Kadmon Holdings, Inc.

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REFERENCES TO KADMON

In this Annual Report on Form 10-K, unless otherwise stated or the context otherwise requires:





FORWARD‑LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward‑looking statements. All statements other than statements of historical facts contained in this Annual Report on Form 10-K may be forward‑looking statements. Statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, including, among others, statements regarding future capital expenditures and debt service obligations, are forward‑looking statements. In some cases, you can identify forward‑looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions.

Forward‑looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward‑looking statements. We believe that these factors include, but are not limited to, the following:

The forward‑looking statements in this Annual Report on Form 10-K are only predictions, and we may not actually achieve the plans, intentions or expectations included in our forward‑looking statements. We have based these forward‑looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Because forward‑looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward‑looking statements as predictions of future events. The events and circumstances reflected in our forward‑looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward‑looking statements.

PART 1  I

Item 1. Business

Overview

We are a fully integratedclinical-stage biopharmaceutical company engaged in the discovery,that discovers, develops and delivers transformative therapies for unmet medical needs. Our team has a proven track record of successful drug development and commercialization of small molecules and biologics within autoimmunecommercialization. Our clinical pipeline includes treatments for immune and fibrotic diseases oncology and genetic diseases.as well as immuno-oncology therapies. We leverage our multi‑disciplinary research and clinical development team members who prior to joining Kadmon brought more than 15 drugs to market, to identify and develop ourpursue a diverse portfolio of novel product candidates, both through in‑licensingin-licensing products and employing our small molecule and biologics platforms. By retaining global commercial rightsWe expect to continue to progress our clinical product candidates we believe weand have the ability to progress these candidates ourselves while maintaining flexibility for commercial and licensing arrangements.further clinical trial events throughout 2020. Below is a brief description of our lead product candidates:

In November 2019, we announced positive topline results from the planned interim analysis of ROCKstar (KD025-213), our pivotal trial evaluating KD025 in patients with cGVHD who have received at least two prior lines of systemic therapy. The trial met the primary endpoint of Overall Response Rate (“ORR”) at the interim analysis, which was conducted, as scheduled, two months after completion of enrollment. KD025 showed statistically significant ORRs of 64% with KD025 200 mg once daily (95% Confidence Interval (“CI”): 51%, 75%; p<0.0001) and 67% with KD025 200 mg twice daily (95% CI: 54%, 78%; p<0.0001). In February 2020, we announced expanded results of the interim analysis of KD025-213, showing that ORRs were consistent across key subgroups, including in patients with four or more organs affected by cGVHD (n=69; 64%) and patients who had no response to their last line of treatment (n=74; 68%). Responses were observed in all affected organ systems, including in organs with fibrotic disease. KD025 has been well tolerated and adverse events have been consistent with those expected in the patient population. Additional secondary endpoints, including duration of response, corticosteroid dose reductions, Failure-Free Survival, Overall Survival and Lee Symptom Scale reductions continue to mature and will be available later in 2020.

Further, in December 2019, we presented two-year follow-up data from our ongoing Phase 2a clinical trial of KD025 in cGVHD (KD025-208). The data showed continued patient benefit, with an ORR of 65% across all three dose cohorts. Responses were observed in all affected organ systems, including organs with fibrotic disease. Kaplan-Meier median duration of response was 35 weeks. KD025 was well tolerated, with no increased risk of infection observed. Twenty-four percent of the patients in the trial had remained on KD025 therapy for more than one-and-a-half years as of June 30, 2019. Subject to FDA feedback, we intend to submit a New Drug Application for KD025 in the second half of 2020.

We also initiated a double-blind, placebo-controlled Phase 2 clinical trial of KD025 for the treatment of systemic sclerosis, a life-threatening autoimmune disease characterized by chronic inflammation, fibrosis and vascular damage, in 2019.

Kadmon Pharmaceuticals markets and distributes a portfolio of branded generic ribavirin products for chronic hepatitis C virus (HCV) infection. In addition, Kadmon Pharmaceuticals distributes products in a variety of therapeutic areas, including those indicated for the management of rare diseases. 

We do not currently depend on commercial revenues from Kadmon Pharmaceuticals to support our non-commercial operations, including drug development efforts and debt obligations. Instead, we leverage our commercial infrastructure, including the regulatory, quality and chemistry, manufacturing and controls (CMC) teams of Kadmon Pharmaceuticals, to

support the development of our clinical-stage product candidates. We believe that our commercial infrastructure will be most advantageous to us in the future, in connection with potential commercial collaborations as well as the anticipated commercialization of our pipeline product candidates, if approved.

Our Strategy

Our goal is to develop first-in-class, innovative therapies for significant unmet medical needs, including autoimmune and fibrotic diseases, oncology and genetic diseases, for which we plan, in many cases, to seek breakthrough designation from the FDA.needs. Our key strategies to achieve this goal are listed below:

Our Clinical‑Stage Pipeline

ROCK2 Inhibitor Platform (Lead Compound: KD025)

TheKadmon’s research has helped define the role of ROCK signaling pathway is a molecular target with substantial therapeutic potential in autoimmune, fibrotic and neurodegenerative disease.  Two ROCK isoforms exist: ROCK1 and ROCK2. We have generated a portfolio of oral ROCK2 and pan-ROCK inhibitors that we believe have the greatest potential based on characteristics including potency, solubility, bioavailability and, in some cases, blood-brain barrier penetrance, to treat specific autoimmune, fibrotic and neurodegenerative diseases.

A central goal in the studypathogenesis of autoimmune disease is to develop therapies that down-regulate pro-inflammatorymany diseases, including immune responses while potentially preserving the immune system’s ability to fight infections and tumors. Throughfibrotic disorders. Specifically, our studies, we haveresearch has demonstrated that selective ROCK2 inhibition affectsKD025 helps to resolve immune dysregulation by down-regulating pro-inflammatory Th17 cells and increasing regulatory T (“Treg”) cells.

ROCK is downstream of major pro-fibrotic mediators and regulates multiple fibrotic processes, including stress fiber formation, myofibroblast activation and pro-fibrotic gene transcription. KD025 has down-regulated key cellular functions that controlfibrotic processes in preclinical models, including with profibrotic gene transcription, stress fiber formation, myofibroblast activation and restore balance to the immune system. ROCK2 inhibitioncollagen deposition.

KD025 Clinical Program

To date, more than 550 subjects have been dosed with KD025 reduces the production of pro-inflammatory cytokines, IL-17, IL-21 and IL-22 by T helper 17 (Th17) cells through the down-regulation of STAT3, a key transcription factor and regulator of the inflammatory pathway. ROCK2 inhibition concurrently increases the suppressive function of regulatory T cells (Tregs) through activation of STAT5, a controller of regulatory cell function, helping to resolve inflammation with a minimal effect on the rest of thefor immune response.

Inor fibrotic diseases ROCK signaling is up-regulated throughout the fibrotic process, effecting macrophage infiltration, endothelial cell activation and myofibroblast differentiation. These processes result in the deposition of excess collagen and creation of scar tissue. We believe that ROCK inhibition withor as healthy volunteers. KD025 has the potential to haltbeen well tolerated and reverse these processes to successfully treat fibrotic diseases.

It is now well understood that neurodegenerative diseases have a neuroinflammatory component. These observations, coupled with the effects of ROCK on neuronal cell behavior, indicate that ROCK inhibition may play an important role in the treatment of neurodegenerative diseases, including, among many others, multiple sclerosis, Alzheimer’s disease and Huntington’s disease.demonstrated clinical activity.

KD025 for the Treatment of ModerateChronic Graft-Versus-Host Disease

Medical Need: Chronic Graft-Versus-Host Disease

cGVHD is a common complication that can occur following HCT. In cGVHD, transplanted immune cells (graft) attack the patient’s cells (host), leading to Severe Psoriasisinflammation and fibrosis in multiple tissues. Approximately 14,000 patients in the United States are living with cGVHD, and approximately 5,000 new patients are diagnosed with cGVHD per year.

KD025 in Chronic Graft-Versus-Host Disease

KD025 has demonstrated clinical activity and tolerability in a completedan ongoing pivotal trial in patients with cGVHD who have received two or more prior lines of systemic therapy (KD025-213, or ROCKstar) as well as in an ongoing Phase 2 clinical trial in moderatepatients with steroid-dependent or steroid-refractory cGVHD with one to severe psoriasis, resultingthree prior lines of treatment for the disease (KD025-208).

Ongoing Pivotal Trial of KD025 in Psoriasis AreaChronic Graft‑Versus‑Host Disease (ROCKstar (KD025-213))

KD025-213 is an ongoing, open-label pivotal trial of KD025 in adults and Severity Index (PASI) score reductions in 85%adolescents with cGVHD who have received at least two prior lines of systemic therapy. Patients were randomized to receive KD025 200 mg QD or 200 mg BID (63 patients per arm). Either KD025 dose may be considered by the FDA for registration. The primary endpoint is the ORR, defined as the percentage of patients completingwho meet the 2014 National Institutes of Health (“NIH”) Consensus Conference overall response criteria of Complete Response (CR) or Partial Response (PR). During a Type C meeting in March 2018, the FDA provided guidance to Kadmon on the design of a pivotal study of KD025 in cGVHD. The FDA granted Breakthrough Therapy Designation to KD025 in cGVHD in October 2018. We plan to continue our dialogue with minimal side effects. PASI scoringregulatory authorities throughout 2020 to obtain further guidance on the regulatory pathway to approval for KD025 in cGVHD. 

In November 2019, we announced positive topline results from the planned interim analysis of ROCKstar. The trial met the primary endpoint at the interim analysis, which was conducted as scheduled two months after completion of enrollment. KD025 showed statistically significant ORRs of 64% with KD025 200 mg QD (95% CI: 51%, 75%; p<0.0001) and 67% with KD025 200 mg BID (95% CI: 54%, 78%; p<0.0001). Statistical significance is a widely used visual measureachieved if the lower bound of psoriasis severity. the 95% CI of ORR exceeds 30%, which was achieved in both arms of the trial at the interim analysis. While the ORR endpoint was met at the interim analysis, the primary analysis of the KD025-213 study will occur six months after completion of enrollment. Topline data from the primary analysis of KD025-213 are expected in the second quarter of 2020.

In completedFebruary 2020, we announced expanded results of the interim analysis of KD025-213, showing that ORRs were consistent across key subgroups, including in patients with four or more organs affected by cGVHD (n=69; 64%) and patients who had no response to their last line of treatment (n=74; 68%). Responses were observed in all affected organ systems, including in organs with fibrotic disease. KD025 has been well tolerated and adverse events have been consistent with those expected in the patient population. Additional secondary endpoints, including duration of response, corticosteroid dose reductions, Failure-Free Survival, Overall Survival and Lee Symptom Scale reductions continue to mature and will be available later in 2020.

Ongoing Phase 2a Clinical Trial of KD025 in cGVHD (KD025-208)

KD025-208 is an ongoing Phase 2 clinical trial in patients with steroid-dependent or steroid-refractory cGVHD with one to three prior lines of treatment for the disease. Three cohorts of patients, (KD025 200 mg QD (n=17), KD025 200 mg BID (n=16) and Phase 2a clinical studies in moderate to severe psoriasis, KD025 resulted in the down-regulation of pro-inflammatory response with no evidence of any deleterious impact on the rest400 mg QD (n=21)), were enrolled sequentially following a safety assessment of the immune system. We believe this effect may potentially avoid toxicities and increased susceptibility to lymphomas and opportunistic infections associatedprevious cohort. KD025 achieved an ORR of approximately 65% across all three cohorts. Responses were observed across all affected organ systems, including in organs with currently available biologic therapies. KD025 is orally administered, whereas most current psoriasis therapies are formulated as infused or injectable biologics. Wefibrotic disease. Responses were durable, with a median duration of response of 35 weeks.

believe thatand patients reported improvements in quality of life and were also able to reduce and/or completely discontinue doses of corticosteroids and other immunosuppressants. Pharmacodynamics data showed a decrease in Th17 cells and an increase in Treg cells during KD025 is an ideal treatment, candidateconsistent with KD025 mechanism of action. KD025 was well tolerated, with no treatment-related serious adverse events and no apparent increased risk of infection. Twenty-four percent of the patients in the trial had remained on KD025 therapy for moderate to severe psoriasis because it has demonstrated clinical activity, is orally delivered and lacks side effects suchmore than one-and-a-half years as headache, nausea and diarrhea.of June 30, 2019.

KD025 for the Treatment of Systemic Sclerosis

Medical Need: Moderate to Severe Psoriasis Systemic Sclerosis

PsoriasisSystemic sclerosis (“SSc”) is a life-threatening autoimmune disease characterized by chronic immune‑mediated, inflammatory skin condition affecting as many as 7.5 milliontissue inflammation, fibrosis and vascular damage. SSc affects 75,000 to 100,000 people in the United States. Most psoriasis patients (approximately 80% to 90%) have chronic plaque psoriasis, characterized by recurrent exacerbations and remissionsCurrently, there are no FDA approved drugs for the treatment of thickened, erythematous, scaly patches of skin that can occur anywhere on the body. Approximately 15% to 25% of these patients have moderate to severe disease requiring systemic therapy. This subset of patients is our targeted patient population.

Many approved therapies target the immune system to treat psoriasis, including recently introduced biologic agents. All of these therapies have significant limitations, including increased risk of serious infections and malignancies, such as tuberculosis, lymphoma, immunogenicity and neurological disorders. In addition, these therapies require regular injections, which is a deterrent to many patients and prescribers. More recently, Otezla (apremilast) was approved by the FDA to treat patients with moderate to severe psoriasis, although it has several clinical side effects. Novel oral agents for moderate to severe psoriasis that lack significant side effects are needed.SSc. 

KD025 Clinical Program in Moderate to Severe PsoriasisSSc

Ongoing Placebo-ControlledIn 2019, we initiated a double-blind, placebo-controlled Phase 2 Clinical Studyclinical trial of KD025 in ModerateSSc, a disease in which KD025 has demonstrated potential in preclinical models. Sixty patients are being randomized to Severe Psoriasis (KD025-211)

Based on clinical data from our recently completed Phase 2 clinical study of KD025, we are conducting a randomized, double‑blind, placebo‑controlled Phase 2 clinical study of KD025 in moderate to severe psoriasis in the United States. This dose‑finding study is evaluating the safety, tolerability and efficacy of KD025 in up to 150 patients with moderate to severe psoriasis who are candidates for systemic therapy or phototherapy. The 16‑week study consists of five cohorts of 30 patients each:receive KD025 200 mg once daily (QD),QD, KD025 200 mg twice daily (BID), KD025 400 mg QD, KD025 600 mg QD (administered as 400 mg in the morningBID or placebo (20 patients per arm) blinded for 28 weeks and 200 mg in the evening) and matching placebo BID.open-label for an additional 24 weeks (total 52 weeks). The primary efficacy endpoint is the percentagechange in Combined Response Index for Systemic Sclerosis (CRISS) score, a measure of patients achievingimprovement in systemic sclerosis, at 24 weeks.

KD045

Kadmon is developing KD045, a 75% reductionnext-generation ROCK inhibitor for the treatment of fibrotic diseases. A key challenge in PASI score at Week 16. The study was initiated in September 2016the development of ROCK inhibitors is to develop potent, selective oral therapies. Earlier-generation ROCK inhibitors target the majority of the AGC kinase family and lack specificity or potency to effectively target ROCK. Using innovative medicinal chemistry, computational and structure-based design approaches, we expecthave identified and developed proprietary, next-generation inhibitors with enhanced potency and AGC-kinase selectivity to report dataspecifically target ROCK. We have selected our lead candidate from this studyeffort, KD045, for clinical development.

KD045 inhibited key fibrotic processes in Q4 2017.multiple in vivo pharmacology models, including in models of bleomycin-induced lung fibrosis, renal fibrosis and liver fibrosis. KD045 has been shown to selectively target ROCK, exhibiting a favorable safety profile compared to earlier-generation ROCK inhibitors. IND-enabling studies are ongoing for KD045.

The FDA has also advisedKD033

We have an in-house novel phage display library able to generate fully human monoclonal antibodies against many protein targets. This platform is run by an experienced group of scientists with an outstanding antibody development track record. Prior to joining Kadmon, this team was involved in the development of multiple commercially successful antibodies including Erbitux (cetuximab) and Cyramza (ramucirumab). Our scientists are developing monoclonal antibodies as well as fusion proteins and bispecific antibodies that we evaluatebelieve represent the potentialnext generation of KD025cancer immunotherapies.

Our most advanced candidate from the biologics platform, KD033, is a novel anti-PD-L1/IL-15 fusion protein designed to stimulate an immune response directed to the tumor microenvironment. Recombinant IL-15 alone, which stimulates cancer-fighting immune effector cells. We have developed KD033 as a novel approach to overcome this challenge by fusing IL-15 to an anti-PD-L1 antibody to direct IL-15 activity specifically to the tumor microenvironment, which is designed to promote efficacy and induce carcinogenicity durable responses while potentially decreasing safety concerns. 

Preclinical data demonstrated that a single dose of KD033 inhibited tumor growth across multiple in two species, as recommended by current FDA guidelinesvivo syngeneic tumor models. KD033 induced a strong immune response with a single treatment, resulting in mice that remained tumor-free following several tumor re-challenges. Furthermore, KD033 in combination with anti-PD-1 therapy demonstrated synergistic activity, providing clinical rationale for drug development. Carcinogenicity assessment planning willadministering KD033 in combination with other immune checkpoint inhibitors. KD033 has demonstrated significant tumor inhibition in murine models that are resistant to approved immunotherapies (PD-L1, PD-1 or CTLA-4 antibodies), suggesting that KD033 may deliver promising clinical outcomes in cancer patients resistant or refractory to immuno-oncology monotherapy. We have presented encouraging preclinical data on KD033 at scientific conferences. We plan to initiate in 2017 as KD025 progresses through development, and we will discuss the plan with the FDA Carcinogenicity Assessment Committee prior to initiating the studies, as recommended by the FDA.

Completed Open-Label Phase 2 Clinical Studya clinical trial of KD025 in Moderate to Severe Psoriasis (KD025‑206)

We completed a Phase 2 clinical study of KD025KD033 in the United States in patients with moderate to severe psoriasis who relapsed following a coursefirst half of systemic therapy.  KD025‑206 was a twelve‑week, dose‑finding clinical study that consisted of three cohorts: KD025 400 mg QD, 200 mg BID and 400 mg BID. Of the 38 patients dosed, 26 completed the study. 85% of patients who completed the trial demonstrated a clinical benefit in moderate to severe psoriasis, defined as any decrease in PASI score. In the 400 mg QD cohort, 42% of patients (5 out of 12) achieved at least a 50% decrease in PASI score (PASI 50). In the 200 mg BID cohort, 71% of patients (5 out of 7) achieved PASI 50 (see figure below). In the 400 mg BID cohort, 29% of patients (2 out of 7) achieved PASI 50. Of the 38 patients in the trial, 12 discontinued, seven of whom had Grade 2-3 elevations in liver transaminases and were taken off therapy by the Kadmon medical monitor. Four patients voluntarily withdrew from the study and one patient was lost to follow-up.

2020.

Elevations in liver transaminases (alanine aminotransferase (ALT) and aspartate aminotransferase (AST)), enzymes that help metabolize amino acids and may be indicators of liver cell injury, were graded on a 0‑4 scale based on the patient’s laboratory results compared to the upper limit of normal (ULN) range, with Grade 4 reflecting the greatest elevation.

The grading of these liver-related laboratory abnormalities is distinct from the grading of other laboratory adverse events, which were graded on the Toxicity Grading Scale for Healthy Adult and Adolescent Volunteers Enrolled in Preventive VaccineOther Clinical Trials, and the grading of clinical adverse events, which were graded on the Common Terminology Criteria for Adverse Events (CTCAE) Scale.Programs

In the 400 mg QD cohort, no patients were discontinued for transaminase elevations. In the 200 mg BID cohort, two patients were discontinued for Grade 2 elevations in transaminases, and one patient was discontinued for a Grade 3 elevation in transaminases. In the 400 mg BID cohort, four patients were discontinued, one for a Grade 2 elevation in transaminases and three for Grade 3 elevations in transaminases.

All transaminase elevations returned to normal when drug was stopped and in three cases, transaminase elevations resolved while KD025 treatment was continued to end of therapy. One patient had elevated bilirubin levels at screening, prior to receiving study drug, which increased and then returned to the patient’s baseline levels while on study drug. This bilirubin elevation was considered by the investigator to be unlikely related to study drug. There was one Grade 4 transaminase elevation that was observed nearly two months after the patient ended treatment. Approximately three months after the patient’s end-of-treatment visit, this transaminase elevation was documented as resolved and was considered by the investigator to be unlikely related to study drug. No serious adverse events were reported in any of the three cohorts, whether based on laboratory abnormalities or clinical events. Liver abnormality grades (e.g., Grade 4) alone do not connote the same CTCAE adverse event grades. In addition to the laboratory adverse events noted, there were CTCAE Grade 1-2 clinical adverse events observed that did not result in any discontinuation of therapy. Due to the transaminase elevations observed in the 400 mg BID group, we are not studying this dose or higher doses in our ongoing Phase 2 placebo‑controlled study of KD025 in moderate to severe psoriasis. Of note, only one Grade 3 transaminase elevation occurred in the doses being studied in the ongoing placebo-controlled trial (KD025-211).

Of patients who completed the study and for whom IL‑17 measurements were available, 84% (21 out of 25) showed reduced levels of pro‑inflammatory cytokine IL‑17, the key driver in psoriasis, and a minimal effect on the rest of the immune system.

KD025 for the Treatment of Idiopathic Pulmonary Fibrosis

Medical Need: Idiopathic Pulmonary Fibrosis

IPFIndependent research from academic institutions has demonstrated that ROCK signaling is a progressive fibrotic disease of the lungs, with a median survival of two to three years from the time of diagnosis. Approximately 128,000 peopleincreased in the United States are living with IPF, with 48,000 new cases diagnosed annually. IPF is thought to be caused by repetitive environmental injury to the lining of theidiopathic pulmonary fibrosis (“IPF”) in humans as well as in murine lung airways (epithelium) and the resulting abnormal wound-healing responses that lead to progressive buildup of stiff extracellular matrix, resulting in restrictive lung function, breathing difficulty and ultimately death. Novel therapeutic options have recently been approved for use; however, these treatments only slow decay in pulmonary function without significantly increasing survival. IPF patients are in need of new therapies designed to halt scarring of the lungs and meaningfully increase survival.

KD025 in Fibrotic Disease

In addition to ROCK2’s potential role in autoimmunity, we believe ROCK2 plays an important role in the development of fibrotic disease.samples. In our preclinical studies, ROCK2 inhibition withresearch, KD025 reduced Type 1 collagen secretion and stellate cell formation associated with scar tissue formation, improving organ functionfibrosis in multiple preclinical models, of fibrosis. Data from these preliminary studiesincluding lung fibrosis in a bleomycin mouse model system. These data suggest that treatment with KD025 may prevent the secretion of Type 1 collagen as well as the formation of myofibroblasts, cells primarily responsible for the secretion of collagen and the progression ofROCK inhibition has therapeutic potential in IPF by blocking key fibrotic disease.processes mediated by ROCK.

Ongoing Phase 2 Clinical StudyTrial of KD025 in Idiopathic Pulmonary Fibrosis (KD025-207)

We are conducting a randomized, open‑label,open-label, Phase 2 clinical studytrial to examine the safety, tolerability and activity of KD025 in IPF patients who have received or been offered anti‑fibrotic drugs pirfenidone and/or nintedanib. We are enrolling upThe study enrolled 39 patients who were randomized 2:1 to 36 IPF patients randomized into two cohorts: one cohort of 24 patients treated withreceive KD025 at 400 mg QD versus another cohort of 12 patients treated with standard of care.or best supportive care (“BSC”). The primary efficacy endpoint is a measure of lung function, the percent change in forced vital capacity (FVC)(“FVC”), from baseline toat 24 weeks. TheIn initial data, KD025 demonstrated clinical benefit in IPF patients, with a median decline in FVC of 48 mL at week 24, compared to a median decline of 175 mL in patients treated with BSC. KD025 was well tolerated, with no drug-related SAEs.

We have expanded the KD025-207 study was initiated in June 2016 and is being conducted in the United States.to enroll approximately 35 additional patients. We expect these data to report data from this study no later than Q4 2017.support the development of KD045, Kadmon’s ROCK inhibitor, for the treatment of fibrotic diseases, including IPF.

KD025Tesevatinib for the Treatment of Chronic Graft-Versus-HostPolycystic Kidney Disease

Medical Need: Chronic Graft Versus Host Disease

Chronic GVHD is a common and often fatal graft-mediated complication following allogeneic stem cell transplantation in which transplanted immune cells attack recipient tissue, leading to fibrosis in the lung, gastrointestinal tract, liver and skin. It is estimated that greater than 50% of allogeneic hematopoietic stem cell transplant recipients develop cGVHD. Several studies have shown that IL-21 and IL-17, two pro-inflammatory cytokines regulated by the ROCK2 signaling pathway, play a key role in cGVHD pathogenesis. Currently, few therapeutic interventions exist for steroid-refractory cGVHD.

KD025 in Chronic Graft Versus Host Disease

In our preclinical research that was published in the journal Blood in March 2016, we demonstrated that ROCK2 inhibition with KD025 effectively decreased cGVHD manifestation in murine and human models. Specifically, KD025 treatment reversed the clinical and immunological symptoms of cGVHD in two murine models, in which mice showed improvements in pulmonary function and a significant decrease in the cGVHD pathology in the lung, liver and spleen compared to vehicle-treated animals. Data from human cells demonstrated that KD025 inhibited the production of pro-inflammatory cytokines. These findings suggest that KD025 may prevent the secretion of Type 1 collagen as well as the formation of myofibroblasts, cells primarily responsible for the secretion of collagen and the progression of fibrotic disease.

Ongoing Phase 2 Clinical Study of KD025 in Chronic Graft‑Versus‑Host Disease (KD025-208)

We are conducting an open-label, dose-escalating Phase 2 clinical study in the United States to evaluate the safety, tolerability and activity of KD025 in patients with steroid‑dependent cGVHD and active disease. We are enrolling up to 48 cGVHD patients into three cohorts of 16 patients: KD025 200 mg QD, 200 mg BID and 400 mg QD for 24 weeks. The primary efficacy endpoint is to evaluate KD025 activity at 24 weeks in terms of complete response and partial response, as defined by the 2014 NIH Consensus Development Project on Clinical Trials in cGVHD. The study was initiated in September 2016 and we expect to report data from this study no later than Q4 2017.

KD025 Animal Models

KD025 has demonstrated activity in multiple rodent models of autoimmune, fibrotic and neurodegenerative diseases, including collagen‑induced arthritis, inflammatory bowel disease, cGVHD, scleroderma, lupus, pulmonary fibrosis and multiple sclerosis. In each case, KD025 administration halted, and in certain cases reversed, disease progression.

Treatment with KD025 attenuated pulmonary fibrosis, significantly reducing fibrosis and inflammation in the lung in a dose‑dependent manner in a bleomycin‑induced mouse model. This model, induced by infusing the chemotherapy bleomycin into the lungs of mice, is believed to reproduce the tissue alterations found in human pulmonary fibrosis. KD025 dosed QD for 13 days at clinically relevant dose levels in bleomycin‑treated mice significantly reduced lung fibrosis and inflammation and improved pulmonary function (see figure below). Importantly, this effect was demonstrated in mice in which pulmonary fibrosis was already established at the time KD025 treatment was initiated (Day 8), suggesting that KD025 potentially reverses pulmonary fibrosis.

KD025 Reduces Pulmonary Fibrosis in Mice

KD025 attenuated the progression of fibrosis (shown in dark blue) in a dose‑dependent manner in mice with bleomycin‑induced lung fibrosis. (“PKD”)

Tesevatinib for NSCLC with Activating EGFR Mutations with Brain Metastases and/or Leptomeningeal Metastases

Tesevatinib (KD019) is an oral small molecule TKI with demonstrated clinical activity against activating mutations of EGFR, a cell surface receptor that is often overexpressedtyrosine kinase inhibitor in lung cancer. In a completed Phase 2 study, response rates of tesevatinib (57%) in previously untreated NSCLC patients with activating EGFR mutations were similar to that of erlotinib (65%) in the same patient population. Unlike currently marketed treatments, tesevatinib is highly penetrant of the blood-brain barrier, which separates the circulating blood from the brain. In preclinical studies, tesevatinib reached equal concentration in the brain as in blood, compared to less than 0.15:1 brain/blood ratios of approved EGFR inhibitors erlotinib, afatinib and gefitinib, and reached levels in the choroid plexus (a network of blood vessels in each ventricle of the brain) and in the leptomeninges of more than 15 times the blood levels. Tesevatinib has shown clinical responsedevelopment for the treatment of brain metastases and leptomeningeal metastases in NSCLC patients with activating EGFR mutations, controlling tumor cell growth. QTc prolongation has been observed in previous tesevatinib studies without any arrhythmia observed. Detailed ECG studies are carried out in every tesevatinib clinical study andautosomal dominant polycystic kidney disease (“ADPKD”), a composite report will be available for submission to the FDA in the future. Tesevatinib is also a reversible TKI, therefore limiting severe toxicities associated with other therapies. We believe that tesevatinib’s anti-EGFR activity, pre-clinical blood-brain barrier penetrance and specific tissue accumulation present an important opportunity to treat CNS metastases and would offer a strong competitive advantage for tesevatinib over approved therapies that in particular do not have the same blood-brain barrier penetrance.

Medical Need:  NSCLC with Activating EGFR Mutations with Brain Metastases and/or Leptomeningeal Metastases

Lung cancer is the most common type of cancer and is responsible for the greatest number of cancer deaths worldwide, killing approximately 1.4 million people globally each year. NSCLC is the most common form of lung cancer, accounting for approximately 85% of all cases.

Approximately 20% of NSCLC cases are driven by activating mutations to the EGFR gene. Approximately 50% of patients with NSCLC with activating EGFR mutations will develop CNS metastases, while approximately 10% of these patients will present with CNS metastases.

Despite the frequency of progression to the CNS, there are no effective approved therapies for brain metastases or leptomeningeal metastases in patients with NSCLC and activating EGFR mutations. Published data have demonstrated that currently approved TKIs have poor brain penetration and are thus unable to effectively treat these metastases. In patients with EGFR-mutant NSCLC, high doses of EGFR TKIs gefitinib or erlotinib have been used to treat brain metastases, with some degree of efficacy. However, in light of poor brain penetration of these agents, response rates are low and the time to disease progression is generally short. Other EGFR inhibitors with improved brain penetration are in development, but to date none have been approved that are being used to treat patients with EGFR-mutant NSCLC with CNS metastases at initial presentation. Brain metastases and leptomeningeal metastases result in significant morbidity, with median survival of three to four months. Therefore, CNS metastases represent a major unmet medical need.

Oncology Clinical Program

genetic kidney disorder. To date, more than 250300 subjects have received at least one dose of tesevatinib for either solid tumor malignancies or as healthy volunteers in clinical pharmacology studies. In completed clinical studies, tesevatinib demonstrated activity through target kinase inhibition and was safe for chronic dosing in oncology patients at 300 mg QD.

Ongoing Phase 2 Clinical Study of Tesevatinib in NSCLC with Activating EGFR Mutations and Brain Metastases and/or Leptomeningeal Metastases (KD019-206)

In Q4 2015, we initiated a Phase 2 open-label clinical study in the United States of tesevatinib 300 mg QD in NSCLC in up to 60 patients with activating EGFR mutations whose disease has metastasized to the brain and/or the leptomeninges. Patients are divided into three cohorts: patients who have progressed with measurable brain metastases while on other EGFR therapy, patients who have symptomatically progressed with leptomeningeal metastases while on other EGFR therapy and patients with measurable brain metastases and no prior EGFR therapy. In patients with measurable brain metastases, the primary endpoint is the objective response rate within the brain. In patients with leptomeningeal metastases, the primary endpoint is improvement in symptoms compared to baseline.

Data from the first 13 enrolled patients demonstrated that tesevatinib enters the CNS and targets EGFR-driven intracranial tumors to achieve tumor shrinkage and/or clinically significant improvement of neurological symptoms. Of the first 13 patients enrolled, 12 had progressed while on prior treatment with erlotinib and radiation therapy to the brain, five of whom had also received other EGFR inhibitors and chemotherapy. One patient was treatment-naïve. Of the 12 patients who had

disease progression while on prior therapy, four patients enrolled with brain metastases, three of whom showed clinical benefit with tesevatinib, and eight patients enrolled with leptomeningeal metastases, seven of whom showed clinical benefit with tesevatinib. The treatment-naïve patient (Patient 045-005) showed a robust partial response in brain metastases in an MRI taken on Study Day 29 and showed a partial response in both brain metastases and peripheral disease at Study Day 57 and durability of over 100 days. In total, 11 of the first 13 enrolled patients had no CNS progression. 

The observed improvements in neurological symptoms include, for some of the enrolled patients, improved strength and balance and reduced headache and fatigue. The observed tumor shrinkages were based on the differences in lesion diameter measurements conducted by a neuroradiologist at the study sites. Of note, one patient with brain metastases and leptomeningeal metastases (Patient 034-002) showed a 57% reduction in a measurable cerebral metastasis in MRI scans at Day 41 from the initial MRI scans. Additionally, one patient with brain metastases (Patient 045-003) showed an approximate 50% decrease in brain metastases mass overall, based on the cumulative measured and observed decreases in multiple brain lesions in MRI scans at Day 23 from the initial MRI scans. These decreases are shown in the figures below. One patient enrolled to date did not show improvement at any point: a 66-year old male, who died within 21 days of initiating tesevatinib therapy due to urosepsis. Any of the other current or future patients may have or could experience disease progression, deterioration or death, notwithstanding any observed improvements at earlier points in the study. To date, no formal interim analyses have been conducted.

The study was designed specifically to assess the efficacy of tesevatinib in CNS metastases, with full knowledge that these heavily pretreated patients had extensive exposure to other EGFR inhibitors and that tesevatinib therefore may not control peripheral disease well due to the previous development of EGFR inhibitor resistance mechanisms. Thus, as expected, five of the 12 pretreated patients had peripheral disease progression, while in four of those five patients, tesevatinib controlled CNS lesions.

Although these are initial observations of study investigators in a limited number of patients, we believe these responses observed in a high proportion of these NSCLC patients with CNS metastases support our continued development of tesevatinib for metastatic NSCLC.

Ongoing NSCLC Study: Patient with Brain Metastases and Leptomeningeal Metastases (034‑002)

Sees Improved Right Parieto‑Occipital Leptomeningeal Enhancement

Ongoing NSCLC Study: Patient with Brain Metastases (045‑003)

Sees ~50% Decrease in Brain Metastases Mass Overall

Planned Randomized Phase 2 Clinical Study of Tesevatinib in NSCLC with Activating EGFR Mutations and Brain Metastases at Presentation (KD019-209)

Based on encouraging clinical data from our ongoing Phase 2 study in EGFR-mutant NSCLC with CNS metastases, we believe that tesevatinib as first-line therapy may treat existing CNS metastases as well as potentially prevent the development of new lesions in EGFR-mutant NSCLC in patients who present with brain metastases. We plan to initiate a randomized, controlled Phase 2 clinical study of tesevatinib as front-line therapy versus treatment with erlotinib or gefitinib in NSCLC patients with activating EGFR mutations who present with brain metastases. We plan to commence enrollment in this study in Q2 2017 in approximately 145 patients in the United States, Asia and potentially additional locations. The primary endpoint of the trial will be to compare the median progression-free survival in the CNS and peripherally in patients who receive initial treatment with tesevatinib versus initial treatment with erlotinib or gefitinib. We expect to report data from this study in Q4 2018.

Ongoing Phase 2 Clinical Study of Tesevatinib in Glioblastoma (KD019-208)

EGFR protein overexpression and gene amplification is present in approximately 50% of gliomas, which are malignant tumors of the glial tissue of the brain. Data show that 25% of gliomas have a mutant EGFR receptor, called vIII. However, clinical studies of EGFR inhibitors in patients with gliomas have produced disappointing results, primarily due to poor blood-brain barrier penetration. Based on our research, we began enrolling a Phase 2 clinical study of tesevatinib for the treatment of glioblastoma in August 2016. This open-label, exploratory Phase 2 clinical study examines the safety, tolerability and activity of tesevatinib 300 mg QD in up to 40 patients with recurrent glioblastoma, including patients with EGFR overexpression or mutations.

Completed Clinical Studies of Tesevatinib

Prior to our acquisition of tesevatinib, previously called XL647, the following clinical studies were conducted.

(a)QD dosing on the first five days of repeated 14-day cycles.

Completed Phase 2 Clinical Studies of Tesevatinib

The first Phase 2 clinical study of tesevatinib, XL647-201, enrolled treatment‑naïve NSCLC patients. This clinical study was conducted in the United States. In this study, tesevatinib demonstrated a 57% overall response rate in NSCLC patients with EGFR activating mutations, based on Response Evaluation Criteria In Solid Tumors (RECIST) assessment, achieving progression-free survival of 9.3 months and overall survival of 22.5 months.

The second Phase 2 clinical study, XL647-203, enrolled patients with relapsed or recurrent NSCLC and a known EGFR resistance mutation (T790M) or progression following treatment with single agent erlotinib or gefitinib. This clinical study was conducted in the United States. This study demonstrated that tesevatinib has limited efficacy against NSCLC with EGFR resistance mutations. Based on RECIST assessment, the majority of evaluable patients had a best response of stable disease (21/33 patients, 63.6%) and one patient (1/33, 3%) achieved a confirmed partial response which lasted for 7.4 months. Once achieved, stable disease for patients dosed with tesevatinib was maintained for 1.7 to 15.2 months.

Tesevatinib for Polycystic Kidney Disease

We are also developing tesevatinib for the treatment of PKD an inherited kidney disorder. Tesevatinib inhibits the molecular pathways central to the progression of ADPKD and ARPKD, namely EGFR and Src family kinases. In addition, tesevatinib accumulates in the kidneys, 15‑fold greater than in the blood. In rodent PKD models, tesevatinib-treated animals have dramatically fewer and smaller renal cysts than vehicle treated controls. We believe the inhibition of EGFR and Src family kinases by tesevatinib and its accumulation in the kidneys make it an excellent potential therapeutic product candidate for PKD. These characteristics allow for lower dosage in patients, making it potentially suitable for long‑term use. We believe that tesevatinib, if approved, could be a first‑line therapy for both ADPKD and ARPKD.or cancer, or as healthy volunteers.

Tesevatinib is currently in a Phase 2a clinical study in the United States in ADPKD. We plan to begin enrolling aOur randomized, placebo-controlled Phase 2 study in ADPKD in the United States in mid-2017 and a Phase 1 study in ARPKD in the United States in Q2 2017.

Medical Need: Polycystic Kidney Disease

PKD is the most prevalent monogenic disease, with approximately 600,000 patients in the United States and 12.5 million patients worldwide, affecting more individuals than all other monogenic diseases combined. There are two forms of the disease: ADPKD, which presents in adulthood, and ARPKD, a rare autosomal recessive form affecting infants. ADPKD and ARPKD demonstrate significant elevation in molecular signaling cascades frequently implicated in cancer cell growth, including EGFR and Src family kinases. A key characteristic of PKD is the formation of enlarged, fluid‑filled cysts, which compromise kidney function and lead to rapid progression to end-stage renal disease. EGFR in particular is implicated in the expansion of renal cysts in PKD. The growth of large cysts over decades in ADPKD compromises kidney function and eventually results in the need for dialysis and kidney transplant. ADPKD is one of the leading causes of end‑stage renal disease, with approximately 50% of patients requiring dialysis by the age of 60.

ARPKD affects approximately one in 20,000 children born in the United States and is a more severe disease than ADPKD, causing cyst formation in multiple organs, leading to significant morbidity and mortality in childhood, with those surviving typically requiring dialysis by the age of 10.

There are no FDA‑approved therapies for either form of PKD and, to our knowledge, there are no candidates in clinical studies for ARPKD. While the role of EGFR is well known in disease causation and progression, other molecules have not been tested in PKD because the blood/serum concentrations required to impact the kidney would be very high and would likely have an intolerable toxicity profile. Current standard of care for end‑stage PKD is limited to dialysis and kidney transplant. Therefore, PKD represents a significant unmet medical need and a substantial commercial opportunity as patients with PKD need therapies that can slow disease progression and increase survival.

PKD Clinical Program

Ongoing Phase 2a Study of Tesevatinib in Autosomal Dominant Polycystic Kidney Disease (KD019‑101)

Kadmon is conducting an ongoing, single‑agent Phase 2a study of tesevatinib in ADPKD.  Findings from this study have demonstrated that tesevatinib is well tolerated and have also identified tesevatinib 50 mg QD as the optimal dose to treat ADPKD. 

KD019‑101 was initiated as a dose‑finding Phase 1b/2a study of tesevatinib. The study enrolled 61 patients with a Total Kidney Volume (TKV) at entry of 1,333.5 mL (normal kidney volume is approximately 400 mL). The Phase 1b portion of the study demonstrated that tesevatinib was generally well tolerated at 50, 100 and 150 mg QD and 150 mg dosed twice or three times weekly, with rashes occurring in the 150 mg dose cohorts. No serious adverse events have occurred, and the 50 mg QD dose was associated with mild rashes in less than 20% of patients. Patients from Study KD019‑101 may continue on tesevatinib therapy in Study KD019‑207, an extension study to collect long‑term safety data.

Recent findings from the study further demonstrated the safety of tesevatinib in ADPKD. The data indicated that tesevatinib is a MATE 1/2-K transporter inhibitor, which mildly increases levels of serum creatinine. Normally, an increase in serum creatinine may indicate kidney damage, but in the case of MATE 1/2-K inhibitors, these increases occur without clinically meaningful alterations in kidney function. In the ongoing trial, serum creatinine levels increased by 10% to 14% during the first 28 days of tesevatinib treatment and reversed upon treatment discontinuation. Importantly, levels of cystatin C, another measure of renal function, were relatively unchanged during the same period. 

We received guidance from the FDA on our development plan for tesevatinib in ADPKD at our End‑of‑Phase 2 meeting on March 21, 2016. The FDA recommended that we gather, and we are gathering, further safety data from additional patients enrolling in our ongoing Phase 2a study prior to initiating our randomized, placebo-controlled study in this indication.

Planned Phase 2 Placebo-Controlled Study of Tesevatinib in Autosomal Dominant Polycystic Kidney Disease (KD019‑211)

We plan to initiate a Phase 2, randomized, double-blind, placebo-controlled trial of tesevatinib in ADPKD inis ongoing and has completed enrollment. We have de-prioritized the United States in mid-2017. The study will evaluate the efficacytesevatinib program, and safety of tesevatinib in up to 100 patients divided evenly into two cohorts of tesevatinib 50 mg QD versus matched placebo. The primary endpoint of the study will be reduction in height-adjusted TKV in the treatment arm versus placebo. The secondary endpoint of the study will be the comparison of estimated glomerular filtration rate (eGFR) in the treatment arm versus placebo. The randomized study design is intended to provide data to enable subsequent registration trials and attract potential partners for co-development of advanced clinical trials. We expect to report data from this study by Q4 2018.

Planned Phase 1 Study of Tesevatinib in Autosomal Recessive Polycystic Kidney Disease (KD019‑103)

We obtained orphan drug designation status in the United States for tesevatinib for the treatment of patients with ARPKD in Q1 2016. Following the FDA’s acceptance of our Investigational New Drug (IND) application in December 2016, we plan to begin enrolling a Phase 1 dose-finding clinical trial of tesevatinib for the treatment of ARPKD in Q2 2017. In order to accommodate the ARPKD population, we developed a taste-masking liquid formulation of tesevatinib for dosing to children, which is designed to enable titration, the process of gradually adjusting the dose of medication by body weight to reach the appropriate dose. Developmental toxicology studies in animals, which are required for this pediatric patient population, indicated that tesevatinib is generally well tolerated, with data supportive of clinical trial initiation. The Phase 1 study will be an ascending single-dose safety study in ARPKD patients ages five to 12.  The study will consist of three cohorts: tesevatinib 0.25 mg/kg, 0.50 mg/kg and 1.0 mg/kg, and we expect to enroll six to 18 subjects. We expect to report data from this study in Q4 2017.

Polycystic Kidney Disease Preclinical Data

In a dose-dependent manner, tesevatinib significantly slowed the progression of PKD in rat and mouse models. Tesevatinib reduced of the formation and growth of renal cystic lesions, reduced kidney volume and weight, and reduced kidney/body weight ratio (see figure below). Treatment with tesevatinib was also associated with reductions in serum creatinine and blood urea nitrogen, indicative of improved kidney function.

Tesevatinib is Effective in Rat and Mouse Models of Polycystic Kidney Disease

KD034

KD034 represents our portfolio of formulations of trientine hydrochloride for second‑line treatment of Wilson’s disease, a genetic liver disease.

Medical Need: Wilson’s disease

Wilson’s disease is a genetic disorder characterized by an inability to excrete copper, leading to severe hepatic, neurologic, psychiatric and/or ophthalmic abnormalities. Wilson’s disease is categorized by the FDA as an orphan disease with approximately 10,000 people diagnosed in the United States. Diagnosis of Wilson’s disease can be challenging due to its varied symptoms and multi‑organ impact. As such, there is a need to identify and treat patients early to prevent severe hepatic and neurologic complications associated with disease progression.

Currently approved Wilson’s disease therapies include chelating agents such as penicillamine or trientine hydrochloride. Penicillamine has a high rate of serious and sometimes fatal adverse events including blood disorders, kidney damage, lung problems, nervous system problems and skin diseases. Severe adverse effects requiring drug discontinuation occur in approximately 30% of patients. Trientine hydrochloride, currently marketed under the brand name Syprine, is used as second-line therapy for patients intolerant of penicillamine. Trientine hydrochloride is well tolerated and effective. The currently marketed formulation of trientine hydrochloride has multiple drawbacks, including necessity for cold storage, a lack of a liquid formulation, high pill burden and inconvenient dosing schedules, potentially impacting patient compliance. Since Wilson’s disease requires lifelong management and as the consequences of discontinuing therapy can be fatal, well-tolerated, effective and convenient therapies are needed.

Key Differentiating Attributes of KD034

For broad market access purposes, we are developing a bottled generic 250 mg capsule formulation of trientine hydrochloride that is identical to Syprine. We are also developing a generic 250 mg capsule formulation in a blister packaging that offers room temperature stability, which we believe has the potential to address shortcomings of currently available

trientine hydrochloride formulations. We are also developing a proprietary liquid formulation of trientine hydrochloride for children and other populations who have difficulty swallowing solid pills.

KD034 Development Program for Wilson’s disease

We conducted an open‑label bioequivalence clinical study in the United States, which showed that our generic capsule formulation was equivalent to Syprine in healthy volunteers. We are also assessing stability of our generic capsule in blister packaging. 

Regulatory Strategy

In December 2016, we submitted an ANDA for our bottled generic formulation of trientine hydrochloride. In Q1 2017, we plan to submit a second ANDA for our generic form of trientine hydrochloride in blister packaging that offers room temperature stability. We intend to use Kadmon Pharmaceuticals, our specialty‑focused commercial organization, to market these formulations, if approved. In addition, we plan to seek approval for our proprietary liquid formulation of trientine hydrochloride, for which we plan to pursue a Section 505(b)(2) New Drug Application (NDA) pathway.

We believe that stability, bioavailability and bioequivalence studies will be needed for the 505(b)(2) submission. Based on the history of the compound (i.e., it is not a new chemical entity) and the nature of the studies planned, we do not plancurrently expect to conduct thesefund additional studies under a new IND as we believe we meetonce the exemption criteria under which bioavailability and bioequivalence studies using unapproved versions of approved drug products can be conducted without submission of an IND.Phase 2 trial is concluded.

Our Drug Discovery Platforms and Preclinical Molecules

Drug Discovery Platforms

We have two drug discovery platforms that support our pipeline of clinical‑stage product candidates: biologicssmall molecules and small molecule chemistry.biologics. We leverage our team of scientific experts and our advanced understanding of the molecular mechanisms of disease to establish development paths for disease areas where significant unmet medical needs exist.

Kadmon Preclinical Compounds in Development (pre‑IND)

Biologics

We have a fully human monoclonal antibody platform run by an experienced group of scientists. This team has developed multiple commercially successful antibodies prior to joining Kadmon, including Erbitux (cetuximab) and Cyramza (ramucirumab). Our scientists are developing monoclonal antibodies as well as fusion proteins and bispecific antibodies that we believe representnovel therapies in the next generationareas of cancer therapeutics.

Our most advanced candidate from our biologics platform, KD035, is a proprietary anti-angiogenic antibody targeting VEGFR2, which inhibits the formation of new blood vessels, blocking blood supply to tumors. New research has demonstrated that inhibition of the VEGF/VEGFR2 pathway also reduces the expression of PD-1, activating the immune system to attack tumors and potentially augmenting the efficacy of immune checkpoint therapies.

We are also developing KD033, a novel anti‑PD‑L1/IL‑15 fusion protein. KD033 inhibits the PD‑L1 pathway to reduce immune checkpoint blockade while simultaneously directing an IL‑15‑stimulated, specific immune response to the tumor microenvironment. KD033 potentially offers greater efficacy than immuno-oncology monotherapy while avoiding toxicities associated with systemic administration of cytokine therapy.

Treatment with KD033 significantly prolonged the survival of colon‑tumor bearing mice, especially compared to treatment with IL‑15 or anti‑PD‑L1 as single agents. In a separate mouse model, KD033 stimulated long‑lasting memory CD8+ T cells to achieve persistent antitumor efficacy without additional treatment. KD033 has demonstrated significant tumor inhibition in murine models that are resistant to PD-L1, PD-1 or CTLA-4 antibodies, suggesting that KD033 may deliver promising clinical outcomes in cancer patients resistant or refractory to immuno-oncology monotherapy. We have presented encouraging preclinical data on KD033 at scientific conferences.

We entered into a collaboration and licensing agreement with Jinghua Pharmaceutical Group Co., Ltd. (Jinghua) in November 2015 to develop anti-VEGFR2 and anti-PD-L1 monoclonal antibodies, KD035 and KD036, exclusively for Greater China.

Small Molecule Chemistry

In addition to conducting traditional medicinal chemistry, we have licensed a proprietary chemical library (the “Chiromics” library) created through an innovative process of enzymatic catalysis. This new method of creating molecules permits the isolation of product candidates with novel chemical scaffolds that we believe will be able to hit targets that were previously difficult to address with traditional small molecule therapies.

We are leveraging our small molecule chemistry team’s expertise to build and expand our ROCK inhibitor platform. We have identified and are developing ROCK2 and pan-ROCK inhibitor compounds with varying specificity, distribution and solubility characteristics to treat specific autoimmune and fibrotic diseases as well as blood‑brain barrier penetrant ROCK2 inhibitors to treat neurodegenerative diseases.immuno-oncology.

In addition, our small molecule chemistry team develops inhibitors to glucose transport 1 (GLUT‑1), a molecular target of the metabolic pathway that is associated with autoimmune diseases.

Research and Development

Research and development expenses consist primarily of costs incurred for the development of our product candidates. For the years ended December 31, 2016, 20152019 and 2014,2018, we recognized $35.8 million, $33.6$56.5 million and $32.9$49.0 million, respectively, in research and development expenses. For further detail about our research and development activities, refer to the research and development sections in “Management’s Discussion and Analysis”Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K.

Sales and Marketing

Kadmon Pharmaceuticals is our marketing and sales organization focused on specialty pharmaceuticals.wholly owned, fully integrated commercial operation. We currently market CLOVIQUE™ (Trientine Hydrochloride Capsules, USP), a room-temperature stable innovative product developed in-house at Kadmon Pharmaceuticals markets a portfolio of branded and generic ribavirin productsTrientine Hydrochloride Capsules USP, 250 mg (collectively, “CLOVIQUE”). Trientine hydrochloride is used as part of a combination treatment for chronic HCV infection (Ribasphere RibaPak and Ribasphere). In addition, Kadmon Pharmaceuticals distributes products in a variety of therapeutic areas, including tetrabenazine for the treatment of chorea associated with Huntington’s disease; valganciclovirWilson’s disease in patients who are intolerant of penicillamine. CLOVIQUE™ is the first FDA-approved trientine product in a portable blister pack that offers room temperature stability for theup to 30 days, potentially providing patients more convenience than existing treatment of cytomegalovirus (CMV) retinitis; abacavir, lamivudine, and a lamivudine and zidovudine combination tablet for the treatment of human immunodeficiency virus type 1 (HIV-1) infection; and entecavir and lamivudine for the treatment of chronic hepatitis B virus (HBV) infection.

Kadmon Pharmaceuticals is a fully integrated commercial organization encompassing managed care and specialty pharmacy account directors, experienced regulatory, quality, compliance and CMC teams, marketing experts and sales specialists. Kadmon Pharmaceuticals has long-standing relationships with specialty pharmacies. The specialty pharmacies through which we distribute our products are fully independent of Kadmon. We do not have any ownership interest in or affiliations with any specialty pharmacy, nor do we consolidate the financial results of any specialty pharmacies with our own.options. 

We do not currently place significant value on our commercial operations from a revenue‑generation standpoint, as revenues from such operations do not currently support our research and development efforts. Product revenues from our commercial operations are primarily derived from sales of RibaPak and Ribasphere. Kadmon Pharmaceuticals’ sales of these drugs have significantly declined, from $63.5 million for the year ended December 31, 2014, to $29.3 million and $17.0 million for the years ended December 31, 2015 and 2016, respectively, as the treatment of chronic HCV infection has significantly changed with multiple ribavirin‑free therapies having entered the market. We leverage our commercial infrastructure to support the development of our clinical-stage product candidates by providing quality assurance, compliance, regulatory and pharmacovigilance among other capabilities. We believe our commercial infrastructure will be most advantageous to us in the future, in connection with the anticipated commercialization of our pipeline product candidates, if approved.

Kadmon Pharmaceuticals is a commercial organization encompassing managed care and specialty pharmacy account directors, experienced regulatory, quality, compliance and CMC teams, marketing experts and sales specialists.

Kadmon Pharmaceuticals has long-standing relationships with specialty pharmacies. The specialty pharmacies through which we distribute our products are fully independent of Kadmon. We do not have any ownership interest in or affiliations with any specialty pharmacy, nor do we consolidate the financial results of any specialty pharmacies with our own.

Investment in MeiraGTx

On June 12, 2018, MeiraGTx Holdings plc (“MeiraGTx”) completed its initial public offering (the “MeiraGTx IPO”) whereby it sold 5,000,000 ordinary shares at $15.00 per share. Upon completion of the MeiraGTx IPO, we owned approximately 13.0% of MeiraGTx’s issued and outstanding ordinary shares and we no longer had the ability to exert significant influence over MeiraGTx’s operations. In October 2019, we entered into a transaction pursuant to which we sold approximately 1.4 million ordinary shares of MeiraGTx for gross proceeds of $22.0 million. As of December 31, 2019, we owned approximately 2.1 million, or 5.7%, of the issued and outstanding ordinary shares of MeiraGTx, with a fair value of $42.0 million.

Strategic Collaborations and License Agreements

Symphony Evolution, Inc.

In August 2010, we entered into a license agreement with Symphony Evolution, Inc. (Symphony), under which Symphony granted to us an exclusive, worldwide, royalty‑bearing, sublicensable license under certain Symphony patents, copyrights and technology to develop, make, use, sell, import and export XL647 and the related technology in the field of oncology and non‑oncology.

We are the licensee of granted patents in Australia, Canada, Europe, Japan and the United States. The patents claim tesevatinib as a composition‑of‑matter, as well as use of tesevatinib to treat certain cancers. A pending U.S. application supports additional composition‑of‑matter claims and methods of synthesis. The last to expire U.S. patent in this family has a term that ends in May 2026 based on a calculated Patent Term Adjustment (PTA) and without regard to any potential Patent Term Extension (PTE), which could further extend the term by an additional five years.

We are the licensee of a second family of granted patents in China and Europe, as well as applications in Canada, Eurasia, Japan, Taiwan and the United States. These patents and applications disclose the use of tesevatinib to treat PKD. The last to expire U.S. patent in this family would have a term that ends in 2031, though this term could be extended by obtaining a PTA and/or PTE.

The license agreement includes a series of acquisition and worldwide development milestone payments totaling up to $218.4 million, and $14.1 million of these payments and other fees have been paid as of December 31, 2016. Additionally, the license agreement includes commercial milestone payments totaling up to $175.0 million, none of which have been paid as of December 31, 2016, contingent upon the achievement of various sales milestones, as well as single‑digit sales royalties. The royalty term expires with the last to expire patent.

Our agreement with Symphony will expire upon the expiration of the last to expire patent within the licensed patents. We may terminate the agreement at any time upon six months written notice to Symphony. Either party may terminate the agreement for any material breach by the other party that is not cured within a specified time period. Symphony may terminate the agreement if we challenge the licensed patents. Either party may terminate the agreement upon the bankruptcy or insolvency of the other party.

On June 11, 2014 we and Symphony executed an additional amendment to the amended and restated agreement, whereby the $1.1 million payment due on June 1, 2014 was extended to September 30, 2014. This amendment increased the payment to $1.2 million to include fees for deferral of the payment. We expensed $200,000 to research and development expense for these additional fees during 2014.

On September 30, 2014 we and Symphony executed an additional amendment to the amended and restated agreement, whereby the $1.2 million payment due on September 30, 2014 was extended to November 30, 2014. This amendment increased the payment to $1.4 million to include fees for deferral of the payment. We expensed $200,000 to research and development expense for these additional fees during 2014. In November 2014, we made payment to Symphony for $1.4 million in settlement of this obligation.

Nano Terra, Inc.

In April 2011, in connection with the acquisition of Surface Logix, Inc. (“SLx”) by Nano Terra, Inc. (“Nano Terra”), our subsidiary Kadmon Corporation entered into a joint venture with Surface Logix, Inc. (SLx)SLx through the formation of NT Life Sciences, LLC (NT Life)(“NT Life”), whereby Kadmon Corporation contributed $0.9 million at the date of formation in exchange for a 50.0% interest in NT Life. Contemporaneously with our entry into the joint venture, we entered into an exclusive sub‑licensesub-license agreement with NT Life and SLx, under which NT Life granted us rights to certain patents and know‑howknow-how it licensed from SLx relating to the compound SLx‑2119 (KD025)KD025 (formerly SLx-2119). Under this agreement, NT Life granted to us an exclusive, worldwide, royalty‑bearing,royalty-bearing, sublicensable license (under the patents and know how it licensed from SLx) to make, have made, use, sell, offer for sale, import and export the product candidates.certain products, including KD025. NT Life also granted to us a worldwide, non‑exclusive, non‑transferable,non-exclusive, non-transferable, sublicensable license under certain SLx platform technology to make, have made, use, sell, offer for sale, import and export the product candidates.products. The initial purpose of the joint venture with SLx was to develop assets licensed to us from SLx and to define the royalty obligations with respect to certain products not exclusively licensed to us. The joint venture is, however, currently inactive. We expect that the joint venture will become active and develop certain intellectual property in the future.

Regarding KD025, weWe are the licenseesublicensee of granted patents in the United States for KD025, as well as applications in Australia, Canada, Europe, Japan and the United States, which claim KD025 as a composition‑of‑matter, as well asand use of KD025 to treat certain diseases. The last to expirelast-to-expire U.S. patent in this family has a term that ends in October 2029 based on a calculated PTA and without regard to any potential PTE, which could further extend the term by an additional five years.

In consideration for the rights granted to us by NT Life, we agreed to assume certain of Nano Terra, Inc.’s (Nano Terra)Terra’s payment obligations, which are limited to the royalty percentages discussed in this paragraph, under the Agreement and Plan of Merger dated April 8, 2011, by and among Nano Terra, NT Acquisition, Inc., SLx, and Dion Madsen, as the Stockholder Representative (Merger Agreement)of SLx (the “Nano Terra Merger Agreement”). Pursuant to these obligations, we are required to pay to the Stockholder Representative aand NT Life royalties on net sales in the amount of 5% and 10% respectively. As we own 50% of NT Life, the cumulative result of these obligations is that we will owe aggregate royalty basedpayments totaling 9.75% on a percentage of net sales of licensed program products in the mid‑single digits, subject to specified deductions and adjustments. We are also required to pay to NT Life a 10.0% royalty on the net sales remaining after giving effect to the royalty payment to the Stockholder Representative.products. Pursuant to the assumption of Nano Terra’s payment obligations, if we further assign or sublicense our rights to any licensed product to certain third parties, we are also required to pay to the Stockholder Representative a portion of any sublicensing revenue relating to thesuch licensed program productsproduct ranging from the low twenty percents to the low forty percents, subject to specified deductions and adjustments. We are also required to pay to NT Life any remaining sublicensing revenue.revenue after giving effect to the foregoing sublicense revenue payment to the Stockholder Representative.

OurUnless earlier terminated, our agreement with NT Life will, with respect to a licensed program product, end on a country‑by‑country and licensed program product‑by‑licensed program product basis upon the latest of (a) the expiration or invalidation of the last valid claim of a licensed patent right covering such licensed program product in such country and (b) the expiration or termination of payment obligations with respect to such licensed program product.product in such country under the Nano Terra Merger Agreement. The agreement will, with respect to the licensed SLx platform technology, end on a country‑by‑country basis upon the expiration or invalidation of the last valid claim of a licensed patent right covering such SLx platform technology.

We may terminate the agreement at any time upon six monthsmonths’ written notice to NT Life.Life and if we provide such notice, NT Life may accelerate such termination upon thirty days’ prior written notice. Either party may terminate the agreement for any material breach by the other party that is not cured within a specified time period. NT Life may terminate the agreement if we challenge the licensed patents. Either party may terminate the agreement upon the bankruptcy or insolvency of the other party. The agreement shall terminate in the event we are dissolved. The

In addition, the agreement shall terminate on a licensed program product‑by‑licensed program product basis in the event such licensed program product reverts to the Stockholder Representative because of a failure to satisfy the diligence requirements as set forth in the Nano Terra Merger Agreement. More specifically, pursuant to our sub-license agreement with NT Life and SLx, we agreed

to assume certain of Nano Terra’s diligence obligations under the Nano Terra Merger Agreement such that we are obligated to use commercially reasonable efforts to develop the licensed products, including KD025. With respect to KD025, our diligence obligations do not expire until the completion of a certain specified Phase 2 clinical trial of KD025 in oncology. If, prior to the expiration of our diligence obligations, we fail to comply with such diligence obligations for any licensed product, including KD025, the Stockholder Representative may require Nano Terra to assign all assets of SLx, including intellectual property, relating to such licensed product to an entity designated by such Stockholder Representative, subject to Nano Terra’s and our rights to contest such assignment. If such an assignment takes place, our sublicense rights to such intellectual property for such licensed product will terminate.

If the agreement is terminated, among other things, we will be required to cease all development and commercialization of the licensed products, including KD025, all licenses granted to us will terminate and we are obligated to grant NT Life a perpetual, irrevocable, worldwide, exclusive license under certain intellectual property owned or controlled by us that relate to the licensed products to develop and commercialize such licensed products.

Dyax Corp. (acquired by Shire Plc in January 2016 and acquired by Takeda Pharmaceutical Co. Ltd in 2018)

In July 2011, we entered into a license agreement with Dyax Corp. (“Dyax”) for the rights to use the Dyax Antibody Libraries, Dyax Materials and Dyax Know‑How (collectively “Dyax Property”). Unless otherwise terminated, the agreement is for a term of four years. The agreement includes the world‑wide, non‑exclusive, royalty‑free, non‑transferable licenses to be used in the research field, without theterminated on September 22, 2015, but we had a right to sublicense. Additionally, we have the option to obtain a sublicense for use in the commercial field iflicense of any research target is obtained. We were required to pay Dyax $600,000 upon entering into the agreement and $300,000 annually to maintainwithin two years of expiration of the agreement. The initial payment was deferred and recorded as prepaid expense; $300,000We exercised this right to a commercial license of two targets in September 2017, one of which will be amortized over the term of the agreement, and $300,000 of which was amortizedis KD033, resulting in a manner consistent with thatlicense fee payable to Shire Plc of the annual payments. All subsequent annual payments will be and have been recorded as prepaid expense and amortized over the applicable term of one year.

On September 13, 2012 we entered into a separate license agreement with Dyax whereby we obtained from Dyax the exclusive, worldwide license to use research, develop, manufacture and commercialize DX‑2400 in exchange for payment of $500,000. All payments associated with this agreement were$1.5 million, which was recorded as research and development expense at the time the agreement was executed.

The DX‑2400 license requires us to make additional payments contingent on the achievement of certain development milestones (such as receiving certain regulatory approvals and commencing certain clinical trials) and sales targets. None of these targets have been achieved and, as such, no assets or liabilities associated with the milestones have been recorded in the accompanying consolidated financial statements for the year ended December 31, 2016. The DX‑2400 license also includes royalty payments commencing on the first commercial salethird quarter of any licensed product, which had not occurred as of December 31, 2016 and 2015.

Chiromics, LLC

In November 2011, we entered into a non‑exclusive license and compound library sale agreement with Chiromics, LLC (Chiromics) under which Chiromics granted to us a non‑exclusive, royalty‑free license to use certain compound libraries and related know‑how for the research, discovery and development of biological and/or pharmaceutical products. No patents were licensed to us under this agreement. The Chiromics library is a collection of more than one million compounds used as a discovery platform. The library was invented using a pioneering technology, which allows access to diverse molecules previously unattainable with traditional synthetic methods. The molecular leads in the library are novel and have complex drug‑like properties enabling the identification of biologically active molecular scaffolds.

We paid Chiromics $200,000 upon execution of the agreement and a total of $300,000 upon the delivery of the compound libraries. We were also required to make quarterly payments of $200,000 for the eight quarters following delivery of the compound libraries. The agreement with Chiromics has no expiration date. Either party may terminate the agreement for

any material breach by the other party that is not cured within a specified time period or upon the bankruptcy or insolvency of the other party.

VIVUS, Inc.

In June 2015, we entered into a co‑promotion agreement with VIVUS, Inc. for the co‑promotion of Qsymia, a treatment for chronic weight management in obese and overweight adults. In November 2016, we notified Vivus that we will not renew this agreement and therefore the agreement terminated on December 31, 2016. No meaningful revenue was generated from this agreement as of December 31, 2016 and 2015.

MeiraGTx Limited

In April 2015, we executed several agreements which transferred our ownership of Kadmon Gene Therapy, LLC to MeiraGTxLimited (“MeiraGTx”), a then wholly‑owned subsidiary of Kadmon. As part of these agreements, we also transferred various property rights, employees and management tied to the intellectual property and contracts identified in the agreements to MeiraGTx. At a later date, MeiraGTx ratified its shareholder agreement and accepted the pending equity subscription agreements, which provided equity ownership to various parties. The execution of these agreements resulted in a 48% ownership in MeiraGTx by us. After MeiraGTx was deconsolidated or derecognized, the retained ownership interest was initially recognized at fair value and a gain of $24.0 million was recorded based on the fair value of this equity investment. Our investment is being accounted for under the equity method at zero cost with an estimated fair value at the time of the transaction of $24.0 million. This value was determined based upon the implied value established by the cash raised by MeiraGTx in exchange for equity interests by third parties.

We assessed the applicability of ASC 810 to the aforementioned agreements and based on the corporate structure, voting rights and contributions of the various parties in connection with these agreements, determined that MeiraGTx is a variable interest entity, however consolidation is not required as we are not the primary beneficiary based upon the voting and managerial structure of the entity.

MeiraGTx, a limited company organized under the laws of England and Wales, was established to focus on the development of novel gene therapy treatments for a range of inherited and acquired disorders. MeiraGTx is developing therapies for ocular diseases, including rare inherited blindness, as well as xerostomia following radiation treatment for head and neck cancer. MeiraGTx is also developing an innovative gene regulation platform that has the potential to expand the way that gene therapy can be applied, creating a new paradigm for biologic therapeutics in the biopharmaceutical industry.

As part of a transition services agreement with MeiraGTx,  we recognized $1.0 million of service revenue to license and other revenue during each of the years ended December 31, 2016 and 2015. During April 2016, we received 230,000 shares of MeiraGTx’s convertible preferred Class C shares as a settlement for $1.2 million in receivables from MeiraGTx. Under ASC 323, the Class C shares of MeiraGTx do not qualify as common stock or in-substance common stock and the $1.2 million was recorded as a cost method investment. We also received cash payments of $0.2 million for service revenue earned during 2016.

We assessed the recoverability of both the cost method and equity method investment in MeiraGTx at December 31, 2016 and 2015 and identified no events or changes in circumstances that may have a significant adverse impact on the fair value of this investment. For the years ended December 31, 2016 and 2015,  we recorded our share of MeiraGTx’s net loss of $13.6 million and $2.8 million, respectively, inclusive of adjustments related to MeiraGTx’s 2015 financial statements that resulted in us recording a loss on equity method investment of $3.9 million for the year ended December 31, 2016.  We maintain a 38.7% ownership in MeiraGTx at December 31, 2016.  Our maximum exposure associated with MeiraGTx is limited to our initial investment of $24.0 million.

AbbVie Inc.

In June 2013, we entered into a series of agreements with AbbVie Inc. (AbbVie) related to our ribavirin product. Pursuant to an asset purchase agreement, as amended, we sold marketing authorizations and related assets for ribavirin in certain countries outside the United States for a cash purchase price of $20.0 million, and we subsequently received an additional cash payment of $19.0 million as consideration for certain future regulatory approvals and clinical milestones. Pursuant to a license agreement, as amended, we licensed certain rights to develop, manufacture and market our proprietary, high‑dose formulation of ribavirin in the United States for an upfront cash payment of $49.0 million, and we subsequently received a cash payment of $1 million as consideration for the achievement of a certain milestone. Pursuant to a supply agreement, as amended, we agreed to supply AbbVie with ribavirin tablets. Under the license agreement and asset purchase agreement, each as amended, we received aggregate upfront payments totaling $69.0 million. Under the asset purchase agreement, as amended, AbbVie is required to pay royalty payments equal to a low single‑digit percentage of annual net sales of the compound. Under the license agreement, as amended, for calendar year 2016, AbbVie paid us a royalty based on the

number of prescriptions dispensed by AbbVie. Under the license agreement, in the event that AbbVie commercialized a product co‑packaged with ribavirin in the United States, beginning in 2017, AbbVie would be required to pay royalty payments equal to a high double digit percentage of the reference selling point of ribavirin with respect to such co‑packaged product. There are no royalty payments under the supply agreement. The license agreement, as amended, will remain in effect unless it is terminated pursuant to the terms of the agreement. AbbVie may terminate the license agreement, as amended, at any time upon prior written notice. There were no patents licensed to us in this series of agreements.

Zydus Pharmaceuticals USA, Inc.

In June 2008, we entered into an asset purchase agreement with Zydus Pharmaceuticals USA, Inc. (Zydus) where we purchased all of Zydus’ rights, title and interest to high dosages of ribavirin.2017.  Under the terms of the agreement, we made paid a one‑time purchase pricealso recorded $1.5 million as research and development expense during the fourth quarter of $1.1 million. We are required to pay a royalty based on net sales of products in the mid‑teen percents, subject to specified reductions and offsets. No patents were licensed to us under this agreement. In April 2013, we entered into an amendment to the asset purchase agreement with Zydus which reduced the royalty payable on net sales of products from the low twenty percents to the mid-teen percents.

In June 2008, we also entered into a non‑exclusive patent license agreement with Zydus, under which we granted Zydus a non‑exclusive, royalty free, fully paid up, non‑transferable license under certain of our patent rights2019, related to ribavirin. This agreement will expire upon the expiration or termination of a specific licensed patent. Either party may terminate the agreement for any material breach by the other party that is not cured within a specified time period or upon the bankruptcy or insolvency of the other party.

We recorded royalty expenses of $1.2 million, $2.7 million and $6.5 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Jinghua Pharmaceutical Group Co., Ltd.

In November 2015, we entered into a collaboration and license agreement with Jinghua. Under this agreement, we granted to Jinghua an exclusive, royalty‑bearing, sublicensable license under certain of our intellectual property and know‑how to use, develop, manufacture, and commercialize certain monoclonal antibodies in China, Hong Kong, Macau and Taiwan.

In partial consideration for the rights granted to Jinghua under the agreement, we received an upfront payment of $10.0 million in the form of an investment in our Class E redeemable convertible membership units. We are eligible to receive from Jinghua a royalty equal to a low double‑digit percentage of net sales of product in the territory. In addition to such payments, we are eligible to receive milestone payments for the achievement of certain development milestones totaling up to $40.0 million. We earned a $2.0 million milestone payment in March 2016, which was recorded as license and other revenuewe met during the year ended December 31, 2016. No revenue was recognized for the years ended December 31, 2015 and 2014. We earned another $2.0 million milestone payment in January 2017, which was received in February 2017 and will be recorded as license and other revenue. We are also eligible to receive a portion of sublicensing revenue from Jinghua ranging from a percentage in the low double‑digits to the low thirties based on the development stage of a product.

Our agreement with Jinghua will continue on a product‑by‑product and country‑by‑country basis until the later of 10 years after the first commercial sale of the product in such country or the date on which there is no longer a valid claim covering the licensed antibody contained in the product in such country. Either party may terminate the agreement for any material breach by the other party that is not cured within a specified time period or upon the bankruptcy or insolvency of the other party. No patents were licensed to us under this agreement.quarter.

Camber Pharmaceuticals, Inc.

Tetrabenazine

In February 2016, we entered into a supply and distribution agreement with Camber Pharmaceuticals, Inc. (Camber) for the purposes of marketing, selling and distributing tetrabenazine, a medicine that is used to treat the involuntary movements (chorea) of Huntington’s disease. The initial term of the agreement is twelve months. Under the agreement, we will obtain commercial supplies of tetrabenazine and will distribute tetrabenazine through our existing sales force and commercial network. We will pay Camber a contracted price for supply of tetrabenazine and will retain 100% of the revenue generated from the sale of tetrabenazine. We recognized revenue of $0.6 million during the year ended December 31, 2016. No revenue was generated from sales of tetrabenazine in 2015 and 2014.  

Valganciclovir

In May 2016, we amended our agreement with Camber to include the marketing, selling and distributing of valganciclovir, a medicine that is used for the treatment of CMV retinitis, a viral inflammation of the retina of the eye, in

patients with acquired immunodeficiency syndrome (AIDS) and for the prevention of CMV disease, a common viral infection complicating solid organ transplants, in kidney, heart and kidney pancreas transplant patients. We will pay Camber a contracted price for supply of valganciclovir and will retain 100% of the revenue generated from the sale of valganciclovir. We recognized revenue of $0.9 million during the year ended December 31, 2016. No revenue was generated from sales of valganciclovir in 2015 and 2014.

Abacavir, Entecavir, Lamivudine, Lamivudine (HBV) and Lamivudine and Zidovudine.

In August 2016, we amended our agreement with Camber to include the marketing, selling and distributing of Abacavir tablets, USP, a medicine that is used in combination with other antiretroviral agents for the treatment of HIV-1 infection; Entecavir, a medicine that is used for the treatment of chronic HBV infection in adults with evidence of active viral replication and either evidence of persistent elevations in serum aminotransferases (ALT or AST) or histologically active disease; Lamivudine tablets, a nucleoside analogue medicine used in combination with other antiretroviral agents for the treatment of HIV-1 infection; Lamivudine tablets (HBV), a medicine that is used for the treatment of chronic HBV infection associated with evidence of hepatitis B viral replication and active liver inflammation; and Lamivudine and Zidovudine tablets, USP, a combination of two nucleoside analogue medicines, used in combination with other antiretrovirals for the treatment of HIV-1 infection.  We will pay Camber a contracted price for supply of these products and will retain 100% of the revenue generated from the sale of these products. No meaningful revenue was generated from sales of these products for the year ended December 31, 2016, 2015 and 2014.

In February 2017, we entered into a third amendment to the supply and distribution agreement with Camber extending the initial term of the agreement by an additional twelve months.

Our Intellectual Property

The proprietary nature of, and protection for, our product candidates, their methods of use, and our technologies are an important part of our strategy to discover and develop small molecules and biologics that address areas of significant unmet medical needs in autoimmune,inflammatory and fibrotic and neurodegenerative diseases, oncology, genetic diseases, and in the area of immuno‑oncology. We are the owner or exclusive licensee of patents and applications relating to certain of our product candidates, and are pursuing additional patent protection for them and for our other product candidates and technologies. We also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. Additionally, we maintain copyrights and trademarks, both registered and unregistered.

Our success will depend significantly on our ability to obtain and maintain patent and other proprietary protection for commercially important products, product candidates, technologies, inventions and know‑how related to our business and our ability to defend and enforce our patents, preserve the confidentiality of our trade secrets and operate without infringing the valid and enforceable patents and proprietary rights of third parties. We also rely on know‑how, continuing technological innovation and in‑licensing opportunities to develop, strengthen and maintain the proprietary position of our development programs. We actively seek to protect our proprietary information, including our trade secrets and proprietary know‑how, by requiring our employees, consultants, advisors and partners to enter into confidentiality agreements and other arrangements upon the commencement of their employment or engagement. The chart below identifies which of our product candidates are covered by patents and patent applications that we own or license, the relevant expiration periods and the major jurisdictions. Additional patent applications have been filed to extend the patent life on some of these products, but there can be no assurance that these will issue as filed.

_________________________

(0)         Indicates the expiration date of a main patent within a patent family.

+            Indicates the expiration date of a granted patent for which a Patent Term Adjustment (PTA) has been fixed by the United States Patent and Trademark Office. The date may be lengthened by a Patent Term Extension (PTE) upon regulatory approval.

*            Indicates the calculated expiration date of a pending patent application based solely on a twenty‑year term from the international filing date, without regard to the outcome of patent prosecution or obtaining a PTA and/or PTE.

Manufacturing and Supply

We currently do not own or operate manufacturing facilities for the production of our product candidates. We currently outsource to a limited number of external service providers the production of all active pharmaceutical ingredients (API), drug substances and drug products, and we expect to continue to do so to meet the preclinical and clinical requirements of our product candidates. We do not have long‑term agreements with these third parties. We have framework agreements with most of our external service providers, under which they generally provide services to us on a short‑term, project‑by‑project basis. We have long‑term relationships with our manufacturing and supply chain partners for our commercial products.

Currently, our drug substance or API raw materials for our product candidates can be supplied by multiple source suppliers. Our API drug raw material for our ribavirin portfolio of products is approved to be supplied by a single source, which we believe has the capacity and quality control to meet ongoing demands. We typically order raw materials and services on a purchase order basis and do not enter into long‑term dedicated capacity or minimum supply arrangements.

Manufacturing is subject to extensive regulations that impose various procedural and documentation requirements, which govern record keeping, manufacturing processes and controls, personnel, quality control and quality assurance, among others. The contract manufacturing organizations that we use to manufacture our product candidates and our ribavirin portfolio are obligated to operate under current Good Manufacturing Practice regulations (cGMP) conditions.

Competition

We compete directly with companies that focus on psoriasis,cGVHD,  systemic sclerosis and IPF, cGVHD, NSCLC with brain metastases and/or leptomeningeal metastases and PKD, and companies dedicating their resources to novel forms of therapies for these indications. We also face competition from academic research institutions, governmental agencies and other various public and private research institutions. With the proliferation of new drugs and therapies in these areas, we expect to face increasingly intense competition as new technologies become available.

Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.

Branded and generic therapies in our commercial operation, particularly RibaPak and Ribasphere, face significant direct competition from other generic high‑dose ribavirin offerings, as well as competition from lower dose and lower cost generic versions of ribavirin. Additionally, the chronic HCV treatment landscape has significantly changed as multiple new therapies have entered, such as Viekira Pak (AbbVie), Epclusa (Gilead Sciences, Inc.), Harvoni (Gilead Sciences, Inc.), Olysio (Janssen Pharmaceuticals, Inc.) and Zepatier (Merck & Co.), and will continue to enter the market that (either now or in the future) may not require the use of ribavirin as part of the treatment protocol.

Many of our competitors have significantly greater financial, manufacturing, marketing, drug development, technical and human resources than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining top qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

The key competitive factors affecting the success of all of our product candidates, if approved, are likely to be their efficacy, safety, dosing convenience, price, the effectiveness of companion diagnostics in guiding the use of related therapeutics, the level of generic competition and the availability of reimbursement from government and other third‑party payors.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, less expensive, more convenient or easier to administer, or have fewer or less severe effects than any products that we may develop. Our competitors also may obtain FDA, European Medicines Agency (EMA)(“EMA”) 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. Even if our product candidates achieve marketing approval, they may be priced at a significant premium over competitive products if any have been approved by then.

There are a number of currently marketed therapies and products in late‑stage clinical development to treat psoriasis,cGVHD, systemic sclerosis and IPF, cGVHD, NSCLC with brain metastases and/or leptomeningeal metastases and PKD, including:

Certain products in development may provide efficacy, safety, dosing convenience and other benefits that are not provided by currently marketed therapies. As a result, they may provide significant competition for any of our product candidates for which we obtain marketing approval.

Government Regulation

Government Regulation and Product Approval

Government authorities in the United States and in other countries extensively regulate, among other things, the research, development, testing, manufacture (including manufacturing changes), quality control, approval, labeling, packaging, storage, record‑keeping, promotion, advertising, distribution, marketing, export and import of products such as those we are developing. The processes for obtaining regulatory approvals in the United States and in foreign countries, along with subsequent compliance with applicable statutes and regulations, require the expenditure of substantial resources.

U.S. Drug Development Process

In the United States, the FDA regulates drugs under the Federal Food, Drug and Cosmetic Act (FDCA)(“FDCA”), and in the case of biologics, also the Public Health Service Act, (PHS Act), and various implementing regulations. Most biological products meet the FDCA’s definition of “drug” and are subject to FDA drug requirements, supplemented by biologics requirements.

Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process, or after approval, may subject an applicant to administrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, untitled or warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties. The process required by the FDA before a drug or biologic may be marketed in the United States generally involves the following:

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

Once a pharmaceutical or biological product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations of product chemistry, toxicity, formulation and stability, as well as animal studies. When a sponsor wants to proceed to test the product candidate in humans, it must submit an IND in order to conduct clinical trials.

An IND sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data and any available clinical data or literature, to the FDA as part of the IND. The sponsor must also include a protocol detailing, among other things, the objectives of the initial clinical study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated if the initial clinical study lends itself to an efficacy evaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns or questions related to a proposed clinical study and places the study on a clinical hold within that 30‑day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical study can begin. Clinical holds also may be imposed by the FDA at any time before or during clinical studies due to safety concerns or non‑compliance, and may be imposed on all product candidates within a certain pharmaceutical class. The FDA also can impose partial clinical holds, for example, prohibiting the initiation of clinical studies of a certain duration or for a certain dose.

All clinical studies must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. These regulations include the requirement that all research subjects provide informed consent in writing

before their participation in any clinical study. Further, an institutional review board (IRB)IRB must review and approve the plan for any clinical study before it commences at any institution, and the IRB must conduct continuing review and reapprove the study at least annually. An IRB considers, among other things, whether the risks to individuals participating in the clinical study are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the information regarding the clinical study and the consent form that must be provided to each clinical study subject or his or her legal representative and must monitor the clinical study until completed.

Each new clinical protocol and any amendments to the protocol must be submitted for FDA review, and to the IRBs for approval. Protocols detail, among other things, the objectives of the clinical study, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject safety.

Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health (NIH),NIH, for public dissemination on their ClinicalTrials.gov website.

Human clinical studies are typically conducted in three sequential phases that may overlap or be combined:

Progress reports detailing the results of the clinical studies must be submitted at least annually to the FDA and safety reports must be submitted to the FDA and the investigators for serious and unexpected suspected adverse events. Phase 1, Phase 2 and Phase 3 testing may not be completed successfully within any specified period, if at all. The FDA or the sponsor may suspend or terminate a clinical study at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical study at its institution if the clinical study is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.

Concurrent with clinical studies, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the product and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

United States Review and Approval Processes

Assuming successful completion of the required clinical testing, the results of product development, preclinical studies and clinical studies, along with descriptions of the manufacturing process, analytical tests conducted on the drug, proposed labeling and other relevant information, are submitted to the FDA as part of an NDA for a new drug, or a BLA for a biological drug product, requesting approval to market the product.

The submission of an NDA or BLA is subject to the payment of a substantial application user fee although a waiver of such fee may be obtained under certain limited circumstances. For example, the agency will waive the application fee for the first human drug application that a small business or its affiliate submits for review. The sponsor of an approved NDA or BLA is also subject to annual product and establishment user fees. For FDA fiscal year 20162019 the application fee for an application with clinical data was $2,374,200.$2,942,965. Sponsors are also subject to the product and establishment fees.a prescription drug program fee. For fiscal 2016,2019, the productprescription drug program fee was $114,450, and the establishment fee was $585,200.$325,424.

In addition, under the Pediatric Research Equity Act of 2003, (PREA), an NDA or BLA applications (or supplements to applications) for a new active ingredient, new indication, new dosage form, new dosing regimen, or new route of administration must contain data that are adequate to assess the safety and effectiveness of the drug for the claimed indications

in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective, unless the applicant has obtained a waiver or deferral.

In 2012, the FDASIAFood and Drug Administration Safety and Innovation Act (“FDASIA”) amended the FDCA to require that a sponsor who is planning to submit a marketing application for a drug or biological product that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit an initial Pediatric Study Plan (PSP), within sixty days of an End‑of‑Phase 2 meeting or as may be agreed between the sponsor and the FDA. The initial PSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including study objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of data or full or partial waivers. The FDA and the sponsor must reach agreement on the PSP. A sponsor can submit amendments to an agreed‑upon initial PSP at any time if changes to the pediatric plan need to be considered based on data collected from preclinical studies, early phase clinical studies, and/or other clinical development programs.

The FDA also may require submission of a REMSRisk Evaluation and Mitigation Strategy (“REMS”) to mitigate any identified or suspected serious risks. The REMS could include medication guides, physician communication plans, assessment plans, and elements to assure safe use, such as restricted distribution methods, patient registries, or other risk minimization tools.

The FDA reviews all NDAs and BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA may request additional information rather than accept an application for filing. In this event, the application must be re‑submitted with the additional information. The re‑submitted application also is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in‑depth substantive review.

The FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing is cGMP‑compliant. For biologics, the applicant must demonstrate that the product is safe, pure, and potent (interpreted to include effectiveness), and that the facilities designed for its production meet standards to ensure the product will consistently be safe, pure, and potent.

The FDA may approve an NDA or BLA only if the methods used in, and the facilities and controls used for, the manufacture processing, packing, and testing of the product are adequate to ensure and preserve its identity, strength, quality, and purity. Drug cGMPs are established in 21 C.F.R. Parts 210 and 211, and biologic drug products must meet the drug standards as well as the supplemental requirements in 21 C.F.R. Part 600 et seq.

Before approving an NDA or BLA, the FDA often will inspect the facility or facilities where the product is or will be manufactured.

The FDA may refer the NDA or BLA to an advisory committee for review, evaluation and recommendation as to whether the application should be approved and under what conditions. An advisory committee is a panel of experts, including clinicians and other scientific experts, who provide advice and recommendations when requested by the FDA. The FDA is not bound by the recommendation of an advisory committee, but it considers such recommendations when making decisions.

Additionally, before approving an NDA or BLA, the FDA will typically inspect one or more clinical sites to ensure that clinical data supporting the submission were developed in compliance with GCP.

The approval process is lengthy and difficult and the FDA may refuse to approve an NDA or BLA if the applicable regulatory criteria are not satisfied, or may require additional clinical data or other data and information. Even if such data and information are submitted, the FDA may ultimately decide that the NDA or BLA does not satisfy the criteria for approval. Data obtained from clinical studies are not always conclusive and the FDA may interpret data differently than an applicant interprets the same data.

After the FDA’s evaluation of an application, the FDA may issue an approval letter, or, in some cases, a complete response letter to indicate that the review cycle is complete and that the application is not ready for approval. A complete response letter generally contains a statement of specific conditions that must be met to secure final approval of the application and may require additional clinical or preclinical testing for the FDA to reconsider the application. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical studies. Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the application, addressing all of the deficiencies identified in the letter, or withdraw the application or request an opportunity for a hearing.

Even with submission of additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If and when those conditions have been met to the FDA’s satisfaction, the FDA will typically issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.

If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. In addition, the FDA may require post‑approval studies, including Phase 4 clinical studies, to further assess safety and effectiveness after approval and may require testing and surveillance programs to monitor the safety of approved products that have been commercialized. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes, and additional labeling claims, are subject to further testing requirements and FDA review and approval.

ANDAs and Section 505(b)(2) New Drug Applications

Most drug products obtain FDA marketing approval pursuant to an NDA or BLA (described above) for innovator products, or an ANDAabbreviated new drug application (“ANDA”) for generic products. Relevant to ANDAs, the Hatch‑Waxman amendments to the FDCA established a statutory procedure for submission and FDA review and approval of ANDAs for generic versions of branded drugs previously approved by the FDA (such previously approved drugs are also referred to as listed drugs). Because the safety and efficacy of listed drugs have already been established by the brand company (sometimes referred to as the innovator), the FDA does not require a demonstration of safety and efficacy of generic products. However, a generic manufacturer is typically required to conduct bioequivalence studies of its test product against the listed drug. The bioequivalence studies for orally administered, systemically available drug products assess the rate and extent to which the API is absorbed into the bloodstream from the drug product and becomes available at the site of action. Bioequivalence is established when there is an absence of a significant difference in the rate and extent for absorption of the generic product and the listed drug. For some drugs (e.g., locally acting drugs like topical anti‑fungals), other means of demonstrating bioequivalence may be required by the FDA, especially where rate and/or extent of absorption are difficult or impossible to measure. In addition to the bioequivalence data, an ANDA must contain patent certifications and chemistry, manufacturing, labeling and stability data.

The third alternative is a special type of NDA, commonly referred to as a Section 505(b)(2) NDA, which enables the applicant to rely, in part, on the FDA’s findings of safety and efficacy of an existing product, or published literature, in support of its application. Section 505(b)(2) NDAs often provide an alternate path to FDA approval for new or improved formulations or new uses of previously approved products. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference. The applicant may rely upon the FDA’s findings with respect to certain preclinical or clinical studies conducted for an approved product. The FDA may also require companies to perform additional studies or measurements to support the change from the approved product. The FDA may then approve the new product candidate for all or some of the label indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant.

In seeking approval for a drug through an NDA, including a 505(b)(2) NDA, applicants are required to list with the FDA certain patents of the applicant or that are held by third parties whose claims cover the applicant’s product. Upon approval of an NDA, each of the patents listed in the application for the drug is then published in the Orange Book. Any subsequent applicant who files an ANDA seeking approval of a generic equivalent version of a drug listed in the Orange Book or a 505(b)(2) NDA referencing a drug listed in the Orange Book must make one of the following certifications to the FDA concerning patents: (1) the patent information concerning the reference listed drug product has not been submitted to the FDA; (2) any such patent that was filed has expired; (3) the date on which such patent will expire; or (4) such patent is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the application is submitted. This last certification is known as a paragraph IV certification. A notice of the paragraph IV certification must be provided to each owner of the patent that is the subject of the certification and to the holder of the approved NDA to which the ANDA or 505(b)(2) application refers. The applicant may also elect to submit a “section viii” statement certifying that its proposed label does not contain (or carves out) any language regarding the patented method‑of‑use rather than certify to a listed method‑of‑use patent.

If the reference NDA holder or patent owners assert a patent challenge directed to one of the Orange Book listed patents within 45 days of the receipt of the paragraph IV certification notice, the FDA is prohibited from approving the application until the earlier of 30 months from the receipt of the paragraph IV certification expiration of the patent, settlement of the lawsuit or a decision in the infringement case that is favorable to the applicant. The ANDA or 505(b)(2) application also will not be approved until any applicable non‑patent exclusivity listed in the Orange Book for the branded reference drug has expired as described in further detail below. Thus approval of a Section 505(b)(2) NDA or ANDA can be stalled until all the listed patents claiming the referenced product have expired, until any non‑patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the referenced product has expired, and, in the case of a

Paragraph IV certification and subsequent patent infringement suit, until the earlier of 30 months, settlement of the lawsuit or a decision in the infringement case that is favorable to the ANDA or Section 505(b)(2) applicant.

Expedited Programs

Fast Track Designation

The FDA has a Fast Track program that is intended to expedite or facilitate the process for reviewing new drugs that meet certain criteria. Specifically, new drugs (including biological drug products) are eligible for Fast Track designation if they are intended to treat a serious or life‑threatening disease or condition for which there is no effective treatment and demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to the combination of the product and the specific indication for which it is being studied. The sponsor of a new drug or biologic

may request the FDA to designate the drug or biologic as a Fast Track product concurrently with, or at any time after, submission of an IND, and the FDA must determine if the product candidate qualifies for Fast Track designation within 60 days of receipt of the sponsor’s request.

The FDA may initiate review of sections of a Fast Track drug’s NDA or BLA before the application is complete. This rolling review is available if the applicant provides, and the FDA approves, a schedule for the submission of each portion of the NDA or BLA and the applicant pays applicable user fees. However, the FDA’s time period goal for reviewing an application does not begin until the last section of the application is submitted. Additionally, the Fast Track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical study process.

Accelerated Approval

Under the FDA’s accelerated approval regulations, the FDA may approve a drug or biologic for a serious or life‑threatening illness that fills an unmet medical need, providing a meaningful therapeutic benefit to patients over existing treatments, based upon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. In clinical studies, a surrogate endpoint is a marker, such as a measurement of laboratory or clinical signs of a disease or condition that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. A product candidate approved on this basis is subject to rigorous post‑marketing compliance requirements, including the completion of post‑approval clinical studies sometimes referred to as Phase 4 studies to confirm the effect on the clinical endpoint. Failure to conduct required post‑approval studies, or to confirm a clinical benefit during post‑marketing studies, will allow the FDA to withdraw the product from the market on an expedited basis. All promotional materials for product candidates approved under accelerated approval regulations are subject to prior review by the FDA.

Breakthrough Designation

The Food and Drug Administration Safety and Innovation Act (FDASIA),FDASIA amended the FDCA to require the FDA to expedite the development and review of a breakthrough therapy. A drug or biologic product can be designated as a breakthrough therapy if it is intended to treat a serious or life‑threatening disease or condition and preliminary clinical evidence indicates that it may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. A sponsor may request that a drug or biologic product be designated as a breakthrough therapy concurrently with, or at any time after, the submission of an IND, and the FDA must determine if the product candidate qualifies for breakthrough therapy designation within 60 days of receipt of the sponsor’s request. If so designated, the FDA shall act to expedite the development and review of the product’s marketing application, including by meeting with the sponsor throughout the product’s development, providing timely advice to the sponsor to ensure that the development program to gather preclinical and clinical data is as efficient as practicable, involving senior managers and experienced review staff in a cross‑disciplinary review, assigning a cross‑disciplinary project lead for the FDA review team to facilitate an efficient review of the development program and to serve as a scientific liaison between the review team and the sponsor, and taking steps to ensure that the design of the clinical studies is as efficient as practicable.

Priority Review

Priority review is granted where there is evidence that the proposed product would be a significant improvement in the safety or effectiveness of the treatment, diagnosis, or prevention of a serious condition. If criteria are not met for priority review, the application is subject to the standard FDA review period of 10 months after the FDA accepts the application for filing. Priority review designation does not change the scientific/medical standard for approval or the quality of evidence necessary to support approval.

Post‑Approval Requirements

Drugs and biologics manufactured or distributed pursuant to FDA approvals are subject to extensive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping (including certain electronic record and signature requirements), periodic reporting, product sampling and distribution, advertising and promotion and reporting of certain adverse experiences, deviations, and other problems with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims are subject to prior FDA review and approval. There also are continuing, annual user fee requirements for any marketed products and the establishments at which such products are manufactured, as well as new application fees for supplemental applications with clinical data.

The FDA strictly regulates labeling, advertising, promotion and other types of information on products that are placed on the market. Products may be promoted only for the approved indications and in accordance with the provisions of the approved label. Further, manufacturers must continue to comply with cGMP requirements, which are extensive and require considerable time, resources and ongoing investment to ensure compliance. In addition, changes to the manufacturing process generally require prior FDA approval before being implemented and other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.

Manufacturers and certain other entities involved in the manufacturing and distribution of approved products are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. The cGMP requirements apply to all stages of the manufacturing process, including the production, processing, sterilization, packaging, labeling, storage and shipment of the product. Manufacturers must establish validated systems to ensure that products meet specifications and regulatory standards, and test each product batch or lot prior to its release.

Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third‑party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance.

The FDA may impose a number of post‑approval requirements as a condition of approval of an application. For example, the FDA may require post‑marketing testing, including Phase 4 clinical trials, and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization.

The FDA may withdraw a product approval if compliance with regulatory requirements is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, problems with manufacturing processes, or failure to comply with regulatory requirements, may result in restrictions on the product or even complete withdrawal of the product from the market.

Potential implications include required revisions to the approved labeling to add new safety information; imposition of post‑market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:

The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs and biologics may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off‑label uses, and a company that is found to have improperly promoted off‑label uses may be subject to significant liability.

In addition, the distribution of prescription drugs and biologics is subject to the Prescription Drug Marketing Act (PDMA), which regulates the distribution of the products and product samples at the federal level, and sets minimum standards

for the registration and regulation of distributors by the states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution.

From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the approval, manufacturing and marketing of products regulated by the FDA. In addition to new legislation, FDA regulations, guidances and policies are often revised or reinterpreted by the agency in ways that may significantly affect our business and our product candidates. It is impossible to predict whether further legislative or FDA regulation or policy changes will be enacted or implemented and what the impact of such changes, if any, may be.

Patent Term Restoration

Depending upon the timing, duration and specifics of FDA approval of the use of our product candidates, some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch‑Waxman Act. The Hatch‑Waxman Act permits a patent restoration term of up to five years as compensation for patent term effectively lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one‑half the time between the effective date of an IND and the submission date of an NDA plus the time between the submission date of an NDA/BLA and the approval of that application, except that the review period is reduced by any time during which the applicant failed to exercise due diligence. Only one patent applicable to an approved drug is eligible for the extension. Extensions are not granted as a matter of right and the extension must be applied for prior to expiration of the patent and within a 60-day period from the date the product is first approved for commercial marketing. The U.S. Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we may apply for Patent Term Extensions, defined as the length of the regulatory review of products covered by our granted patents, for some of our currently owned or licensed applications and patents to add patent life beyond their current expiration dates. Such extensions will depend on the length of the regulatory review; however, there can be no assurance that any such extension will be granted to us.

Marketing Exclusivity

Market exclusivity provisions under the FDCA can also delay the submission or the approval of certain applications. The specific scope varies, but fundamentally the FDCA provides a five‑year period of non‑patent marketing exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an ANDA or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non‑infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, for new indications, dosages or strengths of an existing drug. This three‑year exclusivity covers only the conditions of use associated with the new clinical investigations and does not prohibit the FDA from approving applications for drugs containing the original active agent. Five‑year and three‑year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well‑controlled clinical studies necessary to demonstrate safety and effectiveness.

Pediatric exclusivity is another type of exclusivity in the United States. Pediatric exclusivity, if granted, provides an additional six months to the term of any existing regulatory exclusivity, including the non‑patent exclusivity periods described above. This six‑month exclusivity may be granted based on the voluntary completion of a pediatric clinical study in accordance with an FDA‑issued “Written Request” for such a clinical study.

With respect to biologics, the Patient Protection and Affordable Care Act, as amended by the Healthcare and Education Reconciliation Act (collectively, the PPACA) signed into law on March 23, 2010, includes a subtitle called the Biologics Price Competition and Innovation Act of 2009 (BPCIA), which created an abbreviated licensure pathway for biological products that are biosimilar to or interchangeable with an FDA‑licensed reference biological product. To date, only one biosimilar has been licensed under the BPCIA in the United States (in September 2015), with many more well into the process for approval. Numerous biosimilars have already been approved in Europe. The FDA has issued several guidance documents outlining an approach to review and approval of biosimilars, although there has been significant litigation and questions over interpretation of such guidelines.

Biosimilarity, which requires that the product be “highly similar” and there be no clinically meaningfulsignificant differences between the biological product and the reference product in terms of safety, purity, and potency, can be shown through analytical studies, animal studies, and a clinical study or studies. Interchangeability requires that a product is biosimilar to the

reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product in any given patient and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic. However, complexities associated with the larger, and often more complex, structures of biological products, as well as the processes by which such products are manufactured, pose significant hurdles to implementation of the abbreviated approval pathway that are still being worked out by the FDA.

Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12‑year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing the sponsor’s own preclinical data and data from adequate and well‑controlled clinical trials to demonstrate the safety, purity and potency of their product. The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law.

The BPCIA is complex and only beginning to be interpreted and implemented by the FDA. In addition, recent government proposals have sought to reduce the 12‑year reference product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. As a result, the ultimate impact, implementation, and meaning of the BPCIA is subject to significant uncertainty.

Orphan Designation and Exclusivity

Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs (including biological drug products) intended to treat a rare disease or condition—generally a disease or condition that affects fewer than 200,000 individuals in the United States or that affects more than 200,000 individuals in the United States and for which there is no reasonable expectation that costs of research and development of the drug for the indication can be recovered by sales of the drug in the United States. Orphan drug designation must be requested before submitting an NDA or BLA.

After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. The first applicant to receive FDA approval for a particular active ingredient to treat a particular disease or condition with FDA orphan drug designation is entitled to a seven‑year exclusive marketing period in the United States for that product, for that indication. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA/BLA application user fee.

During the exclusivity period, the FDA may not approve any other applications to market the same drug for the same disease or condition, except in limited circumstances, such as if the second applicant demonstrates the clinical superiority of its product to the product with orphan drug exclusivity through a demonstration of superior safety, superior efficacy, or a major contribution to patient care, or if the manufacturer of the product with orphan exclusivity is not able to assure sufficient quantities of the product. “Same drug” means a drug that contains the same identity of the active moiety if it is a drug composed of small molecules, or of the principal molecular structural features if it is composed of macromolecules and is intended for the same use as a previously approved drug, except that if the subsequent drug can be shown to be clinically superior to the first drug, it will not be considered to be the same drug. Drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition.

Pharmaceutical Coverage, Pricing and Reimbursement

In the United States, sales of Ribasphere RibaPakCLOVIQUE and any products for which we may receive regulatory approval for commercial sale will depend in part on the availability of coverage and reimbursement from third‑party payors. Third‑party payors include government authorities, managed care providers, private health insurers and other organizations.

Significant uncertainty exists as to the coverage and reimbursement status of any products for which we may obtain regulatory approval. The process for determining whether a payor will provide coverage for a biologic or drug may be separate from the process for setting the reimbursement rate that the payor will pay for the product. Some of the additional requirements and restrictions on coverage and reimbursement levels imposed by third‑party payors influence the purchase of healthcare services and products. Third‑party payors may limit coverage to specific biologics and drugs on an approved list, or formulary, which might not include all of the FDA‑approved biologics or drugs for a particular indication, or place biologics and drugs at certain formulary levels that result in lower reimbursement levels and higher cost‑sharing obligation imposed on patients. Moreover, a payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Adequate third‑party reimbursement may not be available to enable us to maintain price levels sufficient to realize an

appropriate return on our investment in product development. Further, one payor’s determination to provide coverage does not assure that other payors will also provide coverage and reimbursement for the product, and the level of coverage and reimbursement may differ significantly from payor to payor.

Third‑party payors are increasingly challenging the price and examining the medical necessity and cost‑effectiveness of medical products and services, in addition to their safety and efficacy. In order to obtain and maintain coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive

pharmacoeconomic studies in order to demonstrate the medical necessity and cost‑effectiveness of any products, in addition to the costs required to obtain regulatory approvals. Our product candidates may not be considered medically necessary or cost‑effective. If third‑party payors do not consider a product to be cost‑effective compared to other available therapies, they may not cover the product after approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow a company to sell its products at a profit.

The U.S. government and state legislatures have shown significant interest in implementing cost containment programs to limit the growth of government‑paid healthcare costs, including price controls, restrictions on reimbursement and coverage and requirements for substitution of generic products for branded prescription drugs. Adoption of government controls and measures, and tightening of restrictive policies in jurisdictions with existing controls and measures, could exclude or limit our drugs and product candidates from coverage and limit payments for pharmaceuticals.

In addition, we expect that the increased emphasis on managed care and cost containment measures in the United States by third‑party payors and government authorities to continue and will place pressure on pharmaceutical pricing and coverage. Coverage policies and third‑party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

Other Healthcare Laws and Compliance Requirements

Healthcare providers, physicians, and third‑party payors often play a primary role in the recommendation and prescription of any currently marketed products and product candidates for which we may obtain marketing approval. Our current and future arrangements with healthcare providers, physicians, third‑party payors and customers, and our sales, marketing and educational activities, may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations (at the federal and state level) that may constrain our business or financial arrangements and relationships through which we market, sell and distribute our products for which we obtain marketing approval.

In addition, we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affectgovern certain of our ability to operateoperations include the following:following, but are not limited to:

If our operations are found to be in violation of any of the health regulatory laws described above or any other laws that apply to us, we may be subject to penalties, including criminal and significant civil monetary penalties, damages, fines, imprisonment, exclusion from participation in government healthcare programs, injunctions, recall or seizure of products, total or partial suspension of production, denial or withdrawal of pre‑marketing product approvals, private qui tam actions brought by individual whistleblowers in the name of the government or refusal to allow us to enter into supply contracts, including government contracts and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

Healthcare Reform

A primary trend in the U.S. healthcare industry and elsewhere is cost containment. There have been a number of federal and state proposals during the last few years regarding the pricing of pharmaceutical and biopharmaceutical products, limiting coverage and reimbursement for drugs and other medical products, government control and other changes to the healthcare system in the United States. By way of example, in March 2010, the PPACA as amended was enacted, which includes measures that have or will significantly change the way healthcare is financed by both governmental and private insurers. Among the provisions of the PPACA of greatest importance to the pharmaceutical industry are the following:

Other legislative changes have been proposed and adopted in the United States since the PPACA was enacted. For example, in August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2012 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013 and due to subsequent legislative amendments to the statute, including the Bipartisan Budget Act of 2015, will remain in effect through 2025 unless additional Congressional action is taken. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. In addition, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products.

There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. Such reforms could have an adverse effect on anticipated revenues from our products and product candidates that we may successfully develop and for which we may obtain regulatory approval and may affect our overall financial condition and ability to develop product candidates.

Foreign Regulation of Drugs and Biologics

In order to market any product outside of the United States, we will need to comply with numerous and varying regulatory requirements of other countries and jurisdictions regarding development, approval, commercial sales and distribution of our products, and governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of our products, if approved. Whether or not we obtain FDA approval for a product, we must obtain the necessary approvals by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The approval process varies between countries and jurisdictions and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries and jurisdictions might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatory process in others.

Employees

As of December 31, 2016,2019,  we employed 118115 people, including 6773 in research and development, 18 in commercial operations and 3324 in a general and administrative capacity, including executive officers. We also engage a number of temporary employees and consultants. None of our employees is represented by a labor union with respect to his or her employment with us. We have not experienced any work stoppages, and we consider our relations with our employees to be good.

Emerging Growth Company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We will remain an emerging growth company until the earlier of (1) December 31, 2021, (2) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (3) the date on which we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (4) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period.

For as long as we remain an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation and financial statements in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote to approve executive compensation and shareholder approval of any golden parachute payments not previously approved. We are choosing to “opt out” of the extended transition periods available under the JOBS Act for complying with new or revised accounting standards, and intend to take advantage of the other reporting exemptions until we are no longer an “emerging growth company.”

Facilities

Our corporate headquarters are located in New York, New York, and consist of approximately 48,89235,771 square feet of space under a lease that expires in October 2024.2025. In addition, we also have locations in Warrendale, Pennsylvania; Cambridge,

Massachusetts and Monmouth Junction, New Jersey. We believe that our facilities are adequate for our current needs and for the foreseeable future.

Corporate Information

We were established in September 2010 as a Delaware limited liability company under the name Kadmon Holdings, LLC. In July 2016, we converted to a Delaware corporation pursuant to a statutory conversion and changed our name to Kadmon Holdings, Inc. We completed our IPO in August 2016. Our common stock is currently listed on The New York Stock Exchange under the symbol “KDMN.” We are an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, and therefore we are subject to reduced public company reporting requirements. Our principal executive offices are located at 450 East 29th Street, New York, New York 10016, and our telephone number is (212) 308-6000.(833)-900-5366. Our website address is www.kadmon.com. The information on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K or any other filings we make with the U.S. Securities and Exchange Commission (SEC).

Available Information

We make available on or through our website certain reports and amendments to those reports that we file with, or furnish to, the SEC in accordance with the Securities Exchange Act of 1934, as amended, or the Exchange Act. These include our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. We make this information available on or through our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC. Our website address is www.kadmon.com. Copies of this information may be obtained at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding our filings, at www.sec.gov. The information on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K or any other filings we make with the SEC.

Item 1A.  Risk Factors

Described below are various risks and uncertainties that may affect our business. These risks and uncertainties are not the only ones we face. You should recognize that other significant risks and uncertainties may arise in the future, which we cannot foresee at this time. Also, the risks that we now foresee might affect us to a greater or different degree than expected. Certain risks and uncertainties, including ones that we currently deem immaterial or that are similar to those faced by other companies in our industry or business in general, may also affect our business. If any of the risks described below actually occur, our business, financial condition or results of operations could be materially and adversely affected. 

Risks Related to Our Financial Position

We have incurred substantial losses since our inception, anticipate that we will continue to incur losses for the foreseeable future and may not achieve or sustain profitability. We expect to continue to incur significant expenses related to the development of our clinical product candidates for at least the next several years, and we anticipate that our expenses will increase substantially as a result of multiple initiatives. These factors individually and collectively raise a substantial doubt about or ability to continue as a going concern.

Since inception, we have incurred substantial operating losses. Our consolidated net loss was $208.8 million, $147.1losses were $61.4 million and  64.4$54.3 million for the years ended December 31, 2016, 20152019 and 2014,2018,  respectively. Our accumulated deficit was $155.7deficits were $333.1 million and $643.8$269.6 million at December 31, 20162019 and 2015,2018, respectively.

To date, we have financed our clinical development operations primarily through issuance of common stock and other equity securities in our IPO, apublic and private placement of our common stockofferings and warrants to purchase common stock,  private placements of our membership units, debt financing and, to a lesser extent, through equipment lease financings. We expect to continue to incur significant expenses related to the development of our clinical product candidates for at least the next several years. We anticipate that our expenses will increase substantially as we:

In the absence of substantial revenue from the sale of our products in our ribavirin portfolio, tetrabenazine, valganciclovir, Abacavir, Entecavir, Lamivudine, Lamivudine (HBV) and Lamivudine and Zidovudine, whichproducts that we distribute, with Camber, or from other sources (the amount, timing, nature or source of which cannot be predicted), we expect our substantial losses to continue as we develop our business and we may need to discontinue operations. Our ability to generate sufficient revenues from our existing products or from any of our product candidates in development, and to transition to profitability and generate consistent positive cash flow is uncertain. We may continue to incur losses and negative cash flow and may never transition to profitability or positive cash flow.

Our levelindependent registered public accounting firm has included an explanatory paragraph in its report as of indebtedness could adversely affect our business and limitfor the year ended December 31, 2019 expressing substantial doubt in our ability to plan for, or respond to, changes incontinue as a going concern based on our business.

Since our inception, we have incurred substantial indebtedness in order to fund acquisitions, researchrecurring and development activities and the operations of our commercial pharmaceutical business. At December 31, 2016, we had approximately $34.6 million outstanding under our senior secured non‑convertible term loan (the 2015 Credit Agreement), which has a maturity date of June 17, 2018. We also had approximately $0.2 million of other funded debt. In addition, we have incurred recurringcontinuing losses from operations and have an accumulated deficitour need for additional funding to continue operations. Our consolidated financial statements as of $155.7 million at December 31, 2016.

Our levelthis going concern uncertainty and have been prepared under the assumption that we will continue to operate as a going concern for the next twelve months, which contemplates the realization of indebtedness could adversely affect our business by, among other things:

We may not be ableassets and the satisfaction of liabilities in the normal course of business. If we are unable to generate sufficient cash to pay our indebtedness, andcontinue as a going concern we may be forced to take other actions to satisfyliquidate our payment obligations under our indebtedness,assets which may not be successful.

Our ability to make scheduled payments on, or to refinance, our debt obligations dependswould have an adverse impact on our future performance, which will be affected by financial, business and economic conditionsdevelopmental activities. In such a scenario, the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements. The reaction of investors to the inclusion of a going concern statement by our independent registered public accounting firm and other factors. We will not be ableour potential inability to control many of these factors, suchcontinue as economic conditions in the industry in which we operatea going concern may materially adversely affect our stock price and competitive pressures. Our cash flow and cash on hand may not be sufficient to allow us to pay principal and interest on our debt and to meet our other obligations. If our cash flow and other capital resources are insufficient to timely fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In addition, the terms of existing or future debt agreements may restrict our ability to pursue any of these alternatives.

Our 2015 Credit Agreement matures on June 17, 2018. We may not be ableraise new capital or to comply with the covenants under the 2015 Credit Agreement or refinance our debt under this facility before the maturity date, in which event our ability to continue our operations would be materially and adversely impacted.

Our 2015 Credit Agreement matures on June 17, 2018. Pursuant to a second amendment to the 2015 Credit Agreement that we enteredenter into in November 2016, we are required to satisfy certain clinical development milestones, as well as to raise $40.0 million of additional equity capital by the end of the second quarter of 2017. A failure to comply with these covenants is an event of default, which, if not cured or waived, could result in the acceleration of the debt under our 2015 Credit Agreement. No assurances can be given that we will be able to comply with these covenants or that we will be able to refinance this debt on or before the maturity date. Subsequent debt financing, if available at all, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to comply with our covenants under these facilities, refinance our debt under these facilities or negotiate an extension of such facilities prior to their maturity dates, the lenders thereunder may accelerate our indebtedness and exercise the remedies available to them as secured creditors, including foreclosure on our tangible and intangible property that we have pledged as security. In that event, our ability to continue our operations may be materially and adversely impacted. If we raise additional funds through marketing and distribution arrangements or collaborations, strategic alliances or licensing arrangements with third parties, we may be required to pledge certain assets, grant licenses on terms that may not be favorable to us or relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.alliances.

We will need additional funding in the future, which may not be available to us, and this may force us to delay, reduce or eliminate our product development programs or commercialization efforts.

We will need to expend substantial resources for research and development and commercialization of our marketed products, including costs associated with:

We do not expect that the net proceeds from our IPO, the $22.7 million of gross proceeds raised in March 2017 and our existing cash, cash equivalents and restricted cash will be sufficient to enable us to fund the completion of development and commercialization of any of our product candidates. We do not have any additional committed external source of funds. Additionally, our revenues may fall short of our projections or be delayed, or our expenses may increase, which could result in our capital being consumed significantly faster than anticipated. Our expenses may increase for many reasons, including:

To the extent that we need to raise additional capital through the sale of equity or convertible debt securities, investors in our common stock will be diluted, and the terms of any newly issued securities may include liquidation or other preferences that adversely affect the value of our common stock.

Our independent registered public accounting firm has expressed doubt about our ability to continue as a going concern.

Based on our recurring losses from operations, the deficiency in stockholders’ capital and a contractual obligation to raise $40.0 million of additional equity capital by the end of the second quarter of 2017  pursuant to the second amendment to the 2015 Credit Agreement we entered into in November 2016, our independent registered public accounting firm has included an explanatory paragraph in its report on our consolidated financial statements as of and for the year ended December 31, 2016 expressing substantial doubt about our ability to continue as a going concern. We expect to incur further losses over the next several years as we develop our business, and we will require significant additional funding to continue operations. If we are unable to continue as a going concern, we may be unable to meet our debt obligations, which could result in an acceleration of our obligation to repay such amounts, and we may be forced to liquidate our assets. In such a scenario, the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.

We are party to certain litigation, which could adversely affect our business, results of operations and financial

condition.

We are party to various litigation claims and legal proceedings. We believe that the plaintiff’s claims in each of the litigations in which we are currently involved have no merit and intend to vigorously defend each action. However, litigation is inherently uncertain, and any adverse outcome(s) could negatively affect our business, results of operations and financial condition. In addition, litigation can involve significant management time and attention and be expensive, regardless of outcome. During the course of litigation, there may be announcements of the results of hearings and motions and other interim developments related to the litigation. If securities analysts or investors regard these announcements as negative, the trading price of our shares of common stock may decline. In addition, we evaluate these litigation claims and legal proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these assessments and estimates, we establish reserves or disclose the relevant litigation claims or legal proceedings, as appropriate. These assessments and estimates are based on the information available to management at the time and involve a significant amount of management judgment. Actual outcomes or losses may differ materially from our current assessments and estimates. See Note 17, “Contingencies” of the notes to our audited consolidated financial statements included in this Annual Report on Form 10-K for more information.

Our ability to utilize our net operating loss carry‑forwards and certain other tax attributes may be limited.

We have incurred substantial losses during our history and may never achieve profitability. To the extent that we continue to generate losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire. As of December 31, 2016, we had unused federal and state net operating loss (“NOL”) carry‑forwards of approximately $432.8 million and $362.9 million, respectively, that may be applied against future taxable income.  At December 31, 2016, we have fully reserved the deferred tax asset related to our NOL carry‑forwards as reflected in our audited consolidated financial statements. These carry-forwards expire at various dates through December 31, 2036. Under Section 382 of the Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership by one or more 5‑percent stockholders (or certain groups of non‑5‑percent stockholders) over a three‑year period), the corporation’s ability to use its pre‑change NOL carry‑forwards and other pre‑change tax attributes to offset its post‑change income would be limited. We experienced ownership changes under Section 382 of the Code in 2010, 2011 and 2016, which may limit our ability to utilize NOL carry-forwards. We did not reduce the gross deferred tax assets related to the NOL carry-forwards, however, because the limitations do not hinder our ability to potentially utilize all of the NOL carry-forwards. We may experience ownership changes in the future as a result of future shifts in our stock ownership. As a result, if we earn net

taxable income, our ability to use our pre‑change NOLs to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed by us.

Risks Related to Our Clinical Development Pipeline

We depend heavily on the success of KD025. If we are unable to obtain regulatory approval for KD025, our ability to create stockholder value will be limited.

Our most advanced product candidate is KD025, for which we are currently conducting a pivotal trial, ROCKstar (KD025-213), in patients with cGVHD who have received at least two prior lines of systemic therapy. We do not generate meaningful revenues from any FDA-approved drug products. Two of our product candidates, KD025 and tesevatinib, are in clinical trials and we have additional internally developed product candidates such as KD033 and KD045, which are in the early stages of development. There is no guarantee that our clinical trials will be successful or that we will continue with clinical studies to support an approval from the FDA of any of our product candidates for any indication. We note that most drug candidates never reach the clinical development stage and even those that do have only a small chance of successfully completing clinical development and gaining regulatory approval. Therefore, our business currently depends heavily on the successful development, regulatory approval and commercialization of KD025, which may never occur.

Clinical development is a lengthy and expensive process with a potentially uncertain outcome. Our long‑term success depends upon the successful development and commercialization of our product candidates. To obtain regulatory approvalcandidates, which is highly uncertain.

Clinical testing is expensive and can take many years to market our products, preclinicalcomplete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of pre-clinical studies and costly and lengthyearly clinical trials are required. The conductmay not be predictive of preclinicalthe results of later-stage clinical trials. We cannot assure you that the FDA will view the results as we do or that any future trials of our drug candidates will achieve positive results. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through pre-clinical studies and initial clinical trials. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials is subjectdue to numerous riskslack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Any future clinical trial results for our drug candidates may not be successful.

In addition, a number of factors could contribute to a lack of favorable safety and efficacy results for our drug candidates. For example, such trials could result in increased variability due to varying site characteristics, such as local standards of the studiescare, differences in evaluation period and trials are highly uncertain.surgical technique, and due to varying patient characteristics, including demographic factors and health status.

We currently have no internally clinically‑developed products approved for sale and we cannot guarantee that we will ever develop such products. To date, we have invested a significant portion of our efforts and financial resources in the acquisition and development of our product candidates. Our long‑term success depends upon the successful development, regulatory approval and commercialization of these product candidates. If we fail to obtain regulatory approval to market and sell our product candidates, or if approval is delayed, we will be unable to generate revenue from the sale of these products, our potential for generating positive cash flow will be diminished and the capital necessary to fund our operations will be increased. Two of our product candidates, KD025 and tesevatinib, are in clinical trials and we have additional product candidates in preclinical development. Our business depends significantly on the successful development, regulatory approval and commercialization of our product candidates, which may never occur.

We cannot be certain as to what type and how many clinical trials the FDA or equivalent foreign regulatory agencies, will require us to conduct before we may successfully gain approval to market any of our product candidates. Prior to approving a new drug or biologic, the FDA generally requires that the effectiveness of the product candidate (which is not typically fully investigated until Phase 3) be demonstrated in two adequate and well‑controlled clinical trials. In some situations, the FDA approves drugs or biologics on the basis of a single well‑controlled clinical trial establishing effectiveness. However, if the FDA or the EMA determines that our Phase 3 clinical trial results do not demonstrate a statistically significant, clinically meaningfulsignificant benefit with an acceptable safety profile, or if the FDA or EMA requires us to conduct additional Phase 3 clinical trials in order to gain approval, we will incur significant additional development costs and commercialization of these products would be prevented or delayed and our business would be adversely affected.

Our ongoing clinical trials may be subject to delays or setbacks for a variety of common and unpredictable reasons.

We may experience unforeseen delays or setbacks in our ongoing clinical trials, such as trial initiation timing, trial redesign or amendments, timing and availability of patient enrollment or successful trial completion. Such delays and setbacks are common and unpredictable in pharmaceutical drug development. Clinical trials can be delayed for a variety of reasons, including delays related to:

In late 2019, a novel strain of COVID-19, also known as coronavirus, was reported in Wuhan, China and began spreading to various parts of the world. Epidemics such as this can adversely impact our business as they can cause disruptions, such as interruptions to supply chain and reduction in access to personnel and services, which could result in delays and complications with respect to our research and development programs and clinical trials. In addition, certain of our business partners and vendors are based in areas currently affected by coronavirus, which could cause additional adverse impact on our business. 

Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating. Furthermore, we rely on clinical trial sites to ensure the proper and timely conduct of our clinical trials and while we have agreements governing their committed activities, we have limited influence over their actual performance.

We could encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by the Data Safety Monitoring Board for such trial or by the FDA or other regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including:

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

If serious adverse events or other undesirable side effects are identified during the use of product candidates in investigator‑sponsored trials, it may adversely affect our development of such product candidates.

Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt non‑clinical studies and clinical trials, or could make it more difficult for us to enroll patients in our clinical trials. If serious adverse events or other undesirable side effects, or unexpected characteristics of our product candidates are observed in investigator‑sponsored trials, further clinical development of such product candidate may be delayed or we may not be able to continue development of such product candidate at all, and the occurrence of these events could have a material adverse effect on our business. Undesirable side effects caused by our product candidates could also result in the delay or denial of regulatory approval by the FDA or other regulatory authorities or in a more restrictive label than we expect.

The regulatory approval processes of the FDA and similar foreign authorities are lengthy, time consuming, expensive and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.

The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities. 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. 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.

Our product candidates could fail to receive regulatory approval for many reasons, including:

This lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval to market our product candidates, including KD025, tesevatinib and/or KD034, which would significantly harm our business, results of operations and prospects.

In addition, even if we were to obtain approval, regulatory authorities may:

If we do not achieve our projected development goals in the timeframes we announce and expect, or we face significant competition from other biotechnology and pharmaceutical companies, the commercialization of our products may be delayed, our operating results may be lower that we expect, the credibility of our management may be adversely affected and, as a result, the value of our common stock may decline.

Even if we obtain regulatory approval for our product candidates, they may never be successfully launched or become profitable, in which case our business, prospects, operating results and financial condition may be materially harmed.

In order to successfully launch our product candidates and have them become profitable, we anticipate that we will have to dedicate substantial time and resources and hire additional personnel to expand and enhance our commercial infrastructure, which will at a minimum include the following:

Because of the numerous risks and uncertainties associated with launch and profitability of our product candidates, we are unable to predict the extent of any future losses, or when we will become profitable, if ever.

Our product candidates may have undesirable side effects that may delay or prevent marketing approval or, if approval is obtained, require them to be taken off the market, require them to include safety warnings or otherwise limit their sales.

Undesirable or unexpected side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. Results of our trials could reveal a high and unacceptable severity and prevalence of these or other side effects. In such an event, our trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of our product candidates for any or all targeted indications. The drug‑related side effects could affect patient recruitment, the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.

Additionally, if one or more of our product candidates receives marketing approval and we or others later identify undesirable or unexpected side effects caused by such products, a number of potentially significant negative consequences could result, including:

In addition, a regulatory agency may:

Non‑compliance may also result in potential whistleblower lawsuits and the potential for liability under the False Claims Act or other laws and regulations, as discussed above. Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, results of operations and prospects.

The results of previous clinical trials may not be predictive of future results, and the results of our current and planned clinical trials may not satisfy the requirements of the FDA or non‑U.S. regulatory authorities.

Clinical failure can occur at any stage of clinical development. Clinical trials may produce negative or inconclusive results, and we or any of our current and future collaborators may decide, or regulators may require us, to conduct additional clinical or preclinical testing. In addition, data obtained from tests are susceptible to varying interpretations, and regulators may not interpret data as favorably as we do, which may delay, limit or prevent regulatory approval.

We will be required to demonstrate with substantial evidence through well‑controlled clinical trials that our product candidates are safe and effective for use in a diverse population before we can seek regulatory approvals for their commercial sale. Success in early clinical trials does not mean that future larger registration clinical trials will be successful because product candidates in later‑stage clinical trials may fail to demonstrate sufficient safety and efficacy to the satisfaction of the FDA and non‑U.S. regulatory authorities despite having progressed through initial clinical trials. Product candidates that have shown promising results in early clinical trials may still suffer significant setbacks in subsequent registration clinical trials. Similarly, the outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and preliminary and interim results of a clinical trial do not necessarily predict final results. A number of companies in the pharmaceutical industry, including those with greater resources and experience than us, have suffered significant setbacks in advanced clinical trials, even after obtaining promising results in earlier clinical trials.

Further, at various points during the course of the preclinical and clinical trial process, companies must assess both the statistical and clinical significance of trial results. In this context, “statistical significance” refers to the likelihood that a result or relationship is caused by something other than random chance or error. Statistical significance is measured by a “p‑value,” which indicates the probability value that the results observed in a study were due to chance alone. A p‑value of < 0.05 is generally considered statistically significant, meaning that the probability of the results occurring by chance alone is less than five percent. The lower the p‑value, the less likely that the results observed were random. “Clinical significance,” on the other hand, is a qualitative assessment of the results observed. Where we use the term “clinically significant,” we have not necessarily made a formal statistical assessment of the probability that the change in patient status was attributable to the study drug as opposed to chance alone, nor does such a statement necessarily mean that study endpoints have been met or the protocol has been completed. A clinically significant effect is one that is determined to have practical importance for patients and physicians, and includes benefits that are often defined by peer‑reviewed literature as having a meaningful impact on a patient’s condition. An effect that is statistically significant may or may not also be clinically significant. When a study fails to result in statistical significance, the FDA may not consider such study to serve as substantial evidence of safety and effectiveness required for approval. Even if a study results in statistical significance, the FDA may also consider clinical significance in evaluating a marketing application. For example, the FDA typically requires more than one pivotal clinical study to support approval of a new drug. However, the FDA has indicated that approval may be based on a single study in limited situations in which a trial has demonstrated a clinically significant effect. In either case, the clinical or statistical significance of a particular study result in no way guarantees that FDA or other regulators will ultimately determine that the drug being investigated is safe and effective.

In addition, the design of a clinical trial can determine whether its results will support approval of a product and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. We may be unable to design and execute a clinical trial to support regulatory approval.

In some instances, there can be significant variability in safety and/or efficacy results between different trials of the same product candidate due to numerous factors, including changes in trial protocols, differences in size and type of the patient populations, adherence to the dosing regimen and other trial protocols and the rate of dropout among clinical trial participants. We do not know whether any Phase 1, Phase 2, Phase 3 or other clinical trials we or any of our collaborators may conduct will demonstrate consistent or adequate efficacy and safety to obtain regulatory approval to market our product candidates.

Further, our product candidates may not be approved even if they achieve their primary endpoints in Phase 3 clinical trials or registration trials. The FDA or other non‑U.S. regulatory authorities may disagree with our trial design and our interpretation of data from preclinical studies and clinical trials. In addition, any of these regulatory authorities may change requirements for the approval of a product candidate even after reviewing and providing comments or advice on a protocol for a pivotal Phase 3 clinical trial that has the potential to result in the FDA or other agencies’ approval. In addition, any of these regulatory authorities may also approve a product candidate for fewer or more limited indications than we request or may grant approval contingent on the performance of costly post‑marketing clinical trials. The FDA or other non‑U.S.

regulatory authorities may not approve the labeling claims that we believe would be necessary or desirable for the successful commercialization of our product candidates.

We may not be successful in our efforts to use and expand our drug discovery platforms to build a pipeline of product candidates.

A key element of our strategy is to leverage our drug discovery platforms to identify and develop new product candidates for additional diseases with significant unmet medical needs. Although our research and development efforts to date have contributed to the development of product candidates directed at autoimmuneinflammatory and fibrotic diseases, oncology and genetic diseases, we may not be able to develop product candidates that are safe and effective. Even if we are successful in continuing to build our pipeline, the potential product candidates that we identify may not be suitable for clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance. If we do not continue to successfully develop and begin to commercialize product candidates, we will face difficulty in obtaining product revenues in future periods, which could result in significant harm to our financial position and adversely affect the price of our common stock.

Biologics carry particular risks and uncertainties, which could have a negative impact on future results of operations.

Through our drug discovery platform, we are currently engaged in the development of novel highly active bi‑functional proteins for immunotherapy in various indications, including oncology. The successful development, testing, manufacturing and commercialization of biologics is a long, expensive and uncertain process. There are particular risks and uncertainties with biologics, including:

Any of these events could result in substantial costs and result in a material adverse effect on our business and results of operations.

We face substantial competition, which may result in others discovering, developing and commercializing products before or more successfully than our products and product candidates.

The development and commercialization of new therapeutics is highly competitive. We face competition (from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide) with respect to our current product candidates and will face competition with respect to any product candidates that we may seek to develop or products we commercialize in the future. We compete directly with companies that focus on NSCLC with brain metastases and/or leptomeningeal metastases, PKD, psoriasis, cGVHD and IPF, and companies dedicating their resources to novel forms of therapies for these indications. We also face competition from academic research institutions, governmental agencies and other various public and private research institutions. Many of these competitors are attempting to develop therapeutics for our target indications. With the proliferation of new drugs and therapies in these areas, we expect to face increasingly intense competition as new technologies become available. Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.

There are products already approved for many of the diseases we are targeting. Many of these approved products are well established therapies and are widely accepted by physicians, patients and third‑party payors. This may make it difficult for us to achieve our business strategy of replacing existing therapies with our product candidates. Branded and generic therapies in ourOur commercial operation, particularly RibaPak and Ribasphere,operations face significant direct competition from other generic high-dose ribavirin offerings, as well as competition from lower dose and lower cost generic versions of ribavirin. Additionally, the treatment of chronic HCV infection is rapidly changing as multiple new therapies have entered, such as Viekira Pak (AbbVie), Epclusa (Gilead Sciences, Inc.), Harvoni (Gilead Sciences, Inc.), Olysio (Janssen Pharmaceuticals, Inc.) and Zepatier (Merck & Co.), and will continue to enter the market that (either now or in the future) may not require the use of ribavirin as part of the treatment protocol. There are also a number of products in late stage clinical development to treat solid tumors, in viral and immunological disorders. Ourour competitors may develop products that are safer, more effective, more convenient or less costly than any that we are developing or that would render our product candidates obsolete or non‑competitive. Our competitors may also obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours.

Many of our competitors have significantly greater financial, manufacturing, marketing, drug development, technical and human resources than we do. Mergers and acquisitions in the pharmaceutical, biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

Our product candidates for which we intend to seek approval may face competition sooner than anticipated, and for biologics there is additional uncertainty as the relevant law is relatively new and there is limited precedent.

Although we plan to pursue all available FDA exclusivities for our product candidates, we may face competition sooner than anticipated. Market and data exclusivity provisions under the FDCAFederal Food, Drug, and Cosmetic Act (FDCA) can delay the submission or the approval of certain applications for competing products. The FDCA provides a five‑year period of non‑patent data exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity, running from the time of NDA approval. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the five‑year exclusivity period for a new chemical entity, the FDA may not accept for review an ANDA or a 505(b)(2) NDA submitted by another company that references the previously approved drug. However, the FDA may accept an ANDA or 505(b)(2) NDA for review after four years if it contains a certification of patent invalidity or non‑infringement.

The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA, or supplement to an existing NDA or 505(b)(2) NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example (for new indications, dosages, strengths or dosage forms of an existing drug). This three‑year exclusivity covers only the conditions of use associated with the new clinical investigations and, as a general matter, does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for generic versions of the original, unmodified drug product.

Five‑year and three‑year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well‑controlled clinical trials necessary to demonstrate safety and effectiveness.

The PPACA, signed into law on March 23, 2010, includes a subtitle called the BPCIA, which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA‑licensed reference biological

product. Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12‑year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing the sponsor’s own preclinical data and data from adequate and well‑controlled clinical trials to demonstrate the safety, purity and potency of their product. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation and meaning are subject to uncertainty. While it is uncertain when such processes intended to implement BPCIA may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our biological products.

We believe that any of our product candidates approved as a biological product under a BLA should qualify for the 12‑year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider our product candidates to be reference products for competing products, potentially creating the opportunity for competition sooner than anticipated. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non‑biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.

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

Because we have limited financial and managerial resources, we focus on our most promising research programs and product candidates that we identify for specific indications.candidates. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights.

Even if we obtain FDA approval of any of our product candidates, we may never obtain approval or commercialize our products outside of the United States, which would limit our ability to realize their full market potential.

None of our product candidates are approved for sale in any jurisdiction, including international markets, and we have limited experience in obtaining regulatory approval in international markets. In order to market any products outside of the United States, we must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval procedures vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approvals could result in significant delays, difficulties and costs for us and may require additional preclinical studies or clinical trials which would be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our products in those countries. Satisfying these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays.

In addition, our failure to obtain regulatory approval in any country may delay or have negative effects on the process for regulatory approval in other countries. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, our target market will be reduced and our ability to realize the full market potential of our products will be harmed. As described above, such effects include the risks that:

Foreign regulators may have requirements for marketing authorization holders or distributors to have a legal or physical presence in that country. Consideration of and compliance with these requirements may result in additional time and

expense before we can pursue or obtain marketing authorization in foreign jurisdictions. If we do receive approval in other countries, we may enter into sales and marketing arrangements with third parties for international sales of any approved products.

The environment in which our regulatory submissions may be reviewed changes over time, which may make it more difficult to obtain regulatory approval of any of our product candidates.

The environment in which our regulatory submissions are reviewed changes over time. Average review times at the FDA for NDAs and BLAs fluctuate, and we cannot predict the review time for any submission with any regulatory authorities. Review times can be affected by a variety of factors, including budget and funding levels and statutory, regulatory and policy changes. Moreover, in light of widely publicized events concerning the safety risk of certain drug products, regulatory authorities, members of Congress, the Government Accountability Office, medical professionals and the general public have raised concerns about potential drug safety issues. These events have resulted in the withdrawal of drug products, revisions to drug labeling that further limit use of the drug products and establishment of Risk Evaluation and Mitigation Strategies that may, for instance, restrict distribution of drug or biologic products. The increased attention to drug safety issues may result in a more cautious approach by the FDA to clinical trials. Data from preclinical studies and clinical trials may receive greater scrutiny with respect to safety, which may make the FDA or other regulatory authorities more likely to terminate clinical trials before completion, or require longer or additional clinical trials that may result in substantial additional expense, a delay or failure in obtaining approval or approval for a more limited indication than originally sought.

In addition, data obtained from preclinical studies and clinical trials are subject to different interpretations, which could delay, limit or prevent regulatory review or approval of our product candidates. Changes in FDA personnel responsible for review of our submissions could also impact the manner in which our data are viewed. Further, regulatory attitudes toward the data and results required to demonstrate safety and efficacy can change over time and can be affected by many factors, such as the emergence of new information (including on other products), policy changes and agency funding, staffing and leadership. We do not know whether future changes to the regulatory environment will be favorable or unfavorable to our business prospects.

We may seek breakthrough therapy designation by the FDA for any of our product candidates but there is no assurance that we will request or receive such designation, and, in any event, even if we do receive such designation, it may not lead to a faster development or regulatory review or approval process, and it does not increase the likelihood that our product candidates will receive marketing approval in the United States.

We may apply for breakthrough therapy designation for some of our product candidates. The FDA is authorized to designate a product candidate as a breakthrough therapy if it finds that the product is intended, alone or in combination with one or more other drugs, to treat a serious or life‑threatening disease or condition, and preliminary clinical evidence indicates that the product candidate may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For products designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Products designated as breakthrough therapies by the FDA may also be eligible for accelerated approval.

Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a breakthrough therapy designation for a product candidate may not result in a faster development process, review or approval compared to product candidates without the breakthrough therapy designation and, in any event, does not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that the product candidates no longer meet the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.

We may seek Fast Track, Accelerated Approval and/or Priority Review designation of some of our product candidates. There is no assurance that the FDA will grant such designations and, even if it does grant any such designation for one of our product candidates, that designation may not ultimately lead to a faster development or regulatory review or approval process, and it does not increase the likelihood that our product candidates will receive marketing approval in the United States.

We may seek Fast Track, Accelerated Approval and/or Priority Review designation and review for our product candidates. We have not, at this point, had any specific discussions with the FDA about the potential for any of our product candidates to take advantage of these potential pathways. The FDA has broad discretion whether or not to grant any of these designations, so even if we believe a particular product candidate is eligible for such a designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures. In addition, the FDA may withdraw any such designation if it believes that the designation is no longer supported by data from our clinical development

program. In addition, any such designation does not have any impact on the likelihood that a product candidate will ultimately be granted marketing approval in the United States.

We plan to seek orphan product designation for certain of our product candidates for certain indications, and we may be unable to obtain orphan product designation, and even if we do, we may be unable to maintain the benefits associated with orphan product designation, including the potential for marketing exclusivity. Moreover, if our competitors are able to obtain orphan product designation and the associated exclusivity for their products that are competitors with our product candidates, the applicable regulatory authority may be prohibited from approving our products for a significant period of time.

Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product candidate as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally defined as having a prevalence of 200,000 affected individuals in the United States or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the United States, orphan designation entitles a party to financial incentives such as opportunities for grant funding toward clinical trial costs, tax advantages and user‑fee waivers. In the European Union, EMA’s Committee for Orphan Medicinal Products grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than 5 in 10,000 persons in the European Union. Additionally, orphan designation is granted for products intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition and when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment in developing the drug or biologic product.

Generally, if a product candidate with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the FDA or the EMA from approving another marketing application for the same drug for the same indication for that time period, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or where the manufacturer is unable to assure sufficient product quantity. The applicable period is seven years in the United States and 10 years in Europe. The European exclusivity period can be reduced to six years if a product no longer meets the criteria for orphan drug designation or if the product is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of patients with the rare disease or condition.

Moreover, even if we obtain orphan designation, we may not be the first to obtain marketing approval of our product candidate for the orphan‑designated indication due to the uncertainties associated with developing pharmaceutical products. In addition, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan‑designated indication. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties can be approved for the same condition. Even after an orphan product is approved, the FDA can subsequently approve the same drug with the same active moiety for the same condition if the FDA concludes that the later drug is safer, more effective, or makes a major contribution to patient care. Orphan drug designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process. In addition, while we intend to seek orphan drug designation for our product candidates, we may never receive such designations.

Independent clinical investigators or CROs that we engage may not devote sufficient time or attention to conducting our clinical trials or may not be able to repeat their past success.

We expect to continue to depend on independent clinical investigators and may depend on CROs to conduct some of our clinical trials. CROs may also assist us in the collection and analysis of data. There is a limited number of third‑party service providers that specialize or have the expertise required to achieve our business objectives. Identifying, qualifying and managing performance of third‑party service providers can be difficult, time consuming and cause delays in our development programs. These investigators and CROs, if any, will not be our employees and we will not be able to control, other than by contract, the amount of resources, including time, which they devote to our product candidates and clinical trials. If independent investigators or CROs fail to devote sufficient resources to the development of our product candidates, or if their performance is substandard, it may delay or compromise the prospects for approval and commercialization of any product candidates that we develop. In addition, the use of third‑party service providers requires us to disclose our proprietary information to these parties, which could increase the risk that this information will be misappropriated. Further, the FDA requires that we comply with standards, commonly referred to as cGCP for conducting, recording and reporting clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial subjects are protected. Failure of

clinical investigators or CROs to meet their obligations to us or comply with cGCP procedures could adversely affect the clinical development of our product candidates and harm our business.

We may not be able to attract collaborators or external funding for the development and commercialization of our product candidates.

Our product development programs and potential commercialization of our product candidates will require substantial additional capital to fund expenses. As part of our ongoing strategy, we may seek additional collaborative arrangements with pharmaceutical and biotechnology companies or other third parties or external funding for certain of our development programs and/or seek to expand existing collaborations to cover additional commercialization and/or development activities. We have a number of research programs and early‑stage clinical development programs. At any time, we may determine that in order to continue development of a product candidate or program or successfully commercialize a drug we need to identify a collaborator or amend or expand an existing collaboration. Potentially, and depending on the circumstances, we may desire that a collaborator either agree to fund portions of a drug development program led by us, or agree to provide all the funding and directly lead the development and commercialization of a program. We face significant competition in seeking appropriate collaborators. Collaborations are complex and time‑consuming to negotiate and document. We may also be restricted under existing collaboration agreements from entering into agreements on certain terms with other potential collaborators. No assurance can be given that any efforts we make to seek additional collaborative arrangements will be successfully completed on acceptable terms, a timely basis or at all.

If we are unable to negotiate favorable collaborations, we may have to curtail the development of a particular product candidate, reduce or delay its development program and its potential commercialization, reduce the scope of our sales or marketing activities, and/or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we will not be able to bring our product candidates to market and generate product revenue.

Risks Related to Our Marketed Products and Product Candidates

Our current and, in part, our future revenue depends on our ribavirin marketed product portfolio and near‑term line extensions.

Our current and, in part, our future revenue depends upon continued sales of our ribavirin portfolio of products, which has represented a substantial portion of our total revenues to date. Additionally, we distribute tetrabenazine for chorea, an involuntary movement disorder associated with Huntington’s disease. We also distribute valganciclovir for the treatment of CMV retinitis, a viral inflammation of the retina of the eye, in patients with AIDS and for the prevention of CMV disease, a common viral infection complicating solid organ transplants, in kidney, heart and kidney‑pancreas transplant patients, Abacavir tablets, USP, a medicine that is used in combination with other antiretroviral agents for the treatment of HIV-1 infection; Entecavir, a medicine that is used for the treatment of chronic HBV infection in adults with evidence of active viral replication and either evidence of persistent elevations in serum aminotransferases (ALT or AST) or histologically active disease; Lamivudine tablets, a nucleoside analogue medicine used in combination with other antiretroviral agents for the treatment of HIV-1 infection; Lamivudine tablets (HBV), a medicine that is used for the treatment of chronic HBV infection associated with evidence of hepatitis B viral replication and active liver inflammation; and Lamivudine and Zidovudine tablets, USP, a combination of two nucleoside analogue medicines, used in combination with other antiretrovirals for the treatment of HIV-1 infection. Although we have acquired the rights to co‑promote tetrabenazine, valganciclovir, Abacavir, Entecavir, Lamivudine, Lamivudine (HBV) and Lamivudine and Zidovudine, our revenue will likely be dependent on sales from our ribavirin product portfolio for the next few years. Our competitors have developed and introduced and are continuing to develop and introduce additional products for chronic HCV infection that may, or may not, require the use of ribavirin in combination, or may require lower doses or shorter durations of treatment with ribavirin. Accordingly, we expect sales from our ribavirin product portfolio to continue to decrease over the next few years. Such decrease will have a negative impact on our sales and profits.

Any issues relating to any of these products, such as safety or efficacy issues, reimbursement and coverage issues, marketing or promotional issues, the introduction or greater acceptance of competing products, including generics, or adverse regulatory or legislative developments may reduce our revenues and adversely affect our results.

If we fail to maintain our competitive position with RibaPak and Ribasphere versus generics or other high‑dose ribavirin product offerings, our business and market position will suffer, and our competitive position may be significantly impacted by the availability of new innovator treatments for chronic HCV infection.

The pharmaceutical industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on developing proprietary therapeutics. We face competition from a number of sources, such as pharmaceutical

companies, generic drug companies, biotechnology companies, drug delivery companies and academic and research institutions, many of which have greater financial resources, marketing capabilities, sales forces, manufacturing capabilities, research and development capabilities, experience in obtaining regulatory approvals for drug product candidates and other resources than us.

In particular, RibaPak and Ribasphere face significant direct competition from other generic high‑dose ribavirin offerings, as well as competition from lower dose and lower cost generic versions of ribavirin. Additionally, the treatment of chronic HCV infection is rapidly changing as multiple new therapies have entered, such as Viekira Pak (AbbVie), Harvoni (Gilead Sciences, Inc.), Olysio (Janssen Pharmaceuticals, Inc.) and Zepatier (Merck & Co.), and will continueRisks Related to enter the market that (either now or in the future) may not require the use of ribavirin as part of the treatment protocol.Multiple ribavirin free treatment regimens, including novel direct acting antivirals, have entered the market and become the new standard of care. As a result, we expect sales of our ribavirin portfolio of products to continue to decline in 2017 and beyond.

With scrutiny on drug costs, payors may look for ways to reduce their overall cost of treatment by switching from RibaPak and other generic high‑dose formulations of ribavirin to a lower dose and lower cost generic version of ribavirin. If healthcare providers receive pressure from patients, or they are encouraged by insurers, to prescribe less expensive generics, or insurers impose additional formulary controls or restrictions on coverage of RibaPak and Ribasphere, our business would be significantly harmed. Additionally, we cannot assure you that other companies will not develop new products that may require a lower dose, shorter duration or complete removal of ribavirin from the treatment combination.

If RibaPak and Ribasphere are unable to be used successfully in combination with new therapies or if new therapies in development are able to achieve sufficiently high sustained virologic cure rates without ribavirin, we may be unable to compete effectively and our business would be materially and adversely affected. Additionally, generic manufacturers of ribavirin and direct high‑dose ribavirin competitors may try to compete with RibaPak and Ribasphere by reducing their prices or adopting other competitive marketing and promotional tactics that could harm our business.Our Marketed Products

We cannot be certain how profitable, if at all, the commercialization of our marketed products will be.

To become and remain profitable, weWe must compete effectively against other therapies with our ribavirin portfolio of products tetrabenazine, valganciclovir, Abacavir, Entecavir, Lamivudine, Lamivudine (HBV) and Lamivudine and Zidovudine or any of our product candidates for which we obtain marketing approvals, as well as developing and eventually commercializing product candidates with significant market potential. This will require us to be successful in a range of challenging activities, including discovering product candidates, completing preclinical testing and clinical trials for our product candidates and obtaining regulatory approval for these line extensions and product candidates, in addition to the manufacturing, marketing and selling of those products for which we may obtain regulatory approval.  We may never succeed in these activities and may never generate revenues that are significant or large enough to achieve profitability.

In addition to the risks discussed elsewhere in this section, our ability to continue to generate revenues from our commercialized products will depend on a number of factors, including, but not limited to:

Because of the numerous risks and uncertainties associated with our commercialization efforts, we may not be able to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. A failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.

Our inability to accurately estimate demand for our products, the uptake of new products or the timing of fluctuations in the inventories maintained by customers makes it difficult for us to accurately forecast sales and may cause our financial results to fluctuate.

We aremay be unable to accurately estimate demand for our products, including uptake from new products, as demand is dependent on a number of factors. We sell products primarily to wholesalers and specialty pharmacies. These customers maintain and control their own inventory levels by making estimates to determine end user demand. Our customers may not be effective in matching their inventory levels to actual end user demand. As a result, changes in inventory levels held by our customers can cause our operating results to fluctuate unexpectedly. Adverse changes in economic conditions or other factors may cause our customers to reduce their inventories of our products, which would reduce their orders from us, even if end user demand has not changed. If our inventory exceeds demand from our customers and exceeds its shelf life, we will be required to destroy unsold inventory and write off its value. As our inventory and distribution channels fluctuate from quarter to quarter, we may continue to see fluctuations in our earnings and a mismatch between prescription demand for our products and our revenues.

In addition, the non‑retail sector in the United States, which includes government institutions, including state drug assistance programs, correctional facilities and large health maintenance organizations, may be inconsistent in terms of buying patterns and may cause quarter over quarter fluctuations that do not necessarily mirror patient demand. Federal and state budget pressure may cause purchasing patterns to not reflect patient demand.

If we discover safety issues with any of our products or if we fail to comply with continuing U.S. and applicable foreign regulations, commercialization efforts for the product could be negatively affected, the approved product could be subject to withdrawal of approval or sales could be suspended, and our business could be materially harmed.

Our products are subject to continuing regulatory oversight, including the review of additional safety information. Drugs are more widely used by patients once approval has been obtained and therefore side effects and other problems may be observed after approval that were not seen or anticipated, or were not as prevalent or severe, during pre‑approval clinical trials or nonclinical studies. The subsequent discovery of previously unknown problems with a product, or public speculation about adverse safety events, could negatively affect commercial sales of the product, result in restrictions on the product or lead to the withdrawal of the product from the market.

If we or our collaborators fail to comply with applicable continuing regulatory requirements, we or our collaborators may be subject to fines, suspension or withdrawal of regulatory approvals for specific products, product recalls and seizures, injunctions, consent decrees or other operating restrictions and/or criminal prosecutions. In addition, the manufacturers we engage to make our products and the manufacturing facilities in which our products are made are subject to periodic review and inspection by the FDA and foreign regulatory authorities. If problems are identified during the review or inspection of these manufacturers or manufacturing facilities, it could result in our inability to use the facility to make our product or a determination that inventories are not safe for commercial sale.

If physicians, nurses, pharmacists, patients, the medical community and/or third‑party payors do not accept our drugs or product candidates, we may be unable to generate significant revenue in future periods.

Our drugs may not gain or maintain market acceptance among physicians, nurses, pharmacists, patients, the medical community and/or third‑party payors. Effectively marketing our products and any of our product candidates, if approved, requires substantial efforts and resources, both prior to launch and after approval; and marketing efforts are subject to numerous regulatory restrictions as well as fraud and abuse laws. The demand for our drugs and degree of market acceptance of our product candidates will depend on a number of factors including:

If any of our drugs or product candidates fails to maintain or achieve, as applicable, market acceptance, we will not be able to generate significant revenue in future periods.

Failure to comply with FDA promotional rules may subject us to withdrawal, and correction, of related product promotion, seizure of product and other administrative or enforcement actions as well as the potential for ancillary liability under the False Claims Act (False Claims Act) and/or product liability litigation.

The FDA regulates the promotion of our products, which may only be promoted within their approved indication for use. Promotional materials and activity must be presented with fair balance of the risks and benefits of any product in a manner which is not otherwise inaccurate or misleading. The FDCA and the FDA’s implementing regulations require that manufacturers label, advertise and promote their products with appropriate safety warnings and adequate directions for their FDA‑approved use. However, the FDA does not have the legal authority to regulate the practice of medicine. Although physicians are permitted, based on their medical judgment, to prescribe products for indications other than those approved by the FDA, manufacturers are prohibited from promoting their products for such off‑label uses. We market RibaPak and Ribasphere in a combination treatment with peginterferon alfa‑2a for the treatment of adults with chronic HCV infection who have compensated liver disease and have not been previously treated with interferon alpha. We currently co‑promote Qsymia, which should be used together with a reduced‑calorie diet and increased physical activity for chronic weight management in adults with an initial body mass index (BMI) of 30 kg/m2 or greater (obese) or 27 kg/m2 or greater (overweight) in the presence of at least one weight‑related medical condition such as high blood pressure, type 2 diabetes or high cholesterol. We also distribute tetrabenazine tablets, which are indicated for the treatment of chorea and valganciclovir tablets, which are indicated for the treatment of CMV retinitis in patients with AIDS and for the prevention of CMV disease in kidney, heart and kidney‑pancreas transplant patients.

Due to the evolving chronic HCV infection treatment landscape, the indication for RibaPak and Ribasphere is inconsistent with the current standard of care. This increases the risk of potential off‑label promotional activity, which could result in increased regulatory scrutiny. If the FDA determines that our promotional materials, training or other activities constitute off‑label promotion, it could request that we modify our training or promotional materials or other activities or subject us to regulatory enforcement actions, including the issuance of a warning letter, injunction, seizure, civil fine and criminal penalties. Violation of the FDCA and other statutes, including the False Claims Act, relating to the promotion and advertising of prescription drugs may also lead to investigations or allegations of violations of federal and state healthcare fraud and abuse laws and state consumer protection laws. The FDA or other regulatory authorities could also request that we enter into a consent decree or a corporate integrity agreement, or seek a permanent injunction against us under which specified promotional conduct is monitored, changed or curtailed.

Although recent decisions of the United States Supreme Court, the U.S. Court of Appeals for the Second Circuit and the U.S. District Court for the Southern District of New York have clarified that the United States may not, consistent with

the First Amendment, restrict or punish a pharmaceutical manufacturer’s truthful and non‑misleading speech promoting the lawful use of an approved drug, there are still significant risks in this area. It is unclear how these court decisions will impact the FDA’s enforcement practices, and there is likely to be substantial disagreement and difference of opinion regarding whether any particular statement is truthful and not misleading.

In the past we have been subject to enforcement action relating to allegations of improper promotion of our products. In March 2011, Kadmon Pharmaceuticals received a warning letter from the FDA’s Division of Drug Marketing, Advertising,products, and Communications (now known as the Office of Prescription Drug Promotion (OPDP)) alleging false or misleading promotional materials for Infergen, a product we then marketed, due to omission of important risk information, broadening of the approved indication, omission of material statements relating to the approved indication, overstatements of efficacy, and unsubstantiated promotional claims. The promotional piece that gave rise to the warning letter was circulated prior to the date on which we acquired the product at issue, through our acquisition of Three Rivers Pharmaceuticals, LLC in 2010, and the matter was closed out with the FDA in August 2011. We subsequently divested the product at issue in 2013.

Subsequently, in November 2013, we received a warning letter from OPDP regarding a January 2013 RibaPak Intro Letter for RibaPak sent by Kadmon Pharmaceuticals to a select group of healthcare providers. In its warning letter, OPDP stated that Kadmon Pharmaceuticals’ letter omitted important risk information for Ribasphere RibaPak, suggested that the drug is useful in a broader range of patients or conditions than has been substantiated, omitted material facts, made unsubstantiated efficacy claims and failed to provide adequate directions for use in violation of the FDCA.

In response to the 2013 warning letter, we immediately ceased the dissemination of all marketing and promotional materials at issue, and commenced discussions with OPDP. A corrective letter was disseminated and on April 21, 2014, OPDP informed us that the matter was closed. We cannot guarantee that the FDA will not raise issues in the future regarding our promotional materials or promotional practices, and if so, we couldmay be subject to additional enforcement action.such action in the future.

If we cannot successfully manage the promotion of our currently marketed products, and product candidates, if approved, we could become subject to significant liability which would materially adversely affect our business and financial condition. It is also possible that other federal, state or foreign enforcement authorities, or private parties, might take action if they believe that an alleged improper promotion led to inappropriate use of one of our products and/or the submission and payment of claims for an off‑label use, which could result in significant fines or penalties under other statutory provisions, such as the False Claims Act and similar laws. Even if it is later determined that we were not in violation of these laws, we may face negative publicity, incur significant expenses defending our actions and have to divert significant management resources from other matters. In addition, there are a number of specific FDA requirements related to drug labeling and advertising, and failure to adhere to these requirements could result in our products being deemed “misbranded.”

The manufacture of pharmaceutical products is a highly exacting and complex process, and if our suppliers encounter problems manufacturing our products, our business could suffer.

The manufacture of pharmaceutical products is a highly exacting and complex process, due in part to strict regulatory requirements. Problems may arise during manufacturing for a variety of reasons, including equipment malfunction, failure to follow specific protocols and procedures, problems with raw materials, delays related to the construction of new facilities or the expansion of existing facilities, including those intended to support future demand for our products, changes in manufacturing production sites and limits to manufacturing capacity due to regulatory requirements, changes in the types of products produced, physical limitations that could inhibit continuous supply, man‑made or natural disasters and environmental factors. If problems arise during the production of a batch of product, that batch of product may have to be discarded and we may experience product shortages or incur added expenses. This could, among other things, lead to increased costs, lost revenue, damage to customer relationships, time and expense spent investigating the cause and, depending on the cause, similar losses with respect to other batches or products. If problems are not discovered before the product is released to the market, recall and product liability costs may also be incurred.

Risks Related to Government and Regulatory AgenciesRegulation

If we engage in research or commercial activities involving any of our products or pipeline assets in a manner that violates federal or state healthcare laws, including fraud and abuse laws, false claims laws, disclosure laws, government price reporting and healthcare information privacy and security laws or other similar laws, we may be subject to corporate or individual civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations.

Our business operations and activities are subject to extensive federal, state and local fraud and abuse and other healthcare laws and regulations, such as the False Claims Act and the federal Anti‑Kickback Statute, the Foreign Corrupt Practices Act (FCPA)(“FCPA”), federal Physician Payment Sunshine Act, the federal Drug Supply Chain Security Act, federal Civil Monetary Penalty statute, the PPACA program integrity requirements, and patient privacy laws and regulation.regulation, criminal laws relating to healthcare fraud and abuse, including but not limited to the Health Insurance Portability and Accountability Act, federal consumer protection and unfair competition laws, federal government price reporting laws and state law equivalents of each of these. These laws and regulations constrain, among other things, the business or financial arrangements and relationships through which we may research and develop any product candidate, as well as market, sell and distribute any approved products. The laws that may affect our ability to operate include, but are not limited to:

In addition, any sales of our products or product candidates, if approved, commercialized outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.

We have entered into consulting agreements, scientific advisory board and other financial arrangements with physicians, including some who prescribe our products and may prescribe our product candidates, if approved. Compensation for some of these arrangements includes the provision of stock options. While these arrangements were structured to comply with all applicable laws, including state and federal anti‑kickback laws, to the extent applicable, regulatory agencies may view these arrangements as prohibited arrangements that must be restructured, or discontinued, or for which we could be subject to other significant penalties. Moreover, while we do not submit claims and our customers make the ultimate decision on how to submit claims, we may provide reimbursement guidance and support to our customers and patients. If a government authority were to conclude that we provided improper advice to our customers and/or encouraged the submission of false claims for reimbursement, we could face action against by government authorities.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. The sales and marketing practices of our industry are the subject of immense scrutiny from federal and state government agencies. Despite sequestration measures, governmental enforcement funding continues at

robust levels and enforcement officials are interpreting fraud and abuse laws broadly. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. The risk of our being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are subject to a variety of interpretations. Even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure of significant resources, divert our management’s attention from the operation of the business, and generate negative publicity, which could harm our business. If our past or present operations are found to be in violation of any such laws or any other governmental regulations that may apply to us, we may be subject to, without limitation, civil, criminal and administrative penalties, damages, monetary fines, disgorgement, exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings and/or the curtailment or restructuring of our operations. If we were to be excluded from federal healthcare programs, it would mean that no federal healthcare program payment could be made for any of our products.

We are planning to pursue the FDA 505(b)(2) pathway for one of our product candidates (KD034), and if we are not able to successfully do so, seeking approval of this product candidate through the 505(b)(1) NDA pathway would require full reports of investigations of safety and effectiveness. Even if we are able to pursue the 505(b)(2) pathway, we could be subject to legal challenges and regulatory changes which might result in extensive delays or result in our 505(b)(2) application being unsuccessful.

Section 505(b)(2) of the FDCA permits the filing of an NDA where at least some of the information required for approval comes from studies that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference. Section 505(b)(2), if applicable to us, would allow an NDA we submit to the FDA to rely in part on data in the public domain or the FDA’s prior conclusions regarding the safety and effectiveness of approved compounds, which could expedite the development program for a product candidate by potentially decreasing the amount of clinical data that we would need to generate in order to obtain FDA approval. We plan to pursue this pathway for one of our product candidates: KD034.

If the FDA does not allow us to pursue the Section 505(b)(2) regulatory pathway as anticipated, we would need to reconsider our plans for this product and might not be able to commercialize it in a cost‑efficient manner, or at all. If we were to pursue approval under the 505(b)(1) NDA pathway, would be subject to the full requirements and risks described for our other product candidates.

In some instances over the last few years, certain brand‑name pharmaceutical companies and others have objected to the FDA’s interpretation of Section 505(b)(2) and legally challenged decisions by the agency. If an FDA decision or action relative to our product candidate, or the FDA’s interpretation of Section 505(b)(2) more generally, is successfully challenged, it could result in delays or even prevent the FDA from approving a 505(b)(2) application for KD034.

The pharmaceutical industry is highly competitive, and Section 505(b)(2) NDAs are subject to special requirements designed to protect the patent rights of sponsors of previously approved drugs that are referenced in a Section 505(b)(2) NDA. A claim by the applicant that a patent is invalid or will not be infringed is subject to challenge by the patent holder, requirements may give rise to patent litigation and mandatory delays in approval (i.e., a 30‑month stay) of a 505(b)(2) application. It is not uncommon for a manufacturer of an approved product to file a citizen petition with the FDA seeking to delay approval of, or impose additional approval requirements for, pending competing products. If successful, such petitions can significantly delay, or even prevent, the approval of the new product. However, even if the FDA ultimately denies such a petition, the FDA may substantially delay approval while it considers and responds to the petition.

In the Federal Register of February 6, 2015, the FDA published a proposed rule to implement statutes that govern the approval of 505(b)(2) applications and ANDAs. The FDA also requested comment on its proposal to amend certain regulations regarding 505(b)(2) applications and ANDAs to facilitate compliance with and efficient enforcement of the FD&C Act. Comments on the proposed rule will inform the FDA’s rulemaking on ANDAs and 505(b)(2) applications, and at this time the implications of these potential regulatory changes is uncertain.

Even if we are able to utilize the Section 505(b)(2) regulatory pathway, there is no guarantee this would ultimately lead to accelerated product development or earlier approval.

Even if approved pursuant to the Section 505(b)(2) regulatory pathway, a drug may be subject to the same post‑approval limitations, conditions and requirements as any other drug.

Our commercial success depends on adequate reimbursement and coverage from third‑party commercial and government payors for our products, and changes to coverage or reimbursement policies, as well as healthcare reform measures, may materially harm our sales and potential revenue.

Our current sales in the United States of Ribasphere tablets and capsules and RibaPak are dependentMost patients rely on the formulary approval and the extent of reimbursement from third‑party payors, including government programs (such as Medicare and Medicaid) and private payor healthcare and insurance programs.programs to pay for their medical needs, including any drugs we may market. Coverage and reimbursement for our products can differ significantly from payor to payor. Even when we obtain coverage and reimbursement for our products, we may not be able to maintain adequate coverage and reimbursement in the future.

There is significant uncertainty related to the third‑party coverage and reimbursement of newly approved products. We intend to seek approval to market our product candidates in the United States, Europe and other selected foreign jurisdictions. Market acceptance and commercial success of our product candidates in both domestic and international markets will depend significantly on the availability of adequate coverage and reimbursement from third‑party payors for any of our product candidates.

Obtaining coverage and reimbursement approval for a product from a government or other third‑party payor is a time consuming and costly process that could require us to provide to the payor supporting scientific, clinical and cost‑effectiveness data for the use of our products to each third‑party payor separately, with no assurance that coverage and adequate reimbursement will be obtained or applied consistently. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. Additionally, coverage may be more limited than the purposes for which the product is approved by the FDA or similar regulatory authorities outside of the United States. Assuming that coverage is obtained for a given product, the resulting reimbursement rates might not be adequate or may require co‑payments that patients find unacceptably high. Patients, physicians, and other healthcare providers may be less likely to prescribe, dispense or use, as applicable, our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products.

Government payors and other third‑party payors, such as private health insurers and health maintenance organizations, decide which drugs they will cover and the amount of reimbursement. Coverage decisions may depend upon clinical and economic standards that disfavor new drug or biologic products when more established or lower‑cost therapeutic alternatives are already available or subsequently become available. Based upon a number of factors, including clinical and economic standards, our products may not qualify for coverage and reimbursement. Coverage and reimbursement by a third‑party payor may depend upon a number of factors, including, but not limited to, the third‑party payor’s determination that use of a product is:

The market for our products will depend significantly on access to third‑party payors’ drug formularies for which third‑party payors provide coverage and reimbursement. The industry competition to be included in such formularies often leads to downward pricing pressures on pharmaceutical companies. Also, third‑party payors may refuse to include a particular branded drug in their formularies or otherwise restrict patient access to a branded drug when a less costly generic equivalent or other alternative is available. If coverage and reimbursement of our future products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, we may be unable to achieve or sustain profitability.

In the United States, our products may be subject to discounts from list price and rebate obligations, and we have experienced increased pricing pressure and restrictions on patient access, such as prior authorizations, due to new and expensive therapies that have entered the hepatitis C market.obligations. Third‑party payors have from time to time refused to include our

products in their formularies, limit the type of patients for whom coverage will be provided, or restrict patient access to our products through formulary control or otherwise, in favor of less‑costly generic versions of ribavirin or other treatment alternatives. Any change in formulary coverage, treatment paradigm, reimbursement levels, discounts or rebates offered on our products may impact our anticipated revenues.

In the United States, governmental and commercial third‑party payors are developing increasingly sophisticated methods of controlling healthcare costs. We believe that pricing pressure for our products will continue, and future coverage and reimbursement will likely be subject to increased restrictions. For example, the PPACA, which has already imposed significant healthcare cost containment measures, also encourages the development of comparative effectiveness research and any adverse findings for our products from such research may reduce the extent of coverage and reimbursement for our products. The PPACA created the Patient‑Centered Outcomes Research Institute to review the effectiveness of treatments and medications in federally‑funded healthcare programs. The PCORI publishes the results of its studies. An adverse finding result may result in a treatment or product being removed from Medicare or Medicare coverage.

Managed care organizations continue to seek price discounts and in some cases, to impose restrictions on the coverage of particular drugs. Government efforts to reduce Medicaid expenses may lead to increased use of managed care organizations by Medicaid programs, which may result in managed care organizations influencing prescription decisions for a larger segment of the population, which could constrain pricing, formulary position or reimbursement for our products. Economic pressure on state budgets may also have a similar impact on Medicaid coverage and reimbursement. A reduction in the availability or extent of reimbursement or removal from and restrictions in use on formularies from U.S. government programs and other third‑party payors could have a material adverse effect on the sales of RibaPak.

If adequate coverage and reimbursement by third‑party payors, including Medicare and Medicaid in the United States, is not available, our ability to continue to successfully market the RibaPak and Ribasphere line of ribavirin products will be materially adversely impacted and it would cause irreversible damage to our financial position, unless we are successful in developing or acquiring rights to promote another product. We can make no assurances that we can do so on a timely basis or on favorable terms, if at all. In certain countries in the European Union and some other international markets, governments provide healthcare at low‑cost to consumers and regulate pharmaceutical pricing, patient eligibility or reimbursement levels to control costs for the government‑sponsored healthcare system. We expect to see strong efforts to reduce healthcare costs in our international markets, including: patient access restrictions; suspensions on price increases; prospective and possibly retroactive price reductions, mandatory discounts and rebates, and other recoupments; recoveries of past price increases; and greater importation of drugs from lower‑cost countries to higher‑cost countries. In addition, certain countries set prices by reference to the prices in other countries where our products are marketed. Thus, our inability to secure adequate prices in a particular country may not only limit the marketing of our products within that country, but may also adversely affect our ability to obtain acceptable prices in other markets.

Healthcare reform measures could hinder or prevent our product candidates’ commercial success, if approved, and could increase our costs.

In both the United States and certain foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system that could impact our ability to sell our products profitably. Among policy makers and payors in the United States and elsewhere, there is a significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and expanding individual access to healthcare. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. For example, in 2010, the PPACA was enacted, which was intended to expand healthcare coverage within the United States, primarily through the imposition of health insurance mandates on employers and individuals, strengthening of program integrity measures and enforcement authority, and expansion of the Medicaid program. The PPACA substantially changes the way healthcare is financed by both governmental and private insurers and significantly affects the pharmaceutical industry. Several provisions of the new law, which have varying effective dates, may affect us and will likely increase certain of our costs. In this regard, the PPACA includes the following provisions:

The reforms imposed by the new law will significantly impact the pharmaceutical industry; however, the full effects of the PPACA cannot be known until these provisions are implemented and the CMS and other federal and state agencies issue and finalize all applicable regulations or guidance. We will continue to evaluate the PPACA, the implementation of regulations or guidance related to various provisions of the PPACA by federal agencies, as well as trends and changes that may be encouraged by the legislation and that may potentially have an impact on our business over time. The cost of implementing more detailed record keeping systems and otherwise complying with these regulations could substantially increase our costs. The changes to the way our products are reimbursed by the CMS could reduce our revenues. Both of these situations could adversely affect our results of operations. There have been judicial and Congressional challenges to certain aspects of the PPACA, and we expect there will be additional challenges and amendments to the PPACA in the future. Significant uncertainty exists regarding the effect of the PPACA, particularly in light of the recent election and campaign pledges to repeal or reform the PPACA.

In addition, other legislative changes have been proposed and adopted since the PPACA was enacted. These changes included aggregate reductions to Medicare payments to providers and suppliers of up to 2% per fiscal year, which went into effect in April 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2025 unless additional Congressional action is taken. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several providers and suppliers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws and future healthcare reform laws may result in additional reductions in Medicare and other healthcare funding.

There also have been, and likely will continue to be, legislative and regulatory proposals at the federal and state levels and elsewhere directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. In addition, thereMay 2018, President Trump announced a Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs. On October 25, 2018, President Trump announced certain actions that are intended to reduce the prices Medicare will pay for drugs.

The Trump Administration has recently been heightened governmental scrutiny overalso taken executive actions to undermine or delay implementation of the manner inPPACA.  In January 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the PPACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the PPACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices.  In October 2017, the President signed a second Executive Order allowing for the use of association health plans and short-term health insurance, which manufacturers set pricesmay provide fewer health benefits than the plans sold through the PPACA exchanges. At the same time, the Administration announced that it will discontinue the payment of cost-sharing reduction, or CSR, payments to insurance companies until Congress approves the appropriation of funds for their marketed products. Additional changes could be madesuch CSR payments. The loss of the CSR payments is expected to governmental healthcare programs that could significantly impactincrease premiums on certain policies issued by qualified health plans under the success of our products or product candidates. We cannot predict the initiatives that may be adoptedPPACA. A bipartisan bill to appropriate funds for CSR payments was introduced in the future. The continuing effortsSenate, but the future of that bill is uncertain.

More recently, with enactment of the government,Tax Cuts and Jobs Act of 2017, which was signed by the President on December 22, 2017, Congress repealed the “individual mandate.” The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, companies, managed care organizations and other payors of healthcare servicesbecame effective in 2019. According to contain or reduce costs of healthcare may adversely affect:

the Congressional Budget

Office, the repeal of the individual mandate will cause 13 million fewer Americans to be insured in 2027 and premiums in insurance markets may rise.  Further, each chamber of the Congress has put forth multiple bills designed to repeal or repeal and replace portions of the PPACA. Although none of these measures has been enacted by Congress to date, Congress may consider other legislation to repeal and replace elements of the PPACA.

Government price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our current and future products.

International operations are also generally subject to extensive price and market regulations and there are many proposals for additional cost‑containment measures, including proposals that would directly or indirectly impose additional price controls or reduce the value of our intellectual property portfolio or may make it economically unsound to launch our products in certain countries. We cannot predict the extent to which our business may be affected by these or other potential future legislative or regulatory developments. Future price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our current and future products, which would adversely affect our revenue and results of operations.

Additionally, in some countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product candidate. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after coverage and reimbursement have been obtained. Reference pricing used by various European Union member states and parallel distribution or arbitrage between low‑priced and high‑priced member states, can further reduce prices. To obtain reimbursement or pricing approval in some countries, we may be required to conduct additional clinical trials that compare the cost‑effectiveness of our product candidates to other available therapies, which is time‑consuming and costly. If reimbursement of our product candidates is unavailable or limited in scope or amount in a particular country, or if pricing is set at unsatisfactory levels, we may be unable to achieve or sustain profitability of our products in such country.

Guidelines and recommendations published by government agencies, professional societies, and private foundations and organizations can reduce the use of our products and product candidates, if approved.