UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM20-F

(Mark One)

OR

For the fiscal year ended December 31, 20182019

OR

for the transition period fromto 

OR

Date of event requiring this shell company report

Commission file number001-38746

台灣微脂體股份有限公司

(Exact name of Registrant as specified in its charter)

Taiwan Liposome Company, Ltd.

(Translation of Registrant’s name into English)

Republic of China

(Jurisdiction of incorporation)

11F-1, No. 3 Yuanqu Street

Nangang District,

Taipei City, Taiwan 11503

Republic of China

(Address of principal executive offices)

George Yeh

President

Taiwan Liposome Company, Ltd.

11F-1, No. 3 Yuanqu Street

Nangang District,

Taipei City, Taiwan 11503

Republic of China

+886 2 2655 7377

(Name, Telephone,E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered, pursuant to Section 12(b) of the Act

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer’sissuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Common shares, par value NT$10 per share: 64,045,13474,193,934 as of December 31, 20182019

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

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ☐    No  ☒

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or an emerging growth company. See the definitions of “large“large accelerated filer,” “accelerated“accelerated filer,” and “emerging“emerging growth company”company” in Rule12b-2 of the Exchange Act.

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards  † provided pursuant to Section 13(a) of the Exchange Act.  ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other”“Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow.    Item 17  ☐    Item 18  ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).    Yes  ☐    No  ☒

Table of ContentINDEX

INDEX

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GENERAL INFORMATION

Unless otherwise indicated or the context otherwise requires, all references in this Annual Report to the terms “TLC,“TLC,” “the“the company,” “we,“we,” “us”“us” and “our”“our” refer to (i) Taiwan Liposome Company, Ltd., a company limited by shares organized under the laws of the Republic of China (ROC), and (ii) our subsidiaries, TLC Biopharmaceuticals, Inc., a Delaware corporation, TLC Biopharmaceuticals B.V., a private limited company organized under the laws of the Netherlands, TLC Biopharmaceuticals, (H.K.) Limited, a private limited company organized under the law of Hong Kong, TLC Biopharmaceuticals, (Shanghai) Limited, a private limited company organized under the laws of China, TLC Biopharmaceuticals Pty Ltd., a private limited company organized under the laws of Australia, and TLC Biopharmaceuticals Japan Co., Ltd, a limited company organized under the laws of Japan.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

We maintain our books and records in New Taiwan dollars, the legal currency of the ROC.Unless otherwise specified, all monetary amounts are in United States (U.S.) dollars. All references in this Annual Report to “$,” “US$,” “dollars” and “USD” mean U.S. dollars and all references in this Annual Report to “NT$” mean New Taiwan dollars.Solely for your convenience, this Annual Report contains translations of certain NT dollar amounts into U.S. dollar amounts at specified exchange rates. Except as discussed in the next two sentences, all translations from NT dollars to U.S. dollars and from U.S. dollars to NT dollars in this Annual Report were made at a rate of NT$30.6129.91 to $1.00, the noon buying rate in The City of New York for cable transfers in NT dollars per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York on December 31, 2018.2019. The translation of the trading price of our common shares on the Taipei Exchange (TPEx) from NT dollars to U.S. dollars were made at a rate of NT$30.8253 to $1.00,29.9290, based on the noon buying rate in The City of New York for cable transfers in NT dollars per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York on April 22, 2019.March 6, 2020. NT dollar amounts relating to the estimated fair value per share of all share-based compensation issued to employees and consultants have been calculated based on historical exchange rates used for our accounting purposes. No representation is made that the NT dollar or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or NT dollars, as the case may be, at any particular rate or at all. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding. Our consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standard Board (IASB), which may differ in material respects from generally accepted accounting principles in other jurisdictions, including the United States.

We have made rounding adjustments to some of the figures included in this Annual Report. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by the words “may,“may,” “might,“might,” “will,“will,” “could,“could,” “would,“would,” “should,“should,” “expect,“expect,” “intend,“intend,” “plan,“plan,” “objective,“objective,” “anticipate,“anticipate,” “believe,“believe,” “estimate,“estimate,” “predict,“predict,” “potential,“potential,” “continue”“continue” and “ongoing,“ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. The forward-looking statements and opinions contained in this Annual Report on Form20-F are based upon information available to us as of the date of this Annual Report and, while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Forward-looking statements include statements about:

You should refer to the section titled “Item“Item 3.D. Risk Factors”Factors” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Annual Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all forward-looking statements.

You should read this Annual Report and the documents that we reference in this Annual Report, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

Unless otherwise indicated, information contained in this Annual Report onForm 20-F concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity and market size estimates, is based on information from independent industry analysts, third-party sources and management estimates. Management estimates are derived from publicly available information released by independent industry analysts and third-party sources, as well as data from our internal research, and are based on assumptions made by us based on such data and our knowledge of such industry and market, which we believe to be reasonable. In addition, while we believe the market opportunity information included in this Annual Report onForm 20-F is generally reliable and is based on reasonable assumptions, such data involve risks and uncertainties and are subject to change based on various factors, including those discussed under the section of this Annual Report onForm 20-F titled “Item 3.D—Risk Factors.”

PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

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Item 3. Key Information

A. Selected Consolidated Financial Data

We derived the selected consolidated comprehensive income statement data for the years ended December 31, 2016, 2017, 2018 and 20182019 and selected consolidated statement of financial position data as of December 31, 20172018 and 20182019 from our consolidated audited financial statements included elsewhere in this Annual Report on Form20-F. The comprehensive income statement data for the year ended December 31, 2016 and the statement of financial position data as of December 31, 2016 and 2017 is derived from financial statements not included in this Annual Report on Form20-F. This data should be read together with, and is qualified in its entirety by reference to, “Item 5. Operating and Financial Review and Prospects” as well as our financial statements and notes thereto appearing elsewhere in this Annual Report on Form20-F. Our historical results are not necessarily indicative of the results to be expected in the future.

B. Capitalization and Indebtedness

Not applicable.

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C.Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

An investment in our American Depositary Shares (ADSs) involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information appearing elsewhere in this Annual Report, before deciding to invest in our ADSs. The occurrence of any of the following risks could have a material adverse effect on our business, financial condition, results of operations and future growth prospects. In these circumstances, the market price of our ADSs could decline, and you could lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations and stock price.

Risks Related to Our Financial Condition and Need for Additional Capital

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

We are a clinical-stage biopharmaceutical company and are focused primarily on developing product candidates based on our proprietary lipid formulation platform, including our primary lead product candidate, TLC599.candidates, TLC599 and TLC590. In addition, as an early stage company, we have limited experience and have not yet demonstrated an ability to overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the pharmaceutical area.

Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will not demonstrate adequate effectiveness in the targeted indication or an acceptable safety profile, gain regulatory approval or become commercially viable. All of our product candidates will require substantial additional development time and resources before we would be able to apply for or receive regulatory approvals and begin generating revenue from product sales. We are not profitable and have incurred significant net losses in each year since our inception, including net losses of NT$873,962901,574 and NT$901,574807,522 (US$29,454)26,999) for fiscal years 20172018 and 2018,2019, respectively.

We have devoted substantially all our financial resources to developing our technology platforms and our product candidates, includingpre-clinical development activities and clinical trials. As a result of the foregoing, we expect to continue to incur significant and increasing losses and negative cash flows for the foreseeable future. We expect to continue to incur substantial and increased expenses as we expand our development activities and advance our clinical programs, particularly with respect to our planned clinical development for TLC599 TLC399,and TLC590, and TLC178, which we expect to be in late or pivotal stage clinical trials by the end of 2020. If our product candidates are not successfully developed or commercialized because of lack of capital to fund our losses or otherwise, or if we incur insufficient revenue following marketing approval, we will not achieve profitability and our business may fail. Even if we successfully obtain regulatory approval to market our product candidates in the United States, our revenue is also dependent upon the size of the markets outside of the United States, as well as our ability to obtain market approval and achieve commercial success.

We currently do not generate significant revenue and may never be profitable.

We do not anticipate generating revenue from sales of our proprietary product candidates for the foreseeable future, if ever. Our ability to generate future revenue from branded product sales and ultimately achieve profitability depends on our success in:

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Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to predict the timing or amount of increased expenses, when, or if, we will begin to generate revenue from branded product sales, or when, or if, we will be able to achieve or maintain profitability. In addition, our expenses could increase beyond expectations if we are required by the Food and Drug Administration (FDA) to perform studies in addition to those that we currently anticipate or if such studies are larger, take longer or are otherwise more expensive to conduct than we expect.

Even if one or more of our product candidates is approved for commercial sale, to the extent we do not engage a third-party collaborator, we anticipate incurring significant costs associated with commercializing any approved product candidate. Even if we are able to generate revenue from the sale of any approved products, we may not become profitable and may need to obtain additional funding to continue operations.

If we fail to obtain additional financing, we may be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is expensive and we have consumed substantial amounts of capital since inception. To date, we have financed our operations through government subsidies, sales related to our generic products, collaboration payments and the sale of equity securities and debt. We do not expect revenues from product sales or potential licensing transactions to be sufficient to offset our development expenses, particularly as we advance our clinical programs, including TLC599.

As of December 31, 2018,2019, we had cash and cash equivalents of NT$807.51,023.9 million (US$26,38034,232 thousand) and time deposits with maturity over three months of NT$307.2 million (US$10,034 thousand) (shown as “Current financial assets at amortized cost” in our consolidated financial statements). Based upon our current operating plan, we believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital requirements for at least the next 12 months.months from the date of issuance. However, changing circumstances beyond our control may cause us to consume capital more rapidly than we currently anticipate. For example, our clinical trials may encounter technical, enrollment or other difficulties that could increase our development costs more than we expect. We cannot be certain that we will have sufficient cash resources to meet such obligation if triggered without seeking additional funding or delaying or terminating certain of our then ongoing clinical development activities. In any event, we will require additional capital prior to completing pivotal clinical trials for filing for regulatory approval for, or commercialization of, TLC599, TLC399, TLC590, TLC178 or any of our other product candidates.

Attempting to secure additional financing may divert our management from ourday-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. If we are unable to raise additional capital when required or on acceptable terms, we may be required to:

If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we will be prevented from pursuing development and commercialization efforts, which will have an adverse effect on our business, operating results and prospects.

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We may sell additional equity or debt securities to fund our operations, which may result in dilution to our shareholders and holders of our ADSs and impose restrictions on our business.

In order to raise additional funds to support our operations, we may sell additional equity or debt securities, which could adversely impact our existing shareholders, as well as our business. The sale of additional equity or convertible debt securities would result in the issuance of additional shares of our capital stock and dilution to all of our shareholders and holders of our ADSs. The incurrence of indebtedness would result in increased fixed payment obligations and could also result in certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.

We have relied on Taiwan government funding, which could require us to take action with respect to our technology or patents that may not be in our best interest and which, if lost or reduced, could have an adverse effect on our research and development.

We have relied on government research grants for a portion of our funding, including grants awarded by the Institute for Information Industry (Institute) on behalf of the Taiwan Ministry of Economic Affairs, Executive Yuan of the Republic of China (MOEA) with respect to TLC399. As of December 31, 2018,2019, we had been awarded a total of approximately NT$41.542.1 million (US$1.4 million) in grants pursuant to these programs. Under the terms of our government grants, we retain all right, title and interest in any research and development achievements (R&D Achievements) with respect to the applicable program, but are subject to certain limitations, including, among others, restrictions on the manufacture or use of the relevant R&D Achievement outside of Taiwan within two years after the creation of such achievement, unless otherwise approved by the MOEA or allowed under relevant regulations. Additionally, the Institute has the right to obtainnon-transferable andnon-exclusive use rights over the relevant R&D Achievements without additional payment if the Institute deems doing so to be in the interest of the nation or socially beneficial. The Institute and MOEA may both also require us to license the relevant R&D Achievements to a third party in the event that we either: (a) fail to implement the R&D Achievements during a reasonable period without a reasonable justification and a third party has requested a license by offering reasonable business terms but was not able to reach an agreement with us during the foregoing period or (b) we implement R&D Achievements in a manner that obstructs environmental protection, public safety or public health and is disciplined by relevant authorities, even if we determine that such actions are not in our best interest.

Funding of government grants is subject to government appropriation and all of our government contracts contain provisions making them terminable if there is a cut in government funding. The government could terminate, reduce or delay the funding under any of our grants at any time. There is no assurance that we will receive funding of any grants that we may be awarded, or that we will be able to secure additional grant funding. In the event we are not successful in obtaining any new government grants or if existing grants are not ultimately funded or extended, or we are required to repay such grants, our research and development efforts could be adversely affected. Additionally, if we obtain any new government grants, the terms of such additional grants may further restrict our research and development or intellectual property ownership flexibility.

We expect to take advantage of a Research & Development Incentive program in Australia, which could be amended or changed.

We received a financial incentive of AU$593,000 from the Australian government as part of its tax incentive program in August 2018. The research and development tax incentive is one of the key elements of the Australian government’sgovernment’s support for Australia’sAustralia’s innovation system and, if eligible, provides the recipient with a 43.5%certain percentage refundable tax offset for research and development activities. There have been recent proposals to change the structure of the innovation and research and development funding landscape in Australia, which may impact the research and development tax incentive receivable for the 20182019 financial year, including proposals to cap the total refundable payments to AU$4.0 million (US$2.8 million) on an annual basis. However, clinical trials will be specifically exempt from this cap. There can be no assurance that we will qualify and be eligible for such incentives or that the Australian government will continue to provide incentives, offset, grants and rebates on similar terms or at all.

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Risks Related to Clinical Development and Regulatory Approval

We are heavily dependent on the success of TLC599, as well as TLC399, TLC590 and TLC178, which are in later stages of development than our other product candidates. We cannot give any assurance that any of TLC599, TLC399, TLC590 or TLC178 will successfully complete clinical development or receive regulatory approval, which is necessary before they can be commercialized.

Our business and future success is substantially dependent on our ability to successfully develop, obtain regulatory approval for and successfully commercialize our primary lead product candidate,candidates, TLC599 and TLC590, and to a lesser extent, TLC399 TLC590 and TLC178. Any delay or setback in the development of any of our product candidates, but particularly TLC599, could adversely affect our business and cause the price of our ADSs or common shares to decline. Should our planned clinical development of our more advanced product candidates fail to be completed in a timely manner or at all, we will need to rely on our other product candidates, which are at an earlier development stage and will require additional time and resources to obtain regulatory approval and proceed with commercialization. We cannot assure you that our planned clinical development for TLC599 will be completed in a timely manner, or at all, or that we will be able to obtain approval for any of our product candidates from the FDA or any foreign regulatory authority.

Clinical development is a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results. Failure can occur at any stage of clinical development. We have never conducted a pivotal clinical trial for our proprietary product candidates or submitted a New Drug Application (NDA) or a Biologics License Application (BLA) to the FDA or similar drug approval filings fornon-generics to comparable foreign authorities.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of subsequent clinical trials.

Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. In addition to the safety and efficacy traits of any product candidate, clinical trial failures may result from a multitude of factors including flaws in trial design, dose selection, placebo effect and patient enrollment criteria. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Based upon negative or inconclusive results, we or any potential future collaborator may decide, or regulators may require us, to conduct additional clinical trials or preclinical studies. In addition, data obtained from trials and studies are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may delay, limit or prevent regulatory approval. Our future clinical trial results may not be successful.

If any product candidate is found to be unsafe or lack efficacy, we will not be able to obtain regulatory approval for it and our business may be materially harmed. For example, if the results of our planned pivotal clinical trialstrial of TLC599 in osteoarthritis (OA), our ongoing and planned Phase I/II clinical trialstrial of TLC590 in post-surgical pain, our Phase II clinical trial of TLC399 in macular edema, our ongoing Phase I/II clinical trial of TLC178 in advanced cancers or any other clinical trials for these product candidates demonstrate unexpected safety findings or do not achieve the primary efficacy endpoints, the prospects for approval of these product candidates, as well the price of our ADSs and common shares and our ability to create shareholder value would be materially and adversely affected. In some instances, there can be significant variability in safety and/or efficacy results between different trials of the same product candidate due to numerous factors, including changes in trial protocols, differences in composition of the patient populations, adherence to the dosing regimen and other trial protocols and the dropout rate among clinical trial participants. For example, we could be required to use a primary endpoint in Phase III clinical trials that is different from endpoints in our Phase II clinical trials, which could result in negative or less compelling efficacy results in pivotal trials despite promising results in Phase II trials. As another example, preliminary evaluation of our Phase II trial data in TLC399 has not been able to show evidence of efficacy beyond three months, which we believe is due to the administration of rescue medication to most patients, even those who did not meet rescue criteria. Patients who receive rescue medication become unevaluable, making it difficult to assess efficacy beyond three months. We have urged trial investigators to confer with the medical monitor to ensure subjects meet rescue criteria prior to administering rescue medication; however, we cannot guarantee that such closer scrutiny will be strictly followed. It is critical for us to differentiate TLC399’sTLC399’s duration from other products on the market, some of which already have efficacy lasting three months. We do not know whether any future clinical trials we may conduct will demonstrate consistent or adequate efficacy and safety to obtain regulatory approval to market our product candidates. If we are unable to bring any of our current or future product candidates to market, our ability to create long-term shareholder value will be limited.

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Delays in clinical trials are common and have many causes, and any delay could result in increased costs to us and jeopardize or delay our ability to obtain regulatory approval and commence product sales.

We may experience delays in clinical trials of our product candidates. Our planned clinical trials may not begin on time, have an effective design, enroll a sufficient number of patients, or be completed on schedule, if at all. Our clinical trials can be delayed for a variety of reasons, including:

We could also experience delays if physicians encounter unresolved ethical issues associated with enrolling patients in clinical trials of our product candidates in lieu of prescribing existing treatments that have established safety and efficacy profiles. Further, a clinical trial may be suspended or terminated by us, the IRBs for the institutions in which such trials are being conducted, any data monitoring committee for such trial, or by the FDA or other regulatory authorities due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of clinical trial operations or trial or manufacturing sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. For example, per the study protocol for our ongoing Phase II clinical trial of TLC399 in 61 planned patients with macular edema due to retinal vein occlusion (RVO) in the United States, an independent safety monitoring committee (SMC) conducted a pre-planned unblinded analysis of the study data and requested a temporary recruitment pause to make a comprehensive assessment of an optimal dose group in the trial. The optimal dose group was selected in August 2018, and we expect to resume recruitment after the study protocol amendment is implemented. We cannot assure you that the temporary pause will not last longer than we anticipate, which could potentially delay our clinical development plans for TLC399. Furthermore, we rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials and while we have agreements governing their committed activities, we have limited influence over their actual performance. If we experience termination of, or delays in the completion of, any clinical trial of our product candidates, the commercial prospects for our product candidates will be harmed, and our ability to generate product revenues will be delayed. In addition, any delays in completing our clinical trials will increase our costs and slow down our product development and approval process. Any of these occurrences may harm our business, prospects, financial condition and results of operations significantly. 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 for our product candidates.

Because we have multiple product candidates in our clinical pipeline and are considering a variety of target indications, we may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we must focus on research and development efforts on those product candidates and specific indications that we believe are the most promising. As a result, we may forego or delay pursuit of opportunities with other product candidates or other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable

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market opportunities. We may in the future spend our resources on other research programs and product candidates for specific indications that ultimately do not yield any commercially viable products. For example, one component of our business strategy is to identify additional opportunities for our extensive library of over 50 formulated discovery compounds. However, these compounds have not been proven and we cannot assure you that they will be viable candidates for preclinical development or that our estimates for the speed of development and resultant pipeline will prove accurate. In addition, the costs, time and resources required to successfully move these compounds into development may be greater than our estimates. Moreover, we have no experience to date developing product candidates at the rate that we intend to pursue. Furthermore, if we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights.

If the FDA does not conclude that TLC599, TLC590, TLC178 or TLC399 satisfy the requirements for the Section 505(b)(2) regulatory approval pathway, or if the requirements for these products under Section 505(b)(2) are not as we expect, the approval pathway for any or all of TLC599, TLC590, TLC178 or TLC399 will likely take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and in any case may not be successful.

We intend to seek FDA approval through the Section 505(b)(2) regulatory pathway for TLC599, TLC590, TLC178 and TLC399. The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Amendments, added Section 505(b)(2) to the Federal Food, Drug and Cosmetic Act (FDCA) or Section 505(b)(2). Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference.

IfIn April 2019, we had anEnd-of-Phase II meeting with the FDA during which we received guidance and discussed the clinical and regulatory pathway for a potential U.S. approval of TLC599. In agreement with the FDA, we believe that our proposed overall design of a single global pivotal Phase III trial will be sufficient to support an NDA submission. We subsequently initiated the global pivotal Phase III clinical trial for TLC599, named “EXCELLENCE”, in October 2019, and recruitment of patients is ongoing. However, if the FDA does not allow us to pursue the Section 505(b)(2) regulatory pathway as anticipated, we may need to conduct additional clinical trials, provide additional data and information and meet additional standards for regulatory approval. If this were to occur in respect of TLC599, TLC590, TLC178 or TLC399, the time and financial resources required to obtain FDA approval, and complications and risks associated with TLC599, TLC590, TLC178 and TLC399, respectively, would likely substantially increase. Moreover, inability to pursue the Section 505(b)(2) regulatory pathway could result in new competitive products reaching the market faster than our product candidates, which could materially adversely impact our competitive position and prospects. Even if we are allowed to pursue the Section 505(b)(2) regulatory pathway, we cannot assure you that TLC599, TLC590, TLC178 or TLC399 will receive the requisite approvals for commercialization.

In addition, notwithstanding the approval of a number of products by the FDA under Section 505(b)(2) over the last few years, some pharmaceutical companies and others have objected to the FDA’sFDA’s interpretation of Section 505(b)(2). If the FDA’sFDA’s interpretation of Section 505(b)(2) is successfully challenged, the FDA may be required to change its 505(b)(2) policies and practices, which could delay or even prevent the FDA from approving any NDA that we submit under Section 505(b)(2).

Our product candidates based on our NanoX platform represent a novel approach to cancer treatment, which could result in delays in clinical development, heightened regulatory scrutiny, delays in our ability to achieve regulatory approval or commercialization, or market acceptance by physicians and patients of our product candidates.

Our product candidates developed through our NanoX platform, which is a novel drug loading vesicle of small unilamellar (single layered) liposomes employing a novel combination of counter-ions to create an ionic gradient for active drug loading, will represent a departure from more commonly used methods for cancer treatment, and therefore carry heightened development risks. To develop our NanoX platform, we must successfully demonstrate that NanoX encapsulated payloads have better toxicity profiles than the widely available treatments upon which they are based. The need to further develop or modify in any way the protocols related to our product candidates to demonstrate safety or efficacy may delay the clinical program, regulatory approval or commercialization. Unexpected safety and tolerability concerns may arise during the development process.

In addition, potential patients and their doctors may be inclined to use conventionalstandard-of-care treatments rather than enroll patients in any future clinical trial or use our product candidates commercially once approved. This may have a material impact on our ability to generate revenues from our product candidates. Further, given the novelty of the administration of our product candidates, hospitals and physicians may prefer traditional treatment methods, may be reluctant to adopt the use of our products or may require a substantial amount of education and training, any of which could delay or prevent acceptance of our products by physicians and patients and materially hinder successful commercialization of our product candidates.

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Even though we have obtained orphan drug designation for TLC178 in STS and a Rare Pediatric Disease Designation for TLC178 in rhabdomyosarcoma (RMS), we may not be able to obtain or maintain the benefits associated with orphan drug status, including market exclusivity, or with Rare Pediatric Disease Designation.

Regulatory authorities in some jurisdictions, including the United States Taiwan and the European Union, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a drug as an orphan drug if it is intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals annually in the United States. The FDA and EMA hasthe European Medicines Agency (EMA) have granted orphan drug status to TLC178 for the treatment of patients with STS in the United States.STS. Generally, if a drug with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the drug may be entitled to a period of marketing exclusivity, which precludes the FDA the ROC Food and Drug Administration (RFDA), or the European Medicines Agency (EMA)EMA from approving another marketing application for the same drug for that orphan designated indication during that time period. We can provide no assurance that another drug will not receive marketing approval prior to our product candidates. The applicable period is seven years in the United States and ten years in Taiwan and the European Union, which may be extended to twelve years in the European Union in the case of product candidates that have complied with anEMA-agreed upon pediatric investigation plan. The exclusivity period in the European Union can be reduced to six years if a drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA the RFDA or EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition. In addition, even after a drug is granted orphan exclusivity and approved, the FDA or the RFDA can subsequently approve another drug for the same condition before the expiration of the seven or ten year exclusivity period if the FDA or the RFDA, respectively, concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care. In the European Union, the EMA may deny marketing approval for a product candidate if it determines such product candidate is structurally similar to an approved product for the same indication.

Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review or approval process. Also, regulatory approval for any product candidate may be withdrawn, and other product candidates may obtain approval before us and receive orphan drug exclusivity, which could block us from entering the market. Even if we obtain orphan drug exclusivity for a product candidate, that exclusivity may not effectively protect the candidate from competition because different drugs can be approved for the same condition before the expiration of the orphan drug exclusivity period.

TLC178 has been granted by the FDA a Rare Pediatric Disease Designation inby the FDA for the treatment of RMS, potentially qualifying us for a chance to receive a Priority Review Voucher that can significantly shorten the marketing application review period for a subsequent application from over ten months to just six months; however, the receipt of any of this designation may not result in a faster development process, review or approval for TLC178 compared to products considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA.FDA or award of a priority review voucher. Congress has only authorized the Rare Pediatric Disease Priority Review Voucher program until September 30, 2020. If a drug candidate receives this designation before October 1, 2020, it is eligible to receive a voucher if it is approved before October 1, 2022. We are only in the early stages of development of TLC178 and may not be able to receive approval of an NDA for TLC178 for RMS prior to October 1, 2022, in which case we would not receive a priority review voucher unless Congress further reauthorizes the program.

Our product candidates may cause adverse events or have other properties that could delay or prevent their regulatory approval or limit the scope of any approved label or market acceptance.

Adverse events (AEs) caused by our product candidates or other potentially harmful characteristics of our product candidates could cause us, other reviewing entities, clinical trial sites or regulatory authorities to interrupt, delay or halt clinical trials and could result in the denial of regulatory approval. If drug-related serious adverse events (SAEs) are observed in any of our clinical trials, our ability to obtain regulatory approval for our product candidates may be adversely affected. For example, in our ongoing Phase I clinical trial withof TLC399 in five11 evaluable patients, with macular edema due to RVO, 19 treatment-related AEsthere were reported, all for eye-related side effectsfour cases of mild to moderate intensity, with two subjects experiencing treatment-related SAEs due to intraocular pressure elevation which were judged as SAEs and considered possibly or probably related to TLC399. Intraocular pressure elevation is a known side effect of the steroid dexamethasone sodium phosphate orand other steroid treatmenttreatments in this indication.macular edema due to retinal vein occlusion (RVO).

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Further, if any of our approved products cause serious or unexpected side effects after receiving market approval, a number of potentially significant negative consequences could result, including:

Any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidate and could substantially increase the costs of commercializing our product candidates.

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

The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’scandidate’s clinical development and may vary among jurisdictions. For example, we cannot guarantee that our recently completed or ongoing Phase I/II or Phase II clinical trials will be sufficient to allow subsequent pivotal clinical development or that the FDA will not require additional or different clinical trials prior to initiating pivotal clinical development of TLC599our product candidates or that the required primary endpoints in pivotal clinical trials will be different than those in Phase II trials.

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

This lengthy approval process, as well as the unpredictability of future clinical trial results, may result in our failing to obtain regulatory approval to market our product candidates, which would harm our business, results of operations and prospects significantly. In addition, even if we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may not approve the price we intend to charge for our products, may grant approval contingent on the performance of costly post-marketing clinical trials or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could harm the commercial prospects for our product candidates. For

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example, we believe that to the extent our clinical development of TLC599 continues to focus on knee OA, any initial indication of TLC599 would be limited to the treatment of knee OA, as opposed to the treatment of OA generally. If an initial indication is limited to knee OA, we would likely need to conduct additional clinical trials in order to market TLC599 for other indications and expand its market potential.

We have not previously submitted an NDA, BLA or any similar drug approval filing to the FDA or any comparable foreign authority for anynon-generic product candidate, and we cannot be certain that any of our product candidates will be successful in clinical trials or receive regulatory approval. Further, our product candidates may not receive regulatory approval even if they are successful in clinical trials. If we do not receive regulatory approvals for our product candidates, we may not be able to continue our operations. Even if we successfully obtain regulatory approvals to market one or more of our product candidates, our revenue will be dependent, to a significant extent, upon the size of the markets in the territories for which we gain regulatory approval. If the markets for patients or indications that we are targeting are not as significant as we estimate, we may not generate significant revenue from sales of such products, if approved.

Even if we obtain regulatory approval for our product candidates, we will still face extensive regulatory requirements and our products may face future development and regulatory difficulties.

Even if we obtain regulatory approval in the United States, the FDA may still impose significant restrictions on the indicated uses or marketing of our product candidates, or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance. Our product candidates, if approved, will also be subject to ongoing FDA requirements governing the labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, record-keeping and reporting of safety and other post-market information. The holder of an approved NDA or BLA is obligated to monitor and report AEs and any failure of a product to meet the specifications in the NDA or BLA, as applicable. The holder of an approved NDA or BLA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process. Advertising and promotional materials must comply with FDA rules and are subject to FDA review, in addition to other potentially applicable federal and state laws.

In addition, manufacturers of drug products and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance with current good manufacturing practices (cGMP) and adherence to commitments made in the NDA. If we or a regulatory agency discovers previously unknown problems with a product, such as AEs of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions relative to that product or the manufacturing facility, including requiring recall or withdrawal of the product from the market or suspension of manufacturing.

If we fail to comply with applicable regulatory requirements following approval of a product candidate, a regulatory agency may:

Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize our products and generate revenue.

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

In order to market any products outside of the United States, we must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approval could result in difficulties and costs for us and require additionalnon-clinical studies or clinical trials which could be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our products in those countries. Other than our generic products, we do not have any product candidates approved for sale in any jurisdiction, including international markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approval in international markets are delayed, our target market will be reduced and our ability to realize the full market potential of our products will be harmed.

The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion ofoff-label uses.

If any of our product candidates are approved and we are found to have improperly promotedoff-label uses of those products, we may become subject to significant liability. The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products, such as our product candidates, if approved. In particular, a product may not be promoted for uses that are not approved by the FDA or such other regulatory agencies as reflected in the product’sproduct’s approved labeling. However, companies may share truthful and not misleading information that is otherwise consistent with a product’s FDA approved labeling. Additionally, physicians may, in their independent medical judgment, prescribe legally available products foroff-label uses. The FDA does not regulate the behavior of physicians in their choice of treatments, but the FDA does restrict manufacturers’ communications on the subject ofoff-label use of their products. For example, if we receive marketing approval for TLC599 as a therapy for knee OA, physicians may nevertheless use our product for their patients in a manner that is inconsistent with the approved label, potentially including as an injection in other joints. If we are found to have promoted suchoff-label uses, we may become subject to significant liability. The federal government has levied large civil and criminal fines against companies for alleged improper promotion ofoff-label use and has enjoined several companies from engaging inoff-label promotion. The FDA has also requestedrequired that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. If we cannot successfully manage the promotion ofare found to have improperly promoted our product candidates, if approved, we could become subject to significant liability, which would materially adversely affect our business and financial condition.

If we fail to develop, acquire orin-license other product candidates or products, our business and prospects will be limited.

Our long-term growth strategy is to develop, acquire orin-license and commercialize a portfolio of product candidates in addition to TLC599 and our other existing product candidates. We are using our proprietary technology platform to assemble product candidates that target areas of unmet medical need in pain management, ophthalmology and oncology. Our business depends not only on our ability to successfully develop, obtain regulatory approval for and commercialize the limited number of internal product candidates we currently have in preclinical and clinical development, but to continue to generate product candidates through our platform.

Even if we are successful in continuing to build our pipeline, any additional product candidates may not be suitable for clinical development, including as a result of harmful side effects, manufacturing issues, limited efficacy or other characteristics that indicate that they are unlikely to be products that will succeed in clinical development, receive marketing approval or achieve market acceptance. If we cannot validate our technology platform by successfully developing and commercializing product candidates based on our approach, we may not be able to obtain product, licensing or collaboration revenue in future periods, which would adversely affect our business, prospects, financial condition and results of operations.

Generating new product candidates or identifying, selecting and acquiring or licensing promising product candidates requires substantial technical, financial and human resources expertise. Efforts to do so may not result in the actual development, acquisition or license of a particular product candidate, potentially resulting in a diversion of our management’smanagement’s time and the expenditure of our resources with no resulting benefit. If we are unable to add additional product candidates to our pipeline, our long-term business and prospects will be limited.

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Risks Related to Our Reliance on Third Parties

We rely on third parties to conduct our preclinical studies and clinical trials. 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 our product candidates and our business could be substantially harmed.

We have relied upon and plan to continue to rely upon third-party CROs to monitor and manage data for our preclinical and clinical programs. We rely on these parties for execution of our preclinical studies and clinical trials, and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards and our reliance on the CROs does not relieve us of our regulatory responsibilities. We and our CROs are required to comply with FDA laws and regulations regarding current good clinical practice (GCP) which are also required by the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory authorities in the form of International Conference onCouncil for Harmonization guidelines for all of our products in clinical development. Regulatory authorities enforce GCP through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our CROs fail to comply with applicable GCP, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP regulations. In addition, our clinical trials must be conducted with product produced under cGMP regulations. While we have agreements governing activities of our CROs, we have limited influence over their actual performance. In addition, portions of the clinical trials for our product candidates are expected to be conducted outside of Taiwan, which will make it more difficult for us to monitor CROs and perform visits of our clinical trial sites and will force us to rely heavily on CROs to ensure the proper and timely conduct of our clinical trials and compliance with applicable regulations, including GCP. Failure to comply with applicable regulations in the conduct of the clinical trials for our product candidates may require us to repeat clinical trials, which would delay the regulatory approval process.

Some of our CROs have an ability to terminate their respective agreements with us if, among other reasons, it can be reasonably demonstrated that the safety of the subjects participating in our clinical trials warrants such termination, if we make a general assignment for the benefit of our creditors or if we are liquidated. If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms. In addition, our CROs are not our employees, and except for remedies available to us under our agreements with such CROs, we cannot control whether or not they devote sufficient time and resources to our preclinical and clinical programs. If our 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, our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. Consequently, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase substantially and our ability to generate revenue could be delayed significantly.

Switching or adding additional CROs involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.

We rely completely on third parties to manufacture our preclinical and clinical drug supplies, and we intend to rely on third parties to produce commercial supplies of any approved product candidate.

If we were to experience an unexpected loss of supply of our product candidates for any reason, whether as a result of manufacturing, supply or storage issues or otherwise, we could experience delays, disruptions, suspensions or terminations of, or be required to restart or repeat, clinical trials. Although we own the equipment used by our third-party manufactures, we do not currently have nor do we plan to acquire the infrastructure or capability internally to manufacture our preclinical and clinical drug supplies, and we lack the resources and the capability to manufacture any of our product candidates on a clinical or commercial scale. The facilities used by our contract manufacturers or other third-party manufacturers to manufacture our product candidates must be approved by the FDA pursuant to inspections that will be conducted after we submit an NDA to the FDA. While we work closely with our third-party manufacturers on the manufacturing process for our product candidates, including quality audits, we generally do not control the implementation of the manufacturing process of,

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and are completely dependent on, our contract manufacturers or other third-party manufacturers for compliance with cGMP regulatory requirements and for manufacture of both active drug substances and finished drug products. If our contract manufacturers or other third-party manufacturers cannot successfully manufacture material that conforms to applicable specifications and the strict regulatory requirements of the FDA or others, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. For example, Evonik Corporation (Evonik), the contract manufacturer we rely on to produce TLC599 has never produced anFDA-approved therapeutic. If Evonik or our other manufacturers are unable to comply with cGMP regulation or if the FDA or other regulators do not approve their facility upon apre-approval inspection, TLC599 or our other product candidates may not be approved or may be delayed in obtaining approval. In addition, we have no control over the ability of our contract manufacturers or other third-party manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which could take several years and would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.

We rely on our manufacturers to purchase from third-party suppliers the materials necessary to produce our product candidates for our clinical trials. There are a limited number of suppliers for raw materials that we use to manufacture our product candidates and there may be a need to assess alternate suppliers to prevent a possible disruption of the manufacture of the materials necessary to produce our product candidates for our clinical trials, and if approved, for commercial sale. We do not have any control over the process or timing of the acquisition of these raw materials by our manufacturers. Moreover, we currently do not have any agreements for the commercial production of these raw materials. Although we generally do not begin a clinical trial unless we believe we have a sufficient supply of a product candidate to complete the clinical trial, any significant delay in the supply of a product candidate, or the raw material components thereof, for an ongoing clinical trial due to the need to replace a contract manufacturer or other third-party manufacturer could considerably delay completion of our clinical trials, product testing and potential regulatory approval of our product candidates. If our manufacturers or we are unable to purchase these raw materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate revenue from the sale of our product candidates.

We expect to continue to depend on contract manufacturers or other third-party manufacturers for the foreseeable future. Other than an agreement with Hospira Australia Pty Ltd with respect to TLC178, Shinlin Sinseng Pharmaceuticals, Ind. Co., Ltd (SSP) with respect to TLC590 and Evonik with respect to TLC599, we have not entered into long-term commercial supply agreements with our current contract manufacturers or with any alternate fill/finish suppliers. Although we intend to do so prior to any commercial launch of our product candidates, if approved by the FDA, in order to ensure that we maintain adequate supplies of finished drug product, we may be unable to enter into such an agreement or do so on commercially reasonable terms, which could have a material adverse impact upon our business, including delaying a product launch or subjecting our commercialization efforts to significant supply risk. Even if we are able to enter into additional long-term agreements with manufacturers for commercial supply on reasonable terms, we may be unable to do so with sufficient time prior to the launch of our product candidates, which would expose us to substantial supply risk and potentially jeopardize our launch.

Manufacturing issues may arise that could increase product and regulatory approval costs or delay commercialization.

As we scale up manufacturing of our product candidates and conduct required stability testing, product, packaging, equipment and process-related issues may require refinement or resolution in order to proceed with our planned clinical trials and obtain regulatory approval for commercial marketing. In the future, we may identify impurities, which could result in increased scrutiny by the regulatory agencies, delays in our clinical program and regulatory approval, increases in our operating expenses, or failure to obtain or maintain approval for our product candidates.

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Risks Related to Commercialization of Our Product Candidates

Our commercial success depends upon attaining significant market acceptance of our product candidates, if approved, among physicians, healthcare payors, patients and the medical community.

Even if we obtain regulatory approval for our product candidates, the product may not gain market acceptance among physicians, healthcare payors, patients and the medical community, which is critical to commercial success. Market acceptance of any product candidate for which we receive approval depends on a number of factors, including:

For example, the steroid dexamethasone sodium phosphate, the API in TLC599, is not as commonly administered as traditional steroids for knee OA. If our product candidates are approved but fail to achieve an adequate level of acceptance by physicians, healthcare payors, patients and the medical community, we will not be able to generate significant revenue, and we may not become or remain profitable. In addition, even if any of our product candidates gain acceptance, the markets for the treatment of patients with our target indications may not be as significant as we estimate.

Guidelines and recommendations published by various organizations can reduce the use of our product candidates.

Government agencies promulgate regulations and guidelines directly applicable to us and to our product candidates. In addition, professional societies, such as the American Academy of Orthopedic Surgeons, practice management groups, private health and science foundations and organizations involved in various diseases from time to time may also publish guidelines or recommendations to the healthcare and patient communities. Recommendations of government agencies or these other groups or organizations may relate to such matters as usage, dosage, route of administration and use of concomitant therapies. Recommendations or guidelines suggesting the reduced use of our product candidates or the use of competitive or alternative products as the standard of care to be followed by patients and healthcare providers could result in decreased use of our product candidates.

If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may be unable to generate any revenue.

Although we intend to establish a targeted sales and marketing organization to promote any approved products in the United States, we currently have no such organization or capabilities, and the cost of establishing and maintaining such an organization may exceed the cost-effectiveness of doing so. In order to market any products that may be approved, we must build sales, marketing, managerial and othernon-technical capabilities or make arrangements with third parties to perform these services. We may enter into strategic partnerships with third parties to commercialize our product candidates outside of the United States.

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To date, we have not entered into any strategic partnerships for any of our product candidates. We face significant competition in seeking appropriate strategic partners, and these strategic partnerships can be intricate and time consuming to negotiate and document. We may not be able to negotiate strategic partnerships for territories outside of the United States on acceptable terms, or at all. For example, in January 2018, we signed a strategic alliance agreement with Jixi Biotechnology Partners (Jixi) to form a joint venture with the goal of streamlining our clinical trials, registration and commercialization processes in China; however, because Jixi was unable to obtain the requisite People’sPeople’s Republic of China governmental approval, we were unable to close the joint venture and in September 2018, we terminated the agreement with Jixi. We are unable to predict when, if ever, we will enter into any strategic partnerships outside of the United States because of the numerous risks and uncertainties associated with establishing strategic partnerships. To the extent that we enter into collaboration arrangements, our future collaboration partners may not dedicate sufficient resources to the commercialization of our product candidates or may otherwise fail in their commercialization due to factors beyond our control. If we are unable to establish effective collaborations to enable the sale of our product candidates in territories outside of the United States, or if our potential future collaboration partners do not successfully commercialize our product candidates in these territories, our ability to generate revenue from product sales will be adversely affected.

If we are unable to negotiate a strategic partnership or obtain additional financial resources for a product candidate, we may be forced to curtail the development of such product candidate, delay potential commercialization, reduce the scope of our sales or marketing activities or undertake development or commercialization activities at our own expense. In addition, without a partnership, we will bear all the risk related to the development of the product candidate, including in territories outside of the United States. If we elect to increase our expenditures to fund development or commercialization activities ourselves, we will 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 TLC599 or any other product candidates to market or generate significant product revenue.

We and any collaboration partners that we may engage will be competing with many companies that currently have extensive and well-funded marketing and sales operations. If we, alone or with commercialization partners, are unable to compete successfully against these established companies, the commercial success of any approved products will be limited.

We may form or seek joint ventures, collaborations or strategic alliances or enter into additional licensing arrangements in the future but may not realize the benefits of such joint ventures, collaborations or strategic alliances. If we are unable to enter into future joint ventures, collaborations, or strategic alliances or if such arrangements are not successful, our business could be adversely affected.

We may form or seek strategic alliances, create joint ventures or collaborations, or enter into additional licensing arrangements with third parties that we believe will complement or augment our clinical development and commercialization efforts with respect to our product candidates and any future product candidates that we may develop, particularly in China. Any of these relationships may require us to incur other charges, increase our near and long-term expenditures, issue securities that dilute our existing stockholders, or disrupt our management and business. In addition, we face significant competition in seeking appropriate strategic partners and the negotiation process is time-consuming and complex and may not ultimately prove successful. For example, in January 2018, we signed a strategic alliance agreement with Jixi to form a joint venture with the goal of streamlining our clinical trials, registration and commercialization processes in China; however, because Jixi was unable to obtain the requisite PRC governmental approval, we were unable to close the joint venture and in September 2018, we terminated the agreement with Jixi. Furthermore, we may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for our product candidates because they may be deemed to be at too early a stage of development for collaborative effort and third parties may not view our product candidates as having the requisite potential to demonstrate safety and efficacy.

Any potential future arrangements with third parties that we may enter into involving our product candidates, are subject to numerous risks, including the following:

As a result, if we are unable to enter into and maintain strategic partnerships, joint ventures or collaborations, or enter into and maintain future arrangements, joint ventures or collaborations, or if such arrangements are not successful, our business could be adversely affected. If we enter into certain arrangements or collaboration agreements and strategic partnerships or license our products or businesses, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture, which could delay our timelines or otherwise adversely affect our business. We also cannot be certain that, following a strategic transaction or license, we will achieve the revenue or specific net income that justifies such transaction. Any delays in entering into new collaborations or strategic partnership agreements related to our product candidates could delay the development and commercialization of our product candidates in certain territories for certain indications, which would harm our business prospects, financial condition, and results of operations.

Our business is subject to economic, political, regulatory and other risks associated with international operations.

As a company based in Taiwan, our business is subject to risks associated with conducting business outside of the United States. Many of our suppliers and collaborative and clinical trial relationships are located outside the United States. Accordingly, our future results could be harmed by a variety of factors, including:

In addition to existing generic steroids, the FDA or other applicable regulatory authorities may approve generic products that could compete with our product candidates. Once an NDA, including a Section 505(b)(2) application, is approved, the product covered thereby becomes a “listed drug”“listed drug” which can, in turn, be cited by potential competitors in support of approval of an abbreviated new drug application (ANDA). The FDCA, FDA regulations and other applicable regulations and policies provide incentives to manufacturers to create modified,non-infringing versions of a drug to facilitate the approval of an

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ANDA or other application for generic substitutes. These manufacturers might only be required to conduct a relatively inexpensive study to show that their product has the same active ingredient(s), dosage form, strength, route of administration, and conditions of use, or labeling, as our product candidate and that the generic product is bioequivalent to ours, meaning it is absorbed in the body at the same rate and to the same extent as our product candidate. These generic equivalents, which must meet the same quality standards as branded pharmaceuticals, would be significantly less costly than ours to bring to market and companies that produce generic equivalents are generally able to offer their products at lower prices. Thus, after the introduction of a generic competitor, a significant percentage of the sales of any branded product is typically lost to the generic product. Accordingly, competition from generic equivalents to our product candidates would materially adversely impact our ability to successfully commercialize our product candidates.

We face significant competition from other biopharmaceutical companies, and our operating results will suffer if we fail to compete effectively.

The biopharmaceutical industry is intensely competitive and subject to rapid and significant technological change. We have competitors both in the United States and internationally, including large and specialty pharmaceutical and biotechnology companies, academic research institutions, governmental agencies and public and private research institutions. For example, the injectable OA treatment market today includes steroids, including TCA, as well as hyaluronic acid viscosupplements. Immediate-release steroids are generic, and therefore available at prices that are significantly below the price we would expect to charge for TLC599, if approved. We believe our ability to compete with immediate-release steroids and extended-release intraarticular steroids, such as ZILRETTA, will depend primarily on whether TLC599 demonstrates superior duration of pain relief and whether TLC599 proves to be safer, particularly with respect to chondrotoxicity, compared to ZILRETTA. The manufacturer of ZILRETTA recently announced that in an open-label, repeat dose Phase 3b safety trial, an analysis of X-rays taken at baseline and Week 52 showed that repeat administration of ZILRETTA had no deleterious effects on cartilage or joint structure. While the full details of these trial results have not been made available, the results may make it more difficult for us to convince healthcare providers, payors and patients that TLC599 has safety advantages over existing TCA products like ZILRETTA, and may require that we conduct additional clinical trials to support future marketing efforts. With respect to TLC399, current approved treatments for macular edema associated with RVO include intravitreal injections of anti-VEGF drugs and intravitreal steroid injections. Macular edema due to RVO is also currently treated with steroid injections in the form of dexamethasone intravitreal implants, such as Ozurdex. With respect to TLC590, numerous post-operative pain treatments exist, including local analgesics, opioids and elastomeric pumps, and we also expect to face competition from EXPAREL, which is a liposomal formulation of bupivacaine. Although there are no FDA approved products for RMS, current treatment options include vinorelbine, doxorubicin, irinotecan, topotecan and trabectedin, which are all conventional chemotherapy drugs.

Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing and manufacturing organizations. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. As a result, these companies may obtain regulatory approval more rapidly than we are able and may be more effective in selling and marketing their products as well. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis drug products or drug delivery technologies that are more effective or less costly than our product candidates that we are currently developing or that we may develop.

We believe that our ability to successfully compete will depend on, among other things:

If our competitors market products that are more effective, safer or less expensive than our future products, if any, or that reach the market sooner than our future products, if any, we may not achieve commercial success. In addition, the biopharmaceutical industry is characterized by rapid technological change. Because we have limited research and development capabilities, it may be difficult for us to stay abreast of the rapid changes in each technology. If we fail to stay at the forefront of technological change, we may be unable to compete effectively. Technological advances or products developed by our competitors may render our technologies or product candidates obsolete, less competitive or not economical.

Certain governments tend to impose strict price controls, which may adversely affect our future profitability.

In certain countries, prescription drug pricing and reimbursement is subject to governmental control. In those countries that impose price controls, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we or our strategic partners may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidates to other available therapies.

Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In certain markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we or our strategic partners might obtain marketing approval for a product candidate in a particular country, but then be subject to price regulations that delay commercial launch of the product candidate, possibly for lengthy time periods, and negatively impact the revenue that are generated from the sale of the product in that country. If reimbursement of such product candidates is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, or if there is competition from lower priced cross-border sales, our profitability will be negatively affected.

It may be difficult for us to profitably sell our product candidates if coverage and reimbursement for these products is limited by government authorities and/or other third-party payor policies.

In addition to any healthcare reform measures which may affect reimbursement, market acceptance and sales of our product candidates, if approved, will depend on, in part, the extent to which our products will be covered by third-party payors, such as government health care programs, commercial insurance and managed care organizations. These third-party payors determine the extent to which new drugs will be covered as a benefit under their plans and the level of reimbursement for any covered product. It is difficult to predict at this time what third party payors will decide with respect to the coverage and reimbursement for our product candidates.

A primary trend in the U.S. healthcare industry and elsewhere has been cost containment, including price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products and/or biosimilars. Third-party payors decide which drugs they will pay for and establish reimbursement andco-payment levels. Government and other third-party payors are increasingly challenging the prices charged for health care products, examining the cost effectiveness of drugs in addition to their safety and efficacy, and limiting or attempting to limit both coverage and the level of reimbursement for prescription drugs. We cannot be sure that coverage will be available for our product candidates, if approved, or, if coverage is available, the level of reimbursement.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services (CMS), an agency within the U.S. Department of Health and Human Services (HHS), as CMS decides

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whether and to what extent a new medicine will be covered and reimbursed under Medicare. Private payors may follow CMS, but have their own methods and approval processes for determining reimbursement for new medicines. It is difficult to predict what CMS as well as other payors will decide with respect to reimbursement for fundamentally novel products such as ours, as there is no body of established practices and precedents for these new products.

Reimbursement may impact the demand for, and/or the price of, any product for which we obtain marketing approval. Assuming we obtain coverage for a given product by a third-party payor, the resulting reimbursement payment rates may not be adequate or may requireco-payments that patients find unacceptably high. Patients who are prescribed medications for the treatment of their conditions, and their prescribing physicians, generally rely on third-party payors to reimburse all or part of the costs associated with their prescription drugs. Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover all or a significant portion of the cost of our products. Therefore, coverage and adequate reimbursement is critical to new product acceptance. Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already available or subsequently become available. There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution.

We expect to experience pricing pressures in connection with the sale of any of our product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs, medical devices and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the successful commercialization of new products. Further, the adoption and implementation of any future governmental cost containment or other health reform initiative may result in additional downward pressure on the price that we may receive for any approved product.

Reimbursement by a third-party payor may depend upon a number of factors including the third-party payor’spayor’s determination that use of a product is:

Obtaining coverage and reimbursement approval for a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide supporting scientific, clinical and cost effectiveness data for the use of our products to the payor. Further, no uniform policy requirement for coverage and reimbursement for drug products exists among third-party payors in the United States. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. As a result, the coverage determination process may require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. We may not be able to provide data sufficient to gain acceptance with respect to coverage and/or sufficient reimbursement levels. We cannot be sure that coverage or adequate reimbursement will be available for our product candidates, if approved. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, our future products. If reimbursement is not available, or is available only to limited levels, we may not be able to commercialize our product candidates, or achieve profitably at all, even if approved.

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Legislative or regulatory healthcare reforms in the United States may make it more difficult and costly for us to obtain regulatory clearance or approval of our product candidates and to produce, market and distribute our products after clearance or approval is obtained.

From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulatory clearance or approval, manufacture and marketing of regulated products or the reimbursement thereof. In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of our product candidates. We cannot determine what effect changes in regulations, statutes, legal interpretation or policies, when and if promulgated, enacted or adopted may have on our business in the future. Such changes could, among other things, require:

Each of these would likely entail substantial time and cost and could harm our business and our financial results.

In addition, in the United States, there have been a number of legislative and regulatory proposals to change the health care system in ways that could affect our ability to sell our products profitably. The pharmaceutical industry in the United States, as an example, has been affected by the passage of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the PPACA) which, among other things, imposed new fees on entities that manufacture or import certain branded prescription drugs and expanded pharmaceutical manufacturer obligations to provide discounts and rebates to certain government programs. Since its enactment, there have beenThere remain judicial and Congressional challenges to certain aspects of the PPACA, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the PPACA. Since January 2017, President Trump has signed two Executive Orders and other directives designed to delay the implementation of any certain provisions of the PPACA or otherwise circumvent some of the requirements for health insurance mandated by the PPACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the PPACA. While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the PPACA have been signed into law. The Tax Cuts and Jobs Act of 2017 includes a provision that repealed, effective January 1, 2019, thetax-based shared responsibility payment imposed by the PPACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”“individual mandate”. Additionally, onthe 2020 federal spending package permanently eliminates, effective January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed1, 2020, the implementation of certain PPACA-mandated fees, including the so-called “Cadillac”“Cadillac” tax on certain high costhigh-cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share,coverage and the medical device excise tax on non-exempt medical devices.and, effective January 1, 2021, also eliminates the health insurer tax. Further, the Bipartisan Budget Act of 2018 (BBA), among other things, amended the PPACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”“donut hole”. In addition, in April 2018, CMS published a final rule that gives states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the PPACA for plans sold through such marketplaces. More recently, inIn December 2018, CMS published a final rule permitting further collections and payments to and from certain PPACA qualified health plans and health insurance issuers under the PPACA risk adjustment program in response to the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment. On December 14, 2018, a Texas U.S. District Court Judge ruled that the PPACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Cuts and Jobs Act of 2017. WhileAdditionally, on December 18, 2019, the Texas U.S. Court of Appeals for the 5th Circuit upheld the District Court Judge, as well as the Trump administration and CMS, have statedruling that the ruling will have no immediate effect pending appealindividual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the decision, itPPACA are invalid as well. It is unclear how this decision, future decisions, subsequent appeals, and other efforts to repeal and replace the PPACA will impact the PPACA. Congress will likely consider other legislation to repeal or repeal and replace other elements of the PPACA. We continue to evaluate the effect that the PPACA and its possible repeal and replacement has on our business. It is uncertain the extent to which any such changes may impact our business or financial condition.

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Other legislative changes have been proposed and adopted in the United States since the PPACA was enacted. For example, in August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2012 through 2021, was unable to reach required goals, thereby triggering the legislation’slegislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013 and, due to subsequent legislative amendments to the statute, including the BBA, will remain in effect through 20272029 unless additional Congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to certain providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

Further, there has been particular and increasing legislative and enforcement interest in the United States with respect to drug pricing practices in recent years, particularly with respect to drugs that have been subject to relatively large price increases over relatively short time periods. There have been several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. At the federal level, the Trump administration’sadministration’s budget proposal for fiscal year 20192020 contains further drug price control measures that could be enacted during the 2019 budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs forlow-income patients. Additionally, the Trump administration released a “Blueprint”“Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers. HHS has already started the process of solicitingsolicited feedback on some of these measures and at the same, is immediately implementingimplemented others under its existing authority. OnFor example, in May 2019, CMS issued a final rule to allow Medicare Advantage plans the option to use step therapy for Part B drugs beginning January 31, 2019, the HHS Office of Inspector General, proposed modifications to the federal Anti-Kickback Statute discount safe harbor for the purpose of reducing the cost of drug products to consumers which, among other things, if finalized, will affect discounts paid by manufacturers to Medicare Part D plans, Medicaid managed care organizations and pharmacy benefit managers working with these organizations.1, 2020. This final rule codified CMS’s policy change that was effective January 1, 2019. Although a number of these and other proposalsmeasures may require additional authorization to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

Additionally, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017 (Right to Try Act) was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational new drug products that have completed a Phase I clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no obligation for a drug manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act.

In the future, there will likely continue to be proposals relating to the reform of the U.S. healthcare system, some of which could further limit coverage and reimbursement of drug products, including our product candidates. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. Our results of operations could be adversely affected by the PPACA and by other health care reforms that may be enacted or adopted in the future.

We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws and health information privacy and security laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

Our operations may be directly or indirectly through our relationships with third-party payors, existing or potential customers and referral sources, including healthcare providers, subject 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 research, market, sell and distribute our products. In addition, we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:

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The U.S. Anti-Kickback Statute prohibits, among other things, any person or entity from knowingly and willfully offering, paying, soliciting, receiving or providing any remuneration, directly or indirectly, overtly or covertly, to induce or in return for purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of any item or service reimbursable, in whole or in part, under Medicare, Medicaid or other U.S. federal healthcare programs. The U.S. Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers, among others, on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution.prosecution, but the exceptions and safe harbors are drawn narrowly and require strict compliance in order to offer protection.

The U.S. federal false claims and civil monetary penalties laws, including the False Claims Act (FCA), prohibit any person or entity from, among other things, knowingly presenting, or causing to be presented, a false, fictitious or fraudulent claim for payment to, or approval by, the U.S. federal government or knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to the U.S. federal government. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes “any“any request or demand”demand” for money or property presented to the U.S. government. In addition, manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to “cause”“cause” the submission of false or fraudulent claims. The FCA also permits a private individual acting as a “whistleblower”“whistleblower” to bring actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery. FCA liability is potentially significant in the healthcare industry because the statute provides for treble damages and significant mandatory penalties. Government enforcement agencies and private whistleblowers have investigated pharmaceutical companies for or asserted liability under the FCA for a variety of alleged promotional and marketing activities, such as providing free product to customers with the expectation that the customers would bill federal programs for the product; providing consulting fees and other benefits to physicians to induce them to prescribe products; engaging in promotion for“off-label”off-label” uses; and submitting inflated best price information to the Medicaid Rebate Program.

The U.S. Health Insurance Portability and Accountability Act of 1996 (HIPAA) prohibits, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.

The Physician Payments Sunshine Act, enacted as part of the PPACA, imposes, among other things, annual reporting requirements for covered manufacturers for certain payments and “transfers“transfers of value”value” provided to physicians, as defined by such law, and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members.

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH) and their respective implementing regulations, impose, among other things, specified requirements relating to the privacy, security and transmission of individually identifiable health information held by health plans and healthcare clearinghouses, and certain healthcare providers, known as covered entities, and their business associates that create, receive, maintain or transmit individually identifiable health information for or on their behalf. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in U.S. federal courts to enforce the federal HIPAA laws and seek attorneys’attorneys’ fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

Many states have analogous state laws and regulations, such as state anti-kickback and false claims laws, that may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed bynon-governmental third-party payors, including private insurers. In addition, certain states require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, marketing expenditures or drug pricing. Further, certain state and local laws require the registration of pharmaceutical sales representatives. Additionally, state data privacy laws that protect the security of health information may differ from each other and medical representatives.may not be preempted by federal law.

Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. In addition, recent health care reform legislation has strengthened these laws. For example, the PPACA, has among other things, amended the intent requirement of the U.S. Anti-Kickback Statute and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. Moreover, recent health care reform legislation provides that the government may assert that a claim including items or services resulting from a violation of the U.S. Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA.

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Ensuring that our business arrangements with third parties comply with applicable healthcare laws and regulations will likely be costly. It is possible that governmental authorities will conclude that our business practices do 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 were 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, disgorgement, imprisonment, possible exclusion from government funded healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations ofnon-compliance with these laws, and curtailment of our operations, any of which could substantially disrupt our operations. If the physicians or other providers or entities with whom we expect to do business are found not to be in compliance with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

We are subject to U.S. and foreign anti-corruption and anti-money laundering laws with respect to our operations andnon-compliance with such laws can subject us to criminal and/or civil liability and harm our business.

We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended (FCPA), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, and possibly other state and national anti-bribery and anti-money laundering laws in countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, third-party intermediaries, joint venture partners and collaborators from authorizing, promising, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector. We engage third-party investigators, CROs, and other consultants to design and perform preclinical studies of our product candidates, and will do the same for any clinical trials. Also, once a product candidate has been approved and commercialized, we may engage third-party intermediaries to promote and sell our products abroad and/or to obtain necessary permits, licenses, and other regulatory approvals. We or our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, collaborators, partners, and agents, even if we do not explicitly authorize or have actual knowledge of such activities.

Noncompliance with anti-corruption and anti-money laundering laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage, and other collateral consequences. If any subpoenas, investigations, or other enforcement actions are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations and financial condition could be materially harmed. In addition, responding to any action will likely result in a materially significant diversion of management’smanagement’s attention and resources and significant defense and compliance costs and other professional fees. In certain cases, enforcement authorities may even cause us to appoint an independent compliance monitor which can result in added costs and administrative burdens.

The incidence and prevalence for target patient populations of our product candidates are based on estimates and third-party sources. If the market opportunities for our product candidates are smaller than we estimate or if any approval that we obtain is based on a narrower definition of the patient population, our revenue and ability to achieve profitability might be materially and adversely affected.

Periodically, we make estimates regarding the incidence and prevalence of target patient populations for particular diseases based on various third-party sources and internally generated analysis and use such estimates in making decisions regarding our drug development strategy, including acquiring orin-licensing product candidates and determining indications on which to focus in preclinical or clinical trials.

These estimates may be inaccurate or based on imprecise data. For example, the total addressable market opportunity will depend on, among other things, acceptance of our product candidates by the medical community and patient access, pricing and reimbursement of our product candidates. The number of patients in the addressable markets may turn out to be lower than expected, patients may not be otherwise amenable to treatment with our product candidates, or new patients may become increasingly difficult to identify or gain access to, all of which may significantly harm our business, financial condition, results of operations and prospects.

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Risks Related to Our Business Operations and Industry

Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.

We are highly dependent on the principal members of our executive team listed under “Management”“Management” located elsewhere in this Annual Report, the loss of whose services may adversely impact the achievement of our objectives. While we have entered into employment agreements or offer letters with each of our executive officers, any of them could leave our employment at any time. Recruiting and retaining other qualified employees for our business, including scientific and technical personnel, will also be critical to our success. There is currently a shortage of skilled executives in our industry, which is likely to continue. As a result, competition for skilled personnel is intense and the turnover rate can be high. We may not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical companies for individuals with similar skill sets. In addition, failure to succeed in clinical studies may make it more challenging to recruit and retain qualified personnel. The inability to recruit or loss of the services of any executive or key employee might impede the progress of our development and commercialization objectives.

We will need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.

As of December 31, 2018,2019, we had 161we had 121 full-time employees.employees, of which 117 employees are located in Taiwan. As our company matures, we expect to expand our employee base to increase our managerial, scientific and engineering, operational, sales, marketing, financial and other resources and to hire more consultants and contractors. Future growth would impose significant additional responsibilities on our management, including the need to identify, recruit, maintain, motivate and integrate additional employees, consultants and contractors. Also, our management may need to divert a disproportionate amount of its attention away from ourday-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Future growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of our existing or future product candidates. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and grow revenue could be reduced, and we may not be able to implement our business strategy. Our future financial performance and our ability to commercialize our product candidates, if approved, and compete effectively will depend, in part, on our ability to effectively manage any future growth.

We face potential product liability, and, if successful claims are brought against us, we may incur substantial liability.

The use of our product candidates in clinical trials, the sale of any products for which we obtain marketing approval, and the sale of any of our current generic products exposes us to the risk of product liability claims. Product liability claims might be brought against us by consumers, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with our products and product candidates. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product liability claims may result in:

Our current clinical trial liability insurance coverage may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and in the future we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If and when we obtain marketing approval for our product candidates, we intend to expand our insurance coverage to include the sale of commercial products; however, we may be unable to obtain product liability insurance on commercially reasonable terms or

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in adequate amounts. On occasion, large judgments have been awarded in class action lawsuits based on drugs that had unanticipated adverse effects. A successful product liability claim or series of claims brought against us could cause the price of our ADSs or common shares to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business.

Our internal computer systems, or those of our CROs or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our therapeutic development programs.

Despite the implementation of security measures, our internal computer systems and those of our CROs and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Such events could cause interruptions of our operations. For instance, the loss of preclinical study or clinical trial data involving our therapeutic candidates could result in delays in our development and regulatory filing efforts and significantly increase our costs. In addition, theft or other exposure of data may interfere with our ability to protect our intellectual property, trade secrets, and other information critical to our operations. We can provide no assurances that certain sensitive and proprietary information relating to one or more of our therapeutic candidates has not been, or will not in the future be, compromised. There can be no assurances we will not experience additional unauthorized intrusions into our computer systems, or those of our CROs and other contractors and consultants, that we will successfully detect future unauthorized intrusions in a timely manner, or that future unauthorized intrusions will not result in material adverse effects on our financial condition, reputation, or business prospects. Payments related to the elimination of ransomware may materially affect our financial condition and results of operations.

Certain data breaches must also be reported to affected individuals and the government, and in some cases to the media, under provisions of HIPAA, as amended by HITECH, other U.S. federal and state law, and requirements ofnon-U.S. jurisdictions, including the European Union General Data Protection Regulation, and financial penalties may also apply.

Our insurance policies may not be adequate to compensate us for the potential losses arising from breaches, failures or disruptions of our infrastructure, catastrophic events and disasters or otherwise. In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all. Further, our insurance may not cover all claims made against us and defending a suit, regardless of its merit, could be costly and divert management’smanagement’s attention.

Furthermore, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on other third parties for the manufacture of our product candidates and to conduct clinical trials, and similar events relating to their computer systems could also have a material adverse effect on our business.

Business interruptions could delay us in the process of developing our product candidates and could disrupt our sales.

Our headquarters are located in Taipei, Taiwan. We are vulnerable to natural disasters such as earthquakes, typhoons and floods, as well as other events that could disrupt our operations. While we carry insurance for fire, flood and certain natural disasters, if we were impacted by these events this insurance may not be sufficient to compensate us for losses that may occur and our operations may be significantly interrupted regardless of insurance recovery. Any losses or damages we incur could have a material adverse effect on our business operations.

We face substantial political risks associated with doing business in the ROC and the PRC, particularly due to domestic political events and the rigid relationship between the ROC and the PRC that could negatively affect our operations and the value of your investment.

Our principal executive office and substantially all of our assets are located in the ROC and substantially all of our revenues are derived from our operations in the ROC. Accordingly, our business, financial condition and results of operations and the market price of our ADSs may be affected by changes in governmental policies, taxation, inflation or interest rates, social instability and diplomatic and social developments in or affecting the ROC.

For example, in 2006, a mass movement formed calling for the resignation of the president of the ROC over a series of alleged corruption scandals and staged dramatic protests. In addition, Taiwan has a unique international political status. Since 1949, the ROC and PRC, have been separately governed by different political parties. The PRC claims that it is the sole government in the PRC, including Taiwan, while some political parties in ROC claim ROC’sROC’s independence or ROC as the

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only legitimate government of the PRC, including the ROC and the PRC. There was a time when the two governments prohibited all trades, transactions and trips crossing the Taiwan Strait. Although significant economic and cultural relations have been established in recent years between the ROC and the PRC, relations have often been strained. The PRC government has refused to renounce the use of military force to regain control over the ROC. Furthermore, the PRC government passed an Anti-Secession Law in March 2005, which has authorized the government to use all necessary measures, includingnon-peaceful means, against Taiwan’sTaiwan’s independence movement in the event of such declaration. In February 2006, the then president of the ROC ceased all activities in the country’scountry’s National Unification Council, a committee established to assist the ROC in its efforts to reunite with the PRC. Such cessation is commonly viewed as having a detrimental effect on the relations between the two sides. Past developments in the relationship between the ROC and the PRC has depressed the share prices of several Taiwanese companies. A recent cessation of dialogue between the ROC and mainland the PRC was followed by an approximate 30% decline of imports from mainland China to the ROC in 2016. An unstable relationship between the ROC and the PRC could materially and adversely affect our financial condition and results of operations, as well as the market price and the liquidity of our securities.

Business relationships between entities in the ROC and entities in the PRC are regulated by the ROC “Act“Act Governing Relations between the People of the Taiwan Area and the Mainland AreaArea” (”臺灣地區與大陸地區人民關係條例 () and the regulations promulgated thereunder (ROC Act). Among other things, the ROC Act requires the ROC government’sgovernment’s prior approval of many business transactions. Any accumulated direct or indirect investment by us into any entity in the PRC in excess of US$1 million, or any technology cooperation agreement between us and any entity in the PRC that involves our intellectual property would be subject to this approval. While we are not currently party to any material transactions or agreements with any entity in the PRC, our future ability to enter into such arrangements may be limited by the ROC Act, particularly if ROC and PRC political relations deteriorate. Although, to our knowledge, we do not currently have any PRC shareholders, any PRC investor’sinvestor’s investment into us must be approved by the Investment Commission, MOEA, Executive Yuan of the ROC, provided our businesses fall within one of the industries included on the list maintained by the MOEA that PRC enterprises are allowed to invest in, or such PRC investor must be a qualified domestic institutional investor (QDII) in the PRC for an investment limit of less than 10% of our issued shares. However, PRC investors, other than QDIIs, are currently prohibited from investing in us as certain aspects of our current business scope are not included on the MOEA’sMOEA’s list. Any approval by the ROC government will depend on the then- current political environment between the ROC and PRC, and we cannot assure you that any PRC investor will receive such approval from the ROC government. Furthermore, any such PRC purchaser of American Depositary Receipts (ADRs) will need to qualify as a QDII in order to exchange their ADRs for underlying common shares of our company.

Risks Related to Our Intellectual Property

If we are unable to obtain or protect intellectual property rights related to our current product candidates, any future product candidates which we may develop and our BioSeizer and NanoX technologies, we may not be able to compete effectively in our market.

We rely upon a combination of patents, trade secret protection, confidentiality agreements and proprietary know how, and intend to seek marketing exclusivity for any approved product, in order to protect the intellectual property related to product candidates. The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. The patent applications that we own orin-license may fail to result in issued patents with claims that cover our product candidates in the United States or in other foreign countries. If this were to occur, early generic competition could be expected against our product candidates. Even if patents do successfully issue, third parties may challenge their validity, enforceability or scope, which may result in such patents being invalidated or deemed as not infringing. Also, a third party may challenge our ownership of patents and patent applications assigned to us, or may challenge our exclusive rights to patents and patent applications that we license from third parties. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing around our claims. If the patent applications we hold with respect to our other product candidates fail to issue or if their breadth or strength of protection is threatened, it could dissuade companies from collaborating with us to develop them, and threaten our ability to commercialize any resulting products. We cannot offer any assurances about which, if any, applications will issue as patents or whether any issued patents will be found not invalid and not unenforceable or will go unthreatened by third parties. Further, if we encounter delays in regulatory approvals, the period of time during which we could market our product candidates under patent protection could be reduced. Furthermore, patent applications by third parties can result in an interference proceeding in the United States being provoked by a third party or instituted by us to determine who was the first to invent any of the subject matter covered by the claims of our applications or patents.

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In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietaryknow-how that is not patentable, processes for which patents are difficult to enforce and any other elements of our drug development process that involve proprietaryknow-how, information or technology that is not covered by patents. Although we generally require all of our employees to assign their inventions to us, and all of our employees, consultants, advisors and any third parties who have access to our proprietaryknow-how, information or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed or that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Further, the laws of certain countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. If we are unable to prevent material disclosure of thenon-patented intellectual property related to our technologies to third parties, and there is no guarantee that we will have any such enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, results of operations and financial condition.

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

We rely on trademarks, service marks, tradenames and brand names to distinguish our products from the products of our competitors, and have registered or applied to register certain trademarks. We cannot assure you that our trademark applications will be approved or that we will seek registered trademark protection for each of our product names in each jurisdiction in which we operate. During trademark registration proceedings, we may receive rejections. Although we are given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, in proceedings before the U.S. Patent and Trademark Office (USPTO) and in proceedings before comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition and could require us to devote resources toward advertising and marketing new brands. Further, we cannot assure you that competitors will not infringe our trademarks or that we will have adequate resources to enforce our trademarks.

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

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

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

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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, financial condition, results of operations, and prospects may be adversely affected.

Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts.

Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions andexparte reexamination andinter partes review before the USPTO. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we and our collaborators are developing product candidates. As the biotechnology and pharmaceutical industries expand and more patents issue, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties. Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that third parties may assert are infringed by our technologies. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any drug substance formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtain a license under the applicable patents, or until such patents are invalidated or expire. Similarly, if any third-party patent were held by a court of competent jurisdiction to cover aspects of our formulations or methods of use, the holders of any such patent may be able to block our ability to develop and commercialize the applicable product candidate unless we obtain a license or until such patent expires. In either case, such a license may not be available on commercially reasonable terms or at all.

Parties making claims against us may request injunctive or other equitable relief. If granted, such relief could effectively block our ability to further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our infringing products or manufacturing processes, which may be impossible or require substantial time and monetary expenditure. We cannot predict whether any such license would be available at all or whether it would be available on commercially reasonable terms. Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties to advance our research, manufacture clinical trial supplies or allow commercialization of our product candidates. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize one or more of our product candidates, which could harm our business significantly. We cannot guarantee that third-party patents do not exist which might be enforced against our products, resulting in either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties.

We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time consuming and unsuccessful.

Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our related patent applications at risk of not issuing.

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Derivation proceedings are brought by third parties or may be brought by us may be necessary to determine the priority of inventions with respect to our patents or patent applications or those of our collaborators or licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense of litigation or derivation proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our ADSs.

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

Periodic maintenance fees or annuity payments on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in whichnon-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits,non-payment of fees and failure to properly legalize and submit formal documents. If we or our licensors that control the prosecution and maintenance of our licensed patents fail to maintain the patents and patent applications covering our product candidates, our competitors might be able to enter the market, which would have a material adverse effect on our business.

We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.

We employ individuals who were previously employed at other biotechnology or pharmaceutical companies. We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of our employees’employees’ former employers or other third parties. We may also be subject to claims that former employers or other third parties have an ownership interest in our patents. Litigation may be necessary to defend against these claims. There is no guarantee of success in defending these claims, and even if we are successful, litigation could result in substantial cost and be a distraction to our management and other employees.

Risks Related to Our ADSs

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

The trading market for 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 our ADSs may fluctuate significantly due to a variety of factors, including:

These and other market and industry factors may cause the market price and demand for our ADSs to fluctuate substantially, regardless of our actual operating performance, which may limit or prevent investors from readily selling their ADSs and may otherwise negatively affect the liquidity of our ADSs. In addition, the stock market in general, and biopharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. In the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the issuer. If any of the holders of our ADSs were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and the attention of our senior management would be diverted from the operation of our business. Any adverse determination in litigation could also subject us to significant liabilities.

Restrictions on the ability to deposit our common shares into our American depositary receipt facility may adversely affect the liquidity of our ADSs.

The ability to deposit our common shares into our American depositary receipt facility for the issuance of ADSs is restricted by ROC law, which may adversely affect the liquidity of our ADSs. Under current ROC law and the Deposit Agreement, no person or entity, including the holders of ADSs and us, may deposit our common shares in our American depositary receipt facility for the issuance of ADRs without specific approval of the FSC unless:

With respect to (3) above, the depositary may issue ADSs against the deposit of those shares only if the total number of ADSs outstanding following the deposit will not exceed the number of ADSs previously approved by the ROC Financial Supervisory Commission (FSC), plus any ADSs issued pursuant to the events described in items (1) and (2) above. Issuance of additional ADSs under item (3) above will be permitted to the extent that a corresponding number of previous ADSs have been cancelled.

Further, we have agreed to not assist existing shareholders in filing the government approval necessary for exchanging their common shares for ADSs until the end of the 180-day lock-up period described under the caption “Underwriting—No Sales of Similar Securities,” unless we have obtained the prior written consent of Cantor Fitzgerald & Co. As a result this contractual restriction and the restrictions under ROC law described above, the U.S. dollar equivalent price of our common shares on the TPEx may differ from the U.S. dollar price of our ADSs on The Nasdaq Global Market.

The price of our ADSs may be limited by the trading price of our common shares on the TPEx.

Our common shares are currently traded on the TPEx. From November 21, 2018 through April 22, 2019,March 6, 2020, the closing price of our common shares on the TPEx ranged from NT$89.4072.90 per share to NT$100.00 per share. During the same period, the closing price of our ADSs on The Nasdaq Global Market ranged from $5.02$4.61 per ADS to $7.29 per ADS. The TPEx sets certain limitations on the trading volatility of our common shares and there are currently limits on the range of daily price movements on the TPEx. As a result of these limitations, the potential increase in trading price of our ADSs may be

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materially limited based on the perceived value of our common shares on the TPEx. Similarly, decreases in the trading price of our common shares on the TPEx due to the perceptions of investors in that market, which may be different from your own, may impact the value of your investment.

We have incurred and will incur increased costs as a result of operating as a public company in the United States, and our senior management will be required to devote substantial time to new compliance initiatives and corporate governance practices.

Our ADSs began trading on The Nasdaq Global Market on November 21, 2018 under the trading symbol “TLC”. As a U.S. public company, we have incurred significant legal, accounting and other expenses that we did not incur previously, and we will incur additional expenses after we no longer qualify as an EGC. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of The Nasdaq Stock Market LLC (Nasdaq) and other applicable securities rules and regulations impose various requirements onnon-U.S. reporting public companies, including the establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our senior management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified senior management personnel or members for our board of directors.

However, these rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (Section 404), we will beare required to furnish a report by our senior management on our internal control over financial reporting, (starting with our Annual Report on Form 20-F for the year ended December 31, 2019), and an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.firm. However, while we remain an EGC we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging.challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants, adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with corporate governance listing standards.

As a foreign private issuer, we are permitted to take advantage of certain provisions in the Nasdaq listing rules that allow us to follow ROC law for certain governance matters. Certain corporate governance practices in the ROC may differ significantly from corporate governance listing standards. When our ADSs are listed on The Nasdaq Global Market, we intend to continue to follow Taiwan corporate governance practices in lieu of the following corporate governance requirements of Nasdaq: (i) disclosure requirement within four business days of any determination to grant a waiver of the code of business conduct and ethics to directors and officers; (ii) the requirement that a majority of our board consist of independent directors; (iii) the requirement that our audit committee be made up of members of our board of directors and have at least one member that has financial sophistication; (iv) requirement that a compensation committee be comprised solely of independent directors with a written charter addressing the committee’scommittee’s responsibilities and authority; (v) requirement that we have independent director oversight of director nominations and a formal written charter or board resolution addressing the nominations process; (vi) requirement that we have a code of conduct applicable to all directors, officers and employees; (vii) requirement to obtain shareholder approval for certain issuances of securities, including

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shareholder approval of stock option plans; and (viii) requirement that our audit committee have review and oversight over all “related“related party transactions,” as defined in Item 7.B of Form20-F. Taiwan law either does not impose the foregoing requirements or does not impose them to the specificity of Nasdaq’sNasdaq’s rules. Therefore, our shareholders may be afforded less protection than they otherwise would have under corporate governance listing standards applicable to U.S. domestic issuers.

You may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. federal courts may be limited, because we are incorporated under the Taiwan Company Act, conduct substantially all of our operations outside the United States and most of our executive officers reside outside the United States.

We are incorporated under the Taiwan Company Act, conduct substantially all of our operations outside the United States, and most of our executive officers reside outside the United States. As a result, it may be difficult if not impossible for you to bring an action against us or against these individuals in Taiwan in the event that you believe that your rights have been infringed under the securities laws or otherwise. Even if you are successful in bringing an action of this kind outside Taiwan, the laws of Taiwan may render you unable to effect service of process upon, or to enforce a judgment against our assets or the assets of our directors and officers. A judgment of a court of another jurisdiction may be reciprocally recognized or enforced if the jurisdiction has a treaty with Taiwan or if judgments of the Taiwanese courts have been recognized before in that jurisdiction, subject to the satisfaction of other requirements. As a result of all of the foregoing, our public shareholders and ADS holders may have more difficulty in protecting their interests through actions against our management, directors or major shareholders than would shareholders or ADS holders of a corporation incorporated in a jurisdiction in the United States.

Certain of our existing shareholders, members of our board of directors and senior management maintain the ability to exercise significant control over us. Your interests may conflict with the interests of these existing shareholders.

As of February 28,December 31, 2019, our senior management, board of directors and shareholders holding over 5% of our common shares, determined as of February 28,December 31, 2019, and their respective affiliates, in the aggregate, beneficially owned 28.9%15.9% of our common shares (including common shares represented by ADSs). These shareholders either alone or voting together as a group may be in a position to determine or significantly influence the outcome of decisions taken at any such general meeting. Any shareholder or group of shareholders controlling more than 50% of the outstanding shares present and voting at our general meetings of shareholders in which a quorum is present may control any shareholder resolution requiring a majority. For example, a quorum oftwo-thirds of our share capital must be present and voting at a meeting of shareholders for certain approvals, including certain decisions relating to our capital structure, the approval of certain significant corporate transactions and amendments to our Articles of Incorporation. If such quorum is met, then any shareholder or group of shareholders controlling more than 50% can control the voting of any such resolution. Among other consequences, this concentration of ownership may have the effect of delaying or preventing a change in control and might therefore negatively affect the market price of our ADSs.

Future sales, or the possibility of future sales, of a substantial number of our ADSs or common shares could adversely affect the price of our ADSs.

Future sales of a substantial number of our ADSs or common shares, or the perception that such sales will occur, could cause a decline in the market price of our ADSs. ADSs issued and sold may be resold in the U.S. public market immediately without restriction. The common shares held byIf any of our directors, executive officers, and certainlarge shareholders will be subject to the lock-up agreements described in “Shares and ADSs Eligible for Future Sale” and “Underwriting.” If, after the endor members of such lock-up agreements, these shareholdersour management team sell substantial amounts of our securities in the public markets, or the market perceives that such sales may occur, the market price of our ADSs and our ability to raise capital through an issue of equity securities in the future could be adversely affected.

Because we do not anticipate paying any cash dividends on our ADSs or common shares in the foreseeable future, capital appreciation, if any, will be the sole source of potential gains with respect to our ADSs or common shares.

Under current Taiwan law, a company must cover all of its accumulated losses and set aside a statutory reserve before dividends can be paid. Therefore, we must have distributable profits before issuing a dividend. We have not paid dividends in the past on our common shares. We intend to retain earnings, if any, for use in our business and do not anticipate paying any cash dividends in the foreseeable future. As a result, capital appreciation, if any, on our ADSs or common shares will be the sole source of potential gains for the foreseeable future, and holders of our ADSs or common shares will suffer a loss on their investment if they are unable to sell their ADSs or the underlying common shares at or above the purchase price.

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Holders of our ADSs may not have the same voting rights as the holders of our common shares and may not receive voting materials in time to be able to exercise their right to vote.

Except as described in this Annual Report, holders of our ADSs will not be able to exercise voting rights attaching to the common shares represented by our ADSs on an individual basis. Holders of our ADSs will appoint the depositary or its nominee as their representative to exercise the voting rights attaching to the common shares in the form of ADSs in accordance with the deposit agreement. Holders of ADSs may not receive voting materials in time to instruct the depositary to vote, and it is possible that they, or persons who hold their ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote. In certain cases, the shares represented by your ADSs may be voted contrary to your instructions and you may be deemed to have instructed the depositary to give a discretionary proxy to a person we designate to vote shares represented by your ADSs in such person’sperson’s discretion. Furthermore, the depositary will not be liable for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, holders of ADSs may not be able to exercise voting rights and may lack recourse if their shares represented by ADSs are not voted as requested. In addition, ADS holders do not have the right to call a shareholders’shareholders’ meeting.

You may not be able to withdraw the underlying common shares of our ADSs.

Pursuant to ROC law, an ADS holder who is anon-ROC person wishing to withdraw and hold deposited common shares from the ADS facility is required to appoint an eligible agent in the ROC for filing tax returns and making tax payments (Tax Guarantor). Such Tax Guarantor will be required to meet the qualifications set by the Taiwan Ministry of Finance and will act as the guarantor of the withdrawing ADS holder’sholder’s tax payment obligations. In addition, subject to certain limited exceptions, under current ROC law, repatriation of profits by anon-ROC withdrawing ADS holder is subject to the submission of evidence by the withdrawing ADS holder of the appointment of a Tax Guarantor to, and approval thereof by, the ROC tax authority and of tax clearance certificates or evidentiary documents issued by the Tax Guarantor. We cannot provide any assurances that a withdrawing ADS holder will be able to appoint and obtain approval from the tax authority in a timely manner or at all.

Pursuant to ROC law, an ADS holder who is not an ROC person or ROC entity wishing to present ADSs to the depositary for cancellation and withdrawal and holding of the underlying common shares from the depositary receipt facility is required to register as a foreign investor with the Taiwan Stock Exchange (TWSE), if the ADS holder has never been registered as foreign investor with the TWSE previously, for making investments in the ROC securities market prior to withdrawing and holding the underlying common shares from the depositary receipts facility.

Additionally, pursuant to ROC law, such withdrawing ADS holder is required to appoint a local agent in the ROC to, on such ADS holder’sholder’s behalf, open a securities trading account with prior approval granted by the TWSE with a local securities brokerage firm (with qualification set by the FSC), and a bank account, pay ROC taxes, remit funds, exercise shareholder rights and perform such other functions as the ADS holder may designate upon such withdrawal. In addition, such withdrawing ADS holder is also required to appoint a custodian bank and open a custodian account to hold the securities and cash in safekeeping, make confirmations, settle trades and report all relevant information. Without making such appointment and the opening of such custodian account, the withdrawing ADS holder would be unable to hold or subsequently sell the deposited common shares withdrawn from the ADR facility on the TPEx. The laws of the ROC applicable to the withdrawal of the underlying common shares may change from time to time. We cannot provide any assurances that current law will remain in effect or that future changes in ROC law will not adversely affect the ability of ADS holders to withdraw deposited common shares.

Currently, a party who is a PRC person may not withdraw and hold the underlying common shares unless it is a QDII in the PRC or has obtained the investment approval from the Taiwanese Investment Commission. Whether a PRC person may freely withdraw and hold the underlying common shares will depend on the total PRC ownership limit or whether the business of the issuer of the underlying common shares is subject to the total PRC ownership limit or within the ROC government’sgovernment’s list of industries open to PRC investment as then in effect. Our business scope currently includes businesses that are not allowed for a PRC person that is not a QDII. We cannot guarantee whether additional or different restrictions or prohibitions will be imposed in the future on PRC persons (including QDIIs) that intend to invest in certain industries in the ROC, and a PRC person may be unable to withdraw and hold the underlying common shares. Under current ROC law, a PRC person means an individual having residence in the PRC (but not including a special administrative region of the PRC such as Hong Kong or Macau, if excluded by applicable laws of the ROC), any legal person, group, or other institutions of the PRC and any corporation and other entity organized in countries outside of the ROC or PRC that is directly or indirectly controlled by or directly or indirectly has more than 30% of its capital beneficially owned by any PRC person described above.

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Holders of our ADSs may not receive distributions on our common shares in the form of ADSs or any value for them if it is illegal or impractical to make them available to holders of ADSs.

The depositary for our ADSs has agreed to pay to purchasers of our ADSs the cash dividends or other distributions it or the custodian receives on our common shares or other deposited securities after deducting its fees and expenses and certain taxes. Purchasers of our ADSs will receive these distributions in proportion to the number of our common shares their ADSs represent. However, in accordance with the limitations set forth in the deposit agreement, it may be unlawful or impractical to make a distribution available to holders of ADSs. We have no obligation to take any other action to permit the distribution of our ADSs, common shares, rights or anything else to holders of our ADSs. This means that purchasers of our ADSs may not receive the distributions we make on our common shares or any value from them if it is unlawful or impractical to make them available to ADS holders. These restrictions may have a negative impact on the market value of our ADSs.

Holders of our ADSs may be subject to limitations on transfer of their ADSs.

ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the deposit agreement.

ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable results to the plaintiff(s) in any such action.

The deposit agreement governing the ADSs representing our common shares provides that holders and beneficial owners of ADSs irrevocably waive the right to a trial by jury in any legal proceeding arising out of or relating to the deposit agreement or the ADSs, including claims under U.S. federal securities laws, against us or the depositary to the fullest extent permitted by applicable law. If this jury trial waiver provision is prohibited by applicable law, an action could nevertheless proceed under the terms of the deposit agreement with a jury trial. Although we are not aware of a specific federal decision that addresses the enforceability of a jury trial waiver in the context of U.S. federal securities laws, it is our understanding that jury trial waivers are generally enforceable. Moreover, insofar as the deposit agreement is governed by the laws of the State of New York, New York laws similarly recognize the validity of jury trial waivers in appropriate circumstances. In determining whether to enforce a jury trial waiver provision, New York courts and federal courts will consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently prominent such that a party has knowingly waived any right to trial by jury.

We believe that this is the case with respect to the deposit agreement and the ADSs. In addition, New York courts will not enforce a jury trial waiver provision in order to bar a viable setoff or counterclaim sounding in fraud or one which is based upon a creditor’screditor’s negligence in failing to liquidate collateral upon a guarantor’sguarantor’s demand, or in the case of an intentional tort claim (as opposed to a contract dispute). No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any provision of U.S. federal securities laws and the rules and regulations promulgated thereunder.

If you or any other holder or beneficial owner of ADSs brings a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, including claims under U.S. federal securities laws, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or the depositary. If a lawsuit is brought against us and/or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different results than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action, depending on, among other things, the nature of the claims, the judge or justice hearing such claims, and the venue of the hearing.

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The depositary for the ADSs is entitled to charge holders fees for various services, including annual service fees.

The depositary for the ADSs is entitled to charge holders fees for various services including for the issuance of ADSs upon deposit of common shares, cancellation of ADSs, distributions of cash dividends or other cash distributions, distributions of ADSs pursuant to share dividends or other free share distributions, distributions of securities other than ADSs and annual service fees. In the case of ADSs issued by the depositary into The Depository Trust Company (DTC), the fees will be charged by the DTC participant to the account of the applicable beneficial owner in accordance with the procedures and practices of the DTC participant as in effect at the time.

The rights of our shareholders differ from the rights typically offered to shareholders of a U.S. corporation.

Our corporate affairs are governed by our articles of incorporation and by the laws governing ROC corporations and companies engaging in drug development, marketing and sales businesses. Certain rights and responsibilities of our shareholders, ADS holders and members of our board of directors under ROC law are different from those that apply to a U.S. corporation. For example, directors of ROC corporations are required to conduct business faithfully and act with the care of good administrators; however, the duty of care required of an ROC corporation’scorporation’s directors may not be the same as the fiduciary duty of a director of a U.S. Delaware corporation. In addition, controlling shareholders of U.S. Delaware corporations owe fiduciary duties to minority shareholders, while controlling shareholders in ROC corporations do not. Further, the rights of our shareholders to bring shareholders’shareholders’ suits against us or our board of directors under ROC law are more limited than those of shareholders of a U.S. Delaware corporation. Under ROC law, only shareholders who collectively hold at least three percent of our shares for at least one year may demand that one of our members of the audit committee institute a lawsuit on our behalf against our directors, and may directly initiate a lawsuit on our behalf if the requested member fails to do so. The court may order the suing shareholders to furnish an appropriate bond. Furthermore, if the suing shareholders do not prevail but cause damage to us, they will be liable for indemnifying us for such damages. As a result, it may be more difficult for our shareholders to protect their rights in connection with actions taken by our directors than would be the case for stockholders of a U.S. Delaware corporation. See the section of this Annual Report titled “Description“Description of Share Capital and Articles of Incorporation”Incorporation” in our prospectus dated November 26, 2018, filed with the SEC pursuant to Rule 424(b) for a description of the principal differences between the provisions of Taiwan law applicable to us and the U.S. Delaware General Corporate Law relating to shareholders’shareholders’ rights and protections. The Taiwan Company Act was amended on August 1, 2018, and took effect on November 1, 2018. Under the amended Taiwan Company Act (the Effective Company Act Amendment), the minimum holding and hold period for a shareholders’shareholders’ suit is reduced to one percent for at least six months. In addition, the court fees payable by such shareholders in a shareholders’shareholders’ suit will be capped NT$600,000, and the court may upon request appoint counsel for the shareholder plaintiffs.

We qualify as a foreign private issuer and, as a result, we are not subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that permit less detailed and frequent reporting than that of a U.S. domestic public company.

We report under the Exchange Act as anon-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form10-Q containing unaudited financial and other specified information, or current reports on Form8-K upon the occurrence of specified significant events. In addition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing”“short-swing” profit recovery provisions of Section 16 of the Exchange Act and the rules thereunder. Therefore, our shareholders may not know on a timely basis when our officers, directors and principal shareholders purchase or sell our common shares or ADSs. In addition, foreign private issuers are not required to file their annual report on Form20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form10-K within 75 days after the end of each fiscal year. Foreign private issuers also are exempt from Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information. As a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.

If we lose our status as a foreign private issuer, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordance with various

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U.S. Securities and Exchange Commission (SEC) and Nasdaq rules. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial compliance costs and would make some activities highly time consuming and costly. We also expect that if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult and expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified members of our board of directors and more expensive to procure director and officer liability insurance.

We are an EGC and we cannot be certain if the reduced reporting requirements applicable to “emerging growth companies” will make our ADSs less attractive to investors.

We are an EGC as defined in the JOBS Act. For as long as we continue to be an EGC, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not EGCs, including not being required to comply with the auditor attestation requirements of Section 404, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We may take advantage of these exemptions until we are no longer an EGC. We could be an EGC until December 31, 2023, although circumstances could cause us to lose that status earlier, including if the aggregate market value of our ADSs and common shares held bynon-affiliates exceeds $700 million as of the end of our second fiscal quarter before that time, in which case we would no longer be an EGC as of the following December 31st (the last day of our fiscal year). We cannot predict if investors will find our ADSs less attractive because we may rely on these exemptions. If some investors find our ADSs less attractive as a result, there may be a less active trading market for our ADSs and the price of our ADSs may be more volatile.

If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our ADSs.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our ADSs.

Management will beis required to assess the effectiveness of our internal controls annually, starting with our Annual Report on Form 20-F for the year ended December 31, 2019.annually. However, for as long as we are an EGC under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404. An independent assessment of the effectiveness of our internal controls could detect problems that our management’sourmanagement’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements requiring us to incur the expense of remediation and could also result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

The dual listing of our common shares and our ADSs may adversely affect the liquidity and value of our ADSs.

We cannot predict the effect of this dual listing on the value of our common shares and ADSs. However, the dual listing of our common shares and our ADSs may dilute the liquidity of these securities in one or both markets and may adversely affect the development of an active trading market for the ADSs in the United States. The price of the ADSs could also be adversely affected by trading in our common shares on the TPEx. In addition, currency fluctuations as between the New Taiwan dollar and U.S. dollar may have an adverse impact on the value of our ADSs.

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If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price of our ADSs and our trading volume could decline.

The trading market for our ADSs will depend in part on the research and reports that securities or industry analysts publish about us or our business. If no or too few securities or industry analysts commence coverage on us, the trading price for our ADSs would likely be negatively affected. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our ADSs or publish inaccurate or unfavorable research about our business, the price of our ADSs would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our ADSs could decrease, which might cause the price of our ADSs and trading volume to decline.

We may be classified as a passive foreign investment company (PFIC) in any taxable year and U.S. holders of our ADSs could be subject to adverse U.S. federal income tax consequences as a result.

Generally, if for any taxable year, at least 75% of our gross income is passive income, or at least 50% of the value of our assets is attributable to assets that produce passive income or are held for the production of passive income, including cash, we would be characterized as a passive foreign investment company, for U.S. federal income tax purposes. The determination of whether we are a PFIC depends on the particular facts and circumstances (such as the valuation of our assets, including goodwill and other intangible assets, and the characterization of our income, including whether certain research and development tax credits received from the government of Taiwan will constitute gross income, and if they do, whether they will constitute passive income for purposes of the PFIC income test) and may also be affected by the application of the PFIC rules, which are subject to differing interpretations. Based on our gross income, the average value of our assets, including goodwill and the nature of our active business, we do not expect to be treated asbelieve we were a PFIC for U.S. federal income tax purposes for the taxable year endingyears ended December 31, 2017 or December 31, 2018.2018 and we do not expect to be a PFIC for the taxable year ended December 31, 2019.

If we become a PFIC, U.S. holders of our ADSs may be subject to adverse U.S. federal income tax consequences, such as the ineligibility for any preferred tax rates on capital gains or on actual or deemed dividends for individuals who are U.S. holders, having interest apply to distributions by us and the proceeds of sales of the ADSs, and additional reporting requirements under U.S. federal income tax laws and regulations. Investors should consult their own tax advisors regarding all aspects of the application of the PFIC rules to our ADSs. For more information related to classification as a PFIC, see “Taxation—“Taxation—Material Income Tax Considerations—Considerations—Passive Foreign Investment Company Consequences.”

Comprehensive tax reform bills could adversely affect our business and financial condition.

The U.S. government has enacted comprehensive tax legislation that includes significant changes to the taxation of business entities. These changes include, among others, a permanent reduction to the corporate income tax rate. Notwithstanding the reduction in the corporate income tax rate, the overall impact of this tax reform is uncertain, and our business and financial condition could be adversely affected. We urge our shareholders to consult with their legal and tax advisors with respect to any such legislation and the potential tax consequences of investing in our common stock.

Item 4. Information on the Company

A. History and Development of the Company

Taiwan Liposome Company, Ltd. was incorporated as a company limited by shares under the provisions of the Company Act of the ROC in 1997 by Dr. Keelung Hong and was listed on the Taipei Exchange on December 21, 2012. We are primarily engaged in the development and commercialization of pharmaceutical products based on our proprietary lipid-assembled drug delivery platform technologies. On November 21, 2018, we completed our initial public offering of American Depositary Shares on the Nasdaq Global Market. Our ADSs are traded under the symbol “TLC”. Our common shares have been trading on the TPEx under “4152” since December 21, 2012.

Our registered and principal executive offices are located at11F-1, No. 3 Yuanqu Street, Nangang District, Taipei City, Taiwan 11503, Republic of China, and our general telephone number is +886 2 2655 7377. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. We also maintain a corporate website at www.tlcbio.com. Information contained in, or that can be accessed through, our website is not a part of, and shall not be incorporated by reference into, this document. We have included our website address in this document solely as an inactive textual reference.

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Our agent for service of process in the United States is George Yeh, TLC Biopharmaceuticals, Inc. (a wholly-owned subsidiary of the registrant) located at 432 North Canal Street, #20611 Gateway Boulevard, Suite 830, South San Francisco, California 9408094080. Phone number: (650)872-8816.

Our actual capital expenditures for the years ended December 31, 2016, 2017, 2018 and 20182019 amounted to NT$21,427 (US$700), NT$18,133 (US$592) and, NT$66,709 (US$2,179) and NT$55,592 (US$1,859), respectively. These capital expenditures primarily consisted of our continued investment in construction of additional facilities to support the development of our products and technologies. We expect our capital expenditures to increase in absolute terms in the near term as we continue to advance our research and development programs and grow our operations. We anticipate our capital expenditures in 20192020 to be financed from the proceeds from our existing cash and cash equivalents, including the net proceeds from our initial public offering of American Depositary Shares on the Nasdaq Global Market.

B. Business Overview

We are a clinical-stage specialty pharmaceutical company dedicated to the development and commercialization of novel nanomedicines that combine our proprietary lipid-assembled drug delivery platform with approved APIs. We believe that our extensive experience with liposome science allows us to combine onset speed and benefit duration, and to improve API concentrations at target tissues while decreasing unwanted systemic exposures. Our BioSeizer lipid formulation technology is designed to enable both local sustained release and fast onset of APIs at the site of disease or injury with increased pharmacokinetic (PK) control, made possible by customization of lipid layers. BioSeizer is utilized in our TLC599, TLC399 and TLC590 programs. Our NanoX active drug loading technology is designed to alter the systemic exposure of the drug, enabling the potential for reduced dosing frequency, and enhanced distribution of liposome-encapsulated APIs to the desired site. We believe NanoX is capable of loading over 50 various compounds and is applied to our two generic products that have been approved for sale in Asia as well as our TLC178 program. We believe our technologies can be used with a broad range of APIs and enable a simplified and scalable manufacturing process. Because our product candidates use already approved APIs, we intend to utilize the streamlined 505(b)(2) regulatory pathway for approval in the United States, which would allow us to rely, in part, on data from investigations that we have not conducted or sponsored and for which we have not obtained a right of reference. We have used our proprietary technology platforms to assemble a diverse product candidate portfolio that targets significant areas of unmet medical need in pain management, ophthalmology and oncology. We anticipate that our four leadOur two product candidates will be in late orpain management, TLC599 and TLC590, are currently in their pivotal stagePhase III and Phase II clinical trials, respectively, with TLC590 expected to enter Phase III by the end of 2020.

TLC599

Our primary lead product candidate, TLC599, is an intraarticular, orin-joint, injectable BioSeizer formulation of the API steroid dexamethasone sodium phosphate (DSP), which. With Phase II data demonstrating statistically significant pain reductions through 24 weeks, we believe TLC599 has the potential to become an attractive treatment for the management of OA pain. We have completed an open-label Phase I/II clinical trial of 40 patients with knee OA. Patients were randomized to be treated with a single dose of TLC599 at a dose level of either 6mg or 12mg DSP, and then followed up for 12 weeks with the primary efficacy endpoint to assess pain. We have also completed a double-blind, placebo-controlled Phase II clinical trial in 75 patients to evaluate the effects of TLC599 at two different dose levels at multiple time points over a24-week period. TLC599 met the primary endpoint of mean change from baseline using the Western Ontario and McMaster Universities Osteoarthritis Index (WOMAC) pain subscale through week 12. TLC599 also met key secondary endpoints of reductions in WOMAC pain scores through and at weeks 1, 4, 8, 12, 16, 20 and 24. Pain reductions observed through and at 24 weeks showed both rapid onset of pain relief as well as durable and persistent pain relief.

Preclinical canine and rabbit studies, which included an evaluation of effect on cartilage, found that TLC599 was not associated with any cartilage damage. In addition, we recently conducted a comparativein vivo animal study in beagle dogs to evaluate the toxicity and knee joint changes observed with TLC599 and two marketed products - products—triamcinolone acetonide (TA) and extended release triamcinolone acetonide (ER TA) - —against a saline control. This study, described further below, showed a moderate reduction in histologic staining for both TA and ER TA, which was attributed to the loss of cartilage matrix. Magnetic resonance imaging (MRI) results of TLC599 on knee cartilage suggested that TLC599 has potential protective effects and may reduce the cartilage damage associated with osteoarthritis.

TLC599 is designed to be administered using needle sizes ranging from 21 gauge to 30 gauge, allowing for possible expanded administration capabilities, for example into hips and shoulders as well as smaller joints such as within the hands and fingers. TLC599 is produced using a scalable manufacturing process that uses sterile filtration at the near end stage, rather than ana costlier, entirely aseptic process from raw material to final product.

We completed an end of Phaseend-of-Phase II meeting with the FDA in FebruaryApril 2019 and expect to initiateinitiated a single pivotal Phase III trial in mid-2019October 2019 evaluating the safety and efficacy of single and repeat administrations of TLC599 for the purpose of an NDA submission.

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TLC590

Our second product candidate, TLC590, is anon-opioid, BioSeizer formulation of the API ropivacaine and is in development for post-surgical pain management. Phase I/II data demonstrating pain reductions after hernia repair surgery through 168 hours showed that TLC590 has the potential to offer distinct advantages over other approved extended release products in this indication. In particular, we believe that (i) ropivacaine as the API has the potential to confer less cardiovascular and central nervous system toxicity than bupivacaine, the API in some extended release formulations, and (ii) TLC590’sTLC590’s dense multilameller structures are capable of providing high concentration drug loading and continuous release of the API which, when administered into the surgical site, may provide both rapid and extended pain relief. In preclinical studies, TLC590 extended the effective half-life of ropivacaine by about20-fold and displayed earlier onset and a longer and larger magnitude of anesthetic effect than a marketed extended release bupivacaine.

We filed an IND application for TLC590 with the FDA in April 2018. We have finished the recruitment and dosing of patients following inguinal hernia surgery inIn March 2019, we completed a Phase I/II dose-escalation clinical trial in the United States.States in patients following inguinal hernia surgery. Topline data from this trial, which we received in March 2019, showed that patients treated with TLC590 demonstrated durable, statistically significant and clinically meaningful improvement over the ropivacaine through 96 hours. TLC590 demonstrated greater reductions in pain than ropivacaine at every24-hour interval through 168 hours. 58.3% of patients treated with TLC590 were opioid-free through the entire duration of the study; among those who did use rescue opioids, time to first use was about four times that of the ropivacaine group. Mean total opioid consumption for the TLC590 group was 54% less than the ropivacaine group.

We have begun aAtwo-part Phase II clinical trial of TLC590 in patients following bunionectomy. Toplinebunionectomy is ongoing. The safety, dose linearity and relative bioavailability were established in Part 1 in June 2019. Part 2 is a double-blinded evaluation of the efficacy and safety of TLC590 compared to placebo and bupivacaine in 150 patients. Enrollment of Part 2 was completed in February 2020, with topline data fromon the first partanalgesic efficacy of this trial isTLC590 expected in mid-2019.mid-2020.

TLC399

Our third product candidate, TLC399, is a multilamellar (multilayered) and multivesicular (membrane enclosed sacs) BioSeizer formulation of DSP for ophthalmology indications. We designed TLC399 to have fast-acting and long-lasting effects when injected into the eye’seye’s vitreous humor to treat macular edema associated with RVO.

Macular edema is one of the most prominent treatable causes of decreased visual acuity in patients with RVO. In preclinical models, TLC399 achieved therapeutic drug levels in the eye for at least six months after a single administration. We have observed in an ongoing Phase I clinical trial that four out of five evaluable patients among the nine patients treated with TLC399 have experienced improvements in and/or stabilized vision and decreased retinal central subfield thickness (CST), with one patient in group 1 reaching and maintaining target CST for 12 months. An increase in intraocular pressure was reported as a serious adverse event in two patients in the Phase I clinical trial but was manageable with eye drops. An increase in intraocular pressure is a known risk of other intravitreal steroid injections, including the standard of care therapies for macular edema. We submitted an IND for macular edema secondary to RVO indication on November 22, 2013.

AWe have completed conduct of a randomized, double-blind Phase II clinical trial evaluating three different doses of TLC399 in RVO patients is underway, with a temporary recruitment pauseand expect to prepare the final data report for an SMC to make a comprehensive assessment to select an optimal dose group withthis trial in the best vision response.second half of 2020. In August 2018, the SMC made a comprehensive assessment and recommended the 0.6mg DSP with 50mM phospholipid (PL) in 50µ50µL solution dose as an optimal dose with the best vision response to move forward; thisforward. This dose will be further studied along within a higher dose (70µL) of the same formulation (containing 50mM PL). We expect to resume recruitment after the study protocol amendment is implemented.separate trial. The preliminary evaluation of our Phase II trial data in TLC399 has not been able to show evidence of efficacy beyond three months. We believe this is due to the use of rescue medications in the majority of patients, even those who did not meet rescue criteria.criteria, and will emphasize to trial investigators in future trials the necessity to confirm that patients meet the rescue criteria prior to administering rescue medication. Efficacy evaluation has also been limited by observations of vitreous haze, which was judged as serious adverse events in two patients in the group treated with the higher concentration formulation.formulation; this dose group has not been chosen to continue. In clinical and animal studies conducted to date, we have observed potential sustained duration of action of three to six months.

Unlike a current dexamethasone treatment, whose drug-eluting implant may take up to six months to dissolve, TLC399 does not use any implants. TLC399 is designed to be administered using a30-gauge needle, which is smaller in diameter (0.3112mm) than current marketed steroid injectionsinjections’’22-gauge 22-gauge (0.7176mm), and consequently could reduce the risk of conjunctival hemorrhaging, infections and complications.

We anticipate exploring additional ophthalmic indications for TLC399 alone or in combination with intravitreal anti-vascular endothelial growth factor (anti-VEGF) drugs, such as diabetic macular edema (DME), an indication where other steroid products have previously demonstrated efficacy.

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TLC178

Our fourth product candidate, TLC178, which uses our NanoX targeted delivery technology with vinorelbine tartrate as the API, is under development to treat RMS, a form of soft tissue sarcoma (STS) that most frequently occurs in children.Non-resectable RMS tumors and tumors that recur after surgery are generally treated with chemotherapeutic agents such as vincristine, dactinomycin, cyclophosphamide, and vinorelbine. In clinical trials of relapsed or refractory RMS, vinorelbine treatment yielded an approximately 36% overall response rate, with four to seven months duration of response. Dose limiting toxicity of vinorelbine is mainly hematological, and TLC178 is designed to enhance the accumulation of vinorelbine in the tumor while limiting systemic exposure, thus reducing hematological toxicity. We submitted an IND to evaluate TLC178 in clinical trials in advanced solid tumors/lymphoma indication on August 31, 2016. A Phase I/II dose escalation trial of TLC178 in adult patients with advanced malignancies is currently underway.ongoing. We have found the suitable dose for dosing every four weeks in Stage 1A of this Phase I/II trial and are exploring the suitable dose for dosing every two weeks in Stage 1B. We plan to provide an interim clinical data update once all patients in Stage 1A have been followed up for six months, in the second quarter of 2020. We filed an IND application for TLC178 in pediatric RMS with the FDA in June 2018, and plan to initiate a pediatric Phase I/II clinical trial once we have identified athe suitable dosedoses in adult patients, which we expect to report in an analysis in the second half of 2019.patients. We have received a Rare Pediatric Disease Designation for TLC178 in RMS, which will qualify TLC178 in this indication for priority review in the United States and make us eligible to receive a transferable Priority Review Voucher, if approved. Assuming successful completion of our development program, we plan to seek initial approval for TLC178 in RMS and believe that asingle-arm, response-oriented registration trial may be sufficient for approval. In parallel with our efforts in RMS, we also plan to initiate clinical trials evaluating TLC178 in other STSs, for which TLC178 has already received from both the FDA and the European Medicines Agency an Orphan Drug Designation (ODD) that can potentially provide marketing exclusivity for seven years in the United States (ten years in the European Union), and innon-small cell lung cancer (NSCLC).

Corporate Information

We were founded in 1997 by Dr. Keelung Hong, PhD, who alsoco-founded Hermes Biosciences Inc. (Hermes) in 1998 and served as its Chief Scientific Officer from 1998 to 2005. Dr. Hong is theco-inventor and patent holder of Hermes’Hermes’ liposomal irinotecan Onivyde. Hermes was acquired by Merrimack Pharmaceuticals, Inc. in 2009 and the Onivyde program was subsequently acquired by Ipsen SA in 2017. Dr. Hong also served as a scientific advisor to Sequus Pharmaceuticals, Inc. (Sequus), which was founded by Dr. Demetrios Papahadjopoulos, a pioneer in liposome development. Sequus was acquired by ALZA Corporation in 1998 after developing its liposomal doxorubicin, Doxil. Dr. Hong has over 35 years of experience in liposome science, accumulating over time at the University of California Berkeley, Stanford University and the Liposome Research Lab at the University of California, San Francisco. During their tenure at our company, Dr. Hong and our Vice President of Research and Development, Dr. Yunlong Tseng, PhD, invented our NanoX platform. Our Senior Director of Product and Development, Dr. Sheue Fang Shih, PhD, is the inventor of our BioSeizer platform. Our President, George Yeh, leads our seasoned team, Mr. Yeh also served as the Chief Financial Officer at Hermes from 2002 to 2005. Our Chief Medical Officer, Dr. George Spencer-Green, MD, MS, served as the clinical head of Pfizer’s biosimilars development program as well as the Global Medical Director at Abbott Laboratories, where he led the rheumatoid arthritis registration and long-term extension programs for the blockbuster drug Humira. Our Vice President of Manufacturing and Development, Dr. Vincent Chang, PhD, brings with him over 35 years of experience in process development, project management and quality assurance, 25 years of which were with Abbott, where he was responsible for the quality assurance of contract manufacturing from APIs to a wide range of dosage forms of drug products.

Our team has over 200 years of domestic and global experience in lipids and other life sciences products and drug development expertise. Their accomplishments include gaining the approval of two NanoX formulation generic lipid formulation products marketed in Asia. We are headquartered in Taipei, Taiwan, with offices in Hsinchu, Hong Kong, Leiden, Melbourne, Shanghai, South San Francisco and Tokyo.

We are a publicly traded company listed on the TPEx.TPEx and Nasdaq. We have been listed on TPEx since December 2012 and have been ranked in the top 5% in the Corporate Governance Evaluation among all Taiwan listed companies every year since our listing on TPEx. We have been listed on Nasdaq since November 2018.

Pipeline

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Pipeline

Our Strategy

Our strategy is to develop and commercialize highly differentiated liposome-based products for indications associated with high unmet medical needs. Our strategy includes the following key components:

TLC599

TLC599 is our proprietary BioSeizer formulation of DSP under development for the treatment of OA pain. We are investigating TLC599 as a therapeutic that has the potential to deliver rapid pain relief and to maintain this pain relief for up to six months.

OA Background

OA is a joint disorder involving the degeneration of the articular cartilage. OA leads to inflammation of the soft tissue and bony structures of the joint. This condition grows more severe over time and leads to progressive thinning of articular cartilage. Symptoms include pain, stiffness, swelling and limitation in the function of the joint. Physicians are currently unable to reverse the progression of OA.

The following graph outlines what we believe to be the standard treatment progression for the treatment of OA pain in the knee:

Figure 1. Typical course of treatment for patients with knee OA

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A number of therapeutic options exist to treat the pain associated with knee OA. In the early stage, oral pain medications such as acetaminophen are often prescribed, followed by oral or topicalnon-steroidal anti-inflammatory drugs (NSAIDs). These oral drugs may have side effects such as stomach pain, heartburn, ulcers, bleeding, headaches, dizziness, liver and kidney problems and high blood pressure. When these therapies fail to alleviate the pain, physicians often prescribe intraarticular, orin-joint, injections of hyaluronic acid or steroid into the affected joint. If the disease continues to progress, patients may eventually require joint replacement surgery, such as total knee arthroplasty, which is expensive and may require substantial recovery time.

According to the Arthritis Foundation, there were an estimated 30.8 million OA patients in the United States in 2015, with the number of patients expected to grow as a result of aging, obesity and sports injuries. According to data published in October 2010 by the National Institutes of Health, by 2030 an estimated 20% of Americans over the age of 65 will be at risk of developing OA. According to GlobalData, the OA market in the United States, France, Germany, Italy, Spain, the United Kingdom and Japan is expected to increase from an aggregate of $1.6 billion in 2016 to an aggregate of $3.5 billion by 2026 at a compound annual growth rate of 8.1%.

Limitations of Current Treatments in OA

Approved intraarticular treatments include steroids and hyaluronic acid viscosupplements. While immediate release steroid injections can provide rapid pain relief, the effect generally only lasts for two to four weeks post injection. In addition, clinical guidelines suggest limiting intraarticular steroid injections in any given joint. Currently approved dexamethasone preparations are freely soluble in water and can therefore be taken up rapidly by cells, leading to a quicker onset of effect as compared to other steroids, but suffer from a concomitant reduced duration of action. The American Academy of Orthopedic Surgeons has stated that they cannot recommend using hyaluronic acid for patients with symptomatic knee OA due to a lack of efficacy.

While anAn extended release steroid formulation for knee OA pain was recentlyhas been approved by the FDA thisand is currently in the market. This product uses a steroid called TA instead of DSP as the API. TA and ER TA, as described further below, have been associated with chondrotoxicity and related cartilage damage in preclinical and clinical studies. We have not observed this effect in our preclinical studies of TLC599 to date. A randomized, placebo-controlled, double-blind clinical trial of intra-articular triamcinolone versus saline for moderate knee OA in 140 patients was conducted from June 2011 to January 2015 at Tufts Medical Center to determine the effects of 40mg of TA on cartilage loss using annual knee magnetic resonance and on knee pain using the WOMAC index. 119 patients completed the study; those who received 40mg immediate release TA four times per year for two years had significantly greater cartilage loss than those receiving placebo, with no significant differences in pain scores between the two groups. The currently marketed long-acting steroid is not approved for repeat administration. However, inIn connection with a Phase 3bIIIb open-label repeat dose safety trial in patients with knee OA, the manufacturer of this extended release steroid formulation recently announced that an analysis ofX-rays taken at baseline and Week 52 showed that repeat administration of this extended release steroid formulation had no deleterious effects on cartilage or joint structure and that there were no observations of chondrotoxicity. The label of this drug was recently revised with a supplementary New Drug Application (sNDA), where the Limitation of Use was revised from “not intended for repeat administration” to “The efficacy and safety of repeat administration have not been demonstrated”. The label now also includes addition of preclinical toxicology data from their single and repeat administration studies innon-diseased animals, which showed that administration of the ER TA resulted in increased incidence, severity, and duration of microscopic changes and decreased staining (decreased proteoglycan content in the cartilage of the knees) compared to an equivalent dose of immediate-release TA. Findings from this preclinical study were consistent with our own preclinical toxicology data, which is described further below.

Despite the use of currently available intraarticular treatments, many OA patients experience persistent and worsening pain, which has the potential to lead to opioid abuse. Therefore, joint replacement surgery, such as total knee arthroplasty, is generally the last option for the treatment of OA. Due to the expense of surgery and the limitations of treatments administered to prevent such surgeries, we believe there is a need for a safe alternative treatment that could provide both rapid and sustained relief from OA pain, which would reduce the risk of opioid abuse, and potentially delay the need for joint replacement surgery. Postponing joint replacement surgery, such as total knee arthroplasty, may further decrease the chance of requiring a second “revision”“revision” surgery in the patient’spatient’s lifetime, which is typically even more complicated and costly than the initial surgery.

Our Solution: TLC599

TLC599 is our proprietary BioSeizer formulation of DSP designed to provide sustained pain management over an extended period of up to six months. We believe TLC599 has the potential to show distinct advantages over current anti-inflammatory products in knee OA because it has the potential to enable patients to receive both immediate and sustained benefit from the local delivery of a highly potent and clinically validated steroid, DSP, that typically has a very short half-life. Based on our clinical studies to date, we have observed a reduction in pain as measured by WOMAC pain scores measured both through and at 24 weeks from baseline. We therefore believe that TLC599 has the potential to achieve one of the longest durations of action for an intra-articular steroid if successfully developed and approved. Furthermore, we believe that the selection of DSP as our API may confer less chondrotoxicity, enabling safer repeat dosing.

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We believe that TLC599 has the potential to provide long-lasting pain relief due to our process of encapsulating the steroid through our BioSeizer technology. Specifically, TLC599 traps DSP in multiple layers and pockets of liposome, much like the structure of an onion. As time progresses, the layers of these multilamellar and multivesicular vesicles are designed to slowly peel off, freeing the DSP that was trapped, or seized, and resulting in a consistent release of the API over time.

The greater solubility of DSP in its unformulated form has limited its routine use in knee OA because of its tendency to dissolve and not stay localized in the knee. Our formulation of DSP in TLC599 exploits the fact that DSP is amphipathic (contains both polar (water-soluble) and nonpolar (not water-soluble) portions in its structure). We believe this amphipathic property is well-suited for liposome-based formulations as it allows DSP to be entrapped into the aqueous portion of the interior volume of the liposome via the polar portion and associated with the vesicle surface of the liposome via the nonpolar portion. This formulation also provides free,non-entrapped drug designed for immediate therapeutic relief while the lipid-entrapped drug is gradually released over a long period of time through hydrolysis and oxidation of the lipids resulting in the lipid bilayer breakdown. Accordingly, TLC599 is designed to convert DSP’sDSP’s key limitation for treating knee OA, its solubility, into an asset, potentially enabling long residence time in the knee with continuous slow release.

DSP has a five-fold increased anti-inflammatory potency compared to TA, allowing more activity to be delivered with a smaller quantity of drug. Inin vivo andin vitro studies, DSP did not cause chondrotoxicity, unlike in third party studies of TA where chondrotoxicity was observed. We believe the selection of DSP as the API for TLC599 will confer less chondrotoxicity.

TLC599 Preclinical Toxicology Data

According to published data in a recent human chondrocytein vitro study of various steroids, Decadron, which is the brand name for DSP, showed the least chondrotoxicity (comparable to negative control). Kenalog, the brand name for TA, which is the API used in the recently approved long-acting steroid for OA knee pain, showed doubled chondrocyte cell death versus control.

Figure 2. Human chondrocytein vitrostudies – Dexamethasone showed the least chondrotoxicity

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In our recent in vivopharmacokinetic and toxicokinetic study in dogs, TLC599 showed a long-lasting release profile in dog joints after a single intra-articular injection; drug levels were locally maintained for up to 120 days. No accumulation of dexamethasone phosphate was observed in dog plasma following multiple-doses of TLC599 with administration every 3 months, supporting the possibility of repeat dosing in humans. Systemic exposure following intra-articular injections of TLC599 is minimal and generally dose proportional. The data was presented in at the Annual European Congress of Rheumatology (EULAR) in June 2019.

In ourin vivo study in dogs, we evaluated the potential toxicity of TLC599 by comparing cartilage damage, proteoglycan loss and the suggested underlying chondrotoxicity of a single-dose intraarticular injection of 12mg of TLC599 with two different doses of two marketed products — TA and ER TA. Beagle dogs were dosed with saline (control), a higher (18.75mg) and lower (2.1mg) dose of TA, a higher (18.75mg) and lower (2.1mg) dose of ER TA, or 12mg of TLC599 (equivalent to 60mg TA) in knee joints. At Day 30, all knee joints (n = 4 per group) were observed microscopically and histology slides with Toluidinetoluidine blue staining were used to evaluate any loss of cartilage matrix. The less intense the staining is compared to saline control, the more proteoglycan loss and underlying chondrotoxicity. As shown below, at 30 days post treatment, TLC599 showed comparable stain intensity to saline. Higher dose TA and ER TA both showed less staining compared to saline, while lower dose ER TA showed less staining than its equipotent dose TA, as well as saline. In this study, ER TA was therefore observed to result in more proteoglycan loss and underlying chondrotoxicity than the API of TA alone.

Figure 3. Proteoglycan staining of the cartilage in beagle dogs – TLC599 showed more intense

staining than TA and ER TA

In anotherin vivo study in dogs and rabbits, a single dose of TLC599 (12mg) was administered into knees of dogs and two doses of TLC599 (1.2mg each dose, second dose one month after) were administered into knees of rabbits. No intensity changes in toluidine blue staining or morphology were observed in either the dogs or rabbits, indicating no proteoglycan loss or cartilage damage, even after repeat dosing.

Figure 4. Proteoglycan staining of the cartilage in dogs & rabbits – no intensity or morphology change observed, even

after repeat dosing of TLC599

Data on proteoglycan staining of the cartilage were presented at the Osteoarthritis Research Society International (OARSI) World Congress in May 2019.

TLC599 Phase I/II Data

In our open-label Phase I/II clinical trial completed in 2016, 40 subjects in Taiwan with moderate to severe knee OA were enrolled and randomly assigned to one of two groups to receive a single intra-articular dose of TLC599 at a dose levels of either 6mg or 12mg DSP and were then followed up for efficacy and safety evaluation over 12 weeks. Visual Analog (VAS) pain and WOMAC scores were utilized as the efficacy measurement instruments. The VAS pain score is a measurement instrument where a patient selects their pain level on a linear scale from 0 to 10 centimeters (with 10 as the worst pain imaginable). The WOMAC is a set of standardized questionnaires used by health professionals to evaluate the condition of patients with knee OA, including pain (max score=20), stiffness (max score=8), and physical functioning (max score=68) of the joints. Higher WOMAC scores indicate worse pain, stiffness and functional limitations. For ease of interpretation, we have scaled and shown the WOMAC scores as the average of responses on a0-4 Likert scale, with 0 being no pain and 4 being extreme pain.

In this Phase I/II clinical trial we found that single doses of TLC599 containing 6mg DSP or 12mg DSP led to rapid decrease, or improvement, in both the VAS pain and WOMAC scores. This exploratory trial only included TLC599 treatment groups and did not make statistical comparisons to a placebo or active control treatment. After a single injection of TLC599, decreases in VAS and WOMAC were observed at the first follow up visit at one week post-injection and persisted without notable loss of effect through the end of the trial at 12 weeks, as shown in the following figures. At baseline, the mean VAS score assessed by all 40 subjects was 6.41 (±(± 1.19 standard deviation (SD)). The mean value of WOMAC total score was 1.51 (±(± 0.78 SD) while the mean subscale scores in pain, stiffness and physical function were 1.48 (±(± 0.77 SD), 1.35 (±(± 0.90 SD) and 1.54 (±(± 0.82 SD), respectively.

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Figure 4.5a. TLC599 Phase I/II VAS Scores

Figure 5. Phase I/II WOMAC scores of TLC599 in knee OA — – onset within one week, persisted to

week 12

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Figure 5b. TLC599 Phase I/II WOMAC scores— onset within one week, persisted to week 12

This trial provided preliminary data of pain reduction in WOMAC score from baseline throughout the trial period. The extent of decrease in WOMAC score also exceeded the minimally clinically important difference cutoff according to the Outcome Measures in Rheumatology-Osteoarthritis Research Society International, a new OA pain measurement tool, indicating the improvement in symptoms was clinically meaningful. Responder criteria is defined as 1) having 50% or more improvement in pain or in function with absolute change of 20 or more points, or 2) 20% or more improvement in both pain and function with absolute change of 10 or more points in each evaluation. The majority of the patients displayed clinical response at all time points through 12 weeks for both dose levels.

Figure 6. Percentage of clinical responders through 12 weeks

Cortisol levels were monitored because cortisol can disrupt glucose homeostasis, which would be a potential concern in patients with diabetes as a comorbidity. During this trial, the value of plasma cortisol decreased after TLC599 injection but remained within the normal range and gradually elevated over time for both dose levels, as shown in the following figure:

Figure 7. Plasma cortisol levels in Phase I/II clinical trial of TLC599 remained in the normal range

The full data set from this Phase I/II study were presented at the 20th Asia Pacific League of Associations for Rheumatology Congress (APLAR) in September 2018.

TLC599 Phase II Data

We completed a double-blind, placebo-controlled Phase II clinical trial in Australia and Taiwan to explore the safety and treatment efficacy of two different dose levels of TLC599 compared to placebo in patients with knee OA in August 2018. In this clinical trial, 75 patients with a mean age of 63.9 years, moderate degeneration knee OA, and VAS scores of5-9 were randomized into three different trial groups, each receiving a single intraarticular administration of either TLC599 12mg, TLC599 18mg, or a placebo control (saline). Study design and demographics are shown in Figure 8.

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Figure 8. TLC599 Phase II clinical trial — study design and demographics

The primary endpoint was to evaluate the change from baseline by WOMAC pain scores through Week 12. Other analyses such as change from baseline in WOMAC pain, WOMAC physical function, and VAS scores through and at various time points up to Week 24, as well as the proportion of clinically durable responders, were included in the secondary endpoints. Safety and efficacy were assessed at Day 3, Week 1, and every four weeks up to 24 weeks.

Using the WOMAC pain outcome measure, TLC599 12mg demonstrated statistically significant reduction in pain compared to placebo from Day 3 through Week 12 (p=0.0027), meeting the primary endpoint. Furthermore, TLC599 12mg demonstrated persistent and statistically significant reduction in pain as measured by WOMAC pain scores compared to placebo from Day 3 through Week 16 (p=0.0024), Week 20 (p=0.0033), and Week 24 (p=0.0037), as shown in Figure 9a, reflecting the sustained reduction in pain for at least 24 weeks. TLC599 12mg also demonstrated statistically significant reduction in pain as measured by WOMAC pain scores compared to placebo at Week 12 (p=0.0050), Week 16 (p=0.0165), Week 20 (p=0.0414), and Week 24 (p=0.0227), as shown in Figure 9b.

Although there were some differences in gender and Kellgren-Lawrence(K-L) grade between groups at baseline, with more males and more subjects withK-L Grade 2 in the TLC599 12mg group than the placebo or 18mg group, we do not believe that these differences affected the results, as we observed the similar trend of greater reductions in pain as measured by WOMAC pain scores in the TLC599 12mg group than in the placebo group regardless of gender andK-L subgroups.

A majority of patients in the TLC599 12mg group had a clinically durable response, maintaining at least 30% pain reduction as measured by WOMAC pain scores at all visits from Week 1 through Week 12 (56% vs 29% in placebo; p=0.0100) and further through Week 24 (52% vs 22% in placebo; p=0.0143), as shown in Figure 9c. The percentage of durable responders over the24-week period in the TLC599 12mg group was more than twice that of the placebo group. According to the consensus by the Initiative on Methods, Measurement, and Pain Assessment in Clinical Trials (IMMPACT), which provides recommendations for interpreting clinical importance of treatment outcomes in clinical trials of the efficacy and effectiveness of chronic pain treatments, reductions of 30% or more reflect at least moderate clinically important differences.

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Figure 9a. TLC599 Phase II clinical trial — TLC599 12mg met primary endpoint of mean change from baseline in

WOMAC pain through Week 12, as well as Weeks 16, 20, and 24

Figure 9b. TLC599 Phase II clinical trial — TLC599 12 mg showed statistically significant reductions in WOMAC pain

as compared to placebo at every scheduled visit

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Figure 9c. Phase II clinical trial of TLC599 — over half of patients treated with TLC599 12 mg maintained at least 30%

reduction in pain as measured in WOMAC scores throughout the24-week study

Similar results were observed using the WOMAC physical function as outcome measure. Patients treated with TLC599 12mg displayed significantly greater improvement in WOMAC physical function than placebo from Day 3 through Weeks 12, 16, 20, and 24, as well as at Week 12, 16, 20, and 24 (p<0.05).

Similar results were also observed using the VAS pain scores as outcome measure. TLC599 12mg demonstrated statistically significant reduction in pain based on VAS pain scores compared to placebo from Day 3 through Week 12 (p=0.0018), Week 16 (p=0.0021), Week 20 (p=0.0026), and Week 24 (p=0.0033), as shown in Figure 10a, again reflecting the sustained reduction in pain for at least 24 weeks. TLC599 12mg also demonstrated statistically significant reduction in pain compared to placebo at Week 12 (p=0.0113), Week 16 (p=0.0192), Week 20 (p=0.0349), and Week 24 (p=0.0319), as shown in Figure 10b.

Using the VAS score outcome measure, the percentage of clinically durable responders in the TLC599 12mg group was three times that of the placebo group. Over half of patients in the TLC599 12mg group maintained at least 30% pain reduction at all visits from Week 1 through Week 12 (52% vs 14% in placebo; p=0.0057) and further through Week 24 (52% vs 17% in placebo; p=0.0136), as shown in Figure 10c.

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Figure 10a. TLC599 Phase II clinical trial — TLC599 12 mg showed statistically significant improvement in VAS

scores through Weeks 12, 16, 20, and 24

Figure 10b. TLC599 Phase II clinical trial — TLC599 12mg showed statistically significant reduction in VAS pain as

compared to placebo at every scheduled visit

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Figure 10c. Phase II clinical trial of TLC599 — three times more patients in TLC599 12mg group maintained at least

30% reduction in pain throughout the 24 week study than placebo group

Overall, TLC599 12mg showed rapid onset of pain reduction, with a robust magnitude of effect observed as early as the first post-administration assessment at Day 3. A majority of patients in the 12mg group maintained at least 30% pain reduction at every visit through week 24. TLC599 18mg did not lead to as much pain score reduction as the TLC 12mg. Across our clinical trials for TLC599, we studied the effects of three different dose levels: 6mg, 12mg and 18mg, and combined data from these trials suggested that the 12mg dose had the largest improvement in pain, with improvement throughout 24 weeks after one single injection. We believe neither the higher 18mg dose nor the lower 6mg dose of the lipid-formulated TLC599 led to better pain score reductions because a certain amount of released DSP in the joint space needs to be achieved in order to provide sustainable therapeutic effects. In anin vitro release study that we conducted to mimic the clinical setting, TLC599 at five different dose levels was injected into artificial synovial fluid and the amount of DSP released was measured at different time points. Our data showed that there was an optimal range of doses of TLC599 that caused DSP to be released at a sustainable level over time. We expect that higher doses of TLC599 cause the release of DSP into the joint environment at a much lower rate, while lower doses of TLC599 cannot produce a sustainable level of DSP over time. We believe that this finding, together with the observation from the Phase II dose-ranging clinical trial, indicates the 12mg dose to be the optimal dose for future development.

Data from the24-week study showed that the incidence of treatment-emergent adverse events (TEAEs) among the three groups (TLC599 12mg, TLC599 18mg and placebo) were comparable and no drug related serious adverse events were observed. The incidence of injection procedure-related and index knee-related TEAEs were similar between TLC599 18mg and placebo groups and were slightly lower in the TLC599 12mg group.

Figure 11. TLC599 was well tolerated, with comparable frequency of TEAEs to placebo

Data from this Phase II study were presented by Dr. David Hunter, Professor of Medicine at the University of Sydney, winner of the 2019 OARSI Clinical Research Award and principal investigator of this trial, as an oral presentation titled “Single Intra-articular Injection of TLC599 Provided Sustained Pain Relief through 24 Weeks in Participants with Symptomatic Knee Osteoarthritis” at OARSI World Congress in May 2019.

TLC599 demonstrated sustained reductions in pain through 24 weeks (Figure 11). We believe the development of a product for knee OA that results in a prolonged suppression of pain, along with a quick onset of pain relief, would be welcomed by both patients and physicians.

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Figure 11.12. Reduction in WOMAC pain in Phase II trial of TLC599

Magnetic resonance imaging (MRI) results of TLC599 on knee cartilage, which were presented at the American College of Rheumatology 2019 ACR/ARP Annual Meeting in October 2019, suggested that TLC599 has potential protective effects and may reduce the cartilage damage associated with osteoarthritis. To evaluate the effect of single intra-articular injection of TLC599 on knee cartilage, MRI was conducted on both knees of all 75 patients before dosing with TLC599 or saline placebo and at Week 24, and cartilage was evaluated by a blinded radiologist at each center using the MRI Osteoarthritis Knee Score (MOAKS) instrument, which indicated the progression of knee joint cartilage deterioration in 14sub-regions, each graded for percentage of surface area (size) loss and percentage of full-thickness (depth) loss. MOAKS score patterns between placebo, which represents the natural course of the disease knees, and the TLC599-treated patient knee were assessed. Index knees were compared with thenon-index knees over the 24-week period. In the placebo group, the index knee displayed similar or more cartilage damage than thenon-index knee. In the TLC599 groups, patients displayed lower proportions of significant cartilage damage in the index knee than thenon-index knee. These findings suggest there may be protection from or delay in cartilage degeneration by TLC599 injection in patients with knee OA.

Figure 13. Comparing MRI of index tonon-index knees, fewer patients treated with TLC599 displayed cartilage loss

than with placebo treatment, suggesting a lack of cartilage damage or potentially a chondroprotective effect

TLC599 PK trial

We submitted an IND and received clearance from the FDA in July 2018 to proceed with a Phase II, open-label, pharmacokinetic trial for TLC599 in the United States. The primary objective of this trial is to characterize the PK profiles of TLC599 and immediate release DSP in the knee joint synovial fluid and blood plasma of subjects with mild to moderate knee OA. Safety and tolerability will also be evaluated. We have begun enrollment of patients in this trial and expect to see PK results for a portion of the patients in the third quarter of 2019.before our NDA submission.

TLC599 Planned Pivotal TrialsTrial

We completed an end of Phaseend-of-Phase II meeting with the FDA in FebruaryApril 2019. Based on our conversations with the FDA, we believe that a single pivotal trial should be sufficient for an NDA submission. We expect to initiateinitiated this pivotal trial in the United States in mid-2019, with no need for anotherOctober 2019.

This multi-center, randomized, double-blind, placebo- and active comparator-controlled pivotal trial one quarter thereafter as previously planned.

For this randomized, controlled pivotalPhase III clinical trial, we plan tonamed “EXCELLENCE”, will assess the safety and efficacy of a single intraarticular administration of TLC599 in comparison to placebo and active DSP comparator treatments in patients with knee OA over 24 weeks, as well as assess the benefit of a repeated intraarticular administration at week 24.

Approximately 500 patients with moderate to severe symptomatic knee OA with radiographic severity of Kellgren-Lawrence (KL) Grade 2 to 3, recruited across 40 sites in the United States and 5 sites in Australia, will be randomized in a 2:1:1 ratio to receive an intraarticular injection of TLC599, DSP or normal saline placebo on Day 1. At week 24, withpatients can receive a second blinded injection of TLC599 or placebo. Patient enrollment is expected take approximately one year, and all patients will be followed for a total follow-up period of 52 weeks.

The primary efficacy endpoint for the single injection is the magnitude of pain relief by WOMAC Pain score versus placebo at Week 16; secondary efficacy endpoints include the magnitude of pain relief by WOMAC Pain or Function scores versus DSP or placebo at Weeks 16, 20, and 24 as well as patient global impression of change (PGIC). Efficacy will also be assessed for the repeated administration by WOMAC Pain or Function score versus placebo.

TLC599 – Expanded Indications

If TLC599 is approved for OA knee pain, we anticipate conducting other trials of TLC599 in additional indications, including OA of the hip and frozen shoulder, as well as erosive OA of the hand and finger, especially the base of the thumb in light of the proposed administration of TLC599 through small needle injections.

The FDA has indicated that our proposal to seek approval of TLC599 using the regulatory 505(b)(2) pathway is reasonable. We have received patents from the USPTO for the method of treating arthritis, with terms extending into 2033, and intend to file additional patenthave filed PCT applications covering use of TLC599 based upon additional research and clinical development.in joint pain treatment.

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TLC599 – Market Research Study

Prior to the completion of the Phase II clinical trial of TLC599, a market survey was conducted by a third party, ZS Associates, on our behalf to better understand the market potential and potential pricing for TLC599 in the United States. The research was comprised of a quantitative survey of 100 physicians and a set of qualitative interviews with nine physicians. Based on the results of the market survey, we believe that sustained release steroids are positioned to occupy a previously vacant niche in the moderate knee OA pain market.

Based on a hypothetical profile of TLC599 which assumed an efficacy duration of 16 weeks, aone-week timespan to peak pain relief, less toxicity and possibility for repeat dosing, the market research study suggests that TLC599 could achieve usage in up to 26% of the total U.S. moderate knee OA patient population, likely due to the assumed sustained duration of pain reduction. As a result of our topline data from our Phase II study, which showed that TLC599 achieved sustained pain reduction based on the WOMAC and VAS scales through 24 weeks, we believe that there is an opportunity to achieve even higher usage of TLC599.

Based on interviews with five different medical directors of payer organizations, we also believe that TLC599, if approved, could justify benchmarked pricing to that of the approved ER TA. We also believe that an additional price premium would be possible if TLC599 is able to achieve or exceed the hypothetical profile stated above.

TLC590

One additionalAnother asset within the BioSeizer technology platform is TLC590, which utilizes the API ropivacaine, anon-opioid anesthetic, and is being developed for post-surgical pain management. We filed an IND application for TLC590 in April 2018. Afirst-in-human Phase I/II dose-escalation clinical trial in the United States was recently completed whichin March 2019 and showed that patients treated with TLC590 following hernia repair surgery demonstrated durable, statistically significant and clinically meaningful improvement over the standard of careropivacaine while reducing opioid use by 54% through 96 hours.

Post-Surgical Pain Background

According to the World Bank, approximately 96 million surgical procedures were performed A Phase II clinical trial in the United States in 2012.patients following bunionectomy completed patient enrollment in February 2020, and topline data on the analgesic efficacy of TLC590 compared to placebo and bupivacaine is expected inmid-2020.

Post-Surgical Pain Background and the Opioid Crisis

According to a report by Research and Markets, the number of outpatient surgical procedures in the United States is expected to grow from approximately129 million procedures in 2018 to approximately 144 million procedures by 2023, at a compound annual growth rate of 2.1% during the forecast period. Most surgical patients experience post-surgical pain, but less than half of these patients receive adequate pain relief according to a study published in the Journal of Pain by the American Pain Society in February 2016. This ongoing discomfort has been shown to negatively affect patient outcomes. Ongoing pain can increase recovery time and lead to longer hospital stays and readmissions, thereby increasingnon-reimbursed hospital costs. The current treatment of post-surgical pain may include wound infiltration with local anesthetics combined with the administration of opioid and NSAID analgesics. Opioids are effective but can also cause many undesirable side effects such as sedation, nausea and vomiting, inhibition of bowel function and dependency or addiction, among others. Respiratory depression is a possible life-threatening complication of opioid use.

Over the last few decades, the United States has seen an increased prescription of opioid medications, which has led to widespread misuse of the highly addictive drug. The 2019 National Survey on Drug Use and Health estimates that approximately 10.3 million people aged 12 or older misused opioids in 2018, and the National Center for Health Statistics estimates that 130 or more people die every day from opioid-related drug overdoses. In 2017, the U. S. Department of Health and Human Services (HHS) declared a public health emergency and announced a5-point strategy to combat the opioid crisis, which includes improving access to treatment and recovery services, promoting use of overdose-reversing drugs, strengthening our understanding of the epidemic through better public health surveillance, providing support for cutting edge research on pain and addiction and advancing better practices for pain management. We believe that TLC590, anon-opioid, has the potential to become one of the better practices for pain management.

Limitations of CurrentNon-Opioid Treatments in Post-Surgical Pain Management

A liposomal formulation of bupivacaine indicated for administration at the surgical site to produce post-operative analgesia was commercially launched in the United States in 2012. This drug demonstrated significant reduction in pain intensity compared to placebo in the first two to six hours, with efficacy up to 24 hours post-surgery, but showed minimal to no difference in mean pain intensity compared to placebo between 24 and 72 hours after administration. There have been no clinical trials comparing the levels of pain reduction between this drug and bupivacaine.

An extended release bupivacaine and meloxicam investigational drug in the form of a hydrogel for administration via instillation at the surgical site is not approved by the FDA. This investigational drug reduced pain better than bupivacaine alone or meloxicam alone through 72 hours, and demonstrated significant reduction in pain compared to placebo as well as bupivacaine. The initial NDA of this investigational drug received a Complete Response Letter (CRL) from the FDA in April 2019, which indicated that the application was not ready for approval. The NDA was revised andre-submitted in September 2019, with a new Prescription Drug User Fee Act (PDUFA) goal date of March 2020, which was recently extended to June 2020.

Local anesthetic systemic toxicity is also a risk of immediate and extended release bupivacaine, as demonstrated in statistical analysis of the FDA Adverse Event Reporting System. Immediate release ropivacaine exhibits reduced cardiotoxicity and central nervous system toxicity compared to bupivacaine. For surgical indications where nerve block is used, ropivacaine may be preferable to bupivacaine, as it may be easier to achieve sensory (pain) blockade with less motor blockade. However, ropivacaine suffers from a relatively short half-life. In addition to the existing unmet need of extended release ropivacaine for prolonged pain control, adequate immediate pain control can be elusive, with some physicians co-administering non-liposomal,co-administeringnon-liposomal, or immediate release, bupivacaine in addition to liposomal bupivacaine to augment post-operative pain control.

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Our Solution: TLC590

Based on preclinical experiments and results from our Phase I/II clinical trial, we anticipate that a single injection of TLC590 will result in not only immediate effect, but will also yield better pain control than liposomal bupivacaine with at least 72 hours of clinical effectiveness. We believe TLC590 to have competitive advantages over current extended release bupivacaine anesthetics due to our selection of a safer API. Ropivacaine has been shown to exhibit less cardiotoxicity and central nervous system toxicity than bupivacaine. Ropivacaine that is loaded into TLC590’sTLC590’s dense multilamellar, or multiple-layered, lipids formulation is released slowly as each layer peels off and dissolves. We also expect that the simplified manufacturing process which requires sterile filtration only at thenear-end stage, instead of a completely aseptic process from start to finish, will reduce cost of goods sold.

TLC590 Preclinical Findings

Evaluation of the releasing profile of TLC590in vitroand the PK and anesthetic effectin vivo, which was published as an article inInternational Journal of Nanomedicine, showed that TLC590 is able to provide a longer anesthetic effect than plain ropivacaine solution after a single administration. Furthermore, TLC590 at dose level of 20 mg/kg in rats did not show any dose-related toxicity.

In a safety evaluation of TLC590 in rates and miniature swine, theno-observed-adverse-effect level (NOAEL) of TLC590 was found to be above 40mg/kg for a single local administration in miniature swine, which translates to an equivalent of 2270mg in a 60kg human. Data from the study, which was presented at the Annual Regional Anesthesiology & Acute Pain Medicine Meeting (ASRA) in April 2019, demonstrated the safety and local tolerance of TLC590 in clinically relevant models and support thefirst-in-human trial of TLC590 by wound infiltration.

In a pharmacokinetic study in rats, TLC590 was found to extend the effective half-life of ropivacaine by about20-fold. In a preclinical analgesic study of equipotent doses of free ropivacaine (1.9mg), TLC590 (1.9mg) and liposomal bupivacaine (1.33mg), TLC590 displayed statistically significant analgesic effects at 0.5, 5 and 6 hours post-injection when compared to liposomal bupivacaine. TLC590 also showed the earliest onset (t = 0.5 h), similar to free ropivacaine, and produced the longest analgesic action. In a preclinical nerve block study of TLC590 with an equal volume and therefore more potent dose of liposomal bupivacaine, TLC590 exhibited a larger magnitude of anesthetic effect (reduction of 50% paw withdrawal threshold) which persisted to the ninth hour, while the effect of ER bupivacaine had diminished to a level comparable with saline by the eighth hour.

These findings were presented at the Annual Regional Anesthesiology & Acute Pain Medicine Meeting (ASRA) in April 2019.

Figure 12a.14a. TLC590 extends the effective half-life of ropivacaine by approximately 20 fold in rat models

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Figure 12b.14b. TLC590 showed statistically significant analgesic effects at 0.5, 5, and 6 hours post-injection

Figure 12c.14c. TLC590 exhibited larger magnitude of anesthetic effect which persisted to the ninth hour

TLC590 Completed Phase I/II Clinical Trial in Hernia Repair Surgery

We filed an IND application with the FDA for TLC590 in April 2018. A In March 2019, we completed afirst-in-human clinical trial was recently completed to assessassessing the safety, tolerability and pharmacokinetic profile of TLC590. This Phase I/II trial was a randomized, double-blind, comparator-controlled, dose escalation study to evaluate TLC590 compared to free,non-liposomal ropivacaine when given as a single infiltrative local administration in adult patients following inguinal hernia repair surgery, a type of soft tissue surgery.

The trial took place in the United States and enrolled 64 evaluable patients across four cohorts. 16 patients were enrolled in each cohort in a 3:1 ratio, with 12 patients receiving a dose of TLC590 and 4 patients receiving the active comparator drug, ropivacaine. Patients were followed up for 30 days.

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Figure 13.15. TLC590 Phase I/II clinical trial design

The primary endpoint of the trial was safety, and key secondary endpoints included area under the curve (AUC) of numeric pain rating scale at various intervals from 0 to 96 hours, proportion of opioid-free patients, time to first postsurgical opioid use, and total opioid consumption.Top-line data, which we received in March 2019, showed that all four doses of TLC590 resulted in greater reductions in pain intensity than ropivacaine as measured by AUC at every interval. Moreover, the 475mg dose of TLC590 showed the following characteristics:

Figure 18. TLC590 Phase II clinical trial design

Part 2 of the Phase II clinical trial is an efficacy and safety study of TLC590 versus bupivacaine and placebo. A total of 150 patients have been randomized at the ratio of 1:1:1 to receive a single infiltrative local dose of TLC590 228mg, bupivacaine 50mg or normal saline placebo at the end of their bunionectomy surgery. All patients are closely monitored for an inpatient period of 72 hours, and then followed up through 42 days after surgery. The primary endpoint is area under the curve (AUC) from 0 to 72 hours on the numerical pain rating scale. Secondary endpoints include proportion of pain-free patients, proportion of opioid-free patients, and total post-operative opioid consumption at various time periods, plus time to the first post-operative use of opioids. Patient enrollment in Part 2 was completed in February 2020. We expected to see topline data inmid-2020.

If the results from the bunionectomy trial are positive, we plan to conduct anEnd-of-Phase II meeting with the FDA with combined data from the first part of this trial is expectedsoft tissue surgery setting in mid-2019. IfPhase I/II and the results are positive, webony tissue setting in Phase II. We anticipate subsequently conductinginitiating our first pivotalPhase III trial inbefore the same indication in 2020. We also plan to conduct a Phase II trial in patients undergoing abdominal wall surgery inend of 2020. In addition, we plan to explore TLC590 in other indications such as nerve block.

We have filed PCT applications covering TLC590 composition and use in treatment and intend to file additional applications covering lipid-based local anesthetic in post-operational pain control upon additional research and clinical development.

TLC399

Following the same design concept of TLC599, TLC399 is our proprietary BioSeizer formulation of DSP intended as an intravitreal, orin-eye, injection for the treatment of macular edema due to RVO. TLC399 in preclinical models has been shown to provide therapeutic levels of DSP in the eye for at least six months after a single administration. In our ongoing Phase I safety trial, we have observed encouraging signs of both reduction of retinal CST and improvements in visual acuity. AWe completed conduct of a larger randomized, double-blind, dose finding Phase II clinical trial is underway.and expect to prepare the final data report for this trial in the second half of 2020. We chose TLC399’sTLC399’s first indication as macular edema due to RVO because we believe it provides the most rapid path to both proof of concept for the approach and subsequent approval. We are also evaluating opportunities to develop TLC399 in DME alone or in combination with intravitreal anti-VEGF drugs.

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RVO Background

RVO is a sight-threatening disorder resulting from a blockage of one of the veins carrying blood out of the retina. RVO is estimated to affect more than 16 million adults worldwide, according to a 2010 study published in the Journal of Ophthalmology. United States data reported in JAMA Ophthalmology in 2008 indicate a15-year incidence of 500 new cases of central retinal vein occlusion (CRVO) per 100,000 population and 1,100 branch retinal vein occlusion (BRVO) cases per 100,000 population. In RVO, the blockage of a retinal vein can lead to poor blood circulation, low oxygen and often inflammation. RVO is associated with macular edema, an abnormal thickening of the central area of the retina. Development of macular edema is a common occurrence in multiple retinal disorders besides RVO, such as DME.

There are two primary pharmacologic treatments currently used for the treatment of macular edema due to RVO: intravitreal injections of anti-VEGF drugs and intravitreal steroid injections. The current standard treatment for macular edema associated with RVO involves intravitreal injections of anti-VEGF drugs, such as ranibizumab, aflibercept or bevacizumab. Ranibizumab and aflibercept are approved for monthly treatments in RVO while bevacizumab is used in a similar fashion, butoff-label. Anti-VEGF drugs are effective in significantly improving vision in approximately 45% of patients with macular edema associated with RVO, and steroid treatment is often recommended for patients who fail to respond to anti-VEGF treatment. These treatments typically involve injections of TA or dexamethasone.

Limitations of Current Steroid Treatments for Macular Edema Due to RVO

There is currently a marketed steroid injection to treat macular edema due to RVO in the form of dexamethasone intravitreal implant, in which a solid polymer implant is inserted into the vitreous cavity. The duration of effect persists for approximately one to three months after onset; however, it takes up to six months for the implant to dissolve. In clinical trials for this steroid implant, 23% of patients experienced conjunctival hemorrhage. Other adverse reactions from the implant include complication of device insertion (implant misplacement), device dislocation, endophthalmitis, hypotony (very low intraocular pressure) and retinal detachment.

Our Solution: TLC399

TLC399 is designed to release therapeutic levels of dexamethasone in the eye for periods greater than six months. We believe TLC399 has distinct advantages over other ocular products, with the potential to provide therapeutic benefit for much longer periods. Dexamethasone levels in the eye have been shown to be maintained for greater than six months in preclinical studies using TLC399, while similar studies with the dexamethasone intravitreal implant in animals have only been shown to maintain these levels for approximately 35 days. We believe the interim results from our ongoing open-label Phase I clinical trial demonstrate the potential to provide therapeutic benefits over an extended period, with some RVO patients continuing to show improvement one year after initial treatment.

In addition to potential extended duration of action, TLC399 may provide meaningful advantages in the method of administration. An approved dexamethasone product uses drug-eluting implants injected into the eye using a22-guage needle, whose diameter of 0.7176mm is 2.3 times larger than the30-gauge needle (0.3112mm) used with TLC399. We believe this smaller needle can drastically reduce the risk of conjunctival hemorrhaging, as well as infections and complications, due to a smaller insertion wound.

TLC399 Preclinical Findings

In an internal preclinical animal study conducted in 2009 in Taiwan, TLC399 demonstrated the delivery of therapeutically relevant doses of dexamethasone in the eye over a much longer period of time than DSP. DSP that was directly injected into the eye was undetectable within one day of administration. Dexamethasone implants can sustain therapeutic levels of dexamethasone in animals for 35 to 40 days. Dexamethasone levels after administration of TLC399, however, were maintained for at least 200 days in the rabbit model receiving a 100mM PL formulation in our PK study.

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Figure 14.19. TLC399 delivers therapeutically relevant doses of dexamethasone over a period of at least 200 days in preclinical studies in rabbits

TLC399 Ongoing Clinical TrialsTrial

We are conducting a Phase I clinical trial in Taiwan in patients with macular edema due to RVO to characterize the safety of different doses. As of October 21, 2018,February 25, 2020, a total of nine11 subjects had been enrolled in this trial,administered TLC399 at the assigned dose levels, of which three in dose group 1 (0.36 mg DSP with 100 mM PL) and another threeeight in dose group R1 (0.24 mg DSP with 100 mM PL) were evaluable for dose-limiting toxicity.

All three patients in dose group 1 displayed a trend of improvement in CST that lasted for six to 12 months after a single dose of drug administration, and one patient in group 1 achieved target CST levels less than 310 micrometers which were maintained through 12 months. The best corrected visual acuity (BCVA), or the best possible vision a person can achieve with corrective lenses, was impacted by the initial presence of vitreous opacity in all treated patients; this transient visual acuity decrease was improved within two to eight weeks after study drug administration. At month six after treatment, all evaluable subjects in group 1 had improvements in BCVA, ranging from five to 18 letters (one to three lines) on the vision chart. BCVA improvements were maintained through 12 months. AllMost patients who were assigned to dose group R1 also displayed a trend in CST reduction soon after receiving TLC399; however, the complete data for thefollow-up period is not yet available. Further patient recruitment will be assigned to dose group R1 to characterize the efficacy and safety profile of this dose group.

Figure 15.20. Decrease in CST over 12 months after single intra-vitreous TLC399 injection

The current treatment-related adverse events reported were of mild to moderatesevere severity, with no unexpected serious adverse reactions or patient withdrawals due to adverse events. One commonly known feature about intra-vitreous steroid injection is the increase of intraocular pressure. TwoFour cases of intraocular pressure elevations during the trial were judged as serious adverse events (SAEs), and both were considered possibly or probably related to TLC399. However, allAll intraocular pressure elevations were considered manageable with eye drops.drops except one patient who underwent a procedure to remove fluid from the eye.

A Phase II clinical trial of TLC399 in patients with macular edema due to RVO was initiated in 2017 and is currently ongoing at 20 sites in the United States.States and conduct has been completed. This trial initiated with three groups receiving a single intravitreal dose at one of three different doses of TLC399: 0.36mg DSP with 100mM PL in 30µ30µL solution (Group 1), 0.6mg DSP with 100mM PL in 50µ50µL solution (Group 2), or 0.6mg DSP with 50mM PL in 50µ50µL solution (Group 3). Group 1 and Group 2 were treated with a higher lipid concentration TLC399, and Group 3 was treated with a lower lipid concentration TLC399. The primary

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endpoint is defined as the proportion of subjects with BCVA gain of 15 or more letters on the eye chart from baseline in the trial eye at six months, with evaluation of BCVA and CST through 12 months as secondary endpoints. Safety measurements include monitoring for elevated intraocular pressure. At approximately halfway through enrollment (after 31 of 66 planned patients treated), the SMC conducted apre-planned unblinded analysis of study data as per study protocol; they requested a temporary recruitment pause in order to make a comprehensive assessment to select an optimal dose group with the best vision response. In August 2018, the SMC recommended the group treated with lower lipid concentration TLC399, or Group 3 (0.6mg DSP with 50mM PL in 50µ50µL solution), to move forward; this dose will be further studied along with a higher dose (70µL) of the same formulation (containing 50mM PL). Group 3 had much lower incidence and degree of vitreous haze than the other two groups, and showed improvement of vision and CST. RecruitmentThis dose will resume after the study protocol amendment is implemented. Last patient enrollment for this trial is expectedbe studied in November 2019.a future trial. In this trial, two patients in Group 2 treated with the higher-concentration formulation had significant persistent vitreous haze which the investigator decided to remove via vitrectomy (anout-patient procedure involving removal of the vitreous humor); one of these patients hadpre-existing cataracts and suspected vitreous hemorrhage that may have contributed to the persistent haze. These events were assessed as serious and related to study treatment. Following vitrectomy, the haze was resolved in both subjects. This treatment group (Group 2) was not selected to go forward in this study. No other treatment-related SAEs have been observed in this study.observed. Preliminary evaluation of our Phase II trial data has not shown evidence of efficacy beyond three months. We believe this result is attributable to the administration of rescue medication to most patients, even those who did not meet rescue criteria. Patients who receive rescue medication become unevaluable, making it difficult to assess efficacy beyond three months. Moving forward, we have urged trial investigators to confer with the medical monitor to describe the patient’s condition including BCVA and CST values over the course of the study to ensure the subject meets rescue criteria prior to administering rescue medication. We believe that the continuation with an optimized formulation, along with more stringent monitoring of the need for rescue medication, should allow more evaluable patients beyond three months.

Figure 16.This Phase 2 trial has provided information on the efficacy and safety of TLC399 Phase II clinical trialand on study design considerations for future trials in the indicated setting. We will prepare a final report in the second half of 2020.

Upon completion of our ongoing randomized, double-blind, dosefinding Phase II clinical trial in RVO (expected in 2020), we plan to conduct a Phase IIb trial to confirm the dose and effect size for a pivotal trial.

TLC399 Planned Trial for DME

We plan to have discussions with the FDA to explore the potential of TLC399 as a therapy for other indications. Following these discussions, we plan to initiate a Phase II clinical trial evaluating the treatment of TLC399 alone or in combination with anti-VEGF therapies in patients with DME.

The FDA has indicated that our proposal to seek approval of TLC399 using the regulatory 505(b)(2) pathway is reasonable. We have received patents from the USPTO for the composition of TLC399 and for the method of reducing complications of ocular DSP, with terms extending into 2029 and 2033, and intend to file additional patent applications covering TLC399 based upon additional research and clinical development.

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TLC178

TLC178 is our formulation of the anticancer drug vinorelbine utilizing NanoX. We are developing TLC178 for the treatment of RMS, a rare form of STS that most frequently occurs in children. Vinorelbine is a vinca alkaloid chemotherapy agent commonly usedoff-label to treat RMS and other sarcomas. TLC178 is a formulation of vinorelbine loaded into liposomes using the NanoX encapsulation technology which is designed to alter the systemic exposure of the drug, potentially reducing dosing frequency and enhancing distribution of liposome-encapsulated APIs to the desired site. In April 2017, the FDA granted TLC178 a Rare Pediatric Disease Designation in RMS, which will qualify TLC178 for submission of an NDA in this indication for priority review, which can reduce the standardten-month FDA review time to six months. In July 2017, the FDA also granted TLC178 an ODD for the treatment of STS. If TLC178 is approved for the treatment of STS, the ODD will provide marketing exclusivity for up to seven years. In January 2019, the EMA also granted ODD for TLC178 for the treatment of STS. If TLC178 is approved for the treatment of STS in the European Union, the ODD by the EMA will provide a10-year period of marketing exclusivity in the European Union.

We are initially developing TLC178 for relapsed or refractory pediatric RMS. We believe that the increased specificity of TLC178 for tumor versus non tumor tissue through the use of our NanoX technology, which utilizes enhanced permeability and retention (EPR) effects, will enable greater dose intensity, with attendant benefits in antitumor response without impairing the safety profile. In particular, we believe that TLC178 will have significantly lower myelosuppression, a condition in which bone marrow activity is decreased that results in fewer red blood cells, white blood cells and platelets, resulting in a lower rate of severe neutropenia, a decrease in neutrophils, which defend against bacteria and infections. Due to the rarity of this disease and the current unmet need for standardized therapies, we expect to be able to perform onesingle-arm, response-oriented pivotal trial to demonstrate a clinically meaningful benefit supporting approval.

In parallel with our efforts in RMS, we also plan to initiate clinical trials evaluating TLC178 in other STSs, for which TLC178 has already received an ODD that can potentially provide marketing exclusivity for seven years, and in NSCLC.

RMS Background

RMS is a tumor that develops from skeletal muscle precursors. It often affects children in the first decade of their lives and results in tumors that are located at various sites in the body such as the head, neck, arms, legs, trunk and urinary and reproductive organs. RMS is a rare disease with 350 new cases diagnosed in the United States each year.

Surgical excision of the tumor, when possible, is the primary treatment for RMS. However, for patients with advanced disease, prognosis is poor. Current recommendations include multidrug chemotherapy, often containing vincristine, dactinomycin and cyclophosphamide. Less than 20% of patients with metastatic RMS respond to aggressive multimodality treatment, and up to 30% of RMS patients relapse within three years of diagnosis. Most patients with recurrent RMS will die within one year of relapse (a median survival time of 0.82 years), and, with a five-year survival rate of less than 20%, there are currently no established guidelines for chemotherapy in the relapse setting. Little meaningful improvement in the treatment of this disease has been observed over the last 30 years.

STS Background

There are more than 50 histological subtypes of STS, which are associated with unique clinical, prognostic and therapeutic features. The rarity and heterogeneity of the disease render STS difficult to study and to treat. In the United States, the incidence of diagnosed STS is approximately 12,310 new cases per year, leading to approximately 5,000 deaths annually. The heterogeneity of STS poses a challenge to a standard chemotherapy approach. For most patients with unresectable or metastatic disease, chemotherapy is primarily palliative. Ifosfamide and doxorubicin are routinely used for these patients, with response rates of 50 to 60%. However, it is unclear if the treatment improves overall survival, which remains at approximately 12 to 18 months for these patients. Olaratumab, a platelet-derived growth factor receptor α blocking antibody, has recently beenwas granted accelerated approval by showing improved median overall survival in an open-label, randomized, active-controlled trial with 133 patients. Other treatment options for second-line therapeutic regimens remain very limited and are only recommended for palliative therapy.

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NSCLC Background

According to a 2017 American Cancer Society analysis, lung cancer is the leading cancer death in the United States with 155,870 deaths every year. Lung cancer is also the second most common cancer in the United States with 222,500 new cases annually. NSCLC constitutes 80% of all types of lung cancer. Adenocarcinoma and squamous cell carcinoma are major histological subtypes of NSCLC. Most patients are diagnosed with advanced disease and cannot be cured. Immunotherapy, several targeted therapies and platinum-based doublet chemotherapy are first-line treatment options for advanced disease.

Somatic mutations involving epidermal growth factor receptors (EGFR), which are receptor proteins that span the cell membrane, whose constant activation produces uncontrolled cell division (also known as EGFR-sensitizing mutation) is the most common and well established driver mutation in lung adenocarcinoma in Asian populations, with an incidence rate of 47.9%; however, the incidence of EGFR-sensitizing mutation is only 19.2% in Western populations. Other druggable driver mutations, such as anaplastic lymphoma kinase or ROS1 gene arrangements, are not common, with an incidence rate of less than 5%. Immunotherapy, such as programmed cell death protein 1(PD-1) antibody, is most active in patients with high programmed death-ligand 1(PD-L1) expressing tumors (tumor proportion score> 50%). The prevalence of highPD-L1 expression is approximately 28%.

For those NSCLC patients without driver mutations and with lowPD-L1 expression, combination cytotoxic chemotherapies are recommended as first-line treatment according to the 2017 American Society of Clinical Oncology Clinical Practice Guideline. For patients who progressed after first line combination cytotoxic chemotherapy who are not responsive to first-line immunotherapy or contraindicated to second line immunotherapy, there exists a need to identify a better salvage regimen to decrease the risk of cross-resistance and also reduce toxicity.

Our Solution: TLC178

TLC178 is a liposomal intravenous injection formulation of vinorelbine we are evaluating in STS, specifically RMS. A Phase I/II open-label dose escalation clinical trial of TLC178 in patients with advanced malignancies is currently underway.

Vinorelbine is a chemotherapeutic agent that is a member of a class of agents known as microtubule inhibitors that work by preventing cell division. Vinorelbine has been approved by the FDA for use in NSCLC since 2000. TheFDA-approved label for vinorelbine states that the safety and effectiveness of vinorelbine in pediatric patients have not been established and showed no meaningful clinical activity in various pediatric cancers; toxicities were similar to those reported in adult patients. The referenced trial was conducted in 46 patients, including 21 with STS, 21 with central nervous system tumors and four with neuroblastoma, with 29 considered evaluable (only seven evaluable patients with STS). The full trial report and data were not submitted for FDA review.

Subsequently, published trials with vinorelbine in pediatric patients conducted by the Children’sChildren’s Oncology Group and other international working groups have shown its potential applications in RMS and other STSs. In several trials targeting relapsed or refractory RMS (11 patients for monotherapy vinorelbine in Kuttesch 2009, 50 patients for combo vinorelbine and cyclophosphamide (VNB+CTX) in Minard-Colin 2012, eight patients for combo VNB+CTX in Casanova 2004), vinorelbine treatment consistently yielded an overall response rate of approximately 36%, with four to seven months duration of response (total of 69 patients in three trials). These trials also demonstrated that vinorelbine was less likely to cause neuropathy than other drugs in the same class such as vincristine. Because of its anticancer activity in this setting and its safety profile, vinorelbine is currently usedoff-label in RMS and other sarcomas and we believe that based on recent trends in demonstrating potential new indications for previously approved drugs through “Real-World Evidence”“Real-World Evidence” the FDA may consider expanding indications for vinorelbine to include the treatment of RMS. Vinorelbine is recommended as an option for RMS by the National Comprehensive Cancer Network (NCCN) guidelines. Vinorelbine is often used in combination with the alkylating agent cyclophosphamide for treatment of sarcomas.

We believe that TLC178 has the capacity to dramatically improve the selective delivery of vinorelbine to tumor versusnon-tumor tissue from the results of a number of our preclinical studies. We evaluated TLC178 and standard vinorelbine alone or in combination with cyclophosphamide in a mouse RMS xenograft study. In the study, TLC178 resulted in total drug exposure levels at the tumor site that were5-fold higher than standard vinorelbine. These higher, sustained levels of active drug resulted in slower tumor growth.

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Figure 17.21. TLC178 can control tumor growth more effectively than free vinorelbine when used in combination with

cyclophosphamide (CPA) in a mouse xenograft model of human alveolar RMS

(Note: 10mg/kg in the mouse is approximately equivalent to the therapeutic vinorelbine dose of 30mg/m² in humans.)

Although vinorelbine demonstratesdemonstrated its potential antitumor activities in pediatrics, it also has significant hematological toxicities. In a third-party conducted trial, which took place from September 1998 to August 2001, of 33 children with advanced sarcomas, grade 3 to 4 neutropenia occurred in 63% of patients. With most liposomal chemotherapeutics (for example, Doxil), the liposomal formulation exhibits less toxicity than the free form. Therefore, we believe TLC178 with preferential distribution to tumor tissue through EPR effect will have reduced systemic toxicity compared to free vinorelbine.

In a preclinical study evaluating the antitumor efficacy of TLC178 versus doxorubicin, the standard of care for patients with STS, in human fibrosarcoma xenograft model, animals treated with TLC178 exhibited a significant tumor reduction compared to placebo and doxorubicin on day 15. Furthermore, TLC178 revealed 14% complete regression and 86% partial regression while no tumor regression was observed in the doxorubicin group.

Figure 18.22. TLC178 demonstrated superior anti-neoplastic activity and better tolerability than doxorubicin in human

fibrosarcoma xenograft model

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In a preclinical study comparing the antitumor activity of TLC178 with free vinorelbine in a human alveolar RMS model, TLC178 demonstrated significantly better tumor volume reduction ability than free vinorelbine from day 18 onwards. Moreover, TLC178 exhibited 16.7% complete regression while no tumor regression was observed with free vinorelbine.

Figure 19.23. TLC178 demonstrated potent anti-tumor activity in human alveolar RMS xenograft model and exhibited

significantly better therapeutic activity than free vinorelbine

Thesein vivo data on the efficacy and enhanced tumor accumulation of TLC178 were presented at the European Society for Medical Oncology Congress (ESMO) in September 2019.

Vinorelbine and gemcitabine (GEM) have been reported to be active in STS and NSCLC. For STS, GEM plus vinorelbine (GV) showed a 25% clinical benefit rate with one complete response lasting longer than one year in one single arm trial with 40 patients. GV regimen has also been listed in NCCN guidelines for STS. For NSCLC, GV has been studied as a front-line treatment with a 25% to 36% response rate. The incidence of grade 4 neutropenia observed was 9% to 25%. Compared to previous TAX317 and TAX320 data in second line treatment, the response rate of single agent docetaxel at the dose of 75mg/m² was approximately 7% and the rate of grade 4 neutropenia was 54% to 67%. These studies have shown that GEM and vinorelbine can be an active and well-tolerated regimen in advanced NSCLC.

In a preclinical study comparing the antitumor activity of TLC178 alone, TLC178 with GEM (gemcitabine), vinorelbine alone, and vinorelbine with GEM, TLC178 showed significantly better antitumor activity than both vinorelbine alone (day 11) and vinorelbine with GEM (day13)(day 13). Furthermore, there was very little difference between the antitumor activity of TLC178 alone and TLC178 with GEM.

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Figure 20.24. TLC178 demonstrated potent anti-tumor activity in NSCLC model and exhibited significantly better