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

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

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

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~August 4,~~October 31, 2022, the registrant had ~~31,587,493~~33,125,954 shares of common stock, $0.0001 par value per share, outstanding.

This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Any statements contained in this Quarterly Report on Form 10-Q that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would,” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

These forward-looking statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate and management’s beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate and you should not rely upon forward-looking statements as predictions of future events. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section of this Quarterly Report on Form 10-Q titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and 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. These forward-looking statements speak only as of the date of this Form Quarterly Report on 10-Q. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this Quarterly Report on Form 10-Q.

Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission (SEC) before making investment decisions regarding our common stock.

	June 30,			December 31,			September 30,			December 31,
	2022			2021			2022			2021
Assets
Cash and cash equivalents	$	23,763		$	15,835		$	40,556		$	15,835
Short-term marketable securities		44,300			77,315			23,880			77,315
Prepaid expenses and other current assets		4,411			6,698			3,127			6,698
Total current assets		72,474			99,848			67,563			99,848
Property and equipment, net		6,913			6,792			6,769			6,792
Operating lease right-of-use asset		199			—			154			—
Long-term marketable securities		—			2,620			—			2,620
Other non-current assets		565			572			551			572
Total assets	$	80,151		$	109,832		$	75,037		$	109,832
Liabilities
Accounts payable	$	1,627		$	1,469		$	1,940		$	1,469
Accrued and other current liabilities		6,130			5,943			4,546			5,943
Operating lease liability		135			—			172			—
Current portion of long-term debt		—			1,080			—			1,080
Total current liabilities		7,892			8,492			6,658			8,492
Operating lease liability, net of current portion		70			—
Total liabilities		7,962			8,492			6,658			8,492
Commitments and contingencies (Note 8)
Stockholders’ equity
Preferred stock, $0.0001 par value, 10,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 0 shares issued and outstanding as of June 30, 2022 and December 31, 2021		—			—
Common stock, $0.0001 par value, 300,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 31,587,493 shares and 31,545,564 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		3			3
Preferred stock, $0.0001 par value, 10,000,000 shares authorized as of September 30, 2022 and December 31, 2021; no shares issued and outstanding as of September 30, 2022 and December 31, 2021								—			—
Common stock, $0.0001 par value, 300,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 33,125,954 shares and 31,545,564 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively								3			3
Additional paid-in-capital		245,814			243,115			257,100			243,115
Accumulated other comprehensive loss		(107	)		(42	)		(63	)		(42	)
Accumulated deficit		(173,521	)		(141,736	)		(188,661	)		(141,736	)
Total stockholders’ equity		72,189			101,340			68,379			101,340
Total liabilities and stockholders’ equity	$	80,151		$	109,832		$	75,037		$	109,832

The accompanying notes are an integral part of these unaudited condensed financial statements.

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021			2022			2021			2022			2021
Operating expenses
Research and development	$	12,496		$	8,443		$	24,052		$	15,599		$	11,342		$	10,170		$	35,394		$	25,769
General and administrative		3,904			3,383			7,894			6,677			4,067			3,160			11,961			9,837
Total operating expenses	$	16,400		$	11,826		$	31,946		$	22,276		$	15,409		$	13,330		$	47,355		$	35,606
Loss from operations		(16,400	)		(11,826	)		(31,946	)		(22,276	)		(15,409	)		(13,330	)		(47,355	)		(35,606	)
Interest income		134			41			174			91			269			33			443			124
Interest expense		(2	)		(47	)		(13	)		(104	)		—			(35	)		(13	)		(139	)
Net loss	$	(16,268	)	$	(11,832	)	$	(31,785	)	$	(22,289	)	$	(15,140	)	$	(13,332	)	$	(46,925	)	$	(35,621	)
Unrealized gain (loss) on marketable securities		14			(8	)		(65	)		(34	)		44			(7	)		(21	)		(41	)
Comprehensive loss	$	(16,254	)	$	(11,840	)	$	(31,850	)	$	(22,323	)	$	(15,096	)	$	(13,339	)	$	(46,946	)	$	(35,662	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.52	)	$	(0.38	)	$	(1.01	)	$	(0.83	)	$	(0.48	)	$	(0.42	)	$	(1.48	)	$	(1.26	)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		31,552,936			31,529,417			31,549,270			26,778,804			31,855,051			31,529,417			31,652,318			28,379,743

The accompanying notes are an integral part of these unaudited condensed financial statements.

	Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders’			Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Capital		Income (Loss)			Deficit			Equity			Shares		Amount		Capital		Income (Loss)			Deficit			Equity
Balances at January 1, 2022		31,545,564	$	3	$	243,115	$	(42	)	$	(141,736	)	$	101,340			31,545,564	$	3	$	243,115	$	(42	)	$	(141,736	)	$	101,340
Stock-based compensation		—		—		1,239		—			—			1,239			—		—		1,239		—			—			1,239
Net loss		—		—		—		—			(15,517	)		(15,517	)		—		—		—		—			(15,517	)		(15,517	)
Other comprehensive loss		—		—		—		(79	)		—			(79	)		—		—		—		(79	)		—			(79	)
Balances at March 31, 2022		31,545,564		3		244,354		(121	)		(157,253	)		86,983			31,545,564		3		244,354		(121	)		(157,253	)		86,983
Stock-based compensation		—		—		1,355		—			—			1,355			—		—		1,355		—			—			1,355
Issuance of common stock under employee share purchase plan		41,929		—		105		—			—			105			41,929		—		105		—			—			105
Net loss		—		—		—		—			(16,268	)		(16,268	)		—		—		—		—			(16,268	)		(16,268	)
Other comprehensive income		—		—		—		14			—			14			—		—		—		14			—			14
Balances at June 30, 2022		31,587,493	$	3	$	245,814	$	(107	)	$	(173,521	)	$	72,189			31,587,493		3		245,814		(107	)		(173,521	)		72,189
Stock-based compensation																	—		—		1,586		—			—			1,586
Issuance of common stock as part of At-the-Market offering, net of issuance costs of $300																	1,538,461		—		9,700		—			—			9,700
Net loss																	—		—		—		—			(15,140	)		(15,140	)
Other comprehensive income																	—		—		—		44			—			44
Balances at September 30, 2022																	33,125,954	$	3	$	257,100	$	(63	)	$	(188,661	)	$	68,379

	Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders’			Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Capital		Income (Loss)			Deficit			Equity			Shares		Amount		Capital		Income (Loss)			Deficit			Equity
Balances at January 1, 2021		17,436,978	$	2	$	162,469	$	29		$	(90,564	)	$	71,936			17,436,978	$	2	$	162,469	$	29		$	(90,564	)	$	71,936
Issuance of common stock upon exercise of stock options		7,932		—		8		—			—			8			7,932		—		8		—			—			8
Issuance of common stock in private placement financing, net of issuance costs of $4,785		14,084,507		1		75,214		—			—			75,215			14,084,507		1		75,214		—			—			75,215
Stock-based compensation		—		—		1,469		—			—			1,469			—		—		1,469		—			—			1,469
Net loss		—		—		—		—			(10,457	)		(10,457	)		—		—		—		—			(10,457	)		(10,457	)
Other comprehensive loss		—		—		—		(26	)		—			(26	)		—		—		—		(26	)		—			(26	)
Balances at March 31, 2021		31,529,417		3		239,160		3			(101,021	)		138,145			31,529,417		3		239,160		3			(101,021	)		138,145
Stock-based compensation		—		—		1,434		—			—			1,434			—		—		1,434		—			—			1,434
Net loss		—		—		—		—			(11,832	)		(11,832	)		—		—		—		—			(11,832	)		(11,832	)
Other comprehensive loss		—		—		—		(8	)		—			(8	)		—		—		—		(8	)		—			(8	)
Balances at June 30, 2021		31,529,417	$	3	$	240,594	$	(5	)	$	(112,853	)	$	127,739			31,529,417		3		240,594		(5	)		(112,853	)		127,739
Stock-based compensation																	—		—		1,273		—			—			1,273
Net loss																	—		—		—		—			(13,332	)		(13,332	)
Other comprehensive loss																	—		—		—		(7	)		—			(7	)
Balances at September 30, 2021																	31,529,417	$	3	$	241,867	$	(12	)	$	(126,185	)	$	115,673

The accompanying notes are an integral part of these unaudited condensed financial statements.

	Six Months Ended			Six Months Ended			Nine Months Ended			Nine Months Ended
	June 30,			June 30,			September 30,			September 30,
	2022			2021			2022			2021
Cash flows from operating activities
Net loss	$	(31,785	)	$	(22,289	)	$	(46,925	)	$	(35,621	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation		190			185			334			292
Amortization of operating lease right-of-use asset		82			—			127			—
Non-cash interest expense, and amortization of debt discount and issuance costs		3			30			3			41
Amortization of premiums / (accretion of discounts), net on marketable securities		326			169			278			377
Stock-based compensation		2,594			2,903			4,180			4,176
Changes in assets and liabilities
Prepaid expenses and other assets		2,294			(701	)		3,592			1,850
Accounts payable		182			394			495			(1,167	)
Accrued and other current liabilities		187			(269	)		(1,397	)		666
Operating lease liabilities, net		(76	)		—			(109	)		—
Other non-current liabilities		—			(4	)		—			(9	)
Net cash used in operating activities		(26,003	)		(19,582	)		(39,422	)		(29,395	)
Cash flows from investing activities
Purchases of marketable securities		(23,763	)		(53,895	)		(25,292	)		(69,226	)
Proceeds from maturities of marketable securities		59,007			18,300			81,048			32,830
Purchases of property and equipment		(335	)		(1,510	)		(335	)		(2,000	)
Net cash provided by (used in) investing activities		34,909			(37,105	)		55,421			(38,396	)
Cash flows from financing activities
Repayment of debt		(1,083	)		(1,000	)		(1,083	)		(1,500	)
Proceeds from private placement financing, net of issuance costs		—			75,215			—			75,215
Proceeds from At-the-Market offering, net								9,700			—
Proceeds from issuance of common stock under employee plans		105			8			105			8
Net cash (used in) provided by financing activities		(978	)		74,223
Net cash provided by financing activities								8,722			73,723
Net increase in cash and cash equivalents		7,928			17,536			24,721			5,932
Cash and cash equivalents
Cash and cash equivalents, at beginning of period		15,835			36,326			15,835			36,326
Cash and cash equivalents, at end of period	$	23,763		$	53,862		$	40,556		$	42,258
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	—		$	5		$	—		$	5
Cash paid for interest	$	14		$	79		$	14		$	107
Supplemental non-cash investing and financing activities:
Operating lease right-of-use asset recorded on the adoption of ASC 842	$	80		$	—		$	80		$	—
Operating lease right-of-use assets obtained in exchange for new lease liabilities	$	201		$	—		$	201		$	—
Purchases of property and equipment in accounts payable and accrued and other current liabilities	$	—		$	56		$	—		$	218

The accompanying notes are an integral part of these unaudited condensed financial statements.

Satsuma Pharmaceuticals, Inc. (the “Company”) is a clinical-stage biopharmaceutical company developing a novel therapeutic for the acute treatment of migraine. The Company’s product candidate, STS101, is a drug-device combination of a proprietary dry-powder formulation of dihydroergotamine mesylate, or DHE, which can be quickly and easily self-administered by a proprietary pre-filled, single-use, nasal delivery device. The Company, headquartered in South San Francisco, was incorporated in 2016 in the state of Delaware.

In February 2021, the Company entered into a Securities Purchase Agreement with certain purchasers, pursuant to which the Company agreed to sell and issue to certain purchasers an aggregate of 14,084,507 shares of its common stock at a per share purchase price of $5.68, the closing price of its common stock on the Nasdaq Global Market on February 26, 2021, for gross proceeds of $80.0 million (“Private Placement”). The Private Placement closed in March 2021 and the Company received $75.2 million in net proceeds after deducting commissions and offering expenses.

In October 2020, the Company entered into a sales agreement (the “SVB Sales Agreement”) with SVB Securities LLC (formerly known as SVB Leerink LLC) (“SVB”) to sell shares of its common stock, from time to time, through an at-the-market (“ATM”) equity offering program under which SVB acted as its sales agent and pursuant to which the Company could sell common stock for aggregate gross sales proceeds of up to $50.0 million. The issuance and sale of shares of common stock by the Company pursuant to the SVB Sales Agreement was deemed an ATM offering under the Securities Act of 1933, as amended. SVB was entitled to compensation for its services equal to up to 3.0% of the gross proceeds of any shares of common stock sold through SVB under the SVB Sales Agreement. In September 2022, the Company issued and sold 1,538,461 shares of common stock under the SVB Sales Agreement. The shares were sold at a price of $6.50 per share for aggregate net proceeds of approximately $9.7 million, after deducting sales commission of $0.3 million payable by the Company. Prior to the quarter ended September 30, 2022, the Company had not issued any shares of common stock under the SVB Sales Agreement. In October 2022, the Company terminated the SVB Sales Agreement and the offer and sale of shares under the SVB Sales Agreement prospectus supplement filed in October 2020.

In November 2022, the Company entered into an At-the-Market Sales Agreement (the “Virtu Sales Agreement”), with Virtu Americas LLC (“Virtu”), to sell shares of its common stock, from time to time, through an ATM equity offering program under which Virtu will act as its sales agent and pursuant to which the Company may sell common stock for aggregate gross sales proceeds of up to $100.0 million. The issuance and sale of shares of common stock by the Company pursuant to the Virtu Sales Agreement is deemed an ATM offering under the Securities Act of 1933, as amended. Virtu is entitled to compensation for its services equal to up to 3.0% of the gross proceeds of any shares of common stock sold through Virtu under the Virtu Sales Agreement.

The Company is subject to risks and uncertainties common to early-stage companies in the biopharmaceutical industry, including, but not limited to, risks of clinical delays or failure, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, reliance on contract manufacturing organizations (“CMOs”), and contract research organizations (“CROs”), compliance with government regulations and the need to obtain additional financing to fund operations. STS101 is an investigational product candidate that will require ~~additional~~completion of clinical development prior to any submission for regulatory approval and commercialization, if approved. These efforts require significant amounts of additional capital, adequate personnel, infrastructure, and extensive compliance and reporting.

The Company has incurred significant losses and negative cash flows from operations in all periods since its inception and had an accumulated deficit of ~~$173.5~~$188.7 million as of ~~June~~September 30, 2022. The Company has historically financed its operations primarily through its initial public offering (“IPO”), ~~and~~ private placements of its equity securities, an ATM equity offering and borrowings under its former long-term debt facility. The Company has no products approved for sale, and the Company has not generated any revenue since its inception. The Company expects to incur significant additional operating losses over at least the next several years. There can be no assurance that in the event the Company requires additional financing, such financing will be available on terms which are favorable or at all. Failure to generate sufficient cash flows from operations or raise additional capital to support its operations would have a material adverse effect on the Company’s ability to achieve its intended business objectives.

As of ~~June~~September 30, 2022, the Company had cash, cash equivalents and marketable securities of ~~$68.1~~$64.4 million. The Company’s management believes that the Company’s current cash, cash equivalents and marketable securities will be sufficient to fund its planned operations for at least 12 months from the date of the issuance of these unaudited interim condensed financial statements as of and for the three and ~~six~~nine months ended ~~June~~September 30, 2022.

The unaudited interim condensed financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), as defined by the Financial Accounting Standards Board, or the FASB.

The accompanying condensed balance sheet as of ~~June~~September 30, 2022, the condensed statements of operations and comprehensive loss for the three and nine months ended September 30, 2022 and 2021, the condensed statements of stockholders’ equity for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 and the condensed statements of cash flows for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 are unaudited. The unaudited interim condensed financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of ~~June~~September 30, 2022 and the results of its operations for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 and its cash flows for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021. The financial data and other information disclosed in these notes related to the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 are also unaudited. The results for the three and ~~six~~nine months ended ~~June~~September 30, 2022 are not

necessarily indicative of results to be expected for the year ending December 31, 2022, any other interim periods, or any future year or period. The balance sheet as of December 31, 2021 included herein was derived from the audited financial statements as of that date. Certain disclosures have been condensed or omitted from the unaudited interim condensed financial statements.

The accompanying interim unaudited condensed financial statements should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2021, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission, or the SEC, on March 15, 2022.

The preparation of unaudited interim condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited interim condensed financial statements and the reported amounts of income and expenses during the reporting period. Such estimates include the accrual of research and development expenses, useful lives of property and equipment and the fair value of stock-based awards. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the impact of the COVID-19 pandemic and related impacts on the global economy which may delay the enrollment of subjects for our clinical trials and may disrupt our supply chain for development and manufacturing activities, and adjust those estimates and assumptions when facts and circumstances dictate. Actual results could differ materially from those estimates and assumptions.

The Company has no significant off-balance sheet concentrations of credit risk. Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents and marketable securities. Substantially all the Company’s cash is held by one financial institution that management believes to be of high credit quality. Such deposits may, at times, exceed federally insured limits. The Company invests its cash equivalents in marketable securities and money market funds. The Company has not experienced any credit losses on its deposits of cash or cash equivalents.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (Topic 842) "Leases." Topic 842 supersedes the lease requirements in Accounting Standards Codification (“ASC”) Topic 840, "Leases." Under Topic 842, lessees are required to recognize assets and liabilities on the balance sheet for most leases and provide enhanced disclosures. Leases will continue to be classified as either finance or operating. In July 2018, the FASB issued ASU 2018-11, “Leases (ASC 842): Targeted Improvements,” which provides companies an optional adoption method to ASU 2016-02 whereby a company does not have to adjust comparative period financial statements for the new standard.

The reported results for the three and ~~six~~nine months ended ~~June~~September 30, 2022 reflect the application of ASC 842, while the comparative information has not been restated and continues to be reported under the related lease accounting standards in effect for those periods. The adoption of this update represents a change in accounting principle and resulted in the recognition of right-of-use ("ROU") assets and operating lease liabilities. The Company elected the package of practical expedients, which permits the Company not to reassess prior conclusions about lease identification, lease classification and initial direct costs incurred. The Company also elected the practical expedient to combine lease and non-lease components when determining the ROU asset and lease liability, as well as the practical expedient to exclude leases with an initial term of 12 months or less. The primary effect of adopting this standard relates to the recognition of operating leases on the condensed balance sheets and providing additional disclosures about the Company’s leasing activities.

The Company adopted ASC 842 effective January 1, 2022 using a modified retrospective method and did not restate comparative periods. The Company recognized ROU assets of $0.1 million and lease liabilities of $0.1 million for its operating leases as of January 1, 2022. The adoption of these ASUs did not have any impact on the condensed statements of operations and comprehensive loss and condensed statements of cash flows. See Note 8 for more information related to the Company’s lease obligations.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), to provide financial statement users with more useful information about expected credit losses, which was subsequently updated by ASU 2019-04, Codification Improvements to Topic 326, Financial Instrument - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, and ASU 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief. The amendment updates the guidance for measuring and recording credit losses on financial assets measured at amortized cost by replacing the “incurred loss” model with an “expected loss” model. Accordingly, these financial assets will be presented at the net amount expected to be collected. The amendment also requires that credit losses related to available-for-sale debt securities be recorded as an allowance through net income rather than reducing the carrying amount under the current, other-than-temporary-impairment model. In November 2019, the FASB issued ASU No. 2019-10, according to which, the new standard is effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies (“SRC”) as defined by the SEC, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For all other entities, the new standard is effective for fiscal years beginning after December 15, 2022, and interim periods within that fiscal year. Early adoption is permitted. The Company is a SRC for fiscal year 2021. For the Company this standard is effective for fiscal years beginning after December 15, 2022, and interim periods within that fiscal year. The adoption of this standard is not expected to have a material impact on the Company’s financial statements and related disclosures.

The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the unaudited interim condensed financial statements on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

As of ~~June~~September 30, 2022, financial assets measured and recognized at fair value were as follows (in thousands):

	Fair Value Measurements at June 30, 2022								Fair Value Measurements at September 30, 2022
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
U.S. government bonds	$	13,531	$	—	$	—	$	13,531	$	8,553	$	—	$	—	$	8,553
Foreign government agency bonds ⁽¹⁾		—		2,500		—		2,500
Corporate bonds		—		23,857		—		23,857		—		14,456		—		14,456
Asset backed securities		—		4,412		—		4,412		—		871		—		871
Marketable securities		13,531		30,769		—		44,300		8,553		15,327		—		23,880
Money market funds ⁽²⁾		23,739		—		—		23,739
Money market funds ⁽¹⁾										40,513		—		—		40,513
Total fair value of assets	$	37,270	$	30,769	$	—	$	68,039	$	49,066	$	15,327	$	—	$	64,393

	Fair Value Measurements at June 30, 2022									Fair Value Measurements at September 30, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimate Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimate Fair Value
Assets
U.S. government bonds	$	13,591	$	—	$	(60	)	$	13,531	$	8,595	$	—	$	(42	)	$	8,553
Foreign government agency bonds ⁽¹⁾		2,500		—		—			2,500
Corporate bonds		23,885		—		(28	)		23,857		14,468		—		(12	)		14,456
Asset backed securities		4,431		—		(19	)		4,412		880		—		(9	)		871
Marketable securities		44,407		—		(107	)		44,300		23,943		—		(63	)		23,880
Money market funds ⁽²⁾		23,739		—		—			23,739
Money market funds ⁽¹⁾											40,513		—		—			40,513
Total fair value of assets	$	68,146	$	—	$	(107	)	$	68,039	$	64,456	$	—	$	(63	)	$	64,393

As of December 31, 2021, financial assets measured and recognized at fair value were as follows (in thousands):

	Fair Value Measurements at December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets
U.S. government bonds	$	4,667	$	—	$	—	$	4,667
Foreign government agency bonds ⁽¹⁾		—		6,526		—		6,526
Corporate bonds		—		49,989		—		49,989
Asset backed securities		—		18,753		—		18,753
Marketable securities		4,667		75,268		—		79,935
Money market funds ⁽²⁾		15,809		—		—		15,809
Total fair value of assets	$	20,476	$	75,268	$	—	$	95,744

	Fair Value Measurements at December 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimate Fair Value
Assets
U.S. government bonds	$	4,670	$	—	$	(3	)	$	4,667
Foreign government agency bonds ⁽¹⁾		6,530		—		(4	)		6,526
Corporate bonds		50,008		—		(19	)		49,989
Asset backed securities		18,769		—		(16	)		18,753
Marketable securities		79,977		—		(42	)		79,935
Money market funds ⁽²⁾		15,809		—		—			15,809
Total fair value of assets	$	95,786	$	—	$	(42	)	$	95,744

There were 0no financial liabilities measured and recognized at fair value as of ~~June~~September 30, 2022 and December 31, 2021.

Depreciation is computed using the straight-line method. Depreciation expense was ~~$0.2~~$0.3 million and ~~$0.2~~$0.3 million for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively. Depreciation expense was $0.1 million and $0.1 million for the three months ended ~~June~~September 30, 2022 and 2021, respectively. Accumulated depreciation as of ~~June~~September 30, 2022 and December 31, 2021 was ~~$0.8~~$1.0 million and $0.6 million, respectively.

Accrued and other current liabilities consisted of the following (in thousands):

	June 30,		December 31,		September 30,		December 31,
	2022		2021		2022		2021
Accrued salaries and benefits	$	1,412	$	2,117	$	1,959	$	2,117
Accrued research and development expenses		4,561		3,396		2,294		3,396
Accrued professional services		122		361		245		361
Other		35		69		48		69
Total	$	6,130	$	5,943	$	4,546	$	5,943

On October 26, 2018, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Silicon Valley Bank. The Loan Agreement ~~provides~~provided for loan advances of up to $10.0 million. The first advance (the “Term A Loan”) of $5.0 million was available for draw down by the Company as of the effective date of the Loan Agreement. The remaining $5.0 million under the facility was never drawn down and is no longer available for draw. Interest on the loan advances were payable monthly at a floating per annum rate equal to the greater of 1.5% above the prime rate or 6.5%. Upon the occurrence of an event of default, interest would increase to 5.0% above the rate that is otherwise applicable. The maturity date of the loan advances was May 1, 2022. The effective interest rate of the Term Loan approximated its stated interest rates.

The Company accreted the final payment due at maturity using the effective interest rate method. The accrued liabilities related to the accretion of the final payment were $0.2 million as of December 31, 2021 and were included in the current portion of long-term debt on the Company’s condensed balance sheets.

On May 3, 2022, the Company repaid its entire obligation under the Loan Agreement amounting to $0.4 million, including outstanding loan amount of $0.2 million and final payment of $0.2 million.

A summary of stock option activity for the ~~six~~nine months ended ~~June~~September 30, 2022 is set forth below:

				Outstanding Options										Outstanding Options
	Shares Available for Grant			Number of Shares			Weighted Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Shares Available for Grant			Number of Shares			Weighted Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)
Balance, January 1, 2022		1,493,893			3,202,588		$	9.14		7.73		1,493,893			3,202,588		$	9.14		7.7
Additional shares authorized		1,261,822										1,261,822
Options granted		(2,139,500	)		2,139,500		$	3.51		9.90		(2,154,500	)		2,154,500		$	3.52		9.7
Options cancelled		57,436			(57,436	)	$	9.64				64,685			(64,685	)	$	10.21
Balance, June 30, 2022		673,651			5,284,652		$	6.85		8.38
Exercisable as of June 30, 2022					2,083,981		$	8.37		6.99
Vested and expected to vest, June 30, 2022					5,284,652		$	6.85		8.38
Balance, September 30, 2022												665,900			5,292,403		$	6.84		8.1
Exercisable as of September 30, 2022															2,237,795		$	8.48		6.8
Vested and expected to vest, September 30, 2022															5,292,403		$	6.84		8.1

The weighted-average grant-date fair value of options granted during the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 was $2.76 and ~~$3.85~~$3.77 per share, respectively.

As of ~~June~~September 30, 2022, the total unrecognized stock-based compensation expense for stock options was ~~$12.9~~$11.4 million, which is expected to be recognized over a weighted-average period of ~~2.8~~2.7 years.

The total fair value of options vested for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 was ~~$2.8~~$4.0 million and ~~$4.9~~$6.0 million, respectively.

In September 2019, the Company adopted the 2019 Employee Share Purchase Plan (“ESPP”), which became effective on the day of effectiveness of the Company’s registration statement on Form S-1 filed in connection with its IPO. As of ~~June~~September 30, 2022, 750,802 shares under the ESPP remain available for purchase. On June 15, 2022, the Company issued 41,929 shares under the ESPP. The offering period and purchase period is determined by the board of directors (the “Board”). The Board authorized a new offering period of six months beginning June 16, 2022 through December 15, 2022.

Total stock-based compensation expense recorded related to options granted to employees and non-employees was as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021		2022		2021		2022		2021
Research and development	$	467	$	452	$	903	$	896	$	578	$	476	$	1,481	$	1,372
General and administrative		888		982		1,691		2,007		1,008		797		2,699		2,804
	$	1,355	$	1,434	$	2,594	$	2,903	$	1,586	$	1,273	$	4,180	$	4,176

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share data):

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021			2022			2021			2022			2021
Numerator:
Net loss attributable to common stockholders	$	(16,268	)	$	(11,832	)	$	(31,785	)	$	(22,289	)	$	(15,140	)	$	(13,332	)	$	(46,925	)	$	(35,621	)
Denominator:
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		31,552,936			31,529,417			31,549,270			26,778,804			31,855,051			31,529,417			31,652,318			28,379,743
Net loss per share attributable to common stockholders, basic and diluted	$	(0.52	)	$	(0.38	)	$	(1.01	)	$	(0.83	)	$	(0.48	)	$	(0.42	)	$	(1.48	)	$	(1.26	)

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the period presented because including them would have been antidilutive:

	June 30,				September 30,
	2022		2021		2022		2021
Options to purchase common stock		5,284,652		3,190,527		5,292,403		3,209,616
Shares committed under ESPP		57,199		—		57,199		—
Total		5,341,851		3,190,527		5,349,602		3,209,616

~~NaN~~Two existing stockholders of the Company that are affiliated with directors of the Company purchased a total of 2,464,788 shares of the Company’s common stock, with an aggregate purchase price of $14.0 million, in the Private Placement.

Rent expense for the three and ~~six~~nine months ended ~~June~~September 30, 2021 was $0.1 million and ~~0.1~~0.2 million, respectively.

	Three Months Ended		Six Months Ended		Three Months Ended		Nine Months Ended
	June 30, 2022		June 30, 2022		September 30, 2022		September 30, 2022
Operating lease cost	$	48	$	87	$	47	$	134
Short-term lease cost		34		67		35		102
Total lease cost	$	82	$	154	$	82	$	236

Future minimum lease payments under non-cancelable operating leases as of December 31, 2021 were as follows (in thousands):

The maturities of operating lease liabilities as of ~~June~~September 30, 2022 are as follows (in thousands):

	June 30, 2022		September 30, 2022
2022 (remaining six months)	$	71
2022 (remaining three months)			$	35
2023		141		141
Total undiscounted lease payments		212		176
Less: imputed interest		7		4
Total operating lease liability		205		172
Less: current portion		135		172
Operating lease liability, net of current portion	$	70	$	—

As of ~~June~~September 30, 2022, the remaining term for the operating lease in North Carolina was ~~1.1~~0.8 years, and the discount rate used to measure the lease liability for such operating lease upon recognition was 4.9%. During the ~~six~~nine months ended ~~June~~September 30, 2022, cash paid for amounts included in operating lease liabilities of $0.1 million was included in cash flows from operating activities on the condensed statements of cash flows.

For the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, the Company did 0tnot record an income tax provision. The U.S. federal and California deferred tax assets generated from the Company’s net operating losses have been fully reserved, as the Company believes it is more likely than not the benefit will not be realized.

For the purposes of the unaudited interim condensed financial statements as of ~~June~~September 30, 2022 and for the three and ~~six~~nine months ended, the Company has evaluated the subsequent events through ~~August 9,~~November 3, 2022, the date the unaudited interim condensed financial statements were issued.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements and notes thereto for the year ended December 31, 2021, included in our Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission, or SEC, on March 15, 2022. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report on Form 10-Q and the Form 10-K, our actual results could differ materially from the results described, in or implied, by these forward-looking statements. Please also see the section of this Quarterly Report on Form 10-Q titled “Forward-Looking Statements.”

We are a clinical-stage biopharmaceutical company developing a novel therapeutic product for the acute treatment of migraine. Our product candidate, STS101, is a drug-device combination of a proprietary dry-powder formulation of dihydroergotamine mesylate, or DHE, which is designed to be quickly and easily self-administered with a proprietary pre-filled, single-use, nasal delivery device. DHE products have long been recommended as a first-line therapeutic option for the acute treatment of migraine and have significant advantages over other therapeutics for many patients. However, broad use has been limited by invasive and burdensome administration and/or sub-optimal clinical performance of available injectable and liquid nasal spray products. STS101 is specifically designed to deliver the clinical advantages of DHE while overcoming these shortcomings. If approved, we believe STS101 has the potential to be an important and differentiated option for the acute treatment of migraine that can address the unmet needs of many people living with migraines.

In September 2020, we announced topline data from the EMERGE Phase 3 efficacy trial, or EMERGE trial, which randomized 1,201 migraine subjects to one of two STS101 dose strengths or placebo. Although STS101 3.9 mg and 5.2 mg showed favorable numerical differences versus placebo on the pre-specified co-primary endpoints of freedom from pain and freedom from most bothersome symptom (from among photophobia, phonophobia and nausea) at two hours post-administration, these differences did not achieve statistical significance for either dose strength. Both dose strengths of STS101 did, however, demonstrate significant effects on both freedom from pain and most bothersome symptom by three hours post-dose and later time points. Both STS101 dose strengths were well-tolerated in the EMERGE trial, with low adverse event rates and no serious adverse events reported.

In March 2021, we announced an update to our development plan for STS101 that takes into account the findings from our analyses of results from our EMERGE efficacy trial and results from our ongoing ASCEND open-label, Phase 3 long-term safety trial of STS101 5.2 mg, or ASCEND trial. Our updated development plan for STS101 included a Phase 1 trial, which we completed in June 2021, to evaluate the pharmacokinetics, safety and tolerability of STS101 5.2 mg and two higher dose strengths, as well as a new pivotal Phase 3 efficacy trial, or SUMMIT trial, of STS101 5.2 mg that we initiated in June ~~2021, with~~2021. We anticipate announcing topline results ~~expected~~ in November 2022 and we are planning for submission of a NDA to the ~~fourth quarter of 2022. If successful, we plan to file an NDA for STS101~~FDA in the first quarter of 2023.

In September 2022, we reported results from the ongoing ASCEND open-label, Phase 3 long-term safety trial of STS101 5.2 mg indicating that STS101 demonstrated a favorable safety and tolerability profile, consistent with clinical experience to date. Subject exposures over time with the STS101 incorporating the second-generation nasal delivery device designed to improve performance exceeded the FDA requirement to support the submission and potential approval of the STS101 NDA.

A secondary objective of the ASCEND open-label trial is to assess the open-label efficacy of STS101 in the acute treatment of migraine attacks over time. STS101 incorporating the second-generation nasal delivery device demonstrated anti-migraine effects, including achievement of high rates of pain freedom and most-bothersome-symptom freedom at two hours post-treatment, consistent with our expectations and suggested that the second-generation nasal delivery device introduced during the conduct of the ASCEND trial was associated with improved clinical performance.

Our net losses were ~~$31.8~~$46.9 million and ~~$22.3~~$35.6 million for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively. As of ~~June~~September 30, 2022, we had an accumulated deficit of ~~$173.5~~$188.7 million.

As we continue ~~the development of~~to develop, seek regulatory approval for and prepare to commercialize STS101, if approved, our expenses will increase substantially over recent ~~periods, as we advance STS101 through clinical development, manufacturing scale-up and seek to obtain regulatory approval, and prepare for commercialization of STS101, if approved.~~periods.

Since our inception in June 2016, we have invested substantially all of our efforts and financial resources in the development of STS101 for the acute treatment of migraine. We have incurred significant operating losses to date and expect that our operating expenses will increase significantly as we advance STS101 through clinical development, manufacturing and regulatory approval, and

as we prepare for commercialization of STS101, if approved; obtain, maintain, protect and enforce our intellectual property portfolio; and hire additional personnel. In addition, we expect to continue to incur increasing costs associated with operating as a public company.

In October 2020, we entered into a sales agreement (the ~~“Sales~~“SVB Sales Agreement”) with SVB Securities LLC (formerly known as SVB Leerink ~~LLC~~LLC) (“SVB”) to sell shares of our common stock, from time to time, through an at-the-market (“ATM”) equity offering program under which SVB ~~will act~~acted as ~~its~~our sales agent and pursuant to which we ~~may~~could sell common stock for aggregate gross sales proceeds of up to $50.0 million. The issuance and sale of shares of common stock by us pursuant to the SVB Sales Agreement iswas deemed an ~~“at-the-market”~~ATM offering under the Securities Act of 1933, as amended. SVB was entitled to compensation for its services equal to up to 3.0% of the gross proceeds of any shares of common stock sold through SVB under the SVB Sales Agreement. As of September 30, 2022, we had received $9.7 million in net proceeds from the sale of 1,538,461 shares of common stock pursuant to the SVB Sales Agreement. Prior to the quarter ended September 30, 2022, we had not issued any shares of common stock under the SVB Sales Agreement. In October 2022, we terminated the SVB Sales Agreement and the offer and sale of shares under the SVB Sales Agreement prospectus supplement filed in October 2020.

In November 2022, we entered into an At-the-Market Sales Agreement (the “Virtu Sales Agreement”), with Virtu Americas LLC (“Virtu”), to sell shares of our common stock, from time to time, through an ATM equity offering program under which Virtu will act as its sales agent and pursuant to which we may sell common stock for aggregate gross sales proceeds of up to $100.0 million. The issuance and sale of shares of common stock by us pursuant to the Virtu Sales Agreement is deemed an ATM offering under the Securities Act of 1933, as amended. Virtu is entitled to compensation for its services equal to up to 3.0% of the gross proceeds of any shares of common

stock sold through ~~SVB~~Virtu under the Virtu Sales Agreement. ~~As of June 30, 2022, we had not received any proceeds from the sale of shares of common stock pursuant to the Sales Agreement.~~

In February 2021, we entered into a Securities Purchase Agreement with certain purchasers, pursuant to which we agreed to sell and issue to certain purchasers an aggregate of 14,084,507 shares of our common stock at a per share purchase price of $5.68, the closing price of our common stock on the Nasdaq Global Market on February 26, 2021, for gross proceeds of $80.0 million (“Private Placement”). We closed the Private Placement in March 2021 and received $75.2 million in net proceeds after deducting commissions and offering expenses.

We do not have any products approved for sale and have not generated any product revenue since our inception. Our ability to generate product revenue will depend on the successful development and eventual commercialization of STS101. Until such time as we can generate significant revenue from sales of STS101, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back, or discontinue the development and commercialization of STS101.

As of ~~June~~September 30, 2022, we had cash, cash equivalents and marketable securities of ~~$68.1~~$64.4 million. Based on our current operating plans, we believe that those cash, cash equivalents and marketable securities will be sufficient to fund our projected operations for at least 12 months from the date of the issuance of these condensed financial statements.

COVID-19 has placed strains on the providers of healthcare services, including the healthcare clinics and institutions where we conduct our ongoing clinical trials and may conduct planned clinical trials. To date, we have initiated and ~~enrolled~~completed enrollment of subjects in our planned STS101 clinical trials in accordance with our previously communicated timeline objectives. We will continue to follow the U.S. Food and Drug Administration (“FDA”) guidance on clinical trial conduct during the COVID-19 pandemic, including with respect to remote monitoring of clinical data. To date, subjects in our clinical trials have generally been able to complete their scheduled visits or treatments and we have been able to collect the essential data from those visits or treatments, as well as from the internet-connected electronic diary devices, as applicable, subjects in our trials may use to record efficacy and other key data.

To date, we have not experienced any disruption in our supply of investigational product necessary to conduct our clinical trials and, given our investigational product inventories, believe we will be able to supply the needs of our clinical trials. We are supporting our employees by utilizing remote work when necessary and appropriate, leveraging virtual meeting technology and encouraging employees to follow local guidelines.

~~The following summarizes our priorities and actions to address the COVID-19 disruption and its impact on our operations:~~

All of our research and development expenses consist of expenses incurred in connection with the development of STS101 for the acute treatment of migraine. These expenses include:

We expense both internal and external research and development expenses as they are incurred. We have entered into various agreements with third party vendors and CMOs. Our research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events or tasks, and contracted costs. The estimated costs of research and development provided, but not yet invoiced, are included in accrued and other current liabilities on the balance sheet. If the actual timing of the performance of services or the level of effort varies from the original estimates, we adjust the accrual accordingly. Payments made to CROs and CMOs under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered. Nonrefundable payments made prior to the receipt of goods or services that will be used or rendered for future research and development activities are deferred and capitalized as prepaid expenses and other current assets on our balance sheet. The capitalized amounts are recognized as expense as the goods are delivered or the related services are performed.

As we continue the development of STS101, ~~our~~we will continue to incur significant research and development expenses, ~~will increase substantially over recent periods,~~ as we seek to advance STS101 through clinical development, manufacturing and regulatory approval, and prepare for commercialization of STS101, if approved. Predicting the timing or the cost to complete our clinical trials or validation of our commercial manufacturing and supply processes is difficult and delays may occur because of many factors, including factors outside of our control. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate ~~if we experience significant delays in enrollment in any of our clinical trials~~ or if we experience delays in manufacturing with any of our CMOs, we could be required to expend significant additional financial resources and time on the completion of clinical development. Furthermore, we are unable to predict with certainty when or if STS101 will receive regulatory approval.

General and administrative expenses consist principally of payroll and personnel expenses, including salaries, benefits and stock-based compensation expenses, professional fees for legal, consulting, accounting and tax services, directors and officers insurance, allocated overhead, including rent, ~~debt service,~~ equipment, depreciation, information technology costs, and utilities, and other general operating expenses not otherwise classified as research and development expenses including expenses associated with pre-commercialization activities.

We anticipate that our general and administrative expenses will increase as a result of increased personnel costs, including salaries, benefits and stock-based compensation expenses, expanded infrastructure and higher consulting, legal and accounting services associated with maintaining compliance with stock exchange listing and Securities and Exchange Commission, or SEC, requirements, expenses associated with pre-commercialization activities, investor relations costs and director and officer insurance premiums associated with being a public company.

Interest income consists primarily of interest earned on our cash, cash equivalents and marketable securities.

Interest expense consists primarily of interest related to our long-term debt and accretion of debt discount, ~~and~~ debt issuance ~~costs.~~costs and final payment.

The following table summarizes our results of operations for the periods indicated (in thousands, except percentages):

	Three Months Ended June 30,												Three Months Ended September 30,
	2022			2021			Change			Change %			2022			2021			Change			Change %
Operating expenses:
Research and development	$	12,496		$	8,443		$	4,053			48	%	$	11,342		$	10,170		$	1,172			12	%
General and administrative		3,904			3,383			521			15	%		4,067			3,160			907			29	%
Loss from operations		(16,400	)		(11,826	)		(4,574	)		39	%		(15,409	)		(13,330	)		(2,079	)		16	%
Interest income		134			41			93			227	%		269			33			236			715	%
Interest expense		(2	)		(47	)		45			(96	)%		—			(35	)		35			(100	)%
Net loss	$	(16,268	)	$	(11,832	)	$	(4,436	)		37	%	$	(15,140	)	$	(13,332	)	$	(1,808	)		14	%

Research and development expenses increased from the three months ended ~~June~~September 30, 2021 to the three months ended ~~June~~September 30, 2022 primarily due to an increase of ~~$3.8~~$1.0 million in clinical trial costs, which was ~~the net of~~mainly due to an increase ~~of $4.7 million~~ for the SUMMIT efficacy trial, ~~$0.4 million for the ASCEND safety trial, and $0.2 million in EMERGE efficacy trial costs offset by a decrease of $1.6 million for the STS101 Phase 1 trials,~~ as well as ~~increases~~an increase of ~~$0.5~~$0.4 million in payroll and personnel expenses, partly offset by a decrease of ~~$0.3~~$0.2 million in manufacturing activities.

General and administrative expenses increased from the three months ended ~~June~~September 30, 2021 to the three months ended ~~June~~September 30, 2022 primarily due to an increase of ~~$0.7~~$0.5 million due to increased pre-commercialization activity, ~~and~~ an increase of ~~$0.2~~$0.3 million of payroll and personnel expenses, including salaries, benefits and stock-based compensation expenses, ~~partly offset by a decrease~~and an increase of $0.2 in professional services for consulting, accounting, legal, tax and other administrative ~~fees, and a decrease of $0.1 million in allocated facilities related expenses.~~fees.

Interest income increased from the three months ended ~~June~~September 30, 2021 to the three months ended ~~June~~September 30, 2022 primarily as a result of the ~~lower~~higher interest yields in the three months ended ~~June~~September 30, ~~2021,~~2022, partly offset by a decrease in average balances of our cash, cash equivalents and marketable securities in the three months ended ~~June~~September 30, 2022.

Interest expense decreased from the three months ended ~~June~~September 30, 2021 to the three months ended ~~June~~September 30, 2022 primarily attributable to a decrease of outstanding debt ~~balances,~~balance, which was fully repaid in May 2022.

	Six Months Ended June 30,												Nine Months Ended September 30,
	2022			2021			Change			Change %			2022			2021			Change			Change %
Operating expenses:
Research and development	$	24,052		$	15,599		$	8,453			54	%	$	35,394		$	25,769		$	9,625			37	%
General and administrative		7,894			6,677			1,217			18	%		11,961			9,837			2,124			22	%
Loss from operations		(31,946	)		(22,276	)		(9,670	)		43	%		(47,355	)		(35,606	)		(11,749	)		33	%
Interest income		174			91			83			91	%		443			124			319			257	%
Interest expense		(13	)		(104	)		91			(88	)%		(13	)		(139	)		126			(91	)%
Net loss	$	(31,785	)	$	(22,289	)	$	(9,496	)		43	%	$	(46,925	)	$	(35,621	)	$	(11,304	)		32	%

Research and development expenses increased from the ~~six~~nine months ended ~~June~~September 30, 2021 to the ~~six~~nine months ended ~~June,~~September, 2022 primarily due to an increase of ~~$8.7~~$9.6 million in clinical trial costs, which was the net of an increase of ~~$9.8~~$10.1 million for the SUMMIT efficacy trial, $0.7 million for the ASCEND safety trial, ~~$0.2 million in EMERGE efficacy trial costs,~~ and ~~$0.3~~$0.4 million for NDA preparation work, as well as an increase of $1.3 million in payroll and personnel expenses offset by ~~a decrease~~decreases of ~~$2.2~~$1.7 million for the STS101 Phase 1 trials, ~~as well as increases of $0.9 million in payroll~~ and ~~personnel expenses, partly offset by~~ a decrease of ~~$1.2~~$1.5 million in manufacturing activities.

General and administrative expenses increased from the ~~six~~nine months ended ~~June~~September 30, 2021 to the ~~six~~nine months ended ~~June~~September 30, 2022 primarily due to an increase of ~~$1.5~~$2.0 million due to increased pre-commercialization activity, and an increase of ~~$0.3~~$0.6 million of payroll and personnel expenses, including salaries, benefits and stock-based compensation expenses, partly offset by a decrease of ~~$0.5~~$0.3 in professional services for consulting, accounting, tax and other administrative fees, and a decrease of ~~$0.1~~$0.2 million in allocated facilities related expenses.

Interest income increased from the ~~six~~nine months ended ~~June~~September 30, 2021 to the ~~six~~nine months ended ~~June~~September 30, 2022 primarily as a result of the ~~lower~~higher interest yields in the ~~six~~nine months ended ~~June~~September 30, ~~2021,~~2022, partly offset by a decrease in average balances of our cash, cash equivalents and marketable securities in the ~~six~~nine months ended ~~June~~September 30, 2022.

Interest expense decreased from the ~~six~~nine months ended ~~June~~September 30, 2021 to the ~~six~~nine months ended ~~June~~September 30, 2022 primarily attributable to a decrease of outstanding debt ~~balances,~~balance, which was fully repaid in May 2022.

We have historically financed our operations primarily through the issuance of common stock in our IPO, and private placements of equity securities and borrowings under ~~its~~our long-term debt facility. We have no products approved for sale, and we have not generated any revenue since inception. We expect to incur significant additional operating losses over at least the next several years.

In October 2020, we entered into the SVB Sales Agreement with SVB to sell shares of our common stock, from time to time, through an ~~at-the-market~~ATM equity offering program under which SVB acted as our sales agent and pursuant to which we could sell common stock for aggregate gross sales proceeds of up to $50.0 million. As of September 30, 2022, we had received $9.7 million in net proceeds from the sale of shares of common stock pursuant to the SVB Sales Agreement.

In November 2022, we entered into the Virtu Sales Agreement with Virtu to sell shares of our common stock, from time to time, through an ATM equity offering program under which Virtu will act as ~~its~~our sales agent and pursuant to which we may sell common stock for aggregate gross sales proceeds of up to ~~$50.0~~$100.0 million. ~~To date we have not received any proceeds from the sale of shares of common stock pursuant to the Sales Agreement.~~

In February 2021, we entered into a Securities Purchase Agreement with certain purchasers, pursuant to which we agreed to sell and issue to certain purchasers an aggregate of 14,084,507 shares of our common stock at a per share purchase price of $5.68, the closing price of our common stock on the Nasdaq Global Market on February 26, 2021 for aggregate gross proceeds of approximately $80.0 million. We closed the Private Placement in March 2021 and received $75.2 million in net proceeds after deducting commissions and offering expenses.

In October 2018, we entered into the Loan Agreement with Silicon Valley Bank. The Loan Agreement provided for loan advances of up to $10.0 million. We drew down the first advance of $5.0 million as of the effective date of the Loan Agreement. The remaining $5.0 million under the facility was never drawn down and is no longer available for draw. Interest on the loan advances was payable monthly at a floating per annum rate equal to the greater of 1.5% above the prime rate and 6.5%. Upon the occurrence of an event of default, interest would increase to 5.0% above the rate that is otherwise applicable. Principal on the outstanding loan advance was repayable commencing on December 1, 2019 in 30 monthly payments through maturity. The maturity date of the loan advances was May 1, 2022.

In May 2022, we repaid our entire obligation under the Loan Agreement amounting to $0.4 million, including outstanding loan amount of $0.2 million and final payment of $0.2 million.

We have incurred net losses since our inception. Our net losses were ~~$31.8~~$46.9 million and ~~$22.3~~$35.6 million for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively. Based on our current operating plan, we believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our planned operations for at least 12 months from the date of the issuance of these condensed financial statements.

As we continue the development of STS101, our operating expenses may increase substantially, as we seek to advance STS101 through clinical development, manufacturing and regulatory approval, and prepare for commercialization of STS101, if approved.

To the extent we continue ~~development of~~to develop, seek approval for and prepare to commercialize STS101, if approved, we will continue to require additional capital to fund operations for the foreseeable future. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize STS101 or enter into collaborative agreements with third parties, and we do not know when, or if, either will occur. We may seek to raise capital through private or public equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue the development and commercialization of STS101. Our need for additional capital will depend on many factors, including:

We are subject to the risks typically related to the development of new drug product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Despite our implementation of a new development plan for STS101, such plan may change, which could significantly change the costs and timing associated with its development of STS101 and our operations. Furthermore, our operating plans may change in the future, and we

will continue to require additional capital to meet operational needs and capital requirements associated with such operating plans. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Any debt financing into which we enter may impose upon us covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments or engage in certain merger, consolidation or asset sale transactions. For example, the Loan Agreement contained many of these restrictions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. If we are unable to raise additional funds when needed, we may be required to delay, reduce, or terminate our development program and clinical trials. We may also be required to sell or license to others rights to STS101 in certain territories or indications that we would prefer to develop and commercialize ourselves. Adequate additional funding may not be available to us on acceptable terms or at all. See “Risk Factors” for additional risks associated with our substantial capital requirements.

The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below (in thousands):

	Six Months Ended June 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net cash (used in) provided by:
Operating activities	$	(26,003	)	$	(19,582	)	$	(39,422	)	$	(29,395	)
Investing activities		34,909			(37,105	)		55,421			(38,396	)
Financing activities		(978	)		74,223			8,722			73,723
Net increase in cash and cash equivalents	$	7,928		$	17,536		$	24,721		$	5,932

Net cash used in operating activities was ~~$26.0~~$39.4 million for the ~~six~~nine months ended ~~June~~September 30, 2022. Cash used in operating activities was primarily due to the use of funds in our operations to develop STS101, which resulted in a net loss of ~~$31.8~~$46.9 million, adjusted for a decrease in accrued and other current liabilities of $1.4 million, which amounts were partially offset by a decrease in prepaid expenses and other assets of ~~$2.3~~$3.6 million, an increase in accounts payable of ~~$0.2 million, an increase in accrued and other liabilities of $0.2~~$0.5 million, stock-based compensation expense of ~~$2.6~~$4.2 million, net amortization of premiums and discounts on marketable securities of $0.3 million, and depreciation expense of ~~$0.2~~$0.3 million. The decrease in prepaid expenses and other assets and accrued and other current liabilities and increase in accounts payable ~~and accrued and other liabilities~~ were primarily the result of the timing of payments to our vendors.

Net cash used in operating activities was ~~$19.6~~$29.4 million for the ~~six~~nine months ended ~~June~~September 30, 2021. Cash used in operating activities was primarily due to the use of funds in our operations to develop STS101, which resulted in a net loss of ~~$22.3~~$35.6 million, adjusted for ~~an increase~~a decrease in accounts payable by $1.2 million, which amounts were partially offset by a decrease in prepaid expenses and other assets of ~~$0.7~~$1.9 million, ~~and a decrease~~an increase in accrued and other liabilities of ~~$0.3 million, which amounts were partially offset by an increase in accounts payable by $0.4~~$0.7 million, stock-based compensation expense of ~~$2.9~~$4.2 million, depreciation expense of ~~$0.2~~$0.3 million, and net amortization of premiums and discounts on marketable securities of ~~$0.2~~$0.4 million. The ~~increase~~decrease in accounts payable and prepaid expenses and other assets and ~~decrease~~increase in accrued and other liabilities were primarily the result of the timing of payments to our vendors.

Net cash provided by investing activities was ~~$34.9~~$55.4 million for the ~~six~~nine months ended ~~June~~September 30, 2022, which consisted of proceeds from maturities of marketable securities of ~~$59.0~~$81.0 million, which amounts were partially offset by purchases of marketable securities of ~~$23.8~~$25.3 million and purchases of property and equipment of $0.3 million.

Net cash used in investing activities was ~~$37.1~~$38.4 million for the ~~six~~nine months ended ~~June~~September 30, 2021, which consisted of purchases of marketable securities of ~~$53.9~~$69.2 million and purchases of property and equipment of ~~$1.5~~$2.0 million, which amounts were partially offset by proceeds from maturities of marketable securities of ~~$18.3~~$32.8 million.

Net cash ~~used in~~provided by financing activities was ~~$1.0~~$8.7 million for the ~~six~~nine months ended ~~June~~September 30, 2022, which ~~primarily related to repayment~~consisted of ~~debt~~$9.7 million of ~~$1.1 million partially offset by~~net cash proceeds from our At-the-Market offering and proceeds from the issuance of common stock under employee share purchase plan of $0.1 million, partially offset by repayment of debt of $1.1 million.

Net cash provided by financing activities was ~~$74.2~~$73.7 million for the ~~six~~nine months ended ~~June~~September 30, 2021, which consisted of $75.2 million of net cash proceeds from our Private Placement, partially offset by repayment of debt of ~~$1.0~~$1.5 million.

Our unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these unaudited interim condensed financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies, Significant Judgments and Use of Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2021. During the ~~six~~nine months ended ~~June~~September 30, 2022, there were no material changes to our critical accounting policies from those discussed in the Annual Report on Form 10-K for the year ended December 31, 2021. See Note 1 to the unaudited interim condensed financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for related discussions on updates on recently issued accounting pronouncements.

The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use this extended transition period under the JOBS Act. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make comparison of our financials to those of other public companies more difficult.

See “Organization and Summary of Significant Accounting Policies—Recent Accounting Pronouncements” in Note 1 to our unaudited interim condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q.

As of ~~June~~September 30, 2022, we had cash, cash equivalents and marketable securities of ~~$68.1~~$64.4 million, consisting of interest-bearing money market funds, investments in corporate bonds and asset backed securities for which the fair value would be affected by changes in the general level of U.S. interest rates. However, due to the short-term maturities and the low-risk profile of our cash equivalents and marketable securities, an immediate 10% change in interest rates would not have a material effect on the fair value of our cash equivalents and marketable securities.

We do not believe that inflation, interest rate changes or exchange rate fluctuations have had a significant impact on our results of operations for any periods presented herein.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Due to the inherent limitations of control systems, not all misstatements may be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of ~~June~~September 30, 2022.

There were no changes in our internal control over financial reporting during the ~~six~~nine months ended ~~June~~September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We are not currently involved in any litigation or legal proceedings that, in management’s opinion, are likely to have any material adverse effect on our company.

Our business involves significant risks, some of which are described below. You should carefully consider these risks, as well as the other information in this Quarterly Report on Form 10-Q, including our unaudited condensed financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events or developments described below could have a material adverse effect on our business, results of operations, financial condition, prospects and stock price. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

We are a clinical-stage biopharmaceutical company with a limited operating history and no products approved for commercial sale. We have incurred significant losses since our inception, and we anticipate that we will continue to incur significant losses for the foreseeable future, which, together with our limited operating history, makes it difficult to assess our prospects.

Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. We are a clinical-stage biopharmaceutical company, and we have only a limited operating history upon which you can evaluate our business and prospects. We have no products approved for commercial sale, have not generated any revenue from product sales and have incurred losses in each year since our inception in June 2016. In addition, we have limited experience and have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the pharmaceutical industry.

In September 2020, we announced topline data from the EMERGE Phase 3 efficacy trial, which randomized 1,201 migraine subjects to one of two STS101 dose strengths or placebo. Although STS101 3.9 mg and 5.2 mg showed favorable numerical differences versus placebo on the pre-specified co-primary endpoints of freedom from pain and freedom from most bothersome symptom (from among photophobia, phonophobia and nausea) at two hours post-administration, these differences did not achieve statistical significance for either dosage strength. In March 2021, we announced an update to our development plan for STS101 that takes into account the findings from our detailed analyses of results and data from our EMERGE efficacy trial. Our updated development plan for STS101 included a Phase 1 trial, which we completed in June 2021, to evaluate the pharmacokinetics, safety and tolerability of STS101 5.2 mg and two higher dose strengths, the ongoing ASCEND Phase 3 long-term safety trial, and the ongoing pivotal SUMMIT Phase 3 efficacy trial that we initiated in June 2021 and for which we expect topline results in the fourth quarter of 2022.

We have limited experience as a company conducting Phase 3 clinical trials, submitting applications for regulatory approvals, such as an NDA, or commercializing any products.

We have had significant operating losses since our inception. Our net losses for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 were approximately ~~$31.8~~$46.9 million and ~~$22.3~~$35.6 million, respectively. As of ~~June~~September 30, 2022, we had an accumulated deficit of ~~$173.5~~$188.7 million. Substantially all of our losses have resulted from expenses incurred in connection with the development of STS101 and general and administrative costs associated with our operations.

STS101 will require substantial additional development time and resources before we would be able to apply for or receive regulatory approvals and begin generating revenue from product sales. In addition, we expect to continue to incur increasing costs associated with operating as a public company. We also do not yet have a sales organization or commercial infrastructure and, accordingly, we will incur significant expenses to establish a sales organization and associated commercial infrastructure in advance of generating any commercial product sales. We expect to continue to incur losses for the foreseeable future, and we anticipate these losses will increase as we continue to develop STS101 through clinical trials and regulatory submissions. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our prior losses, combined with expected losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital.

We will require substantial additional financing to achieve our goals, and a failure to obtain this capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development or commercialization efforts.

Since our inception, we have invested substantially all of our efforts and financial resources in the development of STS101 for the acute treatment of migraine. We believe that we will continue to expend substantial resources for the foreseeable future in connection with the clinical development of STS101. These expenditures will include costs associated with clinical trials, obtaining regulatory approvals, and manufacturing and supply, as well as commercializing STS101, if approved for sale. In addition, other unanticipated costs may arise. Because the outcome of any clinical trial is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of STS101.

As of ~~June~~September 30, 2022, we had resources consisting of cash, cash equivalents and marketable securities of ~~$68.1~~$64.4 million. Based on our current operating plan, we believe our existing cash, cash equivalents and marketable securities will be sufficient to fund our planned operations into the second half of 2023. However, our operating plans may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned. Adequate funding may not be available to us on acceptable terms, or at all, particularly in light of the current ~~COVID-19 pandemic and associated~~ economic uncertainty and potential local and/or global economic recession. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize STS101 or enter into collaborative agreements with third parties, and we do not know when, or if, either will occur. We may seek to raise capital through private or public equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue the development and commercialization of STS101.

Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required to:

We also could be required to seek funds through arrangements with collaborators or others that may require us to relinquish rights to some of our technologies or STS101 that we would otherwise pursue on our own. We do not expect to realize revenue from sales of STS101 in the foreseeable future, if at all, unless and until STS101 is clinically tested, approved for commercialization and successfully commercialized. To date, we have funded our operations through private placements of convertible preferred stock, a convertible promissory note, long-term debt, and common stock. We will be required to seek additional funding in the future and currently intend to do so through public or private equity offerings or debt financings, credit or loan facilities or a combination of one or more of these funding sources. Our ability to raise additional funds will depend on financial, economic and other factors, many of which are beyond our control. If we raise additional funds by issuing equity securities, including pursuant to the Virtu Sales Agreement, ~~we entered into with SVB Leerink LLC in October 2020 in connection with our at-the-market offering,~~ our stockholders will suffer dilution and the terms of any financing may adversely affect the rights of our stockholders. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. Debt financing, if available, is likely to involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of our equity securities received any distribution of our corporate assets.

Our business is entirely dependent on the successful development, regulatory approval and commercialization of STS101, our only product candidate under development.

We have invested substantially all of our efforts and financial resources in the development of STS101 for the acute treatment of migraine, which has not been approved for sale or commercial use. Currently, STS101 is our only product candidate and we have not licensed, acquired, or invented any other product candidates for pre-clinical or clinical evaluation. This may make an investment in our company riskier than similar companies that have multiple product candidates in active development and that therefore may be able to better sustain a failure of a lead candidate. The success of our business, including our ability to finance our company and generate any revenue in the future, will depend entirely on the successful development, regulatory approval and commercialization of STS101, which may never occur.

As we continue development of STS101, ~~our~~we will continue to incur significant research and development expenses, ~~may increase substantially,~~ as we seek to advance STS101 through clinical development, manufacturing and regulatory approval, and prepare for commercialization of STS101, if approved. We may have inadequate financial or other resources to advance STS101 through the clinical trial process, depending on the requirements of the FDA. In addition, our clinical development program for STS101 may not lead to regulatory approval from the FDA and similar foreign regulatory agencies if we fail to demonstrate in ongoing or future trials that STS101 is safe and effective, and we may therefore fail to commercialize STS101. The challenge of establishing STS101 as being safe and effective may be even more difficult given the failure of STS101 to demonstrate statistically significant effects as compared to placebo on the co-primary endpoints of our EMERGE trial. Even if approved, we may fail to obtain differentiated product labeling for STS101 as compared to other available products for migraine and, as a result, our commercial prospects may be impaired. Further, STS101 may not receive regulatory approval even if it is successful in planned and future clinical trials. Any failure to obtain regulatory approval of STS101 would have a material and adverse impact on our business. Even if we successfully obtain regulatory approvals to market STS101, our revenue will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval. If the markets or patient subsets that we are targeting are not as significant as we estimate, we may not generate significant revenues from sales of STS101, even if approved.

The clinical and commercial success of STS101 may depend on a number of factors, including the following:

These factors, many of which are beyond our control, could cause us to experience significant delays or an inability to obtain regulatory approvals or commercialize STS101. Even if regulatory approvals are obtained, we may never be able to successfully commercialize STS101. Accordingly, we cannot provide assurances that we will be able to generate sufficient revenue through the sale of STS101 to continue our business or achieve profitability. In addition, disruptions caused by the COVID-19 pandemic may increase the likelihood that we encounter such difficulties or delays in initiating, enrolling, conducting or completing our planned clinical trials.

While the scope of regulatory approval generally is similar in other countries, in order to obtain separate regulatory approval in other countries we must comply with numerous and varying regulatory requirements of such countries regarding safety and efficacy. Other countries also have their own regulations governing, among other things, requirements for nonclinical studies, clinical trials and

commercial sales, as well as pricing and distribution of STS101, and we may be required to expend significant resources to obtain regulatory approval and to comply with ongoing regulations in these jurisdictions. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others.

STS101 failed to demonstrate a statistically significant difference as compared to placebo on either of the co-primary endpoints in our first pivotal efficacy trial.

In September 2020, we announced topline data from the EMERGE Phase 3 efficacy trial. Although topline data showed numerical differences in favor of STS101 3.9 mg and 5.2 mg versus placebo on the pre-specified co-primary endpoints of freedom from pain and freedom from most bothersome symptom (from among photophobia, phonophobia and nausea) at two hours post-administration, these differences did not achieve statistical significance for either dose strength. Both dose strengths of STS101 did, however, demonstrate significant effects on both freedom from pain and most bothersome symptom by three hours post-dose and later time points. Both STS101 dose strengths were well-tolerated in the EMERGE efficacy trial, with low adverse event rates and no serious adverse events reported.

Based on our analyses and review of EMERGE efficacy trial results and other data, including preliminary results from the ongoing ASCEND safety trial, we believe we have identified and have taken steps in our updated development plan to address the key reasons that STS101 did not achieve statistical significance versus placebo on the co-primary endpoints at two hours post-administration in the EMERGE efficacy trial. Our analyses suggest a significant proportion of subjects in EMERGE who self-administered STS101 to treat their migraine attacks may not have achieved and sustained targeted DHE concentrations due to under-delivery of STS101. We believe we have addressed this under-delivery issue through a combination of introducing improved instructions for STS101 use and subject training in our clinical trials and by making several minor modifications to the second-generation STS101 delivery device to improve its performance. We also believe other factors contributed to a negative outcome in the EMERGE efficacy trial, and we believe we have taken appropriate steps to mitigate these issues in the ongoing SUMMIT efficacy trial through modifications to the trial design and conduct. However, these efforts may prove to be ineffective and there can be no assurance that the measures we have taken or plan to take will result in successful outcomes in our future clinical trials of STS101, including our ongoing SUMMIT efficacy trial, or be sufficient to obtain regulatory approval.

In addition, we may not be able to obtain regulatory approval for and successfully commercialize STS101 without conducting further clinical trials in addition to those trials that are ongoing or planned, and there can be no assurance that the results of any ongoing, planned or additional clinical trials will be sufficient to obtain regulatory approval or support successful commercialization.

The ongoing COVID-19 pandemic and outbreak in the United States and related impacts on the global economy may adversely affect our business.

As a result of the ~~ongoing~~ COVID-19 virus pandemic, we may experience disruptions that could severely impact our business, preclinical studies, clinical trials, and manufacturing activities, including:

•interruption or delays in the operations of the FDA, which may impact review and approval timelines;

In addition, the spread of COVID-19 coronavirus may negatively impact the trading price of shares of our common stock and could further severely impact our ability to raise additional capital on a timely basis or at all.

Although global economic conditions have generally improved with the rollout of COVID-19 vaccines, business activity may not recover as quickly as anticipated, including as a result of inflationary pressures and the responses by central banking authorities to control such inflation, rising interest rates, debt and equity market fluctuations, diminished liquidity and credit availability, increased unemployment rates, decreased investor and consumer confidence, political turmoil, and supply chain challenges. The extent to which the outbreak impacts our business and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, equipment and supply shortages, delays in shipping, delays in manufacturing and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

Furthermore, in response to the COVID-19 pandemic, in March 2020, the FDA announced its intention to temporarily postpone routine surveillance inspections of domestic manufacturing facilities. On July 10, 2020, the FDA announced its intention to restart certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system. The FDA intends to use this risk-based assessment system to identify the categories of regulatory activity that can occur within a given geographic area, ranging from mission critical inspections to resumption of all regulatory activities. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic and may experience delays in their regulatory activities. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business

Clinical development involves a lengthy and expensive process with an uncertain outcome, and delays can occur for a variety of reasons outside of our control.

Clinical development is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. For example, in September 2020, we announced topline data from the EMERGE trial. Although STS101 3.9 mg and 5.2 mg showed favorable numerical differences versus placebo on the pre-specified co-primary endpoints of freedom from pain and freedom from most bothersome symptom (from among photophobia, phonophobia and nausea) at two hours post-administration, these differences did not achieve statistical significance for either dosage strength. In addition, we may experience delays in initiating or completing our ongoing, planned, or future trials of STS101. Furthermore, we cannot be certain that studies or trials for STS101 will begin on time, not require redesign, enroll an adequate number of subjects on time or be completed on schedule, if at all. Clinical trials can be delayed or terminated for a variety of reasons, including delays or failures related to:

We may experience numerous adverse or unforeseen events during, or as a result of, preclinical studies and clinical trials that could delay or prevent our ability to receive marketing approval or commercialize STS101, including:

If we are required to conduct additional clinical trials or other testing of STS101 beyond those that we currently contemplate, including for purposes of demonstrating the potential efficacy of STS101, if we are unable to successfully complete clinical trials of STS101 or other testing, if the results of these trials or tests are not positive or are only moderately positive or if there are safety concerns, we may:

We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted or by the FDA or other regulatory authorities. Such authorities may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

Further, conducting clinical trials in foreign countries, as we could do for STS101, presents additional risks that may delay completion of our clinical trials. These risks include the failure of enrolled subjects in foreign countries to adhere to clinical protocol as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, as well as political and economic risks relevant to such foreign countries.

Principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and may receive cash or equity compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, or a regulatory authority concludes that the financial relationship may have affected the interpretation of the trial, the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical trial itself may be jeopardized, which could result in the delay or rejection of the marketing application we submit. Any such delay or rejection could prevent or delay us from commercializing STS101.

If any of our clinical trials of STS101 are unsuccessful, delayed or terminated, its commercial prospects may be harmed, and our ability to generate revenues from sales of STS101 will be delayed or not realized at all. In addition, any delays in completing our clinical trials may increase our costs, slow down our STS101 development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may significantly harm our business, financial condition and prospects. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of STS101. If STS101 generally proves to be ineffective, unsafe or commercially unviable, it would have a material and adverse effect on our business, financial condition, results of operations and prospects.

We may be unable to obtain regulatory approval for STS101 under applicable regulatory requirements. The denial or delay of any such approval would delay commercialization of STS101 and adversely impact our potential to generate revenue, our business and our results of operations.

We as a company have not previously submitted an NDA or any other marketing application to the FDA or similar filings to comparable foreign regulatory authorities. An NDA or other similar regulatory filing requesting approval to market a product candidate must include extensive preclinical and clinical data and supporting information to establish that the product candidate is safe, effective, pure and potent for each desired indication. The NDA or other similar regulatory filing must also include significant information regarding the chemistry, manufacturing and controls for the product.

The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of pharmaceutical products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, and such regulations differ from country to country. We are not permitted to market STS101 in the United States or in any foreign countries until it receives the requisite approval from the applicable regulatory authorities of such jurisdictions.

The FDA or any foreign regulatory bodies can delay, limit or deny approval of STS101 for many reasons, including:

Of the large number of pharmaceutical products in development, only a small percentage successfully complete the FDA or other regulatory bodies’ approval processes and are commercialized.

Even if we eventually complete clinical testing and receive approval from the FDA or applicable foreign agencies for STS101, the FDA or the applicable foreign regulatory agency may grant approval contingent on the performance of costly additional clinical trials, which may be required after approval. The FDA or the applicable foreign regulatory agency also may approve STS101 for a more limited indication or a narrower patient population than we originally requested, and the FDA or applicable foreign regulatory agency, may not approve it with the labeling that we believe is necessary or desirable for its successful commercialization.

In addition, because migraine affects adolescents (12 to 17 years of age) and children (6 to 11 years of age), pediatric studies are required under the Federal Food, Drug, Cosmetic Act, or the FDCA. To address such requirements, we designed an initial pediatric study plan, or iPSP, consistent with the FDA guidance Migraine: Developing Drugs for Acute Treatment (February 2018). We have received agreement from the FDA on this plan, which we plan to initiate after completing development of STS101 for acute treatment of migraine in adults.

Any delay in obtaining, or inability to obtain, applicable regulatory approval would delay or prevent commercialization of STS101 and ~~would~~could materially adversely impact our business and prospects.

If we encounter difficulties with ~~subject enrollment or~~ completion inof our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of subjects who remain in the study until its conclusion. We may experience difficulties in subject enrollment in our clinical trials for a variety of reasons, including as a result of the availability of approved preventive and acute treatments for migraine. The enrollment of subjects depends on many additional factors, including:

Our clinical trials may also compete with other clinical trials for product candidates that seek to treat migraine, and this competition will reduce the number and types of subjects available to us, because some subjects who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Since the number of qualified clinical

investigators is limited, we may conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of subjects who are available for our clinical trials in such clinical trial sites.

Delays in subject enrollment may result in increased costs or may affect the timing or outcome of the planned clinical trials, which could prevent completion of these trials and adversely affect our ability to advance the development of STS101. Furthermore, the COVID-19 pandemic could significantly affect subject enrollment and completion in our ongoing and planned clinical trials to an extent that we have not anticipated. Although subjects in our EMERGE trial were generally able to complete their scheduled visits and we were able to collect the essential data from those visits, there can be no assurances that our experience with our ASCEND safety trial, our SUMMIT efficacy trial, or any planned or future clinical trials will be the same or similar or that the COVID-19 pandemic will not have a significant impact on our ability to complete our ASCEND and SUMMIT clinical trials and enroll subjects in any planned or future clinical trials.

STS101 may cause undesirable side effects or have other properties that could delay or prevent its regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

The results of our clinical trials may show that STS101 may cause undesirable side effects, which could interrupt, delay or halt clinical trials, resulting in the denial of regulatory approval by the FDA and other regulatory authorities. In light of widely publicized events concerning the safety risk of certain drug products, regulatory authorities, members of Congress, the Government Accounting Office, medical professionals and the general public have raised concerns about potential drug safety issues. These events have resulted in the withdrawal of drug products, revisions to drug labeling that further limit use of the drug products and establishment of risk management programs that may, for instance, restrict distribution of drug products. The increased attention to drug safety issues may result in a more cautious approach by the FDA to clinical trials. Data from clinical trials may receive greater scrutiny with respect to safety, which may make the FDA or other regulatory authorities more likely to terminate clinical trials before completion, or require longer or additional clinical trials that may result in substantial additional expense and a delay or failure in obtaining approval or approval for a more limited indication than originally sought.

Although STS101 has generally been well-tolerated in our clinical trials to date, with low adverse event rates reported, if unacceptable side effects arise in our ongoing ASCEND safety trial, our ongoing SUMMIT efficacy trial, or any other trials we may conduct in the future, we, the FDA, or the IRBs at the institutions in which our studies are conducted could suspend or terminate our clinical trials or the FDA or comparable foreign regulatory authorities could order us to cease clinical trials or deny approval of STS101 for its targeted indications.

Treatment-related side effects in our clinical trials or in the use of approved DHE products could also affect subject recruitment or the ability or willingness of enrolled subjects to complete any of our clinical trials, and/or result in potential product liability claims. In addition, if undesirable side effects caused by other available DHE products or DHE products in development, the development and successful commercialization of STS101, if approved, could be negatively affected. The active pharmaceutical ingredient in STS101 (DHE) is contraindicated for patients with certain pre-existing conditions and the labels of approved DHE products warn against use by patients with cardiovascular risk factors. These contraindications and warnings could limit the use of STS101 following marketing approval, if approved, or cause undesirable side effects in individuals who use STS101 despite these warnings. For example, we received a single report of a treatment-related serious adverse event in an ASCEND trial participant. This adverse event was consistent with a side effect described in prescribing information for DHE and other vasoconstrictive agents, such as triptans. The adverse event occurred following the subject’s sixth use of study medication, and no further occurrences were reported with six subsequent uses of study medication by the subject. Investigation determined the subject’s medical history, which the subject did not disclose to the trial site, included DHE contraindications and fulfilled key trial exclusion criteria that are disqualifying for trial participation. In addition, approved DHE products carry a “black box” warning in their labels for a risk that the coadministration of DHE and certain other drugs, including specific antivirals and antibiotics, may result in elevated levels of DHE in the blood, potentially causing vasospasm that may result in inadequate blood flow to the extremities or the brain. Unless we can successfully demonstrate by conducting drug-drug interaction studies and potentially additional studies that the coadministration of DHE and certain other drugs does not result in drug-drug interactions, the FDA is likely to require the label for STS101, if approved, to include such warning, and this could result in STS101 not achieving its full commercial potential. Treatment-related side effects in our clinical

trials or in the use of approved DHE products could also affect subject recruitment or the ability of enrolled subjects to complete any of our clinical trials or result in potential product liability claims.

If STS101 receives marketing approval and we or others later identify undesirable side effects caused by STS101 or by other DHE products, a number of potentially significant negative consequences could result, including:

Any of the foregoing events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and result in the loss of significant revenues to us, which would materially and adversely affect our results of operations and business.

We may be unable to rely on Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act (FDCA), which could result in a longer development program and more costly trials than we anticipate.

We may not be able to seek FDA marketing approval of STS101 under Section 505(b)(2) of the FDCA. Section 505(b)(2), if applicable to us, would allow any NDA we file with the FDA to rely in part on data in the public domain or the FDA’s prior conclusions regarding the safety and effectiveness of approved DHE products. Under Section 505(b)(2), the development and approval of STS101 could potentially be expedited by decreasing the overall scope of work we must do ourselves so as to enable an STS101 NDA submission based on Phase 3 efficacy and/or safety trial data combined with a demonstration of pharmacokinetic comparability of STS101 to one or more approved DHE products (i.e., reference listed drugs). Although we believe, based on our communications with the FDA, both our Phase 1 trials have established the pharmacokinetic comparability of STS101 5.2 mg to DHE reference listed drugs, if we are unable to rely on Section 505(b)(2), the development program for STS101 would be longer than we expect, and we would also have to conduct more costly trials than we anticipate, which would harm our business.

STS101 is a drug-device combination product, which may result in additional regulatory risks.

Our finished drug product and nasal delivery device will be regulated as a drug-device combination product. There may be additional regulatory risks for drug-device combination products, and neither the drug formulation nor nasal delivery device incorporated in STS101 is utilized in any drug-device combination product that has undergone regulatory review for marketing approval. We may experience delays in obtaining regulatory approval of STS101 given the increased complexity of the review process when approval of the product and a delivery device is sought under a single marketing application. In the United States, each component of a combination product is subject to the requirements established by the FDA for that type of component, whether a drug, biologic or device. The delivery system device will be subject to FDA device requirements regarding design, performance and validation as well as human factors testing, among other things. We implemented several minor modifications to the second-generation STS101 delivery device to improve its performance and we cannot be certain these changes will not result in additional regulatory risks. Delays in or failure of the studies conducted by us, or failure of our company, our collaborators, if any, or our third-party providers or suppliers to obtain or maintain regulatory approval could result in increased development costs, delays in or failure to obtain regulatory approval, and associated delays in STS101 reaching the market.

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

From time to time, we may publicly disclose preliminary or topline data from our preclinical studies and clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline or preliminary results that we report may differ from future results of the same

studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, topline data should be viewed with caution until the final data are available.

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

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure.

If the interim, topline, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition.

Even if STS101 obtains regulatory approval, it may fail to achieve broad market acceptance.

Even if STS101 receives FDA or other regulatory approvals, its commercial success will depend significantly on the extent to which it is adopted, prescribed by physicians and used by patients. The degree of market acceptance of STS101, if approved, will depend on a number of factors, including:

We cannot assure you that STS101, if approved, will achieve broad market acceptance among physicians and patients. Any failure by STS101, if approved, to achieve market acceptance or commercial success would adversely affect our results of operations.

We face, and will continue to face, significant competition in an environment of rapid technological and scientific change and our failure to effectively compete may prevent us from achieving significant market penetration for STS101, if approved. Most of our competitors have significantly greater resources than we have and we may not be able to successfully compete.

The pharmaceutical industry is highly competitive, with a number of established, large pharmaceutical companies, as well as many smaller companies. Many of these companies have greater financial resources, marketing capabilities and experience in obtaining regulatory approvals for product candidates. There are many pharmaceutical companies, biotechnology companies, public and private universities, government agencies and research organizations actively engaged in research and development of products which may target the same markets as STS101. For instance, companies actively marketing branded products or that have products in late-stage development for the acute treatment or prevention of migraine which may directly or indirectly compete with STS101 include, but are not limited to, Teva Pharmaceutical Industries, Eli Lilly, Novartis, Abbvie, ~~Biohaven,~~Pfizer, Lundbeck, Amgen ~~Pfizer~~ and a number of smaller companies, including Impel Pharmaceuticals, Axsome Therapeutics and Amneal Pharmaceuticals. As well, generic products for the acute treatment or prevention of migraine may directly or indirectly compete with STS101. We expect STS101 to compete on the basis of, among other things, product efficacy and safety, price, extent of adverse side effects experienced and ease of administration. One or more of our competitors may develop and commercialize competing products that incorporate technologies similar to our proprietary technologies earlier than us, obtain approvals for such products from the FDA more rapidly than us or develop alternative products or therapies that are safer, more effective and/or more cost effective than STS101.

The market in which we will compete with STS101 is currently dominated by generic triptan products, and also includes other DHE products, newer oral migraine-specific acute treatments and preventive treatments. The majority of the prescriptions written for the acute treatment of migraine are for generic triptans. There are seven FDA-approved triptan molecules available in branded and branded generic/generic oral dose forms, and two of these molecules are also available in injectable and/or liquid nasal spray dose forms that may have faster onset of action than oral dose forms.

With respect to DHE products, we will compete with Bausch Health’s Migranal and several generic versions thereof, which are DHE liquid nasal spray products, as well as branded and generic DHE injectable products. In addition, in September 2021 Impel Pharmaceuticals received FDA approval for and subsequently commercially introduced a DHE liquid nasal spray product, utilizing the same liquid formulation and container closure system as Migranal, but with a different propellant-powered, single-use delivery device. There can be no assurance that STS101, if approved, will be able to successfully compete against such products.

We also face competition from newer oral migraine-specific acute treatments that have been approved by FDA and commercially introduced in 2020 such as Eli Lilly’s lasmiditan, a ditan, and two gepants, Abbvie’s ubrogepant and ~~Biohaven’s~~Pfizer’s rimegepant. Because lasmiditan, ubrogepant, and rimegepant are thought to act by mechanisms other than vasoconstriction, recommended use is not restricted to patients who do not have cardiovascular risk factors or disease, as is the case for triptan and ergot alkaloid products (including DHE) due to their vasoconstrictive actions. Although the labels for lasmiditan, ubrogepant and rimegepant do not limit use to patients without cardiovascular risk factors or disease, we believe these products have disadvantages. For example, lasmiditan has been reported to commonly cause central nervous system adverse events such as dizziness, somnolence and paresthesia, and the lasmiditan label includes warnings for driving impairment and operation of machinery for at least eight hours

after taking a lasmiditan dose, central nervous system depression, serotonin syndrome, and medication overuse headache. Additionally, because lasmiditan has shown potential for abuse and dependence, the U.S. Drug Enforcement Agency, or DEA, has designated lasmiditan as a controlled substance; this designation imposes licensing and documentation requirements upon prescribers and as well restricts distribution. With ubrogepant and rimegepant, reported efficacy is modest in comparison with efficacy historically reported with triptan and DHE products.

Many of our competitors have significantly greater financial, technical, manufacturing, marketing, sales and supply resources and experience than we do. If we successfully obtain approval for STS101, we will face competition based on many different factors, including the safety and effectiveness of STS101, the ease with which STS101 can be administered and the extent to which patients accept the nasal route of administration, the timing and scope of regulatory approvals for STS101, the availability and cost of manufacturing, marketing and sales capabilities, price, reimbursement coverage and patent position. Competing products could present superior treatment alternatives, including by being more effective, safer, less expensive or marketed and sold more effectively than STS101. Competitive products may make any products we develop obsolete or noncompetitive before we recover the expense of developing and commercializing STS101. Such competitors could also recruit our employees, which could negatively impact our level of expertise and our ability to execute our business plan. For additional information regarding our competition, see “Business—Competition” in our Annual Report on Form 10-K for the year ended December 31, 2021.

The successful commercialization of STS101 will depend in part on the extent to which governmental authorities, private health insurers, and other third-party payors provide coverage, adequate reimbursement levels and implement pricing policies favorable for it. Failure to obtain or maintain coverage and adequate reimbursement for STS101, if approved, could limit our ability to market our product and decrease our ability to generate revenue.

The availability of coverage and adequacy of reimbursement by managed care plans, governmental healthcare programs, such as Medicare and Medicaid, private health insurers and other third-party payors are essential for most patients to be able to afford medical services and pharmaceutical products that receive FDA approval. Our ability to achieve acceptable levels of coverage and reimbursement for STS101 by third-party payors will have an effect on our ability to successfully commercialize it. A decision by a third-party payor not to cover or separately reimburse for STS101, could reduce physician utilization if approved. Assuming there is coverage for STS101 by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. We cannot be sure that coverage and reimbursement in the United States, the European Union or elsewhere will be available for STS101 and any reimbursement that may become available may not be adequate or may be decreased or eliminated in the future.

Moreover, increasing efforts by governmental and other third-party payors in the United States and abroad to cap or reduce healthcare costs have resulted in increasing challenges to prices charged for pharmaceutical products and services, and many third-party payors may refuse to provide coverage and adequate reimbursement for particular drugs when an equivalent generic drug, biosimilar or a less expensive therapy is available. It is possible that a third-party payor may consider STS101 as substitutable and only offer to reimburse patients for the less expensive product, if any. For example, there are currently generic versions of both DHE liquid nasal spray products and DHE injectable products, with which we may compete. Even if we show improved efficacy or improved convenience of administration with STS101, pricing of existing third-party therapeutics may limit the amount we will be able to charge for it. These third-party payors may deny or revoke the reimbursement status of STS101, if approved, or establish prices for it at levels that are too low to enable us to realize an appropriate return on our investment. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize STS101.

No uniform policy for coverage and reimbursement for products exists among third-party payors in the United States. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that may require us to provide scientific and clinical support for the use of STS101 to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases on short notice, and we believe that changes in these rules and regulations are likely.

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe and other countries will likely put pressure on the pricing and usage of medical products. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to fix their own prices for medical products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for STS101. Accordingly, in markets outside the United States, the reimbursement for STS101 may be reduced compared with the United States and may be insufficient to generate commercially-reasonable revenue and profits.

We currently have no sales organization. If we are unable to establish sales capabilities on our own or through third parties, we may not be able to market and sell STS101 effectively in the United States and foreign jurisdictions, if approved, or generate product revenue.

We currently do not have a marketing or sales organization. In order to commercialize STS101, if approved, in the United States and foreign jurisdictions, we must build our marketing, sales, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services, and we may not be successful in doing so. If STS101 receives regulatory

approval, we expect to establish a sales organization in the United States with technical expertise and supporting marketing and distribution capabilities to commercialize it, which will be expensive and time consuming. We have no prior experience as a company in the marketing, sale and distribution of pharmaceutical products and there are significant risks involved in building and managing a sales organization, including our ability to hire, retain, and incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel, and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization of STS101. We may choose to collaborate with third parties that have direct sales forces and established distribution systems, either to augment our own sales force and distribution systems or in lieu of our own sales force and distribution systems. If we are unable to enter into such arrangements on acceptable terms or at all, we may not be able to successfully commercialize STS101. If we are not successful in commercializing STS101, either on our own or through arrangements with one or more third parties, we may not be able to generate product revenue and we would incur significant additional losses.

We rely, and intend to continue to rely, on qualified third parties to supply all components of STS101. As a result, we are dependent on several third parties, most of which are sole source suppliers, for the manufacture of STS101 and our supply chain, and if we experience problems with any of these suppliers, or they fail to comply with applicable regulatory requirements or to supply sufficient quantities at acceptable quality levels or prices, or at all, it would materially and adversely affect our business.

We do not own or operate manufacturing facilities for clinical or commercial manufacture of either the proprietary dry-powder formulation of DHE component of STS101 or the proprietary pre-filled, single-use, nasal delivery device, including the drug substance and packaging. We have limited personnel with experience in drug-device product manufacturing and we lack the capabilities to manufacture either the drug or device components of STS101 on a clinical or commercial scale. We currently outsource all manufacturing and packaging of STS101 to third parties, and we do not plan to own or operate our own manufacturing and packaging facilities. There can be no assurance that our clinical development product supplies will not be limited, interrupted, or of satisfactory quality or continue to be available at acceptable prices. In particular, any replacement of any of our third-party suppliers could require significant effort and expertise because there may be a limited number of qualified replacements. In addition, we may encounter issues with transferring technology to a new third-party manufacturer, and we may encounter regulatory delays if we need to move the manufacturing of our products from one third-party manufacturer to another. Some of the third parties on which we rely may also be adversely impacted by COVID-19 or other unforeseen events and public health emergencies, and the foregoing challenges could be compounded as a result.

In addition, we do not currently have long-term commercial supply agreements with third-party manufacturers for either the formulation or device components of STS101 or the STS101 finished product. We may be unable to enter into agreements for commercial supply with all third-party manufacturers, or may be unable to do so on acceptable terms. Even if we enter into these agreements or, for those agreements that we have already entered into, the various manufacturers utilized for STS101 will likely be single source suppliers to us for a significant period of time. We may not be able to establish additional sources of supply for STS101 prior to commercialization. Certain of such suppliers are subject to regulatory requirements covering manufacturing, testing, quality control and record keeping relating to STS101, and are subject to pre-approval and ongoing inspections by the regulatory agencies. Failure by any of our suppliers to comply with applicable regulations may result in long delays and interruptions to our manufacturing capacity while we seek to secure another supplier that meets all regulatory requirements.

Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured STS101 ourselves, including:

Any of these factors could cause the delay of required approvals or commercialization of STS101, could prevent us from commercializing it successfully, could cause the suspension of initiation or completion of clinical trials and regulatory submissions, and could lead to higher product costs.

In addition, the facilities used by our CMOs to manufacture STS101 are subject to various regulatory requirements and may be subject to the inspection of the FDA or other regulatory authorities. We do not directly control manufacturing at our CMOs, and are completely dependent on them for compliance with current regulatory requirements. If our CMOs cannot successfully manufacture components of finished product that conforms to our specifications and the regulatory requirements of the FDA or comparable regulatory authorities in foreign jurisdictions, we may not be able to rely on them for the manufacture of STS101. In addition, we have limited control over the ability of our CMOs to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority finds our facilities or those of our CMOs inadequate for the manufacture of STS101 or if such facilities are subject to enforcement action in the future or are otherwise inadequate, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or commercialize STS101 and the timing of any such approval and commercialization. We implemented several minor modifications to the STS101 delivery device to improve its performance and we cannot be certain these changes will not result in additional regulatory risks. In addition, if any of our CMOs are adversely impacted by COVID-19 or other unforeseen events and public health emergencies, or if such events impede the ability of the FDA or a comparable regulatory authority to inspect the facilities used by our CMOs to manufacture STS101, which could delay our ability to seek approval or commercialize STS101.

Our CMOs may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments.

Additionally, due to COVID-19 pandemic we may experience interruption of, or delays in completing manufacturing and manufacturing-related activities such as CMO qualification, production equipment manufacture, delivery and qualification, validation of manufacturing processes, manufacture and/or analytical characterization of our product candidate, completion of stability studies and/or manufacture of registration batches of our product candidate required for NDA submission. If our CMOs were to encounter any of these difficulties, our ability to provide STS101 to subjects in clinical trials, or to provide product for the treatment of patients once approved, would be jeopardized.

We rely, and intend to continue to rely, on third-party suppliers for materials used in the manufacture of STS101, and the loss of third-party suppliers or their inability to supply us with adequate key materials could harm our business.

We currently do not have the ability to independently conduct any clinical trials. We rely, and intend to continue to rely, on third-party suppliers, most of which are sole source suppliers, for certain key materials required for the production of the DHE dry-powder formulation of STS101. Our dependence on these third-party suppliers and the challenges we may face in obtaining adequate supplies of these materials involve several risks, including limited control over pricing, availability, quality and delivery schedules. As a small company, our negotiation leverage is limited and we are likely to get lower priority than other companies or purchasers that are larger than we are. We cannot be certain that our suppliers will continue to provide us with the quantities of these key materials that we require or satisfy our anticipated specifications and quality requirements. Some of these third parties may also be adversely impacted by COVID-19 or other unforeseen events and public health emergencies. Any supply interruption in limited or sole sourced key materials could materially harm the manufacture of STS101 until a new source of supply, if any, could be identified and qualified. We may be unable to find a sufficient alternative supplier in a reasonable time or on commercially reasonable terms. Any performance failure on the part of our suppliers could delay the development and potential commercialization of STS101, including limiting supplies necessary for clinical trials and regulatory approvals, which would have a material adverse effect on our business.

We rely, and intend to continue to rely, on third parties in the conduct of all of our clinical trials. If these third parties do not successfully carry out their contractual duties, fail to comply with applicable regulatory requirements or meet expected deadlines, we may be unable to obtain regulatory approval for STS101.

The FDA and comparable foreign regulatory authorities in other jurisdictions require us to comply with regulations and standards, commonly referred to as good clinical practice, or GCP, requirements for conducting, monitoring, recording and reporting the results of clinical trials, in order to ensure that the data and results are scientifically credible and accurate and that the trial subjects are adequately informed of the potential risks of participating in clinical trials. We rely on medical institutions, clinical investigators, contract laboratories and other third parties, such as CROs and consultants, to conduct GCP-compliant clinical trials of STS101 properly and on time. While we have agreements with these third parties, we monitor and control only certain aspects of their activities and have limited influence over their actual performance and the amount or timing of resources that they devote to our

programs. Third parties with whom we contract may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities that could harm our competitive position. The third parties with whom we contract for execution of our clinical trials play a significant role in the conduct of these trials and the subsequent collection and analysis of data. Although we rely on these third parties to conduct portions of our clinical trials, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with its investigational plan and protocol and applicable laws and regulations, and our reliance on these third parties does not relieve us of our regulatory responsibilities. These

challenges have been made more difficult by the COVID-19 pandemic and resulting shelter-in-place and stay-at-home restrictions, which are driving greater dependency on electronic monitoring of our clinical trial sites. Such monitoring could prove to be less reliable and could increase data privacy and cybersecurity risks.

If the third parties conducting our clinical trials do not adequately perform their contractual duties or obligations, experience significant business challenges, disruptions or failures, do not meet expected deadlines, terminate their agreements with us or need to be replaced, or if the quality or accuracy of the data they obtain is compromised due to their failure to adhere to our protocols or to GCPs, or for any other reason, we may need to enter into new arrangements with alternative third parties. This could be difficult, costly or impossible, and clinical trials may need to be extended, delayed, terminated or repeated. As a result, we may not be able to obtain regulatory approval in a timely fashion, or at all, for STS101, our results our business and results of operations and the commercial prospects for STS101 would be harmed, our costs could increase, and our ability to generate revenues could be delayed.

We will need to increase the size of our organization, and we may experience difficulties in managing growth.

As of ~~June~~September 30, 2022, we had 25 full-time employees. We will need to continue to expand our managerial, operational, financial and other resources in order to manage our operations and clinical trials, continue our development activities and commercialize STS101. Our management and personnel, systems and facilities currently in place may not be adequate to support this future growth. Our need to effectively execute our growth strategy requires that we:

We may be unable to successfully implement these tasks, which could have a material adverse effect on our business, results of operations, financial condition, prospects and stock price.

We may conduct additional clinical trials and consider additional headache indications for STS101 to enhance its commercial potential; however, these trials may not produce results necessary to enable additional commercial potential or enhancement of its label.

In addition to our pursuit of initial regulatory approval and successful commercialization of STS101 in the United States, we may conduct additional clinical trials and consider additional headache indications for STS101 to expand its commercial potential, including by potentially conducting clinical programs outside the United States. However, any positive results from our ongoing, planned or future clinical trials of STS101 and results from clinical testing by third parties of other DHE products and product candidates, may not be predictive of the results of any such additional clinical trials. Therefore, there can be no assurance that we will ever be successful enhancing the commercial potential of STS101 or expanding its label.

Any future collaboration arrangements that we may enter into, may not be successful, which could significantly limit the likelihood of receiving the potential economic benefits of the collaboration and adversely affect our ability to develop and commercialize STS101.

To the extent that we pursue collaborations relating to STS101 in the future, we may face significant competition in seeking appropriate collaborators and may not be able to ultimately enter into collaborations. Moreover, any such collaboration arrangements may be complex and time-consuming to negotiate, document, implement and maintain and challenging to manage. We may not be successful in our efforts with any such collaborator and we may never receive any milestone or royalty payments under any such agreements. Further, the terms of any collaborations or other arrangements that we may establish, may not be favorable to us.

The success of any collaboration arrangement will depend heavily on the efforts and activities of our collaborators. Collaborations are subject to numerous risks, which may include risks that:

If we engage in future acquisitions or strategic partnerships, this may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.

We may evaluate various acquisitions and strategic partnerships, including licensing or acquiring complementary products, intellectual property rights, technologies, or businesses. Any potential acquisition or strategic partnership may entail numerous risks, including:

In addition, if we undertake acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business.

Our business involves the use of hazardous materials and we and our third-party manufacturers and suppliers must comply with environmental laws and regulations, which can be expensive and restrict how we do business.

Our third-party manufacturers’ and suppliers’ activities involve the controlled storage, use and disposal of hazardous materials owned by us, including the components of STS101 and other hazardous compounds. We and any third-party manufacturers and suppliers we engage are subject to numerous federal, state and local environmental, health and safety laws, regulations and permitting requirements, including those governing laboratory procedures; the generation, handling, use, storage, treatment, and disposal of hazardous and regulated materials and wastes; the emission and discharge of hazardous materials into the ground, air and water; and employee health and safety. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste. In some cases, these hazardous materials and various wastes resulting from their use are stored at our contract manufacturers’ facilities pending their use and disposal. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination, which could cause an interruption of our commercialization efforts, research and development efforts and business operations, environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products.

Although we believe that the safety procedures utilized by our third-party manufacturers for handling and disposing of these materials generally comply with the standards prescribed by these laws and regulations, we cannot guarantee that this is the case or eliminate the risk of accidental contamination or injury from these materials. Under certain environmental laws, we could be held responsible for costs relating to any contamination at our current or past facilities and at third-party facilities. In such an event, we may be held liable for any resulting damages and such liability could exceed our resources and state or federal or other applicable authorities may curtail our use of certain materials and/or interrupt our business operations. Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance.

Compliance with applicable environmental laws and regulations may be expensive, and current or future environmental laws and regulations may impair our research, product development and manufacturing efforts. In addition, we cannot entirely eliminate the risk of accidental injury or contamination from these materials or wastes.

Our success depends on our ability to protect our intellectual property and our proprietary technologies.

Our commercial success depends in part on our ability to obtain and maintain patent protection and trade secret protection for STS101, proprietary technologies and their uses as well as our ability to operate without infringing upon the proprietary rights of others. We generally seek to protect our proprietary position by filing patent applications in the United States and abroad related to STS101, proprietary technologies and their uses that are important to our business. Our patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless, and until, patents issue from such applications, and then only to the extent the issued claims cover the technology in appropriate jurisdictions. There can be no assurance that our patent applications or those of our licensors will result in additional patents being issued or that issued patents will afford sufficient protection against competitors with similar technology, nor can there be any assurance that the patents issued will not be infringed, designed around or invalidated by third parties. Even issued patents may later be found invalid or unenforceable or may be modified or revoked in proceedings instituted by third parties before various patent offices or in courts. The degree of future protection for our proprietary rights is uncertain. Only limited protection may be available and may not adequately protect our rights or permit us to gain or keep any competitive advantage. For example, we do not have a patent covering the composition of matter for DHE, the active ingredient in STS101. If we do not adequately protect our intellectual property and proprietary technology, competitors may be able to use STS101 and proprietary technologies and erode or negate any competitive advantage we may have, which could have a material adverse effect on our financial condition and results of operations.

We have applied, and we intend to continue applying, for patents covering aspects of STS101, proprietary technologies and their uses that we deem appropriate. However, we may not be able to apply for patents on certain aspects of STS101, proprietary

technologies and their uses in a timely fashion, at a reasonable cost, in all jurisdictions, or at all, and any potential patent coverage we obtain may not be sufficient to prevent substantial competition.

We own or have an exclusive license under more than sixty U.S. and foreign patents and pending applications. In the U.S., we own or have exclusive license rights under 10 issued U.S. patents relating to STS101 that have expiration dates (absent any adjustments or extensions of term) as late as 2039. We believe the breadth of our patent estate reflects the highly innovative and

differentiated nature of our proprietary dry-powder nasal delivery and formulation technologies. With the exception of one issued U.S. patent and several issued or allowed patents in the European Union and Japan that we own, all of our rights under issued U.S. and foreign patents relating to STS101 are exclusively licensed from SNBL.

We cannot be certain that the claims in any of our patent applications will be considered patentable by the USPTO, courts in the United States or by the patent offices and courts in foreign countries, nor can we be certain that the claims in issued patents relating to STS101 will not be found invalid or unenforceable if challenged.

The patent application process is subject to numerous risks and uncertainties, and there can be no assurance that we or any of our actual or potential future collaborators will be successful in protecting STS101, proprietary technologies and their uses by obtaining and defending patents. These risks and uncertainties include the following:

The patent position of pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has been the subject of much litigation in recent years. Moreover, the patent prosecution process is also expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Although we enter into non-disclosure and confidentiality agreements with parties who have access to patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators, CROs, contract manufacturers, consultants, advisors and other third parties, any of these parties may breach such agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection.

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents, if issued, or the patent rights that we license from others, may be challenged in the courts or patent offices in the United States and abroad. Once granted, patents may remain open to opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action in court or before patent offices or similar proceedings for a given period after allowance or grant, during which time third parties can raise objections against such initial grant. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop others from using or commercializing similar or

identical products, or limit the duration of the patent protection of STS101. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our intellectual property may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

Our ability to enforce our patent rights depends on our ability to detect infringement. It may be difficult to detect infringers who do not advertise the components or methods that are used in connection with their products and services. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s or potential competitor’s product or service. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded if we were to prevail may not be commercially meaningful.

In addition, proceedings to enforce or defend our patents could put our patents at risk of being invalidated, held unenforceable or interpreted narrowly. Such proceedings could also provoke third parties to assert claims against us or licensor Shin Nippon Biomedical Laboratories, Ltd., or SNBL, which we have agreed to indemnify under certain circumstances, including that some or all of the claims in one or more of our patents are invalid or otherwise unenforceable. If any of our patents covering STS101 are invalidated or found unenforceable, or if a court found that valid, enforceable patents held by third parties covered STS101, our competitive position could be harmed or we could be required to incur significant expenses to enforce or defend our rights. If we initiate lawsuits to protect or enforce our patents, or litigate against third-party claims, such proceedings would be expensive and would divert the attention of our management and technical personnel.

The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:

To the extent we obtain licenses from or collaborate with third parties, in some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license

from third parties, or such activities, if controlled by us, may require the input of such third parties. We may also require the cooperation of our licensors and collaborators to enforce any licensed patent rights, and such cooperation may not be provided. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. Moreover, if we do obtain necessary licenses, we will likely have obligations under those licenses, and any failure to satisfy those obligations could give our licensor the right to terminate the license. Termination of a necessary license, or expiration of licensed patents or patent applications, could have a material adverse impact on our business.

The lives of our patents may not be sufficient to effectively protect STS101 and our business.

Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after its first effective non-provisional filing date. Although various extensions may be available, the life of a patent, and the protection it affords, is limited. Even if patents covering STS101, proprietary technologies and their uses are obtained, once the patent life has expired, we may be open to competition. In addition, although upon issuance in the United States a patent’s life can be increased based on certain delays caused by the USPTO, this increase can be reduced or eliminated based on certain delays caused by the patent applicant during patent prosecution. Given the amount of time required for the development, testing and regulatory review of STS101, patents protecting it might expire before or shortly after it is commercialized. If we do not have sufficient patent life to protect STS101, proprietary technologies and their uses, our business and results of operations will be adversely affected.

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

We rely on the protection of our trade secrets, including unpatented know-how, technology and other proprietary information. We have taken steps to protect our trade secrets and unpatented know-how, including entering into confidentiality agreements with third parties, and confidential information and inventions agreements with employees, consultants and advisors. In addition to contractual measures, we try to protect the confidential nature of our proprietary information using commonly accepted physical and technological security measures. Despite these efforts, we cannot provide any assurances that all such agreements have been duly executed, and any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. In addition, such security measures may not provide adequate protection for our proprietary information, for example, in the case of misappropriation of a trade secret by an employee, consultant, customer or third party with authorized access. Our security measures may not prevent an employee, consultant or customer from misappropriating our trade secrets and providing them to a competitor, and recourse we take against such misconduct may not provide an adequate remedy to protect our interests fully. Monitoring unauthorized uses and disclosures is difficult, and we do not know whether the steps we have taken to protect our proprietary technologies will be effective. Unauthorized parties may also attempt to copy or reverse engineer certain aspects of STS101 that we consider proprietary. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive and time-consuming, and the outcome is unpredictable. Even though we use commonly accepted security measures, the criteria for protection of trade secrets can vary among different jurisdictions.

Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. Moreover, third parties may still obtain this information or may come upon this or similar information independently, and we would have no right to prevent them from using that technology or information to compete with us. Trade secrets will over time be disseminated within the industry through independent development, the publication of journal articles and the movement of personnel skilled in the art from company to company or academic to industry scientific positions. Though our agreements with third parties typically restrict the ability of our advisors, employees, collaborators, licensors, suppliers, third-party contractors and consultants to publish data potentially relating to our trade secrets, our agreements may contain certain limited publication rights. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position. Because from time to time we expect to rely on third parties in the development, manufacture, and distribution of STS101, we must, at times, share trade secrets with them. Despite employing the contractual and other security precautions described above, the need to share trade secrets increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. If any of these events occurs or if we otherwise lose protection for our trade secrets, the value of this information may be greatly reduced and our competitive position would be harmed. If we do not apply for patent protection prior to such publication or if we cannot otherwise maintain the confidentiality of our proprietary technology and other confidential information, then our ability to obtain patent protection or to protect our trade secret information may be jeopardized.

Our rights to develop and commercialize STS101 are subject in part to the terms and conditions of a license granted to us by SNBL. The patent protection, prosecution and enforcement for STS101 may be dependent on third parties.

We currently are reliant upon a license of certain patent rights and proprietary technology pursuant to a licensing and assignment agreement we entered with SNBL in June 2016, or the SNBL License. Such rights and technology are important or necessary to the development of STS101. This and other licenses we may enter into in the future may not provide adequate rights to use such intellectual property and technology in all relevant fields of use or in all territories in which we may wish to develop or commercialize our technology and products in the future. As a result, we may not be able to develop and commercialize our technology and products in fields of use and territories for which we are not granted rights pursuant to such licenses.

Licenses to additional third-party technology that may be required for our development programs may not be available in the future or may not be available on commercially reasonable terms, which could have a material adverse effect on our business and financial condition.

In some circumstances, we may not have the right to control the preparation, filing, prosecution and enforcement of patent applications, or to maintain the patents, covering technology that we license from third parties. In addition, in some instances, the SNBL License requires us to negotiate in good faith a strategy with respect to infringement, and in some instances, SNBL retains the sole right to initiate and control some infringing activities, before we can enforce patent rights. Therefore, we cannot be certain that SNBL or any future licensors or collaborators will prosecute, maintain, enforce and defend such intellectual property rights in a manner consistent with the best interests of our business, including by taking reasonable measures to protect the confidentiality of know-how and trade secrets, or by paying all applicable prosecution and maintenance fees related to intellectual property registrations for STS101. We also cannot be certain that our licensors have drafted or prosecuted the patents and patent applications licensed to us in compliance with applicable laws and regulations, which may affect the validity and enforceability of such patents or any patents that may issue from such applications. If they fail to do so, this could cause us to lose rights in any applicable intellectual property that we in-license, and as a result our ability to develop and commercialize STS101 may be adversely affected and we may be unable to prevent competitors from making, using and selling competing products.

The SNBL License imposes a low single-digit royalty on net sales of STS101 along with certain other obligations on us, and any future licenses, if required, likely will impose various royalty payments, milestones, and other obligations on us. If we fail to comply with any of these obligations, we may be required to pay damages and the licensor may have the right to terminate the license. Termination by the licensor would cause us to lose valuable rights, and could prevent us from developing and commercializing STS101 and proprietary technologies. Our business would suffer if any current or future licenses terminate, if the licensors fail to abide by the terms of the license, if the licensors fail to enforce licensed patents against infringing third parties, if the licensed patents or other rights are found to be invalid or unenforceable, or if we are unable to enter into necessary licenses on acceptable terms. Furthermore, if any current or future licenses terminate, or if the underlying patents fail to provide the intended exclusivity, competitors or other third parties may gain the freedom to seek regulatory approval of, and to market, products identical to ours. Moreover, our licensors may own or control intellectual property that has not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing or otherwise violating the licensor’s rights. In addition, while we cannot currently determine the amount of the royalty obligations we would be required to pay on sales of future products, if any, the amounts may be significant. The amount of our future royalty obligations will depend on the technology and intellectual property we use in products that we successfully develop and commercialize, if any. Therefore, even if we successfully develop and commercialize STS101, we may be unable to achieve or maintain profitability.

Litigation or other proceedings or third-party claims of intellectual property infringement could require us to spend significant time and money and could prevent us from selling our products.

Our commercial success depends significantly on our ability to operate without infringing the patents and other proprietary rights of third parties. However, our research, development and commercialization activities may be subject to claims that we infringe or otherwise violate patents or other intellectual property rights owned or controlled by third parties. Claims by third parties that we infringe their proprietary rights may result in liability for damages or prevent or delay our developmental and commercialization efforts. We cannot assure you that our operations do not, or will not in the future, infringe existing or future patents.

Other entities may have or obtain patents or proprietary rights that could limit our ability to make, use, sell, offer for sale or import STS101 or impair our competitive position. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the pharmaceutical and biotechnology industries, including patent infringement lawsuits, interferences, oppositions, reexaminations, inter partes review proceedings and post-grant review proceedings before the USPTO and/or corresponding foreign patent offices. Numerous third-party U.S. and foreign issued patents and pending patent applications exist in the fields of STS101. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of STS101.

Furthermore, the scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent and the patent’s prosecution history and can involve other factors such as expert opinion. Our interpretation of the relevance or the scope of claims in a patent or a pending application may be incorrect, which may negatively impact our ability to market STS101. Further, we may incorrectly determine that our technologies or STS101 are not covered by a third-party patent or may incorrectly predict whether a third party’s pending patent application will issue with claims of relevant scope. Our determination of the expiration date of any patent in the United States or abroad that we consider relevant may be incorrect, which may negatively impact our ability to develop and market STS101.

As the pharmaceutical industry expands and more patents are issued, the risk increases that STS101 may be subject to claims of infringement of the patent rights of third parties. Our competitors in both the United States and abroad, many of which have

substantially greater resources and have made substantial investments in patent portfolios and competing technologies, may have applied for or obtained or may in the future apply for and obtain, patents that will prevent, limit or otherwise interfere with our ability to make, use and sell STS101. We do not always conduct independent reviews of pending patent applications of and patents issued to third parties.

Patent applications in the United States and elsewhere are typically published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Certain U.S. applications that will not be filed outside the United States can remain confidential until patents issue. In addition, patent applications in the United States and elsewhere can be pending for many years before issuance, or unintentionally abandoned patents or applications can be revived. Furthermore, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our technologies, STS101 or the use of STS101. As such, there may be applications of others now pending or recently revived patents of which we are unaware. These applications may later result in issued patents, or the revival of previously abandoned patents, that will prevent, limit or otherwise interfere with our ability to make, use or sell STS101. Because patent applications are maintained as confidential for a certain period of time, until the relevant application is published we may be unaware of third-party patents that may be infringed by commercialization of STS101, and cannot be certain that we were the first to file a patent application related to a product candidate or technology. Moreover, because patent applications can take many years to issue, there may be currently-pending patent applications that may later result in issued patents that STS101 may infringe. In addition, identification of third-party patent rights that may be relevant to our technology is difficult because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. Any claims of patent infringement asserted by third parties would be time consuming and could:

Although no third-party has asserted a claim of patent infringement against us as of the date of this report, others may hold proprietary rights that could prevent STS101 from being marketed. Any patent-related legal action against us claiming damages and seeking to enjoin commercial activities relating to STS101 or processes could subject us to potential liability for damages, including treble damages if we were determined to willfully infringe, and require us to obtain a license to manufacture or market STS101. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. We cannot predict whether we would prevail in any such actions or that any license required under any of these patents would be made available on commercially acceptable terms, if at all. Even if such licenses are available, we could incur substantial costs related to royalty payments for licenses obtained from third parties, which could negatively affect our gross margins, and the rights may be non-exclusive, which could give our competitors access to the same technology or intellectual property rights licensed to us. In addition, we cannot be certain that we could redesign STS101 or processes to avoid infringement, if necessary. Accordingly, an adverse determination in a judicial or administrative proceeding, or the failure to obtain necessary licenses,

could prevent us from developing and commercializing STS101, which could harm our business, financial condition and operating results. In addition, intellectual property litigation, regardless of its outcome, may cause negative publicity and could prohibit us from marketing or otherwise commercializing STS101.

If we collaborate with third parties in the development of technology in the future, our collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to litigation or potential liability. Further, collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability. Also, we may be obligated under our agreements with our collaborators, licensors, suppliers and others to indemnify and hold them harmless for damages arising from intellectual property infringement by us.

We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time consuming, and unsuccessful. Further, issued patents relating to STS101 could be found invalid or unenforceable if challenged in court.

Competitors may infringe our intellectual property rights or those of our licensors. To prevent infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in a patent infringement proceeding, a court may decide that a patent we own or in-license is not valid, is unenforceable and/or is not infringed. If we or any of our potential future collaborators were to initiate legal proceedings against a third party to enforce a patent directed at STS101, the defendant could counterclaim that our patent is invalid and/or unenforceable in whole or in part. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge include an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could include an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO or made a misleading statement during prosecution. Third parties may also raise similar claims before the USPTO, even outside the context of litigation. Similar mechanisms for challenging the validity and enforceability of a patent exist in ex-U.S. patent offices and may result in the revocation, cancellation, or amendment of any ex-U.S. patents we hold in the future. The outcome following legal assertions of invalidity and unenforceability is unpredictable, and prior art could render our patents or those of our licensors invalid. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on such product candidate. Such a loss of patent protection would have a material adverse impact on our business. Interference or derivation proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the priority of inventions with respect to our patents or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms or at all, or if a non-exclusive license is offered and our competitors gain access to the same technology. Our defense of litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties or enter into development or manufacturing partnerships that would help us bring STS101 to market.

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

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock.

We may fail to comply with our obligations under the SNBL License or any future agreements pursuant to which we may license or otherwise acquire intellectual property rights or technology, which could result in the loss of rights or technology that are material to our business.

Our business is dependent on the SNBL License for certain patent rights and know-how that are directed to SNBL’s proprietary nasal drug delivery technology, including its proprietary nasal delivery device and formulation technologies, for use with DHE. Our rights under the SNBL License and any license for intellectual property or technology that we may enter into in the future are and will be subject to the continuation of and our compliance with the terms of these agreements. Disputes may arise regarding our rights to intellectual property licensed to us from a third party, including but not limited to:

Any disputes over intellectual property and other rights under the SNBL License could prevent or impair our ability to maintain the license on acceptable terms and our ability to successfully develop and commercialize STS101. In addition, if we fail to comply with our obligations under the SNBL License, it may be terminated or the scope of our rights under it may be reduced and we might be unable to develop, manufacture or market STS101.

We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.

We may also be subject to claims that former employees, collaborators or other third parties have an ownership interest in our patents or other intellectual property. In addition, we may face claims by third parties that our agreements with employees, contractors or consultants obligating them to assign intellectual property to us are ineffective or in conflict with prior or competing contractual obligations of assignment, which could result in ownership disputes regarding intellectual property we have developed or will develop and interfere with our ability to capture the commercial value of such intellectual property. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and distraction to management and other employees.

Even if we obtain regulatory approval for STS101, STS101 will remain subject to regulatory scrutiny.

If STS101 is approved, it will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies, and submission of safety, efficacy, and other post- market information, including both federal and state requirements in the United States and requirements of comparable foreign regulatory authorities.

Manufacturers and manufacturers’ facilities are required to comply with extensive FDA and comparable foreign regulatory authority requirements, including ensuring that quality control and manufacturing procedures conform to cGMP regulations. As such, we and our contract manufacturers will be subject to continual review and inspections to assess compliance with cGMP and adherence to commitments made in any approved marketing application. Accordingly, we and others with whom we work must continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, and quality control.

We will have to comply with requirements concerning advertising and promotion for STS101. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved label. As such, we may not promote STS101 for indications or uses for which they do not have

approval. However, companies may share truthful and not misleading information that is otherwise consistent with a product’s FDA approved labeling. We also must submit new or supplemental applications and obtain approval for certain changes to STS101, if approved, product labeling, or manufacturing process. We could also be asked to conduct post-marketing clinical studies to verify the safety and efficacy of STS101 in general or in specific patient subsets. An unsuccessful post-marketing study or failure to complete such a study could result in the withdrawal of marketing approval.

If we discover previously unknown problems with STS101, such as adverse events of unanticipated severity or frequency, or problems with the facility where STS101 is manufactured, or if the FDA disagrees with the promotion, marketing or labeling of STS101, the FDA may impose restrictions on it or us, including requiring withdrawal of it from the market. If we fail to comply with applicable regulatory requirements, the FDA and other regulatory authorities may, among other things:

Any government action or investigation of alleged violations of law could require us to expend significant time and resources in response, and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenue from STS101. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected.

Moreover, the policies of the FDA and of other regulatory authorities may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of STS101. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. In addition, if we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we could lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.

If STS101 obtains regulatory approval, competitors could enter the market with generic versions, which may result in a material decline in sales of affected products.

Under the Hatch-Waxman Amendments to the Federal Food, Drug and Cosmetic Act, or FDCA, a pharmaceutical manufacturer may file an abbreviated new drug application, or ANDA, seeking approval of a generic version of an approved drug product. A manufacturer may also submit an NDA under section 505(b)(2) of the FDCA, which may be for a new or improved version of the originally approved drug product. The Hatch-Waxman Amendments also provide for certain periods of regulatory exclusivity, which preclude FDA acceptance or approval of an ANDA or 505(b)(2) NDA for specific timeframes. In addition to this non-patent exclusivity, an NDA holder may have patents claiming the active ingredient, product formulation or an approved use of the drug, which would be listed in the FDA publication, “Approved Drug Products with Therapeutic Equivalence Evaluations,” known as the Orange Book. If there are patents listed in the Orange Book for a product, a generic or 505(b)(2) applicant that seeks to market its product before expiration of the patents must include in their applications what is known as a “Paragraph IV” certification, challenging the validity or enforceability of, or claiming non-infringement of, the listed patent or patents. Notice of the certification must be given to the patent owner and NDA holder and if, within 45 days of receiving notice, either the patent owner or NDA holder sues for patent infringement, approval of the ANDA or 505(b)(2) NDA is stayed for up to 30 months.

Accordingly, if STS101 is approved, including through the 505(b)(2) pathway, competitors could file ANDAs for generic versions of STS101. If there are patents listed for STS101 in the Orange Book, those ANDAs would be required to include a certification as to each listed patent indicating whether the ANDA applicant does or does not intend to challenge the patent. We cannot predict which, if any, patents in our current portfolio or patents we may obtain in the future will be eligible for listing in the Orange Book, how any generic competitor would address such patents, whether we would sue on any such patents, or the outcome of any such suit.

We may not be successful in securing or maintaining proprietary patent protection for STS101. Moreover, if any of our owned or in-licensed patents that are listed in the Orange Book are successfully challenged by way of a Paragraph IV certification and subsequent litigation, STS101 could immediately face generic competition and its sales would likely decline rapidly and materially.

The successful commercialization of STS101 will depend in part on the extent to which governmental authorities, private health insurers, managed care plans and other third-party payors provide coverage, adequate reimbursement levels and implement pricing policies favorable for STS101. Failure to obtain or maintain coverage and adequate reimbursement for STS101, if approved, could limit our ability to market those products and decrease our ability to generate revenue.

The availability of coverage and adequacy of reimbursement by governmental healthcare programs, such as Medicare and Medicaid, private health insurers, managed care plans and other third-party payors are essential for most patients to be able to afford medical services and pharmaceutical products such as STS101 that receive FDA approval. Our ability to achieve acceptable levels of coverage and reimbursement by third-party payors for our products will have an effect on our ability to successfully commercialize STS101.

No uniform policy for coverage and reimbursement for products exists among third-party payors in the United States. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. The process for determining whether a third-party payor will provide coverage for a product typically is separate from the process for setting the price of such product or for

establishing the reimbursement rate that the payor will pay for the product once coverage is approved. Third-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, or place products at certain formulary levels that result in lower reimbursement levels and higher cost-sharing obligation imposed on patients. One third-party payor’s decision to cover a particular medical product or service does not ensure that other payors will also provide coverage for the medical product or service. As a result, the coverage determination process will often require us to provide scientific and clinical support for the use of our products to each payor separately and can be a time-consuming process, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. We cannot be sure that coverage will be available for any product that we may develop. A decision by a third-party payor not to cover STS101 could reduce physician utilization of our products once approved and adversely affect our business, financial condition, results of operations and prospects.

Assuming there is coverage for our products by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases on short notice, and we believe that changes in these rules and regulations are likely. Third-party payors increasingly are challenging prices charged for pharmaceutical products and services, and many third-party payors may refuse to provide coverage and adequate reimbursement for particular drugs or biologics when an equivalent generic drug, biosimilar or a less expensive therapy is available. It is possible that a third-party payor may consider STS101 as substitutable and only offer to reimburse patients for the less expensive product. For example, there are currently generic versions of both DHE liquid nasal spray products and DHE injectable products, which we may compete with. Even if we show improved efficacy or improved convenience of administration with STS101, pricing of other third-party therapeutics may limit the amount we will be able to charge for our products. These third-party payors may deny or revoke the reimbursement status of our products, if approved, or establish prices for our products at levels that are too low to enable us to realize an appropriate return on our investment. If reimbursement is not available, is decreased or eliminated in the future, or is available only at limited levels, we may not be able to successfully commercialize our products and may not be able to obtain a satisfactory financial return on our products.

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe and other countries has and will continue to put pressure on the pricing and usage of our products, if any. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to fix their own prices for medical products but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our products. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits.

Our business operations and current and future relationships with investigators, healthcare professionals, consultants, third-party payors, patient organizations and customers will be subject to applicable healthcare regulatory laws, which could expose us to penalties.

Our business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors, patient organizations and customers, may expose us to broadly applicable fraud and abuse and other healthcare laws. These laws may constrain the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell and distribute STS101, if approved. Such laws include, but are not limited to:

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

Enacted and future healthcare legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize STS101 and may affect the prices we may set.

In the United States, the European Union and other jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes and proposed changes to the healthcare system that could affect our future results of operations. In particular, there have been and continue to be a number of initiatives at the U.S. federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare. For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the ACA, was enacted, which substantially

changed the way healthcare is financed by both governmental and private payors. Among the provisions of the ACA, those of greatest importance to the pharmaceutical and biotechnology industries include the following:

Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA. For example, the Tax Cuts and Jobs Act of 2017, or the Tax Act, which includes a provision that entered into effect on January 1, 2019, that repeals the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, or Texas District Court Judge, ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the Tax Act, the remaining provisions of the ACA are invalid as well. On December 18, 2019, the U.S. Court of Appeals for the 5th Circuit ruled that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well. The U.S. Supreme Court is currently reviewing the case, although it is unclear when a decision will be made or how

the Supreme Court will rule. In addition, there may be other efforts to challenge, repeal or replace the ACA. We are continuing to monitor any changes to the ACA that, in turn, may potentially impact our business in the future.

In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, led to aggregate reductions of Medicare payments to providers of 2% per fiscal year. These reductions went into effect in April 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030, with the temporary suspension from May 1, 2020 through September 30, 2021, unless additional action is taken by Congress.

Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. For example, CMS may develop new payment and delivery models, such as bundled payment models. In addition, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under government payor programs, and review the relationship between pricing and manufacturer patient programs. We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare products and services, which could result in reduced demand for STS101 or additional pricing pressures.

Individual states in the United States have also increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Legally-mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be

included in their prescription drug and other healthcare programs. Furthermore, there has been increased interest by third-party payors and governmental authorities in reference pricing systems and publication of discounts and list prices.

In the European Union, similar political, economic and regulatory developments may affect our ability to profitably commercialize STS101, if approved. In addition to continuing pressure on prices and cost containment measures, legislative developments at the European Union or member state level may result in significant additional requirements or obstacles that may increase our operating costs. The delivery of healthcare in the European Union, including the establishment and operation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than European Union, law and policy. National governments and health service providers have different priorities and approaches to the delivery of health care and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary constraints in most European Union member states have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever-increasing European Union and national regulatory burdens on those wishing to develop and market products, this could prevent or delay marketing approval of STS101, restrict or regulate post-approval activities and affect our ability to commercialize STS101, if approved. In markets outside of the United States and European Union, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action in the United States, the European Union or any other jurisdiction. If we, or any third parties we may engage, are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or such third parties are not able to maintain regulatory compliance, STS101 may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability.

Changes in and failures to comply with U.S. and foreign privacy and data protection laws, regulations and standards may adversely affect our business, operations and financial performance.

We are subject to or affected by numerous federal, state and foreign laws and regulations, as well as regulatory guidance, governing the collection, use, disclosure, retention, and security of personal data, such as information that we collect about trial participants and healthcare providers in connection with clinical trials in the United States and abroad. The global data protection landscape is rapidly evolving, and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. This evolution may create uncertainty in our business, affect our or any service providers’, contractors’ or future collaborators’ ability to operate in certain jurisdictions or to collect, store, transfer use and share personal information, necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us. The cost of compliance with these laws, regulations and standards is high and is likely to increase in the future. Any failure or perceived failure by us or our collaborators, service providers and contractors to comply with federal, state or foreign laws or regulation, our internal policies and procedures or our contracts governing processing of personal information could result in negative publicity, diversion of management

time and effort and proceedings against us by governmental entities or others. In many jurisdictions, enforcement actions and consequences for noncompliance are rising.

In the United States, California enacted the California Consumer Privacy Act, or the CCPA, on June 28, 2018, which went into effect on January 1, 2020. The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase our compliance costs and potential liability. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the United States, which could increase our potential liability and adversely affect our business. Further, on November 3, 2020, the California Privacy Rights Act, or the CPRA, was voted into law by California residents. The CPRA significantly amends the CCPA, and imposes additional data protection obligations on companies doing business in California, including additional consumer rights processes and opt outs for certain uses of sensitive data. It also creates a new California data protection agency specifically tasked to enforce the law, which would likely result in increased regulatory scrutiny of California businesses in the areas of data protection and security. The substantive requirements for businesses subject to the CPRA will go into effect on January 1, 2023, and become enforceable on July 1, 2023.

Our operations abroad may also be subject to increased scrutiny or attention from data protection authorities. Many countries in these regions have established or are in the process of establishing privacy and data security legal frameworks with which we, our collaborators, service providers, including our CRO, and contractors must comply. For example, the European Union General Data Protection Regulation, or the GDPR, went into effect in May 2018 and introduces strict requirements for processing the personal information of individuals within the European Economic Area, or the EEA, and the United Kingdom, including, including clinical trial data. The GDPR has and will continue to increase compliance burdens on us, including by mandating potentially burdensome documentation requirements and granting certain rights to individuals to control how we collect, use, disclose, retain and process information about them. The processing of sensitive personal data, such as physical health condition, may impose heightened

compliance burdens under the GDPR and is a topic of active interest among foreign regulators. The GDPR also increases the scrutiny of transfers of personal data from the EEA to the United States and other jurisdictions that the European Commission does not recognize as having “adequate” data protection laws; in July 2020, the Court of Justice of the European Union limited how organizations could lawfully transfer personal data from the EEA to the United States by invalidating the EU-US Privacy Shield and imposing further restrictions on use of the standard contractual clauses, which could increase our costs and our ability to efficiently process personal data from the EEA. In addition, the GDPR provides for more robust regulatory enforcement and fines of up to €20 million or 4% of the annual global revenue of the noncompliant company, whichever is greater. Relatedly, following the United Kingdom’s withdrawal from the EEA and the EU, and the expiry of the transition period, companies will have to comply with the GDPR and the GDPR as incorporated into United Kingdom national law, the latter regime having the ability to separately fine up to the greater of £17.5 million or 4% of global turnover. The relationship between the United Kingdom and the EU in relation to certain aspects of data protection law remains unclear, for example around how data can lawfully be transferred between each jurisdiction, which exposes us to further compliance risk. As we expand into other foreign countries and jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business.

Our stock price may be volatile and you may not be able to resell shares of our common stock at or above the price you paid.

The trading price of our common stock may be highly volatile and could be subject to wide fluctuations in response to various factors, including the following:

In addition, the stock markets in general, and the markets for pharmaceutical and biotechnology stocks in particular, have experienced extreme volatility, including as a result of the COVID-19 pandemic, that may have been unrelated to the operating performance of the issuer. These broad market fluctuations may adversely affect the trading price or liquidity of our common stock. In the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the issuer. If we were to become involved in securities litigation, we could incur substantial costs and resources and the attention of our management could be diverted from the operation of our business.

We are an “emerging growth company” and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common stock may be less attractive to investors.

We are an “emerging growth company,” as defined in Jumpstart Our Business Act of 2012, or the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and obtaining stockholder approval of any golden parachute payments not previously approved. In addition, as an “emerging growth company,” the JOBS Act allows us to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We have elected to use this extended transition period under the JOBS Act. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make comparison of our financials to those of other public companies more difficult.

We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until the earlier of (1) December 31, 2024, (2) the last day of the year in which we have total annual gross revenue of at least ~~$1.07~~$1.235 billion, (3) the last day of the year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

We incur increased costs as a result of operating as a public company, and our management devotes substantial time to compliance initiatives. We may fail to comply with the rules that apply to public companies, including Section 404, which could result in sanctions or other penalties that would harm our business.

We incur significant legal, accounting and other expenses as a public company, including costs resulting from public company reporting obligations under the Exchange Act and regulations regarding corporate governance practices. The listing requirements of The Nasdaq Global Market and the rules of the Securities and Exchange Commission, or the SEC, require that we satisfy certain corporate governance requirements relating to director independence, filing annual and interim reports, stockholder meetings, approvals and voting, soliciting proxies, conflicts of interest and a code of conduct. Our management and other personnel devote a substantial amount of time to ensure that we comply with all of these requirements. Moreover, the reporting requirements, rules and regulations associated with being a public company have increased our legal and financial compliance costs and make some activities more time-consuming and costly. Any changes we make to comply with these obligations may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis, or at all. These reporting requirements, rules and regulations, coupled with the increase in potential litigation exposure associated with being a public company, could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or board committees or to serve as executive officers, or to obtain certain types of insurance, including directors’ and officers’ insurance, on acceptable terms and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.

We are subject to Section 404 and the related rules of the SEC, which generally require our management and independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting. Beginning with this annual report, Section 404 requires an annual management assessment of the effectiveness of our internal control over financial reporting. However, for so long as we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth

companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404. Once we are no longer an emerging growth company or, if prior to such date, we opt to no longer take advantage of the applicable exemption, we will be required to include an opinion from our independent registered public accounting firm on the effectiveness of our internal controls over financial reporting. We will remain an emerging growth company until the earlier of (1) December 31, 2024, (2) the last day of the year in which we have total annual gross revenue of at least ~~$1.07~~$1.235 billion, (3) the last day of the year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

To date, we have never conducted a review of our internal control for the purpose of providing the reports required by these rules. In connection with the contemporaneous audits of our financial statements for the years ended December 31, 2017 and 2018, we identified control deficiencies in the design and operation of our internal control over financial reporting that constituted a material weakness. While we believe we have fully remediated the material weakness in our internal controls, if additional material weaknesses in our internal controls over financial reporting are identified in the future, we may not detect errors on a timely basis and our financial statements may be materially misstated. We or our independent registered public accounting firm may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting, which could harm our operating results, cause investors to lose confidence in our reported financial information and cause the trading price of our stock to fall. In addition, as a public company we will be required to file accurate and timely quarterly and annual reports with the SEC under the Exchange Act. In order to report our results of operations and financial statements on an accurate and timely basis, we will depend on CROs to provide timely and accurate notice of their costs to us. Any failure to report our financial results on an accurate and timely basis could result in sanctions, lawsuits, delisting of our shares from The Nasdaq Global Market or other adverse consequences that would materially harm to our business.

We are also subject to more stringent state law requirements. For example, on September 30, 2018, the then California Governor Jerry Brown signed into law Senator Bill 826, which generally requires public companies with principal executive offices in California to have a minimum number of females on the company’s board of directors. By December 31, 2019, each public company with principal executive offices in California is required to have at least one female on its board of directors. By December 31, 2021, each public company is required to have at least two females on its board of directors if the company has at least five directors, and at least three females on its board of directors if the company has at least six directors. The new law does not provide a transition period for newly listed companies. We do not currently meet the December 31, 2021 requirement.

If we fail to comply with SB 826, we could be fined by the California Secretary of State, with a $100,000 fine for the first violation and a $300,000 for each subsequent violation, and our reputation may be adversely affected.

If we sell shares of our common stock in future financings, stockholders may experience immediate dilution and, as a result, our stock price may decline.

We may from time to time issue additional shares of common stock at a discount from the current trading price of our common stock, including pursuant to our 2019 Incentive Award Plan and 2019 Employee Stock Purchase Plan. As a result, our stockholders would experience immediate dilution upon the purchase of any shares of our common stock sold at such discount. In addition, as opportunities present themselves, we may enter into financing or similar arrangements in the future, including the issuance of debt securities, preferred stock or common stock. If we issue common stock or securities convertible into common stock, our common stockholders would experience additional dilution and, as a result, our stock price may decline.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

We have incurred substantial losses during our history, do not expect to become profitable in the near future, and we may never achieve profitability. To the extent that we continue to incur losses for tax purposes, or NOLs, such NOLs, will carry forward to offset a portion of future taxable income, if any, until such NOLs expire, if subject to expiration. Under current tax law, federal NOLs generated in taxable years beginning after December 31, 2017 may be carried forward indefinitely but may only be used to offset 80% of our taxable income in taxable years beginning after December 31, 2020.

In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a rolling three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards, or NOLs, and other pre-change tax attributes (such as research and development tax credits) to offset its post-change income or taxes may be limited. If finalized, Treasury Regulations currently proposed under Section 382 of the Code may further limit our ability to utilize our pre-change NOLs or credits if we undergo a future ownership change. Our ability to utilize NOLs and other tax attributes to offset

future taxable income or tax liabilities may be currently limited as a result of prior ownership changes, including in connection with our IPO. Similar rules may apply under our state or foreign tax laws. We have not completed a formal study to determine if any ownership changes within the meaning of Section 382 and 383 of the Code have occurred. While we do not believe we have experienced ownership changes in the past, it is possible we have done so, and we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership (some of which shifts are outside our control). If an ownership change has occurred, our ability to use our NOLs or tax credit carryforwards may be restricted, which could require us to pay federal or state income taxes earlier than would be required if such limitations were not in effect. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise become unavailable to offset future income tax liabilities.

Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of management.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent changes in control or changes in our management without the consent of our board of directors. These provisions will include the following:

We are also subject to the anti-takeover provisions contained in Section 203 of the Delaware General Corporation Law. Under Section 203, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other exceptions, the board of directors has approved the transaction. For a description of our capital stock, see “Description of Capital Stock” in our Annual Report on Form 10-K for the year ended December 31, 2021.

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

Our amended and restated certificate of incorporation and amended and restated bylaws provide that we will indemnify our directors and officers, in each case, to the fullest extent permitted by Delaware law.

In addition, as permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws and our indemnification agreements that we have entered into with our directors and officers provide that:

Our amended and restated certificate of incorporation and amended and restated bylaws provide for an exclusive forum in the Court of Chancery of the State of Delaware for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation and amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine; provided that, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Securities Act or the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction; and provided further that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware. Nothing in

our amended and restated certificate of incorporation or amended and restated bylaws precludes stockholders that assert claims under the Securities Act or the Exchange Act from bringing such claims in state or federal court, subject to applicable law.

We believe these provisions may benefit us by providing increased consistency in the application of Delaware law and federal securities laws by chancellors and judges, as applicable, particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. If a court were to find the choice of forum provision that will be contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.

We do not currently intend to pay dividends on our common stock, and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We do not currently intend to pay any cash dividends on our common stock for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future. Since we do not intend to pay dividends, your ability to receive a return on your investment will depend on any future appreciation in the market value of our common stock. There is no guarantee that our common stock will appreciate or even maintain the price at which our holders have purchased it.

Unfavorable global economic, market, industry or political conditions could adversely affect our business, financial condition or results of operations.

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets, including the current inflationary economic environment and rising interest rates. A global financial crisis or a global or regional political disruption could cause extreme volatility in the capital markets and lead to diminished liquidity and credit availability, declines in consumer confidence and economic growth, increases in unemployment rates and uncertainty about economic stability. For instance, the COVID-19 pandemic has led to a period of considerable uncertainty and volatility. A severe or prolonged economic downturn or political disruption could result in a variety of risks to our business, including weakened demand for STS101, if approved, and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy or political disruption could also strain our manufacturers or suppliers, possibly resulting in supply disruption, or resulting in the inability of any future customers to pay for STS101, if approved. In addition, historically high rising interest rates in the United States have begun to affect businesses across many industries, including ours, by increasing the costs of labor, employee healthcare, components and shipping, which may further constrain our customers’ or prospective customers’ budgets. To the extent there is a sustained general economic downturn and our products are perceived by customers or potential customers as costly, or too difficult to deploy or migrate to, our revenue may be disproportionately affected by delays or reductions in spending. We cannot predict the timing, strength, or duration of any economic slowdown, instability, or recovery, generally or within any particular industry. If the economic conditions of the general economy or markets in which we operate worsen from present levels, demand for our products, and our business, financial condition, and results of operations, could be adversely affected.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of STS101.

We face an inherent risk of product liability as a result of the planned clinical testing of STS101 and will face an even greater risk if we commercialize it. For example, we may be sued if STS101 allegedly causes injury. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability, and a breach of warranty. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of STS101. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

Our inability to obtain and maintain sufficient product liability insurance at an acceptable cost and scope of coverage to protect against potential product liability claims could prevent or inhibit the commercialization of STS101. We currently carry product liability insurance covering our clinical trials, however, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions and deductibles, and we may be subject to a product liability claim for which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient funds to pay such amounts. Moreover, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses. If and when we obtain approval for marketing any dose of STS101, we intend to expand our insurance coverage to include its sale; however, we may be unable to obtain this liability insurance on commercially reasonable terms or at all.

We depend on our and our third-party suppliers or providers’ information technology systems, and any failure of these systems could harm our business. Any real or perceived security breaches, loss of data, and other disruptions or incidents could compromise the privacy, security, integrity or confidentiality of sensitive information related to our business or prevent us from accessing critical information and expose us to liability and reputational harm, which could adversely affect our business, results of operations and financial condition.

We collect and maintain data and information that is necessary to conduct our business, and we are increasingly dependent on information technology systems and infrastructure to operate our business, including systems infrastructure operated and maintained by our third-party suppliers or providers. In the ordinary course of our business, we collect, store and transmit large amounts of confidential information, including intellectual property, proprietary business information and personal information. It is critical that we do so in a secure manner to maintain the privacy, security, confidentiality and integrity of such confidential information. We have established physical, electronic and organizational measures to safeguard and secure our systems and facilities to prevent an information compromise, and rely on commercially available systems, software, tools, and monitoring to provide security for our information technology systems and the processing, transmission and storage of digital information. We have also outsourced elements of our information technology infrastructure, and as a result a number of third-party vendors may or could have access to our confidential information. Our internal information technology systems and infrastructure, and those of our current and any future collaborators, contractors and consultants and other third parties on which we rely, are vulnerable to damage or unauthorized access or use resulting from computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, denial-of-service attacks, cyber-attacks or cyber-intrusions over the Internet, hacking, phishing and other social engineering attacks, attachments to emails, persons inside our organization (including employees or contractors), lost or stolen devices, or persons with access to systems inside our organization. These challenges have been made more difficult by the COVID-19 pandemic and resulting shelter-in-place and stay-at-home restrictions, which are driving greater dependency on electronic monitoring of our clinical trial sites. Such monitoring could prove to be less reliable and could increase data privacy and cybersecurity risks.

The risk of a security breach or disruption or data loss, particularly through social engineering attacks, cyber-attacks or cyber-intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. In addition, the prevalent use of mobile devices that access confidential information increases the risk of data security breaches, which could lead to the loss of confidential information or other intellectual property. The costs to us to mitigate, investigate and respond to potential security incidents, breaches, disruptions, network security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and while we have implemented security measures to protect our data security and information technology systems, our efforts to address these problems may not be successful, and these problems could result in unexpected interruptions, delays, cessation of service and other harm to our business and our competitive position. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our product development programs. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Moreover, if a real or perceived security breach affects our systems (or those of our third-party providers or suppliers) or results in the loss of or accidental, unlawful or unauthorized access to, use of, release of or other processing of personally identifiable information or clinical trial data, our reputation could be materially damaged. In addition, such a

breach may require notification to governmental agencies, the media or individuals pursuant to various federal and state privacy and security laws, if applicable, including the Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and regulations promulgated thereunder, regulations promulgated by the Federal Trade Commission and state breach notification laws. We would also be exposed to a risk of loss, negative publicity, harm to our reputation, governmental investigation and/or enforcement actions, claims or litigation and potential liability, which could materially adversely affect our business, results of operations and financial condition. The global data protection landscape is rapidly evolving, and we may be affected by or subject to new, amended or existing laws and regulations in the future, including as our operations continue to expand or if we begin to operate in foreign jurisdictions.

Our employees and independent contractors, including principal investigators, consultants, commercial collaborators, service providers and other vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have an adverse effect on our results of operations.

We are exposed to the risk that our employees and independent contractors, including principal investigators, consultants, any future commercial collaborators, service providers and other vendors may engage in misconduct or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or other unauthorized activities that violate the laws and regulations of the FDA and other similar regulatory bodies, including those laws that require the reporting of true, complete and accurate information to such regulatory bodies; manufacturing standards; U.S. federal and state fraud and abuse laws, data privacy and security laws and other similar non-U.S. laws; or laws that require the true, complete and accurate reporting of financial information or data. Activities subject to these laws also involve the improper use or misrepresentation of information obtained in the course of clinical trials, the creation of fraudulent data in our preclinical studies or clinical trials, or illegal misappropriation of product, which

could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other third-parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. In addition, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and financial results, including, without limitation, the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other U.S. federal healthcare programs or healthcare programs in other jurisdictions, integrity oversight and reporting obligations to resolve allegations of non-compliance, imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

Our unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential partners or customers in our markets of interest. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other trademarks or trademarks that incorporate variations of our unregistered trademarks or trade names. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected. We may license our trademarks and trade names to third parties, such as distributors. Though these license agreements may provide guidelines for how our trademarks and trade names may be used, a breach of these agreements or misuse of our trademarks and tradenames by our licensees may jeopardize our rights in or diminish the goodwill associated with our trademarks and trade names. Our efforts to enforce or protect our proprietary rights related to trademarks, trade names, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely affect our financial condition or results of operations.

Changes in patent law in the U.S. or in other countries could diminish the value of patents in general, thereby impairing our ability to protect STS101.

Our patent rights may be affected by developments or uncertainty in U.S. or ex-U.S. patent statutes, patent case laws in USPTO rules and regulations or in the rules and regulations of ex-U.S. patent offices. There are a number of recent changes to the U.S. patent laws that may have a significant impact on our ability to protect our technology and enforce our intellectual property rights. For example, on September 16, 2011, the Leahy-Smith America Invents Act, or Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. In particular, under the Leahy-Smith Act, the United States transitioned in March

2013 to a “first to file” system in which the first inventor to file a patent application will be entitled to the patent. Third parties are allowed to submit prior art before the issuance of a patent by the USPTO, and may become involved in post-grant proceedings including opposition, derivation, reexamination, inter partes review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope or enforceability of, or invalidate, our patent rights, which could adversely affect our competitive position. This could have a negative impact on some of our intellectual property and could increase uncertainties surrounding obtaining and enforcement or defense of issued patents relating to STS101. In addition, Congress may pass patent reform legislation that is unfavorable to us. The Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents we might obtain in the future.

Similarly, statutory or judicial changes to the patent laws of other countries may increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting and defending all current and future patents in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the

United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection but enforcement is not as strong as that in the United States. These products may compete with STS101, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

The legal systems of many foreign countries do not favor the enforcement of patents and other intellectual property protection, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights. For example, some foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, some countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

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

The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to be paid to the USPTO and various governmental patent agencies outside of the U.S. in several stages over the lifetime of the patents and/or applications. We employ reputable professionals and rely on such third parties to help us comply with these requirements and effect payment of these fees with respect to the patents and patent applications that we own, and if we license intellectual property we may have to rely upon our licensors to comply with these requirements and effect payment of these fees with respect to any patents and patent applications that we license. In many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case.

Intellectual property rights do not necessarily address all potential threats to our competitive advantage.

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

Should any of these events occur, they could significantly harm our business, results of operations and prospects.

If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock or business, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no or few securities or industry analysts commence coverage of us, the trading price for our stock would be negatively impacted. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our clinical trials and operating results fail to meet the expectations of analysts, demand for our common stock could decrease and our stock price could decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

On September 12, 2019, the U.S. Securities and Exchange Commission declared effective our registration statement on Form S-1 (File No. 333-233347), as amended, filed in connection with our initial public offering (“IPO”).

There has been no material change in our planned use of the net proceeds from our IPO as described in our final prospectus filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on September 13, 2019.

Exhibit	Exhibit Description	Incorporated by Reference			Filed
Number		Form	Date	Number	Herewith

3.1	Amended and Restated Certificate of Incorporation.	8-K	9/17/2019	3.1

3.2	Amended and Restated Bylaws.	8-K	9/17/2019	3.2

4.1	Reference is made to exhibits 3.1 through 3.2.

4.2	Form of Common Stock Certificate.	S-1/A	9/3/2019	4.2

4.3	Amended and Restated Investors’ Rights Agreement, dated as of April 23, 2019, by and among Satsuma Pharmaceuticals, Inc. and the investors party thereto.	S-1	8/16/2019	4.3

31.1	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X

31.2	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X

32.1*	Certification by the Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X

32.2*	Certification by the Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X

101.INS	XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document				X

101.SCH	Inline XBRL Taxonomy Extension Schema Document				X

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document				X

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document				X

101.LAB	Inline XBRL Taxonomy Extension Labels Linkbase Document				X

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document				X

104	Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Delaware	81-3039831
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
400 Oyster Point Boulevard, Suite 221 South San Francisco, CA	94080
(Address of principal executive offices)	(Zip Code)

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	1
	Condensed Balance Sheets	1
	Condensed Statements of Operations and Comprehensive Loss	2
	Condensed Statements of Stockholders’ Equity	3
	Condensed Statements of Cash Flows	45
	Notes to Unaudited Interim Condensed Financial Statements	56
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1213
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	1920
Item 4.	Controls and Procedures	20
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 3.	Defaults Upon Senior Securities	62
Item 4.	Mine Safety Disclosures	62
Item 5.	Other Information	62
Item 6.	Exhibits	6263
Signatures		6364

	Company Name

Date: ~~August 9,~~November 3, 2022	By:	/s/ John Kollins
		Name: John Kollins
		Title: President and Chief Executive Officer (Principal Executive Officer)

Date: ~~August 9,~~November 3, 2022	By:	/s/ Tom O’Neil
		Name: Tom O’Neil
		Title: Chief Financial Officer (Principal Financial and Accounting Officer)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company