Biogen has several issued patents and is also prosecuting a number of additional patent applications that could adversely affect our business.

        Our information technology and other internal infrastructure systems, including corporate firewalls, servers, leased lines and connection toimpact the Internet, facecommercial efforts of the risk of systemic failure that could disrupt our operations. A significant disruption in the availabilityCompany or any assignee of our information technologyU.S. co-exclusive license rights. These patents and applications, and those of third parties, could adversely impact the commercial efforts of the Company or any assignee of our U.S. co-exclusive license rights if, once approved by the FDA for the treatment of MS, the licensed product was found to infringe any valid patent claim issuing from any one of these applications. Further, the Company or such assignee could be required to pay substantial damages. Biogen and/or other internal infrastructure systemscompetitors may

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initiate legal proceedings against the Company or our assignee, if any, alleging infringement of their intellectual property rights. The outcome of such potential proceedings would be unpredictable and we could cause interruptionsbe prevented from generating revenue, including receiving royalties, milestone or other revenues from any assignee of ours. Moreover, in our collaborations with our partners and delays in our research and development work.any such proceedings brought by Biogen, the License Agreement prohibits the Company from challenging the validity or enforceability of any Biogen patent.

Risks Related to Intellectual Property

We rely on patents and other intellectual property rights to protect our rights with respect to the development and commercialization of FP187,a DMF Formulation, the attainment, defense and maintenance of which may be challenging and costly. Failure to obtain, defend or maintain these rights adequately could materially adversely impact our ability to compete and impair our business.

        OurUnder the License Agreement, the Company has co-exclusive rights under the U.S. intellectual property to develop and commercialize a DMF Formulation in the U.S. unless and until Biogen obtains an exclusive license. If Biogen obtains an exclusive license, we would likely permanently discontinue development of a DMF Formulation in the U.S. Under the License Agreement, Biogen has exclusive rights, even as to the Company, under the intellectual property outside of the U.S. to develop and commercialize a DMF Formulation outside of the U.S.

        In the event Biogen does not obtain an exclusive license under the License Agreement, and we maintain our U.S. intellectual property rights, we could still be prevented from commercializing a DMF Formulation for MS in the U.S. at a 480 mg per day dose if, as a result of the IPR (after any appeals by the Coalition for Affordable Drugs) and Interference Proceeding, Biogen's '514 patent is upheld as valid. In such event, under the terms of the License Agreement, Biogen has the option to purchase for a nominal price all of our U.S. intellectual property, in which case we would likely permanently discontinue development of a DMF Formulation in the U.S.

        In the event Biogen does not obtain an exclusive license under the License Agreement, and the Company or any assignee of our U.S. intellectual property rights develops and commercializes a DMF Formulation in the U.S., our commercial success will depend in large part on obtaining and maintaining patents and other forms of intellectual property rights for FP187,such a formulation and/or its use, as well as on the defense and exploitationprotection of such rights. Failure to protect or to obtain, maintain or extend adequate patent and other intellectual property rights could materially adversely impact our competitive advantage and impair our business.

        Our patent portfolio in the U.S. consists primarily of two basic patent families, our "Core Composition Patent" family and our "Erosion Matrix Patent" family, along with three other patent families. Our issued patents may not be sufficient to protect our intellectual property and our patent applications may not result in issued patents. Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner or challenge the validity of our patents. We have three granted patents in Europe: (i) EP2801355 or the '355 patent, which covers, among other things, the treatment of MS, with 480 mg per day of DMF, formulated as a pH-controlled release composition having an enteric coating, (ii) EP2379063, which covers erosion matrix formulations with a thin enteric coating, and (iii) EP2316430, which covers DMF formulations with certain in vitro dissolution profiles. In the U.S., we have one issued patent with the patent number 8,906,420, entitled "Pharmaceutical formulation comprising one or more fumaric acid esters in an erosion matrix." Our other patent families include U.S. Patent Application No.Nos. 14/419,031, European Application EP13745073.0, International Application PCT/EP2014/06809414/914,031 and International Application PCT/EP2014/06809514/914,025 directed, among other things, to dosing regimens of DMF.

        To date, each of our three European patents, EP2316430, EP2379063 and EP2801355, has been opposed by third parties before the European Patent Office, or EPO, including Biogen. By a decision issued in July 2015, the opposition division of the EPO revoked EP2316430. We have filed an appeal against this decision, which isOur pending before the Board of Appeal. There can be no assurance that the Board of Appeal will rule in our favor. At a hearing on April 5, 2016, the oppositions to the EP2379063 were rejected by the EPO and the patent was maintained in its entirety. One or more of the opponents may appeal this decision and there can be no assurance that the Board of Appeal will rule in our favor. In any of these oppositions, the EPO may ultimately determine that our claims are

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invalid and/or may require us to narrow the scope of the claims to avoid a finding of invalidity. Narrowing the scope of the claims may result in FP187 being outside the scope of such claims.

        If our '355 patent and/or our other European intellectual property rights are revoked or substantially limited in scope, we may be unable to enforce these rights against third parties and, in particular, against several Biogen subsidiaries in the proceedings we brought before the Regional Court in Dusseldorf in Germany.

        Moreover, our other pendingU.S. applications may be subject to a third-party preissuancepre-issuance submission of prior art to the USPTO and the EPO and/or any patents issuing thereon may become involved in opposition, derivation, reexamination, inter partes review, or IPR, post grant review, interference proceedings or other patent office proceedings or litigation in the U.S. or elsewhere, challenging our patent rights. Activist investors, such as Kyle Bass of Hayman Capital, have sought to utilize the IPR process in the U.S. to challenge the validity of patents covering pharmaceutical products. Mr. Bass (acting with affiliated entities and individuals proceeding under the name of the Coalition for Affordable Drugs)

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has filed twothree requests for IPRs against Biogen's patents related to Tecfidera®, including Biogen's '514 patent, which is involved in the interference with our '871 application.Interference Proceeding. In March 2016, the PTAB announced that it would institute an IPR against Biogen's '514 patent in response to the Coalition for Affordable Drugs' request.request (IPR No. 2015-01993). On March 21, 2017, the PTAB issued a decision in the IPR holding that the claims of Biogen's '514 patent are patentable. The Coalition for Affordable Drugs has the right to appeal this decision. Because anyone can challenge third-party patents in an IPR, except for certain statutory limitations, there can be no assurance that our existing and future U.S. patents will not be so challenged. In fact, such third-party pre-issuance submissions were filed with the USPTO questioning two U.S. patent applications from our core composition patent family that had been allowed by the USPTO, but which we subsequently voluntarily abandoned. It is possible that similar third-party preissuancepre-issuance submissions may also be filed if our currently pending patent applications (having substantially the same claims as our earlier allowed but now abandoned applications) are allowed. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, and allow third parties to commercialize our technology or products and compete directly with us, without payment to us. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to exploitprotect our intellectual property or develop or commercialize current or future product candidates.a DMF Formulation.

        The issuance of a U.S. patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents may be challenged in the courts or patent offices in the U.S., the EU and elsewhere.USPTO. Such challenges may result in loss of ownership or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit the duration and scope of the patent protection of our technology and products. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

        In addition, other companies may attempt to circumvent any regulatory data protection or market exclusivity that we obtain under applicable legislation, which may require us to allocate significant resources to preventing such circumvention. Such developments could enable other companies to circumvent our intellectual property rights and use our clinical trial data to obtain marketing authorizations in the U.S., EU, and in other jurisdictions. Such developments may also require us to allocate significant resources to prevent other companies from circumventing or violating our intellectual property rights.

        Our attempts to prevent third parties from circumventing our intellectual property and other rights ultimately may be unsuccessful. We also may also fail to take the required actions or pay the necessary fees to maintain any of our patents that issue.

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Intellectual property rights of third parties could adversely affect our ability to commercialize FP187,a DMF Formulation, such that we could be required to litigate with or obtain licenses from third parties in order to develop or market FP187.parties. Such litigation or licenses could be costly or not available on commercially reasonable terms.terms, if at all.

        OurIn the event that Biogen does not obtain an exclusive license, our commercial success will depend upon our ability andor the ability of any assignee of our potential collaboratorsU.S. co-exclusive license rights, to develop, manufacture, market and sell FP187 or other product candidatesa DMF Formulation without infringing valid intellectual property rights of third parties. If a third-party intellectual property right exists that covers the composition of FP187a DMF Formulation, its manufacture, or the uses and dosages that the regulatory authorities approve for FP187,such a formulation, we or any assignee of ours may not be in a position to commercialize FP187such a DMF Formulation unless we or our assignee, if any, successfully pursue litigation or administrative proceedings in the USPTO to nullify or invalidate the third-party intellectual property right concerned, or enter into a license agreement with the intellectual property right holder, which may not be available on commercially reasonable terms, if at all.

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        It is possible that we are unaware of all patents or applications relevant to the manufacture, use or commercialization of FP187.a DMF Formulation. For example, we have not conducted a recent freedom to operate search in connection with FP187 and its use to treat MS. Any freedom to operate search previously conducted may not have uncovered all relevant patents and patent applications, and there may be pending or future patent applications that, if issued, would block us from commercializing FP187.a DMF Formulation. For example, U.S. patent applications filed before November 29, 2000 and certain U.S. patent applications filed after that date that will not be filed outside the U.S. remain confidential until patents issue. PatentTypically, patent applications in the U.S. filed on or after November 29, 2000 and patent applications filed elsewhere are published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filingclaimed. However, an exception exists whereby certain U.S. patent applications filed after that date being commonly referred to asthat have not been filed outside the priority date.U.S. may remain confidential. Therefore, patent applications covering FP187the composition of a DMF Formulation, its manufacture, or its use to treat MS could have been filed by others without our knowledge. In addition, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover FP187such a DMF Formulation, its manufacture, or the use of FP187.its use. As a result, we do not know whether the manufacture, use or commercialization of FP187 or any future product candidatesa DMF Formulation will infringe any third-party patents with valid claims that have been or will in the future be issued.

        Third-party intellectual property right holders, including our competitors, may actively bring infringement claims against us. We may not be able to successfully settle or otherwise resolve such infringement claims. If we are unable to successfully settle future claims or otherwise resolve such claims on terms acceptable to us, we may be required to engage in or continue costly, unpredictable and time-consuming litigation and we may not have sufficient resources to bring these actions to a successful conclusion. Many of our competitors including Biogen, have substantially greater financial resources than us, and therefore may be able to sustain the costs of complex patent litigation longer than us.

        If we are found to infringe a third party's intellectual property rights, we could face a number of costs and challenges, including:

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substantial damages for past infringement that we may have to pay if a court decides that any product that we commercially market infringes on a competitor's patent;



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a court prohibiting us from selling or licensing our product unless the patent holder licenses the patent to us, which it would not be required to do;



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



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redesigning our products or processes so they do not infringe, which may not be possible or could require substantial funds and time.

        If we are required to obtain a license from a third party to continue developing and marketing our products and technology, we may not be able to obtain such a license on commercially reasonable

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terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializingmarketing the infringing technology or product. In addition, we could be found liable for monetary damages, including treble damages and attorneys' fees if we are found to have willfully infringed a patent. If we are required to redesign our formulations so that they no longer infringe the other party's intellectual property rights, we may be required to conduct additional clinical trials to obtain regulatory approval for the modified formulation, which would be costly and time-consuming. As a result, a finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could also have a similar negative impact on our business.

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        Even if we were ultimately to prevail in an infringement or other claim, such a claim would likely require us to divert substantial financial and management resources that we would otherwise be able to devote to developing our developing business.

        All of the foregoing applies equally to us or any assignee of our U.S. co-exclusive license rights.

There can be no assurance that even if we are successful in the opposition proceedings involving our patents currently pending before the EPO, we will not be subject to subsequent or parallel invalidity proceedings (also called "nullity actions" or "revocation actions") involving these same or other patents of ours before a national court in any of the European Patent Convention member states where our patents were validated, which subsequent or parallel proceedings could result in our challenged patents being subject to continued uncertainty as to their validity until such proceedings have been fully concluded. We cannot at this time anticipate how long any such proceedings may last or when, if at all, our patents currently under challenge will finally be declared to be valid or not.

        The possibility of parallel validity proceedings in national courts and in the EPO is inherent in the legal arrangements under the European Patent Convention under which the EPO was established. If a third party files an opposition to a European patent with the EPO and also, in parallel, initiates a revocation action (also called a "nullity action" or "validity proceeding") against the same patent before a national court, certain national courts may exercise their discretion to either (i) stay the national proceedings, in order to waitawait the outcome of the EPO opposition proceedings, or (ii) allow the revocation proceedings to go ahead, without awaiting the outcome of the EPO proceedings. The rules and practice differ from country to country inwithin the EU.member states of the European Patent Convention. For example, certain countries will stay the main proceeding until a final decision has been reached by the EPO whereas in other countries a stay is not automatic, and in such cases the courts may continue the proceedings notwithstanding the opposition. In Germany, for example, national nullity proceedings cannot be started before the German Federal Patent Court until the EPO opposition proceedings have been concluded or the opposition period has expired. As a result, it is possible that certain of our patents now subject to opposition proceedings before the EPO will, even if we are ultimately successful before the EPO, again become subject to a revocation action in a country like Germany, which means our challenged patents could be subject to continued uncertainty in the EU as to their validity until such proceedings have been fully concluded. We cannot at this time anticipate how long any such proceedings may last or when, if at all, our patents currently under challenge will finally be declared to be valid or not. Furthermore, even if we are successful in the Opposition Proceeding, we will only be eligible to receive royalties outside of the U.S. if our patent(s) remain valid at relevant times on a country-by-country basis, provided that other conditions of the License Agreement are satisfied.

Biogen may initiate legal proceedings alleging thatIf we are infringing its intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the successor any assignee of our business.

        Biogen has several issued patents andU.S. co-exclusive license rights pursue a DMF-containing product that is also prosecuting a number of additional patent applications that could adversely impact our commercial efforts if a commercialized FP187 product were ultimately found to infringe any valid claim by Biogen, in particular if Biogen obtains patent term extensions for certain patents indifferent from the U.S. and/or Supplemental Protection Certificates (which also extend the effective life of patents for drugs) in the EU.

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        We are aware of the seven patents Biogen has listed in the FDA's "Orange Book" (See "Business—Government Regulation—United States—Hatch-Waxman Act and Orange Book Listing") in connection with Tecfidera®, U.S. Patent Nos. 6,509,376, 7,320,999, 7,619,001, 7,803,840, 8,399,514, 8,524,773 and 8,759,393. Our planned regulatory path does not require that we make patent certifications to the FDA in connection with Biogen's Orange Book-listed patents, and at least two of the Biogen patents will expire before we anticipate receiving marketing approval for FP187. In Germany, and possibly other or all European countries (including member states of the EU and the European Economic Area, or EEA, as well as Switzerland), Biogen has filed an application for a Supplementary Protection Certificate, or SPC, using EP1131065B1 (European counterpart to U.S. Patent No. 6,509,376) and EP2137537B1 (European counterpart to U.S. Patent No. 8,399,514) as the basic patents. The applications for the SPCs in Germany have the application Nos. DE122014000068.9 and DE122014000069.7. An SPC may extend the effective monopoly of a basic patent by a maximum of five years. The SPC term may be further extended by an additional six months in accordance with Art. 36 of Regulation 1901/2006, if the requirements for a pediatric extension are met.

        We, together with nine other parties, opposed EP2137537B1 (European counterpart to U.S. Patent No. 8,399,514) in the EPO. At an opposition proceeding held March 8-10, 2016, the opposition division held that Biogen's patent is invalid and revoked the patent.

        In the U.S., Biogen's patent applications include U.S. Patent Application No. 13/266,997 (notice of allowance mailed on August 14, 2014, but the application was abandoned), U.S. Patent Application No. 14/540,136 (pending), U.S. Patent Application No. 13/767,014 (notice of allowance mailed on March 20, 2015, but the application was abandoned), U.S. Patent Application No. 14/718,962 (pending), U.S. Patent Application No. 14/119,373 (pending), U.S. Patent Application No. 14/124,562 (non-final office action mailed on May 20, 2015), U.S. Patent Application No. 13/827,228 (final rejection mailed on June 8, 2015), U.S. Patent Application No. 13/760,916 (abandoned as of April 15, 2015, for failure to respond to office action) and U.S. Patent Application No. 14/679,716 (pending). In Europe, Biogen's pending patent applications include EP2424357, EP2713724 and several others. One or more of these applications could adversely impact our commercial efforts if our marketing of FP187, once approved by the FDA for the treatment of RRMS and/or psoriasis, was ultimately found to infringe any valid patent claim issuing from any one of these applications.

        Biogen's patents and patent applications are said to relate to pharmaceutical preparations of DMF and methods for treating immune disorders such as psoriasis and MS using DMF. Some of the patents and patent applications claim dosing regimens, and include claims directed to a method for treating MS through the administration of a therapeutically effective amount of DMF at about a 480 mg daily dose. If such patent claims were asserted against us, we would vigorously contest such an action. However, the outcome of such potential proceedings would be unpredictable. Further, Biogen's financial resources are substantially greater than ours, and therefore Biogen may be able to sustain the costs of complex patent litigation longer than us. Biogen has reported that Tecfidera® generated global revenue of over $3.6 billion in 2015, which represented approximately 34% of Biogen's revenue for 2015. Accordingly, we believe that Biogen will vigorously defend its patents and patent applications relating to pharmaceutical preparations of DMF and methods for treating immune disorders such as psoriasis and MS using DMF. If Biogen's patents or patent applications were held to be valid, enforceable and infringed by the commercialization of FP187, we could be prevented from commercializing our product candidates, unless we obtain a license to such patents, which may not be available on commercially reasonable terms or at all. If we market FP187 and are later found to infringe one or more of Biogen's patents, we also could be required to pay substantial damages.

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Our drug candidate, FP187, is still under development and, if we pursue versions of FP187 that are modified from those used in our Phase 1 trials and Phase 2 clinical trial, such modified FP187 productsDMF-containing product may be considered outside the scope of our patent families and, as a result, our ability to protect our overall patent estate could be threatened.

        In connection with our Phase 1 trials and Phase 2 clinical trial, we have used and are using various versions of FP187 we believe to be within the scope of our existing patent families. There can be no assurance, however, that if we or any assignee of our U.S. co-exclusive license rights choose to pursue new ora DMF-containing product that is different from the versions of FP187 from those used in our completed Phase 1 trials and Phase 2 trial, that such modified FP187 productsDMF-containing product will not be considered outside of the scope of our patent families. In such event, such modified FP187 productsDMF-containing product could be subject to challenges in connection with new patent proceedings or otherwise by patent registry offices, our competitors and others, the outcome of which could, if ultimately determined adversely to us or any

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assignee of our U.S. co-exclusive license rights, materially adversely affect our business, financial condition and prospects.

We are involvedmay be required to pay significant fees to the USPTO and our attorneys to file, prosecute, and maintain our licensed U.S. patent applications and patents with no assurance of receiving future royalties from Biogen

        Under the License Agreement, the Company is obligated to use commercially reasonable efforts not to decline to file, prosecute or maintain its licensed U.S. patent applications and patents unless and until Biogen either assumes their prosecution and/or maintenance, obtains an exclusive license or exercises its option to purchase all of our U.S. intellectual property. However, there can be no assurance that any of these three scenarios will occur. In the event that none of these scenarios occurs, and the Company is not successful in lawsuits,the Interference Proceeding, after any appeals, we could be obligated to pay significant prosecution fees, both to the USPTO and in attorneys' fees, to file, prosecute and maintain our licensed U.S. patent applications and patents, but would not be entitled to receive any royalties from Biogen.

We may become involved in additional lawsuits to protect, defend and defendenforce our patents or other intellectual property, which could be expensive, time consuming and, if unsuccessful, could result in issued patents covering our product candidatescandidate being found invalid or unenforceable.

        Competitors may infringe our patents or other intellectual property. To counter such infringement, we or unauthorized use, weany assignee of our U.S. co-exclusive license rights may file claims or be required to filejoin or assist claims filed by Biogen, and any related litigation and/or prosecution of such claims canmay be expensive and time consuming. Any claims we assertasserted against perceived infringers could provoke these parties to assert counterclaims against usclaims alleging that we or our assignee, if any, infringe their intellectual property. In addition, in a patent infringement proceeding, or a parallel opposition, nullity or cancellation proceeding, it may be decided that a patent of ours is invalid in whole or in part, unenforceable, or construe the patent's claims narrowly allowing the other party to commercialize competing products on the grounds that our patents do not cover such products.

        Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us or any assignee of our U.S. co-exclusive license rights to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. Such litigation or proceedings could substantially increase our operating lossesexpenses and reduce our resources available for development activities. We or any assignee of our U.S. co-exclusive license rights may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we or our assignee, if any, can because of their substantially greater financial resources. The effects of patent litigation or other proceedings could therefore have a material adverse effect on our ability, including the ability of any assignee of our U.S. co-exclusive license rights, to compete in the marketplace.

We will likely not be able to protect or enforce our intellectual property rights in certain jurisdictions, which may diminish the value of our intellectual property rights in those jurisdictions.

        Filing, prosecuting and defending patents on our product candidates in all countries throughout the world would be prohibitively expensive. The requirements for patentability may differ in certain countries, particularly developing countries. We have principally filed patent applications in the U.S. and Europe. As a result, many of our patent filings have limited geographic reach beyond the U.S. and Europe. In addition, we may decide to abandon national and regional patent applications in Europe, the U.S. or elsewhere in the world before they are granted, if they are granted at all. Finally, the grant proceeding of each national/regional patent is an independent proceeding that may lead to situations in which applications might in some jurisdictions be refused by the relevant registration authorities, while granted by others. It is also quite common that depending on the country, the scope of patent protection may vary for the same product. For example, in some jurisdictions, it is not possible to obtain patents on dosing regimens.

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        The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws in the U.S. and the EU, and many companies have encountered significant difficulties in protecting and defending such rights in such jurisdictions. If our collaboration partners or we encounter difficulties in protecting, or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights may be diminished and we may face additional competition from others in those jurisdictions.

        Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired and our business and results of operations may be adversely affected.

Third parties may claim rights including ownership rights in our intellectual property.

        None of the named inventors on our patent and patent applications were our employees at the time of the filing of the Core Composition Patent family, which we acquired from Aditech Pharma AB (together with its successor-in-interest, Swiss company Aditech Pharma AG, or Aditech). Two of the named inventors of the priority applications in the Core Composition Patent family were consultants of Aditech and, while obligated under their consulting agreements to assign their rights in the Core Composition Patent family to Aditech, were employed by other institutions at the time they were named as inventors. While such institutions have not made any claims to ownership, there can be no assurance they will not do so in the future.

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        Later-filed patent families were filed by us, but some of the named inventors were acting only in a consultant capacity to us. Some of these consultants, while obligated under their consulting agreements to assign their rights in such patent families to us, were employed by other institutions prior to or at the time they made their inventions. While such institutions have not made any ownership claims to the inventions disclosed in the later-filed patent families, there can be no assurance they will not do so in the future.

        Named inventors on our patent applications, whether filed by us or acquired from Aditech, could also challenge whether their property rights were properly assigned. Further, other individuals (including persons not known to us or their employers) could make claims or assertions that they are inventors and/or owners of our intellectual property.

        Under mandatory Danish law, a salaried employee having made a patentable invention (and products that may be registered as a utility model) through his service with an employer has the rights to such invention, provided however, that the rights to the patentable invention upon the employer's request must be transferred to the employer, to the extent not otherwise agreed, provided that the use of such patentable invention falls within the "working area" of the employer or it is a result of a specific assignment given by the employer to the employee. Following notification from the employee onof the invention, the employer has four months to decide whether to apply for a patent, in whole or in part, for the invention in the employer's name. Such a transfer of the invention to the employer entitles the employee to a "reasonable compensation." The fee will be fixed considering the value of the invention and its consequences for the employer, the employee's terms of employment and the impact that the employee's service has had for the invention. In the event that the value of the invention does not exceed what the employee, taking his working conditions as a whole into account, reasonably could be expected to achieve, the employee is not entitled to any fee. The compensation payable by the employer is not subject to any maximum amount and may be paid either as a lump sum or as a continuing royalty payment based on, for example, the number of items produced based on the

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invention. An employee's claim for compensation may become time-barred or forfeited due to the employee's passive behavior. The general relative time-barring deadline under Danish law is five years with respect to claims based on employment matters, whereas the general absolute deadline for such claims is 10 years.

        Some of the named inventors on our newer applications (not the Core Composition Patent or Erosion Matrix Patent) are employees of our wholly-ownedwholly owned German subsidiary, Forward Pharma GmbH, and thus are subject to German employment law. German employment law governs the transfer/assignment of any intellectual property rights generated by such employees. In particular, any inventions eligible for patent protection made by such employees are subject to the provisions of the German Act on Employees' Inventions (Gesetz(Gesetz über Arbeitnehmererfindungen)Arbeitnehmererfindungen), which regulates the ownership of, and compensation for, inventions made by employees. The law provides for a formal procedure for the transfer of an employee's rights to patentable inventions which result from performance of the tasks the employee is charged with at the employer or which are based to a significant extent on the experiences or works of the employer, upon the employer's request within a certain period of time after notification by employee.

        We believe that all inventive contributions made by employees of Forward Pharma GmbH were made after the amended version of the German Act on Employees' Inventions came into force on October 1, 2009, and thus the amended version of the law exclusively applies to such inventions. Prior to October 1, 2009, such formal procedure had been susceptible to faults. The amendments to the law facilitate the transfer of rights in employees' inventions to the employer by replacing the former opt-in approach with an opt-out approach.

        Following the transfer of rights, an employee is entitled to a claim for "reasonable compensation" to be calculated on an individual basis (e.g., revenue achieved through exploitationprotection of the patent). In

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addition, the German Act on Employees' Invention provides for certain obligations on the employer including the obligation to apply for patent protection in Germany, the obligation to release the invention for application in those countries where the employer does not want to apply for a patent and the obligation to offer to the employee granted patents or pending patent applications if the employer intends to abandon rights in any country.

        We face the risk that disputes can occur between us and employees or ex-employees of Forward Pharma GmbH pertaining to alleged non-adherence to the provisions of this act. Such disputes may be costly to defend and take up our management's time and efforts whether we prevail or fail in such dispute. If we are required to pay additional compensation or face other disputes under the German Act on Employees' Inventions, in particular in case of a failed transfer of rights, our results of operations could be adversely affected.

Intellectual property rights do not 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 any competitive advantage we may enjoy. The following examples are illustrative:

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Others may be able to make DMF-basedcommercialize DMF-containing products that are similar to FP187a DMF Formulation that we may develop but that are not covered by the claims of the patents or patent applications that we own, will own or will own.may transfer to any assignee of our U.S. co-exclusive license rights.



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Others may independently develop similar or alternative technologies or otherwise circumvent any of our technologies without infringing our intellectual property rights.



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We or any of our collaboration partners might not have been the first to conceive and reduce to practice the inventions covered by the patents or patent applications that we own, license or will own or license.

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We or any of our collaboration partners might not have been the first to file patent applications covering certain ofon the patents or patent applications that we or they own or will own or to which we or they have obtained or will have obtained a license.inventions disclosed in those applications.



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It is possible that our pending patent applications will not lead to issued patents.



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Issued patents that we own may not provide us or any assignee of our U.S. co-exclusive license rights with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by our competitors.



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Our competitors might conduct research and development activities in countries where we do not have patent rights, or in countries where research and development safe harbor laws exist, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets.



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Ownership of our patents or patent applications may be challenged by third parties.



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The patents of third parties or pending or future applications of third parties, if issued, may have an adverse effect on our business.

Changes in patent laws or patent jurisprudence could diminish the value of patents in general, thereby impairing our ability to protect our products or product candidates.

        As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and exploitingprotecting patents in the biopharmaceutical industry involves both technological and legal complexity. Therefore, obtaining and exploitingprotecting biopharmaceutical patents is costly, time-consuming and inherently uncertain. The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection

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available in certain circumstances or weakening the rights of patent owners in certain situations. Such examples include:

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Kimble et al. v. Marvel Enterprises, Inc.(2015), where the Court upheld a 50-year-old precedent which bars royalty agreements that continue after a patent expires.



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Teva Pharmaceuticals USA Inc. et al. v. Sandoz, Inc.  (2015), where the Court overruled a Federal Circuit rule that all district court claim construction rulings must be reviewed de novo on appeal and held that while the ultimate construction of the claims is a legal conclusion that the Federal Circuit can review de novo, district court claim construction decisions involving factual findings should be reviewed on appeal with deference, for clear error.



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Nautilus, Inc. v. Biosig Instruments, Inc.(2014), where the Court imposed a stricter requirement for clarity of claim language than previously applied by the Federal Circuit, thereby making it easier to invalidate patents for insufficiently apprising the public of the scope of the invention.



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Limelight Networks, Inc. v. Akamai Technologies, Inc.(2014), where the Court articulated a standard for inducement of infringement that makes it more difficult to establish liability for inducing infringement of a multi-step method claim that is performed by multiple parties.



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Association for Molecular Pathology v. Myriad Genetics, Inc.(2013), where the Court held that isolated naturally-occurring DNA is patent ineligible subject matter.



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KSR v. Teleflex (2007), where the Court decided unanimously that the Federal Circuit Court had been wrong in taking a narrow view of when an invention is "obvious" and thus cannot be patented.



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EBay Inc. v. MercExchange, LLC (2006), where the Court heightened the standard for an injunction after a finding of patent infringement.



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Merck KGgA v. Integra Lifesciences (2004), where the Court adopted an expansive interpretation of the activities associated with regulatory approval exempt from patent infringement.

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        The Leahy-Smith America Invents Act, or AIA, was enacted in the U.S. in 2011, and includes a number of significant changes to the U.S. patent system. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, the combination of the U.S. Supreme Court decisions and AIA has created uncertainty with respect to the value of patents, once obtained. A few highlights of changes to U.S. patent law under the AIA are:

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Under the AIA, a patent is awarded to the "first-inventor-to-file" rather than the first to invent.



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There is a new definition of prior art whichthat removes geographic and language boundaries found in the pre-AIA law. At the same time, certain categories of "secret" prior art have been eliminated.



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The AIA introduced new procedures for challenging the validity of issued patents by third parties: post-grant review andinter partes review. IPR.



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Patent owners under the AIA may now request supplemental examination of a patent to consider, reconsider, or correct information believed to be relevant to the patent.



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The AIA allows third parties to submit any patent, published application, or publication relevant to examination of a pending patent application with a concise explanation for inclusion during prosecution of the patent application.

        The "first-inventor-to-file" system and the new definitions of prior art apply to U.S. patent applications with claims having an effective filing date on or after March 16, 2013. Until at least 2034, patent practice will involve both pre-AIA and AIA laws.

        Depending on actions or decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could weaken our ability or the ability of any assignee of our U.S. co-exclusive license rights to obtain new patents or to exploitprotect our existing patents and patents that we might obtain in the future.future patents. Similarly, the complexity and uncertainty of European patent laws have also increased in recent years. In Europe, a new unitary patent system may soon be introduced, which would significantly impact European patents, including those granted before the introduction of such a system. In addition, the European patent system is relatively stringent in the type

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of amendments that are allowed during prosecution and opposition proceedings. Changes in patent law or patent jurisprudence could limit our ability or the ability of any assignee of our U.S. co-exclusive license rights to obtain new patents in the future that may be important for our business.

We may not be able to adequately prevent disclosure of trade secrets and protect other proprietary information.

        We consider proprietary trade secrets and/or confidential know-how and unpatented know-how to be important to our business. We or any assignee of our U.S. co-exclusive license rights may rely on trade secrets and/or confidential know-how to protect ourproprietary technology, especially where patent protection is believed by us to be of limited value. However, trade secrets and/or confidential know-how can be difficult to maintain as confidential.

        To protect this type of information against disclosure or appropriation by competitors, our policy is to require our employees, consultants, contractors and advisors to enter into confidentiality agreements with us. However, current or former employees, consultants, contractors and advisors may unintentionally or willfully disclose our confidential information to competitors, and confidentiality agreements may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Enforcing a claim that a third party obtained illegally and is using trade secrets and/or confidential know-how is expensive, time consuming and unpredictable. The enforceability of confidentiality agreements may vary from jurisdiction to jurisdiction.

        Failure to obtain or maintain trade secrets and/or confidential know-how could adversely affect our competitive position.position or that of any assignee of our U.S. co-exclusive license rights. Moreover, our competitors may independently develop substantially equivalent proprietary information and may even apply for patent protection in respect of the same. If successful

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in obtaining such patent protection, our competitors could limit our or any assignee's use of our trade secrets and/or confidential know-how.

We may be required to transfer certain of our key intellectual property to Aditech

        In 2005, we entered into a patent license agreement with Aditech to license patents and associated know-how related to DMF formulations and delivery systems from Aditech, and in 2010, we acquired this patent family from Aditech pursuant to a patent transfer agreement, subject to both diligence and minimum annual expenditure (€1.0 million per year) obligations on our part, as well as a payment by us to Aditech of up to 2% of net sales generated from our DMF products and processes, regardless of whether such net sales are generated by us or our affiliates, assignees or licensees. Included in the determination of our payment to Aditech is any cash or non-cash consideration generated from our DMF products or processes and received by us or our affiliates, assignees or licensees. Aditech can terminate the agreement (in which event Aditech has an option to receive back, for no consideration, all of our DMF-related assets, which include patent and other rights related to DMF, including FP187) due to any of the following reasons:

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We seek a liquidation, dissolution or winding up of our business, we become insolvent or we make any general assignment for the benefit of our creditors;



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A petition is filed by or against us, or any proceeding is initiated by or against us, or any proceeding is initiated against us as a debtor, under any bankruptcy or insolvency law, unless such petition or proceeding is held to be unfounded;



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A receiver, trustee or any similar officer is appointed to take possession, custody or control of all or any part of our assets or property;



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In the event we do not meet the requirements in respect of the development and commercialization of the patent rights under the agreement; or



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Upon the material breach by us of any material term or material condition of our agreement with Aditech, if such breach continues for 30 calendar days after the receipt of written notice thereof from Aditech.

Risks Related to the Development, Pre-clinical Testing, Clinical Testing, Regulatory Approval and Commercialization of FP187

Pre-clinical and clinical drug development involves a lengthy and expensive process with uncertain timelines and uncertain outcomes. If pre-clinical or clinical trials of FP187 are prolonged or delayed, we may be unable to obtain required regulatory approvals, and therefore may be unable to commercialize FP187 on a timely basis or at all.

        To obtain the requisite regulatory approvals to market and sell FP187, we must demonstrate through extensive pre-clinical and clinical trials that it is safe and effective in humans for its intended use. The process for obtaining governmental approval to market FP187 is rigorous, time-consuming and costly. It is impossible to predict the extent to which this process may be affected by legislative and regulatory developments. Due to these and other factors, FP187 or future product candidates could take a significantly longer time to gain regulatory approval than expected or may never gain regulatory approval. This could delay or eliminate any potential product revenue by delaying or terminating the potential commercialization of FP187.

        Pre-clinical trials must be conducted in accordance with FDA, European Medicines Agency, or EMA, and other applicable regulatory authorities' legal requirements, regulations or guidelines, including good laboratory practice, or GLP, an international standard meant to harmonize the conduct and quality of nonclinical studies and the reporting of findings. Pre-clinical studies including long-term

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toxicity studies and carcinogenicity studies in experimental animals may result in findings which may require further evaluation, which could affect the risk-benefit evaluation of clinical development, or which may even lead the regulatory agencies to delay, prohibit the initiation of or halt clinical trials or delay or deny marketing authorization applications. Failure to adhere to the applicable GLP standards or misconduct during the course of the study may invalidate the study and therefore require us to repeat the study.

        Clinical trials must be conducted in accordance with FDA, EMA and other applicable regulatory authorities' legal requirements, regulations or guidelines, including good clinical practice, or GCP, an international standard meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators, and monitors. Clinical trials are further subject to oversight by these governmental agencies and Institutional Review Boards, or IRBs, at the medical institutions where the clinical trials are conducted. In addition, clinical trials must be conducted with supplies of FP187 produced under current good manufacturing practices, or cGMP, and other requirements. Our clinical trials are or may be conducted at multiple sites, including some sites in countries outside the U.S. and the EU, which may subject us to further delays and expenses as a result of increased shipment costs, additional regulatory requirements and the engagement of non-U.S. and non-EU clinical research organizations, as well as expose us to risks associated with clinical investigators who are unknown to the FDA or the European regulatory authorities, and with different standards of diagnosis, screening and medical care.

        To date, we have not commenced all clinical trials required for the approval of FP187, which is currently being prepared for Phase 3 testing. The commencement and/or completion of clinical trials for FP187 may be delayed, suspended or terminated as a result of many factors, including but not limited to:

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negative or inconclusive results, which may require us to conduct additional pre-clinical or clinical trials or to abandon projects that we expect to be promising;



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unsuccessful efforts to optimize our current Phase 3 clinical strategies in RRMS, timely commence and complete our proposed Phase 3 clinical trial, and obtain any required FDA and other regulatory approvals;



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safety or tolerability concerns, which could cause us to suspend or terminate a trial if we find that the participants are being exposed to unacceptable health risks;



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the delay or refusal of regulators or IRBs to authorize us to commence a clinical trial at a prospective trial site and changes in regulatory requirements, policies and guidelines;



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regulators or IRBs requiring that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements;



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delays in establishing or failure to establish acceptable clinical trial sites, including as a result of political instability in countries in which we might seek to establish such sites;



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delays in reaching or failure to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites;



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delays in patient enrollment and variability in the number and types of patients available for clinical trials;



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the inability to enroll a sufficient number of patients in trials to ensure adequate statistical power to detect statistically significant treatment effects;



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lower than anticipated retention rates of patients and volunteers in clinical trials;

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our third-party research and manufacturing contractors failing to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;



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difficulty in maintaining contact with patients after treatment, resulting in incomplete data;



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delays in establishing the appropriate dosage levels;



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the quality or stability of FP187 falling below acceptable standards;



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the inability to produce or obtain sufficient quantities of FP187 or comparator drugs to complete clinical trials; and



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exceeding budgeted costs due to difficulty in accurately predicting costs associated with clinical trials.

        With respect to our clinical development of FP187 in RRMS, our proposed Phase 3 trial is particularly ambitious, requiring the recruitment of approximately 2,000 RRMS patients worldwide. We have no experience in managing a clinical trial of this size and scope using multiple study sites throughout the world, and we will need to significantly increase our clinical development resources in order to successfully manage and oversee this process.

        We have experienced, and may continue to experience, delays in our planned timelines for clinical trials. For example, identifying and negotiating a letter of intent with a clinical research organization, or CRO, to manage our planned Phase 3 trial for RRMS took longer than expected.

        Positive or timely results from pre-clinical studies and early-stage clinical trials do not ensure positive or timely results in late-stage clinical trials or product approval by the FDA, the EMA or other regulatory authorities.

        Products that show positive pre-clinical or early clinical results may not show sufficient safety or efficacy to obtain regulatory approvals and therefore fail in later-stage clinical trials. The FDA, the EMA and other regulatory authorities have substantial discretion in the approval process, and in determining when or whether regulatory approval will be obtained for FP187. Even if we believe the data collected from clinical trials of FP187 are promising, such data may not be sufficient to support approval by the FDA, the EMA or any other regulatory authority.

        We could encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by the Data Monitoring Committee, or DMC, for such trial, or by the FDA, the EMA or other regulatory authorities. We or such authorities may impose a suspension or termination 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, the EMA or other regulatory authorities resulting in the imposition of a clinical hold, safety issues or adverse side effects, failure to demonstrate a benefit from using the drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. If we experience delays in the completion of, or termination of, any clinical trial of FP187, the commercial prospects of FP187 will be harmed, and our ability to generate product revenues from this product will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow the FP187 development and approval process and jeopardize our ability to commence product sales and generate revenues.

        Any of these occurrences could materially adversely affect 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 FP187. Significant clinical trial delays could also allow our competitors to bring products to market before we do or shorten any periods during which we have the exclusive right to commercialize FP187, either of

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which could impair our ability to commercialize FP187 and harm our business and results of operations.

The FDA and/or the EMA/EC may determine that our proposed single Phase 3 trial for the use of FP187 for the treatment of RRMS, including any Expanded Disability Status Sale, or EDSS, and Sustained Accumulation of Disability, or SAD, data generated through the date of our New Drug Application, or NDA, is insufficient for approval of FP187, which would delay or could prevent the approval of FP187 and adversely affect our prospects.

        We filed our Investigational New Drug, or IND, for FP187 as a drug to treat RRMS in the U.S. on April 30, 2014. On June 10, 2014, the FDA sent us a "may proceed" letter, indicating that the IND is active and that we may conduct studies in humans in the U.S. In August 2013, we had held a pre-IND Application meeting with the FDA, prior to which we submitted a briefing book including a proposal for a large, single Phase 3 trial instead of the standard approach of two separate Phase 3 trials to demonstrate the efficacy of a drug. Approval by the FDA of an NDA is dependent on a number of factors. A final decision as to whether the program we shared with the FDA at a high level in advance of our pre-IND meeting will be sufficient for approval (including the sufficiency of our proposed single Phase 3 trial and whether a favorable effect on SAD, EDSS or other secondary endpoints will need to be demonstrated by us at the time of our NDA submission) can only be made by the FDA once it has reviewed our full NDA package.

        In addition, since we intend to rely on a single Phase 3 trial to demonstrate the effectiveness of FP187, the usual demonstration of the statistical significance of the superiority of FP187 to the active comparator drug in the primary efficacy endpoint (p<0.05) is unlikely to be sufficient to obtain approval utilizing a 505(b)(1) regulatory pathway. We currently expect that we will be required to demonstrate a two-sided p<0.01 for our primary efficacy endpoint of ARR and two-sided p<0.05 for the key secondary efficacy endpoint of SAD and/or other secondary endpoints (e.g., MRI scans) while retaining the primary efficacy advantage for FP187 through the full two-year study. Importantly, during our pre-IND meeting, the FDA explained that although a low p-value may be one of the contributing factors for approval supported by a single study, such low p-value alone is not sufficient for approval, and that a final decision can only be made once the results from the study are reviewed. The FDA commented that consideration of an approval supported by a single study is based on many factors as described in "Guidance for Industry: Providing clinical evidence of effectiveness for human drug and biological products (May, 1998)."

        Currently, we are investigating alternative Phase 3 clinical strategies in RRMS with a goal to optimize our current plan. Overall, there can be no assurances that the FDA will ultimately approve any revised plan or accept the data from any single Phase 3 trial as sufficient for approval when we submit our NDA or at all, or that we will be able to timely submit such an NDA. Similarly, in the EU, we may experience a delay in submitting our market authorization application to the EMA and there can be no assurances that the EC ultimately will approve FP187 as a drug for the treatment of RRMS.

If serious adverse, undesirable or unacceptable side effects are identified during the development or commercialization of FP187, we or our collaboration partners may need to abandon or limit development or commercialization of FP187.

        If FP187 or any other product candidate we develop is associated with serious adverse, undesirable or unacceptable side effects, we may need to abandon such candidate's development or limit development to certain uses or sub-populations in which such side effects are less prevalent, less severe or more acceptable from a risk-benefit perspective. Many compounds that initially showed promise in early-stage or clinical testing have later been found to cause side effects that prevented further development of the compound.

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        Undesirable side effects caused by FP187 or another product candidate we develop could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA, the EC or other comparable foreign authorities. Results of our trials could reveal a high and unacceptable severity and prevalence of these or other side effects. In such an event, our trials could be suspended or terminated and the FDA, EMA or comparable foreign authorities could order us to cease further development of or deny approval of our product candidates for any or all targeted indications. The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Seven Serious Adverse Events, or SAEs, have been reported in our completed clinical trials for FP187, which have included 314 treated patients and tested healthy volunteers. Five cases were classified by the investigator as being unrelated to the use of FP187, while two cases were judged by the investigator as being possibly related to the use of FP187. One patient, who had hypertension and a family history of cardiovascular diseases experienced a transient ischemic attack, or TIA, while a second patient experienced severe abdominal pain over a period of approximately 24 hours. The patient experiencing the TIA discontinued the treatment regimen but the patient experiencing abdominal pain continued the treatment regimen after being discharged from the hospital without additional drug-related Adverse Events, or AEs. These cases have been reported to the FDA and European regulatory authorities but have not resulted in any requests from the authorities. The occurrence of these or other serious adverse, undesirable or unacceptable side effects could materially adversely affect our business, financial condition and prospects.

        It is documented in the Tecfidera® labeling and through experience using Fumaderm® that the use of products containing DMF, the sole active pharmaceutical ingredient, or API, in FP187, may cause a decrease in lymphocytes (white blood cells) in humans, thereby possibly increasing the potential for infection. To date, we are not aware of instances in which this side effect has prevented the FDA or the EC from approving RRMS drugs such as Tecfidera®, although it is expected that each of the FDA and the EMA will require us to monitor the incidence of this condition, known as lymphopenia, and will evaluate whether FP187 increases the potential for infections during the review of our NDA in the U.S. and market authorization application in the EU. In addition, a patient taking Tecfidera® in an extension study, who suffered from severe lymphopenia for more than three years, developed progressive multifocal leukoencephalopathy, or PML, a rare brain infection, and died of pneumonia. Additional cases of PML have occurred in the post-marketing setting, again in the presence of persistent lymphopenia. As a result, Biogen revised the labeling of Tecfidera® in December 2014 and February 2016 to discuss these cases, to include a warning about PML, and to increase the frequency of monitoring of lymphocyte counts. We expect that the FDA is likely to require us to include similar language in our labeling, if the FDA approves FP187 for the treatment of RRMS. Further, drug-related side effects could have different effects on our clinical development programs based on the condition studied and the risk-benefit analysis for the particular condition, such as psoriasis.

        If FP187 or another product candidate we develop receives marketing approval and we or others later identify undesirable side effects caused by such product, a number of potentially significant negative consequences could result, including:

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regulatory authorities may withdraw or limit approvals of such product;



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regulatory authorities may require additional warnings on the labeling;



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we may be required to change the way the product is distributed or administered, conduct additional clinical trials or change the labeling of the product;



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we or our collaboration partners may be required to create a medication guide or risk evaluation and mitigation strategy, or REMS, addressing the risks of such side effect;



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we or our collaboration partners could be sued and held liable for harm caused to patients;

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the cost of our product liability insurance may increase, or we may no longer be able to obtain liability insurance on commercially reasonable terms; and



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our reputation may suffer.

        Any of these events could prevent us from achieving or maintaining market acceptance of FP187 or any other product candidate, if approved, and could materially adversely affect our business, financial condition and prospects.

Positive results in previous clinical trials of FP187 may not be replicated in future clinical trials of FP187, which could result in development delays or a failure to obtain marketing approval.

        Positive results in previous clinical trials of FP187 may not be predictive of similar results in future clinical trials. In addition, interim results during a clinical trial do not necessarily predict final results. A number of companies in the biopharmaceutical industry have suffered significant setbacks in late-stage clinical trials even after achieving promising results in early-stage development. Accordingly, the results from the completed pre-clinical studies and clinical trials for FP187 may not be predictive of the results we may obtain in later-stage trials. Our clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials. Moreover, clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in pre-clinical studies and clinical trials have nonetheless failed to obtain FDA or EMA/EC approval for their products.

We depend on enrollment of patients in our clinical trials for FP187. If we experience delays or difficulties in the enrollment of patients in our clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented, and our business, financial condition and results of operations could be materially adversely affected.

        Successful and timely completion of clinical trials will require that we enroll a sufficient number of patient candidates. Trials may be subject to delays as a result of patient enrollment taking longer than anticipated or patient withdrawal. Patient enrollment depends on many factors, including the size of the patient population, eligibility criteria for the trial, the proximity of patients to clinical sites, the nature of the trial protocol, competing clinical trials and the availability of new drugs approved for the indication the clinical trial is investigating. Our ability to timely complete clinical trials also may be subject to events outside of our control and unrelated to the clinical trials.

        Enrollment of a sufficient number of patients in the Phase 3 trial for RRMS, the proposed size of which is, to our knowledge, unprecedented for drugs intended for the treatment of RRMS, will depend on our ability to convince physicians and patients at the trial sites of the clinical meaningfulness of our study, and the recent availability of oral therapies such as Gilenya® (fingolimod), Aubagio® (teriflunomide) and Tecfidera® (another DMF formulation) may cause patients to be less willing to participate in our clinical trial for an oral therapy in regions in which one of these alternative oral therapies has been approved. Since RRMS is a competitive market in certain regions, such as the U.S. and the EU, with a number of drug candidates in development, patients may have other choices with respect to potential clinical trial participation and we may have difficulty reaching our enrollment targets. Enrollment delays in our clinical trials may result in increased development costs, or the inability to complete development of FP187, which would cause the value of our company to decline, limit our ability to obtain additional financing, and materially impair our ability to generate revenues.

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We may become exposed to costly and damaging liability claims, either when testing FP187 or any other product candidates we develop in the clinic or at the commercial stage; and our product liability insurance may not cover all damages from such claims.

        We are exposed to potential product liability and professional indemnity risks that are inherent in the research, development, manufacturing, marketing and use of pharmaceutical products. Currently, we have no products that have been approved for commercial sale; however, the current and future use of FP187 or other product candidates by us and our collaboration partners in clinical trials, and the sale of any approved products in the future, may expose us to liability claims. These claims might be made by patients that use the product, healthcare providers, pharmaceutical companies, our collaboration partners or others selling such products. Any claims against us, regardless of their merit, could be difficult and costly to defend and could materially adversely affect the market for FP187 or any prospects for commercialization of FP187.

        Although the clinical trial process is designed to identify and assess potential side effects, it is always possible that a drug, even after regulatory approval, may exhibit unforeseen and/or unacceptable side effects. If FP187 were to cause unforeseen and/or unacceptable adverse side effects during clinical trials or after approval of the product candidate, we may be exposed to substantial liabilities. Further, physicians and patients may not comply with any warnings that identify known potential adverse effects and patients who should not use FP187.

        We maintain a limited amount of product liability insurance coverage for FP187 (currently coverage is for $2 million). Therefore, it is possible that our liabilities could exceed our insurance coverage. We intend to expand our insurance coverage to include the sale of commercial products and increase the amount of our coverage if we obtain marketing approval for FP187. However, we may be unable to obtain any insurance covering the sale of FP187, once commercialized, or may be unable to maintain insurance coverage at a reasonable cost or obtain insurance coverage that will be adequate to satisfy any liability that may arise. If a successful product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such claims and our business operations could be impaired.

        Should any of the events described above occur, this could have a material adverse effect on our business, financial condition and results of operations.

Our product candidate FP187 is subject to extensive regulation, compliance with which is costly, time consuming, and may cause unanticipated delays, or which may prevent the receipt of the required approvals to commercialize our product candidate.

        We and our collaboration partners, if any, will not be permitted to market our product candidate, FP187, until we receive regulatory approval from regulatory authorities. The process of obtaining regulatory approval is expensive, often takes many years, and can vary substantially based upon the type, complexity, and novelty of the products involved, as well as the target indications. Approval policies or regulations may change and regulatory authorities have substantial discretion in the drug approval process, including the ability to delay, limit, or deny approval of a product candidate for many reasons. Despite the time and expense invested in clinical development of product candidates, regulatory approval is never guaranteed and may never be obtained.

        The FDA, the EMA or other comparable foreign regulatory authorities can delay, limit, or deny approval of a product candidate for many reasons, including:

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such authorities may disagree with the number, design, size, duration, conduct or implementation of our clinical trials or the adequacy of our pre-clinical studies;



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we may be unable to demonstrate to the satisfaction of the FDA, the EMA or other regulatory authorities that a product candidate is safe and effective for any indication;

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we may be required to conduct additional clinical trials or pre-clinical studies;



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such authorities may not accept clinical data from trials that are conducted at clinical facilities or in countries where the standard of care is potentially different from the country in which regulatory approval is being considered or may disagree with our interpretation of clinical data;



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we may be unable to demonstrate that a product candidate's clinical and other benefits outweigh its safety risks;



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such authorities may not approve the formulation, labeling or specifications of our product; and



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such authorities may find deficiencies in the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies.

        In addition, competitors could attempt to use the regulatory process to attempt to delay or prevent approval of FP187. For example, a competitor could file a citizen petition with the FDA seeking a ruling from the FDA that the use of a single Phase 3 trial as a basis for approving FP187 is not appropriate. We believe that, if our proposed Phase 3 trial for FP187 is successful and the results meet our expectations, the FDA will have a proper basis for approving our NDA for FP187. However, the filing of a citizen petition could delay any approval of FP187 by the FDA, which would adversely affect our prospects. Our belief may not prove to be correct. Further, should any of the events described above occur, this could have a material adverse effect on our business, financial condition and results of operations.

Even if FP187 obtains regulatory approval, it will be subject to continual regulatory review.

        If marketing authorization is obtained for FP187, it will remain subject to continual review and therefore authorization could be subsequently withdrawn or restricted. We and our collaboration partners, if any, will be subject to ongoing obligations and oversight by regulatory authorities, including AE reporting requirements, marketing restrictions and, potentially, other post-marketing obligations, all of which may result in significant expense and limit our ability to commercialize FP187. We and our collaboration partners, if any, will also be subject to regulatory requirements covering the manufacturing of FP187, including maintaining compliance with cGMP, and our contract manufacturers will be subject to periodic inspections by regulatory authorities.

        If there are changes in the application of legislation or regulatory policies, or if problems are discovered with a product or our manufacture of a product, or if we or one of our collaboration partners fails to comply with regulatory requirements, the regulators could take various actions. These include issuing warning and/or untitled letters to us, imposing fines on us, imposing restrictions on FP187 or its manufacture, requiring us to recall or remove the product from the market, entering an injunction against us, requiring us to enter into a consent decree, and pursuing criminal prosecution against us. The regulators could also suspend or withdraw our marketing authorizations or require us to conduct additional clinical trials, change our product labeling or submit additional applications for marketing authorization. If any of these events occurs, our ability to sell such product may be impaired, and we may incur substantial additional expense to comply with regulatory requirements, which could materially adversely affect our business, financial condition and results of operations.

Agencies like the FDA and national competition laws in Europe regulate the promotion and uses of drugs not consistent with approved product labeling requirements. If we are found to have improperly promoted FP187 for uses beyond those that are approved, we may become subject to significant liability.

        Regulatory authorities like the FDA and national competition laws in Europe (e.g., the German Heilmittelwerbegesetz) strictly regulate the promotional claims that may be made about prescription products, such as FP187, if approved. In particular, a product may not be promoted for uses that are not approved by the FDA, the EMA or other regulatory agencies as reflected in the product's approved

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labeling. For example, the FDA requires substantial evidence, which generally consists of two adequate and well-controlled head-to-head clinical trials, for a company to make a claim that its product is superior to another product in terms of safety or effectiveness. Unless we perform clinical trials comparing FP187 to Tecfidera®, we will not be able promote FP187 by making comparative claims to Tecfidera®. If we are found to have made such claims without conducting the required trials or obtaining any necessary regulatory authorization, we may become subject to significant liability. In the U.S., the federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in improper promotion. The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed.

Due to both our limited resources and limited access to capital, we must decide to prioritize development of FP187 for certain indications and at certain doses; these decisions may prove to have been wrong and may materially adversely affect our business, financial condition, results of operations and prospects.

        Because we have both limited resources and limited access to capital to fund our operations, we must decide which dosages and indications to pursue for the clinical development of FP187 and the amount of resources to allocate to each. Our decisions concerning the allocation of research, collaboration, management and financial resources toward dosages or therapeutic areas may not lead to the development of viable commercial products and may divert resources away from better opportunities. If we make incorrect determinations regarding the market potential of FP187 or misread trends in the biopharmaceutical industry, our business, financial condition, results of operations and prospects could be materially adversely affected.

We are subject to environmental, health and safety laws and regulations, and may become exposed to liability and substantial expenses in connection with environmental compliance or remediation activities which may disrupt or delay our production and development efforts and materially adversely affect our business, financial condition and results of operations.

        Our operations, including our research, development, testing and manufacturing activities, are subject to numerous environmental, health and safety laws and regulations. These laws and regulations govern, among other things, the controlled use, handling, release and disposal of, and the maintenance of a registry for, hazardous materials and biological materials, such as chemical solvents, human cells, carcinogenic compounds, mutagenic compounds and compounds that have a toxic effect on reproduction, laboratory procedures and exposure to blood-borne pathogens. If we fail to comply with such laws and regulations, we could be subject to fines or other sanctions.

        As with other companies engaged in activities similar to ours, we face a risk of environmental liability inherent in our current and historical activities, including liability relating to releases of or exposure to hazardous or biological materials. Environmental, health and safety laws and regulations are becoming more stringent. We may be required to incur substantial expenses in connection with future environmental compliance or remediation activities, in which case our production and development efforts may be interrupted or delayed and our financial condition and results of operations may be materially adversely affected.

Our research and development activities could be affected or delayed as a result of possible restrictions on animal testing.

        Certain laws and regulations require us to test our product candidates on animals before initiating clinical trials involving humans. Animal testing activities have been the subject of controversy and adverse publicity. Animal rights groups and other organizations and individuals have attempted to stop animal testing activities by pressing for legislation and regulation in these areas and by disrupting these

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activities through protests and other means. To the extent the activities of these groups are successful, our research and development activities may be interrupted, delayed or become more expensive.

Enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval for and commercialize FP187 and may affect the prices we may set.

        In the U.S., the EU and some other foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system. These changes could prevent or delay marketing approval of FP187, restrict or regulate post-approval activities and affect our ability to profitably sell any products for which we obtain marketing approval.

        In the U.S., the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the Medicare Modernization Act, changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sale prices for physician-administered drugs. In addition, this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class. Cost-reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for any approved products. While the Medicare Modernization Act applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from the Medicare Modernization Act may result in a similar reduction in payments from private payors.

        More recently, in March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, or ACA, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. Key provisions of the ACA specific to the pharmaceutical industry, among others, include the following: (i) an annual, non-deductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents into the U.S., (ii) an increase in the rebates a manufacturer must pay under the Medicaid Drug Rebate Program, (iii) extension of manufacturers' Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations, and (iv) expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program. Substantial new provisions affecting compliance have also been enacted, which may affect our business practices with health care practitioners. Regulations under the ACA are expected to continue being drafted, released, and finalized throughout the next several years. Although we cannot predict their full impact, we anticipate that the ACA, as it is implemented, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage and reimbursement criteria that may negatively impact product price potential, and may also increase our regulatory burdens and operating costs.

        Both in the U.S. and in the EU, legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We are not sure whether additional legislative changes will be enacted, or whether the regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of FP187, if any, may be.

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

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

•

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



•

the U.S. False Claims Act imposes criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the U.S. government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;



•

the U.S. Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;



•

the U.S. false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits items or services;



•

the transparency requirements under the ACA require manufacturers of drugs, devices, biologics and medical supplies to report to the U.S. Department of Health and Human Services information related to physician payments and other transfers of value and physician ownership and investment interests; and



•

analogous laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and some state laws require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring manufacturers to report information related to payments to physicians and other health care providers or marketing expenditures.

        Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from U.S. government funded healthcare programs, such as Medicare and Medicaid, 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 violate applicable laws, they may be subject

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to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

We could be negatively impacted by violations of global anti-bribery laws.

        The anti-bribery laws, including the U.S. Foreign Corrupt Practices Act, or FCPA, generally prohibit covered entities from offering, promising, authorizing, or giving anything of value, directly or indirectly, to foreign officials or other commercial parties with the intent to influence the recipient's act or decision, to induce action or inaction in violation of lawful duty and for the purpose of obtaining or retaining business or other advantages. In addition, the FCPA, in particular, imposes recordkeeping and internal controls requirements on publicly traded corporations and their foreign affiliates, which are intended to, among other things, protect corporate funds from being used as payment of bribes without the company's knowledge, and to prevent the establishment of "off books" slush funds from which such improper payments can be made.

        Other companies in the medical, pharmaceutical, and health care field have recently faced criminal and civil penalties under applicable anti-bribery laws in connection with alleged misconduct by employees and their third-party business partners, including global agents and distributors. Similarly, we may be subject to the risk that we, our employees or any third parties that we engage to do work on our behalf in foreign countries may take action determined to be in violation of anti-corruption laws in any jurisdiction in which we conduct business. As a result of any such findings or allegations, we might incur significant costs and expenses, experience significant interruption of business, which could result in a material adverse effect on our business, prospects, financial condition, or operations, as well as our suffering severe penalties, including criminal and civil fines, disgorgement, and other costly remedial measures.

We operate in a highly competitive and rapidly changing industry, which may result in others discovering, developing or commercializing competing products before or more successfully than we do.

        The biopharmaceutical industry is highly competitive and subject to significant and rapid technological change. Our success is highly dependent on our ability to discover, develop and obtain marketing approval for new and innovative products on a cost-effective basis and to market them successfully. In doing so, we face and will continue to face intense competition from a variety of businesses, including large, fully integrated pharmaceutical companies, specialty pharmaceutical companies and biopharmaceutical companies, academic institutions, government agencies and other private and public research institutions in the U.S., the EU and other jurisdictions. These organizations may have significantly greater resources than we do and conduct similar research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and marketing of products that compete with FP187.

        We believe that our key competitor in the commercialization of DMF for RRMS is Biogen, which has developed Tecfidera®, an oral treatment for patients with RRMS. Tecfidera® has been approved in the U.S., Canada, Australia and the EU. The fact that Tecfidera® has been commercialized and is being marketed in the U.S. may make our development, discovery and commercialization efforts in the area of DMF for the treatment of RRMS more difficult. Other companies are also developing alternative therapeutic approaches to the treatment of RRMS. These alternative therapeutic approaches may be used as complementary to the use of FP187 for the treatment of RRMS, but they could also be competitive.

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        The highly competitive nature of and rapid technological changes in the biopharmaceutical industry could render FP187 or our technology obsolete or non-competitive. Our competitors may, among other things:

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develop and commercialize products that are safer, more effective, less expensive, or more convenient or easier to administer;



•

obtain quicker regulatory approval;



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establish superior intellectual property positions;



•

have access to more manufacturing capacity;



•

implement more effective approaches to sales and marketing; or



•

form more advantageous strategic alliances.

        Should any of these factors occur, our business, financial condition and results of operations could be materially adversely affected.

The successful commercialization of FP187 and any other products we develop will depend, in part, on the extent to which governmental authorities, health insurers and other third-party payors establish adequate reimbursement levels and pricing policies.

        The successful commercialization of FP187 and any other products we develop will depend, in part, on the extent to which third-party coverage and reimbursement for our products will be available from government and health administration authorities, private health insurers and other third-party payors.

        These bodies may deny or revoke the reimbursement status of a given drug product or establish prices for new or existing marketed products at levels that are too low to enable us to realize an appropriate return on our investment in product development. Obtaining and maintaining reimbursement status is time-consuming and costly. Significant uncertainty exists as to the reimbursement status of newly approved medical products. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases on short notice, and we believe that additional changes in these rules and regulations are likely. In addition, many governments and health insurers are increasingly attempting to manage healthcare costs by limiting both coverage and the level of reimbursement of new products. As a result, they may not cover or provide adequate payment for our future products.

        These concerns are particularly present for drugs like FP187 that use an API that is already available in other, approved drugs. Public and private payors may be willing to only provide coverage for FP187 if we can demonstrate a significant clinical advantage, or offer the drug at a price resulting in a treatment cost lower than other available drugs. Public and private payors may not be willing to grant reimbursement prices in line with our expectations if they do not share our views concerning the advantages of our proprietary formulation technology, in particular if they do not give as much weight as we do, for example, to what we expect will be the benefit from reductions in flushing as a side effect.

        The unavailability or inadequacy of third-party coverage and reimbursement could have a material adverse effect on the market acceptance of FP187 and the future revenues we may expect to receive from it. In addition, we are unable to predict what additional legislation or regulation relating to the healthcare industry or third-party coverage and reimbursement may be enacted in the future, or what effect such legislation or regulation would have on our business.

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FP187 and any other products we develop may not gain market acceptance, in which case we may not be able to generate product revenues, which will materially adversely affect our business, financial condition and results of operations.

        Even if the FDA, the EMA or any other regulatory authority approves the marketing of any products that we develop on our own or with a collaboration partner, physicians, healthcare providers, patients or the medical community may not accept or use them. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenues or any profits from operations. The degree of market acceptance of FP187 will depend on a variety of factors, including:

•

the timing of market introduction;



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the number and clinical profile of competing products;



•

our ability to provide acceptable evidence of safety and efficacy;



•

the prevalence and severity of any side effects;



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availability of alternative treatments;



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relative convenience and ease of administration;



•

pricing and cost-effectiveness;



•

patient diagnostics and screening infrastructure in each market;



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marketing and distribution support;



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availability of coverage, reimbursement and adequate payment from health maintenance organizations and other insurers, both public and private; and



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potential advantages over alternative treatment methods.

        If FP187 or any other product we develop fails to gain market acceptance, this will have a material adverse impact on our ability to generate revenues to provide a satisfactory, or any, return on our investment. Even if some products achieve market acceptance, the market may not prove to be large enough to allow us to generate significant revenues.

We have never commercialized a product candidate, and we currently have no marketing and sales organization. To the extent our product candidate FP187 is approved for marketing, if we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our product candidates, we may not be able to effectively market and sell FP187 or generate product revenue.

        We have never commercialized a product candidate, and we currently do not have a marketing or sales organization for the marketing, sales and distribution of FP187 and do not intend to create one at this time. In order to commercialize any of our products that receive marketing approval, we would have to build 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. In the event of successful development of FP187, if we elect to build a targeted specialty sales force, such an effort would be expensive and time consuming. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization of these products. With respect to FP187, we may choose to partner with third parties that have their own sales forces and established distribution systems, in lieu of or to augment any sales force and distribution systems we may create. If we choose to partner with any such third parties and are unable to enter into collaborations with those third parties for the commercialization of approved products, if any, on acceptable terms or at all, or if any such partner does not devote sufficient resources to the commercialization of our product or otherwise fails in commercialization efforts, we may not be able to successfully commercialize FP187 if it receives regulatory approval. If we are not successful in

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commercializing FP187, either on our own or through collaborations with one or more third parties, our future revenue will be materially and adversely impacted.

Risks Related to our Financial Position and Capital Needs

We have a history of operating losses andthrough 2016. While we expect to report a profit in 2017, we may not achieve or sustain profitability. We anticipate that we will continue to incur losses for the foreseeable future. If we fail to obtain additional funding to conduct our planned research and development effort, we could be forced to delay, reduce or eliminate our product development programs or commercial development efforts.profitability thereafter.

        We incurred net losses of $33.3 million, $37.0 million $19.0 million and $15.7$19.0 million for the years ended December 31, 2016, 2015 2014 and 2013,2014, respectively. As of December 31, 2015,2016, we had an accumulated deficit of $131.2$147.5 million. We do not expect to report net income in the future from product sales until we obtain regulatory approval for such product, if ever. Our losses have resulted principally from expenses incurred in research and development of FP187, from general and administrative expenses that we have incurred while building our business infrastructure, and from fair value adjustments to certain convertible loans and net settlement obligations to shareholder warrants. WeOn February 9, 2017, we received a non-refundable cash fee of $1.25 billion, or Non-refundable Fee, from Biogen in connection with the License Agreement, and expect to continueshow a profit for 2017. This was a one-time payment (in addition to incur significant operating losses in thepotential future asroyalty payments) and there is no assurance that we continue our research and development efforts and seekwill be profitable thereafter.

        Prior to obtain regulatory approval and commercialization of FP187.

        To date,2017, we have financed our operations through our initial public offering completed in October 2014, private placements of equity securities, grants from governmental bodies and debt financing arrangements. We have never generated and do not anticipate generating any revenues from product sales. Based on our current plans, we do not expect to generate significant product revenues unless and until we obtain marketing approval for, and commercialize, FP187. We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements beyond the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

        We will require additional funding to commercialize FP187 for the treatment of RRMS and to exploit and defend our intellectual property. We also will have to seek additional funding to develop and commercialize FP187 for the treatment of indications beyond RRMS, including psoriasis. Additional funds may not be available on a timely basis, on favorable terms, or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term business strategy. In addition, we may not be able to obtain further funding from governmental bodies.

Even if we do generate productrevenue, including from future royalties on sales or product sales,other payments by assignees, we may never achieve or sustain profitability on a consistent basis or at all. Our failure to sustain profitability could depress the market price of our ordinary shares and American Depositary Shares, or ADSs and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations. A decline in the market price of our ordinary shares and ADSs also could cause you to lose all or a part of your investment.

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RaisingIf future distributions to shareholders or other expenses result in the Company having insufficient cash to fund its operating expenses, we may be required to raise additional capital may cause dilution to holders of our shares or ADSs, restrictfund our operations, and we may not be able to do so on terms acceptable to us, or require us to relinquish rights to our technologies or products.at all.

        UntilWe are currently evaluating different means to deliver to our shareholders a substantial portion of the $1.25 billion payment that we received from Biogen, which may include dividends, distributions, share repurchases or other means. The amount to be distributed is unknown at this time but we estimate the dividend, distribution, share repurchase or other return of capital will occur during the second quarter of 2017. We are required under the terms of the License Agreement to maintain sufficient capital to continue the Company as a going concern and a solvent entity, plus an additional $5.0 million until such time as the Company has complied with certain obligations under the License Agreement. While we intend to leave sufficient resources in the Company to enable us to comply with our obligations under the License Agreement and to continue operations until such time, if ever, as we can generate substantial product revenues,revenue on sales, including from any assignee, our estimates and assumptions about how much capital will be required could prove to be wrong and we expectmay need to meetraise additional capital to fund our cash needs through a combinationoperations. We cannot assure you that we will be able to raise additional working capital as needed on terms acceptable to us, if at all. If we are unable to raise capital as needed, we may be required to reduce the scope of our existing cashoperations, which could harm our financial condition and cash equivalents and additional financings, as needed.operating results, or cease our operations entirely.

        In the event we need to seek additional funds, we may raise additional capital through the sale of equity or convertible debt securities. In such an event, the ownership interests of our existing equity holders will be diluted, and the terms of any new securities may include liquidation or other preferences that adversely affect the rights of our existing equity holders. In addition, the issuance of additional equity securities by us, or the possibility of such issuance, may cause the market price of our ADSs to decline. Debt financing, if available, may involve agreements that include covenants limiting or

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restricting our ability to take specific actions such as incurring additional debt, making capital expenditures or declaring dividends.

        If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, weFuture distributions to shareholders may be requiredsubject to relinquish valuable rightswithholding tax.

        As noted above, we are currently evaluating different means to deliver to our technologies, future revenue streams or products orshareholders a substantial portion of the $1.25 billion payment that we received from Biogen, which may include a return of capital by way of a dividend, among other means currently being evaluated. Should we determine to grant licenses on terms that may not be favorablepay a dividend to us. If we are unable to raise additional funds when needed, weour shareholders, such dividend may be requiredsubject to delay, limit, reducewithholding tax. Under Danish law, dividends paid in respect of shares are generally subject to Danish withholding tax at a rate of 27%. Withholding tax at a rate of 27% generally applies to shareholders resident outside of Denmark, irrespective of whether the non-resident is a private individual or terminate our product development or future commercialization efforts or grant rightscorporate shareholder. For shareholders who are residents of Denmark, the withholding tax will generally apply to developindividuals, while dividends paid to companies are generally subject to corporate tax at a current rate of 22%. Additionally, while shareholders resident in countries where Denmark has entered into a tax treaty may be eligible to seek a partial refund of the tax withheld, it will be incumbent on the shareholder to seek any such refund and market FP187 or other product candidates that we would otherwise preferthe Company makes no representations regarding the ability of shareholders to develop and market ourselves.successfully apply for such refund(s). See "Item 10. Additional Information—E. Taxation—Danish Tax Considerations" for more information.

Exchange rate fluctuations or abandonment of the Euro currency may materially affect our results of operations and financial condition.

        Due to the international scope of our operations and the fact that a substantial majority of our cash is currently denominated in Euros, fluctuations in exchange rates, particularly between the Danish Kroner, British Pound and the U.S. dollar,Dollar, may adversely affect us. Although we are based in Denmark, we sourcehave sourced research and development, manufacturing, consulting and other services

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from several countries. We have also invested in bonds issued by the governments of Germany, the United Kingdom and the U.S. Further, potential future revenue may be derived from abroad, particularly from the U.S. As a result, our business may be affected by fluctuations in foreign exchange rates between the Danish Kroner, the U.S. dollar,Dollar, British Pound, the Euro or other currencies, which may also have a significant impact on our reported results of operations and cash flows from period to period. For example, in the years ended December 31, 20152016 and 2014,2015, we benefited from unrealized foreign exchange gains of $11.9 million$598,000 and $5.6$11.9 million respectively. In the future, we could experience a foreign exchange loss of equal or greater size. Currently, we do not have any exchange rate hedging arrangements in place and do not currently have plans to implement any hedging arrangements.

        In addition, the possible abandonment of the Euro by one or more members of the EU could materially affect our business in the future. Despite measures taken by the EU to provide funding to certain EU member states in financial difficulties and by a number of European countries to stabilize their economies and reduce their debt burdens, it is possible that the Euro could be abandoned in the future as a currency by countries that have adopted its use. This could lead to the re-introduction of individual currencies in one or more EU member states, or in more extreme circumstances, the dissolution of the EU. The effects on our business of a potential dissolution of the EU, the exit of one or more EU member states from the EU or the abandonment of the Euro as a currency are impossible to predict with certainty, and any such events could have a material adverse effect on our business, financial condition and results of operations.

Developments relating to Biogen, Tecfidera®, our competitors andor their products could materially and adversely affect our business, results of operations, business prospects and the market price of our ADSs.

        In the event that our competitors or others in the pharmaceutical industry, including Biogen, experience developments relating to their business, products or product candidates, our business, results of operations, business prospects and the market price of our ADSs could suffer. In particular, if we are eligible to receive royalties on sales of Tecfidera®, our future success will depend on the continued market acceptance of Tecfidera® and adverse events, or the perception of adverse events, relating to Biogen or its Tecfidera® product couldwould have material adverse effects on us. For example, on July 24, 2015, Biogen announced that it was revising its previous annual financial guidance for 2015 with respect to its expected revenue growth in 2015 compared to 2014 from a range of 14%-16% to a range of 6%-8%, based largely on revised expectations for the growth of Tecfidera®, including moderated patient growth in the U.S. market, lower-than-anticipated reimbursement rates in Europe and lower pricing in Germany. The day of Biogen's announcement, the price of our ADSs dropped by approximately 18%. WeAs a result of entering into the License Agreement, we expect that the market price of our ADSs will continue to bebecome more significantly affected by announcements made by Biogen, over which we have no control. Additionally, at least four confirmed cases of PML have been reported in patients

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being treated with Tecfidera®, which could raise safety concerns and harm the market profile of DMF-basedDMF-containing treatments for RRMS,MS, including Tecfidera® and FP187, if and when we are able to commercialize FP187.or another DMF Formulation that Biogen, the Company or any assignee of our U.S. co-exclusive license rights may develop. Similarly, developments relating to other competitors of Biogen and their products could have significant adverse effects on our business prospects and the market price of our ADSs. For example, competitors may offer their products at reduced prices or with discounts or rebates that increase pricing pressure with respect to therapies for the treatment of our target indications.MS.

Related party transactions may be challenged by tax authorities.

        The jurisdictions in which we conduct or will conduct business, and in particular Denmark, Germany and the U.S,U.S., have detailed transfer pricing rules which require that all transactions with related parties be priced using arm's length pricing principles. Contemporaneous documentation must exist to support this pricing. The taxation authorities in these jurisdictions could challenge our arm's

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length related partyrelated-party transfer pricing policies. For example, Forward Pharma GmbH and Forward Pharma A/S recently terminated their internal license agreement and agreed that Forward Pharma GmbH shall be paid an arm's length compensation for said termination. The German and/or Danish tax authorities could impose additional tax on either entity if they determine that the amount that is paid by Forward Pharma A/S to Forward Pharma GmbH does not satisfy transfer pricing rules. International transfer pricing is an area of taxation that depends heavily on the underlying facts and circumstances and generally involves a significant degree of judgment. Although we believe that our related-party transactions satisfy the substantive requirements of these transfer pricing rules, if any of these taxation authorities are successful in challenging our transfer pricing policies, our income tax expense may be adversely affected and we also could be subjected to interest and penalty charges. Any increase in our income tax expense and related interest and penalties could have a significant negative impact on our future earnings and future cash flows.

        The German tax authorities commenced an audit of the tax returns for our German subsidiary, Forward Pharma GmbH, for each of the three years in the period ended December 31, 2012. The audit is ongoing and no assessment has been received to date from the German tax authorities. It is possible that the German tax authorities could take a position that is contrary to the tax positions taken by Forward Pharma GmbH resulting in the Company being assessed taxes, penalties and interest, which could be material, which would adversely affect the Company's financial position and results of operations.

We may be required to repay all or part of a government grant that we were previously awarded.

        We were awarded a €3.8 million grant from the state owned Sächsische Aufbaubank, or SAB, in Germany that subsidized certain research and development costs that we incurred during the period from March 2007 to December 31, 2012. The grant must be repaid should the SAB determine that the grant was not, or not entirely, used for the specific purpose for which it was given. Further, if we don't establish a production site in Saxony Germany by June 30, 2016 at the earliest or May 31, 2017 at the latest, the grant must be repaid from a share of revenue generated as the result of the funded research and development up to a maximum of the grant amount, plus interest. Should we not comply with this obligation, we will be required to grant the German government rights of use to the results of the funded research. In the future, if the SAB determines that the grant was not used as intended or if we fail to establish a production site in Saxony Germany by June 30, 2016 at the earliest or May 31, 2017 at the latest and we generate revenues as a result of the funded research, we would be obligated to repay the grant. The payment of the grant would negatively affect our financial position and operating results and the affect could be material. For more information see "Item 5. E. Off-balance Sheet Arrangements."

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Risks Related to Our Dependence on Third Parties

If we seek to enter into strategic relationships or collaborations and fail to do so on acceptable terms, our business, financial condition, commercialization prospects and results of operations may be materially adversely affected.

        Our product development programs and the potential commercialization of FP187 or any other product candidates we develop will require substantial cash to fund expenses. Therefore, in addition to financing the developments of FP187 or any other product candidates we develop through additional equity financings or through debt financings, we may decide to enter into collaborations with pharmaceutical or biopharmaceutical companies for the development and potential commercialization of such products or product candidates.

        We face significant competition in seeking appropriate collaborators. Collaborations are complex and time-consuming to negotiate and document. We may also be restricted under existing and future collaboration agreements from entering into agreements on certain terms with other potential collaborators. We may not be able to negotiate collaborations on acceptable terms, or at all. Our ability to reach a definitive collaboration agreement will depend, among other things, upon our assessment of the collaborator's resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator's evaluation of a number of factors, including uncertainty related to the validity of our intellectual property as a result of ongoing litigation. If we are unable to enter into one or more collaborations on acceptable terms, we may have to curtail the development of a particular product, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of our sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we will not be able to bring FP187 to market and generate product revenue. If we do enter into a collaboration agreement, we could be subject to the following risks, each of which may materially harm our business, commercialization prospects and financial condition:

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we may not be able to control the amount and timing of resources that the collaboration partner devotes to the product development program;



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the collaboration partner may experience financial difficulties and thus not commit sufficient financial resources to the product development program;



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we may be required to relinquish important rights such as marketing, distribution and intellectual property rights;



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a collaboration partner could move forward with a competing product developed either independently or in collaboration with third parties, including our competitors; or



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business combinations or significant changes in a collaboration partner's or our business strategy may adversely affect our or our collaboration partner's willingness to complete our or our collaboration partner's obligations under any arrangement.

We expect that we will rely on third parties to conduct any future clinical trials for FP187. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize FP187, which could have a material adverse effect on the success of our business.

        We expect to enter into agreements with third-party CROs to conduct and to manage data for our clinical trials. We will rely heavily on these parties to conduct clinical trials for FP187 and we will not

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have control over their day-to-day activities. As a result, although we will be responsible for ensuring regulatory compliance of their activities, we will have less direct control over the conduct, timing and completion of these clinical trials and the management of data developed through the clinical trials than would be the case if we were relying entirely upon our own staff. Communicating with outside parties can also be challenging, potentially leading to mistakes as well as difficulties in coordinating activities. Outside parties may:

•

have staffing difficulties;



•

fail to comply with contractual obligations;



•

experience regulatory compliance issues;



•

undergo changes in priorities or become financially distressed; or



•

form relationships with other entities, some of which may be our competitors.

        Although we will design our clinical trials for FP187, CROs will conduct all of the clinical trials. As a result, many important aspects of our drug development programs are outside of our day-to-day control. In addition, the CROs may not perform all of their obligations under arrangements with us or in compliance with regulatory requirements, but we remain responsible and are subject to enforcement action that may include civil penalties up to and including criminal prosecution for any violations of laws and regulations during the conduct of our clinical trials. If the CROs do not perform clinical trials in a satisfactory manner, breach their obligations to us or fail to comply with regulatory requirements, the development and commercialization of FP187 may be delayed or our development program materially and irreversibly harmed. If we are unable to rely on clinical data collected by our CROs, we could be required to repeat, extend the duration of, or increase the size of our clinical trials and this could significantly delay commercialization and require significantly greater expenditures. We have identified a CRO to manage our proposed Phase 3 clinical trial in RRMS. However, if we are unable to successfully negotiate a master service agreement with the CRO, our Phase 3 trial could be significantly delayed and the costs of our Phase 3 trial could also increase significantly.

        If our relationship with any CRO terminates, we may not be able to enter into arrangements with an alternative CRO. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, any such clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize FP187. In addition, negotiating the terms of any commercial relationship with a CRO may prove difficult and may delay the expected start of planning and execution of clinical trials. As a result, our financial results and the commercial prospects for FP187 in the subject indication would be harmed, our costs could increase and our ability to generate revenue could be delayed.

We currently rely on third-party suppliers and other third parties for production of FP187 and other materials and our dependence on these third parties may impair the advancement of our research and development programs and the development of FP187.

        We currently rely on, and expect to continue to rely on, third parties for the supply of raw materials and manufacture of drug supplies necessary for the conduct of our clinical trials, and we intend to rely on third parties for commercial supplies of raw materials and the manufacture of our DMF tablets for commercial sale, if approved. We have a single relationship with a manufacturer (a so-called contract manufacturing organization, or CMO) to purchase excipients (i.e., inactive substances formulated alongside DMF), and to develop and manufacture our DMF, which we do through periodic work orders instead of a formal contractual relationship. We also have a single relationship with another CMO for the formulation, development, manufacture, analysis, packaging and supply of our

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DMF tablets, which we also maintain through periodic work orders instead of a formal contractual relationship. We expect to establish relationships with additional CMOs for the supply of raw materials and DMF tablets. Our failure to establish relationships with additional CMOs could have a material adverse effect on our business, financial conditions and results of operations.

        Our current reliance on just one CMO for the purchase of excipients and manufacturing of DMF, and another single CMO for the supply of our DMF tablets, may expose us to more risk than if we were to manufacture FP187 or other products ourselves, or if we were to have relationships with multiple or back-up CMOs for each function. Delays in production by either of these two third parties could delay our clinical trials or have an adverse impact on any commercial activities. In addition, the fact that we are dependent on these two third parties for the manufacture of DMF and formulation of FP187, respectively, means that we are subject to the risk that the products may have manufacturing defects that we have limited ability to prevent or control. Although we oversee these activities in an effort to ensure compliance with our quality standards, budgets and timelines, we have had, and will continue to have, less control over the day-to-day manufacturing of DMF than potentially would be the case if we were to manufacture FP187 ourselves, or have alternative CMOs to turn to in instances where batches of our FP187 did not meet required standards. Further, the CMOs we deal with could have staffing difficulties, might undergo changes in priorities or may become financially distressed, which would adversely affect the manufacture of DMF and the production of our FP187 tablets. In addition, they could be acquired by, or enter into an exclusive arrangement with, one of our competitors, which would adversely affect our ability to access DMF in the form we require. The inability of our single third-party sources of DMF and tablet production to meet our requirements for DMF would have a material adverse impact on our business and prospects.

        We are obliged to work with CMOs and third-party suppliers that comply with EMA, FDA or other regulatory authorities' laws and regulations, including cGMPs, on an ongoing basis. In addition, the facilities used by our CMOs to manufacture active drug substance, sterile drug substance and final drug product must be approved by the FDA and other comparable foreign regulatory agencies following inspections that would be conducted after we submit our NDA or relevant foreign regulatory submission to the applicable regulatory agency. Although we are ultimately responsible for ensuring compliance with these regulatory requirements, we do not have day-to-day control over a CMO or other third-party manufacturer's compliance with these laws, regulations and applicable cGMPs and other laws and regulations, such as those related to environmental health and safety matters. Any failure to achieve and maintain compliance with these laws, regulations and standards could subject us to the risk that we may have to suspend the manufacturing of FP187 or that obtained approvals could be revoked, which would adversely affect our business and reputation. In addition, third-party providers, such as our CMOs, may elect not to continue to work with us due to factors beyond our control. They may also refuse to work with us because of their own financial difficulties, business priorities or other reasons, at a time that is costly or otherwise inconvenient for us. If we were unable to find adequate replacement or another acceptable solution in time, our clinical trials could be delayed or our commercial activities could be harmed.

        The manufacture of DMF requires highly specialized safety procedures and equipment and is therefore carried out by a limited number of CMOs. Our Phase 3 trial for FP187 for the treatment of RRMS, when and if initiated, and our planned commercialization of FP187, will greatly increase our requirements for DMF. Currently, a single CMO provides us with our DMF. While we have identified a supplementary source of production and are currently undergoing technical transfer of the manufacturing process with this alternative source, there can be no assurance that we will be able to successfully transfer the process and to agree on the commercial terms of supply with such secondary supplier, or that we will be able to identify other alternative and/or supplementary sources of production, if needed, the failure of any of which could negatively impact our programs.

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        In addition to the supply of DMF, we also will rely on CMOs and third-party suppliers to provide us with sufficient quantities of the comparator drug to be used in our proposed Phase 3 trial for FP187 for the treatment of RRMS. While we believe we have identified another third-party supplier of the comparator drug, we continue to seek additional sources of supply of the comparator drug. However, there can be no assurance that we will be able to obtain a sufficient supply of the comparator drug for our proposed Phase 3 clinical trial when needed or on commercially reasonable terms. The inability to do so would have a material adverse impact on our business and prospects.

        Problems with the quality of the work of third parties, such as CMOs, may lead us to seek to terminate our working relationships and use alternative service providers. However, making this change may be costly and may delay our planned trials. In addition, it may be very challenging, and in some cases impossible, to find replacement service providers that can develop and manufacture the necessary raw materials (including DMF), tablets or products in an acceptable manner and at an acceptable cost and on a timely basis. The sale of products containing any defects or any delays in the supply of necessary services could adversely affect our business, financial condition and results of operations.

        Growth in the costs and expenses of components or raw materials may also adversely affect our business, financial condition and results of operations. Supply sources could be interrupted from time to time and, if interrupted, supplies may not be resumed (whether in part or in whole) within a reasonable timeframe and at an acceptable cost or at all.

If we fail to retain accounting and financial staff with appropriate experience, our ability to maintain the financial controls required of a public company may be adversely affect our business.affected.

        We currently rely on employed and third-party accounting professionals to assist us with our financial accounting and compliance obligations. If we are unable to retain financial professionals with appropriate experience to maintain our financial control and reporting obligations as a public company, our business may be adversely impacted.

Risks Related to Our Ordinary Shares and ADSs

Holders of our ADSs have different rights than holders of our ordinary shares.

        We have issued to our security holders ADSs and ordinary shares, each of which affords their holders different rights. Currently, only our ADSs are publicly traded (on NASDAQ). An ADS holder will not be treated as one of our shareholders and will not have shareholder rights. Danish law governs shareholder rights. Our depositary, Bank of New York Mellon, is the holder of the ordinary shares underlying outstanding ADSs. Holders of ADSs only have ADS holder rights. The deposit agreement among us, the depositary and ADS holders sets out ADS holder rights as well as the rights and obligations of the depositary.

The market price of the ADSs may be volatile and may fluctuate due to factors beyond our control.

        The price of equity securities of publicly traded emerging biopharmaceutical and drug discovery and development companies has been highly volatile and is likely to remain highly volatile in the future. The market price of the ADSs may fluctuate significantly due to a variety of factors, including:

•

developments concerning proprietary rights, including patents and litigation matters;



•

positivedevelopments concerning if and when termination or negative resultsexpiration of testingthe required waiting period under the HSR Act occurs under our License Agreement with Biogen;



•

whether or not Biogen obtains an exclusive license in the U.S., and clinical trials by us, strategic partners,any developments that could make such an election more or competitors;less likely;



•

delays in entering into strategic relationships with respect to development and/or commercialization of FP187a DMF Formulation under our U.S. co-exclusive license rights or entry into strategic relationships on terms that are not deemed to be favorable to us;



•

technological innovations or commercial product introductions by us orour competitors;

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changes in government regulations;



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public concern relating to the commercial value or safety of FP187;FP187, Tecfidera® or other DMF-containing products;

        An interference is an administrative patent judge designated us asproceeding at the senior party.USPTO to determine which party is the first to invent an invention claimed by two parties. The party with the earliest effective filing date to the common invention is designated "senior party" and is entitled to the presumption that it is the first inventor.

        An interference is an administrative proceeding at the USPTO to determine which party is the first to invent an invention claimed by two parties. Biogen, as the junior party in the interference,Interference Proceeding, has the burden of proof to show a date of invention that predates our invention. During thean interference, the parties can dispute the patentability of the other party's claims, challenge the senior party designation and present proof of prior invention. The interference proceeding will give us the opportunity to prove to the USPTO that we were the first to invent the method of treating MS using about a 480 mg daily dose of DMF. Interference proceedings typically involve both a "motions" phase and a "priority" phase. However, in this interferenceInterference Proceeding those two phases have beenwere combined. The default oral argument for

        At the interference is scheduled for November 30, 2016, which effectively concludes the parties' involvement in the interference and will be followed by a decisionoutset of the USPTO.

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        As a preliminary matter,Interference Proceeding, the administrative patent judge has accorded the Company benefit toof the filing date of our Danish Application No. PA 2004 01546, filed on October 8, 2004. On August 6, 2015, Biogen filed a motion in the interferenceInterference Proceeding to vacate benefit to this priority date. Althoughdate, which we believe we are entitled to the benefit of this priority date, there is no guarantee that the USPTO will agree with us.have opposed. Biogen has also filed a motion in the interferenceInterference Proceeding alleging that our claims are unpatentable under 35 U.S.C. Section 112 and alleging that our claims are unpatentable for lack of written description and lack of enablement. Whileenablement, which we intend to oppose Biogen'shave opposed. The PTAB granted this motion there can be no assurance that we will be successful in doing so.on March 31, 2017. In addition, Biogen has assertedfiled a motion for priority asserting February 19, 2004 as its date of conception of the invention claimed in its '514 patent, which is earlier than the October 8, 2004 the priority date to which our '871 patent application has been accorded benefit as a preliminary matter by the administrative patent judge.benefit. As the junior party in the interference,Interference Proceeding, Biogen has the burden of proving an earlier date of conception and diligent reduction to practice of the invention from a date just before our earliest effective filing date through the date of Biogen's earliest alleged reduction to practice, which is currently Biogen's alleged first constructive reduction to practice on February 8, 2007, the date of Biogen's U.S. provisional application. Thus, Biogen must show diligence for a 28-month period from October 2004 through February 2007. We have opposed Biogen's priority motion.

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        On August 6, 2015, weWe filed four motions in the interference.Interference Proceeding. Our first motion alleges that Biogen's '514 patent is unpatentable under 35 U.S.C. Sections 102 and/or 103 in view of the publication of our international application PCT/DK2005/000648. Our second motion alleges that Biogen's '514 patent claims are unpatentable under 35 U.S.C. Section 112 for lack of written description. Our third motion seeks benefit of the filing dates of our three additional Danish applications and our U.S. provisional application. Our fourth motion attacks Biogen's benefit claim to its February 8, 2007 U.S. provisional application. Biogen has opposed each of our motions.

        The oral argument for the Interference Proceeding took place on November 30, 2016. On March 31, 2017, the PTAB issued a decision in the Interference Proceeding in favor of Biogen. The PTAB ruled that the claims of the '871 application are not patentable due to a lack of adequate written description. The Company intends to appeal the decision to the Federal Circuit. The appeal is expected to last 12 months or longer. If the Company prevails in this appeal, we expect the Federal Circuit to remand the case to the PTAB, in order for the PTAB to resolve both parties' other outstanding motions, including Biogen's priority motion. The oral argument for the inter partes review, or IPR, against Biogen's '514 patent, which was instituted in response to a request from the Coalition for Affordable Drugs (IPR No. 2015-01993), was also held on November 30, 2016. On March 21, 2017, the PTAB issued a decision in the IPR holding that the claims of Biogen's '514 patent are patentable. The Coalition for Affordable Drugs has the right to appeal this decision.

        If we prevail in the Interference Proceeding after any appeals to the Federal Circuit, we expect our '871 application to be in condition for allowance and Biogen's '514 patent to be cancelled. If, however, Biogen is successful in proving that our claims are unpatentable, we would not prevail in the interference proceeding.Interference Proceeding. Even if we can defeat Biogen's argument that our claims are unpatentable, if Biogen is successful in proving an earlier date of conception and diligent reduction to practice, we would not prevail in the interference proceedingInterference Proceeding unless we can successfully prove that Biogen's claims are unpatentable. If we fail to prevail in the interference proceeding and Biogen's '514 patent is upheld, we likely would be prevented from commercializing our lead product candidate for RRMS in the U.S. at a 480 mg per day dose, which likely would prevent us from generating any revenue from this product at that dose in the U.S. If we prevail in the interference, we expect our '871 application to be in condition for allowance and Biogen's '514 Patent to be cancelled. However, either party may appeal the outcome of the interference proceeding. A recent federal court of appeals decision eliminated the district court route of appeal for interference proceedings, leaving only the U.S. Court of Appeals for the Federal Circuit as an option. This route of appeal typically does not allow for the admission of new evidence, and we expect that this appeal route would take about 6-12 months. See "Risk Factors—Risks Related to Our Business and Industry—There can be no assurancesassurance that the interference proceedingInterference Proceeding between our U.S. Patent Application No. 11/576,871 and Biogen's U.S. Patent No. 8,399,514 will ultimately result in judgment against Biogen and the cancellation of its patent claims. In addition, there can be no assurance that any claims substantially similar to those inof our U.S. Patent Application No. 11/576,871 will ever issue in a patent.patent or be royalty bearing under the Settlement and License Agreement with Biogen."

        If we prevail in the Interference Proceeding after any appeals to the Federal Circuit, we further expect our '871 application, if ultimately issued, would be entitled to patent term adjustment extending the patent term to compensate the Company for time lost during prosecution and the interference which the Company estimates would result in patent expiration in 2029 or later. However, there can be no assurance that we would obtain patent term adjustment that would fully compensate us for all such time lost.

        U.S. Patent Application No. 14/213,399.    A second key patent application in the U.S. is Application No. 14/213,399, or the '399 application. The '399 application claims the use of delayed release formulations of DMF to treat MS according to an up-titration (i.e., increasing dose) regimen that reaches a total daily dose of 480 mg. On April 1, 2015, a USPTO patent examiner issued a "final rejection" of this application, but we have appealed this decision to the PTAB. On October 31, 2016, the patent examiner withdrew her prior rejections that were the subject of the appeal, and issued a non-final rejection based on new grounds. A response to the PTAB may ultimately find ouroffice action is due by April 30, 2017. The claims of the '399 application to be allowable. These claims are substantially similar to claims in another application of ours, No. 13/957,117, which were found allowable by the USPTO, but which we voluntarily abandoned.

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        U.S. Patent Application No. 14/212,503.    A third key patent application in the U.S. is Application No. 14/212,503, or the '503 application. The '503 application claims a method of treating a MS subject with 480 mg of DMF per day, using delayed release formulations containing from 120 mg to 240 mg of

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DMF which, following administration, result in certain levels of monomethyl fumarate, or MMF, the main metabolite of DMF, in the bloodstream. On April 17, 2015, a USPTO patent examiner issued a "final rejection" of this patent application but we have appealed this decision and the PTAB may ultimately find our '503 application to be allowable. These claims are substantially similar to claims in another application of ours, No. 13/957,220, which were found allowable by the USPTO, but which we voluntarily abandoned.

        U.S. Patent Application No. 14/209,480.    A fourth key patent application in the U.S. is Application No. 14/209,480, or the '480 application. The '480 application contains claims directed to pharmaceutical compositions comprising DMF in an amount of 50 - 90% by weight of the composition. On April 11, 2017, the patent examiner issued a non-final rejection of the claims.

European Intellectual Property

        European Patent EP2801355.    Our issued European patent EP2801355, or the '355EP'355 patent covers, among other things, the treatment of MS with 480 mg per day of DMF using pH-controlled compositions whichthat have an enteric coating. The European Patent Office, or EPO completed their review of this application and issued this patent on May 20, 2015. This patent has been opposed by several parties. We expect theThe first instance hearing of this opposition proceedingthe Opposition Proceeding in the EPO to take place in 2017 or later. An opposition proceeding is ahas been scheduled for November 6 and 7, 2017. Opposition proceedings are special proceedingproceedings heard by the EPO where one or more third parties request that the patent, or a part thereof, be revoked. Assuming we successfully defend the patent during the opposition proceeding,Opposition Proceeding, the EP'355 patent has a maximum duration until October 2025.2025 (subject to possible SPC extension—see below). This is our first issued patent covering the use of 480 mg per day of DMF to treat MS. The EPO examiner allowed our 480 mg/mg per day patent claims (meaning that the examiner determined that our claims met the statutory requirement ofrequirements for patentability) after considering two anonymous third-party observations that requested the EPO to decline to grant the application as well as to suspend its examination. TheAlthough Biogen may not challenge the validity of the EP'355 patent in national proceedings, the validity of the national parts of the '355EP'355 patent could also be challenged by other third parties in the respective national courts, and in some countries these validity challenges can run in parallel with EPO opposition proceedings. See "Risk Factors—There can be no assurance that even if we are successful in the opposition proceedings involving our patents currently pending before the EPO, we will not be subject to subsequent or parallel invalidity proceedings (also called "nullity actions" or "revocation actions") involving these same or other patents of ours before a national court in any of the European Patent Convention member states where our patents were validated, which subsequent or parallel proceedings could result in our challenged patents being subject to continued uncertainty as to their validity until such proceedings have been fully concluded. We cannot at this time anticipate how long any such proceedings may last or when, if at all, our patents currently under challenge will finally be declared to be valid or not."

        SPC Applications.    In a number of countries in the EU, we have applied for national SPCs in reliance on the '355EP'355 patent and the EU marketing authorization for Biogen's product Tecfidera®. If these applications are successful, the resultant SPCs will effectively extend the duration of the '355EP'355 patent, insofar as it covers Tecfidera®, from October 2025 until January 2029. So far, our SPC applications have been granted in Cyprus, France, Greece, Italy, Luxembourg, Slovenia, Spain and Sweden. This is possible because the case law of the European Court of Justice for the European Union currently allows patent holders to obtain SPCs in reliance on marketing authorizations held by third parties. If the case law were to change such that this is no longer a possibility, we would expect any such SPCs granted in our favor to be revoked. Further, if an EU national court were to hold (subject to any appeal) that the claims of the '355EP'355 patent do not cover Tecfidera®, we would expect the national court to revoke any SPC granted in our favor in that country.

        German Utility Model DE202005022112.0.European Patent EP1799196.    Our utility model, which was published on June 5, 2014 and expired on October 7, 2015, covers, among other things the treatment of MS with 480 mg per day of DMF in a pharmaceutical composition. On November 18, 2014, we filed a lawsuit against Biogen Idec GmbH, Biogen Idec International GmbH and Biogen Idec Ltd. in the Regional Court in Dusseldorf, Germany, asserting infringement of our utility modelEuropean patent by Biogen's marketing of Tecfidera® in Germany with a label instructing a daily dose of 480 mg for the treatment of MS. On May 22, 2015, we expanded the existing lawsuit filed by us against Biogen in the Regional Court of Dusseldorf, to include the assertion of infringement of the '355 patent discussed above. We seek damages for Biogen's sales of Tecfidera® in Germany. If the court agrees with our assertion, we expect the court will declare that we would be entitled to damages and/or compensation for unjust enrichment. If we are unsuccessful, we could be subject to a claim by Biogen for statutory legal fees. An oral hearing in Germany originally scheduled for March 24, 2016 at the Regional Court in Dusseldorf has been stayed (i.e., postponed) under a mutual agreement between the parties. That stay will expire, in

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the case of the '355 patent, upon an initial decision in the EPO opposition proceedings against the '355 patent, and in the case of the utility model, upon a decision in both the '355 EPO opposition proceedings and the utility model cancellation proceedings as discussed further below.

        Utility models are registered without substantive examination and on July 15, 2015, Biogen filed a request for cancellation of our German Utility Model DE202005022112.0 with the German Patent and Trademark Office. If successful, this request would result in the invalidation of the utility model and, if the invalidation decision becomes final, in our losing the lawsuit based thereon in the Regional Court in Dusseldorf.

        European Patent Application EP14172390.8.    A key patent application in the EU is EP14172390.8,EP1799196, or the 0.8 application. The 0.8 application covers, among other things, the treatment of MS with 480 mg per day of DMF using a controlled-release composition with particular in vitro dissolution profiles. The EPO has completed its initial review of this application and has issued a positive "European search report" indicating that the application meets patentability requirements. Several anonymous third-party observations asking the EPO to decline to grant this application have since been filed with the EPO with respect to the 0.8 application. We have responded to an office action relating to the first two third-party observations, and are in the process of responding to an additional third-party observation.

        European Patent Application EP14172396.5.    Another keyEP'196 patent, application in the EU is EP14172396.5, or the 6.5 application. The 6.5 application covers, among other things, the treatment of MS with 480 mg per day of DMF using controlled-release compositions. The EPO has completed its initial review of this application and has issued a negative search report. No objections concerning lack of novelty are raised in the search report from the EPO, however, the search report included objections with regard to lack of inventive step as well as possible added matter. Several anonymous third-party observations asking the EPO to decline to grant this application have since been filed with the EPO with respect to the 6.5 application. We have responded to the EPO's negative search report and the first third-party observation. We are in the process of responding to all additional third-party observations.

        European Patent Application EP05789026.1.    Another key patent application in the EU is EP05789026.1, or the 6.1 application. The 6.1 application covers, among other things, controlled release compositions that release DMF according to a specificin vitro

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release profile. The EPO has issued an office action. Additionally, wepatent was granted on June 22, 2016. Oppositions to this patent have received an anonymous third-party observation. We responded tobeen filed by third parties with the office action on December 30, 2015.EPO.

        European Patent Application EP15166243.4.EP2965751.    Another key patent application in the EU is EP2965751, formerly EP15166243.4, or the 3.4'751 application. The 3.4'751 application covers, among other things, compositions containing DMF where the daily dosage is 480 to 600 mg and the DMF is released depending on pH. The EPO has completed its initial review of this application and issued a negative search report on January 13, 2016. We are in the process of respondingresponded to the search report.report on July 13, 2016. A third party observation was filed on September 20, 2016. We responded to the third party observation on November 16, 2016. A negative office action was issued on February 10, 2017, which we understand to have been the result of a clerical error.

        European Patent EP2801354.    A key patent in the EU is EP2801354, or the EP'354 patent. The EP'354 patent covers, among other things, the treatment of MS with 480 mg per day of DMF using a controlled-release composition with particularin vitro dissolution profiles. The patent was granted on February 8, 2017. Third parties may oppose the grant of the patent at any point up until November 8, 2017.

        European Patent Application EP2792349.    Another key patent application in the EU is EP2792349, formerly EP14172396.5, or the '349 application. The '349 application covers, among other things, the treatment of MS with 480 mg per day of DMF using controlled-release compositions. On February 8, 2017, the EPO issued a notice of intention to grant the patent.

        European Patent EP2316430.    Our European patent EP2316430 covers DMF formulations with certain in vitro dissolution profiles. By a decision issued in July 2015, an Opposition Division of the European Patent Office revoked EP2316430, in particular, for the reason that the claims allegedly contain subject matter not directly and unambiguously derivable from the original application as filed. The Opposition Division of the European Patent Office did not adjudicate on the issues of novelty or inventive step. We have filed an appeal against this decision. Thus, the revocation will only become effective if and when confirmed by the Technical Board of Appeal. As in any legal proceeding, there can be no assurance that we will be successful in our appeal. The claims of this patent are different from the claims of both the '871 application (the U.S. patent application that is currently in an interference proceeding in the U.S.)Interference Proceeding), as well as the '355EP'355 European patent and utility model that are the basis of our ongoing litigation against

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Biogen in Germany.patent. However, the '355EP'355 patent the utility model and European patent EP2316430 are divisionals of the same original application.

        European Patent Application EP3093012.    Another key patent application in the EU is EP3093012, formerly EP16001391.8, or the '012 application. The '012 application covers, among other things, controlled release pharmaceutical compositions comprising DMF in an amount of 50 - 90% by weight of the composition.

Erosion Matrix Patent Family

        A patent from our erosion matrix patent family, EP2379063 (covering matrix formulations with a thin enteric coating), has been granted by the EPO. Multiple third parties, including Biogen, opposed this patent before the EPO. Those oppositions were rejected by the EPO and the patent was maintained in its entirety at a hearing on April 5, 2016. One or more of the opponents may appeal this decision.The decision has been appealed.

        We also have European Application EP12193798.1Patent EP2564839 (containing claims directed to a pharmaceutical formulation in the form of an erosion matrix tablet having a particular composition). The EPO issued this patent on May 11, 2016. An opponent has issuedfiled a notice of its intention to grant this application.opposition with the EPO.

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        In the U.S., the USPTO reviewed the European oppositions to EP2379063 and has since issued our patent application 13/143,498 covering FP187, which is entitled "Pharmaceutical formulation comprising one or more fumaric acid esters in an erosion matrix." The application issued as U.S. Patent No. 8,906,420 on December 9, 2014, and will expire at the latest in January 2030.

Other Patent Families

        Beyond our core composition patent and erosion matrix patent families, our other patent families include U.S. Patent Application No.Nos. 14/419,031, European Patent Application EP 13745073.0, PCT/EP2014/06809414/914,031 and PCT/EP2014/068095, mainly14/914,025, directed, among other things, to dosing regimens of DMF. We believe that our overall patent portfolio, if allowed, should position FP187 competitively for the treatment of RRMS and other indications in the key markets of the U.S. and the EU.

Our Business Strategy

        We have focused on DMF's potential as an immune-modulating drug to improve the health and well-being of patients with immune disorders for approximately the past 10 years, during which time we have assembled and continue to develop our intellectual property portfolio and regulatory strategy. We believe our intellectual property portfolio, combined with the clinical data we have and will have independently obtained and the discussions we have had with the FDA, BfArM and EMA, provide us with the opportunity to pursue the development of FP187 for the treatment of RRMS and other indications in the U.S. and the EU. We intend to pursue a Phase 3 clinical trial of FP187 for the treatment of RRMS which we believe, if successful, would (in combination with other data on FP187 we have and are obtaining) allow us to submit an NDA in the U.S. and a separate marketing authorization application in the EU for FP187 to treat RRMS. In parallel, we are investigating alternative Phase 3 clinical strategies in RRMS with a goal to optimize our current plan. We intend also to pursue the development of FP187 for the treatment of psoriasis, and are currently engaged in re-defining our psoriasis strategy and the clinical development required. We also continue to explore FP187 and other DMF-related formulations for the treatment of other immune disorders.

        Components of our business strategy include:

•

Successfully develop FP187 for the treatment of RRMS.  We plan to pursue approval from the FDA and the EC of FP187 for the treatment of RRMS. If FP187 is approved for RRMS treatment, and if we are successfully able to exploit and defend our intellectual property rights related to FP187 in the U.S. and EU and are not hindered from doing so by third-party rights, we believe FP187 could be an important therapeutic in the multi-billion dollar MS drug market.



•

Successfully develop FP187 for the treatment of other indications such as psoriasis.  We plan to pursue FP187 for the treatment of psoriasis or other indications, and are currently engaged in

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re-defining our psoriasis strategy and the clinical development required. We believe that, if approved, FP187 could become a compelling treatment option for patients with psoriasis or other indications.

•

Exploit and defend our intellectual property rights.  We believe our patents and patent applications related to, among other things, our proprietary formulation technology, combined with our patents and patent applications claiming dosing levels of DMF, are valuable assets of our company. We intend to exploit our intellectual property by continuing to pursue our patent applications by defending our patent rights as we deem necessary for our business and by enforcing our patent rights against third-party infringers.



•

Obtain marketing exclusivity in the U.S. and the EU for FP187.  In addition to patent protection, if and when an NDA is approved, we will be eligible for up to three and one-half years of marketing exclusivity against generic versions of FP187 in the U.S. In the EU, we will be entitled to up to 11 years of exclusivity from the first date of authorization in the EU.



•

Potentially partner FP187 with third parties.  We may opportunistically seek commercial partners for FP187 to offset risk and preserve capital, if appropriate, although we intend to retain key development and commercialization rights. We believe retaining this strategic flexibility will help us to maximize shareholder value.



•

Continue to explore, and potentially develop, other DMF-related formulations for the treatment of other immune disorders.  We intend to continue to explore and potentially develop other DMF-related formulations for the treatment of other immune disorders.

Mode of Action of DMF and Our Proprietary Formulation

        Mode of action.    While the exact mode of action of DMF is not fully understood, we believe that some of its therapeutic effects are mediated via modulation of the immune system. From studying scientific literature on immune cells in vitro and Company-sponsored research, we believe that DMF can rapidly form adducts by combining with the antioxidant molecule glutathione, or GSH, leading to the functional depletion of GSH, followed by the modulation of various cellular pathways. We believe that one important downstream event of intracellular GSH depletion is the increased expression of the anti-inflammatory stress protein HO-1, with subsequent induction of type II dendritic cells leading to a reduction of inflammatory responses. We also believe that the depletion of GSH can induce apoptosis or cell death in different cell types including activated T cells, reducing inflammatory responses. We believe other pre-clinical data have indicated that DMF can also protect cells, including neuronal cells, against oxidative stress.

        In animal models, described in scientific literature and from Company-sponsored research, GSH/DMF adducts have been found in the gastrointestinal, or GI, mucosa and in the portal vein blood, but not in organs like the heart, brain and liver, which suggests to us that the clinical effects of DMF may be mediated at least in part by DMF exerting its action within the tissues in the intestine or pre-systemic circulation. Such a mode of action of DMF is also supported, we believe, by the fact that DMF has not been directly detected in the bloodstream.

        Some proportion of DMF is thought by us to be metabolized by esterases (enzymes ubiquitous in the GI tract) to produce MMF. In contrast to DMF, MMF can be measured in the bloodstream, but the extent to which it may contribute to clinical efficacy is currently unclear to us. However, recent pre-clinical research suggests to us that sudden plasma peaks of MMF may contribute to the side effect of flushing via interaction with nicotinic acid receptors. Flushing is the visible reddening of the skin and is often accompanied by a sensation of heat and prickling or itching of the skin.

        Formulation and clinical profile of FP187.    Our proprietary DMF formulation, FP187, employs two strategies which we believe improve the release of DMF by reducing the peaks of MMF in the

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bloodstream while maintaining overall DMF exposure levels, which, in turn, may control DMF's side effects. FP187 uses an enteric coating material, which forms a polymeric barrier around each DMF-containing core tablet for the purpose of inhibiting the release of DMF in the stomach and allowing for release in the small intestine. Due to the enteric coating, the FP187 tablet remains intact in acid conditions like those found in the stomach but dissolves in a less acidic environment like the one found in the small intestine. The enteric coating employed by FP187 is thinner than the coating used by the other DMF products, which we believe results in the earlier onset of release of DMF in the small intestine. In addition, the DMF in FP187 is embedded in a slow eroding interior structure, which we call our erosion matrix formulation, resulting in what we believe to be a slower release of DMF in the small intestine after the enteric coating has dissolved.

        We believe that all currently available products containing DMF have an enteric coating that controls and inhibits the undesired release of DMF in the stomach and permits the release only in the more neutral environment of the small intestine. Once the enteric coating is dissolved in the small intestine, DMF-containing products such as Tecfidera® or Fumaderm® that are not formulated with an erosion matrix formulation or other rate-controlling release technology may result in DMF being released from the tablet (Fumaderm®) or individual microtablet (Tecfidera®) in a more concentrated and immediate burst. We believe that the slow rate of release of DMF permitted by FP187's erosion matrix formulation greatly reduces the peaks of MMF in the bloodstream observed with formulations in which the DMF is not incorporated into a rate-controlling release formulation, while ensuring that a therapeutically effective dose of DMF is administered, potentially producing fewer and less severe flushing episodes. In addition, we believe that the rate-controlled release of DMF from the erosion matrix formulation, together with the earlier start of release in the small intestine, may allow absorption of DMF over a larger area of GI mucosa, potentially leading to lower local GI concentrations and therefore, we believe, potentially less severe side effects.

        In the completed clinical trials we have performed with FP187, flushing, GI complaints (primarily diarrhea and abdominal pain) and changes in white blood cell counts occurred. All of these side effects resolved or the white blood cell counts returned to their pre-treatment values during the treatment period (without any change in the treatment regime) or during the follow-up period or were deemed not to be clinically relevant at the end of the study. Despite the white blood cell count changes, no increase in infections was observed. In our completed Phase 2 study of FP187, seven Serious Adverse Events, or SAEs, were reported. Five cases were classified by the investigator as being unrelated to the use of FP187, while two cases were judged by the investigator as being possibly related to the use of FP187. One patient was hospitalized with severe GI pain but was discharged the next day, after receiving intravenous fluid overnight, and continued on with the study until its conclusion without further complaints. The second patient had a transient ischemic attack, or TIA. This patient had hypertension prior to participating in the trial and a family history for cardiovascular diseases. Based on our review of the German spontaneous reporting system (a database maintained by BfArM for drug-related Adverse Events, or AEs) covering an estimated patient exposure for Fumaderm® of more than 200,000 patient years, and the recent FDA approval of Tecfidera® in the U.S. and EU with more than 170,000 patient years, we do not believe there is any evidence of an increased risk for cardiovascular related AEs.

Overview of MS

        MS is a chronic disorder of the central nervous system, or CNS, involving brain, spinal cord and optic nerves, and is characterized clinically by recurring episodes of neurological dysfunction. MS is immune-mediated, driven by autoreactive lymphocytes that attack the covering surrounding nerve cells, or myelin sheath. This autoimmune response results in destruction of the myelin sheath, termed demyelination, and nerve damage. The CNS destruction caused by autoreactive lymphocytes can lead to

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debilitating clinical symptoms such as numbness, difficulty walking, visual loss, loss of coordination and muscle weakness.

        The Multiple Sclerosis International Foundation recently estimatedestimates that approximately 2.3 million people suffer from MS worldwide. It is estimated that between 60% and 65% of MS patients have what is referred to as relapsing remitting MS, or RRMS, characterized by recurrent acute exacerbations of neurological dysfunction followed by variable degrees of recovery with clinical stability between relapses, which would mean approximately 1.5 million people worldwide suffer from RRMS. The majority of patients are diagnosed with MS between the ages of 20 and 40. Almost half of relapses result in incomplete recovery of neurological function and leave permanent disability and impairment that accumulates over time. Owing to the complications of chronic disability, life span for patients with MS is typically shortened by approximately 107 years.

        The early onset and progressive nature of RRMSrelapsing forms of MS highlights the need for treatment options that are effective, convenient and tolerable. This unmet need is particularly important for sufferers in the workforce or those raising families. The inevitability of both relapse and disease progression also results in the prescription of the newest medications that offer increased levels of efficacy and differing risk/benefit profiles. As new efficacious and safe treatments are approved, RRMSMS patients will have more options for treatment in earlier stages of the disease.

Clinical Development Summary

        Our clinical development strategy, has beenif we reinitiate development of a DMF Formulation in the U.S., will be designed with a view towards satisfying marketing approval requirements in both the U.S. and the EU, while allowing us to create an electronic common technical document that we can use for marketing authorization applications in other jurisdictions. We have conducted an extensive pre-clinical program and have completed several Phase 1 clinical trials and one Phase 2 clinical trial. We are currently conductingfinishing additional Phase 1 clinical trials, and are in the process of planning abut have no current plan to pursue Phase 3 clinical trial of FP187 in RRMS. Our current proposed Phase 3 clinical trial design for FP187 in RRMS is large, with approximately 2,000 RRMS patients to be enrolled. However, in parallel, we are evaluating alternative Phase 3 clinical strategies in RRMS, which could shorten our time to commercialization and/or reduce costs. We expect to complete these evaluations during 2016, in anticipation of beginning the Phase 3 trial in the second half of 2016.

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Completed clinical trials

        The following table sets forth information regarding completed clinical trials involving FP187: