical trials are positive, we or our collaborators may have to commit substantial time and additional resources to conducting further preclinical studies and clinical trials before obtaining FDA approval for any of our drug candidates.

Clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous requirements. The clinical trial process also consumes a significant amount of time. Furthermore, if patients in clinical trials suffer drug-related adverse reactions during the course of such clinical trials, or if we, our collaborators or the FDA believe that participating patients are being exposed to unacceptable health risks, such clinical trials will have to be suspended or terminated. Failure can occur at any stage of the clinical trials, and we or our collaborators could encounter problems that cause abandonment or repetition of clinical trials.

Clinical trials with REMOXY and our potential future clinical trials for other drug candidates for treatment of pain measure clinical symptoms, such as pain and physical dependence, that are not biologically measurable. The success in these clinical trials depends on reaching statistically significant changes in patients’ symptoms based on clinician-rated scales. Due in part to a lack of consensus on standardized processes for assessing clinical outcomes, these scores may or may not be reliable, useful or acceptable to regulatory agencies.

~~In addition, completion of clinical trials can be delayed by numerous factors, including:~~

~~delays in identifying and agreeing on acceptable terms with prospective clinical trial sites;~~

~~slower than expected rates of patient recruitment and enrollment;~~

~~unanticipated patient dropout rates;~~

~~increases in time required to complete monitoring of patients during or after participation in a clinical trial; and~~

~~unexpected need for additional patient-related data.~~

~~Any of these delays could significantly impact the timing, approval and commercialization of our drug candidates and could significantly increase our overall costs of drug development.~~

Even if clinical trials are completed as planned, their results may not support expectations or intended marketing claims. The clinical trials process may fail to demonstrate that our drug candidates are safe and effective for indicated uses. Such failure would cause us to abandon a drug candidate and could delay development of other drug candidates.

Clinical trial designs that were discussed with regulatory authorities prior to their commencement may subsequently be considered insufficient for approval at the time of application for regulatory approval.

We discuss with and obtain guidance from regulatory authorities on certain of our clinical development activities. With the exception of our Special Protocol Assessment (SPA), these discussions are not binding obligations on the part of regulatory authorities.

Regulatory authorities may revise previous guidance or decide to ignore previous guidance at any time during the course of our clinical activities or after the completion of our clinical trials. Even with successful clinical safety and efficacy data, including such data from a clinical trial conducted pursuant to a SPA, we or our collaborators may be required to conduct additional, expensive clinical trials to obtain regulatory approval.

~~Developments by competitors may establish standards of care that affect our ability to conduct our clinical trials as planned.~~

We have conducted clinical trials of our drug candidates comparing our drug candidates to both placebo and other approved drugs. Changes in standards related to clinical trial design could affect our ability to design and conduct clinical trials as planned. For example, regulatory authorities may not allow us to compare our drug candidates to placebo in a particular clinical indication where approved products are available. In that case, both the cost and the amount of time required to conduct a clinical trial could increase.

The U.S. Drug Enforcement Agency, or DEA, limits the availability of the active ingredients in certain of our current drug candidates and, as a result, quotas for these ingredients may not be sufficient to complete clinical trials, or to meet commercial demand, or may result in clinical delays.

The DEA regulates chemical compounds as Schedule I, II, III, IV or V substances, with Schedule I substances considered to present the highest risk of substance abuse and Schedule V substances the lowest risk. Certain active ingredients in our current drug candidates, such as oxycodone, are listed by the DEA as Schedule II under the Controlled Substances Act of 1970. Consequently, their manufacture, research, shipment, storage, sale and use are subject to a high degree of oversight and regulation. For example, all Schedule II drug prescriptions must be signed by a physician, physically presented to a pharmacist and may not be refilled without a new prescription. Furthermore, the amount of Schedule II substances that can be obtained for clinical trials and commercial distribution is limited by the DEA and quotas for these substances may not be sufficient to complete clinical trials or meet commercial demand. There is a risk that DEA regulations may interfere with the supply of the drugs used in clinical trials for our product candidates, and, in the future, the ability to produce and distribute our products in the volume needed to meet commercial demand.

Conducting clinical trials of our drug candidates or potential commercial sales of a drug candidate may expose us to expensive product liability claims, and we may not be able to maintain product liability insurance on reasonable terms or at all.

The risk of product liability is inherent in the testing of pharmaceutical products. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit or terminate testing of one or more of our drug candidates. Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of our drug candidates. We currently carry clinical trial insurance but do not carry product liability insurance. If we successfully commercialize one or more of our drug candidates, we may face product liability claims, regardless of FDA approval for commercial manufacturing and sale. We may not be able to obtain such insurance at a reasonable cost, if at all. Even if our agreements with any current or future corporate collaborators entitle us to indemnification against product liability losses, such indemnification may not be available or adequate should any claim arise.

If our drug candidates receive regulatory approval, we and our collaborators will be subject to ongoing FDA obligations and continued regulatory review, such as continued safety reporting requirements, and we and our collaborators may also be subject to additional FDA post-marketing obligations or new regulations, all of which may result in significant expense and limit our and our collaborators’ ability to commercialize our potential drugs.

Any regulatory approvals that our drug candidates receive may also be subject to limitations on the indicated uses for which the drug may be marketed or contain requirements for potentially costly post-marketing follow-up studies. In addition, if the FDA approves any of our drug candidates, the labeling, packaging, adverse event reporting, storage, advertising, promotion and record keeping for the drug will be subject to extensive regulatory requirements. The subsequent discovery of previously unknown problems with the drug, including but not limited to adverse events of unanticipated severity or frequency, or the discovery that adverse events previously observed in preclinical research or clinical trials that were believed to be minor actually constitute much more serious problems, may result in restrictions on the marketing of the drug, and could include withdrawal of the drug from the market.

~~The FDA’s policies may change and additional government regulations may be enacted that could prevent or delay regulatory approval of our drug candidates. We cannot predict the likelihood, nature or~~ extent of adverse government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are not able to maintain regulatory compliance, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution. Any of these events could prevent us from marketing our drugs and our business could suffer.

~~We may not be able to successfully develop or commercialize FENROCK, a proprietary abuse-deterrent transdermal pain patch (fentanyl), designed to prevent common methods of abuse of fentanyl.~~

We have no history of developing transdermal patches. We do not know whether any of our planned development activities for FENROCK will result in approval of such drug candidate by the FDA, or, if FENROCK is approved, it will be a commercially viable product.

~~We may not be able to successfully develop or commercialize PTI-125, a proprietary drug candidate to treat Alzheimer’s disease.~~

We have no history of developing treatment for AD. The biopharmaceutical industry as a whole has a poor track record in developing drugs for AD. Drug candidates aimed at AD have almost universally failed in every attempt to show late-stage efficacy in clinical studies. We do not know whether any of our planned development activities for AD will result in approval of such drug candidate by the FDA, or, if PTI-125 is approved, it will be a commercially viable product.

~~We may not be able to successfully develop or commercialize PTI-125DX, a blood-based test to detect Alzheimer’s disease.~~

We have no history of developing diagnostics. The biopharmaceutical industry as a whole has a poor track record in developing blood-based diagnostics for AD. Diagnostics aimed at detecting AD have almost universally failed in large studies despite evidence of success in early testing. We do not know whether any of our planned development activities for AD will result in approval of a diagnostic by the FDA, or, if PTI-125DX is approved, it will be a commercially viable product.

~~Risks Relating to our Collaboration Agreements~~

If Pfizer did not transfer to us all data and documentation or the quality of the data and documentation transferred is insufficient, our ability to achieve approval of the NDA for REMOXY will be negatively impacted and our business will suffer.

In April 2015, we announced that we resumed responsibility for REMOXY under the terms of a letter agreement with Pfizer. The letter agreement was entered into within the scope of the previously disclosed provisions of the Collaboration Agreement between us and Pfizer relating to the return of REMOXY.

We believe Pfizer has transferred to us data, materials, capital equipment and other assets related to REMOXY. In preparing to resubmit the NDA for REMOXY, we may find that there are additional data, materials or agreements that Pfizer should have transferred to us. If Pfizer did not meet its obligations to transfer all such materials or if the quality of the data and documentation transferred is insufficient, we would be significantly delayed in our ability to achieve FDA approval of the NDA for REMOXY, and may need to conduct further development activities or clinical trials to prepare any potential resubmission. As a result, any further development, regulatory approval and product introduction for REMOXY would be delayed or prevented and our business would suffer.

If outside collaborators fail to devote sufficient time and resources to drug development programs related to our product candidates, or to the manufacture of our products, or if their performance is substandard, regulatory submissions and introductions for our products may be delayed.

We rely on Durect as the sole-source provider of certain components of REMOXY. Durect’s failure for any reason to provide these components could result in delays or failures in product testing or delivery, cost overruns or other problems that could materially harm our business.

We depend on independent investigators and collaborators, such as universities and medical institutions, to conduct our clinical trials under agreements with us. These investigators and collaborators are not our employees, and we cannot control the amount or timing of resources that they devote to our programs. They may not assign as great a priority to our programs or pursue them as diligently as we would if we were undertaking such activities ourselves. If these investigators or collaborators fail to devote sufficient time and resources to our drug development programs, or if their performance is substandard, the approval of our regulatory submissions and our introductions of new drugs will be delayed or prevented.

Our collaborators may also have relationships with other commercial entities, some of which may compete with us. If outside collaborators assist our competitors to our detriment, the approval of our regulatory submissions will be delayed and the sales from our products, if any are commercialized, will be less than expected.

If we fail to enter into or maintain collaboration agreements and licenses for REMOXY and other drugs designed to reduce potential risks of unintended use, we may have to reduce or delay our drug candidate development.

Our plan for developing, manufacturing and commercializing REMOXY currently requires us to successfully maintain our license from Durect. If we are unable to meet the obligations necessary to maintain our license with Durect for one or more potential products we may lose the rights to utilize Durect’s technology for such potential products, our potential future revenues may suffer and we may have to reduce or delay development of our other drug candidates. In addition, we expect to seek a new corporate collaborator with respect to REMOXY. If we do not enter into a new collaboration with respect to the continued development and potential commercialization of REMOXY, we will be required to undertake and fund such activities ourselves and may need to seek additional capital (which may not be available on acceptable terms, if at all), personnel or other resources. If we are not successful in ~~such efforts, development~~developing our new product candidates in neurodegeneration, our results of operations and ~~commercialization~~business will be materially adversely affected.

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

From time to time, we may publish interim, “top-line” or preliminary data from our clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of ~~REMOXY~~the clinical outcomes may materially change as patient enrollment continues and ~~our other drug candidates would~~more patient data become available. Preliminary or “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, interim and preliminary data should be ~~delayed~~viewed with caution until the final data is available. Differences between preliminary or ~~prevented,~~interim data and final data could significantly harm our business ~~would suffer.~~prospects and may cause the trading price of our common stock to fluctuate significantly.

~~We may not succeed at in-licensing drug candidates or technologies to expand our product pipeline.~~

We may not successfully in-license drug candidates or technologies to expand our product pipeline. The number of such candidates and technologies is limited. Competition among large pharmaceutical companies and biopharmaceutical companies for promising drug candidates and technologies is intense because such companies generally desire to expand their product pipelines through in-licensing. If we fail to carry out such in-licensing and expand our product pipeline, our potential future revenues may suffer.

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~~Our collaborative agreements may not succeed or may give rise to disputes over intellectual property, disputes concerning the scope of collaboration activities or other issues.~~

Our collaborative agreements with third parties, such as our license agreement with Durect, are generally complex and contain provisions that could give rise to legal disputes, including potential disputes concerning ownership of intellectual property under collaborations or disputes concerning the scope of collaboration activities. Such disputes can delay or prevent the development of potential new drug products, or can lead to lengthy, expensive litigation or arbitration. Other factors relating to collaborative agreements may adversely affect our business, including:

~~the development of parallel products by our collaborators or by a competitor;~~

~~arrangements with collaborative partners that limit or preclude us from developing certain products or technologies;~~

~~premature termination of a collaborative or license agreement; or~~

failure by a collaborative partner to provide required funding, to devote sufficient resources to the development of or legal defense of our potential products or to provide data or other information to us as required by our collaborative agreements.

~~Risks Relating to Commercialization~~

We currently have no in-house capabilities to manufacture or commercialize our product candidates and we rely on third-party commercial drug ~~products.~~manufacturers for clinical drug supplies. If we are unable to develop our own manufacturing, sales, marketing and distribution capabilities, or if we are not successful in contracting with third parties for these services on favorable terms, or at all, our product revenues could be ~~disappointing.~~adversely impacted.

We ~~currently~~ rely on ~~Mallinckrodt as the sole manufacturer for REMOXY~~various third parties to manufacture, fill, label, store, test and ~~commercialization of REMOXY is dependent~~ship our product candidates. We plan to continue to outsource formulation, manufacturing and related activities. These suppliers must comply with cGMP regulations enforced by FDA and other government agencies, and are subject to ongoing periodic unannounced inspection, including preapproval inspections by FDA and corresponding state and foreign government agencies to ensure strict compliance with cGMP and other standards. These manufacturers may subsequently be stopped from producing, manufacturing, filling, labeling, storing, testing and shipping our product candidates due to their non-compliance with federal, state or local regulations. We do not have control over our suppliers’ compliance with these regulations and standards and we cannot control decisions by our suppliers that affect their ability or willingness to continue to supply us on ~~continuation of such relationship.~~ acceptable terms, or at all.

Disputes in the past have arisen with ~~Mallinckrodt~~some of these third parties with respect to us fulfilling ~~our obligations under the Mallinckrodt Agreement.~~certain conditions and obligations. There can be no guarantee that such disputes will not arise again in the future, which may lead to ~~Mallinckrodt terminating the Mallinckrodt Agreement.~~termination of an agreement. If ~~the Mallinckrodt Agreement~~an agreement is terminated, we would not be able to commercialize ~~REMOXY~~our product candidates until another manufacturer is identified and we have entered into a manufacturing agreement with such manufacturer. ~~If we are required~~We may not be able to replace ~~Mallinckrodt~~a commercial supplier on commercially reasonable terms, or at all. Replacing any of our commercial suppliers would be expensive and time consuming. Failure by any of our suppliers to perform as expected could delay or prevent the ~~manufacturer~~commercialization or potential regulatory approval of ~~REMOXY, it is likely to delay commercialization of REMOXY~~our product candidates for an extended period of ~~time.~~time, result in shortages, cost overruns or other problems and would materially harm our business.

We currently have no sales, marketing or distribution capabilities. We have not established commercial strategies regarding any of our product ~~candidates, including REMOXY.~~candidates. In order to commercialize our products, if any are approved by ~~the~~ FDA, we will either have to develop such capabilities internally or collaborate with third parties who can perform these services for us.

If we decide to commercialize any of our drugs ourselves, we may not be able to

~~hire and retain the necessary experienced personnel;~~

~~build sales, marketing and distribution operations in a cost-effective manner which are capable of successfully launching new drugs;~~

~~obtain access to adequate numbers of physicians to prescribe our products; or~~

~~generate sufficient product revenues.~~

hire and retain the necessary experienced personnel;

build sales, marketing and distribution operations in a cost-effective manner which are capable of successfully launching new drugs;

obtain access to adequate numbers of physicians to prescribe our products; or

generate sufficient product revenues.

In addition, establishing such operations on our own will take time and involve significant expense. If our commercial operations lack complementary products, we may not be able to compete in a cost-effective manner with competitors with more products to sell. If we engage third-party collaborators to perform any commercial operations, our future revenues may depend significantly upon the performance of those collaborators.

If we decide to enter into new co-promotion or other licensing arrangements with third parties, we may be unable to locate acceptable collaborators because the number of potential collaborators is limited and because of competition from others for similar ~~alliances with potential collaborators.~~alliances. Even if we are able to identify one or more acceptable new collaborators, we may not be able to enter into any collaborative arrangements on favorable terms, or at all.

In addition, due to the nature of the market for our ~~drug~~product candidates, it may be necessary for us to license all or substantially all of our ~~drug~~product candidates to a single collaborator, thereby eliminating our opportunity to commercialize these other products independently. If we enter into any such new collaborative arrangements, our revenues are likely to be lower than if we marketed and sold our products ourselves.

In addition, any revenues we receive would depend upon our collaborators’ efforts which may not be adequate due to lack of attention or resource commitments, management turnover, change of strategic focus, business combinations or other factors outside of our control. Depending upon the terms of our collaboration, the remedies we have against an under-performing collaborator may be limited. If we were to terminate the relationship, it may be difficult or impossible to find a replacement collaborator on acceptable terms, or at all.

Nearly every attempt at drug approval for Alzheimer’s disease has failed.

Despite billions of dollars invested by NIH and the biopharmaceutical industry in research programs to develop novel therapeutics for Alzheimer’s disease, the FDA has not approved any new drugs for Alzheimer’s disease since 2003, except, however, that in June 2021, aducanumab (Biogen, Inc) received approval from FDA for the treatment of Alzheimer’s disease using the accelerated approval pathway. Since 2003, many new types and classes of drugs have been developed and tested in Alzheimer’s disease, including monoclonal antibodies, gamma secretase modulators and inhibitors, β-site amyloid precursor protein cleaving enzyme (BACE) inhibitors, receptor for advanced glycation end-products (RAGE) inhibitors, nicotinic partial agonists and allosteric modulators, serotonin subtype receptor (5HT6) antagonists, and others. Virtually all of these scientific programs have failed in clinical testing.

We may not be successful in our efforts to expand our technology or product candidates in other indications.

Our drug development strategy is to clinically test and seek regulatory approval for our product candidates in Alzheimer’s disease, our primary indication. We may expand our research efforts outside of this primary indication and into other areas of clinical medicine based on genetic, biological or mechanistic overlap with the primary indication. Conducting clinical studies for additional indications for our product candidates will require substantial technical, financial and human resources and is prone to the inherent risks of failure in drug development. We cannot provide any assurance that we will be successful in our effort to expand our technology or our product candidates in additional indications, even if we obtain approval for our product candidate in Alzheimer’s disease.

If ~~physicians~~we fail to successfully identify and develop additional product candidates, our commercial opportunity will be limited to Alzheimer’s disease or other neurodegenerations.

Identifying, developing, obtaining regulatory approval, and commercializing additional product candidates requires substantial expertise and funding and is prone to the risks of failure inherent in drug development. We cannot provide any assurance that we will be able to successfully identify or acquire additional product candidates, advance any additional product candidates through the development process, or assemble sufficient resources to identify, acquire, or develop additional product candidates. If we are unable to successfully identify, acquire, develop, and commercialize additional product candidates, our commercial opportunity may be limited.

Early indications of safety and tolerability from our small clinical studies with simufilam may not predict the results of later studies.

Results of a Phase 1 clinical study with simufilam demonstrated safety, tolerability and pharmacokinetics in 24 healthy subjects exposed to 50-200 mg in a single ascending dose study. However, this was a small, “first-in-human” Phase 1 study designed to assess the initial safety characteristics of simufilam in healthy subjects and this study was not designed to, and did not, evaluate safety, tolerability and efficacy of simufilam in patients. Additional large, well-controlled, multi-dose studies will be required to evaluate the safety, tolerability and efficacy of simufilam to treat patients with any indication, including Alzheimer’s disease. There can be no assurance that such future studies will demonstrate the safety, tolerability or efficacy of simufilam.

Phase 2 clinical studies with simufilam were designed to assess the safety characteristics of simufilam in patients. Our Phase 2 program was not designed to, and did not, evaluate large-scale or long-term safety, tolerability and efficacy of simufilam in patients. Additional large, well-controlled, multi-dose studies will be required to evaluate the safety, tolerability and efficacy of simufilam to treat patients with any indication, including Alzheimer’s disease. There can be no assurance that such future studies will demonstrate the safety, tolerability or efficacy of simufilam. The failure of simufilam to show safety, tolerability or efficacy in any future clinical studies would significantly harm our business.

We have never obtained FDA approval for a diagnostic test and we may not be able to secure such approval in a timely manner or at all.

We are developing a blood-based diagnostic test for Alzheimer’s disease, called SavaDx, which will require FDA approval prior to commercialization. Our diagnostic product candidate, marketing, sales and development activities and manufacturing processes are subject to extensive and rigorous regulation by FDA pursuant to the FDCA, by comparable agencies in foreign countries, and by other regulatory agencies and governing bodies. Under the FDCA, a diagnostic must

receive FDA clearance or approval before it can be commercially marketed in the U.S. The process of obtaining marketing approval or clearance from FDA or by comparable agencies in foreign countries for new products could:

take a significant period of time;

require the expenditure of substantial resources;

 involve rigorous preclinical testing, as well as increased post-market surveillance;

require changes to products; and

result in limitations on the indicated uses of products.

If we do not ~~accept~~compete effectively with scientific and ~~use~~commercial competitors, we may not be able to successfully develop our ~~drugs,~~diagnostic test for Alzheimer’s disease.

The field of clinical laboratory testing is highly competitive. Diagnostic tests that are developed are characterized by rapid technological change. Our competitors in the U.S. and abroad are numerous and include, among others, major diagnostic companies, reference laboratories, molecular diagnostic firms, universities and other research institutions. Most of our potential competitors have considerably greater financial, technical, marketing and other resources than we do, which may allow these competitors to discover important biological markers and determine their function before we do. We could be adversely affected if we do not discover proteins or biomarkers and characterize their function, develop diagnostic and pharmaceutical and clinical services based on these discoveries, obtain required regulatory and other approvals and launch these tests and their related services before our competitors. We also expect to encounter significant competition with respect to any diagnostic tests that we may develop or commercialize. Those companies that bring to market new diagnostic tests before we do may achieve a significant competitive advantage in marketing and commercializing their tests. We may not be able to develop additional diagnostic tests successfully and we may not obtain or enforce patents, if any, covering these tests that provide protection against our competitors. Moreover, our competitors may succeed in developing diagnostic tests that circumvent our technologies or tests. Furthermore, our competitors may succeed in developing technologies or tests that are more effective or less costly than those developed by us or that would render our technologies or tests less competitive or obsolete. We expect competition to intensify in the fields in which we are involved as technical advances in these fields occur and become more widely known and changes in intellectual property laws generate challenges to our intellectual property position.

We will need to develop our own proprietary antibodies or find alternative approaches that do not ~~achieve sufficient product revenues~~involve antibodies to advance our SavaDx and our ~~business will suffer.~~diagnostic program.

~~Even if~~SavaDx currently relies on the ~~FDA approves our drugs, physicians and patients may not accept and use them. Acceptance and~~ use of ~~our drugs will depend on a number of factors including:~~

~~when the drug is launched into the market and related competition;~~

~~approved label claims;~~

perceptions by members of the healthcare community, including physicians, about the safety and effectiveness of our drugs, and, in particular, the effectiveness of REMOXY in reducing potential risks of unintended use;

~~perceptions by physicians regarding the cost benefit of REMOXY in reducing potential risks of unintended use;~~

~~published studies demonstrating the cost-effectiveness of our drugs relative to competing products;~~

~~availability of reimbursement for our products from government or healthcare payers;~~

~~our or our collaborators’ ability to implement a risk management plan prior to the distribution of any Schedule II drug; and~~

~~effectiveness of marketing and distribution efforts by us and other licensees and distributors.~~

~~Because we expect~~commercially available antibodies, which are complex molecules that can recognize and bind to ~~rely on sales generated by our current lead drug candidates for substantially all of our revenues for the foreseeable future, the failure of~~an intended protein. Commercially available antibodies present certain technical flaws, such as improper validation, significant batch-to-batch variations or inconsistent storage, any of ~~these drugs~~which can jeopardize our studies and experiments. Because antibody underperformance can be a significant drain on time and resources, we have attempted to ~~find market acceptance would harm~~develop and validate our ~~business~~own, fit-for-purpose antibody for use with SavaDx. The complexity of developing our own antibody gives rise to many technical issues that are challenging to solve, and ~~could require us to seek additional financing.~~

~~The science of abuse-deterrence is relatively new.~~

The analytical, clinical, and statistical methods for evaluating abuse-deterrent technologies and study results are new and rapidly evolving. Although we believe the FDA will take a flexible, adaptive approach to the evaluation and labeling of potentially abuse-deterrent products, such as REMOXY, we cannot be certain that we will be able to successfully complete any of these activities, in which case our program may be harmed. We are also evaluating an alternative approach to detect Alzheimer’s disease that does not involve antibodies. The complexity of such an alternative approach also gives rise to many technical issues that are challenging to solve. We cannot be certain that we will be able to successfully complete the development of a detection system for Alzheimer’s disease that does or does not involve antibodies.

We have concentrated a substantial portion of our research and development efforts on the treatment and detection of Alzheimer’s disease, an area of research that has seen significant failure rates. Further, our product candidates are based on new scientific approaches and novel technology, which makes it difficult to predict the time and cost of product candidate development.

We focus substantially all of our research and development efforts on addressing neurodegenerations, such as Alzheimer’s disease. Collectively, efforts by biopharmaceutical companies in the field of neurodegenerative diseases have seen many failures and limited success in drug development. Our future success is highly dependent on the successful development of our product candidates for treating Alzheimer’s disease. Developing and, if approved, commercializing our product candidates for treatment of Alzheimer’s disease subjects us to many challenges, including obtaining regulatory approval from FDA and other regulatory authorities who have only a limited set of precedents to rely on. We cannot be sure that our approach will yield satisfactory therapeutic products that are safe and effective, scalable, or profitable.

Our Phase 2 clinical studies with simufilam in patients with Alzheimer’s disease are generally not designed to show a statistically meaningful difference in cognition or other health functions between those patients who receive placebo and those who receive drug.

Clinical research data is often analyzed with statistical probability (p-value) to address the question of whether a clinical observation is related to a treatment effect, a random effect or something else. This, in turn, requires a clinical study to incorporate a sufficiently large sample patient population to infer the appropriate statistical analysis. By design, our Phase 2 clinical studies with simufilam generally do not include a sufficiently large patient population to generate statistical probability on measures of cognition or other health functions. This feature may make it difficult for investors to properly interpret whether clinical observations in those Phase 2 studies with simufilam are important or meaningful. Conversely, our clinical studies may generate statistically significant data (i.e., p<0.05) with regard to biomarkers, or other endpoints, that have unknown or no clinical importance. In general, the distinction between statistically significant and clinically meaningful is a complex area of research that continues to evolve and may be subject to differences of opinion among scientists, clinicians and other professionals.

We may encounter difficulties enrolling patients in our clinical studies, and our clinical development activities could thereby be delayed or otherwise adversely affected.

The timely completion of clinical studies in accordance with their protocols depends, among other things, on our ability to enroll enough patients who remain in the study until its conclusion. We may experience difficulties in patient enrollment in our clinical studies for a variety of reasons, including:

the size and severity of disease in the patient population;

the patient eligibility criteria defined in the protocol, including biomarker-driven identification and/or certain highly-specific criteria related to stage of disease progression, which may limit the patient populations eligible for our clinical studies to a greater extent than competing clinical studies for the same indication that do not have biomarker-driven patient eligibility criteria;

the size of the study population required for analysis of the trial’s primary endpoints;

the design of our study protocol;

our ability to recruit clinical study investigators with the appropriate competencies and experience;

competing clinical studies for similar therapies or targeting patient populations meeting our patient eligibility criteria;

clinicians’ and patients’ perceptions as to the potential advantages and side effects of the product candidate being studied in relation to other available therapies and product candidates;

our ability to obtain and maintain patient consents;

physicians’ patient referral practices that are out of our control;

our ability to adequately monitor patients and their caregivers during and after treatment; and

the risk that patients enrolled in clinical studies will not complete such studies, for any reason.

Our clinical studies may fail to demonstrate substantial evidence of the safety and efficacy of our product candidates, which would prevent, delay, or limit the scope of regulatory approval and commercialization.

Before obtaining regulatory approvals for any of our product candidates, we must demonstrate through lengthy, complex, and expensive preclinical experiments and clinical studies that our product candidates are both safe and effective for use in an intended population. Each product candidate must demonstrate an adequate risk versus benefit profile in its intended patient population and for its intended use.

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 study process. The results of preclinical studies of our product candidates may not be predictive of the results of early-stage or later-stage clinical studies, and results of early clinical studies of our product candidates may not be predictive of the results of later-stage clinical studies. The results of clinical studies in one set of patients or disease indications may not be predictive of those obtained in another. In some instances, there can be significant variability in safety or efficacy results between different clinical studies of the same product candidate due to numerous factors, including changes in study procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the dosing regimen, and other clinical study protocols and the rate of dropout among clinical study participants.

Open-label extension studies may also extend the timing and cost of a clinical study substantially. Product candidates in later stages of clinical studies may fail to show the desired safety and efficacy profile despite having progressed through preclinical studies and initial clinical studies. Many companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical studies due to lack of efficacy or unacceptable safety issues, notwithstanding promising results in earlier studies. This is particularly true in neurodegenerative diseases, where failure rates historically have been higher than in many other disease areas. Most product candidates that begin clinical studies are never approved by regulatory authorities for commercialization.

We have limited experience in designing clinical studies in neurodegeneration and may be unable to design and execute a clinical study to support marketing approval. We cannot be certain that our current clinical studies or any other future clinical studies will be successful. Additionally, any safety concerns observed in any one of our clinical studies in our targeted indications could limit the prospects for regulatory approval of our product candidates in those and other indications, which could have a material adverse effect on our business, financial condition, and results of operations.

In addition, even if such clinical studies are successfully completed, we cannot guarantee that FDA or foreign regulatory authorities will interpret the results as we do, and more studies could be required before we submit our product candidates for approval. To the extent that the results of the studies are not satisfactory to 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 studies in support of potential approval of our product candidates. Even if regulatory approval is secured for any of our product candidates, the terms of such approval may limit the scope and use of our product candidates, which may also limit its commercial potential.

If our drug candidate causes or contribute to a death or a serious injury before or after approval, we will be subject to medical reporting regulations, which can result in voluntary corrective actions or agency enforcement actions.

Our drug candidate in Alzheimer’s disease is aimed at frail, elderly patients who are in a state of cognitive decline. Under FDA medical reporting regulations, we are required to report to the FDA information that our drug candidate has or may have caused or contributed to a death or serious injury. Any such serious adverse event involving our drug could result in future FDA action, such as an inspection, enforcement action or warning, or in more serious cases, a complete shutdown of our clinical program. In the context of our ongoing clinical trials, we report adverse events to the FDA in accordance with applicable national and local regulations. Any corrective action, whether voluntary or involuntary, and either pre- or post-market, needed to address any serious adverse events will require the dedication of our time and capital, distract management from operating our business, and may harm our reputation and financial results.

The market opportunities for simufilam and SavaDx, if approved, may be smaller than we anticipate.

If our clinical development programs succeed, we expect to seek regulatory approval of simufilam and SavaDx for patients with Alzheimer’s disease. Our projections of the number of patients with Alzheimer’s disease is based on our beliefs and estimates. These estimates have been derived from a variety of outside sources, including scientific literature, patient foundations and market research, and may prove to be incorrect. The actual number of patients may turn out to be lower than expected. Additionally, the potential patient population for our current programs or future product candidates may be limited. Even if we obtain significant market share for any product candidate, if approved, if the potential target populations are smaller than anticipated, we may never achieve profitability without obtaining marketing approval for additional indications.

We face significant competition in an environment of rapid technological and scientific change, and there is a possibility that additional competitors may achieve regulatory approval before us or develop therapies that are safer, more advanced, or more effective than ours, any of which may harm our business operations.

Drug discovery and development is highly competitive. Moreover, the neurodegenerative field is characterized by intense and increasing competition, and a strong emphasis on intellectual property. We may face competition with respect to any of our product candidates that we seek to develop or commercialize in the future from major pharmaceutical companies, specialty pharmaceutical companies, and biotechnology companies worldwide. Potential competitors also include academic institutions, government agencies, and other public and private research organizations that conduct research, seek patent protection, and establish collaborative arrangements for research, development, manufacturing, and commercialization.

In addition to Biogen and Eli Lilly, several large pharmaceutical and biotechnology companies are currently pursuing the development of products for the treatment of neurodegenerative diseases, including Alzheimer’s disease. Many of these current or potential competitors, either alone or with their strategic partners, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical studies, obtaining regulatory approvals, and marketing approved products than we do.

Our commercial opportunity could be reduced or eliminated if other competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient, or are less expensive than any products that we may develop. Furthermore, currently approved products could be discovered to have application for treatment of neurodegenerative disease indications, which could give such products significant advantages over any of our product candidates. Competitors other than Biogen may also obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. For example, Eli Lilly, a large pharmaceutical company, announced it plans to petition the FDA for accelerated approval of donanemab, its monoclonal antibody drug candidate for the proposed treatment of Alzheimer’s disease. Additionally, products or technologies developed by our competitors may render our potential product candidates uneconomical or obsolete, and we may not be successful in marketing any product candidates we may develop against competitors.

In addition, we could face litigation or other proceedings with respect to the scope, ownership, validity, and/or enforceability of our patents relating to our competitors’ products and our competitors may allege that our products infringe, misappropriate, or otherwise violate their intellectual property. The availability of our competitors’ products could limit the demand, and the price we are able to charge, for any products that we may develop and commercialize.

Risks Related to Government Regulation and Other Legal Compliance Matters

Our financial condition and operating results could be adversely impacted by unfavorable results of legal proceedings, government investigations or allegations and other claims.

We are subject to various claims, legal proceedings and government investigations that have arisen in the ordinary course of business and have not yet been fully resolved, and new matters may arise in the future.

We are currently managing U.S. government inquiries, as well as civil claims under federal and state laws, relating to and/or arising out of our disclosures regarding our research and development of simufilam. New claims or inquiries may arise in the future. Regardless of the merit of particular claims and inquiries, defending against litigation or responding to government investigations is expensive, time-consuming, disruptive to our operations and distracting to management. In recognition of these considerations, we may enter into agreements or other arrangements to settle such matters and resolve such challenges. No assurance can be given that such agreements can be obtained on acceptable terms or that litigation will not occur.

The outcome of legal proceedings, academic inquiries or government investigations is inherently uncertain. If one or more such matters were resolved against us, our financial condition and operating results could be materially adversely affected. Further, such an outcome could result in significant compensatory, punitive or trebled monetary damages, disgorgement of revenue or profits, remedial corporate measures or injunctive relief against us, all of which could materially adversely affect our financial condition and operating results.

While we maintain insurance coverage for certain types of claims, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise.

Additional future litigation against us could be costly and time-consuming to defend.

Innovative drug development is highly litigious, and we may become subject, from time to time, to additional legal proceedings, claims and allegations that arise in the ordinary course of business or pursuant to governmental or regulatory enforcement activity. Regardless of merit, any lawsuits against us, individually or in the aggregate, may have a material adverse effect on our business, financial condition, results of operations or cash flows. In addition, any litigation to which we subsequently become a party might result in substantial costs and divert management's attention, time and resources, which

might seriously harm our business, financial condition, results of operations and cash flows. Our insurance policies might not cover such claims, might not provide sufficient payments to cover all of the costs to resolve one or more such claims, and might not continue to be available on terms acceptable to us. In particular, any claim could result in potential liability for us if the claim is outside the scope of the indemnification agreement we have with our third-party partners, or our third-party partners do not abide by the indemnification agreement as required, or the liability exceeds the amount of any applicable indemnification limits or available insurance coverage. A claim brought against us that is uninsured or underinsured could result in unanticipated costs and could have a material adverse effect on our financial condition, results of operations, cash flows or reputation.

If we are ultimately unable to obtain regulatory approval for our product candidates, we will be unable to generate product revenue and our business will be substantially harmed.

The time required to obtain approval by FDA and comparable foreign regulatory authorities is unpredictable, typically takes many years following the commencement of clinical studies, and depends upon numerous factors, including the type, complexity, and novelty of the product candidates involved. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions, which may cause delays in the approval or the decision not to approve an application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical, or other studies. We have not obtained regulatory approval for any product candidate, including our product candidates aimed at Alzheimer’s disease, and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval.

Applications for our product candidates could fail to receive regulatory approval in an initial or subsequent indication for many reasons, including but not limited to the following:

FDA or comparable foreign regulatory authorities may disagree with the design, implementation, or results of our clinical studies;

FDA or comparable foreign regulatory authorities may determine that our product candidates are not safe and effective, only moderately effective or have undesirable or unintended side effects, toxicities, or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use;

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

we may be unable to demonstrate to FDA or comparable foreign regulatory authorities that a product candidate’s risk-benefit ratio when compared to the standard of care is acceptable;

FDA or comparable foreign regulatory authorities may disagree with our interpretation of ~~abuse-deterrent~~ data ~~for REMOXY is consistent with~~ from preclinical studies or clinical studies;

the ~~views~~data collected from clinical studies of ~~the FDA. In~~ our opinion, the FDA has limited data correlating the potentially abuse-deterrent properties of certain opioid drug products, such as REMOXY, with actual reduction in abuse or adverse events associated with abuse. In addition, the FDA has stated it isproduct candidates may not ~~able to provide specific guidance on the magnitude of effect that would~~ be sufficient to support the submission of a new drug application (NDA), or other submission or to obtain regulatory approval in the United States or elsewhere;

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 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 studies, may result in our failing to obtain regulatory approval to market any ~~particular type~~ of ~~label claim for abuse-deterrence.~~our product candidates, which would significantly harm our business, results of operations, and growth prospects.

Our ability to market and promote ~~REMOXY and its abuse-deterrent features~~our product candidates will be determined and limited by FDA-approved labeling.

The commercial success of ~~REMOXY and certain of~~ our ~~other~~ product candidates will depend upon our ability to obtain FDA-approved labeling describing their ~~abuse-deterrent~~ features. Our failure to achieve FDA approval of product labeling containing such information will prevent us from advertising and promoting the ~~abuse-deterrent~~key features of our product candidates in order to differentiate them from other similar products. This would make our products less competitive in the market.

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~~Abuse-deterrent label claims~~

Our employees, independent contractors, consultants, commercial partners, and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

We are exposed to the risk of fraud, misconduct, or other illegal activity by our employees, independent contractors, consultants, commercial partners, and vendors. Misconduct by these parties could include intentional, reckless, and negligent conduct that fails to:

comply with the laws of FDA and other comparable foreign regulatory authorities;

provide true, complete, and accurate information to FDA and other comparable foreign regulatory authorities;

comply with manufacturing standards we have established;

comply with healthcare fraud and abuse laws in the U.S. and similar foreign fraudulent misconduct laws; or

report financial information or data accurately or to disclose unauthorized activities to us.

Activities subject to laws also involve the improper use of information obtained in the course of patient recruitment for ~~REMOXY~~clinical studies, which could result in regulatory sanctions and cause serious harm to our reputation. Further, it is not always possible to identify and deter misconduct by employees and third parties, and the precautions we take to detect and prevent this activity may not be ~~broad enough~~effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to ~~demonstrate~~comply with such laws. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a ~~substantial benefit~~significant impact on our business, including the imposition of significant fines or other sanctions.

If we fail to ~~health care providers~~comply with the complex federal, state, local and ~~patients.~~foreign laws and regulations that apply to our business, we could suffer severe consequences that could materially and adversely affect our operating results and financial condition.

Our operations are subject to extensive federal, state, local and foreign laws and regulations, all of which are subject to change. These laws and regulations currently include, among other things:

The Clinical Laboratory Improvement Amendments (CLIA) of 1988, which are United States federal regulatory standards that apply to all clinical laboratory testing performed on humans in the United States, requires that laboratories obtain certification from the federal government, and state licensure laws;

FDA ~~approval is required in order to make claims that a product has an abuse-deterrent effect. In April 2015, the FDA published final guidance~~laws and regulations;

The Health Insurance Portability and Accountability Act (HIPAA), which imposes comprehensive federal standards with ~~regard~~respect to the ~~evaluation~~privacy and ~~labeling~~security of ~~abuse-deterrent opioids. The guidance provides direction as~~protected health information and requirements for the use of certain standardized electronic transactions, including penalties for violators, enforcement authority to state attorneys general and requirements for breach notification;

state laws regulating testing and protecting the ~~studies and data required for obtaining abuse-deterrent claims in a product label. FDA guidance describes three categories~~privacy of ~~pre-market studies that may lead to an abuse-deterrent claim:~~

~~Category 1 – laboratory manipulation and extraction studies;~~

~~Category 2 – pharmacokinetic studies; and~~

~~Category 3 – human abuse potential studies.~~

~~According to the FDA guidance, label claims for abuse-deterrence should describe the product’s specific abuse-deterrent properties~~test results, as well as state laws protecting the ~~specific routes~~privacy and security of health information and personal data and mandating reporting of breaches to affected individuals and state regulators;

the federal anti-kickback law, or the Anti-Kickback Statute, which prohibits knowingly and willfully offering, paying, soliciting, receiving, or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing, arranging for, or recommending of an item or service that is reimbursable, in whole or in part, by a federal health care program;

the federal False Claims Act (FCA), which imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment to the federal government;

the federal Civil Monetary Penalties Law, which prohibits, among other things, the offering or transfer of remuneration to a Medicare or state health care program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state health care program, unless an exception applies;

other federal and state fraud and abuse laws, such as anti-kickback laws, prohibitions on self-referral, and false claims acts, which may extend to services reimbursable by any third-party payor, including private insurers;

the federal Physician Payments Sunshine Act, which requires manufacturers to track and report to the federal government certain payments and other transfers of value made to physicians and teaching hospitals and ownership or investment interests held by physicians and their immediate family members;

Section 216 of the federal Protecting Access to Medicare Act of 2014 (PAMA), which requires applicable laboratories to report private payer data in a timely and accurate manner every three years (and in some cases annually);

state laws that impose reporting and other compliance-related requirements; and

similar foreign laws and regulations that will apply to us in foreign countries in which we may choose to operate in the future.

Government agencies may establish and promulgate usage guidelines that could limit the use of our product ~~has been developed~~candidates.

Government agencies, professional and medical societies, and other groups may establish usage guidelines that apply to ~~deter. When data predict~~our product candidates. These guidelines could address such matters as usage and dose, among other factors. Application of such guidelines could limit the clinical use or ~~show~~commercial appeal of our product candidates.

Our product candidates may cause undesirable side effects or have other properties that ~~a product’s potentially abuse-deterrent properties can be expected~~could halt their clinical development, prevent their regulatory approval, limit their commercial potential, or result in significant negative consequences.

During the conduct of clinical trials, study participants report changes in their health to their doctor, including illnesses, injuries and discomforts. Often, it is not possible to determine whether our product candidate caused these conditions. Regulatory authorities may draw different conclusions and may require us to pause our clinical trials or ~~actually do,~~require additional testing to confirm these determinations, if they occur. In addition, we have not yet completed long-term safety studies with simufilam to determine if this product candidate is safe for humans. Adverse events or other undesirable side effects caused by simufilam could cause us or regulatory authorities to interrupt, delay, or halt clinical studies and could result in a ~~significant reduction~~more restrictive label or the delay or denial of regulatory approval by FDA or other comparable foreign regulatory authorities. Drug-related side effects could affect patient recruitment, the ability of enrolled patients to complete the study, and/or result in ~~that product’s abuse~~ potential ~~these data, together with an accurate characterization of what the data mean,~~claims.

Our insurance policies may be ~~included in~~inadequate and potentially expose us to unrecoverable risks.

Although we maintain product ~~labeling.~~

Ifliability insurance coverage, such insurance may not be adequate to cover all liabilities that we may incur. We anticipate that we will need to increase our insurance coverage each time we commence a clinical trial and if we successfully commercialize any product ~~is approved by the FDA~~candidate. Insurance availability, coverage terms and pricing continue to ~~include such claims in its label, the applicant~~vary with market conditions. We endeavor to obtain appropriate insurance coverage for insurable risks that we identify; however, we may ~~use the approved labeling information about the abuse-deterrent features of the product in its marketing efforts~~fail to ~~physicians.~~

~~Although~~correctly anticipate or quantify insurable risks, we may not be able to obtain appropriate insurance coverage and insurers may not respond as we intend to ~~provide data~~cover insurable events that may occur. Conditions in the insurance markets relating to ~~the FDA~~nearly all areas of traditional corporate insurance change rapidly and may result in higher premium costs, higher policy deductibles and lower coverage limits. For some risks, we may not have or maintain insurance coverage because of cost or availability.

We are required to ~~support approval of abuse-deterrence label claims for REMOXY, there can be no assurance that REMOXY or any~~maintain product liability insurance pursuant to certain of our development and commercialization agreements. We may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. A successful product liability claim or series of claims brought against us could adversely affect our results of operations, business, and reputation. In addition, regardless of merit or eventual outcome, product liability claims may result in impairment of our business reputation, withdrawal of clinical study participants, costs due to related litigation, distraction of management’s attention from our primary business, initiation of investigations by regulators, substantial monetary awards to patients or other claimants, the inability to commercialize our product candidates, and decreased demand for our product candidates, if approved for commercial sale.

If our product candidates receive regulatory approval, we and our collaborators will ~~receive FDA-approved labeling that describes the abuse-deterrent features~~be subject to ongoing FDA obligations and continued regulatory review, such as continued safety reporting requirements, and we and our collaborators may also be subject to additional FDA post-marketing obligations or new regulations, all of ~~such products. The FDA~~which may ~~find that~~result in significant expense and limit our ~~studies~~ and ~~data do not support abuse-deterrent labeling or~~our collaborators’ ability to commercialize our potential drugs.

Any regulatory approvals that our product candidates doreceive may also be subject to limitations on the indicated uses for which the drug may be marketed or contain requirements for potentially costly post-marketing follow-up studies. In addition,

if FDA approves any of our product candidates, the labeling, packaging, adverse event reporting, storage, advertising, promotion and record keeping for the drug will be subject to extensive regulatory requirements. The subsequent discovery of previously unknown problems with the drug, including but not ~~provide substantial abuse-deterrence because, for example, their deterrence mechanisms do not address~~limited to adverse events of unanticipated severity or frequency, or the ~~way they are most likely~~discovery that adverse events previously observed in preclinical research or clinical studies that were believed to be ~~abused. Further,~~minor actually constitute much more serious problems, may result in restrictions on the ~~FDA is not required to follow its guidance~~marketing of the drug, and could include withdrawal of the drug from the market.

The FDA’s policies may change, ~~this guidance, which~~and additional government regulations may be enacted that could ~~require us to conduct additional studies~~prevent or ~~generate additional data.~~delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of adverse government regulation that may arise from future legislation or administrative action, either in the U.S. or abroad. If ~~the FDA does~~we are not ~~approve abuse-deterrent labeling, we will not be~~ able to ~~promote such~~maintain regulatory compliance, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, ~~based on their abuse-deterrent features~~operating restrictions and criminal prosecution. Any of these events could prevent us from marketing our products and our business ~~may~~could suffer.

Even if we do receive FDA approval for abuse-deterrent claims, the claims may not be broad enough to demonstrate a substantial benefit to health care providers and patients. For instance, the claims may not encompass the more common forms of abuse for products like our product candidates. Moreover, continued investigation in Phase IV studies following product approval, if required, is expensive and may not support the continued use of abuse-deterrent claims.

~~If we cannot compete successfully for market share against other drug companies, we may not achieve sufficient product revenues and our business will suffer.~~

The market for our drug candidates is characterized by intense competition and rapid technological advances. If our drug candidates receive FDA approval, they will compete with a number of existing and future drugs and therapies developed, manufactured and marketed by others. Existing or future competing products may provide greater therapeutic convenience or clinical or other benefits for a specific indication than our products, or may offer comparable performance at a lower cost. If our products are unable to capture and maintain market share, we may not achieve sufficient product revenues and our business will suffer.

We and our collaborators will compete for market share against fully integrated pharmaceutical companies or other companies that are collaborating with larger pharmaceutical companies, academic institutions, government agencies and other public and private research organizations. Many of these competitors have drugs already approved or drug candidates in development that will or may compete against our approved drug candidates. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs and have substantially greater financial resources than we do, as well as significantly greater experience in:

~~developing drugs;~~

~~conducting preclinical testing and human clinical trials;~~

~~obtaining FDA and other regulatory approvals of drugs;~~

~~formulating and manufacturing drugs; and~~

~~launching, marketing, distributing and selling drugs.~~

~~If we fail to obtain acceptable prices or an adequate level of reimbursement for our products from healthcare payers, our ability to generate product revenues will be diminished.~~

~~Our ability to commercialize drugs we (alone or with other collaborators) may develop will depend in part on the extent to which reimbursement can be obtained for such drugs from:~~

~~government and health administration authorities;~~

~~private health maintenance organizations and health insurers; and~~

~~other healthcare payers.~~

Significant uncertainty exists as to the reimbursement status of newly approved healthcare products. Healthcare payers, including Medicare, health maintenance organizations and managed care organizations, are challenging the prices charged for medical products and services and/or are seeking pharmacoeconomic data to justify formulary acceptance and reimbursement practices. We currently have not generated pharmacoeconomic data on any of our drug candidates. Government and other healthcare payers increasingly are attempting to contain healthcare costs by limiting both coverage and the level of reimbursement for drugs, and by refusing, in some cases, to provide coverage for uses of approved products for disease indications for which the FDA has or has not granted labeling approval. Adequate third-party insurance coverage may not be available to patients for any products we discover and develop, alone or with collaborators. If government and other healthcare payers do not provide adequate coverage and reimbursement levels for our products, market acceptance of our drug candidates could be limited.

Enacted and future legislation may increase the difficulty and cost for us to commercialize our product candidates and may reduce the prices we are able to obtain for our product candidates.

Legislative and regulatory changes and future changes regarding the healthcare system could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities or affect our ability to profitably sell any product candidates for which we obtain marketing approval.

In the ~~United States,~~U.S., the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 ~~or the~~(the Medicare Modernization ~~Act,~~Act) established the Medicare Part D program and provided authority for limiting the number of drugs that will be covered in any therapeutic class thereunder. The Medicare Modernization Act, including its cost reduction initiatives, could limit the coverage and reimbursement rate that we receive for any of our approved products. Private payors may follow Medicare coverage policies and payment limitations in setting their own reimbursement rates resulting in similar limits in payments from private payors.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the Affordable Care Act, among other things, imposes a significant annual fee on companies that manufacture or import branded prescription ~~drug products.~~product candidates. It also contains substantial provisions intended to, among other things, broaden access to health insurance, reduce or constrain the growth of health care spending, enhance remedies against healthcare fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, and impose additional health policy reforms, any of which could have a material adverse effect on our business. A significant number of provisions are not yet, or have only recently become, effective, but the Affordable Care Act may result in downward pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs.

The Affordable Care Act, as well as other healthcare reform measures that have been and 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, and could seriously harm our future revenues. 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 compromise our ability to generate revenue, attain profitability or commercialize our products.

The Affordable Care Act is a highly complex piece of legislation that continues to evolve. We do not and cannot understand or anticipate the full impact and potential implications of the Affordable Care Act on our business or on our drugs.

Even if we are able to commercialize any of our product candidates, our products may become subject to unfavorable pricing regulations or third-party coverage and reimbursement policies, which could have a material adverse effect on our business.

Our ability to commercialize any products successfully will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, determine which medications they will cover and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. 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. 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 and whether it will be satisfactory. 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 be able to successfully commercialize any product candidate for which we obtain marketing approval.

There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or foreign regulatory authorities. Moreover, eligibility for coverage and 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 be insufficient to cover our costs and may only be temporary. 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. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and profitable reimbursement rates from both government-funded and private payors for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

Public concern over the abuse of opioids, including law enforcement concerns over diversion of opioid and regulatory efforts to combat abuse, could decrease the potential market for our product candidates.

Media stories regarding prescription drug abuse and the diversion of opioids and other controlled substances are commonplace. Law enforcement and regulatory agencies may apply policies that seek to limit the availability of opioids. Such efforts may inhibit our ability to commercialize our product candidates. Aggressive enforcement and unfavorable publicity regarding, for example, the use or misuse of oxycodone or other opioid drugs; the limitations of ADFs; the ability of drug abusers to discover previously unknown ways to abuse our products; public inquiries and investigations into prescription drug abuse; litigation; or regulatory activity regarding sales, marketing, distribution or storage of opioid drugs could have a material adverse effect on our reputation. Such negative publicity could reduce the potential size of the market for our product candidates and decrease the revenues we are able to generate from their sale. To the extent opioid abuse becomes less prevalent or less urgent of a public health issue, regulators and third party payers may not be willing to pay a premium for ADFs of opioids.

Efforts by the FDA and other regulatory bodies to combat abuse of opioids may negatively impact the market for our product candidates. For example, on September 10, 2013, the FDA announced its intention to effect labeling changes to all approved long-acting opioid formulations. In particular, the FDA announced its intention to update the indication for long-acting opioid formulations so that long-acting opioid formulations will be indicated only for the management of pain severe enough to require daily, around-the-clock, long-term opioid treatment and for which alternative treatment options are inadequate. On April 16, 2014, the FDA updated these indications. It is possible that such changes could reduce the number of prescriptions for opioids written by physicians and negatively impact the potential market for our product candidates.

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If the FDA or other applicable regulatory authorities approve generic products with abuse-deterrent claims that compete with any of our product candidates, it could reduce our sales of those product candidates.

Once an NDA, including a Section 505(b)(2) application, is approved, the product covered thereby becomes a "listed drug" which can, in turn, be cited by potential competitors in support of approval of an abbreviated NDA, or ANDA. Potential competitors may create modified, non-infringing versions of a drug to facilitate the approval of an ANDA or other application for generic substitutes. These competitors might only be required to conduct a relatively inexpensive study to show that their product has the same active ingredients, dosage form, strength, route of administration, and conditions of use, or labeling, as our products and that the generic product is absorbed in the body at the same rate and to the same extent as, or is bioequivalent to, our products. These generic equivalents would be significantly less costly than ours to bring to market and companies that produce generic equivalents are generally able to offer their products at lower prices. Thus, after the introduction of a generic competitor, a significant percentage of the sales of any branded product are typically lost to the generic product. Accordingly, competition from generic equivalents to our products would substantially limit our ability to generate revenues and therefore to obtain a return on the investments we have made in our product candidates.

Our relationships with customers and payors will be subject to applicable anti-kickback, fraud and abuse, transparency, and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, exclusion from government healthcare programs, contractual damages, reputational harm, administrative burdens, and diminished profits and future earnings.

Healthcare providers, physicians and payors play a primary role in the recommendation and prescription of any product candidates for which we may obtain marketing approval. Our future arrangements with 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 market, sell and distribute any product candidates for which we may obtain marketing approval. Even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors, federal and state healthcare laws and regulations pertaining to fraud and abuse and patients' rights are and will be applicable to our business. Restrictions under applicable federal, state and foreign healthcare laws and regulations may affect our ability to operate and expose us to areas of risk, including:

the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid. 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;

the federal False Claims Act, which imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for 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. In addition, the government may assert that a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;

the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability for executing 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 to defraud any healthcare benefit program 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, or HITECH, and its implementing regulations, which also imposes obligations on certain covered entity healthcare providers, health plans, and healthcare clearinghouses as well as their business associates that perform certain services involving the use or disclosure of individually identifiable health information, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

federal laws requiring drug manufacturers to report information related to payments and other transfers of value made to physicians and other healthcare providers, as well as ownership or investment interests held by physicians and their immediate family members, including under the federal Open Payments program, commonly known as the Sunshine Act, as well as other state and foreign laws regulating marketing activities; and

state and foreign equivalents of each of the above laws, including state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental payors, including private insurers; state laws which require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restricting payments that may be made to healthcare providers; and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid. 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;

the FCA, which imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for 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. In addition, the government may assert that a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA;

HIPAA, which imposes criminal and civil liability for executing 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 to defraud any healthcare benefit program 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 and its implementing regulations, which also imposes obligations on certain covered entity healthcare providers, health plans, and healthcare clearinghouses as well as their business associates that perform certain services involving the use or disclosure of individually identifiable health information, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

federal laws requiring drug manufacturers to report information related to payments and other transfers of value made to physicians and other healthcare providers, as well as ownership or investment interests held by physicians and their immediate family members, including under the federal Open Payments program, commonly known as the Sunshine Act, as well as other state and foreign laws regulating marketing activities; and

state and foreign equivalents of each of the above laws, including state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental payors, including private insurers; state laws which require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restricting payments that may be made to healthcare providers; and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. Nonetheless, 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 civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations.

~~Government agencies~~52

A recent federal court ruling may ~~establish~~mandate significant new disclosure requirements for clinical data dating back over a decade which may lead to costly or burdensome disclosures.

A federal court ruling may require all clinical study sponsors to report a decade’s worth of previously exempted clinical study data to the federal government for publication on ClinicalTrials.gov. In February 2020, the U.S. District Court for the Southern District of New York invalidated a prior interpretation of NIH regulations that had exempted many clinical studies conducted between 2007 and ~~promulgate usage guidelines that~~2017 from reporting requirements mandated by the Food and Drug Administration Amendments Act. If this court ruling takes effect without appeal, or if it is upheld on appeal, it could ~~limit~~require us to submit an onerous amount of old clinical data to the ~~use~~federal government. In many cases, we were the responsible party for generating such clinical data, but such prior data may be difficult or not feasible for us to access as a result of our strategic shift away from analgesic drug ~~candidates.~~

~~Government agencies, professional and medical societies, and other groups~~development in 2019. We may ~~establish usage guidelines~~no longer have control over, or access to, prior clinical data that we may legally be required to report to NIH in the future. Furthermore, it is unclear whether such new disclosure requirements apply to inactive, failed or abandoned drug development programs. As a result of these uncertainties, the government’s recent ruling may leave us in a conflicted position or out of compliance with new disclosure requirements. We currently do not and cannot understand or anticipate the full impact and potential implications of this court ruling on our drug candidates. These guidelines could address such matters as usage and dose, among other factors. Application of such guidelines could limit the clinical use or commercial appeal of our drug candidates.business.

Risks ~~Relating~~Related to ~~our~~Our Intellectual Property

~~Our~~If we are unable to obtain and maintain sufficient patent protection for any product candidates we develop, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize ~~our drug~~any product candidates ~~will depend~~we may develop may be adversely affected.

Our success depends in large part on our ability to ~~sell such products without infringing~~obtain and maintain patent protection in the U.S. and other countries with respect to our proprietary product candidates and other technologies we may develop. We seek to protect our proprietary position by filing patent applications in the U.S. and abroad relating to our core programs and product candidates, as well as other technologies that are important to our business. Given that our product candidates are in in early or ~~proprietary rights~~clinical stages of ~~third parties. If we are sued for infringing the~~development, our intellectual property ~~rights~~portfolio with respect to certain aspects of ~~third parties, such litigation will be costly and time consuming and~~our product candidates is also at an ~~unfavorable outcome would~~early stage. For example, we have ~~a significant adverse effect~~filed or intend to file patent applications on ~~our business.~~

~~Our ability to commercialize our drug candidates will depend on our ability to sell such products without infringing the patents or other proprietary rights~~aspects of ~~third parties. Intellectual property rights in the areas of controlled-release~~our technology and pharmaceutical ingredients are complicated and are continuously evolving. Holders of patent rights in these areas may allege that the commercialization of REMOXY or our other drug candidates infringes such patent rights. While we believe that we would have valid defenses to any claim of infringement,core product candidates; however, there can be no assurance that any such patent applications will issue as granted patents. Furthermore, in some cases, we have only filed provisional patent applications on certain aspects of our technology and product candidates and each of these orprovisional patent applications is not eligible to become an issued patent until, among other ~~third-party patents will not limit our~~things, we file a non-provisional patent application within 12 months of the filing date of the applicable provisional patent application. Any failure to file a non-provisional patent application within this timeline could cause us to lose the ability to ~~commercialize REMOXY or~~obtain patent protection for the inventions disclosed in the associated provisional patent applications.

Furthermore, in some cases, we may not be able to obtain issued claims covering compositions relating to our core programs and product candidates, as well as other ~~drug candidates.~~

~~In addition, because~~technologies that are important to our business, and instead may need to rely on filing patent applications ~~are published sometime after filing,~~with claims covering a method of use and/or method of manufacture for protection of such core programs, product candidates, and because applications can take several years to issue, there may be currently pending third party patent applications that are unknown to us, which may later result in issued patents. If a third party claims that we infringe on its patents or other ~~proprietary rights, we could face a number of issues that could seriously harm our competitive position, including:~~

infringement claims that, with or without merit, can be costly and time consuming to litigate, can delay the regulatory approval process and can divert management’s attention from our core business strategy;

~~substantial damages for past infringement which we may have to pay if a court determines that our products or technologies infringe upon a competitor’s patent or other proprietary rights;~~

~~a court order prohibiting us from commercializing our products or technologies unless the holder licenses the patent or other proprietary rights to us, which such holder is not required to do;~~

~~if a license is available from a holder, we may have to pay substantial royalties or grant cross licenses to our patents or other proprietary rights; and~~

redesigning our process so that it does not infringe third party intellectual property rights, which may not be possible, or which may require substantial time and expense including delays in bringing our own products to market. Such actions could harm our competitive position and our ability to generate revenue and could result in increased costs.

~~If we are unable to protect our intellectual property, our competitors could develop and market products with similar features that may reduce demand for our drug candidates.~~

Our success, competitive position and potential future revenues will depend in part on our ability to protect our intellectual property. If we or our collaborators fail to file, prosecute, obtain or maintain certain patents, our competitors could market products that contain features and clinical benefits similar to those of our products, and demand for our products could decline as a result.

We and our collaborators have filed patent applications in the United States and select international jurisdictions to protect our intellectual property. The coverage sought in a patent application can be denied or significantly reduced before or after the patent is issued. Consequently, we do not know whether any of our pending applications will result in the issuance of patents, or if any existing or future patents will provide significant protection or commercial advantage or will be circumvented by others.technologies. There can be no assurance that ~~patents~~any such patent applications will issue as granted patents, and even if they do issue, such patent claims may be insufficient to prevent third parties, such as our competitors, from utilizing our ~~pending~~technology. Any failure to obtain or ~~future~~maintain patent protection with respect to our core programs and product candidates could have a material adverse effect on our business, financial condition, results of operations, and growth prospects.

U.S. intellectual property rights around diagnostic methods is a complex, evolving area of law and effective patent claims may not be available to us for our investigational diagnostic product candidate, SavaDx, in the United States.

The legal system for intellectual property around diagnostic methods is highly complex, remains uncertain and continues to evolve. In the U.S., patent courts have struggled to define a clear means of patent eligibility for modern age diagnostics. Case law interpretations from the U.S. Supreme Court has left certain important scientific advances in the area of diagnostics without effective patent claims. In 2012, the Supreme Court held that a simple process involving correlations between blood test results and patient health is not eligible for patent claims because such processes incorporate “laws of nature”. Since then, different outcomes from different courts, including Federal Circuit, district court and Patent Trial and Appeal Board decisions, have continued to create a sometimes vague or conflicting legal framework for determining the eligibility of patent claims for diagnostic methods. As a result, we cannot be certain how SavaDx fits into the current U.S. legal framework for obtaining

effective patent claims. We currently have no U.S. patents or patent applications with respect to SavaDx, and we believe it may only be protected in the United States by trade secrets, know-how and other proprietary rights technology. Furthermore, claims for diagnostic methods can be complicated to enforce. For patent infringement to occur with a protected diagnostic, the patented method must generally either be performed by one person in its entirety or performed by multiple parties all under the control or direction of a single party. Accordingly, even if effective patent claims are issued for SavaDx, it may be impractical, impossible or even undesirable to enforce potential infringement claims.

Issued patents covering our product candidates and other technologies could be found invalid or unenforceable if challenged in court or before administrative bodies in the U.S. or abroad.

If we initiated legal proceedings against a third party to enforce a patent covering our product candidates or other technologies, the defendant could counterclaim that such ~~patents will be of commercial benefit to us, afford us adequate protection from competing products,~~patent is invalid or ~~not be challenged~~unenforceable. In patent litigation in the U.S., defendant counterclaims alleging invalidity or ~~declared invalid. Thus, if these patent applications do not result in issued patents or result in~~unenforceability are commonplace. Grounds for a ~~patent that is challenged by others, the duration or scope of our patent rights may be limited and our future revenues~~validity challenge could be ~~lower as~~an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a ~~result.~~

Wemisleading statement, during prosecution. Third parties may ~~be involved in challenges to our intellectual property. If our competitors are able to successfully challenge~~raise claims challenging the validity or ~~scope~~enforceability of our ~~patent rights, based on~~patents before administrative bodies in the ~~existence~~U.S. or abroad, even outside the context of ~~prior art or otherwise, they might be able to market products that contain features~~litigation. Such mechanisms include re-examination, post-grant review, inter partesreview, interference proceedings, derivation proceedings, and ~~clinical benefits similar to those of our drug candidates, and demand for our drug candidates could decline as a result. An adverse outcome of a challenge to our intellectual property~~equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in the revocation of, cancellation of, or amendment to our patents in such a way that they no longer cover our product candidates or other technologies. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we or our licensing partners and the patent examiner were unaware during prosecution. If a third party were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates or other technologies. Such a loss of ~~claims of patents or other intellectual property rights that pertain to certain drugs we currently have under development and could~~patent protection would have a material adverse impact on our ~~future revenues.~~business, financial condition, results of operations, and growth prospects.

~~We intend to file additional~~If we do not obtain patent ~~applications relating to our technology, products~~term extension and ~~processes. We may direct our collaborators to file additional patent applications relating to the licensed technology or~~data exclusivity for any product candidates we may do so ourselves. However, our competitors may challenge, invalidate or circumvent any of our current or future patents. These patents may also fail to provide us with meaningful competitive advantages.

~~We may become involved in expensive litigation or other legal proceedings related to our existing intellectual property rights, including patents.~~

~~We expect that we will rely upon patents, trade secrets, know-how, continuing technological innovations and licensing opportunities to~~ develop, and maintain our competitive position. While we use confidentiality agreements with our employees, consultants and certain of our contractors, if trade secrets or other confidential information is made public, our business may be ~~harmed~~materially harmed.

Depending upon the timing, duration, and ~~our legal remedies~~specifics of any FDA marketing approval of any product candidates we may ~~be limited or insufficient. Others may independently~~ develop, substantially equivalent proprietary information or be issued patents that may prevent the sale of our products or know-how or require us to license such information and pay significant fees or royalties in order to produce our products.

Our technology could infringe upon claims of patents owned by others. If we were found to be infringing on a patent held by another, we might have to seek a license to use the patented technology. In that case, we might not be able to obtain such a license on terms acceptable to us, or at all. If a legal action were to be brought against us or our licensors, we could incur substantial defense costs, and any such action might not be resolved in our favor. If such a dispute were to be resolved against us, we could have to pay the other party large sums of money and our use of our technology and the testing, manufacture, marketing or sale of one or more of our ~~proposed products~~U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984 (Hatch-Waxman Act). The Hatch-Waxman Act permits a patent term extension of up to five years as compensation for patent term lost during FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent may be extended and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. Similar extensions as compensation for patent term lost during regulatory review processes are also available in certain foreign countries and territories, such as in Europe under a Supplementary Patent Certificate. However, we may not be granted an extension in the U.S. and/or foreign countries and territories because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be ~~restricted~~less than we request. If we are unable to obtain a patent term extension or ~~prohibited.~~the term of any such extension is shorter than what we request, our competitors may obtain approval of competing products following our patent expiration, and our business, financial condition, results of operations, and growth prospects could be materially harmed.

If we are unable to protect the confidentiality of our ~~intellectual property, the value~~trade secrets, our business and competitive position would be harmed.

In addition to seeking patents for our product candidates and other technologies, we also rely on trade secrets and confidentiality agreements to protect our unpatented know-how, technology, and other proprietary information and to maintain our competitive position. We consider trade secrets and know-how to be one of our primary sources of intellectual ~~property could~~property. Trade secrets and know-how can be ~~materially adversely affected~~difficult to protect. We expect our trade secrets and ~~our business would~~know-how to over time be ~~harmed.~~disseminated within the industry through independent development, the publication of journal articles describing the methodology, and the movement of personnel from academic to industry scientific positions.

We seek to protect ~~our intellectual property,~~these trade secrets and other proprietary technology, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, CROs, CDMOs, consultants, advisors, and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants ~~scientific advisors, contractors~~as well as train our employees not to bring or use proprietary information or technology from former employers to us or in their work, and ~~collaborators. However, there can be no assurance~~remind former employees when they leave their employment of their confidentiality obligations. We cannot guarantee that ~~our intellectual property will not be disclosed~~we have entered into such agreements with each party that may have or ~~that competitors will not otherwise gain~~have had access to our ~~intellectual property~~trade secrets or ~~independently develop~~

~~substantially equivalent intellectual property. For example, if~~proprietary technology and processes. Despite our ~~confidential~~efforts, any of these parties may breach the agreements and disclose our proprietary information, ~~were disclosed in violation of~~including our ~~confidentiality agreements,~~trade secrets, and we may not be able to obtain adequate remedies for such breaches. ~~We also seek~~Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the U.S. are less willing or unwilling to protect our intellectual property by maintaining physical security of our premises and physical and electronic security of our information technology systems, but it is possible that these security measures could be breached.trade secrets. If any of our ~~intellectual property~~trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent ~~such competitor~~them from using that ~~intellectual property~~technology or information to compete with ~~us, which~~us. If any of our trade secrets were to be disclosed to or independently developed by a competitor or other third party, our competitive position would be materially and adversely harmed.

If any of our patent applications do not issue as patents in any jurisdiction, we may not be able to compete effectively.

Changes in either the patent laws or their interpretation in the U.S. and other countries may diminish our ability to protect our inventions, obtain, maintain, and enforce our intellectual property rights and, more generally, could ~~harm~~affect the value of our ~~business.~~

~~Risks Relating~~intellectual property or narrow the scope of our patents with respect to our ~~Business~~product candidates. With respect to our intellectual property related to our product candidates, we cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient protection from competitors or other third parties.

The patent prosecution process is expensive, time-consuming, and ~~Strategy~~

~~Our business~~complex, and we may not be able to file, prosecute, maintain, or enforce all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail ~~without a new equity incentive plan.~~

~~We depend heavily on equity incentives~~ to ~~retain the services of all~~identify patentable aspects of our ~~personnel, without which~~research and development output in time to obtain patent protection. Although we enter into nondisclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development output, such as our employees, outside scientific collaborators, CROs, CDMOs, consultants, advisors, and other third parties, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection. In addition, our ability to obtain and maintain valid and enforceable patents depends on whether the differences between our inventions and the prior art allow our inventions to be patentable. Furthermore, publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the U.S. and other jurisdictions are typically not ~~able~~published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we were the first to ~~retain~~make the inventions claimed in any of our patents or ~~hire qualified personnel~~pending patent applications, or ~~board members. In particular,~~that we were the first to file for patent protection of such inventions.

If the scope of any patent protection we obtain is not sufficiently broad, or if we lose any of our ~~independent board members receive no form~~patent protection, our ability to prevent our competitors from commercializing similar or identical technology and product candidates would be adversely affected.

The patent position of ~~compensation for their services other than new equity incentives every year. The 2008 Equity Plan expired~~biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has been the subject of much litigation in ~~December 2017. Furthermore, in 2017, shareholders rejected a proposal to renew an equity incentive plan.~~recent years. As a result, ~~going-forward~~the issuance, scope, validity, enforceability, and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect our product candidates or other technologies or which effectively prevent others from commercializing competitive technologies and product candidates.

Moreover, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance. Even if patent applications we own currently or in the future issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us, or otherwise provide us with any competitive advantage. Any patents to which we have rights may be challenged, narrowed, circumvented, or invalidated by third parties. Consequently, we do not know whether product candidates or other technologies will be protectable or remain protected by valid and enforceable patents. Our competitors or other third parties may be able to circumvent our patents by developing similar or alternative technologies or products in a

non-infringing manner which could materially adversely affect our business, financial condition, results of operations and growth prospects.

The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability, and our patents may be challenged in the courts or patent offices in the U.S. and abroad. We may be subject to a third-party pre-issuance submission of prior art to the United States Patent and Trademark Office (USPTO) or become involved in opposition, derivation, revocation, reexamination, post-grant and inter partes review, or interference proceedings or other similar proceedings challenging our patent rights. An adverse determination in any such submission, proceeding, or litigation could reduce the scope of, or invalidate or render unenforceable, such patent rights, allow third parties to commercialize our product candidates or other technologies and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. Moreover, we may have to participate in interference proceedings declared by the USPTO to determine priority of invention or in post-grant challenge proceedings, such as oppositions in a foreign patent office, that challenge our priority of invention or other features of patentability with respect to our patents and patent applications. Such challenges may result in loss of patent rights, loss of exclusivity, or in patent claims being narrowed, invalidated, or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our product candidates and other technologies. Such proceedings also may result in substantial cost and require significant time from our scientists and management, even if the eventual outcome is favorable to us. If we are ~~no longer able~~unsuccessful in any such proceeding or other priority or inventorship dispute, we may be required to ~~grant new equity incentives~~obtain and maintain licenses from third parties, including parties involved in any such interference proceedings or other priority or inventorship disputes. Such licenses may not be available on commercially reasonable terms or at all or may be non-exclusive. If we are unable to ~~any~~obtain and maintain such licenses, we may need to cease the development, manufacture, and commercialization of ~~our personnel, including new potential hires and board members, until and unless shareholders approve a new equity incentive plan.~~one or more of the product candidates we may develop. The loss of ~~personnel and board members, and our potential inability to hire replacement personnel, will materially delay~~exclusivity or ~~disrupt our operations and will put us out of compliance with various legal standards and regulations for listed companies, all of which may force us to curtail or cease operations.~~

~~If we are not successful in attracting and retaining qualified personnel, we could experience delays in completing necessary clinical trials, in~~ the ~~regulatory approval process or in formulating, manufacturing, marketing and selling our potential products.~~

~~We depend on the services~~narrowing of our ~~key personnel, including Remi Barbier,~~owned and licensed patent claims could limit our ~~Chairman, President~~ability to stop others from using or commercializing similar or identical technology and ~~Chief Executive Officer. On February 14, 2017, Peter S. Roddy resigned, effective March 9, 2017, as Vice President, Chief Financial Officer~~products.

In addition, given the amount of time required for the development, testing, and ~~Secretary. Remi Barbier, President and Chief Executive Officer, has assumed the role~~regulatory review of ~~Principal Financial Officer until~~new product candidates, patents protecting such ~~time as~~product candidates might expire before or shortly after such product candidates are commercialized. As a ~~new Chief Financial Officer is appointed.~~

~~The loss of key personnel, including members of executive management as well as key bioengineering, product development, and technical personnel, could disrupt~~result, our operations and have an adverse effect on our business. We will need to hire additional qualified personnel with expertise in clinical research, preclinical testing, government regulation, formulation and manufacturing and sales and marketing. We compete for qualified individuals with numerous biopharmaceutical companies, universities and other research institutions. Competition for such individuals is intense, and our search for such personnelintellectual property may not ~~be successful. Attracting and retaining qualified personnel is critical~~provide us with sufficient rights to ~~our success.~~exclude others from commercializing products similar or identical to ours.

We have employees whose equity ownership in the Company could result in a substantial increase in personal wealth if the fair value of our common stock increases. Over time, this increase in personal wealth may make it more challenging to retain these employees.

If third-party manufacturers of our drug candidates fail to devote sufficient time and resources to our concerns, or if their performance is substandard, our clinical trials and product introductions may be delayed and our costs may be higher than expected.

We have no manufacturing facilities and have limited experience in drug product development and commercial manufacturing. We lack the resources and expertise to formulate, manufacture or test the technical performance of our drug candidates. We rely on and expect to continue to rely on a limited number of experienced personnel and a small number of contract manufacturers and other vendors to formulate, test, supply, store and distribute drug supplies for our preclinical studies and clinical trials. Our reliance on a limited number of vendors exposes us to the following risks, any of which could delay our clinical trials, and, consequently, FDA approval of our drug candidates and commercialization of our products, result in higher costs, or deprive us of potential product revenues:

Contract commercial manufacturers, their sub-contractors or other third parties we rely on and expect to rely on, may encounter difficulties in achieving the volume of production needed to satisfy preclinical and clinical needs or commercial demand, may experience technical issues that impact quality or compliance with applicable and strictly enforced regulations governing the manufacture of pharmaceutical products, and may experience shortages of qualified personnel to adequately staff production operations.

~~Our contract manufacturers could default on their agreements with us to provide supplies or meet our requirements for commercialization of our products.~~

For certain of our drug candidates, the use of alternate manufacturers may be difficult because the number of potential manufacturers that have the necessary governmental licenses to produce narcotic products is limited. Additionally, the FDA and the DEA must approve any alternative manufacturer of our products before we may use the alternative manufacturer to produce our supplies.

It may be difficult or impossible for us to find a replacement manufacturer on acceptable terms quickly, or at all. Our contract manufacturers and vendors may not perform as agreed or may not remain in the contract manufacturing business for the time required to successfully produce, store and distribute our products.

~~If any contract manufacturer makes improvements in the manufacturing process for our products, we may not own, or may have to share, the intellectual property rights to such innovation.~~

We may not be able to ~~successfully~~protect our intellectual property and proprietary rights throughout the world.

Filing, prosecuting, and defending patents on our product candidates and other technologies in all countries throughout the world would be prohibitively expensive, and the laws of foreign countries may not protect our rights to the same extent as the laws of the U.S.

Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the U.S., or from selling or importing products made using our inventions in and into the U.S. or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products, and, further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the U.S. These products may compete with our products, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our intellectual property and proprietary rights generally. Proceedings to enforce our intellectual property and proprietary rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property and proprietary rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or ~~commercialize~~license.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on patents and applications will be due to be paid to the USPTO and various government patent agencies outside of the U.S. over the lifetime of our owned or licensed patents and applications. The USPTO and various non-U.S. government agencies require compliance with several procedural, documentary, fee payment, and other similar provisions during the patent application process. In some cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. There are situations, however, in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in a partial or complete loss of patent rights in the relevant jurisdiction. In such an event, potential ~~drug~~competitors might be able to enter the market with similar or identical products or technology, which could have a material adverse effect on our business, financial condition, results of operations, and growth prospects.

Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

Changes in either the patent laws or interpretation of the patent laws in the U.S. could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. Assuming that other requirements for patentability are met, prior to March 2013, in the U.S., the first to invent the claimed invention was entitled to the patent, while outside the U.S., the first to file a patent application was entitled to the patent. After March 2013, under the Leahy-Smith America Invents Act (the America Invents Act) enacted in September 2011, the U.S. transitioned to a first inventor to file system in which, assuming that other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. A third party that files a patent application in the USPTO after March 2013, but before us could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by such third party. This will require us to be cognizant going forward of the time from invention to filing of a patent application. Since patent applications in the U.S. and most other countries are confidential for a period of time after filing or until issuance, we cannot be certain that we were the first to either (i) file any patent application related to our product candidates or other technologies or (ii) invent any of the inventions claimed in our patents or patent applications.

The America Invents Act also includes a number of significant changes that affect the way patent applications will be prosecuted and also may affect patent litigation. These include allowing third party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, inter partesreview, and derivation proceedings. Because of a lower evidentiary standard in USPTO proceedings as compared to the evidentiary standard in U.S. federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for ~~indications~~the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. Therefore, the America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations, and growth prospects.

In addition, the patent positions of companies in the development and commercialization of pharmaceuticals are particularly uncertain. Various U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the validity and enforceability of patents, once obtained. Depending on future actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could have a material adverse effect on our existing patent portfolio and our ability to protect and enforce our intellectual property in the future.

We may be subject to claims challenging the inventorship of our patents and other ~~than pain.~~intellectual property.

~~Our~~We may be subject to claims that former employees, scientific collaborators or other third parties have an interest in our patents, trade secrets, or other intellectual property as an inventor or co-inventor. For example, we may have inventorship

disputes arise from conflicting obligations of employees, consultants, or others who are involved in developing our product candidates or other technologies. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership of our patents, trade secrets, or other intellectual property. If the defense of any such claims fails, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to our product candidates and other technologies. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and growth prospects.

We may not be successful in obtaining necessary rights to our product candidates or other technologies.

Many pharmaceutical companies, biotechnology companies, and academic institutions that compete with us in the field of neurodegeneration therapy may have patents filed and are likely filing patent applications potentially relevant to our business. In order to avoid infringing these third-party patents, we may find it necessary or prudent to obtain licenses to such patents from such third-party intellectual property holders. We may also require licenses from third parties for certain technologies for use with future product candidates. In addition, with respect to any patents we co-own with third parties, we may wish to obtain licenses to such co-owner’s interest to such patents. However, we may be unable to secure such licenses or otherwise acquire any compositions, methods of use, processes, or other intellectual property rights from third parties that we identify as necessary for our future product candidates. The licensing or acquisition of third-party intellectual property rights is a competitive area, and several more established companies may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources, and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment or at all. If we are unable to successfully obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights we have, we may have to abandon development of the relevant program or product candidate, which could have a material adverse effect on our business, financial condition, results of operations, and growth prospects.

We may be subject to claims that our employees, consultants, or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own intellectual property which may prevent or delay the development of our product candidates.

The field of developing innovations for neurodegenerative diseases is highly competitive and dynamic. Due to the focused research and development ~~activities include development of potential drug candidates for indications~~that is taking place by several companies, including us and our competitors, the intellectual property landscape in this field is in flux, and it may remain uncertain in the future. Additionally, no products utilizing our underlying science and technology have yet reached the market. As such, there may be significant intellectual property related litigation and proceedings relating to our, and other ~~than pain. We have no history of developing such drug candidates. We do not know whether any of our planned development activities will result~~third party, intellectual property and proprietary rights in ~~marketable products. We do not anticipate that our drug candidates in these areas will reach~~ the ~~market for at least several years, if at all.~~future.

~~Our employees and consultants are generally subject to confidentiality or other agreements with their former employers and they may inadvertently or otherwise violate those agreements.~~

Many of our employees, consultants, and ~~consultants~~advisors are currently or were previously employed at universities or other biotechnology or pharmaceutical ~~companies. While~~companies, including our competitors and potential competitors. Although we ~~require~~try to ensure that our employees, consultants, and ~~consultants to honor any agreements they may have entered into prior to working with~~advisors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we ~~inadvertently~~ or ~~otherwise~~these individuals have used or disclosed intellectual property, including trade secrets or other ~~confidential~~proprietary information, ~~belonging to~~of any such individual’s current or former ~~employers. Failure~~employer. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in ~~loss~~substantial costs and be a distraction to management.

In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of ~~valuable~~intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing, or ~~personnel,~~the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property. Such claims could have a material adverse effect on our business, financial condition, results of operations, and growth prospects.

Our commercial success depends in part on our ability to develop, manufacture, market, and sell any product candidates that we develop and to use our proprietary technologies without infringing, misappropriating, and otherwise violating the patents and other intellectual property rights of third parties. There is a substantial amount of complex litigation involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, as well as administrative proceedings for challenging patents, including interference, derivation, and reexamination proceedings before the USPTO or oppositions and other comparable proceedings in foreign jurisdictions. We may become party to, or threatened with, such actions in the future, regardless of their merit. As discussed above, recently, due to changes in U.S. law referred to as patent reform, new procedures including inter partes review and post-grant review have been implemented. As stated above, this reform adds uncertainty to the possibility of challenge to our patents in the future.

Numerous U.S. and foreign issued patents and pending patent applications owned by third parties exist in the fields in which we are developing our product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates and other technologies may give rise to claims of infringement of the patent rights of others. Although we believe that we do not infringe on any third parties’ patents or other intellectual property, we cannot assure you that our product candidates and other technologies that we have developed, are developing or may develop in ~~turn~~the future will not infringe existing or future patents owned by third parties. We may not be aware of patents that have already been issued to a third party, such as a competitor in the fields in which we are developing product candidates, who might assert infringement of patents it may hold by our current or future product candidates or other technologies, including claims to compositions, formulations, methods of manufacture or methods of use or treatment that cover our product candidates or other technologies. It is also possible that patents owned by third parties of which we are aware, but which we do not believe are relevant to our product candidates or other technologies, could ~~harm~~be found to be infringed by our product candidates or ~~prevent commercialization~~other technologies. In addition, because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates or other technologies may infringe.

Engaging in litigation to defend against third parties alleging that we have infringed, misappropriated, or otherwise violated their patents or other intellectual property rights is very expensive, particularly for a company of our ~~drug candidates. Successful defense~~size, and time-consuming. Some of our competitors may be able to sustain the costs of litigation or administrative proceedings more effectively than we can because of greater financial resources. Patent litigation and other proceedings may also absorb significant management time. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings against us could impair our ability to compete in the marketplace. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and growth prospects.

We may become involved in lawsuits to protect or enforce our patents and other intellectual property rights, which could be expensive, time consuming, and unsuccessful.

Competitors may infringe on our patents or the patents of our licensing partners, or we may be required to defend against claims of infringement. In addition, our patents or the patents of our licensing partners also may become involved in inventorship, priority, or validity disputes. To counter or defend against such claims can be expensive and time consuming. In an infringement proceeding, a court may decide that a patent in which we have an interest is invalid or unenforceable, the other party’s use of our patented technology falls under the safe harbor to patent infringement, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

Intellectual property rights do not necessarily address all potential threats.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For example:

others may be able to make products that are similar to our product candidates or utilize similar technology but that are not covered by the claims of the patents that we may own;

we might ~~distract~~not have been the first to make the inventions covered by the issued patent or pending patent application that we own now or in the future;

we might not have been the first to file patent applications covering certain of our inventions;

others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our owned intellectual property rights;

it is possible that our current or future pending patent applications will not lead to issued patents;

issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties;

our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

we may not develop additional proprietary technologies that are patentable;

the patents of others may harm our business; and

we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.

Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations, and growth prospects.

Risks Related to Our Business and Operations

Our reputation and operations could be adversely impacted by allegations, regardless of their merits.

We believe that our reputation has significantly contributed to the success of our business. We also believe that maintaining and enhancing our reputation is critical to many of our core operations, such as conducting studies, working with outside vendors, hiring qualified employees, members of our Board of Directors or science collaborators, raising funds for future operations, or working with potential industry and government collaborators. Maintaining and enhancing our reputation will depend largely on our ability to develop innovative drug products, continue to generate credible scientific data and respond appropriately to our critics, which we may not do successfully.

Our reputation may be injured by published false statements purporting to be fact, or by hostile actions made by or paid for by parties who represent investors who seek a decline in the price of our securities (“short-sellers”). Such allegations and statements may be published on internet forums over which we have no control, such as social media, and may be adopted by the editors of scientific or technical journals that have published our research, potentially resulting in retractions or expressions of concern by the journals. Regardless of merit, allegations and false statements may spread quickly and erode confidence in our reputation. Maintaining and enhancing our reputation may require us ~~from executing~~to make substantial investments in legal actions or other activities, and these investments could be expensive, time consuming, and unsuccessful. If we fail to successfully maintain our ~~strategies.~~reputation, or if we incur excessive expenses in this effort, our business, operations, future prospects, cash flows, and financial position may be adversely affected.

~~Law enforcement concerns over~~ Our ability to continue to operate without any significant disruptions will in part depend on our ability to source raw materials and clinical supplies via our product supply chains.

The widespread outbreak of COVID-19 has generally not significantly impacted our ability to source raw materials and clinical supplies to date. However, we are broadly aware of some general supply chain disruptions in certain markets due primarily to the restriction of employee movements and, in North America, due to labor shortages, supply chain disruptions and transportation constraints. In addition, uncertainty in the duration and scope of the pandemic, the emergence of new

mutations or variants of the virus, the likelihood of a resurgence of positive cases, the speed at which treatments and vaccines are administered or mandated and governmental actions in response to the pandemic could result in an unforeseen disruption to our operations. In addition, our ability to conduct clinical trials require the use of a host of critical ancillary supplies. Clinical ancillary supplies are general consumable or disposable products, such as sample collection tubes, latex gloves, instruments and other products routinely used in a medical or clinical research setting. We rely on independent vendors globally to supply us or our clinical collaborators with ancillary supplies. Any disruptions, gaps or shortages in the global supply chain for ancillary supplies could increase the cost or complexity of our supply chain management and delay the completion of our Phase 3 clinical program.

We cannot reasonably predict disruptions, gaps or shortages across our product supply-chains. With prolonged disruptions, there exists the possibility of a material adverse impact on our business, clinical operations, future prospects, cash flows, and financial position. Should we be unable to obtain key raw materials and clinical supplies on a timely basis, it could have a material adverse effect on our business, financial condition, results of operations, and growth prospects.

The worldwide outbreak of the COVID-19 virus and associated mutations or variants may materially and adversely affect our business operations and our ability to conduct clinical studies.

A widespread outbreak of COVID-19 has been declared by the World Health Organization to be a “public health emergency of international concern”; a national emergency by the President of the U.S; and a major disaster by several states in which we operate. This unprecedented spread of disease may affect our operations by causing a period of business disruption, including the potential interruption or halt of our clinical study activities and delays or disruptions in the supply of our products and product candidates, or the inability of our employees to continue their normal course of work due to disease, quarantine or leave requirements, or the possibility of legal claims and actions against us for claims of loss arising out of COVID-19. As a small company that operates with a limited number of employees, the impact of disease may disproportionately hurt our operations. Further, our business insurance may not provide coverage against economic loss or claims specifically tied to COVID-19 or any other disease.

COVID-19 presents many challenges that are without precedent. As such, we cannot presently assess or predict all current and potential uncertainties around the scope and severity of COVID-19 on our business operations with any meaningful precision. There is no assurance that COVID-19 will not have a material adverse impact on our future results. For example, the continued spread of COVID-19 could adversely impact our clinical study operations, including our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 if an outbreak occurs in their geography. COVID-19 could also negatively affect our manufacturing operations, which could result in delays or disruptions in the supply of our product candidates. A greater number of our employees working remotely during this outbreak of disease may expose us to greater risks related to cybersecurity and cyber-liability. Our study participants, vendors, employees, suppliers or others may allege they became sick due to our negligence. In addition, there could be a potential effect of a slowdown at FDA, which could result in delays of regulatory correspondence that are necessary for us to maintain or advance our product candidates in clinical studies. Further, the COVID-19 outbreak may adversely impact our ability to file on a routine and timely basis our obligations under federal securities laws, present new data at annual scientific meetings and professional conferences, reach out to institutional investors through in-person meetings, advance simufilam in a Phase 3 efficacy program, add an international component to our clinical studies, obtain additional financing as needed, engage in partnering discussions or conduct other activities necessary to the success of our business.

The extent to which the COVID-19 pandemic may impact our business with respect to research and development and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, vaccine distribution, variants of the virus, the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. As the COVID-19 pandemic continues to spread around the globe, we will likely experience disruptions that could severely impact our business with respect to research and development and clinical trials, including:

•delays or difficulties in enrolling patients or maintaining scheduled study visits in our clinical trials;

•delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;

•negative impact on interactions necessary for clinical testing, due to restricted access for industry employees;

•challenges in providing clinical study education with respect to our Phase 3 program in a virtual setting, and restrictions on clinician and provider travel;

•diversion of ~~opioids~~healthcare resources, clinical staff, physicians and ~~social issues around abuse~~advanced practice providers in neurology, including clinical sites serving as our clinical trial sites, away from the conduct of ~~opioids~~our clinical trials;

•interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others;

•limitations in employee resources that would otherwise be focused on the conduct of our business with respect to research and development or clinical trials, including due to illness of our employees or their families, an increase in childcare responsibilities for certain employees, the desire of our employees to avoid close contact or contact with large groups of people or because of governmental imposition of stay-at-home orders or similar working restrictions;

•delays in receiving approval from local regulatory authorities to initiate our planned clinical trials;

•delays in clinical sites receiving the supplies and materials needed to conduct clinical trials;

•interruption in domestic or global shipping that may ~~make~~affect the transport of clinical trial materials;

•changes in regulations as part of a response to the COVID-19 pandemic, which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or discontinuing clinical trials altogether;

•delays in necessary interactions and anticipated timelines with local and federal regulators (including the FDA), ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees; and

•refusal of the FDA to accept data from clinical trials in affected geographies outside the United States.

If we or any of the third parties with whom we engage were to experience shutdowns or other business disruptions related to COVID-19, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively impacted, which could have a material adverse effect on our business, results of operations and financial condition.

Our dependence on single source suppliers for our drug substance and drug product could materially adversely affect our ability to manufacture our product candidates and materially increase our costs.

We rely on single source suppliers for materials that are critical to the manufacturing of simufilam, our lead product candidate. This reliance subjects us to risks related to our potential inability to obtain an adequate supply of required materials. Our operating results could be materially adversely affected if we were unable to obtain adequate supplies of simufilam in a timely manner or if their cost increased significantly.

Further, it would likely result in production and delivery delays if we needed to find alternative suppliers for simufilam, which could lead to delays in our clinical trials and have a material adverse effect on our business, results of operations and financial condition.

Changes in funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent our product candidates from being developed or commercialized in a timely manner, which could negatively impact our business.

We rely on the FDA to assist with the development our product candidates. The ability of the FDA to review and approve new drug products can be affected by a variety of factors outside of our control, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for our product candidates to be reviewed and/or potentially approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. If the timing of FDA’s

review and approval ~~process and commercialization~~of new products is delayed, the estimated timing of our drug ~~candidates very difficult.~~

~~Law enforcement agencies or regulatory agencies~~development program may ~~apply policies that seek to limit the availability~~be delayed which would materially increase costs of ~~opioids. Such efforts may adversely affect the regulatory approval and commercialization of our drug candidates.~~

~~Developments by competitors may render our products or technologies obsolete or non-competitive.~~

Alternative technologies and products are being developed to improve or replace the use of opioids for pain management, several of which are in clinical trials or are awaiting approval from the FDA. In addition, the active ingredients in nearly all opioid drugs are available in generic form. Drug companies that sell generic opioid drugs represent substantial competition. Many of these organizations competing with us have substantially greater capital resources, larger research and development staffs and facilities, greater experience in drug development and ~~in obtaining regulatory approvals~~harm our operations or business.

Our reliance on third parties for both the supply and ~~greater manufacturing and marketing capabilities than~~manufacture of materials for our product candidates carries the risk that we ~~do. Our competitors may market less expensive~~will not have sufficient quality or ~~more effective drugs that would compete with our drug~~quantities of such materials or product candidates, or ~~reach market~~that such supply will not be available to us at an acceptable cost, which could delay, prevent, or impair our development or commercialization efforts.

We do not have any manufacturing facilities. We currently rely on CDMOs for all of the manufacture of our materials for preclinical studies and clinical studies and expect to continue to do so for preclinical studies, clinical studies, and for commercial supply of any product candidates that we may develop. We currently have established relationships with ~~competing drugs before~~several CDMOs for the manufacturing of our product candidates. We may be unable to establish any further agreements with CDMOs or to do so on acceptable terms. Even if we are able to ~~reach market~~establish agreements with third-party manufacturers, reliance on CDMOs entails additional risks, including:

the possible breach of the manufacturing agreement by the third party;

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

reliance on the third party for regulatory compliance, quality assurance, safety, and pharmacovigilance and related reporting; and

the inability to produce required volume in a timely manner and to quality standards.

Third-party manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements outside the U.S. Our failure, or the failure of our ~~drug candidates. These organizations also~~CDMOs, to comply with applicable regulations could result in clinical holds on our studies, sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, seizures, or recalls of product candidates or product candidates, operating restrictions, and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates and harm our business, financial condition, results of operations, and growth prospects.

Any product candidates that we may develop may compete with usother product candidates and products for access to ~~attract qualified personnel~~manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and ~~partners~~that might be capable of manufacturing for ~~acquisitions, joint ventures~~us.

Any performance failure on the part of our existing or ~~other collaborations.~~future third-party manufacturers could delay clinical development or marketing approval. If any one of our current contract manufacturers cannot perform as agreed, we may be required to replace that manufacturer and may incur added costs and delays in identifying and qualifying any such replacement. Furthermore, securing and reserving production capacity with contract manufacturers may result in significant costs.

~~Business interruptions could limit~~We also rely on third-parties for the supply of the raw materials required for the production of our product candidates, and we expect to continue to rely on third party manufacturers for the commercial supply of any of our product candidates for which we obtain marketing approval. Our current and anticipated future dependence upon others for the manufacture of any product candidates we may develop may adversely affect our future profit margins and our ability to ~~operate~~commercialize any medicines that receive marketing approval on a timely and competitive basis.

Our employees, principal investigators, consultants and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insider trading.

We are exposed to the risk of fraud or other misconduct by our ~~business.~~

~~Our operations, as well as~~employees, principal investigators, consultants and vendors. Misconduct by these parties could include intentional failures, reckless and/or negligent conduct or unauthorized activities that violate (i) the laws and regulations of FDA and other regulatory authorities, including those laws requiring the reporting of ~~our collaborators on which we depend, are vulnerable~~true, complete and accurate information to ~~damage~~such authorities, (ii) manufacturing standards, (iii) federal and state data privacy, security, fraud and abuse and other healthcare laws and regulations in the United States and abroad and (iv) laws that require the true, complete and accurate reporting of financial information or interruption from computer viruses, human error, natural disasters, electrical and telecommunication failures, international acts of terror and similar events. We have not established a formal disaster recovery plan and our back-up operationsdata. In particular, clinical and business ~~interruption insurance~~arrangements in the biotechnology and healthcare industries are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations restrict or prohibit a wide range of financial arrangements, incentive programs and other business arrangements. Such misconduct also could involve

the improper use of individually identifiable information, including, without limitation, information obtained in the conduct of clinical trials, creating fraudulent data in our preclinical studies or clinical trials or illegal misappropriation of drug product, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be ~~adequate~~effective in controlling unknown or unmanaged risks or losses or in protecting us from government investigations or other actions or lawsuits stemming from a failure to ~~compensate~~comply with these laws or regulations.

Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us ~~for losses~~and we ~~may suffer. A significant business interruption~~are not successful in defending ourselves or asserting our rights, those actions could result in ~~losses~~significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participating in government-funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of noncompliance with these laws, contractual damages, ~~incurred by us~~reputational harm and ~~require us to cease~~the curtailment or ~~curtail our operations.~~

~~Cyber-attacks or other failures in telecommunications or information technology systems could result in information theft, data corruption and significant disruption~~restructuring of our operations, any of which could have a negative impact on our business, ~~operations.~~financial condition, results of operations and prospects.

We ~~use information technology, computer~~expect to grow the size and capabilities of our organization, including accessing new physical facilities, and we may experience difficulties in effectively managing this growth.

As our development plans and strategies develop, we expect to add a significant number of additional managerial, operational, financial, and other personnel. Future growth will impose significant added responsibilities on members of management, including:

identifying, recruiting, integrating, retaining, and motivating additional employees;

executing a planned move to our new corporate headquarters in 2022;

increasing employee headcount;

managing our internal development efforts effectively, including the clinical and FDA review process for our current and future product candidates, while complying with our contractual obligations to contractors and other third parties;

expanding our operational, financial and management controls, reporting systems, and ~~networks~~procedures; and

managing increasing operational and managerial complexity.

Our future financial performance and our ability to ~~process, transmit~~continue to develop and, ~~store electronic information~~if approved, commercialize our product candidates will depend, in ~~connection with~~part, on our ~~business~~ability to effectively manage any future growth. Our management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to manage these growth activities. ~~Cyber incidents, including deliberate attacks~~

We currently rely, and ~~attempts~~for the foreseeable future will continue to ~~gain unauthorized access~~rely, in substantial part on certain independent organizations, advisors, and consultants to ~~computer systems~~provide certain services. There can be no assurance that the services of these independent organizations, advisors, and ~~networks, have increased in frequency, scope~~consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, our clinical studies may be extended, delayed, or terminated, and ~~sophistication in every industry. These threats pose a risk~~we may not be able to ~~the security~~obtain regulatory approval of our ~~systems and networks and the confidentiality, availability and integrity of~~product candidates or otherwise advance our ~~data, and may cause a disruption in our operations, harm our reputation and increase our stock trading risk.~~business. There can be no assurance that we will be ~~successful~~able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable terms, if at all.

If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further develop our product candidates and, accordingly, may not achieve our research, development, and commercialization goals.

Ownership of our corporate headquarters and property leasing are subject to numerous risks and uncertainties.

In August 2021, we made an all-cash purchase of an office complex in ~~preventing cyber-attacks~~Austin, Texas, that we anticipate will serve as our corporate headquarters for the long term. Title to this property is held by Austin Innovation Park, LLC, a Texas limited liability company wholly owned by Cassava Sciences. The purchase required a substantial upfront cash investment and may require further commitments of our resources in the future. We have assumed or ~~successfully mitigating their effects. Similarly, there can~~entered into lessor commitments with independent third parties for portions of our office complex and will continue to do so in the future. Commercial property ownership and

related leasing activity are subject to many factors that pose substantial financial risks and uncertainties, including tenant default or non-payment of lease obligations by tenants. Macro-economic or other factors outside of our control could have an adverse effect on the demand for leased office space in our locale or may cause a decline in the market value of our corporate headquarters. If we fail to lease unoccupied office space at favorable rates, or if we incur excessive expenses in this effort or incur excessive leasehold improvements or property ownership expenses, our business, operations, future prospects, cash flows, and financial position may be ~~no assurance~~adversely affected.

Our internal computer systems, or those used by third parties on whom we rely, may fail or suffer other breakdowns, cyberattacks, or information security breaches that could compromise the confidentiality, integrity, and availability of such systems and data, result in material disruptions of our ~~third-party collaborators, distributors~~development programs and business operations, risk disclosure of confidential, financial, or proprietary information, and affect our reputation.

In the ordinary course of our business, we collect and store sensitive data, including legally protected patient health information, personally identifiable information about our employees, intellectual property, and proprietary business information. We manage and maintain our applications and data utilizing on-site systems. These applications and data encompass a wide variety of business-critical information including research and development information, commercial information and business and financial information. Despite the implementation of security measures, our internal computer systems and those of our current or future Clinical Research Organizations (CROs) and other contractors and consultants ~~will~~may be ~~successful~~vulnerable to damage from computer viruses and unauthorized access. As the cyber-threat landscape evolves, these attacks are growing in ~~protecting our data that is stored on their systems. A~~frequency, sophistication, and intensity, and are becoming increasingly difficult to detect. Such attacks could include the use of key loggers or other harmful and virulent malware, including ransomware or other denials of service, and can be deployed through malicious websites, the use of social engineering, and/or other means. If a breakdown, cyberattack, or ~~destruction~~other information security breach were to occur and cause interruptions in our operations, it could result in a misappropriation of confidential information, including our intellectual property or financial information, and a material disruption of our development programs and our business operations. For example, the loss of clinical study data from completed, ongoing, or future clinical studies could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on our third-party research institution collaborators for research and development of our product candidates and other third parties for the manufacture of our product candidates and to conduct clinical studies, and similar events relating to their computer systems could also have a material adverse effect on our business. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or systems, or inappropriate disclosure of confidential, financial, or proprietary information, including data related to our personnel, we could incur liability or risk disclosure of confidential, financial, or proprietary information, and the further development and commercialization of our product candidates could be delayed. There can be no assurance that we and our business ~~and prospects. In addition, we may suffer reputational harm~~counterparties will be successful in efforts to detect, prevent, or ~~face litigation~~fully recover systems or ~~adverse regulatory action as a result~~data from all breakdowns, service interruptions, attacks, or breaches of ~~cyber-attacks or other data security breaches and may incur significant additional expense to implement further data protection measures.~~

~~Unfavorable media coverage of opioid pharmaceuticals~~systems that could ~~negatively affect our business.~~

Opioid drug abuse receives a high degree of media coverage. Unfavorable publicity regarding, for example, the use or misuse of oxycodone or other opioid drugs, the limitations of ADFs, public inquiries and investigations into prescription drug abuse, litigation or regulatory activity could adversely affect our reputation. Such negative publicity could have an adverse effect on the potential size of the market for our drug candidates and decrease revenues and royalties, which would adversely affect our business and operations and/or result in the loss of critical or sensitive data, which could result in financial, ~~results.~~legal, business, or reputational harm to us.

Our business involves environmental risks that may result in liability for us.

~~Risks Relating~~

In connection with our research and development activities, we, and our collaborators and vendors, are subject to ~~Manufacturing~~federal, state and local laws, rules, regulations and policies governing the use, generation, manufacture, storage, air emission, effluent discharge, handling and disposal of certain materials, biological specimens, chemicals and wastes. Although we believe that we comply with such applicable laws, regulations and policies in all material respects and have not been required to correct any material noncompliance, we may incur significant costs to comply with environmental and health and safety regulations in the future. Although we believe that our safety procedures for handling and disposing of controlled materials comply with the standards prescribed by state and federal regulations, accidental contamination or injury from these materials may occur. In the event of such an occurrence, we could be held liable for any damages that result and any such liability could exceed our resources.

Business disruptions and lack of appropriate levels of commercial insurance could seriously harm our future revenue and financial condition and increase our costs and expenses.

Our operations, and those of our third-party research institution collaborators, CROs, CDMOs, suppliers, and other contractors and consultants, could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, disease epidemics or pandemics, such as COVID-19, a novel coronavirus first detected in 2019, and other natural or man-made disasters or business interruptions, for which we are partly

or entirely uninsured. In addition, we rely on our third-party research institution collaborators for conducting research and development of our product candidates, and they may be affected by government shutdowns or withdrawn funding. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. We rely on third party manufacturers to produce and process our product candidates. Our ability to obtain clinical supplies of our product candidates could be disrupted if the operations of these suppliers are affected by a man-made or natural disaster or other business interruption.

Our day-to-day operations are located in a single office facility in Austin, Texas. Damage or extended periods of interruption to our corporate, development, or research facilities could cause us to cease or delay development of some or all our product candidates. Our insurance might not cover losses under such circumstances and our business may be seriously harmed by such delays and interruption.

Social media platforms present risks and challenges.

As social media continues to expand, it also presents us with new challenges. The inappropriate or unauthorized use of our confidential information on media platforms could cause brand damage or information leakage, which would cause legal or regulatory issues for us. In addition, negative, inappropriate or inaccurate posts or comments about us or our product candidates on social media internet sites could quickly and irreversible damage our reputation, brand image and goodwill. Further, the accidental or intentional disclosure of non-public sensitive information by our workforce or others through media channels could lead to information loss or could lead to legal or regulatory issues for us.

We expect to rely on third parties to conduct our studies and some aspects of our research, and such third parties may not perform satisfactorily, which could delay or harm our studies, research, and testing.

We substantially rely and expect to continue to rely on third parties, such as CROs, clinical data management organizations, medical institutions, and clinical investigators, to conduct some aspects of our research and preclinical testing and our clinical studies. Any of these third parties may terminate their engagements with us or be unable to fulfill their contractual obligations. If we need to enter into alternative arrangements, it will delay our product development activities.

Our reliance on these third parties for research and development activities reduces our control over these activities but does not relieve us of our responsibilities. For example, we remain responsible for ensuring that all of our clinical studies are conducted in accordance with the general investigational plan and protocols for the trial. Moreover, FDA requires us to comply with the norms of Good Clinical Practice (GCPs) for conducting, recording, and reporting the results of clinical studies to assure that data and reported results are credible, reproducible, and accurate and that the rights, integrity, and confidentiality of study participants are protected. We also are required to register ongoing clinical studies and post the results of completed clinical studies on a government-sponsored database within certain timeframes. Failure to do so can result in fines, adverse publicity, and civil and criminal sanctions.

If our third-party vendors do not successfully carry out their contractual duties, meet expected deadlines, or conduct studies in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for any product candidates we may develop and will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates. For example, one of our vendors failed to fully comply with certain Good Laboratory Practice (GLP) norms in its research facility, which required us to repeat a lab study at a different research site.

We also rely on other third parties to label, store and distribute drug supplies for our clinical studies. Any performance failure on the part of our distributors, including with the shipment of any drug supplies, could delay clinical development or marketing approval of any product candidates we may develop or commercialization of our product candidates, producing additional losses and depriving us of potential product revenue.

We do not own any manufacturing facilities and we rely on third-party commercial drug manufacturers for clinical drug supply.

We do not own any manufacturing facilities. We plan to continue to outsource formulation, manufacturing and related activities.

We rely on a limited number of third-party suppliers to formulate, manufacture, fill, label, ship or store all of our ~~drug~~product candidates. These suppliers must comply with current ~~good manufacturing practices, or GMP~~,cGMP regulations enforced by ~~the~~ FDA and other government

agencies, ~~and DEA regulations,~~ and are subject to ongoing periodic unannounced inspection, including preapproval inspections by ~~the~~ FDA ~~and DEA~~ and corresponding state and foreign government agencies to ensure

strict compliance with cGMP and other government regulations and corresponding foreign standards. These manufacturers may subsequently be stopped from producing, storing, shipping or testing our drug products due to their non-compliance with federal, state or local regulations. We do not have control over our suppliers’ compliance with these regulations and standards.

~~If REMOXY is approved, our commercial suppliers may encounter difficulties in achieving high volumes of production to satisfy commercial demands.~~

We cannot control decisions by our suppliers that affect their ability or willingness to continue to supply us on acceptable terms, or at all.

We may not be able to replace a commercial supplier on commercially reasonable terms, or at all. Replacing any of our commercial suppliers would be expensive and time consuming.

Failure by any of our suppliers to perform as expected could delay or prevent commercialization of ~~REMOXY~~our product candidates or result in shortages, cost overruns, or other problems and would materially harm our business.

We ~~will rely~~are a small company with a limited number of employees. We are highly dependent on ~~Durect as the sole source of certain excipients~~our key personnel, and if we are not successful in ~~REMOXY.~~ ~~Durect has limited experience manufacturing pharmaceutical products~~attracting, motivating, and ~~maintaining GMP-compliant operations. We currently do not have a long-term commercial supply agreement in place with Durect. We expect that~~retaining highly qualified personnel, we ~~and Durect will negotiate a supply agreement for these excipients.~~ We may not be able to ~~establish a commercial supply agreement~~successfully implement our business strategy.

Our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon our ability to attract, motivate, and retain highly qualified managerial, scientific, and medical personnel. We are highly dependent on ~~acceptable terms, or at all.~~

~~If we receive marketing approval for~~our management, particularly our President and ~~commercially launch REMOXY, Durect may need~~Chief Executive Officer, Remi Barbier, and our scientific and technical personnel. The loss of the services provided by any of our executive officers, other key employees, and other scientific and medical advisors, and our inability to ~~materially expand its manufacturing capacity. Durect may not be able to increase its manufacturing capacity for REMOXY~~find suitable replacements, could result in ~~a timely or economic manner, or at all. Moreover, significant scale up~~delays in the development of ~~manufacturing will require additional validation studies, which are subject to FDA review~~our product candidates and approval. If Durect is unable to successfully increase the manufacturing capacity, at an acceptable cost or otherwise, and we are unable to establish alternative manufacturing capabilities, there may be a shortage in supply, which would harm our ~~future revenues~~business.

Competition for skilled personnel is intense and ~~cause~~the turnover rate can be high, which may limit our ~~business~~ability to ~~suffer.~~

~~If Durect fails to supply excipients to us, they may be in breach of their supply obligations. With or without a commercial supply agreement,~~ Durect’s failure for any reason to supply these excipients, including failure resulting from Durect relying on sole source providers, could delay or prevent commercialization of REMOXY or result in shortages, delays, unexpected costs or other problemshire and ~~would materially harm our business.~~

We expect to rely on Noramco as the sole source of the oxycodone in REMOXY. We currently do not have a long-term commercial supply agreement in place with Noramco. Effective July 1, 2016, Noramco is owned by SK Capital Partners, a private investment firm. We expect to negotiate with Noramco a commercial supply agreement to supply us with oxycodone. We may not be able to establish a commercial supply agreementretain highly qualified personnel on acceptable terms or at all. ~~Until~~We expect that we may need to recruit talent from outside of our region in Austin, Texas, and doing so may be costly and difficult.

To induce valuable employees to remain at our company, in addition to salary and cash incentives, we have provided equity option grants that vest over time or a ~~commercial supply agreement~~cash bonus plan. The value to employees of these equity grants that vest over time or cash bonus plans may be significantly affected by movements in ~~place~~our stock price that are beyond our control and may at any time be insufficient to counteract more lucrative offers from other companies. Although we have employment agreements with ~~Noramco,~~our key employees, these employment agreements provide for at-will employment, which means that any of our employees could leave our employment at any time, with or without notice. If we ~~expect~~are unable to ~~obtain oxycodone from Noramco via purchase orders. There can be no assurance that Noramco will accept our purchase orders~~attract and incentivize quality personnel on acceptable terms, or at ~~all. With or without~~all, it may cause our business and operating results to suffer.

We may need to cease our operations if we are unable to attract and retain key personnel.

We are engaged in developing early-stage technologies and will continue to do so for the foreseeable future. Unlike larger organizations, we rely on a ~~commercial supply agreement, Noramco’s failure~~very small number of highly skilled, and highly sought after, employees to continue the advancement of our development stage technologies. The knowledge and skills contributed by our key employees may be irreplaceable and the loss of a key employee may cause substantial negative financial, operational and scientific consequences for ~~any reason to supply us with oxycodone could delay or prevent commercialization~~our business. As an example, our research grant awards from NIH depend in part on the continued participation of ~~REMOXY or~~certain key employees, known as a Principal Investigator. The loss of a Principal Investigator may result in ~~shortages, cost overruns~~the loss of one or ~~other problems~~more research grant awards from NIH, which would have significant adverse effects on our ability to continue to conduct, conclude or fund our research programs in Alzheimer’s disease. Likewise, the intellectual property that ~~would materially harm~~is intended to protect our ~~business.~~

Wedevelopment stage technologies is still evolving and its evolution remains highly dependent on a small number of employees with specific expertise. The loss of a key employee may jeopardize our existing or pending intellectual property or may prevent us from accessing the technical information and knowledge necessary to extend our portfolio of intellectual property. Furthermore, we believe the adverse effects that may result from losing a key employee’s participation cannot be compensated with any specific insurance policies, such as “key person” or “business life” insurance. If we are not successful in retaining key employees, our business and financial condition will suffer, and we may need to ~~identify~~cease our operations.

If our current research collaborators or scientific advisors terminate their relationships with us or develop relationships with a ~~third-party~~competitor, our ability to ~~manufacture commercial supplies~~continue our business operations could be adversely affected.

We have relationships with unaffiliated research collaborators at academic and other institutions who conduct research at our request. These research collaborators are not our employees. As a result, we have limited control over their activities and,

except as otherwise required by our collaboration agreements, can expect only limited amounts of ~~REMOXY. Without a commercial manufacturer,~~their time to be dedicated to our activities. Our ability to discover drugs and biomarkers involved in human disease and validate and commercialize diagnostic tests will depend in part on the continuation of these collaborations. If any of these collaborations are terminated, we may not be able ~~commercialize REMOXY. To date, we have not identified such third-party manufacturer and we may never find a viable source of commercial supplies of REMOXY. We expect~~ to ~~rely on such third party as the sole-source drug product manufacturer of REMOXY pursuant to a supply agreement.~~enter into other acceptable collaborations. In addition, our existing collaborations may not be successful. Our research collaborators and scientific advisors may have relationships with other commercial entities, some of which could compete with us. Our research collaborators and scientific advisors sign agreements which provide for the confidentiality of our proprietary information and the results of studies conducted at our request. We may not, however, be able to ~~drug product manufacturing, this third-part manufacturer will need~~maintain the confidentiality of our technology and other confidential information related to all collaborations. The dissemination of our confidential information could have a material adverse effect on our business.

Our business may be ~~responsible~~impacted by political events, war, terrorism, business interruptions and other geopolitical events and uncertainties beyond our control.

War, terrorism, geopolitical uncertainties and other business interruptions could cause damage to, disrupt or cancel the conduct of our clinical studies on a global or regional basis, which could have a material adverse effect on our business, clinical sites or vendors with which we do business. Such events could also decrease patient demand to enroll in our clinical studies or make it difficult or impossible for ~~sourcing excipients~~us to deliver products and services to our clinical investigational sites. In addition, territorial invasions can lead to cybersecurity attacks on technology companies, such as ours, located far outside of the conflict zone. In the event of prolonged business interruptions due to geopolitical events, we could incur significant losses, require substantial recovery time and experience significant expenditures in ~~REMOXY other than those provided by~~order to resume our business or clinical operations. We have no operations in Russia or the ~~Durect Agreement. Failure for any reason~~Ukraine, but we do not and cannot know if the current uncertainties in these geopolitical areas, which are unfolding in real-time, may escalate and result in broad economic and security conditions or rationing of medical supplies, which could limit our ability to ~~manufacture and supply REMOXY could delay or prevent commercialization of REMOXY~~conduct clinical trials outside the U.S. or result in ~~shortages, product recalls or withdrawals, delays or failures~~material implications for our business. In addition, our insurance policies typically contain a war exclusion of some description and we do not know how our insurers are likely to respond in ~~product testing or delivery, cost overruns or other problems~~the event of a loss alleged to have been caused by geopolitical uncertainties.

Risks Related to Financial Condition and Capital Requirements

We have incurred significant net losses in each period since our inception and anticipate that ~~would materially harm our business.~~

If we ~~cannot formulate and scale-up additional dosage forms of REMOXY, the commercial opportunity for REMOXY might be diminished.~~

We plan to formulate and scale-up additional dosage forms of REMOXY. We may not be able to successfully complete our formulation or scale-up activities or we may determine that the commercial opportunity for REMOXY in certain dosage forms is too limited to warrant further investment. If we are unsuccessful in our formulation or scale-up activities with REMOXY, our future revenue may be less than expected and our operations may suffer.

~~We rely solely on Durect to provide us with certain components of drug candidates and~~ will continue to ~~rely on Durect as the sole-source providerof these components.~~

We rely on Durect as the sole-source provider of certain components of REMOXY and other drug candidates designed to reduce the potential risks of unintended use, and will rely solely on Durect to produce commercial supplies of these components. Durect’s failure for any reason to provide these components or to achieve and maintain satisfactory manufacturing standards could result in product recalls or withdrawals, delays or failures in product testing or delivery, cost overruns or other problems that could materially harm our business.

Durect may encounter manufacturing difficulties involving production yields, quality control and quality assurance. Durect is subject to ongoing periodic unannounced inspection by the FDA and corresponding state and foreign agencies to ensure strict compliance with government regulations and corresponding foreign standards. We cannot control Durect’s compliance with these regulations and standards.

If we receive marketing approval for and commercially launch REMOXY, Durect may need to materially expand its manufacturing capacity. Durect may not be able to increase its manufacturing capacity for REMOXY in a timely or economic manner, or at all. Moreover, significant scale up of manufacturing will require additional validation studies, which are subject to FDA review and approval. If Durect is unable to successfully increase the manufacturing capacity for such components of REMOXY, at an acceptable cost or otherwise, and we are unable to establish alternative manufacturing capabilities, commercialization of REMOXY may be delayed, prevented or impaired or there may be a shortage in supply, which would harm our future revenues and cause our business to suffer.

~~We expect to rely on Noramco as the sole source of the oxycodone in REMOXY.~~

We expect to rely on Noramco as the sole source of the oxycodone in REMOXY. We expect we and Noramco will negotiate a supply agreement to supply us with the oxycodone in REMOXY. Noramco’s operation is subject to regulation by the DEA and the Controlled Substances Act. Noramco’s failure for any reason to manufacture and supply us with the oxycodone in REMOXY could result in shortages, cost overruns or other problems that could materially harm our business.

~~Risks Relating to our Financial Position and Need for Financing~~

~~Our operating history may make it difficult for you to evaluate our business to date and to assess its future viability.~~

Our operations from our inception to date have been limited to organizing and staffing our company, acquiring, developing and securing our technology, undertaking preclinical studies and clinical trials of our drug candidates and forming collaborations. We have not yet demonstrated our ability to obtain regulatory approval, formulate and manufacture our drug candidates on a commercial scale or conduct sales and marketing activities. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history.

~~We have a history of~~incur net losses ~~and expect to incur substantial losses and negative operating cash flows~~ for the foreseeable future.

~~Although we were profitable in some years in the past based on payments received pursuant to collaboration agreements and interest income, we have yet to generate any revenues from product sales.~~ We have incurred net losses in each reporting period since our inception, including a net loss of $32.4 million for the year ended December 31, 2021. As of December 31, 2021, we had an accumulated deficit of ~~$157 million~~$207.3 million.

We have invested significant financial resources in research and development activities for product candidates. We do not expect to generate revenue from product sales for several years, if at ~~December 31, 2017. Even if we succeed in developing and commercializing one or more~~all. The amount of our ~~drug candidates, we~~future net losses will depend, in part, on the level of our future expenditures and revenue. Moreover, our net losses may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indicator of our future performance.

We expect to continue to ~~use~~incur significant ~~cash resources in our operations~~expenses and higher operating losses for the foreseeable future.

We anticipate that our expenses will increase substantially as we:

continue our research and discovery activities;

advance our current and any future product candidates through preclinical and clinical development;

initiate and conduct additional preclinical, clinical, or other studies for our product candidates;

work with our CDMO’s to scale up the manufacturing processes for our product candidates;

seek regulatory approvals and marketing authorizations for our product candidates;

obtain, maintain, protect, defend and enforce our intellectual property portfolio;

attract, hire, and retain qualified personnel;

provide additional internal infrastructure to support our continued research and development operations and any planned commercialization efforts in the ~~foreseeable~~future;

experience any delays or encounter other issues related to our operations; and

meet the requirements and demands of being a public company.

Our prior losses and expected future ~~as we:~~

~~continue to conduct preclinical studies and clinical trials for our drug candidates;~~

~~seek regulatory approvals for our drug candidates;~~

~~develop, formulate, manufacture and commercialize our drug candidates;~~

~~implement additional internal systems and develop new infrastructure;~~

~~acquire or in-license additional products or technologies, or expand the use of our technology;~~

~~maintain, defend and expand the scope of our intellectual property; and~~

~~hire additional personnel.~~

losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital. In any quarter, our operating results could be below the expectations of securities analysts or investors, which could cause our stock price to decline.

We have broad discretion in the use of the net proceeds from any of our financing transactions and may not use them effectively.

We have broad discretion in the application of the net proceeds from our financing transactions, and investors will ~~need~~not have the opportunity to ~~generate~~assess whether the net proceeds are being used appropriately. We could spend the net proceeds from offerings in ways that vary substantially from their intended use, do not improve our results of operations or enhance the value of our common stock. Our failure to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending their use, we may invest the net proceeds from our financing transactions in a manner that does not produce income or that loses value.

We have no product revenues and may never achieve revenues or profitability based on product revenues.

We have no products approved for commercial sale. To obtain revenues from the sales of our product candidates that are significant ~~revenues~~or large enough to achieve ~~and maintain profitability. If~~profitability, we must succeed, either alone or ~~our collaborators cannot successfully develop, obtain~~with third parties, in developing, obtaining regulatory approval for, manufacturing, and ~~commercialize~~marketing product candidates with significant commercial value. This is a significant endeavor that few early-stage biopharmaceutical companies can successfully achieve. Our ability to generate revenue and achieve profitability depends on many factors, including:

completing research and preclinical and clinical development of our product candidates;

obtaining regulatory approvals and marketing authorizations for product candidates for which we successfully complete clinical development;

developing a sustainable and scalable manufacturing process for our product candidates, as well as establishing and maintaining commercially viable supply relationships with third parties that can provide adequate products and services to support clinical activities and commercial demand for our product candidates;

identifying, assessing, acquiring, and/or developing new product candidates;

negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter;

addressing any competing technological and market developments;

maintaining, protecting, expanding, and enforcing our portfolio of intellectual property rights, including patents, trade secrets, and know-how; and

attracting, hiring, and retaining qualified personnel.

Because of the numerous risks and uncertainties associated with drug ~~candidates,~~development, we are unable to predict the timing or amount of our expenses, or when we will ~~not~~ be able to generate ~~such revenues~~any meaningful revenue or ~~achieve profitability in the future. Our failure to~~ achieve or maintain profitability, ~~would have a material adverse impact on the market price~~if ever. In addition, our expenses could increase beyond our current expectations if we are required by FDA or foreign regulatory agencies to perform studies in addition to those that we currently anticipate, or if there are any delays in any of our ~~common stock.~~clinical studies or the development of any of our product candidates.

~~If we cannot raise~~We may require additional capital to fund our operations and to complete the development of our product candidates. A failure to obtain this necessary capital on acceptable terms, or at all, could force us to delay, limit, reduce, or terminate our commercialization efforts, product development, or other operations.

Our operations have required substantial amounts of cash since inception, and we ~~may be unable~~expect our expenses to ~~complete planned clinical trials of any or some of our drug candidates or to pursue attractive business opportunities.~~

Weincrease significantly in the foreseeable future. To date, we have ~~funded all of~~financed our operations ~~and capital expenditures with~~primarily through the ~~proceeds from our public~~sale of equity securities, research grants and ~~private stock offerings,~~ payments received ~~under collaboration agreements~~from prior third-party collaborations. Developing our product candidates and ~~interest earned~~conducting clinical studies for the treatment of neurodegenerative diseases, including Alzheimer’s disease, will require substantial amounts of capital. We will also require a significant amount of capital to commercialize any approved products.

As of December 31, 2021, we had cash and cash equivalents of $233.4 million. Based on our ~~investments. We expect~~current operating plan, we believe that our ~~current~~existing cash and cash equivalents ~~and marketable securities~~ will be sufficient to ~~meet~~fund our ~~working capital and capital expenditure needs~~projected operations for at least the next ~~twelve~~12 months. ~~However,~~Our estimate as to how long we expect our existing cash and cash equivalents to be available to fund our operations

is based on assumptions that may prove inaccurate, and we could use our available capital resources sooner than we currently expect. In addition, changing circumstances may cause us to increase our spending significantly faster than we currently anticipate, and we may ~~elect~~need to ~~raise additional funds within such twelve-month period or~~spend more money than currently expected because of circumstances beyond our control. We may need to raise additional funds ~~thereafter and~~sooner than we anticipate if we choose to expand more rapidly than we presently anticipate.

We may require additional ~~financing~~capital for the further development of our product candidates. Additional capital may not be available when we need it, or on ~~favorable~~ terms ifacceptable to us or at all. ~~Even~~We have no committed source of additional capital. If adequate capital is not available to us on a timely basis, we may be required to significantly delay, limit, reduce or terminate our research and development programs or the commercialization of product candidates, if ~~we succeed in selling additional securities~~approved, or be unable to ~~raise funds,~~continue or expand our ~~existing stockholders’ ownership percentage would be reduced~~operations, or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition, results of operations, and ~~new investors may demand rights, preferences or privileges senior~~growth prospects and cause the price of our common stock to ~~those of existing stockholders. If~~decline.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing, if available, ~~such financings~~ may involve agreements that include covenants ~~that restrict~~limiting or restricting our ~~business activities.~~ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If we raise additional ~~capital~~funds through collaborations, strategic ~~alliance and license~~alliances, or licensing arrangements with pharmaceutical partners, we may have to ~~trade our~~relinquish valuable rights to our ~~technology, intellectual property~~technologies, future revenue streams, research programs, or ~~drug~~product candidates, ~~to others in such arrangements~~or grant licenses on terms that may not be favorable to us.

~~If we determine that we need~~Global credit and financial market conditions could negatively impact the value of our portfolio of cash equivalents and our ability to ~~raise additional funds~~meet our financing objectives.

Our cash and cash equivalents are generally maintained in highly liquid investments with original maturities of 90 days or less at the time of purchase. While, as of the date of this filing, we are not ~~successful~~aware of any downgrades, material losses, or other significant deterioration in ~~doing so, we~~the fair value of our cash equivalents since December 31, 2021, no assurance can be given that deterioration in conditions of the global credit and financial markets would not negatively impact our current portfolio of cash equivalents or our ability to meet our financing objectives.

Risks Related to the Ownership of Our Common Stock

We do not know whether a sufficient market will continue to develop for our common stock or what the market price of our common stock will be, and, as a result, it may be ~~unable~~difficult for investors to ~~complete the clinical development of some or all~~sell shares of our ~~drug candidates or~~common stock.

If a market for our common stock is not sustained, it may be difficult to ~~seek or obtain FDA approval~~sell shares of our ~~drug candidates.~~common stock at an attractive price or at all. We then could be forced to discontinue product development, enter into a relationship with an additional strategic partner earlier than currently intended, relinquish or license on unfavorable terms our rights to technologies or drug candidates that we would seek to develop ourselves or significantly delay, scale-back or curtail our operations.

~~Our forecast of~~cannot predict the ~~period of time through~~prices at which our ~~financial resources~~common stock will ~~be adequate to support~~trade. It is possible that in one or more future periods our results of operations ~~is a forward-looking statement~~ and ~~involves risks~~progression of our product pipeline may not meet the expectations of public market analysts and ~~uncertainties,~~investors, and, ~~actual results could vary~~ as a result of these and other factors, the price of our common stock may fall.

The market price of our common stock has historically been highly volatile, and we expect it to continue to be volatile, which could result in substantial losses for investors who purchase our shares.

For example, the closing price of our common stock has fluctuated from a ~~number~~low of ~~factors, including~~$32.15 to a high of $135.30 over the 12 months preceding the filing date of this Annual Report on Form 10-K. Some of the factors ~~discussed elsewhere in this “Risk Factors” section. We have based this estimate on assumptions~~ that may ~~prove~~cause the market price of our common stock to fluctuate include:

the success of existing or new competitive products or technologies;

the timing and results of clinical studies for our current product candidates and any future product candidates that we may develop;

failure or discontinuation of any of our product development and research programs;

results of preclinical studies, clinical studies, or regulatory approvals of product candidates of our competitors, or announcements about new research programs or product candidates of our competitors;

regulatory or legal developments in the United States and other countries;

developments or disputes concerning patent applications, issued patents, or other proprietary rights;

the recruitment or departure of key personnel;

the level of expenses related to any of our research programs, clinical development programs, or product candidates that we may develop;

the results of our efforts to develop additional product candidates or products;

actual or anticipated changes in estimates as to financial results or development timelines;

announcement or expectation of additional financing efforts;

sales of our common stock by us, our insiders, or other stockholders;

variations in our financial results or those of companies that are perceived to be ~~wrong,~~similar to us;

changes in estimates or recommendations by securities analysts, if any, that cover our stock;

market conditions in the pharmaceutical and ~~we could utilize our available capital resources sooner than we currently expect.~~ biotechnology sectors;

general economic, industry, and market conditions; and

securities litigation, regardless of merit.

~~Risks Relating to an Investment~~

In recent years, the stock market in ~~our Common Stock~~

~~Our stock price has been volatile~~general, Nasdaq, and ~~could experience a sudden decline in value.~~

~~Our common stock~~the markets for early stage companies and pharmaceutical and biotechnology companies, has experienced significant price and volume fluctuations ~~and may continue~~that have often been unrelated or disproportionate to ~~experience volatility~~changes in the ~~future. You may not be able to sell your shares quickly or at~~operating performance of the ~~latest market price if trading in our~~companies whose stock is ~~not active or the~~experiencing those price and volume ~~is low.~~

~~The following~~fluctuations. Broad market and industry factors ~~in addition to other risk factors described in this section,~~ may ~~have a significant impact on~~seriously affect the market price of our common ~~stock:~~

~~results of or delays in efforts to seek regulatory approval for REMOXY, and in preclinical studies and clinical trials for our other drug candidates;~~

~~publicity regarding products under development by us or others, including with respect to actual or potential medical results relating to such matters;~~

~~announcements of technological innovations or new commercial products by us or others;~~

~~developments in patent or other proprietary rights by us or others;~~

~~comments or opinions by securities analysts or major stockholders;~~

~~adverse media coverage related to opioid pharmaceuticals;~~

~~future sales of our common stock by existing stockholders;~~

~~developments with respect to potential merger and acquisition activity of companies with whom we have strategic alliances or other agreements;~~

~~regulatory developments or changes in regulatory guidance enacted by applicable governmental or other authorities;~~

~~litigation or threats of litigation;~~

~~economic and other external factors or other disaster or crises;~~

~~the departure of any of our officers, directors or key employees;~~

~~period-to-period fluctuations in financial results;~~

~~announcement or expectations of additional financing efforts;~~

~~changes in accounting practices;~~

~~changes in the structure of the healthcare payment system;~~

~~market conditions in the biopharmaceutical industry;~~

~~publication of research reports about us, our competitor or our industry, or positive or negative recommendations or withdrawal of research coverage by securities analysts; and~~

~~limited daily trading volume.~~

stock, regardless of our actual operating performance. Following periods of such volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Because of the potential volatility of our stock price, we are currently and may become the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and resources from our business.

If securities analysts do not publish research or reports about our business, or we are the subject of negative publicity, the price of our stock could decline.

The trading market for our common stock depends, in part, on the research and reports that securities or industry analysts publish about us or our business. We do not control these analysts. If one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable evaluations of our company or our stock, the price of our stock could decline. If one or more of these analysts cease coverage of our company or fail to publish reports covering our company regularly, our stock may lose visibility in the market, which in turn could cause our stock price to decline. In addition, if we are athe subject of negative publicity, whether from an analyst, academic, social media, industry group or the general or financial press, our stock price may decline.

Effective December 31, 2021, we no longer qualify as “a smaller reporting ~~company~~company” and ~~we cannot be certain if~~ the reduced disclosure requirements applicable to smaller reporting companies no longer apply beginning with ourquarterly report for the three-month period ended March 31, 2022, which will ~~make~~increase our costs and demands on management.

As a result of our public float (the market value of our common ~~stock less attractive to investors.~~

~~We are currently~~shares held by non-affiliates) as of June 30, 2021, we became a large accelerated filer as of December 31, 2021 and, therefore, no longer qualify as a “smaller reporting company” as defined under the Exchange Act. However, we are not required to reflect the change in our smaller reporting company status until our quarterly report for the three-month period ended March 31, 2022.

As a smaller reporting company, we have had the option to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions related to certain “Say-on-Pay” rules under Section 14A of the Exchange Act, including requirements to hold a nonbinding advisory vote on named executive officer compensation, the frequency of such votes and arrangements with named executive officers regarding compensation based on or related to an acquisition, merger, or similar transaction.

General Risk Factors

If we are unable to maintain effective internal controls, our business, financial position, and results of operations could be adversely affected.

As a public company, we are subject to reporting and other obligations under the Securities Exchange Act of 1934, ~~and are thus allowed to provide simplified executive compensation disclosures in~~as amended (Exchange Act), including the requirements of Section 404(a) of SOX, which require annual management assessments of the effectiveness of our ~~filings, are exempt from the provisions of~~ internal control over financial reporting. Section 404(b) of the Sarbanes-Oxley Act ~~requiring~~(“SOX”) also requires our independent auditors to attest to, and report on, the effectiveness of our internal control over financial reporting.

The rules governing the standards that anmust be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation to meet the detailed standards under the rules. During testing, our management may identify material weaknesses or deficiencies which may not be remedied in time to meet the deadline imposed by SOX. These reporting and other obligations place significant demands on our management and administrative and operational resources, including accounting resources.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the U.S. Any failure to maintain effective internal controls, or if our independent registered public accounting firm ~~provide an attestation report on~~is unable to attest to the effectiveness of our internal control over financial reporting and have certain other reduced disclosure obligations with respect to our SEC filings. We will remain a “smaller reporting company” until the aggregate market value of our outstanding common stock held by non-affiliates as of the last business day our recently completed second fiscal quarter is $75 million or more. We cannot predict whether investors will find our common stock less attractive because of our reliance on any of these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

~~We have in the past and may in the future fail to meet all applicable listing requirements, our common stock may be delisted from The Nasdaq Global Market, which~~, could have an adverse ~~impact~~effect on ~~the liquidity~~our business, financial position, and ~~market price~~results of ~~our common stock.~~operations.

Our common stock is currently listed on The Nasdaq Global Market, which has qualitative and quantitative listing criteria. If we are unable to meet any of the Nasdaq listing requirements in the future, such as the corporate governance requirements, the minimum closing bid price requirement, the minimum market value of listed securities requirement, total assets and total revenues, net income from continuing operations, the number of publicly held shares or any other Nasdaq requirements. Nasdaq could determine to delist our common stock. A delisting of our common stock could adversely affect the market

liquidity of our common stock, decrease the market price of our common stock, adversely affect our ability to obtain financing for the continuation of our operations and result in the loss of confidence in our company. On November 16, 2016, we received notice from the Listing Qualifications Department of the Nasdaq Stock Market (the “Staff”) indicating that, for the previous 30 consecutive business days, the bid price for our common stock closed below the minimum $1.00 per share required for continued inclusion on The Nasdaq Global Market. The notification letter stated that we would be afforded 180 calendar days, or until May 15, 2017, to regain compliance with the minimum bid price requirement. In order to regain compliance, on May 4, 2017, our board of directors and stockholders approved the Charter Amendment to effect the Reverse Stock Split. On May 10, 2017, our common stock began trading on The Nasdaq Global Market on a split-adjusted basis at a ratio of 7-for-1. On May 24, 2017, we received a letter from the Staff indicating that we had regained compliance with the $1.00 minimum closing bid price requirement. Despite effecting the Reverse Stock Split, there can be no assurance that the market price per share of our common stock will remain in excess of the $1.00 minimum closing bid price requirement in the future. The continuing effect of the Reverse Stock Split on the market price of our common stock cannot be predicted with any certainty, and the history of similar stock split combinations for companies in like circumstances is varied.

Anti-takeover provisions in our charter documents and Delaware law may prevent or delay removal of incumbent management or a change of control.

Anti-takeover provisions of our amended and restated certificate of incorporation and amended and restated bylaws and Delaware law may have the effect of deterring or delaying attempts by our stockholders to remove or replace management, engage in proxy contests and effect changes in control. The provisions of our charter documents include:

~~a classified board so that only one of the three classes of directors on our board of directors is elected each year;~~

~~elimination of cumulative voting in the election of directors;~~

~~procedures for advance notification of stockholder nominations and proposals;~~

~~the ability of our board of directors to amend our bylaws without stockholder approval; and~~

the ability of our board of directors to issue up to 10,000,000 shares of preferred stock without stockholder approval upon the terms and conditions and with the rights, privileges and preferences as our board of directors may determine.

a classified board so that only one of the three classes of directors on our Board of Directors (the “Board”) is elected each year;

elimination of cumulative voting in the election of directors;

procedures for advance notification of stockholder nominations and proposals;

the ability of the Board to amend our bylaws without stockholder approval; and

the ability of the Board to issue up to 10,000,000 shares of preferred stock without stockholder approval upon the terms and conditions and with the rights, privileges and preferences as the Board may determine.

In addition, as a Delaware corporation, we are subject to Delaware law, including Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder unless certain specific requirements are met as set forth in Section 203.

These provisions, alone or together, could have the effect of deterring or delaying changes in incumbent management, proxy contests or changes in control.

Our ~~share ownership is concentrated,~~amended and restated bylaws provide that the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Laws of 1933, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers ~~directors~~or employees.

Our amended and ~~principal stockholders can exert significant control over matters requiring~~restated bylaws provide that the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933.

While the Delaware courts have determined that such choice of forum provisions are factually valid, a stockholder ~~approval.~~

~~Due~~may nevertheless seek to ~~their combined stock holdings, our officers, directors~~bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and ~~principal stockholders (stockholders holding greater than 5%~~enforceability of the exclusive forum provisions of our ~~common stock) acting collectively~~amended and restated bylaws. This may ~~have~~require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

These exclusive-forum provisions may limit a stockholder’s ability to ~~exercise~~bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage these types of lawsuits. Furthermore, the enforceability of similar choice of forum provisions in other companies’ certificates of incorporation or bylaws has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable. If a court were to find the exclusive-forum provision contained in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur further significant ~~influence over matters requiring stockholder approval including the election~~additional costs associated with resolving such action in other jurisdictions, all of ~~directors and approval~~which could harm our business.

Changes in our ownership could limit our ability to utilize net operating loss carryforwards.

As of ~~significant corporate transactions. In particular, Remi Barbier, our founder, Chairman~~December 31, 2021, we had aggregate federal net operating loss carryforwards of approximately $118.0 million, which begin to expire in 2029. Under Section 382 of the ~~Board~~Internal Revenue Code of ~~Directors, President and Chief Executive Officer, owns or controls a significant~~1986, as amended, changes in our ownership may limit the amount of our net operating loss carryforwards that could be utilized annually to offset our future taxable income, if any. This limitation would generally apply in the ~~voting power~~event of a cumulative change in ownership of our ~~outstanding capital stock. This concentration~~company of ~~ownership~~more than 50% within a rolling three-year period. Any such limitation may ~~delay or prevent a change in control~~significantly reduce our ability to utilize our net operating loss carryforwards and tax credit carryforwards. Any such limitation, whether as the result of the Company and may make some transactions, including but not limited to any merger, consolidation, or sale of substantially all of our assets, more difficult or impossible to complete without the support of key stockholders.

Publicly available information regarding stockholders’ ownership may not be comprehensive because the SEC does not require certain large stockholders to publicly disclose their stock ownership positions.

~~If the fair value of our stock increases and outstanding Performance Awards vest, we expect to use substantial amounts of cash to fund employee tax liabilities.~~

~~We have Performance Awards outstanding. If these Performance Awards vest, we expect to issue our employees shares~~past offerings, sales of our common stock ~~net of statutory employment taxes. This net issuance results in fewer shares issued and uses~~by our ~~cash to~~

~~fund these taxes. The use of cash could be substantially higher, depending on the fair value~~existing stockholders or additional sales of our common stock ~~on the date the Performance Awards vest. If our use of cash to fund these taxes is substantial, our cash balance could substantially decline and our stock price could also decline.~~

~~We may~~by us in the future ~~seek~~could have a material adverse effect on our results of operations in future years. We have not completed a study to assess whether an ownership change for purposes of Section 382 has occurred, or whether there have been multiple ownership changes since our inception, nor do we plan to do so due to the significant costs and complexities associated with such study.

We may sell additional equity or debt securities to fund ~~the cash used~~our operations, and have outstanding securities exercisable for ~~Performance Awards through the sale of our common stock. However, we may not be successful in selling shares of~~ our common stock, ~~to fund the cash used for Performance Awards. If the number of shares we sell to fund the cash used for Performance awards is significant, our stock price could decline.~~

~~Volatility in the stock prices of other companies~~which may ~~contribute to volatility in our stock price.~~

The stock market in general, Nasdaq and the market for technology companies in particular, have experienced significant price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Further, there has been particular volatility in the market prices of securities of early stage life sciences companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. A securities class action suit against us could result in ~~substantial costs, potential liabilities~~dilution to our stockholders and ~~the diversion of management’s attention and resources.~~impose restrictions on our business.

~~Our operating results may fluctuate from quarter to quarter and this fluctuation may cause our stock price to decline.~~

Our quarterly operating results have fluctuated in the past and are likely to fluctuate in the future. Factors contributing to these fluctuations include, among other items, the timing and enrollment rates of clinical trials for our drug candidates, our need for clinical supplies and the valuation of stock-based compensation. Thus, quarter-to-quarter comparisons of our operating results may not be not indicative of what we might expect in the future. As a result, in some future quarters our clinical, financial or operating results may not meet the expectations of securities analysts and investors and could result in a decline in the price of our stock.

~~If securities or industry analysts publish inaccurate or unfavorable research about our business or product candidates, our stock price could decline.~~

Securities or industry analysts publish research and reports about our business or product candidates. An analyst’s conclusions regarding prospects for product candidates in the biopharmaceutical industry can include judgments based on the limited publicly-available data. If one or more analysts issues unfavorable research about our business or our product candidates, including a downgrade of our common stock, the price of our stock may decline.

~~You may experience future dilution as a result of future equity offerings.~~

In order to raise additional capital to support our operations, we may ~~in the future offer~~sell additional shares of our common stock or other securities convertible into or exchangeable for our common ~~stock.~~ stock which could result in dilution our stockholders.

We cannot assure you that we will be able to sell shares or other securities in any other offering at a price per share that is equal to or greater than the price per share paid by investors in prior offerings, and investors purchasing our shares or other securities in the future could have rights superior to existing shareholders. The price per share at which we sell additional shares of our common stock or securities convertible into or exchangeable for our common ~~Stock~~stock in future transactions may be higher or lower than the price per share in prior offerings.

~~There~~ You may ~~not~~also be ~~an active, liquid trading market for our common stock.~~

~~There is no guarantee that an active trading market for~~diluted upon the exercise of outstanding stock options as of December 31, 2021 to purchase 2,663,727 shares of our common stock ~~will be maintained on Nasdaq. Investors~~at a weighted average price of $11.56 per share, and the future issuance of up to 152,188 compensatory equity awards authorized under our 2018 Omnibus Incentive Plan and up to 58,017 shares we may ~~not be able to~~ sell ~~their shares quickly or at the latest market price if trading in~~under our ~~stock is not active.~~Employee Stock Purchase Plan.

Item 1B.Unresolved Staff Comments

None.

Item 2.Properties

We lease approximately 6,000 square feet of office space pursuant to a non-cancelable operating lease in Austin, TXTexas that expires April 30, 2024. We also lease an additional 3,600 square feet of office space in Austin, Texas that expires on April 30, 2022.

On August 4, 2021, we completed the purchase of a two-building office complex in Austin, Texas, which will serve as our future corporate headquarters. The seller was a third party not affiliated with us. This property is intended to accommodate our anticipated growth and expansion of our operations in the coming years. Maintenance, physical facilities, leasing, property management and other key responsibilities related to property ownership are being outsourced to professional real-estate

managers. The purchase price of the property was $22.0 million, including closing costs, funded with cash on hand. The office complex measures approximately 90,000 rentable square feet. At acquisition and December ~~2020. We believe that our facilities are adequate and suitable for our current needs.~~31, 2021, the property was 59% leased. The Company is planning to occupy approximately 25% of the property in 2022.

Item 3.Legal Proceedings

~~None.~~From time to time, we may become involved in litigation or other legal proceedings and claims, including U.S. government inquiries, investigations and Citizen Petitions submitted to FDA. The outcome of these proceedings is inherently uncertain. Regardless of outcome, legal proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. At this time, no assessment can be made as to their likely outcome or whether the outcome will be material to us. No information is available to indicate that it is probable that a loss has been incurred or can be reasonably estimated as of the date of the consolidated financial statements and, as such, no accrual for these matters has been recorded within the consolidated financial statements.

Government Investigations

Certain government agencies have asked us to provide them with corporate information and documents. We have been cooperating and will continue to cooperate with government authorities. No government agency has informed us that any wrongdoing has occurred by any party. We cannot predict the outcome or impact of any these ongoing matters, including whether a government agency may pursue an enforcement action against us or others.

FDA Citizen Petitions

In August 2021, an attorney representing anonymous clients submitted a Citizen Petition to the FDA. This Citizen Petition requested that the FDA Commissioner immediately halt the clinical development of simufilam, our drug candidate for Alzheimer’s disease. The attorney subsequently disclosed that his clients are short sellers, that is, investors who earn a profit from a decline in our stock price. In September 2021, the same attorney filed another Citizen Petition, which requested that the FDA Commissioner immediately rescind previously granted Special Protocol Assessments (SPAs) for our Phase 3 clinical program with simufilam. FDA has not halted the clinical development of simufilam and has not rescinded our SPAs.

In February 2022, FDA denied both Citizen Petitions and their supplements. As of February 23, 2022, FDA’s denial letter could be found at: https://www.regulations.gov/document/FDA-2021-P-0930-0228.

In October 2021, a Citizen Petition was submitted to FDA by an individual unknown to us. This Citizen Petition requests FDA “…approval of simufilam and immediate initiation of Phase 4 trials for further efficacy, safety assessment and, most critically, to address one of the greatest needs in modern medicine.” The FDA has not engaged with us regarding this Citizen Petition.

In November 2021, an academic physician not previously known to us submitted a Citizen Petition to FDA requesting “Accelerated Approval of Simufilam for the most significant medical need in the United States of America.” The FDA has not ruled on this Citizen Petition.

No assurance can be given that FDA will grant, deny, dismiss, defer or otherwise act upon these or any other Citizen Petition or supplements within any timeframe, if ever.

Securities Class Actions and Shareholder Derivative Action

Between August 27 and October 26, 2021, four putative class action lawsuits were filed alleging violations of the federal securities laws by us and certain named officers. The complaints rely on allegations contained in two Citizen Petitions that were submitted to FDA, and allege that various statements made by the defendants regarding simufilam were rendered materially false and misleading. The two Citizen Petitions were subsequently denied by FDA. These actions were filed in the U.S. District Court for the Western District of Texas. The complaints seek unspecified compensatory damages and other relief on behalf of a purported class of purchasers of our securities between September 14, 2020 and August 27, 2021. We expect that the cases will be consolidated and that a lead plaintiff and lead counsel will be appointed and thereafter that a consolidated amended complaint will be filed. We believe the lawsuit claims are without merit and intend to defend against these lawsuits vigorously. We are unable to estimate the possible loss or range of loss, if any, associated with these lawsuits.

On November 4, 2021, a related shareholder derivative action was filed, purportedly on behalf of the Company, in the U.S. District Court for the Western District of Texas, asserting claims under the U.S. securities laws and state fiduciary duty laws against certain named officers and the members of the Company’s board of directors. The complaint relies on allegations made in two Citizen Petitions that were submitted to FDA. The two Citizen Petitions, which were subsequently denied by FDA, allege, among other things, that the individual defendants exposed the Company to unspecified damages and securities law liability by causing it to make materially false and misleading statements, in violation of the U.S. securities laws and in breach of their fiduciary duties to the Company. The derivative case seeks, among other things, to recover unspecified compensatory damages on behalf of the Company arising out of the individual defendant’s alleged wrongful conduct. Although the plaintiffs in the derivative cases does not seek relief against the Company, we have certain indemnification obligations to the individual defendants. Since November 4, 2021, three additional shareholder derivative actions were filed alleging substantially similar claims, two in the U.S. District Court for the Western District of Texas, and one in Texas state court (Travis County District Court). The state court action has been stayed pending the resolution of the motions to dismiss in the securities class actions. The parties to the three federal court actions have filed a motion, which the court has not yet ruled on, to consolidate and stay pending the resolution of motions to dismiss in the securities class actions. We are unable to estimate the possible loss or range of loss, if any, associated with these lawsuits.

Item 4.Mine Safety Disclosures

Not applicable.

PART II

Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Price of and Dividends of the Registrants Common Equity and Related Stockholder Matters

Our common stock is quoted on Nasdaq, under the symbol ~~"PTIE.~~"SAVA." ~~The following table sets forth the high and low sales prices per share~~

As of February 23, 2022, there were approximately 30 registered holders of record of our common ~~stock as reported on~~ ~~Nasdaq~~ ~~for the periods indicated.~~stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.

Sales Prices

High

Low
Fiscal 2016:

First Quarter
$
2.40

$
1.55
Second Quarter
$
2.63

$
1.95
Third Quarter
$
3.00

$
0.96
Fourth Quarter
$
1.04

$
0.51
Fiscal 2017:

First Quarter
$
9.31

$
3.71
Second Quarter
$
7.42

$
3.38
Third Quarter
$
4.30

$
3.10
Fourth Quarter
$
6.49

$
3.10

Dividend Policy

We currently expect to retain future earnings, if any, for use in the operation and expansion of our business and, notwithstanding our special ~~nondividend~~non-dividend distributions in December 2012 (of $0.75 per share of common stock totaling $34.0 million) and December 2010 (of $2.00 per share of common stock totaling $85.7 million), we have not paid and do not anticipate paying any cash dividends in the foreseeable future. ~~As of January 12, 2018, there were approximately 48 holders of record of our common stock.~~

Item 6.~~Selected Financial Data~~[Reserved]

‎

~~Not applicable.~~

4575

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysisof our financial condition and results of operations should be read in conjunction with our consolidated financial statements and accompanying notes included elsewhere in this ~~report.~~ Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations, and intentions, that are based on the beliefs of our management. Operating results are not necessarily indicative of results that may occur in future periods.Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the “Risk Factors” section of this Annual Report on Form 10-K.

Overview

~~Overview~~

We are a clinical-stage biotechnology company based in Austin, Texas. Our mission is to detect and treat neurodegenerative diseases, such as Alzheimer’s disease. Our novel science is based on stabilizing – but not removing – a critical protein in the brain.

~~Pain Therapeutics, Inc. develops proprietary drugs that offer significant improvements~~

Over the past 10 years, we have combined state-of-the-art technology with new insights in neurobiology to ~~patients~~develop novel solutions for Alzheimer’s disease and ~~healthcare professionals.~~ other neurodegenerative diseases. Our strategy is to leverage our unique scientific/clinical platform to develop a first-in-class program for treating neurodegenerative diseases, such as Alzheimer’s.

We ~~generally focus~~ currently have two biopharmaceutical assets under development:

our ~~drug development efforts on disorders of the nervous system.~~

Our expertise consists of developing new drug candidates and guiding these through various regulatory and development pathways in preparation for their eventual commercialization. By necessity, the conduct of drug development is complex, lengthy, expensive and risky. The FDA has not yet established the safety or efficacy of our drug candidates.

~~The following~~lead therapeutic product candidate, called simufilam, is a ~~summary of our pipeline of drug assets:~~novel treatment for Alzheimer’s disease; and

~~REMOXY ER~~ ~~(extended-release oxycodone capsules CII) – REMOXY,~~ our lead ~~drug~~investigational diagnostic product candidate, called SavaDx, is a ~~proprietary abuse-deterrent, twice-daily, oral oxycodone~~novel way to ~~treat severe chronic pain. We plan to resubmit~~detect the ~~REMOXY NDA to the FDA, with Priority Review in Q1 2018. We own exclusive rights to develop and commercialize REMOXY worldwide, with~~presence of Alzheimer’s disease from a ~~sales royalty obligation to one~~small sample of ~~our technology partners.~~blood.

~~FENROCK™~~ (transdermal fentanyl patch CII) – FENROCK is a proprietary, abuse-deterrent fentanyl skin patch to treat severe pain. This is an early-stage program that is substantially funded by a competitive research grant award from the National Institute on Drug Abuse (NIDA), the primary agency of the U.S. government for research on drug abuse. We own exclusive, worldwide rights to FENROCK, with no royalty obligations to any third party.

~~PTI-125~~ ~~– PTI-125 is a proprietary small molecule drug~~Our scientific approach for the treatment of Alzheimer’s disease ~~(AD). In 2017, we completed~~seeks to simultaneously suppress both neurodegeneration and neuroinflammation. We believe our ability to improve multiple vital functions in the brain represents a first-in-human Phase I study with PTI-125. This program is substantially funded by competitive research grant awards from the National Institutes of Health (NIH), the primary agency of the U.S. government for biomedical research. We own exclusive, worldwide rightsnew, different and crucial approach to ~~PTI-125, with no royalty obligations to any third party.~~address Alzheimer’s disease.

~~PTI-125DX~~ ~~– PTI-125~~Our lead therapeutic product candidate, simufilam, is a proprietary ~~blood-based diagnostic/biomarker~~small molecule (oral) drug. Simufilam targets an altered form of a protein called filamin A (FLNA) in the Alzheimer’s brain. Published studies have demonstrated that the altered form of FLNA causes neuronal dysfunction, neuronal degeneration and neuroinflammation.

We believe simufilam improves brain health by reverting altered FLNA back to ~~detect~~its native, healthy conformation, thus countering the downstream toxic effects of altered FLNA. We have generated and published experimental and clinical evidence of improved brain health with simufilam. Importantly, simufilam is not dependent on clearing amyloid from the brain. Since simufilam has a unique mechanism of action, we believe its potential therapeutic effects may be additive or synergistic with those of other therapeutic candidates aiming to treat neurodegeneration.

On October 6, 2021, and November 18, 2021, we announced initiation of our two Phase 3 studies of simufilam, respectively.

The first Phase 3 study, called RETHINK-ALZ, is designed to evaluate the safety and efficacy of oral simufilam 100 mg in enhancing cognition and slowing cognitive and functional decline over 52 weeks. Secondary objectives include the assessment of simufilam's effect on neuropsychiatric symptoms and caregiver burden. This randomized, double-blind, placebo-controlled study plans to enroll approximately 750 patients with mild-to-moderate Alzheimer’s disease ~~(AD).~~in the U.S. and Canada and, eventually, overseas.

The second Phase 3 study, called REFOCUS-ALZ, is designed to evaluate the safety and efficacy of oral simufilam 100 mg and 50 mg over 76 weeks. This ~~clinical-stage~~randomized, double-blind, placebo-controlled study plans to enroll approximately 1,000 patients with mild-to-moderate Alzheimer’s disease in the U.S. and Canada and, eventually, overseas.

Our investigational diagnostic product candidate, called SavaDx, is an early-stage program focused on detecting the presence of Alzheimer’s disease from a small sample of blood. The goal is ~~substantially funded by competitive research grant awards from~~to make the ~~NIH. We own exclusive, worldwide rights to PTI-125DX, with no royalty obligations to any third party.~~detection of Alzheimer’s disease as simple as getting a blood test.

Financial Overview

We have yet to generate any revenues from product sales. We have an accumulated deficit of ~~$157~~$207.3 million at December 31, ~~2017.~~2021. These losses have resulted principally from costs incurred in connection with research and development activities, salaries and other personnel-related costs and general corporate expenses. Research and development activities include costs of preclinical and clinical ~~trials~~studies as well as clinical supplies associated with our ~~drug~~product candidates. Salaries and other personnel-related costs include ~~non-cash~~ stock-based compensation associated with options and other equity awards granted to employees and non-employees. Our operating results may fluctuate substantially from period to period as a result of the timing of preclinical activities, enrollment rates of clinical ~~trials~~studies for our ~~drug~~product candidates and our need for clinical supplies.

We believe that our cash and cash equivalents at December 31, ~~2017,~~2021, will enable us to fund our operating expenses for at least the next 12 months. In addition, we ~~will~~may seek in the future to fund our operations through additional public or private equity or debt financings or other sources. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. If we are unable to obtain financing or ~~increase~~reach profitability, the related lack of liquidity will have a material adverse effect on our operations and future ~~prospects.~~prospects, and we may have to significantly delay, scale back or discontinue the development and commercialization of simufilam, our lead drug candidate, or delay our efforts to expand our product pipeline.

We expect to continue to use significant cash resources in our operations for the next several years. Our cash requirements for operating activities and capital expenditures may increase substantially in the future as we:

~~conduct preclinical and clinical trials for our drug candidates;~~

~~seek regulatory approvals for our drug candidates;~~

~~develop, formulate, manufacture and commercialize our drug candidates;~~

~~implement additional internal systems and develop new infrastructure;~~

~~acquire or in-license additional products or technologies, or expand the use of our technology;~~

~~maintain, defend and expand the scope of our intellectual property; and~~

~~hire additional personnel.~~

continue our ongoing Phase 3 program with simufilam;

manufacture large-scale supplies for simufilam;

conduct other preclinical and clinical studies for our product candidates;

seek regulatory approvals for our product candidates;

develop, formulate, manufacture and commercialize our product candidates;

implement additional internal systems and develop new infrastructure;

acquire or in-license additional products or technologies, or expand the use of our technology;

maintain, defend and expand the scope of our intellectual property; and

hire additional personnel.

Product revenue will depend on our ability to receive regulatory approvals for, and successfully market, our ~~drug~~product candidates. If our development efforts result in regulatory approval and successful commercialization of our ~~drug~~product candidates, we ~~will~~expect to generate revenue from direct sales of our drugs and/or, if we license our drugs to future collaborators, from the receipt of license fees and royalties from sales of licensed products. We conduct our research and development programs through a combination of internal and collaborative programs. We rely on arrangements with universities, ~~our~~certain collaborators, ~~contract research organizations~~CDMOs, CROs and clinical research sites for a significant portion of our product development efforts.

Components of Operating Results

Operating Expenses

Research and Development Expenses

We focus substantially all our research and development efforts on research and development in the areas of neurology. The following table summarizes expenses by category for research and development efforts (in thousands):



	Years ended December 31,				Year ended
	2017		2016		December 31,
					2021		2020
Compensation	$	2,913	$	3,561	$	5,935	$	1,575
Contractor fees and supplies		3,989		4,842		17,970		980
Other common costs		713		773		908		498
	$	7,615	$	9,176	$	24,813	$	3,053

Research and development expenses include compensation, contractor fees and supplies as well as allocated common costs. Contractor fees and supplies generally include expenses for ~~preclinical~~clinical studies and ~~clinical trials~~preclinical studies and costs for formulation and manufacturing activities. Other common costs include the allocation of common costs such as facilities. During the years ended December 31, 2021 and 2020, we received $3.9 million and $4.2 million in research grants from the NIH, respectively. These reimbursements were recorded as a reduction to our research and development expenses.

Our technology has been applied across certain of our portfolio of ~~drug~~product candidates. Data, know-how, personnel, clinical results, research results and other matters related to the research and development of any one of our ~~drug~~product candidates also relate to, and further the development of, our other ~~drug~~product candidates. As a result, costs allocated to a specific ~~drug~~product candidate may not necessarily reflect the actual costs surrounding research and development of ~~that drug~~such product candidate due to cross application of the foregoing.

Estimating the dates of completion of clinical development, and the costs to complete development, of our ~~drug~~product candidates would be highly speculative, subjective and potentially misleading. Pharmaceutical products take a significant amount of time to research, develop and commercialize. The clinical ~~trial~~study portion of the development of a new drug alone usually spans several years. We expect our research and development expenses to increase substantially during the next few years as we seek to advance our product candidates through the clinical development process and, potentially to seek regulatory approval of simufilam. Over the next few years, we expect our preclinical, clinical and contract manufacturing expenses to increase significantly relative to what we have incurred to date. We expect to reassess our future research and development plans based on our review of data we receive from our current research and development activities. The cost and pace of our future research and development activities are linked and subject to change.

Critical Accounting ~~Policies~~Estimates

The preparation of our consolidated financial statements in accordance with ~~United States~~U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and interest income in our consolidated financial statements and accompanying notes. We evaluate our estimates on an ongoing basis, including those estimates related to agreements and research ~~collaborations and investments.~~collaborations. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual

results may differ from these estimates under different assumptions or conditions. The following items in our consolidated financial statements require significant estimates and judgments:

Research Contracts and Accruals. We have entered into various research and development contracts with research institutions and other third-party vendors. Related payments are recorded as research and development expenses as incurred. We record accruals for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, we analyze progress of the studies including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ from our estimates. Our historical accrual estimates have not been materially different from actual costs.

Legal and other contingencies. The Company is subject to lawsuits, claims, allegations and investigations regarding simufilam. The Company believes the claims are without merit and intends to defend against these lawsuits vigorously. The Company is unable to estimate the possible loss or range of loss, if any, associated with these lawsuits. However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. If an unfavorable ruling were to occur, it may cause a material adverse impact on the results of operations, cash flows, or financial condition for the period in which the ruling occurs, or future periods. Refer to Note 12 to the Consolidated Financial Statements for further information on contingencies.

2020 Cash Incentive Bonus Plan. In 2020, we established the 2020 Cash Incentive Bonus Plan (the “Plan”) to incentivize Plan participants. Awards under the Plan are accounted for as liability awards under ASC 718, “Stock-based Compensation”. The fair value of each potential Plan award will be determined once a grant date occurs and will be remeasured each reporting period. Compensation expense associated with the Plan will be recognized over the expected achievement period for each Plan award, when a Performance Condition is considered probable of being met.

~~Stock-based compensation~~.

The Plan was established to promote the long-term success of the Company by creating an “at-risk” cash bonus program that rewards Plan participants with additional cash compensation in lockstep with significant increases in our market capitalization. The Plan is considered “at-risk” because Plan participants will not receive a cash bonus unless our market capitalization increases significantly and (1) we complete a merger or acquisition transaction that constitutes a sale of ownership of the Company or its assets (a Merger Transaction) or (2) the Compensation Committee of the Board (the Compensation Committee) determines the Company has sufficient cash on hand, as defined in the Plan, to render payment (each, a “Performance Condition”), neither of which may ever occur. Because of the inherent discretion and uncertainty regarding these requirements, we have concluded that a Plan grant date has not occurred as of December 31, 2021. No actual cash payments were authorized or made to participants under the Plan through December 31, 2021.

Stock-based Compensation. We recognize non-cash expense for the fair value of all stock options and other share-based awards. We use the Black-Scholes option valuation model to calculate the fair value of stock options, using the single-option award approach and straight-line attribution method. For options granted to employees and directors, we recognize the resulting fair value as expense on a straight-line basis over the vesting period of each respective stock option, generally four years. For options granted to non-employees, we remeasure the fair value expense using Black-Scholes each reporting period.

We have granted share-based awards that vest upon achievement of certain performance criteria, or Performance Awards. We multiply the number of Performance Awards by the fair market value of our common stock on the date of grant to calculate the fair value of ~~each award. We estimate an implicit service period~~stock options, using the single-option award approach and straight-line attribution method. Significant judgments and estimates are made in determining inputs to the Black-Scholes option valuation model. See Note 7 to our Consolidated Financial Statements for achieving performance criteria for each award. We recognize the resulting fair value as expense over the implicit service period when we conclude that achieving the performance criteria is probable. We periodically review and update as appropriate our estimates of implicit service periods and determinations on achievement of the performance criteria. Performance Awards vest and common stock is issued upon achievement of the performance criteria.

~~Income Taxes.~~ ~~We make estimates and judgments in determining the need for a provision for income taxes, including the estimation of our taxable income or loss for each full fiscal year.~~We have accumulated significant deferred tax assets that reflect the tax effects of net operating loss and tax credit carryovers and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Realization of deferred tax assets is dependent upon future earnings, if any. We are uncertain as to the timing and amount of any future earnings. Accordingly, we offset these deferred tax assets with a valuation allowance. We may in the future determine that our deferred tax assets will likely be realized, in which case we will reduce our valuation allowance in the quarter in which such determination is made. If the valuation allowance is reduced, we may recognize a benefit from income taxes in our statement of operations in that period. We classify interest recognized in connection with our tax positions as interest expense, when appropriate.

significant assumptions regarding stock-based compensation.

Recent Accounting Pronouncements

~~In August 2016,~~See Note 2. Summary of Significant Accounting Policies, in Notes to the ~~FASB issued ASU No. 2016-15,~~ ~~Statement~~Consolidated Financial Statements in Item 8 of ~~Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~. This ASU provides guidance on statement of cash flows presentation for eight specific cash flow issues where diversity in practice exists. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company expects that the adoption will not have a material impact on its financial statements.

~~In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842)~~. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. For operating leases, a lessee is required to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is evaluating the effect that the adoptionPart II of this ~~ASU will have~~Annual Report on ~~its~~Form 10-K for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on financial ~~statements. The Company currently expects that its operating lease commitment will be subject to the new standard~~condition and ~~recognized as right-of-use asset and operating lease liability upon adoption~~results of ~~ASU 2016-02,~~operations, which ~~will increase the total assets and total liabilities that it reports relative to such amounts prior to adoption.~~is incorporated herein by reference.

Results of Operations

Research and Development Expense

Research and development expense ~~consists~~consist primarily of costs of drug development work associated with our ~~drug~~product candidates, including:

~~preclinical testing,~~

~~clinical trials,~~

~~clinical supplies and related formulation and design costs, and~~

~~compensation and other personnel-related expenses.~~

clinical studies,

preclinical testing,

clinical supplies and related formulation and design costs, and

compensation and other personnel-related expenses.

Research and development expenses ~~decreased~~increased to ~~$7.6~~$24.8 million in ~~2017~~2021 from ~~$9.2~~$3.1 million in ~~2016,~~2020, representing a 713% increase. This increase was due primarily ~~due~~ to ~~decreases in REMOXY~~costs related ~~expenses~~to manufacture of clinical trial supplies for and ~~non-cash Performance Award related~~the initiation of a Phase 3 clinical program with simufilam, costs of an on-going open-label study and cognition maintenance study with simufilam, as well as increased personnel expenses ~~in the year ended 2017 as~~ compared to the ~~same period~~prior year. Research and development expenses also included stock-based compensation expenses of $1.3 million in ~~2016.~~ 2021 compared to $0.5 million in 2020.

We received ~~a $1.4~~NIH reimbursement of $3.9 million from research ~~grant~~grants in ~~2017 from the NIH that we~~2021 recorded as a reduction to ~~our~~ research and development expense, as compared to ~~a $1.5 million research grant in 2016.~~

~~Research and development expenses included non-cash stock-related compensation expenses of $1.2~~$4.2 million in ~~2017 compared to $1.8 million in 2016.~~2020.

We expect research and development expense to ~~fluctuateover the next several years~~increasein future periods as we manufacture drug supply and continue our ~~development efforts. We expect our development efforts to result in our drug candidates progressing through various stages of~~Phase 3 clinical ~~trials. Our research and development expenses may fluctuate from period to period due to the timing and scope of our development activities and the results of clinical trials and preclinical studies.~~program with simufilam.

General and Administrative Expense

General and administrative expenses consist of personnel costs, allocated expenses and other expenses for outside professional services, including legal, human resources, audit and accounting services. Personnel costs consist of salaries, bonus, benefits and stock-based compensation. Allocated expenses consist primarily of existing facility costs. We incur insurance, audit, investor relations, SOX compliance and other administrative and professional services expenses associated with operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and Nasdaq. General and administrative expense ~~consists primarily of compensation and other general corporate expenses. General and administrative expense decreased~~increased to ~~$4.3~~$8.1 million in ~~2017~~2021 from ~~$5.8~~$3.7 million in ~~2016~~2020. The 115% increase was due primarily ~~due~~ to ~~decreases in non-cash Performance Award related~~higher legal fees, personnel costs and insurance expenses ~~and the departure of our CFO in 2017 as compared in 2016.~~

~~General and administrative expenses included non-cash stock-related compensation expenses of $1.8 million in 2017~~ compared to ~~$2.6 million~~the prior year. In addition, 2021 expense included $500,000 of depreciation and amortization for the two-building office complex in ~~2016.~~Austin, Texas, purchased in third quarter 2021.

We expect ~~other~~ general and administrative expense for ~~2018~~2022 will ~~be consistent with 2017.~~increase in the foreseeable future compared to 2021 due primarily to anticipated higher legal and professional fees related to ongoing securities class action and derivative lawsuits, governmental investigations as well as higher operating costs such as compliance costs and depreciation and amortization.

Gain on Sale of Property and Equipment

There were no sales of property and equipment during the year ended December 31, 2021.

During the year ended December 31, 2020, we sold surplus manufacturing equipment to an non-affiliated third party and received proceeds totaling $360,000. The original cost of the property and equipment was $892,000 and accumulated depreciation was $878,000, resulting in a gain on sale of property and equipment of $346,000 during the year ended December 31, 2020.

Interest Income

Interest and other income, net, was ~~$38,000~~$49,000 in ~~2017~~2021 compared to ~~$107,000~~$112,000 in ~~2016. We expect our~~2020. The decrease in interest income was due to ~~decrease~~lower interest rates, which more than offset additional interest from increases in our cash balances compared to the ~~future~~prior period.

Other income, net

We record the activities related to leasing office space to third parties in buildings we own as other income, net, as leasing is not core to the Company’s operations. Other income, net, was $434,000 during the year ended December 31, 2021. There was no other income, net, during the year ended December 31, 2020 as we ~~use cash to fund our operations~~.acquired the two-building office complex in August 2021.

Liquidity and Capital Resources

Since inception, we have financed our operations primarily through public and private stock offerings, payments received under collaborative agreements and interest earned on our ~~investments.~~cash and cash equivalents balances. We intend to continue to use our capital resources to fund research and development activities, capital expenditures, working capital requirements and other general corporate purposes. As of December 31, ~~2017,~~2021, cash and cash equivalents totaled $233.4 million.

2021 Registered Direct Offering

On February 12, 2021, we completed a common stock offering pursuant to which certain investors purchased 4,081,633 shares of common stock at a price of $49.00 per share. Net proceeds of the offering were approximately $189.7 million after deducting offering expenses.

2020 Follow-on Public Offering

On November 13, 2020, we completed the sale of 9,375,000 shares of our common stock in an underwritten public offering at a price of $8.00 per share. We received net proceeds from the offering of approximately $70.3 million after deducting underwriting discounts and ~~marketable securities~~offering expenses.

Common Stock Warrants

In August 2018, we issued warrants to purchase up to an aggregate of 9.1 million shares of its common stock in conjunction with an offering of our common stock.

During 2021, we received proceeds of $0.7 million from the exercise of 0.6 million shares pursuant to warrants. During 2020, we received proceeds of $4.9 million from the exercise of 4.0 million shares pursuant to warrants.

There were ~~$10.5~~no warrants outstanding following the 2021 exercises.

At the Market (ATM) Common Stock Issuance

On March 27, 2020, we established an at-the-market offering program (ATM) to sell, from time to time, shares of our common stock having an aggregate offering price of up to $100 million in transactions pursuant to a shelf registration statement that was declared effective by the U.S. Securities and Exchange Commission (the SEC) on May 5, 2020. We are obligated to pay a commission of 3.0% of the gross proceeds from the sale of shares of common stock in the offering. We are not obligated to sell any shares in the offering.

There were no common stock sales under the ATM during the years ended December 31, 2021 and 2020.

NIH Research Grant Awards

Our research has been supported by NIH under multiple research grant awards. Strong, long-term support from NIH has allowed us to advance our two lead product candidates, simufilam and SavaDx, into clinical development.

In May 2021, we were awarded a new research grant award from NIH of up to $2.7 million to support clinical readiness activities for a Phase 3 program with simufilam. In April 2020, we were awarded a research grant from NIH of up to $2.5 million. In March 2020, we were awarded a supplemental research funding grant from NIH of up to $374,000. These non-dilutive research grants are intended to strengthen our clinical program of simufilam, our investigational drug to treat Alzheimer’s disease. All of our NIH research grant awards are paid out on a reimbursement basis and require milestone-based technical progress.

2020 Cash Incentive Bonus Plan Obligations

In August 2020, the Board approved the 2020 Cash Incentive Bonus Plan (the Plan). The Plan was established to promote the long-term success of the Company by creating an “at-risk” cash bonus program that rewards Plan participants with additional cash compensation in lockstep with significant increases in the Company’s market capitalization. The Plan is considered “at-risk” because Plan participants will not receive a cash bonus unless the Company’s market capitalization increases significantly and certain other conditions specified in the Plan are met. Specifically, Plan participants will not be paid any cash bonuses unless (1) the Company completes a merger or acquisition transaction that constitutes a sale of ownership of the Company or its assets (a Merger Transaction) or (2) the Compensation Committee determines the Company has sufficient cash on hand, as defined in the Plan. Plan participants will be paid all earned cash bonuses in the event of a Merger Transaction.

The Company’s market capitalization, including all outstanding stock options, was $89.4 million at the inception of the Plan in August 2020. If the Company were to exceed a $5 billion market capitalization for no less than 20 consecutive trading days, and conditions noted above for payment are met, all Plan milestones would be deemed achieved, in which case total cash bonus awards would range from a minimum of $139.1 million up to a hypothetical maximum of $322.3 million.

The Company’s potential financial obligation to plan participants at December 31, 2021 totaled $7.3 million, based upon the achievement of one Plan milestone in the Company’s market capitalization in 2020. No actual cash bonus payments have been made to any Plan participant, as the Company has not yet satisfied all the conditions necessary for amounts to be paid under the Plan. During the year ended December 31, 2021, the Company’s market capitalization increased substantially. These increases triggered the achievement of 11 additional Plan milestones. Collectively, the achievement of such milestones could trigger potential Company obligations to Plan participants ranging from a minimum of $93.7 million up to a hypothetical

maximum of $225.0 million, with exact amounts to be determined by the Compensation Committee and contingent upon future satisfaction of a Performance Condition.

No actual cash payments were authorized or made to participants under the Plan as of December 31, 2021, or through the filing date of this Annual Report on Form 10-K.

Use of Cash

Net cash used in operating activities was ~~$8.2~~$30.2 million for ~~2017 compared to $12.2~~the year ended December 31, 2021, resulting primarily from the net loss reported of $32.4 million and an increase in prepaid and other assets of $11.0 million, partially offset by an increase in accounts payable of $6.2 million, accrued development expense of $2.1 million, accrued compensation and benefits of $1.8 million, other current liabilities of $0.7 million and stock-based compensation expense of $1.8 million.

Net cash used in operating activities was $5.4 million for the year ended December 31, 2020, resulting primarily from the net loss reported of $6.3 million and a gain on sale of property and equipment of $0.3 million, partially offset by stock-based compensation expense of $1.0 million and changes in ~~2016. The decrease~~operating assets and liabilities of $0.3 million.

Net cash used in investing activities during the year ended December 31, 2021 was $22.2 million related primarily ~~due~~ to ~~lower research and development expenses during 2017~~the purchase of a two-building office complex in Austin, Texas, which will serve as ~~compared in 2016.~~our future corporate headquarters.

Net cash provided by investing activities during the year ended December 31, 2020 was ~~$2.1 million in 2017 compared to net cash used in investing activities~~$360,000 for proceeds received from the sale of ~~$2.2 million in 2016. Investing activities for both years consisted primarily of the purchase~~property and ~~maturities of marketable securities.~~equipment.

Net cash ~~used~~provided by financing activities during the year ended December 31, 2021 was $192.3 million, consisting of $189.8��million in proceeds from our registered direct offering of common stock in February 2021, $1.8 million from the exercise of stock options and $0.7 million in proceeds from the exercise of common stock warrants.

Net cash provided by financing activities during the year ended December 31, 2020 was $75.4 million consisting of $70.3 million proceeds from our follow-on public offering of common stock in November 2020, $4.9 million proceeds from exercise of common stock warrants and $0.3 million ~~in 2016 resulting primarily~~ from ~~issuing shares~~exercise of ~~our common~~ stock ~~to employees for vested Performance Awards net of statutory employment taxes.~~options.

Realization of our deferred tax assets is dependent on future earnings, if any. We are uncertain about the timing and amount of any future earnings. Accordingly, we offset these net deferred tax assets with a valuation allowance.

We lease approximately 6,000 square feet of office space pursuant to a non-cancelable operating lease in Austin, TXTexas that expires in ~~2020.~~April 2024. We also lease an additional 3,600 square feet of office space in Austin, Texas that expires on April 30, 2022. Future ~~minimum~~ lease payments are ~~$0.3 million at December 31, 2017.~~as follows (in thousands):

We have license agreements that require us to make milestone payments upon the successful achievement of milestones, including clinical milestones. Our license agreements also require us to pay certain royalties to our licensors if we succeed in


For the year ending December 31,
2022		123
2023		107
2024		36
Total future lease payments	$	266

fully commercializing products under these license agreements. All of these potential future payments are cancelable as of December 31, 2017. Our formulation agreement with Durect Corporation obligates us to make certain milestone payments upon achieving clinical milestones and regulatory milestones.

We have an accumulated deficit of ~~$157~~$207.3 million at December 31, ~~2017.~~2021. We expect our cash requirements to be significant in the future. The amount and timing of our future cash requirements will depend on regulatory and market acceptance of our ~~drug~~product candidates and the resources we devote to researching and developing, formulating, manufacturing, commercializing and supporting our products. We believe that our current resources should be sufficient to fund our operations for at least the next 12 months. We may seek additional future funding through public or private financing ~~within this timeframe,~~in the future, if such funding is available and on terms acceptable to us.

~~Off-balance Sheet Arrangements~~

~~As of December 31, 2017,~~If we ~~did not have any relationships with unconsolidated entities~~raise additional funds by issuing debt financing or ~~financial partnerships, such as entities often referred~~equity securities, our stockholders will experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to ~~as structured finance~~incur liens or ~~special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not~~additional debt, pay dividends, repurchase our common stock, make certain investments and engage in ~~trading activities involving non-exchange traded contracts. Therefore,~~certain merger, consolidation or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not ~~materially exposed~~favorable to financing, liquidity, market or credit risk that could arise if we had engaged in these relationships. We do not have relationships or transactions with persons or entities that derive benefits from their non-independent relationship with us or our ~~related parties.~~stockholders. If we are unable to raise additional funds

when needed, we may be required to delay, reduce, or terminate some or all of our development programs and clinical trials. We may also be required to sell or license to others rights to our drug candidates in certain territories or indications that we would prefer to develop and commercialize ourselves.

Item 7A.Quantitative and Qualitative Disclosures about Market Risk

~~The primary objective~~Pursuant to Item 305(e) of ~~our cash investment activities~~Regulation S-K, the information called for by Item 7A is to preserve principal while at the same time maximizing the income we receive from our investments without significantly increasing risk. Some of the securities that we invest in may be subject to market risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. For example, if we hold a security that was issued with a fixed interest rate at the then-prevailing rate and the interest rate later rises, the principal amount of our investment will probably decline. A hypothetical 50 basis point increase in interest rates reduces the fair value of our available-for-sale securities at December 31, 2017 by approximately $2,000. To minimize this risk in the future, we intend to maintain our portfolio of cash equivalents and marketable securities in a variety of securities, including commercial paper, government and non-government debt securities and/or money market funds that invest in such securities. We have no holdings of derivative financial or commodity instruments. As of December 31, 2017, our investments consisted of investments in commercial paper, corporate notes and obligations or in money market accounts and checking funds with variable market rates of interest. We believe our credit risk is immaterial.not required.

Item 8.Consolidated Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


	Page
Report of Independent Registered Public Accounting Firm(PCAOB ID: 42)	5184
Consolidated Balance Sheets	5286
Consolidated Statements of Operations	5387
~~Statements of Comprehensive Income (Loss)~~	54
Consolidated Statements of Stockholders' Equity		5588
Consolidated Statements of Cash Flows	5689
Notes to Consolidated Financial Statements	5790

‎

5083

Report of Independent Registered Public Accounting Firm

~~The~~To the Stockholders and the Board of Directors ~~and Stockholders~~ of ~~Pain Therapeutics,~~Cassava Sciences, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of ~~Pain Therapeutics,~~Cassava Sciences, Inc. (the Company) as of December 31, ~~2017~~2021 and ~~2016,~~2020, the related consolidated statements of operations, ~~comprehensive income (loss),~~ stockholders' equity and cash flows for each of the two years in the period ended December 31, ~~2017,~~2021, and the related notes (collectively referred to as the ~~“financial~~“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, ~~2017~~2021 and ~~2016,~~2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, ~~2017,~~2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)and our report dated February 28, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the ~~Public Company Accounting Oversight Board (United States) (PCAOB)~~PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.


Description of the Matter	Accrued Development Expenses – Patient Clinical Trials As explained in Note 2 to the consolidated financial statements, the Company has various research and development contracts with research institutions and other third-party vendors to assist in the conducting of patient clinical trials, the costs for which are recorded as research and development expenses as incurred. At December 31, 2021, accrued development expense for patient clinical trials totaled $988 thousand. Auditing the Company’s accrued development expense for patient clinical trials was challenging because the accrual involved a higher degree of management judgment to estimate costs incurred but not yet billed at the end of the reporting period. An estimate of the costs incurred was necessary due to the long duration of the clinical trials and the delayed timing of invoices received from third parties.

How We Addressed the Matter in Our Audit	We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s accounting for accrued development expenses for the patient clinical trials process, including controls over management’s review of clinical trial activity progress in comparison to budgets and invoices received from third parties. To evaluate the adequacy of the Company’s accrued development expense for patient clinical trials, our audit procedures included, among others, testing the accuracy and completeness of the underlying data used in the estimate, evaluating the significant assumptions used by management to estimate the accrual, and evaluating other factors that could impact the accrual such as invoices received. To evaluate the significant assumptions (i.e., progress of patient clinical trials, estimating costs incurred), on a sample basis, we: (i) obtained confirmation directly from third parties of key clinical trial contract terms and conditions, the number of patients enrolled, and costs incurred, (ii) agreed information used in the estimate to the contracts with third parties and any amendments thereto, and (iii) corroborated the progress of clinical trials through inquiry of Company personnel who oversee research and development efforts. We also obtained and reviewed subsequent invoices received from third parties to corroborate the accrual at the end of the reporting period.

Description of the Matter	Loss Contingencies The Company is subject to lawsuits, claims, allegations and investigations regarding simufilam. As described in Note 12 to the consolidated financial statements, such allegations and claims could result in adverse consequences. As further described in Note 12, at December 31, 2021, the Company was unable to estimate the possible loss or range of loss, if any, associated with these lawsuits and investigations. Auditing management’s accounting for and disclosure of loss contingencies related to the lawsuits and investigations was challenging because management’s evaluation of the likelihood of losses required significant judgment.

How We Addressed the Matter in Our Audit	We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the evaluation of the accounting for and disclosure of these matters. This included controls over management’s assessment of the probability of incurrence of a loss and whether the loss or range of loss was reasonably estimable, and the development of related disclosures. Our audit procedures included gaining an understanding of the status of ongoing lawsuits and investigations, reading the minutes of the meetings of the committees of the board of directors, reading summaries of the proceedings and related correspondence, requesting inquiry letters from external legal counsel, meeting with external legal counsel to discuss developments related to the lawsuits and investigations together with our forensic professionals, and obtaining written representations from the Company on these matters. We also evaluated the Company’s disclosures in relation to these matters.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2002.

Austin, Texas

February ~~6, 2018~~28, 2022
‎

5185



PAIN THERAPEUTICS, INC.
CASSAVA SCIENCES, INC.					CASSAVA SCIENCES, INC.

BALANCE SHEETS
(in thousands, except share and per share data)
CONSOLIDATED BALANCE SHEETS					CONSOLIDATED BALANCE SHEETS
(In thousands, except share and par value data)					(In thousands, except share and par value data)

	December 31,				December 31,
	2017		2016		2021			2020

ASSETS	ASSETS				ASSETS
Current assets:
Cash and cash equivalents	$	10,479	$	16,615	$	233,437	$	93,506
Marketable securities		—		2,099
Other current assets		184		356
Prepaid expenses and other current assets						11,045		488
Total current assets		10,663		19,070		244,482		93,994
Operating lease right-of-use assets						210		295
Property and equipment, net		156		232		20,616		11
Intangible assets, net						1,075		—
Other assets		12		—		399		—
Total assets	$	10,831	$	19,302	$	266,782	$	94,300

LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY				LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	424	$	303	$	7,126	$	911
Accrued development expense		399		27		2,803		719
Accrued compensation and benefits		309		335		1,877		83
Operating lease liabilities, current						97		58
Other current liabilities						631		94
Total current liabilities		1,132		665		12,534		1,865
Noncurrent liabilities		—		—
Operating lease liabilities, non-current						139		235
Other non-current liabilities						194		—
Total liabilities		1,132		665		12,867		2,100
Commitments and contingencies
Commitments and contingencies (Notes 10, 11 and 12)
Stockholders' equity:
Preferred stock, $.001 par value; 10,000,000 shares authorized, none issued and outstanding		—		—
Common stock, $.001 par value; 120,000,000 shares authorized; 6,595,509 and 6,591,705
shares issued and outstanding at December 31, 2017 and 2016, respectively		7		7
Preferred stock, $0.001 par value; 10,000,000 shares authorized, NaN issued and outstanding						—		—
Common stock, $0.001 par value; 120,000,000 shares authorized; 40,016,792 and 35,237,987 shares issued and outstanding at December 31, 2021 and 2020, respectively						40		35
Additional paid-in capital		167,091		164,118		461,181		267,086
Accumulated other comprehensive income		—		—
Accumulated deficit		(157,399)		(145,488)		(207,306)		(174,921)
Total stockholders' equity		9,699		18,637		253,915		92,200
Total liabilities and stockholders' equity	$	10,831	$	19,302	$	266,782	$	94,300

See accompanying notes to consolidated financial statements.

‎

5286



CASSAVA SCIENCES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

	Year ended
	December 31,
	2021		2020
Operating expenses:
Research and development, net of grant reimbursement	$	24,813	$	3,053
General and administrative		8,055		3,739
Gain on sale of property and equipment		—		(346)
Total operating expenses		32,868		6,446
Operating loss		(32,868)		(6,446)
Interest income		49		112
Other income, net		434		—
Net loss	$	(32,385)	$	(6,334)
Net loss per share, basic and diluted	$	(0.82)	$	(0.24)
Shares used in computing net loss per share, basic and diluted		39,405		26,105

PAIN THERAPEUTICS, INC.

STATEMENTS OF OPERATIONS
(in thousands, except per share data)

Years ended December 31,

2017

2016
Operating expenses:

Research and development
$
7,615

$
9,176
General and administrative

4,334

5,781
Total operating expenses

11,949

14,957
Operating loss

(11,949)

(14,957)
Interest income

38

107
Net loss
$
(11,911)

$
(14,850)
Net loss per share, basic and diluted
$
(1.82)

$
(2.28)
Shares used in computing net loss per share, basic and diluted

6,537

6,520

See accompanying notes to consolidated financial statements.

5387



CASSAVA SCIENCES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)


						Accumulated
						other				Total
	Common stock			Additional		comprehensive		Accumulated		stockholders'
	Shares	Par value		paid-in capital		income		deficit		equity
Balance at December 31, 2019	21,841,810	$	22	$	190,664	$	—	$	(168,587)	$	22,099
Stock-based compensation for:
Stock options for employees	—		—		961		—		—		961
Stock options for non-employees	—		—		27		—		—		27
Issuance of common stock pursuant to exercise of stock options	71,105		—		256		—		—		256
Issuance of common stock pursuant to exercise of warrants	3,950,072		4		4,936		—		—		4,940
Common stock issued in conjunction with follow-on public offering, net of issuance costs	9,375,000		9		70,242		—		—		70,251
Net loss	—		—		—		—		(6,334)		(6,334)
Balance at December 31, 2020	35,237,987		35		267,086		—		(174,921)	$	92,200
Stock-based compensation for:
Stock options for employees	—		—		1,706		—		—		1,706
Stock options for non-employees	—		—		53		—		—		53
Issuance of common stock pursuant to exercise of stock options	143,153		—		1,824		—		—		1,824
Issuance of common stock pursuant to exercise of warrants	554,019		1		691		—		—		692
Common stock issued in conjunction with registered direct offering, net of issuance costs	4,081,633		4		189,821		—		—		189,825
Net loss	—		—		—		—		(32,385)		(32,385)
Balance at December 31, 2021	40,016,792	$	40	$	461,181	$	—	$	(207,306)	$	253,915

PAIN THERAPEUTICS, INC.

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)

Years ended December 31,

2017

2016
Net loss
$
(11,911)

$
(14,850)
Other comprehensive income (loss):

Net unrealized gains (losses) on marketable securities

—

—
Comprehensive loss
$
(11,911)

$
(14,850)

See accompanying notes to consolidated financial statements.



CASSAVA SCIENCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)


	Year ended December 31,
	2021		2020
Cash flows from operating activities:
Net loss	$	(32,385)	$	(6,334)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		1,759		988
Depreciation		310		22
Amortization of intangible assets		224		—
Gain on sale of property and equipment		—		(346)
Changes in operating assets and liabilities:
Prepaid and other assets		(10,956)		(220)
Operating lease right-of-use assets and liabilities		28		(2)
Accounts payable		6,215		458
Accrued development expense		2,084		(58)
Accrued compensation and benefits		1,794		25
Other liabilities		731		85
Net cash used in operating activities		(30,196)		(5,382)
Cash flows from investing activities:
Purchase of property and equipment		(22,214)		—
Proceeds from sale of property and equipment		—		360
Net cash (used in) provided by investing activities		(22,214)		360
Cash flows from financing activities:
Proceeds from issuance of common stock upon exercise of stock options		1,824		256
Proceeds from issuance of common stock upon exercise of common stock warrants		692		4,940
Proceeds from common stock offering, net of issuance costs		189,825		70,251
Net cash provided by financing activities		192,341		75,447
Net increase in cash and cash equivalents		139,931		70,425
Cash and cash equivalents at beginning of period		93,506		23,081
Cash and cash equivalents at end of period	$	233,437	$	93,506

PAIN THERAPEUTICS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)

Accumulated

other

Total

Common stock

Additional

comprehensive

Accumulated

stockholders'

Shares

Par value

paid-in capital

income

deficit

equity
Balance at December 31, 2015
6,536,588

7

159,998

—

(130,638)

29,367
Non-cash stock-related compensation for:

Stock options for employees
—

—

3,467

—

—

3,467
Stock options for non-employees
—

—

25

—

—

25
Performance Awards and related non-cash stock-related compensation
69,286

—

842

—

—

842
Performance Awards related to statutory taxes
(14,169)

—

(214)

—

—

(214)
Other comprehensive loss
—

—

—

—

—

—
Net loss
—

—

—

—

(14,850)

(14,850)
Balance at December 31, 2016
6,591,705

7

164,118

—

(145,488)

18,637
Non-cash stock-related compensation for:

Stock options for employees
—

—

2,954

—

—

2,954
Stock options for non-employees
—

—

19

—

—

19
Issuance of common stock pursuant to 7 to 1 Reverse stock split round up
3,804

—

—

—

—

—
Net loss
—

—

—

—

(11,911)

(11,911)
Balance at December 31, 2017
6,595,509

$
7

$
167,091

$
—

$
(157,399)

$
9,699

See accompanying notes to ~~financial statements.~~

PAIN THERAPEUTICS, INC.

STATEMENTS OF CASH FLOWS
(in thousands)

Years ended December 31,

2017

2016
Cash flows from operating activities:

Net loss
$
(11,911)

$
(14,850)
Adjustments to reconcile net loss to net cash used in operating activities:

Non-cash stock-based compensation

2,973

4,334
Depreciation and amortization

68

58
Non-cash net interest income

(2)

(8)
Changes in operating assets and liabilities:

Other current assets

172

86
Other non-current assets

(12)

12
Accounts payable

129

(711)
Accrued development expense

372

(867)
Accrued compensation and benefits

(26)

(288)
Net cash used in operating activities

(8,237)

(12,234)
Cash flows from investing activities:

Purchases of property and equipment

—

(75)
Purchases of marketable securities

(399)

(4,141)
Sales of marketable securities

400

—
Maturities of marketable securities

2,100

2,050
Net cash provided (used in) investing activities

2,101

(2,166)
Cash flows from financing activities:

Cash used for statutory taxes for net exercise of Performance Awards

—

(214)
Deferred financing costs

—

(70)
Net cash used in financing activities

—

(284)
Net decrease in cash and cash equivalents

(6,136)

(14,684)
Cash and cash equivalents at beginning of period

16,615

31,299
Cash and cash equivalents at end of period
$
10,479

$
16,615

~~See accompanying notes to~~consolidated financial statements.
‎

5689

~~PAIN THERAPEUTICS,~~CASSAVA SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. General, Liquidity and ~~Liquidity~~Basis of Presentation

~~Pain Therapeutics,~~Cassava Sciences, Inc. and its wholly-owned subsidiary (collectively referred to as the “Company”) discovers and develops proprietary ~~drugs~~pharmaceutical product candidates that may offer significant improvements to patients and healthcare professionals. WeThe Company generally ~~focus our drug~~focuses its product discovery and development efforts on disorders of the nervous ~~system, such as chronic pain.~~system.

~~On November 16, 2016, we received~~Coronavirus Disease 2019 (COVID-19)

The widespread outbreak of a letter from the Listing Qualifications staff of Nasdaq (the “Staff”) notifying us that, for the previous 30 consecutive business days, the bid price for our common stock had closed below the minimum $1.00 per share requirement (the “Minimum Price Requirement”) under Nasdaq’s Listing Rule 5450(a)(1) for continued listing on The Nasdaq Global Market. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), if during the 180 calendar days following the date of the notification,novel infectious disease called Coronavirus Disease 2019, or prior to May 15, 2017, the closing bid price of our common stock is at or above $1.00 for a minimum of 10 consecutive business days, the Staff will provide us with written confirmation of compliance. On May 24, 2017, we received a letter from the Staff indicating that we had regained compliance with the $1.00 minimum closing bid requirement following completion of the reverse stock split described below.

On May 4, 2017, following stockholder approval, our board of directors approved a reverse stock split at a ratio of 7-for-1. On May 4, 2017, we filed with the Secretary of State of the State of Delaware a Certificate of Amendment toCOVID-19, has not significantly impacted the Company’s ~~Amended~~operations or financial condition as of February 28, 2022. However, this pandemic has created a dynamic and ~~Restated Certificate~~uncertain situation in the national economy. The Company continues to closely monitor the latest information to make timely, informed business decisions and public disclosures regarding the potential impact of ~~Incorporation to effect the 7-for-1 reverse stock split~~pandemic on its operations and financial condition. The scope of ~~our outstanding shares of common stock. The number of outstanding shares of common stock~~pandemic is unprecedented and its long-term impact on the ~~date~~Company’s operations and financial condition cannot be reasonably estimated at this time.

Basis of the reverse split was reduced from 46.1 million to 6.6 million shares. Our common stock began trading on the Nasdaq Global Market on a split-adjusted basis when the market opened for trading on May 10, 2017. As a result, all common stock share amounts included in theseConsolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany transactions have been ~~retroactively reduced by a factor of seven, and all common stock per share amounts have been increased by a factor of seven, with the exception of our common stock par value.~~eliminated in consolidation.

Liquidity

The Company has incurred significant net losses and negative cash flows since inception, and as a result has an accumulated deficit of ~~$157~~$207.3 million at December 31, ~~2017. We expect our~~2021. The Company expects its cash requirements to be significant in the future. The amount and timing of ~~our~~the Company’s future cash requirements will depend on regulatory and market acceptance of ~~our drug~~its product candidates and the resources ~~we devote~~it devotes to researching and developing, formulating, manufacturing, commercializing and supporting ~~our~~its products. WeThe Company may seek additional ~~future~~ funding through public or private financing ~~within this timeframe,~~in the future, if such funding is available and on terms acceptable to ~~us.~~the Company. There are no assurances that additional financing will be available on favorable terms, or at all. However, management believes that the current working capital position will be sufficient to meet the Company’s working capital needs for at least the next 12 months.

2. Summary of Significant Accounting Policies

Use of Estimates

The ~~preparation of~~Company makes estimates and assumptions in preparing its consolidated financial statements in conformity with accounting principles generally accepted in the United ~~States of America requires that management make~~States. These estimates and assumptions ~~that~~ affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenue earned and expenses incurred during the reporting period. The Company evaluates its estimates on an ongoing basis, including those estimates related to manufacturing agreements and research collaborations. Actual results could differ from ~~those estimates.~~these estimates and assumptions.

Proceeds from Grants

In ~~2017, we~~2021, the Company received ~~$1.4~~$3.9 million of reimbursement from the National Institutes of Health and National Institute on Drug Abuse and $4.2 million in ~~research grants from the NIH and NIDA and $1.5 million in 2016. We record~~2020. The Company records the proceeds from ~~the grant~~these grants as ~~a reduction~~reductions to ~~our~~its research and development expenses.

Cash and Cash Equivalents ~~Marketable Securities~~ and Concentration of Credit Risk

~~We invest~~The Company invests in cash ~~equivalents~~ and ~~marketable securities. We consider~~cash equivalents. The Company considers highly-liquid financial instruments with original maturities of three months or less to be cash equivalents. ~~Our marketable securities~~Highly liquid investments that are considered cash equivalents include ~~interest-bearing financial instruments, generally consisting~~money market accounts and funds, certificates of ~~corporate or government~~deposit and U.S. Treasury securities.

~~Our investment policy allows for investments in marketable securities with active secondary or resale markets, establishes diversification~~ The Company maintains its cash and ~~credit quality requirements and limits investments by maturity and issuer. We maintain our investments~~cash equivalents at one financial institution.

~~A change~~Fair Value Measurements

The Company recognizes financial instruments in ~~prevailing interest rates may cause~~accordance with the authoritative guidance on fair value measurements and disclosures for financial assets and liabilities. This guidance defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. The guidance also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

Level 1 includes quoted prices in active markets.

Level 2 includes significant observable inputs, such as quoted prices for identical or similar securities, or other inputs that are observable and can be corroborated by observable market data for similar securities. The Company uses market pricing and other observable market inputs obtained from third-party providers. It uses the bid price to establish fair value where a bid price is available. The Company does not have any financial instruments where the fair value ~~of the investment to fluctuate. We do~~is based on Level 2 inputs.

Level 3 includes unobservable inputs that are supported by little or no market activity. The Company does not recognize an impairment charge related to this type of fluctuation because the fluctuation is temporary and eliminated by the time an investment matures. We would recognize an impairment charge if and when we determine that a decline in have any financial instruments where the fair value ~~below~~is based on Level 3 inputs.

If a financial instrument uses inputs that fall in different levels of the ~~amortized cost~~hierarchy, the instrument will be categorized based upon the lowest level of ~~an investment~~input that is ~~other-than-temporary. We consider various factors in determining whether~~significant to ~~recognize an impairment charge, including any adverse changes in the investees’ financial condition, how long~~ the fair value ~~has been below the amortized cost~~calculation. The fair value of cash and ~~whether it is more likely than not that we would elect to or be required to sell the marketable security before its anticipated recovery.~~

We may elect to sell marketable securities before they mature. We hold these investments as “available for sale” and include these investments in our Balance Sheets as current assets, even though the contractual maturity of a particular investment may be beyond one year.

~~Fair Value Measurements~~

~~We report our~~ cash equivalents ~~and marketable securities at fair value as~~was based on Level 1 ~~Level 2 or Level 3 using the following inputs:~~

~~Level 1 includes quoted prices in active markets. We base the fair value of money market funds and U.S. treasury securities on Level 1 inputs.~~

Level 2 includes significant observable inputs, such as quoted prices for identical or similar investments, or other inputs that are observable and can be corroborated by observable market data for similar securities. We use market pricing and other observable market inputs obtained from third-party providers. We use the bid price to establish fair value where a bid price is available. We base the fair value of our marketable securities on Level 2 inputs.

~~Level 3 includes unobservable inputs that are supported by little or no market activity. We do not have any investments where the fair value is based on Level 3 inputs.~~

inputs at December 31, 2021 and 2020.

We include unrealized gains or losses on our investments as Accumulated other comprehensive income (loss) in the Stockholders’ equity section of our Balance Sheets. We include changes in net unrealized gains or losses in our Statements of Comprehensive Income (Loss). We would recognize significant realized gains and losses on a specific identification basis as other income in our Statements of Operations.

Business Segments

~~We report~~The Company reports segment information based on how weit internally ~~evaluate~~evaluates the operating performance of ~~our~~its business units, or segments. ~~Our~~The Company’s operations are confined to ~~one~~1 business segment: the development of novel ~~drugs.~~drugs and diagnostics.

Stock-based Compensation

~~We recognize~~The Company recognizes non-cash expense for the fair value of all stock options and other share-based awards. ~~We use~~The Company uses the Black-Scholes option valuation model (“Black-Scholes”) to calculate the fair value of stock options, using the single-option award approach and straight-line attribution method. This model requires the input of subjective assumptions including expected stock price volatility, expected life and estimated forfeitures of each award. These assumptions consist of estimates of future market conditions, which are inherently uncertain, and therefore, are subject to management's judgment. For all options granted, ~~to employees and directors, we recognize~~it recognizes the resulting fair value as expense on a straight-line basis over the vesting period of each respective stock option, generally four years. ~~For options granted to non-employees, we remeasure the fair value expense using Black-Scholes each reporting period.~~

~~We have~~The Company has granted share-based awards that vest upon achievement of certain performance criteria or (“Performance ~~Awards. We multiply~~Awards”). The Company multiplies the number of Performance Awards by the fair ~~market~~ value of ~~our~~its common stock on the date of grant to calculate the fair value of each award. ~~We estimate~~It estimates an implicit service period for achieving performance criteria for each award. ~~We recognize~~The Company recognizes the resulting fair value as expense over the implicit service period when ~~we conclude~~it concludes that achieving the performance criteria is probable. WeIt periodically ~~review~~reviews and ~~update~~updates as appropriate ~~our~~its estimates of implicit

service periods and conclusions on achieving the performance criteria. Performance Awards vest and common stock is issued upon achievement of the performance criteria.

Net Loss per Share

~~Basic~~The Company computes basic net loss per share ~~is computed~~ on the basis of the weighted-average number of common shares outstanding for the reporting period. Diluted net loss per share is computed on the basis of the weighted-average number of common shares outstanding plus potential dilutive ~~potential~~ common shares outstanding using the treasury-stock method. Potential dilutive common shares consist of outstanding ~~equity awards~~common stock options and warrants. There is no difference between the Company’s net loss and comprehensive loss. The numerators and denominators in the calculation of basic and diluted net loss per share were as follows (in ~~thousands)~~thousands, except net loss per share data):



					Year ended
	Years ended December 31,				December 31,
	2017		2016		2021		2020
Numerator:
Net loss	$	(11,911)	$	(14,850)	$	(32,385)	$	(6,334)
Denominator:
Shares used in computing net loss per share, basic and diluted		6,537		6,520		39,405		26,105
Net loss per share, basic and diluted	$	(1.82)	$	(2.28)	$	(0.82)	$	(0.24)
Dilutive common shares excluded from net loss per share, diluted		2,497		2,535

Dilutive common stock options excluded from net loss per share, diluted						2,211		2,145
Common stock warrants excluded from net loss per share, diluted						—		554

WeThe Company excluded ~~weighted equity awards outstanding to purchase~~ common stock options and warrants outstanding from the calculation of ~~diluted~~ net loss per share, diluted, because the effect of including ~~these shares~~outstanding options and warrants would have been anti-dilutive.

Fair Value of Financial Instruments

Financial instruments include accounts payable and accrued liabilities. The estimated fair value of certain financial instruments may be determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in ~~this calculation~~interpreting market data to develop estimates of fair value; therefore, the estimates are not necessarily indicative of the amounts that could be realized or would be ~~anti-dilutive.~~paid in a current market exchange. The effect of using different market assumptions and/or estimation methodologies may be material to the estimated fair value amounts. The carrying amounts of accounts payable and accrued liabilities are at cost, which approximates fair value due to the short maturity of those instruments.

~~Income Taxes~~Research Contract Costs and Accruals

~~We make~~The Company has entered into various research and development contracts with research institutions and other third-party vendors. These agreements are generally cancelable. Related payments are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates ~~and judgments~~are made in determining the ~~need~~accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from actual costs.

Incentive Bonus Plan

In 2020, the Company established the 2020 Cash Incentive Bonus Plan (the “Plan”) to incentivize Plan participants. Awards under the Plan are accounted for as liability awards under Accounting Standards Codification (ASC) 718 “Stock-based Compensation”. The fair value of each potential Plan award will be determined once a ~~provision~~grant date occurs and will be remeasured each reporting period. Compensation expense associated with the Plan will be recognized over the expected achievement period for each Plan award, when a Performance Condition (as defined below) is considered probable of being met. See Note 11 for further discussion of the Plan.

Leases

The Company recognizes assets and liabilities that arise from leases. For operating leases, the Company is required to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments during the lease term, in the consolidated balance sheets. The Company elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company does not recognize right-of-use assets or lease liabilities. As the Company`s leases do not provide an implicit rate, it uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Property and equipment

Property and equipment is recorded at cost, net of accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets. Buildings and site improvements have estimated useful lives of 39 years and 9 years, respectively. Tenant improvements are amortized using the straight-line method over the useful lives of the improvements or the remaining term of the corresponding leases, whichever is shorter. The remaining term of the corresponding leases is approximately 2.8 years.

Property and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. If property and equipment are considered to be impaired, an impairment loss is recognized.

Intangible assets

Acquired intangible assets are recorded at fair value at the date of acquisition and primarily consist of lease-in-place agreements and leasing commissions. Intangible assets are amortized over the estimated life of the lease-in-place agreements, which approximates 2.7 years.

Intangible assets are reviewed for impairment on an annual basis, and when there is reason to believe that their values have been diminished or impaired. If intangible assets are considered to be impaired, an impairment loss is recognized.

Income Taxes

The Company accounts for income taxes ~~including~~under the ~~estimation~~asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of ~~our taxable income or loss for each full fiscal year.~~

~~We have~~existing assets and liabilities and their respective tax bases. Deferred tax balances are adjusted to reflect tax rates based on currently enacted tax laws, which will be in effect in the years in which the temporary differences are expected to reverse. The Company has accumulated significant deferred tax assets that reflect the tax effects of net operating loss and tax credit carryovers and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Realization of certain deferred tax assets is dependent upon future earnings. ~~We are~~The Company is uncertain about the timing and amount of any future earnings. Accordingly, ~~we offset~~the Company offsets these deferred tax assets with a valuation allowance.

~~We may~~The Company accounts for uncertain tax positions in accordance with ASC 740, “Income Taxes”, which clarifies the accounting for uncertainty in tax positions. These provisions require recognition of the impact of a tax position in the ~~future determine~~Company’s financial statements only if that ~~certain deferred~~position is more likely than not of being sustained upon examination by taxing authorities, based on the technical merits of the position. Any interest and penalties related to uncertain tax ~~assets~~positions will ~~likely~~ be ~~realized, in which case we will reduce our valuation allowance in the period in which such determination is made. If the valuation allowance is reduced, we may recognize~~reflected as a ~~benefit from~~component of income ~~taxes in our Statement of Operations in that period.~~tax expense.

~~We classify interest recognized pursuant to our deferred tax assets as interest expense, when appropriate.~~

Recent Accounting Pronouncements

WeThe Company reviewed recently issued accounting pronouncements and plan to adopt those that are applicable to ~~us. We do~~it, and does not expect the adoption of these pronouncements to have a material impact on ~~our~~its financial position, results of operations or cash flows.

In ~~August~~June 2016, the ~~FASB~~Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-13 (“ASU ~~No. 2016-15,~~ ~~Statement~~2016-13”) Financial Instruments—Credit Losses (Topic 326): Measurement of ~~Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~credit losses on financial instruments. ~~This~~ ASU ~~provides guidance on statement of cash flows presentation~~2016-13 introduces the current expected credit losses methodology for ~~eight specific cash flow issues where diversity in practice exists. This ASU~~estimating allowances for credit losses. The standard is effective ~~for~~in fiscal years and interim periods beginning after December 15, ~~2017,~~2020. The adoption of adoption of ASU 2016-13 in the first quarter of 2021 did not have a material impact on its consolidated financial statements and related disclosures.

In December 2019, the FASB issued Accounting Standards Update No. 2019-12 (“ASU 2019-12”), Income Taxes (Topic 740) Simplifying Accounting for Income Taxes, as part of its initiative to reduce complexity in the accounting standards. The guidance amended certain disclosure requirements that had become redundant, outdated or superseded. Additionally, this guidance amends accounting for the interim period effects of changes in tax laws or rates, and simplifies aspects of the accounting for franchise taxes. The guidance is effective for annual periods beginning after December 15, 2020, including interim periods ~~within those fiscal years.~~therein. The ~~Company expects that~~adoption of ASU 2019-12 in the ~~adoption will~~first quarter of 2021 did not have a material impact on ~~its~~the Company’s consolidated financial statements.

~~In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The core principle of Topic 842 is that a lessee should recognize the~~

3.Prepaid and Other Current Assets

Prepaid and other current assets at December 31, 2021 and liabilities that arise from leases. For operating leases, a lessee is required to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position. This ASU is effective for fiscal years beginning after December 15, 2018, including

interim periods within those fiscal years. The Company is evaluating the effect that the adoption of this ASU will have on its financial statements. The Company currently expects that its operating lease commitment will be subject to the new standard and recognized as right-of-use asset and operating lease liability upon adoption of ASU 2016-02, which will increase the total assets and total liabilities that it reports relative to such amounts prior to adoption.

~~3. Collaboration Agreements~~

~~Durect Corporation~~

We have an exclusive, worldwide Development and License Agreement, or the Durect Agreement, with Durect to use a patented controlled-release technology that forms the basis for REMOXY. Under the terms of the Durect Agreement, we are solely responsible for clinical development, Durect is responsible for furnishing suitable laboratory facilities, equipment and personnel during pre-clinical phases of development and we and Durect are jointly responsible for certain pre-clinical activities. We reimburse Durect’s expenses and have made milestone payments based on the achievement of certain clinical or regulatory milestones.

~~4. Cash and Cash Equivalents and Marketable Securities~~

~~Cash, cash equivalents and marketable securities held as available-for-sale~~2020 consisted of the following (in thousands):

Cash, Cash Equivalents and Marketable Securities

Amortized Cost

Unrealized Gains

Unrealized Losses

Estimated Fair Value

Accrued Interest

Total Value
December 31, 2017

Cash
$
158

$
—

$
—

$
158

$
—

$
158
Cash equivalents

10,321

—

—

10,321

—

10,321
Total cash and cash equivalents
$
10,479

$
—

$
—

$
10,479

$
—

$
10,479
Reported as:

Cash and cash equivalents
$
10,479

—

—

$
10,479

$
—

$
10,479
Marketable securities

—

—

—

—

—

—

$
10,479

$
—

$
—

$
10,479

$
—

$
10,479
Maturities:

Matures in one year or less
$
10,479

$
—

$
—

$
10,479

$
—

$
10,479
Matures one to three years

—

—

—

—

—

—

$
10,479

$
—

$
—

$
10,479

$
—

$
10,479

December 31, 2016

Cash
$
1,434

$
—

$
—

$
1,434

$
—

$
1,434
Cash equivalents

12,783

—

—

12,783

—

12,783
Commercial paper

4,497

—

—

4,497

—

4,497
Total cash and cash equivalents
$
18,714

$
—

$
—

$
18,714

$
—

$
18,714
Reported as:

Cash and cash equivalents
$
16,615

—

—

$
16,615

$
—

$
16,615
Marketable securities

2,099

—

—

2,099

—

2,099

$
18,714

$
—

$
—

$
18,714

$
—

$
18,714
Maturities:

Matures in one year or less
$
18,714

$
—

$
—

$
18,714

$
—

$
18,714
Matures one to three years

—

—

—

—

—

—

$
18,714

$
—

$
—

$
18,714

$
—

$
18,714



		December 31,
		2021		2020
Prepaid insurance	$	662	$	457
Contract research organization and other deposits		10,330		—
Other		53		31
Total prepaid expenses and other current assets	$	11,045	$	488

~~To date we have not recorded any impairment charges on marketable securities~~Contract research organization and other deposits represent cash payments made to vendors in excess of expenses incurred.

4. Real Property Acquisition

On August 4, 2021, the Company completed the all-cash purchase of a two-building office complex in Austin, Texas, which will serve as its future corporate headquarters. This property is intended to accommodate the Company’s anticipated growth and expansion of its operations in the coming years. Maintenance, physical facilities, leasing, property management and other key responsibilities related to ~~other-than-temporary declines~~property ownership are being outsourced to professional real-estate managers. The purchase price of the property was $22.0 million, including transaction costs. The office complex measures approximately 90,000 rentable square feet. At acquisition and December 31, 2021, the property was 59% leased. The Company is planning to occupy approximately 25% of the property in ~~market value.~~2022. The seller was a third party not affiliated with the Company.

~~Our assets measured at~~The purchase was accounted for as an asset acquisition under ASC 805, Business Combinations. As substantially all of the fair value of the gross assets acquired were concentrated into a single identifiable asset, the Company concluded that the screen was met, and the transaction is considered an asset acquisition rather than an acquisition of a business. Pursuant to the cost accumulation method as prescribed in ASC 805, the cost of the acquisition, including certain transaction costs, is allocated to the assets acquired on the basis of relative fair values. The value of acquired in-place leases is measured as the sum of lost revenues that would be incurred during a prospective lease-up period that would be necessary to achieve occupancy similar to that at the time of acquisition. The value is calculated as the average number of months of lease-up multiplied by the gross monthly market rental rate (base rent plus reimbursements) for each particular suite.

The assets acquired are summarized as follows (in thousands):

Level 1

Level 2

Level 3

Total
December 31, 2017

Cash and cash equivalents
$
10,479

$
—

$
—

$
10,479
Commercial paper

—

—

—

—

$
10,479

$
—

$
—

$
10,479
December 31, 2016

Cash and cash equivalents
$
14,217

$
—

$
—

$
14,217
Commercial paper

—

4,497

—

4,497

$
14,217

$
4,497

$
—

$
18,714




Land	$	3,734
Buildings		15,980
Site improvements		453
Tenant improvements		567
Total tangible assets	$	20,734

Lease-in-place agreements	$	1,053
Leasing commissions and other		246
Total intangible assets	$	1,299

Consideration paid	$	22,033

The Company records the net income from building operations and leases as other income, net, as leasing is not core to the Company’s operations. Building depreciation and amortization is included in general and administrative expense. Components of other income, net, for the years ended December 31, 2021 and 2020 were as follows (in thousands):



	Year ended
	December 31,
	2021		2020
Lease revenue	$	911	$	—
Property operating expenses		(477)		—
Other income, net	$	434	$	—

5. Property and Equipment

~~Property~~The components of property and equipment, ~~includes furniture~~net, as of December 31, 2021 and 2020 were as follows (in thousands):



		December 31,
	2021		2020
Land	$	3,734	$	—
Buildings		15,980		—
Site improvements		470		—
Tenant improvements		567		—
Furniture and equipment		178		97
Construction in progress		83		—
Gross property and equipment	$	21,012	$	97
Accumulated depreciation		(396)		(86)
Property and equipment, net	$	20,616	$	11

Depreciation expense for property and equipment ~~with a purchase value of $1.0 million at~~was $310,000 and $22,000 for the years ended December 31, ~~2017~~2021 and ~~2016. Depreciation is recognized using~~2020, respectively.

There were 0 sales of property and equipment during the ~~straight-line method over~~year ended December 31, 2021.

During the ~~expected life~~year ended December 31, 2020, the Company sold surplus manufacturing equipment to an independent third party and received proceeds totaling $360,000. The original cost of the property and ~~equipment. Accumulated~~equipment was $892,000 and accumulated depreciation was ~~$0.8 million at~~$878,000, resulting a gain on sale of property and equipment of $346,000 during the year ended December 31, ~~2017 and $0.7 million at~~2020.

6. Intangible assets

The components of intangible assets, net, as of December 31, ~~2016.~~2021 and 2020 were as follows (in thousands):



	December 31,
	2021		2020
Lease-in-place agreements	$	1,053	$	—
Leasing commissions and other		246		—
Gross intangible assets	$	1,299	$	—
Accumulated amortization		(224)		—
Intangible assets, net	$	1,075	$	—

Amortization expense for intangible assets was $224,000 for the year ended December 31, 2021. There was no amortization expense for the year ended December 31, 2020.

Amortization expense for finite-lived intangible assets is expected to be as follows (in thousands):



For the year ending December 31,
2022		464
2023		464
2024		147
Total amortization	$	1,075

7. Stockholders' Equity and Stock-Based Compensation

Preferred Stock

~~Our~~The Company’s Board of Directors (the “Board”) has the authority to issue preferred stock in one or more series and to fix the rights, preferences, privileges, restrictions and the number of shares constituting any series or the designation of the series.

2021 Registered Direct Offering

On February 12, 2021, the Company completed a common stock offering pursuant to which certain investors purchased 4,081,633 shares of common stock at a price of $49.00 per share. Net proceeds of the offering were approximately $189.8 million after deducting offering expenses.

2020 Follow-on Public Offering

On November 13, 2020, the Company completed the sale of 9,375,000 shares of Cassava common stock in an underwritten public offering at a price of $8.00 per share. The Company received net proceeds from the offering of approximately $70.3 million after deducting underwriting discounts and offering expenses.

Common Stock Warrants

In August 2018, the Company issued warrants to purchase up to an aggregate of 9.1 million shares of its common stock in conjunction with an offering of its common stock.

During 2021, the Company received proceeds of $0.7 million from the exercise of 0.6 million shares pursuant to common stock warrants. There were no common stock warrants outstanding following the 2021 exercises.

During 2020, the Company received proceeds of $4.9 million from the exercise of 4.0 million shares pursuant to common stock warrants.

At the Market (ATM) Common Stock Issuance

On March 27, 2020, the Company established an at-the-market offering program (ATM) to sell, from time to time, shares of Company common stock having an aggregate offering price of up to $100 million in transactions pursuant to a shelf registration statement that was declared effective by the U.S. Securities and Exchange Commission (the SEC) on May 5, 2020. The Company is obligated to pay a commission of 3.0% of the gross proceeds from the sale of shares of common stock in the offering. The Company is not obligated to sell any shares in the offering.

There were 0 common stock sales under the ATM during the years ended December 31, 2021 and 2020.

2008 Equity Incentive Plan

Under ~~our~~the Company’s 2008 Equity Incentive Plan, or 2008 Equity Plan, ~~our~~its employees, directors and consultants received share-based awards, including grants of stock options and Performance Awards. Our Board of Directors or a designated Committee of the Board is responsible for administration of the 2008 Equity Plan and determined the terms and conditions of each option granted, consistent with the terms of the plan.performance awards. The 2008 Equity Plan expired in December 2017. Share-based awards generally expire ten years from the date of grant.

2018 Equity Incentive Plan

In January 2018, the Company’s Board approved the Company’s 2018 Omnibus Incentive Plan (the 2018 Plan). The Company’s Board or a designated Committee of the Board is responsible for administration of the 2018 Plan and determined the terms and conditions of each option granted, consistent with the terms of the 2018 Plan. The Company’s employees, directors, and consultants are eligible to receive awards under the 2018 Plan, including grants of stock options and performance awards. Share-based awards generally expire ten years from the date of grant. The 2018 Plan provides for issuance of up to 1,000,000 shares of common stock, par value $0.001 per share under the 2018 Plan, subject to adjustment as provided in the 2018 Plan.

When stock options or ~~Performance Awards~~performance awards are exercised net of the exercise price and taxes, the number of shares of stock issued is reduced by the number of shares equal to the amount of taxes owed by the award recipient and that number of shares are cancelled. WeThe Company then ~~use our~~uses its cash to pay tax authorities the amount of statutory taxes owed by and on behalf of the award recipient.

Stock Options

The following summarizes information about stock option activity during ~~2017:~~2021:

Number of Options

Weighted Average Exercise Price

Weighted Average Remaining Contractual Term

Aggregate Intrinsic Value

In years

In millions

Outstanding as of December 31, 2016

2,435,249

$
25.19

4.8

$
—

Options granted

1,026,410

$
3.68

Options exercised

—

$
—

Options forfeited/canceled

(479,504)

31.73

Outstanding as of December 31, 2017

2,982,155

$
16.74

6.2

$
0.4

Vested and expected to vest at December 31, 2017

2,982,155

$
16.74

6.2

$
0.4

Exercisable at December 31, 2017

1,757,688

$
24.02

4.1

$
—


	Number of Options		Weighted Average Exercise Price	Weighted Average Remaining Contractual Term in Years	Aggregate Intrinsic Value in Millions

Outstanding as of December 31, 2020	2,817,504	$	11.30	5.60	$	6.4
Options granted	100,000		69.20
Options exercised	(241,638)		30.75
Options forfeited/canceled	(12,139)		44.01
Outstanding as of December 31, 2021	2,663,727		11.56	5.13	$	88.2
Vested and expected to vest at December 31, 2021	2,663,727		11.56	5.13	$	88.2
Exercisable at December 31, 2021	2,294,190	$	10.52	4.63	$	76.5

The following summarizes information about stock options at December 31, ~~2017~~2021 by a range of exercise prices:

Options outstanding

Options exercisable

Weighted

average

Weighted

Weighted

Number of

remaining

average

Number of

average

Range of exercise prices

outstanding

contractual

exercise

vested

exercise

From

To

options

life (in years)

price

options

price

$
3.24

$
4.09

933,200

9.8

$
3.59

46,458

$
3.25

$
4.10

$
15.61

620,243

7.5

$
11.63

345,168

$
12.51

$
16.31

$
23.38

628,411

3.9

$
19.05

597,399

$
19.16

$
23.59

$
35.00

656,841

2.9

$
30.41

626,841

$
30.24

$
36.40

$
53.55

143,460

3.4

$
51.66

141,822

$
51.82

2,982,155

6.2

$
16.74

1,757,688

$
24.02


				Options outstanding				Options exercisable
					Weighted
					average	Weighted			Weighted
				Number of	remaining	average		Number of	average
Range of exercise prices				outstanding	contractual	exercise		vested	exercise
From		To		options	life (in years)	price		options	price
$	0.95	$	1.88	657,813	7.4	$	1.47	415,363	$	1.37
$	3.24	$	3.24	550,000	5.6	$	3.24	550,000	$	3.24
$	4.09	$	12.04	547,576	5.2	$	7.06	506,638	$	7.02
$	12.39	$	23.38	597,746	2.3	$	16.77	597,746	$	16.77
$	23.59	$	77.00	310,592	4.6	$	45.53	224,443	$	36.50
				2,663,727	5.1	$	11.56	2,294,190	$	10.52

~~We use~~The Company uses Black-Scholes to estimate the fair value of options granted. Black-Scholes considers a number of factors, including the market price of ~~our~~the Company’s common stock. ~~For options granted to employees and directors, we used certain factors~~Factors utilized in Black-Scholes to value each stock option granted, ~~which resulted in a~~and the weighted average fair value of options granted during ~~2017~~the years ended December 31, 2021 and ~~2016,~~2020 were as follows:

2017

2016

Volatility
79% to 83%

72%

Risk-free interest rates
2% to 2.4%

1% to 2%

Expected life of option
7 years

7 years

Dividend yield
zero

zero

Forfeiture rate
zero

zero

Weighted average fair value of stock options granted
$2.74

$1.60


	2021	2020
Volatility	147% to 151%	123% to 139%
Risk-free interest rates	1.12% to 1.42%	0.46% to 0.78%
Expected life of option	7.0 years	7.0 years
Dividend yield	0	0
Forfeiture rate	0	0
Weighted average fair value of stock options granted	$65.83	$6.69

Volatility is based on reviews of the historical volatility of ~~our~~the Company’s common stock. Risk-free interest rates are based on yields of U.S. treasury notes in effect at the date of grant. Expected life of option is based on actual historical option exercises. Dividend yield is ~~zero~~0 because ~~we do~~the Company does not anticipate paying cash dividends in the foreseeable future. ~~We estimate forfeitures and adjust this estimate periodically based in part on the extent to which actual forfeitures differ from our estimates.~~

For options granted to non-employees, we estimate the fair value of stock options granted using factors similar to those used for stock options granted to employees and directors and appropriate for the terms underlying the stock options granted to non-employees. We re-measure the compensation expense for options granted to non-employees each reporting period.

As of December 31, ~~2017, we expect~~2021, the Company expects to recognize compensation expense of ~~$5.3~~$6.2 million related to non-vested options held by ~~employees and directors~~equity plan participants over the weighted average remaining recognition period of ~~3.2~~2.1 years.

Performance Awards

The following summarizes information about ~~Performance Award~~performance award activity during ~~2017:~~2021:


		Number of Performance Awards
Outstanding as of December 31, ~~2016~~2020		~~222,060~~
~~Granted~~		—138,055
~~Vested Performance Awards~~Granted		—
~~Forfeited/Canceled~~Vested		~~(69,720)~~ —
Forfeited/canceled		—
Outstanding as of December 31, ~~2017~~2021		~~152,340~~ 138,055

If and when outstanding ~~Performance Awards~~performance awards vest, wethe Company would recognize ~~$2.5~~$2.3 million in ~~non-cash~~ stock-based compensation expense. These ~~Performance Awards~~performance awards expire between 2022 and ~~2026.~~2026.

Stock-Based Compensation Expense

The following summarizes information about ~~non-cash~~ stock-based compensation expense, in thousands:

Years ended December 31,

2017

2016

Research and development

Vesting of stock options
$
1,205

$
1,313
Vesting of Performance Awards

—

438

1,205

1,751
General and administrative

Vesting of stock options

1,768

2,179
Vesting of Performance Awards

—

404

1,768

2,583
Total non-cash stock-based compensation expenses

Vesting of stock options

2,973

3,492
Vesting of Performance Awards

—

842

$
2,973

$
4,334



	Year ended
	December 31,
	2021		2020
Research and development	$	1,302	$	453

General and administrative		457		535

Total stock-based compensation expense	$	1,759	$	988

~~Non-cash stock-related compensation expense related to vesting of Performance Awards was associated with the resubmission of the NDA for REMOXY.~~

8. Employee 401(k) Benefit Plan

~~We have~~The Company has a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code. The plan covers substantially all employees. Employees are eligible to participate in the plan the first day of the month after hire and may contribute up to the current statutory limits under Internal Revenue Service regulations. The 401(k) plan permits usthe Company to make additional matching contributions on behalf of all employees. Through December 31, ~~2017, we have~~2021, the Company has not made any matching contributions to the 401(k) plan.

8.9. Income Taxes

~~U.S. Tax Reform~~

On December 22, 2017, legislation commonly known as the Tax Cuts and Jobs Act, or the Act, was signed in to law. The Tax Act, among other changes, reduces the U.S. federal corporate tax rate from 35% to 21%, requires taxpayers to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. On December 31, 2017, the Company did not have any foreign subsidiaries and the international aspects of the Tax Act are not applicable.

In connection with the initial analysis of the impact of the Tax Act, the Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The remeasurement of the Company's deferred tax balance was primarily offset by application of its valuation allowance. The Company is still in the process of analyzing the impact to the Company of the Tax Act. Where the Company has been able to make reasonable estimates of the effects for which its analysis is not yet complete, the Company has recorded provisional amounts. Where the Company has not yet been able to make reasonable estimates of the impact of certain elements, the Company has not recorded any amounts related to those elements and has continued accounting for them in accordance with ASC 740 on the basis of the tax laws in effect immediately prior to the enactment of the Tax Act.

We did not provide for income taxes in ~~2017~~2021 and ~~2016~~2020 because weit had ~~a net operating loss for tax purposes~~book and federal taxable losses in those years and the tax benefit that would have resulted from the ~~statutory rate~~pre-tax losses was fully offset by a change in the valuation allowance.

The reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the years ended December 31, 2021 and 2020 was as follows:



	Year ended December 31,
	2021		2020
Tax at federal statutory rate	21.0	%		21.0	%
State tax, net of federal benefit	—			—
Share-based compensation	1.2			(42.8)
Research and development credits	2.3			1.6
Section 162(m) limitation	(0.5)			—
Other	(0.2)			—
Change in valuation allowance	(23.8)			20.2
Effective income tax rate	—	%		—	%

Deferred tax assets and valuation allowance

Deferred tax assets reflect the tax effects of net operating loss and tax credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. ~~We reduced our~~The Company’s deferred taxes assets at December 31, ~~2017 for~~2021 and 2020 were valued at the ~~reduced~~ corporate tax rate toof 21% ~~in recently enacted tax legislations. We offset our~~. The Company offsets its deferred tax assets by a valuation allowance because ~~we are~~it is uncertain about the timing and amount of any future profits. Significant components of ~~our~~its deferred tax assets are as follows (in thousands):


	December 31,				December 31,
	2017		2016		2021		2020
Deferred tax assets:
Net operating loss carryforwards	$	15,600	$	22,300	$	24,777	$	18,333
Stock-related compensation		5,300		9,100
Research & development credit carryforwards		6,400		6,200
Share-based compensation						2,870		3,230
Research and development credit carryforwards						7,439		6,687
Other		200		200		1,130		264
Total deferred tax assets						36,216		28,514
Valuation allowance						(36,166)		(28,447)
Net deferred tax assets						50		67
Deferred tax liabilities:
Property and equipment						—		(5)
Operating lease right-of-use assets						(50)		(62)
Total deferred tax liabilities						(50)		(67)
Net deferred tax asset (liability)					$	—	$	—
		27,500		37,800
Valuation allowance		(27,500)		(37,800)
	$	—	$	—

~~As of the beginning of 2017, we increased both our net operating loss carryforwards and our~~The valuation allowance increased by ~~$0.9~~$7.7 million ~~when we adopted ASU 2016-09 for certain tax deductions associated with stock option transactions greater than the stock-related compensation expense~~ in ~~our financial statements.~~ 2021 due primarily to continuing operations.

The valuation allowance decreased by ~~$10.3~~$1.3 million in ~~2017 and increased by $3.6 million in 2016.~~ 2020 due to continuing operations.

~~Our pre-tax~~The Company’s net operating loss carryforwards of ~~$74~~$118.0 million are federal, of which $74.1 million expires between 2029and ~~expire between 2029~~2037 and ~~2036.~~$43.9 million carries forward indefinitely. As of December 31, ~~2017, we~~2021, the Company had federal research and development tax credits of approximately ~~$10.7~~$12.4 million, which expire in the years ~~2023~~2024 through ~~2036.~~ 2041.

Unrecognized tax benefits

~~We have~~As of December 31, 2021 and 2020, the Company has unrecognized tax benefits related to tax ~~credits. We added to our~~credits of $5.0 million and $4.5 million, respectively. None of the unrecognized tax benefits ~~in 2017~~as of December 31, 2021, if recognized, would impact the effective tax rate due to the valuation allowance and ~~2016~~no interest or penalties have been recognized. A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows (in thousands):



						Year ended December 31,
	2017		2016		2021		2020
Beginning balance	$	4,200	$	4,000	$	4,500	$	4,400
Additions based on tax positions related to the current year		100		200		501		100
Ending balance	$	4,300	$	4,200	$	5,001	$	4,500

9.As of December 31, 2021, there were no unrecognized tax benefits that we expect would change significantly over the next 12 months.

The Company files U.S. and Texas income tax returns. In the United States, the statute of limitations with respect to the federal income tax returns for tax years after 2017 are open to audit; however, since the Company has net operating losses, the taxing authority has the ability to review tax returns prior to the 2018 tax year and make adjustments to these net operating loss carryforwards. We are not under audit in any taxing jurisdiction at this time.

100

10. Leases and Commitments

WeRight-of-use Asset and Liability

The Company has a non-cancelable operating lease for approximately 6,000 square feet of office space ~~pursuant to a non-cancelable operating lease~~ in Austin, TXTexas, which is used for the development of novel products. On September 4, 2020, the Company entered into a lease amendment that extended the lease termination date to April 30, 2024 and set new rental rates effective as of January 1, 2021. The Company also has a short-term lease agreement for an additional 3,600 square feet of office space in Austin, Texas that expires ~~in December 2020.~~on April 30, 2022. Future ~~minimum~~ lease payments are (in thousands).

2018

2019

2020

Total
Minimum lease payments

$
91

$
95

$
99

$
285


		2022	2023	2024	Total future lease payments	Less: imputed interest		Total

Operating leases	$	102	107	36	245	(9)	$	236
Short-term operating lease	$	21	—	—	21	—	$	21

~~We believe that our facilities are adequate and suitable for our current needs.~~ Rent expense was $0.1 million ~~both~~for the year ended December 31, 2021 and 2020.

There were 0 right-of-use assets exchanged for operating lease liabilities during the year ended December 31, 2021. The Company recorded a right-of-use asset and lease liability of $316,000 as a result of the lease modification in ~~2017~~September 2020. The Company utilized a discount rate of 3.25% for the modified lease to determine the present value of the future lease payments, which approximated the Company’s incremental borrowing rate in September 2020.

Cash paid for operating lease liabilities totaled $109,000 and ~~2016.~~$99,000 during the years ended December 31, 2021 and 2020, respectively.

~~We conduct our~~Other Commitments

The Company conducts its product research and development programs through a combination of internal and collaborative programs that include, among others, arrangements with universities, contract research organizations and clinical research sites. ~~We have~~It has contractual arrangements with these organizations ~~however these contracts~~that are ~~cancelable on thirty days’ notice and our~~generally cancelable. The Company’s obligations under these contracts are largely based on services performed. The Company had non-cancellable commitments for preclinical and clinical studies as well as the manufacture of simufilam totaling approximately $4.7 million at December 31, 2021.

The Company is dependent on contract development and manufacturing organizations for the manufacture of all our materials for clinical studies.

Note 11. 2020 Cash Incentive Bonus Plan

In August 2020, the Board approved the Plan. The Plan was established to promote the long-term success of the Company by creating an “at-risk” cash bonus program that rewards Plan participants with additional cash compensation in lockstep with significant increases in the Company’s market capitalization. The Plan is considered “at-risk” because Plan participants will not receive a cash bonus unless the Company’s market capitalization increases significantly and certain other conditions specified in the Plan are met. Specifically, Plan participants will not be paid any cash bonuses unless (1) the Company completes a merger or acquisition transaction that constitutes a sale of ownership of the Company or its assets (a Merger Transaction) or (2) the Compensation Committee of the Board (the Compensation Committee) determines the Company has sufficient cash on hand, as defined in the Plan. Because of the inherent discretion and uncertainty regarding these requirements, the Company has concluded that a Plan grant date has not occurred as of December 31, 2021.

Plan participants will be paid all earned cash bonuses in the event of a Merger Transaction.

The Company’s market capitalization for purposes of the Plan is determined based on either (1) the Company’s closing price of one share on the Nasdaq Capital Market multiplied by the total issued and outstanding shares and options

101

to purchase shares of the Company, or (2) the aggregate consideration payable to security holders of the Company in a Merger Transaction. This constitutes a market condition under applicable accounting guidance.

The Plan triggers a potential cash bonus each time the Company’s market capitalization increases significantly, up to a maximum $5 billion in market capitalization. The Plan specifies 14 incremental amounts between $200 million and $5 billion (each increment, a “Valuation Milestone”). Each Valuation Milestone triggers a potential cash bonus award in a pre-set amount defined in the Plan. Each Valuation Milestone must be achieved and maintained for no less than 20 consecutive trading days for Plan participants to be eligible for a potential cash bonus award. Approximately 58% of each cash bonus award associated with a Valuation Milestone is subject to adjustment and approval by the Compensation Committee. Any amounts not awarded by the Compensation Committee are no longer available for distribution.

If the Company were to exceed a $5 billion market capitalization for no less than 20 consecutive trading days, all Valuation Milestones would be deemed achieved, in which case cash bonus awards would range from a minimum of $139.1 million up to a hypothetical maximum of $322.3 million. Payment of cash bonuses is deferred until such time as (1) the Company completes a Merger Transaction, or (2) the Compensation Committee determines the Company has sufficient cash on hand to render payment (each, a “Performance Condition”), neither of which may ever occur. Accordingly, there can be no assurance that Plan participants will ever be paid a cash bonus that is awarded under the Plan, even if the Company’s market capitalization increases significantly.

The Plan is accounted for as a liability award. The fair value of each Valuation Milestone award will be determined once a grant date occurs and will be remeasured each reporting period. Compensation expense associated with the Plan will be recognized over the expected achievement period for each of the 14 Valuation Milestones, when a Performance Condition is considered probable of being met.

In October 2020, the Company achieved the first Valuation Milestone. Subsequently, the Compensation Committee approved a potential cash bonus award of $7.3 million in total for all Plan participants, subject to future satisfaction of a Performance Condition.

During the year ended December 31, 2021, the Company achieved 11 additional Valuation Milestones triggering potential Company obligations to all Plan participants from a minimum of $93.7 million up to a hypothetical maximum of $225.0 million, to be determined by the Compensation Committee and contingent upon future satisfaction of a Performance Condition. However, no compensation expense has been recorded since no grant date has occurred and no Performance Conditions are considered probable of being met. There is no continuing service requirement for Plan participants once the Compensation Committee approves a cash bonus award.

NaN actual cash payments were authorized or made to participants under the Plan through December 31, 2021.

12. Contingencies

Securities Class Actions and Shareholder Derivative Action

Between August 27 and October 26, 2021, four putative class action lawsuits were filed alleging violations of the federal securities laws by the Company and certain named officers. The complaints rely on allegations contained in two Citizen Petitions submitted to FDA, and allege that various statements made by the defendants regarding simufilam were rendered materially false and misleading. The two Citizen Petitions were subsequently denied by FDA. These actions were filed in the U.S. District Court for the Western District of Texas. The complaints seek unspecified compensatory damages and other relief on behalf of a purported class of purchasers of the Company’s securities between September 14, 2020, and August 27, 2021. The Company expects that the cases will be consolidated and that a lead plaintiff and lead counsel will be appointed and thereafter that a consolidated amended complaint will be filed. The Company believes the lawsuit claims are without merit and intends to defend against these lawsuits vigorously. The Company is unable to estimate the possible loss or range of loss, if any, associated with these lawsuits.

102

duty laws against certain named officers and the members of the Company’s board of directors. The complaint relies on the allegations made in two Citizen Petitions that were submitted to FDA. The two Citizen Petitions, which were subsequently denied by FDA, allege, among other things, that the individual defendants exposed the Company to unspecified damages and securities law liability by causing it to make materially false and misleading statements, in violation of the U.S. securities laws and in breach of their fiduciary duties to the Company. The derivative case seeks, among other things, to recover unspecified compensatory damages on behalf of the Company arising out of the individual defendant’s alleged wrongful conduct. Although the plaintiffs in the derivative cases does not seek relief against the Company, it has certain indemnification obligations to the individual defendants. Since November 4, 2021, three additional shareholder derivative actions were filed alleging substantially similar claims, two in the U.S. District Court for the Western District of Texas, and one in Texas state court (Travis County District Court). The state court action has been stayed pending the resolution of the motions to dismiss in the securities class actions. The parties to the three federal court actions have filed a motion, which the court has not yet ruled on, to consolidate and stay pending the resolution of motions to dismiss in the securities class actions. The Company is unable to estimate the possible loss or range of loss, if any, associated with these lawsuits.

103

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.Controls and Procedures

Evaluation of disclosure controls and procedures.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our Chief Executive Officer ~~(as Principle Executive~~and our Chief Financial Officer ~~and Principal Financial Officer)has~~have concluded that our disclosure controls and procedures ~~are~~were effective to ensure that information we are required to disclose in reports that we file or submit under the ~~Securities~~ Exchange Act ~~of 1934, as amended,~~ is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission, or SEC, rules and forms and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures.

Management’s annual report on internal control over financial reporting. ~~We are~~ Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. ~~We have~~Our management has assessed the effectiveness of internal control over financial reporting as of December 31, ~~2017.~~2021. Our assessment was based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in Internal Control-Integrated Framework (2013 Framework).

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

~~(1)~~

~~pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets;~~

~~(2)~~

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and board of directors; and

~~(3)~~

~~provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.~~

(1)pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets;

(2)provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and board of directors; and

(3)provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on the COSO criteria, we believe our internal control over financial reporting as of December 31, ~~2017~~2021 was effective.

Changes in internal control over financial reporting.

~~As previously announced,~~There was no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.

104

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Cassava Sciences, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Cassava Sciences, Inc.’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Cassava Sciences, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Cassava Sciences, Inc. (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, stockholders' equity and cash flows for each of the two years in the period ended December 31, 2021, and the related notes and our report dated February ~~14, 2017, Peter S. Roddy resigned,~~28, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective ~~March 9, 2017,~~internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Annual Report on Internal Controls over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as ~~Vice President, Chief~~we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial ~~Officer~~Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and ~~Secretary. Remi Barbier, President~~the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and ~~Chief Executive Officer, has assumed~~procedures that (1) pertain to the ~~role~~maintenance of ~~Principal Financial Officer until such time~~records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a ~~new Chief Financial Officer is appointed.~~material effect on the financial statements.

105

/s/ Ernst & Young LLP

Austin, Texas

February 28, 2022

‎

106

Item 9B.Other Information

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection

66None.

PART III

Item 10.Directors and Executive Officers and Corporate Governance

The information regarding our directors, executive officers, director nomination process and the audit committee of ~~our board of directors~~the Board is incorporated by reference from "Directors and Executive Officers" in our Proxy Statement for our ~~2018~~2022 Annual Meeting of Stockholders.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the ~~Securities~~ Exchange Act ~~of 1934, as amended~~ requires our executive officers and directors and persons who own more than ten percent (10%) of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC. Executive officers, directors and greater than ten percent (10%) stockholders are required to furnish us with copies of all Section 16(a) forms they file. We believe all of our executive officers and directors complied with all applicable filing requirements during ~~2017.~~2021.

Code of Ethics

We have adopted a Code of Ethics that applies to all of our directors, officers and employees, including our principal executive officer ~~principal financial officer~~ and principal ~~accounting~~financial officer. We publicize the Code of Ethics through posting the policy on our website, http://~~www.paintrials.com.~~www.cassavasciences.com. We will disclose on our website any waivers of, or amendments to, our Code of Ethics.

Item 11.Executive Compensation

The information required by this Item is incorporated by reference from our definitive Proxy Statement referred to in Item 10 above where it appears under the heading "Executive Compensation and Other Matters."

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item regarding security ownership of certain beneficial owners and management is incorporated by reference from our definitive Proxy Statement referred to in Item 10 above where it appears under the heading "Security Ownership of Certain Beneficial Owners and Management."

The following table summarizes the securities authorized for issuance under our equity compensation plans as of December 31, ~~2017:~~2021:


	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights		Weighted Average Exercise Price of Outstanding Options, Warrants and Rights	Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans	Number of ‎Securities to be ‎Issued Upon ‎Exercise of ‎Outstanding ‎Options, Warrants ‎and Rights			Weighted Average ‎Exercise Price of ‎Outstanding ‎Options, ‎Warrants ‎and Rights		Number of Securities ‎Remaining Available ‎for Future Issuance ‎Under Equity ‎Compensation ‎Plans
Equity compensation plans approved by stockholders	3,134,495	$	15.92	58,017	2,801,782	⁽¹⁾	$	10.99	⁽²⁾	210,205	⁽³⁾
Equity compensation plans not approved by stockholders	—		—	—	—			—		—
	3,134,495	$	15.92	58,017	2,801,782		$	10.99		210,205

67107

(1)Includes outstanding stock options and awards for 1,976,885 shares of our common stock under the 2008 Plan and 824,897 shares of our common stock under the 2018 Plan.

(2)Includes the weighted average stock price for outstanding stock options of $12.18 under the 2008 Plan and $10.16 for the 2018 Plan.

(3)Represents 152,188 shares of our common stock for the 2018 Plan and 58,017 for the Employee Stock Purchase Plan. No future awards shall occur under the 2008 Plan.

Item 13.Certain Relationships and Related Transactions and Director Independence

The information required by this Item is incorporated by reference from our definitive Proxy Statement referred to in Item 10 above where it appears under the heading "Certain Relationships and Related Transactions."

Item 14.Principal Accountant Fees and Services

The information required by this Item is incorporated by reference from our definitive Proxy Statement referred to in Item 10 above where it appears under the heading “Principal Accountant Fees and Services.”

‎

108

PART IV

Item 15.Exhibits and Financial Statement Schedules

(a)The following documents are filed as part of this Form 10-K:

(1)Consolidated Financial Statements (included in Part II of this report):

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations

~~Statements of Comprehensive Income~~

Consolidated Statements of Stockholders' Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

(2)Consolidated Financial Statement Schedules:

All consolidated financial statement schedules are omitted because the information is inapplicable or presented in the notes to the consolidated financial statements.

(3)Management Contracts, Compensatory Plans and Arrangements.

Management contracts, compensatory plans and arrangements are indicated by the symbol “*” in the applicable exhibits listed in Item 15(b), below.

(b)Exhibits

The exhibits listed below are filed as part of this Form 10-K other than Exhibit 32.1, which shall be deemed furnished.

Incorporated by Reference

Exhibit
No.

Description

Form

Filing
Date

Exhibit
No.

Filed
Herewith
3.1

Amended and Restated Certificate of Incorporation.

10-Q

7/29/2005

3.1

3.2

Amended and Restated Bylaws.

10-Q

4/24/2013

3.2

3.3

Amended and Restated Certificate of Incorporation

8-K

5/8/2017

3.1

4.1

Specimen Common Stock Certificate.

10-Q

7/29/2005

4.1

10.1
*

Form of Indemnification Agreement between Pain Therapeutics and each of its directors and officers.

S-1

3/14/2000

10.1

10.3
*

Employment Agreement dated October 23, 2001, between Registrant and Nadav Friedmann, PhD. M.D.

10-K

3/22/2002

10.5

10.4
+

Development and License Agreement dated December 19, 2002 between Registrant and DURECT Corporation and Southern Biosystems, Inc.

10-K

2/24/2006

10.10

10.5
+

Amendment dated December 15, 2005 to Development and License Agreement dated December 19, 2002 between Registrant and DURECT Corporation and Southern Biosystems, Inc.

10-K

2/24/2006

10.11

10.11
*

Employment Agreement dated July 1, 1998 and amended December 17, 2008 between Registrant and Remi Barbier.

10-K

2/13/2009

10.12

10.12
*

2000 Employee Stock Purchase Plan, as amended and restated.

10-Q

7/29/2010

10.1

10.13

Lease agreement, dated as of February 14, 2011 between Registrant and StoneCliff Office, L.P.

10-Q

4/27/2011

10.1

10.14
*

Amendment Number 1 to the 2008 Equity Incentive Plan.

10-Q

8/1/2013

10.1

10.15
*

Amendment No. 2 to Employment Agreement between Registrant and Remi Barbier.

10-Q

8/1/2013

10.2

10.16

Second Amendment to Lease Agreement, dated as of April 8, 2014 between Registrant and StoneCliff Office, L.P.

10-Q

8/6/2014

10.1

10.17

Third Amendment to Lease Agreement, dated as of November 3, 2017 between Registrant US REIF Eurus Austin, LLC dba StoneCliff Building as successor in interest to StoneCliff Office, L.P.

X
23.1

Consent of Independent Registered Public Accounting Firm.

X

Incorporated by Reference

Exhibit
‎No.

Description

Form

Filing
‎Date

Exhibit
‎No.

Filed
‎Herewith

3.1

Amended and Restated Certificate of Incorporation.

10-Q

7/29/2005

3.1

3.2

Certificate of Amendment of Restated Certificate of Incorporation.

8-K

5/8/2017

3.1

3.3

Certificate of Amendment of Restated Certificate of Incorporation.

10-K

3/29/2019

3.3

3.4

Amended and Restated Bylaws of Cassava Sciences, Inc.

8-K

12/11/2020

3.1

4.1

Specimen Common Stock Certificate.

10-Q

8/12/2019

4.1

4.2

Description of Registrant’s Securities.

10-K

3/26/2020

4.2

10.2

Employment Agreement, dated October 23, 2001, between Registrant and Nadav Friedmann, PhD. M.D.

10-K

3/22/2002

10.5

Employment Agreement, dated July 1, 1998 and amended December 17, 2008, between Registrant and Remi Barbier.

10-K

2/13/2009

10.12

10.6

2000 Employee Stock Purchase Plan, as amended and restated.

10-Q

7/29/2010

10.1

10.7

2008 Equity Incentive Plan.

8-K

5/29/2008

10.1

10.8

Amendment Number 1 to the 2008 Equity Incentive Plan.

10-Q

8/1/2013

10.1

10.9

Amendment No. 2 to Employment Agreement between Registrant and Remi Barbier.

10-Q

8/1/2013

10.2

10.10

Lease Agreement, dated as of February 14, 2011 between Registrant and StoneCliff Office, L.P.

10-Q

4/27/2011

10.1

10.11

First Amendment to Lease Agreement, dated September 21, 2011.

10-K

2/9/2012

10.20

10.12

Second Amendment to Lease Agreement, dated as of April 3, 2014 between Registrant and StoneCliff Office, L.P.

10-Q

8/6/2014

10.1

10.13

Third Amendment to Lease Agreement, dated as of November 3, 2017 between Registrant US REIF Eurus Austin, LLC dba StoneCliff Building as successor in interest to StoneCliff Office, L.P.

10-K

2/6/2018

10.17

10.14

Fourth Amendment to Lease Agreement, dated September 4, 2020 between Registrant US REIF Eurus Austin, LLC dba StoneCliff Building as successor in interest to StoneCliff Office, L.P.

8-K

9/10/2020

10.1

10.15

2018 Omnibus Incentive Plan.

8-K

5/11/2018

10.1

10.16

Sales Agreement, Dated March 27, 2020, between Registrant and SVB Leerink LLC.

S-3

3/27/2020

1.1

109

~~24.1~~	~~Power of Attorney (included in the signature page to this report).~~	X
~~31.1~~	~~Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~	X
~~32.1~~	~~Certifications of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~	X
~~101.INS~~	~~XBRL Instance Document.~~	X
~~101.SCH~~	~~XBRL Taxonomy Extension Schema Document.~~	X
~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document.~~	X
~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase Document.~~	X
~~101.LAB~~	~~XBRL Taxonomy Extension Labels Linkbase Document.~~	X
~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase Document.~~	X
* Management contract, compensatory plan or arrangement.
~~+ Portions of this Exhibit are subject to a confidential treatment order.~~

10.17

Cassava Sciences, Inc. 2020 Cash Incentive Bonus Plan

8-K

9/1/2020

10.1

10.18

Employment Agreement, executed on October 9, 2018, by and between Registrant and Eric Schoen.

8-K

10/11/2018

10.1

10.19

Employment Agreement, executed on January 1, 2020, by and between Registrant and Dr. James Kupiec.

8-K

1/6/2021

10.1

10.20

Form of Securities Purchase Agreement, dated February 10, 2021, by and between Cassava Sciences, Inc. and the purchasers named therein.

8-K

2/12/2021

10.1

10.21+

Master Services Agreement between Cassava Sciences, Inc. and Evonik Corporation, dated February 22, 2021.

8-K

3/11/2021

10.1

10.22+

Master Services Agreement between Cassava Sciences, Inc. and Premier Research International LLC, dated June 11, 2021

10-Q

8/4/2021

10.3

10.23+

Agreement of Sale and Purchase Between DWF IV Lakewood, LP and Cassava Sciences, Inc. dated July 2, 2021

10-Q

11/15/2021

10.4

10.1

Form of Indemnification Agreement between Registrant and each of its directors and officers.

21.1

Subsidiaries of the Registrant.

23.1

Consent of Independent Registered Public Accounting Firm.

31.1

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certifications of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

XBRL Instance Document.

101.SCH

XBRL Taxonomy Extension Schema Document.

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document.

104

The cover page from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, formatted in Inline XBRL (included in Exhibit 101).

* Management contract, compensatory plan or arrangement.

+Confidential portions of this document have been redacted as permitted by applicable regulations.

(c)Consolidated Financial Statement Schedules

All consolidated financial statement schedules are omitted because the information is inapplicable or presented in the notes to the consolidated financial statements.

Item 16.Form 10-K Summary

The Company has elected not to ~~included~~include summary information.

‎

70110

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Principal Executive
	~~Pain Therapeutics,~~Cassava Sciences, Inc.
	(Registrant)

	/s/ REMI BARBIER
	Remi Barbier,
	Chairman of the Board of Directors,
	President and Chief Executive Officer

Dated: February ~~6, 2018~~28, 2022

~~POWER~~ ~~OF ATTORNEY~~

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Remi Barbier his true and lawful attorneys-in-fact, with full power of substitution, for him in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or their substitute or substitutes may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



Signature	Title	Date

/s/ REMI BARBIER	President, Chief Executive Officer and	February ~~6, 2018~~28, 2022
Remi Barbier	Chairman of the Board of Directors
	(Principal Executive ~~Officer and Principal Financial~~ Officer)

/s/ ERIC J. SCHOEN	Chief Financial Officer	February 28, 2022
Eric J. Schoen	(Principal Financial Officer)

/s/ NADAV FRIEDMANN, PH.D., M.D.	Chief ~~Operating and~~ Medical Officer	February ~~6, 2018~~28, 2022
Nadav Friedmann, Ph.D., M.D.	and Director

/s/ RICHARD J. BARRY	Director	February 28, 2022
Richard J. Barry

/s/ ROBERT Z. GUSSIN, PH.D.	Director	February ~~6, 2018~~28, 2022
Robert Z. Gussin, Ph.D.

/s/ MICHAEL J. O'DONNELL, ESQ.	Director	February ~~6, 2018~~28, 2022
Michael J. O'Donnell, Esq.

~~/s/ SAIRA RAMASASTRY~~	~~Director~~	~~February 6, 2018~~
~~Saira Ramasastry~~

/s/ SANFORD R. ROBERTSON	Director	February ~~6, 2018~~28, 2022
Sanford R. Robertson

/s/ PATRICK SCANNON, ~~M.D,~~M.D., PH.D.	Director	February ~~6, 2018~~28, 2022
Patrick Scannon, M.D., Ph.D.

71111


Delaware	91-1911336
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)


Large accelerated filer ☐þ	Accelerated filer ☐¨
Non-accelerated filer ☐¨	Smaller reporting company ☑þ
~~(Do not check if a smaller reporting company)~~	Emerging growth company ☐¨


Neurogranin*	NfL*	T-tau⁺	P-tau¹⁸¹*	YKL40*	IL-6*	IL-1β*	TNFα⁺



Treatment	Day 0	Day 28	Change-Day 0 to 28
Placebo	24	24	No change
50 mg simufilam	25	20	- 20%
100 mg simufilam	25	18	- 28%


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


☐¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


		Page
PART I
Item 1.	Business	4
Item 1A.	Risk Factors	2235
Item 1B.	Unresolved Staff Comments	4473
Item 2.	Properties	4573
Item 3.	Legal Proceedings	4574
Item 4.	Mine Safety Disclosures	4575

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	4575
Item 6.	~~Selected Financial Data~~[Reserved]	4575
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4676
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	5083
Item 8.	~~Financial~~Consolidated financial Statements and Supplementary Data	5083
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	66104
Item 9A.	Controls and Procedures	66104
Item 9B.	Other Information	66107
Item 9C.	Disclosure Regarding Foreign Jurisdiction that Prevent Inspection	107
~~PART III~~
PART III
Item 10.	Directors and Executive Officers and Corporate Governance	67107
Item 11.	Executive Compensation	67107
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	67107
Item 13.	Certain Relationships and Related Transactions and Director Independence	68108
Item 14.	Principal Accountant Fees and Services	68108

PART IV
Item 15.	Exhibits and Consolidated Financial Statement Schedules	69109
Item 16.	Form 10-K Summary	70110


	Sales Prices
	High		Low
Fiscal 2016:
First Quarter	$	2.40	$	1.55
Second Quarter	$	2.63	$	1.95
Third Quarter	$	3.00	$	0.96
Fourth Quarter	$	1.04	$	0.51
Fiscal 2017:
First Quarter	$	9.31	$	3.71
Second Quarter	$	7.42	$	3.38
Third Quarter	$	4.30	$	3.10
Fourth Quarter	$	6.49	$	3.10



PAIN THERAPEUTICS, INC.

STATEMENTS OF OPERATIONS
(in thousands, except per share data)


	Years ended December 31,
	2017		2016
Operating expenses:
Research and development	$	7,615	$	9,176
General and administrative		4,334		5,781
Total operating expenses		11,949		14,957
Operating loss		(11,949)		(14,957)
Interest income		38		107
Net loss	$	(11,911)	$	(14,850)
Net loss per share, basic and diluted	$	(1.82)	$	(2.28)
Shares used in computing net loss per share, basic and diluted		6,537		6,520



PAIN THERAPEUTICS, INC.

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)


	Years ended December 31,
	2017		2016
Net loss	$	(11,911)	$	(14,850)
Other comprehensive income (loss):
Net unrealized gains (losses) on marketable securities		—		—
Comprehensive loss	$	(11,911)	$	(14,850)



PAIN THERAPEUTICS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)


						Accumulated
						other				Total
	Common stock			Additional		comprehensive		Accumulated		stockholders'
	Shares	Par value		paid-in capital		income		deficit		equity
Balance at December 31, 2015	6,536,588		7		159,998		—		(130,638)		29,367
Non-cash stock-related compensation for:
Stock options for employees	—		—		3,467		—		—		3,467
Stock options for non-employees	—		—		25		—		—		25
Performance Awards and related non-cash stock-related compensation	69,286		—		842		—		—		842
Performance Awards related to statutory taxes	(14,169)		—		(214)		—		—		(214)
Other comprehensive loss	—		—		—		—		—		—
Net loss	—		—		—		—		(14,850)		(14,850)
Balance at December 31, 2016	6,591,705		7		164,118		—		(145,488)		18,637
Non-cash stock-related compensation for:
Stock options for employees	—		—		2,954		—		—		2,954
Stock options for non-employees	—		—		19		—		—		19
Issuance of common stock pursuant to 7 to 1 Reverse stock split round up	3,804		—		—		—		—		—
Net loss	—		—		—		—		(11,911)		(11,911)
Balance at December 31, 2017	6,595,509	$	7	$	167,091	$	—	$	(157,399)	$	9,699



PAIN THERAPEUTICS, INC.

STATEMENTS OF CASH FLOWS
(in thousands)


	Years ended December 31,
	2017		2016
Cash flows from operating activities:
Net loss	$	(11,911)	$	(14,850)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash stock-based compensation		2,973		4,334
Depreciation and amortization		68		58
Non-cash net interest income		(2)		(8)
Changes in operating assets and liabilities:
Other current assets		172		86
Other non-current assets		(12)		12
Accounts payable		129		(711)
Accrued development expense		372		(867)
Accrued compensation and benefits		(26)		(288)
Net cash used in operating activities		(8,237)		(12,234)
Cash flows from investing activities:
Purchases of property and equipment		—		(75)
Purchases of marketable securities		(399)		(4,141)
Sales of marketable securities		400		—
Maturities of marketable securities		2,100		2,050
Net cash provided (used in) investing activities		2,101		(2,166)
Cash flows from financing activities:
Cash used for statutory taxes for net exercise of Performance Awards		—		(214)
Deferred financing costs		—		(70)
Net cash used in financing activities		—		(284)
Net decrease in cash and cash equivalents		(6,136)		(14,684)
Cash and cash equivalents at beginning of period		16,615		31,299
Cash and cash equivalents at end of period	$	10,479	$	16,615



	Cash, Cash Equivalents and Marketable Securities
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value		Accrued Interest		Total Value
December 31, 2017
Cash	$	158	$	—	$	—	$	158	$	—	$	158
Cash equivalents		10,321		—		—		10,321		—		10,321
Total cash and cash equivalents	$	10,479	$	—	$	—	$	10,479	$	—	$	10,479
Reported as:
Cash and cash equivalents	$	10,479		—		—	$	10,479	$	—	$	10,479
Marketable securities		—		—		—		—		—		—
	$	10,479	$	—	$	—	$	10,479	$	—	$	10,479
Maturities:
Matures in one year or less	$	10,479	$	—	$	—	$	10,479	$	—	$	10,479
Matures one to three years		—		—		—		—		—		—
	$	10,479	$	—	$	—	$	10,479	$	—	$	10,479

December 31, 2016
Cash	$	1,434	$	—	$	—	$	1,434	$	—	$	1,434
Cash equivalents		12,783		—		—		12,783		—		12,783
Commercial paper		4,497		—		—		4,497		—		4,497
Total cash and cash equivalents	$	18,714	$	—	$	—	$	18,714	$	—	$	18,714
Reported as:
Cash and cash equivalents	$	16,615		—		—	$	16,615	$	—	$	16,615
Marketable securities		2,099		—		—		2,099		—		2,099
	$	18,714	$	—	$	—	$	18,714	$	—	$	18,714
Maturities:
Matures in one year or less	$	18,714	$	—	$	—	$	18,714	$	—	$	18,714
Matures one to three years		—		—		—		—		—		—
	$	18,714	$	—	$	—	$	18,714	$	—	$	18,714



	Level 1		Level 2		Level 3		Total
December 31, 2017
Cash and cash equivalents	$	10,479	$	—	$	—	$	10,479
Commercial paper		—		—		—		—
	$	10,479	$	—	$	—	$	10,479
December 31, 2016
Cash and cash equivalents	$	14,217	$	—	$	—	$	14,217
Commercial paper		—		4,497		—		4,497
	$	14,217	$	4,497	$	—	$	18,714



			Incorporated by Reference
Exhibit No.		Description	Form	Filing Date	Exhibit No.	Filed Herewith
3.1		Amended and Restated Certificate of Incorporation.	10-Q	7/29/2005	3.1
3.2		Amended and Restated Bylaws.	10-Q	4/24/2013	3.2
3.3		Amended and Restated Certificate of Incorporation	8-K	5/8/2017	3.1
4.1		Specimen Common Stock Certificate.	10-Q	7/29/2005	4.1
10.1	*	Form of Indemnification Agreement between Pain Therapeutics and each of its directors and officers.	S-1	3/14/2000	10.1
10.3	*	Employment Agreement dated October 23, 2001, between Registrant and Nadav Friedmann, PhD. M.D.	10-K	3/22/2002	10.5
10.4	+	Development and License Agreement dated December 19, 2002 between Registrant and DURECT Corporation and Southern Biosystems, Inc.	10-K	2/24/2006	10.10
10.5	+	Amendment dated December 15, 2005 to Development and License Agreement dated December 19, 2002 between Registrant and DURECT Corporation and Southern Biosystems, Inc.	10-K	2/24/2006	10.11
10.11	*	Employment Agreement dated July 1, 1998 and amended December 17, 2008 between Registrant and Remi Barbier.	10-K	2/13/2009	10.12
10.12	*	2000 Employee Stock Purchase Plan, as amended and restated.	10-Q	7/29/2010	10.1
10.13		Lease agreement, dated as of February 14, 2011 between Registrant and StoneCliff Office, L.P.	10-Q	4/27/2011	10.1
10.14	*	Amendment Number 1 to the 2008 Equity Incentive Plan.	10-Q	8/1/2013	10.1
10.15	*	Amendment No. 2 to Employment Agreement between Registrant and Remi Barbier.	10-Q	8/1/2013	10.2
10.16		Second Amendment to Lease Agreement, dated as of April 8, 2014 between Registrant and StoneCliff Office, L.P.	10-Q	8/6/2014	10.1
10.17		Third Amendment to Lease Agreement, dated as of November 3, 2017 between Registrant US REIF Eurus Austin, LLC dba StoneCliff Building as successor in interest to StoneCliff Office, L.P.				X
23.1		Consent of Independent Registered Public Accounting Firm.				X

1 See: FDA Grants Accelerated Approval for Alzheimer’s Drug, June 07, 2021, https://www.fda.gov/news-events/press-announcements/fda-grants-accelerated-approval-alzheimers-drug

¹See: FDA Grants Accelerated Approval for Alzheimer’s Drug, June 07, 2021, https://www.fda.gov/news-events/press-announcements/fda-grants-accelerated-approval-alzheimers-drug