Cidara Therapeutics Inc
Annual Report 2018

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K (Mark One)ýýANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018ORooTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THETRANSITION PERIOD FROM TO Commission File Number 001-36912 CIDARA THERAPEUTICS, INC.(Exact name of Registrant as specified in its charter) Delaware 46-1537286(State or Other Jurisdiction ofIncorporation or Organization) (I.R.S. EmployerIdentification No.) 6310 Nancy Ridge Drive, Suite 101San Diego, CA 92121 (858) 752-6170(Address of Principal Executive Offices) (Registrant’s Telephone Number, Including Area Code)Securities registered pursuant to Section 12(b) of the Act: Common Stock, Par Value $0.0001 Per Share; Common Stock traded on the Nasdaq Global MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES o NO ýIndicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES o NO ýIndicate 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 preceding12 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 ýNO oIndicate 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 ý NO oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. oIndicate 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 growthcompany.Large accelerated filer o Accelerated filer xNon-accelerated filer o Small reporting company xEmerging growth company x 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 financialaccounting standards provided pursuant to Section 13(a) of the Exchange Act. oIndicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO ýThe aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of common stock onThe Nasdaq Global Market on June 30, 2018, was approximately $139.5 million.The number of shares of Registrant’s common stock outstanding as of February 20, 2019 was 27,816,014.DOCUMENTS INCORPORATED BY REFERENCEPortions of the Registrant’s definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Schedule 14A in connection with the registrant’s2018 Annual Meeting of Stockholders, which will be filed subsequent to the date hereof, are incorporated by reference into Part III of this Form 10-K. Such definitive proxystatement will be filed with the Securities and Exchange Commission not later than 120 days following the end of the Registrant’s fiscal year ended December 31, 2018.CIDARA THERAPEUTICS, INC.Table of Contents PagePART I Item 1. Business3Item 1A. Risk Factors21Item 1B. Unresolved Staff Comments53Item 2. Properties53Item 3. Legal Proceedings53Item 4. Mine Safety Disclosures53 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities54Item 6. Selected Financial Data54Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations54Item 7A. Quantitative and Qualitative Disclosures About Market Risk60Item 8. Financial Statements and Supplementary Data61Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure81Item 9A. Controls and Procedures81Item 9B. Other Information81 PART III Item 10. Directors, Executive Officers and Corporate Governance82Item 11. Executive Compensation82Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters82Item 13. Certain Relationships and Related Transactions, and Director Independence82Item 14. Principal Accounting Fees and Services82 PART IV Item 15. Exhibits, Financial Statement Schedules83 SIGNATURES CIDARA THERAPEUTICS, INC.SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K contains forward-looking statements. We may, in some cases, use words such as “anticipate,” “believe,” “could,”“estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of those terms, and similarexpressions that convey uncertainty of future events or outcomes to identify these forward-looking statements. Any statements contained hereinthat are not statements of historical facts may be deemed to be forward-looking statements. Forward-looking statements in this Annual Report onForm 10-K include, but are not limited to, statements about:•our anticipated timing for preclinical development, regulatory submissions, commencement and completion of clinical trials and productapprovals;•our plans to research, develop and commercialize our product candidates;•our ability to fund our working capital requirements;•our expected clinical trial designs and regulatory pathways;•our ability to obtain and maintain regulatory approval of our product candidates and any related restrictions, limitations, and/or warnings inthe label of an approved product candidate;•our ability to successfully commercialize, and our expectations regarding future therapeutic and commercial potential with respect to, ourproduct candidates;•the size and growth potential of the markets for our product candidates, and our ability to serve those markets;•the rate and degree of market acceptance of our products that are approved;•our ability to develop sales and marketing capabilities, whether alone or with potential future collaborators;•regulatory developments in the United States and foreign countries;•the performance of our third-party suppliers and manufacturers;•the success of competing therapies that are or may become available;•our expectations for the attributes of our product and development candidates, including pharmaceutical properties, efficacy, safety anddosing regimens;•our estimates of our expenses, ongoing losses, future revenue, capital requirements and our needs for or ability to obtain additionalfinancing;•our ability to obtain and maintain intellectual property protection for our product candidates;•our ability to use our Cloudbreak platform to identify development candidates, or to expand our Cloudbreak platform to other areas ofinfective disease;•our ability to identify and develop new product candidates;•the potential for prophylactic use of any of our product candidates;•our ability to retain and recruit key personnel;•our financial performance; and•developments and projections relating to our competitors or our industry.These forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates andassumptions as of the date of this Annual Report on Form 10-K and are subject to risks and uncertainties. We discuss many of these risks ingreater detail under “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time totime. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to whichany factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we maymake. Given these uncertainties, you should not place undue reliance on these forward-looking statements.You should read this Annual Report on Form 10-K and the documents that we reference and have filed as exhibits to the Annual Report on Form10-K completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of theforward-looking statements in this Annual Report on Form 10-K by these cautionary statements. Except as required by law, we undertake noobligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.2CIDARA THERAPEUTICS, INC.PART IItem 1. Business.OverviewWe are a biotechnology company focused on the discovery, development and commercialization of novel anti-infectives for the treatment ofdiseases that are inadequately addressed by current standard of care therapies. We are developing a pipeline of product and developmentcandidates, with an initial focus on serious fungal infections. Our lead product candidate is rezafungin acetate, an intravenous formulation of anovel echinocandin. Rezafungin is being developed as a once-weekly, high-exposure therapy for the treatment and prevention of serious, invasivefungal infections.In addition, our proprietary Cloudbreak® platform is designed to discover compounds that directly kill pathogens and also direct a patient's immunesystem to attack and eliminate pathogens. Currently, we are using our Cloudbreak platform to develop antibody-drug conjugates, or ADCs, for viralinfections, including influenza, and bacterial infections.We are focused on the anti-infectives market, which we believe has the following advantages for the development of innovative products:•a high correlation between efficacy in preclinical animal models and outcomes of clinical trials for systemic disease;•a regulatory environment that provides developers of anti-infectives opportunities to reduce development costs and time to market;•an ability to commercialize anti-infective products with a focused sales and marketing organization for inpatient and outpatient settings;and•attractive commercial opportunities in certain segments of the market, such as the estimated $4.2 billion global systemic antifungalmarket in which there is high unmet need, high mortality rate and few new agents in development.RezafunginRezafungin is a novel molecule in the echinocandin class of antifungals. We are developing rezafungin for the treatment and prevention of serious,invasive fungal infections. These infections include candidemia and invasive candidiasis, which are fungal infections associated with high mortalityrates.STRIVE clinical trialIn March 2018, we reported topline results from Part A of our global, randomized Phase 2 clinical trial of rezafungin, called the STRIVE trial. InSTRIVE Part A, patients were randomized to one of two rezafungin arms or to the caspofungin arm. In the two rezafungin arms of the trial,patients received either 400 mg of rezafungin administered intravenously once weekly for two to four weeks (Group 1) or 400 mg for the first weekfollowed by 200 mg once weekly for one to three weeks, for a total of two to four weeks (Group 2). In the comparator arm (Group 3), patientsreceived daily caspofungin administered intravenously according to the approved prescribing information, with an optional step down to oralfluconazole. STRIVE Part A met its primary objectives related to tolerability and safety of rezafungin in the treatment of candidemia/invasivecandidiasis, and rezafungin was generally well-tolerated at both dosing regimens.Data from this trial indicated that a 400mg / 200mg dosing regimen of rezafungin had a higher rate of Clinical Cure by PI Assessment at Day 14(86%) and a lower All Cause Mortality at Day 30 (3%) when compared with once daily Caspofungin (71% and 11%, respectively).Cloudbreak PlatformWe believe our Cloudbreak platform is a fundamentally new approach for the treatment of infectious disease, and may have broad potentialapplications across a wide spectrum of infectious diseases, including viral and bacterial infections. The lead program is focused on the treatmentand prevention of the influenza virus. We have generated preclinical, in vivo proof of concept data in both our Cloudbreak antiviral and antibacterialprograms.3CIDARA THERAPEUTICS, INC.Our StrategyOur objective is to become the leading biotechnology company in the discovery, development and commercialization of novel, best-in-class anti-infectives. Key elements of our strategy include:•Rapidly advance rezafungin to commercialization. We plan to leverage the favorable regulatory environment for anti-infectives toexpedite the development of rezafungin.•Develop our Cloudbreak antiviral program in influenza. We expect to nominate a development candidate for influenza in the firstquarter of 2019. We will also continue to establish intellectual property related to the Cloudbreak platform, its applications anddevelopment candidates.•Commercialize products in the United States with a targeted sales force. The anti-infectives market benefits from an ability toaddress large sales opportunities with a relatively small, specialized commercial organization. We currently intend to build and manage atargeted sales and marketing organization to commercialize our products in the United States, addressing the relatively small base of well-defined customers for the treatment and prevention of serious infections in both the hospital and outpatient settings. In geographiesoutside the United States, we may seek to collaborate with other parties to commercialize our products.RezafunginWe acquired rezafungin, a novel echinocandin antifungal agent, in 2014. We believe rezafungin has the potential to be differentiated from otherechinocandins and other classes of antifungal agents based on its prolonged half-life, high Cmax, or maximum concentration reached, safety andtolerability profile, lack of drug-drug interactions, tissue penetration and high AUC, or area under the curve, which measures the overall drugexposure per dose.Rezafungin is being developed as a once-weekly, high-exposure therapy for the treatment and prevention of serious, invasive fungal infections.Overview of Systemic Fungal Infections and the Antifungal MarketFungal infections pose significant medical challenges in both the hospital and outpatient settings. While fungi are ubiquitous in our environment,they are usually harmless for people with a normal immune system. If fungi access and proliferate in the bloodstream, these infections becomesystemic and potentially life-threatening. Risk factors for systemic fungal infections include recent gastrointestinal surgery, broad-spectrumantibiotic use, central vascular catheter placement, use of total parenteral nutrition, renal failure, solid organ transplantation, bone marrowtransplantation, and other forms of immune suppression.We estimate that the annual worldwide sales of prescription systemic antifungals are approximately $4.2 billion. This includes therapies used asprophylaxis (preventive) in the inpatient and outpatient setting, therapies used for the treatment of hospitalized patients, and therapies used for thetreatment of patients who are being discharged from the hospital.The majority of invasive fungal infections are caused by two fungi, Candida and Aspergillus. We estimate that approximately 97,000 Americansmay die from invasive fungal infections each year. Approximately 90 percent of all reported fungal related deaths result from a few common fungi,including Candida, Aspergillus and Pneumocystis. Systemic Candida infections include candidemia and invasive candidiasis. In a 2014 study inthe New England Journal of Medicine, candidemia was shown to be the most common cause of healthcare-acquired bloodstream infections in theUnited States.Despite advances achieved in the diagnosis and treatment of candidemia, these infections continue to cause high mortality rates. According to astudy published in Clinical Infectious Disease (2009), candidemia has a crude mortality rate of 35% within 12 weeks of diagnosis. By contrast, theCDC reports that the mortality rate due to methicillin-resistant staphylococcus aureus, or MRSA, infections is 13%. Further, it is estimated thateach case of candidemia results in an additional 23 days of hospitalization and over $68,000 in additional treatment costs.Physicians’ options for the treatment of fungal infections are limited by a lack of innovative therapies. Several factors have contributed to the lowrate of antifungal drug development, including a previously challenging regulatory environment that necessitated large and costly clinical trials. Asa result of this regulatory environment and other factors, the number of antifungals in development has decreased, while anti-microbial resistancehas increased.The current treatment alternatives for systemic fungal infections, including polyenes, azoles and currently-approved echinocandins, havelimitations that we believe may be addressed by novel antifungals. While these drugs have proven to be efficacious in many patients, mortalityrates remain high, and the polyenes and azoles may cause severe side effects warranting discontinuation and are known to cause changes in adrug's effect on the body when taken together with a second drug, or drug-drug interactions.4CIDARA THERAPEUTICS, INC.Echinocandins, introduced in 2001, are increasingly recommended for the treatment of fungal infections in the United States. In December 2015,the Infectious Diseases Society of America, or the IDSA, released new clinical guidelines that recognize the important role of echinocandins in theinitial treatment of invasive fungal infections. The guidelines recommend a shift to echinocandins as first-line treatment for candidemia andinvasive candidiasis. The currently approved echinocandins include caspofungin, micafungin, and anidulafungin, and are considered both well tolerated and safe relativeto other antifungal drug classes. However, they must be administered daily by intravenous infusion, potentially extending the hospitalization ofpatients for the duration of therapy and limiting their use mainly to the hospital setting. Despite this limitation, the use of echinocandins in theoutpatient setting is growing at approximately ten percent per year, and the total days of therapy for this class are shifting from inpatient tooutpatient therapy. This trend is reflective of an increased need for broad spectrum Candida coverage, increasing azole resistance andcomplications due to the complexity of patients, and a financial incentive to discharge patients earlier to reduce hospital costs.The U.S. Centers for Disease Control and Prevention, or CDC, reports that certain species of Candida are becoming increasingly resistant toavailable antifungals, such as azoles and approved echinocandins. Widespread usage of antifungals in the azole class, in particular, hasstimulated an increase in resistance. Non-albicans Candida, which have a higher rate of azole resistance, now cause approximately two-thirds ofcandidemia cases in the United States. In a recent study of cancer patients with Candida infections from MD Anderson Cancer Center, patientprognosis was inversely correlated with a patient's fungal infection's resistance to caspofungin. Patients infected with the most drug-sensitivestrains had a 28-day survival rate of 75% compared to only 25% for those with caspofungin-resistant strains.In order to be effective, an echinocandin drug should be present early in therapy at an exposure that is as high as is safely possible. The keypharmacokinetic parameters affecting exposure include the drug’s half-life, C max and AUC. The maximum dose that can be used is based on thedrug’s overall safety profile. With echinocandin drugs, high drug exposures early in therapy, as measured by C max or AUC, maximize theantifungal therapeutic benefit of these drugs.When a fungus starts to develop resistance to a drug, the minimum inhibitory concentration, or MIC, rises, which means that a higher drugexposure will be required in order for the drug to have the same efficacy as it has against sensitive strains. Having a C max and an AUC that arefar greater than the starting MIC provides the best chance of treating infections caused by strains resistant to other antifungals, including otherechinocandins. Additionally, the EU label for caspofungin requires higher doses in obese patients. A recent analysis found that micafungin, themarket leader in the United States, achieves 85% - 88% target attainment [against C. glabrata MIC97 of 0.06 mg/L] when given at the higherdosing regimen of 200 mg followed by 150 mg, daily but achieves only 10% - 50% with its approved dose of 100 mg once daily. These factorssuggest the pharmacokinetics of the currently approved echinocandins are not optimal.Despite the widespread continued use of each class of antifungals, we believe that market opportunities exist for novel therapeutics whichcombine the spectrum and safety of the echinocandins, while improving pharmacokinetic characteristics to enable enhanced efficacy andconvenience.Our Solution—Rezafungin for the Treatment and Prevention of Serious Fungal InfectionsDue to its novel chemical structure, rezafungin has a prolonged half-life, a high Cmax and a high AUC. In addition, rezafungin was tested in vitroagainst 27 echinocandin-non-susceptible Candida isolates and demonstrated equivalent or greater potency against these strains compared tocaspofungin, with up to eight-fold greater potency for several isolates. Rezafungin was also tested in vitro against 100 isolates of Candida auris, ahighly resistant emerging strain, including eight isolates that were resistant to other echinocandins, and showed equivalent or better potency (up to64-fold) than the currently available echinocandins against the echinocandin-resistant strains.These factors are in contrast to all other echinocandins, and we believe they can allow rezafungin to be developed as a once-weekly intravenoustherapy for the treatment and prevention of systemic fungal infections. We are developing rezafungin to overcome the limitations of theechinocandin class and other antifungals by offering the following key benefits.•Potential to treat resistant pathogens. We believe that rezafungin can be used to treat fungal infections caused by drug-resistant fungi,including those currently resistant to echinocandins, due to its potency against resistant strains and its higher drug exposure early in thecourse of therapy. We expect that this higher exposure early in the course of disease will improve outcomes in infections caused by bothresistant as well as non-resistant pathogens.•Single-agent treatment. Rather than treating patients with an echinocandin followed by an oral azole solely to enable earlier hospitaldischarge, rezafungin would enable extended single-agent intravenous echinocandin treatment for the full course of therapy, therebyenabling treatment that is consistent with current guidance in the United States and European Union.•Shorter and less costly hospital stays, and lower outpatient costs. Physicians with access to a once-weekly intravenousechinocandin can potentially discharge appropriate patients earlier and thereby reduce hospital5CIDARA THERAPEUTICS, INC.costs, which we believe may account for over 80% of the overall treatment cost of candidemia. Furthermore, early discharge from thehospital setting may reduce the risk for contracting nosocomial infections. For patients discharged on an intravenous echinocandin, once-weekly rezafungin could eliminate significant outpatient infusion costs for once-daily intravenous echinocandin therapy. •Improved compliance. A once-weekly treatment of rezafungin could facilitate compliance by eliminating the need for patients to return toa hospital or outpatient center for a daily dose of an intravenous echinocandin, and could eliminate the likelihood of patient non-compliancefor those receiving oral step down therapy with a daily azole. •Enabling or improving prophylaxis regimens. Some patients cannot receive azole or trimethoprim-sulfamethoxazole prophylactictherapy due to drug interactions or poor tolerability. We expect that once weekly rezafungin therapy could provide for better prophylactictherapy on an inpatient and outpatient basis, particularly for these patients.The FDA has granted rezafungin designations for orphan drug and Qualified Infectious Disease Product, or QIDP for the treatment of candidemiaand invasive candidiasis. The QIDP designation, provided under the Generating Antibiotic Incentives Now Act, or the GAIN Act, offers certainincentives for the development of new antibacterial or antifungal drugs, including eligibility for fast track designation, priority review and, ifapproved by the FDA, eligibility for an additional five years of marketing exclusivity. Fast track designation may enable more frequent interactionswith the FDA to expedite drug development and review. The seven-year period of marketing exclusivity provided through orphan designationcombined with an additional five years of marketing exclusivity provided by the QIDP designation positions rezafungin with a total of 12 years ofpotential marketing exclusivity to be granted at the time of FDA approval. The orphan drug designation provides eligibility for seven years ofmarket exclusivity in the United States upon FDA approval, a waiver from payment of user fees, an exemption from performing clinical studies inpediatric patients, and tax credits for the cost of the clinical research. We have also received QIPD and Fast Track designations for rezafungin forprophylactic use. We plan to seek orphan drug designation for rezafungin for prophylactic use in the United States and Europe.Rezafungin Clinical ResultsSTRIVE Part AIn March 2018, we reported topline results from Part A of our global, randomized Phase 2 clinical trial of rezafungin, called the STRIVE trial.STRIVE is an international, multicenter, double-blind clinical trial evaluating the safety, tolerability and efficacy of once-weekly dosing ofrezafungin compared to once-daily dosing of caspofungin in patients with candidemia and/or invasive candidiasis. In Part A, patients wererandomized to one of two rezafungin arms or to the caspofungin arm. In the two rezafungin arms of the trial, patients received either 400 mg ofrezafungin administered intravenously once weekly for two to four weeks (Group 1) or 400 mg for the first week followed by 200 mg once weeklyfor one to three weeks, for a total of two to four weeks in total (Group 2). In the comparator arm (Group 3), patients received daily caspofunginadministered intravenously according to the approved prescribing information, with an optional step down to oral fluconazole. The STRIVE trialresults we reported include efficacy data from 92 treated patients (the microbiological intent-to-treat, or mITT, population) and safety andtolerability results from 104 patients, from 31 trial sites in North America and Europe. The trial was not statistically powered to demonstratesuperiority or non-inferiority and therefore comparisons of efficacy are directional.STRIVE Part A met its primary objectives related to tolerability and safety of rezafungin in the treatment of candidemia/invasive candidiasis.Topline efficacy data are summarized in Table 1. Overall success is defined as eradication of Candida from the blood or infected organ, plusclinical cure, which is defined as resolution of clinical signs of infection which were present at baseline. Additionally, clinical response is assessedby the principal investigator based on the clinical and microbiological resolution of disease.6CIDARA THERAPEUTICS, INC.Table 1: Overall Response, High APACHE II Score Response, and Principal Investigator (PI) Assessment of Clinical Response at Day 14and All-Cause Mortality in the mITT Populationa Group 1: Rezafungin once weekly 400mgGroup 2: Rezafungin once weekly400mg Week 1/200mgGroup 3: Caspofungin once daily 70 mg Day 1/50 mgn (%)Overall Success (Day 14)19/26 (73%)22/28 (79%)18/26 (69%)Invasive Candidiasis Patients1/2 (50%)5/5 (100%)1/3 (33%)Response: High APACHE II Score Patients6/10 (60%)8/10 (80%)7/12 (58%)Clinical Cure (Day 14) by PI Assessmentb25/32 (78%)24/28 (86%)20/28 (71%)All Cause Mortality (Day 30)c5/33 (15%)1/31 (3%)3/28 (11%)aExcludes indeterminate responses (inability to assess outcome due to missing data point(s)).bOutcome that most closely approximates the primary outcome in prior candidemia/invasive candidiasis clinical trials.cPrimary outcome measure for FDA for planned Phase 3 ReSTORE trial to assess rezafungin in treatment of candidemia and/or invasivecandidiasis.Rezafungin was generally well-tolerated at both dosing regimens. Treatment Emergent Adverse Events, or TEAEs, were observed in mostpatients, with an incidence of 88.6 percent in Group 1, 94.4 percent in Group 2, and 81.8 percent in Group 3.The rates of severe adverse events were 37.1 percent, 27.8 percent, and 39.4 percent, respectively. There were six adverse events leading tostudy drug discontinuation across all study groups: four in Group 1, one in Group 2 and one in Group 3. Two of the six adverse events wereconsidered possibly related to study drug, one in Group 1 and one in Group 3.There were two serious adverse events possibly related to study drug: one in Group 2 and one in Group 3, and both patients fully recovered. Therewere no deaths related to study drug, and there were no concerning trends in System Organ Class groups or specific adverse events.Phase 1 SAD / MAD TrialsIn November 2015, we obtained data from our single ascending dose, or SAD, study of rezafungin. This was a Phase 1, randomized, double-blind,placebo-controlled, dose-escalation study to determine the safety, tolerability, and pharmacokinetics of single intravenous doses of rezafungin inhealthy subjects. Results demonstrated that rezafungin was well tolerated in all dose cohorts after single doses of 50 mg, 100 mg, 200 mg, and400 mg. Rezafungin exhibited a pharmacokinetic profile consistent with preclinical data and supportive of once-weekly dosing.In January 2016, we obtained data from our multiple ascending dose, or MAD, Phase 1 study. This was a Phase 1, randomized, double-blind,placebo-controlled, dose-escalation study to determine the safety, tolerability, and pharmacokinetics of multiple intravenous doses of rezafungin inhealthy subjects. Results demonstrated that rezafungin was well tolerated in all dose cohorts after multiple doses of 100 mg, 200 mg, and 400 mg.Rezafungin exhibited a pharmacokinetic profile consistent with preclinical data and supportive of once-weekly dosing.For both Phase 1 SAD and MAD trials, there were no serious adverse events, or SAEs, severe TEAEs, or relationships for overall TEAEs. Themajority of TEAEs were mild, and all TEAEs completely resolved by the end of the study. There were no drug-related TEAEs resulting fromclinically significant hematology or clinical chemistry laboratory abnormalities at any dose. In addition, there were no safety issues related toelectrocardiograms, vital signs, or physical exam findings.The clinical results of these Phase 1 trials demonstrated that a single dose of rezafungin is sufficient drug exposure for a period of seven days. Incontrast, a single dose of anidulafungin provides sufficient drug exposure for only one day. Rezafungin has the potential to be safely developed asa once-weekly intravenous drug for the effective and convenient treatment and prevention of serious, invasive fungal infections in the inpatient oroutpatient settings.In addition, rezafungin demonstrated a Cmax and an AUC significantly higher than other approved echinocandins. Based on the higher drugexposure demonstrated by rezafungin early in the course of therapy and high, sustained tissue concentration at the site of infection, we believethat rezafungin can be used to treat some fungal infections caused by less susceptible fungi, including some of those currently resistant toechinocandins. We expect that this higher exposure and enhanced tissue penetration early in the course of disease will improve outcomes ininfections caused by both resistant as well as non-resistant pathogens.7CIDARA THERAPEUTICS, INC.Phase 1 DDI StudyIn May 2018, we obtained data from our Phase 1 Drug-Drug Interaction study, or DDI study, to evaluate the potential effects of rezafungin on otherdrugs. We evaluated the pharmacokinetics, or PK, of several drug combinations with and without rezafungin. The results suggested no clinicallysignificant drug-drug interactions with any of the drugs tested including: tacrolimus, repaglinide, metformin, rosuvastatin, pitavastatin, caffeine,efavirenz, midazolam and digoxin. Together with in vitro experiments, we do not expect drug-drug interactions for rezafungin via common drugmetabolism or transport pathways.Phase 1 QT TrialIn March 2018 we announced the results of our definitive Phase 1 QT clinical trial of rezafungin. The QT clinical trial was a Phase 1, single-center,randomized, comparative study of the effect of single-ascending doses of rezafungin, intravenous placebo, and a single oral dose of moxifloxacin(positive control) in healthy adult subjects. The primary objective was to assess the effects of rezafungin on QT interval. Secondary objectivesincluded assessments of other cardiac conduction parameters, including PR intervals, QRS intervals and heart rate. The results of the trialindicated that rezafungin in single intravenous doses up to 1400 mg had no significant effect on QT prolongation or on any of the other cardiacconduction parameters tested.Clinical Development PlanBased on the STRIVE Part A trial results, we have initiated our ReSTORE Phase 3 clinical trial of rezafungin, and continue to discuss withregulatory authorities our plans for the design and initiation of our second Phase 3 trial, the ReSPECT Phase 3 clinical trial.•Phase 3 ReSTORE Treatment Trial: A single, global, randomized, double-blind, controlled Phase 3 pivotal clinical trial in patients withcandidemia and/or invasive candidiasis. The design is similar to the STRIVE trial, except that the only rezafungin dosing regimen that willbe studied is 400 mg for the first week followed by 200 mg once weekly for up to four weeks in total, in comparison to caspofungin in a 1:1randomization regime. The primary efficacy outcome for the FDA is all-cause mortality at day 30, and the primary efficacy outcome for theEMA is global response (clinical, radiological, and mycological response) at day 14. We expect this trial to enroll approximately 184 mITTpatients. This trial began in the third quarter of 2018 and we expect to produce topline results in mid-2020.With the expected size of the ReSTORE trial, we estimate that the total number of patients exposed to our selected dose and duration ofrezafungin treatment will be less than the target safety database of 300 patients. For this reason, as well as to maintain enrollmentmomentum before the start of the Phase 3 trial, we are continuing enrollment at several STRIVE trial sites. This continuation of theSTRIVE trial, which we call STRIVE Part B, will evaluate the 400mg/400mg and 400mg/200mg doses selected from the initial portion ofthe STRIVE trial in comparison to caspofungin in a 1:1 randomization regime. We expect to announce topline results of Part B in mid-2019.•Phase 3 ReSPECT Prophylaxis (Prevention) Trial: A single, global, randomized, double-blind, controlled Phase 3 pivotal clinical trial inpatients undergoing allogeneic blood and marrow transplant to assess rezafungin in a 90-day prophylaxis regimen to prevent infections dueto Candida, Aspergillus and Pneumocystis. Subject to approval of the Phase 3 trial by the U.S. and E.U. regulatory authorities, rezafunginwill be dosed once weekly and compared to a regimen containing two drugs (an azole and Bactrim) dosed once daily for 90 days. Theprimary efficacy outcome for the FDA is expected to be fungal-free survival at day 90. The primary efficacy outcome for the EMA isexpected to be prophylaxis success at day 90. We expect this trial to enroll approximately 462 patients. We plan to conduct an interimfutility analysis after primary endpoint data is available for approximately 50% of the trial's subjects, which we expect to be in mid-2020.Based on these considerations and assuming the successful outcome of ongoing discussions with regulatory authorities, we anticipatecommencing the trial in the first half of 2019 and to announce topline results in the first quarter of 2021.We also plan to conduct a trial with the NIH to evaluate safety, tolerability, and pharmacokinetics for a subcutaneous formulation of rezafungin. Weexpect to commence this trial in the first half of 2019.Cloudbreak PlatformWe believe that our Cloudbreak platform is a fundamentally new approach for the treatment of infectious disease that, in a single molecule, pairspotent antimicrobials with agents that direct the immune system to destroy microbial pathogens. The design of the Cloudbreak platform recognizesthat infectious disease is often due to a temporary deficiency in the function of the immune system to address potentially life-threateninginfections. Our Cloudbreak molecules are designed to address this deficiency by directly acting against the pathogen while recruiting componentsof the patient’s immune8CIDARA THERAPEUTICS, INC.system to the site of infection, enabling more effective treatment. Similar to the way that immunotherapy has the potential to transform thetreatment of cancer by redirecting the immune system to destroy cancer cells, we believe that our Cloudbreak platform has the potential totransform the treatment of infectious disease caused by a variety of bacterial, fungal and viral pathogens.Cloudbreak has the potential to incorporate both small and large molecule approaches. In either case, the Cloudbreak candidates would attackpathogens via two routes consisting of a targeting moiety, or TM, that binds a conserved cell surface target and an effector moiety, or EM, thatengages and directs the immune system. The coupling of the TM to the EM results in a bispecific molecule with intrinsic antimicrobial activity thatcan also direct the immune system specifically to the targeted pathogen.Our Cloudbreak development candidates have the potential to feature the following attributes:•small or large molecule components with antimicrobial activity that bind conserved targets on the surface of the pathogen;•selective binding to pathogens to amplify their immunogenicity (recognition by the immune system) and thereby efficient recruitment of theinnate and adaptive immune system to assist in the rapid eradication of the pathogen;•use as adjunctive therapy along with standard of care regimens; and•broad applicability in the treatment and prevention of infectious diseases.We have generated preclinical in vitro and in vivo proof of concept data in both our Cloudbreak antiviral and antibacterial programs. Below wediscuss the results of our Cloudbreak antiviral program for influenza.Cloudbreak Antiviral ProgramInfluenza, or flu, is a respiratory infection caused by influenza viruses. The flu virus can cause mild to severe illness, and at times can lead todeath. Young children, adults older than 65 years, pregnant women and immunocompromised patients are more prone to infection, but evenhealthy people are at risk of infection with seasonal flu. In 2017, the CDC estimated that between 291,000 and 646,000 people worldwide die frominfluenza each year.In the U.S., the CDC estimated that during the 2017-18 flu season almost 50 million people became ill from the flu, resulting in approximately onemillion hospitalizations and $10.4 billion per year in direct medical expenses and an additional $16.3 billion per year in lost earnings. The CDC alsoestimated that almost 80,000 people died during the 2017-18 flu season, which makes it one of the most severe in recent history.The primary preventive measure to protect against flu is the seasonal vaccine. However, in recent years the efficacy of the vaccine has varied,with recent studies estimating that the flu vaccine reduces the risk of flu illness by between 38% and 62%, depending on the virus strain and ageand health of the recipient, among other factors. In years when the seasonal vaccine results in sub-optimal protection, more patients are at higherrisk for serious complications resulting from the flu. Vulnerable patient populations must then rely upon therapeutic options.Older antiviral medications, such as amantadine and rimantadine, are no longer recommended for use because of high levels of resistance.Currently, four antiviral drugs are recommended by the CDC for treating the flu:•oseltamivir phosphate (Tamiflu®)9CIDARA THERAPEUTICS, INC.•zanamivir (Relenza®)•peramivir (Rapivab®)•baloxavir marboxil (Xofluza™)The above list includes neuraminidase inhibitors and the recently approved cap-dependent endonuclease inhibitor, baloxavir. These moleculeshave one or more of the following limitations: short half-life; high susceptibility to resistance; multi-dose regimens; and dosing route limitations.The current therapies should be administered within 48 hours of symptom onset to be effective.Pre-Clinical Studies of CB-012 for FluWe plan to develop novel ADCs that provide a direct and sustained antiviral effect and engage the immune system for additional potency. Wehave run multiple studies to test the efficacy of CB-012, one of several potential Cloudbreak flu antivirals we are evaluating, and initial resultsindicate it may have efficacy in both the treatment and prophylaxis settings.In Vitro Studies Measuring CB-012 Potency Against Multiple Flu StrainsWe evaluated CB-012 in vitro for its ability to inhibit viral replication in a human epithelial cell line versus a range of seasonal and pandemicInfluenza A strains, including H1N1, H3N2 and H5N1, as well as Influenza B. CB-012 showed potent activity against all of the strains tested,including influenza B, which is less sensitive to oseltamivir phosphate.In Vivo Studies Measuring CB-012 Potency Against Multiple Flu Strains in Lethal Infection ModelsWe evaluated CB-012 in vivo in lethal mouse models of H1N1 and H3N2 compared to oseltamivir phosphate. CB-012 provided 100% protectionagainst both H1N1 and H3N2 using single, low doses, while oseltamivir phosphate required twice daily dosing for 5 days to protect 100% and 80%of mice from death in the H1N1 and H3N2 models, respectively. CB-012 was able to provide the same protection as oseltamivir phosphate inthese models at approximately 1/500th to 1/1000th the cumulative dose.In both studies, we also measured the average body weights of the mice over time to support the survival data with CB-012. The CB-012 dosedmice maintained stable body weights over the 14 day course of the experiment demonstrating the potency of CB-012 at low doses and the potencyand tolerability of CB-012 at high doses. The mice dosed with oseltamivir phosphate showed approximately 10% loss of body weight upondiscontinuation of treatment after the five-day treatment cycle, suggesting that the influenza virus was not eradicated upon cessation of treatment.Body weights for the mice dosed with oseltamivir phosphate recovered as their immune system overcame the disease.Additional pre-clinical toxicity studies in rats indicate the potential for a broad safety margin for CB-012 with no signs of acute or chronic toxicity atover 100-fold the efficacious dose in prophylactic efficacy models.In Vivo Study Evaluating CB-012 as a Long-Acting Prophylactic Agent Against FluWe tested mean plasma concentrations of CB-012 in mice and based on the long half life we observed, we evaluated CB-012 in vivo in a lethalmouse model of H1N1 by administering CB-012 to the mice 28 days before we administered the flu challenge. CB-012 provided 100% protectionfrom mortality across a broad range of dose levels, demonstrating its potential suitability as a long-acting prophylactic agent.In Vivo Study Measuring CB-012 Treatment Window Against FluWe evaluated CB-012 and oseltamivir phosphate in vivo in a lethal mouse model of H1N1 by challenging the mice with flu and then administeringantiviral treatment at different time periods after challenge. CB-012 and oseltamivir phosphate both provided 100% protection against flu whendosed up to 24 hours post-infection. However, when anti-viral treatment was administered at 48- and 72-hours post-infection, a single dose of CB-012 was more effective at reducing mortality than multiple doses of oseltamivir phosphate, even though the single dose of CB-012 wassubstantially lower than the cumulative dose of oseltamivir phosphate.Potential Advantages of Cloudbreak Antibody-Drug ConjugatesBased on our pre-clinical studies and the inherent mode of action, the ADCs we are evaluating may offer several potential advantages overvaccines, small molecule antiviral treatments, and monoclonal antibodies.Long-acting: A single dose may provide months of protection from flu, with antibody-like half-life.10CIDARA THERAPEUTICS, INC.Broad Coverage: While estimates of the efficacy of the flu vaccine have ranged from 10% to 60% for the past 14 flu seasons, the ADCs mayprovide broad coverage against seasonal and pandemic Influenza A and seasonal Influenza B viruses, including oseltamivir phosphate-resistantviruses.Potent TM Activity: ADCs may protect immune-compromised patients who cannot mount a sufficient immune response to a vaccine.Superior Resistance Profile: ADCs are expected to be less prone to resistance because they target highly conserved regions of the virus andhave bi-functional modality. For example, H3N2 is poorly covered by the seasonal flu vaccine due to the fact that it rapidly mutates. According tothe CDC, vaccine efficacy rates are less than 30% against H3N2.Manufacturing: ADCs may be more reliable to manufacture than the current vaccine manufacturing processes.Cloudbreak Antibacterial ProgramIn May 2018, we and Rutgers University were awarded a five year, $5.5 million partnership grant from the U.S. National Institute of Allergy andInfectious Diseases, or the NIAID. The grant will fund continued research and development of our Cloudbreak antibacterial program to identifynovel immunotherapy agents for the treatment and prevention of serious and life-threatening multi-drug resistant Gram-negative bacterial infectionsin high-risk populations. We began work under this grant in July 2018 but have not recognized any potential reimbursements for the year endedDecember 31, 2018 as the subaward agreement between us and Rutgers University has not yet been executed.ManufacturingWe do not own or operate, and currently have no plans to establish, any manufacturing facilities. We currently rely, and expect to continue to rely,on third parties to manufacture supplies of rezafungin, any Cloudbreak development candidates, and any future product candidates.Our third-party contract manufacturers are currently producing, and will produce in the future, our product and development candidates for use inour preclinical studies and clinical trials utilizing reliable and reproducible processes and common manufacturing techniques. We obtain oursupplies from manufacturers on a purchase order basis and do not have any long-term arrangements. In addition, we do not currently have anylong-term arrangements in place for bulk drug substance or drug product services. We intend to identify and qualify additional manufacturers toprovide bulk drug substance and drug product services prior to submission of any NDA to the FDA as necessary to ensure sufficient commercialquantities of each product.Intellectual PropertyThe proprietary nature of, and protection for, rezafungin, our ADCs, our Cloudbreak platform, our processes and our know-how are important to ourbusiness. We seek to protect our proprietary position through patent protection in the United States and internationally where available and whenappropriate. Our policy is to pursue, obtain, maintain and defend patent rights, developed internally and/or potentially licensed from third parties,and to protect the technology, inventions and improvements that are commercially important to the development of our business. We also rely ontrade secrets that may be important to the development of our business. We cannot be sure that patents will be granted with respect to any of ourpending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patentsor any patents that may be granted to us in the future will be commercially useful in protecting our inventions, improvements and technology. Forthis and more comprehensive risks related to our intellectual property, please see “Risk Factors-Risks Related to Our Intellectual Property.”Our success will depend significantly on our ability to:•obtain and maintain patent and other proprietary protection for the technology, inventions and improvements we consider important to ourbusiness;•defend and enforce our current and potential future patents;•preserve the confidentiality of our trade secrets; and•operate our business without infringing the patents and proprietary rights of third parties.We have established, and will continue to build, proprietary positions for rezafungin, any other product candidates and technology in the UnitedStates and abroad. As of February 28, 2019, our patent portfolio included 13 families of patents and patent applications related to various aspectsof rezafungin, and nine families of patent applications related to our Cloudbreak platform.For our issued patents related to rezafungin, we expect the last to expire in 2033, excluding any additional term for patent term adjustments orapplicable patent term extensions.11CIDARA THERAPEUTICS, INC.With respect to our Cloudbreak platform, any patents that result from our currently pending applications would be expected to expire between 2037and 2039, excluding any additional term for patent term adjustments or applicable patent term extensions.Market exclusivity is the exclusive marketing right granted by the FDA and certain foreign equivalents upon the approval of a drug if certainstatutory requirements are met. When granted, the applicable regulatory authority will not approve another application to market the same drug forthe same indication during the period of market exclusivity. The length of market exclusivity depends on the type of exclusivity granted. We intendto seek market exclusivity on our product candidates where appropriate.We have received orphan drug designation from the FDA for rezafungin for the treatment of candidemia and invasive candidiasis. An orphan drugdesignation by the FDA makes rezafungin eligible for seven years of market exclusivity in candidemia and invasive candidiasis.In addition to the orphan drug designation, rezafungin was designated as a Qualified Infectious Disease Product under the GAIN Act, making iteligible for an additional five years of market exclusivity.Further, we seek trademark protection in the United States and internationally where available and when appropriate. We have filed for trademarkprotection in several countries for the Cidara trademark, which we use in connection with our pharmaceutical research and development servicesand our pharmaceutical compounds. We currently have registered trademarks for the Cidara mark in the United States, the European Union, andAustralia and pending trademark applications in Canada, and we have a registered trademark for the Cloudbreak mark in the United States for ourpharmaceutical preparations for the treatment or prevention of infectious diseases.CompetitionThe biopharmaceutical industry is characterized by intense and dynamic competition to develop new technologies and proprietary therapies. Anyproduct candidates that we successfully develop and commercialize will have to compete with existing therapies and new therapies that maybecome available in the future. We believe that rezafungin and any Cloudbreak development candidates we pursue in the future, paralleled with ourscientific and development expertise in the field of anti-infectives, provide us with competitive advantages over our peers. However, we facepotential competition from various sources, including larger and better-funded pharmaceutical, specialty pharmaceutical, and biotechnologycompanies, as well as from generic drug manufacturers, academic institutions, governmental agencies and public and private research institutions.Rezafungin will primarily compete with antifungal classes for the treatment of candidemia and invasive candidiasis, which include polyenes, azolesand echinocandins. The approved branded therapies for this indication include Cancidas (caspofungin, marketed by Merck & Co.), Eraxis(anidulafungin, marketed by Pfizer, Inc.) and Mycamine (micafungin, marketed by Astellas Pharma US, Inc.). There will be generic versions of oneor more of the current echinocandins available at the time of rezafungin regulatory approval, which will create added competition. In addition, thereare other generic products approved for candidemia, marketed by companies such as Baxter Healthcare Corporation, Mylan Inc. and GlenmarkGenerics Inc., among others. In addition to approved therapies, we expect that rezafungin will compete with product candidates that we are awareof in clinical development by third parties, such as SCY-078, which is being developed by Scynexis, Inc.We expect that any antiviral drug candidates developed through our Cloudbreak antiviral program for influenza will compete against approved andinvestigational agents for the treatment of viral influenza infections, including neuraminidase inhibitors such as Tamiflu, Relenza, and Peramivir,and endonuclease inhibitors such as Xofluza. We intend to develop other product candidates through our Cloudbreak platform for the treatment ofinvasive infections. We are aware of a number of approved and investigational therapies in these areas.Many of our competitors, either alone or with their strategic partners, have substantially greater financial, technical and human resources than wedo and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals oftreatments and commercializing those treatments. These same competitors may invent technology that competes with our Cloudbreak platform.Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated among asmaller number of our competitors. These competitors also compete with us in recruiting and retaining qualified scientific and managementpersonnel and establishing clinical study sites and subject enrollment for clinical studies, as well as in acquiring technologies complementary to, ornecessary for, our programs. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborativearrangements with large and established companies.We expect any treatments that we develop and commercialize to compete on the basis of, among other things, efficacy, safety, convenience ofadministration and delivery, price, the level of generic competition and the availability of reimbursement from government and other third-partypayors.12CIDARA THERAPEUTICS, INC.Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective,have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors alsomay obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in ourcompetitors establishing a strong market position before we are able to enter the market. In addition, we expect that our products, if approved, willbe priced at a significant premium over competitive generic products and our ability to compete may be affected in many cases by insurers orother third-party payors seeking to encourage the use of generic products.Government RegulationGovernment authorities in the United States, at the federal, state and local level and in other countries extensively regulate, among other things,the research, development, testing, manufacture, including any manufacturing changes, packaging, storage, recordkeeping, labeling, advertising,promotion, distribution, marketing, post-approval monitoring and reporting, import and export of pharmaceutical products, such as those we aredeveloping.United States Drug Approval ProcessIn the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations. Theprocess of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulationsrequires the expenditure of substantial time and financial resources. Failure to comply with the applicable United States requirements at any timeduring the product development process, approval process or after approval may subject an applicant to a variety of administrative or judicialsanctions, such as the FDA’s refusal to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warningletters and untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals ofgovernment contracts, restitution, disgorgement of profits or civil or criminal penalties.The process required by the FDA before a drug may be marketed in the United States generally involves the following:•contract manufacturing expenses, primarily for the production of clinical supplies;•completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practice, orGLP, regulations;•submission to the FDA of an investigational new drug application, or IND, which must become effective before human clinical trials maybegin;•approval by an independent institutional review board, or IRB, at each clinical site before each trial may be initiated;•performance of adequate and well-controlled human clinical trials in accordance with good clinical practices, or GCP, to establish thesafety and efficacy of the proposed drug for each indication;•submission to the FDA of a new drug application, or NDA;•satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assesscompliance with current good manufacturing practices, or cGMP, requirements and to assure that the facilities, methods and controls areadequate to preserve the drug’s identity, strength, quality and purity; and•FDA review and approval of the NDA.Preclinical Studies and INDPreclinical studies include laboratory evaluation of product chemistry and formulation, as well as in vitro and animal studies to assess the potentialfor adverse events, and in some cases, to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federalregulations and requirements, including GLP regulations for safety/toxicology studies. An IND sponsor must submit the results of the preclinicaltests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among otherthings, to the FDA as part of an IND. Some long-term preclinical 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, theFDA raises concerns or questions related to one or more proposed clinical trials and places the trial on clinical hold. In such a case, the INDsponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not resultin the FDA allowing clinical trials to commence.13CIDARA THERAPEUTICS, INC.Clinical TrialsClinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators inaccordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consentin writing before their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, theobjectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for each clinicaltrial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB at each institutionparticipating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB mustconduct continuing review. The IRB must review and approve, among other things, the study protocol and informed consent information to beprovided to study subjects. An IRB must operate in compliance with FDA regulations.Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health for public dissemination atwww.clinicaltrials.gov. Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:•Phase 1: The drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety,dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness.•Phase 2: The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarilyevaluate 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 in adequate and well-controlled clinical trials to generate sufficientdata to statistically confirm the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the productand to provide adequate information for the labeling of the product.Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and, more frequently, if serious adverseevents 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 arebeing exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinicaltrial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm topatients.Marketing ApprovalAssuming successful completion of the required clinical testing, the results of the preclinical studies and clinical trials, together with detailedinformation relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as partof an NDA requesting approval to market the product for one or more indications. Under federal law, the submission of most NDAs is additionallysubject to a substantial application fee, and the sponsor of an approved NDA is also subject to annual program fees, which are typically increasedannually.The FDA conducts a preliminary review of all NDAs within the first 60 days after submission before accepting them for filing to determine whetherthey are sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. Inthis event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before theFDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA has agreed tospecified performance goals in the review of NDAs. Under these goals, the FDA has committed to review most such applications for non-priorityproducts within 10 months, and most applications for priority review products, that is, drugs that the FDA determines represent a significantimprovement over existing therapy, within six months from filing. The review process may be extended by the FDA for three additional months toconsider certain information or clarification regarding information already provided in the submission. The FDA may also refer applications for noveldrugs or products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and otherexperts, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by therecommendations of an advisory committee, but it considers such recommendations carefully when making decisions.The testing and approval process requires substantial time, effort and financial resources, and each may take many years to complete. Dataobtained from clinical activities are not always conclusive and may be susceptible to varying interpretations, which could delay, limit or preventregulatory approval. The FDA may not grant approval on a timely basis, or at all. We may encounter difficulties or unanticipated costs in our effortsto develop our product candidates and secure necessary governmental approvals, which could delay or preclude us from marketing our products.14CIDARA THERAPEUTICS, INC.After the FDA’s evaluation of the NDA and inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete responseletter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A completeresponse letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for theFDA 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 ofinformation included. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy theregulatory criteria for approval and refuse to approve the NDA. Even if the FDA approves a product, it may limit the approved indications for use ofthe product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, includingPhase 4 clinical trials, be conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor theproduct after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, includingRisk Evaluation and Mitigation Strategies, or REMs, which can materially affect the potential market and profitability of the product. The FDA mayprevent or limit further marketing of a product based on the results of post-market studies or surveillance programs. After approval, some types ofchanges to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to furthertesting requirements and FDA review and approval.Fast Track DesignationThe FDA is required to facilitate the development and expedite the review of drugs that are intended for the treatment of a serious or life-threatening condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for thecondition. Under the fast track program, the sponsor of a new product candidate may request the FDA to designate the product for a specificindication as a fast track product concurrent with or after the submission of the IND for the product candidate. The FDA must determine if theproduct candidate qualifies for fast track designation within 60 days after receipt of the sponsor’s request.In addition to other benefits, such as the ability of the sponsor to use surrogate endpoints in the evaluation of the pivotal clinical trials and havemore frequent interactions with the FDA, the FDA may initiate review of sections of a fast track product’s NDA before the application is complete.This rolling review is available if the applicant provides and the FDA approves a schedule for the submission of the remaining information and theapplicant pays applicable user fees. However, the FDA’s time period goal for reviewing a fast track application does not begin until the last sectionof the NDA is submitted. In addition, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longersupported by data emerging in the clinical trial process.Priority ReviewUnder FDA policies, a product candidate may be eligible for priority review, or review generally within a six-month time frame from the time acomplete application is received. Products regulated by the FDA’s Center for Drug Evaluation and Research, or CDER, are eligible for priorityreview if they provide a significant improvement compared to marketed products in the treatment, diagnosis or prevention of a disease. A fasttrack designated product candidate would ordinarily meet the FDA’s criteria for priority review.Breakthrough Therapy DesignationA breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the product candidate may demonstrate substantial improvementover existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinicaldevelopment. Drugs designated as breakthrough therapies are also eligible for accelerated approval. The FDA must take certain actions, such asholding timely meetings and providing advice, intended to expedite the development and review of an application for approval of a breakthroughtherapy. Even if a product candidate qualifies for one or more of these programs, the FDA may later decide that the product candidate no longermeets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.Orphan DrugsUnder the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which is generallydefined as a disease or condition that affects fewer than 200,000 individuals in the United States. Orphan drug designation must be requestedbefore submitting an NDA. After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosedpublicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approvalprocess.15CIDARA THERAPEUTICS, INC.The first NDA applicant to receive FDA approval for a particular active ingredient to treat a particular disease with FDA orphan drug designation isentitled to a seven-year exclusive marketing period in the United States for that product and for that indication. During the seven-year exclusivityperiod, the FDA may not approve any other applications to market the same drug for the same orphan indication, except in limited circumstances,such as a showing of clinical superiority to the product with orphan drug exclusivity in that it is shown to be safer, more effective or makes a majorcontribution to patient care. Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition, orthe same drug for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and awaiver of the NDA application user fee.Qualified Infectious Disease ProductsIn response to the growing unmet medical need in the area of serious bacterial infections, the Generating Antibiotic Incentives Now Act, or theGAIN Act, is intended to provide incentives, including, for example, access to expedited FDA review for approval and five years of potentialmarket exclusivity extension, for the development of new, qualified infectious disease products, or QIDP, including antibacterial or antifungal drugsintended to treat serious or life-threatening infections that are resistant to treatment, or that treat qualifying resistant pathogens identified by theFDA. A sponsor must request QIDP designation for a new drug before an NDA is submitted. If designated as a QIDP and approved, the drug iseligible for an additional five years of exclusivity beyond any period of exclusivity to which it would have otherwise been entitled. In addition, aQIDP receives NDA priority review and fast track designation.Pediatric Exclusivity and Pediatric UseUnder the Best Pharmaceuticals for Children Act, or the BPCA, certain drugs may obtain an additional six months of exclusivity if the sponsorsubmits information requested in writing by the FDA, or a Written Request, relating to the use of the active moiety of the drug in children. The FDAmay issue a Written Request for studies on unapproved or approved indications, but it may not issue a Written Request where it determines thatinformation relating to the use of a drug in a pediatric population, or part of the pediatric population, may not produce health benefits in thatpopulation.In addition, the Pediatric Research Equity Act, or PREA, requires a sponsor to conduct pediatric studies for most drugs and biologics, for a newactive ingredient, new indication, new dosage form, new dosing regimen or new route of administration. Under PREA, original NDAs, biologicslicense applications and supplements thereto, must contain a pediatric assessment unless the sponsor has received a deferral or waiver. Unlessotherwise required by regulation, PREA does not apply to any drug for an indication for which an orphan drug designation has been granted. Therequired assessment must assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulationsand support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA mayrequest a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including afinding that the drug or biologic is ready for approval for use in adults before pediatric studies are complete or that additional safety oreffectiveness data needs to be collected before the pediatric studies begin.Other Regulatory RequirementsAny drug manufactured or distributed by us pursuant to FDA approvals is 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 andreporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or otherlabeling claims are subject to prior FDA review and approval.The FDA may impose a number of post-approval requirements, including REMs, as a condition of approval of an NDA. For example, the FDA mayrequire post-marketing testing, including Phase 4 clinical trials, and surveillance to further assess and monitor the product’s safety andeffectiveness after commercialization.In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register theirestablishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies forcompliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval beforebeing implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting anddocumentation requirements upon us and third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue toexpend time, money and effort in the areas of production and quality control to maintain cGMP compliance.Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or ifproblems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events ofunanticipated severity or frequency, or with manufacturing16CIDARA THERAPEUTICS, INC.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 imposition of distribution or other restrictions under a REMsprogram. Other potential consequences 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 applications or supplements to approved applications, or suspension or revocation of productlicense approvals;•product seizure or detention, or refusal to permit the import or export of products; or •consent decrees, injunctions or the imposition of civil or criminal penalties.The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted onlyfor the approved indications and in accordance with the provisions of the approved label. However, companies may share truthful and notmisleading information that is otherwise consistent with the product's FDA approved labeling. The FDA and other agencies actively enforce thelaws and regulations prohibiting the promotion of off label uses, and a company that is found to have improperly promoted off label uses may besubject to significant liability.Additional ProvisionsIn addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws restrict our businessactivities, including certain marketing practices. These laws include, without limitation, anti-kickback laws, false claims laws, data privacy andsecurity laws, as well as transparency laws regarding payments or other items of value provided to healthcare providers.The federal healthcare program anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receivingremuneration to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item, good,facility or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term “remuneration” has been broadlyinterpreted to include anything of value. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on theone hand and prescribers, purchasers and formulary managers on the other hand. Although there are a number of statutory exceptions andregulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions, but the exceptions and safe harborsare drawn narrowly and practices that involve remuneration that are alleged to be intended to induce prescribing, purchases or recommendationsmay be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicablestatutory exception or regulatory safe harbor does not make the conduct per se illegal under the federal healthcare program anti-kickback statute.Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all its facts and circumstances.Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is toinduce referrals of federal healthcare covered business, the federal healthcare program anti-kickback statute has been violated. Additionally, theintent standard under the federal healthcare program anti-kickback statute was amended by the Patient Protection and Affordable Care Act of2010, as amended by the Health Care and Education Reconciliation Act of 2010, collectively the Affordable Care Act, to a stricter standard suchthat a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.In addition, the Affordable Care Act codified case law that a claim including items or services resulting from a violation of the federal healthcareprogram anti-kickback statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.Federal false claims laws, including the federal civil False Claims Act, and civil monetary penalties laws, prohibit any person or entity from, amongother things, knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, orcausing to be made, a false statement to have a false claim paid. Pharmaceutical and other healthcare companies have been prosecuted underthese laws for, among other things, allegedly inflating drug prices they report to pricing services, which in turn were used by the government to setMedicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customers wouldbill federal programs for the product. In addition, certain marketing practices, including off-label promotion, may also violate false claims laws.The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal civil and criminal statutes thatprohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program,including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminalinvestigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materiallyfalse, fictitious or17CIDARA THERAPEUTICS, INC.fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Like the federal healthcare programanti-kickback statute, the Affordable Care Act amended the intent standard for certain healthcare fraud under HIPAA such that a person or entityno longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.In addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct ourbusiness. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementingregulations, imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information. Amongother things, HITECH makes HIPAA’s security standards directly applicable to business associates, independent contractors or agents of coveredentities, which include certain healthcare providers, health plans and healthcare clearinghouses, that receive or obtain protected health informationin connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amendedHIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civilactions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated withpursuing federal civil actions.Additionally, the federal Physician Payments Sunshine Act, created under the Affordable Care Act, and its implementing regulations, requirecertain manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or theChildren’s Health Insurance Program (with certain exceptions) to report annually information related to certain payments or other transfers of valueprovided to physicians and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, physicians and teachinghospitals, and applicable manufacturers and group purchasing organizations to report annually certain ownership and investment interests held byphysicians and their immediate family members.The majority of states also have statutes or regulations similar to the aforementioned federal fraud and abuse laws, some of which are broader inscope and apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.Further, some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and therelevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related topayments or other transfers of value provided to physicians and other health care providers and entities, marketing expenditures, or drug pricing.Certain state and local laws also require the registration of pharmaceutical sales representatives.If our operations are found to be in violation of any of the health regulatory laws described above or any other laws that apply to us, we may besubject to potentially significant criminal, civil and administrative penalties, damages, fines, disgorgement, imprisonment, additional reportingobligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance withthese laws, exclusion from participation in government healthcare programs, as well as contractual damages, reputational harm, administrativeburdens, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect ourability to operate our business and our results of operations.Coverage and ReimbursementSales of pharmaceutical products depend in significant part on the availability of coverage and adequate reimbursement by third-party payors.Patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payors toreimburse all or part of the associated healthcare costs. Patients and providers are unlikely to use our products unless coverage is provided andreimbursement is adequate to cover a significant portion of the cost of therapies in which our products are used. In the United States, no uniformpolicy of coverage and reimbursement for products exists among third-party payors. Therefore, coverage and reimbursement for products candiffer significantly from payor to payor. Decisions regarding the extent of coverage and amount of reimbursement to be provided for each of ourproduct candidates will be made on a plan by plan basis. One payor’s determination to provide coverage for a product does not assure that otherpayors will also provide coverage, and adequate reimbursement, for the product. Additionally, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our product candidates to each payorseparately, with no assurance that coverage and adequate reimbursement will be obtained.Healthcare ReformCurrent and future legislative proposals to further reform healthcare or reduce healthcare costs may result in lower reimbursement for our products.The cost containment measures that payors and providers are instituting and the effect of any healthcare reform initiative implemented in thefuture could significantly reduce our revenues from the sale of our products.For example, implementation of the Affordable Care Act has substantially changed healthcare financing and delivery by both governmental andprivate insurers, and significantly impacted the pharmaceutical industry. The Affordable Care Act,18CIDARA THERAPEUTICS, INC.among other things, established an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescriptiondrugs and biologic agents, revised the methodology by which rebates owed by manufacturers to the state and federal government for coveredoutpatient drugs under the Medicaid Drug Rebate Program are calculated, increased the minimum Medicaid rebates owed by most manufacturersunder the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled inMedicaid managed care organizations, and provided incentives to programs that increase the federal government’s comparative effectivenessresearch. Since its enactment there have been judicial and Congressional challenges to certain aspects of the Affordable Care Act, as well asrecent efforts by the Trump administration to repeal and replace certain aspects of the Affordable Care Act, and we expect such challenges tocontinue. Since January 2017, President Trump has signed two Executive Orders and other directives designed to delay the implementation ofcertain provisions of the Affordable Care Act or otherwise circumvent some of the requirements for health insurance mandated by the AffordableCare Act. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the Affordable Care Act. WhileCongress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the Affordable Care Acthave been enacted. The Tax Cuts and Jobs Act of 2017, or Tax Act, includes a provision which repealed, effective January 1, 2019, the tax-basedshared responsibility payment imposed by the Affordable Care Act on certain individuals who fail to maintain qualifying health coverage for all orpart of a year that is commonly referred to as the “individual mandate”. On January 22, 2018, President Trump signed a continuing resolution onappropriations for fiscal year 2018 that delayed the implementation of certain fees mandated by the Affordable Care Act, including the so-called“Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based onmarket share, and the medical device excise tax on non-exempt medical devices. The Bipartisan Budget Act of 2018, or the BBA, among otherthings, amended the Affordable Care Act, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, and also increased,effective January 1, 2019, the percentage that a drug manufacturer must discount the cost of prescription drugs from 50 percent to 70 percent. InJuly 2018, the Centers for Medicare & Medicaid Services, or CMS, published a final rule permitting further collections and payments to and fromcertain Affordable Care Act qualified health plans and health insurance issuers under the Affordable Care Act risk adjustment program in responseto the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment. On December 14, 2018, aTexas U.S. District Court Judge ruled that Affordable Care Act is unconstitutional in its entirety because the “individual mandate” was repealed byCongress as part of the Tax Act. While the Texas U.S. District Court Judge, as well as the Trump administration and CMS, have stated that theruling will have no immediate effect pending appeal of the decision, it is unclear how this decision, subsequent appeals, and other efforts to repealand replace Affordable Care Act will impact Affordable Care Act.In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. In August 2011, the Presidentsigned into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommendto Congress proposals in spending reductions. The Joint Select Committee did not achieve a targeted deficit reduction of at least $1.2 trillion forthe years 2013 through 2021, triggering the legislation’s automatic reduction to several government programs. This includes reductions to Medicarepayments to providers of 2% per fiscal year, which went into effect in April 2013 and, due to subsequent legislative amendments, including theBBA, will remain in effect through 2027 unless additional congressional action is taken. Additionally, in January 2013, the President signed into lawthe American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several providers and increased the statuteof limitations period for the government to recover overpayments to providers from three to five years.Further, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products. At thefederal level there have been several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to,among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship betweenpricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. At the federal level, theTrump administration’s budget proposal for fiscal year 2019 contains additional drug price control measures that could be enacted during the 2019budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certaindrugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid and to eliminate cost sharing for generic drugs for low-income patients. Further, the Trump administration released a “Blueprint”, or plan, to lower drug prices and reduce out of pocket costs of drugs thatcontains additional proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs,incentivize manufacturers to lower the list price of their products, and reduce the out of pocket costs of drug products paid by consumers. TheDepartment of Health and Human Services, or HHS, has already started the process of soliciting feedback on some of these measures and, at thesame, is immediately implementing others under its existing authority. For example, in September 2018, CMS announced that it will allowMedicare Advantage plans the option to use step therapy for Part B drugs beginning January 1, 2019, and in October 2018, CMS proposed a newrule that would require direct-to-consumer television advertisements of prescription drugs and biological products, for which payment is availablethrough or under Medicare or Medicaid, to include in the advertisement the Wholesale Acquisition Cost, or list price, of that drug or biologicalproduct. On January 31, 2019, the HHS Office of Inspector General, proposed modifications to the federal healthcare program anti-kickbackstatute discount safe harbor for the purpose of reducing the cost of drug19CIDARA THERAPEUTICS, INC.products to consumers which, among other things, if finalized, will affect discounts paid by manufacturers to Medicare Part D plans, Medicaidmanaged care organizations and pharmacy benefit managers working with these organizations. While some of these and other proposed measuresmay require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it willcontinue to seek new legislative and/or administrative measures to control drug costs. At the state level, legislatures have increasingly passedlegislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursementconstraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases,designed to encourage importation from other countries and bulk purchasing.Additionally, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017, or the Right toTry Act, was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational newdrug products that have completed a Phase I clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances,eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded accessprogram. There is no obligation for a drug manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act.Foreign RegulationIn order to market any product outside of the United States, we would need to comply with numerous and varying regulatory requirements of othercountries regarding safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercial sales anddistribution of our products. Whether or not we obtain FDA approval for a product, we would need to obtain the necessary approvals by thecomparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. Theapproval process varies from country to country and can involve additional product testing and additional administrative review periods. The timerequired to obtain approval in other countries might differ from and be longer than that required to obtain FDA approval. Regulatory approval in onecountry does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impactthe regulatory process in others.New Legislation and RegulationsFrom time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing thetesting, approval, manufacturing and marketing of products regulated by the FDA. In addition to new legislation, FDA regulations and policies areoften revised or interpreted by the agency in ways that may significantly affect our business and our products. It is impossible to predict whetherfurther legislative changes will be enacted or whether FDA regulations, guidance, policies or interpretations changed or what the effect of suchchanges, if any, may be.EmployeesAs of February 15, 2019, we had 68 total employees, all of whom were full-time employees, and 21 of whom hold Ph.D. or M.D. degrees, 50 ofwhom were engaged in research and development activities and 18 of whom were engaged in business development, finance, informationsystems, facilities, human resources or administrative support. None of our employees is subject to a collective bargaining agreement. Weconsider our relationship with our employees to be good.FacilitiesWe lease a 29,638 square foot facility in San Diego, California for administrative and research and development activities. Our lease expires onDecember 31, 2021 and we have two individual two-year extension option rights. We believe that our existing facilities are adequate to meet ourcurrent needs, and that suitable additional alternative spaces will be available in the future on commercially reasonable terms.Corporate InformationWe were incorporated in Delaware as K2 Therapeutics, Inc. in December 2012. In July 2014, we changed our name to Cidara Therapeutics, Inc.Our principal executive offices are located at 6310 Nancy Ridge Drive, Suite 101, San Diego, California 92121, and our telephone number is(858) 752-6170.We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. We will remain an emerginggrowth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offeringin April 2015, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer,which requires the market value of our common stock that is held by non-affiliates to exceed $700 million as of the prior June 30th, or (2) the dateon which we have20CIDARA THERAPEUTICS, INC.issued more than $1 billion in non-convertible debt during the prior three-year period. References to “emerging growth company” in this AnnualReport have the meaning associated with it in the JOBS Act.We formed wholly-owned subsidiaries, Cidara Therapeutics UK Limited, in England, and Cidara Therapeutics (Ireland) Limited, in Ireland, in March2016 and October 2018, respectively, for the purpose of developing our product candidates in Europe.Legal ProceedingsFrom time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. We are notcurrently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business.Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of managementresources and other factors.Available InformationWe make available free of charge on or through our internet website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, CurrentReports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with orfurnished to the Securities and Exchange Commission. We also regularly post copies of our press releases as well as copies of presentations andother updates about our business on our website. Our website address is www.cidara.com. The information contained in or that can be accessedthrough our website is not part of this Annual Report on Form 10-K. Information is also available through the Securities and ExchangeCommission’s website at www.sec.gov.Item 1A. Risk Factors.You should carefully consider the following risk factors, as well as the other information in this report and in our public filings, before decidingwhether to purchase, hold or sell shares of our common stock. The occurrence of any of the following risks could harm our business, financialcondition, results of operations and/or growth prospects or cause our actual results to differ materially from those contained in forward-lookingstatements we have made in this report and those we may make from time to time.Risks Related to Drug Discovery, Development and CommercializationWe depend heavily on the success of rezafungin, currently in Phase 3 clinical development, and we also are very early in ourdevelopment efforts from our Cloudbreak programs, neither of which may be successful.We have completed four Phase 1 clinical trials of rezafungin, as well as Part A of the STRIVE Phase 2 clinical trial of rezafungin for the treatmentof candidemia and invasive candidiasis. We are currently conducting an additional Phase 1 clinical trial of rezafungin, Part B of the STRIVEPhase 2 clinical trial of rezafungin and the ReSTORE Phase 3 clinical trial of rezafungin for treatment of candidemia and invasive candidiasis.Assuming the successful outcome of ongoing discussions with regulatory authorities, we anticipate commencing the ReSPECT Phase 3 clinicaltrial of rezafungin for prophylaxis in the first half of 2019. We are also conducting preclinical studies of ADCs in our Cloudbreak programs for viralinfections and infections caused by multidrug-resistant Gram-negative pathogens. Our assumptions about why rezafungin is worthy of futuredevelopment, as well as our assumptions about the market for rezafungin or any potential products from our Cloudbreak programs, are based ondata primarily collected by other companies. The timing and costs of our preclinical and clinical development programs, and the regulatory pathsfor marketing approvals for our products remain uncertain. Our ability to generate product revenue, which we do not expect will occur for manyyears, if ever, will depend heavily on the successful development and eventual commercialization of our product candidates. The success ofrezafungin and any other product candidates we may develop will depend on many factors, including the following:•successful completion of preclinical studies;•successful enrollment in, and completion of, clinical trials;•agreement with regulatory authorities on study design and other requirements for study initiation;•demonstrating safety and efficacy;•receipt of marketing approvals from applicable regulatory authorities;•establishing clinical and commercial manufacturing capabilities or making arrangements with third-party manufacturers;•obtaining and maintaining patent and trade secret protection and non-patent exclusivity for our product candidates and technologies;21CIDARA THERAPEUTICS, INC.•launching commercial sales of the product candidates, if and when approved, whether alone or selectively in collaboration with others;•acceptance of the product candidates, if and when approved, by patients, the medical community and third-party payors;•effectively competing with other therapies;•a continued acceptable safety profile of the products following approval; and•enforcing and defending intellectual property rights and claims.If we do not accomplish one or more of these goals in a timely manner, or at all, we could experience significant delays or an inability tosuccessfully commercialize our product candidates, which would harm our business.If clinical trials for rezafungin or any other product candidates are delayed, terminated or suspended, or fail to demonstrate safety andefficacy to the satisfaction of regulatory authorities, we may incur additional costs, or experience delays in completing, or ultimately beunable to complete, the development and commercialization of our product candidates.Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must complete preclinical developmentand then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing isexpensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A delay in starting or completingour clinical trials would materially impact our timelines and our ability to complete development of our product candidates in a timely manner or atall. For example, our ability to commence our ReSPECT Phase 3 clinical trial for prophylaxis in the first half of 2019 or at all is dependent on thesuccessful outcome of our ongoing discussions with regulatory authorities.A failure of one or more clinical trials could occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not bepredictive of the success of later clinical trials, and interim results of a particular clinical trial do not necessarily predict final results of that trial. Forexample, although Part A of the STRIVE Phase 2 clinical trial met its primary objectives related to tolerability and safety of rezafungin in thetreatment of candidemia and invasive candidiasis, this does not guarantee success in the ongoing Part B of the STRIVE Phase 2 clinical trial, inour ReSTORE Phase 3 clinical trial for treatment or our planned ReSPECT Phase 3 clinical trial for prophylaxis.Moreover, preclinical and clinical data are often susceptible to multiple interpretations and analyses. Many companies that have believed theirproduct candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of theirproducts. For example, the historically observed high rate of correlation for clinical efficacy for antifungals, antibacterials and other anti-infectivesbased on preclinical data may not apply for our current or future product candidates, and any of the potential benefits that we anticipate for humanclinical use may not be realized.We do not know whether our planned clinical trials, such as our ReSPECT Phase 3 clinical trial for prophylaxis, will begin on time or whether ourongoing or planned clinical trials will be completed on schedule, or at all. We may experience numerous unforeseen events in preparation for,during, or as a result of our clinical trials that could delay or prevent our ability to commence or complete our clinical trials, which could then delayor prevent our ability to receive marketing approval or commercialize our product candidates, including:•regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial on our expected timeline orat all or conduct a clinical trial at a prospective trial site or in a given country;•regulators may disagree with our interpretation of preclinical data, which may impact our ability to commence our trials on our expectedtimeline or at all;•regulators may require that trials or studies be conducted, or sized or otherwise designed in ways, that were unforeseen in order to beginplanned studies or to obtain marketing authorization;•we may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospectivetrial sites;•clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, toconduct additional clinical trials, modify planned clinical trial designs or abandon product development programs;•the number of patients required for clinical trials of our product candidates may be larger than we anticipate;•enrollment in these clinical trials may be slower than we anticipate, clinical sites may drop out of our clinical trials or participants may dropout of these clinical trials at a higher rate than we anticipate;22CIDARA THERAPEUTICS, INC.•our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, orat all;•regulators, institutional review boards or the Data Safety Monitoring Board assembled by us to oversee our rezafungin clinical trials mayrequire that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatoryrequirements or a finding that the participants are being exposed to unacceptable health risks due to serious and unexpected side effects;•the cost of clinical trials of our product candidates may be greater than we anticipate;•the FDA or comparable foreign regulatory authorities could require that we perform more studies than, or evaluate clinical endpoints otherthan, those that we currently expect;•the supply of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be delayed orinsufficient, or the quality of such materials may be inadequate; and•we may be required to delay or terminate studies due to financial constraints.We plan to conduct an interim futility analysis for our ReSPECT Phase 3 clinical trial for prophylaxis after primary endpoint data is available forapproximately 50% of the total subjects we intend to enroll. The futility analysis will be conducted based on conditional power. If the conditionalpower is below a pre-specified cutoff for both primary endpoints, the study may be stopped for futility.We are also in discussions with regulatory authorities about the final trial design of and other matters related to our ReSPECT Phase 3 clinical trialfor prophylaxis. These discussions and potential design changes could lead to delays in the commencement and completion of the ReSPECT trial,or may result in the trial not proceeding at all.If we are required to conduct additional clinical trials or other tests of our product candidates beyond those that we currently contemplate, if we areunable to complete clinical trials of our product candidates or other tests successfully or in a timely manner, if the results of these trials or testsare not positive or are only modestly positive or if there are safety concerns, we 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 intended or desired;•obtain approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings;•be subject to additional post-marketing testing requirements;•be subject to significant restrictions on reimbursement from public and/or private payors; or•have the product removed from the market after obtaining marketing approval.Product development costs will also increase if we experience delays in testing or in receiving marketing approvals. We do not know whether anyclinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant clinical trial delays also couldshorten any periods during which we may have the exclusive right to commercialize our product candidates, could allow our competitors to bringproducts to market before we do, could increase competition from generics of the same class, and could impair our ability to successfullycommercialize our product candidates, any of which may harm our business and results of operations.If we experience delays or difficulties in enrolling patients in clinical trials, our receipt of necessary regulatory approvals could bedelayed or prevented.We may not be able to initiate or continue clinical trials for our product candidates if we are unable to identify and enroll a sufficient number ofeligible patients to participate in these trials as required by the FDA or analogous regulatory authorities outside the United States or if we do notbelieve that the number of patients required by such regulatory authorities in any clinical trial can be enrolled in a reasonable timeframe. Inaddition, some of our competitors may have ongoing or new clinical trials for product candidates that would treat the same indications as ourproduct candidates or be used in the same patients and, therefore, patients who would otherwise be eligible for our clinical trials may instead enrollin clinical trials of our competitors’ product candidates. Patient enrollment is also affected by other factors, including:•severity of the disease under investigation;•availability, safety and efficacy of approved medications or other investigational medications being studied clinically for the disease underinvestigation;•eligibility criteria for the trial in question;23CIDARA THERAPEUTICS, INC.•perceived risks and benefits of the product candidate under study;•efforts to facilitate timely enrollment in clinical trials;•reluctance of physicians to encourage patient participation in clinical trials;•the ability to monitor patients adequately during and after treatment;•the proximity and availability of clinical trial sites for prospective patients;•delays or failures in maintaining an adequate supply of quality drug product for use in clinical trials; and•changing treatment patterns that may reduce the burden of disease which our product candidates address.Our inability to enroll a sufficient number of patients for our clinical trials, or to enroll such patients in a timely manner, would result in significantdelays or may require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increaseddevelopment costs for our product candidates, which would cause the value of our company to decline and could limit our ability to obtainadditional financing.If serious adverse effects or unexpected characteristics of our product candidates are identified during development, we may need toabandon or limit our development of some or all of our product candidates.Because it is impossible to predict when or if any of our product candidates will prove effective or safe in humans or will receive marketingapproval, the risk of each of our programs is high. If our product candidates are associated with undesirable side effects or have characteristicsthat are unexpected, we may need to abandon their development or limit development to certain uses or subpopulations in which the undesirableside effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. For example, thepharmacokinetic properties, such as a longer half-life or less frequent dosing regimen, that differentiate rezafungin from other echinocandins couldhave side effects that we have not anticipated and the consequences of such side effects could be more severe than have been seen with otherechinocandins that have shorter half-lives or more frequent dosing regimens, or are dosed at lower concentrations than we expect for rezafungin.Further, the treatment advantages that we are predicting for rezafungin, such as lower healthcare costs resulting from an ability to administerrezafungin once-weekly or the predicted ability of rezafungin to be effective against resistant strains of fungal pathogens, may not be realized. Forour ADCs, the bispecific mechanism of action, including the use of the immune system, may lead to side effects that are not anticipated based onthe preclinical work we have conducted to date.In the biotechnology industry, many agents that initially show promise in early stage testing may later be found to cause side effects that preventfurther development of the agents. In addition, fungal and bacterial infections can occur in patients with co-morbidities and weakened immunesystems, and there may be adverse events and deaths in our clinical trials that are attributable to factors other than investigational use of ourproduct candidates.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidatesor indications that may be more profitable or for which there is a greater likelihood of success.We have limited financial resources. As a result, we may forego or delay pursuit of opportunities with other product candidates or for otherindications that later prove to have greater commercial potential than opportunities we pursue. For example, because we believe that an NDA filingfor rezafungin for prophylaxis can be supported by one Phase 3 trial in prophylaxis, together with the data from our Phase 3 clinical trial in thetreatment of candidemia and invasive candidiasis and the remainder of our rezafungin treatment program, if financial constraints require us tochoose between our planned rezafungin treatment and prophylaxis programs, we may be required to choose our treatment program and forego ordelay our prophylaxis program.Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spendingon current and future research and development programs and product candidates for specific indications may not yield any commercially viableproducts. If we do not accurately evaluate the commercial potential or target markets for a particular product candidate or opportunity, we mayrelinquish valuable rights to that product candidate or opportunity through collaboration, licensing or other royalty arrangements in cases in which itwould have been more advantageous for us to retain sole development and commercialization rights to such product candidate or opportunity.24CIDARA THERAPEUTICS, INC.Even if any of our product candidates receive marketing approval, they may fail to achieve the degree of market acceptance byphysicians, patients, third-party payors and others in the medical community necessary for commercial success.If any of our product candidates receive marketing approval, they may nonetheless fail to gain sufficient market acceptance by physicians,patients, third-party payors and others in the medical community for us to achieve commercial success. If our product candidates do not achievean adequate level of acceptance, we may not generate sufficient product revenue to become profitable. The degree of market acceptance of ourproduct candidates, if approved for commercial sale, will depend on a number of factors, including:•the efficacy and potential advantages compared to alternative therapies;•the size of the markets in the countries in which approvals are obtained;•terms, limitations or warnings contained in any labeling approved by the FDA or other regulatory authority;•our ability to offer any approved products for sale at competitive prices;•convenience and ease of administration compared to alternative treatments;•the willingness of the target patient population to try new therapies or dosing regimens;•the willingness of physicians to prescribe these therapies and, in the case of rezafungin, transition to a once-weekly dosing regimen fromtraditional once-daily dosing;•the strength of marketing and distribution support;•the success of competing products and the marketing efforts of our competitors;•sufficient third-party payor coverage and adequate reimbursement; and•the prevalence and severity of any side effects.If, in the future, we are unable to establish sales and marketing capabilities or to selectively enter into agreements with third parties tosell and market our product candidates, we may not be successful in commercializing our product candidates, if and when they areapproved.We do not have a sales or marketing infrastructure. To achieve commercial success for any approved product, we must either develop a sales andmarketing organization or outsource these functions to third parties.There are risks involved both with establishing our own sales and marketing capabilities and with entering into arrangements with third parties toperform these services. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. Ifthe commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occurfor any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly and our investmentwould be lost if we cannot reposition our sales and marketing personnel.Factors that may inhibit our efforts to commercialize our product candidates on our own include:•our inability to recruit and retain adequate numbers of effective sales and marketing personnel;•the inability of sales personnel to obtain access to physicians or to achieve adequate numbers of prescriptions for any future products;and•unforeseen costs and expenses associated with creating an independent sales and marketing organization.If we enter into arrangements with third parties to perform sales, marketing and distribution services, our product revenue or the profitability ofthese product revenues to us may be lower than if we were to market and sell any products that we develop ourselves. In addition, we may not besuccessful in entering into arrangements with third parties to sell and market our product candidates or may be unable to do so on terms that arefavorable to us. We may have little control over such third parties and any of them may fail to market and sell our products effectively, includingby failing to devote the necessary resources and attention. If we do not establish sales and marketing capabilities successfully, either on our ownor in collaboration with third parties, we will not be successful in commercializing our product candidates.We face substantial competition, which may result in others discovering, developing or commercializing products before or moresuccessfully than we do.The development and commercialization of new drug products is highly competitive. We face competition with respect to our current productcandidates, and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future frommajor pharmaceutical companies, specialty pharmaceutical companies and25CIDARA THERAPEUTICS, INC.biotechnology companies worldwide. Regulatory incentives to develop drugs for treatment of infectious diseases have increased interest andactivity in this area and will lead to increased competition for clinical investigators and clinical trial subjects, as well as for future prescriptions, ifany of our product candidates are successfully developed and approved. There are a number of large pharmaceutical and biotechnologycompanies that currently market and sell products or are pursuing the development of products for the treatment of the indications on which we arefocusing our product development efforts. Some of these competitive products and therapies are based on scientific approaches that are the sameas or similar to our approach and others are based on entirely different approaches. Potential competitors also include academic institutions,government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborativearrangements for research, development, manufacturing and commercialization.We expect that rezafungin will primarily compete with certain antifungal classes of drugs, which include polyenes, azoles and echinocandins.Approved branded echinocandin antifungal therapies include Cancidas (caspofungin, marketed by Merck & Co.), Eraxis (anidulafungin, marketedby Pfizer, Inc.), Mycamine (micafungin, marketed by Astellas Pharma US, Inc.). We expect that there will be generics of all of the currentechinocandins available at the time of rezafungin market approval, which will create added competition. In addition, there are other genericproducts approved for candidemia, marketed by companies such as Baxter Healthcare Corporation, Mylan Inc. and Glenmark Generics Inc.,among others. In addition to approved therapies, we expect that rezafungin will compete with product candidates that we are aware of in clinicaldevelopment by third parties, such as SCY-078 (being developed by Scynexis, Inc.).We expect that any influenza product candidates developed through our Cloudbreak antiviral program will compete against approved andinvestigational agents for the treatment of viral influenza infections, including neurominidase inhibitors such as Tamiflu, Relenza and Peramivir,and endonuclease inhibitors such as Xolfluza. We may develop other product candidates through our Cloudbreak platform for the treatment ofother invasive infections. We are aware of a number of approved and investigational therapies in these areas.Our competitors may develop products that are more effective, safer, more convenient or less costly than any that we are developing or that wouldrender our product candidates obsolete or non-competitive. Our competitors may also obtain marketing approval from the FDA or other regulatoryauthorities for their products sooner than we may obtain approval for ours, which could result in our competitors establishing a strong marketposition before we are able to enter the market.Many of our competitors have significantly greater name recognition, financial resources and expertise in research and development,manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergersand acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smallernumber of our competitors. Smaller and other early stage companies may also prove to be significant competitors, particularly throughcollaborative arrangements with large and established companies. These same competitors may invent technology that competes with ourrezafungin program or our Cloudbreak platform.These third parties may compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sitesand patient enrollment for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.Interim, topline and preliminary data from our clinical trials that we announce or publish from time to time may change as more patientdata become available and are subject to audit and verification procedures that could result in material changes in the final data.From time to time, we may publicly disclose interim, preliminary or topline data from our clinical studies, which is based on a preliminary analysisof then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of thedata related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analysis of data,and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline results that we report maydiffer from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have beenreceived and fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materiallydifferent from the preliminary data we previously published. As a result, topline data should be viewed with caution until the final data are available.For example, we expect to receive topline data from Part B of our STRIVE Phase 2 clinical trial in mid-2019. The topline data may be reported aspositive, however, if the final data materially differs in an adverse manner from the topline data, we may have unnecessarily expended orcontinued to commit substantial resources to the Phase 3 clinical trials, which costs we may not be able to recover. From time to time, we mayalso disclose interim data from our clinical studies. Interim data from clinical trials that we may complete are subject to the risk that one or more ofthe clinical outcomes may materially change as patient enrollment continues and more patient data become available. Adverse differencesbetween preliminary or interim data and final data could significantly harm our business prospects. For example, we plan to conduct an interimfutility analysis after primary endpoint data is available for approximately 50% of the subjects that we26CIDARA THERAPEUTICS, INC.intend to enroll in the ReSPECT Phase 3 clinical trial. There can be no guarantee that a favorable futility analysis will result in a favorable finalresult at the completion of the clinical trial.Further, others, including regulatory authorities, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses ormay interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability orcommercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publiclydisclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with whatwe determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclosemay ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular drug, drugcandidate or our business. If the topline data that we report differ from actual results, or if others, including regulatory authorities, disagree with theconclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm ourbusiness, operating results, prospects or financial condition.Even if we are able to commercialize any product candidates, these products may become subject to unfavorable pricing regulations,third-party reimbursement practices or healthcare reform initiatives, which would harm our business.The regulations that govern marketing approvals, pricing, coverage and reimbursement for new drugs vary widely from country to country. In theUnited States, new and future legislation may significantly change the approval requirements in ways that could involve additional costs and causedelays in obtaining approvals. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricingreview period begins after marketing or product-licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remainssubject to continuing governmental control even after initial marketing approval is granted. As a result, we might obtain marketing approval for adrug in a particular country but then be subject to price regulations that delay its commercial launch, possibly for lengthy time periods, andnegatively impact the revenue we are able to generate from the sale of the drug in that country. Adverse pricing limitations may hinder our ability tocommercialize and generate revenue from one or more product candidates, even if our product candidates obtain marketing approval.Our ability to commercialize any product candidates successfully also will depend in part on the extent to which coverage and adequatereimbursement for these products and related treatments will be available from government health programs, private health insurers, integrateddelivery networks and other third-party payors. Third-party payors decide which medications they will pay for and establish reimbursement levels.A significant trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party payors haveattempted to control costs by limiting coverage and the amount of payment for particular medications. Increasingly, third-party payors are requiringthat drug companies provide predetermined discounts from list prices and are challenging the prices charged for medical products. Coverage andreimbursement may not be available for any product that we commercialize and, if reimbursement is available, the level of reimbursement may notbe sufficient for commercial success. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for whichwe obtain marketing approval. If coverage and reimbursement is not available or is available only to limited levels, we may not be able tosuccessfully commercialize any product candidate for which we obtain marketing approval.There may be significant delays in obtaining coverage and adequate reimbursement for newly approved products, and coverage may be morelimited than the purposes for which the product is approved by the FDA or similar regulatory authorities outside the United States. Moreover,eligibility for coverage and reimbursement does not imply that any product will be paid for in all cases or at a rate that covers our costs, includingresearch, development, manufacture, sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient tocover our costs and may not be made permanent. Coverage and reimbursement rates may vary according to the use of the drug and the medicalcircumstances under which it is used may be based on reimbursement levels already set for lower cost products or procedures or may beincorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required bygovernment healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countrieswhere they may be sold at lower prices than in the United States. Commercial third-party payors often rely upon Medicare coverage policies andpayment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and profitable payment rates from bothgovernment-funded programs and private payors for any approved products that we develop could have a material adverse effect on our operatingresults, our ability to raise capital needed to commercialize our approved products and our overall financial condition.27CIDARA THERAPEUTICS, INC.Product liability lawsuits against us could cause us to incur substantial liabilities and could limit the commercialization of any productcandidates we may develop.We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and we will face aneven greater risk if we commercially sell any products that receive marketing approval. If we cannot successfully defend ourselves against claimsthat our product candidates caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims mayresult in:•decreased demand for any product candidates that we may develop;•injury to our reputation and significant negative media attention;•withdrawal of clinical trial participants;•significant costs and distraction of management to defend any related litigation;•the initiation of investigations by regulatory bodies;•substantial monetary awards to trial participants or patients;•loss of revenue;•product recalls, withdrawals or labeling, marketing or promotional restrictions; and•the inability to commercialize any products we may develop.Although we have product liability insurance for our clinical trials, such insurance may not be adequate to cover all liabilities that we may incur. Weanticipate that we will need to increase our insurance coverage as we continue or expand our clinical trials and if we successfully commercializeany products. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in anamount adequate to satisfy any liability that may arise.If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incurcosts that could harm our business.We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and thehandling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammablematerials, including chemicals and biological and radioactive materials. Our operations also produce hazardous waste products. We generallycontract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from thesematerials. In the event of contamination or injury resulting from our use 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.Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees in ourworkplace, including those resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potentialliabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with ourstorage or disposal of biological, chemical, 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. Thesecurrent or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws andregulations also may result in substantial fines, penalties or other sanctions.We may not be successful in our efforts to identify, discover, and develop potential product candidates through our Cloudbreak platformor otherwise.Through our Cloudbreak platform, we are developing ADCs for the treatment of viral infections and multidrug-resistant bacterial infections. Wecurrently do not have any development candidates from the Cloudbreak platform. Our Cloudbreak platform may not be successful in identifyingadditional molecules that could be developed as drug therapies. In addition, our Cloudbreak platform may initially show promise in identifyingpotential product candidates, yet fail to yield product candidates for clinical development for a number of reasons. In particular, our researchmethodology used may not be successful in identifying compounds with sufficient potency, bioavailability or efficacy to be potential productcandidates. In addition, our potential product candidates may, on further study, be shown to have harmful side effects or other negativecharacteristics.Research programs to identify new product candidates require substantial technical expertise and human resources. For example, we haverecently announced preclinical results from our Cloudbreak antiviral program. We have limited28CIDARA THERAPEUTICS, INC.experience with the use of the Cloudbreak platform applied to viral pathogens. A failure to optimize our expertise using the Cloudbreak platform forthe development of our Cloudbreak antiviral program may limit our ability to identify a product candidate and successfully advance this program.Research programs to identify new product candidates also require substantial financial resources. We may choose to expend our financialresources on potential product candidates that ultimately prove to be unsuccessful. If we are unable to develop successful product candidatesfrom our Cloudbreak platform for preclinical and clinical development, we will not be able to generate product revenue, which would harm ourfinancial position and adversely impact our stock price.Risks Related to Our Financial Position and Need for Additional CapitalWe need substantial additional funding to advance the development of rezafungin, as well as other product and development candidates.If we are unable to raise capital, we will be forced to delay, reduce or eliminate our drug development and discovery programs.In connection with the preparation of our financial statements for the fiscal year ending December 31, 2018, we performed an analysis of our abilityto continue as a going concern. We believe, based on our current business plan, that our existing cash and cash equivalents will be sufficient tofund our obligations through the third quarter of 2019, but will not be sufficient to fund our obligations after the third quarter of 2019. Our ability toexecute our operating plan, including continuing the development of rezafungin, beyond the third quarter of 2019 depends on our ability to obtainadditional funding through equity offerings, debt financings or potential licensing and collaboration arrangements.There can be no assurance that additional funds will be available from any source or, if available, will be available on terms that are acceptable tous. For example, investors that participated in our May 2018 registered direct offering may invest $50 million on a pro rata basis in a secondclosing triggered by our receipt of topline data from Part B of the STRIVE Phase 2 clinical trial, and, should we chose to proceed with the optional3rd closing, those investors may also invest an additional $20 million on a pro rata basis, in each case subject to certain conditions; however,investors from the first closing may refuse to participate in the second closing or may decline the option to participate in the optional third closing.There can also be no assurance that additional funds will be available to us without first obtaining the approval of our stockholders, which can be adifficult and lengthy process with an uncertain outcome. For example, the purchase price at the initial closing of the May 2018 registered directoffering was based on a price of $4.70 per share of common stock and, due to the rules of The Nasdaq Stock Market regarding stockholderapproval requirements, we may not complete the 2nd or optional 3rd closings at a price below $4.70 per share of common stock without firstobtaining the approval of our stockholders. The subscription agreement for the May 2018 registered direct offering specifies that the purchase pricein the second and optional third closings is 75% of the volume weighted average price of our common stock for the five trading days following ourannouncement of topline data from Part B of the STRIVE clinical trial. Accordingly, if our common stock is trading below $6.27 at that time, theresulting purchase price for the 2nd and 3rd closings will be less than $4.70 per share of our common stock and we will be unable to complete the2nd or 3rd closings without first obtaining the approval of our stockholders. As of the date we issued our financial statements for the fiscal yearending December 31, 2018, the price of our common stock was below $6.27. The stockholder approval process could be lengthy and expensive,and there is no assurance that the stockholders would provide their approval.Even if we raise additional capital, we may also be required to modify, delay or abandon some of our plans which could have a negative effect onour business, operating results and financial condition and our ability to achieve our intended business objectives.In addition, our expenses may increase in connection with our ongoing activities beyond what is currently expected. Our future capitalrequirements will depend on many factors, including:•the costs and timing to complete our Phase 3 ReSTORE and Phase 3 ReSPECT clinical trials;•the costs, timing and outcome of any regulatory review of rezafungin or future development candidates;•our ability to establish and maintain collaborations, when and if necessary, on favorable terms, if at all;•the costs and timing of commercialization activities, including manufacturing, marketing, sales and distribution, for rezafungin or anyfuture product candidates that receive marketing approval;•the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defendingintellectual property-related claims;•the scope, progress, results and costs of drug discovery, preclinical development, laboratory testing and clinical trials for our productcandidates, for the Cloudbreak platform; and•the extent to which we acquire or in-license other product candidates and technologies.29CIDARA THERAPEUTICS, INC.Identifying potential development candidates and conducting preclinical studies and clinical trials are time consuming, expensive and uncertainprocesses that take years to complete, and we may never generate the necessary data or results required to obtain marketing approval andachieve product sales for any of our current or future product candidates. In addition, our product candidates, if approved, may not achievecommercial success.Our commercial revenue, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if at all.Accordingly, we need substantial additional funding in connection with our continuing operations and to achieve our goals. Since December 6, 2012(inception) through December 31, 2018, our operations have been financed primarily by gross proceeds of approximately $269.4 million from theissuance of convertible debt securities, the sale of shares of convertible preferred stock, the sale of shares of our common stock in our IPO, ourOctober 2016 term loan facility with Pacific Western, our October 2016 follow-on public offering of common stock, our October 2017 privateplacement of common stock, sales of common stock during the fourth quarter of 2017 and the first quarter of 2018 under our controlled equitysales agreement with Cantor Fitzgerald & Co., which has since been terminated, and our May 2018 registered direct offering of common stock. Asof December 31, 2018, we had cash and cash equivalents of $74.6 million.If we are unable to raise capital or on attractive terms, we will be forced to delay, reduce or eliminate our research and development programs orfuture commercialization efforts, make reductions in spending, extend payment terms with suppliers, liquidate or grant rights to assets wherepossible, or suspend, curtail or terminate planned programs. Any of these actions could materially harm our business, results of operations andfuture prospects.Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to ourtechnologies or product candidates.Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity anddebt financings, as well as potentially entering into collaborations, strategic alliances and licensing arrangements or receiving government and/orcharitable grants or contracts. In November 2018, we entered into a new controlled equity offering sales agreement with Cantor Fitzgerald & Co.with an aggregate offering price of up to $35 million. Other than our November 2018 controlled equity offering sales agreement with CantorFitzgerald & Co., the term loan facility with Pacific Western and the potential to complete the second and optional third closings of our May 2018registered direct offering after we announce data from Part B of the STRIVE Phase 2 clinical trial, each of which is subject to the fulfillment ofspecified conditions, we do not currently have any committed external source of funds. To the extent that we raise additional capital through thesale of equity or convertible debt securities, your ownership interest will be diluted and the terms of these securities may include liquidation orother preferences that adversely affect your rights as a common stockholder. For instance, your ownership interest will be diluted in the event wecomplete the 2nd and optional 3rd closings of the 2018 May registered direct offering. In the event that we proceed with the optional 3rd closing ofour May 2018 registered direct offering, your ownership interest may be further diluted as certain investors participating in the optional 3rd closingwill also have the right to purchase an aggregate of up to 2,500,000 shares of our common stock at a purchase price of $0.125 per share subjectto each such warrant at an exercise price of $6.81 per share. Debt financing, if available, may involve agreements that include covenants limitingor restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may besecured by all or a portion of our assets. There can be no assurances that we will be able to enter into contracts with or receive grants from theUnited States government or charitable organizations to support our programs. The process of obtaining grants and contracts is lengthy anduncertain and we will have to compete with other companies and institutions for each grant or contract. United States government grants andcontracts typically contain unfavorable termination provisions and are subject to audit and modification by the government at its sole discretion,which will subject us to additional risks. If we receive a United States government grant or contract, we would be required to comply with numerouslaws and regulations relating to the formation, administration and performance of the grant or contract, which can make it more difficult for us toretain our rights under such grant or contract and result in increased costs. If we raise funds by entering into collaborations, strategic alliances orlicensing arrangements with third parties or by receiving charitable grants, we may have to relinquish valuable rights to our technologies, futurerevenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raiseadditional funds through equity or debt financings or through collaborations, strategic alliances, licensing arrangements or government or charitableprograms when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grantrights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.30CIDARA THERAPEUTICS, INC.The terms of our term loan facility place restrictions on our operating and financial flexibility, and failure to comply with covenants or tosatisfy certain conditions of the agreement governing the debt facility may result in acceleration of our repayment obligations andforeclosure on our pledged assets, which could significantly harm our liquidity, financial condition, operating results, business andprospects and cause the price of our common stock to decline.In October 2016, we entered into a loan and security agreement with Pacific Western, or the Loan Agreement, as amended in June 2018 and July2018, under which we borrowed $10.0 million, subject to certain terms and conditions set forth therein.The outstanding principal balance under the Loan Agreement is secured by a security interest in substantially all of our assets, other thanintellectual property, which is subject to a double negative pledge. The Loan Agreement requires us to comply with a number of customaryaffirmative and restrictive covenants, including covenants that limit our ability to, among other things: transfer any part of our business or property;merge or consolidate with another entity or otherwise experience a change in control, incur additional indebtedness, encumber the collateralsecuring the loan, declare or pay any cash dividend or make distributions on our capital stock, repurchase or redeem any class of stock or otherequity interest, acquire, own or make investments, and make certain capitalized expenditures over a specified threshold, in each case subject toexceptions. In addition, the Loan Agreement contains an operating covenant, which requires us to achieve positive data from Part B of theSTRIVE clinical trial of rezafungin on or before July 31, 2019.The Loan Agreement also includes standard events of default, including a provision that Pacific Western could declare an event of default uponthe occurrence of any event that it interprets as having a material adverse effect on (i) our operations, business or financial condition andsubsidiaries taken as a whole; (ii) our ability to perform or pay the secured obligations under the Loan Agreement and related agreements; or(iii) the collateral pledged to Pacific Western under the Loan Agreement. Upon such determination, Pacific Western could declare all obligationsunder the Loan Agreement immediately due and payable.In connection with the audit of our 2018 financial statements, we received an unqualified auditor opinion with a going concern explanatoryparagraph. Pacific Western provided written confirmation that it has not and will not deem the inclusion of the going concern explanatory paragraphto constitute an event of default under the Loan Agreement as a material adverse effect; however, Pacific Western also specified that it has notmade and is not making any determination with respect to the underlying circumstances that prompted the inclusion of such a paragraph in theopinion. In the future, Pacific Western may determine that the underlying circumstances resulting in the receipt of a going concern explanatorynote in the auditor opinion for our 2018 financial statements either on their own, or together with contemporaneous events or circumstances, suchas a failure to timely secure additional funding, constitute a material adverse effect upon our business, operations, properties, assets, or financialcondition or upon our ability to perform or pay the secured obligations under the Loan Agreement.Additionally, Pacific Western may determine that the occurrence of adverse results or delays in any clinical study or the denial, delay or limitationof approval of or taking of any other regulatory action by the FDA or another governmental entity may also constitute a material adverse effectupon our business, operations, properties, assets, or financial condition or upon our ability to perform or pay the secured obligations under theLoan Agreement, either on its own or together with contemporaneous events or circumstances, such as our status regarding going concern or afailure to timely secure additional funding.The Loan Agreement also requires us to timely deliver certain financial statements, reports, and certificates including a requirement to provideaudited annual financial statements together with an unqualified audit opinion or a qualified opinion only for going concern so long as our investorsprovide additional equity as needed or if Pacific Western otherwise provides its consent in writing. In connection with the audit of our 2018 financialstatements, we received an unqualified auditor opinion with a going concern explanatory paragraph. Pacific Western provided us with a writtenacknowledgement that inclusion of the going concern explanatory paragraph in the auditor opinion for our 2018 financial statements satisfies ourrequirements regarding delivery of an auditor opinion under the Loan Agreement; however, should we in the future receive either a qualified orunqualified opinion with a going concern explanatory paragraph without satisfaction of the additional equity criteria or the consent of PacificWestern required by the Loan Agreement, this may also constitute a default under the facility.If we default under the facility, Pacific Western may accelerate all of our repayment obligations. At such time, we may not have enough availablecash or be able to raise additional funds on satisfactory terms, if at all, through equity or debt financings to repay our indebtedness at the time anysuch repayment is required. If we are unable to access funds to meet those obligations or to renegotiate the Loan Agreement, Pacific Westerncould take control of and may sell our pledged assets. In such an event, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant to others rights to develop and market product candidates that we would otherwise prefer todevelop and market ourselves. If our assets were liquidated, Pacific Western’s right to repayment would be senior to the rights of our stockholdersto receive any proceeds from the liquidation. Any declaration by Pacific Western of31CIDARA THERAPEUTICS, INC.an event of default could significantly harm our liquidity, financial condition, operating results, business, and prospects and cause the price of ourcommon stock to decline.We may incur additional indebtedness in the future. The debt instruments governing such indebtedness may contain provisions that are as, ormore, restrictive than the provisions governing our existing indebtedness under the Loan Agreement. If we are unable to repay, refinance orrestructure our indebtedness when payment is due, the lenders could proceed against the collateral or force us into bankruptcy or liquidation.We have incurred significant operating losses since our inception, and we anticipate that we will continue to incur substantial operatinglosses for the foreseeable future. We may never achieve or maintain profitability.Since our inception, we have incurred significant operating losses. Our net loss was $59.0 million and $55.7 million for our 2018 and 2017 fiscalyears, respectively. As of December 31, 2018, we had an accumulated deficit of $218.7 million. To date, we have financed our operations primarilythrough private placements of convertible preferred stock and convertible notes, our initial public offering of our common stock, or our IPO, ourOctober 2016 term loan facility with Pacific Western Bank, or Pacific Western, our October 2016 follow-on public offering of common stock, ourOctober 2017 private placement of common stock, sales of common stock during the fourth quarter of 2017 and the first quarter of 2018 under ourcontrolled equity sales agreement with Cantor Fitzgerald & Co., which has since been terminated, and our May 2018 registered direct offering ofcommon stock. We have devoted substantially all of our financial resources and efforts to research and development. We have completed Part Aof our STRIVE Phase 2 clinical trial of rezafungin and we are conducting Part B of the STRIVE Phase 2 clinical trial, the ReSTORE Phase 3clinical trial of rezafungin, Phase 1 and non-clinical studies of rezafungin and preclinical studies of our ADCs, and we are planning to conduct theReSPECT Phase 3 clinical trial of rezafungin for prophylaxis. We expect that it will be many years, if ever, before we receive regulatory approvaland have a product candidate available for commercialization. We expect to continue to incur significant expenses and increasing operating lossesfor the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses willincrease substantially if and as we:•submit INDs to the FDA and equivalent filings to other regulatory authorities, and seek approval of our clinical protocols by institutionalreview boards, or IRBs, at clinical trial sites;•continue to advance rezafungin through clinical development;•continue the preclinical development of our ADCs from our Cloudbreak platform or otherwise, and advance one or more of such productcandidates into clinical trials;•seek marketing approvals for rezafungin and other product candidates;•establish or contract for a sales, marketing and distribution infrastructure to commercialize any product candidates for which we obtainmarketing approval;•maintain, expand and enforce our intellectual property portfolio;•hire additional manufacturing, clinical, regulatory, quality assurance and scientific personnel;•add operational, financial and management systems and personnel, including personnel to support product development; and•acquire or in-license other product candidates and technologies.To become and remain profitable, we must develop and eventually commercialize one or more products with significant market potential. This willrequire us to be successful in a range of challenging activities, including completing preclinical studies and clinical trials of our product candidates,obtaining marketing approval for these product candidates, manufacturing, marketing and selling those product candidates for which we may obtainmarketing approval, and satisfying any post-marketing requirements. We may never succeed in these activities and, even if we do, may nevergenerate revenue that is significant or large enough to achieve profitability. Our failure to become and remain profitable would decrease the valueof the company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue ouroperations. A decline in the value of our company could also cause you to lose all or part of your investment.Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. The recentglobal financial crisis caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn, suchas the recent global financial crisis, could result in a variety of risks to our business, including our ability to raise additional capital when needed onacceptable terms, if at all. This is particularly true in Europe, which is undergoing a continued severe economic crisis. A weak or decliningeconomy could also strain our suppliers, possibly32CIDARA THERAPEUTICS, INC.resulting in supply disruption. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economicclimate and financial market conditions could adversely impact our business.The United Kingdom’s referendum to leave the European Union or “Brexit,” has and may continue to cause disruptions to capital and currencymarkets worldwide. The full impact of the Brexit decision, however, remains uncertain. A process of negotiation will determine the future terms ofthe United Kingdom’s relationship with the European Union. During this period of negotiation, our results of operations and access to capital maybe negatively affected by interest rate, exchange rate and other market and economic volatility, as well as regulatory and political uncertainty.Brexit may also have a detrimental effect on our customers, distributors and suppliers, which would, in turn, adversely affect our financialcondition.Our short operating history may make it difficult for you to evaluate the success of our business to date and assess our future viability.We were founded in December 2012 and our operations to date have been limited to organizing and staffing our company, business planning,raising capital, developing our technology, identifying potential development and product candidates, undertaking preclinical studies andconducting clinical trials. We have not yet demonstrated our ability to successfully complete large-scale, pivotal clinical trials required forregulatory approval of our product candidates, obtain marketing approvals, manufacture a commercial scale product, or arrange for a third party todo so on our behalf, or conduct sales and marketing activities necessary for successful commercialization. Typically, it takes many years todevelop one new product from the time it is discovered to when it is commercially available. Consequently, any predictions made about our futuresuccess or viability may not be as accurate as they could be if we had a longer operating history or if we had product candidates in advancedclinical trials.In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factorsthat may alter or delay our plans. We will need to continue to transition from a company with a research focus to a company capable of supportinglate-stage development activities and, if a product candidate is approved, a company with commercial activities. We may not be successful in anystep of such a transition.Risks Related to Our Dependence on Third PartiesWe may seek to selectively establish collaborations, and, if we are unable to establish them on commercially reasonable terms or at all,we may have to alter our development and commercialization plans.Our drug development programs and the potential commercialization of our product candidates will require substantial additional cash to fundexpenses. For some of our product candidates, we may decide to collaborate with other pharmaceutical and biotechnology companies for thedevelopment and potential commercialization of those product candidates. We do not currently have any such collaborations.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 collaborationand the proposed collaborator’s evaluation of a number of factors.Those factors may include:•the design or results of preclinical studies or 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 in the territories that are the subject of the collaboration;•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 withoutregard to the merits of the challenge; and•industry and market conditions generally.The collaborator may also consider alternative product candidates for similar indications that may be available to collaborate on and whether sucha collaboration could be more attractive than the one with us for our product candidate.33CIDARA THERAPEUTICS, INC.To the extent we enter into any collaborations, we may depend on collaborators for the development and commercialization of ourproduct candidates. If those collaborations are not successful, we may not be able to capitalize on the market potential of our productcandidates.We may selectively seek third-party collaborators for the development and commercialization of our product candidates. Our likely potentialcollaborators include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnologycompanies. We do not currently have any such arrangements and if we enter into any such arrangements with any third parties in the future, wewill likely have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization ofour product candidates. Our ability to generate revenue from these arrangements will depend on our collaborators’ abilities to successfully performthe functions assigned to them in these arrangements.Collaborations involving our product candidates pose many risks to us, including that:•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 renewdevelopment or commercialization programs based on clinical trial results, changes in the collaborator’s strategic focus or availablefunding 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 productcandidate, 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 productcandidates or products if the collaborators believe that competitive products are more likely to be successfully developed or can becommercialized under terms that are more economically attractive than ours;•a collaborator with marketing and distribution rights to one or more product candidates or products may not commit sufficient resources tothe marketing and distribution of such drugs;•collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as toinvite litigation that could jeopardize or invalidate our intellectual property rights or proprietary information or expose us to potentiallitigation;•disputes may arise between the collaborators and us that result in the delay or termination of the research, development orcommercialization of our product candidates or products or that result in costly litigation or arbitration that diverts management attentionand resources;•we may lose certain valuable rights under circumstances identified in our collaboration agreements if we undergo a change of control;•collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development orcommercialization of the applicable product candidates;•collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner, or at all;and •if a future collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our productdevelopment or commercialization program under such collaboration could be delayed, diminished or terminated.If our ability to generate revenue under any of our collaboration agreements is adversely impacted by any of these risks, our share of the revenuesgenerated by the product, if approved, under the terms of the collaboration could be insufficient to allow us to achieve or maintain profitability orthe product may be less valuable to us than if we had not entered into the collaboration.We intend to continue to rely on third parties to conduct our clinical trials and to conduct some aspects of our research and preclinicaltesting and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials,research or testing.We currently rely and expect to continue to rely on third parties, such as contract research organizations, contract manufacturers of clinicalsupplies, clinical data management organizations, medical institutions and clinical investigators, to conduct our clinical trials and to conduct someaspects of our research and preclinical testing. Any of these third parties may terminate their engagements with us at any time. If these thirdparties do not successfully carry out their contractual34CIDARA THERAPEUTICS, INC.duties, meet expected deadlines or conduct our studies in accordance with regulatory requirements or our stated protocols, we will not be able toobtain, 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. Furthermore, these third parties may also have relationships with other entities, some ofwhich may be our competitors. If we need to enter into alternative arrangements, it would delay our product development activities.Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of ourresponsibilities. For example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the generalinvestigational plan and protocols for the trial. Moreover, the FDA and other international regulatory authorities require us to comply with standards,commonly referred to as Good Clinical Practices, for conducting, recording and reporting the results of clinical trials to assure that data andreported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. We also are required toregister ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database, available atwww.clinicaltrials.gov, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.We have no experience manufacturing product candidates on a clinical or commercial scale and will be dependent on third parties forthe manufacture of our product candidates. If we experience problems with any of these third parties, they could delay clinicaldevelopment or marketing approval of our product candidates or our ability to sell any approved products.We do not have any manufacturing facilities. We currently rely, and expect to continue to rely, on third-party manufacturers for the manufacture ofour product candidates for preclinical studies and clinical trials and for commercial supply of any of these product candidates for which we obtainmarketing approval.We may be unable to establish agreements with third-party manufacturers for preclinical, clinical or commercial supply on terms favorable to us, orat all. Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks,including:•reliance on the third party for regulatory compliance and quality assurance;•the possible breach of the manufacturing agreement by the third party, including the inability to supply sufficient quantities or to meetquality standards or timelines; and•the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.Third-party manufacturers may not be able to comply with current U.S. Good Manufacturing Practice requirements, or cGMPs, or similar regulatoryrequirements outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with cGMPs or other applicableregulations, even if such failures do not relate specifically to our product candidates or approved products, could result in sanctions being imposedon us or the manufacturers, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizuresor recalls of product candidates, operating restrictions and criminal prosecutions, any of which could adversely affect supplies of our productcandidates and harm our business and results of operations.Any product that we develop may compete with other product candidates and products for access to these manufacturing facilities. There are alimited number of manufacturers that operate under cGMPs and that might be capable of manufacturing for us.Any performance failure on the part of our existing or future manufacturers, including a failure that may not relate specifically to our productcandidate or approved product, could delay clinical development or marketing approval or adversely impact our ability to generate commercialsales. If any one of our current contract manufacturers cannot perform as agreed, we may be required to replace that manufacturer.Our current and anticipated future dependence upon others for the manufacture of our product candidates or products may adversely affect ourfuture profit margins and our ability to commercialize any product candidates that receive marketing approval on a timely and competitive basis.We currently rely, and expect to continue to rely, on third parties to release, label, store and distribute drug supplies for our clinical trials. Anyperformance failure on the part of these third parties, including a failure that may not relate specifically to our product candidate or approvedproduct, could delay or otherwise adversely impact clinical development or marketing approval of our product candidates or commercialization ofour drugs, producing additional losses and depriving us of potential revenue.Moreover, our manufacturers and suppliers may experience difficulties related to their overall businesses and financial stability, which could resultin delays or interruptions of supply of our product candidates or approved products.35CIDARA THERAPEUTICS, INC.We do not have alternate manufacturing plans in place at this time. If we need to change to other manufacturers, the FDA and comparable foreignregulators may have to approve these manufacturers’ facilities and processes prior to our use, which would require new testing and complianceinspections. In addition, the new manufacturers would have to be educated in or independently develop the processes necessary for production.This would result in delays and costs, and in the case of approved products, the potential loss of revenue.Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance MattersIf we are unable to take full advantage of regulatory programs designed to expedite drug development or provide other incentives, ourdevelopment programs may be adversely impacted. There are a number of incentive programs administered by the FDA and other regulatory bodies to facilitate development of drugs in areas ofunmet medical need. Rezafungin received the designations as a Qualified Infectious Disease Product, or QIDP, a fast track product, and anorphan drug in the U.S. for the treatment of candidemia and invasive candidiasis. Rezafungin also received QIPD and Fast Track designation inthe U.S. for the prevention of invasive fungal infections in adults undergoing allogeneic bone marrow transplantation. We plan to seek designationas an orphan drug in the U.S. and Europe for the prophylaxis indication and we also plan to seek orphan drug designation for rezafungin fortreatment in Europe. Our product candidates may not qualify for or maintain designations under these or other incentive programs under any of theFDA’s existing or future programs to expedite drug development in areas of unmet medical need. Our inability to fully take advantage of theseincentive programs may require us to run larger trials, incur delays, lose opportunities that may not otherwise be available to us, lose marketingexclusivity for which we would otherwise be eligible and incur greater expense in the development 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, orwill be delayed in commercializing, our product candidates and our ability to generate revenue will be impaired.Our product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture,release, safety, efficacy, regulatory filings, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject tocomprehensive regulation by the FDA and other regulatory authorities in the United States and by comparable authorities in other countries. Forexample, in order to commence clinical trials of our product candidates in the United States, we must file an IND and obtain FDA agreement toproceed. The FDA may place our development program on clinical hold and require further preclinical testing prior to allowing our clinical trials toproceed.We must obtain marketing approval in each jurisdiction in which we market our products. Failure to obtain marketing approval for a productcandidate will prevent us from commercializing the product candidate. We have not submitted a marketing application or received approval tomarket any of our product candidates from regulatory authorities in any jurisdiction. We have only limited experience in filing and supporting theapplications necessary to gain marketing approvals and expect to rely on third-party contract research organizations to assist us in this process.Securing regulatory approval requires the submission of extensive preclinical and clinical data and supporting information to the various regulatoryauthorities for each indication to establish the product candidate’s safety and efficacy. Securing regulatory approval also requires the submissionof information about the product manufacturing process, testing and release and inspection of manufacturing facilities and personnel by therelevant regulatory authority. Our product candidates may not be effective, may be only moderately effective or may prove to have undesirable orunintended 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 elsewhere, is expensive, may take many years and can varysubstantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. We cannot assure youthat we will ever obtain any marketing approvals in any jurisdiction. 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 causedelays in the approval or rejection of an application. The FDA and comparable authorities in other countries have substantial discretion in theapproval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinicalor other studies, changes in the manufacturing process or facilities or clinical trials. Moreover, approval by the FDA or an equivalent foreignauthority does not ensure approval by regulatory authorities in any other countries or jurisdictions, but a failure to obtain marketing approval in onejurisdiction may adversely impact the likelihood of approval in other jurisdictions. In addition, varying interpretations of the data obtained frompreclinical testing, manufacturing and product testing and clinical trials could delay, limit or prevent marketing approval of a product candidate.Additionally, any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render theapproved product not commercially viable.36CIDARA THERAPEUTICS, INC.Any product candidate for which we obtain marketing approval could be subject to marketing restrictions or withdrawal from the marketand we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with ourproducts.Any product candidate for which we obtain marketing approval, along with the manufacturing processes and facilities, 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 otherregulatory authorities. These requirements include submissions of promotional materials and safety and other post-marketing information andreports, registration and listing requirements, cGMP requirements for product facilities, quality assurance and corresponding maintenance ofrecords and documents and requirements regarding the distribution of samples to physicians and related recordkeeping. Even if marketingapproval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may bemarketed or to the conditions of approval or contain requirements for costly post-marketing testing and surveillance to monitor the safety orefficacy of the medicine. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure that they are marketed only forthe approved indications and in accordance with the provisions of the approved labeling. However, companies may share truthful and notmisleading information that is otherwise consistent with the product’s FDA approved labeling. The FDA imposes stringent restrictions onmanufacturers’ communications regarding off-label use and if we do not comply with these restrictions, we may be subject to enforcement actions.In addition, later discovery of previously unknown problems with our products, manufacturers or manufacturing processes and facilities or failure tocomply with regulatory requirements, may result in, among other things:•restrictions on such products, manufacturers or manufacturing processes or facilities;•restrictions on the labeling, marketing, distribution or use of a product;•requirements to conduct post-approval clinical trials, other studies or other post-approval commitments;•warning or untitled 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 revenue;•suspension or withdrawal of marketing approvals;•refusal to permit the import or export of our products;•product seizure; and•injunctions or the imposition of civil or criminal penalties.Our relationships with customers, health care professionals and third-party payors may be subject to applicable healthcare laws, whichcould expose us to penalties, including administrative, civil or criminal penalties, damages, fines, imprisonment, exclusion fromparticipation in federal healthcare programs such as Medicare and Medicaid, reputational harm, the curtailment or restructuring of ouroperations and diminished future profits and earnings.Healthcare professionals and third-party payors will play a primary role in the recommendation and prescription of any product candidates for whichwe obtain marketing approval. Our current and future arrangements with customers, healthcare professionals and third-party payors may exposeus to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements andrelationships through which we conduct research, market, sell and distribute our medicines for which we obtain marketing approval. Restrictionsunder applicable federal and state healthcare laws and regulations include the following, among others:•the federal healthcare anti-kickback statute, which prohibits persons and entities from, among other things, knowingly and willfullysoliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of anindividual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be madeunder federal and state healthcare programs such as Medicare and Medicaid;•the federal false claims laws, which impose criminal and civil penalties, including civil whistleblower or qui tam actions under the federalcivil False Claims Act, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, to thefederal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal anobligation to pay money to the federal government;37CIDARA THERAPEUTICS, INC.•HIPAA, as amended by HITECH, which imposes criminal and civil liability for, among other things, executing a scheme to defraud anyhealthcare 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 enacted under HIPAA, which prohibits knowingly and willfully falsifying, concealing or covering up amaterial fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items orservices;•the federal transparency requirements under the Affordable Care Act, which require, among other things, certain manufacturers of drugs,devices, biologics and medical supplies to report annually to CMS information related to physician payments and other transfers of valueand physician ownership and investment interests; and•analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to our businessactivities, including sales or marketing arrangements and claims involving healthcare items or services including, in some states, thosereimbursed by non-governmental third-party payors, including private insurers, some state laws which require pharmaceutical companiesto comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by thefederal government in addition to requiring drug manufacturers to report information related to payments or other transfers of valueprovided to physicians and other health care providers and entities, marketing expenditures, or drug pricing, state and local laws thatrequire the registration of pharmaceutical sales representatives, and state and foreign laws governing the privacy and security of healthinformation in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA,thus complicating compliance efforts.•As of May 25, 2018, the EU General Data Protection Regulation 2016/679, or GDPR replaced the EU General Data Protection Regulationwith respect to the processing of personal data in the European Union. The GDPR imposes many requirements for controllers andprocessors of personal data, including, for example, higher standards for obtaining consent from individuals to process their personal data,more robust disclosures to individuals and a strengthened individual data rights regime, shortened timelines for data breach notifications,limitations on retention and secondary use of information, increased requirements pertaining to health data and pseudonymised (i.e., key-coded) data and additional obligations when we contract third-party processors in connection with the processing of the personal data. TheGDPR allows EU member states to make additional laws and regulations further limiting the processing of genetic, biometric or healthdata. Failure to comply with the requirements of GDPR and the applicable national data protection laws of the EU member states mayresult in fines of up to €20,000,000 or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher,and other administrative penalties. The GDPR includes more stringent operational requirements for processors and controllers of personaldata and creates additional rights for data subjects. Additionally, in June 2016, United Kingdom voters approved an exit from the EU,commonly referred to as “Brexit,” which could also lead to further legislative and regulatory changes. In March 2017, the United Kingdombegan the process to leave the EU by April 2019. While the Data Protection Act of 2018, that “implements” and complements the GDPRhas achieved Royal Assent on May 23, 2018 and is now effective in the United Kingdom, it is still unclear whether transfer of data fromthe EEA to the United Kingdom will remain lawful under GDPR. We may incur liabilities, expenses, costs, and other operational lossesunder GDPR and applicable EU Member States and the United Kingdom privacy laws in connection with any measures we take to complywith them.Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involvesubstantial costs. Interpretations of standards of compliance under these laws and regulations are rapidly changing and subject to varyinginterpretations and it is possible that governmental authorities will conclude that our business practices may not comply with current or futurestatutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be inviolation of any of these laws or any other laws that may apply to us, we may be subject to significant civil, criminal and administrative penalties,damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, reputational harm, imprisonment,additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations ofnon-compliance with these laws and the curtailment or restructuring of our operations, any of which could diminish our future profits or earnings. Ifany of the physicians or other providers or entities with whom we expect to do business are 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.38CIDARA THERAPEUTICS, INC.We are dependent on information technology systems, infrastructure and data, which exposes us to data security risks.We are dependent upon our own or third-party information technology systems, infrastructure and data, including mobile technologies, to operateour business. The multitude and complexity of our computer systems may make them vulnerable to service interruption or destruction, disruptionof data integrity, malicious intrusion, or random attacks. Likewise, data privacy or security incidents or breaches by employees or others may posea risk that sensitive data, including our intellectual property, trade secrets or personal information of our employees, patients, customers or otherbusiness partners may be exposed to unauthorized persons or to the public. Cyber-attacks are increasing in their frequency, sophistication andintensity. Cyber-attacks could include the deployment of harmful malware, denial-of-service, social engineering and other means to affect servicereliability and threaten data confidentiality, integrity and availability. Our business partners face similar risks and any security breach of theirsystems could adversely affect our security posture. A security breach or privacy violation that leads to disclosure or modification of or preventsaccess to patient information, including personally identifiable information or protected health information, could harm our reputation, compel us tocomply with federal and/or state breach notification laws and foreign law equivalents, subject us to mandatory corrective action, require us to verifythe correctness of database contents and otherwise subject us to litigation or other liability under laws and regulations that protect personal data,any of which could disrupt our business and/or result in increased costs or loss of revenue. Moreover, the prevalent use of mobile devices thataccess confidential information increases the risk of data security breaches, which could lead to the loss of confidential information, trade secretsor other intellectual property. While we have invested, and continue to invest, in the protection of our data and information technologyinfrastructure, there can be no assurance that our efforts will prevent service interruptions, or identify breaches in our systems, that couldadversely affect our business and operations and/or result in the loss of critical or sensitive information, which could result in financial, legal,business or reputational harm to us. In addition, our liability insurance may not be sufficient in type or amount to cover us against claims related tosecurity breaches, cyber-attacks and other related breaches. We are subject to extensive laws and regulations related to data privacy, and our failure to comply with these laws and regulations couldharm our business.We are subject to laws and regulations governing data privacy and the protection of personal information. These laws and regulations govern ourprocessing of personal data, including the collection, access, use, analysis, modification, storage, transfer, security breach notification,destruction and disposal of personal data. There are foreign and state law versions of these laws and regulations to which we are currently and/ormay in the future, be subject. For example, the collection and use of personal health data in the EU is governed by the GDPR. The GDPR, whichis wide-ranging in scope, imposes several requirements relating to the consent of the individuals to whom the personal data relates, the informationprovided to the individuals, the security and confidentiality of the personal data, data breach notification and the use of third party processors inconnection with the processing of personal data. The GDPR also imposes strict rules on the transfer of personal data out of the EU to the UnitedStates, provides an enforcement authority and imposes large monetary penalties for noncompliance. The GDPR requirements apply not only tothird-party transactions, but also to transfers of information within our company, including employee information. The GDPR and similar dataprivacy laws of other jurisdictions place significant responsibilities on us and create potential liability in relation to personal data that we or our thirdparty service providers process, including in clinical trials conducted in the United States and EU. In addition, we expect that there will continue tobe new proposed laws, regulations and industry standards relating to privacy and data protection in the United States, the EU and otherjurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business.We are subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws and anti-moneylaundering laws and regulations. Compliance with these legal standards could impair our ability to compete in domestic andinternational markets. We can face criminal liability and other serious consequences for violations, which can harm our business.We are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations,various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls, the U.S.Foreign Corrupt Practices Act of 1977, as amended, or FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. TravelAct, the USA PATRIOT Act and other state and national anti-bribery and anti-money laundering laws in the countries in which we conductactivities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors, and other collaboratorsfrom authorizing, promising, offering or providing, directly or indirectly, improper payments or anything else of value to recipients in the public orprivate sector. We may engage third parties for clinical trials outside of the United States, to sell our products abroad once we enter acommercialization phase and/or to obtain necessary permits, licenses, patent registrations, and other regulatory approvals. We have direct orindirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities and other organizations. We can be held liable for39CIDARA THERAPEUTICS, INC.the corrupt or other illegal activities of our employees, agents, contractors and other collaborators, even if we do not explicitly authorize or haveactual knowledge of such activities. Any violations of the laws and regulations described above may result in substantial civil and criminal finesand penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation,reputational harm and other consequences.Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercializeour product candidates and affect the prices we may obtain.In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changesregarding the healthcare system, including cost-containment measures, that could reduce or limit coverage and reimbursement for newly approveddrugs, prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitablysell any product candidates for which we obtain marketing approval.For example, in March 2010, President Obama signed into law the Affordable Care Act, a sweeping law intended to, among other things, broadenaccess to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add newtransparency requirements for health care and health insurance industries, impose new taxes and fees on the health industry and imposeadditional health policy reforms. The Affordable Care Act and subsequent regulations revised the definition of “average manufacturer price” forreporting purposes, which could increase the amount of Medicaid drug rebates to states. Further, the law imposed a significant annual fee oncompanies that manufacture or import branded prescription drug products. Substantial new provisions affecting compliance have also beenenacted, which may affect our business practices with healthcare practitioners. Since its enactment there have been judicial and Congressionalchallenges to certain aspects of the Affordable Care Act, as well as recent efforts by the Trump administration to repeal and replace certainaspects of the Affordable Care Act and we expect such challenges to continue. Since January 2017, President Trump has signed two ExecutiveOrders and other directives designed to delay the implementation of certain provisions of the Affordable Care Act or otherwise circumvent some ofthe requirements for health insurance mandated by the Affordable Care Act. Concurrently, Congress has considered legislation that would repeal orrepeal and replace all or part of the Affordable Care Act. While Congress has not passed comprehensive repeal legislation, two bills affecting theimplementation of certain taxes under the Affordable Care Act have been enacted. The Tax Act includes a provision which repealed, effectiveJanuary 1, 2019, the tax-based shared responsibility payment imposed by the Affordable Care Act on certain individuals who fail to maintainqualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. On January 22, 2018, President Trumpsigned a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain fees mandated by the AffordableCare Act, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain healthinsurance providers based on market share and the medical device excise tax on non-exempt medical devices. The Bipartisan Budget Act of2018, or the BBA, among other things, amended the Affordable Care Act, effective January 1, 2019, to close the coverage gap in most Medicaredrug plans and also increased, effective January 1, 2019, the percentage that a drug manufacturer must discount the cost of prescription drugsfrom 50 percent to 70 percent. In July 2018, CMS published a final rule permitting further collections and payments to and from certain AffordableCare Act qualified health plans and health insurance issuers under the Affordable Care Act risk adjustment program in response to the outcome offederal district court litigation regarding the method CMS uses to determine this risk adjustment. On December 14, 2018, a Texas U.S. DistrictCourt Judge ruled that the Affordable Care Act is unconstitutional in its entirety because the "individual mandate" was repealed by Congress aspart of the Tax Act. While the Texas U.S. District Court Judge, as well as the Trump administration and CMS, have stated that the ruling will haveno immediate effect, it is unclear how this decision, subsequent appeals, and other efforts to repeal and replace the Affordable Care Act willimpact the Affordable Care Act and our business.Although the full effect of the Affordable Care Act remains uncertain, the law appears likely to continue the pressure on pharmaceutical pricing,especially under the Medicare program, and may also increase our regulatory burdens and operating costs.Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities forpharmaceutical products.Further, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. In August 2011, the Presidentsigned into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommendto Congress proposals in spending reductions. The Joint Select Committee did not achieve a targeted deficit reduction of at least $1.2 trillion forthe years 2013 through 2021, triggering the legislation’s automatic reduction to several government programs. This includes reductions to Medicarepayments to providers of 2% per fiscal year, which went into effect in April 2013 and, due to subsequent legislative amendments, including theBBA, will remain in effect through 2027 unless additional congressional action is taken. Additionally, in January 2013, the President signed into lawthe American Taxpayer Relief Act of 2012, which, among other things,40CIDARA THERAPEUTICS, INC.reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments toproviders from three to five years.In addition, there have been several recent Congressional inquiries and proposed and enacted federal and state legislation designed to, amongother things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs and reformgovernment program reimbursement methodologies for drug products. At the federal level, the Trump administration’s budget proposal for fiscalyear 2019 contains additional drug price control measures that could be enacted during the 2019 budget process or in other future legislation,including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow somestates to negotiate drug prices under Medicaid and to eliminate cost sharing for generic drugs for low-income patients. Further, the Trumpadministration released a “Blueprint”, or plan, to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals toincrease drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lowerthe list price of their products, and reduce the out of pocket costs of drug products paid by consumers. HHS, has already started the process ofsoliciting feedback on some of these measures and, at the same, is immediately implementing others under its existing authority. For example, inSeptember 2018, CMS announced that it will allow Medicare Advantage plans the option to use step therapy for Part B drugs beginning January 1,2019, and in October 2018, CMS proposed a new rule that would require direct-to-consumer television advertisements of prescription drugs andbiological products, for which payment is available through or under Medicare or Medicaid, to include in the advertisement the WholesaleAcquisition Cost, or list price, of that drug or biological product. On January 31, 2019, the HHS Office of Inspector General, proposed modificationsto the federal healthcare program anti-kickback statute discount safe harbor for the purpose of reducing the cost of drug products to consumerswhich, among other things, if finalized, will affect discounts paid by manufacturers to Medicare Part D plans, Medicaid managed care organizationsand pharmacy benefit managers working with these organizations. While some of these and other proposed measures may require authorizationthrough additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek newlegislative and/or administrative measures to control drug costs.At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biologicalproduct pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing costdisclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Wecannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changedor what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by theU.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringentproduct labeling and post-marketing testing and other requirements.Additionally, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017, or Right to TryAct, was signed into law. The law, among other things, provides a federal framework for certain patients with life-threatening diseases or conditionsto access certain investigational new drug products that have completed a Phase 1 clinical trial. Under certain circumstances, eligible patients canseek treatment without enrolling in clinical trials and without obtaining FDA approval under the FDA expanded access program. There is noobligation for a drug manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act.We expect that additional healthcare reform measures will be adopted within and outside the United States in the future, any of which could adddifficulty to the regulatory approval processes for our product candidates or limit the amounts that governments will pay for healthcare productsand services, which could result in reduced demand for our product candidates or additional pricing pressures. The continuing efforts of third-partypayors to contain or reduce costs of healthcare may adversely affect the demand for any drug products for which we may obtain regulatoryapproval, our ability to set a price that we believe is fair for our products, our ability to obtain coverage and reimbursement approval for a product,our ability to generate revenues and achieve or maintain profitability and the level of taxes that we are required to pay.Risks Related to Our Intellectual PropertyIf our efforts to protect the proprietary nature of the intellectual property related to rezafungin, our Cloudbreak compounds or our otherproduct candidates or compounds are not adequate, we may not be able to compete effectively in our markets.We rely upon a combination of patents, trademarks, trade secret protection and confidentiality agreements to protect the intellectual propertyrelated to rezafungin and our other product candidates and compounds. Any involuntary disclosure to or misappropriation by third parties of ourproprietary information could enable competitors to quickly duplicate or surpass our technological achievements, thus eroding our competitiveposition in our markets.41CIDARA THERAPEUTICS, INC.The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain and ourcommercial success will depend on our ability to obtain patents and maintain adequate protection for rezafungin, our ADCs and other compoundsand product candidates in the United States and other countries. We currently hold issued U.S. utility and foreign patents and multiple pendingU.S. utility patent applications, pending U.S. provisional patent applications and pending international, foreign national and regional counterpartpatent applications covering various aspects of rezafungin and our ADCs. The patent applications may fail to result in issued patents in the UnitedStates or in foreign countries or jurisdictions. Even if the applications do successfully issue, third parties may challenge the patents.Further, the existing and/or future patents, if any, may be too narrow to prevent third parties from developing or designing around these patents. Ifthe sufficiency of the breadth or strength of protection provided by the patent and patent applications we own with respect to rezafungin or ourADCs or the patents we pursue related to any of our other product candidates or compounds is threatened, it could dissuade companies fromcollaborating with us to develop and threaten our ability to commercialize the product candidates or compounds. Further, if we encounter delays inour clinical trials, the period of time during which we could market our product candidates under patent protection would be reduced, although apatent term extension or supplementary protection certificate having varied scope may be available in certain jurisdictions to compensate for someof the lost patent term. In addition, we do not know whether:•we were the first to make the inventions covered by each of our pending patent applications or our issued patents;•we were the first to file patent applications for these inventions;•others will independently develop similar or alternative technologies or duplicate any of our technologies;•any of our pending patent applications will result in issued patents;•any of our patents, once issued, will be valid or enforceable or will issue with claims sufficient to protect our products, or will be challengedby third parties;•any patents issued to us will provide us with any competitive advantages;•we will develop additional proprietary technologies that are patentable; or•the patents of others will have an adverse effect on our business.In addition, patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and theenforcement or defense of our issued patents. In September 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed intolaw. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patentapplications are prosecuted and may also affect patent litigation. The United States Patent and Trademark Office, or USPTO, developed newregulations and procedures to govern administration of the Leahy-Smith Act and many of the substantive changes to patent law associated withthe Leahy-Smith Act and, in particular, the first to file provisions, only became effective in March 2013. The Leahy-Smith Act and itsimplementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defenseof our issued patents, all of which could have a material adverse effect on our business, financial condition and prospects.In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-howthat is not patentable in one or more jurisdictions, inventions for which patents are difficult to enforce and any other elements of our drug discoveryprogram that involve proprietary know-how, information and technology that is not covered by patents. Although we require all of our employees,consultants, advisers and third parties who have access to our proprietary know-how, information and technology to enter into confidentialityagreements, we cannot be certain that this know-how, information and technology will not be disclosed or used in an unauthorized manner or thatcompetitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.There also may be challenges or other disputes concerning the inventorship, ownership or right to use our intellectual property. For example, ourconsultants and advisors may have obligations to assign certain inventions and/or know-how that they develop to third-party entities in certaininstances, and these third parties may challenge our ownership or other rights to our intellectual property, which would adversely affect ourbusiness.An inability to obtain, enforce and defend patents covering our proprietary technologies would materially and adversely affect our businessprospects and financial condition. Further, the laws of some foreign countries do not protect proprietary rights to the same extent as the laws ofthe United States. We may encounter significant problems in protecting, enforcing and defending our intellectual property both in the United Statesand abroad. If we are unable to prevent unauthorized material disclosure of the intellectual property related to our technologies to third parties orare otherwise unable to protect, enforce or defend our intellectual property, we will not be able to establish or, if established,42CIDARA THERAPEUTICS, INC.maintain a competitive advantage in our markets, which could materially adversely affect our business, operating results and financial condition.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee paymentand other requirements imposed by governmental patent agencies and our patent protection could be reduced or eliminated for non-compliance with these requirements.Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to be paid tothe USPTO and various foreign or jurisdictional governmental patent agencies in several stages over the lifetime of the patents and/orapplications. We have systems in place to remind us to pay these fees, and we employ an outside firm to pay these fees due to foreign patentagencies. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, feepayment and other similar provisions during the patent application process.We employ reputable law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of alate fee or by other means in accordance with the applicable rules. However, there are situations in which noncompliance can result inabandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respondto official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. Suchnoncompliance events are outside of our direct control for (1) non-U.S. patents and patent applications owned by us and, (2) if applicable in thefuture, patents and patent applications licensed to us by another entity. In such an event, our competitors might be able to enter the market, whichwould have a material adverse effect on our business.Third-party claims of intellectual property infringement may prevent or delay our drug discovery and development efforts.Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. Third parties mayassert that we are employing their proprietary technology without authorization. There may be third-party patents with claims to materials, methodsof manufacture or methods of treatment related to the use or manufacture of rezafungin, our ADCs and/or our other product candidates orcompounds. If any third-party patents were held by a court of competent jurisdiction to cover the rezafungin or ADC manufacturing process, anymolecules formed during these processes or the final products or any use thereof, the holders of any such patents may be able to block our abilityto commercialize the product unless we obtained a license under the applicable patent or patents or until such patents expire. These same issuesand risks arise in connection with any other product candidates we develop as well. We cannot predict whether we would be able to obtain alicense on commercially reasonable terms, or at all. Any inability to obtain such a license under the applicable patents on commercially reasonableterms, or at all, would have a material adverse effect on our ability to commercialize the affected product until such patents expire.In addition, third parties may obtain patents in the future and claim that our product candidates and/or the use of our technologies infringes uponthese patents. Furthermore, parties making claims against us may obtain injunctive or other equitable relief, which could effectively block ourability to further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, wouldinvolve substantial litigation expense and would be a substantial diversion of management and other employee resources from our business. In theevent of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees inthe case of willful infringement, obtain one or more licenses from third parties, pay royalties and/or redesign our infringing products, which may beimpossible and/or require substantial time and monetary expenditure. In addition, even in the absence of litigation, we may need to obtain licensesfrom third parties to advance our research or allow commercialization of one or more of our product candidates. We may fail to obtain any of theselicenses at a reasonable cost or on reasonable terms, or at all. In that event, we would not be able to further develop and commercialize suchproduct candidates, which could harm our business significantly.We may be required to file lawsuits or take other actions to protect or enforce our patents, which could be expensive, time consumingand unsuccessful.Competitors may infringe our current or future patents. To counter infringement or unauthorized use, we may be required to file infringementclaims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that one or more of ourasserted patents is not valid or is unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that ourpatents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents atrisk of being invalidated, held unenforceable or interpreted narrowly and could put our patent applications at risk of not issuing. Pursuit of these43CIDARA THERAPEUTICS, INC.claims would involve substantial litigation expense and would be a substantial diversion of management and other employee resources from ourbusiness.Interference proceedings or derivative proceedings provoked by third parties or brought by the USPTO may be necessary to determine theentitlement to patent protection with respect to our patents or patent applications. An unfavorable outcome could result in a loss of our patentrights and could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business couldbe harmed if the prevailing party does not offer us a license on commercially reasonable terms, or at all. Litigation or patent office proceedingsmay result in a decision adverse to our interests and, even if we are successful, may result in substantial costs and distract our management andother employees. We may not be able to prevent misappropriation of our trade secrets or confidential information, particularly in countries wherethe laws or legal process may not protect those rights as fully as in the United States.Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some ofour confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements ofthe results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to benegative, it could have a substantial adverse effect on the price of our common stock.Issued patents covering our product candidates and technologies could be found invalid or unenforceable if challenged in court or theUSPTO.If we initiate legal proceedings against a third party to enforce a patent covering one of our product candidates or our technologies, the defendantcould counterclaim that the patent covering our product candidate or our technology, as applicable, is invalid and/or unenforceable. In patentlitigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace and there are numerousgrounds upon which a third party can assert invalidity or unenforceability of a patent. Third parties may also raise similar claims beforeadministrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post grantreview, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in revocation oramendment to our patents in such a way that they no longer cover our product candidates or our technologies. The outcome following legalassertions of invalidity and/or unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that thereis no invalidating prior art or that prior art that was cited during prosecution, but not relied on by the patent examiner, will not be revisited. If adefendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patentprotection directed to our product candidates or technologies. Such a loss of patent rights could have a material adverse impact on our business.Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.As is the case with other pharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining andenforcing patents in the pharmaceutical industry involve both technological and legal complexity, and are therefore costly, time-consuming andinherently uncertain. In addition, the United States has implemented wide-ranging patent reform legislation, including patent office administrativeproceedings that offer broad opportunities to third parties to challenge issued patents. Recent U.S. Supreme Court rulings have narrowed thescope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition toincreasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect tothe value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, the USPTO and foreign governmentalbodies and tribunals, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain newpatents or to enforce our existing patents and patents that we might obtain in the future. For example, in Assoc. for Molecular Pathology v. MyriadGenetics, Inc., the U.S. Supreme Court held in 2013 that certain claims to DNA molecules are not patentable and lower courts have since beenapplying this case in the context of other types of biological subject matter. We cannot predict how future decisions by the courts, the U.S.Congress, the USPTO or foreign governmental bodies or tribunals may impact the value of our patent rights.We have limited foreign intellectual property rights and may not be able to protect our intellectual property rights throughout the world.We have limited intellectual property rights outside the United States. Filing, prosecuting and defending patents on product candidates in allcountries throughout the world would be prohibitively expensive and our intellectual property rights in some countries outside the United States canbe less extensive than those in the United States. In addition, the laws and legal processes of some foreign countries do not protect intellectualproperty to the same extent as federal and44CIDARA THERAPEUTICS, INC.state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outsidethe United States or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitorsmay use our technologies in jurisdictions where we have not obtained patents to develop their own products and further, may export otherwiseinfringing products to territories where we have patents but enforcement is not as strong as that in the United States. These products maycompete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.Many companies have encountered significant problems in protecting and defending intellectual property in foreign jurisdictions. The legal systemsof certain countries, particularly China and certain other developing countries, do not favor the enforcement of patents, trade secrets and otherintellectual property, particularly those relating to pharmaceutical products, which could make it difficult for us to stop the infringement of ourpatents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreignjurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put any of our patentsat risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claimsagainst us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commerciallymeaningful. The requirements for patentability may differ in certain countries, particularly developing countries. Furthermore, generic drugmanufacturers or other competitors may challenge the scope, validity or enforceability of any of our current or future patents, requiring us toengage in complex, lengthy and costly litigation or other proceedings. Certain countries in Europe and developing countries, including China andIndia, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In those countries, we mayhave limited remedies if any of our patents are infringed or if we are compelled to grant a license to a third party, which could materially diminishthe value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectual property rightsaround the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interestand our business may be adversely affected.Our trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. Wemay not be able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need for namerecognition by potential partners or customers in our markets of interest. If we are unable to establish name recognition based on our trademarksand trade names, we may not be able to compete effectively and our business may be adversely affected.We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidentialinformation of third parties.We have received confidential and proprietary information from third parties. In addition, we employ individuals who were previously employed atother biotechnology or pharmaceutical companies, including our competitors or potential competitors, and academic or research institutions. Wemay be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosedconfidential information of these third parties or our employees’ former employers. Litigation may be necessary to defend against these claims.Even if we are successful in defending against these claims, litigation could result in substantial cost and be a distraction to our management andemployees.Risks Related to U.S. Government Contracts and GrantsIf we are unable to generate revenues from partnerships, government funding or other sources of funding, we may be forced to suspendor terminate one or more of our Cloudbreak programs.We have been awarded a partnership grant with Rutgers University from the NIAID for our Cloudbreak antibacterial program. This will cover only aportion of our Cloudbreak development expenses for the antibacterial program and will not cover any expenses for the Cloudbreak antiviralprogram. In order to continue our Cloudbreak programs, we will need to seek funding from partnerships, the government or other sources offunding. There can be no assurances that we will be able to obtain funding from partnerships, or enter into new contracts with the United Statesgovernment or obtain other sources of funding to support any program resulting from our Cloudbreak platform. The process of completing apartnership or obtaining government contracts is lengthy and uncertain and we will have to compete with other companies and institutions in eachinstance. Further, with respect to government contracting, changes in government budgets and agendas may result in a decreased and de-prioritized emphasis on supporting the discovery and development of anti-infective products. If we cannot obtain or maintain government or otherfunding for our Cloudbreak programs, we may be forced to discontinue those programs.45CIDARA THERAPEUTICS, INC.Our use of government funding adds uncertainty to our research and commercialization efforts and may impose requirements thatincrease our costs.Contracts funded by the U.S. government and its agencies include provisions that reflect the government’s substantial rights and remedies, manyof which are not typically found in commercial contracts, including powers of the government to:•terminate agreements, in whole or in part, for any reason or no reason;•reduce or modify the government’s obligations under such agreements without the consent of the other party;•claim rights, including intellectual property rights, in products and data developed under such agreements;•audit contract-related costs and fees, including allocated indirect costs;•suspend the contractor from receiving new contracts pending resolution of alleged violations of procurement laws or regulations;•impose U.S. manufacturing requirements for products that embody inventions conceived or first reduced to practice under suchagreements;•suspend or debar the contractor from doing future business with the government;•control and potentially prohibit the export of products; and•pursue criminal or civil remedies under the Federal Civil Monetary Penalties Act and the federal civil False Claims Act and similar remedyprovisions specific to government agreements.In addition, government contracts contain additional requirements that may increase our costs of doing business, reduce our profits and expose usto liability for failure to comply with these terms and conditions. These requirements include, for example:•specialized accounting systems unique to government contracts;•mandatory financial audits and potential liability for price adjustments or recoupment of government funds after such funds have beenspent;•public disclosures of certain contract information, which may enable competitors to gain insights into our research program; and•mandatory socioeconomic compliance requirements, including labor standards, anti-human-trafficking, non-discrimination, and affirmativeaction programs and environmental compliance requirements.If we fail to maintain compliance with these requirements, we may be subject to potential liability and to termination of our contracts.Changes in funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership andother personnel, prevent new products from being developed or commercialized in a timely manner or otherwise prevent those agenciesfrom performing normal 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 fundinglevels, ability to hire and retain key personnel and accept payment of user fees, and statutory, regulatory, and policy changes. Average reviewtimes at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies onwhich our operations may rely, including those that fund research and development activities is subject to the political process, which is inherentlyfluid 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 necessarygovernment agencies, which would adversely affect our business. For example, over the last several years, including beginning on December 22,2018 and ending on January 25, 2019, the U.S. government has shut down several times and certain regulatory authorities, such as the FDA andthe SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities. If repeated orprolonged government shutdowns occur, it could significantly impact the ability of the FDA to timely review and process our regulatorysubmissions, which could have a material adverse effect on our business. Further, future government shutdowns could impact our ability toaccess the public markets and obtain necessary capital in order to properly capitalize and continue our operations.46CIDARA THERAPEUTICS, INC.Our business is subject to audit by the U.S. government and a negative audit could adversely affect our business.United States government agencies routinely audit and investigate government contractors and recipients of Federal grants. These agenciesreview a contractor’s performance under its contracts, cost structure and compliance with applicable laws, regulations and standards. BU also hasthe right to audit our activities under our CARB-X Subaward Agreement.Government agencies also review the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including thecontractor’s purchasing, property, estimating, compensation and management information systems. Any costs found to be improperly allocated toa specific contract will not be reimbursed, while such costs already reimbursed must be refunded.If an audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including:•termination of contracts;•forfeiture of profits;•suspension of payments;•fines; and•suspension or prohibition from conducting business with the United States government.In addition, we could suffer serious reputational harm if allegations of impropriety were made against us, which could cause our stock price todecrease.Laws and regulations affecting government contracts make it more expensive and difficult for us to successfully conduct our business.We must comply with numerous laws and regulations relating to the formation, administration and performance of government contracts, which canmake it more difficult for us to retain our rights under our government grant contracts. These laws and regulations affect how we conduct businesswith government agencies. Among the most significant government contracting regulations that affect our business are:•the Federal Acquisition Regulations, or FAR, and agency-specific regulations supplemental to the FAR, which comprehensively regulatethe procurement, formation, administration and performance of government contracts;•business ethics and public integrity obligations, which govern conflicts of interest and the hiring of former government employees, restrictthe granting of gratuities and funding of lobbying activities and include other requirements such as the Anti-Kickback Statute and ForeignCorrupt Practices Act;•export and import control laws and regulations; and•laws, regulations and executive orders restricting the use and dissemination of information classified for national security purposes andthe exportation of certain products and technical data.Any changes in applicable laws and regulations could restrict our ability to maintain our existing CARB-X Subaward Agreement and obtain newcontracts, which could limit our ability to conduct our business and materially adversely affect our results of operations.Risks Related to Employee Matters and Managing GrowthOur future success depends on our ability to retain our senior management team and to attract, retain and motivate qualified personnel.We are highly dependent upon our senior management team, as well as the other principal members of our research and development teams. Allof our executive officers are employed “at will,” meaning we or they may terminate the employment relationship at any time. We maintain “keyperson” insurance for our Chief Executive Officer but not for any of our other executives or employees. The loss of the services of any of thesepersons could impede the achievement of our research, development and commercialization objectives.Recruiting and retaining qualified scientific, clinical, manufacturing, regulatory, quality assurance and sales and marketing personnel will also becritical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerouspharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinicalpersonnel from universities and research institutions. In addition, we rely on consultants and advisers, including scientific, regulatory, qualityassurance and clinical advisers, to47CIDARA THERAPEUTICS, INC.assist us in formulating our research and development and commercialization strategy. Our consultants and advisers may be employed byemployers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability tous.We expect to expand our operations, and may encounter difficulties in managing our growth, which could disrupt our business.We expect to expand the scope of our operations, particularly in the areas of drug development, manufacturing, clinical, regulatory affairs, qualityassurance and sales and marketing. To manage our anticipated future growth, we must continue to implement and improve our managerial,operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. We may not be able toeffectively manage the expected expansion of our operations or recruit and train additional qualified personnel. Moreover, the expected expansionof our operations may lead to significant costs and may divert our management and business development resources. Any inability to managegrowth could delay the execution of our business plans or disrupt our operations.We may engage in acquisitions that could disrupt our business, cause dilution to our stockholders or reduce our financial resources.In the future, we may enter into transactions to acquire other businesses, products or technologies and our ability to do so successfully isunproven. If we do identify suitable candidates, we may not be able to make such acquisitions on favorable terms, or at all. Any acquisitions wemake may fail to strengthen our competitive position and these transactions may be viewed negatively by customers or investors. We may decideto incur debt in connection with an acquisition or issue our common stock or other equity securities to the stockholders of the acquired company,which would reduce the percentage ownership of our existing stockholders. We could incur losses resulting from undiscovered liabilities of theacquired business that are not covered by the indemnification we may obtain from the seller. In addition, we may not be able to successfullyintegrate the acquired personnel, technologies and operations into our existing business in an effective, timely and non-disruptive manner.Acquisitions may also divert management attention from day-to-day responsibilities, increase our expenses and reduce our cash available foroperations and other uses. We cannot predict the number, timing or size of future acquisitions or the effect that any such transactions might haveon our operating results.Risks Related to Ownership of our Common StockThe price of our stock may be volatile, and you could lose all or part of your investment.The trading price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, someof which are beyond our control, including limited trading volume. In addition to the factors discussed in this “Risk Factors” section and elsewherein this report, these factors include:•the commencement, timing, enrollment or results of the current and planned clinical trials of our product candidates or any future clinicaltrials we may conduct, or changes in the development status of our product candidates;•any delay in our regulatory filings for our product candidates and any adverse development or perceived adverse development with respectto the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter,"complete response" letter, or a request for additional information;•adverse results, suspensions, terminations or delays in pre-clinical or clinical trials;•our decision to initiate a clinical trial, not to initiate a clinical trial, or to terminate an existing clinical trial or development program;•adverse regulatory decisions, including failure to receive regulatory approval of our product candidates;•changes in laws or regulations applicable to our products, including but not limited to requirements for approvals;•changes in the structure of healthcare payment systems;•adverse developments concerning our contract manufacturers;•our inability to obtain adequate product supply for any approved product or inability to do so at acceptable prices or acceptable quality;•our inability to establish collaborations, if needed;•our failure to commercialize our product candidates successfully, or at all;48CIDARA THERAPEUTICS, INC.•additions or departures of key scientific or management personnel;•unanticipated serious safety concerns related to the use of our product candidates;•the introduction of new products or services offered by us or our competitors;•announcements of significant acquisitions, strategic partnerships, joint ventures, government grants or contracts or capital commitmentsby us or our competitors;•our ability to effectively manage our growth; •the size and growth of our fungal infection, bacterial infection or other target markets;•our ability to successfully enter new markets or develop additional product candidates;•actual or anticipated variations in quarterly operating results;•our cash position and our ability to raise additional capital and the manner and terms on which we raise it, and the expectation of futurefundraising activities by us;•our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;•publication of research reports or other media coverage about us or our industry or our therapeutic approaches in particular or positive ornegative recommendations or withdrawal of research coverage by securities analysts;•changes in the market valuations of similar companies;•overall performance of the equity markets;•sales of our common stock by us or our stockholders in the future or the expectation of such sales;•the trading volume of our common stock;•changes in accounting practices;•ineffectiveness of our internal controls;•disputes or other developments relating to proprietary rights, including patent rights, litigation matters and our ability to obtain patentprotection for our technologies;•significant lawsuits, including patent or stockholder litigation;•general political and economic conditions; and•other events or factors, many of which are beyond our control.In addition, the stock market in general, and The Nasdaq Global Market and pharmaceutical companies in particular, have experienced extremeprice and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad marketand industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. You may notrealize any return on your investment in us and may lose some or all of your investment. In the past, securities class action litigation has oftenbeen instituted against companies following periods of volatility in the market price of a company’s securities. This type of litigation, if instituted,could result in substantial costs and a diversion of management’s attention and resources, which would harm our business, operating results orfinancial condition.We do not intend to pay dividends on our common stock, so any returns will be limited to the value of our stock.We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipatedeclaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the appreciation of theirstock.Our principal stockholders and management own a significant percentage of our stock and are able to exert significant control overmatters subject to stockholder approval.Our executive officers, directors and 5% stockholders and their affiliates currently beneficially own a significant percentage of our outstandingvoting stock. These stockholders have the ability to influence us through this ownership position. These stockholders may be able to determine allmatters requiring stockholder approval. For example, these stockholders may be able to control elections of directors, amendments of ourorganizational documents or approval of any merger, sale of assets or other major corporate transaction. This may prevent or discourageunsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.49CIDARA THERAPEUTICS, INC.We are an emerging growth company and we cannot be certain if the reduced reporting requirements applicable to emerging growthcompanies will make our common stock less attractive to investors.We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, enacted in April 2012. For as longas we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicableto other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirementsof Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executivecompensation in our periodic reports and proxy statements and exemptions from the requirements of holding nonbinding advisory votes onexecutive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growthcompany through 2020, although circumstances could cause us to lose that status earlier. We will remain an emerging growth company until theearlier of (a) December 31, 2020, (b) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (c) the lastday of the fiscal year in which we are deemed to be a large accelerated filer, which requires the market value of our common stock that is held bynon-affiliates to exceed $700 million as of the prior June 30th and (d) the date on which we have issued more than $1 billion in non-convertible debtduring the prior three-year period.Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standardsapply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and,therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Asa result, changes in rules of U.S. generally accepted accounting principles or their interpretation, the adoption of new guidance or the application ofexisting guidance to changes in our business could significantly affect our financial position and results of operations.We incur significant costs as a result of operating as a public company, and our management will be required to devote substantial timeto compliance initiatives.As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. We are subject to thereporting requirements of the Securities Exchange Act of 1934, which require, among other things, that we file with the Securities and ExchangeCommission, or 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 Global Market to implement provisions of the Sarbanes-Oxley Act,impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financialcontrols and changes in corporate governance practices. Further, in July 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-FrankAct that require the SEC to adopt additional rules and regulations in these areas such as “say on pay” and proxy access. Recent legislationpermits emerging growth companies to implement many of these requirements over a longer period and up to five years from the pricing of ourIPO. We intend to take advantage of this legislation but cannot guarantee that we will not be required to implement these requirements sooner thanbudgeted or planned and thereby incur unexpected expenses. Stockholder activism, the political environment and the level of governmentintervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliancecosts 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 result in substantial legal and financial compliance costs and tomake some activities more time-consuming and costly. If these requirements divert the attention of our management and personnel from otherbusiness concerns, they could have a material adverse effect on our business, financial condition and results of operations. These costs coulddecrease 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 ourproducts or services. For example, these rules and regulations could make it more difficult and more expensive for us to obtain director and officerliability insurance and we may be required to incur substantial costs to maintain the same or similar coverage. We cannot predict or estimate theamount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it moredifficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.Sales of a substantial number of shares of our common stock by our existing stockholders in the public market could cause our stockprice to fall.If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the trading price ofour common stock could decline. We had 27,816,014 shares of common stock outstanding as of December 31, 2018. We are unable to predict theeffect that sales may have on the prevailing market price of our common stock.50CIDARA THERAPEUTICS, INC.Sales of our common stock by current stockholders may make it more difficult for us to sell equity or equity-related securities in the future at atime and price that we deem reasonable or appropriate and may make it more difficult for you to sell shares of our common stock. In addition,shares of common stock that are either issuable upon the exercise of outstanding options or warrants or reserved for future issuance under ouremployee benefit plans will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules andRule 144 and Rule 701 under the Securities Act. If these additional shares of common stock are sold, or if it is perceived that they will be sold, inthe public market, the trading price of our common stock could decline.Certain holders of our securities are entitled to rights with respect to the registration of their shares under the Securities Act. Registration of theseshares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for sharesheld by affiliates, as defined in Rule 144 under the Securities Act. Any sales of securities by these stockholders could have a material adverseeffect on the trading price of our common stock.Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans,could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.We believe, based on our current business plan, that our existing cash and cash equivalents will not be sufficient to fund our obligations past thethird quarter of 2019. Significant additional capital will be needed to continue our operations as currently planned, beyond the third quarter of 2019,including conducting clinical trials, commercialization efforts, expanded research and development activities and costs associated with operatingas a public company. To raise capital, we may sell common stock, convertible securities or other equity securities in one or more transactions atprices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities, new investorscould gain rights, preferences and privileges senior to our existing stockholders and our existing stockholders may be materially diluted by suchsubsequent sales. For example, current stockholders may be diluted by the completion of the 2nd and optional 3rd closings of our May 2018registered direct offering. Investors in the May 2018 registered direct offering may invest $50 million on a pro rata basis in a second closingtriggered by our receipt of topline data from Part B of the STRIVE Phase 2 clinical trial, and, should we chose to proceed with the optional 3rdclosing, those investors also have the option to invest an additional $20 million on a pro rata basis at such time, in each case subject to certainconditions. The price at which we would sell common stock in the second and optional third closings would be 75% of the volume weightedaverage price of our common stock for the five trading days following our announcement of topline data from Part B of the STRIVE Phase 2clinical trial. Additionally, certain investors in the optional 3rd closing also have the right to purchase warrants to purchase an aggregate of up to2,500,000 shares of our common stock at a purchase price of $0.125 per share subject to each such warrant. The warrants will be exercisableimmediately for cash, at an exercise price of $6.81 per share and may also be dilutive to our current stockholders.Pursuant to our 2015 Equity Incentive Plan, or the 2015 EIP, our management is authorized to grant stock options to our employees, directors andconsultants. The number of shares of our common stock reserved for issuance under the 2015 EIP will automatically increase on January 1 ofeach year through and including January 1, 2025, by 4% of the total number of shares of our capital stock outstanding on December 31 of thepreceding calendar year or a lesser number of shares determined by our board of directors. Additionally, the number of shares of our commonstock reserved for issuance under our 2015 Employee Stock Purchase Plan, or the ESPP, will automatically increase on January 1 of each yearthrough and including January 1, 2025, by the lesser of 1% of the total number of shares of our capital stock outstanding on December 31 of thepreceding calendar year or 490,336 shares. Unless our board of directors elects not to increase the number of shares available for future granteach year under the 2015 EIP and the ESPP, our stockholders may experience additional dilution, which could cause our stock price to fall.We have broad discretion in the use of working capital and may not use it effectively.Our management will have broad discretion in the application of our working capital. Because of the number and variability of factors that willdetermine our use of our working capital, its ultimate use may vary substantially from its currently intended use. Our management might not applyour working capital in ways that ultimately increase the value of your investment. We expect to use our working capital to fund research anddevelopment activities and general operating expenses. The failure by our management to apply this working capital effectively could harm ourbusiness. Pending its use, we may invest our working capital in short-term, investment-grade, interest-bearing securities. These investments maynot yield a favorable return to our stockholders. If we do not invest or apply our working capital in ways that enhance stockholder value, we mayfail to achieve expected financial results, which could cause our stock price to decline.51CIDARA THERAPEUTICS, INC.Anti-takeover provisions under our charter documents and Delaware law could delay or prevent a change of control which could limit themarket price of our common stock and may prevent or frustrate attempts by our stockholders to replace or remove our currentmanagement.Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent a change ofcontrol of our company or changes in our board of directors that our stockholders might consider favorable. Some of these provisions include:•a board of directors divided into three classes serving staggered three-year terms, such that not all members of the board will be electedat one time;•a prohibition on stockholder action through written consent, which requires that all stockholder actions be taken at a meeting of ourstockholders;•a requirement that special meetings of stockholders be called only by the chairman of the board of directors, the chief executive officer orby a majority of the total number of authorized directors;•advance notice requirements for stockholder proposals and nominations for election to our board of directors;•a requirement that no member of our board of directors may be removed from office by our stockholders except for cause and, in additionto any other vote required by law, upon the approval of not less than two-thirds of all outstanding shares of our voting stock then entitled tovote in the election of directors;•a requirement of approval of not less than two-thirds of all outstanding shares of our voting stock to amend any bylaws by stockholderaction or to amend specific provisions of our certificate of incorporation; and •the authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder approvaland which preferred stock may include rights superior to the rights of the holders of common stock.In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporate Law,which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These anti-takeoverprovisions and other provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make it moredifficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by the then-currentboard of directors and could also delay or impede a merger, tender offer or proxy contest involving our company. These provisions could alsodiscourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing or cause us to take othercorporate actions you desire. Any delay or prevention of a change of control transaction or changes in our board of directors could cause themarket price of our common stock to decline.Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum forsubstantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicialforum for disputes with us or our directors, officers or employees.Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action orproceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to theDelaware General Corporation Law, our certificate of incorporation or our bylaws; or any action asserting a claim against us that is governed by theinternal affairs doctrine. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable fordisputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and otheremployees. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated bylaws to be inapplicable orunenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affectour business and financial condition.If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stockprice and trading volume could decline.The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us orour business. If one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about ourbusiness, our stock price may decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly,demand for our stock could decrease, which might cause our stock price and trading volume to decline.52CIDARA THERAPEUTICS, INC.Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change” (generallydefined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change netoperating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited. As a result of capital raising andother transactions that have occurred since our inception in 2012, we may or may not have experienced an “ownership change.” We may alsoexperience ownership changes in the future as a result of subsequent shifts in our stock ownership. As of December 31, 2018, we had U.S. netoperating loss carryforwards of approximately $179.1 million, which begin to expire in 2033, which could be limited if we experience an “ownershipchange.”Our business and operations would suffer in the event of system failures.Despite the implementation of security measures, our internal computer systems and those of our contractors and consultants are vulnerable todamage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While wehave not experienced any such system failure, accident or security breach to date, if such an event were to occur and cause interruptions in ouroperations, it could result in a material disruption of our drug development programs. For example, the loss of clinical trial data from completed orongoing or planned clinical trials could result in delays in our regulatory approval efforts and we may incur substantial costs to attempt to recoveror reproduce the data. If any disruption or security breach resulted in a loss of or damage to our data or applications or inappropriate disclosure ofconfidential or proprietary information, we could incur liability and/or the further development of our product candidates could be delayed.Our operations are vulnerable to interruption by natural disasters, power loss, terrorist activity and other events beyond our control, theoccurrence of which could materially harm our business.Businesses located in California have, in the past, been subject to electrical blackouts as a result of a shortage of available electrical power andany future blackouts could disrupt our operations. We are vulnerable to a major earthquake, wildfire, inclement weather and other natural and man-made disasters and we have not undertaken a systematic analysis of the potential consequences to our business as a result of any such naturaldisaster and do not have an applicable recovery plan in place. We carry only limited business interruption insurance that would compensate us foractual losses from interruption of our business that may occur and any losses or damages incurred by us in excess of insured amounts couldcause our business to materially suffer.Item 1B. Unresolved Staff Comments.Not applicable.Item 2. Properties.We lease a 29,638 square foot facility in San Diego, California for administrative, research and development activities. Our lease currently expiresin December 2021, subject to our option to renew for up to two additional two-year terms. We believe that our facility is sufficient to meet ourneeds and that suitable additional space will be available as and when needed.Item 3. Legal Proceedings.None.Item 4. Mine Safety Disclosures.Not applicable.53CIDARA THERAPEUTICS, INC.PART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.Market InformationOur common stock is traded on The Nasdaq Global Market under the symbol “CDTX.” Holders of RecordAs of February 20, 2019, there were approximately 26 holders of record for our common stock.Dividend PolicyWe do not anticipate declaring or paying, in the foreseeable future, any cash dividends on our capital stock. In addition, the terms of our loanagreement with Pacific Western restrict our ability to declare or pay any cash dividends or make any other distribution or payment on account of orin redemption, retirement or purchase of any capital stock, subject to certain limited exceptions. We currently intend to retain all available fundsand any future earnings to support our operations and finance the growth and development of our business. Any future determination related to ourdividend policy will be made at the discretion of our board of directors and will depend upon, among other factors, our results of operations,financial condition, capital requirements, contractual restrictions, business prospects and other factors our board of directors may deem relevant.Securities Authorized for Issuance under Equity Compensation PlansInformation about our equity compensation plans is incorporated herein by reference to Part III, Item 12 of this Annual Report.Item 6. Selected Financial Data.As a smaller reporting company, we are not required to provide information typically disclosed under this item.Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.You should read the following discussion and analysis together with our consolidated financial statements and related notes included elsewhere inthis Annual Report.Forward-Looking StatementsThe following discussion contains forward-looking statements that involve risks and uncertainties. These forward-looking statements involve risksand uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation,the risks set forth in Part II, Item 1A, “Risk Factors” in this Annual Report. See “Special Note Regarding Forward-Looking Statements.”OverviewWe are a biotechnology company focused on the discovery, development and commercialization of novel anti-infectives for the treatment ofdiseases that are inadequately addressed by current standard of care therapies. We are developing a pipeline of product and developmentcandidates, with an initial focus on serious fungal infections. Our lead product candidate is rezafungin acetate, an intravenous formulation of anovel echinocandin. Rezafungin is being developed as a once-weekly, high-exposure therapy for the treatment and prevention of serious, invasivefungal infections.In addition, we are developing our ADCs for viral infections, including influenza, and bacterial infections as part of our proprietary Cloudbreak®platform. The Cloudbreak platform is designed to discover compounds that directly kill pathogens and also direct a patient’s immune system toattack and eliminate pathogens.RezafunginRezafungin is a novel molecule in the echinocandin class of antifungals. We are developing rezafungin for the treatment and prevention of serious,invasive fungal infections. These infections include candidemia and invasive candidiasis, which are fungal infections associated with high mortalityrates.54CIDARA THERAPEUTICS, INC.STRIVE clinical trialIn March 2018, we reported topline results from Part A of our global, randomized Phase 2 clinical trial of rezafungin, called the STRIVE trial. InSTRIVE Part A, patients were randomized to one of two rezafungin arms or to the caspofungin arm. In the two rezafungin arms of the trial,patients received either 400 mg of rezafungin administered intravenously once weekly for two to four weeks (Group 1) or 400 mg for the first weekfollowed by 200 mg once weekly for one to three weeks, for a total of two to four weeks (Group 2). In the comparator arm (Group 3), patientsreceived daily caspofungin administered intravenously according to the approved prescribing information, with an optional step down to oralfluconazole. STRIVE Part A met its primary objectives related to tolerability and safety of rezafungin in the treatment of candidemia/invasivecandidiasis, and rezafungin was generally well-tolerated at both dosing regimens.Data from this trial indicated that a 400mg / 200mg dosing regimen of rezafungin had a higher rate of Clinical Cure by PI Assessment at Day 14(86%) and a lower All Cause Mortality at Day 30 (3%) when compared with once daily Caspofungin (71% and 11%, respectively).Cloudbreak PlatformWe believe our Cloudbreak platform is a fundamentally new approach for the treatment of infectious disease, and may have broad potentialapplications across a wide spectrum of infectious diseases, including viral and bacterial infections. The lead program is focused on the treatmentand prevention of the influenza virus. We have generated preclinical, in vivo proof of concept data in both our Cloudbreak antiviral and antibacterialprograms.FINANCIAL OPERATIONS OVERVIEWRevenuesTo date, we have not generated any revenues. In the future, we may generate revenue from a combination of license fees and other upfrontpayments, other funded research and development agreements, milestone payments, product sales, government and other third-party funding, androyalties in connection with strategic alliances. We expect that any revenue we generate will fluctuate from quarter-to-quarter as a result of thetiming of our achievement of nonclinical, clinical, regulatory and commercialization milestones, the timing and amount of payments relating to suchmilestones and the extent to which any of our products are approved and successfully commercialized. If we are unable to fund our developmentcosts, or we are unable to develop product candidates in a timely manner or obtain regulatory approval for them, our ability to generate futurerevenues and our results of operations and financial position would be adversely affected.Research and development expensesTo date, our research and development expenses have related primarily to nonclinical development of our rezafungin acetate and CD201 productcandidates and our Cloudbreak platform, as well as clinical development of rezafungin and CD101 topical. Research and development expensesconsist of wages, benefits and stock-based compensation for research and development employees, as well as the cost of scientific consultants,facilities and overhead expenses, laboratory supplies, manufacturing expenses, and nonclinical and clinical trial costs. We accrue clinical trialexpenses based on work performed, which relies on estimates of total costs incurred based on patient enrollment, completion of studies oractivities within studies and other events.Research and development costs are expensed as incurred and costs incurred by third parties are expensed as the contracted work is performed.We accrue for costs incurred as the services are being provided by monitoring the status of the study or project and the invoices received from ourexternal service providers. We adjust our accruals as actual costs become known.We have received potential research and development funding through a grant from CARB-X and a partnership grant from the NIAID. We haveevaluated the terms of the grants to assess our obligations and the classification of funding received. Amounts received for funded research anddevelopment are recognized in the statement of operations as a reduction to research and development expense over the grant period as therelated costs are incurred to meet our obligations.Research and development activities are central to our business model. Product candidates in later stages of clinical development generally havehigher development costs than those in earlier stages of development, primarily due to the increased size and duration of later-stage clinical trials.We expect our research and development expenses to increase over the next several years as we continue to conduct nonclinical and clinicalstudies, expand our research and development pipeline and progress our product candidates through clinical trials. However, it is difficult todetermine with certainty the duration, costs and timing to complete our current or future nonclinical programs and clinical trials of our productcandidates.55CIDARA THERAPEUTICS, INC.The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors that include, but arenot limited to, the following:•per patient trial costs;•the number of patients that participate in the trials;•the number of sites included in the trials;•the countries in which the trials are conducted;•the length of time required to enroll eligible patients;•the number of doses that patients receive;•the drop-out or discontinuation rates of patients;•potential additional safety monitoring or other studies requested by regulatory authorities;•the duration of patient follow-up; •the phase of development of the product candidate; and•the efficacy and safety profile of the product candidates.Research and development expenses by major program or category were as follows (in thousands): Year ended December 31, 2018 2017 2016Rezafugin$30,634 $24,394 $11,230CD101 topical— 1,385 7,604Cloudbreak platform3,147 2,915 2,915Personnel costs12,378 11,022 10,084Other research and development expenses2,983 3,107 3,866Total research and development expenses$49,142 $42,823 $35,699We typically deploy our employees, consultants and infrastructure resources across our programs. Thus, some of our research and developmentexpenses are not attributable to an individual program but are included in other research and development expenses as shown above.In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capabilityand commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific andclinical success of each product candidate, as well as an assessment of each product candidate’s commercial potential.In February 2017, we reported results from our Phase 2 clinical trial of rezafungin topical, which was designed to evaluate gel and ointment topicalformulations of rezafungin in women with moderate-to-severe VVC. The study found that while the gel and ointment topical formulations ofrezafungin tested in the study were well tolerated, both formulations were similar in efficacy to each other but lower in clinical and mycological curerates compared to oral fluconazole. As a result, we discontinued the rezafungin topical development program for VVC.General and administrative expensesGeneral and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to ourexecutive, finance, legal, business development, commercial planning and support functions. Other general and administrative expenses includefacility and overhead costs not otherwise included in research and development expenses, consultant expenses, travel expenses and professionalfees for auditing, tax, legal, and other services. We expect that general and administrative expenses will increase in the future as we expand ouroperating activities and incur additional costs associated with operating as a publicly traded company. These increases will likely include legalfees, accounting fees, directors’ and officers’ liability insurance premiums and costs associated with investor relations.Other income (expense)Other income (expense) consists primarily of the change in the fair value of the contingent forward purchase obligation and related issuance costs,interest income and expense, and various income or expense items of a non-recurring nature.56CIDARA THERAPEUTICS, INC.We earn interest income from interest-bearing accounts and money market funds for cash and cash equivalents and marketable securities and forour short-term investments. Interest expense represents interest payable related to term loans and the amortization of debt issuance costs.Contingent forward purchase obligationOn May 21, 2018, we entered into a subscription agreement with certain investors providing for the purchase and sale of up to an aggregate of$120.0 million of common stock and preferred stock in three closings. The second and optional third closings and warrants related to the optionalthird closing are triggered by our announcement of topline data from our STRIVE Part B Phase 2 clinical trial of rezafungin. We determined thatthese closings are classified as liabilities and represent contingent forward purchase obligations. These liabilities are recorded at their estimatedfair value initially and on a recurring basis. The liability was initially recorded at $4.3 million on May 21, 2018, and fair value adjustments resultingin a gain of $3.9 million were recorded during the year ended December 31, 2018.Beneficial conversion featureFor the year ended December 31, 2018, we recognized the fair value of an embedded beneficial conversion feature of $10.3 million on the Series XConvertible Preferred Stock issued in connection with the financing transaction that closed on May 23, 2018.CRITICAL ACCOUNTING POLICIES AND ESTIMATESOur discussion and analysis of our financial condition and results of operations is based upon financial statements that we have prepared inaccordance with accounting principles generally accepted in the United States. The preparation of these financial statements requiresmanagement to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses, and related disclosures. Onan on-going basis, we evaluate these estimates, including those related to preclinical and clinical trial accruals and share-based compensation.Estimates are based on historical experience, information received from third parties and various other assumptions that are believed to bereasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilitiesthat are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Theitems in our financial statements requiring significant estimates and judgments are as follows:Subaward Agreement and Partnership GrantsIn March 2017, we entered into a Subaward Agreement with CARB-X, under which CARB-X will reimburse us for qualifying development expensesfor our Cloudbreak antibacterial program for CD201. We stopped work under the CARB-X Subaward Agreement in the first quarter of 2018.In May 2018, we and Rutgers University were awarded a five year, $5.5 million partnership grant from the NIAID, under which we will bereimbursed for qualifying expenses from our Cloudbreak antibacterial program.We reflect the costs reimbursed under these agreements as a reduction of our research and development expenses. See Notes 2 and 9 to ourfinancial statements for additional information.Preclinical and Clinical Trial AccrualsWe make estimates of our accrued expenses as of each balance sheet date in our financial statements based on the facts and circumstancesknown to us at that time. Our accrued expenses for preclinical studies and clinical trials are based on estimates of costs incurred and fees thatmay be associated with services provided by contract research organizations, or CROs, clinical trial investigational sites and other clinical trial-related activities. Payments under certain contracts with such parties depend on factors such as successful enrollment of patients, site initiationand the completion of clinical trial milestones. In accruing for these services, we estimate the time period over which services will be performedand the level of effort to be expended in each period. If possible, we obtain information regarding unbilled services directly from these serviceproviders. However, we may be required to estimate these services based on other information available to us. If we underestimate oroverestimate the activities or fees associated with a study or service at a given point in time, adjustments to research and development expensesmay be necessary in future periods. Historically, our estimated accrued liabilities have approximated actual expense incurred. Subsequentchanges in estimates may result in a material change in our accruals.57CIDARA THERAPEUTICS, INC.Stock-based compensationThe Company accounts for stock-based compensation expense related to employee stock options, restricted stock and employee stock purchaseplan rights by estimating the fair value on the date of grant. We estimate the fair value of stock option awards to employees and non-employees using the Black-Scholes option pricing model, which requiresthe input of highly subjective assumptions, including (a) the risk-free interest rate, (b) the expected volatility of our stock, (c) the expected term ofthe award, and (d) the expected dividend yield. Due to the lack of an adequate history of a public market for the trading of our common stock anda lack of adequate company-specific historical and implied volatility data, we have based our estimate of expected volatility on the historicalvolatility of a group of similar companies that are publicly traded. For these analyses, we have selected companies with comparablecharacteristics to ours, including enterprise value, risk profiles, and position within the industry, and with historical share price informationsufficient to meet the expected life of the stock-based awards. We compute the historical volatility data using the daily close prices for theselected companies’ shares during the equivalent period of the calculated expected term of our stock-based awards. We will continue to apply thisprocess until a sufficient amount of historical information regarding the volatility of our common stock price becomes available. We haveestimated the expected life of our employee stock options using the “simplified” method, whereby the expected life equals the average of thevesting term and the original contractual term of the option. The risk-free interest rates for periods within the expected life of the option are basedon the yields of zero-coupon U.S. treasury securities. See Note 8 of the Notes to the Financial Statements for additional information.Restricted Stock UnitsIn 2017 and 2018, we granted Restricted Stock Units, or RSUs, and Performance-based RSUs, or PRSUs, to employees. We estimate the fairvalue of RSUs and PRSUs based on the closing price of the Company's common stock on the date of grant. For awards subject to time-basedvesting conditions, stock-based compensation expense is recognized ratably over the requisite service period of the awards. For awards subject toperformance-based vesting conditions, we assess the probability of achievement of the individual milestones under the stock-based awards andrecognize stock-based compensation expense over the implicit service period commencing once we believe the performance criteria is probable ofachievement.Stockholder's EquityOn May 21, 2018, we entered into a subscription agreement with certain investors providing for the purchase and sale, in a registered directoffering, of up to an aggregate of $120.0 million of our common stock and preferred stock in three closings. On May 23, 2018, we completed thefirst closing, which was comprised of 6,185,987 shares of common stock at an offering price of $4.70 per share, 445,231 shares of Series XConvertible Preferred Stock at an offering price of $47.00 per share, and an option fee relating to the third closing paid by the investors for a totalof $0.5 million. In a private placement concurrent with the first closing, we also sold warrants to purchase an aggregate of 12,499,997 shares ofcommon stock at $0.125 per warrant share. Net proceeds for the first closing and the concurrent private placement were $49.5 million. Wedetermined that warrants and future closings represented derivative instruments requiring bifurcation under ASC 815. Accordingly, we determined afair value for each component of the subscription agreement and allocated the expected proceeds across each component on a relative fair valuebasis. Key estimates within the valuation include the expected timing for completion and estimated probability of success of our STRIVE Part Bclinical trial. See Note 7 of the Notes to the Financial Statements for additional information.RESULTS OF OPERATIONSComparison of the years ended December 31, 2018 and 2017The following table summarizes our results of operations for the years ended December 31, 2018 and 2017 (in thousands): Year ended December 31, 2018 2017 ChangeResearch and development$49,142 $42,823 6,319General and administrative14,143 12,898 1,245Other income (expense), net4,269 (7) 4,27658CIDARA THERAPEUTICS, INC.Research and development expensesResearch and development expenses were $49.1 million for the year ended December 31, 2018 compared to $42.8 million for the year endedDecember 31, 2017. The increase in research and development expenses is due to higher clinical expenses associated with start up activities forthe rezafungin ReSTORE and ReSPECT studies, as well as higher personnel costs. The increase was partially offset by a decrease in clinicalexpenses associated with the rezafungin STRIVE clinical trial and a decrease in CD101 topical expenses due to the discontinuation of thatprogram in February 2017.General and administrative expensesGeneral and administrative expenses were $14.1 million for the year ended December 31, 2018 compared to $12.9 million for the year endedDecember 31, 2017. The increase in general and administrative expenses was primarily related to higher legal, accounting, and consultingexpense.Other income (expense)Other income for the year ended December 31, 2018 related primarily to the change in the fair value of the contingent forward purchase obligationand related issuance costs, as well as income generated from cash held in interest-bearing investments. Other income was partially offset byinterest expense in connection with our loan from Pacific Western Bank. Other expense for the year ended December 31, 2017 included interestexpense incurred in connection with our loan from Pacific Western Bank, offset by income generated from cash held in interest-bearinginvestments.Comparison of the year ended December 31, 2017 and 2016The following table summarizes our results of operations for the years ended December 31, 2017 and 2016 (in thousands): Year ended December 31, 2017 2016 ChangeResearch and development$42,823 $35,699 7,124General and administrative12,898 12,737 161Other income (expense), net(7) 271 (278)Research and development expensesResearch and development expenses were $42.8 million for the year ended December 31, 2017 compared to $35.7 million for the yearended December 31, 2016. The majority of the increase in research and development expense is due to higher clinical expenses associated withthe rezafungin STRIVE trial. Increases in rezafungin expenses were partially offset by decreases in CD101 topical expenses due to thediscontinuation of that program in February 2017.General and administrative expensesGeneral and administrative expenses were $12.9 million for the year ended December 31, 2017 compared to $12.7 million for the yearended December 31, 2016. The increase in general and administrative expenses was primarily related to personnel costs.Other Income (Expense)Other income (expense) for the years ended December 31, 2017 and 2016 relates to income generated from cash held in interest-bearinginvestments, offset by the cash and non-cash interest associated with our loan from Pacific Western Bank.LIQUIDITY AND CAPITAL RESOURCESSince our inception, we have received $269.4 million in gross proceeds to fund our operations, primarily through private placements of convertiblepreferred stock, convertible notes, our initial public offering, our entry into a debt facility in October 2016 with Pacific Western Bank, our October2016 public offering of common stock, our October 2017 private placement of common stock, sales of common stock under our controlled equitysales agreement, and our May 2018 registered direct offering.59CIDARA THERAPEUTICS, INC.As of December 31, 2018, we had $74.6 million in cash and cash equivalents. The following table shows a summary of our cash flows for theyears ended December 31, 2018, 2017 and 2016 (in thousands): Year ended December 31, 2018 2017 2016Net cash provided by (used in): Operating activities$(56,705) $(49,909) $(39,771)Investing activities14,301 4,471 25,482Financing activities56,153 20,884 37,094Net increase (decrease) in cash and cash equivalents$13,749 $(24,554) $22,805Operating activitiesNet cash used in operating activities was $56.7 million for the year ended December 31, 2018 compared to $49.9 million and $39.8 million for theyears ended December 31, 2017 and 2016, respectively. The increase in net cash used in operating activities was attributable to a net loss of$59.0 million for the year ended December 31, 2018 compared to net losses of $55.7 million and $48.2 million for the years ended December 31,2017 and 2016, respectively. For all periods presented, the primary use of cash was to fund increased levels of research and developmentactivities for our product candidates, which activities and uses of cash we expect to continue to increase for the foreseeable future.Investing activitiesOur primary investing activities during the years ended December 31, 2018, 2017, and 2016 consisted of purchases and maturities of short-terminvestments. For the years ended December 31, 2018, 2017, and 2016 we purchased approximately $14.5 million, $19.5 million, and $69.6 million,respectively, of short-term investments and received proceeds of $29.0 million, $24.3 million, and $95.5 million, respectively, from the maturity ofshort-term investments. Net cash used for the purchase of property and equipment was $0.2 million, $0.3 million, and $0.4 million for the yearsended December 31, 2018, 2017, and 2016, respectively.Financing activitiesNet cash provided by financing activities was $56.2 million for the year ended December 31, 2018 compared to $20.9 million and $37.1 million forthe years ended December 31, 2017 and 2016, respectively. During the year ended December 31, 2018, net proceeds from the sale of commonstock, Series X Convertible Preferred Stock, and warrants were $55.9 million. During the year ended December 31, 2017, net proceeds from thesale of common stock was $20.7 million. During the year ended December 31, 2016, net proceeds from the sale of common stock and issuance ofthe term loan were $26.6 million and $9.9 million, respectively.Operating Capital RequirementsWe performed an analysis of our ability to continue as a going concern. We believe, based on our current business plan, that our existing cash andcash equivalents will be sufficient to fund our obligations through the third quarter of 2019, but will not be sufficient to fund our obligations after thethird quarter of 2019. Our ability to execute our operating plan beyond the third quarter of 2019 depends on our ability to obtain additional fundingthrough equity offerings, debt financings or potential licensing and collaboration arrangements. We plan to continue to fund our losses fromoperations through cash and cash equivalents on hand, as well as through future equity offerings, debt financings, other third party funding, andpotential licensing or collaboration arrangements. There can be no assurance that additional funds will be available when needed from any sourceor, if available, will be available on terms that are acceptable to us. Even if we raise additional capital, we may also be required to modify, delay orabandon some of our plans which could have a material adverse effect on our business, operating results and financial condition and our ability toachieve our intended business objectives. Any of these actions could materially harm our business, results of operations and future prospects.Item 7A. Quantitative and Qualitative Disclosures about Market Risk.As a smaller reporting company, we are not required to provide information typically disclosed under this item.60CIDARA THERAPEUTICS, INC.Item 8. Consolidated Financial Statements and Supplementary Data.Report of Independent Registered Public Accounting FirmTo the Shareholders and the Board of Directors of Cidara Therapeutics, Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cidara Therapeutics, Inc. (the Company) as of December 31, 2018 and 2017,the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity, and cash flowsfor each of the three years in the period ended December 31, 2018, and the related notes. In our opinion, the consolidated financial statementspresent fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the results of its operations andits cash flows for each of the three years in the period ended December 31, 2018, in conformity with U.S. generally accepted accountingprinciples.The Company's Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. Asdiscussed in Note 1 to the financial statements, the Company has experienced net losses and negative cash flows from operating activities sinceits inception and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management's evaluation ofthe events and conditions and management’s plans regarding these matters are also described in Note 1. The consolidated financial statementsdo not include any adjustments that might result from the outcome of this uncertainty.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’sfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (UnitedStates) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable 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 obtainreasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is notrequired 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 toobtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of theCompany'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 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 anddisclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis forour opinion./s/ Ernst & Young LLPWe have served as the Company's auditor since 2014.San Diego, CaliforniaFebruary 28, 201961CIDARA THERAPEUTICS, INC.Consolidated Balance Sheets December 31, 2018 December 31, 2017(In thousands, except share and per share data) ASSETS Current assets: Cash and cash equivalents$74,562 $60,813Short-term investments— 14,501Accounts receivable— 321Prepaid expenses and other current assets2,567 2,035Total current assets77,129 77,670Property and equipment, net712 1,044Other assets1,271 321Total assets$79,112 $79,035LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable$2,846 $2,590Accrued liabilities3,883 4,257Accrued compensation and benefits2,824 2,571Contingent forward purchase obligation411 —Current portion of term loan9,928 2,667Total current liabilities19,892 12,085Term loan, less debt issuance costs— 7,206Other long-term liabilities81 —Total liabilities19,973 19,291Commitments and contingencies Stockholders' equity: Preferred stock, $0.0001 par value; 10,000,000 shares authorized at December 31, 2018 andDecember 31, 2017:— —Series X Convertible Preferred stock, $0.0001 par value; 5,000,000 shares authorized atDecember 31, 2018 and no shares authorized at December 31, 2017; 445,231 shares issuedand outstanding at December 31, 2018; no shares issued and outstanding at December 31,2017— —Common stock, $0.0001 par value; 200,000,000 shares authorized at December 31, 2018 and2017; 27,816,014 shares issued and outstanding at December 31, 2018; 20,534,993 and20,525,688 shares issued and outstanding, respectively, at December 31, 20173 2Additional paid-in capital277,871 209,140Accumulated other comprehensive loss— (8)Accumulated deficit(218,735) (149,390)Total stockholders' equity59,139 59,744Total liabilities and stockholders' equity$79,112 $79,035See accompanying notes.62CIDARA THERAPEUTICS, INC.Consolidated Statements of Operations and Comprehensive Loss Years ended December 31,(In thousands, except share and per share data)201820172016Operating expenses: Research and development$49,142 $42,823 $35,699General and administrative14,143 12,898 12,737Total operating expenses63,28555,72148,436Loss from operations(63,285)(55,721)(48,436)Other income (expense): Change in fair value of contingent forward purchase obligation3,851 — —Interest income (expense), net629 (7) 271Other expense(211) — —Total other income (expense)4,269(7)271Net loss$(59,016)$(55,728)$(48,165)Recognition of beneficial conversion feature(10,329) — —Net loss attributable to common shareholders$(69,345) $(55,728) $(48,165)Basic and diluted net loss per common share$(2.76) $(3.18) $(3.32)Shares used to compute basic and diluted net loss per common share25,142,976 17,500,853 14,488,987 Net loss$(59,016) $(55,728) $(48,165)Unrealized gain(loss) on short-term investments8 (7) 7Comprehensive loss$(59,008) $(55,735) $(48,158)See accompanying notes.63CIDARA THERAPEUTICS, INC.Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity Series X Convertible PreferredStockCommon StockAdditional Paid-InCapitalAccumulatedDeficitOtherComprehensiveLossTotal Stockholders'Equity(In thousands, except sharedata)SharesAmountSharesAmountBalance, December 31, 2015— $—13,786,285$1$149,416$(45,497)$(8) $103,912Public offering of commonstock, net of issuance costs— — 2,752,637 1 26,621 — — 26,622Stock-based compensation— — — — 4,344 — — 4,344Vesting of restricted shares— — 90,423 — 197 — — 197Issuance of common stockfor exercise of stock options— — 83,353 — 525 — — 525Issuance of common stockunder Employee StockPurchase Plan— — 58,616 — 562 — — 562Issuance of warrants inconnection with term loan— — — — 175 — — 175Unrealized loss on marketablesecurities— — — — — — 7 7Net loss— — — — — (48,165) — (48,165)Balance, December 31, 2016——16,771,3142181,840(93,662)(1) 88,179Sale of common stock, net ofissuance costs— — 3,600,178 — 20,771 — — 20,771Stock-based compensation— — — — 5,696 — — 5,696Vesting of restricted shares— — 19,055 — 44 — — 44Issuance of common stockfor exercise of stock options— — 38,332 — 228 — — 228Issuance of common stockfor restricted share unitsvested— — 2,500 — 18 — — 18Issuance of common stockunder Employee StockPurchase Plan— — 94,309 — 543 — — 543Unrealized gain on marketablesecurities— — — — — — (7) (7)Net loss— — — — — (55,728) — (55,728)Balance, December 31, 2017— — 20,525,688 2 209,140 (149,390) (8) 59,744Registered Direct Offering,net of offering costs445,231 — 6,185,987 1 45,457 — — 45,458Beneficial conversion featureof Series X ConvertiblePreferred Stock— — — — 10,329 (10,329) — —Public offering of commonstock, net of issuance costs— — 847,937 — 6,440 — — 6,440Stock-based compensation— — — — 5,710 — — 5,710Vesting of restricted shares— — 9,305 — 21 — — 21Issuance of common stockfor exercise of stock options— — 89,031 — 204 — — 204Issuance of common stockunder Employee StockPurchase Plan— — 158,066 — 570 — — 570Unrealized loss on marketablesecurities— — — — — — 8 8Net loss— — — — — (59,016) — (59,016)Balance, December 31, 2018445,231 $— 27,816,014 $3 $277,871 $(218,735) $— $59,139See accompanying notes.64CIDARA THERAPEUTICS, INC.Consolidated Statements of Cash Flows Years ended December 31,(In thousands)201820172016Operating activities: Net loss$(59,016) $(55,728) $(48,165)Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization523 667 732Stock-based compensation5,710 5,714 4,344Non-cash interest expense43 61 17Amortization of discount or premium on short-term investments31 (33) (176)Amortization of debt issue costs13 18 5Deferred rent30 (29) (8)Change in fair value of contingent forward purchase obligations(3,851) — —Contingent forward purchase obligation offering costs211 — —Changes in operating assets and liabilities: Prepaid expenses and other current assets(211) (1,481) (76)Accounts payable and accrued liabilities(59) 642 1,913Accrued compensation822 453 1,760Other assets(951) (193) (117)Net cash used in operating activities(56,705) (49,909) (39,771)Investing activities: Purchases of short-term investments(14,548) (19,523) (69,617)Maturities of short-term investments29,026 24,300 95,500Purchases of property and equipment(177) (306) (401)Net cash provided by investing activities14,301 4,471 25,482Financing activities: Proceeds from Registered Direct Offering, net of offering costs49,509 — —Proceeds from issuance of common stock, net of offering costs6,440 20,735 26,622Proceeds from issuance of Term Loan, net of offering costs— — 9,947Proceeds from exercise of stock options204 228 525Repurchase of unvested restricted stock— (79) —Net cash provided by financing activities56,153 20,884 37,094Net increase (decrease) in cash and cash equivalents13,749 (24,554) 22,805Cash and cash equivalents at beginning of year60,813 85,367 62,562Cash and cash equivalents at end of year$74,562 $60,813 $85,367Supplemental disclosure of cash flows: Interest paid$582 $511 $—Non-cash investing activity: Property and equipment acquired but not yet paid$14 $30 $21Non-cash financing activities: Issuance of warrants to purchase common stock upon execution of term loan$— $— $175Vesting of early exercised stock options$21 $44 $197Purchase of shares pursuant to Employee Stock Purchase Plan$570 $543 $562Receivable for issuance of common stock, net of offering costs$— $36 $—See accompanying notes.65CIDARA THERAPEUTICS, INC.Notes to Consolidated Financial Statements1. THE COMPANY AND BASIS OF PRESENTATIONDescription of BusinessCidara Therapeutics, Inc., or the Company, was originally incorporated in Delaware in December 2012 as K2 Therapeutics, Inc., and its name waschanged to Cidara Therapeutics, Inc. in July 2014. The Company is a biotechnology company focused on the discovery, development andcommercialization of novel anti-infectives. The Company’s portfolio is comprised of a proprietary product candidate for the treatment andprevention of serious fungal infections. The Company is also conducting research in bacterial and viral infection. The Company formed wholly-ownedsubsidiaries, Cidara Therapeutics UK Limited, in England, and Cidara Therapeutics (Ireland) Limited, in Ireland, in March 2016 and October 2018,respectively, for the purpose of developing its product candidates in Europe.Basis of PresentationThe Company has a limited operating history and the sales and income potential of the Company’s business and market are unproven. TheCompany has experienced net losses and negative cash flows from operating activities since its inception. At December 31, 2018, the Companyhad an accumulated deficit of $218.7 million. The Company expects to continue to incur net losses into the foreseeable future. Successfultransition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support the Company’s cost structure.At December 31, 2018, the Company had cash and cash equivalents of $74.6 million. Based on the Company’s current business plan,management believes that existing cash and cash equivalents will be sufficient to fund the Company’s obligations through the third quarter of2019. The Company’s ability to execute its operating plan beyond the third quarter of 2019 depends on its ability to obtain additional fundingthrough equity offerings, debt financings or potential licensing and collaboration arrangements. The accompanying consolidated financialstatements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets andsettlement of liabilities in the normal course of business. However, the Company’s current working capital, anticipated operating expenses and netlosses and the uncertainties surrounding its ability to raise additional capital as needed, as discussed below, raise substantial doubt about itsability to continue as a going concern for a period of one year following the date that these financial statements are issued. The consolidatedfinancial statements do not include any adjustments for the recovery and classification of assets or the amounts and classification of liabilitiesthat might be necessary should the Company be unable to continue as a going concern.The Company plans to continue to fund its losses from operations through cash and cash equivalents on hand, as well as through future equityofferings, debt financings, other third party funding, and potential licensing or collaboration arrangements. There can be no assurance thatadditional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to the Company.Even if the Company raises additional capital, it may also be required to modify, delay or abandon some of its plans which could have a materialadverse effect on the Company’s business, operating results and financial condition and the Company’s ability to achieve its intended businessobjectives. Any of these actions could materially harm the Company’s business, results of operations and future prospects.Basis of Consolidation—The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Allsignificant intercompany accounts and transactions have been eliminated in consolidation.Use of Estimates—The preparation of financial statements in conformity with U.S. generally accepted accounting principles, or GAAP, requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assetsand liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The Company evaluates itsestimates and assumptions on an ongoing basis. The most significant estimates in the Company’s consolidated financial statements relate toestimating the fair value of the Company’s stock options, the fair value of the Company's contingent forward purchase obligations, and certainaccruals, including those related to nonclinical and clinical activities. Although the estimates are based on the Company’s knowledge of currentevents, comparable companies, and actions it may undertake in the future, actual results may ultimately materially differ from these estimates andassumptions.Segment Information—Operating segments are identified as components of an enterprise about which separate discrete financial information isavailable for evaluation by the chief operating decision maker, the Chief Executive Officer, in making decisions regarding resource allocation andassessing performance. The Company views its operations and manages its business as one operating segment.66CIDARA THERAPEUTICS, INC.Notes to Consolidated Financial Statements — Continued2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESCash and Cash Equivalents—The Company considers all short-term investments purchased with a maturity of three months or less whenacquired to be cash equivalents.Investments Available-for-Sale— Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported inaccumulated other comprehensive loss. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discountsto maturity. The amortization of premiums and accretion of discounts is included in interest income. Realized gains and losses and declines invalue judged to be other-than-temporary, if any, on available-for-sale securities are included in other income (expense). The cost of securities soldis based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income.Securities with maturity dates of 12 months or less from the date of purchase are classified as short-term investments and securities with maturitydates of more than 12 months are classified as long-term investments.Property and Equipment— The Company records property and equipment at cost, which consists of lab equipment, computer equipment andsoftware, office equipment, furniture and fixtures and leasehold improvements. Property and equipment is depreciated using the straight-linemethod over the estimated useful lives (generally three to seven years). Leasehold improvements are amortized over the lesser of their useful lifeor the remaining lease term, including any renewal periods that are deemed to be reasonably assured. Repair and maintenance costs areexpensed as incurred.Concentration of Credit Risk—The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cashand cash equivalents and short-term investments. Periodically, the Company maintains deposits in government insured financial institutions inexcess of government insured limits. The Company invests its cash balances in financial institutions that it believes have high credit quality, hasnot experienced any losses on such accounts and does not believe it is exposed to significant credit risk.Patent Costs— The Company expenses all costs as incurred in connection with patent applications (including direct application fees, and the legaland consulting expenses related to making such applications) and such costs are included in general and administrative expenses in theaccompanying statements of operations.Income Taxes—The Company follows the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740,Income Taxes, or ASC 740, in reporting deferred income taxes. The ASC 740 requires a company to recognize deferred tax assets and liabilitiesfor expected future income tax consequences of events that have been recognized in the Company’s consolidated financial statements. Under thismethod, deferred tax assets and liabilities are determined based on temporary differences between financial statement carrying amounts and thetax basis of assets and liabilities using enacted tax rates in the years in which the temporary differences are expected to reverse. Valuationallowances are provided if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will notbe realized.The Company accounts for uncertain tax positions pursuant to ASC 740, which prescribes a recognition threshold and measurement process forfinancial statement recognition of uncertain tax positions taken or expected to be taken in a tax return. If the tax position meets this threshold, thebenefit to be recognized is measured as the tax benefit having the highest likelihood of being realized upon ultimate settlement with the taxingauthority. The Company recognizes interest accrued related to unrecognized tax benefits and penalties in the provision for income taxes.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Tax Act”), which among other provisions, reduced the U.S. corporatetax rate from 35% to 21%, effective January 1, 2018. Due to the timing of the enactment and the complexity involved in applying the provisions ofthe Tax Act, the Company made reasonable estimates of the effects and recorded provisional amounts, offset with valuation allowances, in itsfinancial statements as of December 31, 2017. At December 31, 2018, the Company has completed its assessment of the impact of the Tax Cutsand Jobs Act and has reflected the impact in the current year. At December 31, 2018, there were no material changes from the provisionalamounts recorded for the year ended December 31, 2017.Revenue Recognition—The Company recognizes revenues when customers obtain control of promised goods or services, in an amount thatreflects the consideration which it expects to receive in exchange for those goods or services. The Company recognizes revenues following thefive step model prescribed under Accounting Standards Update ("ASU") No. 2014-09 ("ASU 2014-09"): (i) identify contract(s) with a customer; (ii)identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performanceobligations in the contract; and (v) recognize revenues when (or as) the Company satisfies the performance obligation.Grant Funding—The Company has received research and development funding through a grant from CARB-X, a public-private partnershipfocused on antibacterials. The Company has also been awarded a partnership grant with Rutgers University from the NIAID. The Company hasevaluated the terms of the grants to assess its obligations and the classification of funding received. Amounts billable for funded research anddevelopment are recognized in the statement67CIDARA THERAPEUTICS, INC.Notes to Consolidated Financial Statements — Continuedof operations as a reduction to research and development expense over the grant period as the related costs are incurred to meet the Company'sobligations.Research and Development Costs—Research and development expenses consist of wages, benefits and stock-based compensation charges forresearch and development employees, scientific consultant fees, facilities and overhead expenses, laboratory supplies, manufacturing expenses,and nonclinical and clinical trial costs. The Company accrues nonclinical and clinical trial expenses based on work performed, which relies onestimates of total costs incurred based on patient enrollment, completion of studies, and other events.Costs incurred in purchasing technology assets and intellectual property are charged to research and development expense if the technology hasnot been conclusively proven to be feasible and has no alternative future use.Comprehensive Loss—Comprehensive loss is defined as the change in equity during a period from transactions and other events and/orcircumstances from non-owner sources. The Company’s only component of other comprehensive loss is unrealized gains (losses) on short-terminvestments. Comprehensive losses have been reflected in the consolidated statements of operations and comprehensive loss and as a separatecomponent of the statements of convertible preferred stock and stockholders’ equity (deficit) for all periods presented.Stock-based Compensation— The Company accounts for stock-based compensation expense related to employee stock options and employeestock purchase plan rights by estimating the fair value on the date of grant using the Black-Scholes option pricing model. The fair value ofRestricted Stock Units (RSUs) and Performance-based RSUs (PRSUs) granted to employees is estimated based on the closing price of theCompany's common stock on the date of grant. For awards subject to time-based vesting conditions, stock-based compensation expense isrecognized ratably over the requisite service period of the awards. For awards subject to performance-based vesting conditions, the Companyassesses the probability of achievement of the individual milestones under the stock-based awards and recognizes stock-based compensationexpense over the implicit service period commencing once the Company believes the performance criteria is probable of achievement. TheCompany accounts for stock options, RSUs, and PRSUs granted to non-employees using the fair value approach. These stock-based awards aresubject to periodic revaluation over their vesting terms. The Company recognizes forfeitures related to stock-based compensation as they occur.Net Loss Per Share—Basic net loss per share is calculated by dividing the net loss allocable to common shares by the weighted-average numberof common shares outstanding for the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed bydividing the net loss allocable to common shares by the weighted-average number of common shares and dilutive common stock equivalentsoutstanding for the period determined using the treasury-stock and if-converted methods. Dilutive common stock equivalents are comprised ofwarrants, Series X Convertible Preferred stock, unvested restricted common stock subject to repurchase, and RSUs and options outstandingunder the Company’s stock option plans. For all periods presented, there is no difference in the number of shares used to calculate basic anddiluted shares outstanding.The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per sharebecause to do so would be anti-dilutive (in common stock equivalent shares): December 31, 2018 2017Common stock warrants12,517,328 17,331Series X Convertible Preferred stock4,452,310 —Common stock options, RSUs and PRSUs issued and outstanding4,392,671 3,099,173Common stock subject to repurchase— 9,305Total21,362,309 3,125,809Fair Value of Financial Instruments— The Company follows ASC 820-10 issued by the FASB with respect to fair value reporting for financialassets and liabilities. The guidance defines fair value, provides guidance for measuring fair value and requires certain disclosures. The guidancedoes not apply to measurements related to share-based payments. The guidance discusses valuation techniques such as the market approach(comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the servicecapacity of an asset or replacement cost). The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques usedto measure fair value into three broad levels.The Company’s financial instruments consist of cash and cash equivalents, marketable securities, contingent forward purchase obligations, andlong-term debt. Fair value estimates of these instruments are made at a specific point in time based on relevant market information. Theseestimates may be subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined withprecision. The carrying amount of cash and cash equivalents, accounts receivable, prepaid expenses, accounts payable, and accrued liabilitiesare generally considered to68CIDARA THERAPEUTICS, INC.Notes to Consolidated Financial Statements — Continuedbe representative of their respective fair values because of the short-term nature of those instruments. The fair value of short-term investments isbased upon market prices quoted on the last day of the fiscal period or other observable market inputs. The fair value of contingent forwardpurchase obligations is based on a probability-weighted valuation approach (See Note 4). The Company believes that the fair value of long-termdebt approximates its carrying value.Recently Issued Accounting Standards— During 2016, the FASB issued ASU 2016-02, “Leases,” which requires that lease arrangements longerthan 12 months result in an entity recognizing an asset and liability. The updated guidance is effective for interim and annual periods beginningafter December 15, 2018, and early adoption is permitted. The Company currently expects that its operating lease commitments will be subject tothe new standard and recognized as right-of-use assets and operating lease liabilities upon the adoption of ASU 2016-02, which will increase thetotal assets and total liabilities that it reports relative to such amounts prior to adoption.During 2018, the FASB issued ASU 2018-07, "Improvements to Nonemployee Share-Based Payment Accounting," which expanded the scope ofTopic 718 to include share-based payment transactions for acquiring goods and services from non-employees. Under the ASU, the guidance onsuch payments to nonemployees is aligned with the accounting for share-based payments granted to employees, including the measurement ofequity-classified awards, which is fixed at the grant date under the new guidance. The updated guidance is effective for interim and annual periodsbeginning after December 15, 2018, and early adoption is permitted. The Company is currently assessing the impact that this standard will have onits consolidated financial statements.During 2018, the FASB issued ASU 2018-13, "Changes to the Disclosure Requirements for Fair Value Measurement," which modifies certaindisclosure requirements on fair value measurements. The updated guidance is effective for interim and annual periods beginning after December15, 2019, and early adoption is permitted. The Company is currently assessing the impact that this standard will have on its consolidated financialstatements.3. SHORT-TERM INVESTMENTSThe Company did not have any available-for-sale securities at December 31, 2018. The following table summarizes the available-for-sale securitiesheld at 2017 (in thousands):As of December 31, 2017Amortized Cost Unrealized Gains Unrealized Losses Fair ValueCorporate debt14,509 — (8) 14,501Total$14,509 $— $(8) $14,501All available-for-sale securities held at December 31, 2017 had maturities of less than one year. Unrealized gains and losses on available-for-salesecurities are included as a component of other comprehensive loss. The Company reviews its investments to identify and evaluate investmentsthat have an indication of possible other-than-temporary impairment. Factors considered in determining whether a loss is other-than-temporaryinclude the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of theinvestee, and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in marketvalue. During the years ended December 31, 2018 and 2017, the Company did not recognize any impairment or gains or losses on sales ofavailable-for-sale securities.4. FAIR VALUE MEASUREMENTSThe Company follows ASC 820-10, Fair Value Measurements and Disclosures, which among other things, defines fair value, establishes aconsistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either arecurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer aliability in an orderly transaction between market participants. As such, fair value is a market-based measurement determined based onassumptions that market participants would use in pricing an asset or liability. The carrying amounts of accounts payable and accrued liabilitiesare considered to be representative of their respective fair values because of the short-term nature of those instruments. Based on the borrowingrates available to the Company for loans with similar terms, which is considered a Level 2 input as described below, the Company believes thatthe fair value of long-term debt approximates its carrying value.As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuringfair value as follows:Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities;Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; andLevel 3: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions,which reflect those that a market participant would use.69CIDARA THERAPEUTICS, INC.Notes to Consolidated Financial Statements — ContinuedThe Company classifies investments in money market funds within Level 1 as the prices are available from quoted prices in active markets.Investments in commercial paper, corporate debt and reverse repurchase agreements are classified within Level 2 as these instruments are valuedusing observable market inputs including reported trades, broker/dealer quotes, bids and/or offers.As discussed in Note 7, on May 21, 2018, the Company entered into a subscription agreement with certain investors providing for the purchaseand sale of up to an aggregate of $120.0 million of its common stock and preferred stock in three closings. The second and optional third closingsand warrants related to the optional third closing, which are triggered by the Company's announcement of topline data of Part B of its STRIVEPhase 2 clinical trial of rezafungin, contain features for subsequent closings that are not solely within the control of the Company and that embodyan obligation that the Company must settle by issuing a variable number of shares when the obligation is based predominantly on having a fixedvalue at inception. In accordance with ASC 480, "Distinguishing Liabilities from Equity," the Company determined that these closings areclassified as liabilities and represent contingent forward purchase obligations. These liabilities are required to be recorded at their estimated fairvalue initially and on a recurring basis. The contingent forward purchase obligations are classified within Level 3 of the fair value hierarchy as theCompany is using a probability-weighted valuation approach, utilizing significant unobservable inputs including the probability and estimated timingof achieving positive or negative results associated with Part B of the STRIVE Phase 2 clinical trial and estimated discount rates related to therisk of achievement of the expected equity issuances. The liability was initially recorded at $4.3 million on May 21, 2018 and fair valueadjustments resulting in a gain of $3.9 million were recorded during the year ended December 31, 2018. The liability was valued at $0.4 million forthe year ended December 31, 2018.None of the Company’s non-financial assets or liabilities are recorded at fair value on a non-recurring basis. No transfers between levels haveoccurred during the periods presented.The following tables summarize the Company’s financial instruments measured at fair value on a recurring basis (in thousands): TOTAL LEVEL 1 LEVEL 2 LEVEL 3December 31, 2018 Assets: Money market funds$74,077 $74,077 $— $—Total assets at fair value$74,077 $74,077 $— $— Liabilities: Contingent forward purchase obligations$411 $— $— $411Total liabilities at fair value$411 $— $— $411 December 31, 2017 Assets: Money market funds$11,556 $11,556 $— $—U.S. Treasury reverse repurchase agreements48,000 — 48,000 —Corporate debt15,101 — 15,101 —Total assets at fair value$74,657 $11,556 $63,101 $—70CIDARA THERAPEUTICS, INC.5. PROPERTY AND EQUIPMENTProperty and equipment consisted of the following (in thousands): December 31, 2018 2017Laboratory equipment$2,114 $2,051Leasehold improvements425 425Computer hardware and software455 327Office equipment119 119Furniture and fixtures142 142 3,255 3,064Less accumulated depreciation and amortization(2,543) (2,020)Total$712 $1,044Depreciation and amortization of property and equipment of $523,000 and $667,000 were recorded for the years ended December 31, 2018 and2017, respectively.6. DEBTTerm LoansOn October 3, 2016, the Company entered into a loan and security agreement, (the "Loan Agreement"), with Pacific Western Bank, as thecollateral agent and a lender (the "Lender"), pursuant to which the Lender agreed to lend to the Company up to $20.0 million in a series of termloans. Contemporaneously, the Company borrowed $10.0 million from the Lender (the "Term A Loan"). Under the terms of the Loan Agreement,because the Company achieved positive clinical results from the STRIVE Phase 2 clinical trial of rezafungin by March 31, 2018, the Companycould, at its sole discretion through October 3, 2018, borrow from the Lender up to an additional $10.0 million (the "Term B Loan," and together withthe Term A Loan, the "Term Loans"). The Company did not borrow any funds available under the Term B Loan before the draw period ended.The Company’s obligations under the Loan Agreement are secured by a first priority security interest in substantially all of the Company’s currentand future assets, other than its intellectual property, which is subject to a double negative pledge. The Company may prepay the borrowed amounts, provided that the Company will be obligated to pay a prepayment fee equal to (i) 2.0% of theapplicable principal amount of the Term Loan if the prepayment occurs before the first anniversary of the applicable funding date, and (ii) 1.0% ofthe applicable principal amount of the Term Loan if the prepayment occurs after the first anniversary of the funding date of such Term Loan but onor prior to the second anniversary of the funding date of such Term Loan.While any amounts are outstanding under the Loan Agreement, the Company is subject to a number of affirmative and restrictive covenants,including covenants regarding dispositions of property, business combinations or acquisitions, incurring additional indebtedness and transactionswith affiliates, among other customary covenants. The Company is also restricted from paying dividends or making other distributions or paymentson its capital stock, subject to limited exceptions.Pursuant to the Loan Agreement, on October 3, 2016, the Company issued to the Lender a warrant to purchase an aggregate of upto 17,331 shares of the Company’s common stock at an exercise price of $11.54 per share. If the Company borrows additional amounts under theLoan Agreement, it will, in connection with any such borrowing, issue the Lender an additional warrant to purchase that number of shares of theCompany’s common stock as is equal to 2.0% of the additional principal amount borrowed divided by the exercise price. The exercise price shallbe equal to the 30-day average closing price of the Company’s common stock, calculated as of the date immediately prior to the date of suchadditional borrowing. The warrants are immediately exercisable and will expire ten years from the date of the grant.On June 13, 2018, the Company and the Lender entered into a First Amendment to the Loan Agreement, which reset the operating covenant torequire the Company to achieve positive data from Part B of the STRIVE Phase 2 clinical trial of rezafungin on or prior to July 31, 2019 (the"Milestone").On July 27, 2018, the Company and the Lender entered into a Second Amendment to the Loan Agreement, which amended, among other things,the interest-only period, the date of maturity (the "Maturity Date") and the interest rate. The Maturity Date is January 3, 2022. Payments under theTerm Loans will be interest-only through July 31, 2019, which will be extended to October 31, 2019 if the Milestone is achieved. The interest-onlyperiod will be followed by equal monthly payments of principal and interest. The Term Loans will bear interest at a variable annual rate equal to the71CIDARA THERAPEUTICS, INC.greater of (i) 4.5% or (ii) the Lender’s prime interest rate plus 0.75%. At December 31, 2018, the Term Loans bear interest at 6.25%.The Company evaluated the First and Second Amendments to evaluate whether the amendments represented modifications or extinguishment ofdebt. The Company determined that the amendments did not represent a substantial change from the original Loan Agreement and accounted forthe amendments as debt modifications. Costs previously deferred under the original terms of the Loan Agreement are amortized into interestexpense over the new term of the Second Amendment.Upon the occurrence of certain events, including but not limited to the Company’s failure to satisfy its payment obligations under the LoanAgreement, the breach of certain of its other covenants under the Loan Agreement, including the receipt of positive data from Part B of theSTRIVE Phase 2 clinical trial of rezafungin on or prior to July 31, 2019, or the occurrence of a material adverse change, the collateral agent willhave the right, among other remedies, to declare all principal and interest and other amounts due to the Lender under the Loan Agreementimmediately due and payable. The principal payments due under the Loan Agreement have been classified as a current liability at December 31,2018 due to the considerations discussed in Note 1 and the assessment that the material adverse change clause under the Loan Agreement is notwithin the Company's control. The Company has not been notified of an event of default by the Lenders as of the date of the filing of this Form 10-K.As of December 31, 2018, future principal payments due under the Term A Loan are as follows (in thousands):Year ended:December 31, 2019$1,667December 31, 20204,000December 31, 20214,000December 31, 2022333Total future principal payments due under the Term A Loan$10,000The fair value of the warrants to purchase common stock issued in connection with Term Loan A was estimated on the date of issuance using theBlack-Scholes valuation model and recorded to additional paid-in capital. The fair value of the warrants on the date of issuance as well as the debtissue costs incurred in connection with the entry into the Loan Agreement are presented as a direct deduction from the carrying amount of the termloan on the consolidated balance sheet and are being amortized utilizing the effective interest method over the term of the loan. The Companyrecorded interest expense for the amortization of the fair value of the warrants and debt issue costs of $56,000 and $78,000 for the years endedDecember 31, 2018 and 2017, respectively, for the amortization of the fair value of the warrants and debt issue costs.7. STOCKHOLDERS’ EQUITYMay 2018 Registered Direct Offering— On May 21, 2018, the Company entered into a subscription agreement with certain investors providing forthe purchase and sale, in a registered direct offering, of up to an aggregate of $120.0 million of its common stock and preferred stock in threeclosings. On May 23, 2018, the Company completed the first closing, which was comprised of 6,185,987 shares of common stock at an offeringprice of $4.70 per share, 445,231 shares of Series X Convertible Preferred Stock at an offering price of $47.00 per share, and an option fee relatingto the third closing paid by the investors for a total of $0.5 million. In a private placement concurrent with the first closing (the “First PrivatePlacement”), the Company also sold warrants, at $0.125 per warrant share, to purchase an aggregate of 12,499,997 shares of common stock. Netproceeds for the first closing and the First Private Placement were $49.5 million.The Company performed an analysis to allocate the proceeds from the May 2018 registered direct offering to the offering's various components ona relative fair value basis, including the contingent forward purchase obligations (discussed further in Note 4) as well as the common stock, SeriesX Convertible Preferred Stock, warrants, and option fee. With respect to the Series X Convertible Preferred Stock, because the adjustedconversion price on the commitment date (following the allocation of proceeds on a fair value basis) was below the fair value of the common stockat the date of issuance, a beneficial conversion feature with a calculated fair value of $10.3 million existed at the issuance date. The beneficialconversion feature is amortized as a deemed dividend to the preferred holders. As the Series X Convertible Preferred Stock is fully convertible atissuance, the full amortization of the $10.3 million was recorded at issuance as a one-time deemed dividend on May 23, 2018. This one-time, non-cash deemed dividend impacted net loss attributable to common stockholders and net loss attributable to common stockholders per share for theyear ended December 31, 2018.In the second closing of the offering, the Company may sell up to an additional $50.0 million in shares of common stock to investors whopurchased at least $1.0 million of shares of common stock in the first closing of the offering at a purchase72CIDARA THERAPEUTICS, INC.Notes to Consolidated Financial Statements — Continuedprice per share that is equal to 75% of the volume weighted average price of the common stock for the five trading days following the Company’spublic release of topline data from Part B of its STRIVE global, randomized Phase 2 clinical trial of rezafungin, provided that the Company will notbe obligated to complete the second closing of the offering if the purchase price is less than $4.70 per share.In the optional third closing, which would be held five trading days following the second closing, purchasers who fully participate in the secondclosing may, at their option, purchase up to an additional $20.0 million of common stock at a purchase price per share equal to the purchase priceof the shares purchased at the second closing.At the Company’s option, and prior to the completion of the second or third closing, as applicable, the Company may reduce the aggregate offeringsize of the such closing by the dollar amount received by the Company from any (i) strategic partnership or other non-dilutive source of funding or(ii) sale of equity securities at a price greater than $6.81 per share.If the volume weighted average price of the Company's common stock for the five trading days following the Company's public release of toplinedata from Part B of its STRIVE global, randomized Phase 2 clinical trial of rezafungin is below $6.27, the resulting purchase price for the secondand third closings will be less than $4.70 per share and the Company will be unable to complete the second and third closings without firstobtaining the approval of our stockholders. As of the date the Company issued financial statements for the fiscal year ending December 31, 2018,the price of the Company's common stock was below $6.27.The Company will also offer to each purchaser in the second or third closing the opportunity, in lieu of purchasing common stock, to purchaseSeries X Convertible Preferred Stock. For each share of Series X Convertible Preferred Stock purchased in the offering in lieu of common stock,the Company will reduce the number of shares of common stock being sold by 10 shares. Each share of Series X Convertible Preferred Stock isconvertible into 10 shares of common stock.As the issuance of the additional closings are outside the control of the Company, the second closing and optional third closing are accounted foras a liability in accordance with ASC 480, Distinguishing Liabilities from Equity, which is measured at fair value on a recurring basis. See Note 4 toour financial statements for additional information.In a private placement to be held concurrently with the optional third closing (the “Second Private Placement”), the Company would sell warrants topurchase up to 2,500,000 shares of Common Stock to the purchasers that participate, at a purchase price of $0.125 per warrant share (suchwarrants, together with the warrants sold in the First Private Placement, each, a “Warrant”, and collectively, the “Warrants”).The Warrants are exercisable immediately for cash at an exercise price of $6.81 per share. The Warrants issued in the First Private Placement willexpire upon the earliest of (i) five years from the date of the first closing of the offering, (ii) the date that the holder of such Warrant transfers orsells any of the shares of Common Stock purchased by such holder in the first closing of the offering, if such transfer or sale occurs prior to thedate that is 120 calendar days following the closing of the first closing of the offering, (iii) the taking of any short position on the Common Stock bythe holder of such Warrant prior to the completion of the second closing of the offering, and (iv) the failure by the holder of such Warrant topurchase its pro rata allocation of shares of Common Stock in the second closing of the offering. The Company accounts for the Warrants asequity instruments in accordance with ASC 480, Distinguishing Liabilities from Equity.The Warrants issued in the Second Private Placement will expire five years from the date of the third closing of the offering.Preferred Stock— Under the amended and restated certificate of incorporation, the Company’s board of directors has the authority, without furtheraction by the stockholders, to issue up to 10,000,000 shares of preferred stock in one or more series, to establish from time to time the number ofshares to be included in each such series, to fix the rights, preferences and privileges of the shares of each wholly unissued series and anyqualifications, limitations or restrictions thereon and to increase or decrease the number of shares of any such series, but not below the number ofshares of such series then outstanding. The Company had 10,000,000 shares of preferred stock authorized at December 31, 2018.In May 2018, the Company designated 5,000,000 shares of preferred stock as Series X Convertible Preferred Stock with a par value of $0.0001per share. As of December 31, 2018, 445,231 shares of Series X Convertible Preferred Stock were issued and outstanding.The specific terms of the Series X Convertible Preferred Stock are as follows:Conversion: Each share of Series X Convertible Preferred Stock is convertible at the option of the holder into 10 shares of common stock.Holders are not permitted to convert Series X Convertible Preferred Stock into common stock if, after conversion, the holder, its affiliates, andany other person whose beneficial ownership of common stock would be aggregated with the holder's for purposes of Section 13(d) or Section16 of the Exchange Act, would beneficially own more than 9.99% of the number of shares of common stock outstanding immediately after theconversion.73CIDARA THERAPEUTICS, INC.Notes to Consolidated Financial Statements — ContinuedDividends: Holders of Series X Convertible Preferred Stock are not entitled to receive any dividends except to the extent that dividends arepaid on the Company's common stock. If dividends are paid on shares of common stock, holders of Series X Convertible Preferred Stock areentitled to participate in such dividends on an as-converted basis.Liquidation: Upon the liquidation, dissolution, or winding up of the company, each holder of Series X Convertible Preferred Stock willparticipate pari passu with any distribution of proceeds to holders of common stock.Voting: Shares of Series X Convertible Preferred Stock will generally have no voting rights, except as required by law and except that theconsent of the holders of a majority of the outstanding Series X Convertible Preferred Stock will be required to amend the terms of the SeriesX Convertible Preferred Stock, if such action would adversely alter or change the preferences, rights, privileges or powers of, or restrictionsprovided for the benefit of the Series X Convertible Preferred Stock, or to increase or decrease (other than by conversion) the number ofauthorized shares of Series X Convertible Preferred Stock.The Company evaluated the Series X Convertible Preferred Stock for liability or equity classification under ASC 480, Distinguishing Liabilities fromEquity, and determined that equity treatment was appropriate because the Series X Convertible Preferred Stock did not meet the definition of theliability instruments defined thereunder as convertible instruments. Specifically, the Series X Convertible Preferred Stock does not meet thecriteria for classification as an ASC 480 liability. As such, the Series X Convertible Preferred Stock should be recorded as permanent equity.Additionally, the Series X Convertible Preferred Stock is not redeemable for cash or other assets (i) on a fixed or determinable date, (ii) at theoption of the holder, and (iii) upon the occurrence of an event that is not solely within control of the Company.Common Stock—The Company had 200,000,000 shares of common stock authorized as of December 31, 2018. Holders of outstanding shares ofcommon stock are entitled to one vote for each share held of record on all matters submitted to a vote of the holders of common stock. Subject tothe rights of the holders of any class of the Company’s capital stock having any preference or priority over common stock, the holders of commonstock are entitled to receive dividends that are declared by the Company’s board of directors out of legally available funds. In the event of aliquidation, dissolution or winding-up, the holders of common stock are entitled to share ratably in the net assets remaining after payment ofliabilities, subject to prior rights of preferred stock, if any, then outstanding. The common stock has no preemptive rights, conversion rights,redemption rights or sinking fund provisions, and there are no dividends in arrears or default. All shares of common stock have equal distribution,liquidation and voting rights, and have no preferences or exchange rights.On October 13, 2016, the Company completed a public offering of common stock in which it sold 2,752,637 shares of its common stock at anoffering price of $10.10 per share. The Company raised net proceeds of approximately $26.6 million after deducting underwriting discounts andcommissions and offering expenses.In October 2017 the Company closed a private placement transaction pursuant to which an aggregate of 3,360,000 shares of common stock weresold at a price of $6.00 per share. The Company received net proceeds of approximately $18.9 million after deducting placement agent fees andoffering expenses.In November 2017 the Company began to sell shares of common stock under a controlled equity sales agreement with Cantor Fitzgerald & Co.During the years ended December 31, 2018 and December 31, 2017, the Company sold 847,937 and 240,178 shares of common stock for netproceeds of approximately $6.4 million and $1.8 million, respectively, after deducting placement agent fees.Common Stock Reserved for Future IssuanceCommon stock reserved for future issuance is as follows (in common stock equivalent shares): Years ended December 31, 2018 2017Common stock warrants12,517,328 17,331Series X Convertible Preferred stock4,452,310 —Stock options, RSUs and PRSUs issued and outstanding4,392,671 3,099,173Authorized for future stock awards669,873 1,006,307Awards available under the ESPP706,242 380,875Total22,738,424 4,503,68674CIDARA THERAPEUTICS, INC.Notes to Consolidated Financial Statements — Continued8. EQUITY INCENTIVE PLANS2015 Equity Incentive PlanIn March 2015, the Company’s board of directors and stockholders approved and adopted the 2015 Equity Incentive Plan (“2015 EIP”). Under the2015 EIP, the Company may grant stock options, stock appreciation rights, restricted stock, RSUs, and other awards to individuals who areemployees, officers, directors or consultants of the Company. The number of shares of stock available for issuance under the 2015 EIP will beautomatically increased each January 1 by 4% of the outstanding number of shares of the Company’s common stock on the immediatelypreceding December 31 or such lesser number as determined by the Company’s board of directors.Terms of stock award agreements, including vesting requirements, are determined by the board of directors, subject to the provisions of the 2015EIP. Stock options granted by the Company generally vest over a three- or four-year period. Certain stock options are subject to acceleration ofvesting in the event of certain change of control transactions. The stock options may be granted for a term of up to 10 years from the date ofgrant. The exercise price for stock options granted under the 2015 EIP must be at a price no less than 100% of the estimated fair value of theshares on the date of grant as determined by the board of directors, provided that for an incentive stock option granted to an employee who at thetime of grant owns stock representing more than 10% of the voting power of all classes of stock of the Company, the exercise price shall be noless than 110% of the estimated value on the date of grant.2015 Employee Stock Purchase PlanIn March 2015, the Company’s board of directors and stockholders approved and adopted the 2015 Employee Stock Purchase Plan("ESPP"). The number of shares of stock available for issuance under the ESPP will be automatically increased each January 1 by the lesser of(i) 1% of the outstanding number of shares of the Company’s common stock on the immediately preceding December 31, (ii) 490,336 shares, or(iii) such lesser number as determined by the Company’s board of directors.The ESPP allows substantially all employees to purchase the Company’s common stock through a payroll deduction at a price equal to 85% ofthe lower of the fair market value of the stock as of the beginning or the end of each purchase period. An employee’s payroll deductions under theESPP are limited to 15% of the employee’s eligible compensation. During the year ended December 31, 2018, 158,066 shares were issuedpursuant to the ESPP.Restricted StockThe Company permits exercise of certain stock options prior to vesting. Any such exercised shares are restricted and subject to repurchase bythe Company until the conditions for vesting are met. At December 31, 2018 there was no liability for cash received from the early exercise ofstock options. At December 31, 2017, the liabilities for the cash received from the early exercise of stock options was $21,000 and was classifiedin accrued liabilities on the balance sheet. The Company reduces the liability as the underlying shares vest in accordance with the vesting termsoutlined in the stock option agreements, which generally are 4 years. At December 31, 2018, there were no shares subject to repurchase by theCompany.Restricted Stock UnitsThe following table summarizes RSU and PRSU activity during the year ended December 31, 2018: Number ofRSUs and PRSUsOutstanding at December 31, 2017227,500RSUs and PRSUs granted55,000RSUs and PRSUs vested(2,500)RSUs and PRSUs canceled(20,000)Outstanding at December 31, 2018260,000For the year ended December 31, 2018, stock-based compensation expense related to RSUs and PRSUs was approximately $0.3 million. AtDecember 31, 2018, estimated unrecognized compensation expense related to RSUs and PRSUs granted to employees was approximately $1.0million.75CIDARA THERAPEUTICS, INC.Notes to Consolidated Financial Statements — ContinuedStock OptionsThe following table summarizes stock option activity during the year ended December 31, 2018: Number ofShares WeightedAverageExercise Price WeightedAverageRemainingContractual Lifein Years Total AggregateIntrinsic Value (inthousands)Outstanding at December 31, 20173,099,173 $7.74 8.10 $2,264Options granted1,436,250 4.22 Options exercised(89,031) 2.29 Options canceled(313,721) 8.41 Outstanding at December 31, 20184,132,671 $6.58 7.41 $25Vested and expected to vest at December 31, 20184,132,671 $6.58 7.41 $25Exercisable at December 31, 20182,423,061 $7.29 6.74 $25The intrinsic value of a stock option is the difference between the market price of the common stock at the measurement date and the exerciseprice of the option.The following table summarizes the Black-Scholes option pricing model assumptions used to estimate the fair value of stock options granted toemployees under our equity incentive plans and the shares purchasable under our 2015 ESPP during the periods presented: For the years ended December 31, 2018 20172015 EIP Risk-free interest rate2.55% - 3.06% 1.87% - 2.23%Expected dividend yield0% 0%Expected volatility83% 79% - 86%Expected term (years)5.50 - 6.08 5.50 - 6.082015 ESPP Risk-free interest rate2.14% - 2.81% 1.05% - 1.77%Expected dividend yield0% 0%Expected volatility77% - 92% 79% - 102%Expected term (years)0.50 - 2.00 0.50 - 2.00Stock-based compensation expense recognized for restricted shares, RSUs, PRSUs, stock options, and the ESPP has been reported in thestatements of operations and comprehensive loss as follows (in thousands): Years ended December 31, 2018 2017Research and development$2,676 $2,428General and administrative3,034 3,286Total$5,710 $5,714The weighted-average grant date fair value of stock options granted to employees during the year ended December 31, 2018 was $2.98 per share.The total grant date fair value of stock options that vested during the year ended December 31, 2018 was $3.6 million. As of December 31, 2018,total unrecognized share-based compensation expense related to unvested employee stock options of the Company was approximately $5.4million. This unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately 2.31 years.As of December 31, 2018, total unrecognized compensation expense related to the Company’s ESPP was approximately $0.8 million. Thisunrecognized compensation cost is expected to be recognized over approximately 0.70 years.76CIDARA THERAPEUTICS, INC.Notes to Consolidated Financial Statements — ContinuedCommon Stock WarrantsA summary of warrant activity for the year ended December 31, 2018 is presented below: Warrants Weighted AverageExercise Price Total Intrinsic ValueOutstanding at December 31, 2017 17,331 11.54 $—Issued 12,499,997 6.81 —Exercised — — —Canceled — — —Outstanding at December 31, 2018 12,517,328 6.82 $—The intrinsic value of a common stock warrant is the difference between the market price of the common stock at the measurement date and theexercise price of the warrant.9. SIGNIFICANT AGREEMENTS AND CONTRACTSCombating Antibiotic Resistant Bacteria Accelerator (CARB-X) Subaward AgreementOn March 30, 2017, the Company entered into a Cost Reimbursement Research Subaward Agreement (the "Subaward Agreement") with theTrustees of Boston University. Under the Subaward Agreement, the Company is a subawardee under the CARB-X program. CARB-X is a public-private partnership focused on antibacterials, created by the U.S. Department of Health and Human Services (HHS), Biomedical AdvancedResearch and Development Authority (BARDA), the NIAID. CARB-X is funded by BARDA and the London-based Wellcome Trust, a globalcharitable foundation (Wellcome), and administered by the Boston University School of Law.The subaward was intended to support development of the Company's CD201 product candidate. Under the Subaward Agreement, during an initialphase that began on April 1, 2017 and ends upon acceptance by the U.S. Food and Drug Administration of an initial new drug application, CARB-Xwould reimburse up to $3.9 million of qualifying development expenses. If all of the milestones in such initial phase are met, the CARB-X JointOversight Committee will evaluate the progress made in such initial phase and determine whether to exercise its option to fund a second stage.During the second stage, CARB-X would reimburse up to $3.0 million of qualifying development expenses through a Phase 1 clinical trial. Suchsecond stage would be subject to a new subaward agreement.Under the Subaward Agreement, the Company is reimbursed for direct costs incurred plus allowable indirect costs which consist of fringe benefitsand allowable general and administrative expenses. For the year ended December 31, 2018, the Company did not recognize any reductions toresearch and development expenses for costs eligible for reimbursement under the Subaward Agreement. As of December 31, 2018, there were nobilled or unbilled accounts receivable related to reimbursable expenses under the Subaward Agreement.The Subaward Agreement can be terminated upon the delivery of 30 days written notice to the Company for default or convenience. Upon receiptof a notice of termination, the Company must discontinue contract activities and CARB-X must pay the Company a final settlement based oneligible expenses incurred under the Subaward Agreement. Based on preclinical studies of CD201 as well as preclinical studies of antibody-drug conjugates (ADCs) from the Cloudbreak program, theCompany decided in February 2018 to cease development of CD201 to focus on the more promising ADCs. The Company will no longer beseeking funding under the Subaward Agreement relating to CD201.Partnership Grant for the Development of Cloudbreak Antibody-Drug ConjugatesIn May 2018, the Company and Rutgers University were awarded a five year, $5.5 million partnership grant from the NIAID. The grant will fundcontinued research and development of the Company's Cloudbreak platform to identify novel immunotherapy agents for the treatment andprevention of serious and life-threatening viral infections and multi-drug resistant Gram-negative bacterial infections in high-risk populations. TheCompany began work under this grant in July 2018 but has not billed Rutgers University for any work performed to date, nor recognized anypotential reimbursements in the statement of operations for the year ended December 31, 2018 as the subaward agreement between the Companyand Rutgers University has not yet been executed.77CIDARA THERAPEUTICS, INC.Notes to Consolidated Financial Statements — Continued10. INCOME TAXESThe Company accounts for income taxes under ASC 740. Deferred income tax assets and liabilities are determined based upon differencesbetween financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effectwhen the differences are expected to reverse.The following table provides a reconciliation between income taxes computed at the federal statutory rate and the provision for income taxes (inthousands): Years Ended December 31, 2018 2017 2016Federal income taxes at 21% for 2018 and 34% for 2017 and 2016$(12,393) $(18,947) $(16,334)State income tax, net of federal benefit— — (1)Tax effect on nondeductible expenses(278) 3,389 1,650Research credits(4,737) (8,125) (3,538)Rate change— — 267Change in valuation allowance16,421 5,133 14,996Reserve for uncertain tax positions1,184 1,451 2,883Tax Cuts and Jobs Act— 17,334 —Other(197) (235) 77Income tax expense$— $— $—Significant components of the Company’s net deferred tax assets are as follows (in thousands): Years Ended December 31, 2018 2017Deferred tax assets: Net operating losses$38,268 $26,364Research credits14,007 10,232Intangibles241 265Other2,488 1,722Total deferred tax assets55,004 38,583Less valuation allowance(55,004) (38,583)Income tax expense$— $—At December 31, 2018, the Company had federal and state net operating loss carryforwards of approximately $179.1 million and $132 million,respectively. The federal and state loss carryforwards begin to expire in 2033, unless previously utilized. The Company also has federal researchand development and orphan drug credit carryforwards totaling $17 million and state research and development credit carryforwards totaling $2.4million. The federal research and development credit and orphan drug credit carryforwards begin to expire in 2033, unless previously utilized. Thestate research and development credit carryforwards begin to expire in 2029.Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use theexisting deferred tax assets. Based on the weight of all evidence, including a history of operating losses, management has determined that it ismore likely than not that the net deferred tax assets will not be realized. A valuation allowance of $55.0 million and $38.6 million as ofDecember 31, 2018 and 2017, respectively, has been established to offset the deferred tax assets as realization of such assets is uncertain.Future utilization of the Company’s net operating loss and research and development credits carryforwards to offset future taxable income may besubject to an annual limitation, pursuant to Internal Revenue Code (IRC) Sections 382 and 383, as a result of ownership changes that may haveoccurred or that could occur in the future. An ownership change occurs when a cumulative change in ownership of more than 50% occurs within athree-year period. The Company has not completed an IRC Section 382/383 analysis regarding the limitation of net operating loss and researchand development credit carryforwards.The Tax Cuts and Jobs Act was enacted on December 22, 2017. The Act reduces the US federal corporate tax rate from 35% to 21%, requirescompanies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes oncertain foreign sourced earnings. At December 31, 2017, the Company made a reasonable estimate of the effects on their existing deferred taxbalances. At December 31, 2017 the Company78CIDARA THERAPEUTICS, INC.Notes to Consolidated Financial Statements — Continuedrecognized a provisional amount of $17.3 million which was included as a component of income tax expense from continuing operations offset withvaluation allowances. As of December 31, 2018, the Company has completed its assessment of the impact of the Tax Cuts and Jobs Act with noadditional impact recorded in the current year.The Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained uponexamination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet amore likely than not recognition at the effective date to be recognized. At December 31, 2018 and 2017, the unrecognized tax benefits recordedwere approximately $16.5 million and $10.8 million, respectively. Approximately $13.4 million of the unrecognized tax benefits would reduce theCompany's annual effective tax rates, if recognized, subject to the valuation allowances. The Company does not anticipate a significant change inthe unrecognized tax benefits within the next 12 months.A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for 2018, 2017 and 2016 is as follows (in thousands): Years Ended December 31, 2018 2017 2016Balance as of the beginning of the year$10,756 $4,642 $356Increases related to current year tax positions1,224 2,149 921Increases related to prior year tax positions4,544 3,965 3,365Balance as of the end of the year$16,524 $10,756 $4,642The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, theCompany is subject to examination by the United States and state jurisdictions where applicable. There are currently no pending income taxexaminations. The Company’s tax years from inception in 2012 are subject to examination by the federal and state tax authorities due to thecarryforward of unutilized net operating losses and research and development credits. The Company’s practice is to recognize interest andpenalties related to income tax matters in income tax expense. The Company has not recognized interest or penalties since inception.11. COMMITMENTS AND CONTINGENCIESLitigation—From time to time, the Company may be involved in various lawsuits, legal proceedings, or claims that arise in the ordinary course ofbusiness. Management believes there are no claims or actions pending against the Company at December 31, 2018 which will have, individually orin the aggregate, a material adverse effect on its business, liquidity, financial position or results of operations. Litigation, however, is subject toinherent uncertainties, and an adverse result in such matters may arise from time to time that may harm the Company’s business.Lease Obligations—In June 2014, the Company entered into an operating lease agreement for laboratory and office space in San Diego,California. Amendments for additional space were entered into in February 2015, March 2015 and August 2015. On June 29, 2018 the Companyentered into a Fourth Amendment to its lease which extended the term of the lease by an additional 36 months and increases base rent to $70,000per month effective January 1, 2019. The Company has also been granted an option, exercisable prior to September 30, 2019, to expand itsleased premises on the same terms as the current lease, subject to compliance with specified conditions. The lease expires in December2021 with options for two individual two-year extensions. The lease is subject to charges for common area maintenance and other costs, and baserent is subject to 3% annual increases every January. Rent expense is being recorded on a straight-line basis over the life of the lease.Future minimum payments required under the lease as of December 31, 2018 are summarized as follows (in thousands):201983620208612021887Total minimum lease payments$2,584Rent expense was $776,000 and $704,000 for the years ended December 31, 2018 and 2017, respectively.Contractual Obligations—The Company enters into contracts in the normal course of business with vendors for research and developmentactivities, manufacturing, and professional services. These contracts generally provide for termination either on or within 30 days of notice.79CIDARA THERAPEUTICS, INC.Notes to Consolidated Financial Statements12. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) First Quarter Second Quarter Third Quarter Fourth Quarter2018 Operating expenses$16,810 $15,152 $14,725 $16,598Other income (expense)61 (1,154) 1,106 4,256Net loss(16,749) (16,306) (13,619) (12,342)Basic and diluted net loss per share$(0.80) $(1.13) $(0.49) $(0.44)Shares used to compute basic and diluted net loss per share20,894,353 23,592,763 27,705,472 27,780,2122017 Operating expenses$13,398 $16,615 $12,249 $13,459Other income (expense)— (30) (8) 31Net loss(13,398) (16,645) (12,257) (13,428)Basic and diluted net loss per share$(0.80) $(0.99) $(0.73) $(0.69)Shares used to compute basic and diluted net loss per share16,795,366 16,831,960 16,864,211 19,489,37580Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.None.Item 9A. Controls and Procedures.Evaluation of Disclosure Controls and ProceduresWe maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and currentreports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms,and that such information is accumulated and communicated to our management, including our chief executive officer and principal financialofficer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures,management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and notabsolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily wasrequired to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any systemof controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design willsucceed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes inconditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective controlsystem, misstatements due to error or fraud may occur and not be detected.As of December 31, 2018, we carried out an evaluation, under the supervision and with the participation of our management, including our principalexecutive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, asdefined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financialofficer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2018.Management’s Report on Internal Control over Financial Reporting.Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined inExchange Act Rule 13a-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accountingprinciples. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition,projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes inconditions, or that the degree of compliance with the policies or procedures may deteriorate.Our management, with the participation of our principal executive officer and principal financial officer, assessed the effectiveness of our internalcontrol over financial reporting as of December 31, 2018. In making this assessment, management used the criteria set forth by the Committee ofSponsoring Organizations of the Treadway Commission (COSO) in its 2013 Internal Control — Integrated Framework. Based on this assessment,our management has concluded that, as of December 31, 2018, our internal control over financial reporting was effective.This Annual Report does not include an attestation report of our registered public accounting firm due to a transition period established by theJOBS Act that is applicable to emerging growth companies.Changes in Internal Control over Financial ReportingThere were no changes in our internal control over financial reporting that occurred during our latest fiscal quarter that have materially affected, orare reasonably likely to materially affect, our internal control over financial reporting.Item 9B. Other Information.None.81PART IIIItem 10. Directors, Executive Officers and Corporate Governance.The information required by this item and not set forth below will be set forth in the section headed “Election of Directors” and “Executive Officers”in our Proxy Statement for our 2019 Annual Meeting of Stockholders, or Proxy Statement, to be filed with the SEC within 120 days after the fiscalyear ended December 31, 2018, and is incorporated herein by reference.We have adopted a code of ethics for directors, officers (including our principal executive officer, principal financial officer and principal accountingofficer) and employees, known as the Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics is available on ourwebsite at http://www.cidara.com under the Corporate Governance section of our Investor Relations page. We will promptly disclose on ourwebsite (i) the nature of any amendment to the policy that applies to our principal executive officer, principal financial officer, principal accountingofficer, or persons performing similar functions and (ii) the nature of any waiver, including an implicit waiver, from a provision of the policy that isgranted to one of these specified individuals that is required to be disclosed pursuant to SEC rules and regulations, the name of such person whois granted the waiver and the date of the waiver. The information contained on, or that can be accessed through, our website is not part of thisAnnual Report, and the inclusion of our website address in this Annual Report is an inactive textual reference onlyItem 11. Executive Compensation.The information required by this item will be set forth in the section headed “Executive and Director Compensation” in our Proxy Statement and isincorporated herein by reference.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.The information required by this item will be set forth under the headings “Equity Benefit Plans” and “Security Ownership of Certain BeneficialOwners and Management” in our Proxy Statement and is incorporated herein by reference.The information required by Item 201(d) of Regulation S-K will be set forth in the section headed “Executive and Director Compensation” in ourProxy Statement and is incorporated herein by reference.Item 13. Certain Relationships and Related Transactions, and Director Independence.The information required by this item will be set forth in the section headed “Certain Relationships and Related Party Transactions” in our ProxyStatement and is incorporated herein by reference.Item 14. Principal Accounting Fees and Services.The information required by this item will be set forth in the section headed “Principal Accountant Fees and Services” in our Proxy Statement andis incorporated herein by reference.82PART IVItem 15. Exhibits, Financial Statement Schedules.1.Financial Statements—We have filed the following documents in Item 8of this Annual Report: PageReport of Independent Registered Public Accounting Firm61Balance Sheets62Statements of Operations and Comprehensive Loss63Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)64Statements of Cash Flows65Notes to Financial Statements662.Financial Statement Schedules—All other schedules are omitted because they are not required or the requiredinformation is included in the financial statements or notes thereto.3.Exhibits—For a list of exhibits filed with this Annual Report, refer to the exhibit index below. The exhibits listed in theExhibit Index are filed or incorporated by reference as part of this Annual Report.83Exhibit IndexExhibitNumber Description1.1 Controlled Equity OfferingSM Sales Agreement, dated as of November 8, 2018, by and between Cidara Therapeutics, Inc. andCantor Fitzgerald & Co. (incorporated by reference to Exhibit 1.2 to the Registrant’s Registration Statement on Form S-3, filed onNovember 8, 2018).3.1 Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect (incorporated by reference to Exhibit 3.1to the Registrant’s Current Report on Form 8-K, filed on April 24, 2015).3.2 Amended and Restated Bylaws of the Registrant, as currently in effect (incorporated by reference to Exhibit 3.2 to the Registrant’sCurrent Report on Form 8-K, filed on April 24, 2015).3.3 Certificate of Designation of Preferences, Rights and Limitations of Series X Convertible Preferred Stock (incorporated by referenceto Exhibit 3.1 to the Registrant's Current Report on Form 8-K, filed on May 21, 2018).4.1 Form of Common Stock Certificate of the Registrant (incorporated by reference to Exhibit 4.1 to the Registrant's RegistrationStatement on Form S-1 (File No. 333-202740), as amended, originally filed on March 13, 2015).4.2 Form of Warrant to Purchase Common Stock issued to Pacific Western Bank (incorporated by reference to Exhibit 10.2 to theRegistrant's Current Report on Form 8-K, filed on October 3, 2016).4.3 Form of Common Stock Purchase Warrant for First Private Placement (incorporated by reference to Exhibit 4.1 to the Registrant'sCurrent Report on Form 8-K, filed on May 21, 2018)4.4 Form of Common Stock Purchase Warrant for Second Private Placement (incorporated by reference to Exhibit 4.2 to theRegistrant's Current Report on Form 8-K, filed on May 21, 2018)10.1+ Form of Indemnity Agreement by and between the Registrant and its directors and officers (incorporated by reference to Exhibit10.1 to the Registrant's Registration Statement on Form S-1 (File No. 333-202740), as amended, originally filed on March 13, 2015).10.2+ 2015 Equity Incentive Plan and Form of Grant Notice, Stock Option Agreement and Notice of Exercise thereunder (incorporated byreference to Exhibit 99.2 to the Registrant's Registration Statement on Form S-8 (File No. 333-203434), filed on April 15, 2015).10.3+ 2015 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.3 to the Registrant's Registration Statement on FormS-1 (File No. 333-202740), as amended, originally filed on March 13, 2015).10.4+ 2013 Stock Option and Grant Plan and Form of Stock Option Agreement, Notice of Exercise and Stock Option Grant Noticethereunder, as amended (incorporated by reference to Exhibit 10.4 to the Registrant's Registration Statement on Form S-1 (File No.333-202740), as amended, originally filed on March 13, 2015).10.5+ Form of Amended and Restated Employment Agreement by and between the Registrant and its executive officers (incorporated byreference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q, filed on November 10, 2016).10.6 Consulting and Independent Contractor Agreement by and between the Registrant and Dirk Thye, M.D., dated September 2, 2016(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on September 1, 2016).10.7 Loan and Security Agreement by and between Registrant and Pacific Western Bank, dated October 3, 2016 (incorporated byreference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on October 3, 2016).10.8 Asset Purchase Agreement by and between Registrant and Seachaid Pharmaceuticals, Inc., dated May 30, 2014 (incorporated byreference to Exhibit 10.12 to the Registrant's Registration Statement on Form S-1 (File No. 333-202740), as amended, originallyfiled on March 13, 2015).10.9 Addendum to Asset Purchase Agreement by and between Registrant and Seachaid Pharmaceuticals, Inc., dated September 23,2014 and deemed effective as of May 30, 2014 (incorporated by reference to Exhibit 10.13 to the Registrant's RegistrationStatement on Form S-1 (File No. 333-202740), as amended, originally filed on March 13, 2015).10.10 Standard Industrial/Commercial Multi-Tenant Lease by and between the Registrant and Nancy Ridge Technology Center, L.P.,dated June 9, 2014 (incorporated by reference to Exhibit 10.14 to the Registrant's Registration Statement on Form S-1 (File No.333-202740), as amended, originally filed on March 13, 2015).10.11 First Amendment to Lease by and between the Registrant and Nancy Ridge Technology Center, L.P., dated June 9, 2014(incorporated by reference to Exhibit 10.15 to the Registrant's Registration Statement on Form S‑1 (File No. 333-202740), asamended, originally filed on March 13, 2015).10.12 Second Amendment to Lease by and between the Registrant and Nancy Ridge Technology Center, L.P., dated February 15, 2015(incorporated by reference to Exhibit 10.16 to the Registrant's Registration Statement on Form S-1 (File No. 333-202740), asamended, originally filed on March 13, 2015).10.13 Third Amendment to Lease by and between the Registrant and Nancy Ridge Technology Center, L.P., dated July 1, 2015(incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, filed on November 16, 2015).8410.14* Cost Reimbursement Research Subaward Agreement by and between Registrant and the Trustees of Boston University, datedMarch 30, 2017 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 10,2017).10.15+ Form of Restricted Stock Unit Award Grant Notice (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report onForm 10-Q, filed on May 10, 2017).10.16 Securities Purchase Agreement by and among the Registrant and each of the persons and entities, severally and not jointly, listedas a Purchaser on the Schedule of Purchasers attached as Schedule I thereto, dated October 19, 2017 (incorporated by referenceto Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on October 19, 2017).10.17 First Amendment to Loan and Security Agreement, by and between the Registrant and Pacific Western Bank, dated June 13, 2018(incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q, filed August 9, 2018).10.18 Subscription Agreement by and among the Registrant and the purchasers identified on the signature pages thereto, dated May 21,2018 (incorporated by reference to the Registrant's Current Report on Form 8-K, filed on May 21, 2018).10.19 Placement Agency Agreement by and among the Registrant, Citigroup Global Markets, Inc. and Cantor Fitzgerald & Co., date May21, 2018 (incorporated by reference to the Registrant's Current Report on Form 8-K, filed on May 21, 2018).10.20 Fourth Amendment to Lease by and between the Registrant and Nancy Ridge Technology Center, L.P., dated June 29, 2018(incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on July 3, 2018).10.21 Second Amendment to Loan and Security Agreement, by and between the Registrant and Pacific Western Bank, dated July 27,2018 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on July 31, 2018).21.1* List of subsidiaries of the Registrant.23.1* Consent of Independent Registered Public Accounting Firm.24.1 Power of Attorney. Reference is made to the signature page hereto.31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934,as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, asAdopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1* Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of theSarbanes-Oxley Act of 2002.32.2* Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of theSarbanes-Oxley Act of 2002.101.INS XBRL Instance Document101.SCH XBRL Taxonomy Extension Schema Document101.CAL XBRL Taxonomy Extension Calculation Linkbase Document101.DEF XBRL Taxonomy Extension Definition Linkbase Document101.LAB XBRL Taxonomy Extension Label Linkbase Document.101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. + Indicates management contract or compensatory plan.* Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been filed separatelywith the Securities and Exchange Commission85SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused thisReport to be signed on its behalf by the undersigned, thereunto duly authorized. Cidara Therapeutics, Inc. Date: February 28, 2019By:/s/ Jeffrey Stein, Ph.D. Jeffrey Stein, Ph.D. President and Chief Executive OfficerPOWER OF ATTORNEYKNOW ALL BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jeffrey Stein, Ph.D. and JamesLevine, and each of them, as his or her true and lawful attorneys-in-fact and agents, each with the full power of substitution, for him or her and inhis or her name, place or stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibitsthereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact andagents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and aboutthe premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons onbehalf of the Registrant in the capacities and on the dates indicated.Name Title Date /s/ Jeffrey Stein, Ph.D. President and Chief Executive Officer February 28, 2019Jeffrey Stein, Ph.D. (Principal Executive Officer) /s/ James Levine Chief Financial Officer February 28, 2019James Levine (Principal Financial Officer and Principal Accounting Officer) /s/ Scott M. Rocklage, Ph.D. Chairman of the Board of Directors February 28, 2019Scott M. Rocklage, Ph.D. /s/ Daniel D. Burgess Member of the Board of Directors February 28, 2019Daniel D. Burgess /s/ Timothy R. Franson, M.D. Member of the Board of Directors February 28, 2019Timothy R. Franson, M.D. /s/ David Gollaher, Ph.D. Member of the Board of Directors February 28, 2019David Gollaher /s/ Chrysa Mineo Member of the Board of Directors February 28, 2019Chrysa Mineo /s/ Theodore R. Schroeder Member of the Board of Directors February 28, 2019Theodore R. Schroeder 86Exhibit 21.1Cidara Therapeutics, Inc. SubsidiariesThe following is a list of subsidiaries of the Company, doing business under the name stated.Name Country or State of IncorporationCidara Therapeutics UK Limited United KingdomCidara Therapeutics (Ireland) Limited IrelandExhibit 23.1Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the following Registration Statements:(1)Registration Statement (Form S-3 Nos. 333-211472, 333-221535, 333-225061, 333-225445, 333-225787, and 333-228268) of CidaraTherapeutics, Inc., and(2)Registration Statements (Form S-8 Nos. 333-216722, 333-203434, 333-210263, and 333-228282) pertaining to the 2013 Stock Option andGrant Plan, the 2015 Equity Incentive Plan, and the 2015 Employee Stock Purchase Plan of Cidara Therapeutics, Inc.;of our report dated February 28, 2019, with respect to the consolidated financial statements of Cidara Therapeutics, Inc. included in this AnnualReport (Form 10-K) of Cidara Therapeutics, Inc. for the year ended December 31, 2018./s/ Ernst & Young LLPSan Diego, CaliforniaFebruary 28, 2019Exhibit 31.1CERTIFICATION PURSUANT TORULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Jeffrey Stein, Ph.D., certify that:1.I have reviewed this Annual Report on Form 10-K of Cidara Therapeutics, Inc.;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 tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to theperiod covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects 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 (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-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 oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known tous 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 designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial 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 conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based onsuch evaluation; and(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant'smost recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or isreasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalentfunctions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably 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'sinternal control over financial reporting.Date: February 28, 2019By: /s/ Jeffrey Stein, Ph.D. Jeffrey Stein, Ph.D.President and Chief Executive Officer (Principal Executive Officer)Exhibit 31.2CERTIFICATION PURSUANT TORULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, James Levine, certify that:1.I have reviewed this Annual Report on Form 10-K of Cidara Therapeutics, Inc.;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 tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to theperiod covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects 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 (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-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 oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known tous 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 designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial 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 conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based onsuch evaluation; and(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant'smost recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or isreasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalentfunctions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably 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'sinternal control over financial reporting.Date: February 28, 2019By: /s/ James Levine James LevineChief Financial Officer (Principal Financial Officer and Principal Accounting Officer)Exhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report on Form 10-K of Cidara Therapeutics, Inc. (the “Company”) for the period ending December 31, 2018as filed with the Securities and Exchange Commission on the date hereof and to which this certification is attached as an exhibit (the “Report”), I,Jeffrey Stein, Ph.D., President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906of the Sarbanes-Oxley Act of 2002, that:(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended;and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations ofthe Company.Date: February 28, 2019By: /s/ Jeffrey Stein, Ph.D. Jeffrey Stein, Ph.D.President and Chief Executive Officer (Principal Executive Officer)This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not tobe incorporated by reference into any filing of Cidara Therapeutics, Inc. under the Securities Act of 1933, as amended, or the Securities ExchangeAct of 1934, as amended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained insuch filing.Exhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report on Form 10-K of Cidara Therapeutics, Inc. (the “Company”) for the period ending December 31, 2018as filed with the Securities and Exchange Commission on the date hereof and to which this certification is attached as an exhibit (the “Report”), I,James Levine, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-OxleyAct of 2002, that:(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended;and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations ofthe Company.Date: February 28, 2019By: /s/ James Levine James LevineChief Financial Officer (Principal Financial Officer and Principal Accounting Officer)This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not tobe incorporated by reference into any filing of Cidara Therapeutics, Inc. under the Securities Act of 1933, as amended, or the Securities ExchangeAct of 1934, as amended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained insuch filing.

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