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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FORM 10-K
For the fiscal year ended December 31, 2020
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-36845
Bellerophon Therapeutics, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
184 Liberty Corner Road, Suite 302 Warren, New Jersey
(Address of principal executive offices)
47-3116175
(I.R.S. Employer Identification No.)
07059
(Zip Code)
Registrant’s telephone number, including area code: (908) 574-4770
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.01 par value per share
Trading Symbol(s)
BLPH
Name of each exchange on which registered
The Nasdaq Capital Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ⌧ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ⌧ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. ⌧ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
⌧ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer," “smaller reporting company,” and “emerging growth company”
in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Smaller reporting company ⌧ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Non-accelerated filer ⌧
Accelerated filer ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued
its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ⌧ No
As of June 30, 2020, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately
$86.9 million, based upon the closing price on the Nasdaq Capital Market reported for such date. Shares of common stock beneficially owned by each officer
and director and by each person who is known to own 10% or more of the outstanding common stock have been excluded in that such persons may be
deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
The number of shares outstanding of the registrant’s common stock, as of March 8, 2021: 9,491,111
DOCUMENTS INCORPORATED BY REFERENCE
The following documents (or parts thereof) are incorporated by reference into the following parts of this Form 10-K: Certain information required
in Part III of this Annual Report on Form 10-K is incorporated from the registrant’s Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed
with the Securities and Exchange Commission.
Table of Contents
Business
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
Properties
Legal Proceedings
Mine Safety Disclosures
TABLE OF CONTENTS
PART I
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 6.
Item 7.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Item 8.
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11.
Item 12.
Item 13.
Item 14.
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Item 15.
Item 16.
Exhibits and Financial Statement Schedules
Form 10-K Summary
PART IV
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REFERENCES TO BELLEROPHON
In this Annual Report on Form 10-K, unless otherwise stated or the context otherwise requires references to the
“Company,” “Bellerophon,” “we,” “us” and “our” refer to Bellerophon Therapeutics, Inc. and its consolidated subsidiaries.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and
uncertainties. All statements, other than statements of historical facts, contained in this Annual Report on Form 10-K,
including statements regarding our future results of operations and financial position, business strategy and plans and
objectives of management for future operations, are forward-looking statements. The words “may,” “will,” “should,”
“expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,”
“predicts,” “potential” or “continue” or the negative of these terms or other similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain these identifying words.
The forward-looking statements in this Annual Report on Form 10-K include, among other things, statements
about:
● the timing of the ongoing and expected clinical trials of our product candidates, including statements
regarding the timing of completion of the trials and the respective periods during which the results of the
trials will become available;
● our ability to obtain adequate financing to meet our future operational and capital needs;
● the timing of and our ability to obtain marketing approval of our product candidates, and the ability of our
product candidates to meet existing or future regulatory standards;
● our ability to comply with government laws and regulations;
● our commercialization, marketing and manufacturing capabilities and strategy;
● our estimates regarding the potential market opportunity for our product candidates;
● the timing of or our ability to enter into partnerships to market and commercialize our product candidates;
● the rate and degree of market acceptance of any product candidate for which we receive marketing approval;
● our intellectual property position;
● our estimates regarding expenses, future revenues, capital requirements and needs for additional funding and
our ability to obtain additional funding;
● the success of competing treatments;
● our competitive position; and
● any of the other risks included in this Annual Report on Form 10-K, including those set forth under the
heading “Risk Factors.”
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements,
and you should not place undue reliance on our forward-looking statements. Actual results or events could differ
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materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have
included important factors in the cautionary statements included in this Annual Report on Form 10-K, particularly in the
“Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements
that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers,
dispositions, joint ventures or investments we may make.
You should read this Annual Report on Form 10-K and the documents that we have filed as exhibits to this Annual
Report on Form 10-K completely and with the understanding that our actual future results may be materially different from
what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by applicable law.
This Annual Report on Form 10-K includes statistical and other industry and market data that we obtained from
industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party
research, surveys and studies generally indicate that their information has been obtained from sources believed to be
reliable, although they do not guarantee the accuracy or completeness of such information.
SUMMARY OF PRINCIPAL RISK FACTORS
This summary briefly lists the principal risks and uncertainties facing our business, which are only a select portion
of those risks. A more complete discussion of those risks and uncertainties is set forth in Part I, Item 1A of this Annual
Report, entitled Risk Factors. Additional risks not presently known to us or that we currently deem immaterial may also
affect us. If any of these risks occur, our business, financial condition or results of operations could be materially and
adversely affected.
Our business is subject to the following principal risks and uncertainties:
Risks Related to Our Financial Position and Need for Additional Capital
● We have incurred significant losses since inception. We expect to incur losses over the next several years and
may never achieve or maintain profitability.
● Our limited operating history may make it difficult for our stockholders to evaluate the success of our
business to date and to assess our future viability.
● We will need substantial additional funding.
● Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to
relinquish rights to technologies or product candidates.
● We may not be able to utilize all of our net operating loss carryforwards.
Risks Related to Our Business and Industry
● We face substantial competition from other pharmaceutical, biotechnology and medical device companies
and our operating results may suffer if we fail to compete effectively.
Risks Related to the Discovery, Development and Commercialization of Our Product Candidates
● If we are unable to develop, obtain marketing approval for or successfully commercialize our product
candidates, either alone or through a collaboration, or experience significant delays in doing so, our business
could be materially harmed.
● We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the
development and commercialization of our product candidates due based on the lengthy and uncertain
outcome of clinical trials.
● We may experience problems with, failure of, or delays in obtaining INOpulse components.
● We have conducted, and may in the future conduct, clinical trials for certain of our product candidates at sites
outside the United States, and the FDA may not accept data from trials conducted in such locations.
● Some of our clinical trials have failed and others may fail to demonstrate safety and efficacy.
● If we experience any of a number of possible unforeseen events in connection with clinical trials of our
product candidates, potential marketing approval or commercialization of our product candidates could be
delayed or prevented.
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● We may experience delays or difficulties in the enrollment of patients in clinical trials.
● We may not obtain orphan drug exclusivity for any of our product candidates and indications.
● Serious adverse events, or SAEs, or undesirable side effects of our product candidates may be identified.
● We may not be successful in our efforts to identify or discover additional potential product candidates.
● Even if one of our product candidates receives marketing approval, it may fail to achieve the degree of
market acceptance by physicians, patients, third-party payors and others in the medical community necessary
for commercial success, and the market opportunity for the product candidate may be smaller than we
estimate.
● We may not be successful in commercializing any product candidates that we develop.
● Even if we are able to commercialize any product candidate that we develop, the product may become
subject to unfavorable pricing regulations, third-party payor reimbursement practices or healthcare reform
initiatives that could harm our business.
● Regulatory approval of generic versions of any of our products that receive marketing approval could
adversely affect the sales of our products.
● Product liability lawsuits against us could divert our resources and cause us to incur substantial liabilities.
● Our INOpulse devices use lithium-ion battery cells, which have been observed to catch fire or vent smoke
and flame, and these events may raise concerns about the batteries we use.
● Our business has been and may continue to be adversely affected by the COVID-19 pandemic.
Risks Related to Our Dependence on Third Parties
● The intellectual property underlying INOpulse is exclusively licensed from Ikaria. If Ikaria terminates the
license agreement, or fails to prosecute, maintain or enforce the underlying patents, our business will be
materially harmed.
● We rely on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily.
● We currently rely on a single supplier, Ikaria, for our supply of nitric oxide for the clinical trials of INOpulse.
● Any failure by a third-party supplier or manufacturer to produce or deliver supplies for us or to provide
necessary servicing may delay or impair our ability to complete our clinical trials or commercialize our
product candidates.
● Our product candidates currently in development are exclusively licensed from third parties, and we may
enter into additional agreements to in-license technology from third parties.
● We may seek to enter into collaborations with third parties for the development and commercialization of our
product candidates. If we fail to enter into such collaborations, or such collaborations are not successful, we
may not be able to capitalize on the market potential of our product candidates.
Risks Related to Our Intellectual Property
● If we fail to obtain and maintain sufficiently broad patent protection of our technology or if we are unable to
obtain and maintain patent protection for our technology and products or if the scope of the patent protection
obtained is not sufficiently broad, our competitors could develop and commercialize technology and products
similar or identical to ours, and our ability to successfully commercialize our technology and products may
be impaired.
● We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which
could be expensive, time consuming and unsuccessful.
● If we fail to comply with our obligations under license agreements, we could lose rights that are important to
our business.
● We may be subject to claims by third parties asserting that we or our employees have misappropriated their
intellectual property, or claiming ownership of what we regard as our own intellectual property.
● If we are unable to protect the confidentiality of our trade secrets, our business and competitive position
would be harmed.
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Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters
● Even if we complete the necessary clinical trials, the expensive, time consuming and uncertain nature of the
marketing approval process has and may continue to prevent us from obtaining approvals for the
commercialization of some or all of our product candidates.
● Our failure to obtain marketing approval in foreign jurisdictions would prevent our product candidates from
being marketed abroad.
● Changes in law or policy could have a negative impact on the approval of our drug candidates.
Risks Related to Employee Matters and Managing Growth
● Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified
personnel.
● Our employees may engage in misconduct or other improper activities, including noncompliance with
regulatory standards and requirements and insider trading.
Risks Related to Ownership of Our Common Stock
● Our common stock may be delisted from The Nasdaq Capital Market if we fail to comply with continued
listing standards.
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PART I
Item 1. Business
Overview
We are a clinical-stage therapeutics company focused on developing innovative products that address significant
unmet medical needs in the treatment of cardiopulmonary diseases. Our focus is the continued development of our nitric
oxide therapy for patients with or at risk of pulmonary hypertension, or PH, using our proprietary pulsatile nitric oxide
delivery platform, INOpulse.
In 2016, we began developing INOpulse for the treatment of pulmonary hypertension associated with fibrotic
interstitial lung disease (“fILD”), which includes PH associated with idiopathic pulmonary fibrosis (“PH-IPF”) as well as
other pulmonary fibrosing diseases. During May 2017, we announced the completion of our Phase 2 clinical trial using
INOpulse therapy to treat PH-IPF. The clinical data showed that INOpulse was associated with clinically meaningful
improvements in hemodynamics and exercise capacity in difficult-to-treat PH-IPF patients. The PH-IPF trial was a proof of
concept study (n=4) designed to evaluate the ability of pulsed inhaled nitric oxide, or iNO, to provide selective vasodilation
as well as to assess the potential for improvement in hemodynamics and exercise capacity in PH-IPF patients. The clinical
trial met its primary endpoint showing an average of 15.3% increase in blood vessel volume (p<0.001) during acute
inhalation of iNO as well as showing a significant association between ventilation and vasodilation, demonstrating the
ability of INOpulse to provide selective vasodilation to the better ventilated areas of the lung. The trial showed consistent
benefit in hemodynamics with a clinically meaningful average reduction of 14% in systolic pulmonary arterial pressure
(sPAP) with acute exposure to iNO. The study assessed both the iNO 75 and iNO 30 dose.
During August 2017, we announced acceptance by the U.S. Food and Drug Administration (the “FDA”) of our
Investigational New Drug (“IND”) application for our Phase 2b (“iNO-PF”) clinical trial using INOpulse therapy in a
broad population of patients with pulmonary fibrosis, or PF, at both low and intermediate/high risk of PH. In January 2018,
we announced the first patient enrollment in our iNO-PF Phase 2b trial. In October 2018, we announced the enrollment
completion of the planned 40 subjects, or cohort 1, in our iNO-PF trial. In addition, we announced the expansion of the
trial with the addition of cohort 2 and cohort 3, to evaluate a higher iNO 45 and iNO 75 dose as well as a longer 16 week
evaluation period. iNO-PF was designed as an exploratory study to identify the optimal dose and endpoints to progress into
Phase 3.
In January 2019, we announced top-line results from cohort 1 of our iNO-PF trial. The results suggested
directional improvements in multiple clinically meaningful exploratory endpoints as measured by a wearable medical-
grade activity monitor. In addition, these results suggested that iNO may have a favorable safety profile, supporting the
continuation into cohort 2. In April 2019, we announced that we reached an agreement with the FDA on modifying the
ongoing Phase 2b trial into a seamless Phase 2/3 trial, with cohort 3 serving as the pivotal study, as well as an agreement on
the primary endpoint in cohort 3 of change in moderate to vigorous activity (“MVPA”) from baseline to month 4, measured
by Actigraphy. Actigraphy (medical wearable continuous activity monitoring) has the potential to provide highly sensitive
objective real-world physical activity data that we expect to correlate with clinically meaningful patient functional abilities
and health outcomes. Actigraphy is currently being utilized as the primary endpoint in multiple late-stage clinical programs
in various cardiopulmonary diseases such as heart failure and chronic obstructive pulmonary disease (“COPD”). In
December 2019, we announced top-line results from cohort 2 of the iNO-PF trial. Cohort 2 of iNO-PF suggested
directionally favorable and potentially clinically meaningful placebo corrected improvement in MVPA, in subjects treated
with iNO45 (45 mcg/kg IBW/hr) versus placebo. The improvement in MVPA was underscored by benefits in overall
activity, as well as multiple patient reported outcomes. In March 2020, we announced that in consultation with the FDA,
we had finalized some of the key elements of our planned pivotal Phase 3 study for fILD, including the use of MVPA as
the primary endpoint for approval, the patient population of pulmonary fibrosis subjects at risk of PH, as well as the dose
of iNO45. In December 2020, we announced the first patient enrollment in this Phase 3 study called REBUILD.
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In 2018, we initiated an ancillary Phase 2 open-label intra-patient dose escalation study that utilizes right heart
catheterization to assess the hemodynamic effect of INOpulse from a dose of iNO 30 to iNO 125 in PH-PF subjects. In
February 2020, we announced the completion of the study and that the top-line results demonstrated that INOpulse
achieved clinically and statistically meaningful cardiopulmonary improvements in pulmonary vascular resistance and mean
pulmonary arterial pressure. The data suggested that inhaled nitric oxide was generally well tolerated and may yield a
favorable risk-benefit profile across doses.
In 2018, we also initiated development of INOpulse for the treatment of PH associated with Sarcoidosis (PH-
Sarc). Sarcoidosis is a multi-system disease which is characterized by the growth of granulomas (inflammatory cells) in
one or more organs. The most frequent organs involved are the lungs and lymph nodes within the chest. Pulmonary
hypertension may be present in as many as 74% of patients depending on the disease severity and how the pulmonary
hypertension (PH) is defined. The presence of PH in sarcoidosis is associated with a poor prognosis. There are a number of
different mechanisms linking PH with sarcoidosis. The primary treatment for sarcoidosis is corticosteroids; however, the
outcome of this treatment on the PH is unclear. There is no approved therapy for PH associated with sarcoidosis. Various
PAH treatments have been tried including iNO and IV prostacyclin with some clinical and functional improvement. The
study is a Phase 2 open-label dose escalation design that utilizes right heart catheterization to assess the acute
hemodynamic effect of INOpulse from a dose of iNO 30 to iNO 125 in PH-Sarc subjects. We have completed the process
of initiating clinical sites and we are enrolling patients into the trial, with results expected in 2021.
We completed a randomized, placebo-controlled, double-blind, dose-confirmation Phase 2 clinical trial of
INOpulse for pulmonary hypertension associated with chronic obstructive pulmonary disease, or PH-COPD, in July 2014.
The results from this trial showed that iNO 30 was a potentially safe and effective dose for treatment of PH-COPD. Based
on the results of this trial, we completed further Phase 2 testing to assess the targeted vasodilation provided by INOpulse in
this patient population. We presented the results of this trial in September 2015 at the European Respiratory Society
International Congress 2015 in Amsterdam. The data showed that INOpulse improved vasodilation in patients with PH-
COPD. In July 2016, the results were published in the International Journal of COPD in an article entitled “Pulmonary
vascular effects of pulsed inhaled nitric oxide in COPD patients with pulmonary hypertension.” During September 2017,
we shared the results of our Phase 2a PH-COPD trial that was designed to evaluate the acute effects of pulsed inhaled nitric
oxide, or iNO, on vasodilation as well as the chronic effect on hemodynamics and exercise tolerance. The trial showed a
statistically significant increase (average 4.2%) in blood vessel volume on iNO compared to baseline (p=0.03), and a
statistically significant correlation in Ventilation-Vasodilation (p=0.01). The chronic results demonstrated a statistically
significant and clinically meaningful increase in six minute walk distance, or 6MWD, of 50.7m (p=0.04) as well as a
decrease of 19.9% in systolic pulmonary arterial pressure (p=0.02), as compared to baseline. The data suggested that the
dose may have a favorable safety profile. In May 2018, we announced that the FDA concurred with the design of our
planned Phase 2b study of INOpulse for treatment of PH-COPD. The study will assess the effect of INOpulse on various
parameters including exercise capacity, right ventricular function and oxygen saturation, as well as other composite
endpoints. We continue to evaluate alternatives for the funding and timing of this program.
On March 19, 2020, the FDA granted emergency expanded access (“EA”) to allow for our INOpulse system to
immediately be used as supportive treatment for a patient with COVID-19 under the care and supervision of the patient’s
physician. The clinical goal of this experimental treatment was to mitigate the hospitalized patient’s disease progression
and avoid the need to perform intubation. Under the emergency access program, 180 hospitalized patients with COVID-19
from 18 hospitals across the United States received treatment with INOpulse. In April 2020, we submitted an IND
application to the FDA to study the iNO delivery system for the treatment of patients with COVID-19. The proposed
randomized, placebo controlled study, called COViNOX, was designed to evaluate the efficacy and safety of INOpulse in
patients diagnosed with COVID-19 who require supplemental oxygen before the disease progresses to necessitate
mechanical ventilation support. The COViNOX protocol aimed to enroll up to 500 patients with COVID-19 who were to
be treated with either INOpulse or placebo. The primary endpoint of the study required an assessment of the proportion of
subjects who experienced respiratory failure or mortality during the 28-day study period, which would allow the trial to
serve as a registrational study for approval. The IND application was accepted by the FDA in May 2020, and the trial was
initiated with the first patient treated in July 2020. The first 100 patients completed their 28-day assessment periods in
October 2020. In November 2020, we announced that the independent Data Monitoring Committee (“DMC”) had
completed its pre-specified interim analysis from the first 100 patients. Based on the finding of futility, we placed the
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COViNOX study on a clinical hold. Although new enrollment of subjects into the study was halted, the remaining 91
subjects already enrolled at the time the clinical hold was announced were allowed to complete the treatment course. Upon
completion of the protocol defined monitoring period, the pre-specified efficacy and safety analysis of these 191 patients
was reviewed by the DMC and the DMC concluded that there were no safety concerns that were attributed to INOpluse for
COVID-19. Based on the COVINOX results, we put the trial on a permanent clinical hold and we are not planning
additional studies for INOpulse for the treatment of COVID-19.
We initiated a Phase 3 clinical trial of INOpulse for PAH in June 2016. As agreed upon with the FDA, a pre-
specified interim analysis was conducted by the Data Monitoring Committee, or DMC, in August 2018, after half of the
planned subjects completed 16 weeks of blinded treatment. The data showed INOpulse provided clinically meaningful
improvements in pulmonary vascular resistance (18%), cardiac output (0.7 L/min) and NT Pro-BNP. The trial results
showed 6 minute walk distance was improved when subjects were on less background therapies and more patients
deteriorated in 6MWD on placebo as compared to iNO. Subjects on PAH background mono-therapy showed a 23 meter
improvement in 6MWD, while subjects that were not on prostanoid background therapy showed a 17 meter improvement
in 6MWD. However, the DMC determined that the overall change in 6MWD, the primary endpoint of the trial, was
insufficient to support the continuation of the study. Accordingly, based on the DMC's recommendation, we discontinued
the trial in August 2018. During the trial, however, the data suggested that INOpulse may have a favorable safety profile.
In addition, other potential indications for our INOpulse platform include: chronic thromboembolic PH, or
CTEPH, and PH associated with pulmonary edema from high altitude sickness.
We have devoted all of our resources to our therapeutic discovery and development efforts, including performance
of IND-enabling studies, conducting clinical trials for our product candidates, protecting our intellectual property and the
general and administrative support of these operations. We have devoted significant time and resources to developing and
optimizing our drug delivery system, INOpulse, which operates through the administration of nitric oxide as brief,
controlled pulses that are timed to occur at the beginning of a breath.
To date, we have generated no revenue from product sales. We expect that it will be several years before we
commercialize a product candidate, if ever.
Our Development Program
The following table summarizes key information about INOpulse and indications for which we have worldwide
commercialization rights.
From the inception of our business through December 31, 2020, $310.9 million was invested in our development
programs. Prior to our February 2015 initial public offering, or IPO, our sole source of funding was investments in us by
our former parent company, Ikaria, Inc. (a subsidiary of Mallinckrodt plc), or Ikaria. As used herein, unless the context
otherwise requires, references to “Ikaria” refer to Ikaria, Inc. and its subsidiaries and any successor entity.
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INOpulse
Our INOpulse program is an extension of the technology used in hospitals to deliver continuous-flow inhaled
nitric oxide. Use of inhaled nitric oxide is approved by the FDA and certain other regulatory authorities to treat persistent
PH of the newborn. Ikaria has marketed continuous-flow inhaled nitric oxide as INOmax for hospital use in this indication
since FDA approval in 1999. In October 2013, Ikaria transferred to us exclusive worldwide, royalty-free rights to develop
and commercialize pulsed nitric oxide in PAH, PH associated with chronic obstructive pulmonary disease, or PH-COPD,
and PH associated with idiopathic pulmonary fibrosis, or PH-IPF. In July 2015, we expanded the scope of our license to
allow us to develop our INOpulse program for the treatment of CTEPH, PH-Sarc and PH associated with pulmonary
edema from high altitude sickness with a royalty equal to 5% of net sales of any commercial products for these three
additional indications. In November 2015, we entered into an amendment to our exclusive cross-license, technology
transfer and regulatory matters agreement with Ikaria that included a royalty equal to 3% of net sales of any commercial
products for PAH. In April 2018, we expanded the scope of our license from PH-IPF to PH in patients with Pulmonary
Fibrosis (PH-PF), which includes idiopathic interstitial pneumonias, chronic hypersensitivity pneumonitis, occupational
and environmental lung disease, with a royalty equal to 1% of net sales of any commercial products for PH-PF.
Our INOpulse program is built on scientific and technical expertise developed for the therapeutic delivery of
inhaled nitric oxide. In 2010 and 2012, respectively, Ikaria submitted INDs for INOpulse for the treatment of patients with
PAH and PH-COPD. PAH is a form of PH that is closely related to persistent PH of the newborn. These INDs were
included in the assets that were transferred to us by Ikaria.
Nitric oxide is naturally produced and released by the lining of the blood vessels and results in vascular smooth
muscle relaxation, an important factor in regulating blood pressure. Relaxation of the muscles of the blood vessels allows
the heart to increase blood flow to tissues and organs of the body, including the lung. When administered through
inhalation, nitric oxide acts to selectively reduce pulmonary arterial pressure in the lung with minimal effects on blood
pressure outside of the lungs, an important safety consideration.
Inhaled nitric oxide is widely used in the hospital setting for the treatment of a variety of conditions and, as
reported by Ikaria, over 700,000 patients have been treated with inhaled nitric oxide worldwide since its approval in 1999.
However, chronic outpatient use of this therapy has previously been limited by a lack of a safe and compact delivery
system for outpatient use. We have designed our INOpulse device, which is the means by which inhaled nitric oxide is
delivered to the patient, to be portable, which enables use by ambulatory patients on a daily basis inside or outside their
homes. Our INOpulse device has a proprietary mechanism that delivers brief, targeted pulses of nitric oxide timed to occur
at the beginning of a breath for delivery to the well-ventilated alveoli of the lungs, which minimizes the amount of drug
required for treatment. We estimate that this, and the higher concentration of nitric oxide we use, reduces the volume of
drug delivered to approximately 5% of the volume required for equivalent alveolar absorption using standard continuous
flow delivery systems, and also reduces the amount of nitric oxide, as well as its by-product nitrogen dioxide, that is
exhaled and released into the patient’s environment. INOpulse is designed to automatically adjust nitric oxide delivery
based on a patient’s breathing pattern to deliver a constant and appropriate dose of the inhaled nitric oxide over time,
independent of the patient’s activity level, thus ensuring more consistent dosing of the nitric oxide to the alveoli of the
lungs.
In our previous Phase 2 INOpulse clinical trials, we used the first generation INOpulse device, which we refer to
as the INOpulse DS device. Beginning with our Phase 3 trial of INOpulse for PAH in 2016, we began using our second
generation device, which we refer to as the INOpulse device. The INOpulse device has approximately the same dimensions
as a paperback book and weighs approximately 2.5 pounds. The INOpulse device has a simple and intuitive user interface
and a battery life of approximately 16 hours when recharged, which takes approximately four hours, and can be done while
the patient sleeps. Based on the doses we have evaluated in our clinical trials, we expect that most patients will use one or
two cartridges a day. The INOpulse device incorporates our proprietary triple-lumen nasal cannula, safety systems and
proprietary software algorithms. The triple-lumen nasal cannula enables more accurate dosing of nitric oxide and
minimizes infiltration of oxygen, which can react with nitric oxide to form nitrogen dioxide. Our triple-lumen nasal
cannula consists of a thin, plastic tube that is divided into three channels from end-to-end, including at the prongs that are
placed in the patient’s nostrils, with one channel delivering inhaled nitric oxide, a second
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for breath detection and a third available for oxygen delivery. INOpulse is configured to be highly portable and compatible
with long-term oxygen therapy, or LTOT, systems via nasal cannula delivery.
The INOpulse device has been well received by patients in the usability research we have conducted. In addition
to the baseline testing on the original INOpulse DS device, we have conducted two rounds of testing with COPD and PAH
patients to evaluate the user interface, loading mechanism, size, carrying bag and other features. In the usability research
conducted, all eight patients who were experienced with the use of the INOpulse DS device responded positively to the
modifications in the INOpulse device. We conducted two studies to assess the environmental and the expiratory
concentration of nitrogen dioxide associated with use of the INOpulse delivery system. Both studies found that the nitrogen
dioxide levels were below the National Ambient Air Quality Standards.
Our technology is based on patents we have exclusively licensed from Ikaria for the treatment of PAH, PH-COPD,
PH-PF, CTEPH, PH-Sarc and PH associated with pulmonary edema from high altitude sickness which, collectively, we
refer to as the Bellerophon indications. These include patents with respect to the pulsed delivery of nitric oxide to ensure a
consistent dose over time, which expire as late as 2027 in the United States and as late as 2026 in certain other countries, as
well as with respect to the special triple-lumen cannula that allows for safer and more accurate dosing of pulsed nitric
oxide, which expires in 2033 in the United States and abroad. We have also licensed several other patent applications from
Ikaria for certain of the innovations included in the INOpulse device, and certain of the resulting patents, if issued, would
expire as late as 2030 in the United States. We have also expanded our patent portfolio by filing several Company-owned
patent applications relating to the use of nitric oxide that will expire as late as 2038.
During January 2016, the European Patent Office issued a Notice of Intention to Grant a European Patent that
provides protection for our INOpulse program. The patent, entitled “System of Administering a Pharmaceutical Gas to a
Patient,” covers the ability to provide a known amount of pharmaceutical gas to a patient regardless of the patient
inspiration rate or volume and distinguishes the INOpulse® delivery system from others on the market. This patent was
granted by the European Patent Office on March 30, 2016, and was subsequently validated in 30 European countries. Also
during January 2016, we received European Conformity, or EC, Certification for our proprietary new, INOpulse® drug-
device delivery system. This EC Certification grants CE marking on the INOpulse product, which confirms INOpulse
compliance with the essential requirements of the relevant European health, safety and environment protection legislation
of the European Union, or the EU. This certification covers the design, development and manufacture of inhaled pulsatile
nitric oxide drug delivery systems including our triple-lumen cannula and application software.
INOpulse for fILD
We are developing INOpulse for the treatment of patients with fibrotic interstitial lung disease (“fILD”) at a risk
for pulmonary hypertension, which includes PH associated with idiopathic pulmonary fibrosis as well as other pulmonary
fibrosing diseases. All ILDs affect the interstitium, a lace-like network of tissue that extends throughout both lungs. ILDs
are a chronic progressive disease of destruction of the airways and lung tissue. This disease results in scarring, thickening
of the lung tissue causing insufficient ability for the lungs to oxygenate blood to be delivered to the body, caused by
imbalance in mediators and chronic inflammation. While ILD is primarily a respiratory disease, it can also affect the
pulmonary vasculature both directly and indirectly via hypoxia, resulting in vascular remodeling and pulmonary
hypertension. Chronic elevation of the pulmonary artery pressures puts stress on the right ventricle and can lead to right
ventricular failure.
One of the largest and most serious subsets of ILDs is idiopathic pulmonary fibrosis (IPF), a progressive disease
of unknown etiology associated with growth of fibrotic tissue in the lungs causing hypoxemia, dyspnea, fatigue and cough.
Based on academic studies, we estimate the prevalence of IPF in the United States at approximately 90,000 patients, with
20-40% suffering from pulmonary hypertension. There are two therapies that are currently approved to treat IPF,
Nintedanib and Pirfenidone, each of which costs approximately $100,000 per year. PH with IPF increases mortality, with a
median survival of only two to three years. The presence of PH correlates most closely with the need for oxygen therapy.
However, there are currently no treatments approved to treat PH associated with IPF.
iNO may improve outcomes in PH-PF including PH-IPF by both improving Ventilation-Perfusion, or V/Q,
matching with increases in arterial oxygenation and by lowering pulmonary artery pressures. It has been shown (Yoshida
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et al., Eur Respir J 1997: 10: 2051-2054) that inhalation of nitric oxide significantly reduced the mean pulmonary arterial
pressure and the pulmonary vascular resistance as compared with room air alone in subjects with PH-IPF. In addition, the
combined inhalation of nitric oxide and oxygen produced both a significant decrease of pulmonary arterial pressure
(p<0.01) as well as an improvement (p<0.05) in PaO2 as compared to oxygen alone. These findings support the potential
for the combined use of nitric oxide and oxygen for treating patients with PH-PF including PH-IPF.
INOpulse for PH-Sarcoidosis
In 2018, we also initiated development of INOpulse for the treatment of PH associated with Sarcoidosis (PH-
Sarc). Sarcoidosis is a multi-system disease which is characterized by the growth of granulomas (inflammatory cells) in
one or more organs. The most frequent organs involved are the lungs and lymph nodes within the chest. Pulmonary
hypertension may be present in as many as 74% of patients depending on the disease severity and how the pulmonary
hypertension (PH) is defined. The presence of PH in sarcoidosis is associated with a poor prognosis. There are a number of
different mechanisms linking PH with sarcoidosis. The primary treatment for sarcoidosis is corticosteroids; however, the
outcome of this treatment on the PH is unclear. There is no approved therapy for PH associated with sarcoidosis. Various
PAH treatments have been tried including iNO and IV prostacyclin with some clinical and functional improvement.
The study is a Phase 2 open-label dose escalation design that will utilize right heart catheterization to assess the
acute hemodynamic effect of INOpulse from a dose of iNO 30 to iNO 125 in PH-Sarc subjects. We have completed the
process of initiating sites and we are enrolling patients into the trial, with results expected in 2021.
INOpulse for PH-COPD
We are also developing INOpulse for the treatment of PH-COPD. COPD is a disease characterized by progressive
and persistent airflow limitations. Patients with more severe COPD frequently have hypoxemia, or an abnormally low level
of oxygen in the blood, and may be treated with LTOT. Despite treatment with oxygen, hypoxemia can progress and
contribute to PH. In 2010, Datamonitor estimated that over 1.4 million COPD patients in the United States were being
treated with LTOT. Based on academic studies, we estimate that 50% of COPD patients on LTOT have PH. PH-COPD
patients have a lower median life expectancy and a higher rate of hospitalization than COPD patients with similar
respiratory disease but without PH. Currently, there are no approved therapies for treating PH-COPD, and the only
generally accepted treatments are LTOT, pulmonary rehabilitation and lung transplant. The overall COPD market in the
United States was estimated to be approximately $32 billion in 2010 with a compounded annual growth rate of
approximately 4% (Ford et al., Chest, 2015, Vol 147, pp 31-45).
The data from an initial three-month, open-label chronic-use Phase 2 trial conducted by a third party, which we in-
licensed, showed that pulsed inhaled nitric oxide significantly reduced pulmonary arterial pressures in PH-COPD patients
on LTOT and did so without causing hypoxemia, which is a significant concern for these patients. In order to confirm the
dose with our proprietary INOpulse device, we conducted a Phase 2 acute dose ranging randomized placebo-controlled
trial in 159 patients with the INOpulse DS device, with doses ranging from iNO 3 to iNO 75. This trial, which we
completed in July 2014, identified a dose range that showed similar reduction in pulmonary arterial pressure versus
baseline when compared to the initial acute effects of pulsed inhaled nitric oxide in the original chronic-use trial. In
addition, in our confirmatory trial, none of the INOpulse doses tested had an adverse effect on hypoxemia relative to
placebo. While the reduction in pulmonary arterial pressure did not reach statistical significance versus placebo in this
acute setting, which was the primary endpoint of the trial, we believe that the results have confirmed a dose range for this
therapy that delivers a significant reduction in pulmonary arterial pressure versus baseline and does not cause hypoxemia in
patients with PH-COPD. In September 2015, an oral presentation of late-breaking data from a clinical trial that we
sponsored was presented at the European Respiratory Society International Congress 2015 in Amsterdam. The data showed
that INOpulse improved vasodilation in patients with PH-COPD. In July 2016, the results were published in the
International Journal of COPD in an article titled “Pulmonary vascular effects of pulsed inhaled nitric oxide in COPD
patients with pulmonary hypertension”. Building upon this and other subsequent work with acute testing, we initiated
additional Phase 2 testing for the use of the INOpulse device for PH-COPD patients to evaluate the potential benefit of
chronic use on exercise capacity, and enrolled the first patient in October 2016. During September 2017, we shared the
results of our Phase 2a PH-COPD trial that was designed to evaluate the acute effects of iNO on vasodilation
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as well as the chronic effect on hemodynamics and exercise tolerance. The trial showed a statistically significant increase
(average 4.2%) in blood vessel volume on iNO compared to baseline (p=0.03), and a statistically significant correlation in
Ventilation-Vasodilation (p=0.01). The chronic results demonstrated a statistically significant and clinically meaningful
increase in 6MWD of 50.7m (p=0.04) as well as a decrease of 19.9% in systolic pulmonary arterial pressure (p=0.02), as
compared to baseline. In May 2018, we announced that the FDA concurred with the design of our planned Phase 2b trial of
INOpulse for treatment of PH-COPD. The study will assess the effect of INOpulse on various parameters, including
exercise capacity, right ventricular function and oxygen saturation, as well as other composite endpoints. We are currently
evaluating alternatives for the funding and timing of this program.
INOpulse for COVID-19
Although our focus continues to be on the development of INOpulse for patients with pulmonary hypertension,
studies suggested that naturally produced nitric oxide may be critical to the immune response against pathogens and
infections. In vitro studies have shown that nitric oxide inhibits the replication of severe acute respiratory syndrome-related
coronavirus (SARS-CoV), the virus that caused the SARS epidemic from 2002 to 2004, and improves survival for cells
infected with SARS-CoV. Based on the genetic similarities between SARS-CoV and the virus that causes COVID-19
(SARS-CoV-2), the historical data on SARS-CoV supports the potential that iNO may provide benefit for patients with
COVID-19. However, there is no history of using iNO to treat patients with viral infections that can cause severe
respiratory symptoms.
On March 19, 2020, the FDA granted emergency expanded access (“EA”) to allow for our INOpulse therapy to
immediately be used as supportive treatment for a patient with COVID-19 under the care and supervision of the patient’s
physician. The clinical goal of this experimental treatment was to mitigate the hospitalized patient’s disease progression
and avoid the need to perform intubation. Under the recently completed emergency access program, 180 hospitalized
patients with COVID-19 from 18 hospitals across the United States received treatment with INOpulse. Preliminary data
from the expanded access demonstrated a recovery rate of 73.0% and mortality rate of 6.3% measured at 14 days from
treatment initiation. In addition, preliminary data suggested that INOpulse may have a favorable safety profile.
In April 2020, we submitted an IND application to the FDA to study the iNO delivery system for the treatment of
patients with COVID-19. The proposed randomized, placebo controlled study, called COViNOX, was designed to evaluate
the efficacy and safety of INOpulse in patients diagnosed with COVID-19 who require supplemental oxygen before the
disease progresses to necessitate mechanical ventilation support. The COViNOX protocol aimed to enroll up to 500
patients with COVID-19 who were to be treated with either INOpulse or placebo. The primary endpoint of the study
required an assessment of the proportion of subjects who experienced respiratory failure or mortality during the 28-day
study period, which would allow the trial to serve as a registrational study for approval. The IND application was accepted
by the FDA in May 2020, and the trial was initiated with the first patient treated in July 2020. The first 100 patients
completed their 28-day assessment periods in October 2020. In November 2020, we announced that the independent Data
Monitoring Committee (“DMC”) had completed its pre-specified interim analysis from the first 100 patients. Based on the
finding of futility, we placed the COViNOX study on a clinical hold. Although new enrollment of subjects into the study
was halted, the remaining 91 subjects already enrolled at the time the clinical hold was announced were allowed to
complete the treatment course. Upon completion of the protocol defined monitoring period, the pre-specified efficacy and
safety analysis of these 191 patients was reviewed by the DMC and the DMC concluded that there were no safety concerns
that were attributed to INOpluse for COVID-19. Based on the COVINOX results, we put the trial on a permanent clinical
hold and we are not planning additional studies for INOpulse for the treatment of COVID-19.
INOpulse for PAH
PAH is characterized by abnormal constriction and remodeling of the arteries in the lung that increases the blood
pressure in the lungs which, in turn, results in abnormal strain on the heart’s right ventricle, eventually leading to heart
failure. PAH affects fewer than 200,000 individuals in the United States and while prevalence data varies widely, we
estimate that there are a total of at least 35,000 patients currently diagnosed with and being treated for PAH in the United
States and European Union. Moreover, because PAH is rare and causes varied symptoms, we believe there is significant
under-diagnosis of the condition at its early stages. There are several approved therapies for PAH, and we
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estimate, based on public product sales data, that 2014 combined global sales for these therapies were over $4.6 billion
with a compounded annual growth rate of approximately 7%. Most PAH patients are treated with multiple medications and
many are on supportive therapy. We believe that 40 to 60% of PAH patients are on LTOT. Despite the availability of
multiple therapies for this condition, PAH continues to be a life-threatening, progressive disorder. A French registry
initiated in 2002 and a U.S. registry initiated in 2006 estimate that the median survival of patients with PAH is three and
five years from initial diagnosis, respectively.
We completed a randomized, placebo-controlled, double-blind Phase 2 clinical trial of INOpulse for PAH in
October 2014, which was Part 1 of the trial. In February 2016, we announced positive data from the final analysis of Part 2
of our Phase 2 clinical trial of INOpulse for PAH. The data reinforced the results from October 2014 and indicated a
sustainability of benefit to PAH patients who received INOpulse therapy at the 75 mcg/kg dose for an average of greater
than 12 hours per day and were also treated with LTOT. After reaching an agreement with the FDA, and the European
Medicines Agency, or the EMA, on our Phase 3 protocol, we initiated the first of the two Phase 3 trials. The INOvation-1
trial was initiated with the first patient enrolled in June 2016. As agreed upon with the FDA, a pre-specified interim
analysis was conducted by the Data Monitoring Committee, or DMC, in August 2018, after half of the planned subjects
completed 16 weeks of blinded treatment. The data showed INOpulse provided clinically meaningful improvements in
pulmonary vascular resistance (18%), cardiac output (0.7 L/min) and NT Pro-BNP. In addition, subjects on PAH
background mono-therapy showed a 23 meter improvement in 6MWD, while subjects who were not on prostanoid
background therapy showed a 17 meter improvement in 6MWD. However, the DMC determined that the overall change in
6MWD, the primary endpoint of the trial, was insufficient to support the continuation of the study. Accordingly, based on
the DMC’s recommendation, we discontinued the trial in August 2018. The trial results showed 6MWD was improved
when subjects were on less background therapies and more patients deteriorated in 6MWD on placebo as compared to
iNO. In addition, data suggested that INOpulse may have a favorable safety profile.
BCM
In December 2011, we initiated a clinical trial of Bioabsorbable Cardiac Matrix, or BCM, and completed
enrollment in December 2014. Top-line results from the clinical trial were announced in July 2015. In July 2018, we
informed BioLineRx Ltd., from whom we in-licensed the BCM technology, of our decision to discontinue further
development and terminate the License and Commercialization Agreement.
Our Strategy
Our goal is to become a leader in developing and commercializing innovative products that address significant
unmet medical needs in the treatment of cardiopulmonary diseases. The key elements of our strategy to achieve this goal
include:
● Advance the clinical development of INOpulse. One of our lead indications for our product candidate is
INOpulse for fILD. We have completed our Phase 2b PH-PF program for INOpulse, which included 85
patients in two cohorts to evaluate two different doses of iNO for periods of eight to 16 weeks. We also
completed Phase 2 studies for INOpulse in each of fILD to evaluate the acute hemodynamic benefit and PH-
COPD to evaluate the effect of chronic use on exercise capacity and initiated a Phase 2 dose escalation study
for PH-Sarc.
● Leverage our historical core competencies to expand our pipeline. Our employees have years of institutional
experience in the use of inhaled nitric oxide in treating PH and in the development of drug-device
combination product candidates. If we successfully advance INOpulse, we expect to develop INOpulse for
treatment of CTEPH and PH associated with pulmonary edema from high altitude sickness and, subject to
obtaining additional license rights from Ikaria, potentially other outpatient PH indications. Our longer-term
vision is to identify and opportunistically in-license innovative therapies that are at the intersection of drugs
and devices and to develop and commercialize these product candidates.
● Build commercial infrastructure in select markets. As we near completion of the development of our product
candidates, we may build a commercial infrastructure to enable us to market and sell certain of our
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product candidates with a specialized sales force and to retain co-promotion or similar rights, when feasible,
in indications requiring a larger commercial infrastructure. While we may partner with third parties to
commercialize our product candidates in certain countries, we may also choose to establish
commercialization capabilities in select countries outside the United States.
INOpulse
INOpulse Scientific Background
Nitric oxide is a naturally occurring molecule produced by many cells of the body. Researchers found that nitric
oxide is produced and released by the lining of the blood vessels and plays a role in controlling muscle tone in blood
vessels. In particular, nitric oxide results in vascular smooth muscle relaxation in blood vessels and thus is an important
factor in regulating blood pressure. As the muscles of the blood vessels relax, blood flow increases, helping the heart to
deliver more blood to the body. PH patients can have a deficiency in endogenous nitric oxide production in their lungs.
When administered by inhalation to patients with PH, we expect inhaled nitric oxide to act in a similar manner to naturally
produced nitric oxide.
The scientific journal Science named nitric oxide Molecule of the Year in 1992. Additionally, the three researchers
who discovered the role of nitric oxide as a signaling molecule in the cardiovascular system earned the Nobel Prize for
Physiology or Medicine in 1998.
In 1991, Dr. Warren Zapol and his associates at the Massachusetts General Hospital discovered that inhaling nitric
oxide in gas form could reduce high blood pressure in the lungs, a condition known as PH. Nitric oxide is a rapid and
potent vasodilator, which means it dilates, or widens, blood vessels. When inhaled, it quickly dilates blood vessels in the
lungs, which reduces blood pressure in the lungs, strain on the right ventricle and shunting of de-oxygenated blood away
from the lungs. Because more blood can flow through the lungs, oxygen levels within blood improve. In addition, inhaled
nitric oxide improves the efficiency of oxygen delivery, and because it is a gas, it goes only to the portions of the lung that
are ventilated, or receiving air flow, and increases blood flow only in these areas. Thus, inhaled nitric oxide improves
ventilation-perfusion matching, an important element of lung function involving the air that reaches the lungs, or
ventilation, and the blood that reaches the lungs, or perfusion. Inhaled nitric oxide is quickly inactivated after contact with
blood, and is selective for the lungs, meaning that it has minimal effects on blood pressure outside of the lungs, which is an
important safety consideration.
In 1999, the FDA approved the use of inhaled nitric oxide for the short-term treatment of persistent PH of the
newborn. Based on this approval, and similar approvals from foreign regulatory authorities, continuous-flow inhaled nitric
oxide, which is administered to ventilated patients by a dedicated in-hospital device, is marketed by Ikaria and its
commercialization partners worldwide as INOmax (INOflo in Japan). Inhaled nitric oxide is widely used in the hospital
setting for the treatment of a variety of conditions and, as reported by Ikaria, over 700,000 patients have been treated with
inhaled nitric oxide worldwide since its approval in 1999. However, chronic outpatient use of this therapy has previously
been limited by the lack of a safe and compact delivery system for outpatient use.
Introduction to Pulmonary Hypertension
PH is a disease characterized by constriction of the blood vessels in the lung, which causes blood pressure in the
lung to rise and, in turn, increases the work required for the right ventricle of the heart to pump blood. The World Health
Organization, or WHO, has endorsed a consensus classification for PH that was updated most recently in 2018. The WHO
classification has five broad PH groups based on similarities in pathological and hemodynamic characteristics and
therapeutic approaches. We are initially focusing development of INOpulse in indications included in WHO Groups 1, 3
and 5 due to our view of the likelihood of success and the size and commercial viability of these markets. Group 1 PH is
comprised of patients with PAH. This Group combines conditions with a range of causes, all of which have a characteristic
pattern of vascular remodeling. The constriction of the blood vessels and the resulting pressure on the heart is often the
major reason for poor prognosis of PAH patients since they can be otherwise healthy. Most PAH-specific medications are
vasodilators and work through one of the three key mechanistic pathways for vasoconstriction and vasodilation. Group 3
PH consists of PH associated with lung disease or hypoxemia, which is an abnormally low level of
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oxygen in the blood. This Group includes patients with COPD and ILD (including fILD and IPF), among others. Group 5
PH consists of PH associated with blood, systematic and metabolic disorders. This Group includes patients with PH-Sarc.
INOpulse for fILD
We are developing INOpulse for the treatment of patients with fibrotic interstitial lung disease (“fILD”) at a risk
for pulmonary hypertension, which includes PH associated with idiopathic pulmonary fibrosis as well as other pulmonary
fibrosing diseases. Fibrotic interstitial lung disease (fILD), also referred to as pulmonary fibrosis (PF), is a general category
that includes many different lung conditions. All fILDs affect the interstitium, a lace-like network of tissue that extends
throughout both lungs and is the infrastructure that supports the small airways, blood vessels, and gas exchange units. The
interstitium under normal and healthy conditions is a very thin layer, however, it becomes dense and thick in conditions
such as in ILD. This thickening may become very dense and consolidated leading to lung scarring, otherwise known as
fibrosis. Typically, fILDs are chronic and progressive leading to destruction of the airways, blood vessels and lung tissue.
This causes insufficient ability for the lungs to oxygenate blood, caused by imbalance in mediators and chronic
inflammation. While fILD is primarily a respiratory disease, it can also affect the pulmonary vasculature, resulting in
vascular remodeling and pulmonary hypertension. Chronic elevation of the pulmonary artery pressures puts stress on the
right ventricle and can lead to right ventricular failure and death.
Disease Background and Market Opportunity
One of the largest and most serious subsets of fILDs is idiopathic pulmonary fibrosis (IPF), a progressive disease
of unknown etiology associated with growth of fibrotic tissue in the lungs causing hypoxemia, dyspnea, fatigue and cough.
Based on academic studies, we estimate the prevalence of IPF in the United States at approximately 90,000 patients, with
20-40% suffering from pulmonary hypertension. There are two therapies that are currently approved to treat IPF,
Nintedanib and Pirfenidone, each of which costs approximately $100,000 per year. PH with IPF increases mortality, with a
median survival of only two to three years. The presence of PH correlates most closely with the need for oxygen therapy.
However, there are currently no treatments approved to treat PH associated with IPF.
Scientific Rationale for Use of INOpulse for fILD
Like endogenous pulmonary nitric oxide, inhaled nitric oxide works by selectively relaxing lung vascular smooth
muscles, causing dilation of pulmonary blood vessels and consequently increased pulmonary blood flow. This reduces the
elevated pulmonary artery pressure in patients at risk of PH associated with fILD.
iNO may also improve outcomes in fILD including IPF by both improving Ventilation-Perfusion, or V/Q,
matching with increases in arterial oxygenation and by lowering pulmonary artery pressures. It has been shown (Yoshida et
al., Eur Respir J 1997: 10: 2051-2054) that inhalation of nitric oxide significantly reduced the mean pulmonary arterial
pressure and the pulmonary vascular resistance as compared with room air alone in IPF patients with pulmonary
hypertension. However, the arterial oxygen partial pressure (PaO2) did not improve. The combined inhalation of nitric
oxide and oxygen produced both a significant decrease of pulmonary arterial pressure (p<0.01) as well as an improvement
(p<0.05) in PaO2 as compared to oxygen alone. These findings support the potential for the combined use of nitric oxide
and oxygen for treating patients with fILD, including IPF.
Clinical Development Program
During May 2017, we announced the completion of our Phase 2 clinical trial using INOpulse therapy to treat PH-
IPF. The clinical data showed that INOpulse was associated with clinically meaningful improvements in hemodynamics
and exercise capacity in difficult-to-treat PH-IPF patients. The PH-IPF trial was a proof of concept study (n=4) designed to
evaluate the ability of pulsed inhaled nitric oxide, or iNO, to provide selective vasodilation as well as to assess the potential
for improvement in hemodynamics and exercise capacity in PH-IPF patients. The clinical trial met its primary endpoint
showing an average of 15.3% increase in blood vessel volume (p<0.001) during acute inhalation of iNO as well as showing
a significant association between ventilation and vasodilation, demonstrating the ability of INOpulse to provide selective
vasodilation to the better ventilated areas of the lung. The trial showed consistent benefit
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in hemodynamics with a clinically meaningful average reduction of 14% in systolic pulmonary arterial pressure (sPAP)
with acute exposure to iNO, and assessed both the iNO 75 and iNO 30 dose.
During August 2017, we announced FDA acceptance of our IND for our Phase 2b (iNO-PF) clinical trial using
INOpulse therapy in a broad population of patients with pulmonary fibrosis, or PF, at both low and intermediate/high risk
of PH. In January 2018, we announced the first patient enrollment in our iNO-PF Phase 2b trial. In October 2018, we
announced the enrollment completion of the planned 40 subjects, or cohort 1, in our iNO-PF trial. In addition, we
announced the expansion of the trial with the addition of cohort 2 and cohort 3, to evaluate higher doses as well as a longer
16 week evaluation period.
In January 2019, we announced top-line results from cohort 1 of our iNO-PF study. The Phase 2 trial was
designed as an exploratory study to identify optimal endpoints to progress into pivotal Phase 3 trial. The results suggested
benefit in multiple clinically meaningful activity parameters as measured by a wearable medical-grade activity monitor:
● subjects on iNO demonstrated an increase of 8% in moderate activity versus a 26% decrease for subjects on
placebo (p=0.04);
● subjects on iNO showed no decline in their overall activity levels versus a 12% decline for subjects on
placebo (p=0.05);
Clinically meaningful improvements were also demonstrated in the following key areas:
● subjects on iNO showed an increase of 15% in NT-ProBNP versus a 42% increase for subjects on placebo
(NT-ProBNP is a peptide marker of right ventricular failure, with higher levels indicative of disease
worsening);
● subjects on iNO demonstrated improved oxygen saturation by 9% versus a worsening of 11% for placebo.
In addition, the preliminary data suggested that iNO may present a favorable safety profile supporting the
continuation into cohort 2.
In April 2019, we announced that we reached an agreement with the FDA on modifying the ongoing Phase 2b
trial into a seamless Phase 2/3 trial, with cohort 3 serving as the pivotal study, as well as an agreement on the primary
endpoint in cohort 3 of change in MVPA from baseline to week 16, measured by Actigraphy. Actigraphy (medical
wearable continuous activity monitoring) has the potential to provide highly sensitive objective real-world physical activity
data that we expect to correlate with clinically meaningful patient functional abilities and health outcomes. Actigraphy is
currently being utilized as the primary endpoint in multiple late-stage clinical programs in various cardiopulmonary
diseases such as heart failure and COPD.
In May 2019, we presented additional positive data from cohort 1 at the American Thoracic Society 115th
International Conference:
● 23% of subjects on iNO had a clinically significant improvement in MVPA, compared to 0% of subjects on
placebo. This represents a placebo corrected difference of 23% - a clinically significant improvement is >
15% increase in MVPA from baseline;
● 39% of subjects on iNO had a clinically significant decline in MVPA, compared to 71% of subjects on
placebo. This represents a placebo corrected difference of 32% - a clinically significant improvement is
>15% decrease in MVPA from baseline;
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● Proportion of awake time spent in MVPA improved by 38% (16% increase on iNO vs. 22% decrease on
placebo; p=0.04), (p-value based on t-test on available data; exploratory endpoint; post-hoc analysis not
adjusted for multiplicity);
● Calorie expenditure improved by 12% (6% decrease on iNO vs. 18% decrease on placebo; p=0.05), (p-value
based on t-test on available data; exploratory endpoint; post-hoc analysis not adjusted for multiplicity);
● Subjects on open-label extension demonstrated consistent improvements in MVPA and overall activity, with
subjects transitioning from placebo to open-label experiencing a reversal from worsening to improving.
In September 2019, we announced that that we received an Orphan Drug Designation for nitric oxide for the
treatment of IPF. Orphan drug designation provides us access to various development incentives, including tax credits for
qualified clinical trial expenditures and waivers for certain FDA user fees. Orphan Drug Designation also provides up to
seven years of marketing exclusivity if regulatory approval is received.
In October 2019, we presented additional positive responder analysis data from cohort 1, as well as new long-term
results for subjects on open-label extension (OLE) at the American College of Chest Physicians Conference:
● Responder analysis:
● 85% of subjects on placebo declined in MVPA, overall activity and non-sedentary activity;
● 46% of subjects on INOpulse improved in MVPA, 62% in overall activity and 39% in non-sedentary
activity (compared to only 15% of subjects on placebo in each category).
● OLE:
● Collectively, subjects (with an average of 27 weeks of OLE data) demonstrated maintenance of MVPA,
overall activity and non-sedentary activity;
● Subjects randomized to active treatment in the blinded portion of the trial continued to maintain their
activity levels when transitioning to OLE over 27 weeks of open-label treatment;
● Subjects randomized to placebo in the blinded portion of the trial transitioned from a decline during
blinded treatment to stabilization of activity levels (MVPA, overall activity and non-sedentary activity)
over 27 weeks of open-label treatment.
In December 2019, we announced top-line results from Cohort 2 of iNO-PF. Cohort 2 suggested directionally
favorable and possibly clinically meaningful placebo corrected improvement in MVPA, defined as walking, stairs,
yardwork, and similar activities, in subjects treated with iNO45 (45 mcg/kg IBW/hr) versus placebo. The improvements in
MVPA were supported by potential benefits in overall activity, as well as patient reported outcomes. Subjects on iNO
showed a placebo corrected benefit in the following top-line parameters:
● MVPA improved by 14 minutes per day (p=0.02), representing a 20% improvement, after 4 months (p-value
based on t-test on available data; exploratory endpoint; post-hoc analysis not adjusted for multiplicity);
● Overall activity improved by 100 counts/min, representing a 7% improvement;
● St. George Respiratory Questionnaire (“SGRQ”) Total score improved by 3 points;
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● SGRQ Impacts score improved by 5 points;
● SGRQ Activity score improved by 6 points;
● University of California, San Diego Shortness of Breath Questionnaire improved by 5 points;
● Data indicated that iNO45 showed a favorable safety profile.
In addition, a longitudinal analysis based on all available data, as planned for Phase 3 for multiple endpoints
showed:
● a 20% benefit in MVPA and 7% benefit in overall activity after 4 months (analysis based on MMRM model
with change from month 1; no baseline covariate; data log-transformed for analysis);
● SGRQ total score improved by 4 points, Impacts score improved by 6 points and Activity score improved by
6 points;
● University of California, San Diego Shortness of Breath Questionnaire improved by 5 points.
In March 2020, we announced that in consultation with the FDA, we had finalized the key elements of our
planned pivotal Phase 3 study for fILD, including the use of MVPA as the primary endpoint for approval, the patient
population of pulmonary fibrosis subjects at risk of PH, as well as the dose of iNO45.
In 2018, we also implemented an open-label intra-patient acute dose escalation trial utilizing right heart
catheterization to assess the hemodynamic effect of INOpulse from a dose of iNO 30 to iNO 125 in PH-PF subjects. In
February 2020, we announced the completion of the study and that the top-line results from PHPF-002 demonstrated that
INOpulse achieved clinically and statistically meaningful cardiopulmonary improvements in multiple pre-specified
hemodynamic parameters (statistical analysis was conducted based on available data from the 9 fILD study participants
using Wilcoxon Log Rank test to compare results for each dose to baseline as well as the prior dose; study did not pre-
specify a statistical analysis methodology and results were not adjusted for multiplicity):
● Pulmonary vascular resistance reduced by 21% (average reduction of 125 dyne*sec*cm-5; baseline of 583
dyne*sec*cm-5); doses of iNO 30 (p<0.01), iNO 45 (p<0.01) and iNO 75 (p=0.01) were statistically
significant as compared to baseline, with increased benefit (p<0.01) on dose escalation from iNO30 (30
mcg/kg IBW/hr) to iNO45 (45 mcg/kg IBW/hr);
● Mean pulmonary arterial pressure reduced by 12% (average reduction of 4 mmHg; baseline of 34.7 mmHg);
doses of iNO 30 (p=0.02), iNO 45 (p=0.03) and iNO 75 (p=0.01) were statistically significant as compared to
baseline;
● Data suggested that iNO was generally well-tolerated and may yield a favorable risk-benefit profile across
doses.
INOpulse for PH-Sarcoidosis
We are also developing INOpulse for PH-Sarcoidosis. We believe the mechanism of action of inhaled nitric oxide
as a targeted pulmonary vasodilator, and thus INOpulse, can be effective in treating PH related to other conditions
including PH associated with sarcoidosis. Sarcoidosis is a multi-system disease which is characterized by the growth of
granulomas (inflammatory cells) in one or more organs. The most frequent organs involved are the lungs and lymph nodes
within the chest. Pulmonary hypertension may be present in as many as 74% of patients depending on the disease severity
and how the pulmonary hypertension (PH) is defined. The presence of PH in sarcoidosis is associated with a poor
prognosis. There are a number of different mechanisms linking PH with sarcoidosis. The primary treatment for sarcoidosis
is corticosteroids; however, the outcome of this treatment on the PH is unclear. There is no approved therapy
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for PH associated with sarcoidosis. Various PAH treatments have been tried including iNO and IV prostacyclin with some
clinical and functional improvement.
In 2018, we also initiated development of INOpulse for the treatment of PH associated with Sarcoidosis (PH-
Sarc). The study is a Phase 2 open-label dose escalation design that will utilize right heart catheterization to assess the
acute hemodynamic effect of INOpulse from a dose of iNO 30 to iNO 125 in PH-Sarc subjects. We have completed the
process of initiating clinical sites and we are enrolling patient into the trial, with results expected in 2021.
INOpulse for PH-COPD
We are developing INOpulse for PH-COPD to address a significant unmet medical need that we believe is often
overlooked in everyday clinical practice because of the lack of available therapy. PH is more prevalent among those COPD
patients who have advanced loss of respiratory function and low peripheral blood oxygen levels requiring treatment with
LTOT. The co-morbidity of PH in these patients leads to cardiovascular complications from the added strain on the right
ventricle of the heart. Current drug therapies for COPD are targeted to relieve the symptoms and complications of the
respiratory component of the disease. Unlike these therapies, INOpulse is directed at treating the cardiovascular
complications of PH-COPD. We believe PH-COPD patients on LTOT who are at risk for cardiovascular complications
could benefit from the use of INOpulse in addition to any respiratory benefits that result from their existing treatments.
Disease Background and Market Opportunity
COPD is a progressive disease caused by chronic inflammation and destruction of the airways and lung tissue.
While COPD is primarily a respiratory disease, over time, as the disease progresses, the extent of the chronic pulmonary
pathology impairs gas exchange resulting in deprivation of adequate oxygen supply, or hypoxia, and can contribute to
vasoconstriction in the pulmonary arterial bed. In addition, COPD patients can have deficiency in endogenous nitric oxide
production in their lungs, which can worsen vasoconstriction. This pulmonary vasoconstriction puts pressure on the right
side of the heart, making it less able to cope with stressors and potentially leading to progressive cardiac dilation, heart
failure and death. This cardiovascular component of COPD is, we believe, often overlooked despite pulmonologists’
general awareness of the problem, in part because there are no specific therapies for the condition in these patients. While it
is widely believed that the cardiovascular complications of COPD occur only in the advanced stage of the disease as a
consequence of chronic hypoxemia, recent findings demonstrate an earlier involvement of the cardiovascular system in this
disease.
In 2010, Datamonitor estimated that approximately 12 million patients in the United States were being treated for
COPD and that over 1.4 million of these patients were being treated with LTOT. Based on academic studies, we estimate
that 50% of COPD patients on LTOT in the United States have PH. Even though the degree of PH in these patients is
milder than in PAH patients, data published in literature suggests that even small elevations in mean pulmonary artery
pressure in patients with advanced COPD can impact hospitalization, patient-assessed functional outcomes and mortality.
PH is a well-known predictor of increased morbidity and mortality in COPD patients and is associated with poor quality of
life, worse clinical outcomes and shorter survival time. Based on a long-term study completed in 1992 and published in
1995, PH-COPD patients had a four-year survival rate of approximately 50%. By contrast, in this same long-term study,
COPD patients with similar pulmonary functions, but without PH, had a four-year survival rate of 80%.
The overall COPD market in the United States was estimated to be approximately $32 billion in 2010 with a
compounded annual growth rate of approximately 4%. We expect INOpulse for PH-COPD, if approved, would be treated
as a specialty drug. Specialty drugs are typically high-cost medications, often ranging in price in the United States from
approximately $15,000 to $50,000 per patient per year, and are used to treat rare or complex conditions, requiring close
clinical management, special handling and distribution through specialty pharmacies.
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Scientific Rationale for Use of INOpulse for PH-COPD
The mechanism of action of inhaled nitric oxide in vasodilation at the alveolar smooth muscle in PH-COPD is
similar to its action in fILD. Like endogenous pulmonary nitric oxide, inhaled nitric oxide works by selectively relaxing
lung vascular smooth muscles, causing dilation of pulmonary blood vessels and consequently increased pulmonary blood
flow. This reduces the elevated pulmonary artery pressure in patients with PH-COPD.
PH-COPD patients generally have hypoxemia as a result of deteriorating lung function, which can be treated with
supplemental oxygen therapy. However, these patients are not treated with currently approved PAH-specific drugs because
these drugs can worsen hypoxemia. This worsening can occur when these drugs, which are systemically bioavailable,
cause indiscriminate pulmonary vasodilation, even in poorly ventilated alveoli, resulting in lower average blood
oxygenation levels. We believe that pulsed nitric oxide, as a locally active selective pulmonary vasodilator, can avoid the
indiscriminate vasodilation associated with drugs that are systemically bioavailable. The INOpulse technology, by targeting
the delivery of the pulse to the well ventilated alveoli, has the potential to drop pulmonary arterial pressure while avoiding
the lowering of blood oxygen levels.
The targeted delivery of inhaled nitric oxide to specific alveoli is important because early trials with continuous-
flow inhaled nitric oxide reduced pulmonary arterial pressure in PH-COPD patients but also resulted in lowering of blood
oxygen levels. It was postulated that this unwanted effect might be avoided by administering nitric oxide as a brief pulse at
the beginning of each breath because well-ventilated alveoli open faster, and a brief early pulse would only reach these
alveoli. As early as 1997, this concept was demonstrated by testing inhaled nitric oxide in PH-COPD patients during
exercise, which allowed the dose to mimic pulse dosing. Recently, data from a computational fluid-flow modeling study we
conducted, using high resolution computed tomography scans and computer simulations, supported this hypothesis that
early pulsed delivery of nitric oxide could be directed specifically to the well-ventilated alveoli.
Clinical Development Program
INOpulse for PH-COPD is designated as a drug-device combination by the FDA and is being reviewed by the
Division of Cardiovascular and Renal Products in the Center for Drug Evaluation and Research (CDER) with consultation
from the Division of Pulmonary, Allergy, and Rheumatology Products and the Center for Devices and Radiological Health
(CDRH). In our IND for PH-COPD, we referenced all of the information in our IND for PAH. The data referenced in our
IND, as well as the years of use of the marketed product, demonstrate that nitric oxide is generally well tolerated. The FDA
has agreed that the IND package is adequate for supporting Phase 2 clinical development of INOpulse for PH-COPD. The
FDA also agreed that no additional pre-clinical studies are needed to support product approval.
We completed a randomized, placebo-controlled, double-blind, dose-confirmation Phase 2 clinical trial of
INOpulse for PH-COPD in July 2014. We have received results from this trial, and have initiated further Phase 2 testing to
demonstrate the potential benefit on exercise capacity. In September 2015, an oral presentation of late-breaking data from a
clinical trial that we sponsored was presented at the European Respiratory Society International Congress 2015 in
Amsterdam. The data showed that INOpulse improved vasodilation in patients with PH-COPD. In July 2016, the results
were published in the International Journal of COPD in an article titled “Pulmonary vascular effects of pulsed inhaled nitric
oxide in COPD patients with pulmonary hypertension”. Building upon this and other work we have done over recent
quarters, we have initiated additional Phase 2 testing for the use of the INOpulse device for PH-COPD patients to evaluate
the potential benefit of chronic use on exercise capacity, with the first patient enrolled in October 2016. During
September 2017, we shared the results of our Phase 2a PH-COPD study designed to evaluate the acute effects of pulsed
inhaled nitric oxide, or iNO, on vasodilation as well as the chronic effect on hemodynamics and exercise tolerance. In
May 2018, we announced that we reached agreement with the FDA on the design of our planned Phase 2b study of
INOpulse for treatment of PH-COPD. The study will assess the effect of INOpulse on various parameters including
exercise capacity, right ventricular function, oxygen saturation as well as other composite endpoints. We continue to
evaluate alternatives for the funding and timing of this program.
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INOpulse for Pulmonary Arterial Hypertension
PAH is a life-threatening, progressive disorder characterized by abnormally high blood pressure, or hypertension,
in the pulmonary artery, the blood vessel that carries blood from the heart to the lungs. Since the discovery of the
significant role of nitric oxide in vasodilation, there has been an expectation in the scientific community that inhaled nitric
oxide could be an effective therapy for PAH. According to the Cleveland Clinic Center for Continuing Education section
on Pulmonary Hypertension, exogenous administration of nitric oxide by inhalation is probably the most effective and
specific therapy for PAH, but cost and technical complexity of delivering inhaled nitric oxide have limited its use to the
hospital. Although not approved for the treatment of PAH, data from an in-hospital survey conducted by Ikaria showed an
estimated 1,000 to 2,000 INOmax uses in PAH patients in the United States each year, indicating that physicians already
use nitric oxide in some PAH patients. The difficulty in delivering inhaled nitric oxide outside of the hospital results from
the size of the device and cylinder and the need for a specialized delivery system with built-in safety systems.
Clinical Development Program
We completed a randomized, placebo-controlled, double-blind Phase 2 clinical trial of INOpulse for PAH in
October 2014, which was Part 1 of the trial. In February 2016, we announced positive data from the final analysis of Part 2
of our Phase 2 clinical trial of INOpulse for PAH. The data reinforced the results from October 2014 and indicated a
sustainability of benefit to PAH patients who received INOpulse therapy at the 75 mcg dose for an average of greater than
12 hours per day and were also treated with LTOT. After reaching agreement with the FDA, and the EMA on our Phase 3
protocol, we initiated the first of the two Phase 3 trials. The INOvation-1 trial was initiated with the first patient enrolled in
June 2016. As agreed upon with the FDA, a pre-specified interim analysis was conducted by the Data Monitoring
Committee, or DMC, in August 2018, after half of the planned subjects completed 16 weeks of blinded treatment. The data
showed INOpulse provided clinically meaningful improvements in pulmonary vascular resistance (18%), cardiac output
(0.7 L/min) and NT Pro-BNP. In addition, subjects on PAH background mono-therapy showed a 23 meter improvement in
6MWD, while subjects that were not on prostanoid background therapy showed a 17 meter improvement in 6MWD.
However, the DMC determined that the overall change in 6MWD, the primary endpoint of the trial, was insufficient to
support the continuation of the study. Accordingly, based on the DMC’s recommendation, we discontinued the trial in
August 2018. The trial results showed 6MWD was improved when subjects were on less background therapies and more
patients deteriorated in 6MWD on placebo as compared to iNO. During the trial, however, the data suggested that
INOpulse may have a favorable safety profile.
INOpulse for Other Pulmonary Hypertension Conditions
PH disease is often classified according to the WHO classification system which groups patients with PH
according to the underlying etiologies, or causes, of the PH. In this system, PAH is defined as Group 1 and COPD and ILD
(including fILD and IPF) are classified under Group 3, PH due to lung disease and/or hypoxemia. Group 5 PH consists of
PH associated with blood, systematic and metabolic disorders. This Group includes patients with PH-Sarc. We believe the
mechanism of action of inhaled nitric oxide as a targeted pulmonary vasodilator, and thus INOpulse, can be effective in
treating PH related to other conditions, including CTEPH and PH associated with pulmonary edema from high altitude
sickness.
In 2013, riociguat (Adempas) was the first drug therapy approved for treating CTEPH, although other PAH
medications are sometimes used to treat this condition. Patients with sarcoidosis are often treated with steroids or other
anti-inflammatory medications, however, there are no therapies approved to treat the PH associated with this disease.
Pulmonary edema from high altitude sickness is typically treated with oxygen therapy, however, there are no current
treatments for PH associated with this disease.
Our current license from Ikaria covers the development of the Bellerophon indications as noted above.
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Relationship with Ikaria after the Spin-Out
The development of our programs was initiated under the leadership of our scientific and development team while
at Ikaria. Ikaria’s lead product, INOmax, is an inhaled nitric oxide product used for the treatment of persistent PH of the
newborn. Our understanding of the medical applications of nitric oxide and associated delivery devices, as well as our
innovative approach to the pulsed delivery of nitric oxide, originated at Ikaria.
In October 2013, Ikaria completed an internal reorganization of certain assets and subsidiaries, in which it
transferred to us exclusive worldwide royalty-free rights to develop and commercialize pulsed nitric oxide in PAH, PH-
COPD and PH-IPF. In November 2015, we entered into an amendment to our exclusive cross-license, technology transfer
and regulatory matters agreement with Ikaria that included a royalty equal to 3% of net sales of any commercial products
for PAH. Following the internal reorganization, in February 2014, Ikaria distributed all of our then outstanding units to its
stockholders through the payment of a special dividend on a pro rata basis based on each stockholder’s ownership of Ikaria
capital stock. We refer to Ikaria’s distribution of our then outstanding units to its stockholders as the Spin-Out.
Shortly after the Spin-Out, Ikaria was acquired by entities affiliated with Madison Dearborn Partners. On April 16,
2015, Mallinckrodt plc, or Mallinckrodt, announced that it had completed its acquisition of Ikaria.
In connection with the Spin-Out, we entered into several agreements with Ikaria providing for, among other
things, the provision of transition services, the cross license of certain intellectual property, commitments not to compete,
the manufacture and supply of the INOpulse drug and device and certain employee matters.
Exclusive Cross-License, Technology Transfer and Regulatory Matters Agreement
In February 2014, we entered into an exclusive cross-license, technology transfer and regulatory matters
agreement with Ikaria. Pursuant to the terms of the license agreement, Ikaria granted to us a fully paid-up, non-royalty
bearing, exclusive license under specified intellectual property rights controlled by Ikaria to engage in the development,
manufacture and commercialization of nitric oxide, devices to deliver nitric oxide and related services for or in connection
with out-patient, chronic treatment of patients with PAH, PH-COPD or PH-IPF. In July 2015, we entered into an
amendment to the license agreement to expand the scope of our license to allow us to develop our INOpulse program for
the treatment of three additional indications: CTEPH, PH associated with sarcoidosis and PH associated with pulmonary
edema from high altitude sickness. Subject to the terms set forth therein, the amendment to the license agreement also
provides that the Company will pay Ikaria a royalty equal to 5% of net sales of any commercialized products for the three
additional indications. In November 2015, we entered into an amendment to our exclusive cross-license, technology
transfer and regulatory matters agreement with Ikaria that included a royalty equal to 3% of net sales of any commercial
products for PAH.
In April 2018, we expanded the scope of our license from PH-IPF to PH in patients with Pulmonary Fibrosis (PH-
PF), which includes idiopathic interstitial pneumonias, chronic hypersensitivity pneumonitis, occupational and
environmental lung disease, with a royalty equal to 1% of net sales of any commercial products for PH-PF.
We have granted to Ikaria a fully paid-up, non-royalty-bearing, exclusive license under specified intellectual
property rights that we control to engage in the development, manufacture and commercialization of products and services
for or used in connection with the diagnosis, prevention or treatment, whether in- or out-patient, of certain conditions and
diseases other than the Bellerophon indications and for the use of nitric oxide to treat or prevent conditions that are
primarily managed in the hospital, which we refer to collectively as the Ikaria nitric oxide business.
We have agreed that, during the term of the license agreement, we will not, without the prior written consent of
Ikaria, grant a sublicense under any of the intellectual property licensed to us under the license agreement to any of our
affiliates or any third party, in either case that directly or indirectly competes with the Ikaria nitric oxide business. We have
also agreed that we will include certain restrictions in our agreements with customers of our products to ensure that such
products will only be used for the Bellerophon indications.
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The license agreement will expire on a product-by-product basis for products for a specific Bellerophon indication
at such time as we are no longer developing or commercializing any product for such indication. The license agreement
may be terminated by either party in the event an act or order of a court or governmental authority prohibits either party
from substantially performing under the license agreement. Either party may also terminate the license agreement in the
event of an uncured material breach by the other party or in the event the other party is insolvent or in bankruptcy
proceedings. Ikaria may also terminate the license agreement if we or any of our affiliates breach the agreements not to
compete described below, or if we or any successor to our rights under the license agreement markets a generic nitric oxide
product that is competitive with INOmax. Under certain circumstances, if the license agreement is terminated, the licenses
granted to Ikaria by us will survive such termination.
Ikaria retains the right to develop and commercialize inhaled nitric oxide products, including pulsed products, in
all indications other than the Bellerophon indications.
Agreements Not to Compete
In September 2013, October 2013 and February 2014, we and each of our subsidiaries entered into an agreement
not to compete with Ikaria, each of which was amended in July 2015. We refer to these agreements collectively as the
agreements not to compete. Pursuant to the agreements not to compete, as amended, we and each of our subsidiaries agreed
not to engage, anywhere in the world, in any manner, directly or indirectly, until the earlier of five years after the effective
date of such agreement not to compete, as amended, or the date on which Ikaria and all of its subsidiaries are no longer
engaged in such business, in:
● the development, manufacture, commercialization, promotion, sale, import, export, servicing, repair, training,
storage, distribution, transportation, licensing or other handling or disposition of any product or service
(including, without limitation, any product or service that utilizes, contains or includes nitric oxide for
inhalation, a device intended to deliver nitric oxide or a service that delivers or supports the delivery of nitric
oxide), bundled or unbundled, for or used in connection with (a) the diagnosis, prevention or treatment, in
both adult and/or pediatric populations, and whether in- or out-patient, of: (i) hypoxic respiratory failure
associated with pulmonary hypertension, (ii) pulmonary hypertensive episodes and right heart failure
associated with cardiovascular surgery, (iii) bronchopulmonary dysplasia, (iv) the management of
ventilation-perfusion mismatch in acute lung injury, (v) the management of ventilation-perfusion mismatch
in acute respiratory distress syndrome, (vi) the management of pulmonary hypertension episodes and right
heart failure in congestive heart failure, (vii) the management of pulmonary hypertension episodes and right
heart failure in pulmonary or cardiac surgery, (viii) the management of pulmonary hypertension episodes and
right heart failure in organ transplant, (ix) sickle cell vaso-occlusive crisis, (x) hypoxia associated with
pneumonia or (xi) ischemia-reperfusion injury or (b) the use of nitric oxide to treat or prevent conditions that
are primarily managed in the hospital; or
● any and all development, manufacture, commercialization, promotion, sale, import, export, storage,
distribution, transportation, licensing, or other handling or disposition of any terlipressin or any other product
within the pressin family, (a) intended to treat (i) hepatorenal syndrome in any form, (ii) bleeding esophageal
varices or (iii) septic shock or (b) for or in connection with the management of low blood pressure.
The agreements not to compete expressly exclude the Bellerophon indications.
In February 2014, we also entered into drug and device clinical supply agreements with Ikaria. In
November 2015, we entered into an amendment to the drug supply agreement. See “Manufacturing” below for a
description of the drug and device clinical supply agreements.
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Manufacturing
INOpulse Drug Product
In February 2014, we and a subsidiary of Ikaria entered into a drug supply agreement which was subsequently
amended in November 2015. Under this agreement, Ikaria has agreed to use commercially reasonable efforts to supply
inhaled nitric oxide for us in our clinical trials, and we have agreed to purchase our clinical supply of inhaled nitric oxide
from Ikaria. We have also granted Ikaria a right of first negotiation in the event that we desire to enter into a commercial
supply agreement with a third party for supply of nitric oxide for inhalation. The drug supply agreement will expire on a
product-by-product basis on the date we discontinue clinical development of such product. In addition, either party may
terminate the drug supply agreement in the event of an uncured material breach by the other party.
Ikaria manufactures pharmaceutical-grade nitric oxide at its facility in Port Allen, Louisiana. This facility, which
we believe is operated in compliance with current Good Manufacturing Practices, or cGMP, is the only FDA-approved site
in the world for manufacturing medical nitric oxide.
To support business outside of the United States, the Port Allen manufacturing facility has also successfully
passed inspections by the EMA, Health Canada; the Pharmaceutical and Medical Devices Agency, or PMDA, of Japan, and
the Korean FDA, or KFDA. The EMA, the Health Protection Branch of Health Canada, PMDA and KFDA operate in a
similar fashion to the FDA in that each requires submission of a dossier containing substantial evidence of safety and
effectiveness prior to approval. These agencies’ monitoring of safety in a post-marketing setting also is similar to that of
the FDA.
The filling process has been developed by Ikaria as a high-throughput batch fill process that leverages several
technologies that Ikaria has developed, and we have licensed, to fill the cartridge (containers) at a high pressure and purity.
This manufacturing system is designed to be modular and can be expanded as needed. The current installed
capacity within the Port Allen plant is sufficient to support our INOpulse clinical program as currently planned. In addition,
the plant has the capacity to expand to meet additional demand. We have a license from Ikaria to use this fill process
technology to work with additional companies, as needed, to produce the final cartridge. Commercial supply
manufacturing can be supported with additional units installed at the Port Allen site or other regional locations, by Ikaria or
other manufacturers, as determined by distribution requirements. For our clinical trials, Ikaria can supply and ship product
from the Port Allen site and the current cartridges have a shelf life of at least two years. We are testing the finished product
to potentially establish a shelf life of up to three years.
INOpulse Drug Delivery Systems
In February 2015, we entered into an agreement with Flextronics Medical Sales and Marketing Ltd., a subsidiary
of Flextronics International Ltd., or Flextronics, to manufacture and service the INOpulse device. In June 2018, we entered
into a similar agreement with Benchmark Electronics, Inc. to manufacture and service additional INOpulse devices.
PH patients have the potential for rebound PH, which is a sudden and serious increase in pulmonary arterial
pressure that results from therapy withdrawal. However, in the PAH Phase 2 trial and Phase 2 PH-PF trial, all patients were
tested for rebound PH and we found no adjudicated cases of rebound PH with this testing. Though the likelihood of
rebound PH is very low, all of our patients are provided with a backup system.
Competition
The biotechnology and pharmaceutical industries are highly competitive. There are many pharmaceutical
companies, biotechnology companies, public and private universities and research organizations actively engaged in the
research and development of products that may be similar to our products. In addition, other companies are increasingly
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looking at cardiopulmonary indications as a potential opportunity. It is possible that the number of companies seeking to
develop products and therapies for the treatment of unmet needs in our target markets will increase.
Our competitors, either alone or with their strategic partners, may have substantially greater financial, technical
and human resources than we do and significantly greater experience in the discovery and development of product
candidates, obtaining FDA and other regulatory approvals of products and the commercialization of those products.
Accordingly, our competitors may be more successful than we may be in obtaining approval for therapies and achieving
widespread market acceptance. We anticipate that we will face intense and increasing competition as new drugs and
advanced technologies become available.
Currently, there are no approved therapies for treating PH-COPD, and the only generally accepted treatments are
LTOT, pulmonary rehabilitation and lung transplant, and we are not aware of any therapies for PH-COPD in advanced
clinical development. Currently, there are no approved therapies for treating PH-PF including PH-IPF and only one therapy
in advanced clinical development that we are aware of.
Patents and Proprietary Rights
We strive to protect the proprietary technologies that we believe are important to our business, including seeking
and maintaining patent protection intended to protect, for example, our product candidates, related technologies and/or
other aspects of the inventions that are important to our business. Our owned and licensed patents and patent applications
cover patentable subject matter from composition of matter, methods of use, devices and device components, critical safety
features and design components with respect to INOpulse. However, patent protection is not available for the composition
of matter of the active pharmaceutical ingredients in INOpulse since nitric oxide is a naturally occurring molecule.
Actual protection afforded by a patent, which can vary from country to country, depends on the type of patent, the
scope of its coverage and the availability of legal remedies in the country. We also rely on trade secrets and careful
monitoring of our proprietary information to protect aspects of our business that are not amenable to, or that we do not
consider appropriate for, patent protection.
We plan to continue to expand our intellectual property estate by filing patent applications directed to inventions
which provide additional patent protection for our product offering, for instance, device enhancements, safety features and
manufacturing processes. Our success will depend significantly on our ability to obtain and maintain patent and other
proprietary protection for commercially important technology, inventions and know-how related to our business; defend
and enforce our patents; maintain our licenses to use intellectual property owned by third parties; preserve the
confidentiality of our trade secrets; and operate without infringing the valid and enforceable patents and other proprietary
rights of third parties. We also consider know-how, continuing technological innovation and in-licensing opportunities to
develop, strengthen and maintain our proprietary positions.
A third party may hold intellectual property, including patent rights that are important or necessary to the
development of our programs. It may be necessary for us to use the patented or proprietary technology of third parties to
commercialize our product candidates, in which case we would be required to obtain a license from these third parties on
commercially reasonable terms, or our business could be harmed, possibly materially. For example, if we want to expand
the indications for which we could develop and commercialize pulsed nitric oxide beyond the Bellerophon indications, we
will need to obtain a license from Ikaria.
The patent positions of therapeutics companies like us are generally uncertain and involve complex legal,
scientific and factual questions. In addition, the coverage claimed in a patent application can be significantly reduced
before the patent is issued, and patent scope can be reinterpreted by the courts after issuance. Moreover, many jurisdictions
permit third parties to challenge issued patents in administrative proceedings which may result in further narrowing or even
cancellation of patent claims. Consequently, we do not know whether any of our product candidates will be protectable or
remain protected by enforceable patents. We cannot predict whether the patent applications we are currently pursuing will
issue as patents in any particular jurisdiction or whether the claims of any issued patents will
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provide sufficient protection from competitors. Any patents that we own or license may be challenged, narrowed,
circumvented or invalidated by third parties.
Because patent applications in the United States and certain other jurisdictions are maintained in secrecy for
18 months or potentially even longer, and since publication of discoveries in the scientific or patent literature often lags
behind actual discoveries, we cannot be certain of the priority of inventions covered by pending patent applications.
Moreover, we may have to participate in interference proceedings declared by the U.S. Patent and Trademark Office, or
USPTO, to determine priority of inventions for any patent applications filed with the USPTO on or before March 15, 2013.
Likewise, derivation proceedings may also be declared for any patent filings filed after March 15, 2013.
The patents and patent applications that relate to our programs are described below.
INOpulse
As of December 31, 2020, we hold exclusive licenses from Ikaria to at least 100 patents and pending patent
applications in both the United States and foreign countries including Australia, Brazil, Canada, China, Eurasia, Europe,
Hong Kong, India, Indonesia, Israel, Japan, Korea, Mexico, the Philippines, Russia, Singapore and South Africa. Certain of
these issued patents and patent applications, if issued, will expire as late as 2033. These patent rights have been exclusively
licensed for the treatment of patients with Bellerophon indications and cover methods of delivery and the drug delivery
device, as well as important safety features and the ornamental design of the drug delivery device.
A primary basis for patent exclusivity is based on pending and issued in-licensed patents directed to proprietary
methods of administering pulsed inhaled nitric oxide, as well as a device for delivering the same. At least one patent has
been issued in the United States as well as Australia, Brazil, Canada, China, Europe, Hong Kong, Japan and Mexico. Patent
applications are pending in Australia, Europe, Hong Kong, Mexico and the United States. This patent family expires as late
as 2027 in the United States and in 2026 in the other countries.
Another important basis for patent exclusivity is based on an in-licensed portfolio of patents, directed to novel
nasal cannula features that we believe are necessary for the accurate, safe and efficacious administration of pulsed nitric
oxide. The patent family consists of six issued U.S. patents and issued patents in Australia, China, Eurasia, Europe, Hong
Kong, Israel, Japan, and Mexico, as well as pending applications in the United States as well as Australia, Brazil, Canada,
China, Eurasia, Europe, Hong Kong, Israel, India, Japan, Korea, Mexico and South Africa. Each of these patents and patent
applications, if issued, will expire in 2033 in the United States and abroad.
Another in-licensed patent family relates to features of the drug delivery canister necessary for providing drug
product for use with our proprietary pulsing drug delivery device. This patent family includes at least one issued patent in
each of the United States, Australia, Canada, China, Europe, Hong Kong, Indonesia, Israel, Japan, Korea, Mexico, the
Philippines, Russia and Singapore, as well as pending patent applications in the United States, Brazil, India, Mexico and
Singapore. These pending applications, if issued, as well as the non-U.S. issued patents will expire in 2029. Two issued
U.S. patents will expire in 2030.
Several other patent families directed to device and safety features are issued and pending. One U.S. issued patent
directed to the valve configuration of our proprietary drug delivery device and the shape of the nitric oxide pulses will
expire in 2039. Furthermore, design patents covering the ornamental designs of the intended commercial device and
clinical device have been granted.
We have also filed several Company-owned patent applications relating to the use and administration of nitric
oxide and devices for administering nitric oxide. These Company-owned patent families are currently pending as
international PCT patent applications, US applications and/or applications in foreign countries including Argentina,
Australia, Brazil, Canada, China, Eurasia, Europe, Hong Kong, India, Indonesia, Israel, Japan, Korea, Mexico, New
Zealand, the Philippines, Singapore, South Africa and/or Taiwan, and any patents that issue in these families will expire in
2038 or 2039 or 2040. The patent families relate to the use of inhaled nitric oxide for the improvement of right and/or left
ventricular function, the use of inhaled nitric oxide for the treatment of PH-ILD, the use of inhaled nitric oxide and oxygen
for the treatment of PH, and treating PH by maintaining dosing frequency and/or minimizing skipped breaths
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during pulsed administration of inhaled nitric oxide. Additional patent families relate to methods of administering pulsed
nitric oxide, administration of nitric oxide for improvement of severe hypoxemia, administration of nitric oxide in
combination with PDE-5 inhibitors, and administration of nitric oxide to improve activity levels in patients having lung-
related impairment. In addition, we have filed multiple patent applications in 2020 that would expire in 2041 if issued.
In addition, the FDA has granted orphan drug designation to our nitric oxide program for the treatment of PAH
and IPF, which could result in marketing exclusivity of seven years in the United States should this be the first NDA
approved for inhaled nitric oxide in this indication. The active ingredient, nitric oxide, was previously approved by the
FDA as a drug in a separate clinical application. Accordingly, any related patent rights will not be eligible for a patent term
extension under relevant provisions of the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as
the Hatch-Waxman Act.
Patent Term
The base term of a U.S. patent is 20 years from the filing date of the earliest-filed non-provisional patent
application from which the patent claims priority. The term of a U.S. patent can be lengthened by patent term adjustment,
which compensates the owner of the patent for administrative delays at the USPTO. In some cases, the term of a U.S.
patent is shortened by a terminal disclaimer that reduces its term to that of an earlier-expiring patent.
The term of a U.S. patent may be eligible for patent term extension under the Hatch-Waxman Act to account for at
least some of the time the drug or device is under development and regulatory review after the patent is granted. With
regard to a drug or device for which FDA approval is the first permitted marketing of the active ingredient, the Hatch-
Waxman Act allows for extension of the term of one U.S. patent. Thus, patent term extension is not available for INOpulse
since the active moiety is nitric oxide, which is already subject to an approved NDA. The extended patent term cannot
exceed the shorter of five years beyond the non-extended expiration of the patent or 14 years from the date of the FDA
approval of the drug or device. Some foreign jurisdictions have analogous patent term extension provisions that allow for
extension of the term of a patent that covers a device approved by the applicable foreign regulatory agency.
Trade Secrets
In addition to patents, we rely on trade secrets and know-how to develop and maintain our competitive position.
We typically rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider
appropriate for, patent protection. For example, elements of the manufacture of our products are based on trade secrets and
know-how that are not publicly disclosed. We protect trade secrets and know-how by establishing confidentiality
agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors and
commercial partners. These agreements provide that all confidential information developed or made known during the
course of an individual or entity’s relationship with us must be kept confidential during and after the relationship. These
agreements also provide that all inventions resulting from work performed for us or relating to our business and conceived
or completed during the period of employment or assignment, as applicable, shall be our exclusive property. In addition,
we take other appropriate precautions, such as physical and technological security measures, to guard against
misappropriation of our proprietary technology by third parties.
Trademarks
We also seek trademark protection where available and when appropriate. The symbol ™ indicates a common law
trademark. Other service marks, trademarks and trade names appearing in this Annual Report on Form 10-K are the
property of their respective owners.
Government Regulation
Government authorities in the United States, at the federal, state and local level, and in other countries and
jurisdictions, including the European Union, extensively regulate, among other things, the research, development, testing,
manufacture, quality control, clearance, approval, packaging, storage, recordkeeping, labeling, advertising, promotion,
distribution, marketing, post-approval monitoring and reporting, and import and export of pharmaceutical
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products and medical devices. The processes for obtaining marketing approvals in the United States and in foreign
countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory
authorities, require the expenditure of substantial time and financial resources.
Review and Approval of Drugs in the United States
In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and
implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with applicable
federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources.
Failure to comply with the applicable U.S. requirements at any time during the product development process, approval
process or after approval may subject an applicant and/or sponsor to a variety of administrative or judicial sanctions,
including refusal by the FDA to approve pending applications, withdrawal of an approval, imposition of a clinical hold,
issuance of warning letters, product recalls, product seizures, total or partial suspension of production or distribution,
injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, or civil or criminal investigations
and penalties brought by the FDA and the Department of Justice or other governmental entities.
Our product candidates must be approved by the FDA before they may be legally marketed in the United States.
An applicant seeking approval to market and distribute a new drug in the United States must typically undertake the
following:
● completion of pre-clinical laboratory tests, animal studies and formulation studies in compliance with
applicable good laboratory practice, or GLP, regulations;
● submission to the FDA of an IND which must take effect before human clinical trials may begin;
● approval by an independent institutional review board, or IRB, at each clinical site before a clinical trial may
be initiated at that site;
● performance of adequate and well-controlled human clinical trials in accordance with good clinical practices,
or GCP, to establish the safety and efficacy of the proposed drug product for each indication;
● preparation and submission to the FDA of an NDA;
● satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product
is produced to assess compliance with cGMP requirements and to assure that the facilities, methods and
controls are adequate to preserve the product’s identity, strength, quality and purity; and
● FDA review and approval of the NDA.
Pre-Clinical Studies
Pre-clinical studies include laboratory evaluation of the purity and stability of the manufactured drug substance or
active pharmaceutical ingredient and the formulated drug or drug product, as well as in vitro and animal studies to assess
the toxicity, safety and activity of the drug for initial testing in humans and to establish a rationale for therapeutic use. The
conduct of pre-clinical and other non-clinical studies is subject to FDA regulations, including GLP regulations. An IND
sponsor must submit the results of the pre-clinical studies, together with manufacturing information, analytical data, any
available clinical data or literature and plans for clinical trials, among other things, to the FDA as part of an IND. Some
long-term pre-clinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may continue after
the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time
the FDA raises concerns or questions related to the proposed clinical trial and places the IND on clinical hold. In such a
case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result,
submission of an IND may not result in the FDA allowing clinical trials to commence.
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After the IND becomes effective, the sponsor continues to perform nonclinical studies including those related to
the development of a manufacturing process that is capable of consistently producing quality batches of the drug candidate
and the development of methods for testing the identity, strength, quality and purity of the final drug product. Additionally,
appropriate packaging must be selected and tested and stability studies must be conducted to support the eventual shelf life
and storage of the drug.
Human Clinical Trials in Support of an NDA
Clinical trials involve the administration of the investigational product to human subjects under the supervision of
qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all
research subjects provide their informed consent in writing before their participation in any clinical trial. Clinical trials are
conducted under written protocols detailing, among other things, the objectives of the clinical trial, the parameters to be
used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for each phase of a clinical trial and any
subsequent protocol amendments must be submitted to the FDA as part of the IND.
In addition, an IRB representing each institution participating in the clinical trial must review and approve the
plan for any clinical trial before it commences at that institution, and the IRB must conduct continuing review at least
annually. The IRB must review and approve, among other things, the study protocol and informed consent information to
be provided to study subjects. An IRB must operate in compliance with FDA regulations.
Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:
● Phase 1: The drug is initially introduced into a small number of healthy human subjects or patients with the
target disease (e.g., cancer) or condition and tested for safety, dosage tolerance, absorption, metabolism,
distribution, excretion and, if possible, to gain an early indication of its effectiveness and to determine
optimal dosage.
● Phase 2: The drug is administered to a limited patient population to identify possible adverse effects and
safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to
determine dosage tolerance and optimal dosage.
● Phase 3: The drug is administered to an expanded patient population, generally at geographically dispersed
clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the
efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and
to provide adequate information for the labeling of the product.
Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing
approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic
indication, particularly for long-term safety follow up. In certain instances, the FDA may mandate the performance of
Phase 4 clinical trials as a condition of approval of an NDA.
Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more
frequently if serious adverse effects, or SAEs, occur. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed
successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical
trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable
health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not
being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious
harm to patients. The FDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity
of the clinical data submitted. In addition, the sponsor of a clinical trial must register and post information about the trial on
the National Institutes of Health’s ClinicalTrials.gov website. Information related to the product, patient population, phase
of investigation, study sites and investigators and other aspects of the clinical trial is made public as part of the registration
of the clinical trial. Sponsors are also obligated to disclose the results of their clinical trials after completion, although in
some cases disclosure of the results of these trials can be delayed for up to
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two years after the trial completion date. Competitors may use this publicly available information to gain knowledge
regarding the progress of development programs.
Traditional and Section 505(b)(2) NDAs
NDAs for most new drug products are based on two full, or pivotal, clinical trials that must contain substantial
evidence of the safety and efficacy of the proposed new product. These applications are submitted under Section 505(b)
(1) of the FDCA. The FDA is, however, authorized to approve an alternative type of NDA under Section 505(b)(2) of the
FDCA. This type of application allows the applicant to rely, in part, on the FDA’s previous findings of safety and efficacy
for a drug product previously approved under an NDA, published literature, or a combination of both. Specifically,
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. If the 505(b)
(2) applicant can establish that reliance on studies conducted for a previously-approved product or FDA’s previous findings
regarding safety or effectiveness is appropriate, the applicant may eliminate the need to conduct certain pre-clinical studies
or clinical trials of the new product. Thus, Section 505(b)(2) often provides an alternate and potentially more expeditious
pathway to FDA approval via NDA for new or improved formulations or new uses of previously approved products.
Unlike the abbreviated new drug, or ANDA, pathway used by developers of generic versions of innovator drugs,
which does not allow applicants to submit new clinical data other than bioavailability or bioequivalence data, the 505(b)
(2) NDA pathway does not preclude the possibility that a follow-on applicant would need to conduct additional clinical
trials or nonclinical studies; for example, a 505(b)(2) applicant may be seeking approval to market a new dosage form of a
previously approved drug or for the treatment of a different patient population, which would require new clinical data to
demonstrate safety or effectiveness. The FDA will generally require companies to perform additional studies to support any
differences from the previously approved product, called a listed drug. The FDA may then approve the new drug candidate
for all or some of the label indications for which the listed drug has been approved, or for any new indication sought by the
505(b)(2) applicant, as applicable. Accordingly, a 505(b)(2) NDA is subject to the same patent certification requirements as
an ANDA with respect to the previously-approved drug being referenced, and it may be eligible for the three-year period of
marketing exclusivity based on the submission of new clinical data that are essential to the approval of the new 505(b)
(2) drug product. For more information, see section below entitled Hatch-Waxman Act and Marketing Exclusivity.
Submission of an NDA to the FDA
Assuming successful completion of clinical trials and other requirements, the results of the non-clinical studies
and clinical trials, together with detailed information relating to the product’s chemistry, manufacture, controls and
proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the drug
candidate for one or more indications. Under federal law, the submission of most NDAs is additionally subject to a user
fee, which for FY2021 exceeds $2.8 million for NDAs that require clinical trials, and the sponsor of an approved NDA is
also subject to annual program fee of $336,432. These fees are typically increased annually.
The FDA conducts a preliminary review of an NDA within 60 days of its receipt and informs the sponsor by the
74th day after the FDA’s receipt of the submission whether the application will be filed because it is sufficiently complete
to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this
event, the application must be resubmitted with the additional information. The resubmitted application is also subject to
review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth
substantive review. Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act, or
PDUFA, the FDA has agreed to specified performance goals in the review process of NDAs. For most applications
involving first-in-kind molecular entities, FDA has ten months from the date of filing in which to complete its initial
review of a standard application and respond to the applicant, and six months from the date of filing for an application with
“priority review” products are meant to be reviewed within six months of filing. Priority review can be applied to drugs
intended to treat a serious condition and that the FDA determines offer major advances in treatment by providing a
significant improvement in safety or effectiveness, or that provide a treatment where no adequate therapy exists. Even if
the NDA is filed by the FDA, however, companies cannot be sure that any approval will be granted on a
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timely basis, if at all. Moreover, the FDA does not always meet its PDUFA goal dates, and the review process for both
standard and priority new drug applications may be extended by the FDA for various reasons, including for three
additional months to consider new information or clarification provided by the applicant to address an outstanding
deficiency identified by the FDA following the original submission.
Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is
manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities
are in compliance with cGMP requirements and adequate to assure consistent production of the product within required
specifications. Additionally, before approving an NDA, the FDA will often inspect one or more clinical sites to assure
compliance with GCP.
The FDA may refer an application for a novel drug to an advisory committee. Typically, an advisory committee is
a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a
recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by
the recommendations of an advisory committee, but it considers such recommendations when making decisions.
Special Protocol Assessment
A sponsor of an IND may request that the FDA evaluate within 45 days certain protocols and issues relating to the
protocols to assess whether they are adequate to meet scientific and regulatory requirements for approval. If the trials were
the subject of discussion at an end-of-Phase 2 meeting with the FDA, an SPA may be requested for clinical protocols for
Phase 3 trials whose data is intended to form the primary basis for an efficacy claim. If the sponsor and the FDA reach a
written agreement regarding the protocol, the SPAs will be considered binding on the FDA and will not be changed unless
the sponsor fails to follow the agreed-upon protocol, data supporting the request are found to be false or incomplete, or the
FDA determines that a substantial scientific issue essential to determining the safety or effectiveness of the drug was
identified after the testing began. Even if an SPA is agreed to, approval of the NDA is not guaranteed since a final
determination that an agreed-upon protocol satisfies a specific objective, such as the demonstration of efficacy, or supports
an approval decision, will be based on a complete review of all the data in the NDA.
Expedited Review Programs and Accelerated Approval
The FDA has various programs, including Fast Track, priority review, breakthrough therapy designation, and
accelerated approval, which are intended to expedite or simplify the process for reviewing drugs, and/or provide for
approval on the basis of surrogate endpoints. Even if a drug qualifies for one or more of these programs, the FDA may later
decide that the drug no longer meets the conditions for qualification or that the time period for FDA review or approval
will not be shortened. Generally, drugs that may be eligible for these programs are those for serious or life threatening
conditions, those with the potential to address unmet medical needs, and those that offer meaningful benefits over existing
treatments. For example, Fast Track is a process designed to facilitate the development, and expedite the review, of drugs
to treat serious diseases and fill an unmet medical need. The request may be made at the time of IND submission and
generally no later than the pre-NDA meeting. The FDA will respond within 60 calendar days of receipt of the request.
Priority review, which is requested at the time of NDA submission, is designed to give drugs that offer major advances in
treatment or provide a treatment where no adequate therapy exists an initial review within six months as compared to a
standard review time of ten months. Although Fast Track and priority review do not affect the standards for approval, the
FDA will attempt to facilitate early and frequent meetings with a sponsor of a Fast Track designated drug and expedite
review of the application for a drug designated for priority review.
In contrast, accelerated approval provides an earlier pathway to approval of drugs to treat serious or life-
threatening diseases and that that generally provide a meaningful therapeutic advantage to patients over existing treatments
and demonstrate an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. Drugs granted
accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditional
approval. For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement,
radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is not itself a measure of
clinical benefit. The FDA may also grant accelerated approval for such a drug when the product has an effect on an
intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or
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mortality, or IMM, and that is reasonably likely to predict an effect on IMM or other clinical benefit, taking into account
the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. An intermediate
clinical endpoint is a measurement of a therapeutic effect that is considered reasonably likely to predict the clinical benefit
of a drug, such as an effect on IMM. The FDA has limited experience with accelerated approvals based on intermediate
clinical endpoints, but has indicated that such endpoints generally may support accelerated approval when the therapeutic
effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a basis for
concluding that the therapeutic effect is reasonably likely to predict the ultimate long-term clinical benefit of a drug.
Discussions with the FDA about the feasibility of an accelerated approval typically begin early in the development of the
drug in order to identify, among other things, an appropriate endpoint. The accelerated approval pathway is usually
contingent on a sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to
verify and describe the drug’s clinical benefit. As a result, a product candidate approved on this basis is subject to rigorous
post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the
effect on the clinical endpoint. Failure to conduct required post-approval studies, or to confirm the predicted clinical benefit
of the product during post-marketing studies, would allow the FDA to withdraw approval of the drug. Products granted
accelerated approval also are subject to additional requirements for the pre-dissemination review by the FDA of proposed
promotional materials both during the NDA review process and for 120 days after marketing approval.
In 2012, Congress enacted the Food and Drug Administration Safety and Innovation Act, or FDASIA. This law
established a new designation for drugs as “breakthrough therapies.” A product may be designated as a breakthrough
therapy if it is intended, either alone or in combination with one or more other drugs, to treat a serious or life-threatening
disease or condition where preliminary clinical evidence indicates that the drug may demonstrate substantial improvement
over available therapy on a clinically significant endpoint(s), such as substantial treatment effects observed early in clinical
development. The FDA may take certain actions with respect to products designated as breakthrough therapies, including:
holding meetings with the sponsor throughout the development process; providing timely advice to the sponsor regarding
development and approval, including working with the sponsor on an alternative clinical trial design; involving more
senior staff in the review process; assigning a cross-disciplinary project lead for the review team; and initiating a rolling
review of the NDA. Although a request for breakthrough therapy designation may be submitted with the sponsor’s original
IND, typically the timing of such requests follows the completion of Phase 1 or Phase 2 studies, due to the statutory
criterion that the FDA make these determinations based on preliminary clinical evidence.
The FDA’s Decision on an NDA
The approval process is lengthy and often difficult, and the FDA may refuse to approve an NDA if the applicable
regulatory criteria are not satisfied or may require additional clinical or other data and information. On the basis of the
FDA’s evaluation of the NDA and accompanying information, including the results of the inspection of the manufacturing
facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial
marketing of the product with specific prescribing information for specific indications. A complete response letter, or CRL,
generally outlines the deficiencies in the submission and may require substantial additional testing or information in order
for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA’s satisfaction in a
resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions
in two or six months depending on the type of information included. Even with submission of this additional information,
the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
When issued, an NDA approval letter authorizes commercial marketing of the drug with specific prescribing
information for specific indications as described in the application. Further, depending on the specific risk(s) to be
addressed, FDA may limit the approved indications for use for the product, require that contraindications, warnings or
precautions be included in the product labeling, require that post-approval studies, including Phase 4 clinical trials, be
conducted to further assess the drug’s safety after approval, require testing and surveillance programs to monitor the
product after commercialization, or impose other conditions which can materially affect the potential market and
profitability of the product. In addition, as a condition of approval, the FDA may require an applicant to develop a risk
evaluation and mitigation strategy, or REMS, if it determines that a REMS is necessary to ensure that the benefits of the
product outweigh its potential risks and to assure the safe use of the drug product. To determine whether a REMS is
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needed, the FDA will consider the size of the population likely to use the product, seriousness of the disease, expected
benefit of the product, expected duration of treatment, seriousness of known or potential adverse events, and whether the
product is a new molecular entity. REMS can include medication guides, physician communication plans for healthcare
professionals, and elements to assure safe use, or ETASU. ETASU may include, but are not limited to, special training or
certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of
patient registries. The FDA may require a REMS before approval or post-approval if it becomes aware of a serious risk
associated with use of a drug product. The requirement for a REMS can materially affect the potential market and
profitability of a product.
The FDA may prevent or limit further marketing of a product based on the results of post-market studies or
surveillance programs. After approval, many types of changes to the approved product, such as adding new indications,
manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and
approval.
Post-Approval Requirements
Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation
by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling
and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most
changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review
and approval. There also are continuing, annual user fee requirements for that are now assessed as program fees for certain
NDA-approved drugs. The most recent, 2017 reauthorization of PDUFA restructured the prescription drug user fee
program to eliminate the previously collected establishment and supplemental application fees.
In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs
are required to register their establishments with the FDA and some state agencies, and are subject to periodic
unannounced inspections by the FDA for compliance with cGMP and other requirements. Changes to the manufacturing
process, specifications or container closure system for an approved drug product are strictly regulated and often require
prior FDA approval before being implemented. Compliance with cGMPs requires, among other things, the investigation
and correction of any deviations from cGMP and the imposition of reporting and documentation requirements upon the
sponsor and the manufacturer. Accordingly, manufacturers must continue to expend time, money, and effort in the area of
production and quality control to maintain cGMP compliance and ensure ongoing compliance with other statutory
requirements the FDCA, such as the requirements for making manufacturing changes to an approved NDA.
Thus, even after a new drug approval is granted, the FDA may withdraw the approval if compliance with
regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later
discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency,
or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved
labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or the
imposition of distribution or other restrictions under a REMS program. Other potential consequences of regulatory non-
compliance include, among other things:
● restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the
market or product recalls;
● fines, warning letters or holds on post-approval clinical trials;
● refusal of the FDA to approve pending NDAs or supplements to approved NDAs;
● product seizure or detention, or refusal to permit the import or export of products; or
● injunctions or the imposition of civil or criminal penalties.
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The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the
market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved
label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses,
and a company that is found to have improperly promoted off-label uses may be subject to significant liability.
In addition, the distribution of prescription pharmaceutical products is subject to a variety of federal and state
laws, the most recent of which is still in the process of being phased in to the U.S. supply chain and regulatory framework.
The Prescription Drug Marketing Act of 1987, or PDMA, was the first federal law to set minimum standards for the
registration and regulation of drug distributors by the states and to regulate the distribution of drug samples. Today, both
the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to
ensure accountability in distribution. Congress more recently enacted the Drug Supply Chain Security Act, or DSCSA,
which made significant amendments to the FDCA, including by replacing certain provisions from the PDMA pertaining to
wholesale distribution of prescription drugs with a more comprehensive statutory scheme. The DSCSA now requires
uniform national standards for wholesale distribution and, for the first time, for third-party logistics providers; it also
provides for preemption of certain state laws in the areas of licensure and prescription drug traceability. The product tracing
provisions of the DSCSA were negotiated over many years by groups representing all supply chain stakeholders.
Accordingly, the comprehensive system envisioned by this law is being implemented both by the FDA and those various
stakeholders towards the shared goal of building an interoperable electronic system to identify and trace prescription drugs
distributed in the United States for enhanced supply chain security. The DSCSA mandates phased-in and resource-intensive
obligations for pharmaceutical manufacturers, repackagers, wholesale distributors, and dispensers (primarily pharmacies)
over a 10‑year period that is expected to culminate in November 2023.
Hatch-Waxman Act and Marketing Exclusivity
In 1984, with the passage of the Hatch-Waxman Amendments to the FDCA, Congress authorized the FDA to
approve generic drugs that are the same as drugs previously approved by the FDA under the NDA provisions of the statute.
To obtain approval of a generic drug, an applicant must submit an abbreviated new drug application, or ANDA, to the
agency. In support of such applications, a generic manufacturer may rely on the pre-clinical and clinical testing previously
conducted for a drug product previously approved under an NDA, known as the reference listed drug, or RLD.
Specifically, in order for an ANDA to be approved, the FDA must find that the generic version is identical to the
RLD with respect to the active ingredients, the route of administration, the dosage form, and the strength of the drug. At
the same time, the FDA must also determine that the generic drug is “bioequivalent” to the innovator drug. Under the
statute, a generic drug is bioequivalent to a RLD if the rate and extent of absorption of the drug do not show a significant
difference from the rate and extent of absorption of the listed drug.
Upon approval of an ANDA, the FDA indicates whether the generic product is “therapeutically equivalent” to the
RLD in its publication “Approved Drug Products with Therapeutic Equivalence Evaluations,” also referred to as the
“Orange Book.” Physicians and pharmacists consider a therapeutic equivalent generic drug to be fully substitutable for the
RLD. In addition, by operation of certain state laws and numerous health insurance programs, the FDA’s designation of
therapeutic equivalence often results in pharmacy substitution of the generic drug without the knowledge or consent of
either the prescribing physician or patient.
Under the Hatch-Waxman Amendments, the FDA may not approve an ANDA until any applicable period of non-
patent exclusivity for the RLD has expired. The FDCA provides a period of five years of non-patent data exclusivity for a
new drug containing a new chemical entity. In cases where such exclusivity has been granted, an ANDA may not be
submitted to the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV
certification, in which case the applicant may submit its application four years following the original product approval. The
FDCA also provides for a period of three years of exclusivity if the NDA includes reports of one or more new clinical
investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant and are
essential to the approval of the application. This three-year exclusivity period often protects changes to a previously
approved drug product, such as a new dosage form, route of administration, combination or indication.
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The Hatch-Waxman Amendments also amended the FDCA to create Section 505(b)(2) of the FDCA, and as
previously described in “Traditional and Section 505(b)(2) NDAs,” 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. Due to the inclusion of new clinical investigations conducted to
demonstrate the safety and efficacy of the new product that relies in part on am FDA-approved listed drug, new drug
applications submitted under Section 505(b)(2) are also eligible for three-year exclusivity, or in certain rare cases, five-year
new chemical entity exclusivity. Accordingly, when it comes to the various forms of marketing and data exclusivity
available to NDA applicants under the FDCA, a 505(b)(2) application is more similar to a traditional NDA than a generic
drug application. However, the 505(b)(2) NDA follows similar procedures as an ANDA with respect to the required patent
certifications, the application of the 30-month stay, and other regulatory requirements of Hatch-Waxman that may be
triggered based on the nature of the listed drug being relied upon by the 505(b)(2) applicant.
Hatch-Waxman Patent Certification and the 30-Month Stay
Upon approval of an NDA or a supplement thereto, NDA sponsors are required to list with the FDA each patent
with claims that cover the applicant’s product or an approved method of using the product. Each of the patents listed by the
NDA sponsor is published in the Orange Book. When an ANDA applicant submits its application to the FDA, the applicant
is required to certify to the FDA concerning any patents listed for the reference product in the Orange Book, except for
patents covering methods of use for which the ANDA applicant is not seeking approval. To the extent that the
Section 505(b)(2) applicant is relying on studies conducted for an already approved product, the applicant is required to
certify to the FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an
ANDA applicant would.
Specifically, under FDA’s regulations implementing the Hatch-Waxman provisions, as amended, an ANDA or
505(b)(2) applicant must certify with respect to each listed patent that:
● the required patent information has not been filed by the original applicant;
● the listed patent has expired;
● the listed patent has not expired, but will expire on a particular date and approval is sought after patent
expiration; or
● the listed patent is invalid, unenforceable or will not be infringed by the manufacture, use or sale of the new
product.
If a Paragraph I or II certification is filed, the FDA may make approval of the application effective immediately
upon completion of its review. If a Paragraph III certification is filed, the approval may be made effective on the patent
expiration date specified in the application, although a tentative approval may be issued before that time. If an application
contains a Paragraph IV certification, a series of events will be triggered, the outcome of which will determine the effective
date of approval of the ANDA or 505(b)(2) application. The ANDA or Section 505(b)(2) application also will not be
approved until any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity, identified in
the Orange Book for the listed drug has expired.
A certification that the new product will not infringe the already approved product’s listed patents or that such
patents are invalid or unenforceable is called a Paragraph IV certification. If the follow-on applicant does not challenge the
listed patents or indicate that it is not seeking approval of a patented method of use, the ANDA application will not be
approved until all the listed patents claiming the referenced product have expired (other than method of use patents
involving indications for which the ANDA applicant is not seeking approval).
If the ANDA applicant or 505(b)(2) applicant has provided a Paragraph IV certification to the FDA, the applicant
must also send notice of the Paragraph IV certification to the NDA owner and patent holders once the ANDA or 505(b)
(2) NDA has been accepted for filing by the FDA. The NDA owner and patent holders may then initiate a patent
infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent
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infringement lawsuit within 45 days after the receipt of a Paragraph IV certification automatically prevents the FDA from
approving the ANDA or 505(b)(2) NDA until the earlier of 30 months after the receipt of the Paragraph IV notice,
expiration of the patent, or a decision in the infringement case that is favorable to the ANDA or 505(b)(2) applicant.
Alternatively, if the listed patent holder does not file a patent infringement lawsuit within the required 45-day period, the
follow-on applicant’s ANDA or 505(b)(2) NDA will not be subject to the 30-month stay.
Orphan Designation and Exclusivity
Under the Orphan Drug Act, the FDA may designate a drug product as an “orphan drug” if it is intended to treat a
rare disease or condition (generally meaning that it affects fewer than 200,000 individuals in the United States, or more in
cases in which there is no reasonable expectation that the cost of developing and making a drug product available in the
United States for treatment of the disease or condition will be recovered from sales of the product). A company must
request orphan product designation before submitting an NDA for the relevant drug candidate (which may be a traditional
new chemical entity or a 505(b)(2) NDA candidate). If the request is granted, the FDA will disclose the identity of the
therapeutic agent and its potential use. Orphan product designation does not convey any advantage in or shorten the
duration of the regulatory review and approval process.
If a product with orphan status receives the first FDA approval for the disease or condition for which it has such
designation, the product will be entitled to orphan drug exclusivity. Orphan drug exclusivity means that the FDA may not
approve any other applications for the same product for the same indication for seven years, except in certain limited
circumstances. Competitors may receive approval of different products for the indication for which the orphan product has
exclusivity and may obtain approval for the same product but for a different indication. If a designated orphan drug
ultimately receives marketing approval for an indication broader than what was described in its orphan drug designation
request, it may not be entitled to exclusivity under the Orphan Drug Act.
Pediatric Studies and Exclusivity
Under the Pediatric Research Equity Act, or PREA, amendments to the FDCA, an NDA or supplement to an NDA
must contain data that are adequate to assess the safety and effectiveness of the drug for the claimed indications in all
relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the
product is safe and effective. The Food and Drug Administration Safety and Innovation Act, or FDASIA, enacted in 2012,
made permanent PREA to require that a sponsor who is planning to submit a marketing application for a drug that includes
a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit an
initial Pediatric Study Plan, or PSP, within 60 days of an end-of-Phase II meeting or, if there is no such meeting, as early as
practicable before the initiation of the Phase III or Phase II/III study. Unless otherwise required by regulation, PREA does
not apply to any drug for an indication where orphan designation has been granted, although FDA has recently taken steps
to limit what it considers abuse of this statutory exemption in PREA by announcing that it does not intend to grant any
additional orphan drug designations for rare pediatric subpopulations of what is otherwise a common disease.
The sponsor or the FDA may request a deferral of pediatric studies for some or all of the pediatric subpopulations.
A deferral may be granted for several reasons, including a finding that the drug or biologic is ready for approval for use in
adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected before the
pediatric studies begin. The FDA must send a non-compliance letter to any sponsor that fails to submit the required
assessment, keep a deferral current or fails to submit a request for approval of a pediatric formulation.
In addition, pediatric exclusivity is a type of non-patent marketing exclusivity available in the United States that,
if granted, provides for the attachment of an additional six months of marketing protection to the term of any existing
regulatory exclusivity or listed patents. This six-month exclusivity may be granted if an NDA sponsor submits pediatric
data that fairly respond to a Written Request from the FDA for such data. The data do not need to show the product to be
effective in the pediatric population studied; rather, if the clinical trial is deemed to have fairly responded to the FDA’s
request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by the
FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent
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protection cover the product are extended by six months. This is not a patent term extension, but it effectively extends the
regulatory period during which the FDA cannot approve another application. The issuance of a Written Request does not
require the sponsor to undertake the described studies.
Patent Term Restoration and Extension
A patent claiming a prescription drug or medical device for which FDA approval is granted may be eligible for a
limited patent term extension under the Hatch-Waxman Act, which permits a patent restoration of up to five years for
patent term lost during product development and the FDA regulatory review provided that certain statutory and regulatory
requirements are met. The length of the patent term extension is related to the length of time the drug is under regulatory
review while the patent is in force. The restoration period granted on a patent covering a new prescription drug product is
typically one-half the time between the date a clinical investigation on human beings is begun and the submission date of
an application for premarket approval of the product, plus the time between the submission date of an application for
approval of the product and the ultimate approval date. Patent term restoration cannot be used to extend the remaining term
of a patent past a total of 14 years from the product’s approval date. Only one patent applicable to an approved drug
product is eligible for the extension, and the application for the extension must be submitted prior to the expiration of the
patent in question. A patent that covers multiple drugs for which approval is sought can only be extended in connection
with one of the NDA approvals. The USPTO reviews and approves the application for any patent term extension or
restoration in consultation with the FDA.
Review and Approval of Medical Devices in the United States
Medical devices are strictly regulated by the FDA in the United States. Under the FDCA a medical device is
defined as “an instrument, apparatus, implement, machine, contrivance, implant, -in vitro- reagent, or other similar or
related article, including a component, part or accessory which is, among other things: intended for use in the diagnosis of
disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals; or
intended to affect the structure or any function of the body of man or other animals, and which does not achieve its primary
intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon
being metabolized for the achievement of any of its primary intended purposes.” This definition provides a clear distinction
between a medical device and other FDA regulated products such as drugs. If the primary intended use of a medical
product is achieved through chemical action or by being metabolized by the body, the product is usually a drug or biologic.
If not, it is generally a medical device.
Unless an exemption applies, a new medical device may not be marketed in the United States unless and until it
has been cleared through the premarket notification, or 510(k) process or approved by the FDA pursuant to a premarket
approval application, or PMA. The information that must be submitted to the FDA in order to obtain clearance or approval
to market a new medical device varies depending on how the medical device is classified by the FDA. Medical devices are
classified into one of three classes on the basis of the controls deemed by the FDA to be necessary to reasonably ensure
their safety and effectiveness.
Class I devices are those low risk devices for which reasonable assurance of safety and effectiveness can be
provided by adherence to the FDA’s general controls for medical devices, which include applicable portions of the FDA’s
Quality System Regulation, or QSR; facility registration and product listing; reporting of adverse medical events and
malfunctions; and appropriate, truthful and non-misleading labeling, advertising and promotional materials. Most Class I
devices are exempt from premarket regulation; however, some Class I devices require premarket clearance by the FDA
through the 510(k) process.
Class II devices are moderate risk devices and are subject to the FDA’s general controls, and any other special
controls, such as performance standards, post-market surveillance, and FDA guidelines, deemed necessary by the FDA to
provide reasonable assurance of the devices’ safety and effectiveness. Premarket review and clearance by the FDA for
most Class II devices is accomplished through the 510(k) process, although some Class II devices are exempt from the
510(k) requirements. To obtain 510(k) clearance, a sponsor must submit to the FDA a premarket notification demonstrating
that the device is substantially equivalent to a device that is already legally marketed in the United States and for which a
PMA was not required (i.e., a Class II device). The device to which the sponsor’s device is compared for
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the purpose of determining substantial equivalence is called a “predicate device.” The FDA’s goal is to make a substantial
equivalence determination within 90 days of FDA’s receipt of the 510(k) application, but it often takes longer if the FDA
requests additional information. Most 510(k)s do not require supporting data from clinical trials, but the FDA may request
such data. After a device receives 510(k) clearance, any modification that could significantly affect its safety or
effectiveness, or that would constitute a major change in its intended use, will require a new clearance or possibly a pre-
market approval. Premarket notifications are subject to user fees, unless a specific exemption applies.
Class III devices are deemed by the FDA to pose the greatest risk to patients, such as those for which reasonable
assurance of the device’s safety and effectiveness cannot be assured solely by the general controls and special controls
described above and that are life-sustaining or life-supporting. All Class III devices must be reviewed and approved by the
FDA through the PMA process. A PMA must be supported by extensive data including, but not limited to, technical,
preclinical, clinical trials, manufacturing and labeling to demonstrate to the FDA’s satisfaction the safety and effectiveness
of the device for its intended use. After a PMA is sufficiently complete, the FDA will accept the application for filing and
begin an in‑depth review of the submitted information. By statute, the FDA has 180 days to review the accepted
application, although review of the application generally can take between one and three years. During this review period,
the FDA may request additional information or clarification of information already provided. Also during the review
period, an advisory panel of experts from outside the FDA may be convened to review and evaluate the application and
provide recommendations to the FDA as to the approvability of the device. Although the FDA is not bound by the advisory
panel decision, it considers such recommendations when making final decisions on approval. In addition, the FDA will
conduct a preapproval inspection of the manufacturing facility to ensure compliance with the QSR. New premarket
approval applications or premarket approval application supplements are also required for product modifications that affect
the safety and efficacy of the device. PMA (and supplemental PMAs) are subject to significantly higher user fees than are
510(k) premarket notifications.
Medical device types that the FDA has not previously classified as Class I, II or III are automatically classified
into Class III regardless of the level of risk they ultimately pose to patients and/or users. The Food and Drug
Administration Modernization Act of 1997 established a new route to market for low to moderate risk medical devices that
are automatically placed into Class III due to the absence of a predicate device, called the “Request for Evaluation of
Automatic Class III Designation,” or the de novo classification procedure. This procedure allows a manufacturer whose
novel device is automatically classified into Class III to request down-classification of its medical device into Class I or
Class II based on a benefit-risk analysis demonstrating the device actually presents low or moderate risk, rather than
requiring the submission and approval of a PMA application. Prior to the enactment of the Food and Drug Administration
Safety and Innovation Act of 2012, or FDASIA, a medical device could only be eligible for de novo classification if the
manufacturer first submitted a 510(k) premarket notification and received a determination from the FDA that the device
was not substantially equivalent. FDASIA streamlined the de novo classification pathway by permitting manufacturers to
request de novo classification directly without first submitting a 510(k) premarket notification to the FDA and receiving a
not substantially equivalent determination. Under FDASIA, the FDA is required to classify the device within 120 days
following receipt of the de novo application however, the most recent FDA premarket review goals state that in fiscal year
2021, FDA will attempt to issue a decision on 65% of all de novo classification requests received within 150 days of
receipt. If the manufacturer seeks reclassification into Class II, the manufacturer must include a draft proposal for special
controls that are necessary to provide a reasonable assurance of the safety and effectiveness of the medical device. In
addition, the FDA may reject the reclassification petition if it identifies a legally marketed predicate device that would be
appropriate for a 510(k) or determines that the device is not low to moderate risk or that general controls would be
inadequate to control the risks and special controls cannot be developed. De novo reclassification requests are also subject
to user fees, unless a specific exemption applies.
Post-Marketing Restrictions and Enforcement
After a device is placed on the market, numerous regulatory requirements apply. These include, but are not limited
to:
● submitting and updating establishment registration and device listings with the FDA;
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● compliance with the QSR, which requires manufacturers to follow stringent design, testing, control,
documentation, record maintenance, including maintenance of complaint and related investigation files, and
other quality assurance controls during the manufacturing process;
● unannounced routine or for-cause device facility inspections by the FDA, which may include our suppliers’
facilities; and
● labeling regulations, which prohibit the promotion of products for uncleared or unapproved (or “off-label”)
uses and impose other restrictions relating to promotional activities;
● corrections and removal reporting regulations, which require that manufacturers report to the FDA field
corrections or removals if undertaken to reduce a risk to health posed by a device or to remedy a violation of
the FDCA that may present a risk to health; and
● post-market surveillance regulations, which apply to certain Class II or III devices when necessary to protect
the public health or to provide additional safety and effectiveness data for the device.
Under the FDA medical device reporting, or MDR, regulations, medical device manufacturers are required to
report to the FDA information that a device has or may have caused or contributed to a death or serious injury or has
malfunctioned in a way that would likely cause or contribute to death or serious injury if the malfunction of the device or a
similar device of such manufacturer were to recur. The decision to file an MDR involves a judgment by the manufacturer.
If the FDA disagrees with the manufacturer’s determination, the FDA can take enforcement action.
Additionally, the FDA has the authority to require the recall of commercialized products in the event of material
deficiencies or defects in design or manufacture. The authority to require a recall must be based on an FDA finding that
there is reasonable probability that the device would cause serious adverse health consequences or death. Manufacturers
may, under their own initiative, recall a product if any distributed devices fail to meet established specifications, are
otherwise misbranded or adulterated, or if any other material deficiency is found. The FDA requires that certain
classifications of recalls be reported to the FDA within ten working days after the recall is initiated.
The failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which
may include any of the following sanctions:
● warning letters, fines, injunctions or civil penalties;
● recalls, detentions or seizures of products;
● operating restrictions;
● delays in the introduction of products into the market;
● total or partial suspension of production;
● delay or refusal of the FDA or other regulators to grant 510(k) clearance or PMA approvals of new products;
● withdrawals of 510(k) clearance or PMA approvals; or
● in the most serious cases, criminal prosecution.
To ensure compliance with regulatory requirements, medical device manufacturers are subject to market
surveillance and periodic, pre-scheduled and unannounced inspections by the FDA, and these inspections may include the
manufacturing facilities of subcontractors.
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Review and Approval of Combination Products in the United States
Products comprised of separate components (e.g., a drug and a device; a biologic and a device; a drug and a
biologic; or a drug, device, and a biologic) are known as “combination products.” Such products often raise regulatory,
policy and review management challenges because they integrate components that are regulated under different types of
regulatory requirements and by different FDA Centers, namely, CDER, CDRH, or the Center for Biologics Evaluation and
Research (CBER). Differences in regulatory pathways for each component can impact the regulatory processes for all
aspects of product development and management, including preclinical testing, clinical investigation, marketing
applications, manufacturing and quality control, adverse event reporting, promotion and advertising, user fees and post-
approval modifications. Specifically, under regulations issued by the FDA, a combination product may be:
● a product comprised of two or more regulated components that are physically, chemically, or otherwise
combined or mixed and produced as a single entity;
● two or more separate products packaged together in a single package or as a unit and comprised of drug and
device products;
● a drug or device packaged separately that according to its investigational plan or proposed labeling is
intended for use only with an approved individually specified drug or device where both are required to
achieve the intended use, indication, or effect and where upon approval of the proposed product the labeling
of the approved product would need to be changed, e.g., to reflect a change in intended use, dosage form,
strength, route of administration, or significant change in dose; or
● any investigational drug or device packaged separately that according to its proposed labeling is for use only
with another individually specified investigational drug, device, or biological product where both are
required to achieve the intended use, indication, or effect.
The FDA’s Office of Combination Products (OCP) was established in 2003 to provide prompt determination of
the FDA Center with primary jurisdiction over the review and regulation of a combination product; ensure timely and
effective premarket review by overseeing the timeliness of and coordinating reviews involving more than one center;
ensure consistent and appropriate post-market regulation; resolve disputes regarding review timeliness; and review/revise
agreements, guidance and practices specific to the assignment of combination products.
OCP, determines which Center will have primary jurisdiction (the “Lead Center”) for the combination product
based on the combination product’s “primary mode of action” (PMOA). A mode of action is the means by which a product
achieves an intended therapeutic effect or action. The PMOA is the mode of action that provides the most important
therapeutic action of the combination product, or the mode of action expected to make the greatest contribution to the
overall intended therapeutic effects of the combination product. The Lead Center has primary responsibility for the review
and regulation of a combination product; however a second Center is often involved in the review process, especially to
provide input regarding the “secondary” component(s). In most instances, the Lead Center applies its usual regulatory
pathway. For example, a drug-device combination product assigned to CDER will typically be reviewed under an NDA,
while a drug-device combination product assigned to CDRH is typically reviewed under through a 510(k), Premarket
Approval Application (PMA), or de novo reclassification request.
Often it is difficult for OCP to determine with reasonable certainty the most important therapeutic action of the
combination product. In those difficult cases, OCP will consider consistency with other combination products raising
similar types of safety and effectiveness questions, or which Center has the most expertise to evaluate the most significant
safety and effectiveness questions raised by the combination product. A sponsor may use a voluntary formal process,
known as a Request for Designation, when the product classification is unclear or in dispute, to obtain a binding decision as
to which center will regulate the combination product. If the sponsor objects to that decision, it may request that the agency
reconsider that decision.
Combination products are subject to application User Fees based on the type of application submitted for the
product’s premarket approval or clearance. For example, a combination product for which an NDA is submitted is
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subject to the NDA fee under the Prescription Drug User Fee Act. Likewise, a combination product for which a PMA is
submitted is subject to the PMA fee under the Medical Device User Fee and Modernization Act.
Since a combination product incorporates two or more components that have different regulatory requirements, a
combination product manufacturer must comply with all cGMP and QSR requirements that apply to each component. The
FDA has issued a combination product cGMP regulation, along with final guidance, describing two approaches a
combination product manufacturer may follow to demonstrate compliance. Under these two options, the manufacturer
demonstrates compliance with
1. All cGMP regulations applicable to each separate regulated component included in the combination product;
or
2. Either the drug cGMPs or the QSR, as well as with specified provisions from the other of these two sets of
requirements (also called the “streamlined approach”).
We believe that our INOpulse product will be reviewed as NDAs by CDER with consulting review on the device
component provided by CDRH. The QSR will apply to all manufacturing of our device components and we may be subject
to additional QSR requirements applicable to medical devices, such as management responsibility, design controls,
purchasing controls, and corrective and preventive action.
Review and Approval of Drug Products in the European Union
In addition to regulations in the United States, we are and will be subject, either directly or through our
distribution partners, to a variety of regulations in other jurisdictions governing, among other things, clinical trials and
future commercial sales and distribution of our products, if approved in those markets.
We must obtain the requisite approvals from regulatory authorities in non-U.S. countries prior to the
commencement of clinical trials or marketing of a product in those countries. Moreover, the time required to obtain
approval in other countries and jurisdictions might differ from and be longer than that required to obtain FDA approval.
Regulatory approval in one country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in
obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatory process in others. As of
January 31, 2020, the United Kingdom (UK) is no longer a member state of the EU, and therefore a separate marketing
authorization application (MAA) and approval will be required to market a medicinal product in the UK.
As in the United States, medicinal products can be marketed in the EU only if a marketing authorization from the
competent regulatory agencies has been obtained. Similar to the United States, the various phases of preclinical and clinical
research in the EU are subject to significant regulatory controls. Also similar to the United States, when a drug-device
combination product’s principal intended action is accomplished by the drug constituent part, the EU regulates the
combination product as a medicinal product.
Pursuant to the European Clinical Trials Directive, a system for the approval of clinical trials in the EU has been
implemented through national legislation of the member states. Under this system, an applicant must obtain approval from
the competent national authority of an EU member state in which the clinical trial is to be conducted. Furthermore, the
applicant may only start a clinical trial after a competent ethics committee has issued a favorable opinion. Clinical trial
applications must be accompanied by an investigational medicinal product dossier with supporting information prescribed
by the European Clinical Trials Directive and corresponding national laws of the member states and further detailed in
applicable guidance documents. In April 2014, the new Clinical Trials Regulation, (EU) No 536/2014 (Clinical Trials
Regulation) was adopted and it is anticipated to come into application in late 2021. The Clinical Trials Regulation will be
directly applicable in all the EU Member States, repealing the current Clinical Trials Directive 2001/20/EC. Conduct of all
clinical trials performed in the European Union (EU) will continue to be bound by currently applicable provisions until the
new Clinical Trials Regulation becomes applicable. The extent to which ongoing clinical trials will be governed by the
Clinical Trials Regulation will depend on when the Clinical Trials Regulation becomes applicable and on the duration of
the individual clinical trial. If a clinical trial continues for more
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than three years from the day on which the Clinical Trials Regulation becomes applicable the Clinical Trials Regulation
will at that time begin to apply to the clinical trial.
The new Clinical Trials Regulation aims to simplify and streamline the approval of clinical trials in the European
Union. The main characteristics of the regulation include: a streamlined application procedure via a single entry point, the
“EU portal”; a single set of documents to be prepared and submitted for the application as well as simplified reporting
procedures for clinical trial sponsors; and a harmonized procedure for the assessment of applications for clinical trials,
which is divided in two parts. Part I is assessed by the competent authorities of all EU Member States in which an
application for authorization of a clinical trial has been submitted (Member States concerned). Part II is assessed separately
by each Member State concerned. Strict deadlines have been established for the assessment of clinical trial applications.
The role of the relevant ethics committees in the assessment procedure will continue to be governed by the national law of
the concerned EU Member State. However, overall related timelines will be defined by the Clinical Trials Regulation.
To obtain marketing approval of a drug in the EU, an applicant must submit an MAA either under a centralized or
decentralized procedure. The centralized procedure provides for the grant of a single marketing authorization by the
European Commission that is valid for all EU member states, Iceland, Lichtenstein and Norway. The centralized procedure
is compulsory for specific products, including for medicines produced by certain biotechnological processes, products
designated as orphan medicinal products, advanced therapy products (such as gene-therapy, somatic cell-therapy or tissue-
engineered medicines) and products with a new active substance indicated for the treatment of certain diseases. For
products with a new active substance indicated for the treatment of certain diseases and products that are highly innovative
or for which a centralized process is in the interest of patients, the centralized procedure may be optional. Under the
centralized procedure the maximum timeframe for the evaluation of an MAA by the European Medicines Agency (EMA)
is 210 days, excluding clock stops, when additional written or oral information is to be provided by the applicant in
response to questions asked by the Committee for Medicinal Products for Human Use (CHMP). Accelerated assessment
might be granted by the CHMP in exceptional cases, when a medicinal product is expected to be of a major public health
interest, particularly from the point of view of therapeutic innovation. The timeframe for the evaluation of an MAA under
the accelerated assessment procedure is of 150 days, excluding stop-clocks.
The decentralized procedure is available to applicants who wish to market a product in specific EU member states
where such product has not received marketing approval in any EU member states before. The decentralized procedure
provides for an applicant to apply to one-member state to assess the application (the reference member state) and
specifically list other member states in which it wishes to obtain approval (concerned member states). Under this
procedure, an applicant submits an application based on identical dossiers and related materials, including a draft summary
of product characteristics, and draft labelling and package leaflet, to the reference member state and each concerned
member state. The reference member state prepares a draft assessment report and drafts of the related materials within 210
days after receipt of a valid application which is then reviewed and approved commented on by the concerned member
states. Within 90 days of receiving the reference member state’s assessment report and related materials, each concerned
member state must decide whether to approve the assessment report and related materials.
In the EU, only products for which marketing authorizations have been granted may be promoted. A marketing
authorization is valid for five years in principle and the marketing authorization may be renewed after five years on the
basis of a re-evaluation of the risk-benefit balance by the EMA or by the competent authority of the authorizing member
state. To this end, the marketing authorization holder must provide the EMA or the competent authority with a consolidated
version of the file in respect of quality, safety and efficacy, including all variations introduced since the marketing
authorization was granted, at least six months before the marketing authorization ceases to be valid. Once renewed, the
marketing authorization is valid for an unlimited period, unless the European Commission or the competent authority
decides, on justified grounds relating to pharmacovigilance, to proceed with one additional five-year renewal. Any
authorization which is not followed by the actual placing of the drug on the EU market (in case of centralized procedure) or
on the market of the authorizing member state within three years after authorization ceases to be valid (the so-called sunset
clause). Even if authorized to be marketed in the EU, prescription-only medicines may only be promoted to health care
professionals, not the general public. All promotion should be in accordance with the particulars listed in the summary of
product characteristics. Promotional materials must also comply with various laws, and codes of
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conduct developed by pharmaceutical industry bodies in the EU which govern (among other things) the training of sales
staff, promotional claims and their justification, comparative advertising, misleading advertising, endorsements, and (where
permitted) advertising to the general public. Failure to comply with these requirements could lead to the imposition of
penalties by the competent authorities of the EU member states. The penalties could include warnings, orders to
discontinue the promotion of the drug product, seizure of promotional materials, fines and possible imprisonment.
Rest of World Government Regulation
In order to market any product outside of the United States, a company must also comply with numerous and
varying regulatory requirements of other countries and jurisdictions regarding quality, safety and efficacy and governing,
among other things, clinical trials, marketing authorization, commercial sales and distribution of drug products. Whether or
not it obtains FDA approval for a product, the company will have to obtain the necessary approvals by the comparable
foreign regulatory authorities before it can commence clinical trials or marketing of the product in those countries or
jurisdictions. The approval process ultimately varies between and among countries and jurisdictions and can involve
additional product testing and additional administrative review periods. The time required to obtain approval in other
countries and jurisdictions might differ from and be longer than that required to obtain FDA approval. Regulatory approval
in one country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory
approval in one country or jurisdiction may negatively impact the regulatory process in others.
Pharmaceutical Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of products approved by the FDA and
other government authorities. Sales of products approved for marketing in the U.S. by the FDA will depend, in part, on the
extent to which products are covered by third-party payors, including government health programs in the United States
such as Medicare and Medicaid, commercial health insurers and managed care organizations and the amount that will be
paid. The process for determining whether a payor will provide coverage for a product may be separate from the process
for setting the price or reimbursement rate that the payor will pay for the product once coverage is approved. Third-party
payors may limit coverage to specific products on an approved list, or formulary, which might not include all of the
approved products for a particular indication. Additionally, the containment of healthcare costs has become a priority of
federal and state governments, and the prices of drugs have been a focus in this effort. The U.S. government, state
legislatures and foreign governments have shown significant interest in implementing cost-containment programs,
including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of
price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing
controls and measures, could further limit our net revenue and results.
In order to secure coverage and reimbursement for any product that might be approved for sale, a company may
need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness
of the product, which are separate and apart from the costs required to obtain FDA or other comparable regulatory
approvals based on the product’s safety and effectiveness. A payor’s decision to provide coverage for a product does not
imply that an adequate reimbursement rate will be approved. Third-party reimbursement may not be sufficient to maintain
price levels high enough to realize an appropriate return on investment in product development.
In Europe and other countries outside of the United States, pricing and reimbursement schemes vary widely from
country to country. Some countries provide that drug products may be marketed only after a reimbursement price has been
agreed to. Some countries may require the completion of additional studies that compare the cost-effectiveness of a
particular product candidate to currently available therapies. In some countries, cross-border imports from low-priced
markets exert competitive pressure that may reduce pricing within a country. Any country that has price controls or
reimbursement limitations for drug products may not allow favorable reimbursement and pricing arrangements.
Healthcare Law and Regulation
If our product candidates are approved in the United States, we will have to comply with various U.S. federal and
state laws, rules and regulations pertaining to healthcare fraud and abuse, including anti-kickback laws and
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physician self-referral laws, rules and regulations. Violations of the fraud and abuse laws are punishable by criminal and
civil sanctions, including, in some instances, exclusion from participation in federal and state healthcare programs,
including Medicare and Medicaid. These laws include the following:
● the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully
soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or
reward either the referral of an individual for, or the purchase, order or recommendation of, any good or
service, for which payment may be made, in whole or in part, under a federal healthcare program such as
Medicare and Medicaid;
● the federal False Claims Act imposes civil penalties, and provides for civil whistleblower or qui tam actions,
against individuals or entities for knowingly presenting, or causing to be presented, to the federal
government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or
conceal an obligation to pay money to the federal government;
● the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and
civil liability for executing a scheme to defraud any healthcare benefit program or making false statements
relating to healthcare matters;
● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its
implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to
safeguarding the privacy, security and transmission of individually identifiable health information;
● the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a
material fact or making any materially false statement in connection with the delivery of or payment for
healthcare benefits, items or services;
● the federal transparency requirements under the Physician Payments Sunshine Act require manufacturers of
FDA-approved drugs, devices, biologics and medical supplies covered by Medicare or Medicaid to report, on
an annual basis, to the Department of Health and Human Services information related to payments and other
transfers of value to physicians, teaching hospitals, and certain advanced non-physician health care
practitioners and physician ownership and investment interests; and
● analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may
apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by
nongovernmental third-party payors, including private insurers.
Some state laws require pharmaceutical or medical device companies to comply with the relevant industry’s
voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition
to requiring drug manufacturers to report information related to payments to physicians and other health care providers or
marketing expenditures.
State and foreign laws also govern the privacy and security of health information in some circumstances, many of
which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance
efforts. We also may be subject to, or may in the future become subject to, U.S. federal and state, and foreign laws and
regulations imposing obligations on how we collect, use, disclose, store and process personal information. Our actual or
perceived failure to comply with such obligations could result in liability or reputational harm and could harm our
business. Ensuring compliance with such laws could also impair our efforts to maintain and expand our customer base and
thereby decrease our future revenues.
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Health Care Reform and Potential Changes to Laws and Regulations
FDA and other regulatory authority policies may change and additional government regulations may be enacted
that could prevent, limit or delay regulatory approval of our product candidates. For example, in December 2016, the 21st
Century Cures Act, or Cures Act, was signed into law. The Cures Act, among other things, is intended to modernize the
regulation of drugs and devices and to spur innovation, but its ultimate implementation is uncertain. In addition, in August
2017, the FDA Reauthorization Act was signed into law, which reauthorized the FDA’s user fee programs and included
additional drug and device provisions that build on the Cures Act. If we are slow or unable to adapt to changes in existing
requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we
may lose any marketing approval that we otherwise may have obtained and we may not achieve or sustain profitability,
which would adversely affect our business, prospects, financial condition and results of operations.
Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting
changes in health care systems with the stated goals of containing health care costs, improving quality and/or expanding
access. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the
amount of reimbursement for particular medical products and services, implementing reductions in Medicare and other
health care funding and applying new payment methodologies. For example, in March 2010, the Patient Protection and
Affordable Care Act (ACA) was enacted, which, among other things, increased the minimum Medicaid rebates owed by
most manufacturers under the Medicaid Drug Rebate Program; introduced a new methodology by which rebates owed by
manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled,
implanted or injected; extended the Medicaid Drug Rebate Program to utilization of prescriptions of individuals enrolled in
Medicaid managed care plans; imposed mandatory discounts for certain Medicare Part D beneficiaries as a condition for
manufacturers’ outpatient drugs coverage under Medicare Part D; and established a Center for Medicare Innovation at the
U.S. Centers for Medicare and Medicaid Services (CMS), to test innovative payment and service delivery models to lower
Medicare and Medicaid spending. As another example, the 2021 Consolidated Appropriations Act (P.L. 116-260) signed
into law on December 27, 2020 incorporated extensive health care provisions and amendments to existing laws, including a
requirement that all manufacturers of drug products covered under Medicare Part B report the product’s average sales
price, or ASP, to DHHS beginning on January 1, 2022, subject to enforcement via civil money penalties.
Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, and as a
result certain sections of the ACA have not been fully implemented or effectively repealed. In particular, in December of
2018, a Texas U.S. District Court Judge ruled that the ACA is unconstitutional in its entirety because the individual
mandate was repealed by Congress as part of the Tax Cuts and Jobs Act, effective January 1, 2019. In December 2019, the
Fifth Circuit Court of Appeals upheld the district court’s ruling that the individual mandate in the ACA was
unconstitutional but remanded the case to the district court to determine whether other reforms enacted as part of the ACA
but not specifically related to the individual mandate or health insurance could be severed from the rest of the ACA so as
not to have the law declared invalid in its entirety. On March 2, 2020, the United States Supreme Court granted the
petitions for writs of certiorari to review this case and allocated one hour for oral arguments, which occurred on November
10, 2020. A decision from the Supreme Court is expected to be issued in spring 2021. It is unclear how this litigation and
other efforts to repeal and replace the ACA will affect the implementation of that law, the pharmaceutical industry more
generally, and our business. We continue to evaluate the potential impact of the ACA and its possible repeal or replacement
on our business.
Other legislative changes have been proposed and adopted in the United States since the ACA that may affect
health care expenditures. For example, the 2020 Consolidated Appropriations Act (P.L. 116-94) includes a piece of
bipartisan legislation called the Creating and Restoring Equal Access to Equivalent Samples Act of 2019 or the
“CREATES Act.” The CREATES Act aims to address the concern articulated by both the FDA and others in the industry
that some brand manufacturers have improperly restricted the distribution of their products, including by invoking the
existence of a REMS for certain products, to deny generic and biosimilar product developers access to samples of brand
products. Because generic and biosimilar product developers need samples to conduct certain comparative testing required
by the FDA, some have attributed the inability to timely obtain samples as a cause of delay in the entry of generic and
biosimilar products. To remedy this concern, the CREATES Act establishes a private cause of action that permits a generic
or biosimilar product developer to sue the brand manufacturer to compel it to furnish the
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necessary samples on “commercially reasonable, market-based terms.” Whether and how generic and biosimilar product
developments will use this new pathway, as well as the likely outcome of any legal challenges to provisions of the
CREATES Act, remain highly uncertain and its potential effects on our future commercial products are unknown. Other
new laws may result in additional reductions in Medicare and other health care funding, which could have an adverse effect
on customers for our approved product and, accordingly, our financial operations.
We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation
or administrative or executive action, either in the United States or abroad. We expect that additional state and federal
health care reform measures will be adopted in the future, any of which could limit the amounts that federal and state
governments will pay for health care products and services. Moreover, if we are slow or unable to adapt to changes in
existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory
compliance, our therapeutic candidates may lose any marketing approval that may have been obtained and we may not
achieve or sustain profitability, which would adversely affect our business.
Sales and Marketing
We do not have a sales, marketing or distribution infrastructure and have limited experience in the sale, marketing
and distribution of pharmaceutical products. To achieve commercial success for any approved product, we must either
develop a sales and marketing organization or outsource these functions to third parties. We expect to build a commercial
infrastructure to allow us to market and sell certain of our product candidates when approved, if any, using a specialty sales
force in the United States, and we may choose to establish commercialization capabilities in select countries outside the
United States.
Employees
As of December 31, 2020, we had 21 full-time employees, of which 16 employees were engaged in research and
development and 5 employees provided general and administrative support. Of our employees, ten have earned advanced
degrees. Our employees are not represented by a labor union or covered by a collective bargaining agreement.
Our Corporate Information
We were incorporated under the laws of the State of Delaware on October 17, 2013 under the name Ikaria
Development LLC. We changed our name to Bellerophon Therapeutics LLC on January 27, 2014. On February 12, 2015,
we converted from a Delaware limited liability company into a Delaware corporation and changed our name to
Bellerophon Therapeutics, Inc. We currently have three wholly-owned subsidiaries: Bellerophon BCM LLC, a Delaware
limited liability company; Bellerophon Pulse Technologies LLC, a Delaware limited liability company; and Bellerophon
Services, Inc., a Delaware corporation. Our website address is www.bellerophon.com. The information contained on, or
that can be accessed through, our website does not constitute part of this Annual Report on Form 10-K. We have included
our website address in this Annual Report on Form 10-K solely as an inactive textual reference.
Our executive offices are located at 184 Liberty Corner Road, Suite 302, Warren, New Jersey 07059, and our
telephone number is (908) 574-4770.
Available Information
We make available free of charge through our website our annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Sections 13(a) and
15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We make these reports available through
our website as soon as reasonably practicable after we electronically file or furnish such reports to, the Securities and
Exchange Commission, or the SEC. We also make available, free of charge on our website, the reports filed with the SEC
by our executive officers, directors and 10% stockholders pursuant to Section 16 under the Exchange Act as soon as
reasonably practicable after copies of those filings are provided to us by those persons. The information contained on, or
that can be access through, our website is not a part of or incorporated by reference in this Annual Report on Form 10-K.
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Item 1A. Risk Factors
The following risk factors and other information included in this Annual Report on Form 10-K should be carefully
considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties
not presently known to us or that we presently deem less significant may also impair our business operations. Please see
page 2 of this Annual Report on Form 10-K for a discussion of some of the forward-looking statements that are qualified
by these risk factors. If any of the following risks occur, our business, financial condition, results of operations and future
growth prospects could be materially and adversely affected.
Risks Related to Our Financial Position and Need for Additional Capital
We have incurred significant losses since inception. We expect to incur losses over the next several years and may never
achieve or maintain profitability.
Since inception, we have incurred significant operating losses. Our operating loss was approximately $26.3
million, $17.5 million and $27.9 million for the years ended December 31, 2020, 2019 and 2018, respectively. We do not
know whether or when we will become profitable. We have not generated any revenues to date from product sales. We
have not completed development of any product candidate and have devoted substantially all of our financial resources and
efforts to research and development, including pre-clinical studies and clinical trials. We expect to continue to incur
significant expenses and operating losses over the next several years. Our net losses may fluctuate significantly from
quarter to quarter and year to year. Net losses and negative cash flows have had, and will continue to have, an adverse
effect on our deficit and working capital. We anticipate that our expenses will increase substantially if and as we:
● continue our research and clinical development of our product candidates;
● identify, develop and/or in-license additional product candidates;
● seek regulatory approvals for any product candidates that successfully complete clinical trials;
● in the future, establish a manufacturing, sales, marketing and distribution infrastructure;
● maintain, expand and protect our intellectual property portfolio;
● add equipment and physical infrastructure to support our research and development;
● hire additional clinical, regulatory, quality control and scientific personnel; and
● add operational, financial and management information systems and personnel, including personnel to
support our product development and any future commercialization efforts.
To become and remain profitable, we must succeed in developing and eventually commercializing products that
generate significant revenue. We do not expect to generate significant revenue unless and until we are able to obtain
marketing approval for, and successfully commercialize, one or more of our product candidates. This will require us to be
successful in a range of challenging activities, including completing pre-clinical studies and clinical trials of our product
candidates, discovering additional product candidates, obtaining regulatory approval for our product candidates,
manufacturing, marketing and selling any products for which we may obtain regulatory approval, satisfying any post-
marketing requirements and obtaining reimbursement for our products from private insurance or government payors. We
are in the early stages of most of these activities and have not yet commenced the other activities. We may never succeed in
these activities and, even if we do, may never generate revenues that are significant enough to achieve profitability.
Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are
unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve
profitability. If we are required by the FDA or the EMA to perform trials in addition to those currently expected, or if
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there are any delays in completing our clinical trials or the development of any of our product candidates, our expenses
could increase.
Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual
basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to
raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or even
continue our operations. A decline in the value of our company could cause our stockholders to lose all or part of their
investment in us.
In addition, our recurring losses from operations, accumulated deficit and our need to raise additional financing in
order to continue to fund our operations, may raise substantial doubt about our ability to continue as a going concern.
Given our planned expenditures for the next several years, including, without limitation, expenditures in connection with
our clinical trials, we and our independent registered public accounting firm may conclude in the future that there is
substantial doubt regarding our ability to continue as a going concern.
Our limited operating history may make it difficult for our stockholders to evaluate the success of our business to date
and to assess our future viability.
We were formed as a wholly-owned subsidiary of Ikaria in October 2013 and became a stand-alone company in
February 2014 following the Spin-Out and, as such, have a limited independent operating history.
Our operations to date have been limited to organizing and staffing our company, developing and securing our
technology, and undertaking pre-clinical studies and clinical trials of our product candidates. We have not yet demonstrated
the ability to complete the development of any product candidates, obtain marketing approvals, manufacture a commercial
scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for
successful product commercialization. Consequently, any predictions our stockholders make about our future success or
viability may not be as accurate as they could be if we had a longer operating history or a history of successfully
developing and commercializing products.
Assuming we obtain marketing approval for any of our product candidates, we will need to transition from a
company with a research and development focus to a company capable of supporting commercial activities or we will need
to enter into strategic partnerships. We may encounter unforeseen expenses, difficulties, complications and delays and may
not be successful in such a transition.
We will need substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay,
reduce or eliminate our product development programs or commercialization efforts.
We expect our expenses to increase in connection with our ongoing activities, particularly as we continue research
and development and initiate additional clinical trials of our product candidates and seek regulatory approval for these and
potentially other product candidates. In addition, if we obtain regulatory approval for any of our product candidates, we
expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution.
In particular, the costs that may be required for the manufacture of any product candidate that receives marketing approval
may be substantial. Accordingly, we will need to obtain substantial additional funding in connection with our continuing
operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or
eliminate our research and development programs or any future commercialization efforts.
We plan to use our current cash and cash equivalents primarily to fund our ongoing research and development
efforts. We will be required to expend significant funds in order to advance development of our product candidates and any
other potential product candidates. Our existing cash and cash equivalents will be used primarily to complete the Phase 3
trial of INOpulse for fILD and to complete the dose escalation study for PH-Sarc., and will not be sufficient to fund all of
the efforts that we plan to undertake or the completion of clinical development or commercialization of any of our product
candidates. Accordingly, we will be required to obtain further funding through public or private equity offerings, debt
financings, collaborations or licensing arrangements or other sources. Adequate additional funding may
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not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed would have a negative
impact on our financial condition and our ability to pursue our business strategy.
We believe that our existing cash and cash equivalents as of December 31, 2020, and proceeds expected to
become available upon the sale of state net operating losses, or NOLs, and research and development (R&D) tax credits
under the State of New Jersey’s Technology Business Tax Certificate Transfer Program will be sufficient to satisfy our
operating cash needs for at least one year after the filing of this Annual Report on Form 10-K. We have based this estimate
on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.
Our future capital requirements will depend on many factors, including:
● the timing, progress, and results of our ongoing and planned clinical trials of our product candidates;
● our ability to manufacture sufficient clinical supply of our products candidates and the costs thereof;
● discussions with regulatory agencies regarding the design and conduct of our clinical trials and the costs,
timing and outcome of regulatory review of our product candidates;
● the cost and timing of future commercialization activities, including product manufacturing, marketing, sales
and distribution, for any of our product candidates for which we receive marketing approval;
● the costs of any other product candidates or technologies we pursue;
● our ability to establish and maintain strategic partnerships, licensing or other arrangements and the financial
terms of such agreements;
● the revenue, if any, received from commercial sales of any product candidates for which we receive
marketing approval; and
● the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our
intellectual property rights and defending any intellectual property-related claims.
Identifying potential product candidates and conducting clinical trials is a time-consuming, expensive and
uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain
regulatory approval and achieve product sales. In addition, our product candidates, if approved, may not achieve
commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be
commercially available for several years, if at all. Accordingly, we will need to continue to rely on additional financing to
achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. In
addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe
we have sufficient funds for our current or future operating plans. We also have certain restrictions on issuing shares and
incurring indebtedness that are part of our Stockholders Agreement.
Any additional fundraising efforts may divert our management from their day-to-day activities, which may
adversely affect our ability to develop and commercialize our product candidates. Our ability to raise additional funds will
depend, in part, on the success of our preclinical studies and clinical trials and other product development activities,
regulatory events, our ability to identify and enter into in-licensing or other strategic arrangements, and other events or
conditions that may affect our value or prospects, as well as factors related to financial, economic and market conditions,
many of which are beyond our control. We cannot be certain that sufficient funds will be available to us when required or
on acceptable terms, if at all. Raising additional capital through the sale of securities could cause significant dilution to our
stockholders. If we are unable to secure additional funds on a timely basis or on acceptable terms, we may be required to
defer, reduce or eliminate significant planned expenditures, restructure, curtail or eliminate some or all of our development
programs or other operations, dispose of technology or assets, pursue an acquisition of our company by a
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third party at a price that may result in a loss on investment for our stockholders, enter into arrangements that may require
us to relinquish rights to certain of our product candidates, technologies or potential markets, file for bankruptcy or cease
operations altogether. Any of these events could have a material adverse effect on our business, financial condition and
results of operations. Moreover, if we are unable to obtain additional funds on a timely basis, there will be substantial doubt
about our ability to continue as a going concern and increased risk of insolvency and loss of investment by our
stockholders.
Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish
rights to technologies or product candidates.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs
through a combination of public or private equity offerings, debt financings and/or license and development agreements
with collaboration partners. To the extent that we raise additional capital through the sale of equity or convertible debt
securities, the ownership interests of our stockholders may be materially diluted, and the terms of such securities could
include liquidation or other preferences or other rights such as anti-dilution rights that adversely affect the rights of our
stockholders. For example, there could be potential dilution from the exercising of the warrants issued in connection with
our secondary offering completed in November 2016. Debt financing and preferred equity financing, if available, may
involve agreements that include restrictive covenants that limit our ability to take specified actions, such as incurring
additional debt, making capital expenditures or declaring dividends.
If we are unable to raise additional funds through equity or debt financings when needed, we may be required to
delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and
market product candidates that we would otherwise prefer to develop and market ourselves. If we raise funds through
collaborations, strategic partnerships or marketing, distribution or licensing arrangements with third parties, we may have
to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant
licenses on terms that may not be favorable to us.
We may not be able to utilize all of our net operating loss carryforwards.
The State of New Jersey’s Technology Business Tax Certificate Program allows certain high technology and
biotechnology companies to sell unused net operating loss (“NOL”) carryforwards to other New Jersey-based corporate
taxpayers. In accordance with this program, for the year ended December 31, 2020, we sold New Jersey NOL
carryforwards, resulting in the recognition of $2.1 million of income tax benefit compared to $1.8 million for the year
ended December 31, 2019. Subject to program availability and state approval, we have plans to sell additional NOLs and
credits under the same program in following years as well. If there is an unfavorable change in the State of New Jersey’s
Technology Business Tax Certificate Program (whether as a result of a change in law, policy or otherwise) that terminates
the program or eliminates or reduces our ability to use or sell our NOL carryforwards, or if we are unable to find a suitable
buyer to utilize our New Jersey NOL carryforwards to the extent the NOLs expire before we are able to utilize them
against our future taxable income, our future cash taxes may increase which might have an adverse effect on our future
financial condition.
Risks Related to Our Business and Industry
We face substantial competition from other pharmaceutical, biotechnology and medical device companies and our
operating results may suffer if we fail to compete effectively.
The pharmaceutical, biotechnology and medical device industries are highly competitive. There are many
pharmaceutical, biotechnology and medical device companies, public and private universities and research organizations
actively engaged in the research and development of products that may be similar to our product candidates. In addition,
other companies are increasingly looking at the cardiopulmonary disease market as a potential opportunity. For example,
currently, there are 14 drugs approved for the treatment of PAH and there are also other potential therapies in clinical
development, although none of these therapies are currently approved for the treatment of PH associated with fILD, Sarc.
or COPD. In addition, there are multiple nitric oxide generation and delivery systems that are under development, primarily
for the treatment of persistent pulmonary hypertension in a hospital setting. Many of our competitors, either
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alone or through their strategic partners, have substantially greater name recognition and financial, technical,
manufacturing, marketing and human resources than we do and significantly greater experience and infrastructure in the
research and clinical development of medical products, obtaining FDA and other regulatory approvals of those products,
and commercializing those products around the world. Additional mergers and acquisitions in the pharmaceutical,
biotechnology and medical device industries may result in even more resources being concentrated in our competitors.
Large pharmaceutical and medical device companies in particular have extensive expertise in pre-clinical and clinical
testing and in obtaining regulatory approvals for medical products. In addition, academic institutions, government agencies
and other public and private organizations conducting research may seek patent protection with respect to potentially
competitive products or technologies. These organizations may also establish exclusive collaborative or licensing
relationships with our competitors. Accordingly, our competitors may be more successful than we may be in obtaining
approval for inhaled nitric oxide products and achieving widespread market acceptance. We anticipate that we will face
intense and increasing competition as new products and technologies become available.
We will not be able to compete effectively unless we successfully:
● design, develop and commercialize products that are competitive in the market;
● attract qualified scientific, medical, sales and marketing, engineering and commercial personnel;
● obtain patent and/or other proprietary protection for our processes and product candidates; and
● obtain required regulatory approvals.
It is also possible that Ikaria will seek to develop and commercialize inhaled nitric oxide products or product
candidates in the Bellerophon indications. While a subsidiary of Ikaria has granted to us an exclusive license to develop
and commercialize pulsed nitric oxide in the Bellerophon indications and the scope of that license includes certain
technology developed or acquired by that subsidiary after the date of the license agreement, the license does not include
technology developed or acquired by other subsidiaries or affiliates of Ikaria including Mallinckrodt’s other subsidiaries.
Because Ikaria, Mallinckrodt and its other subsidiaries and affiliates are not subject to any non-competition obligations in
our favor, it is possible that these other subsidiaries or affiliates of Ikaria or Mallinckrodt may seek to develop or
commercialize inhaled nitric oxide or other products or product candidates, using technology not exclusively licensed to us
that are competitive with our products or product candidates, which could adversely affect our business, financial condition
or results of operations.
Risks Related to the Discovery, Development and Commercialization of Our Product Candidates
We are dependent on the success of our INOpulse product candidates and our ability to develop, obtain marketing
approval for and successfully commercialize these product candidates. If we continue to be unable to develop, obtain
marketing approval for or successfully commercialize our product candidates, either alone or through a collaboration,
or experience significant delays in doing so, our business could be materially harmed.
We currently have no products approved for sale and have invested a significant portion of our efforts and
financial resources in the development of our INOpulse for PAH, INOpulse for fILD, INOpulse for PH-COPD, INOpulse
for PH-Sarc, INOpulse for COVID-19 and Bioabsorbable Cardiac Matrix, or BCM, product candidates. Our prospects are
substantially dependent on our ability to develop, obtain marketing approval for and successfully commercialize these
product candidates.
In July 2015, we announced top-line results of our 303-patient, randomized, double-blind, placebo-controlled
clinical trial of BCM, which showed no statistically significant treatment differences between patients treated with BCM
and patients treated with placebo for both the primary and secondary endpoints. In July 2018, we informed
BioLineRx Ltd., from whom we in-licensed the BCM technology, of our decision to discontinue further development and
terminate the License and Commercialization Agreement. As a result, we have become even more dependent on the
success of our INOpulse product candidates and our ability to develop, obtain marketing approval for and successfully
commercialize our INOpulse product candidates.
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The success of our product candidates will depend on, among other things, our ability to successfully complete
clinical trials of each product candidate. The clinical trial process is uncertain, and failure of one or more clinical trials can
occur at any stage of testing. For example, although we believe our Phase 2 clinical trial of INOpulse for PH-COPD
supports advancement into further Phase 2 testing, the primary endpoint for INOpulse for PH-COPD was not statistically
significant for any of the doses tested. In November 2020, we halted our clinical trial on INOpulse for COVID-19 for
futility.
In addition to the successful completion of clinical trials, the success of our product candidates will also depend
on several other factors, including the following:
● receipt of marketing approvals from the FDA or other applicable regulatory authorities;
● establishment of supply arrangements with third-party raw materials suppliers and manufacturers;
● establishment of arrangements with third-party manufacturers to obtain finished drug products that are
appropriately packaged for sale;
● the performance of our future collaborators for one or more of our product candidates, if any;
● the extent of any required post-marketing approval commitments to applicable regulatory authorities;
● obtaining and maintaining patent, trade secret protection and regulatory exclusivity, both in the United States
and internationally;
● protection of our rights in our intellectual property portfolio;
● launch of commercial sales if and when our product candidates are approved;
● a continued acceptable safety profile of our product candidates following any marketing approval;
● commercial acceptance, if and when approved, by patients, the medical community and third-party payors;
● establishing and maintaining pricing sufficient to realize a meaningful return on our investment; and
● competition with other products.
If we are unable to develop, obtain marketing approval for or successfully commercialize our INOpulse product
candidates, either alone or through a collaboration, or experience significant delays in doing so, our business could be
materially harmed.
Clinical trials involve a lengthy and expensive process with an uncertain outcome. We may incur additional costs or
experience delays in completing, or ultimately be unable to complete, the development and commercialization of our
product candidates.
The risk of failure of all of our product candidates is high. It is impossible to predict when or if any of our product
candidates will prove effective or safe in humans or will receive regulatory approval. Before obtaining marketing approval
from regulatory authorities for the sale of any product candidate, we must conduct extensive clinical trials to demonstrate
the safety and efficacy of our product candidates in humans. Clinical testing is expensive, difficult to design and
implement, can take many years to complete and is uncertain as to outcome. A failure of one or more clinical trials can
occur at any stage of testing. The clinical development of our product candidates is susceptible to the risk of failure
inherent at any stage of development, including failure to demonstrate efficacy in a clinical trial or across a broad
population of patients, the occurrence of severe or medically or commercially unacceptable adverse events, failure
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to comply with protocols or applicable regulatory requirements and determination by the FDA or any comparable non-U.S.
regulatory authority that a drug product is not approvable.
It is possible that even if one or more of our product candidates has a beneficial effect, that effect will not be
detected during clinical evaluation as a result of one or more of a variety of factors, including the size, duration, design,
measurements, conduct or analysis of our clinical trials. Conversely, as a result of the same factors, our clinical trials may
indicate an apparent positive effect of a product candidate that is greater than the actual positive effect, if any. Similarly, in
our clinical trials we may fail to detect toxicity of or intolerability caused by our product candidates, or mistakenly believe
that our product candidates are toxic or not well tolerated when that is not in fact the case. Also, the exclusion criteria we
define may not sufficiently rule out patients who are at a higher risk of being harmed by the treatment. For example, our
exclusion criteria for pre-existing left heart dysfunction in our Phase 2 INOpulse clinical trials completed in 2014 may not
rule out patients who may experience an adverse event related to left ventricular function due to exposure to nitric oxide. In
addition, patients who are not excluded for reactive pulmonary vasculature when exposed to nitric oxide may still
experience PH.
The outcome of pre-clinical studies and early clinical trials may not be predictive of the success of later clinical
trials, and interim results of a clinical trial do not necessarily predict final results, particularly when earlier trials are small,
open-label or non-placebo-controlled trials and in trials that have different endpoints than earlier trials. For example, for
PAH, , a pre-specified interim analysis was conducted by the DMC, in August 2018, after half of the planned subjects
completed 16 weeks of blinded treatment. The DMC determined that the overall change in 6MWD, the primary endpoint of
the trial, was insufficient to support the continuation of the study and based on the DMC’s recommendation, we
discontinued the trial in August 2018. Many companies in the biotechnology, pharmaceutical and medical device industries
have suffered significant setbacks in late-stage clinical trials after achieving positive results in earlier development, and we
cannot be certain that we will not face such setbacks.
The design of a clinical trial can determine whether its results will support approval of a product, and flaws in the
design of a clinical trial may not become apparent until the clinical trial is well advanced or completed. We have limited
experience in designing clinical trials and may be unable to design and execute a clinical trial to support marketing
approval. In addition, pre-clinical and clinical data are often susceptible to varying interpretations and analyses. Many
companies that believed their product candidates performed satisfactorily in pre-clinical studies and clinical trials have
nonetheless failed to obtain marketing approval for the product candidates. Even if we believe that the results of clinical
trials for our product candidates warrant marketing approval, the FDA or comparable non-U.S. regulatory authorities may
disagree and may not grant marketing approval of our product candidates.
In some instances, there can be significant variability in safety or efficacy results between different clinical trials
of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols,
differences in the size and type of the patient populations, changes in and adherence to the clinical trial protocols and the
rate of dropout among clinical trial participants. Any Phase 3 or other clinical trials that we may conduct may not
demonstrate the efficacy and safety necessary to obtain regulatory approval to market our product candidates.
INOpulse is a sophisticated electro-mechanical device comprised of components that may fail or deteriorate over time or
with improper use. If we experience problems with, failure of, or delays in obtaining any INOpulse components, our
business could be materially adversely harmed.
Because INOpulse is a sophisticated electro-mechanical device, the parts which comprise the device are subject to
sudden failure or to wear and tear, which may result in decreased function or failure of those parts over time. Although we
perform scheduled, preventive maintenance on our drug delivery system to limit device failures, and additional
maintenance as needed whenever a user reports a device malfunction, components of our devices may fail. In addition,
although we have designed INOpulse to be simple and easy to use and will provide user manuals and other training
materials, users of INOpulse may use the devices improperly, which could cause the devices to fail or otherwise not work
properly.
There are several components in INOpulse that are custom designed or assembled for us. We are dependent on a
single company to supply us with some of these components. While we believe there are alternative suppliers from
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which we could purchase most of these components, there is a risk that a single-source supplier could fail to deliver
adequate supply, or could suffer a business interruption that could affect our supply of these components.
We obtain some of the components for INOpulse through individual purchase orders executed on an as needed
basis rather than pursuant to long-term supply agreements. Our business, financial condition or results of operations could
be adversely affected if any of our principal third-party suppliers or manufacturers experience production problems, lack of
capacity or transportation disruptions or otherwise cease producing such components.
We have conducted, and may in the future conduct, clinical trials for certain of our product candidates at sites outside
the United States, and the FDA may not accept data from trials conducted in such locations.
We have conducted, and may in the future choose to conduct, one or more of our clinical trials outside the United
States. For example, our first of two Phase 3 clinical trials of INOpulse for PAH included sites outside of the United States,
including Canada.
Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of this
data is subject to certain conditions imposed by the FDA. For example, the clinical trial must be well designed and
conducted and performed by qualified investigators in accordance with GCP in the case of drug trials, or the Declaration of
Helsinki or the laws and regulations of the country in which the research is conducted, whichever affords greater protection
to the human subjects, in the case of device trials. The trial population must also adequately represent the U.S. population,
and the data must be applicable to the U.S. population and U.S. medical practice in ways that the FDA deems clinically
meaningful. Generally, the patient population for any clinical trials conducted outside of the United States must be
representative of the population for whom we intend to seek approval in the United States. In addition, while these clinical
trials are subject to the applicable local laws, FDA acceptance of the data will be dependent upon its determination that the
trials also complied with all applicable U.S. laws and regulations. There can be no assurance that the FDA will accept data
from trials conducted outside of the United States.
In addition, the conduct of clinical trials outside the United States could have a significant impact on us. Risks
inherent in conducting international clinical trials include:
● foreign regulatory requirements that could restrict or limit our ability to conduct our clinical trials;
● administrative burdens of conducting clinical trials under multiple foreign regulatory schema;
● foreign exchange fluctuations; and
● diminished protection of intellectual property in some countries.
Some clinical trials of our product candidates failed to demonstrate safety and efficacy of our product candidates to the
satisfaction of the FDA and if other clinical trials also fail to demonstrate safety and efficacy to the satisfaction of the
FDA and comparable non-U.S. regulators, we may incur additional costs or experience delays in completing, or
ultimately be unable to complete, the development and commercialization of these product candidates.
We are not permitted to commercialize, market, promote or sell any product candidate in the United States without
obtaining marketing approval from the FDA. Comparable non-U.S. regulatory authorities, such as the EMA, impose
similar restrictions. We may never receive such approvals. We must complete extensive pre-clinical studies and clinical
trials to demonstrate the safety and efficacy of our product candidates in humans before we will be able to obtain these
approvals.
Any inability to successfully complete pre-clinical and clinical development could result in additional costs to us
and impair our ability to generate revenues from product sales. In addition, if (1) we are required to conduct additional
clinical trials or other testing of our product candidates beyond the trials and testing that we contemplate, (2) we are unable
to successfully complete clinical trials of our product candidates or other testing, (3) the results of
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these trials or tests are unfavorable, uncertain or are only modestly favorable, such as in our Phase 2 clinical trials of
INOpulse for PAH, INOpulse for PH-COPD and INOpulse for COVID-19, or (4) there are unacceptable safety concerns
associated with our product candidates, we, in addition to incurring additional costs, may:
● be delayed in obtaining marketing approval for our product candidates;
● not obtain marketing approval at all;
● obtain approval for indications or patient populations that are not as broad as we intended or desired;
● obtain approval with labeling that includes significant use or distribution restrictions or significant safety
warnings, including boxed warnings;
● be subject to additional post-marketing testing or other requirements; or
● be required to remove the product from the market after obtaining marketing approval.
If the FDA or other regulatory authority requires us to conduct additional testing or determines that an
unacceptable amount of nitrogen dioxide is formed through the use of INOpulse, we may be required to alter the design of
INOpulse, which may not be possible, and the clinical development timeline for INOpulse may be delayed or prove to be
more costly than we currently anticipate.
We have experienced and may continue to experience a number of possible undesirable events in connection with
clinical trials of our product candidates, potential marketing approval or commercialization of our product candidates
could be delayed or prevented.
We have experienced and may continue to experience numerous undesirable events during, or as a result of,
clinical trials that could delay or prevent marketing approval of our product candidates, including:
● clinical trials of our product candidates may produce unfavorable or inconclusive results;
● we may decide, or regulators may require us, to conduct additional clinical trials or abandon product
development programs;
● the number of patients required for clinical trials of our product candidates may be larger than we anticipate,
patient enrollment in these clinical trials may be slower than we anticipate or participants may drop out of
these clinical trials at a higher rate than we anticipate;
● our third-party contractors, including those manufacturing our product candidates or components or
ingredients thereof or conducting clinical trials on our behalf, may fail to comply with regulatory
requirements or meet their contractual obligations to us in a timely manner or at all;
● regulators or institutional review boards may not authorize us or our investigators to commence a clinical
trial or conduct a clinical trial at a prospective trial site;
● we may experience delays in reaching or fail to reach an agreement on acceptable clinical trial contracts or
clinical trial protocols with prospective trial sites;
● patients who enroll in a clinical trial may misrepresent their eligibility to do so or may otherwise not comply
with the clinical trial protocol, resulting in the need to withdraw such patients from the clinical trial, increase
the needed enrollment size for the clinical trial or extend the clinical trial’s duration;
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● regulators or institutional review boards may require that we or our investigators suspend or terminate
clinical research for various reasons, including noncompliance with regulatory requirements or their
respective standards of conduct, a finding that the participants are being exposed to unacceptable health risks,
undesirable side effects or other unexpected characteristics of the product candidate or findings of
undesirable effects caused by a chemically or mechanistically similar drug or drug candidate;
● the FDA or comparable non-U.S. regulatory authorities may disagree with our clinical trial design or our
interpretation of data from pre-clinical studies and clinical trials;
● the FDA or comparable non-U.S. regulatory authorities may find regulatory non-compliance with the
manufacturing processes or facilities of third-party manufacturers with which we enter into agreements for
clinical and commercial supplies;
● the supply or quality of raw materials or manufactured product candidates or other materials necessary to
conduct clinical trials of our product candidates may be insufficient, inadequate or not available at an
acceptable cost, or we may experience interruptions in supply; and
● the approval policies or regulations of the FDA or comparable non-U.S. regulatory authorities may
significantly change in a manner rendering our clinical data insufficient to obtain marketing approval.
Product development costs for us will increase if we experience delays in testing or pursuing marketing approvals
and we may be required to obtain additional funds to complete clinical trials and prepare for possible commercialization of
our product candidates. We do not know whether any pre-clinical studies or clinical trials will begin as planned, will need
to be restructured or will be completed on schedule, or at all. For example, although we completed a Phase 2 clinical trial
for INOpulse for PH-COPD in 2014, we only began further Phase 2 development in this indication in 2016. Significant
pre-clinical study or clinical trial delays also could shorten any periods during which we may have the exclusive right to
commercialize our product candidates or allow our competitors to bring products to market before we do and impair our
ability to successfully commercialize our product candidates and may harm our business and results of operations. In
addition, many of the factors that cause, or lead to, clinical trial delays may ultimately lead to the denial of marketing
approval of any of our product candidates.
If we experience delays or difficulties in the enrollment of patients in clinical trials, we may not achieve our clinical
development on our anticipated timeline, or at all, and our receipt of necessary regulatory approvals could be delayed or
prevented.
We may not be able to initiate or continue clinical trials for our INOpulse product candidates if we are unable to
locate and enroll a sufficient number of eligible patients to participate in clinical trials. Patient enrollment is a significant
factor in the timing of clinical trials, and is affected by many factors, including:
● the size and nature of the patient population;
● the severity of the disease under investigation;
● the proximity of patients to clinical sites;
● the eligibility criteria for the trial;
● the design of the clinical trial;
● limitations placed on enrollment by regulatory authorities;
● efforts to facilitate timely enrollment;
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● competing clinical trials; and
● clinicians’ and patients’ perceptions as to the potential advantages and risks of the product candidate being
studied in relation to other available therapies, including any new product candidates that may be approved
for the indications we are investigating.
For example, we may experience difficulty enrolling our clinical trials, including, but not limited to, any future
clinical trials of INOpulse for fILD, PH-Sarc, or any future clinical trials of INOpulse for PH-COPD because such trials
may require that patients meet the restrictive enrollment criteria, such as having been diagnosed with both COPD and PH,
be undergoing treatment with LTOT and not having significant left ventricular dysfunction.
Our inability to enroll a sufficient number of patients for our clinical trials could result in significant delays or
may require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in
increased development costs for our product candidates, delay or halt the development of and approval processes for our
product candidates and jeopardize our ability to achieve our clinical development timeline and goals, including the dates by
which we will commence, complete and receive results from clinical trials. Enrollment delays may also delay or jeopardize
our ability to commence sales and generate revenues from our product candidates. Any of the foregoing could cause the
value of our company to decline and limit our ability to obtain additional financing, if needed.
We may not obtain orphan drug exclusivity for any of our product candidates and indications, or we may not receive the
full benefit of orphan drug exclusivity even if we obtain such exclusivity.
Regulatory authorities in some jurisdictions, including the United States and the EU, may designate drugs and
biologics intended for the treatment of relatively small patient populations as orphan drugs. Under the Orphan Drug Act,
the FDA may designate a product as an orphan drug if it is a drug or biologic intended to treat a rare disease or condition,
which is generally defined as a patient population of fewer than 200,000 individuals in the United States who have been
diagnosed as having the disease or condition at the time of the submission of the request for orphan drug designation. The
FDA has granted orphan drug designation to our nitric oxide program for the treatment of IPF and for the treatment of
PAH. Accordingly, if we are the first company to receive FDA approval for nitric oxide for the treatment of IPF or PAH,
we will obtain seven years of marketing exclusivity, during which time the FDA may not approve another product
containing nitric oxide as its active ingredient for the treatment of these rare diseases, except under a limited number of
situations including a showing that another product is clinically superior. We have not yet applied for orphan drug
designation in any jurisdictions outside of the United States.
Even though we have obtained orphan drug designation for our nitric oxide program to treat these diseases in the
United States, and even if we obtain orphan drug designation for our product candidates in other indications, for our future
product candidates or in other jurisdictions, due to the uncertainties associated with developing pharmaceutical products,
we may not be the first to obtain marketing approval for any particular orphan indication, or we may not obtain approval
for an indication for which we have obtained orphan drug designation. Further, even if we obtain orphan drug exclusivity
for a product candidate, that exclusivity may not protect the product effectively from competition because different drugs
can be approved for the same condition. For example, even after an orphan drug is approved, the FDA can subsequently
approve the same drug for the same condition if the FDA concludes that the later drug is safer, more effective or makes a
major contribution to patient care. Orphan drug designation neither shortens the development time or regulatory review
time of a drug, nor gives the drug any advantage in the regulatory review or approval process. Orphan drug exclusivity may
be lost if the FDA, or the equivalent regulatory authority in jurisdictions outside of the United States, determines that the
request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product
to meet the needs of patients with the rare disease or condition.
Serious adverse events, or SAEs, or undesirable side effects or other unexpected properties of our product candidates
have been identified in past clinical trials and may be identified during development of other treatments that could delay
or prevent the product candidate’s marketing approval.
SAEs or undesirable side effects caused by, or other unexpected properties of, our product candidates could cause
us, an institutional review board or regulatory authorities to interrupt, delay or halt clinical trials of one or more of
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our product candidates and could result in a more restrictive label or the delay or denial of marketing approval by the FDA
or comparable non-U.S. regulatory authorities. If any of our product candidates is associated with SAEs or undesirable side
effects or has properties that are unexpected, we may need to abandon development or limit development of that product
candidate to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent,
less severe or more acceptable from a risk-benefit perspective. Many drugs or devices that initially showed promise in
clinical or earlier stage testing have later been found to cause undesirable or unexpected side effects that prevented further
development of the drug or device.
For example, in our Phase 2 clinical trial for INOpulse for PAH completed in October 2014, SAEs were reported
for four patients in the 25 mcg/kg ideal body weight/hour, or mcg, low-dose active treatment arm, including bacteremia,
myelodysplastic syndrome, increased shortness of breath, and dyspnea, one of which was assessed as possibly related to
trial therapy. In the 75 mcg high-dose active treatment arm, nine patients had SAEs. The most common SAEs reported
were syncope and bronchitis/tracheobronchitis, one of which was assessed as possibly related to trial therapy.
Discontinuation of trial therapy due to adverse events occurred for two patients in the 75 mcg arm and one subject in the
25 mcg arm. Additional or more SAEs, undesirable side effects or other unexpected properties of INOpulse for PAH or our
other product candidates could arise or become known during further clinical development. If such an event occurs during
development, clinical trials for our product candidates could be suspended or terminated and the FDA or comparable
foreign regulatory authorities could order us or our collaborators to cease further development, require us to conduct
additional clinical trials or other tests or studies or deny approval of the applicable product candidate.
Additionally, INOpulse is an extension of the technology that is used in hospitals to deliver inhaled nitric oxide to
neonates with a form of PH called persistent PH of the newborn. Persistent PH is an FDA-approved use of inhaled nitric
oxide, which is currently marketed by Ikaria as INOmax. Because INOpulse draws on the established efficacy and safety of
INOmax, if any SAEs or undesirable side effects or other unexpected properties of INOmax or other inhaled nitric oxide
delivery systems developed by Ikaria are identified, INOpulse may be adversely affected and we may be required to
interrupt, delay or halt our INOpulse clinical trials.
We may not be successful in our efforts to identify or discover additional potential product candidates.
A significant portion of the research that we are conducting involves the development of innovative approaches to
the pulsed delivery of nitric oxide. Our drug-device discovery efforts may not be successful in creating drugs or devices
that have commercial value or therapeutic utility. Our research programs may initially show promise in creating potential
product candidates, yet fail to yield viable product candidates for clinical development for a number of reasons, including
that potential product candidates may, on further study, be shown to have harmful side effects or other characteristics that
indicate that they are unlikely to be product candidates that will receive marketing approval and achieve market
acceptance.
Our research programs to identify new product candidates will require substantial technical, financial and human
resources. In addition, we may focus our efforts and resources on one or more potential product candidates that ultimately
prove to be unsuccessful.
Pursuant to the terms of our license agreement with Ikaria, we only have the right to develop and commercialize
pulsed nitric oxide for the Bellerophon indications; Ikaria retains the right to develop and commercialize inhaled nitric
oxide products, including pulsed products, for all other indications. Additionally, we are limited in the scope of potential
product candidates that we can identify or discover due to non-competition agreements that we entered into with Ikaria,
which agreements were amended in July 2015 and April 2018. In the event that we or one of our subsidiaries materially
breach the provisions of the non-competition agreements and do not cure such breach within 30 days after receiving written
notice thereof from Ikaria, Ikaria will have the right to terminate the license agreement.
If we are unable to identify suitable additional compounds for pre-clinical and clinical development, or at all, our
ability to develop product candidates and obtain product revenues in future periods could be compromised, which could
result in significant harm to our financial position and adversely impact our stock price.
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If any of our product candidates receives marketing approval and we, or others, later discover that the product is less
effective than previously believed or causes undesirable side effects that were not previously identified, our ability to
market the product could be adversely affected.
Clinical trials of our product candidates are conducted in carefully defined subsets of patients who have agreed to
enter into clinical trials. Consequently, it is possible that our clinical trials may indicate an apparent positive effect of a
product candidate that is greater than the actual positive effect, if any, or alternatively fail to identify undesirable side
effects. If, following approval of a product candidate, we, or others, discover that the drug is less effective than previously
believed or causes undesirable side effects that were not previously identified, any of the following undesirable events
could occur:
● regulatory authorities may withdraw their approval of the product or seize the product;
● we may be required to recall the product or change the way the product is administered;
● additional restrictions may be imposed on the marketing of, or the manufacturing processes for, the particular
product;
● we may be subject to fines, injunctions or the imposition of civil or criminal penalties;
● regulatory authorities may require the addition of labeling statements, such as a “black box” warning or a
contraindication;
● we may be required to create a handout, sometimes referred to as a Medication Guide, outlining the risks of
the previously unidentified side effects for distribution to patients;
● we could be sued and held liable for harm caused to patients;
● the product may become less competitive; and
● our reputation may suffer.
Any of these events could have a material and adverse effect on our operations and business and could adversely
impact our stock price.
Even if one of our product candidates receives marketing approval, it may fail to achieve the degree of market
acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial
success, and the market opportunity for the product candidate may be smaller than we estimate.
We have never commercialized a product. Even if one of our product candidates is approved by the appropriate
regulatory authorities for marketing and sale, it may nonetheless fail to gain sufficient market acceptance by physicians,
patients, third-party payors and others in the medical community. For example, physicians are often reluctant to switch
their patients from existing therapies even when new and potentially more effective or convenient treatments enter the
market. Further, patients often acclimate to the therapy that they are currently taking and do not want to switch unless their
physicians recommend switching products or they are required to switch therapies due to lack of reimbursement for
existing therapies.
Efforts to educate the medical community and third-party payors on the benefits of our product candidates may
require significant resources and may not be successful. If any of our product candidates is approved but does not achieve
an adequate level of market acceptance, we may not generate significant revenues and we may not become
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profitable. The degree of market acceptance of, and potential market opportunity for, our product candidates, if approved
for commercial sale, will depend on a number of factors, including:
● the efficacy and safety of the product;
● the potential advantages of the product compared to alternative treatments;
● the prevalence and severity of any side effects;
● the clinical indications for which the product is approved;
● whether the product is designated under physician treatment guidelines as a first-line therapy or as a second-
or third-line therapy;
● limitations or warnings, including distribution or use restrictions, contained in the product’s approved
labeling;
● our ability to offer the product for sale at competitive prices;
● our ability to establish and maintain pricing sufficient to realize a meaningful return on our investment;
● our ability to prevent use of our INOpulse for PH-COPD device by fILD patients due to expected pricing
differences;
● the product’s convenience and ease of administration compared to alternative treatments;
● the willingness of the target patient population to try, and of physicians to prescribe, the product;
● the strength of sales, marketing and distribution support;
● the approval of other new products for the same indications;
● changes in the standard of care for the targeted indications for the product;
● the timing of market introduction of our approved products as well as competitive products and other
therapies;
● availability and amount of reimbursement from government payors, managed care plans, private health
coverage insurers and other third-party payors;
● adverse publicity about the product or favorable publicity about competitive products; and
● potential product liability claims.
The potential market opportunities for our product candidates are difficult to estimate precisely. Our estimates of
the potential market opportunities, including our estimates with respect to pricing and reimbursement, are predicated on
many assumptions, including industry knowledge and publications, third-party research reports and other surveys. While
we believe that our internal assumptions are reasonable, these assumptions involve the exercise of significant judgment on
the part of our management, are inherently uncertain and the reasonableness of these assumptions has not been assessed by
an independent source. If any of the assumptions proves to be inaccurate, the actual markets for our product candidates
could be smaller than our estimates of the potential market opportunities.
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If we are unable to establish sales, marketing and distribution capabilities or enter into acceptable sales, marketing and
distribution arrangements with third parties, we may not be successful in commercializing any product candidates that
we develop, if and when those product candidates are approved.
We do not have a sales, marketing or distribution infrastructure and have limited experience in the sale, marketing
and distribution of pharmaceutical products. To achieve commercial success for any approved product, we must either
develop a sales and marketing organization or outsource these functions to third parties. We expect to build a commercial
infrastructure to allow us to market and sell certain of our product candidates when approved, if any, using a specialty sales
force in the United States, and we may choose to establish commercialization capabilities in select countries outside the
United States. The development of sales, marketing and distribution capabilities will require substantial resources, will be
time-consuming and could delay any product launch. We expect that we will commence the development of these
capabilities prior to receiving approval of any of our product candidates. If the commercial launch of a product candidate
for which we recruit a sales force and establish marketing and distribution capabilities is delayed or does not occur for any
reason, we could have prematurely or unnecessarily incurred these commercialization costs. Such a delay may be costly,
and our investment could be lost if we cannot retain or reposition our sales and marketing personnel. In addition, we may
not be able to hire or retain a sales force in the United States that is sufficient in size or has adequate expertise in the
medical markets that we plan to target. If we are unable to establish or retain a sales force and marketing and distribution
capabilities, our operating results may be adversely affected.
If a potential partner has development or commercialization expertise or financial resources that we believe is
particularly relevant to one of our product candidates, then we may seek to collaborate with that potential partner even if
we believe we could otherwise develop and commercialize the product independently. We may partner with third parties to
commercialize our product candidates in certain countries outside the United States. As a result of entering into
arrangements with third parties to perform sales, marketing and distribution services, our product revenues or the
profitability of these product revenues may be lower, perhaps substantially lower, than if we were to directly market and
sell products in those markets. Furthermore, we may be unsuccessful in entering into the necessary arrangements with third
parties or may be unable to do so on terms that are favorable to us. In addition, we may have little or no control over such
third parties, and any of them may fail to devote the necessary resources and attention to sell and market our product
candidates effectively.
If we do not establish sales and marketing capabilities, either on our own or in collaboration with third parties, we
will not be successful in commercializing any of our product candidates that receive marketing approval.
Even if we are able to commercialize any product candidate that we develop, the product may become subject to
unfavorable pricing regulations, third-party payor reimbursement practices or healthcare reform initiatives that could
harm our business.
The commercial success of our product candidates will depend substantially, both in the United States and abroad,
on the extent to which the costs of our product candidates will be paid by health maintenance, managed care, pharmacy
benefit and similar healthcare management organizations, or reimbursed by government health administration authorities,
private health coverage insurers and other third-party payors. If reimbursement is not available, or is available only to
limited levels, we may not be able to successfully commercialize our product candidates. Even if coverage is provided, the
approved reimbursement amount may not be high enough to allow us to establish and maintain pricing sufficient to realize
a meaningful return on our investment.
There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved drugs
and devices. Marketing approvals, pricing and reimbursement for new drug and device products vary widely from country
to country. Some countries require approval of the sale price of a drug or device before it can be marketed. In many
countries, the pricing review period begins after marketing or product licensing approval is granted. In some non-U.S.
markets, pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we
might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay
commercial launch of the product, possibly for lengthy time periods, which may negatively impact the revenues we are
able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our
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ability to recoup our investment in one or more product candidates, even if our product candidates obtain marketing
approval.
Our ability to commercialize our product candidates will depend in part on the extent to which coverage and
reimbursement for these products and related treatments will be available from government health administration
authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private
health insurers and health maintenance organizations, decide which medications they will cover and establish
reimbursement levels. The healthcare industry is acutely focused on cost containment, both in the United States and
elsewhere. Government authorities and third-party payors have attempted to control costs by limiting coverage and the
amount of reimbursement for particular medications, which could affect our ability to sell our product candidates
profitably. These payors may not view our products, if any, as cost-effective, and coverage and reimbursement may not be
available to our customers, or may not be sufficient to allow our products, if any, to be marketed on a competitive basis.
Cost-control initiatives could cause us to decrease the price we might establish for products, which could result in lower
than anticipated product revenues. If the prices for our products, if any, decrease or if governmental and other third-party
payors do not provide adequate coverage or reimbursement, our prospects for revenue and profitability will suffer.
Approval of a product does not guarantee sufficient reimbursement to achieve commercial success.
There may also be delays in obtaining coverage and reimbursement for newly approved products, and coverage
may be more limited than the indications for which the product is approved by the FDA or comparable non-U.S. regulatory
authorities. Moreover, eligibility for reimbursement does not imply that any product will be paid for in all cases or at a rate
that covers our costs, including research, development, manufacture, sale and distribution. Reimbursement rates may vary,
by way of example, according to the use of the product and the clinical setting in which it is used. Reimbursement rates
may also be based on reimbursement levels already set for lower cost products or may be incorporated into existing
payments for other services.
In addition, increasingly, third-party payors are requiring higher levels of evidence of the benefits and clinical
outcomes of new technologies and are challenging the prices charged. We cannot be sure that coverage will be available for
any product candidate that we commercialize and, if available, that the reimbursement rates will be adequate. Further, the
net reimbursement for drug products may be subject to additional reductions if there are changes to laws that presently
restrict imports of drugs from countries where they may be sold at lower prices than in the United States. An inability to
promptly obtain coverage and adequate payment rates from both government-funded and private payors for any our
product candidates for which we obtain marketing approval could have a material adverse effect on our operating results,
our ability to raise capital needed to commercialize products and our overall financial condition.
If the FDA or comparable non-U.S. regulatory authorities approve generic versions of any of our products that receive
marketing approval, or such authorities do not grant our products appropriate periods of data exclusivity before
approving generic versions of our products, the sales of our products could be adversely affected.
Once an NDA is approved, the product covered thereby becomes a “reference listed drug” in the FDA’s
publication, “Approved Drug Products with Therapeutic Equivalence Evaluations.” Manufacturers may seek approval of
generic versions of reference listed drugs through submission of ANDAs in the United States, or through a similar process
in foreign jurisdictions. In support of an ANDA, a generic manufacturer need not conduct clinical studies. Rather, the
applicant generally must show that its product has the same active ingredient(s), dosage form, strength, route of
administration and conditions of use or labeling as the reference listed drug and that the generic version is bioequivalent to
the reference listed drug, meaning it is absorbed in the body at the same rate and to the same extent. Generic products may
be significantly less costly to bring to market than the reference listed drug and companies that produce generic products
are generally able to offer them at lower prices. Thus, following the introduction of a generic drug, a significant percentage
of the sales of any branded product or reference listed drug may be typically lost to the generic product.
The FDA may not approve an ANDA for a generic product until any applicable period of non-patent exclusivity
for the reference listed drug has expired. Manufacturers may seek to launch these generic products following the expiration
of the applicable marketing exclusivity period, even if we still have patent protection for our product.
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Competition that our products may face from generic versions of our products could materially and adversely
impact our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on the
investments we have made in those product candidates.
Product liability lawsuits against us could divert our resources, cause us to incur substantial liabilities and limit
commercialization of any products that we may develop.
We face an inherent risk of product liability claims as a result of the clinical testing of our product candidates
despite obtaining appropriate informed consents from our clinical trial participants. We will face an even greater risk if we
commercially sell any product that we may develop. For example, we may be sued if any product we develop allegedly
causes injury or is found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such
product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers
inherent in the product, negligence, strict liability or a breach of warranties. For example:
● improper use or failure of INOpulse may result in rebound PH, which can be fatal in some patients;
● rebound PH may also occur if both the primary and back-up devices fail before we can replace them, if the
built-in back-up with a device does not work properly or if the patient does not carry or have access to his or
her back-up device; and
● rebound PH can also occur in patients who were not previously considered at risk for this reaction and who
may not have been provided an adequate back-up device.
● Claims could also be asserted under state consumer protection acts. If we cannot successfully defend
ourselves against product liability claims, we may incur substantial liabilities or be required to limit
commercialization of our product candidates. Regardless of the merits or eventual outcome, liability claims
may result in:
● decreased demand for products that we may develop;
● injury to our reputation and significant negative media attention;
● withdrawal of clinical trial participants;
● significant costs to defend resulting litigation;
● substantial monetary awards to trial participants or patients;
● loss of revenue;
● reduced resources of our management to pursue our business strategy; and
● the inability to commercialize any products that we may develop.
Although we maintain general liability insurance of $2.0 million in the aggregate, umbrella insurance in the
amount of $10.0 million in the aggregate and clinical trial liability insurance of $20.0 million in the aggregate, this
insurance may not fully cover potential liabilities that we may incur. The cost of any product liability litigation or other
proceeding, even if resolved in our favor, could be substantial. We will need to increase our insurance coverage if and when
we begin the commercial sale of any product candidate that receives marketing approval. In addition, insurance coverage is
becoming increasingly expensive. If we are unable to obtain or maintain sufficient insurance coverage at an acceptable cost
or to otherwise protect against potential product liability claims, it could prevent or inhibit the development and
commercial production and sale of our product candidates, which could adversely affect our business, financial condition,
results of operations and prospects.
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Our INOpulse devices use lithium-ion battery cells, which have been observed to catch fire or vent smoke and flame,
and these events may raise concerns about the batteries we use.
The battery pack used in our INOpulse devices makes use of lithium-ion cells. On rare occasions, lithium-ion cells
can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials.
Highly publicized incidents of laptop computers and cell phones bursting into flames have focused consumer attention on
the safety of these cells. There can be no assurance that the battery packs we use would not fail, which could lead to
property damage, personal injury or death, and may subject us to lawsuits. We may also have to recall our products, if any,
which would be time consuming and expensive. Also, negative perceptions in the healthcare and patient communities
regarding the suitability of lithium-ion cells for medical applications or any future incident involving lithium-ion cells
could seriously harm our business, even in the absence of an incident involving us.
Our business has been and may continue to be adversely affected by the COVID-19 pandemic.
The COVID-19 pandemic has affected our operations and may materially affect our business. In response to the
pandemic, we have revised our operations, including implemented work from home and social distancing policies. For
instance, our clinical trials may suffer from lower than anticipated patient recruitment or enrollment and we may be forced
to temporarily delay ongoing trials in PH. In addition, we risk a delay, default and/or nonperformance under our existing
agreements arising from force majeure. The extent to which COVID-19 impacts our results will depend on future
developments, which are highly uncertain and cannot be predicted, including new information which may emerge
concerning the severity of COVID-19 and the actions to contain it or treat its impact, among others.
In addition, COVID-19 has resulted in significant governmental measures being implemented to control the spread
of the virus, including quarantines, travel restrictions, social distancing and business shutdowns. We have taken temporary
precautionary measures intended to help minimize the risk of the virus to our employees, including temporarily allowing
all employees to work remotely. We have suspended non-essential travel worldwide for our employees and are
discouraging employee attendance at other gatherings. These measures could negatively affect our business. For instance,
temporarily allowing employees to work remotely may induce absenteeism, disrupt our operations or increase the risk of a
cybersecurity incident. COVID-19 has also caused volatility in the global financial markets and a slowdown in the global
economy, which may negatively affect our ability to raise additional capital on attractive terms or at all.
The extent to which COVID-19 may impact our business will depend on future developments, which are highly
uncertain and cannot be predicted with confidence, such as the duration of the pandemic, the severity of COVID-19 or the
effectiveness of actions to contain and treat COVID-19, particularly in the geographies where we or our third party
suppliers, contract manufacturers, or contract research organizations operate. We cannot presently predict the scope and
severity of any potential business shutdowns or disruptions. If we or any of the third parties with whom we engage,
however, were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and
on the timelines presently planned could be materially and negatively affected, which could have a material adverse impact
on our business and our results of operations and financial condition.
Risks Related to Our Dependence on Third Parties
The intellectual property underlying INOpulse is exclusively licensed from Ikaria. If Ikaria terminates the license
agreement, or fails to prosecute, maintain or enforce the underlying patents, our business will be materially harmed.
We have licensed the intellectual property underlying INOpulse from Ikaria. The license agreement prohibits us
from sublicensing to any competitor of Ikaria any intellectual property licensed to us by Ikaria. In addition, we are required
to ensure that all of our products candidates are used solely for the chronic treatment of the Bellerophon indications and to
enter into written agreements with any customers that contain restrictions on the use of our products and termination rights
in the event such restrictions are violated.
Ikaria has the initial right, but not the obligation, to prosecute and maintain all patents that are licensed to us
pursuant to the license agreement. While we have certain step-in rights to assume control if Ikaria declines to file,
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prosecute or maintain certain licensed patents that are core to our business, in the event Ikaria reasonably determines that
our actions could materially impair its business operations or intellectual property rights, Ikaria may prohibit us from
taking such actions. In addition, Ikaria has the initial right, but not the obligation, to initiate a legal action against a third
party with respect to any actual or suspected infringement of patent rights licensed to us pursuant to the license agreement.
We have the right to initiate legal action against a third-party infringer of licensed patents that are core to our business in
the event Ikaria declines to take action with respect to such infringement, however, if Ikaria determines that our pursuit of
any such action could materially impair its business operations or intellectual property rights, Ikaria may prohibit us from
taking any such action.
The license agreement terminates, on an INOpulse product-by-INOpulse product basis, at such time as we are no
longer actively and continuously engaged in the development or commercialization of such product. In addition, Ikaria may
terminate the license agreement if, among other things, (1) we breach or fail to comply with any material term or condition
required to be performed or complied with by us and do not cure such breach or failure within 30 days after receiving
written notice of such breach from Ikaria, (2) we or any of our affiliates breaches any of our agreements not to compete
with Ikaria, (3) we or any of our affiliates challenges the validity or enforceability of the licensed patents or (4) we or any
person that is a successor to our license rights markets a generic nitric oxide product that is competitive with Ikaria’s
INOmax product. Upon termination of the license agreement with respect to any INOpulse product candidate, we will lose
our ability to market such INOpulse product candidate, and upon Ikaria’s written request, be required to transfer any and all
regulatory approvals relating to such INOpulse product candidate to Ikaria.
We rely, and expect to continue to rely, on third parties to conduct our clinical trials, and those third parties may not
perform satisfactorily, including failing to meet deadlines for the completion of such trials.
We currently rely on third-party companies to conduct our clinical trials. We expect to continue to rely on third
parties, such as clinical research organizations, or CROs, clinical data management organizations, medical institutions and
clinical investigators, to conduct our clinical trials. Our agreements with these third parties generally allow the third party
to terminate the agreement at any time. If we are required to enter into alternative arrangements because of any such
termination, the introduction of our product candidates to market could be delayed.
Our reliance on these third parties for research and development activities will reduce our control over these
activities but will not relieve us of our responsibilities. For example, we design our clinical trials and will remain
responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and
protocols for the trial. Moreover, the FDA requires us to comply with GCPs for conducting, recording and reporting the
results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and
confidentiality of trial participants are protected. Our reliance on third parties that we do not control does not relieve us of
these responsibilities and requirements. We also are required to register ongoing clinical trials and post the results of
completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within specified time frames. Failure to
do so can result in fines, adverse publicity and civil and criminal sanctions.
Furthermore, these third parties may also have relationships with other entities, some of which may be our
competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct
our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may
be delayed in obtaining, marketing approvals for our product candidates and will not be able to, or may be delayed in our
efforts to, successfully commercialize our product candidates.
We also expect to rely on other third parties to store and distribute drug and device supplies for our clinical trials.
Any performance failure on the part of our distributors could delay clinical development or marketing approval of our
product candidates or commercialization of our products, producing additional losses and depriving us of potential product
revenue.
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We currently rely on Ikaria, as our single source supplier, for our supply of nitric oxide for the clinical trials of
INOpulse. Ikaria’s inability to continue manufacturing adequate supplies of nitric oxide, or its refusal to supply us with
commercial quantities of nitric oxide on commercially reasonable terms, or at all, due to the bankruptcy filing of
Ikaria’s parent company Mallinckrodt plc or otherwise could result in a disruption in the supply of, or impair our ability
to market, INOpulse.
We have a drug clinical supply agreement with Ikaria, pursuant to which Ikaria will manufacture and supply our
requirements for nitric oxide for inhalation and corresponding placebo for use in clinical trials of INOpulse. Ikaria
manufactures pharmaceutical-grade nitric oxide at its facility in Port Allen, Louisiana. Ikaria’s Port Allen facility is subject
to the risks of a natural disaster or other business disruption, including the widespread outbreak of infectious diseases as the
outbreak of the coronavirus known as COVID-19. We maintain under controlled storage conditions a two- to three-month
supply of clinical trial drug product, but there can be no assurance that we would be able to meet our requirements for
INOpulse if there were a catastrophic event or failure of Ikaria’s manufacturing system. Because Ikaria’s Port Allen facility
is one of the few FDA-inspected sites that can manufacture nitric oxide for INOpulse and because the manufacture of a
pharmaceutical gas requires specialized equipment and expertise, there are few third-party manufacturers to which we
could contract this work in a short period of time. Therefore, any disruption in Ikaria’s Port Allen facility, or the failure by
Ikaria for any other reason to provide us with nitric oxide, could materially and adversely affect supplies of nitric oxide for
INOpulse and our ongoing and planned clinical trials. In addition, Ikaria’s parent company, Mallinckrodt plc, filed for
Chapter 11 bankruptcy protection in October 2020. While we have been assured by Ikaria and believe that there will be no
disruption in Ikaria’s ability to fulfill its supply obligations to us, there can be no assurance that there will not be a
disruption or delay in such manufacture and supply of nitric oxide for our use. Any such disruption would force us to seek
nitric oxide from an alternative source, which may not be available on commercially reasonable terms. In addition, we do
not currently have any arrangements with Ikaria to provide us with commercial quantities of nitric oxide. If we are unable
to arrange for Ikaria to provide such quantities on commercially reasonable terms, or at all, we may not be able to
successfully produce and market INOpulse or may be delayed in doing so.
We rely on third-party suppliers and manufacturers to produce and deliver clinical devices and supplies as well as for
the servicing of these devices for our INOpulse product candidates, and may also do so for other product candidates.
Any failure by a third-party supplier or manufacturer to produce or deliver supplies for us or to provide necessary
servicing may delay or impair our ability to complete our clinical trials or commercialize our product candidates.
We currently rely, and expect to continue to rely, on third parties for supply of the device, cannula and certain
other supplies for our INOpulse product candidates. These suppliers are, and any future third-party suppliers with whom
we enter into agreements may be, our sole suppliers of these devices or any of our other current or future devices used in
the INOpulse program. These suppliers are commonly referred to as single-source suppliers. If our suppliers fail to deliver
materials and provide services needed for the production of the INOpulse device and related supplies or for our other
product candidates in a timely and sufficient manner, if they fail to comply with applicable regulations, or if we do not
qualify alternate suppliers, clinical development or regulatory approval of our product candidates or commercialization of
our products could be delayed, increasing our costs to complete clinical development and to obtain regulatory approval,
which could deprive us of potential additional product revenue.
If one or more of our product candidates are approved by the FDA or comparable regulatory authorities in other
countries for commercial sale, we will need to manufacture such product candidate in larger quantities. We do not currently
have any arrangements with Ikaria or any other third-party manufacturer to provide commercial quantities of our product
candidates. If we are unable to arrange for such a third-party manufacturing source, or fail to do so on commercially
reasonable terms, we may not be able to successfully produce and market our product candidates or may be delayed in
doing so.
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Our product candidates currently in development are exclusively licensed from third parties, and we may enter into
additional agreements to in-license technology from third parties. If current or future licensors terminate the applicable
license, or fail to maintain or enforce the underlying patents, our competitive position and market share will be harmed.
We have exclusively licensed INOpulse, for certain indications and settings, and subject to certain retained rights
of the licensor, from Ikaria. We may also enter into additional license agreements as part of the development of our
business in the future. Such licensors, if any, may be responsible for prosecution of certain patent applications and
maintenance of certain patents. Such licensors may not successfully prosecute such patent applications or maintain such
patents, which we have licensed and on which our business depends. Our licensors may fail to pursue litigation against
third-party infringers, may fail to prove infringement, or may fail to defend against counterclaims of patent invalidity or
unenforceability. If these in-licenses are terminated, or if the underlying patents fail to provide the intended market
exclusivity, competitors would have the freedom to seek regulatory approval of, and to market, products identical to ours.
This could have a material adverse effect on our competitive business position and our business prospects.
Third parties may seek to hold us responsible for liabilities of Ikaria that we did not assume in our agreements.
In connection with our separation from Ikaria, Ikaria has generally agreed to retain all liabilities that did not
historically arise from our business. Third parties may seek to hold us responsible for Ikaria’s retained liabilities. Under our
agreements with Ikaria, Ikaria has agreed to indemnify us for claims and losses relating to these retained liabilities.
However, if those liabilities are significant and we are ultimately liable for them, we cannot assure our stockholders that we
will be able to recover the full amount of our losses from Ikaria.
Any disputes that arise between us and Ikaria with respect to our past and ongoing relationships could harm our
business operations.
Disputes may arise between Ikaria and us in a number of areas relating to our past and ongoing relationships,
including:
● intellectual property, technology and business matters, including failure to make required technology
transfers and failure to comply with non-compete provisions applicable to Ikaria and us;
● labor, tax, employee benefit, indemnification and other matters arising from our separation from Ikaria;
● distribution and supply obligations;
● employee retention and recruiting;
● business combinations involving us;
● the nature, quality and pricing of transitional services Ikaria has agreed to provide us; and
● business opportunities that may be attractive to both Ikaria and us.
We may not be able to resolve any potential conflicts, and even if we do, the resolution may be less favorable than
if we were dealing with an unaffiliated party.
We may seek to enter into collaborations with third parties for the development and commercialization of our product
candidates. If we fail to enter into such collaborations, or such collaborations are not successful, we may not be able to
capitalize on the market potential of our product candidates.
We may seek third-party collaborators for development and commercialization of our product candidates. Our
likely collaborators for any marketing, distribution, development, licensing or broader collaboration arrangements
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include large and mid-size pharmaceutical and medical device companies, regional and national biotechnology companies
and pharmaceutical companies. We are not currently party to any such arrangement. However, if we do enter into any such
arrangements with any third parties in the future, we will likely have limited control over the amount and timing of
resources that our collaborators dedicate to the development or commercialization of our product candidates. Our ability to
generate revenues from these arrangements will depend on our collaborators’ abilities to successfully perform the functions
assigned to them in these arrangements.
Collaborations involving our product candidates would pose certain risks to us, including:
● collaborators have significant discretion in determining the efforts and resources that they will apply to these
collaborations;
● collaborators may not pursue development and commercialization of our product candidates or may elect not
to continue or renew development or commercialization programs based on clinical trial results, changes in
the collaborators’ strategic focus or available funding, or external factors such as an acquisition that diverts
resources or creates competing priorities;
● collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical
trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a
product candidate for clinical testing;
● collaborators could independently develop, or develop with third parties, products that compete directly or
indirectly with our products or product candidates if the collaborators believe that competitive products are
more likely to be successfully developed or can be commercialized under terms that are more economically
attractive than ours;
● collaborators with marketing and distribution rights to one or more of our products may not commit
sufficient resources to the marketing and distribution of such product or products;
● collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary
information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or
proprietary information or expose us to potential litigation;
● collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation
and potential liability;
● disputes may arise between the collaborators and us that result in the delay or termination of the research,
development or commercialization of our products or product candidates or that result in costly litigation or
arbitration that diverts management attention and resources; and
● collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue
further development or commercialization of the applicable product candidates.
Collaboration agreements may not lead to the development or commercialization of product candidates in the
most efficient manner or at all. If a collaborator of ours were to be involved in a business combination, the continued
pursuit and emphasis on our product development or commercialization program could be delayed, diminished or
terminated.
If we are not able to establish collaborations, we may have to alter our development and commercialization plans.
Our drug and device development programs and the potential commercialization of our product candidates will
require substantial additional cash to fund expenses. For some of our product candidates, we may decide to collaborate
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with biotechnology and pharmaceutical companies for the development and potential commercialization of those product
candidates.
We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for
a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the
terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors.
Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar
regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and
complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the
existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such
ownership without regard to the merits of the challenge and industry and market conditions generally. The collaborator
may also consider alternative product candidates or technologies for similar indications that may be available to collaborate
on and whether such a collaboration could be more attractive than the one with us for our product candidate. The terms of
our current or future license agreements may restrict our ability to enter into agreements on certain terms with future
collaborators. For example, our license agreement with Ikaria prohibits us from granting a sublicense under any of the
intellectual property licensed to us under such license agreement to any of our affiliates or any third party, in each case,
which directly or indirectly competes with the Ikaria nitric oxide business, and any future license agreements may contain
similar restrictions. Collaborations are complex and time-consuming to negotiate and document. In addition, there have
been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a
reduced number of potential future collaborators.
We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to
do so, we may have to curtail the development of a product candidate, reduce or delay its development program or one or
more of our other development programs, delay its potential commercialization or reduce the scope of any sales or
marketing activities, or increase our expenditures and undertake development or commercialization activities at our own
expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may
need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient
funds, we may not be able to further develop our product candidates or bring them to market and generate product revenue.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain patent protection for our technology and products or if the scope of the patent
protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products
similar or identical to ours, and our ability to successfully commercialize our technology and products may be impaired.
Our success depends in large part on our ability to obtain and maintain patent protection in the United States and
other countries with respect to our proprietary technology and products. We seek to protect our proprietary position by
filing patent applications in the United States and abroad related to our technologies and product candidates. The patents
we have licensed from Ikaria relating to INOpulse’s feature of providing delivery of nitric oxide to ensure a consistent dose
over time expire as late as 2027 in the United States and as late as 2026 in certain other countries, as well as a patent with
respect to the triple-lumen cannula that allows for safer and more accurate dosing of pulsed inhaled nitric oxide, which
expires in 2033.
The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all
necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to
identify patentable aspects of our research and development output before it is too late to obtain patent protection.
Moreover, pursuant to our license agreement with Ikaria, we do not have the right to control the preparation, filing and
prosecution of patent applications, or to maintain the patents, covering the INOpulse technology that we license from
Ikaria, except in the event that Ikaria declines to prosecute or maintain certain licensed patents that are core to our business,
elects to allow any of such patents to lapse or elects to abandon any such patents, in which case we would have step-in
rights to assume control of the prosecution and/or maintenance of such patents, subject to Ikaria’s right to prohibit us from
taking such actions if it reasonably determines that such actions could materially impair its business,
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operations or intellectual property rights. Similarly, under the terms of any future agreements that we may enter into with
other third parties, we may not have the right to control the preparation, filing and prosecution of patent applications, or to
maintain the patents, covering the technology that is licensed to us under such agreements. Therefore, these patents and
applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves
complex legal and factual questions and has in recent years been the subject of much litigation. In addition, the laws of
non-U.S. countries may not protect our rights to the same extent as the laws of the United States. For example, European
patent law restricts the patentability of methods of treatment of the human body more than U.S. law does. Publications of
discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States
and other jurisdictions are typically not published until 18 months after filing, and in some cases not at all. Therefore, we
cannot know with certainty whether we were the first to make the inventions claimed in our owned or licensed patents or
pending patent applications, or that we or our licensors were the first to file for patent protection of such inventions. As a
result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our
pending and future patent applications may not issue as patents that protect our technology or products, in whole or in part,
or which effectively prevent others from commercializing competitive technologies and products. Changes in either the
patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our
patents or narrow the scope of our patent protection.
Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our
patent applications and the enforcement or defense of our owned or licensed issued patents. On September 16, 2011, the
Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number
of significant changes to U.S. patent law. The Leahy-Smith Act includes provisions that affect the way patent applications
are prosecuted and affect patent litigation. The USPTO recently developed new regulations and procedures to govern
administration of the Leahy-Smith Act. Many of the substantive changes to patent law associated with the Leahy-Smith
Act, and in particular, the first to file provisions, became effective on March 16, 2013. Accordingly, it is not clear what, if
any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its
implementation could increase the uncertainties and costs surrounding the prosecution of our owned or licensed patent
applications and the enforcement or defense of our owned or licensed issued patents, all of which could have a material
adverse effect on our business and financial condition.
Moreover, we may be subject to third-party preissuance submissions of prior art to the USPTO, or become
involved in opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings
challenging our owned or licensed patent rights or the patent rights of others. An adverse determination in any such
submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to
commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to
manufacture or commercialize products without infringing third-party patent rights. In addition, if the breadth or strength
of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating
with us to license, develop or commercialize current or future product candidates.
Even if our owned and licensed patent applications issue as patents, they may not issue in a form that will provide
us with any meaningful protection, prevent competitors from competing with us, or otherwise provide us with any
competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by developing similar or
alternative technologies or products in a non-infringing manner. We may not receive patent term extension under the
Hatch-Waxman Act that we expect or our rights during the extension period may be more limited than the full scope of the
patent, making it easier for our competitors to develop and market non-infringing technologies or products.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned
and licensed patents may be challenged in courts or patent offices in the United States and abroad. Such challenges may
result in loss of exclusivity or freedom to operate, or in patent claims being narrowed, invalidated or held unenforceable, in
whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology
and products, or limit the duration of the patent protection of our technology and products. Given the amount of time
required for the development, testing and regulatory review of new product candidates, patents protecting such candidates
might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed
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patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or
identical to ours.
We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be
expensive, time consuming and unsuccessful.
Competitors may infringe our owned or licensed patents or other intellectual property. To counter infringement or
unauthorized use, we may be required to file or participate in infringement claims, which can be expensive and time
consuming. Any claims we or our licensors assert against perceived infringers could provoke these parties to assert
counterclaims against us alleging that we infringe their patents. In addition, in a patent infringement proceeding, a court
may decide that a patent of ours or our licensor is invalid or unenforceable, in whole or in part, construe the patent’s claims
narrowly or 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 proceeding could put one or more of our owned or licensed
patents at risk of being invalidated or interpreted narrowly.
Under the terms of our license agreement with Ikaria, in the event a third party is suspected of infringing any
patent rights licensed to us by Ikaria, Ikaria has the initial right, but not the obligation, to initiate a legal action against such
third party. In the event that Ikaria declines to take any action with respect to an alleged infringement of certain licensed
patents that are core to our business, we have the right, in certain circumstances, to initiate a legal action against such third
party, provided that, if Ikaria reasonably determines that our pursuit of any action with respect to infringement of any of
such core patents could materially impair Ikaria’s business operations or intellectual property rights, Ikaria may require us
to not undertake or to cease any such action. Our inability to initiate a legal action against a third party suspected of
infringing intellectual property rights important to our business may have a material adverse effect on our competitive
business position and our business prospects.
If we fail to comply with our obligations under license agreements, we could lose rights that are important to our
business.
Under our license agreement with Ikaria, we have granted Ikaria a sole and exclusive worldwide license to any
intellectual property rights that we control for use in Ikaria’s nitric oxide business, and we are required to ensure that all of
our products, if any, are used solely for the chronic treatment of Bellerophon indications and to enter into written
agreements with any customers that contain restrictions on the use of our products and termination rights in the event such
restrictions are violated. We have also agreed to pay 100% of the reasonable and documented costs incurred by Ikaria for
the prosecution and maintenance of certain licensed patents that are core to our business and 10% of such costs incurred by
Ikaria for all other licensed patents. If we fail to comply with our obligations under current or future license agreements,
our counterparties may have the right to terminate these agreements, in which event we might not be able to develop,
manufacture or market any product that is covered by the agreement or face other penalties under the agreement. Such an
occurrence could materially adversely affect the value of the product candidate being developed under any such agreement.
Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the
outcome of which would be uncertain and could have a material adverse effect on the success of our business.
Our commercial success depends upon our ability to develop, manufacture, market and sell our product candidates
and use our proprietary technologies without infringing the proprietary rights of third parties. There is considerable
intellectual property litigation in the pharmaceutical, biotechnology and medical device industries. We may become party
to, or be threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to
our products and technology, including interference or derivation proceedings before the USPTO. Third parties may assert
infringement claims against us based on existing patents or patents that may be granted in the future.
If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from
such third party to continue developing and marketing our products and technology. However, we may not be able to obtain
any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-
exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be
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forced, including by court order, to cease commercializing the infringing technology or product. In addition, we could be
found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed
a patent. A finding of infringement could prevent us from commercializing our product candidates or force us to cease
some of our business operations, which could materially harm our business. Claims that we have misappropriated the
confidential information or trade secrets of third parties could have a similar negative impact on our business.
We may be subject to claims by third parties asserting that we or our employees have misappropriated their intellectual
property, or claiming ownership of what we regard as our own intellectual property.
Many of our employees were previously employed at other pharmaceutical, biotechnology or medical device
companies, including our competitors or potential competitors. Although we try to ensure that our employees do not use
the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these
employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such
employee’s former employer. Litigation may be necessary to defend against these claims.
In addition, while it is our policy to require our employees and contractors who may be involved in the
development of intellectual property to execute agreements assigning such intellectual property to us, we may be
unsuccessful in timely obtaining such an agreement with each party who in fact develops intellectual property that we
regard as our own. Even if timely obtained, such agreements may be breached, and we may be forced to bring claims
against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our
intellectual property.
If we fail in prosecuting or defending any such claims, we may lose valuable intellectual property rights or
personnel, in addition to paying monetary damages. Even if we are successful in prosecuting or defending against such
claims, litigation could result in substantial costs.
Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their
normal responsibilities.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may
cause us to incur significant expenses, and could distract our technical and management personnel from their normal
responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim
proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a
substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our
operating losses and reduce the resources available for development activities or any future sales, marketing or distribution
activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately.
Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can
because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation
or other proceedings could compromise our ability to compete in the marketplace.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be
harmed.
In addition to seeking patents for some of our technology and product candidates, we also rely on trade secrets,
including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We
seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who
have access to them, such as our employees, outside scientific collaborators, contract manufacturers, consultants, advisors
and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our
employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our
proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches.
Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-
consuming, and the outcome is unpredictable. Even if we are successful in prosecuting such claims, any remedy awarded
may be insufficient to fully compensate us for the improper disclosure or misappropriation. In addition, some
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courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets
were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those
to whom they communicate it, from using that technology or information to compete with us. If any of our trade secrets
were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.
We are increasingly dependent on information technology and our systems and infrastructure face certain risks,
including cybersecurity and data storage risks.
Significant disruptions to our information technology systems or breaches of information security could adversely
affect our business. Although we maintain cyber liability insurance of $2.0 million in the aggregate, this insurance may not
fully cover potential liabilities that we may incur. In the ordinary course of business, we collect, store and transmit
confidential information, and it is critical that we do so in a secure manner in order to maintain the confidentiality and
integrity of such confidential information. Our information technology systems are potentially vulnerable to service
interruptions and security breaches from inadvertent or intentional actions by our employees, partners, vendors, or from
attacks by malicious third parties. Maintaining the secrecy of this confidential, proprietary, and/or trade secret information
is important to our competitive business position. While we have taken steps to protect such information and invested in
information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches in
our systems or the unauthorized or inadvertent wrongful access or disclosure of confidential information that could
adversely affect our business operations or result in the loss, dissemination, or misuse of critical or sensitive information. A
breach of our security measures or the accidental loss, inadvertent disclosure, unapproved dissemination or
misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether as a result
of theft, hacking, or other forms of deception, or for any other cause, could enable others to produce competing products,
use our proprietary technology and/or adversely affect our business position. Further, any such interruption, security
breach, loss or disclosure of confidential information could result in financial, legal, business, and reputational harm to us
and could have a material effect on our business, financial position, results of operations and/or cash flow.
Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual
property rights have limitations and may not adequately protect our business, or permit us to maintain our competitive
advantage. The following examples are illustrative:
● Others may be able to develop and commercialize treatments that are similar to our product candidates but
that are not covered by the claims of the patents that we own or have exclusively licensed.
● We or our licensors might not have been the first to make the inventions covered by the issued patent or
pending patent application that we own or have exclusively licensed.
● We or our licensors might not have been the first to file patent applications covering certain of our
inventions.
● Others may independently develop similar or alternative technologies or duplicate any of our technologies
without infringing our intellectual property rights.
● It is possible that our pending patent applications will not lead to issued patents.
● Issued patents that we own or have exclusively licensed may not provide us with any competitive
advantages, or may be held invalid or unenforceable, as a result of legal challenges by our competitors.
● Our competitors might conduct research and development activities in countries where we do not have patent
rights and then use the information learned from such activities to develop competitive products for sale in
our major commercial markets.
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● We may not develop additional proprietary technologies that are patentable.
● The patents of others may have an adverse effect on our business.
● Another party may be granted orphan drug exclusivity for an indication that we are seeking before us or may
be granted orphan drug exclusivity for one of our products for another indication.
Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters
Even if we complete the necessary clinical trials, the marketing approval process is expensive, time consuming and
uncertain and may prevent us from obtaining approvals for the commercialization of some or all of our product
candidates. If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be
able to commercialize our product candidates, and our ability to generate revenue will be materially impaired.
Our product candidates and the activities associated with their development and commercialization, including
their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale
and distribution, are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States
and by the EMA and similar regulatory authorities outside the United States. Failure to obtain marketing approval for a
product candidate will prevent us from commercializing the product candidate. Our product candidates are in the early
stages of development and are subject to the risks of failure inherent in drug and device development. We have not received
approval to market any of our product candidates from regulatory authorities in any jurisdiction. We have only limited
experience in conducting and managing the clinical trials, and in filing and supporting the applications necessary to gain
marketing approvals and may rely on third-party CROs to assist us in this process. Securing marketing approval requires
the submission of extensive pre-clinical and clinical data and supporting information to regulatory authorities for each
therapeutic indication to establish the product candidate’s safety and efficacy. Securing marketing approval also requires
the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by,
the regulatory authorities. Our product candidates may not be effective, may be only moderately effective or may prove to
have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing
approval or prevent or limit commercial use.
The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take
many years if additional clinical trials are required, if approval is obtained at all, and can vary substantially based upon a
variety of factors, including the type, complexity and novelty of the product candidates involved. Changes in marketing
approval policies during the development period, changes in or the enactment of additional statutes or regulations, or
changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an
application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any
application or may decide that our data are insufficient for approval and require additional pre-clinical, clinical or other
studies. In addition, varying interpretations of the data obtained from pre-clinical and clinical testing could delay, limit or
prevent marketing approval of a product candidate. Any marketing approval we ultimately obtain may be limited or subject
to restrictions or post-approval commitments that render the approved product not commercially viable. If we experience
delays in obtaining approval or if we fail to obtain approval of our product candidates, the commercial prospects for our
product candidates may be harmed and our ability to generate revenues will be materially impaired.
Our failure to obtain marketing approval in foreign jurisdictions would prevent our product candidates from being
marketed abroad, and any approval we are granted for our product candidates in the United States would not assure
approval of product candidates in foreign jurisdictions.
In order to market and sell our products in the EU and many other jurisdictions, we must obtain separate
marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies
among countries and can involve additional testing. The time required to obtain approval may differ substantially from that
required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the
risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that
the product be approved for reimbursement before the product can be approved for sale in that country. We may not obtain
approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA
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does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory
authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or
by the FDA. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize
our products in any market.
Even if we obtain marketing approval for our product candidates, the terms of approvals and ongoing regulation of our
products may limit how we manufacture and market our products and compliance with such requirements may involve
substantial resources, which could materially impair our ability to generate revenue.
Even if marketing approval of a product candidate is granted, an approved product and its manufacturer and
marketer are subject to ongoing review and extensive regulation, including the requirement to implement a risk evaluation
and mitigation strategy or to conduct costly post-marketing studies or clinical trials and surveillance to monitor the safety
or efficacy of the product. We must also comply with requirements concerning advertising and promotion for any of our
product candidates for which we obtain marketing approval. Promotional communications with respect to prescription
drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the
product’s approved labeling. Thus, we will not be able to promote any products we develop for indications or uses for
which they are not approved. In addition, manufacturers of approved products and those manufacturers’ facilities are
required to ensure that quality control and manufacturing procedures conform to cGMP, which include requirements
relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation
and reporting requirements. We and our contract manufacturers could be subject to periodic unannounced inspections by
the FDA and other regulatory authorities to monitor and ensure compliance with cGMP.
Accordingly, assuming we receive marketing approval for one or more of our product candidates, we and our
contract manufacturers will continue to expend time, money and effort in all areas of regulatory compliance, including
manufacturing, production, product surveillance and quality control. If we are not able to comply with post-approval
regulatory requirements, we could have the marketing approvals for our products withdrawn by regulatory authorities and
our ability to market any future products could be limited, which could adversely affect our ability to achieve or sustain
profitability. Thus, the cost of compliance with post-approval regulations may have a negative effect on our operating
results and financial condition.
Any product candidate for which we obtain marketing approval will be subject to strict enforcement of post-marketing
requirements and we could be subject to substantial penalties, including withdrawal of our product from the market, if
we fail to comply with all regulatory requirements or if we experience unanticipated problems with our products, when
and if any of them are approved.
Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-
approval clinical data, labeling, advertising and promotional activities for such product, will be subject to continual
requirements of and review by the FDA and other regulatory authorities. These requirements include, but are not limited to,
restrictions governing promotion of an approved product, submissions of safety and other post-marketing information and
reports, registration and listing requirements, cGMP requirements relating to manufacturing, quality control, quality
assurance and corresponding maintenance of records and documents, and requirements regarding the distribution of
samples to physicians and recordkeeping.
The FDA and other federal and state agencies, including the Department of Justice, closely regulate compliance
with all requirements governing prescription drug and device products, including requirements pertaining to marketing and
promotion of drugs and devices in accordance with the provisions of the approved labeling and manufacturing of products
in accordance with cGMP requirements. Violations of such requirements may lead to investigations alleging violations of
the Food, Drug, and Cosmetic Act and other statutes, including the False Claims Act and other federal and state health care
fraud and abuse laws as well as state consumer protection laws. Our failure to comply with all regulatory requirements, and
later discovery of previously unknown adverse events or other problems with our products, manufacturers or
manufacturing processes, may yield various results, including:
● litigation involving patients taking our products;
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● restrictions on such products, manufacturers or manufacturing processes;
● restrictions on the labeling or marketing of a product;
● restrictions on product distribution or use;
● requirements to conduct post-marketing studies or clinical trials;
● untitled or warning letters;
● withdrawal of the products from the market;
● refusal to approve pending applications or supplements to approved applications that we submit;
● recall of products;
● fines, restitution or disgorgement of profits or revenues;
● suspension or withdrawal of marketing approvals;
● damage to relationships with any potential collaborators;
● unfavorable press coverage and damage to our reputation;
● refusal to permit the import or export of our products;
● product seizure; or
● injunctions or the imposition of civil or criminal penalties.
Non-compliance by us or any future collaborator with regulatory requirements regarding safety monitoring or
pharmacovigilance, and with requirements related to the development of products for the pediatric population, can also
result in significant financial penalties. Similarly, failure to comply with regulatory requirements regarding the protection
of personal information could also lead to significant penalties and sanctions.
We will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations after we
obtain FDA approval and begin to commercialize our products, which could expose us to criminal sanctions, civil
penalties, contractual damages, reputational harm and diminished profits and future earnings.
After we obtain marketing approval, we will be 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 market,
sell and distribute any products for which we obtain marketing approval. Restrictions under applicable federal and state
healthcare laws and regulations, include the following:
● the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully
soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or
reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of,
any good or service, for which payment may be made under a federal healthcare program such as Medicare
and Medicaid;
● the federal False Claims Act imposes criminal and civil penalties, including civil whistleblower or qui tam
actions, against individuals or entities for, among other things, knowingly presenting, or causing to be
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presented false or fraudulent claims for payment by a federal government program, or making a false
statement or record material to payment of a false claim or avoiding, decreasing or concealing an obligation
to pay money to the federal government;
● the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the
Health Information Technology for Economic and Clinical Health Act, imposes criminal and civil liability
for executing a scheme to defraud any healthcare benefit program and also imposes obligations, including
mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of
individually identifiable health information;
● the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a
material fact or making any materially false statement in connection with the delivery of or payment for
healthcare benefits, items or services;
● the federal transparency requirements under the Physician Payments Sunshine Act require manufacturers of
FDA-approved drugs, devices, biologics and medical supplies covered by Medicare or Medicaid to report, on
an annual basis, to the Department of Health and Human Services information related to payments and other
transfers of value to physicians, teaching hospitals and certain advanced non-physician health care
practitioners and physician ownership and investment interests; and
● analogous state laws and regulations such as state anti-kickback and false claims laws and analogous non-
U.S. fraud and abuse laws and regulations, may apply to sales or marketing arrangements and claims
involving healthcare items or services reimbursed by non-governmental third-party payors, including private
insurers, and some state laws require pharmaceutical companies to comply with the pharmaceutical
industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal
government in addition to requiring drug manufacturers to report information related to payments to
physicians and other health care providers or marketing expenditures. Some state laws require
pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines
and the relevant compliance guidance promulgated by the federal government and may require drug
manufacturers to report information related to payments and other transfers of value to physicians and other
healthcare providers or marketing expenditures. State and non-U.S. laws also govern the privacy and security
of health information in some circumstances, many of which differ from each other in significant ways and
often are not preempted by HIPAA, thus complicating compliance efforts.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws
and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business
practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or
other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other
governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative
penalties, damages, fines, imprisonment, exclusion of products from government funded healthcare programs, such as
Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other healthcare
providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may
be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare
programs.
Laws and regulations governing any international operations we may have in the future may preclude us from
developing, manufacturing and selling certain product candidates and products outside of the United States and require
us to develop and implement costly compliance programs.
If we expand our operations outside of the United States, we must dedicate additional resources to comply with
numerous laws and regulations in each jurisdiction in which we plan to operate. The Foreign Corrupt Practices Act, or the
FCPA, prohibits any U.S. individual or business from paying, offering, authorizing payment or offering anything of value,
directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision
of such third party in order to assist the individual or business in obtaining or retaining business. The FCPA also
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obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring
the company to maintain books and records that accurately and fairly reflect all transactions of the company, including
international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international
operations.
Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized
problem. In addition, the FCPA presents particular challenges in the medical device industry, because, in many countries,
hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials.
Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments
to government officials and have led to FCPA enforcement actions.
Various laws, regulations and executive orders also restrict the use and dissemination outside of the United States,
or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain
products and technical data relating to those products. If we expand our presence outside of the United States, it will
require us to dedicate additional resources to comply with these laws, and these laws may preclude us from developing,
manufacturing or selling certain product candidates and products outside of the United States, which could limit our growth
potential and increase our development costs.
The failure to comply with laws governing international business practices may result in substantial civil and
criminal penalties and suspension or debarment from government contracting. The SEC also may suspend or bar issuers
from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions.
If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or
penalties or incur costs that could harm our business.
Currently, we do not operate any research and development or production facilities, including laboratory,
development or manufacturing facilities. However, if we decided to operate our own research and development and
production facilities, we would be subject to numerous environmental, health and safety laws and regulations, including
those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and
wastes. Such operations may involve the use of hazardous and flammable materials, including chemicals and biological
materials. Our operations may also produce hazardous waste products. Even if we contract with third parties for the
disposal of these materials and wastes, we would not be able to eliminate the risk of contamination or injury from these
materials. In the event of contamination or injury resulting from our use or disposal of hazardous materials, we could be
held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs
associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.
Although we would increase our level of workers’ compensation insurance to cover us for costs and expenses we
may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide
adequate coverage against potential liabilities. We do not expect to maintain insurance for environmental liability or toxic
tort claims that may be asserted against us in connection with our possible future storage or disposal of biological,
hazardous or radioactive materials.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and
safety laws and regulations. These current or future laws and regulations may impair our research, development or
production efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or
other sanctions.
Changes in law or policy could have a negative impact on the approval of our drug candidates.
We also cannot predict the likelihood, nature or extent of government regulation that may arise from future
legislation or administrative or executive action, either in the United States or abroad. In the United States and in some
other jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the
healthcare system that could prevent or delay marketing approval of our product candidates or any potential future product
candidates of ours, restrict or regulate post-approval activities, or affect our ability to profitably sell any product
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candidates for which we obtain marketing approval. Increased scrutiny by the U.S. Congress of the FDA’s approval process
may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-
marketing testing and other requirements. Congress also must reauthorize the FDA’s user fee programs every five years and
often makes changes to those programs in addition to policy or procedural changes that may be negotiated between the
FDA and industry stakeholders as part of this periodic reauthorization process. The negotiation process for the next cycle
of prescription drug and medical device user fee programs is beginning in 2020 as those programs must be reauthorized by
Congress in mid-2022.
Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting
changes in health care systems with the stated goals of containing health care costs, improving quality and/or expanding
access. In the United States, the pharmaceutical industry has been a focus of these efforts and has been significantly
affected by major legislative initiatives. In March 2010, Congress passed the ACA, which substantially changed the way
health care is financed by both the government and private insurers, and significantly impacts the United States
pharmaceutical industry. As another example, the 2021 Consolidated Appropriations Act signed into law on December 27,
2020 incorporated extensive health care provisions and amendments to existing laws, including a requirement that all
manufacturers of drug products covered under Medicare Part B report the product’s average sales price, or ASP, to DHHS
beginning on January 1, 2022, subject to enforcement via civil money penalties.
There remain judicial and Congressional challenges to certain aspects of the ACA, and as a result certain sections
of the ACA have not been fully implemented or effectively repealed. In particular, in December of 2018, a Texas U.S.
District Court Judge ruled that the ACA is unconstitutional in its entirety because the individual mandate was repealed by
Congress as part of the Tax Cuts and Jobs Act, effective January 1, 2019. In December 2019, the Fifth Circuit Court of
Appeals upheld the district court’s ruling that the individual mandate in the ACA was unconstitutional but remanded the
case to the district court to determine whether other reforms enacted as part of the ACA but not specifically related to the
individual mandate or health insurance could be severed from the rest of the ACA so as not to have the law declared
invalid in its entirety. On March 2, 2020, the United States Supreme Court granted the petitions for writs of certiorari to
review this case and allocated one hour for oral arguments, which occurred on November 10, 2020. A decision from the
Supreme Court is expected to be issued in spring 2021. It is unclear how this litigation and other efforts to repeal and
replace the ACA will affect the implementation of that law, the pharmaceutical industry more generally, and our business.
Additionally, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated
“Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021,
also eliminates the health insurer tax. Further, the Bipartisan Budget Act of 2018, among other things, amended the ACA,
effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut
hole”. In addition, CMS published a final rule that would give states greater flexibility, effective January 1, 2020, 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 ACA for plans sold through such marketplaces. We continue to evaluate the potential
impact of the ACA and its possible repeal or replacement on our business.
The uncertainty around the future of the ACA, and in particular the impact to reimbursement levels, may lead to
uncertainty or delay in the purchasing decisions of our customers, which may in turn negatively impact our product sales.
If there are not adequate reimbursement levels, our business and results of operations could be adversely affected.
In addition, other legislative changes have been proposed and adopted since the ACA was enacted. These changes
include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the Budget Control
Act of 2011, which began in 2013 and will remain in effect through 2030 unless additional Congressional action is taken.
However, the Medicare sequester reductions under the Budget Control Act of 2011 was suspended from May 1, 2020
through December 31, 2020 due to the COVID-19 pandemic, pursuant to provisions of the Coronavirus Aid, Relief, and
Economic Security Act, or the CARES Act, which also extended the sequester by one year, through 2030, in order to offset
the added expense of the 2020 cancellation. The 2021 Consolidated Appropriations Act was subsequently signed into law
on December 27, 2020 and extends the CARES Act suspension period to March 31, 2021.
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In addition, the Drug Supply Chain Security Act enacted in 2013 imposed obligations on manufacturers of
pharmaceutical products related to product tracking and tracing. More recently, on December 20, 2019, President Trump
signed the Further Consolidated Appropriations Act for 2020 into law (P.L. 116-94) that includes a piece of bipartisan
legislation called the CREATES Act. The CREATES Act aims to address the concern articulated by both the FDA and
others in the industry that some brand manufacturers have improperly restricted the distribution of their products, including
by invoking the existence of a REMS for certain products, to deny generic and biosimilar product developers access to
samples of brand products. The CREATES Act establishes a private cause of action that permits a generic or biosimilar
product developer to sue the brand manufacturer to compel it to furnish the necessary samples on “commercially
reasonable, market-based terms.” Whether and how generic and biosimilar product developments will use this new
pathway, as well as the likely outcome of any legal challenges to provisions of the CREATES Act, remain highly uncertain
and its potential effects on our future commercial products are unknown. Other legislative and regulatory proposals have
been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products.
We are unsure whether additional legislative changes will be enacted, or whether the current regulations, guidance or
interpretations will be changed, or whether such changes will have any impact on our business.
Additionally, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing
practices considering the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent
congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more
transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform
government program reimbursement methodologies for products. For example, state legislatures are increasingly passing
legislation and implementing regulations designed to control pharmaceutical 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. In December
2020, the U.S. Supreme Court held unanimously that federal law does not preempt the states’ ability to regulate
pharmaceutical benefit managers (PBMs) and other members of the health care and pharmaceutical supply chain, an
important decision that may lead to further and more aggressive efforts by states in this area.
At the federal level, DHHS has solicited feedback on various measures intended to lower drug prices and reduce
the out of pocket costs of drugs and has implemented others under its existing authority. For 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 1,
2020. This final rule codified CMS’s policy change that was effective January 1, 2019. In addition, in September 2020, the
FDA finalized a rulemaking to establish a system whereby state governmental entities could lawfully import and distribute
prescription drugs sourced from Canada. Those new regulations became effective on November 30, 2020, although the
impact of such future programs is uncertain in part because lawsuits have been filed challenging the government’s
authority to promulgate them. The final regulations may also be vulnerable to being overturned by a joint resolution of
disapproval from Congress under the procedures set forth in the Congressional Review Act, which could be applied to
regulatory actions taken by the Trump administration on or after August 21, 2020 (i.e., in the last 60 days of legislative
session of the 116th Congress). Congress and the executive branch have each indicated that it will continue to seek new
legislative and/or administrative measures to control drug costs. For example, in July 2020, President Trump announced
four executive orders related to prescription drug pricing that attempted to implement several of his Administration’s
proposals, including a policy that would tie Medicare Part B drug prices to international drug prices; one that directed
DHHS to finalize the Canadian drug importation proposed rule previously issued by DHHS (which has since been
finalized, as noted above) and made other changes allowing for personal importation of drugs from Canada; one that
directed DHHS to finalize the rulemaking process on modifying the anti-kickback law safe harbors for plans, pharmacies,
and pharmaceutical benefit managers after DHHS confirms that the action is not projected to increase federal spending,
Medicare beneficiary premiums, or patients’ total out-of-pocket costs (which DHHS finalized in November 2020, also
making those rules subject to potentially being overturned under the Congressional Review Act); and one that reduces
costs of insulin and epinephrine auto-injectors to patients of federally qualified health centers. President Trump also issued
another executive order on September 13, 2020 that directed DHHS to undertake rulemaking in order to test an
international reference pricing model for prescription drug products, which was also implemented by DHHS and then
challenged in federal court by industry groups in December 2020. The probability of success of these newly announced
policies and their impact on the U.S. prescription drug marketplace is unknown. There are likely to be continued political
and legal challenges associated with implementing
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these reforms as they are currently envisioned, and the January 20, 2021 transition to a new Democrat-led presidential
administration created further uncertainty. Following his inauguration, President Biden took immediate steps to order a
regulatory freeze on all pending substantive executive actions in order to permit incoming department and agency heads to
review whether questions of fact, policy, and law may be implicated and to determine how to proceed. The implementation
of cost containment measures or other health care reforms may prevent us from being able to generate revenue, attain
profitability, or commercialize our products. Current and future health care legislation could have a significant impact on
our business. There is uncertainty with respect to the impact these changes, if any, may have, and any changes likely will
take time to unfold. In addition, it is possible that additional governmental action is taken to address the COVID-19
pandemic. For example, on April 18, 2020, CMS announced that qualified health plan issuers under the ACA may suspend
activities related to the collection and reporting of quality data that would have otherwise been reported between May and
June 2020 given the challenges health care providers are facing responding to the COVID-19 virus. Any additional federal
or state health care reform measures could limit the amounts that third-party payers will pay for health care products and
services, and, in turn, could significantly reduce the projected value of certain development projects and reduce our
profitability.
Inadequate funding for the FDA, the SEC and other government agencies could hinder their ability to hire and
retain key leadership and other personnel, prevent new products and services from being developed or commercialized
in a timely manner or otherwise prevent those agencies from performing normal business functions on which the
operation of our business may rely, which could negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including
government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and
statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In
addition, government funding of the SEC and other government agencies on which our operations may rely, including
enabling us to raise capital in order to fund research and development activities is subject to the political process, which is
inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or
approved by necessary government agencies, which would adversely affect our business. For example, over the last
several years, including in December 2018, the U.S. government has shut down several times and certain regulatory
agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop
critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely
review and process our regulatory submissions, which could have a material adverse effect on our business. Further, future
government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to
properly capitalize and continue our operations.
Risks Related to Employee Matters and Managing Growth
Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified
personnel.
We are dependent on the scientific, business development and clinical expertise of our management team.
Leadership transitions can be inherently difficult to manage and may cause some disruptions in our business.
Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel will also
be critical to our success. Any of our employees may terminate their employment with us at any time. The loss of the
services of our executive officers or other key employees could impede the achievement of our research, development and
commercialization objectives and seriously harm our ability to successfully implement our business strategy. We do not
maintain “key person” insurance for any of our executives or other employees. Furthermore, replacing executive officers
and key employees may be difficult and may take an extended period of time because of the limited number of individuals
in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of and
commercialize products. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or
motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical, biotechnology
and medical device companies for similar personnel. We also experience competition for
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the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants
and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and
commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have
commitments under consulting or advisory contracts with other entities that may limit their availability to us.
Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory
standards and requirements and insider trading.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include
intentional failures to comply with FDA regulations, to provide accurate information to the FDA, to comply with federal
and state healthcare fraud and abuse laws and regulations, to report financial information or data accurately, to disclose
unauthorized activities to us or to comply with our code of business conduct and ethics. In particular, sales, marketing and
business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud,
kickbacks, false claims, inappropriate promotion, self-dealing and other abusive practices. These laws and regulations may
restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive
programs and other business arrangements. Employee misconduct could also involve the improper use of information
obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. The
precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or
losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in
compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in
defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the
imposition of significant fines or other sanctions.
In addition, during the course of our operations, our directors, executives and employees may have access to
material, non-public information regarding our business, our results of operations or potential transactions we are
considering. We may not be able to prevent a director, executive or employee from violating our insider trading policies
and trading in our common stock on the basis of, or while having access to, material, non-public information. If a director,
executive or employee was to be investigated, or an action was to be brought against a director, executive or employee for
insider trading, it could have a negative impact on our reputation and our stock price. Such a claim, with or without merit,
could also result in substantial expenditures of time and money, and divert attention of our management team from other
tasks important to the success of our business.
Risks Related to Ownership of Our Common Stock
A significant portion of our total outstanding shares are subject to volume limitations as to sale, but have registration
rights that could allow them to be sold into the market without such restrictions, which could cause the market price of
our common stock to drop significantly, even if our business is performing well.
Sales of a substantial number of shares of our common stock in the public market could occur at any time, subject
to certain restrictions described below. These sales, or the perception in the market that holders of a large number of shares
intend to sell shares, could reduce the market price of our common stock. Certain holders of a significant number of shares
of our common stock have rights, subject to certain conditions, to require us to file registration statements covering their
shares or to include their shares in registration statements that we may file for ourselves or other stockholders. Many of
these shares could be freely sold without registration subject to the volume limitations applicable to affiliates under
Rule 144. As of March 8, 2021, we had outstanding options to purchase an aggregate of 712,718 shares of our common
stock, of which options to purchase approximately 450,368 were vested and outstanding and outstanding warrants to
purchase an aggregate of 2,028,626 shares of our common stock. These shares can be freely sold in the public market upon
issuance, subject to volume limitations applicable to affiliates.
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If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our
stock, the price or trading volume of our stock could decline.
The trading market for our common stock relies, in part, on the research and reports that industry or financial
analysts publish about us or our business. If no, or few, analysts commence coverage of us, the trading price of our stock
would likely decrease. Even if we do obtain analyst coverage, if one or more of the analysts covering our business do not
publish favorable reports or downgrade their evaluations of our stock, the price of our stock could decline. If one or more
analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock
price or trading volume to decline.
The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for
our stockholders.
Our stock price may be volatile. The stock market in general, and the market for pharmaceutical companies in
particular, has experienced extreme volatility that has often been unrelated to the operating performance of particular
companies. As a result of this volatility, investors may not be able to sell their shares of common stock at or above the price
they paid for their shares. The market price for our common stock may be influenced by many factors, including:
● actual or anticipated results from and any delays in our clinical trials, including our expected and ongoing
clinical trials of our INOpulse product candidates, as well as results of regulatory input on our clinical trial
programs and regulatory reviews relating to the approval of our product candidates;
● the results of our efforts to discover, develop, acquire or in-license additional product candidates or products;
● failure or discontinuation of any of our clinical development programs;
● the level of expenses related to any of our product candidates or clinical development programs;
● commencement or termination of any collaboration or licensing arrangement;
● disputes or other developments relating to proprietary rights, including patents, litigation matters and our
ability to obtain patent protection for our technologies;
● announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures and
capital commitments;
● additions or departures of key scientific or management personnel;
● variations in our financial results or those of companies that are perceived to be similar to us;
● new products, product candidates or new uses for existing products introduced or announced by our
competitors, and the timing of these introductions or announcements;
● results of clinical trials of product candidates of our competitors;
● general economic and market conditions and other factors that may be unrelated to our operating
performance or the operating performance of our competitors, including changes in market valuations of
similar companies;
● regulatory or legal developments in the United States and other countries;
● changes in the structure of healthcare payment systems;
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● conditions or trends in the pharmaceutical, biotechnology and medical device industries;
● actual or anticipated changes in earnings estimates, development time lines or recommendations by securities
analysts;
● announcement or expectation of additional financing efforts;
● sales of common stock by us or our stockholders in the future, as well as the overall trading volume of our
common stock; and
● the other factors described in this “Risk Factors” section.
If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our
common stock could decline substantially. Furthermore, any quarterly fluctuations in our operating results may, in turn,
cause the price of our stock to fluctuate substantially. We believe that quarterly comparisons of our financial results are not
necessarily meaningful and should not be relied upon as an indication of our future performance.
In the past, following periods of volatility in the market price of a company’s securities, securities class-action
litigation often has been instituted against that company. Such litigation, if instituted against us, could cause us to incur
substantial costs to defend such claims and divert management’s attention and resources, which could seriously harm our
business, financial condition, results of operations and prospects.
An active trading market for our common stock may not be sustained.
Our shares of common stock began trading on the Nasdaq Global Market on February 13, 2015. On August 28,
2019, we received approval from the Listing Qualifications Department of The Nasdaq Stock Market (“Nasdaq”) to
transfer the listing of our common stock from the Nasdaq Global Market to the Nasdaq Capital Market. Our common stock
was transferred to the Nasdaq Capital Market effective as of August 30, 2019. Given the limited trading history of our
common stock, there is a risk that an active trading market for our shares may not continue to develop or be sustained. If an
active market for our common stock does not continue to develop or is not sustained, it may be difficult for investors to sell
shares without depressing the market price for the shares, or at all.
Our common stock may be delisted from The Nasdaq Capital Market if we fail to comply with continued listing
standards.
Our common stock is currently traded on The Nasdaq Capital Market under the symbol “BLPH.” If we fail to
meet any of the continued listing standards of The Nasdaq Capital Market, our common stock could be delisted from The
Nasdaq Capital Market. These continued listing standards include specifically enumerated criteria, such as:
● a $1.00 minimum closing bid price;
● stockholders’ equity of $2.5 million;
● 500,000 shares of publicly-held common stock with a market value of at least $1 million;
● 300 round-lot stockholders; and
● compliance with Nasdaq’s corporate governance requirements, as well as additional or more stringent criteria
that may be applied in the exercise of Nasdaq’s discretionary authority.
If we fail to comply with Nasdaq’s continued listing standards, we may be delisted and our common stock will
trade, if at all, only on the over-the-counter market, such as the OTC Bulletin Board or OTCQX market, and then only if
one or more registered broker-dealer market makers comply with quotation requirements. In addition, delisting of our
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common stock could depress our stock price, substantially limit liquidity of our common stock and materially adversely
affect our ability to raise capital on terms acceptable to us, or at all. Further, delisting of our common stock would likely
result in our common stock becoming a “penny stock” under the Exchange Act.
We have broad discretion in the use of our cash and cash equivalents and may not use them effectively.
Our management has broad discretion in the application of our cash and cash equivalents and could spend these
funds in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our
management to apply these funds effectively could result in financial losses that could have a material adverse effect on our
business, cause the price of our common stock to decline and delay the development of our product candidates. Pending
their use, we may invest our cash and cash equivalents in a manner that does not produce income or that loses value.
We are incurring significant increased costs and demands upon management as a result of operating as a public
company.
As a public company, and particularly if and after we cease to be a “smaller reporting company,” we incur
significant legal, accounting, and other expenses. We ceased to be an “emerging growth company,” as defined in the JOBS
Act, on December 31, 2020. As a result, we expect to incur additional expenses and to devote increased management time
toward ensuring compliance with those requirements applicable to companies that are not emerging growth companies. We
are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which
require, among other things, that we file with the SEC annual, quarterly and current reports with respect to our business
and financial condition. In addition, the Sarbanes-Oxley Act, as well as rules subsequently adopted by the SEC and The
Nasdaq Capital Market to implement provisions of the Sarbanes-Oxley Act, imposes significant requirements on public
companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in
corporate governance practices. Further, in 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the
Dodd-Frank Act, was enacted. There are significant corporate governance and executive compensation related provisions
in the Dodd-Frank Act that required the SEC to adopt additional rules and regulations in these areas such as “say on pay”
and proxy access. Stockholder activism, the current political environment, and the current high level of government
intervention and regulatory reform may result in substantial new regulations and disclosure obligations, which may lead to
additional compliance costs and impact the manner in which we operate our business in ways we cannot currently
anticipate.
We expect the rules and regulations applicable to public companies to continue to substantially increase our legal
and financial compliance costs and to make some activities more time-consuming and costly. If public company rules and
regulations divert the attention of our management and personnel from other business concerns, our business, financial
condition, and results of operations could be adversely affected. Increased costs associated with public company expenses
will decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business or
increase the prices of our products or services. For example, public company rules and regulations make it more difficult
and more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantial
costs to maintain the same or similar coverage. We cannot predict or estimate the amount or timing of additional costs we
may incur to respond to these requirements, the impact of which could also make it more difficult for us to attract and
retain qualified persons to serve on our board of directors, our board committees, or as executive officers.
Our certificate of incorporation provides that the doctrine of “corporate opportunity” will not apply to any of our
stockholders or directors, except in limited circumstances, which may adversely affect our business or prospects.
Our certificate of incorporation provides that the doctrine of “corporate opportunity” will not apply to any of our
stockholders or directors, other than any stockholder or director that is an employee of ours. The doctrine of corporate
opportunity generally provides that a corporate fiduciary may not develop an opportunity using corporate resources,
acquire an interest adverse to that of the corporation or acquire property that is reasonably incident to the present or
prospective business of the corporation or in which the corporation has a present or expectancy interest, unless that
opportunity is first presented to the corporation and the corporation chooses not to pursue that opportunity. The
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doctrine of corporate opportunity is intended to preclude officers or directors from personally benefiting from opportunities
that belong to the corporation. We have renounced any prospective corporate opportunity so that our stockholders and
directors (other than those that are employees of ours) and their respective representatives have no duty to communicate or
present corporate opportunities to us, including any opportunity that becomes known to Ikaria and its directors, and have
the right to either hold any corporate opportunity for its (and its representatives’) own account and benefit or to
recommend, assign or otherwise transfer such corporate opportunity to persons other than us, including to Ikaria. As a
result, our stockholders, directors and their respective affiliates will not be prohibited from investing in competing
businesses or doing business with our customers. Therefore, we may be in competition with our stockholders, directors or
their respective affiliates, and we may not have knowledge of, or be able to pursue, a transaction that could potentially be
beneficial to us. Accordingly, we may lose a corporate opportunity or suffer competitive harm, which could negatively
impact our business or prospects.
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive
forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to
obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive
forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any
action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of
incorporation or our bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine. This
provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or
our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and
other employees. Alternatively, if a court were to find this provision in our certificate of incorporation to be inapplicable or
unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions,
which could adversely affect our business and financial condition.
Provisions in our certificate of incorporation, our bylaws or Delaware law might discourage, delay or prevent a change
in control of our company or changes in our management and, therefore, depress the trading price of our common
stock.
Provisions of our certificate of incorporation, our bylaws or Delaware law may discourage, delay or prevent a
merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which
our stockholders might otherwise receive a premium for their shares. These provisions may also prevent or frustrate
attempts by our stockholders to change the composition of our board of directors or to replace or remove our management.
These provisions include:
● limitations on the removal of directors;
● a classified board of directors so that not all members of our board are elected at one time;
● advance notice requirements for stockholder proposals and nominations;
● limitations on the ability of stockholders to call and bring business before special meetings and to take action
by written consent in lieu of a meeting;
● limitations on the liability of, and the provision of indemnification to, our director and officers; and
● the ability of our board of directors to authorize the issuance of blank check preferred stock, which could be
issued with voting, liquidation, dividend and other rights superior to our common stock.
In addition, we are subject to Section 203 of the Delaware General Corporation Law, which prohibits a publicly-
held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person
which together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a
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period of three years after the date of the transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner.
The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be
willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company,
thereby reducing the likelihood that investors could receive a premium for their shares of our common stock in an
acquisition.
Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital
appreciation, if any, will be the sole source of gain for our stockholders.
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future
earnings, if any, to finance the growth and development of our business. In addition, the terms of any future debt
agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be
the sole source of gain for our stockholders for the foreseeable future.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our principal facilities consist of approximately 22,000 square feet of office space at our headquarters located in
Warren, New Jersey and approximately 3,640 square feet of office space and research lab facilities also located in Warren,
New Jersey. Both the office space and the laboratory space are under leases that expire in 2023. We believe that we have
adequate space for our anticipated needs and that suitable additional space will be available at commercially reasonably
terms as needed.
Item 3. Legal Proceedings
We are not presently a party to any material litigation or regulatory proceeding, and we are not aware of any
pending or threatened litigation or regulatory proceeding against us that could have a material adverse effect on our
business, operating results, financial condition or cash flows.
Item 4. Mine Safety Disclosures
Not applicable.
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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
PART II
Market Information
Our Common Stock is traded on The Nasdaq Stock Market under the symbol “BLPH”.
Stockholders
As of March 8, 2021, we had 9,491,111 outstanding shares of common stock and approximately 174 holders of
record of our common stock. This number does not include beneficial owners whose shares are held by nominees in street
name.
Dividends
We have not declared or paid any cash dividends on our common stock since our inception. We do not plan to pay
dividends in the foreseeable future. We currently intend to retain all available funds and any future earnings, if any, for use
in the operation of our business. Any future determination to declare cash dividends will be made at the discretion of our
board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital
requirements, general business conditions and other factors that our board of directors may deem relevant, and subject to
the restrictions contained in any financing instruments. Consequently, stockholders will need to sell shares of our common
stock to realize a return on their investment, if any.
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
We did not purchase any of our registered equity securities during the period covered by this Annual Report on
Form 10-K.
Item 6. Selected Financial Data
As a smaller reporting company, we are not required to provide this information.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together
with our financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the
information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including
information with respect to our plans and strategy for our business and related financing, includes forward-looking
statements that involve risks and uncertainties and should be read together with the “Risk Factors” section of this Annual
Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the
results described in or implied by the forward-looking statements contained in the following discussion and analysis. This
section of this Annual Report on Form 10-K generally discusses 2020 and 2019 items and year to-year comparisons
between 2020 and 2019. Discussions of 2018 items and year to-year comparisons between 2019 and 2018 that are not
included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2019.
Overview
Business
We are a clinical-stage therapeutics company focused on developing innovative products that address significant
unmet medical needs in the treatment of cardiopulmonary. Our focus is the continued development of our nitric oxide
therapy for patients with or at risk of pulmonary hypertension, or PH, using our proprietary pulsatile nitric oxide delivery
platform, INOpulse.
In 2016, we began developing INOpulse for the treatment of pulmonary hypertension associated with fibrotic
interstitial lung disease (fILD), which includes PH associated with idiopathic pulmonary fibrosis (PH-IPF) as well as other
pulmonary fibrosing diseases. During August 2017, we announced acceptance by the U.S. Food and Drug Administration
(the “FDA”) of our Investigational New Drug (IND) application for our Phase 2b (iNO-PF) clinical trial using INOpulse
therapy in a broad population of patients with pulmonary fibrosis, or PF, at both low and intermediate/high risk of PH. In
January 2018, we announced the first patient enrollment in our iNO-PF Phase 2b trial. In October 2018, we announced the
enrollment completion of the planned 40 subjects, or cohort 1, in our iNO-PF trial. In addition, we announced the
expansion of the trial with the addition of cohort 2 and cohort 3, to evaluate a higher iNO 45 and iNO 75 dose as well as a
longer 16 week evaluation period.
In January 2019, we announced top-line results from cohort 1 of our iNO-PF trial. The results suggested
directional improvements in some exploratory endpoints as measured by a wearable medical-grade activity monitor. In
addition, these results suggested that iNO may have favorable safety profile, supporting the continuation into cohort 2. In
April 2019, we announced that we reached an agreement with the FDA on modifying the ongoing Phase 2b trial into a
seamless Phase 2/3 trial, with cohort 3 serving as the pivotal study, as well as an agreement on the primary endpoint in
cohort 3 of change in moderate to vigorous activity (“MVPA”) from baseline to month 4, measured by Actigraphy. In
December 2019, we announced top-line results from cohort 2 of the iNO-PF trial. Cohort 2 of iNO-PF suggested
directionally favorable and potentially clinically meaningful placebo corrected improvement in MVPA, in subjects treated
with iNO45 (45 mcg/kg IBW/hr) versus placebo. The improvements in MVPA was underscored by benefits in overall
activity, as well as multiple patient reported outcomes. In March 2020, we announced that in consultation with the FDA,
we had finalized some of the key elements of our planned pivotal Phase 3 study for fILD, including the use of MVPA as
the primary endpoint for approval, the patient population of pulmonary fibrosis subjects at risk of PH, as well as the dose
of iNO45. In December 2020, we announced the first patient enrollment in this Phase 3 study called REBUILD.
In 2018, we initiated an ancillary Phase 2 open-label intra-patient dose escalation study that utilizes right heart
catheterization to assess the acute hemodynamic effect of INOpulse from a dose of iNO 30 to iNO 125 in PH-PF subjects.
In February 2020, we announced the completion of the study and that the top-line results demonstrated that INOpulse
achieved clinically and statistically meaningful cardiopulmonary improvements in pulmonary vascular
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resistance and mean pulmonary arterial pressure. The data suggested that inhaled nitric oxide was generally well-tolerated
may and yield a favorable risk-benefit profile across doses.
In 2018, we also initiated development of INOpulse for the treatment of PH associated with Sarcoidosis (PH-
Sarc). Sarcoidosis is a multi-system disease which is characterized by the growth of granulomas (inflammatory cells) in
one or more organs. The most frequent organs involved are the lungs and lymph nodes within the chest. Pulmonary
hypertension may be present in as many as 74% of patients depending on the disease severity and how the pulmonary
hypertension (PH) is defined. The presence of PH in sarcoidosis is associated with a poor prognosis. There are a number of
different mechanisms linking PH with sarcoidosis. The primary treatment for sarcoidosis is corticosteroids; however, the
outcome of this treatment on the PH is unclear. There is no approved therapy for PH associated with sarcoidosis. Various
PAH treatments have been tried including iNO and IV prostacyclin with some clinical and functional improvement. The
study is a Phase 2 open-label dose escalation design that will utilize right heart catheterization to assess the acute
hemodynamic effect of INOpulse from a dose of iNO 30 to iNO 125 in PH-Sarc subjects. We have completed the process
of initiating sites and we are enrolling patients into the trial, with results expected in 2021.
We completed a randomized, placebo-controlled, double-blind, dose-confirmation Phase 2 clinical trial of
INOpulse for pulmonary hypertension associated with chronic obstructive pulmonary disease, or PH-COPD, in July 2014.
The results from this trial showed that iNO 30 was a potentially safe and effective dose for treatment of PH-COPD. Based
on the results of this trial, we completed further Phase 2 testing to assess the targeted vasodilation provided by INOpulse in
this patient population. We presented the results of this trial in September 2015 at the European Respiratory Society
International Congress 2015 in Amsterdam. The data showed that INOpulse improved vasodilation in patients with PH-
COPD. In July 2016, the results were published in the International Journal of COPD in an article entitled “Pulmonary
vascular effects of pulsed inhaled nitric oxide in COPD patients with pulmonary hypertension.” During September 2017,
we shared the results of our Phase 2a PH-COPD study designed to evaluate the acute effects of pulsed inhaled nitric oxide,
or iNO, on vasodilation as well as the chronic effect on hemodynamics and exercise tolerance. The trial showed a
statistically significant increase (average 4.2%) in blood vessel volume on iNO compared to baseline (p=0.03), and a
statistically significant correlation in Ventilation-Vasodilation (p=0.01). The chronic results demonstrated a statistically
significant and clinically meaningful increase in 6MWD of 50.7m (p=0.04) as well as a decrease of 19.9% in systolic
pulmonary arterial pressure (p=0.02), as compared to baseline. The data suggested that the dose may have a favorable
safety profile. In May 2018, we announced that the FDA concurred with the design of our planned Phase 2b study of
INOpulse for treatment of PH-COPD. The study will assess the effect of INOpulse on various parameters including
exercise capacity, right ventricular function and oxygen saturation, as well as other composite endpoints. We continue to
evaluate alternatives for the funding and timing of this program.
On March 19, 2020, the FDA granted emergency expanded access (“EA”) to allow for our INOpulse system to
immediately be used as supportive treatment for a patient with COVID-19 under the care and supervision of the patient’s
physician. The clinical goal of this experimental treatment was to mitigate the hospitalized patient’s disease progression
and avoid the need to perform intubation. Under the emergency access program, 180 hospitalized patients with COVID-19
from 18 hospitals across the United States received treatment with INOpulse. In April 2020, we submitted an IND
application to the FDA to study the iNO delivery system for the treatment of patients with COVID-19. The proposed
randomized, placebo controlled study, called COViNOX, was designed to evaluate the efficacy and safety of INOpulse in
patients diagnosed with COVID-19 who require supplemental oxygen before the disease progresses to necessitate
mechanical ventilation support. The COViNOX protocol aimed to enroll up to 500 patients with COVID-19 who were to
be treated with either INOpulse or placebo. The primary endpoint of the study required an assessment of the proportion of
subjects who experienced respiratory failure or mortality during the 28-day study period, which would allow the trial to
serve as a registrational study for approval. The IND application was accepted by the FDA in May 2020, and the trial was
initiated with the first patient treated in July 2020. The first 100 patients completed their 28-day assessment periods in
October 2020. In November 2020, we announced that the independent Data Monitoring Committee (“DMC”) had
completed its pre-specified interim analysis from the first 100 patients. Based on the finding of futility, we placed the
COViNOX study on a clinical hold. Although new enrollment of subjects into the study was halted, the remaining 91
subjects already enrolled at the time the clinical hold was announced were allowed to complete the treatment course. Upon
completion of the protocol defined monitoring period, the pre-specified efficacy and safety analysis of these 191 patients
was reviewed by the DMC and the DMC concluded that there were no safety concerns that were attributed to
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INOpluse for COVID-19. Based on the COVINOX results, we put the trial on a permanent clinical hold and we are not
planning additional studies for INOpulse for the treatment of COVID-19.
We initiated a Phase 3 clinical trial of INOpulse for PAH in June 2016. As agreed upon with the FDA, a pre-
specified interim analysis was conducted by the Data Monitoring Committee, or DMC, in August 2018, after half of the
planned subjects completed 16 weeks of blinded treatment. The data showed INOpulse provided clinically meaningful
improvements in pulmonary vascular resistance (18%), cardiac output (0.7 L/min) and NT Pro-BNP. In addition, subjects
on PAH background mono-therapy showed a 23 meter improvement in 6MWD, while subjects that were not on prostanoid
background therapy showed a 17 meter improvement in 6MWD. However, the DMC determined that the overall change in
6MWD, the primary endpoint of the trial, was insufficient to support the continuation of the study. Accordingly, based on
the DMC’s recommendation, we discontinued the trial in August 2018. The trial results showed 6MWD was improved
when subjects were on less background therapies and more patients deteriorated in 6MWD on placebo as compared to
iNO. During the trial, however, the data suggested that INOpulse may have a favorable safety profile.
In addition, other potential indications for our INOpulse platform include: chronic thromboembolic PH, or
CTEPH and PH associated with pulmonary edema from high altitude sickness.
We have devoted all of our resources to our therapeutic discovery and development efforts, including conducting
clinical trials for our product candidates, protecting our intellectual property and the general and administrative support of
these operations. We have devoted significant time and resources to developing and optimizing our drug delivery system,
INOpulse, which operates through the administration of nitric oxide as brief, controlled pulses that are timed to occur at the
beginning of a breath.
To date, we have generated no revenue from product sales. We expect that it will be several years before we
commercialize a product candidate, if ever.
Financial Operations Overview
Prior to February 2014, we were a wholly-owned subsidiary of Ikaria, Inc. (a subsidiary of Mallinckrodt plc), or
Ikaria. As part of an internal reorganization of Ikaria in October 2013, Ikaria transferred to us exclusive worldwide rights,
with no royalty obligations, to develop and commercialize pulsed nitric oxide in PAH, PH-COPD and fIPF. Following the
internal reorganization, in February 2014, Ikaria distributed all of our then outstanding units to its stockholders through the
payment of a special dividend on a pro rata basis based on each stockholder’s ownership of Ikaria capital stock, which we
refer to as the Spin-Out, and as a result we became a stand-alone company. In November 2015, we entered into an
amendment to our exclusive cross-license, technology transfer and regulatory matters agreement with Ikaria that included a
royalty equal to 3% of net sales of any commercial products for PAH. In April 2018, we expanded the scope of our license
from PH-IPF to PH in patients with Pulmonary Fibrosis (PH-PF), which includes idiopathic interstitial pneumonias,
chronic hypersensitivity pneumonitis, occupational and environmental lung disease, with a royalty equal to 1% of net sales
of any commercial products for PH-PF.
Revenue
To date, we have not generated any revenue from product sales and may not generate any revenue from product
sales for the next several years, if ever. In the future, we may generate revenue from a combination of product sales, license
fees and milestone payments in connection with strategic partnerships, and royalties from the sale of products developed
under licenses of our intellectual property. Our ability to generate revenue and become profitable depends primarily on our
ability to successfully develop and commercialize or partner our product candidates as well as any product candidates we
may advance in the future. We expect that any revenue we may generate will fluctuate from quarter to quarter as a result of
the timing and amount of any payments we may receive under future partnerships, if any, and from sales of any products
we successfully develop and commercialize, if any. If we fail to complete the development of any of our product candidates
currently in clinical development or any future product candidates in a timely manner, or to obtain regulatory approval for
such product candidates, our ability to generate future revenue, and
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our business, results of operations, financial condition and cash flows and future prospects would be materially adversely
affected.
Research and Development Expenses
Research and development expenses consist of costs incurred in connection with the development of our product
candidates, including upfront and development milestone payments, related to in-licensed product candidates and
technologies.
Research and development expenses primarily consist of:
● employee-related expenses, including salary, benefits and stock-based compensation expense;
● expenses incurred under agreements with contract research organizations, investigative sites that conduct our
clinical trials and consultants that conduct a portion of our pre-clinical studies;
● expenses relating to vendors in connection with research and development activities;
● the cost of acquiring and manufacturing clinical trial materials;
● facilities, depreciation and allocated expenses;
● lab supplies, reagents, active pharmaceutical ingredients and other direct and indirect costs in support of our
pre-clinical and clinical activities;
● device development and drug manufacturing engineering;
● license fees related to in-licensed products and technology; and
● costs associated with non-clinical activities and regulatory approvals.
We expense research and development costs as incurred.
Conducting a significant amount of research and development is central to our business model. Product candidates
in late stages of clinical development generally have higher development costs than those in earlier stages of clinical
development primarily due to the increased size and duration of late-stage clinical trials. Subject to the availability of
requisite financing, we plan to increase our research and development expenses for ongoing clinical programs for the
foreseeable future as we seek to continue multiple clinical trials for our product candidates, including to potentially
advance INOpulse for PH-COPD, and seek to identify additional early-stage product candidates.
We track external research and development expenses and personnel expenses on a program-by-program basis.
We use our employee and infrastructure resources, including regulatory, quality, clinical development and clinical
operations, across our clinical development programs and have included these expenses in research and development
infrastructure. Research and development laboratory expenses are also not allocated to a specific program and are included
in research and development infrastructure. Engineering activities related to INOpulse and the manufacture of cylinders
related to INOpulse are included in INOpulse engineering.
INOpulse for fILD
We initiated our clinical program in fILD in 2016. During May 2017, we announced the completion of our Phase
2 study using INOpulse therapy to treat PH-IPF. After reaching an agreement with the FDA, we initiated and are currently
conducting our Phase 2b trial in fILD. In January 2019, we announced top-line results from cohort 1 of our iNO-PF study
and in December 2019, we announced top-line results from cohort 2 of the iNO-PF trial. In March 2020,
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we announced that in consultation with the FDA, we had finalized the key elements of our planned pivotal Phase 3 study
for fILD, including the use of MVPA as the primary endpoint for approval, the patient population of pulmonary fibrosis
subjects at risk of PH, as well as the dose of iNO45. In December 2020, we announced the first patient enrollment in this
Phase 3 study.
INOpulse for COVID-19
In April 2020, we submitted an IND application to the FDA to study the iNO delivery system for the treatment of
patients infected with COVID-19. The IND application was accepted by the FDA in May 2020, and the trial was initiated
with the first patient treated in July 2020. The first 100 patients completed their 28 days assessment period in October
2020. In November 2020, we announced that the independent DMC had completed its pre-specified interim analysis from
the first 100 patients. Based on the finding of futility, we placed the COViNOX study on a clinical hold. Although new
enrollment of subjects into the study was halted, the remaining 91 subjects already enrolled at the time the clinical hold
was announced were allowed to complete the treatment course. Upon completion of the protocol defined monitoring
period, the pre-specified efficacy and safety analysis of these 191 patients was reviewed by the DMC and the DMC
concluded that there were no safety concerns that were attributed to INOpulse for COVID-19. Based on the COVINOX
results, we put the trial on a permanent clinical hold and we are not planning additional studies for INOpulse for the
treatment of COVID-19.
Drug and Delivery System Costs
Drug and delivery system costs include cartridge procurement, cartridge filling, delivery system manufacturing
and delivery system servicing. These costs relate to all indications that utilize the INOpulse delivery system.
Research and Development Infrastructure
We invest in regulatory, quality, clinical development and clinical operations activities, which are expensed as
incurred. These activities primarily support our clinical development programs.
INOpulse Engineering
We have invested a significant amount of funds in INOpulse, which is configured to be highly portable and
compatible with available modes of long-term oxygen therapy, or LTOT, via nasal cannula delivery. Our Phase 2 clinical
trials of INOpulse for PAH and INOpulse for PH-COPD utilized the first generation INOpulse DS/DS-C device. We
believe that our second generation INOpulse device, as well as a custom triple-lumen cannula, have significantly improved
several characteristics of our INOpulse delivery system. We have also invested in design and engineering technology,
through Ikaria, for the manufacture of our drug cartridges. We manufacture and service the INOpulse devices that we are
using in our ongoing clinical trials of INOpulse for fILD and PH-Sarc by third party turnkey manufacturers.
General and Administrative Expenses
General and administrative expenses include salaries and costs related to executive, finance, and administrative
support functions, patent filing, patent prosecution, professional fees for legal, insurance, consulting, investor relations,
human resources, information technology and auditing and tax services not otherwise included in research and
development expenses.
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Results of Operations
Comparison of Years Ended December 31, 2020 and 2019
The following table summarizes our results of operations for the years ended December 31, 2020 and 2019,
together with the changes in these items in dollars and as a percentage.
(Dollar amounts in thousands)
Research and development expenses:
fILD, PH-Sarc and PH-COPD
COVID-19
Other clinical trials
Drug and delivery system costs
Clinical programs
Research and development infrastructure
INOpulse engineering
Total research and development expenses
General and administrative expenses
Total operating expenses
Loss from operations
Change in fair value of common stock warrant liability
Warrant amendment charge
Interest income and financing expenses, net
Pre-tax loss
Income tax benefit
Net loss
Year Ended December 31,
2020
2019
$Change
% Change
$
3,090
5,300
107
2,636
11,133
4,956
1,801
17,890
8,386
26,276
(26,276)
(327)
(250)
(26,853)
2,125
$ (24,728)
$
3,502
—
54
1,382
4,938
4,928
1,166
11,032
6,441
17,473
(17,473)
2,682
(674)
397
(15,068)
1,801
$ (13,267)
—
$
(412)
5,300
53
1,254
6,195
28
635
6,858
1,945
8,803
(8,803)
(3,009)
674
(647)
(11,785)
324
$ (11,461)
(12)%
—
98 %
91 %
125 %
1 %
54 %
62 %
30 %
50 %
50 %
(112)%
—
(163)%
78 %
18 %
86 %
Total Operating Expenses. Total operating expenses for the year ended December 31, 2020 were $26.3
million compared to $17.5 million for the year ended December 31, 2019, an increase of $8.8 million, or 50%. This
increase was primarily due to an increase in clinical program expenditures attributable to the commencement of the
COVID-19 trial in the current year as well as an increase in our general and administrative expenses.
Research and Development Expenses. Total research and development expenses for the year ended December 31,
2020 were $17.9 million compared to $11.0 million for the year ended December 31, 2019, an increase of $6.9 million, or
62%. Total research and development expenses consisted primarily of the following:
● fILD, PH-Sarc and PH-COPD research and development expenses for the year ended December 31, 2020
were $3.1 million compared to $3.5 million for the year ended December 31, 2019, a decrease of $0.4
million, or 12%. The decrease was primarily due to the timing of the Phase 2 fILD trial which was ongoing
during the prior year and the Phase 3 trial, which was initiated this year.
● COVID-19 expenses for the year ended December 31, 2020 were $5.3 million. COVID-19 expenses included
costs related to our Phase 3 clinical trial during the current year as well as the EA program.
● Drug and delivery system costs for the year ended December 31, 2020 were $2.6 million compared to $1.4
million for the year ended December 31, 2019, an increase of $1.2 million, or 91%. Drug and delivery
system costs are recorded at the time of purchase from our suppliers. The increase in the drug and delivery
system costs is attributable to the requirements to support the COVID-19 trial and Phase 3 trial activities of
fILD.
● INOpulse engineering expenses for the year ended December 31, 2020 were $1.8 million compared to $1.2
million for the year ended December 31, 2019, an increase of $0.6 million, or 54%. The increase was
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primarily due to additional consulting expenses related to improvement of the delivery system manufacturing
process.
General and Administrative Expenses. General and administrative expenses for the year ended December 31,
2020 were $8.4 million compared to $6.4 million for the year ended December 31, 2019, an increase of $2.0 million, or
30%. The increase was primarily due to legal, consulting, and labor costs.
Change in Fair Value of Common Stock Warrant Liability. Change in fair value of common stock warrant
liability for the year ended December 31, 2020 was an expense of $0.3 million compared to an income of $2.7 million for
the year ended December 31, 2019. The warrants were issued in November 2016 and May 2017 and the change in the
liability fair value was due to a change in our stock price, volatility, shorter remaining term and a reduced number of
liability-classified warrants following the warrant amendment as described below.
Warrant Amendment Charge. On June 28, 2019, we entered into a warrant amendment (the “Warrant
Amendment”) with certain holders (the “Holders”) of the November 2016 warrants to purchase 839,899 shares of common
stock. Pursuant to the Warrant Amendment, we and the Holders agreed to eliminate provisions that had previously
precluded equity classification treatment on our balance sheets. In consideration of such amendment, the November 2016
warrants were extended by two (2) additional years (or until November 29, 2023). The difference in fair market value of
the warrants before and after the amendment, of $0.7 million, was recorded in our statement of operations as a warrant
amendment charge.
Income Tax Benefit. Income tax benefit was $2.1 million for the year ended December 31, 2020, compared to
$1.8 million for the year ended December 31, 2019, an increase of $0.3 million, or 18%. In May 2020, we sold $21.2
million of state NOLs and $0.2 million of Research and Development credit under the State of New Jersey's Technology
Business Tax Certificate Transfer Program for net proceeds of $2.0 million. In March 2019, we sold $20.0 million of state
NOLs under the same program for net proceeds of $1.7 million. The proceeds from such sales are recorded as income tax
benefit when sales occur or proceeds are received.
Liquidity and Capital Resources
In the course of our development activities, we have sustained operating losses and expect such losses to continue
over the next several years. We expect to continue to incur significant expenses and operating losses for the foreseeable
future as we continue to develop, conduct clinical trials and seek regulatory approval for our product candidates. Our
primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical
research and development services, contract manufacturing services, laboratory and related supplies, clinical costs, legal
and other regulatory expenses and general overhead costs.
If we obtain regulatory approval for any of our product candidates, we expect to incur significant
commercialization expenses. We do not have a sales, marketing, manufacture or distribution infrastructure for a
pharmaceutical product. To develop a commercial infrastructure, we will have to invest financial and management
resources, some of which would have to be deployed prior to having any certainty of marketing approval.
We had cash and cash equivalents of $47.6 million as of December 31, 2020. Our existing cash and cash
equivalents as of December 31, 2020 will be used primarily to fund the Phase 3 trial of INOpulse for fILD, to complete the
dose escalation study for PH-Sarc and to fund the closeout activities of the Phase 3 trial of INOpulse for the treatment of
patients infected with COVID-19.
We have evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial
doubt about our ability to continue as a going concern within one year beyond the filing of this Annual Report on Form 10-
K.
Based on such evaluation and our current plans, we believe that our existing cash and cash equivalents will be
sufficient to satisfy our operating cash needs for at least one year after the filing of this Annual Report on Form 10-K.
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We may continue to pursue potential sources of funding, including equity financing and previously were able to
obtain funding from equity offerings and sale of tax attributes, including:
● On June 25, 2018, we filed a shelf registration statement on Form S-3 with the SEC, which became effective
on July 6, 2018. The shelf registration allows us to issue, from time to time at prices and on terms to be
determined prior to the time of any such offering, up to $100 million of any combination of common stock,
preferred stock, debt securities, warrants and rights, either individually or in units.
● On January 25, 2019, we completed the sale of 666,666 shares of our common stock at a public offering
price of $10.50 per share, resulting in net proceeds of approximately $6.2 million, after deducting placement
fees of $0.5 million and offering costs of $0.3 million. Such shares were sold pursuant to our effective shelf
registration statement on Form S-3.
● On December 16, 2019, we entered into a Binding Term Sheet and Agreement for a Line of Credit Facility
(the “Term Sheet”) with New Mountain Partners II AIV-A LP, New Mountain Partners II AIV-B LP,
Allegheny New Mountain Partners LP, New Mountain Affiliated Investors II LP, Puissance Capital
Management LP, Jonathan M. Peacock, Naseem Amin and Ted Wang (each a Lender and collectively, the
“Lenders”). Pursuant to the Term Sheet, the Lenders made available to us, on a pro rata basis, a $10,000,000
line of credit facility pursuant to which we had the right to draw down $5,000,000 after March 31, 2020,
provided that we had randomized the first patient in its iNO-PF Phase 3 clinical trial by such date, and
another $5,000,000 after June 30, 2020, provided that no drawdowns shall be made later than December 31,
2020. We agreed to pay the Lenders a fee in cash equal to $300,000 upon the occurrence of certain events,
and this fee became payable as a result of the April 1, 2020 registered direct offering.
● On April 1, 2020, we completed the sale of 1,275,000 shares of our common stock in a registered direct
offering at an offering price of $12.00 per share, resulting in net proceeds of approximately $14.1 million,
after deducting agent fees of $1.1 million and offering costs of $0.1 million. Such shares were sold pursuant
to our effective shelf registration statement on Form S-3.
● On May 22, 2020, we completed the sale of 3,365,384 shares of our common stock in a public offering and
concurrent registered direct offering including a full exercise of an option to purchase additional shares at a
price of $13.00 per share, resulting in net proceeds of approximately $40.6 million, after deducting agent fees
of $2.9 million and offering costs of $0.3 million. The agent fees included a financial advisory fee of $0.9
million to Angel Pond Capital LLC, a company affiliated with Theodore Wang, a member of our board of
directors. Such shares were sold pursuant to our prior shelf registration statement on Form S-3.
● In July 2020, we entered into an Open Market Sale Agreement with Jefferies LLC, as sales agent, pursuant to
which we may offer and sell shares of our common stock, from time to time, for an aggregate sales price
of up to $40.0 million through an “at the market offering” program under a shelf registration statement on
Form S-3. To date, we have not sold any shares under this agreement.
● The State of New Jersey’s Technology Business Tax Certificate Transfer Program enables qualified,
unprofitable New Jersey based technology or biotechnology companies to sell a percentage of NOL and
R&D tax credits to unrelated profitable corporations, subject to meeting certain eligibility criteria. Based on
consideration of various factors, including application processing time and past trend of benefits made
available under the program, we believe that it is probable that our plans to sell our NOLs can be effectively
implemented to address our financial needs. We have sold $21.2 million of state NOLs and $0.2 million of
Research and Development credits under the State of New Jersey’s Technology Business Tax Certificate
Transfer Program in May 2020 for net proceeds of $2.0 million and have sold $20.0 million of state NOLs
for net proceeds of $1.7 million in January 2019. Subject to state approval and program availability, we plan
to sell additional NOLs and R&D credits under the same program in the future subject to program
availability and state approval. The proceeds from such sales are recorded as income tax benefit when sales
occur or proceeds are received.
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We have based our estimates on assumptions that may prove to be wrong, and we may exhaust our capital
resources sooner than we expect. In addition, the process of testing product candidates in clinical trials is costly, and the
timing of progress in clinical trials is uncertain. Because our product candidates are in clinical development and the
outcome of these efforts is uncertain, we cannot estimate the actual amounts that will be necessary to successfully complete
the development and commercialization of our product candidates or whether, or when, we may achieve profitability. Our
future capital requirements will depend on many factors, including:
● progress and cost of our clinical trials and other research and development activities;
● our ability to manufacture sufficient supply of our product candidates and the costs thereof;
● the cost and timing of seeking regulatory approvals;
● the costs and timing of future commercialization activities, including product manufacturing, marketing,
sales and distribution for any of our product candidates for which we receive marketing approval;
● the number and development requirements of any other product candidates we pursue;
● our ability to enter into collaborative agreements and achieve milestones under those agreements;
● the revenue, if any, received from commercial sales of our product candidates for which we receive
marketing approval;
● the cost of filing, prosecuting, defending and enforcing patent applications, claims, patents and other
intellectual property rights; and
● the extent to which we acquire or in-license other products and technologies.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs
through a combination of equity and debt offerings, sales of state NOL and R&D credits, existing working capital and
funding from potential future collaboration arrangements. To the extent that we raise additional capital through the future
sale of equity or debt, the ownership interest of our existing stockholders will be diluted, and the terms of such securities
may include liquidation or other preferences or rights such as anti-dilution rights that adversely affect the rights of our
existing stockholders. If we raise additional funds through strategic partnerships in the future, we may have to relinquish
valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be
favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be
required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to
develop and market product candidates that we would otherwise prefer to develop and market ourselves. In addition, the
timing of when existing and new capital resources are used and received may not align with the period of time evaluated by
management for going concern purposes such that management may be required to conclude that substantial doubt about
our ability to continue as a going concern in accordance with relevant accounting guidance may exist in future periods.
On February 5, 2020, we filed a certificate of amendment to our amended and restated Certificate of Incorporation
to effect a 1 - for- 15 reverse stock split of our outstanding shares of common stock, which became effective on February 7,
2020. The shares of common stock and exercise price underlying our outstanding options and warrants were also
proportionately adjusted for the reverse stock split. In addition, the number of shares of common stock available for
issuance, under our equity incentive plans and employee stock purchase plan, were proportionately adjusted for the reverse
stock split. Further, the per share exercise prices for options granted under such plans were proportionately adjusted for the
reverse stock split. The reverse stock split reduced the number of shares of our common stock that were outstanding at
February 10, 2020 from 69,053,548 to 4,603,460 after the cancellation of fractional shares. No fractional shares were
issued in connection with the reverse stock split. Stockholders who otherwise held fractional shares of our common stock
as a result of the reverse stock split received a cash payment in lieu of such
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fractional shares. The consolidated financial statements herein and descriptions of transactions give retroactive effect to
such reverse stock split and all share and per share amounts have been adjusted accordingly.
Cash Flows
The following table summarizes our cash flows for the years ended December 31, 2020, and 2019:
(Dollar amounts in thousands)
Operating activities
Financing activities
Net change in cash, cash equivalents and restricted cash
Net Cash Used in Operating Activities
Year Ended December 31,
2020
(19,884) $
57,567
37,683
$
$
$
2019
(12,936)
6,167
(6,769)
Cash used in operating activities for the year ended December 31, 2020 was $19.9 million, as compared to $12.9
million for the year ended December 31, 2019. The change in cash used in operating activities was primarily due to an
increase in our operating expenses related to our research and development expenses that was partially offset by the change
in operating assets and liabilities.
Net Cash Provided by Financing Activities
Cash provided by financing activities for the year ended December 31, 2020 was $57.6 million, which included
the proceeds from the direct and public offerings in the second quarter of 2020 as well as warrant exercises in the first
quarter of 2020. Cash provided by financing activities for the year ended December 31, 2019 was $6.2 million, which
included the proceeds from the January 2019 public offering.
Contractual Obligations and Commitments
The following is a summary of our long-term contractual cash obligations as of December 31, 2020 (in
thousands):
Contractual Obligations
Operating Lease Obligations(1)
Total
Total
$
$
1,758 $
$
1,758
Payments Due by Period
Less than
1 year
1 to 3 years
3 to 5 years
770 $
$
770
988 $
$
988
—
—
(1) Operating lease obligations include a lease agreement we entered into on August 6, 2015 for office space and a lease
agreement we entered into on September 3, 2019 for laboratory space, both in Warren, New Jersey.
Royalty payments and success-based milestones associated with our license and supply agreements with Ikaria
have not been included in the above table of contractual obligations as we cannot reasonably estimate if or when they will
occur.
In the course of our normal business operations, we also enter into agreements with suppliers, contract service
providers and others to assist in the performance of our research and development and manufacturing activities. We can
elect to discontinue the work under these contracts and purchase orders at any time with notice, and such contracts and
purchase orders do not contain minimum purchase obligations.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements,
as defined under applicable Securities and Exchange Commission rules.
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Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our
financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The
preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in our financial statements.
On an ongoing basis, we evaluate our estimates and judgments, including those related to research and development
expense, impairment of long-lived assets, stock-based compensation, common stock warrants, and income taxes. We base
our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different
assumptions or conditions.
While our significant accounting policies are described in Note 2 of the notes to our consolidated financial
statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies to be
most critical to the judgments and estimates used in the preparation of our financial statements.
Research and Development Expense
Research and development costs are expensed as incurred. These expenses include the costs of our proprietary
research and development efforts, as well as costs incurred in connection with certain licensing arrangements. Upfront and
milestone payments made to third parties in connection with research and development collaborations are expensed as
incurred up to the point of regulatory approval. Payments made to third parties upon or subsequent to regulatory approval
are capitalized and amortized over the remaining useful life of the related product. We expense the cost of purchased
technology and equipment in the period of purchase if we believe that the technology or equipment has not demonstrated
technological feasibility and does not have an alternative future use. Nonrefundable advance payments for goods or
services that will be used or rendered for future research and development activities are deferred and are recognized as
research and development expense as the related goods are delivered or the related services are performed.
As part of the process of preparing our financial statements, we are required to estimate a portion of our prepaid
and accrued research expenses. This process involves reviewing open contracts and purchase orders, communicating with
applicable personnel and third party service providers to identify services that have been performed on our behalf and
estimating the level of service performed and the associated cost incurred for the service when we have not yet been
invoiced or otherwise notified of actual cost. We make such estimates of our incurred research and development expenses
as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. We
periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. Examples
of estimated prepaid and accrued research and development expenses include:
● fees paid to contract research organizations in connection with clinical trials;
● fees paid to investigative sites in connection with clinical trials; and
● fees paid to contract manufacturers in connection with the production of clinical trial materials.
We base our expenses related to research and development and clinical trials on actual costs incurred in addition to
our estimates of the services received and efforts expended pursuant to contracts with multiple third parties, including
research institutions and contract research organizations that conduct and manage clinical trials on our behalf. The financial
terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment
flows. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the
completion of clinical trial milestones. In accruing the research and development service fees, we consider the terms of
each agreement, the time period over which the services will be performed and the level of effort required to complete the
service. If the actual timing of the performance of the services or the level of effort varies from our estimate, we adjust the
accrual accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred,
our understanding of the status and timing of services performed relative to the actual status
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and timing of services performed may vary and may result in us reporting amounts that are too high or too low in any
particular period.
It is difficult to determine with certainty the duration and completion costs of our current or any future pre-clinical
programs and any of our current or future clinical trials and any future product candidates we may advance, or if, when or
to what extent we will generate revenue from the commercialization and sale of any of our product candidates that obtain
regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates. The
duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors,
including the uncertainties of any future clinical trials and pre-clinical studies, uncertainties in clinical trial enrollment rate
and significant and changing government regulation. In addition, the probability of success for each product candidate will
depend on numerous factors, including competition, manufacturing capability and commercial viability. A change in the
outcome of any of these variables with respect to the development of a product candidate could change significantly the
costs and timing associated with the development of that product candidate. For example, if the FDA or other regulatory
authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the
completion of clinical development of a product candidate, or if we experience significant delays in enrollment in any of
our clinical trials, we could be required to expend significant additional financial resources and time with respect to the
development of that product candidate. We will determine which programs to pursue and how much to fund each program
in response to the scientific and clinical success of each product candidate, as well as an assessment of each product
candidate’s commercial potential, including the likelihood of regulatory approval on a timely basis.
Common Stock Warrant Liability
We account for common stock warrants issued as freestanding instruments in accordance with applicable
accounting guidance provided in Accounting Standards Codification, or ASC Topic 480, Distinguishing Liabilities From
Equity, as either liabilities or as equity instruments depending on the specific terms of the warrant agreement. We classify
warrant liability on the consolidated balance sheet as noncurrent liabilities, which are revalued at each balance sheet date
subsequent to the initial issuance. Changes in the fair value of the warrants are reflected in the consolidated statement of
operations as “Change in fair value of common stock warrant liability.” We use the Black-Scholes-Merton pricing model
to value the related warrant liability. Certain assumptions used in the model include expected volatility, dividend yield and
risk-free interest rate. Refer to Note 6 of the notes to our consolidated financial statements appearing elsewhere in this
Annual Report on Form 10-K for a detailed description of our accounting for warrants.
Stock-Based Compensation
We issue stock-based awards to employees and non-employees in the form of stock options, restricted stock
awards, or RSAs, and may issue restricted stock units, or RSUs.
We account for our stock-based compensation in accordance with ASC Topic 718 Compensation- Stock
Compensation, which establishes accounting for share-based awards, including stock options and restricted stock,
exchanged for services and requires companies to expense the estimated fair value of these awards over the requisite
service period. We recognize stock-based compensation expense in operations based on the fair value of the award on the
date of the grant. The resulting compensation expense is recognized on a straight-line basis over the requisite service
period or sooner if the awards immediately vest. We use the Black-Scholes-Merton option pricing model to value our stock
option awards. Refer to Note 8 of the notes to our consolidated financial statements appearing elsewhere in this Annual
Report on Form 10-K for a detailed description of our accounting for stock-based compensation.
Recently Issued Accounting Standards
Adopted
In February 2016, the FASB issued ASU No. 2016-02, “Leases” (ASU 2016-02) which along with subsequent
ASUs, was codified as Accounting Standards Codification 842 (ASC 842) and provides accounting guidance for both
lessee and lessor accounting models. The new standard became effective for the Company on January 1, 2019. We
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adopted the standard using the effective date method at the beginning of the year in which the new lease standard was
adopted, rather than to the earliest comparative period presented in their financial statements. The recognition of lease
liabilities and corresponding ROU assets had a material impact on our consolidated balance sheet. Upon adoption, as of
January 1, 2019, we recognized a $2.6 million operating lease liability and a $2.3 million ROU asset. The adoption of this
standard did not have a material impact on our consolidated statements of operations, stockholders’ equity or cash flows.
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820) - Disclosure Framework -
Changes to the Disclosure Requirements for Fair Value Measurement”, which eliminates, adds and modifies certain
disclosure requirements for fair value measurements. The standard requires the disclosure of the range and weighted
average used to develop significant unobservable inputs and how weighted average is calculated for recurring and
nonrecurring Level 3 fair value measurements. The amendment is effective for fiscal years beginning after December 15,
2019 and interim periods within those fiscal years with early adoption permitted. The Company adopted ASU 2018-13
during the year ended December 31, 2020 by including disclosure on the range of inputs used to calculate the Company's
Level 3 fair value measurements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk related to changes in interest rates. As of December 31, 2020, we had cash and cash
equivalents of $47.6 million, consisting primarily of demand deposits with U.S. banking institutions. Our primary exposure
to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly
because our investments are in cash and cash equivalents. Due to the nature of our deposits and the low risk profile of our
investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our
deposits.
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2020 and 2019
Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2020, 2019 and 2018
Consolidated Statement of Changes in Stockholders’ Equity (Deficiency in Assets) for the years ended
December 31, 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018
Notes to Consolidated Financial Statements
Page
101
102
103
104
105
106
107
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Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Bellerophon Therapeutics, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Bellerophon Therapeutics, Inc. and subsidiaries
(the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive (loss)
income, changes in stockholders’ equity (deficiency in assets), and cash flows for each of the years in the three‑year period
ended December 31, 2020, and the related notes (collectively, the consolidated financial statements). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three‑year
period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of
accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Codification (ASC) Topic 842,
Leases.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were
communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that
are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex
judgments. We determined that there are no critical audit matters.
/s/ KPMG LLP
We have served as the Company’s auditor since 2013.
Short Hills, New Jersey
March 11, 2021
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BELLEROPHON THERAPEUTICS, INC.
Consolidated Balance Sheets
(Amounts in thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents
Restricted cash
Prepaid expenses and other current assets
Total current assets
Restricted cash, non-current
Right of use assets, net
Property and equipment, net
Other non-current assets
Total assets
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
Accrued research and development
Accrued expenses
Current portion of operating lease liabilities
Total current liabilities
Long term operating lease liabilities
Common stock warrant liability
Total liabilities
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value per share; 200,000,000 shares authorized and
9,491,111 and 4,580,127 shares issued and outstanding at December 31, 2020 and
December 31, 2019, respectively
Preferred stock, $0.01 par value per share; 5,000,000 shares authorized, zero shares
issued and outstanding at December 31, 2020 and December 31, 2019
Additional paid-in capital
Accumulated deficit
Total stockholders' equity
Total liabilities and stockholders' equity
December 31, 2020 December 31, 2019
$
$
$
$
$
$
$
47,557
103
420
48,080
300
1,504
169
186
50,239
3,725
3,699
2,305
704
10,433
956
601
11,990
9,874
103
405
10,382
300
2,110
316
—
13,108
3,106
2,117
1,703
658
7,584
1,659
274
9,517
95
—
252,645
(214,491)
38,249
50,239
$
46
—
193,308
(189,763)
3,591
13,108
The accompanying notes are an integral part of these consolidated financial statements.
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BELLEROPHON THERAPEUTICS, INC.
Consolidated Statements of Operations
(Amounts in thousands, except share and per share data)
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Change in fair value of common stock warrant liability
Warrant amendment charge
Interest income and financing expenses, net
Pre-tax loss
Income tax benefit
Net (loss) income
Weighted average shares outstanding:
Basic
Diluted
Net (loss) income per share:
Basic
Diluted
Year Ended
December 31,
2019
$
2020
17,890
8,386
26,276
(26,276)
(327)
—
(250)
(26,853)
2,125
(24,728)
$
$
$
11,032
6,441
17,473
(17,473)
2,682
(674)
397
(15,068)
1,801
(13,267)
$
$
2018
20,259
7,621
27,880
(27,880)
24,877
—
378
(2,625)
5,439
2,814
7,797,130
7,797,130
4,503,375
4,503,375
3,829,769
4,336,593
$
$
(3.17)
(3.17)
$
$
(2.95)
(2.95)
$
$
0.73
(5.07)
The accompanying notes are an integral part of these consolidated financial statements.
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BELLEROPHON THERAPEUTICS, INC.
Consolidated Statements of Comprehensive (Loss) Income
(in thousands)
Net (loss) income
Other comprehensive income
Unrealized gains on available-for-sale marketable securities
Total other comprehensive income
Comprehensive (loss) income
Year Ended
December 31,
2019
2018
2020
$ (24,728) $ (13,267) $
2,814
— $
— $
$
$
$ (24,728)
— $
— $
$
4
4
2,818
$ (13,267)
The accompanying notes are an integral part of these consolidated financial statements.
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BELLEROPHON THERAPEUTICS, INC.
Consolidated Statements of Changes in Stockholders’ Equity (Deficiency in Assets)
(Amounts in thousands except share and per share data)
Common Stock
Additional Paid in Comprehensive Accumulated
Accumulated
Other
Balance at December 31, 2017
Net income
Other comprehensive income
Warrant exercises - shares include
19,284 shares paid for in 2017 and
issued in 2018
Exercise of stock options
Stock-based compensation
Balance at December 31, 2018
Net loss
Warrant amendment
Public offering
Surrender of shares to the Company for
the payment of tax withholding
obligations
Stock-based compensation
Balance at December 31, 2019
Net loss
Reverse stock split adjustment
Warrant exercises
Direct offerings
Public offering
Stock-based compensation
Balance at December 31, 2020
Shares
3,793,195 $
Amount
38 $
— —
— —
35,272
391
82,999
3,911,857
—
—
1
39
$
$
— —
— —
666,666
7
(13,547)
15,151
4,580,127
(826)
254,760
2,428,846
2,211,538
16,666
9,491,111
—
—
$
46
$
— —
—
3
24
22
—
$
95
$
Capital
Loss
176,682 $
—
—
673
4
2,954
180,313
$
—
4,683
6,229
(69)
2,152
193,308
$
—
—
3,054
28,178
26,472
1,633
252,645
$
Deficit
(4) $ (179,310) $
4
2,814
—
—
—
—
$
—
—
—
— $ (176,496)
(13,267)
—
—
—
—
—
—
—
—
—
— $ (189,763)
—
(24,728)
—
—
—
—
—
— $ (214,491)
—
—
—
—
—
$
Total
Stockholders'
Equity (Deficiency
in Assets)
(2,594)
2,814
4
673
4
2,955
3,856
(13,267)
4,683
6,236
(69)
2,152
3,591
(24,728)
—
3,057
28,202
26,494
1,633
38,249
The accompanying notes are an integral part of these consolidated financial statements.
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BELLEROPHON THERAPEUTICS, INC.
Consolidated Statements of Cash Flows
(Amounts in thousands)
Cash flows from operating activities:
Net (loss) income
Adjustments to reconcile net (loss) income to net cash used in operating
activities:
Depreciation
Stock-based compensation
Change in fair value of common stock warrant liability
Warrant amendment charge
Financing expense
Changes in operating assets and liabilities:
Prepaid expenses and other current assets
Other non-current assets
Accounts payable, accrued research and development, accrued expenses and
other liabilities
Net cash used in operating activities
Cash flows from investing activities:
Proceeds from sale of marketable securities
Net cash provided by investing activities
Cash flows from financing activities:
Proceeds received from exercise of warrants
Proceeds received from exercise of options
Proceeds from issuance of common stock in Public Offering, net of offering
expenses
Payment of expenses related to the ATM sale agreement
Proceeds from sale of common stock in PIPE Offering, net of offering
expenses
Proceeds from sale of common stock in Direct Offerings, net of offering
expenses
Tax withholding payments for stock compensation
Net cash provided by financing activities
Net change in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Non-cash investing activities:
Change in unrealized holding gains on marketable securities, net
Non-cash financing activities:
Conversion of warrant liability to common stock upon exercise of warrants
Reclassification of warrant liability to equity on amendment of warrant
agreements
New right of use asset and operating lease
$
$
$
$
$
Year Ended December,
2019
2018
2020
$ (24,728)
$ (13,267)
$
2,814
147
1,633
327
—
300
348
2,152
(2,682)
674
—
362
2,955
(24,877)
—
—
(15)
—
245
—
2,709
54
2,452
(19,884)
(406)
(12,936)
488
(15,495)
—
—
3,057
—
—
—
—
—
26,494
(186)
6,236
—
3,000
3,000
190
4
—
—
—
—
(28)
28,202
—
57,567
37,683
10,277
47,960
—
(69)
6,167
—
—
166
(6,769)
17,046
10,277
(12,329)
29,375
17,046
$
$
— $
— $
4
— $
— $
483
— $
— $
4,009
322
$
$
—
—
The accompanying notes are an integral part of these consolidated financial statements.
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BELLEROPHON THERAPEUTICS, INC.
Notes to Consolidated Financial Statements
(1) Organization and Nature of the Business
Bellerophon Therapeutics, Inc., or the Company, is a clinical-stage therapeutics company focused on developing
innovative products that address significant unmet medical needs in the treatment of cardiopulmonary diseases. The focus
of the Company’s clinical program is the continued development of its nitric oxide therapy for patients with pulmonary
hypertension, or PH, using its proprietary delivery system, INOpulse. The Company has three wholly-owned subsidiaries:
Bellerophon BCM LLC, a Delaware limited liability company; Bellerophon Pulse Technologies LLC, a Delaware limited
liability company; and Bellerophon Services, Inc., a Delaware corporation.
The Company’s business is subject to significant risks and uncertainties, including but not limited to:
● The risk that the Company will not achieve success in its research and development efforts, including clinical
trials conducted by it or its potential collaborative partners.
● The expectation that the Company will experience operating losses for the next several years.
● Decisions by regulatory authorities regarding whether and when to approve the Company’s regulatory
applications as well as their decisions regarding labeling and other matters which could affect the commercial
potential of the Company’s products or product candidates.
● The risk that the Company will fail to obtain adequate financing to meet its future operational and capital
needs.
● The risk that key personnel will leave the Company and/or that the Company will be unable to recruit and
retain senior level officers to manage its business.
● There are many uncertainties regarding the novel coronavirus (“COVID-19”) pandemic, and the Company is
closely monitoring the impact of the pandemic on all aspects of its business, including how the pandemic will
impact its clinical trials, employees and suppliers. While the pandemic did not materially affect the
Company's financial results and business operations in the Company's year ended December 31, 2020, the
extent to which the coronavirus impacts the Company's results will depend on future developments, which
are highly uncertain and cannot be predicted. Further, should COVID-19 continue to spread, the Company's
business operations could be delayed or interrupted. For instance, the Company's clinical trials may suffer
from lower than anticipated patient recruitment or enrollment and the Company may be forced to temporarily
delay ongoing trials.
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting
principles or GAAP. Intercompany balances and transactions have been eliminated. The Company operates in one
reportable segment and solely within the United States. Accordingly, no segment or geographic information has been
presented.
The preparation of financial statements requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of costs and expenses during the reporting period, including prepaid and accrued
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research and development expenses, stock-based compensation, common stock warrant liability and income taxes. Actual
results could differ from those estimates.
On February 5, 2020, the Company filed a certificate of amendment to its amended and restated Certificate of
Incorporation to effect a 1 - for - 15 reverse stock split of the Company’s outstanding shares of common stock which
became effective on February 7, 2020. The shares of common stock underlying the Company’s outstanding options and
warrants were also proportionately adjusted for the reverse stock split. In addition, the number of shares of common stock
available for issuance under the Company’s equity incentive plans and employee stock purchase plan were proportionately
adjusted for the reverse stock split. Further, the per share exercise prices for options granted under such plans and warrants
were proportionately adjusted for the reverse stock split. There was no change to our authorized number of shares or to our
par value per share. The reverse stock split reduced the number of shares of the Company’s common stock that were
outstanding at February 10, 2020 from 69,053,548 to 4,603,460, after the cancellation of fractional shares. No fractional
shares were issued in connection with the reverse stock split. Stockholders who otherwise held fractional shares of the
Company’s common stock as a result of the reverse stock split received a de minimis cash payment in lieu of such
fractional shares. These consolidated financial statements give retroactive effect to such reverse stock split and all share
and per share amounts have been adjusted accordingly.
(b) Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity date of three months or less to be
cash equivalents. All investments with maturities of greater than three months from date of purchase are classified as
available-for-sale marketable securities.
(c) Stock-Based Compensation
The Company accounts for its stock-based compensation in accordance with applicable accounting guidance
which establishes accounting for share-based awards, including stock options and restricted stock, exchanged for services
and requires companies to expense the estimated fair value of these awards over the requisite service period. The Company
recognizes stock-based compensation expense in operations based on the fair value of the award on the date of the grant.
The resulting compensation expense, less estimated forfeitures, is recognized on a straight-line basis over the requisite
service period or sooner if the awards immediately vest. The Company determines the fair value of stock options issued
using a Black-Scholes-Merton option pricing model. Certain assumptions used in the model include expected volatility,
dividend yield, risk-free interest rate, estimated forfeitures and expected term. For restricted stock, the fair value is the
closing market price per share on the grant date. See Note 8 - Stock-Based Compensation for a description of these
assumptions.
(d) Common Stock Warrant Liability
The Company accounts for common stock warrants issued as freestanding instruments in accordance with
applicable accounting guidance as either liabilities or as equity instruments depending on the specific terms of the warrant
agreement. The Company classifies warrant liability on the consolidated balance sheet based on the warrants’ terms as
long-term liabilities, which are revalued at each balance sheet date subsequent to the initial issuance. Changes in the fair
value of the warrants are reflected in the consolidated statement of operations as “Change in fair value of common stock
warrant liability.” The Company uses the Black-Scholes-Merton pricing model to value the related warrant liability. Certain
assumptions used in the model include expected volatility, dividend yield and risk-free interest rate. See Note 7 - Fair
Value Measurements for a description of these assumptions.
(e) Income Taxes
The Company uses the asset and liability approach to account for income taxes as required by applicable
accounting guidance, which requires the recognition of deferred tax assets and liabilities for the expected future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Valuation allowances are provided when necessary to reduce deferred tax assets to the
amount expected to be realized, on a more likely than not basis. The Company recognizes the benefit of an
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uncertain tax position that it has taken or expects to take on income tax returns it files if such tax position is more likely
than not to be sustained on examination by the taxing authorities, based on the technical merits of the position. These tax
benefits are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate
resolution.
(f) Research and Development Expense
Research and development costs are expensed as incurred. These expenses include the costs of the Company’s
proprietary research and development efforts, as well as costs incurred in connection with certain licensing arrangements.
Upfront and milestone payments made to third parties in connection with research and development collaborations are
expensed as incurred up to the point of regulatory approval. Payments made to third parties upon or subsequent to
regulatory approval are capitalized and amortized over the remaining useful life of the related product. The Company
expenses the cost of purchased technology and equipment in the period of purchase if it believes that the technology or
equipment has not demonstrated technological feasibility and it does not have an alternative future use. Nonrefundable
advance payments for goods or services that will be used or rendered for future research and development activities are
deferred and are recognized as research and development expense as the related goods are delivered or the related services
are performed.
(g) Leases
A lease is a contract, or part of a contract, that conveys the right to control the use of explicitly or implicitly
identified property, plant or equipment in exchange for consideration. Control of an asset is conveyed to the Company if
the Company obtains the right to obtain substantially all of the economic benefits of the asset or the right to direct the use
of the asset. The Company recognizes ROU assets and lease liabilities at the lease commencement date based on the
present value of future, fixed lease payments over the term of the arrangement. ROU assets are amortized on a straight-line
basis over the term of the lease. Lease liabilities accrete to yield and are reduced at the time when the lease payment is
payable to the vendor. Variable lease payments are recognized at the time when the event giving rise to the payment occurs
and are recognized in the statement of operations in the same line item as expenses arising from fixed lease payments.
In accordance with Topic 842, leases are measured at present value using the rate implicit in the lease or, if the
implicit rate is not determinable, the lessee’s implicit borrowing rate. As the implicit rate is not typically available, the
Company uses its implicit borrowing rate based on the information available at the lease commencement date to determine
the present value of future lease payments. The implicit borrowing rate approximates the rate the Company would pay to
borrow on a collateralized basis over a similar term an amount equal to the lease payments.
The Company does not recognize right of use assets or related lease liabilities with a lease term of twelve months
or less on our consolidated balance sheet. Short-term lease costs are recorded in our consolidated statements of operations
in the period in which the obligation for those payments was incurred. Short-term lease costs for the year ended
December 31, 2020 were de minimis.
Financial information presented prior to January 1, 2019 has not been adjusted and is presented in accordance
with ASC 840.
(h) New Accounting Pronouncements
Adopted
In February 2016, the FASB issued ASU No. 2016-02, “Leases” (ASU 2016-02) which along with subsequent
ASUs, was codified as Accounting Standards Codification 842 (ASC 842) and provides accounting guidance for both
lessee and lessor accounting models. The new standard became effective for the Company on January 1, 2019. The
Company adopted the standard using the effective date method at the beginning of the year in which the new lease standard
was adopted, rather than to the earliest comparative period presented in their financial statements. The recognition of lease
liabilities and corresponding ROU assets had a material impact on our consolidated balance sheet.
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Upon adoption, as of January 1, 2019, we recognized a $2.6 million operating lease liability and a $2.3 million ROU asset.
The adoption of this standard did not have a material impact on the Company's consolidated statements of operations,
stockholders’ equity or cash flows.
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820) - Disclosure Framework -
Changes to the Disclosure Requirements for Fair Value Measurement”, which eliminates, adds and modifies certain
disclosure requirements for fair value measurements. The standard requires the disclosure of the range and weighted
average used to develop significant unobservable inputs and how weighted average is calculated for recurring and
nonrecurring Level 3 fair value measurements. The amendment is effective for fiscal years beginning after December 15,
2019 and interim periods within those fiscal years with early adoption permitted. The Company adopted ASU 2018-13 as
of January 1, 2020 by including disclosure on the range of inputs used to calculate the Company's Level 3 fair value
measurements.
(3) Liquidity
In the course of its development activities, the Company has sustained operating losses and expects such losses to
continue over the next several years. The Company expects to continue to incur significant expenses and operating losses
for the foreseeable future as it continues the development and clinical trials of, and seek regulatory approval for, its product
candidates. The Company’s primary uses of capital are, and it expects will continue to be, compensation and related
expenses, third-party clinical research and development services, contract manufacturing services, laboratory and related
supplies, clinical costs, legal and other regulatory expenses and general overhead costs.
If the Company obtains regulatory approval for any of its product candidates, the Company expects to incur
significant commercialization expenses. The Company does not have a sales, marketing, manufacturing or distribution
infrastructure for a pharmaceutical product. To develop a commercial infrastructure, the Company will have to invest
financial and management resources, some of which would have to be deployed prior to having any certainty of marketing
approval.
The Company had cash and cash equivalents of $47.6 million as of December 31, 2020. The Company’s existing
cash and cash equivalents as of December 31, 2020, will be used primarily to fund the Phase 3 trial of INOpulse for fILD,
to complete the dose escalation study for PH-Sarc and to fund the closeout activities of the Phase 3 trial of INOpulse for
the treatment of patients infected with COVID-19.
The Company evaluated whether there are any conditions and events, considered in the aggregate, that raise
substantial doubt about its ability to continue as a going concern within one year beyond the filing of this Annual Report on
Form 10-K.
Based on such evaluation and the Company’s current plans, management believes that the Company’s existing
cash and cash equivalents will be sufficient to satisfy the Company’s operating cash needs for at least one year after the
filing of this Annual Report on Form 10-K.
The Company may continue to pursue potential sources of funding, including equity financing and previously was
able to obtain funding from equity offerings and sale of tax attributes, including the below as well as other offerings prior
to 2018:
● On June 25, 2018, the Company filed a shelf registration statement on Form S-3 with the SEC, which
became effective on July 6, 2018. The shelf registration allows the Company to issue, from time to time at
prices and on terms to be determined prior to the time of any such offering, up to $100 million of any
combination of common stock, preferred stock, debt securities, warrants and rights, either individually or in
units.
● On January 25, 2019, the Company completed the sale of 666,666 shares of its common stock at a public
offering price of $10.50 per share, resulting in net proceeds of $6.2 million, after deducting placement fees
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of $0.5 million and offering costs of $0.3 million. Such shares were sold pursuant to the Company’s effective
shelf registration statement on Form S-3.
● On December 16, 2019, the Company entered into a Binding Term Sheet and Agreement for a Line of Credit
Facility (the “Term Sheet”) with New Mountain Partners II AIV-A LP, New Mountain Partners II AIV-B LP,
Allegheny New Mountain Partners LP, New Mountain Affiliated Investors II LP, Puissance Capital
Management LP, Jonathan M. Peacock, Naseem Amin and Ted Wang (each a Lender and collectively, the
“Lenders”). Pursuant to the Term Sheet, the Lenders made available to the Company, on a pro rata basis, a
$10,000,000 line of credit facility pursuant to which the Company had the right to draw down $5,000,000
after March 31, 2020, provided that the Company had randomized the first patient in its iNO-PF Phase 3
clinical trial by such date, and another $5,000,000 after June 30, 2020, provided that no drawdowns shall be
made later than December 31, 2020. The Company agreed to pay the Lenders a fee in cash equal to $300,000
upon the occurrence of certain events, and this fee became payable as a result of the April 1, 2020 registered
direct offering.
● On April 1, 2020, the Company completed the sale of 1,275,000 shares of its common stock in a registered
direct offering at an offering price of $12.00 per share, resulting in net proceeds of approximately $14.1
million, after deducting agent fees of $1.1 million and offering costs of $0.1 million. Such shares were sold
pursuant to the Company’s effective shelf registration statement on Form S-3.
● On May 22, 2020, the Company completed the sale of 3,365,384 shares of its common stock in a public
offering and concurrent registered direct offering including a full exercise of an option to purchase additional
shares at a price of $13.00 per share, resulting in net proceeds of approximately $40.6 million, after
deducting agent fees of $2.9 million and offering costs of $0.3 million. The agent fees included a financial
advisory fee of $0.9 million to Angel Pond Capital LLC, a company affiliated with Theodore Wang, a
member of the Company’s board of directors. Such shares were sold pursuant to our prior shelf registration
statement on Form S-3.
● In July 2020, the Company entered into an Open Market Sale Agreement with Jefferies LLC, as sales agent,
pursuant to which it may offer and sell shares of its common stock, from time to time, for an aggregate sales
price of up to $40.0 million through an “at the market offering” program under a shelf registration statement
on Form S-3. To date, the Company has not sold any shares under this agreement.
● The Technology Business Tax Certificate Transfer Program enables qualified, unprofitable New Jersey based
technology or biotechnology companies to sell a percentage of NOL and research and development (R&D)
tax credits to unrelated profitable corporations, subject to meeting certain eligibility criteria. Based on
consideration of various factors, including application processing time and past trend of benefits made
available under the program, the Company believes that it is probable that its plans to sell its NOLs can be
effectively implemented to address its short term financial needs. The Company has sold $21.2 million of
state NOLs and $0.2 million of Research and Development credits under the State of New Jersey’s
Technology Business Tax Certificate Transfer Program in May 2020 for net proceeds of $2.0 million and has
sold an additional $20.0 million of state NOLs for net proceeds of $1.7 million in January 2019. The
Company plans to sell additional NOLs and R&D credits under the same program in the future subject to
program availability and state approval. The proceeds from such sales are recorded as Income tax benefit
when sales occur or proceeds are received.
Until such time, if ever, as the Company can generate substantial product revenues, its expects to finance its cash
needs through a combination of equity and debt financings, sales of state NOLs and R&D credits subject to program
availability and approval, existing working capital and funding from potential future collaboration arrangements. To the
extent that the Company raises additional capital through the future sale of equity or convertible debt, the ownership
interest of its existing stockholders may be diluted, and the terms of such securities may include liquidation or other
preferences or rights such as anti-dilution rights that adversely affect the rights of its existing stockholders. If the Company
raises additional funds through strategic partnerships in the future, it may have to relinquish valuable rights to its
technologies, future revenue streams or product candidates or grant licenses on terms that
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may not be favorable to it. If the Company is unable to raise additional funds through equity or debt financings when
needed, or unable to sell its state NOLs and R&D credits, it may be required to delay, limit, reduce or terminate its product
development or future commercialization efforts or grant rights to develop and market product candidates that it would
otherwise prefer to develop and market itself.
(4) Right of Use Assets and Leases
The Company has two operating leases in Warren, NJ, one for the use of an office and research facility and a
second for the use of a laboratory. The office and research facility lease is for a term of four years with a term date of
March 31, 2023, with the Company’s right to extend the original term for one period of five years. The laboratory lease is
for a term of three years and nine months with a term date of April 30, 2023, with the Company’s right to extend the
original term for one period of 90 days. The office and research facility as well as the laboratory operating leases are
included in “Right of use assets, net” on the Company’s December 31, 2020 consolidated balance sheet and represents the
Company’s right to use the underlying assets for the respective lease term. The Company’s obligation to make lease
payments are included in “Current portion of operating lease liabilities” and “Long term operating lease liabilities” on the
Company’s December 31, 2020 consolidated balance sheet. Operating lease expense is recognized on a straight-line basis
over the respective lease term.
The Company does not recognize right of use assets or related lease liabilities with a lease term of twelve months
or less on our consolidated balance sheet. Short-term lease costs are recorded in our consolidated statements of operations
in the period in which the obligation for those payments was incurred. Short-term lease costs for the year ended
December 31, 2020 were de minimis.
Information related to the Company’s right of use assets and related lease liabilities is as follows ($ amounts in
thousands):
Cash paid for operating lease liability
Operating lease expenses
Weighted average remaining lease term
Weighted average discount rate
For the Year Ended
December 31, 2020
$
$
For the Year Ended
December 31, 2019
$
757
$
705
2.26 years
4.93 %
683
642
3.26 years
4.94 %
Maturities of lease liabilities as of December 31, 2020 were as follows:
2021
2022
2023
Less imputed interest
Total operating lease liability
Rent expenses for the year ended December 31, 2019 were $0.6 million.
112
$
$
770
783
205
1,758
(98)
1,660
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(5) Property and Equipment
Property and equipment as of December 31, 2020 and 2019 consist of the following (in thousands):
Machinery and equipment
Leasehold improvements
Furniture and fixtures
Property and equipment, gross
Less accumulated depreciation
December 31, December 31,
2020
2019
$
$
2,048
204
276
2,528
(2,359)
169
$
$
2,048
204
276
2,528
(2,212)
316
Depreciation expense for the years ended December 31, 2020, 2019 and 2018 was $0.1 million, $0.3 million, and
$0.4 million, respectively.
(3)
(6) Common Stock Warrants
On November 29, 2016, the Company issued 1,142,838 warrants that were immediately exercisable and will
expire 5 years from issuance at an exercise price of $12.00 per share. On June 28, 2019, the Company entered into a
warrant amendment (the “Warrant Amendment”) with certain holders (the “Holders”) of 839,899 of the 2016 Warrants to
purchase shares. Pursuant to the Warrant Amendment, the Company and the Holders agreed to eliminate provisions that
had previously precluded equity classification treatment on the Company’s consolidated balance sheets. In consideration of
such amendment, the 2016 Warrants were extended by two (2) additional years (until November 29, 2023). The difference
in fair market value of the warrants before and after the amendment, of $0.7 million, was recorded in the consolidated
statement of operations as a warrant amendment charge during the year ended December 31, 2019. The fair market value of
the amended warrants was reclassified from common stock warrant liability to stockholders’ equity. The balance of the
2016 Warrants that were not amended could require cash settlement under certain circumstances, and therefore continue to
be classified as liabilities and to be recorded at estimated fair value using a Black-Scholes-Merton pricing model. As of
December 31, 2020, there were 661,310 of the 2016 Warrants outstanding, of which 585,139 were equity classified and
76,171 were liability classified. The outstanding liability classified warrants, which were not subject to the Warrant
Amendment previously described, remain subject to the original expiration date in November 2021. During the year ended
December 31, 2020, there were 254,760 of the November 2016 warrants exercised for net proceeds of $3.1 million.
On May 15, 2017, the Company issued to an investor warrants to purchase 66,666 shares that became exercisable
commencing six months from their issuance and will expire five years from the initial exercise date at an exercise price of
$22.50 per share. In addition, the Company issued to the placement agent warrants to purchase 4,000 shares that were
immediately exercisable and will expire five years from issuance at an exercise price of $28.125 per share. As the warrants,
under certain situations, could require cash settlement, the warrants were classified as liabilities and recorded at estimated
fair value using a Black-Scholes-Merton pricing model. As of December 31, 2020, all of these warrants were outstanding.
On September 29, 2017, the Company issued warrants to purchase 1,296,650 shares that became exercisable
commencing six months from their issuance and will expire five years from the initial exercise date at an exercise price of
$18.63 per share. As the warrants could not require cash settlement, the warrants were classified as equity. As of
December 31, 2020, all of these warrants were outstanding.
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The following table summarizes warrant activity for the year ended December 31, 2020 (fair value amount in
thousands):
Equity Classified
Liability Classified
Warrants
Warrants
Warrants outstanding as of December 31, 2019
Exercises
Change in fair value of common stock warrant liability recognized
in consolidated statement of operations
Warrants outstanding as of December 31, 2020
2,136,549
(254,760)
—
1,881,789
146,837
Estimated Fair Value
274
—
$
—
—
$
146,837
327
601
The following table summarizes warrant activity for the year ended December 31, 2019 (fair value amount in
thousands):
Warrants outstanding as of December 31, 2018
Reclassification of warrants to equity on amendment of warrant
agreements
Change in fair value of common stock warrant liability recognized
in consolidated statement of operations
Warrants outstanding as of December 31, 2019
Equity Classified
Liability Classified
Warrants
Warrants
1,296,650
986,736
Estimated Fair Value
6,965
$
839,899
(839,899)
—
2,136,549
—
$
146,837
(4,009)
(2,682)
274
See Note 7 for determination of fair value of common stock warrant liability.
(7) Fair Value Measurements
Assets and liabilities recorded at fair value on the balance sheets are categorized based upon the level of judgment
associated with the inputs used to measure the fair value. Level inputs are as follows:
● Level 1 - Values are based on unadjusted quoted prices for identical assets or liabilities in an active market
which the company has the ability to access at the measurement date.
● Level 2 - Values are based on quoted market prices in markets where trading occurs infrequently or whose
values are based on quoted prices of instruments with similar attributes in active markets.
● Level 3 - Values are based on prices or valuation techniques that require inputs that are both unobservable
and significant to the overall fair value measurement. These inputs reflect management’s own assumptions
about the assumptions a market participant would use in pricing the asset.
The following table summarizes fair value measurements by level at December 31, 2020 for financial instruments
measured at fair value on a recurring basis (in thousands):
Common stock warrant liability
Level 1 Level 2 Level 3
Total
$ — $
— $
601
$
601
The following table summarizes fair value measurements by level at December 31, 2019 for financial instruments
measured at fair value on a recurring basis (in thousands):
Common stock warrant liabilities
Level 1 Level 2 Level 3
Total
$ — $
— $
274
$
274
The Company uses a Black-Scholes-Merton option pricing model to value its common stock warrants. The
significant unobservable inputs used in calculating the fair value of common stock warrants represent management’s best
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estimates and involve inherent uncertainties and the application of management’s judgment. For volatility, the Company
uses its own historical volatility as a basis for its expected volatility to calculate the fair value of common stock warrants.
The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected term of the common
stock warrant. Any significant increases or decreases in the observable and unobservable inputs may result in significantly
higher or lower fair value measurements.
The following are the weighted average assumptions used in estimating the fair value of warrants outstanding as
of December 31, 2020 and 2019:
December 31, 2020
December 31, 2019
Valuation assumptions:
Risk-free interest rate
Expected volatility
Expected term (in years)
Dividend yield
(6)
Range
0.10 % -
0.13 %
169.63 % - 231.10 %
0.9
-
— % -
1.9
— %
Weighted Average
0.11 %
202.21 %
1.4
— %
Range
1.57 % -
1.61 %
104.74 % - 109.05 %
1.9
-
— % -
2.9
— %
Weighted Average
1.59 %
107.00 %
2.4
— %
(8) Stock-Based Compensation
Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions, the
expected term of the option and expected volatility. The Company uses the Black-Scholes-Merton option pricing model to
value its stock option awards. The assumptions used in calculating the fair value of stock-based awards represent
management’s best estimates and involve inherent uncertainties and the application of management’s judgment. The
expected term of stock options is estimated using the “simplified method.” The simplified method is based on the average
of the vesting tranches and the contractual life of each grant. For volatility, the Company historically used comparable
public companies as a basis for its expected volatility to calculate the fair value of option grants due to its limited history as
a public company; however, during the year ended December 31, 2020, the Company had sufficient history of a public
company and ceased using the comparable public company peer group as the basis for its expected volatility. The risk-free
interest rate is based on U.S. Treasury notes with a term approximating the expected term of the option. For restricted
stock, the fair value is the closing market price per share on the grant date. The estimation of the number of stock awards
that will ultimately vest requires judgment, and to the extent actual results or revised estimates differ from the Company’s
current estimates, such amounts will be recorded as an adjustment in the period in which estimates are revised.
Incentive Plans
During 2014, the Company adopted the 2014 Equity Incentive Plan, or the 2014 Plan, which provided for the
grant of options. Following the effectiveness of the Company’s registration statement filed in connection with its IPO, no
options may be granted under the 2014 plan. The awards granted under the 2014 Plan generally have a vesting period of
between one to four years.
During 2015, the Company adopted the 2015 Equity Incentive Plan, or the 2015 Plan, which provides for the
grant of options, restricted stock and other forms of equity compensation. On May 4, 2017, the Company’s stockholders
approved an amendment to the 2015 Plan to increase the aggregate number of shares available for the grant of awards to
333,333 and to increase the maximum number of shares available under the annual increase to 200,000 shares. On May 14,
2019, the Company’s stockholders approved an additional amendment to the 2015 Plan to increase the aggregate number of
shares reserved for issuance under the 2015 plan from 333,333 to 833,333. As of December 31, 2020, the Company had
392,778 shares available for grant.
As of December 31, 2020, there was approximately $2.3 million of total unrecognized compensation expense
related to unvested stock awards. This expense is expected to be recognized over a weighted-average period of 2.0 years.
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No tax benefit was recognized during the years ended December 31, 2020, 2019 and 2018 related to stock-based
compensation expense since the Company incurred operating losses and has established a full valuation allowance to offset
all the potential tax benefits associated with its deferred tax assets.
Options
Compensation expense is measured based on the fair value of the option on the grant date and is recognized on a
straight-line basis over the requisite service period, or sooner if vesting occurs sooner than on a straight-line basis. Options
are forfeited if the employee ceases to be employed by the Company prior to vesting.
The weighted average grant-date fair value of options issued during the years ended December 31, 2020, 2019 and
2018 was $9.28, $5.68 and $15.27, respectively. The following are the weighted average assumptions used in estimating
the fair value of options issued during the years ended December 31, 2020, 2019 and 2018.
Valuation assumptions:
Risk-free rate
Expected volatility
Expected term (years)
Dividend yield
December 31,
2020
Year Ended
December 31,
2019
December 31,
2018
0.33 %
144.33 %
5.7
— %
1.67 %
86.02 %
6.0
— %
2.74 %
84.55 %
6.0
— %
A summary of option activity under the 2015 Plan and 2014 Plan for the years ended December 31, 2020, 2019
and 2018 is presented below:
Bellerophon 2015 and 2014 Equity Incentive Plans
Granted
Exercised
Expired
Forfeited
Options outstanding as of December 31, 2017
Options outstanding as of December 31, 2018
Options
217,972
245,527
(391)
(532)
(11,330)
451,246
221,562
(133)
(9,174)
663,501
77,263
(507)
740,257
Options outstanding as of December 31, 2020
Options vested and exercisable as of December 31, 2020 433,996
Options outstanding as of December 31, 2019
Granted
Expired
Forfeited
Granted
Forfeited
Exercise
Price
$
13.65 -
7.35 -
7.35 - 199.20
43.80
29.10
199.20
7.35 - 180.00
7.35 - 199.20
13.20
7.50 -
$
$
10.12 -
180.00
7.35 - 180.00
7.35 - 199.20
12.58
7.35 - 199.20
7.35 - 199.20
7.35 - 199.20
$
$
Weighted
Average
Price
$ 45.61
20.91
7.80
199.20
29.82
$ 32.41
7.87
180.00
35.03
$ 24.15
10.12
23.47
$ 22.69
$ 30.62
Weighted Average
Remaining
Contractual
Life (in years)
8.4
8.6
8.3
7.5
6.8
The intrinsic value of options outstanding, vested and exercisable as of December 31, 2020 was zero.
Restricted Stock
All restricted stock awards granted under the 2015 Plan during the year ended December 31, 2020 were in relation
to director compensation and vested in full by December 31, 2020, except for the restricted stock that expired due to certain
terms and conditions.
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A summary of restricted stock activity under the 2015 Plan for the years ended years ended December 31, 2020,
2019 and 2018 is presented below:
Bellerophon 2015 Equity Incentive Plan
Weighted Average
Fair Value
Weighted Average
Aggregate Grant
Date Fair Value
(in millions)
Remaining
Contractual
Life (in years)
Restricted stock outstanding as of December 31, 2017
Granted
Vested
Restricted stock outstanding as of December 31, 2018
Granted
Vested
Restricted stock outstanding as of December 31, 2019
Granted
Vested
Expired
Restricted stock outstanding as of December 31, 2020
Shares
21,897
82,999
(40,531)
64,365
15,151
(79,516)
$
$
$
$
21.25
21.16
(25.45)
18.49
13.21
(17.48)
— $
— $
23,332
(16,666)
(6,666)
6.00
(6.00)
(6.00)
— $
— $
0.5
1.8
(1)
1.2
0.2
(1.4)
—
0.1
(0.1)
—
—
0.2
0.3
—
—
Ikaria Equity Incentive Plans for Periods Prior to February 12, 2014
Options
The Company has outstanding options that were assumed during its spin-out from Ikaria, Inc., or Ikaria. A
summary of option activity under the assumed Ikaria 2007 stock option plan and the assumed Ikaria 2010 long term
incentive plan for the years ended December 31, 2020, 2019 and 2018 is presented below:
Options outstanding, vested and exercisable as of
December 31, 2017
Forfeited
Options outstanding, vested and exercisable as of
December 31, 2018
Forfeited
Expired
Options outstanding, vested and exercisable as of
December 31, 2019
Forfeited
Expired
Options outstanding, vested and exercisable as of
December 31, 2020
Ikaria Equity Incentive Plans for Periods Prior to
February 12, 2014
Shares
Range of
Exercise Price
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contractual
Life (in years)
4,764 $ 116.55 - 268.80 $
(170)
174.75
138.17
174.75
4,594
(759)
(372)
$ 116.55 - 268.80
116.55 - 223.65
268.80
3,463
(892)
(63)
$ 116.55 - 223.65
116.55 - 124.05
208.65
$
$
136.81
129.65
268.80
124.21
119.17
119.17
4.0
3.2
2.3
2,508
$ 116.55 - 223.65
$
123.87
1.5
There were no options exercised during the years ended December 31, 2020, 2019 and 2018. The intrinsic value
of options outstanding, vested and exercisable as of December 31, 2020 was zero.
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Stock-Based Compensation Expense, Net of Estimated Forfeitures
The following table summarizes the stock-based compensation expense for the years ended December 31, 2020,
2019 and 2018. The following disclosures include stock-based compensation expense recognized under the 2015 Plan and
the 2014 Plan (in thousands):
Research and development
General and administrative
Total expense
(8)
(9) Income Taxes
2020
376
1,257
1,633
$
$
Year Ended
December 31,
2019
$
$
691
1,461
2,152
$
$
2018
721
2,234
2,955
Prior to its conversion to a Delaware corporation in February 2015, the Company was a Delaware limited liability
company, or LLC, that passed through income and losses to its members for U.S. federal and state income tax purposes. As
a result of its conversion to a Delaware corporation, the Company recognized deferred income taxes through income tax
expense related to temporary differences that existed as of the date of its tax status change.
The Company’s tax rate for 2020 and 2019 are (7.9%) and (13.6%), respectively, due to the fact that it sold its
New Jersey state Net Operating Losses and Credits and recognized the sale as a benefit . The Company expects to generate
additional losses and currently has a full valuation allowance.
The Company may be subject to certain limitations in its annual utilization of NOL carry forwards to off-set
future taxable income (and of tax credit carry forwards to off-set future tax expense) pursuant to Section 382 of the Internal
Revenue Code, which could result in tax attributes expiring unused.
A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the years ended
December 31, 2020, 2019 and 2018 is as follows:
U.S. federal statutory rate
State and local taxes, net of federal tax effect
Research tax credits
Valuation allowance
Prior year adjustments
Sale of NOLs and R&D tax credits
Expenses associated with common stock warrant liability (a)
Incentive stock options, non-deductible and permanent items
Year Ended Year Ended Year Ended
December 31,
December 31,
2018
2019
December 31,
2020
21 %
(0.9)%
4.5 %
(22.8)%
0.5 %
(7.9)%
(0.3)%
(2.0)%
(7.9)%
21 %
0.4 %
5.5 %
(34.4)%
5.0 %
(13.6)%
3.2 %
(0.7)%
(13.6)%
21 %
105.9 %
(53.3)%
104 %
5.4 %
(193.3)%
(185.6)%
2.7 %
(193.2)%
(a) Represents change in fair value and attributable issuance costs
Deferred taxes as of December 31, 2020 and 2019 reflect the tax effects of the differences between the amounts
recorded as assets and liabilities for financial reporting purposes and the comparable amounts recorded for income tax
purposes.
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Table of Contents
Significant components of the deferred tax assets (liabilities) at December 31, 2020 are as follows (in thousands):
Net operating loss carryforwards
Research tax credit carryforwards
Property and equipment
Stock based compensation
Intangible assets
Lease liability
Accrued expenses
Subtotal
Valuation allowance
Total deferred tax assets (liabilities)
Net deferred tax assets
December 31, 2020
$
Assets
31,732
25,976
$
—
1,909
5,363
44
432
65,456
(65,455)
$
1
—
$
$
(Liabilities)
—
—
(1)
—
—
—
(1)
—
(1)
Significant components of the deferred tax assets (liabilities) at December 31, 2019 are as follows (in thousands):
Net operating loss carryforwards
Research tax credit carryforwards
Property and equipment
Stock based compensation
Intangible assets
Lease liability
Accrued expenses
Subtotal
Valuation allowance
Total deferred tax assets (liabilities)
Net deferred tax assets
December 31, 2019
Assets
25,651
25,228
$
—
1,594
6,027
58
1,006
59,564
(59,548)
16
$
—
$
$
$
(Liabilities)
—
—
(16)
—
—
—
(16)
—
(16)
A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax
assets will not be realized. As of December 31, 2020, management believed that it was more likely than not that the
deferred tax assets would not be realized, based on future operations, consideration of tax strategies and the reversal of
deferred tax liabilities. The valuation allowance is required until the Company has sufficient positive evidence of taxable
income necessary to support realization of its deferred tax assets. A valuation allowance release is recognized as an income
tax benefit.
As of December 31, 2020, the Company has available net operating loss, or NOL, carry forwards for federal
income tax reporting purposes of approximately $133.6 million and for state income tax reporting purposes of
approximately $51.8 million, which expire at various dates between fiscal 2037 and 2040 for NOLs incurred for federal
income tax prior to January 1, 2018. Losses incurred after this date have an indefinite life. The Company has sold $21.2
million of state NOLs and $0.2 million of Research and Development credits under the State of New Jersey’s Technology
Business Tax Certificate Transfer Program in May 2020 for net proceeds of $2.0 million and has sold an additional $20.0
million of state NOLs for net proceeds of $1.7 million in January 2019. The Company plans to sell additional NOLs and
R&D credits under the same program in the future subject to program availability and state approval. As of December 31,
2020 and 2019, the Company had no material uncertain tax positions.
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(10) Net (Loss) Income Per Share
Net (loss) income
Weighted-average shares:
Basic
Effect of dilutive securities:
Warrants
Diluted
Net (loss) income per share:
Basic
Diluted
Twelve months ended December 31,
2019
(13,267) $
2020
(24,728) $
2018
2,814
$
7,797,130
4,503,375
3,829,769
7,797,130
4,503,375
—
—
506,824
4,336,593
$
$
(3.17) $
(3.17) $
(2.95) $
(2.95) $
0.73
(5.07)
For the year ended December 31, 2020, the total number of potential shares of common stock excluded from the
diluted earnings per share computation because their inclusion would have been anti-dilutive was 2.7 million, which
included 0.7 million options to purchase shares and 2.0 million warrants to purchase shares.
For the year ended December 31, 2019, the total number of potential shares of common stock excluded from the
diluted earnings per share computation because their inclusion would have been anti-dilutive was 3.0 million, which
included 0.7 million options to purchase shares and 2.3 million warrants to purchase shares.
For the year ended December 31, 2018, the total number of potential shares of common stock excluded from the
diluted earnings per share computation because their inclusion what have been anti-dilutive was 2.4 million, which
included 0.5 million options to purchase shares, 0.1 million restricted shares and 1.8 million warrants to purchase shares.
Basic net (loss) income per share is calculated by dividing net (loss) income by the weighted average number of
shares outstanding during the period, as applicable. Diluted net loss per share is calculated by dividing net (loss) income,
adjusted to reflect the impact of dilutive warrants, by the weighted average number of shares outstanding, adjusted to
reflect potentially dilutive securities using the treasury stock method, except when the effect would be anti-dilutive.
(11) Commitments and Contingencies
Legal Proceedings
The Company periodically becomes subject to legal proceedings and claims arising in connection with its
business. The ultimate legal and financial liability of the Company in respect to all proceedings, claims and lawsuits,
pending or threatened, cannot be estimated with any certainty.
As of the date of this report, the Company is not aware of any proceeding, claim or litigation, pending or
threatened, that could, individually or in the aggregate, have a material adverse effect on the Company’s business,
operating results, financial condition and/or liquidity.
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Contractual Obligations
The following is a summary of the Company’s long-term contractual cash obligations as of December 31, 2020 (in
thousands):
2021
2022
2023
Thereafter
Total
Operating Lease (1)
770
$
783
205
—
1,758
$
(1) Operating lease obligations include a lease agreement the Company entered into on August 6, 2015 for office space
and a lease agreement the Company entered into on September 3, 2019 for laboratory space both in Warren, New
Jersey.
Royalty payments and success-based milestones associated with the Company’s license and supply agreements
with Ikaria have not been included in the above table of contractual obligations as the Company cannot reasonably estimate
if or when they will occur.
In the course of its normal business operations, the Company also enters into agreements with contract service
providers and others to assist in the performance of its research and development and manufacturing activities. The
Company can elect to discontinue the work under these contracts and purchase orders at any time with notice, and such
contracts and purchase orders do not contain minimum purchase obligations.
License Agreement with Ikaria
In February 2014, the Company entered into a cross-license, technology transfer and regulatory matters agreement
with a subsidiary of Ikaria. Pursuant to the terms of the license agreement, Ikaria granted to the Company a fully paid-up,
non-royalty-bearing, exclusive license under specified intellectual property rights controlled by Ikaria to engage in the
development, manufacture and commercialization of nitric oxide, devices to deliver nitric oxide and related services for or
in connection with out-patient, chronic treatment of patients who have PAH, PH-COPD or PH associated with idiopathic
pulmonary fibrosis, or PH-IPF. Pursuant to the terms of the license agreement, the Company granted Ikaria a fully paid-up,
non-royalty-bearing, exclusive license under specified intellectual property rights that the Company controls to engage in
the development, manufacture and commercialization of products and services for or used in connection with the diagnosis,
prevention or treatment, whether in- or out-patient, of certain conditions and diseases other than PAH, PH-COPD or PH-
IPF and for the use of nitric oxide to treat or prevent conditions that are primarily managed in the hospital. The Company
agreed that, during the term of the license agreement, it will not, without the prior written consent of Ikaria, grant a
sublicense under any of the intellectual property licensed to the Company under the license agreement to any of its
affiliates or any third party, in either case, that directly or indirectly competes with Ikaria’s nitric oxide business. In
July 2015, the Company and Ikaria entered into an amendment to the license agreement to expand the scope of the
Company’s license to allow the Company to develop its INOpulse program for the treatment of three additional
indications: chronic thromboembolic PH, or CTEPH, PH associated with sarcoidosis and PH associated with pulmonary
edema from high altitude sickness. Subject to the terms set forth therein, the amendment to the license agreement also
provides that the Company will pay Ikaria a royalty equal to 5% of net sales of any commercialized products for the three
additional indications. In November 2015, the Company entered into an amendment to its exclusive cross-license,
technology transfer and regulatory matters agreement with Ikaria that included a royalty equal to 3% of net sales of any
commercial products for PAH. In April 2018, we expanded the scope of our license from PH-IPF to PH in patients with
Pulmonary Fibrosis (PH-PF), which includes idiopathic interstitial pneumonias, chronic hypersensitivity pneumonitis,
occupational and environmental lung disease, with a royalty equal to 1% of net sales of any commercial products for PH-
PF.
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Agreements Not to Compete
In September 2013, October 2013 and February 2014, the Company entered into an agreement not to compete with
Ikaria, each of which was amended in July 2015, or, collectively, the agreements not to compete. Pursuant to the agreements
not to compete, as amended, the Company agreed not to engage, anywhere in the world, in any manner, directly or indirectly,
until the earlier of five years after the effective date of such agreement not to compete amendments or the date on which Ikaria
and all of its subsidiaries are no longer engaged in such business as specified in the agreements.
(12) Quarterly Financial Data (unaudited)
(in thousands, except share/
and per share data)
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Change in fair value of
common stock warrant
liability
Warrant amendment charge
Interest income and
financing expenses, net
Pre-tax loss
Income tax benefit
Net loss
Weighted average shares
outstanding:
Basic
Diluted
Net loss per share:
Basic
Diluted
o11
Three Months Ended
December 31,
Three Months Ended
September 30,
Three Months Ended
June 30,
Three Months Ended
March 31,
2020
2019
2020
2019
2020
2019
2020
2019
$
$
$
6,136
2,010
8,146
(8,146)
$
2,839
1,476
4,315
(4,315)
$
6,065
2,196
8,261
(8,261)
$
3,259
1,332
4,591
(4,591)
$
3,451
2,308
5,759
(5,759)
$
2,629
1,596
4,225
(4,225)
$
2,238
1,872
4,110
(4,110)
441
—
178
—
319
—
215
—
(193)
—
673
(674)
(300)
(8,005)
—
$
(8,005)
57
(4,080)
—
$
(4,080)
9
(7,933)
—
$
(7,933)
89
(4,287)
—
$
(4,287)
7
(5,945)
2,125
(3,820)
$
121
(4,105)
—
$
(4,105)
(894)
—
34
(4,970)
—
$
(4,970)
2,305
2,037
4,342
(4,342)
1,616
—
130
(2,596)
1,801
(795)
9,491,111
9,491,111
4,566,886
4,566,886
9,491,111
9,491,111
4,553,535
4,553,535
7,554,023
7,554,023
4,543,993
4,543,993
4,615,046
4,615,046
4,346,109
4,346,109
$
$
(0.84)
(0.84)
$
$
(0.89)
(0.89)
$
$
(0.84)
(0.84)
$
$
(0.94)
(0.94)
$
$
(0.51)
(0.51)
$
$
(0.90)
(0.90)
$
$
(1.08)
(1.08)
$
$
(0.18)
(0.18)
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated
the effectiveness of our disclosure controls and procedures as of December 31, 2020. The term “disclosure controls and
procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a
company that are designed to ensure that information required to be disclosed by a company in the reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the
SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the company’s management, including its principal executive and principal financial
officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-
benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as
of December 31, 2020, our principal executive officer and principal financial officer concluded that, as of such date, our
disclosure controls and procedures were effective at the reasonable assurance level.
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Management’s Annual Report on Internal Control Over Financial Reporting
Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a
process designed by, or under the supervision of, the company’s principal executive and principal financial officers and
effected by the company’s board of directors, management and other personnel to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. The company’s internal control over financial reporting includes those policies
and procedures that:
● pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company;
● provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and directors of the
company; and
● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31,
2020. In making this assessment, management used the criteria set forth in the Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on our assessment, management believes that, as of December 31, 2020, our internal control over financial
reporting is effective based on those criteria.
This Annual Report on Form 10-K does not include an attestation report of our independent registered public
accounting firm regarding internal control over financial reporting. Effective April 27, 2020, the SEC adopted amendments
to the “accelerated filer” and “large accelerated filer” definitions in Rule 12b-2 under the Exchange Act. The amendments
exclude from the accelerated and large accelerated filer definitions an issuer that is eligible to be a smaller reporting
company and that had annual revenues of less than $100 million in the most recent fiscal year for which audited financial
statements are available. We determined that our company does not meet the accelerated or large accelerated filer
definitions as of December 31, 2020. For as long as we remain a non-accelerated filer, we intend to take advantage of the
exemption permitting us not to comply with the requirement under Section 404(b) of the Sarbanes-Oxley Act of 2002 that
our independent registered public accounting firm provide an attestation on the effectiveness of our internal control over
financial reporting.
Changes in Internal Control Over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) occurred during the fiscal quarter ended December 31, 2020 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
On March 9, 2021, Andre Moura and Matthew Bennett, who were designees of New Mountain Capital, one of the
Company’s original funders, notified the Company that they will resign from the Board of Directors of the Company and
all committees thereof effective immediately. Messrs. Moura’s and Bennett’s decision was not a result of any disagreement
with the Company on any matter relating to the Company’s operations, policies or practices. Mr. Moura served as a director
of the Company since February 2014 and Mr. Bennett served as a director of the Company since March 2018.
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Item 10. Directors, Executive Officers and Corporate Governance
PART III
Directors
The response to this item is incorporated by reference from the discussion responsive thereto under the captions
“Management and Corporate Governance,” “Delinquent Section 16(a) Reports,” and “Code of Conduct and Ethics” in our
Proxy Statement for the 2021 Annual Meeting of Stockholders (our “2021 Proxy Statement”).
Executive Officers
The following table sets forth the name, age and position of each of our executive officers as of March 8, 2021.
Name
Fabian Tenenbaum
Peter Fernandes
Assaf Korner
Martin Dekker
Amy Edmonds
Parag Shah
Age
47
66
43
48
49
44
Position
Chief Executive Officer
Chief Regulatory and Safety Officer
Chief Financial Officer and Secretary
Vice President of Engineering and Manufacturing
Vice President of Clinical Operations and Administration
Vice President of Business Operations
Fabian Tenenbaum has served as our Chief Executive Officer since November 2016. Prior to then Mr. Tenenbaum
served as Chief Financial Officer and Chief Business Officer from February 2016. Mr. Tenenbaum joined us from
Anterios, Inc. a clinical-stage biopharmaceutical company focused on the development of dermatology products, where he
served as Chief Financial Officer and Chief Business Officer from October 2014 to February 2016. Prior to that,
Mr. Tenenbaum served as Chief Executive Officer with Syneron Beauty from 2011 to October 2014, and Chief Financial
Officer and Executive Vice President of Syneron Medical from May 2007 to 2011. Prior to Syneron Medical,
Mr. Tenenbaum was Vice President Americas for Radiancy, Inc., from 2002 to 2006, and Director, Commercial Operations
and Corporate Development at Sunlight Medical, Inc. from 1999 to 2002. Mr. Tenenbaum holds a Bachelor in Medicine
(B.Md.) from Ben Gurion University, Israel and an MBA from Columbia Business School.
Peter Fernandes has been our Chief Regulatory and Safety Officer since May 2015. Prior to joining us,
Mr. Fernandes was Vice President of Global Regulatory Affairs at Ikaria Inc., from October 2012 to May 2015, and in this
capacity also led our regulatory group since its inception in February 2014. Previously, he led Regulatory Affairs and
Quality Assurance for OptiNose, Inc. from October 2010 to September 2012, was Vice President US Drug Regulatory
Affairs Respiratory and US DRA Respiratory Franchise Head for Novartis Pharmaceuticals from November 2007 to
October 2010. He has also served as the Head of US Development Site and Vice President of Regulatory Affairs and
Quality Assurance at Altana Pharma, a subsidiary of Nycomed Inc., and led the US Respiratory and GI Drug Regulatory
Affairs group at Boehringer Ingelheim. Mr. Fernandes has an M. Pharm. from the Grant Medical College and a B. Pharm.
from the K.M. K College of Pharmacy, both at the University of Bombay in India.
Assaf Korner has served as our Chief Financial Officer and Secretary since January 2018. Prior to joining us,
Mr. Korner served as the Chief Financial Officer of L&R Distributors, a national distributor, since February 2016. Prior to
that, Mr. Korner served as the Chief Financial Officer of Iluminage Beauty, a Joint Venture between Unilever and Syneron
Medical, from 2011 through January 2016. Prior to Iluminage Beauty, Mr. Korner held several senior finance roles in
Syneron Medical from 2005 through 2011. Prior to Syneron Medical, Mr. Korner served as a Senior Auditor at
KPMG. Mr. Korner holds an MBA from Tel-Aviv University, Israel, a Bachelor’s degree in Accounting and Economics
from Haifa University, Israel and is a Certified Public Accountant.
Martin Dekker has served as our Vice President of Engineering and Manufacturing since January 2015. Prior to
joining us, Mr. Dekker held several positions at Spacelabs Healthcare, a company that develops and manufactures
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medical devices, from November 1998 to January 2015, most recently as Director of Global Operations Engineering.
During his time at Spacelabs Healthcare, Mr. Dekker led and co-designed new products, developed and launched
transformative manufacturing technologies and championed cross-functional quality/engineering projects. He is a member
of the Institute of Electrical and Electronic Engineers. Mr. Dekker received a B.S. in electronics from Noordelijke
Hogeschool Leeuwarden, the Netherlands.
Amy Edmonds has served as our Vice President of Clinical Operations and Administration since September 2015
with responsibilities for Clinical Operations, Contracts & Outsourcing, Human Resources and Information Technology.
Ms. Edmonds has over twenty years of global Clinical Operations and Training experience. Prior to joining us in 2014,
Ms. Edmonds was responsible for Ikaria’s Clinical Operations and Contracts & Outsourcing departments from
October 2012 to February 2014 and held several positions of increasing responsibility at Celgene from November 2002
through October 2012. During her time at Celgene, Ms. Edmonds served as Global Clinical Operations Lead for the
Americas for multiple therapeutic programs, the Head of North America Monitoring, and the Head of Clinical Operations
Training. Ms. Edmonds has also worked in Clinical Operations and Training for Pfizer, Knoll Pharmaceuticals and ICON
Clinical Research. Ms. Edmonds holds a Bachelor’s degree from the University of Richmond.
Parag Shah, Ph.D. has served as our Vice President of Business Operations since April 2016 with responsibilities
for Project Management, Supply Distribution, Pre-Clinical and Business Development activities. Prior to joining us,
Dr. Shah was Principal Scientist at Pfizer from 2004 through 2010 where he was responsible for leading multiple parenteral
and liquid formulation development teams. In addition, Dr. Shah was a member of multiple Limited Duration Teams
including serving as Pfizer’s Team Lead for the Nanoparticle Network responsible for internal and external evaluation of
nanoparticle technologies. Dr. Shah joined Ikaria as Parenteral Development Lead in 2010 and assumed additional
responsibilities in 2012 as Director, Pharmaceutical Science, covering both Pharmaceutical Development and Clinical
Supply Management. Dr. Shah received his Bachelor’s degree from Carnegie Mellon and his Ph.D. in Chemical
Engineering from The University of Texas at Austin.
There are no family relationships among any of our executive officers.
Code of Ethics and Code of Conduct
We have adopted a written code of business conduct and ethics that applies to our directors, officers and
employees, including our principal executive officer, principal financial officer, principal accounting officer or controller,
or persons performing similar functions. We have posted a current copy of the code on our website, www.bellerophon.com.
If we make any substantive amendments to, or grant any waivers from, the code of business conduct and ethics for any
officer or director, we will disclose the nature of such amendment or waiver on our website or in a current report on
Form 8-K.
Delinquent Section 16(a) Reports
The information concerning compliance with Section 16(a) of the Securities Exchange Act of 1934 required by
this Item is incorporated by reference to the “Delinquent Section 16(a) Reports” section of our 2021 Proxy Statement.
Item 11. Executive Compensation
The response to this item is incorporated by reference from the discussion responsive thereto under the caption
“Executive Officer and Director Compensation” in our 2021 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The response to this item is incorporated by reference from the discussion responsive thereto under the captions
“Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in our
2021 Proxy Statement.
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Item 13. Certain Relationships and Related Transactions, and Director Independence
The response to this item is incorporated by reference from the discussion responsive thereto under the captions
“Certain Relationships and Related Person Transactions” and “Management and Corporate Governance” in our 2021 Proxy
Statement.
Item 14. Principal Accountant Fees and Services
The response to this item is incorporated by reference from the discussion responsive thereto under the caption
“Independent Registered Public Accounting Firm” in our 2021 Proxy Statement.
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Item 15. Exhibits and Financial Statement Schedules
(1) Financial Statements
PART IV
Our consolidated financial statements are set forth in Part II, Item 8 of this Annual Report on Form 10-K and are
incorporated herein by reference.
(2) Financial Statement Schedules
No financial statement schedules have been filed as part of this Annual Report on Form 10-K because they are not
applicable or are not required or because the information is otherwise included herein.
(3) Exhibits
The exhibits filed as part of this Annual Report on Form 10-K are set forth on the Exhibit Index immediately
following our financial statements. The Exhibit Index is incorporated herein by reference.
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Item 16. Form 10-K Summary
None.
Exhibit
Number
EXHIBIT INDEX
Description of Exhibit
2.1 Plan of Conversion (incorporated by reference to Exhibit 2.1 to the Registrant’s Registration Statement on
Form S 3 (File No. 333 239473) filed with the SEC on June 26, 2020)
2.2 Agreement and Plan of Merger (incorporated by reference to Exhibit 2.2 to the Registrant’s Registration
Statement on Form S 3 (File No. 333 239473) filed with the SEC on June 26, 2020)
3.1 Restated Certificate of Incorporation of the Registrant, as amended, dated July 30, 2018 (incorporated by
reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36845) filed with
the SEC on November 7, 2018)
3.2 Certificate of Amendment to the Restated Certificate of Incorporation of Bellerophon Therapeutics, Inc.,
filed with the Secretary of State of the State of Delaware on February 5, 2020 (incorporated by reference to
Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36845) filed with the SEC on
February 7, 2020)
3.3 Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s
Current Report on Form 8-K (File No. 001-36845) filed with the SEC on February 25, 2015)
4.1 Specimen Stock Certificate evidencing the shares of common stock (incorporated by reference to Exhibit 4.1
to the Registrant’s Registration Statement on Form S-1/A (File No. 333-201474) filed with the SEC on
February 3, 2015)
4.2 Stockholders Agreement, dated February 12, 2015, between the Registrant and Linde North America, Inc.
(incorporated by reference to Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K (File No. 001-
36845) filed with the SEC on March 31, 2015)
4.3 Stockholders Agreement, dated February 12, 2015, among the Registrant and New Mountain Partners II
(AIV-A), L.P., New Mountain Partners II (AIV-B), L.P., New Mountain Affiliated Investors II, L.P. and
Allegheny New Mountain Partners, L.P. (incorporated by reference to Exhibit 4.3 to the Registrant’s Annual
Report on Form 10-K (File No. 001-36845) filed with the SEC on March 31, 2015)
4.4 Form of Warrant Amendment, dated June 28, 2019 , between the Registrant and certain holders identified
therein (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (File
No. 001-36845) filed with the SEC on July 1, 2019)
4.5 Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934 (filed
herewith)
4.6 Form of Senior Indenture (incorporated by reference to Exhibit 4.6 to the Registrant’s Registration Statement
on Form S 3 (File No. 333 239473) filed with the SEC on June 26, 2020)
4.7 Form of Subordinated Indenture (incorporated by reference to Exhibit 4.7 to the Registrant’s Registration
Statement on Form S 3 (File No. 333 239473) filed with the SEC on June 26, 2020)
10.1+ Assumed 2007 Ikaria Stock Option Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s
Registration Statement on Form S-1 (File No. 333-201474) filed with the SEC on January 13, 2015)
10.2+ Assumed 2010 Ikaria Long Term Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s
Registration Statement on Form S-1 (File No. 333-201474) filed with the SEC on January 13, 2015)
10.3+ 2014 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Registration
Statement on Form S-1 (File No. 333-201474) filed with the SEC on January 13, 2015)
10.4+ Form of Option Agreement under 2014 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to
the Registrant’s Registration Statement on Form S-1 (File No. 333-201474) filed with the SEC on
January 13, 2015)
10.5+ Amended and Restated 2015 Equity Incentive Plan (incorporated by reference to Appendix A to the
Registrant’s Definitive Proxy Statement (File No. 001-36845) filed with the SEC on March 20, 2017)
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10.6+ Form of Incentive Stock Option Agreement under 2015 Equity Incentive Plan (incorporated by reference to
Exhibit 10.6 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-201474) filed with the
SEC on February 3, 2015)
10.7+ Form of Nonstatutory Stock Option Agreement under 2015 Equity Incentive Plan (incorporated by reference
to Exhibit 10.7 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-201474) filed with
the SEC on February 3, 2015)
10.8† Amended and Restated License and Commercialization Agreement, dated as of August 26, 2009, among
Ikaria Development Subsidiary One LLC, BioLineRx Ltd. and BioLine Innovations Jerusalem L.P., as
amended (incorporated by reference to Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K (File
No. 001-36845) filed with the SEC on March 31, 2015)
10.9 Form of Agreement Not to Compete, entered into by Ikaria Acquisition LLC and each of the Registrant,
Bellerophon BCM LLC, Bellerophon Pulse Technologies LLC and Bellerophon Services, Inc. (incorporated
by reference to Exhibit 10.9 to the Registrant’s Registration Statement on Form S-1 (File No. 333-201474)
filed with the SEC on January 13, 2015)
10.10† Drug Clinical Supply Agreement, dated as of February 9, 2014, between Bellerophon Pulse
Technologies LLC and INO Therapeutics LLC (incorporated by reference to Exhibit 10.12 to the Registrant’s
Registration Statement on Form S-1 (File No. 333-201474) filed with the SEC on January 13, 2015)
10.11† Exclusive Cross-License, Technology Transfer and Regulatory Matters Agreement, dated February 9, 2014,
between Bellerophon Pulse Technologies LLC and INO Therapeutics LLC, as amended on March 27, 2014
(incorporated by reference to Exhibit 10.14 to the Registrant’s Registration Statement on Form S-1 (File
No. 333-201474) filed with the SEC on January 13, 2015)
10.12 Registration Rights Agreement, dated February 12, 2015, among the Registrant, New Mountain Partners II
(AIV-A), L.P., New Mountain Partners II (AIV-B), L.P., Allegheny New Mountain Partners, L.P., New
Mountain Affiliated Investors II, L.P., ARCH Venture Fund VI, L.P., Venrock Partners, L.P., Venrock
Associates IV, L.P., Venrock Entrepreneurs Fund IV, L.P., Linde North America, Inc., 5AM Ventures LLC
and Aravis Venture I L.P. (incorporated by reference to Exhibit 10.16 to the Registrant’s Annual Report on
Form 10-K (File No. 001-36845) filed with the SEC on March 31, 2015)
10.13 Form of Indemnification Agreement between the Registrant and each of its executive officers and directors
(incorporated by reference to Exhibit 10.17 to the Registrant’s Registration Statement on Form S-1 (File
No. 333-201474) filed with the SEC on January 13, 2015)
10.14+ Employment Agreement, dated June 20, 2014, between Jonathan M. Peacock, the Registrant and Bellerophon
Services, Inc. (incorporated by reference to Exhibit 10.22 to the Registrant’s Registration Statement on
Form S-1 (File No. 333-201474) filed with the SEC on January 13, 2015)
10.15 Form of Management Rights Letter between the Registrant and certain of its stockholders (incorporated by
reference to Exhibit 10.23 to the Registrant’s Registration Statement on Form S-1 (File No. 333-201474)
filed with the SEC on January 13, 2015)
10.16+ Amendment to Assumed Employment Agreement, dated as March 13, 2015, between Jonathan M. Peacock
and the Registrant (incorporated by reference to Exhibit 10.9 to the Registrant’s Quarterly Report on
Form 10-Q (File No. 001-36845) filed with the SEC on May 15, 2015)
10.17+ Offer Letter, dated April 20, 2015, between Peter Fernandes and the Registrant (incorporated by reference to
Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36845) filed with the SEC on
August 14, 2015)
10.18+ Offer Letter, dated December 8, 2014, between Martin Dekker and the Registrant (incorporated by reference
to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36845) filed with the SEC
on August 14, 2015)
10.19 Lease Agreement between 184 Property Owner, LLC and the Registrant dated August 6, 2015 (incorporated
by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36845) filed
with the SEC on November 12, 2015)
10.20 Second Amendment to the Exclusive Cross-License, Technology Transfer, and Regulatory Matters
Agreement between Bellerophon Pulse Technologies LLC and INO Therapeutics LLC, dated July 27, 2015
(incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-
36845) filed with the SEC on November 12, 2015)
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10.21 Form of Amendment to Agreement Not to Compete, entered into by Ikaria Acquisition LLC and each of the
Registrant, Bellerophon BCM LLC, Bellerophon Pulse Technologies LLC and Bellerophon Services, Inc.
dated July 27, 2015 (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on
Form 10-Q (File No. 001-36845) filed with the SEC on November 12, 2015)
10.22+ Offer Letter between Deborah Quinn and the Registrant dated December 8, 2014 (incorporated by reference
to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36845) filed with the SEC
on November 12, 2015)
10.23+ Offer Letter between Amy Edmonds and the Registrant dated February 14, 2014 (incorporated by reference
to Exhibit 10.9 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36845) filed with the SEC
on November 12, 2015)
10.24+ Form of Restricted Stock Agreement under 2015 Equity Incentive Plan (incorporated by reference to
Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36845) filed with the SEC on
December 4, 2015)
10.25 Second Amendment to Drug Clinical Supply Agreement and Third Amendment to Exclusive Cross-License,
Technology Transfer, and Regulatory Matters Agreement, dated November 16, 2015, between Bellerophon
Pulse Technologies LLC and INO Therapeutics LLC (incorporated by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K (File No. 001-36845) filed with the SEC on January 12, 2016)
10.26+ Employment Agreement between the Registrant and Fabian Tenenbaum, effective as of November 11, 2016
(incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC
on November 15, 2016)
10.27+ Amended and Restated Employment Agreement between Jonathan M. Peacock and the Registrant dated
March 12, 2016 (incorporated by reference to Exhibit 10.44 to the Registrant’s Annual Report on Form 10-K
(File No. 001-36845) filed with the SEC on March 21, 2016)
10.28 Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.46 to the Registrant’s
Registration Statement on Form S-1/A (File No. 333-214230) filed with the SEC on November 21, 2016)
10.29 Form of Securities Purchase Agreement, dated May 9, 2017, by and between Bellerophon Therapeutics, Inc.
and the purchaser named therein (incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC
on May 11, 2017)
10.30 Engagement Letter between Bellerophon Therapeutics, Inc. and H.C. Wainwright & Co., LLC, dated as of
May 9, 2017 (incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on May 11, 2017)
10.31 Securities Purchase Agreement, dated September 26, 2017, among the Registrant and the investors named
therein (incorporated by reference to Exhibit 10.1 on Form 8-K filed with the SEC on September 27, 2017)
10.32 Registration Rights Agreement, dated September 26, 2017, among the Registrant and the investors named
therein (incorporated by reference to Exhibit 10.2 on Form 8-K filed with the SEC on September 27, 2017)
10.33+ Offer Letter between Assaf Korner and the Registrant dated December 18, 2017 (incorporated by reference to
Exhibit 5.02 on Form 8-K filed with the SEC on December 20, 2017)
10.34+ Form of Retention Agreement by and between the Registrant and each of all Company’s employees
(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-
36845) filed with the SEC on August 13, 2018)
10.35 Binding Term Sheet and Agreement for Line of Credit Facility dated December 16, 2019 between the
Company and the signatories identified therein (incorporated by reference to Exhibit 10.1 to the Registrant’s
Current Report on Form 8-K (File No. 001-36845) filed with the SEC on December 17, 2019)
10.36 Form of Securities Purchase Agreement, dated as of March 30, 2020, by and among Bellerophon
Therapeutics, Inc. and the Investors. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current
Report on Form 8-K (File No. 001-36845) filed with the SEC on March 30, 2020)
10.37 Advisory Agreement, by and between Bellerophon Therapeutics, Inc. and Angel Pond Capital LLC, dated
May 18, 2020 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
(File No. 001-36845) filed with the SEC on May 20, 2020)
10.38 Subscription Agreement by and between Bellerophon Therapeutics, Inc. and Puissance Life Science
Opportunities Fund VI, dated May 18, 2020 (incorporated by reference to Exhibit 4.1 to the Registrant’s
Current Report on Form 8 K (File No. 001 36845) filed with the SEC on May 20, 2020)
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10.39 Open Market Sale Agreement, dated July 17, 2020, by and between Bellerophon Therapeutics, Inc. and
Jefferies LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
(File No. 001-36845) filed with the SEC on July 17, 2020)
21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to the Registrant’s Registration
Statement on Form S-1 (File No. 333-201474) filed with the SEC on January 13, 2015)
23.1 Consent of KPMG LLP independent registered public accounting firm
31.1 Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange
Act of 1934, as amended
31.2 Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange
Act of 1934, as amended
32 Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. §1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Schema Document
101.CAL Inline XBRL Taxonomy Calculation Linkbase Document
101.LAB Inline XBRL Taxonomy Label Linkbase Document
101.PRE Inline XBRL Taxonomy Presentation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
104 Cover Page Interactive Data File (Formatted as Inline XBRL and contained in Exhibit 101)
*
Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant hereby
undertakes to furnish copies of any of the omitted schedules and exhibits upon request by the Securities and Exchange
Commission.
† Confidential treatment has been granted as to certain portions, which portions have been omitted and separately filed
with the Securities and Exchange Commission.
+ Management contract or compensatory plan or arrangement filed in response to Item 15(a)(3) of the Instructions to the
Annual Report on Form 10-K.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 11, 2021
BELLEROPHON THERAPEUTICS, INC.
By: /s/ Fabian Tenenbaum
Fabian Tenenbaum
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
/s/ Fabian Tenenbaum
Fabian Tenenbaum
Chief Executive Officer and Director
(Principal Executive Officer)
Date
March 11, 2021
/s/ Assaf Korner
Assaf Korner
Chief Financial Officer and Secretary
(Principal Financial Officer and Principal Accounting Officer)
March 11, 2021
/s/ Jonathan M. Peacock
Jonathan M. Peacock
/s/ Naseem Amin
Naseem Amin
/s/ Scott P. Bruder
Scott P. Bruder
/s/ Mary Ann Cloyd
Mary Ann Cloyd
/s/ Crispin Teufel
Crispin Teufel
/s/ Ted Wang
Ted Wang
Chairman
March 11, 2021
March 11, 2021
March 11, 2021
March 11, 2021
March 11, 2021
March 11, 2021
Director
Director
Director
Director
Director
132
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
Exhibit 4.5
As of March 8, 2021, Bellerophon Therapeutics, Inc. (“Bellerophon,” “we,” “us” or the “Company”) had one class of securities
registered under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”): Common Stock, $0.01 par
value per share (“Common Stock”). Each of the Company’s securities registered under Section 12(b) of the Exchange Act are listed on
The Nasdaq Capital Market.
General
The following description of our capital stock and provisions of our restated certificate of incorporation and amended and restated
bylaws are summaries and are qualified by reference to the restated certificate of incorporation and the amended and restated bylaws that
are on file with the Securities and Exchange Commission.
Our authorized capital stock consists of 200,000,000 shares of our common stock, $0.01 par value per share, and 5,000,000 shares of our
preferred stock, $0.01 par value per share, all of which preferred stock is undesignated.
As of March 8, 2021, we had issued and outstanding:
· 9,941,111 shares of our common stock held by 174 stockholders of record;
· options to purchase 712,718 shares of our common stock, at a weighted average exercise price of $23.57 per share; and
· warrant to purchase 2,028,626 shares of our common stock, at a weighted average exercise of $16.61 per shares.
Common Stock
Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not
have cumulative voting rights. Each election of directors by our stockholders will be determined by a plurality of the votes cast by the
stockholders entitled to vote on the election. Holders of common stock are entitled to receive proportionately any dividends as may be
declared by our board of directors, subject to any preferential dividend rights of outstanding preferred stock.
In the event of our liquidation or dissolution, the holders of our common stock are entitled to receive proportionately all assets available
for distribution to stockholders after the payment of all debts and other liabilities and subject to the prior rights of any of our outstanding
preferred stock. Holders of our common stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences
and privileges of holders of our common stock are subject to and may be adversely affected by the rights of the holders of shares of any
series of our preferred stock that we may designate and issue in the future.
Preferred Stock
Under the terms of our restated certificate of incorporation, our board of directors is authorized to issue shares of preferred stock in one
or more series without stockholder approval. Our board of directors has the discretion to determine the rights, preferences, privileges and
restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series
of preferred stock.
The purpose of authorizing our board of directors to issue preferred stock and determine its rights and preferences is to eliminate delays
associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing flexibility in connection with
possible acquisitions, future financings and other corporate purposes, could have the effect of making it more difficult for a third party to
acquire, or could discourage a third party from seeking to acquire, a majority of our outstanding voting stock. There are no shares of
preferred stock currently outstanding, and we have no present plans to issue any shares of preferred stock.
Stockholders Agreements
New Mountain Stockholders Agreement
In February 2015, in connection with our IPO, we entered into a stockholders agreement with the investment funds affiliated with New
Mountain Capital, or the New Mountain Entities, which provides that the New Mountain Entities are entitled to designate one director
for nomination to our board of directors, to designate one director to the board of directors (or equivalent governing body) of each of our
subsidiaries and to appoint the lead director of our board of directors, in each case, for so long as the New Mountain Entities or
certain of their respective assignees beneficially own (i) 50% or more of the sum of (a) the number of shares of our common stock that
they owned immediately prior to the closing of our IPO and (b) the number of shares of common stock, if any, acquired following the
closing of our IPO (subject to in each case adjustment in the event of any stock split, reverse stock split, stock dividend, recapitalization,
combination of shares, reclassification or other similar change in our capitalization) and (ii) 15% or more of our common stock
outstanding (as set forth on the cover of our then most recently filed annual report on Form 10-K or quarterly report on Form 10-Q).
Subject to the same ownership thresholds, the director nominated by the New Mountain Entities is entitled to serve on each committee of
our board of directors and of the board of directors (or equivalent governing body) of each of our subsidiaries and the consent of the New
Mountain Entities is required to establish any new committee of our board of directors or the board of directors (or equivalent governing
body) of any of our subsidiaries, in each case except to the extent prohibited by applicable law or applicable listing exchange rules.
The New Mountain Entities may assign their rights to designate one director for nomination to our board of directors, to designate a
director to the board of directors (or equivalent governing body) of each of our subsidiaries and to appoint the lead director of our board
of directors to a person who acquires, in a transaction other than a registered public offering or a sale pursuant to Rule 144 under the
Securities Act, at least 50% of the aggregate number of shares of our common stock owned, directly or indirectly, by the New Mountain
Entities as of immediately prior to such transaction.
In addition, the stockholders agreement provides that, we are required to obtain the prior written approval of the New Mountain Entities
to take certain actions, including, among other things, actions to:
· consolidate or merge into or with any other person, sell, lease or transfer all or a significant portion of our assets or capital stock
to another person or enter into any other similar business combination transaction, or effect a liquidation;
· authorize, issue, sell, offer for sale or solicit offers to buy any shares of our common stock or any convertible securities or any
other equity or debt securities or rights to acquire any of our or our subsidiaries’ equity or debt securities, subject to certain
exceptions, including among other things, the issuance under our stock incentive plan of grants that have been approved by our
board of directors (or a board committee) and at least one director appointed by the New Mountain Entities;
· incur indebtedness or refinance any indebtedness, in each case in an amount in excess of a specified threshold;
· hire or replace our chief executive officer; or
· agree or otherwise commit to do any of the foregoing (unless the commitment is conditioned on obtaining the approval of the
New Mountain Entities).
These approval rights of the New Mountain Entities will terminate when the New Mountain Entities or certain of their respective
assignees beneficially own either (i) less than 50% of the sum of (a) the aggregate number of shares of our common stock that they
collectively owned immediately prior to the closing of our IPO and (b) the number of shares of our common stock, if any, acquired
following the closing of our IPO (subject to in each case adjustment in the event of any stock split, reverse stock split, stock dividend,
recapitalization, combination of shares, reclassification or similar changes in our capitalization) or (ii) less than 15% of our common
stock outstanding (as set forth on the cover of our then most recently filed annual report on Form 10-K or quarterly report on Form 10-
Q). As of March 5, 2021, the New Mountain Entities held approximately 10.6% of our outstanding common stock.
Linde Stockholders Agreement
In February 2015, in connection with our IPO, we also entered into a stockholders agreement with Linde North America, Inc., an indirect
wholly-owned subsidiary of Linde AG, or Linde, which provides that Linde is entitled to designate one director for nomination to our
board of directors and to designate one director to the board of directors (or equivalent governing body) of each of our subsidiaries, in
each case, for so long as Linde or certain of its assignees beneficially own (i) 50% or more of the sum of (a) the number of shares of our
common stock that they owned immediately prior to the closing of our IPO and (b) the number of shares of common stock, if any,
acquired following the closing of our IPO (subject to in each case adjustment in the event of any stock split, reverse stock split, stock
dividend, recapitalization, combination of shares, reclassification or other similar change in our capitalization) and (ii) 10% or more of
our common stock outstanding (as set forth on the cover of our then most recently filed annual report on Form 10-K or quarterly report
on Form 10-Q). Subject to the same ownership thresholds, the director designated by Linde is entitled to serve on each committee of our
board of directors and of the board of directors (or equivalent governing body) of each of our subsidiaries and the consent of Linde is
required to establish any new committee of our board of directors or the board of directors (or equivalent governing body) of any of our
subsidiaries, in each case except to the extent prohibited by applicable law or applicable listing exchange rules.
Linde may assign its rights to designate one director for nomination to our board of directors and to designate a director for nomination
to the board of directors (or equivalent governing body) of each of our subsidiaries to a person who acquires, in a transaction other than a
registered public offering or a sale pursuant to Rule 144 under the Securities Act, at least 50% of the aggregate number of shares of
our common stock owned, directly or indirectly, by Linde as of immediately prior to such transaction. As of March 8, 2021, Linde held
approximately 3.7% of our outstanding common stock.
Delaware Anti-Takeover Law and Certain Charter and Bylaw Provisions
Delaware Law
We are subject to Section 203 of the Delaware General Corporation Law, which prohibits a publicly-held Delaware corporation from
engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within
the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in a prescribed manner. Subject to certain exceptions,
Section 203 prevents a publicly held Delaware corporation from engaging in a “business combination” with any “interested stockholder”
for three years following the date that the person became an interested stockholder, unless either the interested stockholder attained such
status with the approval of our board of directors, the business combination is approved by our board of directors and stockholders in a
prescribed manner or the interested stockholder acquired at least 85% of our outstanding voting stock in the transaction in which it
became an interested stockholder. A “business combination” includes, among other things, a merger or consolidation involving us and
the “interested stockholder” and the sale of more than 10% of our assets. In general, an “interested stockholder” is any entity or person
beneficially owning 15% or more of our outstanding voting stock and any entity or person affiliated with or controlling or controlled by
such entity or person. The restrictions contained in Section 203 are not applicable to any of our existing stockholders that owned 15% or
more of our outstanding voting stock upon the closing of our IPO.
Staggered Board; Removal of Directors
Our restated certificate of incorporation and our amended and restated bylaws divide our board of directors into three classes with
staggered three-year terms. In addition, a director may be removed only for cause and only by the affirmative vote of the holders of at
least 75% of the outstanding shares of our common stock. In addition, the authorized number of our directors may be changed only by
resolution of our directors, and any vacancy on our board of directors, including a vacancy resulting from an enlargement of our board of
directors, may be filled only by vote of a majority of our directors then in office.
The classification of our board of directors and the limitations on the ability of our stockholders to change the authorized number of
directors, remove directors and fill vacancies could make it more difficult for a third party to acquire, or discourage a third party from
seeking to acquire, control of our company.
Stockholder Action; Special Meeting of Stockholders; Advance Notice Requirements for Stockholder Proposals and Director
Nominations
Our restated certificate of incorporation and our amended and restated bylaws provide that any action required or permitted to be taken
by our stockholders at an annual meeting or special meeting of stockholders may only be taken if it is properly brought before such
meeting and may not be taken by written action in lieu of a meeting. Our restated certificate of incorporation and our amended and
restated bylaws also provide that, except as otherwise required by law, special meetings of the stockholders can only be called by the
chairman of our board of directors, our chief executive officer or our board of directors. In addition, our amended and restated bylaws
establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of stockholders, including
proposed nominations of candidates for election to our board of directors. Stockholders at an annual meeting may only consider
proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of our board of directors,
or by a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has delivered timely
written notice in proper form to our secretary of the stockholder's intention to bring such business before the meeting. These provisions
could have the effect of delaying until the next stockholder meeting stockholder actions that are favored by the holders of a majority of
our outstanding voting securities. These provisions also could discourage a third party from making a tender offer for our common stock,
because even if it acquired a majority of our outstanding voting stock, it would be able to take action as a stockholder, such as electing
new directors or approving a merger, only at a duly called stockholder meeting and not by written consent.
Super-Majority Voting
The Delaware General Corporation Law provides generally that the affirmative vote of a majority of the shares entitled to vote on any
matter is required to amend a corporation's certificate of incorporation or bylaws, unless a corporation's certificate of incorporation or
bylaws, as the case may be, requires a greater percentage. Our amended and restated bylaws may be amended or repealed by a majority
vote of our board of directors or the affirmative vote of the holders of at least 75% of the votes that all our stockholders would be entitled
to cast in any annual election of directors. In addition, the affirmative vote of the holders of at least 75% of the votes that all our
stockholders would be entitled to cast in any election of directors is required to amend, repeal or adopt any provisions inconsistent with
any of the provisions of our restated certificate of incorporation described above.
Exclusive Forum
Our restated certificate of incorporation provides that the Court of Chancery of the State of Delaware shall be the sole and exclusive
forum for (i) any derivative action or proceeding brought on behalf of our company, (ii) any action asserting a claim of breach of a
fiduciary duty owed by any of our directors or officers to the company or our stockholders, (iii) any action asserting a claim against our
company arising pursuant to any provision of the Delaware General Corporation Law or our restated certificate of incorporation or
amended and restated bylaws or (iv) any action asserting a claim against our company or any of our directors or officers governed by the
internal affairs doctrine. Although our restated certificate of incorporation contains the provision described above, it is possible that a
court could rule that such a provision is inapplicable for a particular claim or action or that such provision is unenforceable.
Registration Rights
We have entered into a registration rights agreement with certain holders of our common stock, including our 5% stockholders and their
affiliates and entities affiliated with our directors. The registration rights agreement provides these holders the right to demand that we
file a registration statement or request that their shares be covered by a registration statement that we are otherwise filing.
Demand Registration Rights
At any time or from time to time, subject to specified limitations set forth in the registration rights agreement and to any lock-up period,
the New Mountain Entities or the holders of 10% of our then outstanding shares of common stock, may at any time demand in writing
that we register all or a portion of the shares having rights under the registration rights agreement, which we refer to as the registrable
shares, under the Securities Act if the total amount of registrable shares registered have an aggregate offering price of at least
$10.0 million, unless the registration is of the balance of the registrable shares held by all the parties to the registration rights agreement.
We are not obligated to effect a registration pursuant to this provision on more than six occasions in the case of demands made by the
New Mountain Entities, or on more than two occasions in the aggregate in the case of demands made by the other parties to the
agreement, and we are not obligated to effect a registration pursuant to this provision within 90 days of the effective date of any other
registration statement that we may file pursuant to a demand registration.
Form S-3 Registration Rights
In addition, at any time after we become eligible to file a registration statement on Form S-3, subject to specified limitations set forth in
the registration rights agreement, either the New Mountain Entities or the holders in the aggregate of 10% or more of our outstanding
shares of common stock may demand in writing that we register on Form S-3 all or a portion of the registrable shares so long as the total
amount of registrable shares being registered have an aggregate offering price of at least $10.0 million, unless the registration is of the
balance of the registrable shares held by all the parties to the registration rights agreement.
Incidental Registration Rights
If we propose to file a registration statement under the Securities Act, subject to certain exceptions set forth in the registration rights
agreement, the holders of registrable shares will be entitled to notice of the registration and, subject to specified exceptions in the case of
an underwritten offering, including market conditions, have the right to require us to register all or a portion of the registrable shares then
held by them.
Underwritten Public Offering
In the event that any registration in which the holders of registrable shares participate pursuant to the registration rights agreement is an
underwritten public offering, we agree to enter into an underwriting agreement containing customary representation and warranties and
covenants, including without limitation customary provisions with respect to indemnification of the underwriters of such offering.
Holders of registrable securities must agree to any such underwriting agreement as a condition to participation in the offering. If the total
number of shares, including registrable shares, requested by holders to be included in such offering exceeds the largest number of shares
to be sold (other than by us) that the underwriters believe can be sold in an orderly manner in such underwritten public offering, then we
shall include shares in the offering in accordance with the priority guidelines set forth in the registration rights agreement.
Expenses and Indemnification
Pursuant to the registration rights agreement, we are required to pay all registration expenses, including registration and filing fees,
exchange listing fees, printing expenses and accounting fees and the fees and expenses of one counsel to represent the selling
stockholders, other than any underwriting discounts and commissions, that are related to any demand or incidental registration described
above. The registration rights agreement contains customary cross-indemnification provisions, pursuant to which we are obligated to
indemnify the selling stockholders in the event of material misstatements or omissions in the registration statement attributable to us, and
the selling stockholders are obligated to provide an undertaking pursuant to which they will indemnify us for material misstatements or
omissions in the registration statement attributable to them.
Corporate Opportunity
Our restated certificate of incorporation provides that the doctrine of “corporate opportunity” does not apply to any of our stockholders
or directors, other than in the case of a corporate opportunity that is offered to such person in writing solely in his or her capacity as our
director, officer or employee. Accordingly, our stockholders and directors and their respective representatives have no duty to
communicate or present corporate opportunities to us and have the right to either hold any corporate opportunity for its (and its
representatives') own account and benefit or to recommend, assign or otherwise transfer such corporate opportunity to persons other than
us, other than in the case of a corporate opportunity that is offered to such person in writing solely in his or her capacity as our director,
officer or employee. As a result, our stockholders, directors and their respective affiliates will not be prohibited from investing in
competing businesses or doing business with our customers.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Computershare Trust Company, N.A.
Nasdaq Capital Market Listing
Our common stock is publicly traded on the Nasdaq Capital Market under the symbol “BLPH.”
Provisions of Delaware Law Governing Business Combinations
We are subject to the “business combination” provisions of Section 203 of the DGCL. In general, such provisions prohibit a publicly held
Delaware corporation from engaging in any “business combination” transactions with any “interested stockholder” for a period of three
years after the date on which the person became an “interested stockholder,” unless:
· prior to such date, the board of directors approved either the “business combination” or the transaction which resulted in the
“interested stockholder” obtaining such status; or
· upon consummation of the transaction which resulted in the stockholder becoming an “interested stockholder,” the “interested
stockholder” owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the
“interested stockholder”) those shares owned by (a) persons who are directors and also officers and (b) employee stock plans in
which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer; or
· at or subsequent to such time the “business combination” is approved by the board of directors and authorized at an annual or
special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock which is not owned by the “interested stockholder.”
A “business combination” is defined to include mergers, asset sales and other transactions resulting in financial benefit to a stockholder.
In general, an “interested stockholder” is a person who, together with affiliates and associates, owns 15% or more of a corporation’s
voting stock or within three years did own 15% or more of a corporation’s voting stock. The statute could prohibit or delay mergers or
other takeover or change in control attempts with respect to us and, accordingly, may discourage attempts to acquire us.
Limitations on Liability and Indemnification of Officers and Directors
Section 145 of the DGCL authorizes a court to award, or a corporation’s board of directors to grant, indemnity to directors and officers in
terms sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933. Our amended and restated certificate of incorporation limits the liability of our
officers and directors to the fullest extent permitted by the DGCL, and our amended and restated certificate of incorporation provides that
we will indemnify our officers and directors to the fullest extent permitted by such law.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons
controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
The Board of Directors
Bellerophon Therapeutics, Inc.:
We consent to the incorporation by reference in the registration statements (Nos. 333-232002, 333-230256, 333-225871, 333-219387,
333-210312 and 333-202069) on Form S-8, the registration statements (Nos. 333-239473, 333-225878, 333-221087 and 333-211166) on
Form S-3 and the registration statement (Nos. 333-214773 and 333-214230) on Form S-1 of Bellerophon Therapeutics, Inc. of our report
dated March 8, 2021, with respect to the consolidated balance sheets of Bellerophon Therapeutics, Inc. as of December 31, 2020 and
2019, and the related consolidated statements of operations, comprehensive (loss) income, changes in stockholders’ equity (deficiency in
assets), and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the
“consolidated financial statements”), which report appears in the December 31, 2020 annual report on Form 10-K of Bellerophon
Therapeutics, Inc. Our report includes an explanatory paragraph that states that the Company has changed its method of accounting for
leases as of January 1, 2019 due to the adoption of Accounting Standards Codification (ASC) Topic 842, Leases.
/s/ KPMG LLP
Short Hills, New Jersey
March 11, 2021
Exhibit 31.1
I, Fabian Tenenbaum, certify that:
1. I have reviewed this Annual Report on Form 10-K of Bellerophon Therapeutics, Inc.;
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 11, 2021
By: /s/ Fabian Tenenbaum
Fabian Tenenbaum
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
I, Assaf Korner, certify that:
1. I have reviewed this Annual Report on Form 10-K of Bellerophon Therapeutics, Inc.;
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 11, 2021
By: /s/ Assaf Korner
Assaf Korner
Chief Financial Officer
(Principal Financial Officer)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United
States Code), each of the undersigned officers of Bellerophon Therapeutics, Inc., a Delaware corporation (the “Company”), does hereby
certify, to such officer's knowledge, that:
(1) the Company's Annual Report on Form 10-K for the year ended December 31, 2020 (the “Report”) fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
Date: March 11, 2021
Date: March 11, 2021
By: /s/ Fabian Tenenbaum
Fabian Tenenbaum
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Assaf Korner
Assaf Korner
Chief Financial Officer
(Principal Financial Officer)