Eiger BioPharmaceuticals
Annual Report 2017

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 Form 10-K (Mark One)☒☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017or☐☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to .Commission file number 001-36183 Eiger BioPharmaceuticals, Inc.(Exact name of registrant as specified in its charter) Delaware 33-0971591(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.) 350 Cambridge Avenue, Suite 350, Palo Alto, CA 94306(Address of principal executive offices) (Zip Code) (650) 272 6138(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registeredCommon Stock, par value $0.001 per share The NASDAQ Global Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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 ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submittedand posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit andpost such files). Yes ☒ No ☐Indicate 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. ☒Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growthcompany. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Checkone):Large accelerated filer ☐ Accelerated filer ☐Non-accelerated filer ☐ (Do not check if a smaller reporting company) Smaller reporting company ☒Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒The aggregate market value of voting and non-voting common stock held by non-affiliates of the registrant as of June 30, 2017 totaled approximately $36,711,134 based onthe closing price of $7.90 as reported by the NASDAQ Global Market.The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, as of March 2, 2018 was 10,526,599.  Eiger BioPharmaceuticals, Inc.Form 10-KFor the Fiscal Year Ended December 31, 2017TABLE OF CONTENTS PART I 1 ITEM 1. Business 2 ITEM 1A. Risk Factors 40 ITEM 1B. Unresolved Staff Comments 68 ITEM 2. Properties 68 ITEM 3. Legal Proceedings 69 ITEM 4 Mine Safety Disclosures 69 PART II 70 ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 70 ITEM 6. Selected Financial Data 70 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 71 ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 82 ITEM 8. Financial Statements and Supplementary Data 83 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 110 ITEM 9A. Controls and Procedures 110 ITEM 9B. Other Information 110 PART III 111 ITEM 10. Directors, Executive Officers and Corporate Governance 111 ITEM 11. Executive Compensation 111 ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 111 ITEM 13. Certain Relationships and Related Party Transactions, and Director Independence 111 ITEM 14. Principal Accounting Fees and Services 111 PART IV 112 ITEM 15. Exhibits and Financial Statement Schedules 112 i PART IForward-Looking StatementsThis Annual Report on Form 10-K, including the sections entitled “Business,” “Risk Factors” and “Management’s Discussion and Analysis of FinancialCondition and Results of Operations,” may contain “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 herein that are notstatements of historical facts may be deemed to be forward-looking statements. Forward-looking statements in this Annual Report include, but are not limitedto, statements about: •the success, cost and timing of our product development activities and clinical trials; •our ability and the time required to obtain and maintain regulatory approval for lonafarnib, pegylated interferon lambda (Lambda), exendin9-39 and ubenimex, and any of our future product candidates, and any related restrictions, limitations, and/or warnings in the label of anapproved product candidate; •our ability to obtain funding for our operations, including funding necessary to complete all clinical trials that may potentially be requiredto file a new drug application, or NDA, and a Marketing Authorization Application, or MAA, for our product candidates; •the commercialization of our product candidates, if approved; •our plans to research, develop and commercialize our product candidates; •our ability to attract collaborators with development, regulatory and commercialization expertise; •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 product candidates; •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 ability to attract and retain key scientific or management personnel; •the accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional financing; and •our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates.These forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates and assumptions as ofthe filing date of this Annual Report and are subject to risks and uncertainties. We discuss many of these risks in greater detail under “Risk Factors.”Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management topredict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actualresults to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place unduereliance on these forward-looking statements. Except as required by law, we undertake no obligation to publicly update any forward-looking statements,whether as a result of new information, future events or otherwise.1 ITEM 1. BusinessMerger of Celladon Corporation and Eiger BioPharmaceuticals, Inc.On March 22, 2016, Celladon Corporation, or Celladon, and privately-held Eiger BioPharmaceuticals, Inc., or Private Eiger, completed a businesscombination in accordance with the terms of the Agreement and Plan of Merger and Reorganization, or the Merger Agreement, dated as of November 18,2015, by and among Celladon, Celladon Merger Sub, Inc., a wholly-owned subsidiary of Celladon, or Merger Sub, and Private Eiger, pursuant to whichMerger Sub merged with and into Private Eiger, with Private Eiger surviving as a wholly-owned subsidiary of Celladon. This transaction is referred to hereinas “the Merger.” Immediately following the Merger, Celladon changed its name to “Eiger BioPharmaceuticals, Inc.” In connection with the closing of theMerger, our common stock began trading on The NASDAQ Global Market under the ticker symbol “EIGR” on March 23, 2016.OverviewWe are a late stage biopharmaceutical company focused on bringing to market novel product candidates for the treatment of rare diseases. Since our foundingin 2008, we have worked with investigators at Stanford University, or Stanford, and evaluated a number of potential development candidates frompharmaceutical companies to comprise a pipeline of novel product candidates. Our resulting pipeline includes four Phase 2 development programsaddressing three distinct rare diseases. The programs have several aspects in common: the disease targets represent conditions of high medical need which areinadequately treated by current standard of care; the therapeutic approaches are supported by an understanding of disease biology and mechanism aselucidated by our academic research relationships; prior clinical experience with the product candidates guides an understanding of safety; and thedevelopment paths leverage the experience and capabilities of our experienced, commercially focused management team. The pipeline includes lonafarnibfor Hepatitis Delta Virus, or HDV, PEG-interferon lambda-1a (Lambda) for HDV, exendin 9-39 for Post-Bariatric Hypoglycemia, or PBH, and ubenimex forlymphedema. Our lead program in HDV has been discussed with the FDA in respect to a proposal to progress into Phase 3 with a single, pivotal clinical trialplanned for initiation in the second half of 2018. We currently plan to deliver data from three ongoing Phase 2 clinical trials with Lambda, exendin 9-39 andubenimex over the next twelve months.Our current project timelines, planned development and regulatory pathways are illustrated below. As discussed above, prior clinical experience by ourlicensors with the product candidates has supported and guided our understanding of safety in advancing these products in our clinical developmentprograms. Specifically, we in-licensed lonafarnib from Merck Sharp & Dohme Corp, or Merck, in 2010; licensed ubenimex from Nippon Kayaku Co., Ltd., orNippon Kayaku, in 2015; and licensed Lambda from Bristol-Myers Squibb, or BMS, in April 2016. We have relied upon Merck’s, Nippon Kayaku’s andBMS’s prior Phase 1/2/3 clinical data, manufacturing and experience with these three molecules to proceed directly into Phase 2 clinical trials followingauthorization by the U.S. Food and Drug Administration.2 Pipeline Timeline Note: All dates represent our current expectations. Actual timing may vary.Our product candidate pipeline includes four Phase 2 programs: 1.Lonafarnib (LNF)Lonafarnib, or LNF, is an orally bioavailable, small molecule in Phase 2 clinical trials for HDV infection and is our most advanced program. HDV is the mostsevere form of viral hepatitis for which there is currently no approved therapy. Chronic HDV infection can lead to a rapid progression to liver cirrhosis, agreater likelihood of developing liver cancer, and has the highest fatality rate of all the chronic hepatitis infections.We in-licensed LNF from Merck in 2010. LNF blocks the production of HDV virus particles by inhibiting a key step, called farnesylation, in the virus lifecycle. To date, 129 HDV infected patients have been dosed with LNF across five international Phase 2 clinical trials. LNF has demonstrated dose-relatedactivity in reducing HDV viral load both as a monotherapy and in combination with other agents. LNF boosted with ritonavir, or RTV, has demonstratedgreater or equal to 2 log decline or PCR-negativity in 50% of patients at 24 weeks of treatment. LNF boosted with RTV and combined with pegylatedinterferon alfa, or PEG-IFN-alfa, has demonstrated greater or equal to 2 log decline or PCR-negativity in 71% of patients at 24 weeks of treatment. In addition,the majority of patients normalize alanine transferase levels at 24 weeks of treatment. The most common gastrointestinal-related adverse events experiencedwith LNF were mild to moderate anorexia, nausea, vomiting, diarrhea and weight loss.LNF for the treatment of HDV infection has been granted orphan drug designation by the U.S. Food and Drug Administration, or the FDA, and EuropeanMedicines Agency, or EMA. The potential market for HDV therapies in the United States and Western Europe is growing due to increased migration fromregions where the disease is endemic, primarily from Eastern Europe, the Middle East and Asia. 2.LambdaPegylated interferon lambda (Lambda) is our second program treating HDV. Lambda is a well-characterized, late-stage, first in class, type III interferon, or IFN,that stimulates immune responses that are critical for the development of host protection during viral infections. Lambda targets type III IFN receptors whichare distinct from the type I IFN, receptors targeted by IFN-alfa. These type III receptors are highly expressed on hepatocytes with limited3 expression on hematopoietic and central nervous system cells, which has been demonstrated to reduce the off-target effects associated with other IFNs andimprove the tolerability of Lambda. Although Lambda does not use the IFN-alfa receptor, signaling through either the IFN-lambda or IFN-alfa receptorcomplexes results in the activation of the same Jak-STAT signal transduction cascade.We licensed worldwide rights to Lambda from BMS in April 2016. Lambda has been administered in clinical trials involving over 3,000 patients infectedwith the Hepatitis B Virus, or HBV, or Hepatitis C Virus, or HCV. Lambda has not been approved for any indication. We plan to develop Lambda as amonotherapy and in a combination therapy with lonafarnib. Currently, we are conducting a Phase 2 monotherapy study using Lambda to treat HDV and arehave completed recruitment of 33 patients. Dosing is ongoing at four international sites with final dosing expected in the second half of 2018, and end ofstudy expected in first quarter of 2019. In April 2017, we filed a U.S. IND for Lambda in HDV. In July 2017, the FDA granted Fast Track designation forLambda a potential treatment for HDV infection, and in September 2017, the FDA granted orphan designation for Lambda in HDV infection. 3.Exendin 9-39Exendin 9-39 is the third Phase 2 program and we are developing this candidate as a treatment for PBH. PBH is a debilitating and potentially life-threateningcondition for which there is currently no approved therapy. This disorder occurs often in a subset of bariatric surgeries called Roux-en-Y gastric bypass, orRYGB, where affected patients experience frequent symptomatic hypoglycemia, with blood glucose concentrations often low enough to cause seizures,altered mental status, loss of consciousness and even death. Gastric bypass procedures are widely performed and are increasing in frequency for medicallycomplicated obesity.We have demonstrated clinical proof of concept in 36 patients suffering from PBH indicating that exendin 9-39 can potentially prevent post-prandialhypoglycemia in affected patients. Exendin 9-39 is a glucagon-like peptide-1, or GLP-1, receptor antagonist that competes with endogenous GLP-1 and hasthe potential to prevent the excessive post-prandial insulin release that characterizes this disorder. These data were generated using both intravenous andsubcutaneous, or SC, formulation delivery. Pharmacokinetics from these Phase 2 SC study indicate that the SC formulation could enable once or twice a daypre-prandial dosing. We developed a proprietary SC liquid formulation and completed a Phase 1 dose-ranging pharmacokinetics trial in healthy humans. Wehave initiated PREVENT, our Phase 2, 28-day trial in affected patients with our exendin 9-39 proprietary SC formulation in the first quarter of 2018 andexpect to have data from this study in the second half of 2018.In December 2016, Eiger filed an Investigational New Drug application for exendin 9-39 in the United States. Exendin 9-39 for the treatment ofhyperinsulinemic hypoglycemia has been granted orphan drug designation by the FDA and EMA. 4.UbenimexOur fourth Phase 2 program involves clinical development of ubenimex in lymphedema, which is a state of vascular functional insufficiency in whichdecreased clearance of interstitial fluid through the lymphatic vasculature leads to edema formation and to progressive, debilitating architectural alterationsin skin and supporting tissues. There is no approved pharmacologic therapy. The current standard of therapy involves compression garments.Ubenimex is a well-characterized, oral, small-molecule inhibitor of leukotriene A4 hydrolase, or LTA4H, the enzyme responsible for converting theinflammatory mediator leukotriene A4, or LTA4, to leukotriene B4, or LTB4.Researchers at Stanford have demonstrated for the first time that LTB4 is elevated in both animal models of lymphedema as well as human lymphedema andthat elevated LTB4 is associated with tissue inflammation and impaired lymphatic function. In that research, applying inhibitors of LTB4 promotedphysiologic lymphatic repair and reversed lymphedema in treated animals. Eiger is developing ubenimex for lymphedema based on its distinct mechanism ofaction impacting lymphangiogenesis as published in Science Translation Medicine (Tian et al, May 2017). We are currently conducting a Phase 2 clinicaltrial, or the ULTRA Study, treating subjects with both primary lymphedema and secondary lymphedema with ubenimex. We completed enrollment of 54patients in the ULTRA Study in January 2018 and expect results from this multi-center international Phase 2 clinical trial in the second half of 2018.4 Ubenimex was exclusively licensed from Nippon Kayaku, for use in the United States, Europe and certain other countries for inflammatory diseasesinvolving LTB4, including lymphedema. Ubenimex has been marketed in Japan and other countries outside of our licensed territories by Nippon Kayaku forover 25 years for a different indication.In January 2018, Phase 2 LIBERTY study results in PAH demonstrated no improvement overall or in key subgroups for both the primary efficacy endpoint ofpulmonary vascular resistance (PVR) and the secondary endpoint of 6-minute walk distance (6MWD). No safety signals attributed to ubenimex wereidentified in the preliminary analysis. Further analysis of data, including biomarkers is ongoing, although we will discontinue development of ubenimex inPAH based on these results. We plan to continue to study ubenimex in lymphedema.Business Model and Management TeamWe believe that our approach to clinical development enables achievement of early clinical signals of efficacy and safety in our Phase 2 programs andpotentially reduces clinical risks and costs inherent in the drug discovery and development process. We have a highly experienced management team whosemembers have, in the course of their prior employment, participated in bringing more than 20 product candidates through regulatory approval and intocommercialization. We plan to leverage our management team’s breadth and depth of experience in clinical and regulatory drug development as well asmarket development and commercialization to identify potentially promising product candidates to address unmet medical needs.Our current product candidate pipeline has been obtained by in-licensing from pharmaceutical companies. With our focus on rare diseases, our strategy is toacquire and retain some or all commercialization rights to our products in significant territories to diversify risk, identify a rapid regulatory pathway toapproval and minimize the development investment in order to maximize long-term value for our stockholders. Over time, depending upon the data andpotential market opportunity, we expect to establish a commercial organization, which we believe can be targeted and cost effective for selected, promisingorphan disease designated programs. We plan to balance these interests with opportunities to out-license assets from our portfolio enhance stockholder valuethrough partnerships and other strategic relationships.We plan to continue evaluating in-licensing opportunities in order to enhance our pipeline and leverage our business development, clinical development,regulatory and commercial expertise. We believe our management team has the capability and experience to continue to execute this model. Ourmanagement team has worked in other private and public biotechnology companies such as Prestwick Pharmaceuticals, New River Pharmaceuticals, ClinicalData Inc., CoTherix and InterMune, each of which was acquired by a larger pharmaceutical industry company. Our management also has previous workexperience, in some cases working together, at pharmaceutical companies, including The Upjohn Company, Glaxo, Glaxo Wellcome, Glaxo Smith Kline,Bristol-Meyers Squibb, Arena Pharmaceuticals, Alza (Johnson and Johnson), Halozyme, Clinical Data Inc., New River Pharmaceuticals, Genentech, AchillionPharmaceuticals, Schering-Plough, and Globe ImmuneOur StrategyOur mission is to identify, develop, and, directly or through collaborations, bring to market novel products that receive orphan drug designation for thetreatment of rare diseases or conditions. We currently have a diverse portfolio of well-characterized product candidates with the potential to address diseasesfor which the unmet medical need is high, the biology for treatment is believed to be understood, and for which an effective therapy is not available. Our goalis to be a leader in the development and commercialization of novel therapeutics for serious unmet medical needs in rare diseases. Our focus to achieve thisgoal will be to utilize our experience and capabilities to: •Advance our existing product candidates through late-stage clinical trials, generating meaningful clinical results; •Work with U.S. and international regulatory authorities for expeditious, efficient development pathways toward registration; •Prepare for commercialization of each program;5 •Use our industry relationships and experience to source, evaluate and in-license well-characterized product candidates to continue pipelinedevelopment; and •Identify potential commercial or distribution partners for our products in relevant territories.Our Product CandidatesLonafarnib in HDVLonafarnib, or LNF, is a small molecule that we in-licensed from Merck in 2010 and that we are advancing for the treatment of HDV infection. LNF is a well-characterized, orally active inhibitor of farnesyl transferase, an enzyme involved in modification of proteins through a process called prenylation. HDV usesthis prenylation process inside host liver cells to complete a key step in its life cycle. LNF inhibits the prenylation step of HDV replication inside liver cellsand blocks the virus life cycle at the stage of assembly. Since prenylation is carried out by a host enzyme, there is a higher barrier to develop viral resistancemutations to LNF therapy. We have generated clinical results in over 129 HDV-infected patients in Phase 2 trials, across international study sites,demonstrating rapid decreases in HDV viral loads and no measurable levels of resistance. We have completed five Phase 2 clinical trials including Proof ofConcept (NIH), LOWR HDV – 1 (Ankara, Turkey), LOWR HDV – 2 study (Ankara, Turkey), LOWR HDV – 3 (NIH) and LOWR HDV – 4 (Hannover, Germany)in over 129 HDV-infected patients, across international study sites, demonstrating rapid decreases in HDV viral loads and no resistance. In February 2018, wemet with the FDA and, subject to agreement on a proposed Phase 3 clinical trial design, have an opportunity for a potentially pivotal single Phase 3 trial asthe basis for an NDA filing.Lambda in HDVLambda is a well-characterized, late-stage, first in class, type III interferon, or IFN, that we in-licensed from BMS in April 2016 for the treatment of HDV.Lambda stimulates immune responses that are critical for the development of host protection during viral infections. Lambda targets type III IFN receptorswhich are distinct from the type I IFN receptors targeted by IFN-alfa. These type III receptors are highly expressed on hepatocytes with limited expression onhematopoietic and central nervous system cells, which in BMS’s clinical trials has demonstrated to reduce the off-target effects associated with other IFNsand improve the tolerability of Lambda. Although Lambda does not use the IFN-alfa receptor, signaling through either the lambda or IFN-alfa receptorcomplexes results in the activation of the same Jak-STAT signal transduction cascade. Lambda has not been approved for any indication. We are developingLambda as both a monotherapy and a combination therapy with lonafarnib. Currently, we are conducting a Phase 2 monotherapy study using Lambda to treatHDV and have completed recruitment of 33 patients and are currently dosing at four international sites.As part of the FDA meeting in February 2018, Eiger discussed the potential regulatory pathways for a Lonafarnib / Ritonavir / Lambda combination regimenincluding possible study designs and clinical endpoints. The current status of discussion with the FDA is as follows: •Eiger had a very positive meeting with the agency on February 14th. •Agency has agreed that the next Eiger study can be a single, registration trial in HDV. •Eiger expects written minutes from the agency (by the end of March 2018) and plans to announce additional details on its clinicaldevelopment efforts in HDV during the second quarter of this year.Hepatitis Delta Virus OverviewAbout Hepatitis Delta VirusHepatitis delta infection is caused by HDV, a small circular ribonucleic acid, or RNA, that expresses only one protein, the hepatitis delta antigen, or HDAg.There are two forms of HDAg; small and large. Together, these two forms of HDAg and the single-stranded RNA genome are surrounded by a lipid envelope,which is embedded with Hepatitis B Virus, or HBV surface antigen, or HBsAg, proteins. HDV does not encode its own envelope proteins and must acquirethem from HBV during the final steps of replication. Hence, natural HDV infections always occur in the presence of a co-existing HBV infection. HBsAg isthe only element of HBV relied upon by HDV. HDV replication can occur independently of HBV replication.6 HDV is the most severe form of viral hepatitis. HDV can be acquired either by co-infection (a simultaneous co-infection with HDV and HBV) or by super-infection (HDV infection of someone already harboring a chronic HBV infection). Both co-infection and super-infection with HDV result in more severecomplications compared to infection with HBV alone. These complications include a greater likelihood of experiencing liver failure in acute infections and arapid progression to liver cirrhosis, with an increased chance of developing liver cancer in chronic infections. HDV has the highest fatality rate of all thehepatitis infections at up to 20%. Although HDV/HBV simultaneous co-infection in adults usually resolves completely, in some cases it can becomefulminant hepatitis, which carries a very high mortality rate. In the case of super-infections, the predominant form of HDV, HDV super-infection leads to amore severe form of disease than chronic HBV mono-infection. In a study published in 1987 in the Journal of Infectious Diseases (Fattovich, G. et al.“Influence of Hepatitis Delta Virus Infection on Progression to Cirrhosis in Chronic Hepatitis Type B,” J Infect Dis, 1987; 155:931), histological liverdeterioration was observed in 77% of HBV patients co-infected with HDV over a 15-year follow-up period, versus 30% of patients infected with HBV alone(p<0.01). In a 2013 study of chronic HBV patients published in the Journal of Gastroenterology and Hepatology (Gish, R. et al. “Coinfection with hepatitis Band D: epidemiology, prevalence and disease in patients in Northern California,” J Gastroenterol Hepatol, 2013; 28(9):1521), cirrhosis was present in 73% ofHBV patients co-infected with HDV, compared to only 22% of those infected with HBV alone. Patients co-infected with HDV are more than twice-as-likely todevelop liver-related complications, cirrhosis, or require liver transplants than matched patients infected with HBV alone.HDV is generally spread through exchange of body fluids either sexually or through contact with infected blood. Globally, it is estimated that between 4.3%and 5.7% of the 240 million worldwide chronic HBV population, or 15 to 20 million people, are infected with HDV. The prevalence of HDV in patientsinfected with chronic HBV is even higher in certain regions, including certain parts of Mongolia, China, Russia, Central Asia, Pakistan, Turkey, Africa andSouth America, with an HDV prevalence as high as 60% being reported in HBV-infected patients in Mongolia and Pakistan. The prevalence of HDV hasrecently begun to increase in Western Europe and the United States due to migration from countries with high infection rates.The Role of HDV Screening in Identifying Patients Who May Benefit From LNF and/or LambdaThere are diagnostic tests in use today in clinical laboratories to detect anti-HDV antibodies in serum. These tests are currently able to detect acute HDVinfections after four weeks, but they are poor tests for active HDV infections. Active HDV infections are best detected by reverse transcriptase-polymerasechain reaction, or RT-PCR, assays for genomic RNA. These assays yield a quantitative assessment of the number of viral particles, or viral load, in serum. Acommercial assay for quantitative HDV RNA has been available in Europe (Robogene®) since 2015. A commercial assay for quantitative HDV RNA wasmade available in the United States in October 2016. Both of these assays are calibrated using the World Health Organization HDV standard provided by thePaul Erhlich Institute in Germany.Our initial discussions with payors have indicated that they would be willing to reimburse healthcare providers for HDV RNA quantitative assays that arecarried out following a positive HBsAg test for HBV. A commercially available assay will increase the number of assays performed and increase the numberof identified patients who can potentially benefit from an HDV therapy such as LNF.Current Therapy for HDVCurrently, there is no FDA approved therapy for hepatitis delta infection. The American Association for the Study of Liver Diseases, or the AASLD,guidelines suggest treatment of chronic hepatitis delta infections with IFN-alfa. In clinical trials of IFN-alfa or PEG-IFN-alfa, between 25% and 33% of HDVinfected patients were able to achieve PCR HDV RNA negativity after a minimum of 48 weeks of therapy, with some requiring two years of therapy. However,long-term therapy with IFN-alfa is known to be associated with numerous adverse events and tolerability is a significant problem for some of these patients.In addition, rebound of HBV RNA is common. HBV nucleoside analogs that inhibit HBV genome replication are ineffective against HDV since they areineffective in suppressing the expression HBsAg. Other classic antiviral therapies have been tested, but none have shown to be effective against HDVinfection.7 HDV Replication and FarsenylationAfter HDV enters a target cell hepatocyte, the genome is translocated to the nucleus where genome replication occurs and the two forms of HDAg small deltaantigen, or SHDAg, and large delta antigen, or LHDAg, are produced. The newly formed HDV genome and the small and large delta antigen must acquire alipid envelope from HBV to complete the assembly process. An important interaction between HDV and HBV proteins has been shown to depend on thepresence of the last four amino acids of the large delta antigen, comprising a CXXX box motif, where C represents cysteine and X denotes any other aminoacid. This amino acid sequence is required for LHDAg to be farsenylated by a host enzyme which covalently attaches a 15-carbon prenyl lipid (farnesyl-moiety) to the cysteine of the CXXX box. Farsenylation of the large delta antigen renders it more lipophilic, promotes its association with HBsAg and isessential for initiating the HDV particle formation process. Our approach involves targeting this host process called farsenylation, or protein farnesylation,which has been shown to be essential for the last steps in HDV replication, the assembly and release of new virus progeny.In the 1980s farnesyltransferase inhibitors were developed by multiple pharmaceutical companies for oncology indications. Addition of a farnesyl or prenyllipid group to the Ras protein, or Ras, a well-known and important regulator of cellular proliferation, allows for membrane association. Once membranebound, Ras may then be activated. The importance of activated Ras in tumor development was demonstrated by sequence analyses of tumors from patientswhere up to 30% have mutations involving Ras. Several farsenylation inhibitors were developed in oncology and taken into the clinic and in some casesthrough late-stage clinical development. However, these programs did not lead to approvals, due to a lack of compelling efficacy. The class-related, dose-limiting toxicity has been gastrointestinal side effects including nausea, vomiting, diarrhea and weight loss.Published studies demonstrate that farnesyltransferase inhibitors block HDV viral production both in cellular experiments and in HDV transgenic mice.Targeting farsenylation or farnesyl transferase, a host target, significantly reduces the likelihood of HDV developing resistance to escape effects of antiviraltherapy. Viruses mutate quickly and there is a higher rate of mutations in viral replication compared to mammalian cell division. However, no matter howmuch HDV may mutate, these changes are unlikely to alter the host process of farsenylation which HDV requires to complete packaging. Thus, targeting ahost farsenylation process provides what we believe to be a higher barrier to resistance. Identification of clinic-ready farnesylation inhibitors has allowed usto move rapidly into proof-of-concept studies in humans.Our Lead HDV Opportunity: LNFLNF is a well-characterized, orally active inhibitor of farnesyl transferase. LNF inhibits the farsenylation step of HDV replication inside liver cells and blocksthe ability of the virus to multiply. Since farsenylation is a host process, not under control of HDV, and LNF inhibits farsenylation, we believe that there isalso a potentially higher barrier to resistance with LNF therapy. LNF for the treatment of HDV infection has been granted orphan drug designation in Europeand the United States, and LNF in combination with RTV has been granted Fast Track designation from FDA for the treatment of chronic HDV infections. Wehave completed five Phase 2 clinical trials including Proof of Concept (NIH), LOWR HDV – 1 (Ankara, Turkey), LOWR HDV – 2 study (Ankara, Turkey),LOWR HDV – 3 (NIH) and LOWR HDV – 4 (Hannover, Germany). LNF has never been approved or commercialized for any indication.LNF Clinical DataWe in-licensed LNF from Merck in 2010, and have relied upon Merck’s prior Phase 1, 2 and 3 clinical experience with LNF to understand safety andpharmacokinetics.LNF has been tested in five Phase 2 trials (POC, LOWR HDV – 1, LOWR HDV – 2, LOWR HDV – 3, LOWR HDV – 4) in 129 HDV-infected patients.8 National Institutes of Health (NIH) Clinical Proof-of-Concept Phase 2a Study in HDVThe National Institutes of Health, or the NIH, conducted a 14 patient, double blind, placebo-controlled, proof of concept study, which was the first ever toevaluate LNF in patients infected with HDV. Patients either received LNF 100 mg (group 1) or LNF 200 mg (group 2) twice daily, or BID, for 28 days with sixmonths of follow-up. Both groups enrolled six treatment participants and two placebo participants. The two placebo patients from group 1 later receivedopen-label LNF as group 2 participants. Doses of 100 mg and 200 mg of LNF administered BID demonstrated a dose dependent decrease in viral loads of 0.73and 1.54 log decline, respectively, in 28 days. The results were published in The Lancet Infectious Diseases Journal in 2015. As shown in the table above, statistically significant decreases in HDV RNA viral load were demonstrated by both the 100 mg of LNF BID (p=0.03) and 200mg of LNF BID (p<0.0001) active groups versus the placebo. A statistically significant correlation between increasing LNF serum levels and decreasing HDVRNA viral loads was also demonstrated. The 100 mg twice daily dose was well-tolerated with less frequent GI Adverse Events, or AEs, such as nausea anddiarrhea experienced in the 200 mg twice daily dose. No resistant variants were identified from population-based sequencing of HDV infected patients after28 days of treatment with LNF.A p-value is a statistical measure of the probability that the difference in two values could have occurred by chance. The smaller the p-value, the greater thestatistical significance and confidence in the result. Typically, results are considered statistically significant if they have a p-value less than 0.05, meaningthat there is less than a one-in-20 likelihood that the observed results occurred by chance. The FDA requires that sponsors demonstrate the effectiveness andsafety of their product candidates through the conduct of adequate and well-controlled studies in order to obtain marketing approval. Typically, the FDArequires a p-value of less than 0.05 to establish the statistical significance of a clinical trial, although there are no laws or regulations requiring that clinicaldata be statistically significant, or that require a specific p-value, in order for the FDA to grant approval.9 In 2014, we initiated the LOWR HDV (Lonafarnib With Ritonavir in HDV) Phase 2 Program. The objective of this program is to identify dose(s) andregimen(s) for registration. To date, 129 HDV subjects have been dosed with LNF in multiple studies including: •LOWR HDV – 1 Study (Combination: LNF with RTV or PEG IFN-α) •LOWR HDV – 2 Study (Dose Finding: LNF + RTV ± PEG IFN-α) •LOWR HDV – 3 Study (QD Dosing: LNF + RTV) •LOWR HDV – 4 Study (Dose-Escalation: LNF + RTV)LOWR HDV—1 (LOnafarnib With and without Ritonavir in HDV - 1) Phase 2 StudyThe LOWR HDV—1 trial studied LNF in 21 subjects who were enrolled into one of seven groups for durations of 4-12 weeks (three patients in each group):LNF 200 mg BID (12 weeks), LNF 300 mg BID (12 weeks), LNF 100 mg TID (5 weeks), LNF 100 mg BID + RTV 100 mg QD (8 weeks), LNF 100 mg BID +PEG-IFN-alfa 180 mcg QW (8 weeks), LNF 200 mg BID + PEG-IFN-alfa 180 mcg QW (8 weeks) and LNF 300 mg BID + PEG-IFN-alfa 180 mcg QW (8 weeks).In LNF monotherapy treatment groups, increasing the dosage of LNF from 100 mg three times a day to 200 mg twice a day to 300 mg twice a day led togreater reductions in viral loads at Week 4 (1.2 logs versus 1.6 logs versus 2.0 logs). However, increasing the dosage of LNF also led to increasinggastrointestinal, or GI, intolerability and was not considered for longer term dosing.In the LNF-RTV combination arm of LOWR HDV—1, 100 mg of LNF BID was combined with 100 mg of RTV once daily. RTV is a pharmacokinetic, or PK,enhancer known to inhibit the metabolism of LNF, allowing lower doses of LNF to be administered, while resulting in higher systemic concentrations of LNF.The addition of 100 mg of RTV once daily to 100 mg LNF BID led to a four- to five-fold increase in the serum concentration of LNF in treated patientscompared to LNF 100 mg BID alone. This dose combination led to a mean viral load decrease of 2.4 logs after 28 days of treatment, which is a greater thanthree-fold reduction in viral load compared to the NIH data of a mean viral load decrease of 0.74 logs after 28 days of monotherapy treatment of 100 mg LNFBID. Extending dosing to Week 8 resulted in a 3.2 viral load decline. Importantly, when therapy was discontinued the viral loads rebounded, which webelieve indicates that LNF treatment was eliciting an antiviral effect. The addition of 180 mcg of PEG-IFN-alfa once weekly to 100 mg LNF BID was alsomore active in reducing HDV RNA versus studies with either agent alone. This dose combination led to a greater reduction in viral load, compared to the NIHresults on monotherapy treatment with 100 mg LNF BID, with a mean decrease of 0.74 logs versus 1.8 logs after four weeks. Extending dosing to eight weeksresulted in a 3.0 logs viral load decline. Importantly, when therapy was discontinued the viral loads rebounded. The mean change in HDV RNA for thepatients receiving eight weeks of treatment of 100 mg LNF BID in combination with RTV and 100 mg LNF BID in combination with PEG-IFN-alfa is shownbelow. Viral loads for LNF 200 mg and 300 mg BID in combination with PEG-IFN-alfa was not shown since these dosages were intolerable (all patientsdiscontinued) for future development. LOWR HDV-1 did not include a placebo arm and, as such, statistical significance could not be determined.10 Liver enzymes are often elevated during infections with viral hepatitis, a sign of damage being done to liver cells. In both LNF combination cohorts, all HDVpatients enrolled had elevated alanine aminotransferase, or ALT, a liver enzyme that is a surrogate marker of inflammation, prior to receiving any treatment.By the end of eight weeks of combination therapy with LNF and RTV or LNF and PEG-IFN-alfa, all patients’ ALT liver enzymes normalized or trendedtoward normal while on therapy.11 In the three patients receiving LNF in combination with RTV and the three patients receiving LNF in combination with PEG-IFN-alfa, we observed decreasesin HDV RNA viral load of approximately 3.2 logs and 3.0 logs after eight weeks of treatment, respectively. For comparison, and as shown in the figure below,published data from the HIDIT-2 trial of PEG-IFN-alfa in 91 HDV infected patients demonstrated a mean decline in HDV RNA of approximately 1.6 logs and2.7 logs after 8 weeks and 48 weeks, respectively. The HIDIT-2 (Hep-Net International Delta Hepatitis International Trial-II) was a multicenter randomizedtrial studying effects of PEG-IFN-alfa plus tenofovir in chronic HDV patients, and is the largest clinical study to date in HDV. The HIDIT-2 trial wasconducted on 91 patients, whereas the LOWR HDV—1 study was conducted on an aggregate of 21 patients, with three patients per treatment arm. If theLOWR HDV—1 trial was conducted on a larger group of patients, the mean HDV RNA decline may differ from the 3.2 log and 3.0 log declines after eightweeks of treatment observed in the three patient arms receiving LNF combination treatment in the LOWR HDV—1 trial. However, based on clinical results todate, we expect all patients who are treated with LNF to show a viral load response. LOWR HDV—2 (LOnafarnib With Ritonavir in HDV - 2) Phase 2 StudyLOWR HDV – 2 is a dose-finding Phase 2 study of multiple doses of LNF boosted by RTV with and without PEG-IFN-alfa in 58 subjects for 24-48 weeks oftreatment with 24 weeks of follow-up, with the aim to identify regimen(s) with improved tolerability for the longer-term registration studies. LOWR HDV – 2(conducted as an extension of LOWR HDV – 1, collectively EIG-300) was conducted at Ankara University in Turkey and we have identified and certain goodclinical practice violations at this site that may impact certain data and information that we plan to submit to the FDA.Fifty-eight subjects were enrolled into one of ten groups of different LNF with RTV and/or PEG-IFN-alfa combinations for 12 or 24 or 48 weeks as follows:Group 1: LNF 100 mg BID + RTV 50 mg BID; Group 2: LNF 100 mg BID + RTV 100 mg QD; Group 3: LNF 150 mg QD + RTV 100 mg QD; Group 4: LNF100 mg QD + RTV 100 mg QD; Group 5: LNF 75 mg BID + RTV 100 mg BID with PEG-IFN-alfa 180 mcg QW added at week 12; Group 6: LNF 50 mg BID +RTV 100 mg BID; Group 7: LNF 50 mg BID + RTV 100 mg BID with PEG-IFN-alfa 180 mcg QW added at week 12; Group 8: LNF 50 mg BID + RTV 100 mgBID + PEG-IFN-alfa 180 mcg QW; Group 9: LNF 25 mg BID + RTV 100 mg BID; and Group 10: LNF 25 mg BID + RTV 100 mg BID + PEG-IFN-alfa 180 mcgQW.12 End of study results were presented at EASL 2017 in Amsterdam, Netherlands. Key findings were that in the all-oral LNF 50 mg BID + RTV 100 mg BIDregimen, 7 of 14 (50%) patients demonstrated ≥ 2 log decline or PCR-negative at Week 24. Combination regimens of LNF 25 mg BID + RTV 100 mg BID +PEG IFN-α 180 mcg QW resulted in the highest response rates of 5 of 7 (71%) patients achieving ≥ 2 log decline or PCR-negative at Week 24 and themajority of patients normalized ALT at Week 24. In addition, GI AEs predominantly were predominantly mild and moderate. Reported data used a researchuse only assay at Ankara University.LOWR HDV—3 (LOnafarnib With Ritonavir in HDV - 3) Phase 2 StudyLOWR HDV – 3 was a double-blind, randomized, placebo-controlled study designed to evaluate the efficacy and tolerability of once-daily doses of LNF – 50mg, 75 mg and 100 mg – each combined with RTV 100 mg once daily for 12 (N=9) or 24 (N=12) weeks. Twenty-one patients with chronic hepatitis deltawere randomized into one of six treatment groups. LOWR HDV – 3 was conducted at the National Institutes of Health (NIH) Bethesda, MD. This study hascompleted.End of study results were presented at EASL 2017 in Amsterdam, Netherlands. After 12 weeks of therapy, the median log HDV RNA decline from baselinewas 1.60 log IU/mL (LNF 50 mg), 1.33 (LNF 75 mg) and 0.83 (LNF 100 mg) (p=0.001). In subjects treated for 24 weeks, HDV RNA levels significantlydiffered from placebo (p=0.04). During the study, 6 patients achieved ≥ 2 log decline in HDV RNA; HDV RNA levels became undetectable in one subject and< LLOQ in three subjects. ALT normalization was achieved in 47% of patients. Adverse events were mild to moderate and included nausea, vomiting,dyspepsia, anorexia, diarrhea, and weight loss. There were no treatment discontinuations for adverse events.The LOWR HDV-3 study demonstrated that the all-oral combination of once-daily ritonavir boosted lonafarnib was safe and tolerable in patients for up to 6months of therapy and demonstrated antiviral activity. Reported data used Robogene® HDV RNA Quantification Kit 2.0.LOWR HDV—4 (LOnafarnib With Ritonavir in HDV - 4) Phase 2 StudyLOWR HDV – 4 was an open-label study to evaluate the efficacy and tolerability of dose-escalation of LNF combined with RTV administered twice daily fordosing durations of 24 weeks. Fifteen patients were initiated at LNF 50 mg and RTV 100 mg twice daily, and dose-escalated up to LNF 100 mg twice daily atthe discretion of the investigator and patient tolerability. LOWR HDV – 4 was conducted at Hannover Medical School in Hannover, Germany.End of study results were presented at EASL 2017 in Amsterdam, Netherlands. At end of treatment, 5 of 15 (33%) patients reached and maintained LNF 100mg BID + RTV through EOT; 1 of 5 (20%) patients achieved undetectable HDV-RNA, and 1 of 5 (20%) patients achieved HDV-RNA < LLOQ. ALTnormalization was demonstrated in 53% patients.In follow-up visits, 1 of 15 (7%) patients remained HDV-RNA < LLOQ and 3 of 15 (20%) patients dropped > 2 logs from baseline. Gastrointestinal AEs weremostly grade 1-2; 8 of 15 (53%) patients required dose reduction and 2 of 15 (13%) patients were discontinued. Reported data used Robogene® HDV RNAQuantification Kit 2.0.Key findings from the LOWR HDV Program demonstrate that LNF (all-oral) can achieve HDV-RNA negativity on-treatment, and that the most robust HDV-RNA on-treatment on-anti-viral activity is observed in LNF triple therapy with PEG-IFN-alfa. Findings demonstrate that LNF-based regimens can normalizeALTs in 60% of patients. With dosing regimens of LNF 25 and 50 mg BID identified with predominantly grade 1 GI AEs amongst per-protocol treatedpatients, 48-week dosing may be possible and expected to improve outcomes. Early data also indicate that LNF-based regimens can also induce post-treatment HDV-RNA clearance in a subset of patients, suggesting immune reactivation as a potential second mechanism to achieve HDV-RNA PCR-negativity.13 Our Second HDV Therapeutic Approach: Lambda for HDVLambda is a well-characterized, late-stage, first in class, type III interferon, or IFN, that we in-licensed from Bristol-Myers Squibb in April 2016 for thetreatment of HDV infection. Lambda stimulates immune responses that are critical for the development of host protection during viral infections. Lambdatargets type III IFN receptors which are distinct from the type I IFN receptors targeted by IFN-alfa. These type III receptors are highly expressed onhepatocytes with limited expression on hematopoietic and central nervous system cells, which has been14 demonstrated to reduce the off-target effects associated with other IFNs and improve the tolerability of Lambda (Chan 2016). Although Lambda does not usethe IFN-alfa receptor, signaling through either the IFN-lambda or IFN-alfa receptor complexes results in the activation of the same Jak-STAT signaltransduction cascade.In clinical trials of IFN-alfa or PEG-IFN-alfa, between 25% and 33% of HDV-infected patients were able to clear their infections, or SVR24, after a minimumof 48 weeks of therapy, with some requiring two years of therapy. However, long-term therapy with IFN-alfa is known to be associated with numerous adverseevents and tolerability is a significant problem for some of these patients. We believe lambda will be a safer and better tolerated pegylated interferoncompared to PEG-IFN-alfa. We are currently dosing Lambda in 33 patients in the LIMT HDV, or Lambda MonoTherapy, Phase 2 clinical trial in NewZealand, Israel and Pakistan. Lambda has never been approved or commercialized for any indication.Lambda Clinical DataA head-to-head study comparing the safety and efficacy of lambda versus PEG-IFN-alfa was reported in 2016 by Chan et al. In this study, HBeAg(+) patientswere treated with either Lambda (n=80) or PEG-IFN-alfa (n=83) for 48 weeks. A subset of on-treatment safety data is summarized in the table below. Lambdais generally better-tolerated when compared to PEG-IFN-alfa. Lower rates of flu-like symptoms and musculoskeletal symptoms were observed with lambdaversus PEG-IFN-alfa. LIMT HDV Monotherapy Phase 2 Clinical TrialThe LIMT HDV Phase 2 Clinical Trial is a 1:1 randomized, open-label study of Lambda 120 or 180 microgram subcutaneous injections administered weeklyfor 48 weeks in 33 patients with chronic HDV. End of treatment, which is expected in the second half of 2018, will be followed by a treatment-free 24-weekobservation period. The primary objective of the Phase 2 Clinical Trial is to evaluate the safety, tolerability, and efficacy of treatment with two dose levels ofLambda monotherapy in patients with chronic HDV infection. All patients will also be administered an anti-HBV nucleos(t)ide analog throughout the study.The trial is being conducted at four international sites in New Zealand, Israel and Pakistan.Interim Week 24 data was presented at AASLD 2017 in Washington, D.C. During this interim analysis, 10 of 33 patients had reached Week 24. Of these 10patients, 5 (50%) achieved > 2 log decline and 4 (40%) achieved PCR-negativity.Interim data shows that Lambda demonstrates comparable anti-HDV activity to historical PEG-alfa and that Lambda is well tolerated in the majority ofpatients. There were a few ALT flares that were associated with HDV viral load decline, suggesting a vigorous immune response to therapy rather thanhepatotoxicity.15 Potential for Registration in HDV for LNF and LambdaOur goal in developing LNF and Lambda is to reduce viral load in such a manner as to achieve durable suppression of the virus to below the level ofquantification (

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