UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended April 30, 20172020

OR

Commission File Number 001-36830

KalVista Pharmaceuticals, Inc.

(Exact name of Registrant as specified in its Charter)

Registrant’s telephone number, including area code: (857) 999-0075

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

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

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

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

Indicate by check mark whether the Registrantregistrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrantregistrant was required to submit and post such files).   YES ☒ NO ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

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

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

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

The aggregate market value of common stock held by non-affiliates of the registrant calculated based on the closing price of $7.34 (as adjusted to reflect the 1 for 14 reverse split that occurred on November 21, 2016)$10.60 of the registrant’s common stock as reported on The NASDAQ Global Market on October 31, 2016,2019, the last business day of the registrant’s most recently completed second quarter, was $11,607,447.$164,278,175.

The number of shares of Registrant’s Common Stock outstanding as of July 1, 2017June 24, 2020 was 9,713,042.17,847,224.

DOCUMENTS INCORPORATED BY REFERENCE

PortionsInformation required in responses to Part III of Form 10-K is hereby incorporated by reference to portions of the Registrant’s Definitive Proxy Statement for its 2017the Annual Meeting of Stockholders (“Proxy Statement”), to be held in 2020. The Proxy Statement will be filed withinby the Registrant with the Securities and Exchange Commission no later than 120 days after the end of the Registrant’s fiscal year ended April 30, 2017, is incorporated by reference into Part III of this Annual Report on Form 10-K.

2020. 

Table of Contents

i

PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of this Annual Report on Form 10-K. These forward-looking statements may include, but are not limited to, statements regarding our current and future nonclinical, preclinical and clinical development activities, anticipated impacts of the COVID-19 pandemic, our future results of operations and financial position, business strategy, market size, potential growth opportunities, the efficacy and safety profile of our product candidates, expected timing and results of preclinicalour clinical trials, and clinical development activities,receipt and timing of potential regulatory designations, approval and commercialization of product candidates. In some cases, forward looking-statementsforward-looking statements may be identified by terminology such as “believe,” “may,” “will,” “should,” “predict,” “goal,” “strategy,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect,” “seek” and similar expressions and variations thereof. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the “Risk Factors” section and elsewhere in this Annual Report on Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.

As used in this Annual Report on Form 10-K, the terms “KalVista,” “the Company,” “we,” “us,” and “our” refer to KalVista Pharmaceuticals, Inc. and, where appropriate, its consolidated subsidiary,subsidiaries, unless the context indicates otherwise.

Item 1. Business.

Overview

We are a clinical stage pharmaceutical company focused on the discovery, development and commercialization of small molecule protease inhibitors.inhibitors for diseases with significant unmet need. Our first product candidates are inhibitors of plasma kallikrein being developed for two indications: hereditary angioedema (“HAE”) and diabetic macular edema (“DME”). We apply our insights into the chemistry of proteases and, with our current programs, the biology of the plasma kallikrein system, to develop moleculessmall molecule oral inhibitors with properties such ashigh selectivity, potency and bioavailability that we believe will make them successful treatments for disease.

There is good evidence that inhibition We have created a structurally diverse portfolio of oral plasma kallikrein is able to treat HAE. Currently marketed therapies are all administered by injectioninhibitors and we anticipate considerable potential for orally delivered, small molecule treatments. In the case of DME, we are initially developing a plasma kallikrein inhibitor which is administered directly into the eye but anticipate ultimate development of orally delivered drugs. To achieve these aims we are advancing several proprietary productadvanced multiple drug candidates into clinical trials. We began a first-in-human clinical trial of our firsttrials in order to create what we believe will be best-in-class oral HAE candidate, KVD818, in the third calendar quarter of 2016 and plan to advance our lead DME candidatetherapies for intravitreal injection, KVD001, to Phase 2 trials later this year. We are currently progressing additional oral HAE candidates through preclinical studies and plan to take at least one of those into the clinic in 2017 and an additional program in 2018, in keeping with our strategy of developing a portfolio of molecules to yield a best-in-class therapy.these two indications.

1

Our primary focus is currently on developing oral plasma kallikrein inhibitors for HAE, for which we have two drug program candidates in clinical trials. HAE is a rare and potentially life-threatening condition with symptoms that include episodes of debilitating and often painful swelling in the skin, gastrointestinal tract or airways. PriorDespite having multiple therapies approved, we believe HAE patients are in need of alternatives that better meet their objectives for quality of life and ease of disease control. Currently marketed therapies are all administered by injection, which patients can find challenging despite their efficacy because they can be painful, time consuming

1

to deliver and difficult to store. We anticipate that there will be strong interest in safe and effective, orally delivered, small molecule treatments, and our strategy is to develop oral drug candidates for both on-demand and prophylactic use with the goal of providing patients with a complete set of oral options to treat their disease.

Our strategy is based upon extensive patient, physician and payer research to identify the key needs in the market. According to our analysis, oral therapy remains the highest unmet need, with 93% of patients surveyed by KalVista expressing a willingness to switch to oral therapy for both on-demand and prophylactic use. Importantly however, the survey data shows that patients are not prepared to accept significantly reduced efficacy or safety with a switch to oral therapy, and so we place a high degree of emphasis on advancing program candidates that we believe can compare favorably to existing approved therapies in both those dimensions.

We have advanced the first of our candidates, KVD900, into later stage clinical studies,development as potential on-demand therapy for HAE attacks, with a Phase 2 clinical trial expected to complete in the second half of 2020. This trial is being conducted in approximately 20 sites in Europe and the U.S., and is intended to complete 50 HAE patients in a placebo-controlled, crossover study designed to evaluate the safety and efficacy of KVD900 in treatment of HAE attacks. We believe that KVD900 displays an attractive profile for on-demand therapy, with a rapid uptake of the drug to very high blood levels, and with no concerning safety signals observed to date in any clinical trials, including thoseno treatment-related gastrointestinal adverse events. The 600mg dose used in our ongoing Phase 2 trial yields maximal concentrations more than 100 times the level we believe is required for another currently marketed therapy have shown thatclinical efficacy, with effective concentrations reached in as little as 10 minutes after dosing. We believe this pharmacokinetic profile compares favorably to the existing injected therapies, which show no faster absorption and generally much lower peak levels of drug concentration. Our pharmacodynamic analysis of samples collected from volunteers following administration of KVD900 shows high levels of plasma kallikrein inhibition for as long as 12 hours after a single dose, and near complete inhibition of plasma kallikrein for as long as six hours. This data, combined with the level of inhibition of plasma kallikrein activity by exogenously added KVD900 in HAE patient plasma tested in a separate assay, leads us to believe that a single dose of KVD900 may inhibit plasma kallikrein in patients experiencing an acute HAE attack sufficiently to provide a therapeutic alternative that is a proven targetsuperior to current treatments. KVD900 has received Fast Track designation from the U.S. Food and Drug Administration (“FDA”).

In early 2020, we announced the selection of KVD824 as our next oral program to be developed, in thethis case for prophylactic treatment of HAE. A conveniently administeredBased on a first-in-human study we conducted in 2019, we believe that KVD824 can achieve the profile necessary for a twice-daily treatment for prevention of HAE attacks, which also remains an area of high unmet need. We are currently conducting additional clinical studies intended to optimize the formulation and exposure profile of KVD824, following which we plan to commence a Phase 2 clinical trial in the second half of 2020 to evaluate the safety and efficacy of KVD824 as a potential oral product could provide anprophylactic treatment for HAE.

KVD824 was chosen as our next oral HAE candidate because it offers the opportunity to capturetailor an exposure profile which delivers the strong and sustained inhibition of plasma kallikrein required for a significant portion of the current market and expand it to patients with less frequent HAE attacks.  

We believe that HAEsuccessful prophylactic treatment. KVD824 is a clinical indicationpotent inhibitor of plasma kallikrein in vitro (<10nM) and market that can be served by ain whole human plasma assays (<80nM). The first-in-human study of KVD824 showed very high exposures and essentially complete suppression of plasma kallikrein activity with good tolerability following single and multiple dosing. Our initial development plan for KVD824 is focused commercial organization because thereon twice-daily dosing to ensure trough concentrations are a limited numbermaintained well above the target required to maximize efficacy. Our patient surveys indicate this schedule causes no reduction in attractiveness of primary prescribers and active patient-focused disease organizations for this rare disease, which has a prevalence of between approximately 1 in 50,000 and 1 in 65,000 people. We intend to develop a portfolio of orally-delivered molecules,oral therapy, with the goal of providing a best-in-class therapeutic for this indication. For this reason, we anticipate advancing multiple molecules to early stage clinical trials, only selecting those that will be advanced further once we have sufficient data to allow comparisons of the molecules based upon a matrix of key criteria that we believe best reflect the unmet needs88% of patients with this disease.saying they would accept twice-daily dosing.

The second indication we are pursuing is DME. DME is the leading cause of moderate vision loss in most developed countries and diabetes, the underlying cause of DME, is the leading cause of blindness among American adults aged 20 to 74 years old, according to 2014 statistics published by the Center for Disease Control and Prevention. Our DME program is initially focused on the development of an intravitreally administered small molecule plasma kallikrein inhibitor.inhibitor, KVD001. We believe intravitreal plasma kallikrein inhibitors may be an effective complementaryalternative therapy to vascular endothelial growth factor (“VEGF“VEGF”) inhibitors and further improve visual acuity and decrease macular thickening. Preclinical pharmacokinetic studies have shown that direct injection into the eye delivers a high drug concentration at the desired site of action. The drug concentration is maintained for a prolonged period with a low systemic exposure, potentially supporting an extended dosing schedule. With our most advanced compound, KVD001,In 2019 we have successfully completed a first-in-humanPhase 2 clinical trial of KVD001 in patients with DME and are planning for a multiple injection Phase 2 trial that we intend to commence later in 2017. In addition to KVD001, we also planintend to develop an oral plasma kallikrein inhibitor to treat DME. An oral treatment may provide the opportunity to reduce treatment burden, treat patients earlier in disease development,progression, and provide a convenient and readily accessible treatment option for DME.

2

The Phase 2 clinical trial of KVD001 evaluated the safety and efficacy of two dose levels (3μg and 6μg) of KVD001 compared to a sham control in 129 DME patients who had previously been treated with anti-VEGF therapy, and still had significant edema and reduced visual acuity. The study was conducted at 38 sites in the United States, and consisted of four intravitreal injections or sham administered over three months with a three month follow up period. The primary efficacy endpoint of change in best corrected visual acuity (“BCVA”) at 16 weeks compared to sham was not met. The 6μg dose showed a difference of +2.6 letters versus sham, which was not statistically significant (p=0.223), and the 3μg dose showed a difference of +1.5 letters (p=0.465). No significant differences were observed in the secondary endpoints of central subfield thickness or the diabetic retinopathy severity scale. KVD001 was generally safe and well tolerated with no drug-related serious adverse events. In the overall study population, KVD001 demonstrated a protection against vision loss. In the sham treated group, 54.5% of patients experienced a reduction in vision compared to 32.5% in the 6μg dose (p=0.042). The study also included a pre-specified subgroup analysis investigating the impact of baseline visual acuity on response. After excluding those patients with the most severe vision loss (visual acuity of <55 letters at baseline), the remaining 70% of the total patient population showed a difference in BCVA compared to sham of 4.9 letters (p=0.056) at the 6μg dose. As many as 40% of DME patients may not respond adequately to VEGF inhibitor treatment, and we believe that KVD001 may offer these patients protection against further vision loss.

In October 2017, our wholly-owned, U.K. based subsidiary KalVista Pharmaceuticals Limited and Merck Sharp & Dohme Corp. (“Merck”) entered into an option agreement (the “Option Agreement”) under which we granted to Merck an option to acquire KVD001 through a period following completion of a Phase 2 clinical trial. We also granted to Merck a similar option to acquire investigational orally delivered molecules for DME (the “Oral DME Compounds”) through a period following the completion of a Phase 2 clinical trial. Under the terms of the Option Agreement, Merck paid to us a non-refundable upfront fee of $37.0 million in November 2017. Merck also invested approximately $9.1 million in a separate private placement transaction of common shares that closed concurrently with the Option Agreement. In February 2020, Merck notified us that those options would not be exercised. As a result, we have retained all the rights and intellectual property that were subject to the Option Agreement, and Merck has no further rights or obligations to us, and we have no obligations to Merck. We continue to believe that the results of the KVD001 Phase 2 study suggest a patient population in which plasma kallikrein inhibition may yield vision benefits, and we intend to explore further development opportunities for this and oral DME programs over time.

Strategy

Key elements of our strategy include:

23

Plasma Kallikrein in HAE and DME

Plasma kallikrein is a serine protease enzyme that is a key early mediator of inflammation and edema or swelling.edema. The body modulates the inflammatory effects of plasma kallikrein through a circulating inhibitor protein called C1-esterase inhibitor (“C1-INH”). PatientsMost patients with HAE have genetic mutations that lead to either aC1-INH deficiency, or non-functioning of C1-INH, which results in an inability to control activated plasma kallikrein in affected tissues. This excessive activation leads to inflammation, edema, and pain.

Published laboratory work has shown that the vitreous fluid of the eye is also a site of increased plasma kallikrein in DME. In diabetic patients, the retina is one of a few tissues in which edema develops. Under normal circumstances the eye is protected from the diffusion of plasma proteins by an effective blood vessel barrier. In diabetes this barrier becomes less effective and allows plasma proteins such as plasma kallikrein to enter the eye.retina and vitreous. While C1-INH willcan also be able to enter by the same route, animal models of DME have shown that the concentration of C1-INH in the vitreous fluid is insufficient to fully suppress the effects of plasma kallikrein on retinal edema. Over time, this edema leads to retinal damage that causes blindness.

Hereditary Angioedema

Disease Overview

HAE is a rare and potentially life-threatening genetic condition that occurs in between about 1 in 50,00010,000 to 1 in 65,00050,000 people, according to multiple population-based epidemiological investigations.published information from an HAE patient advocacy group. Excessive plasma kallikrein activation that is not sufficiently controlled by C1 inhibitionC1-INH leads to HAE attacks, which can vary with regard to the typical HAE attack.affected tissue or organ and severity. HAE attacks include episodes of intense swelling or edema usually in the skin, gastrointestinal tract or airways. They often lead to temporary disfiguration of various body parts including the hands, feet, face, body trunk, and genitals. In addition, patients often have bouts of excruciating abdominal pain, nausea and vomiting that is caused by swelling in the intestinal wall. Airway swelling is particularly dangerous and can lead to death by asphyxiation.

Most attacksAttacks can occur spontaneously although they often are associated with no apparent reason. However, anxiety, stress, minor trauma, surgery, or illnesses such as coldsillnesses. Commonly patients are often cited asalerted to an impending attack by prodromal events.symptoms which include rash, fatigue, and muscle aches. Trauma to the oral cavity caused by dental procedures makes HAE patients particularly vulnerable to airway attacks. The frequency of HAE attacks is highly variable, with some patients having attacks several times per week and others very infrequently. Population studies have shown that the median number of attacks per month for patients is approximately one, and approximately 90% of patients have two or fewer attacks per month. Although life-threatening airway swelling is rare, at least half of HAE patients have experienced at least one such attack and airway attacks remain a major cause of mortality in HAE patients. The severity of attacks is unpredictable and not related to their underlying frequency. A patient with only one attack per year can nevertheless be at risk of suffering a laryngeal attack.

4

HAE is caused primarily by genetic defects or mutations in the gene that regulates C1inhibition and is an autosomal dominant disease, meaning that a defect in only one copy of the gene leads to symptoms and that it occurs at similar rates in both males and females. The most common cause of HAE is a defect or mutation in the gene responsible for the production of C1-INH. While HAE can result throughfrom the inheritance of a defective C1-INH gene from a parent, a number of cases also arise from novelspontaneous mutations. Patients with C1-INH-related disease are classified as Type 1 or Type 2; Type 1 is the most common form and results in low levels of circulating C1-INH and Type 2 results in production of a low function protein. An additional form of HAE, sometimes called normal C1-INH HAE, can occur in patients with normal levels of C1-INH for a variety of reasons including mutations in genes for Factor 12, plasminogen or angiopoetin. Moreover, bradykinin-induced acute attacks of angioedema can occur idiopathically in individuals for which a hereditary cause has not yet been identified. Excessive formation of bradykinin can also be caused by increased circulation of estrogens, reduced elimination of bradykinin, or through use of drugs such as ACE inhibitors.

C1-INH is a natural plasma-borne peptideprotein that functions asis an inhibitor of multiple serine proteases in both the complement and kallikrein kinin systems. C1-INH is the predominant physiological inhibitor of plasma kallikrein, and thereby suppresses the generation of bradykinin, a potent hormone produced by plasma kallikrein, that activates its receptors on blood vessels to increase vascular leakage. Uncontrolled plasma kallikrein activity leads to the tissue inflammation and edema that is the hallmark of HAE. Selective plasma kallikrein inhibitors and a bradykinin receptor antagonist are the hallmarks ofapproved therapies for HAE. As such, plasma kallikrein is a clinically validated target for HAE and previous studies have demonstrated that plasma kallikrein inhibition can both treat and prevent HAE attacks.

3

Current Treatments and Market opportunitiesOpportunities

There are a number of marketed and development stage therapeutics for HAE which provide evidence that inhibition of plasma kallikrein activity will give therapeutic benefit in HAE. Most relevantTakyzyro^® is ecallantidea monoclonal antibody against plasma kallikrein indicated for prophylaxis to prevent attacks of HAE. The prescribing information recommends subcutaneous administration every two weeks, though dosing at more extended intervals may be considered in some patients. Ecallantide (Kalbitor®) which is a small protein inhibitor of plasma kallikrein that is approved for treatment of acute attacks of HAE. While effective, ecallantide has been associated with cases of anaphylaxis and its approval by the U.S. Food and Drug Administration (“FDA”)FDA includes a black box warning limiting its administration to healthcare professionals. Other therapies employprovide C1-INH replacement to control plasma kallikrein levels. Marketed C1-INH replacement therapies include Cinryze® and Haegarda® for prophylaxis, and Berinert® for treatment of acute attacks, all of which are purified from human plasma, whereasand Ruconest® which is a recombinant product.product also for treatment of acute attacks. Icatibant (Firazyr®) is a synthetic peptide-based antagonist that blocks the activity of bradykinin.bradykinin and is indicated for treatment of acute attacks. All of these products are administered by injection, which is typically less convenient for patients and has the potential to reduce compliance. As a result of the lifelong nature of HAE and the challenges related to compliance.taking many of the injected therapies, patient surveys consistently indicate an overwhelming desire of patients for an oral therapy. We believe that a safe and effective oral agent has the potential to transform treatment for this disease. We also believe that opportunities exist for both acute and prophylaxisprophylactic treatments, and we intend to consider alldevelop drug candidates for both on-demand and prophylactic use, with the goal of our programs as potential therapiesproviding patients with a complete set of oral options to treat their disease.

We believe a further future market opportunity may exist in both segmentstreatment of normal C1-INH HAE. Estimates of the market.  Forsize of this reason,patient population vary widely, but we plan to evaluate multiple formulationsbelieve that the nature of normal C1-INH HAE disease may make prophylaxis less attractive for these patients than a safe and profiles of our programs as part of our clinical development strategy.rapidly effective on-demand plasma kallikrein inhibitor therapy.

Our Portfolio of HAE Programs

KVD818

Our strategy is the firstto evaluate and develop multiple oral molecules in pursuit of our portfoliobest-in-class therapies for HAE patients, with an initial focus on treatment of orally available plasma kallikrein inhibitors to progress toType 1 and Type 2 HAE. We have promoted multiple molecules into clinical testing. In common with other candidates it is a potenttesting and selective inhibitor of human plasma kallikrein that displays properties which we believe support its investigation in early clinical trials to assess its suitability to progress to trials in HAE patients. We are currently studying KVD818 in a first-in-human study in the UK that has explored multiple doses and formulations.  To date, we have demonstrated that KVD818 achieves exposures in subjects and has been generally well-tolerated. We plan to continue to explore the properties of KVD818 to support decisions on further development as well as to enhance our knowledge of HAE therapy and inform our portfolio strategy.

We are developingpursuing additional program candidates in order to expand the universe of properties and increase the likelihood of delivery of aone or more best-in-class treatmenttreatments for HAE. The first of these additional product candidates being evaluated in later stage clinical trials is KVD900. Consistent with our strategyKVD900 is in a Phase 2 clinical trial as a potential on-demand treatment for HAE attacks that is expected to complete in the second half of progressing multiple candidates, we are preparing this molecule2020. Our second oral treatment in development for clinical testing andHAE is KVD824. We plan to have enabledcommence a Phase 2 clinical trial in the first-in-human study before the endsecond half of the year. KVD900 is2020 intended to evaluate KVD824 as a potent inhibitor of plasma kallikrein displaying 50% inhibition with a concentration of 6nM, and shows very high selectivity against related proteases as shown in Table 1 below. Of particular note is that it is >6000 fold selective against tissue kallikrein (also called tissue kallikrein 1 or KLK1). This enzyme shares the same substrate as plasma kallikren and has been linked to effects on cardiac safety, making selectivity against it an important element of our design process.potential oral prophylactic treatment for HAE.

Table 1: Selectivity of KVD900 against human proteases related to plasma kallikrein.

In ongoing preclinical safety studies, KVD900 is rapidly and highly absorbed. In rats, plasma concentrations up to 30,000-fold IC50 have been obtained within one hour following dosing and maintained well above IC50 for at least 24 hours. In addition, in non-animal safety studies to date, KVD900 has shown a profile consistent with progression to clinical studies. For example, the potential for a compound to affect, or be affected by, the dosing of another drug (drug-drug interaction), can be investigated by looking at its impact on the enzymes responsible for metabolizing drugs. In these assays against cytochrome P450 enzymes, KVD900 is >1000 fold less potent than it is against plasma kallikrein.

45

ManufactureKVD900

The first clinical study of KVD900 has been completedwas a multi-part trial consisting of a single ascending dose phase, a formulation cross-over phase, and investigation of food effect in 84 healthy, male volunteers. Doses up to 600 mg were tested in this study using both capsule and tablet formulation, with the tablet as the intended formulation for future development. Data from the single ascending dose phase of the study showed that KVD900 tablets were rapidly absorbed into the bloodstream and achieved blood levels that we believe are sufficient for efficacy within as little as 10 minutes at the multi-kilogram scale to support preclinicalhigher dose levels, and clinical testing and multiple formulations have been developed, manufactured and dosed to primates establishing the feasibility of manufacture of clinically acceptable dose forms. These dose forms are designed to enable variable dosing regimens.

In parallel with progression of KVD900, we are not only focused on expansion of our proprietary compound portfolio but also our profiling techniques to enable a collection of molecules differentiated by both chemical structure and properties, maximizing the chance of discovering and progressing best-in-class treatments for HAE. Our scientific team has demonstrated the ability to consistently generate new candidate molecules, enabling a rigorous selection process that only advances programs that meet strict internal criteria. As part of this effort, we have developed assays that provide proprietary insights intoessentially complete inhibition of plasma kallikrein supporting selectionwas observed within 30 minutes. Food effect studies showed little impact of product candidates at anfed state on the pharmacodynamic profile of KVD900 tablets, delivering 95% inhibition within 30 minutes.

There were no severe adverse events (“SAE”) reported. On active treatment, 22 of the 23 reported adverse events (“AE”) were mild; a moderate AE of headache was reported in the 10 mg dose group and considered unrelated to treatment. There was one gastrointestinal AE reported during the study which occurred three days post dosing and was considered unrelated to treatment. There were no clinically significant changes in vital signs, electrocardiogram (“ECG”) or safety laboratory findings. Single doses of KVD900 up to 600 mg were generally well-tolerated in this study.

Evidence from studies using therapies approved for the treatment of acute HAE attacks shows that earlier stagetreatment has a powerful impact on the efficacy outcomes. Despite clear evidence that may have a higherearly treatment markedly reduces attack duration, treatment is often delayed. In one outcome study of 207 HAE attacks, attack duration was 2.75-fold shorter when treatment was administered within 1 hour of attack onset (6.1 hours versus 16.8 hours (p<0.001)), yet treatment was administered more than 1 hour after attack onset in nearly 60% of attacks, and for 30% of attacks treatment was administered more than five hours after attack onset. We believe this delay in administration is due to many factors including the inconvenience of preparation and administration as well as the discomfort of injectable therapies. An oral therapy has the potential to overcome these and lower the barrier for treatment for patients. The combination of the rapid uptake of KVD900 to very high blood levels and the likelihood of demonstratingearlier dosing by patients, could lead to much better disease management and prevention of attacks reaching the critical stage of significant swelling and discomfort. We therefore believe that a safe, oral on-demand treatment has the potential to become a preferred alternative for patients currently using injectable treatments, including both acute and prophylactic therapies.

Based upon the results of the Phase 1 study, we are currently dosing KVD900 in a Phase 2 clinical success.trial intended to evaluate KVD900 as an on-demand treatment for HAE attacks. This trial is investigating the safety and efficacy of KVD900 in at least 50 Type 1 and Type 2 HAE patients, conducted at approximately 20 sites in Europe and the U.S. During the first part of this two-part study, patients receive a single 600 mg dose of KVD900 while not having an attack to explore pharmacokinetic and pharmacodynamic profiles. All patients then enter part two of the study, which is a randomized, blinded, crossover investigation of the efficacy of KVD900 versus placebo. Each patient treats two attacks with trial medication, one with KVD900 and one with placebo in a randomized, blinded sequence. Following randomization, patients are given the first treatment of the sequence to take home. At the onset of an attack, patients call their doctor to confirm the attack has started and take their treatment within one hour of the recorded onset. Patients then return to the clinic to receive the alternative treatment and proceed to treat a second attack in an identical manner.  Patients have access to their normal, acute treatment as required. The primary endpoint is time to use of standard of care and the secondary endpoints are comprised of several different symptom severity scores. Data is expected from this trial in the second half of 2020.

In the first calendar quarter of 2020 we completed a multiple dose study of KVD900 that was designed to explore the safety and pharmacokinetics of repeat dosing over differing timeframes. A numbertotal of these earlier candidates42 healthy male and female subjects were included in the study, consisting of 30 active and 12 placebo. Study subjects received a total dose of 1800mg KVD900 given as 3x600mg doses at intervals of 8 hours (6 active, 2 placebo), 4 hours (6 active, 2 placebo) or 2 hours (18 active and 8 placebo).

6

The study showed that dosing every two hours achieved maximum concentrations of KVD900 approximately three times the maximum concentration of a single 600mg dose. All reported AEs were mild and resolved without intervention. The incidence of AEs was similar between KVD900-treated and placebo-treated cohorts. The protocol also included continuous cardiac monitoring of subjects. There was no clinically significant effect of KVD900 treatment on any ECG parameters.

Based upon this study, we believe there are being profiledno concerns about the potential for progressionmultiple dosing of KVD900, including on short intervals.

KVD824

In 2019, we announced the initiation of a first-in-human study for our next clinical stage oral plasma kallikrein inhibitor, KVD824. This study included single ascending dose, multiple ascending dose, and food effect cohorts, at dose levels ranging from 10 mg to scale-up manufacture1,280 mg. The single ascending dose part of the study demonstrated dose-dependent increases in exposure, achieving mean C_max concentrations of over 9,000 ng/ml at the highest dose studied. The multiple ascending dose part of the study was conducted at doses from 80 mg up to 640 mg twice per day for 5 days. Exposures were consistent between days 1 and entry into formal5 at all dose levels. Examination of the blinded safety studies.data across all cohorts, both single and multiple dose, revealed no significant changes in vital signs, ECG or safety laboratory results, there were no dose-limiting tolerability or safety signals reported and all subjects completed the study.

Based on preclinical and clinical work conducted, we believe that KVD824 can achieve the profile necessary for a twice-daily treatment for prevention of HAE attacks, which also remains an area of high unmet need. We are currently undertaking additional clinical studies to optimize the formulation and dosing profile of KVD824. Following that activity, we plan to commence a Phase 2 clinical trial intended to evaluate KVD824 as a potential oral prophylactic treatment for HAE in the second half of 2020.

Diabetic Macular Edema

Disease Overview

DME occurs as a resultcomplication of diabetes and is caused by the breakdown of the endothelial barrier function in the retina, resulting in the accumulation of fluid in the macula. This leads to edematous thickening of the macula region of the retina and loss of visual acuity, potentially leading to blindness. DME is a major complication associated with diabetes, affecting an estimated 26% of type 1 diabetic patients after 14 years of the disease, and an estimated 29% withinover their lifetime; 17% of type 1 diabetic patients were estimated to develop clinically significant macular edema withinover their lifetime. Approximately 900,000 patients in the United States have active DME and are at serious risk of vision loss, according to a study published in 2015.

The current standard of care for DME in the United States is therapy directed against VEGF, a hypoxia-induced protein that stimulates the growth of blood vessels in the retina. FDA approved anti-VEGF therapies for DME are ranibizumab (Lucentis^®) and aflibercept (Eylea^®). Both of these products are administered via intravitreal injection at roughly monthly intervals. In addition to treatment by these two products, a large fraction of patients is treated with bevacizumab (Avastin^®), another therapy that works through the same mechanism of binding to VEGF but has not been approved for ophthalmic use. Bevacizumab is priced based on its application in oncology and off-label use by retinal specialists typically results in treatment at a fraction of the cost seen with both ranibizumab and aflibercept. Patients are also treated with laser therapy in some circumstances.

A number of other drug therapies are used to treat DME, including corticosteroid anti-inflammatories such as triamcinolone acetonide, fluocinolone, and dexamethasone. These drugs also are administered via intravitreal injection. Sustained release versions of fluocinolone (Illuvien^®) and dexamethasone (Ozurdex^®) have recently been approved for use in DME, substantially reducing the number of injections required to obtain and maintain clinical responses. These novel corticosteroid formulations led to 15-letter improvements in visual acuity in approximately 20-30% of patients. Corticosteroid treatment, however, is associated with a dramatic increase in cataract formation and a rise in intraocular pressure, reducing the attractiveness of these agents as potential therapies in many patients.

7

In a recent large, multi-center clinical trial in DME patients, anti-VEGF therapy led to approximately 20% of patients improving their visual acuity by 15 letters or more after a median of 9 or 10 intravitreal injections, leaving a significant portion of the patients with inadequate control of their disease. Further, in one study conducted for an approved VEGF inhibitor,anti-VEGF, 40% of patients displayed nominimal improvement in visual improvementacuity following anti-VEGF therapy after months of treatment. Unfortunately, even for those patients that do initially respond well to anti-VEGF therapy, their disease recurs within several months of treatment cessation, thus requiring extended rounds of intravitreal injections to achieve and maintain a clinical response.

Research into the biology underlying DME led by our scientific team has identified plasma kallikrein as a potential novel target for this indication. They foundKalVista scientists were the first to identify increased concentrations of plasma kallikrein in vitreous fluid samples obtained from individuals with diabetic retinopathy and DME and have pioneered the development of plasma kallikrein inhibitors for the treatment of this disease. Our group has established preclinical models to investigate the role of plasma kallikrein in both VEGF-independent and VEGF-mediated DME as well as for underlying pathologies associated with diabetic retinopathy. We have used this in-depth knowledge of the plasma kallikrein system, diabetic retinopathy, and clinical ophthalmology to evaluate the effects of orally available plasma kallikrein inhibitors for the treatment of DME. Using a pharmacology platform, originally developed and validated using plasma kallikrein knockout mice at the Joslin Diabetes Center and Harvard Medical School, we have screened and characterized the pharmacodynamic effects of KalVista’s oral plasma kallikrein inhibitors. We were the first to demonstrate that plasma kallikrein levels were higher in vitreous fluid from DME patients compared to patients without diabetic retinopathy. They further found that targeted disruption ofinhibition and gene knockout are protective against VEGF-induced retinal edema.

Using subcutaneously implanted osmotic pumps we have quantified the gene for plasma prekallikrein or the administration of a small molecule plasma kallikrein inhibitor led to decreases

5

in retinal thickening in animal retinopathy models. We believe that inhibitiondose-dependent pharmacodynamic effect of plasma kallikrein provides an opportunity to address DME through a novel mechanism that is independentinhibitors on VEGF-induced retinal edema and have correlated these effects with both plasma and retinal drug concentrations. Moreover, using gavage we have characterized the pharmacokinetic and pharmacodynamics effects of orally administered plasma kallikrein inhibitors on retinal edema. These models and protocols have enabled detailed characterization and comparison of the current pathways targeted by anti-VEGF and steroid therapies.effects of multiple oral plasma kallikrein inhibitors on retinal edema.

Our DME Development ActivitiesKVD001

Our first potential DME therapy is KVD001. KVD001 is a potent inhibitor of human plasma kallikrein with an IC50a Ki of approximately 10nM10 nM and a high degree of selectivity against a broad range of other proteases. We have developed KVD001 for intravitreal injection because we believe that trials using this delivery modality will provide a relatively early and direct proof of concept for its product candidateproof-of-concept since the molecule is delivered directly to the site of edema. Since other products such as anti-VEGF therapies are also delivered intravitreally, we believe this will be accepted by both physicians and patients and will not lead to any competitive disadvantages. Another inherent advantage of intravitreal administration is that there is very limited systemic exposure, thus reducing potential systemic safety concerns.

We have completed an open-label single ascending dose Phase 1 trial of KVD001 in 14 DME patients, all of whom had previously received anti-VEGF treatment. This trial investigated three doses of KVD001: 1, 3, and 10 µg/eye. While this trial was not powered to show statistically significant improvements in visual acuity, a pooled analysis of all patients and all doses demonstrates a trend toward improvement over time, with the mean change in visual acuity following a single dose of KDV001 of approximately four letters at 84 days following treatment. No adverse events were considered related to study drug at the low (n=3 patients) or high (n=8 patients) doses. At the mid-dose (n=3 patients) two adverse events were considered related to the study drug although both events were also considered related to study procedures. Those study procedures consist of intravitreal injection, which includes inherent risks such as intraocular inflammation, sterile and culture positive endophthalmitis, corneal decomposition, retinal detachment, and retinal tear. The first of these adverse events was a case of eye inflammation considered of mild intensity and possibly related to study drug and study procedure. The second was a case of increased intraocular pressure considered of severe intensity and related to study procedure and probably related to study drug. These results represent the first investigation of clinical application of plasma kallikrein inhibitors in DME and are an encouraging sign of the potential of KVD001, and plasma kallikrein inhibitors in general, in this indication.

Following this study,In December 2019 we conducted further preclinical testing to enable multiple monthly injections of KVD001, as well as allow concurrent treatment with both KVD001 and anti-VEGF therapies. We believe the ability to provide patients with multiple injections and longer duration of treatment may further enhance efficacy beyond that observed in the single dose Phase 1 trial. We are currently planningannounced data from a Phase 2 trial for KVD001. This study evaluated the safety and efficacy of two dose levels (3μg and 6μg) of KVD001 administered by intravitreal injectioncompared to a sham control in 129 DME patients that will consist of four injections over a period of three months, and will include a control group. We intend to select patients who havehad previously been treated with anti-VEGF therapies but have experienced insufficient response.therapy, and still had significant edema and reduced visual acuity. The study was conducted at 38 sites in the United States and consisted of four intravitreal injections or sham administered over three months with a three month follow up period. The primary outcome will be an increaseefficacy endpoint of change in best corrected visual acuity (“BCVA”) at 16 weeks compared to sham was not met. The 6μg dose showed a difference of +2.6 letters versus sham, which was not statistically significant (p=0.223), and the 3μg dose showed a difference of +1.5 letters (p=0.465). No significant differences were observed in the secondary endpoints of central subfield thickness or the diabetic retinopathy severity scale. KVD001 was generally safe and well tolerated with no drug-related serious adverse events. In the overall study population, KVD001 demonstrated a protection against vision loss. In the sham treated group 54.5% of patients experienced a reduction in vision compared to 32.5% in the 6μg dose (p=0.042). The study also included a pre-specified subgroup analysis investigating the impact of baseline visual acuity on response. After excluding those patients with the most severe vision loss (visual acuity of <55 letters at baseline), the remaining 70% of the total patient population showed a difference in BCVA compared to sham of 4.9 letters (p=0.056) at the 6μg dose. As many as 40% of DME patients may not respond adequately to VEGF inhibitor treatment, and we believe that KVD001 may offer these patients protection against further vision loss.

8

The KVD001 program and our planned future oral DME programs were subject to an Option Agreement with Merck. Under the terms of the agreement, Merck had a defined period following receipt of a clinical data package including the final injection.results of the Phase 2 trial for KVD001, to determine whether to exercise its option to acquire KVD001 and to maintain its option on the oral DME programs. In February 2020, Merck notified us that those options would not be exercised. As a result, we have retained all the rights and intellectual property that were subject to the Option Agreement, and Merck has no further rights or obligations to us, and we have no obligations to Merck. We anticipatecontinue to believe that the results of the KVD001 Phase 2 study suggest a patient population in which plasma kallikrein inhibition may yield vision benefits, and we intend to explore further development opportunities for this trial will last approximately 12 months and currently plan to launch the trial later in 2017.oral DME programs over time.

Potential for Systemic DeliveryOral DME Therapies

In parallel with the clinical development of itsour intravitreal product candidate KVD001, we intend to identify and advance plasma kallikrein inhibitors as oral therapies for DME. We believe that a safe and effective oral therapy has the potential to transform the treatment of DME which to-dateto date has been dominated by drug therapies that must be injected intravitreally. Future trials in DME with oral plasma kallikrein inhibitors may focus on the treatment of earlier stage disease, a stage at which intravitreal injections are not a desirable solution due to their inherently invasive nature and consequent risk of adverse reactions.

Additional Earlier Stage Programs

In addition to our clinical stage candidates, we are continually conducting preclinical development work on multiple additional drug candidates in order to achieve our goal of creating best-in-class oral plasma kallikrein inhibitors for HAE therapy, as well as for the treatment of DME. We currently have multiple additional compounds in preclinical testing. We routinely terminate earlier stage programs for any number of reasons that lead us to believe they will not achieve our objectives, and our medicinal chemistry team is constantly developing new potential candidates. We believe this capacity to develop large numbers of candidate compounds is key to success in drug development and represents a core strategic asset of the Company.

Competition

In treating HAE, we expect to face competition from several FDA-approved therapeutics, including Takhzyro and Cinryze, marketed by ShireTakeda Pharmaceuticals Company Limited (“Takeda”) in the United States and Europe for the prevention of angioedema attacks in adults and adolescents; Firazyr, marketed by ShireTakeda in the United States, Europe and certain other geographic territories for the treatment of acute angioedema attacks in adult patients; Kalbitor, an injectable plasma kallikrein inhibitor marketed by ShireTakeda for the resolution of acute attacks in adolescent and adult HAE patients; Berinert, and Haegarda, marketed by CSL Behring

6

for the prophylaxis and treatment of acute abdominal, facial or laryngeal attacks of HAE in adults and adolescents;adolescents, and Haegarda, also marketed by CSL Behring, for prophylaxis; and Ruconest, marketed by Pharming Group for the treatment of acute angioedema attacks in adult patients. We are also aware of two companies that are engaged in the clinical development of other product candidates, including a plasma kallikrein monoclonal antibody (SHP643, from Shire) and an oral plasma kallikrein inhibitor (BCX7353, from Biocrystinhibitors for use as prophylaxis in HAE patients, BioCryst Pharmaceuticals, ) for the treatment of HAE patients.Inc. and Attune Pharmaceuticals, Inc.

In treating DME, we expect to face competition from several FDA-approved therapeutics, including anti-VEGF therapies Lucentis, marketed by Roche Holding AG (“Roche”) and Novartis International AG (“Novartis”), Eylea, marketed by Regeneron Pharmaceuticals (“Regeneron”), and off labeloff-label use of Avastin from Roche. We also face competition from various corticoid steroids including extended release formulations lluvien, marketed by Alimera Sciences, Inc., and Ozurdex, marketed by Allergan.Allergan plc. We further expect to compete with generic corticosteroids such as fluocinolone acetonide, fluocinolone, and dexamethasone and we are aware of a number of other companies that have product candidates in early clinical trials, including Novartis, GlaxoSmithKline plc, Boehringer Ingelheim, Roche, Regeneron, Ohr Pharmaceutical, Inc., Aerpio Therapeutics, Verseon, ThrombogenicsOxurion NV and Allegro Ophthalmics. Verseon and Thrombogenics areOphthalmics, LLC. We also developingbelieve that Oxurion continues to develop an intravitreally delivered plasma kallikrein inhibitorsinhibitor for the treatment of DME by either topical administration (Verseon) or intravitreal injection (Thrombogenics).DME.

9

Intellectual Property

Our success substantially depends on our ability to obtain and maintain patents and other forms of intellectual property rights for our product candidates, methods used to manufacture our product candidates and methods for treating patients using our product candidates, as well as our ability to preserve our trade secrets, to prevent third parties from infringing upon our proprietary rights and to operate without infringing upon the proprietary rights of others. As of April 30, 2017,2020, we are the owner of fivethirteen U.S. patents expiring between 2023 and 2034,2037, absent any extensions, as well as fournine pending U.S. patent applications and fivefour pending U.S.US provisional applications. Any patents issuing from the foregoing owned or licensed U.S. patent applications are expected to expire in between 2034 and 2038, absent any adjustments or extensions. As of April 30, 2017,2020, we owned a total of 89165 pending foreign applications and 89257 patents in multiple jurisdictions. Any issued patents, or those issuing from these foreign patent applications, are expected to expire between 2023 and 2037,2039, absent any adjustments or extensions. As of April 30, 2017,2020, we also controlled threetwelve pending international applications that, if issued, are expected to expire in 2035,between 2038 and 2040, absent any adjustments or extensions. The chemical structures of KVD001 and KVD818 are included in composition of matter applications.

KVD001 is covered by U.S. patents, U.S. patent applications and patentU.S. provisional applications covering composition of matter, methods of treatment, solid form and clinical formulations. The anticipated expiration dates of these patents, patents arising from applications, or patents arising from applications claiming priority from provisional applications, range from 2032 to 2040, absent any adjustments or extensions. KVD001 is also covered by European patents with the European Patent Office (“EPO”), European patent applications, and an additional expected European patent application claiming priority from a U.S. provisional application, covering composition of matter, medical use, solid form and clinical formulations. The anticipated expiration dates of these European patents, or European patents arising from applications, range from 2032 to 2034,2040 absent any adjustments or extensions.

Our portfolio of oral plasma kallikrein inhibitors, including KVD818KVD900 and KVD900,KVD824, is covered by U.S. patents, U.S. patent applications and U.S. provisional applications, and pending international applications covering composition of matter, and methods of treatment, solid form and anyclinical formulations and the anticipated expiration dates of these patents, patents arising from those applications, are expected to expire betweenor patents arising from applications claiming priority from provisional applications range from 2034 to 2035,2040, absent any adjustments or extensions. NewOur portfolio of oral plasma kallikrein inhibitors, including KVD900 and KVD824, is also covered by EPO patents, European patent applications, and expected European patent applications claiming priority from U.S. provisional applications, directed to solid forms and further compositionscovering composition of matter, were filed in 2016medical use, solid form and 2017.

In addition, we own a portfolioclinical formulations. The anticipated expiration dates of these European patents, and patentor European patents arising from applications, not relatedrange from 2034 to the former Carbylan Therapeutics product candidates following the share purchase transaction with KalVista Pharmaceuticals Limited. As of April 30, 2017, this included seven granted U.S. patents expiring between 2028 and 2032, as well as three pending U.S. patent applications which would be expected to expire between 2030 and 2034. Also as of April 30, 2017, this portfolio included 22 pending foreign applications and 31 foreign granted patents.2040 absent any extensions.

Patents extend for varying periods according to the date of patent filing or grant and the legal term of patents in various countries where patent protection is obtained. The actual protection afforded by a patent, which can vary from country to country, depends on the type of patent, the scope of its coverage and the availability of legal remedies in the country.

We also use other forms of protection, such as trademark, copyright and trade secret protection for our intellectual property, particularly where we do not believe patent protection is appropriate or obtainable. We require our employees, consultants, contractors and other advisors to execute nondisclosure and assignment of invention

7

agreements upon commencement of their respective employment or engagement. In addition, we also require confidentiality or service agreements from third parties that receive confidential information or materials.

Government Regulation and Product Approval

Government authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions, including the United Kingdom and European Union, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, and import and export of pharmaceutical products. The processes for obtaining regulatory approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.

10

FDA approval process

In the United States, pharmaceutical products are subject to extensive regulation by the FDA. The Federal Food, Drug, and Cosmetic Act, and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as clinical hold, FDA refusal to approve pending new drug applications (“NDA”), warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, and criminal prosecution.

Pharmaceutical product development for a new product or certain changes to an approved product in the United States typically involves preclinical laboratory and animal tests, the submission to the FDA of an Investigational New Drug (“IND”), application, which must become effective before clinical testing may commence in the United States, and adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug for each indication for which FDA approval is sought. Satisfaction of FDA approval requirements prior to marketing a pharmaceutical product typically takes many years and the actual time required may vary substantially based upon the type, complexity, and novelty of the product or disease.

Preclinical studiestests include laboratory evaluation of product chemistry, formulation and manufacturing process, as well as toxicity studies in animals to assess the characteristics and potential safety and efficacy of the product. The conduct of the preclinical tests must comply with federal regulations and requirements, including good laboratory practices and good manufacturing practice (“cGMP”). The results of preclinical testing are submitted to the FDA as part of an IND along with the information on product chemistry, manufacturing and controls, and a proposed clinical trial protocol. Long term preclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue after the initial IND is “opened” (i.e. effective). For the initial IND submission, a 30-day waiting period after the submission of the IND is required prior to the commencement of the clinical trial in humans. If the FDA has neither commented on nor questioned the IND within this 30-day period, the clinical trial proposed in the IND may begin. For subsequent clinical trial protocols submitted to the IND, there is no mandated review time for FDA. Longer duration pre-clinical studies, for example animal tests of reproductive toxicology and carcinogenicity, if required, will be conducted and submitted to the IND throughout the development of the product until sufficient data is available to support submission of an NDA. Clinical trials involve the administration of the investigational drug to healthy volunteers or patients under the supervision of a qualified investigator. Clinical trials must be conducted: (i) in compliance with federal regulations; (ii) in compliance with good clinical practice (“GCP”), an international standard designed to protect the rights, safety and well-being of trial subjects and to ensuredefine the integrityroles of the clinical trial data generated;sponsors, administrators and monitors; as well as (iii) under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. Each protocol involving testing on U.S. patients and subsequent protocol amendments must be submitted to the FDA as part of the IND.

The FDA may order the temporary, or permanent, discontinuation of a clinical trial at any time, or impose other sanctions if it believes that the clinical trial either is not being conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients. The trial protocol and informed consent information for patients in clinical trials must also be submitted to an institutional review board (“IRB”), for approval prior to the start of the clinical trial. An IRB may also orderrequire the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRB’s requirements, or may impose other conditions.

8

Clinical trials to support NDAs for marketing approval are typically conducted in three sequential phases, but the phases may overlap. In Phase 1, the initial introduction of the drug into healthy human subjects or patients, the product is tested to assess metabolism, pharmacokinetics, pharmacological actions, side effects associated with increasing doses, and, if possible, early evidence on effectiveness. Phase 2 usually involves trials in a limited patient population to determine the effectiveness of the drug for a particular indication, optimization of thedosage tolerance and optimum dose, and to identify common adverse effects and safety risks. If a compound demonstrates evidence of effectiveness and an acceptable safety profile in Phase 2 evaluations, Phase 3 trials are undertaken to obtain the additional information about clinical efficacy and safety in a larger number of patients, typically at geographically dispersed clinical trial sites, to permit the FDA to evaluate the overall benefit risk relationship of the drug and to provide adequate information for the labeling of the product. In most cases, the FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the efficacy of the drug. A single Phase 3 trial with other confirmatory evidence may

11

be sufficient in rare instances where the trial is a large multicenter trial demonstrating internal consistency and a statistically persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or prevention of a disease with a potentially serious or life-threatening outcome and confirmation of the result in a second trial would be practically or ethically impossible.

The manufacturer of an investigational drug in a Phase 2 or 3 clinical trial for a serious or life- threatening disease is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for expanded access to such investigational drug.

After completion of the required clinical testing, an NDA is prepared and submitted to the FDA. FDA approval of the NDA is required before marketing of the product may begin in the United States. The NDA must include the results of all preclinical and clinical data, including pharmacology and toxicology results, and the results of other testing and a compilation of data relating to the product’s chemistry, manufacture and controls. The cost of preparing and submitting aan NDA is substantial. The submission of most NDAs is additionally subject to a substantialan application user fee, and once approved, the NDA is also subject to annual product and establishment user fees. These fees are typically increased annually. The FDA has 60 days from its receipt of an NDA to determine whether the application will be accepted for filing based on the agency’s threshold determination that it is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth review. The FDA has agreed to certain performance goals in the review of NDAs. Most such applications for standard review drug products are reviewed within ten months of the date the FDA files the NDA; most applications for priority review drugs are reviewed within six months of the date the FDA files the NDA. Priority review can be applied to a drug that the FDA determines has the potential to treat a serious or life-threatening condition and, if approved, would be a significant improvement in safety or effectiveness compared to available therapies. The review process for both standard and priority review may be extended by the FDA for three additional months to consider certain late-submitted information, or information intended to clarify information already provided in the submission.

After the FDA evaluates the NDA and the compliance of manufacturing facilities with GMP, it issues either an approval letter or a complete response letter. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing, or information, in order for the FDA to reconsider the application. If, or when, those deficiencies have been addressed to the FDA’s satisfaction, the FDA will issue an approval letter. The FDA has committed to reviewing such additional data in two or six months depending on the type of information included. An approval letter authorizes commercial marketing of the drug with specific prescribing information for the indication being supported. As a condition of NDA approval, the FDA may require a risk evaluation and mitigation strategy (“REMS”) if it is considered that additional measures are needed to ensure that the benefits of the drug outweigh the potential risks. REMS can include the use of medication guides and communication plans for healthcare professionals, and elements to assure safe use (“ETASU”). ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The requirement for a REMS can materially affect the potential market and profitability of the product. Moreover, a condition of the NDAproduct approval may require substantial post-approval testing and surveillance to monitor the product’s safety or efficacy.

Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing. Changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of a new NDA or NDA supplement before the change can be implemented. An NDA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing NDA supplements as it does in reviewing NDAs.

9

Foreign clinical studies to support an NDA

The FDA will accept as support for marketing approval of a product (NDA) well-designed, well-conducted, clinical studies conducted outside of the United States if the studies have been conducted in accordance with the exact same standards of GCP, as required in the United States, and the protocol was submitted to the IND. FDA may validate the data from the study through an onsite inspection, if necessary. Clinical studies conducted outside the United States are subject to the same rigorous regulatory controls as the United States (see “— Europe / rest of world government regulation” below).

12

A sponsor or applicant who wishes to rely on a non-IND foreign clinical study to support an IND must submit the following supporting informationdocumentation to the FDA to demonstrate that thecompliance with GCP. The FDA may also request to inspect a foreign clinical study conformedsite to GCP:

Orphan drug designation

Under the Orphan Drug Act, the FDA may grant orphan drug designation to drug products intendeda compound with the potential to treat a rare disease or condition. This is defined ascondition, generally a disease or condition that affects fewer than 200,000 individuals in the United States, or if it affects more than 200,000 individuals in the United States, there is no reasonable expectation that the cost of developing and making a product available in the United States for such disease or condition will be recovered from sales of the product.

A request for orphanOrphan drug designation must be submitted and approvedrequested prior to submitting an NDA. After the FDA grants orphan drug designation, the generic identity of the drug productcompound 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 of an NDA. The first NDA applicant to receive FDA approval for a drug product containing a particular active moiety to treat a particular disease withcompound that has FDA orphan drug designation is entitled to a seven-year exclusive marketing period in the United States for that drug product for that orphan indication. During the seven-year exclusivity period, the FDA may not approve any other applications to market a drug product containing the same active moiety for the same disease, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity. A product is clinically superior if it is safer, more effective or makes a major contribution to patient care. Orphan drug exclusivity does not prevent the FDA from

10

approving a drug product containing a different active moiety for the same disease or condition, or the same drug product for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA user fee.

Fast Track Designation and Priority Review

The FDA is required to facilitate the development, and expedite the review, of drugs that are intended for the treatment of a serious or life-threatening disease or condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for the condition. Fast track designation may be granted for products that are intended to treat a serious or life-threatening disease or condition for which there is no effective treatment and preclinical or clinical data demonstrate the potential to address unmet medical needs for the condition. Fast track designation applies to both the product and the specific indication for which it is being studied. Any product submitted to FDA for marketing, including under a fast track program, may be eligible for other types of FDA programs intended to expedite development and review, such as priority review.

Priority review may be granted for products that are intended to treat a serious or life-threatening condition and, if approved, would provide a significant improvement in safety and effectiveness compared to available therapies. FDA will attempt to direct additional resources to the evaluation of an application designated for priority review in an effort to facilitate the review.

Disclosure of clinical trial information

Sponsors of clinical trials of FDA-regulated products, including drugs, are required to register and disclose certain clinical trial information.information on the website www.clinicaltrials.gov. Information related to the product, patient population, phase of investigation, trial sites and investigators, and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to discuss the results of their clinical trials after completion. Disclosure of the results of these trials can be delayed untilin certain circumstances for up to two years after the new product or new indication being studied has been approved.date of completion of the trial. Competitors may use this publicly available information to gain knowledge regarding the progress of clinical development programs.programs as well as clinical trial design.

13

Pediatric information

Under the Pediatric Research Equity Act (“PREA”) NDAs or supplements to NDAs must contain data 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 drug product is safe and effective. A Pediatric Submission Plan (“PSP”) must be submitted toThe FDA for review at the latest 60 days following the End of Phase 2 meeting. The PSP will include a full pediatric clinical development plan, or a request formay grant full or partial waiver,waivers, or a deferral,deferrals, for conducting pediatric clinical trialsubmission of data. The FDA reviews and approves the PSP, or will request amendments to the plan. Unless otherwise required by regulation, PREA does not apply to any drug product for an indication for which orphan designation has been granted.

Post-approval requirements

Once an NDA is approved, a product will be subject to certain post-approval requirements. For instance, the FDA closely regulates the post-approval marketing and promotion of drugs, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet. Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved labeling.

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

Other U.S. healthcare laws and compliance requirements

In the United States, our activities are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including but not limited to, the Centers for Medicare and Medicaid Services (“CMS”), other divisions of the U.S. Department of Health and Human Services (such as the Office of Inspector General), the U.S. Department of Justice (“DOJ”), and individual U.S. Attorney offices within the DOJ, and state and local governments. For example, sales, marketing and scientific/educational grant programs may have to comply with the anti-fraud and abuse provisions of the Social Security Act, the federal false claims laws, the privacy and security provisions of the Health Insurance Portability and Accountability Act (“HIPAA”), and similar state laws, each as amended, as applicable.

11

The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering, recommending or arranging for the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term remuneration has been interpreted broadly to include anything of value. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, andand/or formulary managers on the other. There are a number of statutory exceptions and regulatory safe harbors protecting somecertain common activities from prosecution.prosecution or other regulatory sanctions. The exceptions and safe harbors are drawn narrowly and practices that involve remuneration that may be alleged to be intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances. Our practicesPractices may not in all cases meet all of the criteria for protection under a statutory exception or regulatory safe harbor. In addition, the statutory exceptions and regulatory safe harbors are subject to change.

14

Additionally, the intent standard under the Anti-Kickback Statute was amended by the Patient Protection and Affordable Care Act, (“ACA”as amended by the Health Care and Education Affordability Reconciliation Act (collectively, the “ACA”), to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the ACA codified case law that a claim including items or services resulting from a violation of the federal Anti- KickbackAnti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act (discussed below).

The civil monetary penalties statute imposes penalties against any person or entity that,who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.

Federal false claims and false statement laws, including the federal civil False Claims Act, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment to, or approval by, the federal healthcare programs, including Medicare and Medicaid,government or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property presented to the U.S. government. Recently, several pharmaceuticalIn addition, manufacturers can be held liable under the civil False Claims Act even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims. Pharmaceutical and other healthcare companies have been prosecuted under these laws for, among other things, allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of the product for unapproved, and thus generally non-reimbursable, uses.uses and purportedly concealing price concessions in the pricing information submitted to the government for government price reporting purposes.

HIPAA created additional federal criminal statutes that prohibit among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any healthcare benefit program, including private third-party payors willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. LikeSimilar to the Anti-Kickback Statute, the ACA amended the intent standard for certain healthcare fraud statutes under HIPAA such that a person or entity no longer needsdoes not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

Also, many states have similar fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Additionally, to the extent that any of our products are sold in a foreign country, we may be subject to similar foreign laws.

We may be subject to dataData privacy and security regulations by both the federal government and the states in which it conducts business.business is conducted may also be applicable. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), and its implementing regulations, imposes requirements relating to the privacy, security and transmission of individually identifiable health information. HIPAA requires covered entities to limit the use and transmission of individually identifiable health information. HIPAA requires covered entities to limit the use and disclosure of protected health information to specifically authorized situations, and requires covered entities to implement security measures to protect health information that they maintain in electronic form. Among other things, HITECH makesmade HIPAA’s privacy and security standards directly applicable to business associates, independent contractors or agents of

12

covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, many state laws govern the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

15

Additionally, the federal Physician Payments Sunshine Act within the ACA, and its implementing regulations, require that certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) report annually to CMS information related to certain payments or other transfers of value made or distributed to physicians and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate family members. Moreover, the Drug Supply Chain Security Act imposes new obligations on manufacturers of pharmaceutical products related to product tracking and tracing. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products.

In order to distribute products commercially, we must comply with state laws that require the registration of manufacturers and wholesale distributors of drug products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers or distributors have no place of business within the state. Some states also impose requirements on manufacturers and distributors to establish the pedigree of product in the chain of distribution, including some states that require manufacturers and others to adopt new technology capable of tracking and tracing product as it moves through the distribution chain. Several states have enacted legislation requiring pharmaceutical and biotechnology companies to establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities, and/or register their sales representatives, as well as to prohibit pharmacies and other healthcare entities from providing certain physician prescribing data to pharmaceutical and biotechnology companies for use in sales and marketing, and to prohibit certain other sales and marketing practices. AllCertain local jurisdictions also require drug manufacturers to report information related to payments and other transfers of ourvalue to physicians and other healthcare providers or marketing expenditures. Sales and marketing activities are also potentially subject to federal and state consumer protection and unfair competition laws.

If our operations are found to be in violation of any of the federal and state healthcare laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including without limitation, significant civil, criminal and/or administrative penalties, damages, fines, disgorgement, exclusion from participation in government programs, such as Medicare and Medicaid, imprisonment, injunctions, private “qui tam” actions brought by individual whistleblowers in the name of the government, or refusal to allow us to enter into government contracts, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

Coverage, pricing and reimbursement

Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we obtain regulatory approval. In the United States and markets in other countries, sales of any products for which it receiveswe receive regulatory approval for commercial sale will depend, in part, on the extent to which third-partythird party payors provide coverage, and establish adequate reimbursement levels for such products. In the United States, third-partythird party payors include federal and state healthcare programs, private managed care providers, health insurers and other organizations. The process for determining whether a third-partythird party payor will provide coverage for a product may be separate from the process for setting the price of a product or for establishing the reimbursement rate that such a payor will pay for the product. Third-partyThird party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the FDA-approved products for a particular indication. Third-partyThird party payors are increasingly challenging the price, examining the medical necessity and reviewing the cost-effectiveness of medical products, therapies and services, in addition to questioning their safety and efficacy. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of its products, in addition to the costs required to obtain the FDA approvals. Our product candidates

13

may not be considered medically necessary or cost-effective. A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. Adequate third-partythird party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on its investment in product development.

16

Different pricing and reimbursement schemes exist in other countries. In the EU, governments influence the price of pharmaceutical products through their pricing and reimbursement rules and control of national health care systems that fund a large part of the cost of those products to consumers. Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost effectiveness of a particular product candidate to currently available therapies. Other member states allow companies to fix their own prices for medicines but monitor and control company profits. The downward pressure on health care costs has become intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced markets exert a commercial pressure on pricing within a country.

The marketability of any product candidates for which we receive regulatory approval for commercial sale may suffer if the government and third-partythird party payors fail to provide adequate coverage and reimbursement. In addition, emphasis on managed care in the United States has increased and it expectswe expect will continue to increase the pressure on healthcare pricing. Coverage policies and third-partythird 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.

Healthcare reform

In March 2010, the President Obama enactedsigned into law the ACA, which has the potential to substantially change healthcare financing and delivery by both governmental and private insurers, and significantly impactimpacts the pharmaceutical and biotechnology industry. The ACA will impact existing government healthcare programs and will result in the development of new programs.

Among the ACA provisions of importance to the pharmaceutical industries, in addition to those otherwise described above, are the following: