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Millendo Therapeutics, Inc.

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FY2018 Annual Report · Millendo Therapeutics, Inc.
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Dear shareholders, employees and friends, 

Millendo  Therapeutics  is  starting  2019  in  a  stronger  position  than  ever  before.  We  believe  this  past  year  was  a 
transformative one for the company, as we advanced both of our orphan endocrine programs into late stage clinical 
trials in two areas of major unmet need, Prader-Willi syndrome (PWS) and classic congenital adrenal hyperplasia 
(CAH), capitalized the company to continue our development activities and made key hires to further execute our 
strategic initiatives. Millendo made its public debut on the Nasdaq exchange on December 10, 2018. 

Importantly, we remain passionate and committed to the work that we do because of the potential for our innovative 
therapies to impact patients and families living with rare endocrine diseases. 

Our  lead  compound,  livoletide,  is  an  unacylated  ghrelin  analogue  that  has  shown  promise  in  PWS  patients  to 
improve hyperphagia, the excessive and unrelenting hunger that is a hallmark symptom of this rare genetic disease. 
There are limited treatment options and no approved therapies available to address hyperphagia in PWS, creating 
a significant burden for both patients and caregivers as they manage this challenging disease. In March 2019, we 
initiated a pivotal Phase 2b/3 clinical study of livoletide in PWS patients, called ZEPHYR. This study will evaluate 
the safety and efficacy of livoletide on food-related behaviors in PWS patients. We expect to enroll approximately 
150 patients from up to 40 clinical sites across the United States and Europe in the Phase 2b portion of the pivotal 
Phase 2b/3 study, which has the potential to support a New Drug Application (NDA) submission. 

In September 2018, we initiated a Phase 2b clinical study of our other clinical stage drug candidate, nevanimibe, in 
patients with CAH. This is an orphan genetic adrenal disease that results in abnormal hormone levels, affecting overall 
health, growth and development. Patients with CAH are often treated with lifelong high-dose hydrocortisone that 
can cause significant and chronic adverse side effects including diabetes, obesity, hypertension and psychological 
problems. Suboptimal doses of cortisol can result in female CAH patients experiencing hirsutism (unwanted facial 
hair), infertility and menstrual irregularity, and male CAH patients experiencing infertility and testicular tumors. 
Currently,  physicians  must  choose  between  therapies  that  cause  either  chronic  high  levels  of  glucocorticoids  or 
high  levels  of  androgens.  Nevanimibe  has  the  potential  to  provide  a  better  treatment  option  by  avoiding  these 
tradeoffs, with its novel approach to decreasing abnormal adrenal steroidogenesis through the adrenal-selective 
inhibition of ACAT1.  

We  are  excited  about  the  potential  for  our  late  stage  clinical  assets,  livoletide  and  nevanimibe,  to  significantly 
impact patient care in PWS and CAH, respectively, and look forward to sharing topline data from both the Phase 2b 
portion of ZEPHYR and the Phase 2b clinical study of nevanimibe in the first half of 2020.

Executing on our vision as a leading endocrine company requires a world-class team. Joining our senior leadership 
team  in  2018  were  Louis  Arcudi  III  as  Chief  Financial  Officer  and  Ryan  Zeidan  as  Senior  Vice  President  of 
Development. Additional hires in human resources, clinical operations, medical affairs, commercial and business 
operations  have  strengthened  our  ability  to  execute  for  continued  success.  Looking  into  2019  and  beyond,  we 
expect our team will continue to integrate and grow as a global biopharmaceutical company, including establishing 
a foundation for our commercial organization to help prepare for potential product launch.  

Our achievements in 2018 are the result of contributions by many within Millendo and beyond. On behalf of our 
Board of Directors and senior leadership team, I would like to thank the extraordinary group of colleagues here at 
Millendo for their dedication and commitment to moving forward on our shared passion, mission and work. To the 
patients and healthcare providers who have been a part of our clinical trials and programs, you have our sincerest 
gratitude for enabling our efforts to bring innovative medications to those who need them the most. And to all of 
you, our valued shareholders, thank you for your continued support. 

Sincerely,

Julia C. Owens, Ph.D. 
President and Chief Executive Officer 
Millendo Therapeutics, Inc.

 
UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION 
WASHINGTON, DC 20549 

FORM 10-K 

(Mark One) 
(cid:95)  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the fiscal year ended December 31, 2018 

OR 
(cid:133)  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
Commission File Number: 001-35890 

Millendo Therapeutics, Inc. 
(Exact Name of Registrant as Specified in its Charter) 

Delaware 
(State or other jurisdiction of 
incorporation or organization) 

301 North Main Street, Suite 100 
Ann Arbor, Michigan 
(Address of principal executive offices) 

45-1472564 
(I.R.S. Employer 
Identification No.) 

48104 
(Zip Code) 

Registrant’s telephone number, including area code: (734) 845-9000 

Securities registered pursuant to Section 12(b) of the Act: 

Title of Each Class 
Common Stock, $0.001 par value 

Name of Each Exchange on which Registered 
The Nasdaq Stock Market, LLC 

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  (cid:133)   No  (cid:95)(cid:3)

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.   Yes  (cid:133)   No  (cid:95) 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange 

Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject 
to such filing requirements for the past 90 days.     Yes  (cid:95)    No  (cid:133) 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to 

Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to 
submit).    Yes  (cid:95)    No  (cid:133) 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained 
herein, and will not be contained, to the best of registrant’s knowledge, 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.    (cid:133) 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting 

company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and 
“emerging growth company” in Rule 12b-2 of the Exchange Act. 

Large accelerated filer 

Non-accelerated filer 

   (cid:133) 

   (cid:95)   

  (cid:3)

    Accelerated filer 

   (cid:133) 

    Smaller reporting company 

   (cid:95) 

  Emerging growth company 

  (cid:133)(cid:3)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying 

with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:133) 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  (cid:133)    No  (cid:95)(cid:3)

The aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates as of June 29, 2018 (the last 
business day of the registrant’s most recently completed second fiscal quarter) was approximately $29.9 million, which is based on the information 
made available to the registrant in the reverse merger completed with OvaScience, Inc. on December 7, 2018 and a closing sale price of $13.61, as 
reported on the Nasdaq Capital Market on that date and adjusted for the registrant’s reverse stock split effective December 10, 2018. 

As of March 1, 2019, the registrant had 13,357,999 shares of common stock, $0.001 par value per share, outstanding. 

 
 
 
 
 
  
 
 
 
 
 
  
 
 
 
 
 
 
 
 
EXPLANATORY NOTE 

On December 7, 2018, OvaScience, Inc., or the Company, completed a reverse merger with what was then 

known as “Millendo Therapeutics, Inc.”, or Private Millendo, in accordance with the terms of the Agreement and Plan of 
Merger and Reorganization dated as of August 8, 2018, as amended on September 25, 2018 and November 1, 2018, or 
the Merger Agreement, by and among the Company, Private Millendo and Orion Merger Sub, Inc., a Delaware 
corporation and a wholly owned subsidiary of the Company, or Merger Sub, pursuant to which, among other matters, 
Merger Sub merged with and into Private Millendo, with Private Millendo continuing as a wholly owned subsidiary of 
the Company. We refer to the foregoing transactions in this Annual Report on Form 10-K as “the Merger”. On 
December 6, 2018, in connection with, and prior to the completion of, the Merger, the Company effected a 1-for-15 
reverse stock split of its common stock, or the Reverse Stock Split, and immediately following the Merger, the Company 
changed its name to “Millendo Therapeutics, Inc.” Following the completion of the Merger, the business conducted by 
the Company became the business conducted by Private Millendo, which is a biopharmaceutical company focused on 
developing novel treatments for orphan endocrine diseases. All references to common stock share and per share amounts 
in this Annual Report have been retroactively adjusted to reflect, where applicable, the Reverse Stock Split, as indicated. 
As used herein, the words “Millendo,” “we,” “us,” and “our” refer to Millendo Therapeutics, Inc. and its direct and 
indirect subsidiaries, as applicable. In addition, the word “OvaScience” refers to the Company prior to the completion of 
the Merger. 

1 

 
 
 
 
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 

This Annual Report on Form 10-K, or this Annual Report, contains forward-looking statements within the 

meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 
1934, as amended, or the Exchange Act, that involve substantial risks and uncertainties. The forward-looking statements 
are contained principally in Part I, Item 1. “Business,” Part I, Item 1A. “Risk Factors,” and Part II, Item 7. 
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but are also contained 
elsewhere in this Annual Report. In some cases, you can identify forward-looking statements by the words “may,” 
“might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” 
“predict,” “project,” “potential,” “continue” and “ongoing,” or the negative of these terms, or other comparable 
terminology intended to identify statements about the future. These statements involve known and unknown risks, 
uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be 
materially different from the information expressed or implied by these forward-looking statements. Although we 
believe that we have a reasonable basis for each forward-looking statement contained in this Annual Report, we caution 
you that these statements are based on a combination of facts and factors currently known by us and our expectations of 
the future, about which we cannot be certain. Forward-looking statements include statements about: 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

our plans to develop and commercialize our product candidates; 

the timing of our planned clinical trials for our product candidates; 

the timing of and our ability to obtain and maintain regulatory approvals for our product candidates; 

the clinical utility of our product candidates; 

our commercialization, marketing and manufacturing capabilities and strategy; 

our intellectual property position; 

our plans to in-license, acquire, develop and commercialize additional product candidates; 

our competitive position and the development of and projections relating to our competitors or our 
industry; 

our ability to identify, recruit and retain key personnel; 

the impact of laws and regulations; 

our plans to identify additional product candidates with significant commercial potential that are consistent 
with our commercial objectives; and 

our estimates regarding future revenue, expenses and needs for additional financing. 

You should refer to Item 1A. “Risk Factors” in this Annual Report for a discussion of important factors that 

may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As 
a result of these factors, we cannot assure you that the forward-looking statements in this Annual Report will prove to be 
accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light 
of the significant uncertainties in these forward-looking statements, you should not regard these statements as a 
representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time 
frame, or at all. The forward-looking statements in this Annual Report represent our views as of the date of this Annual 
Report. We anticipate that subsequent events and developments may cause our views to change. However, while we may 
elect to update these forward-looking statements at some point in the future, we undertake no obligation to publicly 
update any forward-looking statements, whether as a result of new information, future events or otherwise, except as 
required by law. You should, therefore, not rely on these forward-looking statements as representing our views as of any 
date subsequent to the date of this Annual Report.  

2 

 
 
Table of Contents 

Page
4
PART I 
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   34
Unresolved Staff Comments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   75
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   75
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   75
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   76

Item 1. 
Item 1A. 
Item 1B. 
Item 2. 
Item 3. 
Item 4. 

Item 5. 

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of 

PART II 

76

Item 6. 
Item 7. 
Item 7A. 
Item 8. 
Item 9. 
Item 9A.  
Item 9B. 

Item 10. 
Item 11. 
Item 12. 

Item 13. 
Item 14. 

Equity Securities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   76
Selected Financial Data  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   77
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . .   77
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   88
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   89
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . .   116
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   116
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   117

117
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   117
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   122
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder 

PART III 

Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   129
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . .   132
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   135

136
Exhibits and Financial Statement Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   136
Item 15. 
Item 16 
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   140
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   141

PART IV 

3 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 1. BUSINESS 

Overview 

PART I 

We are a late-stage biopharmaceutical company focused on developing novel treatments for orphan endocrine 

diseases where current therapies do not exist or are insufficient. The endocrine system is a collection of glands that 
secrete hormones into the blood stream to regulate a number of functions, including appetite, metabolism, growth, 
development and reproduction. Diseases of the endocrine system can cause multiple and varied symptoms, including 
appetite dysregulation, metabolic dysfunction, obesity, cardiovascular disease, menstrual irregularity, hirsutism, and 
infertility.  

We are currently advancing two product candidates to treat three indications. Our most advanced product 

candidate, livoletide (AZP-531), is a potential treatment for Prader-Willi syndrome, or PWS, a rare and complex genetic 
endocrine disease characterized by hyperphagia, or insatiable hunger, that contributes to serious complications, a 
significant burden on patients and caregivers and early mortality. In a randomized, double-blind, placebo-controlled 
Phase 2 clinical trial in 47 patients with PWS, we observed that administration of livoletide once daily was associated 
with a clinically meaningful improvement in hyperphagia, as well as a reduction in appetite. In a pre-specified analysis 
of 38 home-resident PWS patients from the Phase 2 trial, we observed a larger and statistically significant decrease in 
hyperphagia following administration of livoletide as compared to placebo. In March 2019, we announced that we 
initiated a pivotal Phase 2b/3 clinical trial of livoletide in PWS patients, with topline results from the Phase 2b portion of 
the study expected in the first half of 2020.  

We are also developing nevanimibe (ATR-101) with a primary focus on treating patients with classic congenital 
adrenal hyperplasia, or CAH, a rare, monogenic adrenal disease that requires lifelong treatment with exogenous cortisol, 
often at high doses. These chronic high doses of cortisol can result in side effects that include diabetes, obesity, 
hypertension and psychological problems. When on suboptimal doses of cortisol, female CAH patients can experience 
hirsutism, infertility and menstrual irregularity, and male CAH patients can experience infertility and testicular tumors, 
making it difficult for physicians to appropriately treat CAH without causing adverse consequences. We reported results 
from our Phase 2 clinical trial of nevanimibe in patients with CAH in March 2018 and initiated a Phase 2b trial in the 
third quarter of 2018, with results expected in the first half of 2020. We are also investigating nevanimibe in a Phase 2 
clinical trial for the treatment of patients with endogenous Cushing’s syndrome, or CS, a rare endocrine disease 
characterized by excessive cortisol production from the adrenal glands.  

Merger 

On December 7, 2018, OvaScience, Inc., or OvaScience, now known as Millendo Therapeutics, Inc., completed 

its reverse merger or, the Merger, with what was then known as “Millendo Therapeutics, Inc.,” or Private Millendo, in 
accordance with the terms of the Agreement and Plan of Merger and Reorganization dated as of August 8, 2018, as 
amended on September 25, 2018 and November 1, 2018.  OvaScience’s shares of common stock listed on The Nasdaq 
Capital Market, previously trading through the close of business on Friday, December 7, 2018 under the ticker symbol 
“OVAS,” commenced trading on The Nasdaq Capital Market, under the ticker symbol “MLND,” on Monday, 
December 10, 2018. 

Immediately following the Merger, Private Millendo became a wholly-owned subsidiary of OvaScience.  Upon 
consummation of the Merger, OvaScience adopted the business plan of Private Millendo and discontinued the pursuit of 
OvaScience’s business plan pre-Closing.   

Livoletide (AZP-531) for the treatment of Prader-Willi syndrome (PWS) 

We are developing livoletide for the treatment of patients with PWS, a rare and complex genetic endocrine 

disease affecting appetite, growth, metabolism, cognitive function and behavior. Recognized as the most common 
genetic cause of life-threatening childhood obesity, PWS is estimated to affect between 8,000-11,000 patients in the 

4 

United States and 13,000-18,000 in Europe. While PWS patients experience a multitude of symptoms, hyperphagia, 
which typically begins in early childhood, is among the most serious. When coupled with the low resting energy 
expenditures that also characterize PWS, hyperphagia leads to significant weight gain and obesity. Mortality occurs early 
in PWS patients, with death often occurring between the ages of 30 and 40 from respiratory distress, cardiovascular 
events and accidents, most resulting from complications associated with hyperphagia. There are currently no approved 
treatments for hyperphagia or the abnormal eating behaviors associated with PWS. Managing hyperphagia requires 
security measures to prevent access to food in cupboards, refrigerators and garbage, placing a significant burden on 
patients and their caregivers, often parents. While growth hormone is used in a majority of PWS patients to help 
optimize adult height, cognition and body composition, it has shown no convincing evidence to date that it affects 
hyperphagia.  

We believe that livoletide, a cyclic peptide analogue of unacylated ghrelin, or UAG, may provide a unique 
approach for the treatment of PWS by addressing the underlying hormone dysregulation that causes the disease. In a 
randomized, double-blind, placebo-controlled Phase 2 clinical trial in 47 patients with PWS, we observed that 
administration of livoletide once daily was associated with a clinically meaningful improvement in hyperphagia, as 
assessed by the PWS Hyperphagia Questionnaire, as well as a reduction in appetite. In a pre-specified analysis of 38 
home-resident PWS patients from the Phase 2 trial, we observed a larger and statistically significant decrease in 
hyperphagia following administration of livoletide as compared to placebo. Based on clinical and preclinical data, we 
believe livoletide has the potential to decrease hyperphagia and negative food-related behaviors, with potential long-term 
benefits with respect to obesity and its complications. We announced in March 2019 that we initiated a pivotal Phase 
2b/3 clinical trial of livoletide for the treatment of PWS patients, with topline results from the Phase 2b portion of the 
study expected in the first half of 2020.  

We acquired livoletide in connection with our acquisition of Alizé Pharma SAS, or Alizé, in December 2017. 

We have received orphan drug designation for livoletide from the U.S. Food and Drug Administration, or FDA, and the 
European Medicines Agency, or EMA, for the treatment of PWS. As of December 31, 2018, we owned four issued U.S. 
patents with respect to livoletide, the earliest of which is not due to expire before 2028 and the latest of which is not due 
to expire before 2033 without extension pursuant to the Hatch-Waxman Act. 

Nevanimibe for the treatment of classic congenital adrenal hyperplasia (CAH) and endogenous Cushing’s syndrome 
(CS) 

We are primarily focused on developing nevanimibe for the treatment of patients with CAH, a rare, monogenic 

adrenal disease. CAH is diagnosed at birth through universal screening, occurs in approximately one in 15,000 live 
births in the United States and is characterized by an inability of the body to produce cortisol naturally. CAH patients 
require lifelong treatment with exogenous cortisol, often at high doses, which can result in side effects that include 
diabetes, obesity, hypertension and psychological problems. Conversely, in the absence of suppressive cortisol levels, 
excess steroid precursors and androgens are generated and can result in hirsutism, infertility and menstrual irregularity in 
female CAH patients, and testicular atrophy and infertility in male CAH patients. In addition, as many as half of male 
CAH patients develop large testicular tumors.  

We believe that nevanimibe, a potentially first-in-class acyl coenzyme A: cholesterol acyltransferase 1, or 

ACAT1, inhibitor represents a novel, adrenal-specific approach to treating CAH that will minimize the need to 
administer chronic high doses of exogenous cortisol. ACAT1 is a critical enzyme involved in adrenal steroid synthesis 
and, by inhibiting ACAT1, nevanimibe seeks to suppress the hormonal process that ultimately leads to the production of 
excess steroid precursors, particularly 17-hydroxyprogesterone, or 17-OHP, and androgens in CAH patients. In a Phase 2 
proof-of-concept clinical trial of nevanimibe for the treatment of patients with CAH, we observed nevanimibe to be 
associated with clear signs of clinical activity in seven of 10 treated patients, as well as to have rapid onset of action. In 
this trial, we further observed that during treatment with nevanimibe at all doses, patients exhibited a mean reduction in 
levels of 17-OHP, the key biomarker used by physicians to guide patient treatment, while during administration of 
placebo, patients exhibited a mean increase in 17-OHP levels. Seventy percent of subjects experienced a decrease in 17-
OHP of at least 50% during at least one nevanimibe treatment period. We initiated a Phase 2b clinical trial of 
nevanimibe in CAH patients in the third quarter of 2018, with results expected in the first half of 2020.  

5 

We are also pursuing development of nevanimibe for the treatment of patients with CS, a rare endocrine disease 

characterized by excessive cortisol production from the adrenal glands and associated with weight gain, hypertension, 
diabetes, bone loss, cognitive impairment, mood disorders and a range of neurologic symptoms. We estimate that CS 
affects approximately 20,000 people in the United States. We are currently conducting a Phase 2 clinical trial of 
nevanimibe for the treatment of patients with CS.  

We have received orphan drug designation for nevanimibe from the FDA for the treatment of CAH and CS, as 

well as from the EMA for the treatment of CAH. As of December 31, 2018, we owned two issued U.S. patents with 
respect to nevanimibe, which are not due to expire before 2035, and we jointly owned, with University of Michigan, 
three issued U.S. patents, which are each not due to expire before 2033. 

The figure below depicts our product candidate pipeline: 

Strategy 

We are a leading endocrine company that creates distinct and transformative treatments for a wide range of 

endocrine diseases where there is significant unmet medical need. Key elements of our strategy are as follows: 

•  Rapidly and efficiently advance development of, obtain approval for, and commercialize livoletide for the 
treatment of PWS. Building on our Phase 2 trial results, we believe livoletide may provide a unique, first-
in-class treatment approach to address hyperphagia in PWS patients, the key concern for those with this 
disease and their caregivers, and where we believe there is a significant unmet medical need. We initiated a 
pivotal Phase 2b/3 clinical trial in PWS patients in March 2019, with topline results from the Phase 2b 
portion of the study expected in the first half of 2020. If this trial is successful, we plan to pursue 
registration of livoletide for the treatment of PWS. 

•  Pursue development of, obtain approval for, and commercialize nevanimibe for the treatment of two 

orphan adrenal indications-CAH and CS. We believe nevanimibe, working through a novel mechanism of 
action, may allow CAH patients to obtain therapeutic benefit from exogenous cortisol at lower and better-
tolerated doses. In so doing, nevanimibe may enable physicians to effectively treat the disease with lower 
doses of exogenous cortisol, thereby reducing the effects of long-term high doses of exogenous cortisol, 
while simultaneously preventing androgen excess. We reported results from our Phase 2 clinical trial of 
nevanimibe in CAH patients in March 2018 and initiated a Phase 2b clinical trial in the third quarter of 

6 

 
2018, with results expected in the first half of 2020. We have also initiated a Phase 2 clinical trial of 
nevanimibe for the treatment of CS. 

•  Continue to expand our pipeline by leveraging our expertise in in-licensing and acquiring product 

candidates. We have a strong track record of licensing or acquiring novel programs to build the current 
pipeline and we plan to strategically pursue licensing or acquisition of novel therapeutic opportunities that 
complement our existing portfolio. We believe that there are many opportunities to leverage our deep 
endocrine expertise to develop new treatments for endocrine diseases with significant unmet medical 
needs. 

•  Build a specialized sales and marketing organization in the United States targeting endocrinologists. If 

approved by the FDA, we plan to commercialize both of our current endocrine product candidates in the 
United States ourselves. As we advance livoletide and nevanimibe through clinical development, we plan 
to grow our commercial organization in support of anticipated product launches. 

•  Maximize the value of our portfolio by strategically collaborating in selected markets. We currently have 
worldwide development and commercialization rights with respect to both of our product candidates. We 
plan to strategically consider collaboration or partnering opportunities in markets outside of the United 
States. We believe our strategy will allow us to efficiently allocate resources to maximize the commercial 
potential of our product candidates, if approved. 

Product Candidates 

Livoletide (AZP-531) for the treatment of Prader-Willi syndrome (PWS) 

Background 

PWS is a rare endocrine disease caused by a spontaneous genetic error that results in lack of expression of 

several genes on chromosome 15 and is characterized by hyperphagia, intellectual disability, short stature and 
incomplete sexual development. Recognized as the most common genetic cause of life-threatening childhood obesity, 
PWS occurs in approximately one in 15,000 births, with an estimated prevalence of 8,000 to 11,000 patients in the 
United States and 13,000 to 18,000 patients in Europe. 

During infancy, PWS patients often have low muscle tone, or hypotonia, and failure to thrive, which leads to 

early diagnosis. Early in childhood, appetite and interest in food start to increase and, by approximately five to eight 
years of age, patients experience an increase in hyperphagia. PWS patients typically display aggressive and obsessive 
food-seeking behaviors, including food storage, foraging and hoarding, all of which represent a lifelong source of 
distress and severely affect social adaptation, occupational performance and quality of life. In addition, hyperphagia in 
PWS patients is associated with significant morbidity, including weight gain and obesity often exacerbated by the low 
resting energy expenditure levels that characterize the disease, type 2 diabetes and related complications, stomach 
rupture and choking. More than half of adult PWS patients have a body mass index over 40 and one quarter of adult 
PWS patients have type 2 diabetes. Mortality occurs early in PWS patients, with death often occurring between the ages 
of 30 and 40 from respiratory distress, cardiovascular events and accidents, most resulting from complications of 
hyperphagia. 

Most PWS patients are unable to live independently or work and require constant supervision and care. 

Managing hyperphagia requires security measures to prevent access to food in cupboards, refrigerators and garbage, 
placing a significant burden on patients and their caregivers, often parents. Caregivers often struggle to control the 
aggressive food-seeking behavior of the PWS patients under their care, especially as patients age and gain weight as a 
result of the disease. According to the Foundation for Prader-Willi Research, 74% of caregivers identified reduced 
hyperphagia as the most desirable feature they would look for in an ideal PWS treatment, absent a cure. This struggle 
with food is compounded by the fact that a significant majority of PWS patients suffer from some form of intellectual or 
emotional disability, resulting in some PWS patients ultimately being transferred to a structured setting. There are 
currently no approved treatments for hyperphagia or the abnormal eating behaviors associated with PWS. While growth 

7 

hormone is used in a majority of PWS patients to help optimize adult height, cognition and body composition, it has no 
effect on hyperphagia. 

While the basis for the abnormal eating behavior in PWS patients is not yet fully understood, evidence suggests 

involvement of appetite hormone disturbances and dysfunction of the mechanisms of the central nervous system that 
regulate food intake. Acylated ghrelin, or AG, is the most potent known appetite-stimulating hormone and is commonly 
known as the “hunger hormone.” AG acts in the hypothalamus and plays a central role in the regulation of feeding and 
food seeking behavior. Signaling through the AG receptor, also known as the growth hormone secretagogue receptor, 
has been linked to many physiological functions, including appetite stimulation, lipid accumulation and insulin 
resistance. Historically, research has linked high total ghrelin concentrations (which includes AG, UAG and other 
peptide forms of ghrelin) to the hyperphagia and excessive eating that is characteristic of PWS. However, recent studies 
indicate that the ratio of AG to UAG is also elevated in PWS patients compared to aged-matched healthy subjects. UAG 
is a naturally occurring hormone associated with inhibition of AG-induced food intake, reduction of insulin levels and 
inhibition of adipose tissue deposition. UAG is also referred to as des-acyl ghrelin, or DAG. The observations from these 
recent studies suggest a potential role for UAG in negatively regulating hyperphagia. 

We believe that livoletide, a cyclic peptide analogue of UAG, may provide a unique, first-in-class approach for 
the treatment of hyperphagia in PWS patients by addressing the underlying hormone dysregulation causing the disease. 

Clinical development 

To date, our livoletide clinical program has included clinical trials with over 150 subjects, including in a 

Phase 1 clinical program with 44 healthy volunteers, 32 overweight or obese adults and 36 type 2 diabetes patients and 
in a Phase 2 clinical trial with 47 PWS patients. In these trials, livoletide was reported to be well tolerated at single doses 
of up to 120 μg/kg and multiple doses over 14 days of up to 60 μg/kg. 

Phase 2 trial 

Livoletide was evaluated in a randomized, double-blind, placebo-controlled Phase 2 clinical trial conducted to 
study its effects in PWS. The trial enrolled 47 PWS patients and included both patients residing at home and at a single 
hospital-based clinical trial site. Patients residing at home were typically cared for by parents, while hospital staff 
generally cared for patients at the hospital-based site. All patients were administered either a 3 or 4 mg dose of livoletide 
(based on body weight), or placebo, subcutaneously once daily for 14 days. The primary objective of the trial was to 
evaluate the safety and tolerability of livoletide over the course of two weeks. The main efficacy variable explored in the 
trial was changes in hyperphagia, as assessed using the PWS Hyperphagia Questionnaire, or HQ. The HQ is a disease-
specific instrument that has been specifically designed and developed to capture food-related behaviors in PWS patients, 
as reported by caregivers. The FDA and EMA have accepted a nine-item version of the HQ as the primary endpoint in 
PWS clinical trials and this nine-item HQ is being used in our recently initiated pivotal Phase 2b/3 trial. 

In the trial, we observed a decrease in the total HQ score across all patients administered livoletide as compared 
to placebo (p=0.097). In a pre-specified analysis of 38 home-resident PWS patients from the Phase 2 trial, we observed a 
larger and statistically significant decrease in hyperphagia following administration of livoletide as compared to placebo 
(p=0.034). The analysis of home-resident patients excluded patients residing at the single hospital-based site, which 
provided a different treatment environment across a number of variables, including lack of consistency with respect to 
the party completing the HQ. We observed the largest treatment effect in a post-hoc analysis of 26 home-resident 
patients with baseline HQ scores of 10 or greater, which is reflective of the target patient population for our pivotal 
Phase 2b/3 trial. We believe that these changes in HQ scores reflect clinically meaningful changes in hyperphagic 
behaviors that affect patient and caregiver quality of life. The figure below shows the change in HQ scores relative to 

8 

baseline for patients treated with livoletide or placebo, respectively, across each of the three patient groups discussed 
above: 

A result is considered to be statistically significant when the probability of the result occurring by random 

chance, rather than from the efficacy of the treatment, is sufficiently low. The conventional method for measuring the 
statistical significance of a result is known as the “p-value,” which represents the probability that random chance caused 
the result (e.g., a p-value = 0.001 means that there is a 0.1% or less probability that the difference between the control 
group and the treatment group is purely due to random chance). Generally, a p-value less than 0.05 is considered 
statistically significant, and may be supportive of a finding of efficacy by regulatory authorities. However, regulatory 
authorities, including the FDA and EMA, do not rely on strict statistical significance thresholds as criteria for marketing 
approval and maintain the flexibility to evaluate the overall risks and benefits of a treatment. 

We observed greater decreases in mean values in individual HQ item scores in the livoletide treatment group 

compared to placebo across each of nine individual questions in the HQ. We believe that improvements in just a few HQ 
items could have a profound effect on patients and caregivers, including reducing high-risk behaviors. The figure below 
shows the changes relative to baseline with respect to each of the nine individual items of the HQ in home-resident PWS 
patients treated with livoletide and placebo, respectively: 

9 

 
 
Livoletide was reported to be well tolerated and no serious adverse events were observed. The overall number 

of reported adverse events were balanced between livoletide and placebo, with 60.9% of patients on livoletide and 
58.3% of patients on placebo reporting adverse events. The most commonly reported adverse events in both groups were 
injection site reactions, which were generally mild and transient. There were no significant changes in vital signs or 
safety labs, nor were there any premature discontinuations from the trial due to side effects. 

Preclinical Development 

A comprehensive preclinical program for livoletide, including toxicology and pharmacology studies, has been 

conducted.  

In one of a number of preclinical studies in rodents, administration of livoletide was associated with reduced 

AG-induced food intake. In rodent models of AG-induced food intake, rats receiving an intraperitoneal injection of AG 
exhibited significantly increased food intake within the first three hours post injection. Co-administration of AG with 
either UAG or livoletide was associated with inhibition of the stimulatory effect of AG on food uptake over this three-
hour period. The figure below shows the observed effects of UAG and livoletide on AG-induced food uptake in rats: 

UAG 

livoletide 

In longer term preclinical studies, overexpression of UAG from a transgene in mice was associated with 

significantly reduced food intake, fat pad mass, triglycerides and body weight at week 44 following commencement of 
dosing. These results are consistent with studies of shorter duration in which overexpression of UAG was associated 
with reduced mouse body weight beginning at age 16 weeks, as well as less development of white adipose tissue and 
better modulation of glucose tolerance and insulin sensitivity. Administration of livoletide was associated with similar 
outcomes in a four-week preclinical study.  

Based on clinical and preclinical data, we believe that administration of livoletide has the potential to increase 
functional UAG levels (level of UAG plus livoletide) and decrease hyperphagia and negative food-related behaviors in 
PWS patients, with potential long-term benefits with respect to obesity and its complications.  

Clinical development plan  

In March 2019, we announced that we initiated a pivotal Phase 2b/3 clinical trial of livoletide in PWS patients, 
which we often refer to as the ZEPHYR trial, with topline results from the Phase 2b portion of the study expected in the 
first half of 2020.  

10 

 
 
 
 
 
We discussed the development strategy with both the FDA and EMA in advance of initiating the Phase 2b/3 

study with livoletide. There was agreement with key elements of the development program: 

•  Suitability of the validated 9-item PWS Hyperphagia Questionnaire (HQ-CT) for clinical trials survey as 

the primary efficacy endpoint for the study. 

•  The Phase 2b portion of our recently initiated Phase 2b/3 PWS trial may or may not be sufficient to support 
FDA approval depending on the data. Additionally, the FDA may require additional data (for example in 
children) in order to support an NDA approval in PWS in the United States. 

•  The preference from the FDA to use fixed-exposure dosing (rather than fixed-dosing) given the wide range 

of body weights to be studied. 

We expect that the Phase 2b portion of the randomized, double blind, placebo-controlled clinical trial will 

enroll approximately 150 PWS patients at up to 40 sites in the United States and Europe. Patients will be administered 
one of two different doses of livoletide based on body weight or a placebo by once daily subcutaneous injection for three 
months. The primary endpoint of the trial will be an assessment of changes in hyperphagia based on the HQ-CT. 
Secondary endpoints include assessments of changes in total body fat mass, body mass index and body weight. 
Following completion of the three month placebo-controlled portion of the trial, patients will be eligible to enroll in a 
nine-month extension, which we anticipate will provide up to 12 months of safety and efficacy data. We believe that the 
three month placebo-controlled portion of the trial, if favorable, may be sufficient to support the filing of a New Drug 
Application, or NDA, in the U.S., or marketing authorization application in Europe, for livoletide for the treatment of 
PWS.  

We expect that the Phase 3 portion of the clinical trial will enroll approximately 80 PWS patients at the same 

clinical sites. Patients who participated in the Phase 2b portion of the trial will not be eligible to participate in the 
Phase 3 portion of the trial. Patients will be administered a dose of livoletide (selected on the basis of the Phase 2b 
results) based on body weight, or a placebo, subcutaneously once daily for six months. The primary endpoint of the trial 
will be an assessment of changes in hyperphagia based on the HQ-CT. Secondary endpoints include assessments of 
changes in total body fat mass, body mass index and body weight, subject to change based on the outcome of the 
Phase 2b portion of the trial. Following completion of the six month placebo-controlled portion of the trial, patients will 
be eligible to enroll in a six-month extension.  

Nevanimibe for the treatment of classic congenital adrenal hyperplasia (CAH) 

Background 

CAH is a rare, monogenic adrenal disease caused by patients’ inability to produce cortisol, which results in 

excessive production of steroid precursors and androgens, and requires lifelong treatment with exogenous cortisol. CAH 
occurs in approximately one in 15,000 live births in the United States and has a higher incidence in Europe, with an 
estimated prevalence of 15,000 to 18,000 patients in the United States and approximately 40,000 patients in Europe. 
CAH is diagnosed at birth through universal screening. 

The most frequent form of CAH, responsible for between 90% and 95% of cases, is caused by a deficiency in 
the enzyme 21-hydroxylase, which is required for the production of cortisol and other steroids in the adrenal cortex. As 
the hypothalamus and pituitary gland function normally in CAH patients, low or nonexistent cortisol levels stimulate the 
hypothalamus to produce and secrete an excess of corticotropin-releasing hormone, or CRH. Excess CRH stimulates 
cells in the pituitary gland to produce and secrete excess adrenocorticotropic hormone, or ACTH. In individuals without 
CAH, excess ACTH would lead to the over-synthesis of cortisol. However, in CAH patients, the lack of cortisol 
production results in increased levels of the adrenal steroid hormone precursors, including 17-OHP, with approximately 
80% of CAH patients having 17-OHP levels outside of normal bounds. These excess precursors are diverted largely to 
the androgen pathway, resulting in elevated androgen levels, which leads to hirsutism, virilization, infertility and 
menstrual irregularity in women. In men, testicular tumors of adrenal gland origin are common. 

11 

CAH requires treatment with exogenous cortisol, often at high doses, which both replaces the lack of 
endogenous cortisol and aims to suppress the hormonal processes that lead to excess CRH, ACTH and androgens. These 
chronic high doses of cortisol can result in side effects that include diabetes, obesity, hypertension and psychological 
problems, making it difficult for physicians to appropriately treat CAH without causing adverse consequences. Few 
CAH patients are able to achieve an optimal balance between exogenous cortisol dose and suppression of CRH, ACTH 
and androgens. 

Nevanimibe is an adrenal-selective inhibitor of ACAT1. ACAT1 is a critical enzyme that converts free 

cholesterol into cholesteryl esters in the adrenal glands. Cholesteryl esters are the reservoirs in which cholesterol is 
stored prior to its synthesis into adrenal steroids, including cortisol and androgens. By inhibiting ACAT1 in the adrenal 
glands, nevanimibe seeks to reduce the amount of cholesteryl esters and associated stored cholesterol available for 
synthesis into adrenal steroids thus reducing the levels of all adrenal steroids. By inhibiting ACAT1, we believe that 
nevanimibe represents a novel, adrenal-specific approach to treating CAH that will minimize the need to administer 
chronic high doses of exogenous cortisol to suppress the hormonal process that ultimately leads to the production of 
excess CRH, ACTH and androgens, including 17-OHP, in CAH patients. 

The graphic below depicts the mechanism of action of nevanimibe for the treatment of CAH: 

Clinical development  

Phase 2 trial  

We evaluated nevanimibe in a multicenter, single blind, intra-patient dose escalation Phase 2 clinical trial for 
the treatment of adult CAH. The trial’s objectives were to evaluate the efficacy and safety of nevanimibe in this patient 
population. 

Following a two-week placebo lead-in period, eligible patients with baseline 17-OHP levels greater than or 

equal to four times the upper limit of normal, or ULN, received the lowest dose of nevanimibe for two weeks. This two-
week treatment period was followed immediately by a single-blind placebo washout period of two weeks. If the primary 
outcome measure of reducing 17-OHP levels less than or equal to two times the ULN was not met, the patient was up-
titrated to the next highest dose of nevanimibe. This process was repeated until the primary outcome measure was met or 
the patient reached the highest dose. A total of five nevanimibe dose levels were tested (125 mg BID, 250 mg BID, 500 
mg BID, 750 mg BID and 1,000 mg BID). All patients remained on mineralocorticoid and glucocorticoid replacement 
throughout the trial. 

12 

 
The trial enrolled 10 patients. The baseline 17-OHP levels of patients at screening ranged from seven to 187 

times ULN, with a mean value of 52.5 times ULN. Nine patients completed the trial and one patient discontinued from 
the trial while on the highest dose level of nevanimibe due to a serious adverse event of enteritis. 

In the trial, we observed nevanimibe to be associated with clear signs of clinical activity in seven of 10 treated 
patients. We further observed that during treatment with nevanimibe at all doses, patients exhibited a mean reduction in 
levels of 17-OHP, while during administration of placebo, patients experienced a mean increase in 17-OHP levels. Two 
patients met the primary endpoint, with observed 17-OHP reductions to two times the ULN or less, and other patients 
had observed maximal decreases in 17-OHP of up to 72% during the two week treatment period. Overall, 70% of 
patients saw a 17-OHP reduction of 50% or more. During the placebo washout periods following each nevanimibe dose 
level, we observed that 17-OHP increased markedly, with no patients having a mean percentage decrease in 17-OHP. 
The bar graph below shows the change in the study population mean 17-OHP (ng/dL) values by study visit. Visits are 
numbered 1 to 13. Visit 1 was the screening visit and is not associated with a change in 17-OHP. The 17-OHP value 
presented at visit 2 shows the mean change in 17-OHP from visit 1 to the start of the single-blind, two week placebo 
lead-in period (visit 2). Visit 3 shows the change in 17-OHP that occurred from the start of the single-blind, two week 
placebo lead-in period (visit 2) to the end of that period (visit 3). We believe that the decrease in 17-OHP associated with 
visit 3 reflects increased compliance with concomitant medications. Visit 4 shows the decrease associated with 
administration of nevanimibe 125 mg BID, with the mean 17-OHP value at visit 3 serving as the baseline for the two-
week nevanimibe 125 mg BID treatment period that ends at visit 4. Visit 5 shows the increase in 17-OHP associated 
with the two-week placebo washout period that immediately followed the nevanimibe 125 mg BID dosing period, with 
the mean 17-OHP value at visit 4 serving as the baseline for the two-week placebo period that ends at visit 5. Visits 5 
and 6 (where nevanimibe, 250 mg BID was assessed), visits 7 and 8 (where nevanimibe 500 mg BID was assessed), 
visits 9 and 10 (where nevanimibe, 750 mg BID was assessed) and visits 11 and 12 (where nevanimibe 1000 mg BID 
was assessed) followed the same paradigm. 

Data with respect to one patient who completed the trial is excluded from the graphic below because that patient 

was administered high doses of exogenous cortisol in response to a serious adverse event (viral gastroenteritis), which 
would confound the results of the trial. In addition, one patient met the primary endpoint of the trial following visit 7 and 
therefore did not receive additional doses of nevanimibe. Accordingly, the graphics below includes data with respect to 
nine patients through visit seven and eight patients through all 13 visits. 

The graphic below illustrates the mean change in 17-OHP levels in patients at the indicated points in time. 

We believe the observed decreases in 17-OHP associated with each nevanimibe dose level and the 
corresponding observed increases in 17-OHP during the placebo wash-out periods demonstrate a treatment effect. We 
believe signs of clinical activity observed in seven of 10 patients, with two patients meeting the primary endpoint, 
provide sufficient evidence for the use of nevanimibe in the treatment of CAH to support further development. The 
primary efficacy endpoint assessed the percentage of patients meeting the primary outcome measure (17-OHP levels less 
than two times ULN); however the relatively small sample size and open-label, intra-subject dose escalation design of 
the trial precluded the use of formal statistical analyses (e.g., p-values) for either the primary efficacy endpoint or 

13 

 
secondary objectives, which included assessments of changes in levels of adrenal cortical steroids and steroid 
intermediates, changes in levels of ACTH and pharmacokinetics. 

Nevanimibe was reported to be well tolerated at all dose levels. Two serious adverse events were reported in the 

trial, both occurring in the same patient: one case of viral gastroenteritis, which was deemed not to be drug related, and 
one case of enteritis, which was deemed to be drug related. Both serious adverse events were treated with higher than 
usual doses of exogenous cortisol. The overall number of reported adverse events was balanced between nevanimibe and 
placebo. The most commonly reported adverse events in both groups were gastrointestinal disorders, nasopharyngitis 
and headaches, which were generally mild and transient. There were no observed dose-related trends in adverse events 
or safety laboratory results. 

Phase 1 trials 

We previously studied nevanimibe in a Phase 1 clinical trial in 63 patients with adrenocortical carcinoma across 

14 dose-ranging cohorts. In the trial, we observed nevanimibe to be well tolerated at doses up to 158.5 mg/kg/day 
(approximately 12,000 mg/day for a 75 kg individual). The longest duration of treatment was 13 months (97.9 
mg/kg/day). Forty-eight of the patients received a nevanimibe dose similar to or greater than the dose range in our Phase 
2b CAH clinical trial. 

Preclinical development 

A comprehensive preclinical program for nevanimibe, including chronic toxicology and pharmacology studies, 

has been conducted. 

In one of a number of preclinical studies in dogs, we observed that administration of nevanimibe was associated 
with decreases in levels of adrenal steroids and steroid precursors. Nevanimibe was observed to be associated with dose 
and time-dependent decreases in basal and ACTH-stimulated levels of all adrenal steroids and steroid precursors tested 
after 14 days of treatment as shown in the figure below. Notably, both basal and ACTH-stimulated levels of 17-OHP 
were reduced by 100%. 

% Change after 14d 
nevanimibe  

Basal  

 80.3  * 

    ACTH-Stim    
 78.8  * 
*
* 
 43.3 
 100   
 87.3   
 41.4   
 84.4   
 100   
 86.1   
 86.5   
 77.5   
 71.4   
 44.1   

 51.7   
 99.8   
 77.5   
 66.6   
 88.2  * 
 100   
67. 3   
 49.5   
 11.2   
 32.3   
 19.2   

Pathway  
Androgen/Estrogen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    Pregnenolone 

Steroid  

  DHEA 
  DHEA-S 
  Androstenedione 
  Testosterone 
Progesterone    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    Progesterone 

  17-Hydroxyprogesterone  
Mineralocorticoid  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    11-Deoxycorticosterone   

Glucocorticoid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    11-Deoxycortisol 

  Corticosterone 

  Cortisol 
  Cortisone 

*     Day 1 data used for maximum levels 
**   Day 3 data used for maximum levels 

Chronic toxicology studies of nevanimibe in rats and dogs are complete.  

14 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    
    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Clinical development plan 

We initiated a Phase 2b clinical trial of nevanimibe for the treatment of CAH in the third quarter of 2018, with 

results expected in the first half of 2020. 

We expect that the open-label, intra-subject dose-escalation trial will enroll a total of 20 to 24 CAH patients 
across approximately ten sites with either (1) 17-OHP levels greater than or equal to four times ULN or (2) 17-OHP 
levels less than four times ULN while on a high dose of exogenous cortisol. With respect to patients in the latter group, 
exogenous cortisol dosing will be reduced such that patients will have 17-OHP levels greater than or equal to four times 
ULN prior to administration of nevanimibe. Patients will receive nevanimibe for a total of 12 consecutive weeks starting 
at a dose of 1,000 mg BID. Dose escalation to 1,500 mg BID or 2,000 mg BID will be based on the primary outcome 
measure: 17-OHP levels. The primary endpoint will be an assessment of the percentage of patients that achieve 17-OHP 
levels less than or equal to two times ULN. Secondary endpoints include assessments of levels of other adrenal 
hormones, including androgens. 

Nevanimibe for the treatment of endogenous Cushing’s syndrome (CS) 

CS is a rare endocrine disease characterized by excessive cortisol production from the adrenal glands. The 

chronic cortisol excess in CS can cause weight gain, hypertension, diabetes, bone loss and a range of neurologic 
symptoms. With chronic exposure to higher than normal levels of cortisol, patients may also exhibit cognitive 
impairment and mood disorders. The cumulative impact of these symptoms can significantly decrease both the quality of 
life and life expectancy of patients, with one study showing that CS patients have a comparable quality of life to patients 
suffering from cancer and multiple sclerosis. In some cases, untreated CS can be life-threatening. We estimate that CS 
affects approximately 20,000 people in the United States, with the medically managed target market being between 
5,000 and 6,000 patients in the United States. CS most commonly affects people who are 20 to 50 years of age and 
women are affected three times more often than men. 

CS may be caused by benign pituitary, primary adrenal gland or non-adrenal cortisol secreting tumors, as well 

as by non-pituitary tumors (such as in the lung, thyroid and pancreas) that produce ACTH and lead to excess stimulation 
of steroid synthesis in the adrenal cortex. Approximately 70% of CS patients have pituitary tumors, 20% have adrenal 
tumors and the balance have ectopic tumors. Many cases of CS can be cured through surgery, but for those cases where 
the tumor is inoperable or where surgery is unsuccessful, medical management can be challenging. 

Our approach to the treatment of CS is based on the same mechanism of action of nevanimibe, at similar dosing 
levels, that we are exploring for the treatment of CAH. In preclinical studies, nevanimibe was observed to be associated 
with dose and time-dependent decreases in basal and ACTH stimulated cortisol levels. Additionally, in canines with 
naturally-occurring CS, nevanimibe treatment was observed to result in the decrease of ACTH-stimulated cortisol levels 

15 

in 90% of the subjects treated regardless of the cause. The figure below shows the effects of nevanimibe on cortisol 
levels in dogs with naturally-occurring CS treated with nevanimibe for 14 days: 

We are currently conducting a Phase 2 trial of nevanimibe for the treatment of patients with CS. This trial, 

including both an open-label portion and a randomized double-blind placebo-controlled portion, is being conducted in up 
to 16 adults and is designed to provide dosing and efficacy information. Enrollment in the trial is ongoing. In the open-
label portion, patients will be dose escalated until they achieve the goal of cortisol control or the dose escalation period 
ends. Patients will then progress to a randomized, double-blind placebo-controlled withdrawal period. The primary 
endpoint of this trial is the proportion of subjects with either a normal 24-hour urinary free cortisol, or UFC, or a 
reduction in UFC of greater than 50% relative to baseline values at the end of the randomized, double-blind withdrawal 
period. Secondary endpoints include effects on other steroid measurements, pharmacokinetic measurements and safety 
assessments. 

If we are successful in receiving regulatory approval, nevanimibe has the potential to be a first-in-class agent 

that directly reduces cortisol levels in CS patients. Nevanimibe has received orphan drug designation from the FDA for 
the treatment of CS. 

Sales and Marketing 

We have worldwide development and commercialization rights with respect to both of our current product 

candidates.  

If approved by the FDA, we plan to commercialize both of our current product candidates in the United States 

ourselves. As we advance livoletide and nevanimibe through clinical development, we plan to grow our commercial 
organization in support of anticipated product launches. We intend to build a small, specialized sales force to market 
livoletide and nevanimibe targeting endocrinologists. We intend to focus on patient support and reimbursement 
assistance in order to facilitate patient access, uptake and compliance for all indications. We also intend to develop 
health economic models demonstrating the value of livoletide and nevanimibe to third-party payors. 

Outside of the United States, we plan to strategically consider collaboration or partnering opportunities to allow 

us to efficiently allocate resources to maximize the commercial potential of our product candidates, if approved. 

Research and Development 

We believe that there are many opportunities to leverage our deep endocrine expertise to develop new 

treatments for endocrine diseases with significant unmet medical needs. We will also continue to seek research and 

16 

 
development synergies across all our programs and indications. However, we also plan to aggressively pursue licensing 
or acquisitions of novel therapeutic opportunities exploiting biological discoveries that can transform the treatment of 
endocrine diseases. In this way, we expect to expand our portfolio as we continue to build our pipeline as a leading 
endocrine company. 

License Agreement with the University of Michigan 

In June 2013, we entered into a license agreement with the University of Michigan, or the UM License 

Agreement, for a worldwide, exclusive, sublicensable license to the University of Michigan’s interest in certain patent 
rights jointly owned with us, covering, among other things, the use of nevanimibe to treat CAH and CS. Such license 
rights allow us to make, have made, import, export, use, market, offer for sale and sell products containing nevanimibe 
for such uses in the United States. Under the UM License Agreement, the University of Michigan reserved the right to 
practice the licensed patent rights for its own internal research, public service and internal educational purposes and to 
grant such rights to other non-profit research institutions solely for its internal use. 

The UM License Agreement requires that products containing nevanimibe that are used or sold in the United 
States must be manufactured substantially in the United States. The UM License Agreement further obligates us to use 
commercially reasonable efforts to bring at least one product containing nevanimibe subject to the licensed rights to 
market, and to continue active, diligent marketing efforts using commercially reasonable efforts for any such product 
that achieves regulatory approval throughout the term of the UM License Agreement. We are further obligated under the 
UM License Agreement to use commercially reasonable efforts to obtain and retain any necessary governmental 
approvals that are required to manufacture and/or sell products containing nevanimibe that are subject to the licensed 
patents. 

We agreed under the UM License Agreement to use commercially reasonably efforts to reach certain 
commercialization, research and development milestones by certain dates. We have the right to extend by a specified 
period the time it takes to achieve such commercialization, research and development milestones upon notice and 
payment to the University of Michigan of a low six figure fee. We may exercise such right up to a specified number of 
times during the term of the UM License Agreement. To date, we have not exercised such option. 

As consideration for the rights granted to us under the UM License Agreement, we agreed to pay the University 
of Michigan a flat, low single figure royalty on net sales of product containing nevanimibe that are covered by the claims 
of the licensed patents, with minimum royalties per year ranging between $10,000 and $20,000 through 2023 and 
minimum royalties per year of $0.2 million beginning in 2024 through expiration of the term of the UM License 
Agreement. We also agreed to make payments to the University of Michigan totaling up to $2.5 million upon the 
achievement of certain development and commercial milestones, of which $0.1 million was paid during the year ended 
December 31, 2017. No amounts were paid in 2018 related to the achievement of development or commercial 
milestones. 

We have also agreed to pay a tiered percentage of revenues, other than revenues based on net sales, received 

under a sublicense of the rights granted under the UM License Agreement. Such revenue percentages range from a mid-
single digit to low double digits depending on the stage of development of nevanimibe at the time of the applicable 
sublicense, with the lower percentages applicable to sublicenses granted at later stages of development. 

The UM License Agreement will expire upon expiration of the last to expire of the issued patents that are the 

subject of the UM License Agreement that would be infringed by our making, having made, using, marketing, 
importing, exporting, offering to sell and selling of products containing nevanimibe. We may terminate the UM License 
Agreement upon 90 days’ notice. The University of Michigan may terminate the UM License Agreement for any 
uncured failure to pay amounts due the University of Michigan or for any other uncured material breach, which includes 
our failure to exercise commercially reasonable efforts to meet research and development milestones by certain 
deadlines, and if we challenge the validity or enforceability of the licensed patents. 

17 

Assignment Agreement with Erasmus University Medical Center and the University of Turin 

We have an assignment agreement with Erasmus University Medical Center, the University of Turin and 

certain individuals, which we refer to collectively as the assignors, for certain patents and patent applications relating to 
livoletide. 

In connection with the assignment agreement, we agreed to pay the assignors a flat, low single digit royalty on 

net commercial sales of products containing livoletide that are covered by the claims of the assigned intellectual 
property. Further, upon approval of livoletide by the FDA or EMA, we are required to pay the assignors CDN$100,000, 
which amount will be deducted from any future royalty payments due to the assignors. We also agreed to pay the 
assignors a low single digit percentage of any amounts received in connection with our license of the assigned 
intellectual property or products containing livoletide that are covered by the claims of the assigned intellectual property. 

The assignors have a right to repurchase the assigned intellectual property at a certain price in the event we do 
not, upon receiving notice, use reasonable efforts to develop, introduce for sale and promote products derived from the 
assigned intellectual property. Such reasonable efforts involve spending an annual amount of at least CDN$100,000 in 
research and development related to livoletide, actively pursuing the registration, licenses and permits necessary to 
market livoletide, and the actual commercialization of livoletide, if approved. In addition, pursuant to the assignment 
agreement, certain individuals at the Erasmus University Medical Center and the University of Turin were granted non-
exclusive rights to use the assigned intellectual property for non-commercial research with our prior written consent. 

Competition 

The commercialization of new drugs is competitive, and we may face worldwide competition from major 
pharmaceutical companies, specialty pharmaceutical companies, biotechnology companies and ultimately generic 
companies. Our competitors may develop or market therapies that are more effective, safer or less costly than any that 
we are commercializing, or may obtain regulatory or reimbursement approval for their therapies more rapidly than we 
may obtain approval for ours. 

With respect to ours efforts to treat patients with PWS, livoletide is the only UAG analogue in development. 

Compounds with several different mechanisms are in clinical development by others for the treatment of PWS. Soleno 
Therapeutics, Inc. is currently developing diazoxide choline controlled release, an ATP-sensitive potassium channel 
agonist, and Levo Therapeutics, Inc. is pursuing development of carbetocin, a long-acting analogue of oxytocin. Each of 
Saniona AB, GLWL Research Inc. and Insys Therapeutics, Inc. have also announced or initiated smaller trials in PWS 
for the treatment of hyperphagia. There are also a number of compounds in preclinical development. 

With respect to nevanimibe to treat patients with CAH, we believe that there are a limited number of products 

in development that are focused on the indication. Diurnal Group PLC is developing an exogenous cortisol treatment 
with a modified release intended to more closely match the physiological release profile of cortisol but recently 
announced a failed Phase 3 study and placed their U.S. development activities on hold. Neurocrine Biosciences, Inc. has 
an ongoing Phase 2 clinical trial targeting CRF 1, and Spruce Biosciences, Inc. is developing a CRF 1 antagonist in a 
Phase 2 clinical trial. Novartis AG is currently marketing Signifor and Corcept Therapeutics Inc. is currently marketing 
Korlym, both for the treatment of subsets of CS patients. There are several other product candidates currently in clinical 
development for CS, including by Novartis, Corcept, HRA Pharma, SA and StrongBridge BioPharma plc. 

Intellectual Property 

Our success will significantly depend upon our ability to obtain and maintain patent and other intellectual 

property and proprietary protection for our drug candidates in the United States and internationally, including 
composition-of-matter, dosage and formulation patents, as well as patent and other intellectual property and proprietary 
protection for our novel biological discoveries and other important technology inventions and know-how. In addition to 
patents, we rely upon unpatented trade secrets, know-how, and continuing technological innovation to develop and 
maintain our competitive position. We protect our proprietary information, in part, using confidentiality agreements with 
our commercial partners, collaborators, employees and consultants and invention assignment agreements with our 

18 

employees as well as selected commercial partners and consultants. Despite these measures, any of our intellectual 
property and proprietary rights could be challenged, invalidated, circumvented, infringed or misappropriated, or such 
intellectual property and proprietary rights may not be sufficient to permit us to take advantage of current market trends 
or otherwise to provide competitive advantages. In addition, such confidentiality agreements and invention assignment 
agreements can be breached and we may not have adequate remedies for any such breach. For more information, please 
see “Risk Factors—Risks Related to Our Intellectual Property.” 

We seek patent protection in significant markets and/or countries for each drug in development. We also seek to 

maximize patent term. The patent exclusivity period for a drug will prevent generic drugs from entering the market. 
Patent exclusivity depends on a number of factors including the initial patent term, patent term adjustments and available 
patent term extensions based upon delays caused by the regulatory approval process. 

The patent positions of biotechnology companies like ours are generally uncertain and involve complex legal, 

scientific and factual questions. In addition, the coverage claimed in a patent application can be significantly reduced 
before the patent is issued, and its scope can be reinterpreted after issuance. Consequently, we may not obtain or 
maintain adequate patent protection for any of our product candidates. As of December 31, 2018, with respect to 
livoletide patent rights, we owned four issued U.S. patents, one pending U.S. patent application, and a number of patents 
and pending patent applications in other jurisdictions. As of December 31, 2018, with respect to nevanimibe patent 
rights, we owned two issued U.S. patents, two pending U.S. patent applications, and a number of pending patent 
applications in other jurisdictions, and we jointly owned, with University of Michigan, three issued U.S. patents, one 
pending U.S. patent application, and a number of patent applications in other jurisdictions. We cannot predict whether 
the patent applications we pursue will issue as patents in any particular jurisdiction or whether the claims of any issued 
patents will provide any proprietary protection from competitors. The patent portfolios for our leading product 
candidates as of December 31, 2018 are summarized below. 

Livoletide 

With respect to livoletide patent rights, as of December 31, 2018, we owned four issued U.S. patents, which are 

not due to expire before 2028, 2028, 2029, and 2033, respectively, excluding any additional term for patent term 
extension pursuant to the Hatch-Waxman Act; one pending U.S. patent application, which is not due to expire before 
2034, excluding any additional term for patent term adjustment or extension; and a number of patent applications in 
other jurisdictions. The foregoing patents and patent applications cover a form of and methods of making and using 
livoletide or its analogs. Related international patent applications have issued in Australia, Canada, China, Europe, 
Japan, and Mexico and are pending in a number of other countries, including Canada, Europe, and India. 

Nevanimibe 

With respect to nevanimibe patent rights, as of December 31, 2018, we owned two issued U.S. patents, which 
are not due to expire before 2035, excluding any additional term for patent term adjustment or extension; two pending 
U.S. patent applications, which, if issued, are not due to expire before 2035 and 2036, respectively, excluding any 
additional term for patent term adjustment or extension; and a number of patent applications in other jurisdictions. As of 
December 31, 2018, we jointly owned, with University of Michigan, three issued U.S. patents, which are each not due to 
expire before 2033, excluding any additional term for patent term adjustments or extensions; one pending U.S. patent 
application, which, if issued, is not due to expire before 2033, excluding any additional term for patent term adjustment 
or extension; and a number of patent applications in other jurisdictions. The foregoing patents and patent applications 
cover a form of and methods of making and using nevanimibe or its analogs. Related international patent applications 
have issued in China and New Zealand and are pending in a number of other countries, including Australia, Brazil, 
Canada, China, Europe, Japan and Mexico. 

Manufacturing 

We rely on contract manufacturing organizations, or CMOs, to produce drug candidates in accordance with the 

FDA’s current Good Manufacturing Practices, or cGMP, regulations for use in our clinical trials. The manufacture of 
pharmaceuticals is subject to extensive cGMP regulations, which impose various procedural and documentation 

19 

requirements and govern all areas of record keeping, production processes and controls, personnel and quality control. 
Our peptide and small molecule drug candidates, livoletide and nevanimibe, are manufactured using common chemical 
engineering and synthetic processes from readily available raw materials. 

To meet our projected needs for clinical supplies to support its activities through regulatory approval and 
commercial manufacturing, the CMOs with whom we currently work may need to increase the scale of production or we 
will need to secure alternate suppliers. We believe that there are multiple potential sources for our contract 
manufacturing, but we have not engaged alternate suppliers in the event that its current CMOs are unable to scale 
production. Our relationships with CMOs are managed by internal personnel with extensive experience in 
pharmaceutical development and manufacturing. 

If we are unable to obtain sufficient quantities of drug candidates or receive raw materials in a timely manner, 
we could be required to delay its ongoing clinical trials and seek alternative manufacturers, which would be costly and 
time-consuming. 

Government Regulation and Approval 

United States-FDA process 

In the United States, the FDA regulates drugs. The Federal Food, Drug, and Cosmetic Act, or FDCA, and other 

federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, 
storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and 
reporting, sampling, and import and export of drugs. To obtain regulatory approvals in the United States and in foreign 
countries, and subsequently comply with applicable statutes and regulations, we will need to spend substantial time and 
financial resources. 

Approval process 

The FDA must approve any new drug or a drug with certain changes to a previously approved drug before a 

manufacturer can market it in the United States. If a company does not comply with applicable United States 
requirements it may be subject to a variety of administrative or judicial sanctions, such as FDA refusal to approve 
pending applications, warning or untitled letters, clinical holds, drug recalls, drug seizures, total or partial suspension of 
production or distribution, injunctions, fines, civil penalties, and criminal prosecution. The steps we must complete 
before we can market a drug include: 

• 

• 

• 

• 

• 

• 

• 

completion of preclinical laboratory tests, animal studies, and formulation studies, all performed in 
accordance with the FDA’s good laboratory practice, or GLP, regulations; 

submission to the FDA of an IND application for human clinical testing, which must become effective 
before human clinical studies start. The sponsor must update the IND annually; 

approval of the study by an independent institutional review board, or IRB, or ethics committee 
representing each clinical site before each clinical study begins; 

performance of adequate and well-controlled human clinical studies to establish the safety and efficacy of 
the drug for each indication to the FDA’s satisfaction; 

submission to the FDA of an NDA; 

potential review of the drug application by an FDA advisory committee, where appropriate and if 
applicable; 

satisfactory completion of an FDA inspection of the manufacturing facility or facilities to assess 
compliance with current good manufacturing practices, cGMP, or regulations; and 

•  FDA review and approval of the NDA. 

20 

It generally takes companies many years to satisfy the FDA approval requirements, but this varies substantially 

based upon the type, complexity, and novelty of the drug or disease. Preclinical tests include laboratory evaluation of a 
drug’s chemistry, formulation, and toxicity, as well as animal trials to assess the characteristics and potential safety and 
efficacy of the drug. The conduct of the preclinical tests must comply with federal regulations and requirements, 
including GLP. The company submits the results of the preclinical testing to the FDA as part of an IND along with other 
information, including information about the product drug’s chemistry, manufacturing and controls, and a proposed 
clinical study protocol. Long term preclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, are 
generally conducted after submitting the initial IND. 

The FDA requires a 30-day waiting period after the submission of each IND before the company can begin 

clinical testing in humans in the United States. The FDA may, within the 30-day time period, raise concerns or questions 
relating to one or more proposed clinical studies and place the study on a clinical hold. In such a case, the company and 
the FDA must resolve any outstanding concerns before the company begins the clinical study. Accordingly, the content 
of an IND submission may or may not be sufficient for the FDA to permit the sponsor to start a clinical study. The 
company must also make a separate submission to an existing IND for each successive clinical study conducted in the 
U.S. during drug development. 

Clinical studies 

Clinical studies involve administering the investigational new drug to healthy volunteers or patients under the 

supervision of a qualified investigator. The company must conduct clinical studies: 

• 

• 

• 

in compliance with federal regulations; 

in compliance with good clinical practice, or GCP, an international standard meant to protect the rights and 
health of patients and to define the roles of clinical study sponsors, administrators, and monitors; as well as 

under protocols detailing the objectives of the trial, the safety monitoring parameters, and the effectiveness 
criteria. 

The company must submit each protocol involving testing on United States patients and subsequent protocol 

amendments to the FDA as part of the IND. The FDA may order the temporary, or permanent, discontinuation of a 
clinical study at any time, or impose other sanctions, if it believes that the sponsor is not conducting the clinical study in 
accordance with FDA requirements or presents an unacceptable risk to the clinical study patients. The sponsor must also 
submit the study protocol and informed consent information for patients in clinical studies to an institutional review 
board for approval. An IRB may halt the clinical study, either temporarily or permanently, for failure to comply with the 
IRB’s requirements, or may impose other conditions. 

Companies generally divide the clinical investigation of a drug into three or four phases. While companies 

usually conduct these phases sequentially, they are sometimes overlapped or combined. 

•  Phase 1. The company evaluates the drug in healthy human subjects or patients with the target disease or 
condition. These studies typically evaluate the safety, dosage tolerance, metabolism and pharmacologic 
actions of the investigational new drug in humans, the side effects associated with increasing doses, and if 
possible, gain early evidence on effectiveness. 

•  Phase 2. The company administers the drug to a limited patient population to evaluate dosage tolerance and 
optimal dosage, identify possible adverse side effects and safety risks, and preliminarily evaluate efficacy. 
•  Phase 3. The company administers the drug to an expanded patient population, generally at geographically 
dispersed clinical study sites, to generate enough data to statistically evaluate dosage, clinical effectiveness 
and safety, to establish the overall benefit-risk relationship of the investigational drug, and to provide an 
adequate basis for product approval. 

•  Phase 4. In some cases, the FDA may condition approval of an NDA for a drug on the company’s 

agreement to conduct additional clinical studies after approval. In other cases, a sponsor may voluntarily 

21 

conduct additional clinical studies after approval to gain more information about the drug. We typically 
refer to such post-approval studies as Phase 4 clinical studies. 

A pivotal study is a clinical study that adequately meets regulatory agency requirements to evaluate a drug’s 
efficacy and safety to justify the approval of the drug. Generally, pivotal studies are Phase 3 studies, but the FDA may 
accept results from Phase 2 studies if the study design provides a well-controlled and reliable assessment of clinical 
benefit, particularly in situations in which there is an unmet medical need and the results are sufficiently robust.  

The FDA, the IRB, or the clinical study sponsor may suspend or terminate a clinical study at any time on 

various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. 
Additionally, an independent group of qualified experts organized by the clinical study sponsor, known as a data safety 
monitoring board or committee, may oversee some clinical studies. This group provides authorization for whether or not 
a study may move forward at designated checkpoints based on access to certain data from the study. We may also 
suspend or terminate a clinical study based on evolving business objectives and the competitive climate.  

Submission of an NDA 

After a company completes the required clinical testing, it can prepare and submit an NDA to the FDA, who 
must approve the NDA before it can start marketing the drug in the United States. An NDA must include all relevant 
data available from pertinent preclinical and clinical studies, including negative or ambiguous results as well as positive 
findings, together with detailed information relating to the drug’s chemistry, manufacturing, controls, and proposed 
labeling, among other things. Data can come from company-sponsored clinical studies on a drug, or from a number of 
alternative sources, including studies initiated by investigators or studies not conducted under a U.S. IND. To support 
marketing authorization, the data we submit must be sufficient in quality and quantity to establish the safety and 
effectiveness of the investigational drug to the FDA’s satisfaction. 

The cost of preparing and submitting an NDA is substantial. The submission of most NDAs is additionally 

subject to a substantial application user fee, and the manufacturer and/or sponsor under an approved new drug 
application are also subject to annual program user fees. The FDA typically increases these fees annually. Orphan drug 
designation entitles a party to financial incentives such as opportunities for grant funding towards clinical study costs, 
tax advantages, and user-fee waivers. 

The FDA has 60 days from its receipt of an NDA to determine whether it will accept the application for filing 
based on the agency’s threshold determination that the application is sufficiently complete to permit substantive review. 
Once the FDA accepts the filing, the FDA begins an in-depth review. The FDA has agreed to certain performance goals 
in the review of NDAs. Under the Prescription Drug User Fee Act, the FDA has a goal of responding to standard review 
NDAs within ten months after the 60-day filing review period, but this timeframe may be extended. The FDA reviews 
most applications for standard review drugs within ten to 12 months and most applications for priority review drugs 
within six to eight months. Priority review can be applied to drugs that the FDA determines offer major advances in 
treatment, or provide a treatment where no adequate therapy exists. 

The FDA may also refer applications for novel drugs that present difficult questions of safety or efficacy, to an 

advisory committee. This is typically a panel that includes clinicians and other experts that will review, evaluate, and 
recommend whether the FDA should approve the application. The FDA is not bound by the recommendation of an 
advisory committee, but it generally follows such recommendations. Before approving an NDA, the FDA will typically 
inspect one or more clinical sites to assure compliance with GCP, and will inspect the facility or the facilities at which 
the drug is manufactured. The FDA will not approve the drug unless compliance with cGMP is satisfactory and the NDA 
contains data that provide evidence that the drug is safe and effective in the indication studied. 

The FDA’s decision on an NDA 

After the FDA evaluates the NDA and the manufacturing facilities, it issues either an approval letter or a 

complete response letter. A complete response letter indicates that the FDA has completed its review of the application, 
and the agency has determined that it will not approve the application in its present form. A complete response letter 

22 

generally outlines the deficiencies in the submission and may require substantial additional clinical data and/or other 
significant, expensive, and time-consuming requirements related to clinical studies, preclinical studies and/or 
manufacturing. The FDA has committed to reviewing resubmissions of the NDA addressing such deficiencies in two or 
six months, depending on the type of information included. Even if we submit such data, the FDA may ultimately decide 
that the NDA does not satisfy the criteria for approval. Also, the government may establish additional requirements, 
including those resulting from new legislation, or the FDA’s policies may change, which could delay or prevent 
regulatory approval of our drugs under development. 

An approval letter authorizes commercial marketing of the drug with specific prescribing information for 

specific indications. As a condition of NDA approval, the FDA may require a risk evaluation and mitigation strategy, or 
REMS, to help ensure that the benefits of the drug outweigh the potential risks. REMS can include communication plans 
for healthcare professionals, special training or certification for prescribing or dispensing, dispensing only under certain 
circumstances, special monitoring, and the use of patient registries. The requirement for REMS can materially affect the 
potential market and profitability of the drug. Moreover, the FDA may condition approval on substantial post-approval 
testing and surveillance to monitor the drug’s safety or efficacy. Once granted, the FDA may withdraw drug approvals if 
the company fails to comply with regulatory standards or identifies problems following initial marketing. 

Changes to some of the conditions established in an approved application, including changes in indications, 

labeling, or manufacturing processes or facilities, require submission and FDA approval of a new NDA or NDA 
supplement before we can implement the change. An NDA supplement for a new indication typically requires clinical 
data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing NDA 
supplements as it does in reviewing new NDAs. As with new NDAs, the FDA often significantly extends the review 
process with requests for additional information or clarification. 

Post-approval requirements 

The FDA regulates drugs that are manufactured or distributed pursuant to FDA approvals and has specific 

requirements pertaining to recordkeeping, periodic reporting, drug sampling and distribution, advertising and promotion 
and reporting of adverse experiences with the drug. After approval, the FDA must provide review and approval for most 
changes to the approved drug, such as adding new indications or other labeling claims. There also are continuing, annual 
user fee requirements for any marketed drugs and the establishments who manufacture its drugs, as well as new 
application fees for supplemental applications with clinical data. 

Drug manufacturers are subject to periodic unannounced inspections by the FDA and state agencies for 
compliance with cGMP requirements. There are strict regulations regarding changes to the manufacturing process, and, 
depending on the significance of the change, it may require prior FDA approval before we can implement it. FDA 
regulations also require investigation and correction of any deviations from cGMP and impose reporting and 
documentation requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, 
manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain 
compliance with cGMP and other aspects of regulatory compliance. 

The FDA may withdraw approval if a company does not comply with regulatory requirements and maintain 

standards or if problems occur after the drug reaches the market. If a company or the FDA discovers previously 
unknown problems with a drug, including adverse events of unanticipated severity or frequency, issues with 
manufacturing processes, or the company’s failure to comply with regulatory requirements, the FDA may revise the 
approved labeling to add new safety information; impose post-marketing studies or other clinical studies to assess new 
safety risks; or impose distribution or other restrictions under a REMS program. Other potential consequences may 
include: 

• 

• 

restrictions on the marketing or manufacturing of the drug, complete withdrawal of the drug from the 
market or drug recalls; 

fines, warning letters or holds on post-approval clinical studies; 

23 

• 

• 

• 

the FDA refusing to approve pending NDAs or supplements to approved NDAs, or suspending or revoking 
of drug license approvals; 

drug seizure or detention, or refusal to permit the import or export of drugs; or 

injunctions or the imposition of civil or criminal penalties. 

The FDA strictly regulates marketing, labeling, advertising, and promotion of drugs that are placed on the 

market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved 
label. However, companies may share truthful and not misleading information that is otherwise consistent with the 
product’s FDA approved labeling. The FDA and other agencies actively enforce the laws and regulations prohibiting the 
promotion of off-label uses. We could be subject to significant liability if we violated these laws and regulations. 

Orphan drug designation 

The FDA may grant orphan drug designation to sponsors of drugs intended to treat a rare disease or condition 

that affects fewer than 200,000 individuals in the United States, or if it affects more than 200,000 individuals in the 
United States, there is no reasonable expectation that the cost of developing and making the drug for this type of disease 
or condition will be recovered from sales in the United States. 

Orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards 
clinical study costs, tax advantages, and user-fee waivers. In addition, if a drug receives FDA approval for the indication 
for which it has orphan designation, the drug may be entitled to orphan drug exclusivity, which means the FDA may not 
approve any other application to market the same drug for the same indication for a period of seven years, except in 
limited circumstances, such as a showing of clinical superiority over the drug with orphan exclusivity. 

Pediatric information 

Under the Pediatric Research Equity Act, or PREA, NDAs or supplements to NDAs must contain data to assess 
the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support 
dosing and administration for each pediatric subpopulation for which the drug is safe and effective. The FDA may grant 
full or partial waivers, or deferrals, for submission of data. Unless otherwise required by regulation, PREA does not 
apply to any drug for an indication for which the FDA has granted an orphan designation. 

Healthcare reform 

In the United States and foreign jurisdictions, the legislative landscape continues to evolve. There have been a 

number of legislative and regulatory changes to the healthcare system that could affect the future results of our 
operations. In particular, there have been and continue to be a number of initiatives at the United States federal and state 
levels that seek to reform the way in which healthcare is funded and reduce healthcare costs. In March 2010, the Patient 
Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively 
PPACA, was enacted, which includes measures that have significantly changed health care financing by both 
governmental and private insurers. The provisions of PPACA of importance to the pharmaceutical and biotechnology 
industry are, among others, the following: 

• 

• 

• 

an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs 
agents, apportioned among these entities according to their market share in certain government healthcare 
programs;  

an increase in the rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 
13% of the average manufacturer price for branded and generic drugs, respectively; 

a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 
70% point-of-sale discounts to negotiated prices of applicable brand drugs to eligible beneficiaries during 

24 

their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under 
Medicare Part D; 

extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are 
enrolled in Medicaid managed care organizations, unless the drug is subject to discounts under the 340B 
drug discount program; 

expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer 
Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for certain 
individuals with income at or below 133% of the Federal Poverty Level, thereby potentially increasing 
manufacturers’ Medicaid rebate liability; 

expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing 
program; 

expansion of healthcare fraud and abuse laws, including the federal civil False Claims Act and the federal 
Anti-Kickback Statute, new government investigative powers and enhanced penalties for noncompliance; 

new requirements under the federal Physician Payments Sunshine Act for drug manufacturers to report 
information related to payments and other transfers of value made to physicians and teaching hospitals as 
well as ownership or investment interests held by physicians and their immediate family members; and 

new requirement to annually report certain drug samples that manufacturers and distributors provide to 
licensed practitioners, or to pharmacies of hospitals or other healthcare entities. 

• 

• 

• 

• 

• 

• 

Some of the provisions of the PPACA have yet to be implemented, and there have been judicial and 

Congressional challenges to certain aspects of the PPACA, as well as recent efforts by the Trump administration to 
repeal or replace certain aspects of the PPACA. Since January 2017, President Trump has signed two Executive Orders 
and other directives designed to delay the implementation of certain provisions of the PPACA or otherwise circumvent 
some of the requirements for health insurance mandated by the PPACA. Concurrently, Congress has considered 
legislation that would repeal or repeal and replace all or part of the PPACA. While Congress has not passed 
comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the PPACA have been 
signed into law. The Tax Cuts and Jobs Act of 2017, or Tax Act, included a provision which repealed, effective 
January 1, 2019, the tax-based shared responsibility payment imposed by the PPACA on certain individuals who fail to 
maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. On 
January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the 
implementation of certain PPACA-mandated fees, including the so-called “Cadillac” tax on certain high cost employer-
sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the 
medical device excise tax on non-exempt medical devices. The Bipartisan Budget Act of 2018, among other things, 
amended the PPACA to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”. 
More recently, in July 2018, the Centers for Medicare & Medicaid Services, or CMS, published a final rule permitting 
further collections and payments to and from certain PPACA qualified health plans and health insurance issuers under 
the PPACA risk adjustment program in response to the outcome of federal district court litigation regarding the method 
CMS uses to determine this risk adjustment. On December 14, 2018, a Texas U.S. District Court Judge ruled that the 
PPACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax 
Act. While the Texas U.S. District Court Judge, as well as the Trump administration and CMS, have stated that the 
ruling will have no immediate effect pending appeal of the decision, it is unclear how this decision, subsequent appeals, 
and other efforts to repeal and replace the PPACA will impact the PPACA. 

In addition, other health reform measures have been proposed and adopted in the United States since PPACA 

was enacted. For example, as a result of the Budget Control Act of 2011, as amended, providers are subject to Medicare 
payment reductions of 2% per fiscal year through 2027 unless additional Congressional action is taken. Further, the 
American Taxpayer Relief Act of 2012 reduced Medicare payments to several providers and increased the statute of 
limitations period for the government to recover overpayments from providers from three to five years. 

More recently, there has been heightened governmental scrutiny over the manner in which manufacturers set 

prices for their marketed products, which have resulted in several recent Congressional inquiries and proposed and 

25 

enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the 
relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare, and reform 
government program reimbursement methodologies for drugs. At the federal level, the Trump administration’s budget 
proposal for fiscal year 2019 contained further drug price control measures that could be enacted during the 2019 budget 
process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the 
price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to 
eliminate cost sharing for generic drugs for low-income patients. Further, the Trump administration released a 
“Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contains 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. The Department of Health and Human Services, or HHS, has already started the process of soliciting 
feedback on some of these measures and, at the same, is immediately implementing others under its existing authority. 
On January 31, 2019, the HHS Office of Inspector General, proposed modifications to the federal Anti-Kickback Statute 
discount safe harbor for the purpose of reducing the cost of drug products to consumers which, among other things, if 
finalized, will affect discounts paid by manufacturers to Medicare Part D plans, Medicaid managed care organizations 
and pharmacy benefit managers working with these organizations. While some proposed measures may require 
additional authorization through additional legislation to become effective, Congress and the Trump administration have 
each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. At the 
state level, legislatures have increasingly passed legislation and implemented regulations designed to control 
pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, 
restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, 
designed to encourage importation from other countries and bulk purchasing. 

European Union-EMA process 

In the European Union, our product candidates are also be subject to extensive regulatory requirements. As in 

the United States, medicinal products can only be marketed if a marketing authorization, or MA, from the competent 
regulatory agencies has been obtained. 

Similar to the United States, the various phases of preclinical and clinical research in the European Union are 

subject to significant regulatory controls. Clinical trials of medicinal products in the European Union must be conducted 
in accordance with European Union and national regulations and the International Conference on Harmonization, or 
ICH, guidelines on Good Clinical Practices, or GCP. Although the EU Clinical Trials Directive 2001/20/EC has sought 
to harmonize the European Union clinical trials regulatory framework, setting out common rules for the control and 
authorization of clinical trials in the European Union, the EU Member States have transposed and applied the provisions 
of the Directive differently. This has led to significant variations in the Member State regimes. To improve the current 
system, Regulation (EU) No 536/2014 on clinical trials on medicinal products for human use, which repealed Directive 
2001/20/EC, was adopted on April 16, 2014 and published in the European Official Journal on May 27, 2014. The 
Regulation aims to harmonize and streamline the clinical trials authorization process, simplify adverse event reporting 
procedures, improve the supervision of clinical trials, and increase their transparency. Although the Regulation entered 
into force on June 16, 2014, it will not be applicable until six months after the full functionality of the IT portal and 
database envisaged in the Regulation is confirmed. This is not expected to occur until the course of 2019. Until then the 
Clinical Trials Directive 2001/20/EC will still apply. 

Under the current regime, before a clinical trial can be initiated it must be approved in each of the EU Member 
States where the trial is to be conducted by two distinct bodies: the National Competent Authority, or NCA, and one or 
more Ethics Committees, or ECs. Under the current regime all suspected unexpected serious adverse reactions, or 
SUSARs, to the investigated drug that occur during the clinical trial have to be reported to the NCA and ECs of the 
Member State where they occurred  and would also be reported in all countries where the drug is being used in a clinical 
trial. 

26 

Approval Process 

Under the centralized procedure, after the EMA issues an opinion, the European Commission issues a single 

marketing authorization valid across the European Union, as well as Iceland, Liechtenstein and Norway. The centralized 
procedure is compulsory for human drugs that are: derived from biotechnology processes, such as genetic engineering; 
contain a new active substance indicated for the treatment of certain diseases, such as HIV/AIDS, cancer, diabetes, 
neurodegenerative disorders diseases or autoimmune diseases and other immune dysfunctions; advanced-therapy 
medicines, such as gene-therapy, somatic cell-therapy or tissue-engineered medicines; and officially designated orphan 
drugs. For drugs that do not fall within these categories, an applicant has the option of submitting an application for a 
centralized marketing authorization to the EMA, as long as the drug concerned contains a new active substance; is a 
significant therapeutic, scientific or technical innovation,; or if its authorization would be in the interest of public health. 

There are also three other possible routes to authorize medicinal products in the European Union, which are 

available for products that fall outside the scope of the centralized procedure: 

•  National procedure. National MAs, issued by the competent authorities of the Member States of the EEA, 

are available however these only cover their respective territory; 

•  Decentralized procedure. Using the decentralized procedure, an applicant may apply for simultaneous 
authorization in more than one European Union country of a medicinal product that has not yet been 
authorized in any European Union country; and 

•  Mutual recognition procedure. In the mutual recognition procedure, a medicine is first authorized in one 
European Union Member State, in accordance with the national procedures of that country. Thereafter, 
further marketing authorizations can be sought from other European Union countries in a procedure 
whereby the countries concerned agree to recognize the validity of the original, national marketing 
authorization. 

We do not foresee that any of our current product candidates will be suitable for a National MA as they fall 
within the mandatory criteria for the Centralized Procedure. Therefore, our product candidates will be reviewed and 
approved through Centralized Procedure. 

Pursuant to Regulation (EC) No 1901/2006, all applications for marketing authorization for new medicines 

must include the results of all studies performed and details of all information collected in compliance with as described 
in a pediatric investigation plan, or PIP, agreed between regulatory authorities, the EMA’s Paediatric Committee, and the 
applicant, unless the medicine is exempt because of a deferral or waiver (e.g., because the relevant disease or condition 
occurs only in adults). Applicants are encourage to submit pediatric investigation plans early during product 
development, in time for studies to be conducted in the pediatric population, where appropriate, before marketing 
authorization applications are submitted.  Before the EMA is able to begin its assessment of a centralized procedure MA 
application, it will validate that the applicant has complied with an agreed pediatric investigation plan, or an application 
for a waiver has been submitted. The applicant and the EMA may, where such a step is adequately justified, agree to 
modify a pediatric investigation plan to assist validation. Modifications are not always possible; may take longer to agree 
than the period of validation permits; and may still require the applicant to withdraw its marketing authorization 
application, or MA, and to conduct additional non-clinical and clinical studies.  Products that are granted a MA on the 
basis of the pediatric clinical trials conducted in accordance with the PIP are eligible for a six month extension of the 
protection under a supplementary protection certificate or a patent qualifying for a supplementary protection (if any is in 
effect at the time of approval) or certificate or, in the case of orphan medicinal products, a two year extension of the 
orphan market exclusivity. This pediatric reward is subject to specific conditions and is not automatically available when 
data in compliance with the PIP are developed and submitted. 

27 

Orphan drug designation 

In the European Union, Regulation (EC) No 141/2000, as amended, states that a drug will be designated as an 

orphan drug if its sponsor can establish: 

• 

• 

that it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating 
condition affecting not more than five in ten thousand persons in the European Union when the application 
is made, or that it is intended for the diagnosis, prevention or treatment of a life-threatening, seriously 
debilitating or serious and chronic condition in the European Union and that without incentives it is 
unlikely that the marketing of the drug in the European Union would generate sufficient return to justify the 
necessary investment; and 

that there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question 
that has been authorized in the European Union or, if such method exists, that the drug will be of 
significant benefit to those affected by that condition. 

Regulation (EC) No 847/2000 sets out further provisions for implementation of the criteria for designation of a 
drug as an orphan drug. An application for the designation of a drug as an orphan drug may be submitted at any stage of 
development of the drug before submission of a MA application.  However, an application for designation as an orphan 
drug may be submitted for a new therapeutic indication for an already authorized medicinal product. 

If a centralized procedure MA in respect of an orphan drug is granted pursuant to Regulation (EC) No 
726/2004, regulatory authorities will not, for a period of 10 years, accept another application for a MA, or grant a MA or 
accept an application to extend an existing MA, for the same therapeutic indication, in respect of a similar drug. This 
period may however be reduced to six years if, at the end of the fifth year, it is established, in respect of the drug 
concerned, that the criteria for orphan drug designation are no longer met, for example, when it is shown on the basis of 
available evidence that the product is sufficiently profitable not to justify maintenance of market exclusivity. The 
exclusivity period may increase to 12 years if, among other things, the MA includes the results of studies from an agreed 
pediatric investigation plan. Notwithstanding the foregoing, a MA may be granted for the same therapeutic indication to 
a similar drug if: 

• 

• 

• 

the holder of the MA for the original orphan drug has given its consent to the second applicant; 

the holder of the MA for the original orphan drug is unable to supply sufficient quantities of the drug; or 

the second applicant can establish in the application that the second drug, although similar to the orphan 
drug already authorized, is safer, more effective or otherwise clinically superior. 

Regulation (EC) No 847/2000 lays down definitions of the concepts ‘similar drug’ and ‘clinical superiority’. 

Other incentives available to orphan drugs in the European Union include financial incentives such as a reduction of fees 
or fee waivers and protocol assistance. Orphan drug designation does not shorten the duration of the regulatory review 
and approval process. 

Good manufacturing practices 

Like the FDA, the EMA, the competent authorities of the European Union Member States and other regulatory 
agencies regulate and inspect equipment, facilities and processes used in the manufacturing of drugs intended for the EU 
market to ensure that certain minimum standards are met. These requirements apply, no matter where in the world the 
manufacturing process takes place and are designed to ensure that products intended for the EU market are of consistent 
high quality, are appropriate for their intended use and meet the requirements of the marketing authorization or clinical 
trial authorization.  If, after receiving clearance from regulatory agencies, a company makes a material change in 
manufacturing equipment, location, or process, additional regulatory review and approval may be required. We and our 
partners will be required to continue to comply with cGMP, and drug-specific regulations enforced by, the European 
Commission, the EMA and the competent authorities of European Union Member States following drug approval. Also 
like the FDA, the EMA, the competent authorities of the European Union Member States and other regulatory agencies 
also conduct regular, periodic visits to reinspect equipment, facilities, and processes following the initial approval of a 

28 

drug. If, as a result of these inspections, the regulatory agencies determine that we or our partners’ equipment, facilities, 
or processes do not comply with applicable regulations and conditions of drug approval, they may seek civil, criminal or 
administrative sanctions and/or remedies against us, including the suspension of its manufacturing operations or the 
withdrawal of our drug from the market. 

Post-Approval Controls 

The holder of a European MA must establish and maintain a pharmacovigilance system and appoint an 

individual qualified person for pharmacovigilance, or QPPV, who is responsible for oversight of that system. Key 
obligations include expedited reporting of suspected serious adverse reactions and submission of periodic safety update 
reports, or PSURs. 

All new MAs must include a risk management plan, or RMP, describing the risk management system that the 

company will put in place, recording the product’s safety profile and documenting the effectiveness of risk-minimization 
measures. The regulatory authorities may also impose specific obligations as a condition of the MA. Such risk-
minimization measures or post-authorization obligations may include additional safety monitoring, more frequent 
submission of PSURs, or the conduct of additional clinical trials or post-authorization safety studies. RMPs and PSURs 
are routinely available to third parties requesting access, subject to limited redactions. All advertising and promotional 
activities for the product must be consistent with the approved summary of product characteristics, and therefore all off-
label promotion is prohibited. Direct-to-consumer advertising of prescription medicines is also prohibited in the 
European Union. Although general requirements for advertising and promotion of medicinal products are established 
under EU directives, the details are governed by regulations in each EU Member State and can differ from one country 
to another. 

Data and market exclusivity 

Similar to the United States, there is a process to authorize generic versions of innovative drugs in the European 

Union. Generic competitors can, where data exclusivity has expired, submit abridged applications to authorize generic 
versions of drugs authorized by the EMA through the centralized procedure referencing the innovator’s data and 
demonstrating bioequivalence to the reference drug, among other things. If a marketing authorization is granted for a 
medicinal product containing a new active substance, that product benefits from eight years of data exclusivity, during 
which generic marketing authorization applications referring to the data of that product may not be accepted by the 
regulatory authorities, and a further two years of market exclusivity, during which such generic products may not be 
placed on the market. The two-year period may be extended to three years if during the first eight years a new 
therapeutic indication with significant clinical benefit over existing therapies is approved. This system is usually referred 
to as “8+2”. There is also a special regime for biosimilars, or biological medicinal products that are similar to a reference 
medicinal product but that do not meet the definition of a generic medicinal product, for example, because of differences 
in raw materials or manufacturing processes. For such products, the results of appropriate preclinical or clinical trials 
must be provided, and guidelines from the EMA detail the type of quantity of supplementary data to be provided for 
different types of biological product.  In addition, there are certain circumstances, such as where the innovator company 
is granted a marketing authorization for a significant new indication for the relevant medicinal product, where an 
additional one year of marketing exclusivity may be granted.   As referenced above, orphan medicinal products are 
subject to separate marketing exclusivity arrangements. 

Other international markets-drug approval process 

In some international markets (such as China or Japan), although data generated in United States or European 

Union trials may be submitted in support of a marketing authorization application, regulators may require additional 
clinical studies conducted in the host territory, or studying people of the ethnicity of the host territory, prior to the filing 
or approval of marketing applications within the country. 

29 

Pricing and reimbursement 

Significant uncertainty exists as to the coverage and reimbursement status of any drugs for which we may 

obtain regulatory approval. In the United States and markets in other countries, sales of any drugs for which we receive 
regulatory approval for commercial sale will depend in part on the availability of coverage and reimbursement from 
third-party payors. Third-party payors include government authorities, managed care plans, private health insurers and 
other organizations. The process for determining whether a third-party payor will provide coverage for a drug may be 
separate from the process for setting the reimbursement rate that the payor will pay for the drug. Third-party payors may 
limit coverage to specific drugs on an approved list, or formulary, which might not include all of the FDA-approved 
drugs for a particular indication. Moreover, a third-party payor’s decision to provide coverage for a drug does not imply 
that an adequate reimbursement rate will be approved. Additionally, coverage and reimbursement for drugs can differ 
significantly from payor to payor. One third-party payor’s decision to cover a particular drug does not ensure that other 
payors will also provide coverage for the drug, or will provide coverage at an adequate reimbursement rate. Adequate 
third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate 
return on its investment in drug development. 

Third-party payors are increasingly challenging the price and examining the medical necessity and cost-

effectiveness of drugs and services, in addition to their safety and efficacy. To obtain coverage and reimbursement for 
any drug that might be approved for sale, we may need to conduct expensive pharmacoeconomic studies to demonstrate 
the medical necessity and cost-effectiveness of its drug. These studies will be in addition to the studies required to obtain 
regulatory approvals. If third-party payors do not consider a drug to be cost-effective compared to other available 
therapies, they may not cover the drug after approval as a benefit under their plans or, if they do, the level of payment 
may not be sufficient to allow a company to sell its drugs at a profit. 

The U.S. government, state legislatures and foreign governments have shown significant interest in 
implementing cost containment programs to limit the growth of government-paid health care costs, including price 
controls, restrictions on reimbursement and requirements for substitution of generic drugs for branded prescription 
drugs. By way of example, PPACA contains provisions that may reduce the profitability of drugs, including, for 
example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed 
care plans, mandatory discounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical 
companies’ share of sales to federal health care programs. Adoption of government controls and measures, and 
tightening of restrictive policies in jurisdictions with existing controls and measures, could limit payments for our drugs. 

In the European Community, governments influence the price of drugs through their pricing and reimbursement 

rules and control of national health care systems that fund a large part of the cost of those drugs to consumers. Some 
jurisdictions operate positive and negative list systems under which drugs may only be marketed once a reimbursement 
price has been agreed to by the government. To obtain reimbursement or pricing approval, some of these countries may 
require the completion of clinical studies that compare the cost effectiveness of a particular drug candidate to currently 
available therapies. Other member states allow companies to fix their own prices for medicines, but monitor and control 
company profits. The downward pressure on health care costs in general, particularly prescription drugs, has become 
very intense. As a result, increasingly high barriers are being erected to the entry of new drugs. In addition, in some 
countries, cross border imports from low-priced markets exert a commercial pressure on pricing within a country. 

The marketability of any drugs for which we receive regulatory approval for commercial sale may suffer if 

government and other third-party payors fail to provide coverage and adequate reimbursement. In addition, the focus on 
cost containment measures in the United States and other countries has increased and we expect will continue to increase 
the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may change at any time. 

Other healthcare laws impacting sales, marketing, and other company activities 

Numerous regulatory authorities in addition to the FDA, including, in the United States, CMS, other divisions 

of the U.S. Department of Health and Human Services, or HHS, the U.S. Department of Justice, and similar foreign, 
state, and local government authorities, regulate and enforce laws and regulations applicable to sales, promotion and 
other activities of pharmaceutical manufacturers. These laws and regulations may impact, among other things, our 

30 

clinical research programs, proposed sales and marketing and education activities, and financial and business 
relationships with future prescribers of our product candidates, once approved. These laws and regulations include U.S. 
federal, U.S. state and foreign anti-kickback, false claims, and data privacy and security laws, which are described 
below, among other legal requirements that may affect our current and future operations. 

The FDA regulates all advertising and promotion activities for drugs under its jurisdiction both prior to and 

after approval. Only those claims relating to safety and efficacy that the FDA has approved may be used in labeling once 
the drug is approved. Physicians may prescribe legally available drugs for uses that are not described in the drug’s 
labeling and that differ from those we tested and the FDA approved. Such off-label uses are common across medical 
specialties, and often reflect a physician’s belief that the off-label use is the best treatment for the patients. The FDA 
does not regulate the behavior of physicians in their choice of treatments, but FDA regulations do impose stringent 
restrictions on manufacturers’ communications regarding off-label uses. If we do not comply with applicable FDA 
requirements we may face adverse publicity, enforcement action by the FDA, corrective advertising, consent decrees and 
the full range of civil and criminal penalties available to the FDA. Promotion of off-label uses of drugs can also 
implicate the false claims laws described below. 

Anti-kickback laws including, without limitation, the federal Anti-Kickback Statute that applies to items and 
services reimbursable under governmental healthcare programs such as Medicare and Medicaid, make it illegal for a 
person or entity to, among other things, knowingly and willfully solicit, receive, offer or pay remuneration, directly or 
indirectly, to induce, or in return for, purchasing, leasing, ordering, or arranging for or recommending the purchase, 
lease, or order of any good, facility, item, or service reimbursable, in whole or in part, under a federal healthcare 
program. Due to the breadth of the statutory provisions, limited statutory exceptions and regulatory safe harbors, and the 
scarcity of guidance in the form of regulations, agency advisory opinions, sub-regulatory guidance and judicial decisions 
addressing industry practices, it is possible that our practices might be challenged under anti-kickback or similar laws. 
Moreover, recent healthcare reform legislation has strengthened these laws. For example, PPACA among other things, 
amends the intent requirement of the federal Anti-Kickback Statute and certain other criminal healthcare fraud statutes to 
clarify that a person or entity does not need to have actual knowledge of these statutes or specific intent to violate them 
in order to have committed a crime. In addition, PPACA clarifies that the government may assert that a claim that 
includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent 
claim for purposes of the federal civil False Claims Act. 

False claims laws, including, without limitation, the federal civil False Claims Act, and civil monetary penalty 

laws prohibit, among other things, anyone from knowingly and willingly presenting, or causing to be presented for 
payment, to the federal government (including Medicare and Medicaid) claims for reimbursement for, among other 
things, drugs or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for 
medically unnecessary items or services. Our activities relating to the sales and marketing of its drugs may be subject to 
scrutiny under these laws, as well as civil monetary penalties laws and the criminal healthcare fraud provisions enacted 
as part of the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA. 

HIPAA imposes criminal and civil liability for, among other things, knowingly and willfully executing, or 

attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, 
concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or 
payment for, healthcare benefits, items or services. Similar to the U.S. federal Anti-Kickback Statute, a person or entity 
does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a 
violation. 

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, 

and their implementing regulations governs the conduct of certain electronic healthcare transactions and imposes 
requirements with respect to safeguarding the security and privacy of protected health information on HIPAA covered 
entities and their business associates who provide services involving HIPAA protected health information to such 
covered entities. 

The federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, 

biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health 

31 

Insurance Program (with certain exceptions) to report annually to CMS information related to payments or other 
“transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) 
and teaching hospitals, and requires applicable manufacturers and group purchasing organizations to report annually to 
the government ownership and investment interests held by the physicians described above and their immediate family 
members. 

In addition, we may be subject to state law equivalents of each of the above federal laws, such as anti-kickback, 

self-referral, and false claims laws which may apply to our business practices, including but not limited to, research, 
distribution, sales and marketing arrangements and submitting claims involving healthcare items or services reimbursed 
by any third-party payor, including commercial insurers; state laws that require pharmaceutical manufacturers to comply 
with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal 
government that otherwise restricts payments that may be made to healthcare providers; state laws that require 
pharmaceutical manufacturers to file reports with states regarding marketing information, such as the tracking and 
reporting of gifts, compensation and other remuneration and items of value provided to healthcare professionals and 
entities; state laws that require the reporting of information related to drug pricing; state and local laws requiring the 
registration of pharmaceutical sales and medical representatives; and state laws governing the privacy and security of 
health information in certain circumstances, many of which differ from each other in significant ways, thus complicating 
compliance efforts. 

Violations of these laws may result in significant criminal, civil and administrative sanctions, including fines 

and civil monetary penalties, the possibility of exclusion from federal healthcare programs (including Medicare and 
Medicaid), disgorgement, contractual damages, reputational harm and the imposition of corporate integrity agreements 
or other similar agreements with governmental entities, which may impose, among other things, rigorous operational and 
monitoring requirements on companies. Similar sanctions and penalties, as well as individual imprisonment, also can be 
imposed upon executive officers and employees, including criminal sanctions against executive officers under the so-
called “responsible corporate officer” doctrine, even in situations where the executive officer did not intend to violate the 
law and was unaware of any wrongdoing. Given the significant penalties and fines that can be imposed on companies 
and individuals if convicted, allegations of such violations often result in settlements even if the company or individual 
being investigated admits no wrongdoing. Settlements often include significant civil sanctions and additional corporate 
integrity obligations. If the government were to allege or convict us or our executive officers of violating these laws, our 
business could be harmed. 

Similar rigid restrictions are imposed on the promotion and marketing of drugs in the European Union and other 

countries. Even in those countries where we may not be directly responsible for the promotion and marketing of our 
drugs, if our potential international distribution partners engage in inappropriate activity it can have adverse implications 
for us. 

Employees 

As of March 1, 2019, we had 34 employees, 32 of whom were full-time employees and two of whom were part-
time employees. As of March 1, 2019, 20 of our employees were engaged in research and development activities and 14 
of our employees were engaged in business development, commercial, finance, information systems, facilities, human 
resources or administrative support. As of March 1, 2019, we had 27 employees located in the United States and seven 
employees located in France. None of our U.S. employees are represented by any collective bargaining agreements. Our 
French employees are represented by collective bargaining agreements. We believe that we maintain good relations with 
our employees. 

Available Information 

Our internet website address is www.millendo.com. In addition to the information about us and our subsidiaries 

contained in this Annual Report, information about us can be found on our website. Our website and information 
included in or linked to our website are not part of this Annual Report. 

32 

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and 

amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 
1934, as amended, are available free of charge through our website as soon as reasonably practicable after they are 
electronically filed with or furnished to the Securities and Exchange Commission, or SEC. Additionally the SEC 
maintains an internet site that contains reports, proxy and information statements and other information. The address of 
the SEC’s website is www.sec.gov. 

33 

 
ITEM 1A. RISK FACTORS 

You should carefully consider the risks described below, as well as general economic and business risks and 

the other information in this Annual Report on Form 10-K. The occurrence of any of the events or circumstances 
described below or other adverse events could have a material adverse effect on our business, results of operations and 
financial condition and could cause the trading price of our common stock to decline. Additional risks or uncertainties 
not presently known to us or that we currently deem immaterial may also harm our business. 

Risks Related to the Reverse Merger 

The risks arising with respect to the historic OvaScience business and operations may be different from what we 
anticipate, which could lead to significant, unexpected costs and liabilities and could materially and adversely affect 
our business going forward. 

It is possible that we may not have fully anticipated the extent of the risks associated with the recent Reverse 

Merger we completed with OvaScience. After the Reverse Merger, OvaScience’s historic business was discontinued, but 
prior to the transaction OvaScience had a significant operating history. As a consequence, we may be subject to claims, 
demands for payment, regulatory issues, costs and liabilities that were not and are not currently expected or anticipated. 
Notwithstanding our exercise of due diligence pre-transaction and winding down of the OvaScience business post-
transaction, the risks involved with taking over a business with a significant operating history and the costs and liabilities 
associated with these risks may be greater than we anticipate. We may not be able to contain or control the costs or 
liabilities associated with OvaScience’s historic business, which could materially and adversely affect our business, 
liquidity, capital resources or results of operation. 

Risks Related to Our Financial Position and Need for Additional Capital 

We have incurred significant operating losses since inception and anticipate that we will continue to incur substantial 
operating losses for the foreseeable future and may never achieve or maintain profitability. 

Since inception, we have incurred significant operating losses and negative operating cash flows and there is no 

assurance that we will ever achieve or sustain profitability. Our net loss was $84.6 million and $27.2 million for the 
years ended December 31, 2017 and 2018, respectively. As of December 31, 2018, we had an accumulated deficit of 
$164.1 million. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable 
future. We have devoted substantially all of our efforts to the acquisition of and preclinical and clinical development of 
our product candidates, livoletide and nevanimibe, as well as to building our management team and infrastructure. It 
could be several years, if ever, before we have a commercialized product and our commercialized products, if any, may 
not be profitable. The net losses we incur may fluctuate significantly from quarter to quarter and year to year. We 
anticipate that our expenses will increase significantly in connection with our ongoing activities such as: 

• 

• 

• 

• 

continuing the ongoing and planned clinical development of livoletide and nevanimibe; 

initiating preclinical studies and clinical trials for any additional diseases for our current product candidates 
and any future product candidates that we may pursue; 

building a portfolio of product candidates through the acquisition or in-license of drugs or product 
candidates and technologies; 

developing, maintaining, expanding and protecting our intellectual property portfolio; 

•  manufacturing, or having manufactured, clinical and commercial supplies of our product candidates; 
• 

seeking marketing approvals for our current and future product candidates that successfully complete 
clinical trials; 

• 

establishing a sales, marketing and distribution infrastructure to commercialize any product candidate for 
which we may obtain marketing approval; 

34 

• 

• 

hiring additional administrative, clinical, regulatory and scientific personnel; and 

incurring additional costs associated with operating as a public company. 

In order to become and remain profitable, we will need to develop and eventually commercialize, on our own or 
with collaborators, one or more product candidates with significant market potential. This will require us to be successful 
in a range of challenging activities, including completing clinical trials of livoletide and nevanimibe, developing 
commercial scale manufacturing processes, obtaining marketing approval, manufacturing, marketing and selling any 
current and future product candidates for which we may obtain marketing approval, and satisfying any post-marketing 
requirements. We may never succeed in any or all of these activities and, even if we do, we may never generate revenue 
from product sales or achieve profitability. 

Because of the numerous risks and uncertainties associated with pharmaceutical products and development, we 

are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve 
profitability. If we are required by the U.S. Food and Drug Administration, or FDA, or other regulatory authorities such 
as the European Medicines Agency, or EMA, to perform studies and trials in addition to those currently expected, or if 
there are any delays in the development or in the completion of any planned or future preclinical studies or clinical trials 
of our current or future product candidates, our expenses could increase and profitability could be further delayed. 

Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or 

annual basis. Our failure to become and remain profitable would decrease our value and could impair our ability to raise 
capital, maintain our research and development efforts, expand our business or continue our operations. A decline in our 
value also could cause you to lose all or part of your investment. 

We have a limited operating history and have never generated any revenue from product sales, which may make it 
difficult to assess our future viability. 

We are a clinical stage biopharmaceutical company with a limited operating history. Our operations to date, 
with respect to the development of our product candidates, have been limited to organizing and staffing the business, 
business planning, raising capital, acquiring our product candidates and other assets and conducting preclinical and 
clinical development of our product candidates. We have not yet demonstrated an ability to successfully complete 
clinical development of a product candidate, obtain marketing approval, manufacture a commercial-scale drug (or 
arrange for a third-party to do so on our behalf), or conduct sales and marketing activities necessary for successful 
commercialization. Consequently, our predictions about our future success or viability may not be as accurate as they 
could be if we had more experience developing product candidates. 

Our ability to generate revenue from product sales and achieve profitability depends on our ability, alone or 

with any future collaborations, to successfully complete the development of, and obtain the regulatory approvals 
necessary to commercialize, livoletide, nevanimibe and any additional product candidates that we may pursue in the 
future. We do not anticipate generating revenue from product sales for the next several years, if ever. Our ability to 
generate revenue from product sales depends heavily on our or any future collaborators’ success in: 

• 

• 

• 

• 

timely and successful completion of clinical development of our current product candidates; 

obtaining and maintaining regulatory and marketing approvals for livoletide, nevanimibe and any future 
product candidates for which we successfully complete clinical trials; 

launching and commercializing any product candidates for which we obtain regulatory and marketing 
approval by establishing a sales force, marketing and distribution infrastructure or, alternatively, 
collaborating with a commercialization partner; 

qualifying for coverage and adequate reimbursement by government and third-party payors for our current 
or any future product candidates, if approved, both in the United States and internationally, and reaching 
acceptable agreements with such government and third-party payors on pricing terms; 

35 

• 

• 

• 

• 

• 

• 

developing, validating and maintaining a commercially viable, sustainable, scalable, reproducible and 
transferable manufacturing process for livoletide, nevanimibe or any future product candidates that are 
compliant with current good manufacturing practices, or cGMP; 

establishing and maintaining supply and manufacturing relationships with third parties that can provide an 
adequate amount and quality of drugs and services to support our planned clinical development, as well as 
the market demand for livoletide, nevanimibe and any future product candidates, if approved; 

obtaining market acceptance, if and when approved, of livoletide, nevanimibe or any future product 
candidates as a viable treatment option by physicians, patients, third-party payors and others in the medical 
community; 

effectively addressing any competing technological and market developments; 

implementing additional internal systems and infrastructure, as needed; 

negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter, 
and performing our obligations pursuant to such arrangements; 

•  maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade 

secrets and know-how; 

• 

• 

avoiding and defending against third-party interference or infringement claims; and 

attracting, hiring and retaining qualified personnel. 

We will require additional capital to finance our operations, which may not be available on acceptable terms, if at all. 
Failure to obtain capital when needed may force us to delay, limit or terminate certain of our development programs, 
future commercialization efforts or other operations. 

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue to 

develop, and if approved, commercialize, livoletide and nevanimibe. Additionally, if we obtain marketing approval for 
our product candidates, we expect to incur significant expenses related to manufacturing, marketing, sales and 
distribution. Furthermore, we expect to incur additional costs associated with operating as a public company. 

As of December 31, 2018, our cash, cash equivalents and marketable securities were $77.7 million. Our 

existing cash, cash equivalents and marketable securities are currently expected to be sufficient to fund our current 
operating plans into the second half of 2020, which we expect will be sufficient to fund our operating plans through the 
topline results of the Phase 2b portion of our livoletide pivotal Phase 2b/3 PWS study and completion of our nevanimibe 
Phase 2b CAH study. However, our operating plans may change as a result of many factors currently unknown to us, and 
we may need to seek additional funds sooner than planned, through public or private equity or debt financings, third-
party funding, and marketing and distribution arrangements, as well as other collaborations, strategic alliances and 
licensing arrangements, or a combination of these approaches. In any event, we will require additional capital to pursue 
preclinical and clinical activities, regulatory approval and the commercialization of our current and future product 
candidates. Even if we believe we have sufficient capital for our current or future operating plans, we may seek 
additional capital if market conditions are favorable or if we have specific strategic considerations. If we elect to do so, 
additional capital may not be available to us on acceptable terms, if at all. Our ability to access additional capital, and as 
a result our operating results and liquidity needs, could be negatively affected by market fluctuations and economic 
downturn. Any additional capital raising efforts may divert our management from its day-to-day activities, which may 
adversely affect our ability to develop and commercialize our current and future product candidates. 

Raising additional capital by issuing equity or debt securities may cause dilution to our existing stockholders, and 
raising funds through lending and licensing arrangements may restrict our operations or require us to relinquish 
proprietary rights. 

Until such time as we can generate substantial revenue from product sales, if ever, we expect to finance our 

cash needs through a combination of equity and debt financings, strategic alliances and license and development 

36 

agreements in connection with any future collaborations. To the extent that we raise additional capital by issuing equity 
securities, our existing stockholders’ ownership may experience substantial dilution, and the terms of these securities 
may include liquidation or other preferences that adversely affect your rights as a stockholder. Equity and debt financing, 
if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, 
such as redeeming our shares, making investments, incurring additional debt, making capital expenditures or declaring 
dividends. 

The incurrence of indebtedness could result in increased fixed payment obligations and we may be required to 

agree to certain restrictive covenants therein, such as limitations on our ability to incur additional debt, limitations on our 
ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely affect 
our ability to conduct our business. 

If we raise additional capital through collaborations, strategic alliances or third-party licensing arrangements, 

we may have to relinquish valuable rights to our intellectual property, future revenue streams, research programs or 
product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional capital 
through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product 
development or future commercialization efforts, or grant rights to develop and market product candidates that we would 
otherwise develop and market ourselves. 

We may be required to make payments under licenses applicable to livoletide and nevanimibe. 

We have certain milestone and royalty payments related to livoletide and nevanimibe.  We acquired worldwide, 
exclusive rights to nevanimibe pursuant to our license agreement with the Regents of the University of Michigan, or the 
University of Michigan, entered into in June 2013, or the UM License Agreement. Under the terms of the UM License 
Agreement, we are obligated to make significant milestone and royalty payments in connection with the attainment of 
certain development steps and the sale of resulting products with respect to nevanimibe, as well as other material 
obligations. In addition, pursuant to an assignment agreement for certain patents and patent applications relating to 
livoletide, we are also required to pay royalties on commercial sales and licensing of livoletide to the assignors. If 
milestone or other non-royalty obligations become due, we may not have sufficient funds available to meet our 
obligations, which will materially adversely affect our business operations and financial condition. 

We may expend our limited resources to pursue a particular product candidate or disease and fail to capitalize on 
product candidates or diseases that may be more profitable or for which there is a greater likelihood of success. 

Because we have limited financial and managerial resources, we focus on research programs and product 

candidates for specific indications. As a result, we may forego or delay pursuit of opportunities with respect to our own 
product candidates for additional indications and other product candidates or diseases that later prove to have greater 
commercial potential. Our resource allocation decisions may ultimately not result in successful clinical development 
programs and may cause us to fail to capitalize on other viable product candidates, commercial products or profitable 
market opportunities. In addition, our spending on current and future research and development programs and product 
candidates for specific indications may not yield any commercially viable products. For example, we expended 
substantial time and resources on a previous product candidate, MLE4901, which we ceased developing in 2017. 

If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we 

may relinquish valuable rights to that product candidate through sale, collaboration, licensing or other royalty 
arrangements in cases in which it would have been advantageous for us to retain sole development and 
commercialization rights. 

37 

Risks Related to Development and Commercialization 

Our future success is dependent on the successful clinical development, regulatory approval and subsequent 
commercialization of livoletide, nevanimibe and any future product candidates. If we are not able to obtain the 
required regulatory approvals, we will not be able to commercialize our current or future product candidates and our 
ability to generate revenue will be adversely affected. 

We do not have any drugs that have received regulatory approval and may never be able to develop marketable 

product candidates. We expect that a substantial portion of our efforts and expenses for the foreseeable future will be 
devoted to the clinical development of livoletide and nevanimibe, and as a result, our business currently depends heavily 
on the successful development, regulatory approval and commercialization of these product candidates. We cannot be 
certain that livoletide or nevanimibe will receive regulatory approval or be successfully commercialized even if we 
receive regulatory approval. The research, testing, manufacturing, safety, efficacy, labeling, approval, sale, marketing 
and distribution of our product candidates are, and will remain, subject to comprehensive regulation by the FDA and 
other regulatory agencies in the United States and similar foreign regulatory authorities. Failure to obtain regulatory 
approval for livoletide or nevanimibe in the United States or other jurisdictions will prevent us from commercializing 
and marketing livoletide or nevanimibe. 

The Phase 2b portion of our recently initiated Phase 2b/3 PWS trial may or may not be sufficient to support 

FDA approval depending on the data.  Additionally, the FDA may require additional data (for example, in children) in 
order to support an NDA approval in PWS in the United States. 

Even if we were to successfully obtain approval from the FDA and comparable foreign regulatory authorities 

for our product candidates, any approval might contain significant limitations related to use restrictions for specified age 
groups, warnings, precautions or contraindications, or may be subject to burdensome post-approval study or risk 
management requirements. If we are unable to obtain regulatory approval for our product candidates, or any approval 
contains significant limitations, on our own or with any future collaborators, we may not be able to obtain sufficient 
funding or generate sufficient revenue to continue the development of any other product candidate that we may in-
license, develop or acquire in the future. 

Furthermore, even if we obtain regulatory approval for livoletide or nevanimibe, we will still need to develop a 

commercial infrastructure, or otherwise develop relationships with collaborators to commercialize, establish a 
commercially viable pricing structure and obtain approval for adequate reimbursement from third-party and government 
payors. If we, or our collaborators, are unable to successfully commercialize livoletide or nevanimibe, we may not be 
able to generate sufficient revenue to continue our business. 

Preclinical studies or earlier clinical trials are not necessarily predictive of future results and the results of our 
clinical trials may not support our livoletide or nevanimibe claims. 

Our product candidates, livoletide and nevanimibe, are still in development and will require extensive clinical 

testing before we are prepared to submit an NDA or other similar application for regulatory approval. We cannot predict 
with any certainty if or when we might submit an NDA for regulatory approval for livoletide or nevanimibe for the 
treatment of any indication or whether any such application will be approved by the relevant regulatory authority. 
Human clinical trials are very expensive and difficult to design and implement, in part because they are subject to 
rigorous regulatory requirements. For instance, the FDA or foreign regulatory authorities may not agree with our 
proposed endpoints for any clinical trials of livoletide or nevanimibe, even if validated in prior clinical trials of similar 
product candidates, which may delay the commencement of our future clinical trials. The FDA or foreign regulatory 
authorities may also not agree with our proposed trial designs or dosing regimens, which may likewise prevent or delay 
the commencement of our future clinical trials. The clinical trial process is also time-consuming. We estimate that 
clinical trials of livoletide and nevanimibe for each of the indications that we are pursuing will take the next several 
years to complete. Failure can occur at any stage of the trials, and we could encounter problems that cause us to abandon 
or repeat clinical trials. Further, we may encounter challenges in the clinical development of product candidates for 
reasons unrelated to the observed safety or efficacy of such product candidates in prior clinical trials. In addition, 
because we are pursuing the treatment of two different indications with nevanimibe, setbacks or failures in, or 

38 

termination of, clinical development for one indication may have a negative impact on the clinical development for the 
treatment of other indications. 

Success in preclinical testing and early clinical trials does not ensure that later and pivotal clinical trials will 

generate the same results, or otherwise provide adequate data to demonstrate the safety and efficacy of a product 
candidate. Frequently, product candidates that have shown promising results in early clinical trials have subsequently 
suffered significant setbacks in later or pivotal clinical trials. Our approach to targeting orphan endocrine diseases where 
current therapies do not exist or are insufficient, is novel and unproven, and as such, the cost and time needed to develop 
livoletide and nevanimibe is difficult to predict and our efforts may not be successful. If we do not observe favorable 
results in future or planned clinical trials of livoletide and nevanimibe, we may decide to delay or abandon development 
of livoletide and nevanimibe, which could harm our business, financial condition and results of operations. A number of 
companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of 
efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. 

We may encounter substantial delays in our clinical trials or we may fail to demonstrate safety and efficacy to the 
satisfaction of applicable regulatory authorities. 

Before obtaining marketing approval from regulatory authorities for the sale of livoletide, nevanimibe and any 
future product candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the product 
candidate for its intended indications. We cannot guarantee that any clinical trials will be conducted as planned or 
completed on schedule, if at all. A failure of one or more clinical trials can occur at any stage of testing. Events that may 
prevent successful or timely completion of clinical development include: 

• 

• 

• 

• 

• 

• 

• 

• 

• 

failure to obtain regulatory approval to commence a trial;   

unforeseen safety issues;   

determination of dosing issues;   

lack of effectiveness during clinical trials;   

inability to reach agreement on acceptable terms with prospective contract research organizations, or 
CROs, and clinical trial sites;    

slower than expected rates of patient recruitment, failure to recruit adequate numbers of suitable patients to 
participate in our clinical trials or failure to maintain participation of recruited patients in clinical trials;   

failure to manufacture sufficient quantities of a product candidate for use in clinical trials;   

inability to monitor patients adequately during or after treatment; and   

inability or unwillingness of medical investigators to follow our clinical protocols. 

Further, we, the FDA, an institutional review board, or IRB, or other regulatory authority may suspend our 

clinical trials at any time if it appears that we or our collaborators are failing to conduct a trial in accordance with 
regulatory requirements, including, for example, the FDA’s good clinical practice, or GCP, regulations, that we are 
exposing participants to unacceptable health risks, or if the FDA or other regulatory authority, as the case may be, finds 
deficiencies in our investigational new drug, or IND, application or other submissions, or the manner in which the 
clinical trials are conducted. Therefore, we cannot predict with any certainty the schedule for commencement and 
completion of future clinical trials. If we experience delays in the commencement or completion of our clinical trials, or 
if we terminate a clinical trial prior to completion, the commercial prospects of our current and future product candidates 
could be harmed, and our ability to generate revenue from our current or future product candidates, once approved, may 
be delayed or eliminated. In addition, any delays in our clinical trials could increase our costs, slow down the approval 
process and jeopardize our ability to commence product sales and generate revenue. Any of these occurrences may harm 
our business, financial condition and results of operations. In addition, many of the factors that cause, or lead to, a delay 
in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our 
product candidates.  

39 

Moreover, principal investigators for our clinical trials may serve as our scientific advisors or consultants from 

time to time and receive compensation in connection with such services. We will be required to report these relationships 
to the FDA or other regulatory authorities as part of the drug approval process. The FDA or other regulatory authorities 
may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or 
otherwise affected interpretation of the trial results. They may therefore question the integrity of the data generated at the 
applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in 
approval, or rejection, of our marketing applications by the FDA or other regulatory authority, as the case may be, and 
may ultimately lead to the denial of marketing approval of one or more of our product candidates.  

We have never obtained marketing approval for a product candidate and we may be unable to obtain, or may be 
delayed in obtaining, marketing approval for our current product candidates or any future product candidates that we 
may develop. 

We have never obtained marketing approval for a product candidate. It is possible that the FDA may refuse to 
accept for substantive review any NDAs that we submit for our product candidates or may conclude after review of our 
data that our application is insufficient to obtain marketing approval of our product candidates. If the FDA does not 
accept or approve our NDAs for any of our product candidates, it may require that we conduct additional clinical trials, 
preclinical studies or manufacturing validation studies and submit that data before it will reconsider our applications, 
Depending on the extent of these or any other FDA-required trials or studies, approval of any NDA or application that 
we submit may be delayed by several years, or may require us to expend more resources than it has available. It is also 
possible that additional trials or studies, if performed and completed, may not be considered sufficient by the FDA to 
approve our NDAs. 

Any delay in obtaining, or an inability to obtain, marketing approvals would prevent us from commercializing 
our product candidates, generating revenues and achieving and sustaining profitability. If any of these outcomes occurs, 
we may be forced to abandon our development efforts for our product candidates, which could significantly harm our 
business, prospects, operating results and financial condition. 

Enrollment and retention of patients in clinical trials is a competitive, expensive and time-consuming process and 
could be made more difficult or rendered impossible by multiple factors outside our control. 

Identifying and qualifying patients to participate in our clinical trials is critical to our success. We may 
encounter delays in enrolling, or be unable to enroll, a sufficient number of patients to complete any of our clinical trials, 
and even once enrolled we may be unable to retain a sufficient number of patients to complete any of our trials. Patient 
enrollment and retention in clinical trials, including our recently initiated Phase 2b/3 clinical trial of livoletide in PWS 
patients, depends on many factors, including: the size of the patient population, the nature of the trial protocol, our 
ability to recruit clinical trial investigators with the appropriate competencies and experience, the existing body of safety 
and efficacy data with respect to the study drug, the number and nature of competing treatments and ongoing clinical 
trials of competing drugs for the same disease, the proximity of patients to clinical sites and the eligibility criteria for the 
trials, our ability to obtain and maintain patient consents and the risk that patients enrolled in clinical trials will drop out 
of the trials before completion.  

The competitive nature of clinical trials in the pharmaceutical and biotechnology industries may make it 
difficult for us to recruit a sufficient number of patients to complete any of our clinical trials, or may increase costs.  We 
may not be able to initiate or continue to support clinical trials of our product candidates for one or more indications, or 
any future product candidates, if we are unable to locate and enroll a sufficient number of eligible participants in these 
trials as required by the FDA or other regulatory authorities. For example, in our planned Phase 2 clinical trial for CS, 
for which enrollment is ongoing, we have experienced slower than anticipated enrollment.  The estimated prevalence of 
CS is 20,000 cases in the United States (across all ages), and only a subset of this group satisfies the enrollment criteria 
for our Phase 2 clinical trial.  Although we are reviewing options to improve enrollment rates, there is no assurance that 
our efforts will be successful. Even if we are able to enroll a sufficient number of patients in our clinical trials, if the 
pace of enrollment is slower than we expect, the development costs for our product candidates may increase and the 
completion of our trials may be delayed or our trials could become too expensive or impractical to complete.   

40 

 
Our ability to enroll and retain patients in clinical trials of livoletide may be adversely impacted by the fact that 
livoletide is administered by subcutaneous injection. Furthermore, any negative results we may report in clinical trials of 
our product candidates may make it difficult or impossible to recruit and retain patients in other clinical trials of those 
product candidates. Delays or failures in planned patient enrollment or retention may result in increased costs, program 
delays or both, which could have a harmful effect on our ability to develop livoletide and nevanimibe, or could render 
further development impossible. In addition, we may rely on CROs and clinical trial sites to ensure proper and timely 
conduct of our future clinical trials and, while we intend to enter into agreements governing their services, we will be 
limited in our ability to compel their actual performance. 

Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their 
regulatory approval, limit their commercial potential or result in significant negative consequences following any 
potential marketing approval. 

During the conduct of clinical trials, clinical investigators monitor changes in patients’ health, including 

illnesses, injuries and discomforts. Often, it is not possible to determine whether or not the product candidate being 
investigated caused these conditions, and regulatory authorities may draw different conclusions or require additional 
testing to confirm these determinations if they occur. In addition, it is possible that as we test livoletide, nevanimibe or 
any other product candidate in larger, longer and more extensive clinical programs, or as use of these product candidates 
becomes more widespread if they receive regulatory approval, illnesses, injuries, discomforts and other adverse events 
that were observed in earlier trials, as well as conditions that did not occur or went undetected in previous trials, will be 
observed or reported by subjects. If clinical testing indicates that livoletide, nevanimibe or any future product candidate 
has side effects or causes serious or life-threatening side effects, we may need to change the design of ongoing clinical 
trials or adjust dosing levels in ongoing or future clinical trials, and the development of the product candidate may be 
delayed or terminated entirely. For example, in recent years clinical trials by other companies evaluating product 
candidates for treatment of PWS, which employed a different mechanism of action than livoletide, have resulted in 
serious adverse events, including patient deaths, and the eventual termination of the clinical trial and/or clinical 
development program. Further, if the product candidate has received regulatory approval, such approval may be revoked, 
which would materially harm our business, prospects, operating results and financial condition. 

Moreover, if we elect or are required to modify, delay, suspend or terminate any clinical trial for our product 

candidates, the commercial prospects of our product candidates may be harmed and our ability to generate revenue 
through their sale may be delayed or eliminated. Any of these occurrences may harm our business, financial condition 
and prospects significantly. 

We face substantial competition, and our operating results will suffer if we fail to compete effectively.  

The commercialization of new drugs is competitive, and we may face worldwide competition from major 
pharmaceutical companies, specialty pharmaceutical companies, biotechnology companies and ultimately generic 
companies. Our competitors may develop or market therapies that are more effective, safer or less costly than any that 
we are commercializing, or may obtain regulatory or reimbursement approval for their therapies more rapidly than we 
may obtain approval for ours. 

We are aware of a number of companies that are working to develop drugs that would compete, directly or 
indirectly, against livoletide for the treatment of PWS and nevanimibe for the treatment of classic congenital adrenal 
hyperplasia, or CAH, and endogenous Cushing’s syndrome, or CS. 

Soleno Therapeutics, Inc. is currently developing diazoxide choline controlled release, an ATP-sensitive 
potassium channel agonist, and Levo Therapeutics, Inc. is pursuing development of carbetocin, a long-acting analogue of 
oxytocin, for the treatment of PWS. Each of Saniona AB, GLWL Research Inc. and Insys Therapeutics, Inc. have also 
announced or initiated smaller trials in PWS for the treatment of hyperphagia. There are also a number of compounds in 
preclinical development. 

We are aware of three other companies developing treatments for patients with CAH: Diurnal Group PLC is 
developing an exogenous cortisol treatment with a modified release intended to more closely match the physiological 

41 

release profile of cortisol but recently announced a failed Phase 3 study and placed their U.S. development activities on 
hold. Neurocrine Biosciences, Inc. has initiated a Phase 2 clinical trial targeting CRF 1 antagonist in a Phase 2 clinical 
trial, and Spruce Biosciences, Inc. is developing a CRF 1 antagonist in a Phase 2 clinical trial. Novartis AG is currently 
marketing Signifor and Corcept Therapeutics Inc. is currently marketing Korlym, both for the treatment of subsets of CS 
patients. There are several other product candidates currently in clinical development for CS, including by Novartis, 
Corcept, HRA Pharma, SA and StrongBridge BioPharma plc. Many of our existing or potential competitors may have 
substantially greater financial, technical and human resources than we do, and significantly greater experience in the 
discovery and development of product candidates, including in the recruitment of patients for clinical trials, as well as in 
obtaining regulatory approvals of those product candidates in the United States and in foreign countries. Our current and 
potential future competitors may also have significantly more experience commercializing drugs that have been 
approved for marketing. If we are not able to compete effectively against existing and potential competitors, our business 
and financial condition may be harmed. 

Mergers and acquisitions in the pharmaceutical and biotechnology industries could result in even more 
resources being concentrated among a small number of our competitors. Competition may reduce the number and types 
of patients available to us to participate in clinical trials, because some patients who might have opted to enroll in our 
trials may instead opt to enroll in a trial being conducted by one of our competitors. 

Competition may further increase as a result of advances in the commercial applicability of technologies and 
greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring 
or licensing, on an exclusive basis, drugs that are more effective or less costly than any product candidate that we may 
develop. 

Any inability to successfully complete clinical development of a product candidate could result in additional 
costs or impair or eliminate our ability to generate revenue from future sales of such product candidate, if approved, or 
from any regulatory and commercialization milestone with respect to such product candidate. In addition, if we make 
manufacturing or formulation changes to livoletide or nevanimibe, we may need to conduct additional testing to bridge 
our modified product candidates to earlier versions. Clinical trial delays could also shorten any periods during which we 
may have the exclusive right to commercialize livoletide or nevanimibe, or allow our competitors to bring comparable 
drugs to market before we do, which could impair our ability to successfully commercialize livoletide or nevanimibe, 
and may harm our business, financial condition and results of operations. 

Established pharmaceutical and biotechnology companies may invest heavily to accelerate discovery and 
development of novel compounds or to in-license novel compounds that could make livoletide or nevanimibe less 
competitive. In addition, any new product that competes with an approved product must demonstrate compelling 
advantages in efficacy, convenience, tolerability and safety in order to overcome price competition and to be 
commercially successful. Accordingly, our competitors may succeed in obtaining patent protection, discovering, 
developing and receiving FDA or other regulatory authority approval, or commercializing drugs before we do, which 
would have an adverse impact on our business and results of operations. 

The availability of our competitors’ products could limit the demand and the price we are able to charge for any 
product candidate we develop. The inability to compete with existing or subsequently introduced drugs would harm our 
business, prospects, financial condition and results of operations. 

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and 
inherently unpredictable, and even if we obtain approval for a product candidate in one country or jurisdiction, we 
may never obtain approval for, or commercialize, that product candidate in any other jurisdiction, which would limit 
our ability to realize our full market potential. 

Prior to obtaining approval to commercialize a product candidate in any jurisdiction, we or our collaborators 
must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the FDA or 
foreign regulatory agencies, that such product candidates are safe and effective for their intended uses. Results from 
preclinical studies and clinical trials can be interpreted in different ways. Even if our product candidates meet their safety 
and efficacy endpoints in clinical trials, the FDA or foreign regulatory agencies may believe the clinical trials do not 

42 

show the appropriate balance of safety and efficacy in the indication being sought or may interpret the data differently 
than we do, and deem the results insufficient to demonstrate the appropriate balance of safety and efficacy at the level 
required for product approval. Further, the regulatory authorities may not complete their review processes in a timely 
manner, or we may otherwise not be able to obtain regulatory approval. Additional delays may result if an FDA 
Advisory Committee or other regulatory authority recommends non-approval or restrictions on approval. In addition, we 
may experience delays or rejections based upon additional government regulation from future legislation or 
administrative action, or changes in regulatory authority policy during the period of product development, clinical trials 
and the review process. 

Further, in order to market any products in any particular jurisdiction, we must establish and comply with 

numerous and varying regulatory requirements on a country-by-country basis regarding safety and efficacy. Approval by 
the FDA in the United States does not ensure approval by regulatory authorities in any other country or jurisdiction. In 
addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and 
regulatory approval in one country does not guarantee regulatory approval in any other country. Approval processes vary 
among countries and can involve additional product testing and validation and additional administrative review periods. 
Seeking foreign regulatory approval could result in difficulties and costs for us and require additional preclinical studies 
or clinical trials, which could be costly and time consuming. We do not have any product candidates approved for sale in 
any jurisdiction, including in international markets, and we do not have experience in obtaining regulatory approval in 
international markets. If we fail to comply with regulatory requirements in international markets or to obtain and 
maintain required approvals, or if regulatory approvals in international markets are delayed, our target market will be 
reduced and our ability to realize the full market potential of any product we develop will be unrealized. 

The FDA or any foreign regulatory bodies can delay, limit or deny approval of our product candidates or 
require us to conduct additional preclinical or clinical testing or abandon a program for many reasons, including: 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

the FDA or the applicable foreign regulatory agency’s disagreement with the design or implementation of 
our clinical trials, including any study in 4 to 7 year old PWS patients; 

negative or ambiguous results from our clinical trials or results that may not meet the level of statistical 
significance required by the FDA or comparable foreign regulatory agencies for approval; 

serious and unexpected drug-related side effects experienced by participants in our clinical trials or by 
individuals using drugs similar to our product candidates; 

our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory body that 
our product candidates are safe and effective for the proposed indication; 

the FDA’s or the applicable foreign regulatory agency’s disagreement with the interpretation of data from 
preclinical studies or clinical trials; 

our inability to demonstrate the clinical and other benefits of our product candidates outweigh any safety or 
other perceived risks; 

the FDA’s or the applicable foreign regulatory agency’s requirement for additional preclinical studies or 
clinical trials; 

the FDA’s or the applicable foreign regulatory agency’s disagreement regarding the formulation, labeling 
or the specifications of our product candidates; 

the FDA’s or the applicable foreign regulatory agency’s failure to approve the manufacturing processes or 
facilities of third-party manufacturers with which we contract, including failure of such manufacturers to 
pass the required pre-approval inspections; or 

the potential for approval policies or regulations of the FDA or the applicable foreign regulatory agencies 
to significantly change in a manner rendering our clinical data insufficient for approval. 

Even if we eventually complete clinical testing and receives approval of an NDA or foreign marketing 
application for our product candidates, the FDA or the applicable foreign regulatory agency may grant approval 

43 

contingent on the performance of costly additional clinical trials, including Phase 4 clinical trials, or the implementation 
of a Risk Evaluation and Mitigation Strategy, or REMS, which may be required to ensure safe use of the drug after 
approval. The FDA or the applicable foreign regulatory agency also may approve a product candidate for a more limited 
indication or patient population than we originally requested, and the FDA or applicable foreign regulatory agency may 
not approve the labeling that we believe is necessary or desirable for the successful commercialization of a product 
candidate. Any delay in obtaining, or inability to obtain, applicable regulatory approval would delay or prevent 
commercialization of that product candidate and would negatively impact our business and results of operations. 

If we are not able to obtain orphan drug designations or exclusivity for any of our current or future product 
candidates for which we seek such designation, the potential profitability of any such product candidates could be 
limited. 

Regulatory authorities in some jurisdictions, including the United States, may designate drugs for relatively 

small patient populations as orphan drugs. Under the Orphan Drug Act of 1983, the FDA may designate a product as an 
orphan drug if the treatment is intended to treat a rare disease or condition, which is generally defined as a patient 
population of fewer than 200,000 individuals in the United States. Generally, if a product with an orphan drug 
designation subsequently receives the first marketing approval for a disease for which it receives the designation, then 
the product is entitled to a period of marketing exclusivity that precludes the applicable regulatory authority from 
approving another marketing application for the same product for the same disease for the exclusivity period except in 
limited situations. For purposes of small molecule drugs, the FDA defines “same drug” as a drug that contains the same 
active moiety and is intended for the same use as the drug in question. 

We have received orphan drug designation for livoletide from the FDA and EMA for the treatment of PWS. 

Nevanimibe has received orphan drug designation from the FDA for the treatment of CAH and CS and the EMA for the 
treatment of CAH. We may also seek orphan drug designation, where applicable, for our current product candidates in 
additional indications or for our future product candidates. However, obtaining an orphan drug designation can be 
difficult and we may not be successful in doing so for any of our current or future product candidates, in any applicable 
indication. Even if we were to obtain orphan drug designation for a product candidate, we may not obtain orphan 
exclusivity and that exclusivity may not effectively protect the product candidate from the competition of different 
products or drugs for the same condition, which could be approved during the exclusivity period. Additionally, after an 
orphan drug is approved, the FDA could subsequently approve another application for the same product for the same 
disease if the FDA concludes that the later product is shown to be safer, more effective or makes a major contribution to 
patient care. Orphan drug exclusive marketing rights in the United States also may be lost if the FDA later determines 
that the request for designation was materially defective, the prevalence of the orphan disease is found to increase such 
that the qualifying criterion is no longer met or if the manufacturer is unable to assure sufficient quantity of the product 
to meet the needs of patients with the rare disease or condition. The failure to obtain an orphan drug designation for any 
product candidates we may develop and seek it for, the inability to maintain that designation for the duration of the 
applicable period, or the inability to obtain or maintain orphan drug exclusivity could reduce our ability to make 
sufficient sales of the applicable product candidates to balance our expenses incurred to develop it, which would have a 
negative impact on our operational results and financial condition. 

If we are not able to obtain required regulatory approvals, we will not be able to commercialize livoletide or 
nevanimibe, and our ability to generate revenue will be harmed. 

Livoletide and nevanimibe and the activities associated with their development and commercialization, 

including their design, research, testing, manufacture, safety, efficacy, recordkeeping, labeling, packaging, storage, 
approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and other 
regulatory agencies in the United States and by similar regulatory authorities outside the United States. Failure to obtain 
marketing approval for livoletide and nevanimibe or failure to meet post-marketing requirements will prevent us from 
commercializing them. 

We have not yet received approval from regulatory authorities to market any product candidate in any 
jurisdiction, and it is possible that none of livoletide, nevanimibe or any future product candidates will ever obtain the 
appropriate regulatory approvals necessary for us to commence product sales. Neither we nor any future collaborator is 

44 

permitted to market any of our product candidates in the United States until we receive regulatory approval of an NDA 
from the FDA. 

The time required to obtain approval of an NDA by the FDA is unpredictable but typically takes many years 

following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion 
of the regulatory authorities. Prior to submitting an NDA to the FDA or an equivalent application to other foreign 
regulatory authorities for approval of livoletide for the treatment of PWS and for approval of nevanimibe for the 
treatment of CAH and CS, respectively, we will need to complete its currently planned registration clinical trials for 
each, and additional trials that the FDA may require us to complete. 

Additionally, if the results of our clinical trials are inconclusive or if there are safety concerns or serious 

adverse events associated with livoletide or nevanimibe, we may: 

• 

• 

• 

• 

• 

• 

• 

• 

• 

be delayed in obtaining marketing approval for livoletide or nevanimibe, if 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; 

be subject to additional post-marketing testing requirements; 

be required to perform additional clinical trials to support approval or be subject to additional post-
marketing testing requirements; 

have regulatory authorities withdraw, or suspend, their approval of the drug or impose restrictions on its 
distribution in the form of REMS; 

be subject to the addition of labeling statements, such as warnings or contraindications; 

be sued; or 

experience damage to our reputation. 

Furthermore, approval policies, regulations, or the type and amount of clinical data necessary to gain approval 

may change during the course of a product candidate’s clinical development and may vary among jurisdictions.  

We may rely on third-party CROs and consultants to assist us in filing and supporting the applications 
necessary to gain marketing approvals. Securing marketing approval requires the submission of extensive preclinical and 
clinical data and supporting information to regulatory authorities for each disease to establish the safety and efficacy of 
livoletide, nevanimibe and any future product candidate for that disease. Securing marketing approval also requires the 
submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the 
regulatory authorities.  

Even if we obtain regulatory approval for livoletide, nevanimibe or future product candidates, we will remain subject 
to ongoing regulatory oversight. 

Even if we obtain any regulatory approval for livoletide, nevanimibe or future product candidates, the approved 
product will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, 
promotion, sampling, record-keeping and submission of safety and other post-market information. For example, we must 
comply with the FDA’s advertising and promotion requirements, such as those related to direct-to-consumer advertising 
and the prohibition on promoting products for uses or in patient populations that are not described in the product’s 
approved labeling. In addition, any regulatory approvals that we receive for livoletide, nevanimibe or future product 
candidates may also be subject to REMS limitations on the approved indicated uses for which the drug may be marketed 
or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 
clinical trials, and surveillance to monitor the quality, safety and efficacy of the drug. 

45 

In addition, drug manufacturers and their facilities are subject to payment of user fees and continual review and 
periodic inspections by the FDA and other regulatory authorities for compliance with cGMP requirements and adherence 
to commitments made in the NDA or foreign marketing application. If we, or a regulatory authority, discover previously 
unknown problems with a drug, such as adverse events of unanticipated severity or frequency, or problems with the 
facility where the drug is manufactured or disagrees with the promotion, marketing or labeling of that drug, a regulatory 
authority may impose restrictions relative to that drug, the manufacturing facility or us, including requiring recall or 
withdrawal of the drug from the market or suspension of manufacturing. 

If we fail to comply with applicable regulatory requirements following approval of livoletide, nevanimibe or 

future product candidates, a regulatory authority may, among other things: 

• 

• 

• 

• 

• 

• 

• 

• 

• 

issue a warning letter asserting that we are in violation of the law; 

seek an injunction or impose administrative, civil or criminal penalties or monetary fines; 

suspend or withdraw regulatory approval; 

suspend any ongoing clinical trials; 

refuse to approve a pending NDA or comparable foreign marketing application (or any supplements 
thereto) submitted by us or our strategic partners; 

restrict the marketing or manufacturing of the drug; 

seize or detain the drug or otherwise require the withdrawal of the drug from the market; 

refuse to permit the import or export of product candidates; or 

refuse to allow us to enter into supply contracts, including government contracts. 

Any government investigation of alleged violations of law could require us to expend significant time and 

resources in response and could generate negative publicity. The occurrence of any event or penalty described above 
may inhibit our ability to commercialize livoletide and nevanimibe, and harm our business, financial condition and 
results of operations. 

In addition, the FDA’s policies, and those of equivalent foreign regulatory agencies, may change and additional 
government regulations may be enacted that could suspend or restrict regulatory approval of livoletide and nevanimibe. 
We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or 
administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing 
requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, 
we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which 
would harm our business, financial condition and results of operations. 

Even if one of our product candidates receives marketing approval, it may fail to achieve market acceptance by 
physicians, patients, third-party payors or others in the medical community necessary for commercial success. 

Even if one of our product candidates receives marketing approval, it may fail to gain sufficient market 
acceptance by physicians, patients, third-party payors and others in the medical community. If any such product 
candidate does not achieve an adequate level of acceptance, we may not generate significant product revenue and may 
not become profitable. The degree of market acceptance of a product candidate, if approved for commercial sale, will 
depend on a number of factors, including but not limited to: 

• 

• 

• 

the efficacy and potential advantages compared to alternative treatments; 

the success of our efforts to educate physicians, patients, third-party payors and others in the medical 
community on the benefits of our products; 

effectiveness of sales and marketing efforts; 

46 

• 

• 

• 

• 

• 

• 

• 

• 

the cost of treatment in relation to alternative treatments, including any similar generic treatments; 

our ability to offer our drugs, once approved, for sale at competitive prices; 

the convenience and ease of administration compared to alternative treatments; 

the willingness of the target patient population to try new therapies and of physicians to prescribe these 
therapies; 

the strength of marketing and distribution support; 

the availability of third-party coverage and adequate reimbursement, and patients’ willingness to pay out-
of-pocket in the absence third-party coverage or adequate reimbursement; 

the prevalence and severity of any side effects; and 

any restrictions on the use of our drugs, once approved, together with other medications 

If the market opportunities for our product candidates are smaller than we believe they are, our product revenues 
may be adversely affected and our business may suffer. 

Our efforts to educate physicians, patients, third-party payors and others in the medical community on the 

benefits of our products, if and when approved, may require significant resources and may never be successful. Further, 
patient populations suffering from PWS, CAH and CS, and other indications we may target in the future, are small and 
have not been established with precision. If the actual number of patients is smaller than we estimate for any disease that 
we are targeting, or if we cannot raise awareness of these diseases and diagnosis is not improved, our revenue and ability 
to achieve profitability may be adversely affected. For example, since the patient populations for PWS, CAH and CS are 
small, the per-patient drug pricing must be high in order to recover our development and manufacturing costs, fund 
adequate patient support programs and achieve profitability. For PWS, CAH and CS, then, we may not maintain or 
obtain sufficient sales volume at a price high enough to justify our product development efforts and our sales and 
marketing and manufacturing expenses. Because we expect sales of livoletide and nevanimibe, if approved, to generate 
substantially all of our product revenue for the foreseeable future, the failure of either of these product candidates to find 
market acceptance would harm our business. 

If we are unable to establish sales, marketing and distribution capabilities, either on our own or in collaboration with 
third parties, we may not be successful in commercializing our product candidates, if approved. 

We do not have any infrastructure for the sales, marketing or distribution of our products, and the cost of 

establishing and maintaining such an organization may exceed the cost-effectiveness of doing so. In order to market any 
product that may be approved, we must build our sales, distribution, marketing, managerial and other non-technical 
capabilities, or make arrangements with third parties to perform these services. There can be no assurance we will be 
able to do so in a cost-effective manner, on terms favorable to us, or at all. 

While we may seek the aid of global or regional collaborators to provide additional resources for larger 
indications or to co-commercialize our product candidates in the European Union and certain other territories, we expect 
to build a focused sales, distribution and marketing infrastructure to market our product candidates in the United States 
itself, if approved. There are significant expenses and risks involved with establishing our own sales, marketing and 
distribution capabilities, including our ability to hire, retain and appropriately incentivize qualified individuals, generate 
sufficient sales leads, provide adequate training to sales and marketing personnel, and effectively manage a 
geographically dispersed sales and marketing team. Any failure or delay in the development of our internal sales, 
marketing and distribution capabilities could delay any product launch, which would adversely impact its 
commercialization. 

Factors that may inhibit our efforts to commercialize our products on our own include: 

• 

our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel; 

47 

• 

• 

• 

• 

• 

the inability of sales personnel to obtain access to educate adequate numbers of physicians as to the 
benefits or our drug products; 

the inability of reimbursement professionals to negotiate arrangements, for formulary access, 
reimbursement, and other acceptance by payors; 

restricted or closed distribution channels that make it difficult to distribute our products to segments of the 
patient population; 

the lack of complementary medicines to be offered by sales personnel, which may put us at a competitive 
disadvantage relative to companies with more extensive product lines; and 

unforeseen costs and expenses associated with creating an independent sales and marketing organization. 

Further, we do not anticipate having the resources in the foreseeable future to allocate to the sales and 
marketing of our product candidates in certain markets overseas. Therefore, our future success will depend, in part, on 
our ability to enter into and maintain collaborative relationships for such capabilities, the collaborator’s strategic interest 
in a product and such collaborator’s ability to successfully market and sell the product. We intend to pursue collaborative 
arrangements regarding the sale and marketing of our product candidates, if approved, for certain markets overseas; 
however, we cannot assure you that we will be able to establish or maintain such collaborative arrangements, or if able 
to do so, that we will have effective sales forces. To the extent that we depend on third parties for marketing and 
distribution, any revenue we receive will depend upon the efforts of such third parties, and there can be no assurance that 
such efforts will be successful. 

If we are unable to build our own sales force or negotiate a collaborative relationship for the commercialization 
of our product candidates, we may be forced to delay our potential commercialization or reduce the scope of our sales or 
marketing activities for them. If we elect to increase our expenditures to fund commercialization activities itself, we will 
need to obtain additional capital, which may not be available to us on acceptable terms, or at all. If we do not have 
sufficient funds, we will not be able to bring our product candidates to market or generate product revenue. We could 
enter into arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be ideal and we 
may be required to relinquish rights to our product candidates or otherwise agree to terms unfavorable to us, any of 
which may have an adverse effect on our business and results of operations. 

If we are unable to establish adequate sales, marketing and distribution capabilities, either on our own or in 

collaboration with third parties, we will not be successful in commercializing our product candidates and may not 
become profitable. We will be competing with many companies that currently have extensive and well-funded sales and 
marketing operations. Without an internal team or the support of a third-party to perform sales and marketing functions, 
we may be unable to compete successfully against these more established companies. 

Even if we obtain and maintain approval for our current and future product candidates from the FDA, we may 
nevertheless be unable to obtain approval for our product candidates outside of the United States, which would limit 
our market opportunities and could harm our business. 

Approval of a product candidate in the United States by the FDA does not ensure approval of such product 

candidate by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority 
does not ensure approval by regulatory authorities in other foreign countries or by the FDA. If approved, sales of 
livoletide, nevanimibe and any future product candidate outside of the United States will be subject to foreign regulatory 
requirements governing clinical trials and marketing approval. Even if the FDA grants marketing approval for a product 
candidate, comparable regulatory authorities of foreign countries also must approve the manufacturing and marketing of 
the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements 
and administrative review periods different from, and more onerous than, those in the United States, including additional 
preclinical studies or clinical trials. In many countries outside the United States, a product candidate must be approved 
for reimbursement before it can be approved for sale in that country. In some cases, the price that we intend to charge for 
any product candidates, if approved, is also subject to approval. Obtaining approval for livoletide, nevanimibe or any 
future product candidate in the European Union from the European Commission following the opinion of the EMA, if 
we choose to submit a marketing authorization application there, would be a lengthy and expensive process. Even if a 

48 

product candidate is approved, the FDA or the European Commission, as the case may be, may limit the indications for 
which the drug may be marketed, require extensive warnings on the drug labeling or require expensive and time-
consuming additional clinical trials or reporting as conditions of approval. Obtaining foreign regulatory approvals and 
compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could 
delay or prevent the introduction of livoletide, nevanimibe or any future product candidate in certain countries. 

Further, clinical trials conducted in one country may not be accepted by regulatory authorities in other 
countries. Also, regulatory approval for livoletide, nevanimibe or any future product candidate may be withdrawn. If we 
fail to comply with the regulatory requirements, our target market will be reduced and our ability to realize the full 
market potential of livoletide, nevanimibe or any future product candidate will be negatively impacted, and our business, 
prospects, financial condition and results of operations could be harmed. 

We are exposed to a variety of risks associated with our international operations. 

Since the closing date of the Merger, we have been engaged in the process of winding up various subsidiaries of 

OvaScience, some or all of which are in foreign jurisdictions. We expect to incur additional costs to complete this 
process. Moreover, even if we successfully wind up these entities, we may be exposed to liability in these foreign 
jurisdictions as a result of their historical operations. 

In addition, in December 2017, we acquired Alizé, a biopharmaceutical company based in Lyon, France. As of 

March 1, 2019, we had 27 employees located in the United States and seven employees located in France. Our global 
operations expose us to numerous and sometimes conflicting legal, tax and regulatory requirements, and violations or 
unfavorable interpretation by the respective authorities of these regulations could harm our business. Risks associated 
with international operations include the following, and these risks may be more pronounced if we seek to 
commercialize livoletide, nevanimibe or any future product candidates outside of the United States: 

• 

• 

• 

• 

• 

• 

• 

different regulatory requirements for approval of therapies in foreign countries; 

reduced protection for intellectual property rights; 

unexpected changes in tariffs, trade barriers and regulatory requirements; 

economic weakness, including inflation, or political instability in particular foreign economies and 
markets; 

compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; 

foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and 
other obligations incident to doing business in another country; 

foreign reimbursement, pricing and insurance regimes; 

•  workforce uncertainty in countries where labor unrest is more common than in the United States; 
• 

changes in diplomatic and trade relationships; 

• 

• 

• 

anti-corruption laws, including the FCPA, and its equivalent in foreign jurisdictions, such as the UK 
Bribery Act; 

production shortages resulting from any events affecting raw material supply or manufacturing capabilities 
abroad; and 

business interruptions resulting from geopolitical actions, including war and terrorism or natural disasters 
including earthquakes, typhoons, floods and fires. 

In addition, there are complex regulatory, tax, labor, and other legal requirements imposed by both the 

European Union and many of the individual countries in and outside of Europe, with which we may need to comply. 
Many biopharmaceutical companies have found the process of marketing their own products in foreign countries to be 
very challenging. 

49 

Furthermore, in some countries, the pricing of prescription pharmaceuticals is subject to governmental control. 

In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of 
marketing approval for a product candidate. In addition, there can be considerable pressure by governments and other 
stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political, economic 
and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after 
coverage and reimbursement have been obtained. Reference pricing used by various countries and parallel distribution or 
arbitrage between low-priced and high-priced countries, can further reduce prices. To obtain reimbursement or pricing 
approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of ours 
product candidate to other available therapies, which is time-consuming and costly. If coverage and reimbursement of 
our product candidates are unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our 
business could be harmed.  

Legal, political and economic uncertainty surrounding the planned exit of the U.K., from the European Union, or 
EU, may be a source of instability in international markets, create significant currency fluctuations, adversely affect 
our operations in the U.K. and pose additional risks to our business, revenue, financial condition, and results of 
operations. 

On June 23, 2016, the U.K. held a referendum in which a majority of the eligible members of the electorate 

voted for the U.K. to leave the EU. The U.K.’s withdrawal from the EU is commonly referred to as Brexit.  The lack of 
clarity over which EU laws and regulations will continue to be implemented in the U.K. after Brexit (including financial 
laws and regulations, tax and free trade agreements, intellectual property rights, data protection laws, supply chain 
logistics, environmental, health and safety laws and regulations, immigration laws and employment laws) may 
negatively impact foreign direct investment in the U.K., increase costs, depress economic activity and restrict access to 
capital. The uncertainty concerning the U.K.’s legal, political and economic relationship with the EU after Brexit may be 
a source of instability in the international markets, create significant currency fluctuations, and/or otherwise adversely 
affect trading agreements or similar cross-border co-operation arrangements (whether economic, tax, fiscal, legal, 
regulatory or otherwise) beyond the date of Brexit. 

These developments, or the perception that any of them could occur, have had, and may continue to have, a 

significant adverse effect on global economic conditions and the stability of global financial markets, and could 
significantly reduce global market liquidity and limit the ability of key market participants to operate in certain financial 
markets. In particular, it could also lead to a period of considerable uncertainty in relation to the U.K. financial and 
banking markets, as well as on the regulatory process in Europe. Asset valuations, currency exchange rates and credit 
ratings may also be subject to increased market volatility.  The long-term effects of Brexit will depend on any 
agreements (or lack thereof) between the U.K. and the EU and, in particular, any arrangements for the U.K. to retain 
access to EU markets either during a transitional period or more permanently. 

Such a withdrawal from the EU is unprecedented, and it is unclear how the U.K.’s access to the European 

single market for goods, capital, services and labor within the EU, or single market, and the wider commercial, legal and 
regulatory environment, will impact us.  We may also face new regulatory costs and challenges that could have an 
adverse effect on our operations. Depending on the terms of the U.K.’s withdrawal from the EU, the U.K. could lose the 
benefits of global trade agreements negotiated by the EU on behalf of its members, which may result in increased trade 
barriers that could make our doing business in the U.K. more difficult. Furthermore, there are likely to be changes to the 
way in which marketing approvals are granted in the U.K., which could add time and expense to the process by which 
our product candidates receive and maintain regulatory approval in the U.K. and across the EEA in future. 

Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization 
of any product candidate that we may develop. 

We face an inherent risk of product liability exposure related to the testing of our current and future product 

candidates, and may face an even greater risk if we commercialize any product candidate that it may develop. If we 

50 

cannot successfully defend ourselves against claims that any such product candidates caused injuries, we could incur 
substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in: 

• 

• 

• 

• 

decreased demand for any product candidate that we may develop; 

loss of revenue; 

substantial monetary awards to trial participants or patients; 

significant time and costs to defend the related litigation; 

•  withdrawal of clinical trial participants; 
• 

the inability to commercialize any product candidate that it may develop; 

• 

• 

injury to our reputation and significant negative media attention; and 

increased marketing costs to attempt to overcome any injury to our reputation or negative media attention. 

In addition, we face an inherent risk of product liability exposure related to OvaScience's prior use of fertility 

treatments in humans. Product liability claims involving OvaScience's activities may be brought for significant amounts 
because OvaScience's potential fertility treatments involved mothers and children. For example, it is possible that we 
will be subject to product liability claims that assert that OvaScience's potential fertility treatments have caused birth 
defects in children or that such defects are inheritable.  These claims could be made many years into the future based on 
effects that were not observed or observable at the time of birth. If we cannot successfully defend against claims that 
OvaScience's potential fertility treatments caused injuries, we will incur substantial liabilities. Regardless of merit or 
eventual outcome, liability claims may result in, among other things, significant costs to defend the related litigation; 
substantial monetary awards or payments to trial participants or patients; loss of revenue; and the diversion of 
management's resources. 

Although we maintain product liability insurance coverage, such insurance may not be adequate to cover all 

liabilities that we may incur. We anticipate that we will need to increase our insurance coverage each time we commence 
a clinical trial and if we successfully commercialize any product candidate. Insurance coverage is increasingly 
expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy 
any liability that may arise. 

If OvaScience failed to comply with environmental, health and safety laws and regulations, we could become subject 
to fines or penalties or incur costs that could have a material adverse effect on the success of our business. 

OvaScience is subject to numerous environmental, health and safety laws and regulations, including those 
governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and 
wastes. OvaScience's prior operations involved the use of hazardous and flammable materials, including chemicals and 
biological materials. OvaScience's prior operations also produced hazardous waste products. OvaScience generally 
contracted with third parties for the disposal of these materials and wastes.  In the event of contamination or injury 
resulting from OvaScience's 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. 

We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in 

connection with OvaScience's storage or disposal of biological, hazardous or radioactive materials. 

51 

Risks Related to Regulatory Compliance 

Our current and future relationships with investigators, health care professionals, consultants, third-party payors and 
customers may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims 
laws, health information privacy and security laws, and other healthcare laws and regulations. If we are unable to 
comply, or have not fully complied, with such laws, we could face substantial penalties. 

Our operations may be directly, or indirectly through our prescribers, customers and purchasers, subject to 

various federal and state fraud and abuse laws and regulations, including, without limitation, the federal Anti-Kickback 
Statute, the federal civil and criminal false claims laws and Physician Payments Sunshine Act and regulations. These 
laws may constrain our current and future business or financial arrangements and relationships through which we 
conduct our operations, including how we research, market, sell and distribute our products for which we obtain 
marketing approval. In addition, we may be subject to patient privacy laws by both the federal government and the states 
and other countries in which we conduct our business. The laws that will affect our operations include, but are not 
limited to: 

• 

• 

• 

the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly 
and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe or 
rebate), directly or indirectly, overtly or covertly, in cash or in kind, in return for the purchase, 
recommendation, leasing or furnishing of an item or service reimbursable under a federal healthcare 
program, such as the Medicare and Medicaid programs. This statute has been interpreted to apply to 
arrangements between pharmaceutical manufacturers on the one hand, and prescribers, purchasers, 
formulary managers, and others on the other hand. In addition, the Patient Protection and Affordable Care 
Act, as amended by the Health Care and Education Reconciliation Act, or collectively PPACA, amended 
the intent requirement of the federal Anti-Kickback Statute, establishing that a person or entity no longer 
needs to have actual knowledge of this statute or specific intent to violate it in order to have committed a 
violation; 

federal civil and criminal false claims laws, including the federal civil False Claims Act, and civil monetary 
penalty laws which prohibit, among other things, individuals or entities from knowingly presenting, or 
causing to be presented, claims for payment or approval from Medicare, Medicaid or other government 
payors that are false or fraudulent. PPACA provides, and recent government cases against pharmaceutical 
and medical device manufacturers support the view, that federal Anti-Kickback Statute violations and 
certain marketing practices, including off-label promotion, may implicate the federal civil False Claims 
Act; 

the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created 
additional federal civil and criminal statutes that prohibit a person from knowingly and willfully executing 
a scheme or from making false or fraudulent statements to defraud any healthcare benefit program, 
regardless of the payor (e.g., public or private); 

•  HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or 

HITECH, and their implementing regulations, which imposes certain requirements relating to the privacy, 
security and transmission of individually identifiable health information without appropriate authorization 
by entities subject to the rule, such as health plans, health care clearinghouses and certain health care 
providers, known as covered entities, and their business associates who create, use or disclose individually 
identifiable health information on their behalf; 

• 

federal transparency laws, including the federal Physician Payments Sunshine Act, that require certain 
manufacturers of drugs, devices, biologics and medical supplies for which payment is available under 
Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report 
annually to CMS information related to: (i) payments or other “transfers of value” made to physicians and 
teaching hospitals and (ii) ownership and investment interests held by physicians and their immediate 
family members; 

52 

• 

• 

state and foreign law equivalents of each of the above federal laws, such as state anti-kickback, self-
referral, and false claims laws which may apply to our business practices, including but not limited to, 
research, distribution, sales and marketing arrangements as well as submitting claims involving healthcare 
items or services reimbursed by any third-party payor, including commercial insurers; state laws that 
require pharmaceutical manufacturers to comply with the industry’s voluntary compliance guidelines and 
the applicable compliance guidance promulgated by the federal government that otherwise restricts 
payments that may be made to healthcare providers; state laws that require pharmaceutical manufacturers 
to file reports with states regarding marketing information, such as the tracking and reporting of gifts, 
compensation and other remuneration and items of value provided to healthcare professionals and entities; 
state laws that require the reporting of information related to drug pricing; and state and local laws 
requiring the registration of pharmaceutical sales and medical representatives; and 

state and foreign laws that govern the privacy and security of health information in some circumstances, 
many of which differ from each other in significant ways and often are not preempted by HIPAA, thus 
complicating compliance efforts. 

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws 
and regulations will involve substantial costs. However, because of the breadth of these laws and the narrowness of the 
statutory exceptions and regulatory safe harbors available, it is possible that some of our business activities could be 
subject to challenge under one or more of such laws. If our operations are found to be in violation of any of the laws 
described above or any other government regulations that apply to us, we may be subject to penalties, including 
significant administrative, civil and criminal penalties, damages, fines, additional reporting requirements and oversight if 
we become subject to a corporate integrity agreement or similar agreement to resolve allegations of noncompliance with 
these laws, exclusion from participation in government health care programs, such as Medicare and Medicaid, 
disgorgement, contractual damages, reputational harm and the curtailment or restructuring of our operations, any of 
which could harm our ability to operate our business and our results of operations. Similar sanctions and penalties, as 
well as individual imprisonment, also can be imposed upon executive officers and employees, including criminal 
sanctions against executive officers under the so-called “responsible corporate officer” doctrine, even in situations where 
the executive officer did not intend to violate the law and was unaware of any wrongdoing. 

The risk of us being found in violation of these laws is increased by the fact that many of them have not been 

fully interpreted by the regulatory authorities or the courts, and its provisions are open to a variety of interpretations. 
Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur 
significant legal expenses and divert our management’s attention from the operation of our business. The shifting 
compliance environment and the need to build and maintain a robust and expandable system to comply with multiple 
jurisdictions with different compliance and/or reporting requirements increases the possibility that a healthcare company 
such as we may run afoul of one or more of the requirements. 

Coverage and adequate reimbursement may not be available for our current or future product candidates, which 
could make it difficult for us to sell them profitably, if approved.  

Market acceptance and sales of any product candidates that we commercialize, if approved, will depend in part 

on the extent to which coverage and reimbursement for these drugs and related treatments will be available from third-
party payors, including government health administration authorities and private health insurers. Third-party payors 
often rely upon Medicare coverage policy and payment limitations in setting their own coverage and reimbursement 
policies. However, decisions regarding the extent of coverage and amount of reimbursement to be provided for any 
product candidates that we develop will be made on a plan-by-plan basis. As a result, the coverage determination process 
is often a time-consuming and costly process that may require us to provide scientific and clinical support for the use of 
our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied 
consistently or obtained. One payor’s determination to provide coverage for a drug does not assure that other payors will 
also provide coverage, and adequate reimbursement, for the drug. Additionally, a third-party payor’s decision to provide 
coverage for a therapy does not imply that an adequate reimbursement rate will be approved. Each plan determines 
whether it will provide coverage for a therapy, what amount it will pay the manufacturer for the therapy, and on what tier 
of its formulary it will be placed. The position on a formulary generally determines the co-payment that a patient will 

53 

need to make to obtain the therapy and can strongly influence the adoption of such therapy by patients and physicians. 
Patients who are prescribed treatments for their conditions and providers prescribing such services generally rely on 
third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our drugs unless 
coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our drugs. 

A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Third-party payors have 

attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. We cannot 
be sure that coverage and reimbursement will be available for any drug that we commercialize and, if reimbursement is 
available, what the level of reimbursement will be. Inadequate coverage and reimbursement may impact the demand for, 
or the price of, any drug for which we obtain marketing approval. If coverage and reimbursement are not available, or 
are available only to limited levels, we may not be able to successfully commercialize livoletide, nevanimibe and any 
future product candidates that we develop. 

Additionally, there have been a number of legislative and regulatory proposals to change the healthcare system 

in the United States and in some foreign jurisdictions that could affect our ability to sell any future product candidates 
profitably. These legislative and regulatory changes may negatively impact the coverage and available reimbursement 
for livoletide, nevanimibe and any future product candidates we may commercialize, following approval, if obtained. 

Healthcare legislative reform measures may have a negative impact on our business and results of operations. 

In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and 

regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing 
approval of product candidates, restrict or regulate post-approval activities, and affect our ability to profitably sell any 
product candidates for which we obtain marketing approval. 

In March 2010, PPACA was passed, which substantially changed the way healthcare is financed by both the 

government and private insurers, and significantly impacts the U.S. pharmaceutical industry. PPACA, among other 
things: (i) addresses a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate 
Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; (ii) increases the minimum 
Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to 
individuals enrolled in Medicaid managed care organizations; (iii) establishes annual fees and taxes on manufacturers of 
certain branded prescription drugs; (iv) expands the availability of lower pricing under the 340B drug pricing program 
by adding new entities to the program; and (v) establishes a new Medicare Part D coverage gap discount program, in 
which manufacturers must now agree to offer 570% (and 70% beginning January 1, 2019) point-of-sale discounts off 
negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for 
the manufacturer’s outpatient drugs to be covered under Medicare Part D. 

Since PPACA was enacted, the U.S. federal government also has announced delays in the implementation of 

key provisions of PPACA. Additionally, there have been judicial and Congressional challenges to certain aspects of 
PPACA, as well as efforts by the Trump administration to repeal or replace certain aspects of PPACA. Since January 
2017, President Trump has signed two Executive Orders and other directives designed to delay the implementation of 
certain provisions of PPACA or otherwise circumvent some of the requirements for health insurance mandated by 
PPACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of 
PPACA. While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation of 
certain taxes under PPACA have been signed into law. The Tax Cuts and Jobs Act of 2017, or Tax Act, included a 
provision which repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by PPACA on 
certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to 
as the “individual mandate”. Additionally, on January 22, 2018, President Trump signed a continuing resolution on 
appropriations for fiscal year 2018 that delayed the implementation of certain PPACA-mandated fees, including the so-
called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health 
insurance providers based on market share, and the medical device excise tax on non-exempt medical devices. Further, 
the Bipartisan Budget Act of 2018, among other things, amended the PPACA, effective January 1, 2019, to increase 
from 50 percent to 70 percent the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in 
Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”. 

54 

More recently, in July 2018 CMS published a final rule permitting further collections and payments to and from certain 
PPACA qualified health plans and health insurance issuers under the PPACA risk adjustment program in response to the 
outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment. On 
December 14, 2018, a Texas U.S. District Court Judge ruled that the PPACA is unconstitutional in its entirety because 
the “individual mandate” was repealed by Congress as part of the Tax Act. While the Texas U.S. District Court Judge, as 
well as the Trump administration and CMS, have stated that the ruling will have no immediate effect pending appeal of 
the decision, it is unclear how this decision, subsequent appeals, and other efforts to repeal and replace the PPACA will 
impact the PPACA. We continue to evaluate the potential impact of PPACA and its possible repeal or replacement on 
our business. 

We expect that PPACA, as well as other healthcare reform measures that may be adopted in the future, may 

result in more rigorous coverage criteria and in additional downward pressure on the price that we are able to charge for 
any approved drug in the United States. For example, there have been several recent U.S. Congressional inquiries and 
proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug 
pricing, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under 
Medicare, and reform government program reimbursement methodologies for drugs. At the federal level, the Trump 
administration’s budget proposal for fiscal year 2019 contains further drug price control measures that could be enacted 
during the 2019 budget process or in other future legislation, including, for example, measures to permit Medicare 
Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices 
under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients. Further, the Trump 
administration released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contains 
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. The Department of Health and Human Services, or HHS, has already started 
the process of soliciting feedback on some of these measures and, at the same, is immediately implementing others under 
its existing authority. While some proposed measures will require authorization through additional legislation to become 
effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or 
administrative measures to control drug costs. At the state level, legislatures are increasingly passing legislation and 
implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient 
reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and 
transparency measures, and, in some cases, such measures are designed to encourage importation from other countries 
and bulk purchasing. Any reduction in reimbursement from Medicare or other government programs may result in a 
similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare 
reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our drugs. We expect 
that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the 
amounts that federal and state governments will pay for healthcare products and services, which could result in reduced 
demand for our product candidates or additional pricing pressures. 

In addition, other legislative changes have been adopted since PPACA was enacted. These changes include 

aggregate reductions in Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 
and, following passage of the Bipartisan Budget Act of 2018, among other legislative amendments, will remain in effect 
through 2027 unless additional Congressional action is taken. In January 2013, President Obama signed into law the 
American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several types 
of providers and increased the statute of limitations period for the government to recover overpayments to providers 
from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding, 
which could have a material adverse effect on our customers and, accordingly, our financial operations. 

Additional changes that may affect our business include those governing enrollment in federal healthcare 

programs, reimbursement changes, rules regarding prescription drug benefits under the health insurance exchanges and 
fraud and abuse and enforcement. Continued implementation of PPACA and the passage of additional laws and 
regulations may result in the expansion of new programs such as Medicare payment for performance initiatives, and may 
impact existing government healthcare programs, such as by improving the physician quality reporting system and 
feedback program. For each state that does not choose to expand its Medicaid program, there likely will be fewer insured 
patients overall, which could impact the sales, business and financial condition of manufacturers of branded prescription 

55 

drugs. Where patients receive insurance coverage under any of the new options made available through PPACA, the 
possibility exists that manufacturers may be required to pay Medicaid rebates on their resulting drug utilization, a 
decision that could impact manufacturer revenues. 

Regulatory, legislative or self-regulatory/standard developments regarding privacy and data security matters could 
adversely affect our ability to conduct our business. 

We are subject to and affected by laws, rules, regulations and industry standards related to data privacy and 

security, and restrictions or technological requirements regarding the collection, use, storage, security, retention or 
transfer of data. In the United States, the rules and regulations to which we may be subject include federal laws and 
regulations enforced by the Federal Trade Commission, the Department of Health & Human Services, and state privacy, 
data security, and breach notification laws, as well as regulator enforcement positions and expectations. Internationally, 
governments and agencies have adopted and could in the future adopt, modify, apply or enforce additional laws, policies, 
regulations, and standards covering privacy and data security that may apply to our business. New regulation or 
legislative actions regarding data privacy and security (together with applicable industry standards) may increase our 
costs of doing business. In addition to privacy and data security regulations currently in force in the jurisdictions where 
we operate, the European Union General Data Protection Regulation, or GDPR, went into effect in May 2018. The 
GDPR contains numerous requirements and changes from existing European Union, or EU, law, including more robust 
obligations on data processors and data controllers and heavier documentation requirements for data protection 
compliance programs. Specifically, the GDPR will introduce numerous privacy-related changes for companies operating 
in the EU, including greater control over personal data-by-data subjects (e.g., the “right to be forgotten”), increased data 
portability for EU consumers, data breach notification requirements, and increased fines. In particular, under the GDPR, 
fines of up to €20 million or up to 4% of the annual global revenue of the noncompliant company, whichever is greater, 
could be imposed for violations of certain of the GDPR’s requirements. The GDPR requirements apply not only to third-
party transactions, but also to transfers of information between us and our subsidiaries, including employee information. 
However, despite our ongoing efforts to bring our practices into compliance before the effective date of the GDPR, we 
may not be successful either due to various factors within our control, such as limited financial or human resources, or 
other factors outside our control. It is also possible that local data protection authorities may have different 
interpretations of the GDPR, leading to potential inconsistencies amongst various EU member states. Any failure or 
alleged failure (including as a result of deficiencies in our policies, procedures, or measures relating to privacy, data 
security, marketing, or communications) by us to comply with laws, regulations, policies, legal or contractual 
obligations, industry standards, or regulatory guidance relating to privacy or data security, may result in governmental 
investigations and enforcement actions, litigation, fines and penalties, additional regulatory oversight and reporting 
obligations or adverse publicity. We expect that there will continue to be new proposed laws, regulations and industry 
standards relating to privacy and data protection in the United States, the European Union, and in other jurisdictions, and 
we cannot determine the impact such future laws, regulations and standards may have on our business. 

Future laws, regulations, standards and other obligations or any changed interpretation of existing laws or 

regulations could impair our ability to operate our business and negatively impact our results of operations. 

Risks Related to Our Intellectual Property 

We rely on the availability of licenses for intellectual property from third parties and these licenses may not be 
available to us on commercially reasonable terms, or at all. 

We rely upon the UM License Agreement to certain patent rights and proprietary technology from the 

University of Michigan that are important or necessary to the development of nevanimibe. As of December 31, 2018, 
with respect to nevanimibe patent rights, we owned two issued U.S. patents, two pending U.S. patent applications, and a 
number of patent applications in other jurisdictions, and we jointly owned, with the University of Michigan, three issued 
U.S. patents, one pending U.S. patent application, and a number of patent applications in other jurisdictions. In addition, 
as of December 31, 2018, with respect to livoletide patent rights, we owned four issued U.S. patents, one pending U.S. 
patent application, and a number of patents and pending patent applications in other jurisdictions. There is no guarantee 
that any of the foregoing patent applications will result in issued patents, or that any current patents or patent 
applications, if issued, will include claims that are sufficiently broad to cover our product candidates or future products, 

56 

or to provide meaningful protection from our competitors in all territories in which we may wish to develop or 
commercialize our products in the future. We will be able to protect our proprietary rights from unauthorized use by 
third parties only to the extent they are covered by valid and enforceable patents or are effectively maintained as trade 
secrets within our organization. If third parties disclose or misappropriate our proprietary rights, it may have a material 
adverse effect on our business. 

The licenses granted under the UM License Agreement are revocable under certain circumstances including if 

we cease to do business, fail to make the payments due thereunder, commit a material breach of the agreement that is not 
cured within a certain time period after receiving written notice or fail to meet certain specified development and 
commercial timelines. In such an event, our ability to compete in the market may be diminished. Termination of the UM 
License Agreement may result in us having to negotiate a new or reinstated agreement, which may not be available to us 
on equally favorable terms, or at all, which may mean we are unable to develop or commercialize nevanimibe. 
Additionally, the UM License Agreement and other licenses we may enter into in the future may not provide exclusive 
rights to use such intellectual property and technology at all, in all relevant fields of use and/or in all territories in which 
we may wish to develop or commercialize our product candidates in the future. As a result, we may not be able to 
prevent competitors from developing and commercializing competitive products, including in territories included in the 
UM License Agreement. 

Licenses to additional third-party patents and materials that may be required for our development programs may 

not be available in the future or may not be available on commercially reasonable terms, or at all, which could harm our 
business and financial condition. 

Our intellectual property licenses and agreements with third parties may be subject to disagreements over contract 
interpretation, which could narrow the scope of our rights to the relevant intellectual property or technology or 
increase our financial or other obligations to our licensors. 

We currently depend, and will continue to depend, on the UM License Agreement. In addition, pursuant to an 

assignment agreement for certain patents and patent applications relating to livoletide, we are also required to pay 
royalties on commercial sales and licensing of livoletide to the assignors. Further, the assignors under this assignment 
agreement have a right to repurchase the assigned intellectual property at a certain price in the event we do not, upon 
receiving notice, use reasonable efforts to develop, introduce for sale and promote products derived from the assigned 
intellectual property. Such reasonable efforts involve spending an annual amount of at least CDN$100,000 in research 
and development related to livoletide, actively pursuing the registration, licenses and permits necessary to market 
livoletide and actual commercialization of livoletide, if approved. Further development and commercialization of 
livoletide and nevanimibe may, and development of any future product candidates may, require us to enter into 
additional license, assignment or collaboration agreements. The agreements under which we currently hold or license 
intellectual property or technology from third parties are complex, and certain provisions in such agreements may be 
susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could 
narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what 
we believe to be our financial or other obligations under the relevant agreement, either of which could have a material 
adverse effect on our business, financial condition, results of operations and prospects. 

If any of our current or future licenses or agreements or material relationships or any in-licenses upon which our 

current or future licenses and intellectual property are based are terminated or breached, we may: 

• 

• 

• 

• 

• 

lose our rights to develop and market our current and any future product candidates; 

lose our rights to patent protection for our current or any future product candidates; 

experience significant delays in the development or commercialization of our current or any future product 
candidates; 

not be able to obtain any other licenses on acceptable terms, if at all; or 

incur liability for damages. 

57 

These risks apply to any agreements that we may enter into in the future for livoletide, nevanimibe or for any 

future product candidates. If we experience any of the foregoing, it would have a material adverse effect on our business, 
financial condition and results of operations. 

If we fail to comply with our obligations in the agreements under which we hold or license intellectual property 

rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could 
lose license and intellectual property rights that are important to our business. 

Further, we cannot provide any assurances that third-party patents or other intellectual property rights do not 
exist, which might be enforced against our current product candidates, resulting in either an injunction prohibiting our 
manufacture or sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of 
compensation to third parties. Moreover, if disputes over intellectual property that we have licensed prevent or impair 
our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to 
successfully develop and commercialize the affected product candidates, which could have a material adverse effect on 
our business, prospects, financial condition and results of operations. 

If we are unable to obtain and maintain patent protection for our technology and products, or if the scope of the 
patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets.  

We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the 
intellectual property related to our product candidates. Our success depends in large part on our ability to obtain and 
maintain patent protection in the United States and other countries with respect to our current and future product 
candidates in the United States and other countries in which we plan to develop and commercialize such product 
candidates. We seek to protect our proprietary position by filing patent applications in the United States and abroad 
related to our development programs and product candidates. The patent prosecution process is expensive and time-
consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable 
cost or in a timely manner. 

Pursuant to the UM License Agreement, we obtained an exclusive, worldwide license to develop, manufacture 

and commercialize nevanimibe. However, the UM License Agreement permits the University of Michigan, and other 
non-profit research institutions which are granted such rights from the University of Michigan, to manufacture and 
research nevanimibe for internal research, public service and internal educational purposes, all of which could result in 
new patentable inventions concerning the manufacture or use of nevanimibe. In addition, pursuant to an assignment 
agreement for certain livoletide patents and patent applications, certain individuals at the Erasmus University Medical 
Center and the University of Turin were granted non-exclusive rights to use the assigned intellectual property for non-
commercial research with our prior written consent, all of which could result in new patentable inventions concerning 
the manufacture or use of livoletide. 

It is also possible that we will fail to identify patentable aspects of our research and development output before 

it is too late to obtain patent protection. The patent applications that we own or in-licenses may fail to result in issued 
patents with claims that cover our current and future product candidates in the United States or in other foreign 
countries. There is no assurance that all of the potentially relevant prior art relating to our patents and patent applications 
has been found, which can invalidate a patent or prevent a patent from issuing from a pending patent application. Even if 
patents do successfully issue and even if such patents cover our current and future product candidates, third parties may 
challenge their validity, enforceability or scope, which may result in such patents being narrowed, invalidated or held 
unenforceable. Any successful opposition to these patents or any other patents owned by or licensed to us could deprive 
us of rights necessary for the successful commercialization of any product candidates that we may develop. Further, if 
we encounter delays in regulatory approvals, the period of time during which we could market a product candidate and 
companion diagnostic under patent protection could be reduced. 

If the patent applications we hold or have in-licensed with respect to our development programs and product 

candidates fail to issue, if their breadth or strength of protection is threatened, or if they fail to provide meaningful 
exclusivity for our current and future product candidates, it could dissuade companies from collaborating with us to 

58 

develop product candidates, and threaten our ability to commercialize future drugs. Any such outcome could have a 
material adverse effect on our business. 

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves 

complex legal and factual questions and has in recent years been the subject of much litigation. In addition, the laws of 
foreign countries may not protect our rights to the same extent as the laws of the United States, or vice versa. For 
example, European patent law restricts the patentability of methods of treatment of the human body more than United 
States law does. Further, we may not be aware of all third-party intellectual property rights potentially relating to our 
product candidates. Publications of discoveries in scientific literature often lag behind the actual discoveries, and patent 
applications in the United States and other jurisdictions are typically published 18 months after filing, or in some cases, 
not at all. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our 
owned or licensed patents or pending patent applications, or that we were the first to file for patent protection of such 
inventions. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly 
uncertain. Our pending and future patent applications may not result in patents being issued which protect our 
technology or product candidates, in whole or in part, or which effectively prevent others from commercializing 
competitive technologies and drugs. Changes in either the patent laws or interpretation of the patent laws in the United 
States and other countries may diminish the value of our patents or narrow the scope of our patent protection. 

Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our 

patent applications and the enforcement or defense of our issued patents. On September 16, 2011, the Leahy-Smith 
America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of 
significant changes to United States patent law. These include provisions that affect the way patent applications are 
prosecuted and may also affect patent litigation. The United States Patent and Trademark Office, or USPTO, recently 
developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the 
substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only 
became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on 
the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties 
and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all 
of which could have a material adverse effect on our business and financial condition. Any further changes in either the 
patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our 
patents and patent applications or narrow the scope of our potential patent protection. 

Moreover, we may be subject to a third-party pre-issuance submission of prior art to the USPTO or become 
involved in opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings 
challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding 
or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our 
technology or product candidates and compete directly with us, without payment to us, or result in our inability to 
manufacture or commercialize product candidates without infringing third-party patent rights. In addition, if the breadth 
or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from 
collaborating with us to license, develop or commercialize current or future product candidates. 

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned 

and licensed patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges 
may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held 
unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or 
identical technology and product candidates, or limit the duration of the patent protection of our technology and product 
candidates. Moreover, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 
20 years from the earliest filing date of a non-provisional patent application. Various extensions may be available; 
however, the life of a patent, and the protection it affords, is limited. Without patent protection for our current or future 
product candidates, we may be open to competition from generic versions of such drugs. Given the amount of time 
required for the development, testing and regulatory review of new product candidates, patents protecting such 
candidates might expire before or shortly after such candidates are commercialized. As a result, we owned and licensed 
patent portfolio may not provide it with sufficient rights to exclude others from commercializing drugs similar or 
identical to that of us. 

59 

We jointly own patents and patent applications with third parties. Our ability to exploit or enforce these 

patent rights, or to prevent the third-party from granting licenses to others with respect to these patent rights, may be 
limited in some circumstances.  

We jointly owns certain patents and patent applications with third parties. In the absence of an agreement with 

each co-owner of jointly owned patent rights, we will be subject to default rules pertaining to joint ownership. Some 
countries require the consent of all joint owners to exploit, license or assign jointly owned patents, and if we are unable 
to obtain that consent from the joint owners, we may be unable to exploit the invention or to license or assign our rights 
under these patents and patent applications in those countries. For example, we secured exclusive rights from the 
University of Michigan for certain patents and patent applications that they jointly own with us related to nevanimibe. 
Additionally, in the United States, each co-owner may be required to be joined as a party to any claim or action we may 
wish to bring to enforce these patent rights, which may limit our ability to pursue third-party infringement claims. 

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

Periodic maintenance fees, renewal fees, annuity fees and various other government fees on patents and/or 

applications will be due to be paid to the USPTO and various government patent agencies outside of the United States in 
several stages over the lifetime of our owned and licensed patents and/or applications and any patent rights it may own 
or license in the future. We rely on our outside counsel or our licensing partners to pay these fees due to non-U.S. patent 
agencies. The USPTO and various non-U.S. government patent agencies require compliance with several procedural, 
documentary, fee payment and other similar provisions during the patent application process. We employ reputable law 
firms and other professionals to help us comply and we are also dependent on our licensors to take the necessary action 
to comply with these requirements with respect to our licensed intellectual property. In many cases, an inadvertent lapse 
can be cured by payment of a late fee or by other means in accordance with the applicable rules. 

There are situations, however, in which non-compliance can result in abandonment or lapse of the patent or 

patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. 

In such an event, potential competitors might be able to enter the market and this circumstance would have a 

material adverse effect on our business. 

Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate 
amount of time. 

Given the amount of time required for the development, testing and regulatory review of new product 

candidates such as livoletide and nevanimibe, patents protecting such candidates might expire before or shortly after 
such candidates are commercialized. We expect to seek extensions of patent terms in the United States and, if available, 
in other countries where we are prosecuting patents. In the United States, the Drug Price Competition and Patent Term 
Restoration Act of 1984 permits extension of the term of one U.S. patent that includes at least one claim covering the 
composition of matter of an FDA-approved drug, an FDA-approved method of treatment using the drug. The extended 
patent term cannot exceed the shorter of five years beyond the non-extended expiration of the patent or 14 years from the 
date of the FDA approval of the drug. However, the applicable authorities, including the FDA and the USPTO in the 
United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether 
such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions 
than we request. Further, we may not elect to extend the most beneficial patent to us or the claims underlying the patent 
that it chooses to extend could be invalidated. If any of the foregoing occurs, our competitors may be able to take 
advantage of our investment in development and clinical trials by referencing its clinical and preclinical data and launch 
their drug earlier than might otherwise be the case. 

60 

Intellectual property rights do not necessarily address all potential threats to our business. 

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual 

property rights have limitations, and may not adequately protect our business. The following examples are illustrative: 

• 

others may be able to make compounds, or livoletide and nevanimibe formulations that are similar to our 
livoletide and nevanimibe formulations but that are not covered by the claims of the patents that we own or 
control; 

•  we or any strategic partners might not have been the first to make the inventions covered by the issued 

patents or pending patent applications that we own or control; 

•  we might not have been the first to file patent applications covering certain of our inventions; 
• 

others may independently develop similar or alternative technologies or duplicate any of our technologies 
without infringing our intellectual property rights; 

• 

• 

• 

it is possible that our pending patent applications will not lead to issued patents; 

issued patents that we own or control may not provide us with any competitive advantages, or may be held 
invalid or unenforceable as a result of legal challenges; 

our competitors might conduct research and development activities in the United States and other countries 
that provide a safe harbor from patent infringement claims for certain research and development activities, 
as well as in countries where we do not have patent rights and then use the information learned from such 
activities to develop competitive drugs for sale in our major commercial markets; 

•  we may not develop additional proprietary technologies that are patentable; and 
• 

the patents of others may have an adverse effect on our business. 

We do not have broad composition of matter patent protection with respect to nevanimibe. 

We own certain patents and patent applications with claims directed to the form of nevanimibe and to specific 

methods of using nevanimibe and it expects to have marketing exclusivity from the FDA and EMA for a period of seven 
and ten years, respectively, because nevanimibe has not been approved in these markets. However, we do not have 
composition of matter protection in the United States and elsewhere broadly covering nevanimibe. We may be limited in 
our ability to list our patents in the FDA’s Orange Book if the form of the compound used is materially different from 
what is claimed in our patents, or if the use of its product, consistent with its FDA-approved label, would not fall within 
the scope of our patent claims. Also, our competitors may be able to offer and sell products so long as these competitors 
do not infringe any other patents that we (or third parties) hold, including patents with claims directed to the forms and 
manufacture of nevanimibe and/or method of use patents. In general, patents covering certain forms of a compound and 
method of use patents are more difficult to enforce than broad composition of matter patents because, for example, of the 
risks that the FDA may approve different forms of subject compounds or alternative uses of the subject compounds not 
covered by the method of use patents, and others may engage in off-label sale or use of the subject compounds. 
Physicians are permitted to prescribe an approved product for uses that are not described in the product’s labeling. 
Although off-label prescriptions may infringe its method of use patents, the practice is common across medical 
specialties and such infringement is difficult to prevent or prosecute. FDA approval of uses that are not covered by our 
patents would limit our ability to generate revenue from the sale of nevanimibe, if approved for commercial sale. Off-
label sales would limit our ability to generate revenue from the sale of nevanimibe, if approved for commercial sale. 

Third parties may initiate legal proceedings, which are expensive and time consuming, alleging that we are infringing 
their intellectual property rights, the outcome of which would be uncertain and could have a material adverse impact 
on the success of our business. 

Our commercial success depends, in part, upon our ability, and the ability of our future collaborators, to 
develop, manufacture, market and sell livoletide, nevanimibe and any future product candidates and use our proprietary 

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technologies without infringing the proprietary rights and intellectual property of third parties. The biotechnology and 
pharmaceutical industries are characterized by extensive and complex litigation regarding patents and other intellectual 
property rights. We may in the future become party to, or be threatened with, adversarial proceedings or litigation 
regarding intellectual property rights with respect to livoletide, nevanimibe and any future product candidates and 
technology, including interference proceedings, post grant review and inter partes review before the USPTO. Third 
parties may assert infringement claims against us based on existing patents or patents that may be granted in the future, 
regardless of their merit. There is a risk that third parties may choose to engage in litigation with us to enforce or to 
otherwise assert their patent rights against us. Even if we believe such claims are without merit, a court of competent 
jurisdiction could hold that these third-party patents are valid, enforceable and infringed, which could have a material 
adverse effect on our ability to commercialize livoletide, nevanimibe and any future product candidates. In order to 
successfully challenge the validity of any such U.S. patent in federal court, we would need to overcome a presumption of 
validity. As this burden is a high one requiring us to present clear and convincing evidence as to the invalidity of any 
such U.S. patent claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any 
such U.S. patent. If we are found to infringe a third-party’s valid and enforceable intellectual property rights, we could 
be required to obtain a license from such third-party to continue developing, manufacturing and marketing our product 
candidate and technology. However, we may not be able to obtain any required license on commercially reasonable 
terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors and 
other third parties access to the same technologies licensed to us, and it could require us to make substantial licensing 
and royalty payments. We could be forced, including by court order, to cease developing, manufacturing and 
commercializing the infringing technology or product candidate. In addition, we could be found liable for monetary 
damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other 
intellectual property right. A finding of infringement could prevent us from manufacturing and commercializing 
livoletide, nevanimibe or any future product candidates or force us to cease some or all of our business operations, which 
would have a material adverse effect on our business. Claims that we have  misappropriated the confidential information 
or trade secrets of third parties could have a similar material adverse effect on our business. Even if we prevail in such 
infringement claims, patent litigation can be expensive and time consuming, which would harm our business, financial 
condition and results of operations. 

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

Competitors may infringe or otherwise violate our patents, the patents of our licensors or our other intellectual 

property rights. To counter infringement or unauthorized use, we may be required to file legal claims, which can be 
expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours or 
our licensors is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on 
the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense 
proceedings could put one or more of ours patents at risk of being invalidated or interpreted narrowly and could put our 
patent applications at risk of not issuing. The initiation of a claim against a third-party may also cause the third-party to 
bring counter claims against us such as claims asserting that our patents are invalid or unenforceable. In patent litigation 
in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a 
validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, 
obviousness, non-enablement or lack of statutory subject matter. Grounds for an unenforceability assertion could be an 
allegation that someone connected with prosecution of the patent withheld relevant material information from the 
USPTO, or made a materially misleading statement, during prosecution. Third parties may also raise similar validity 
claims before the USPTO in post-grant proceedings such as ex parte reexaminations, inter partes review, or post-grant 
review, or oppositions or similar proceedings outside the United States, in parallel with litigation or even outside the 
context of litigation. The outcome following legal assertions of invalidity and unenforceability is unpredictable. We 
cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during 
prosecution. For the patents and patent applications that we have licensed, we may have limited or no right to participate 
in the defense of any licensed patents against challenge by a third-party. If a defendant were to prevail on a legal 
assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of any future patent protection on 
our current or future product candidates. Such a loss of patent protection could have material adverse effect on our 
business. 

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We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, 
particularly in countries where the laws may not protect those rights as fully as in the United States. Our business could 
be harmed if in litigation the prevailing party does not offer us a license on commercially reasonable terms. Any 
litigation or other proceedings to enforce our intellectual property rights may fail, and even if successful, may result in 
substantial costs and distract our management and other employees. Even if we prevail in such infringement claims, 
patent litigation can be expensive and time consuming, which would harm our business, financial condition and results 
of operations. 

Furthermore, because of the substantial amount of discovery required in connection with intellectual property 
litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type 
of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings 
or developments. If securities analysts or investors perceive these results to be negative, it could have an adverse effect 
on the price of our common stock. 

Changes in U.S. patent law or the patent law of other countries or jurisdictions could diminish the value of patents in 
general, thereby impairing our ability to protect our product candidates. 

The United States has recently enacted and implemented wide-ranging patent reform legislation. The U.S. 

Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available 
in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing 
uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty 
with respect to the value of patents, once obtained. Depending on actions by the U.S. Congress, federal courts, USPTO, 
and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in 
unpredictable ways that would weaken our ability to obtain new patents or to enforce patents that we have licensed or 
that we might obtain in the future. Similarly, changes in patent law and regulations in other countries or jurisdictions or 
changes in the governmental bodies that enforce them or changes in how the relevant governmental authority enforces 
patent laws or regulations may weaken our ability to obtain new patents or to enforce patents that we have licensed or 
that we may obtain in the future. 

We may not be able to protect our intellectual property rights throughout the world, which could have a material 
adverse effect on our business. 

Filing, prosecuting and defending patents covering livoletide, nevanimibe and any future product candidates 

throughout the world would be prohibitively expensive. Competitors may use our technologies in jurisdictions where we 
have not obtained patent protection to develop our own drugs and, further, may export otherwise infringing drugs to 
territories where we may obtain patent protection, but where patent enforcement is not as strong as that in the United 
States. These drugs may compete with our drugs in jurisdictions where we do not have any issued or licensed patents and 
any future patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so 
competing. 

Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor 
will discover them or that our trade secrets will be misappropriated or disclosed. 

If we rely on third parties to manufacture and commercialize livoletide, nevanimibe or any future product 

candidates, or if we collaborate with third parties for the development of livoletide, nevanimibe or any future product 
candidates, we must, at times, share trade secrets with them. We may also conduct joint research and development 
programs that may require us to share trade secrets under the terms of our research and development partnerships or 
similar agreements. We seek to protect our proprietary technology in part by entering into confidentiality agreements 
and, if applicable, material transfer agreements, consulting agreements or other similar agreements with our advisors, 
employees, third-party contractors and consultants prior to beginning research or disclosing proprietary information. 
These agreements typically limit the rights of the third parties to use or disclose our confidential information, including 
our trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade 
secrets and other confidential information increases the risk that such trade secrets become known by our competitors, 
are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. 

63 

Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our 
trade secrets or other unauthorized use or disclosure could have an adverse effect on our business and results of 
operations. 

In addition, these agreements typically restrict the ability of our advisors, employees, third-party contractors 
and consultants to publish data potentially relating to our trade secrets. Despite our efforts to protect our trade secrets, 
our competitors may discover our trade secrets, either through breach of our agreements with third parties, independent 
development or publication of information by any of third-party collaborators. A competitor’s discovery of our trade 
secrets would harm our business. 

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

Certain of our employees, consultants or advisors are currently, or were previously, employed at universities or 
other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try 
to ensure that our employees, consultants and advisors do not use the proprietary information or know-how of others in 
their work for us, we may be subject to claims that these individuals or we have used or disclosed intellectual property, 
including trade secrets or other proprietary information, of any such individual’s current or former employer. Litigation 
may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary 
damages we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against 
such claims, litigation could result in substantial costs and be a distraction to management. 

In addition, while it is our approach to require our employees and contractors who may be involved in the 

conception or development of intellectual property to execute agreements assigning such intellectual property to us, we 
may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual 
property that we regard as our own. The assignment of intellectual property rights may not be self-executing or the 
assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims 
that they may bring against us, to determine the ownership of what we regard as our intellectual property. 

Risks Related to Our Dependence on Third Parties 

We do not have our own manufacturing capabilities and will rely on third parties to produce clinical and commercial 
supplies of livoletide and nevanimibe, and any future product candidate. 

We have no experience in drug formulation or manufacturing and do not own or operate, and we do not expect 

to own or operate, facilities for product manufacturing, storage and distribution, or testing. We will rely on a contract 
manufacturing organization, or CMO, to produce additional livoletide active pharmaceutical ingredient, or API, for us 
for clinical use. We also currently rely on CMOs to produce nevanimibe for our clinical trials. Additionally, we rely on 
CMOs with respect to the manufacture of drug product for our clinical trials, including for filing and packaging. Any 
significant delay in the supply of a product candidate, or the raw material components thereof, for an ongoing clinical 
trial due to the need to replenish the supply or replace a third-party manufacturer could considerably delay completion of 
our clinical trials, product testing and potential regulatory approval of our product candidates. If we or our manufacturer 
are unable to purchase these raw materials after regulatory approval has been obtained for our product candidates, the 
commercial launch of our product candidates would be delayed or there would be a shortage in supply, which would 
impair our ability to generate revenue from the sale of our product candidates. 

We will need to rely on third-party manufacturers to supply us with sufficient quantities of livoletide and 

nevanimibe to be used, if approved, for the commercialization of each. The facilities used by our contract manufacturers 
to manufacture our product candidates must be approved by the FDA pursuant to inspections that will be conducted after 
we submit our NDA to the FDA. We do not control the manufacturing process of, and are completely dependent on, our 
contract manufacturing partners for compliance with cGMP requirements for manufacture of drug products. If our 
contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict 
regulatory requirements of the FDA or others, they will not be able to secure or maintain regulatory approval for their 
manufacturing facilities. In addition, we have no control over the ability of our contract manufacturers to maintain 

64 

adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory 
authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such 
approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our 
ability to develop, obtain regulatory approval for or market our product candidates, if approved. Further, our reliance on 
third-party manufacturers entails risks, to which we would not be subject if we manufactured product candidates 
ourselves, including: 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

inability to meet our product specifications and quality requirements consistently; 

delay or inability to procure or expand sufficient manufacturing capacity; 

issues related to scale-up of manufacturing; 

costs and validation of new equipment and facilities required for scale-up; 

failure to comply with cGMP and similar foreign standards; 

inability to negotiate manufacturing agreements with third parties under commercially reasonable terms; 

termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that is 
costly or damaging to us; 

reliance on a limited number of sources, and in some cases, single sources for product components; 

lack of qualified backup suppliers for those materials that are currently purchased from a sole or single 
source supplier; 

operations of our third-party manufacturers or suppliers could be disrupted by conditions unrelated to our 
business or operations, including the bankruptcy of the manufacturer or supplier; 

inability to find replacement manufacturers or suppliers, if necessary, on terms favorable to us, in a timely 
manner, or at all; 

carrier disruptions or increased costs that are beyond our control; and 

failure to deliver our products under specified storage conditions and in a timely manner. 

Any of these events could lead to clinical trial delays, failure to obtain regulatory approval or impact our ability 

to successfully commercialize our products once approved. Some of these events could be the basis for FDA or other 
regulatory authority action, including injunction, recall, seizure, or total or partial suspension of production. 

We may in the future enter into collaborations with third parties to develop our product candidates. If these 
collaborations are not successful, our business could be harmed. 

We may enter into collaborations with third parties in the future. We may in the future determine to collaborate 

with other pharmaceutical and biotechnology companies for development and potential commercialization of our 
product candidates. These relationships, or those like them, may require us to incur non-recurring and other charges, 
increase our near- and long-term expenditures, issue securities that dilute our existing stockholders or disrupt our 
management and business. In addition, we could face significant competition in seeking appropriate collaborators and 
the negotiation process is time-consuming and complex. Our ability to reach a definitive collaboration agreement will 
depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions 
of the proposed collaboration and the proposed collaborator’s evaluation of several factors. If we license rights to our 
product candidates, we may not be able to realize the benefit of such transactions if we are unable to successfully 
integrate them with our existing operations and company culture. 

If any such potential future collaborations do not result in the successful development and commercialization of 
product candidates, or if one of our future collaborators terminates its agreement with us, we may not receive any future 
research funding or milestone or royalty payments under the collaboration. If we do not receive the funding we expect 
under these agreements, the development of our product candidates could be delayed and we may need additional 

65 

resources to develop our product candidates. In addition, if one of our future collaborators terminates its agreement with 
us, we may find it more difficult to attract new collaborators and the perception of us in the business and financial 
communities could be adversely affected. All of the risks relating to product development, regulatory approval and 
commercialization apply to the activities of our potential future collaborators. 

We may not be successful in finding strategic collaborators for continuing development of livoletide or nevanimibe, 
or successfully commercializing or competing in the market for certain diseases. 

We may seek to develop strategic partnerships for developing and commercializing livoletide or nevanimibe, 

due to capital costs required to develop the product candidate, manufacturing constraints or anticipated 
commercialization costs. We may not be successful in our efforts to establish such a strategic partnership or other 
alternative arrangements for livoletide or nevanimibe because our research and development pipeline may be insufficient 
or third parties may not view livoletide or nevanimibe as having the requisite potential to demonstrate safety and 
efficacy. In addition, we may be restricted under an existing collaboration agreement from entering into a future 
agreement with a potential collaborator. We cannot be certain that, following a strategic transaction or license, we will 
achieve an economic benefit that justifies such transaction. 

If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms or at all, 

we may have to curtail the development of our product candidates, reduce or delay the development programs, delay 
potential commercialization, reduce the scope of any sales or marketing activities or increase our expenditures and 
undertake development or commercialization activities at our own expense. If we elect to fund development or 
commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may 
not be available to us on acceptable terms or at all. If we fail to enter into collaborations and do not have sufficient funds 
or expertise to undertake the necessary development and commercialization activities, we may not be able to further 
develop livoletide or nevanimibe, which could harm our business, financial condition and results of operations. 

We rely on third parties to conduct, supervise and monitor our clinical trials, and if those third parties perform in an 
unsatisfactory manner, it may harm our business. 

We currently do not have the ability to independently conduct preclinical studies and clinical trials that comply 

with the regulatory requirements known as good laboratory practice, or GLP, or GCP, respectively. We also do not 
currently have the ability to independently conduct large clinical trials. We intend to rely on CROs and clinical trial sites 
to ensure the proper and timely conduct of our clinical trials, and we expect to have limited influence over their actual 
performance. 

We intend to rely upon CROs to monitor and manage data for our clinical programs, as well as the execution of 

future preclinical studies. We expect to control only certain aspects of our CROs’ activities. Nevertheless, we will be 
responsible for ensuring that each of our studies or trials is conducted in accordance with the applicable protocol, legal, 
regulatory and scientific standards and our reliance on the CROs does not relieve us of our regulatory responsibilities. 

We and our CROs will be required to comply with GLP and GCP, which are regulations and guidelines 
enforced by the FDA and are also required by the Competent Authorities of the Member States of the European 
Economic Area and comparable foreign regulatory authorities in the form of International Conference on Harmonization 
guidelines for any of our product candidates that are in preclinical and clinical development, respectively. The regulatory 
authorities enforce GCP through periodic inspections of trial sponsors, principal investigators and clinical trial sites. 
Although we rely on CROs to conduct any future GLP-compliant preclinical and preclinical studies and current or 
planned GCP-compliant clinical trials, we remain responsible for ensuring that each of our GLP preclinical studies and 
clinical trials is conducted in accordance with our investigational plan and protocol and applicable laws and regulations, 
and our reliance on the CROs does not relieve us of our regulatory responsibilities. If we or our CROs fail to comply 
with GCP, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign 
regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. 
Accordingly, if our CROs fail to comply with these regulations or fail to recruit a sufficient number of subjects, we may 
be required to repeat clinical trials, which would delay the regulatory approval process. 

66 

While we will have agreements governing their activities, our CROs are and will not be our employees, and we 
will not control whether or not they devote sufficient time and resources to our future clinical and preclinical programs. 
These CROs may also have relationships with other commercial entities, including our competitors, for whom they may 
also be conducting clinical trials, or other drug development activities which could harm our business. We face the risk 
of potential unauthorized disclosure or misappropriation of our intellectual property by CROs, which may reduce our 
trade secret protection and allow our potential competitors to access and exploit our proprietary technology. If our CROs 
do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or 
accuracy of the clinical data they obtain is compromised due to the failure to adhere to its clinical protocols or regulatory 
requirements or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able 
to obtain regulatory approval for, or successfully commercialize any product candidate that we develop. As a result, our 
financial results and the commercial prospects for any product candidate that we develop would be harmed, our costs 
could increase, and our ability to generate revenue could be delayed. 

If our relationships with these CROs terminate, we may not be able to enter into arrangements with alternative 

CROs or do so on commercially reasonable terms. Switching or adding additional CROs involves substantial cost and 
requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. 
As a result, delays occur, which can negatively impact our ability to meet our desired clinical development timelines. 
Though we intend to carefully manage our relationships with our CROs, there can be no assurance that we will not 
encounter challenges or delays in the future or that these delays or challenges will not have a negative impact on our 
business and financial condition. Further, we currently rely on two CROs to conduct our ongoing clinical trials and may 
engage one of these same CROs to conduct additional clinical trials on our behalf. To the extent that these CROs fail to 
comply with GLP or their contractual obligations to us for any reason, the negative impact on our business and financial 
condition could be more profound than if we relied on a greater number of CROs. 

Risks Related to Our Business Operations, Employee Matters and Managing Growth 

Recent acquisitions and potential future acquisitions could prove difficult to integrate, disrupt our business, dilute 
stockholder value and strain our resources. 

We completed our acquisition of Alizé Pharma SAS, or Alizé, through which we acquired livoletide, our PWS 

product candidate, in December 2017. In the future, we may acquire additional companies, technologies or product 
candidates that we believe could complement or expand our business. Integrating the operations of acquired businesses 
successfully or otherwise realizing any of the anticipated benefits of acquisitions involves a number of potential 
challenges. The failure to meet these integration challenges could seriously harm our financial condition and results of 
operations. Realizing the benefits of acquisitions depends in part on the integration of operations and personnel. These 
integration activities are complex and time-consuming, and we may encounter unexpected difficulties or incur 
unexpected costs, including with respect to: 

• 

• 

• 

• 

• 

• 

• 

diversion of management attention from ongoing business concerns to integration matters;   

coordinating clinical and preclinical development plans;   

consolidating and rationalizing information technology and accounting platforms and administrative 
infrastructures;    

complexities associated with managing the geographic separation of the combined businesses and 
consolidating multiple physical locations;    

discontinuation of operations of OvaScience and contingent liabilities we assumed in connection with the 
Merger; 

reconciling different corporate cultures; and   

retaining scientific and other key employees. 

67 

Acquired businesses may have liabilities, adverse operating issues or other matters of concern arise following 

the acquisition that we fail to discover through due diligence prior to the acquisition. Further, our acquisition targets may 
not have as robust internal controls over financial reporting as would be expected of a public company. Acquisitions may 
also result in the recording of goodwill and other intangible assets that are subject to potential impairment in the future 
that could harm our financial results. We may also become subject to new regulations as a result of an acquisition, 
including if we acquire operations in a country in which we do not already operate. If we fail to properly evaluate 
acquisitions or unanticipated issues arise following the acquisition, we may incur costs in excess of what we anticipate 
and may not otherwise achieve the anticipated benefits of any such acquisitions. 

We are highly dependent on the services of our key executives and personnel, including Julia C. Owens, Ph.D., our 
chief executive officer, Louis Arcudi, our chief financial officer, and Pharis Mohideen, MD, our chief medical 
officer, and if we are not able to retain these members of our management team or recruit and retain additional 
management, clinical and scientific personnel, our business will be harmed. 

We are highly dependent on Drs. Owens and Mohideen and Mr. Arcudi. The employment agreements we have 
with these officers do not prevent such persons from terminating their employment with us at any time. The loss of the 
services of any of these persons could impede the achievement of our research, development and commercialization 
objectives. 

In addition, we are dependent on our continued ability to attract, retain and motivate highly qualified additional 
management, clinical and scientific personnel. If we are not able to retain our management and to attract, on acceptable 
terms, additional qualified personnel necessary for the continued development of our business, we may not be able to 
sustain our operations or grow. 

We may not be able to attract or retain qualified personnel in the future due to the intense competition for 
qualified personnel among biotechnology, pharmaceutical and other businesses. Many of the other pharmaceutical 
companies that we compete against for qualified personnel and consultants have greater financial and other resources, 
different risk profiles, are located in geographies with a larger biotechnology industry presence and a longer history in 
the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. 
Some of these characteristics may be more appealing to high-quality candidates and consultants than what we have to 
offer. If we are unable to continue to attract, retain and motivate high-quality personnel and consultants to accomplish 
our business objectives, the rate and success at which we can discover and develop product candidates and our business 
will be limited and we may experience constraints on our development objectives. 

Our future performance will also depend, in part, on our ability to successfully integrate newly hired executive 

officers into our management team and our ability to develop an effective working relationship among senior 
management. Our failure to integrate these individuals and create effective working relationships among them and other 
members of management could result in inefficiencies in the development and commercialization of our product 
candidates, harming future regulatory approvals, sales of our product candidates and our results of operations. 
Additionally, we do not currently maintain “key person” life insurance on the lives of our executives or any of our 
employees. 

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

As of March 1, 2019, we had 34 employees, 32 of whom were full-time and two of whom were part-time 
employees. As our development and commercialization plans and strategies develop, we expect to need additional 
managerial, operational, sales, marketing, financial, legal and other resources. Our management may need to divert a 
disproportionate amount of our attention away from our day-to-day activities and devote a substantial amount of time to 
managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may 
result in weaknesses in our infrastructure, operational inefficiencies, loss of business opportunities, loss of employees 
and reduced productivity among remaining employees. Our expected growth could require significant capital 
expenditures and may divert financial resources from other projects, such as the development of our current and future 
product candidates. If our management is unable to effectively manage our growth, our expenses may increase more than 

68 

expected, our ability to generate and grow revenue could be reduced, and we may not be able to implement our business 
strategy. Our future financial performance and our ability to commercialize our product candidates, develop a scalable 
infrastructure and compete effectively will depend, in part, on our ability to effectively manage any future growth. 

Our employees, independent contractors, principal investigators, consultants, commercial collaborators, service 
providers and other vendors may engage in misconduct or other improper activities, including noncompliance with 
regulatory standards and requirements, which could have an adverse effect on our results of operations. 

We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants 

and commercial partners. Misconduct by these parties could include intentional failures to comply with FDA regulations 
or the regulations applicable in other jurisdictions, provide accurate information to the FDA and other regulatory 
authorities, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, report 
financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and 
business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, 
misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations restrict or prohibit a wide 
range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other 
business arrangements. Such misconduct also could involve the improper use of information obtained in the course of 
clinical trials or interactions with the FDA or other regulatory authorities, which could result in regulatory sanctions and 
cause serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and the 
precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks 
or losses or in protecting us from government investigations or other actions or lawsuits stemming from a failure to 
comply with these laws or regulations. If any such actions are instituted against us and we are not successful in 
defending itself or asserting our rights, those actions could have a negative impact on our  business, financial condition 
and results of operations, including the imposition of significant fines or other sanctions. 

We may be delayed in our receipt of certain tax benefits that Alizé historically received as a French technology 
company. 

As a French technology company, Alizé historically benefited from certain tax advantages, including the French 

research tax credit (credit d’impot recherche), or CIR. The CIR is a French tax credit aimed at stimulating research and 
development, and can offset French corporate income tax due. Alizé has historically received CIR reimbursements 
promptly following filing for such reimbursements with applicable French taxing authorities. During the year ended 
December 31, 2017, Alizé received $0.5 million for claims made during the year ended December 31, 2016. Additional 
claims were made during the year ended December 31, 2017, totaling $1.0 million, which we received in 2019. 
However, following our acquisition of Alizé, the combined business may no longer qualify as a French small or medium 
size enterprise, and, accordingly, the combined business may be subject to a three-year waiting period for reimbursement 
of CIRs, which could adversely affect the combined business’s results of operations and cash flows.  

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

Our internal computer systems and those of our current and any future collaborators and other contractors or 
consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and 
telecommunication and electrical failures. While we are not aware of any such material system failure, accident or 
security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a 
material disruption of our development programs and our business operations, whether due to a loss of our trade secrets 
or other proprietary information or other similar disruptions. For example, the loss of clinical trial data from completed 
or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to 
recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage 
to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur 
liability, our competitive position could be harmed and the further development and commercialization of our product 
candidates could be delayed. 

69 

We may be exposed to significant foreign exchange risk.  

We incur portions of our expenses, and may in the future derive revenue, in currencies other than the U.S. 

dollar, in particular, the euro. As a result, we are exposed to foreign currency exchange risk as our results of operations 
and cash flows are subject to fluctuations in foreign currency exchange rates. We currently do not engage in hedging 
transactions to protect against uncertainty in future exchange rates between particular foreign currencies and the euro. 
Therefore, for example, an increase in the value of the euro against the U.S. dollar could be expected to have a negative 
impact on our operating expenses as euro denominated expenses, if any, would be translated into U.S. dollars at an 
increased value. We cannot predict the impact of foreign currency fluctuations, and foreign currency fluctuations in the 
future may adversely affect our financial condition, results of operations and cash flows. 

Risks Related to Ownership of Our Common Stock and Our Status as a Public Company 

The trading price of the shares of our common stock may be volatile, and purchasers of our common stock could 
incur substantial losses. 

Our stock price may be volatile. The stock market in general and the market for biopharmaceutical companies 

in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular 
companies. As a result of this volatility, investors may not be able to sell their common stock at or above the price paid 
for the shares. The market price for our common stock may be influenced by many factors, including: 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

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the commencement, enrollment or results of our clinical trials or changes in the development status of our 
product candidates; 

any delay in our regulatory filings for any product candidate we may develop, and any adverse 
development or perceived adverse development with respect to the applicable regulatory authority’s review 
of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter or a request for 
additional information; 

adverse results from, delays in or termination of clinical trials; 

adverse regulatory decisions, including failure to receive regulatory approval of our product candidates; 

unanticipated serious safety concerns related to the use of our product candidates; 

changes in financial estimates by us or by any securities analysts who might cover our stock; 

conditions or trends in our industry; 

changes in the structure of healthcare payment systems; 

changes in the structure of healthcare payment systems; 

changes in the market valuations of similar companies; 

stock market price and volume fluctuations of comparable companies and, in particular, those that operate 
in the biopharmaceutical industry; 

publication of research reports about us or our industry or positive or negative recommendations or 
withdrawal of research coverage by securities analysts; 

announcements by us or our competitors of significant acquisitions, strategic partnerships or divestitures; 

announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us; 

investors’ general perception of our company and our business; 

recruitment or departure of key personnel; 

overall performance of the equity markets; 

70 

• 

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trading volume of our common stock; 

disputes or other developments relating to proprietary rights, including patents, litigation matters and our 
ability to obtain patent protection 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, in the past, stockholders have initiated class action lawsuits against pharmaceutical and 
biotechnology companies following periods of volatility in the market prices of these companies’ stock. Such litigation, 
if instituted against us, could cause us to incur substantial costs and divert management’s attention and resources from 
our business. 

If equity research analysts do not publish research or reports, or publish unfavorable research or reports, about us, 
our business or our market, our stock price and trading volume could decline. 

The trading market for our common stock will be influenced by the research and reports that equity research 

analysts publish about us and our business. As a newly public company, we have only limited research coverage by 
equity research analysts. Equity research analysts may elect not to initiate or continue to provide research coverage of 
our common stock, and such lack of research coverage may adversely affect the market price of our common stock. 
Even if we continue to have equity research analyst coverage, we will not have any control over the analysts or the 
content and opinions included in their reports. The price of our stock could decline if one or more equity research 
analysts downgrade our stock or issue other unfavorable commentary or research. If one or more equity research analysts 
ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which 
in turn could cause our stock price or trading volume to decline. 

Future sales of our common stock in the public market could cause our share price to decline.  

Sales of a substantial number of shares of our common stock in the public market could occur at any time, 
subject to the restrictions and limitations described below. If our stockholders sell, or the market perceives that our 
stockholders intend to sell, substantial amounts of our common stock in the public market, the market price of our 
common stock could decline significantly.  

In connection with the Merger, stockholders holding approximately 58.4% of our common stock outstanding 

are subject to lock-up restrictions restricting their sale or transfer of our shares until June 6, 2019, or the Lock-Up Period, 
and, will, after the expiration of such Lock-Up Period, have the right, subject to various conditions and limitations, to 
include their shares of our common stock in registration statements relating to our securities. Additionally, 1,866,574 of 
our shares are currently registered for resale and are freely tradeable on Form S-3 and the holders of approximately 
9,090,379 shares of our common stock, or their transferees, have rights, subject to some conditions, to require us to file 
one or more registration statements covering their shares or to include their shares in registration statements that we may 
file for ourselves or other stockholders. If we were to register the resale of these shares, they could be freely sold in the 
public market. If these additional shares are sold, or if it is perceived that they will be sold, in the public market, the 
trading price of our common stock could decline. 

In addition, we intend to file a registration statement on Form S-8 under the Securities Act registering the 

issuance of currently unregistered shares of common stock subject to options or other equity awards issued or reserved 
for future issuance under our equity incentive plans. Shares registered under this registration statement on Form S-8 are 
available for sale in the public market subject to vesting arrangements and exercise of options, the lock-up agreements 
described above and the restrictions of Rule 144 in the case of our affiliates. 

71 

Provisions in our certificate of incorporation and by-laws and under Delaware law could make an acquisition of us, 
which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace 
or remove our current management. 

Provisions in our certificate of incorporation and by-laws may discourage, delay or prevent a merger, 
acquisition or other change in control of us that stockholders may consider favorable, including transactions in which our 
common stockholders might otherwise receive a premium price for their shares. These provisions could also limit the 
price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market 
price of our common stock. In addition, because our board of directors is responsible for appointing the members of our 
management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our 
current management by making it more difficult for stockholders to replace members of our board of directors. Among 
other things, these provisions: 

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• 

• 

• 

• 

• 

• 

establish a classified board of directors such that not all members of the board are elected at one time; 

allow the authorized number of our directors to be changed only by resolution of our board of directors; 

limit the manner in which stockholders can remove directors from the board; 

establish advance notice requirements for stockholder proposals that can be acted on at stockholder 
meetings and for nominations to our board of directors; 

limit who may call stockholder meetings; 

prohibit actions by our stockholders by written consent; 

require that stockholder actions be effected at a duly called stockholders meeting; 

authorize our board of directors to issue preferred stock without stockholder approval, which could be used 
to institute a "poison pill" that would work to dilute the stock ownership of a potential hostile acquirer, 
effectively preventing acquisitions that have not been approved by our board of directors; and 

require the approval of the holders of at least 75 percent of the votes that all our stockholders would be 
entitled to cast to amend or repeal certain provisions of our certificate of incorporation or by-laws. 

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the 
Delaware General Corporation Law, which prohibits a person who owns 15 percent or more of our outstanding voting 
stock from merging or combining with us for a period of three years after the date of the transaction in which the person 
acquired 15 percent or more of our outstanding voting stock, unless the merger or combination is approved in a manner 
prescribed by the statute. 

Concentration of ownership of our common stock among our existing executive officers, directors and principal 
stockholders may prevent our other stockholders from influencing significant corporate decisions. 

Our executive officers, directors and current beneficial owners of 5% or more of our common stock and their 

respective affiliates, in the aggregate, beneficially own 60.8% of our outstanding common stock. As a result, these 
persons, acting together, can significantly influence all matters requiring stockholder approval, including the election and 
removal of directors, any merger, consolidation, sale of all or substantially all of our assets, or other significant corporate 
transactions. 

Some of these persons or entities may have interests different than yours. For example, because many of these 

stockholders purchased their shares at prices substantially below the current market price of our common stock and have 
held their shares for a longer period, they may be more interested in selling our company to an acquirer than other 
investors, or they may want us to pursue strategies that deviate from the interests of other stockholders. 

72 

We are at risk of securities class action and similar litigation. 

In the past, securities class action litigation has often been brought against a company following a decline in the 

market price of our securities. This risk is especially relevant for us because biopharmaceutical companies have 
experienced significant stock price volatility in recent years. We remain the subject of various securities class action 
lawsuits and shareholder derivative lawsuits that were filed against OvaScience and certain of its officer and directors, as 
described in more detail in Item 3, Legal Proceedings. These lawsuits, as well as any similar lawsuits initiated in the 
future, could result in substantial cost and a diversion of management's attention and resources, which could harm our 
business. 

If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a 
timely basis could be impaired. 

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the 
Exchange Act, The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the 
Sarbanes-Oxley Act and the rules and regulations of the stock market on which our common stock is listed. The 
Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and 
internal control over financial reporting. Notwithstanding that we do not qualify for the relief afforded by Instruction 1 to 
Item 308 of Regulation S-K to newly public companies, our management has not assessed nor attested to our internal 
control over financial reporting as is set forth in Item 308 of Regulation S-K promulgated under the Exchange Act, and 
Section 404 of the Sarbanes-Oxley Act as of December 31, 2018, the end of our last fiscal year. We were unable to 
conduct the required assessment primarily due to the Merger occurring in the fourth quarter of 2018 and the substantial 
change in operational focus, management and the internal control environment following the Merger. We intend to do 
our first internal control assessment as of December 31, 2019. 

We may identify weaknesses in our system of internal financial and accounting controls and procedures that 

could result in a material misstatement of our financial statements. Our internal control over financial reporting will not 
prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only 
reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations 
in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud 
will not occur or that all control issues and instances of fraud will be detected. 

If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely 
manner, or if we are unable to maintain proper and effective internal controls, we may not be able to produce timely and 
accurate financial statements. If that were to happen, the market price of our stock could decline and we could be subject 
to sanctions or investigations by the stock exchange on which our common stock is listed, the Securities and Exchange 
Commission, or SEC, or other regulatory authorities. 

We expect to incur increased costs as a result of operating as a public company, and our management is required to 
devote substantial time to compliance with our public company responsibilities and corporate governance practices. 

As a relatively new public company, we incur significant legal, accounting and other expenses that we did not 

incur as a private company. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, 
the listing requirements of the Nasdaq Capital Market and other applicable securities rules and regulations impose 
various requirements on public companies. Our management and other personnel need to devote a substantial amount of 
time to compliance with these requirements. Moreover, these rules and regulations increase our legal and financial 
compliance costs and will make some activities more time-consuming and costly. For example, we expect that these 
rules and regulations may make it more difficult and more expensive for us to obtain directors’ and officers’ liability 
insurance, compared to when we were a private company, which could make it more difficult for us to attract and retain 
qualified members of our board of directors. We cannot predict or estimate the amount of additional costs we will 
continue to incur as a public company or the timing of such costs. Furthermore, those costs are likely to increase after we 
are no longer an "emerging growth company" under the Jumpstart Our Business Startups Act. 

73 

The recently passed comprehensive tax reform bill could adversely affect our business and financial condition. 

On December 22, 2017, President Trump signed into law the Tax Act which significantly revises the Internal 

Revenue Code of 1986, as amended. The newly enacted federal income tax law, among other things, contains significant 
changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate 
of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small 
businesses), effective for net operating losses incurred in taxable years beginning after December 31, 2017, limitation of 
the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss 
carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination 
of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new 
investments instead of deductions for depreciation expense over time, and modifying or repealing many business 
deductions and credits. Notwithstanding the reduction in the corporate income tax rate, the overall impact of the new 
federal tax law is uncertain and our business and financial condition could be adversely affected. In addition, it is 
uncertain how various states will respond to the newly enacted federal tax law. The impact of this tax reform on holders 
of our common stock is also uncertain and could be adverse. We urge you to consult with your legal and tax advisors 
with respect to this legislation and the potential tax consequences of investing in or holding our common stock. 

Our effective tax rate may fluctuate, and we may incur obligations in tax jurisdictions in excess of accrued amounts. 

We are subject to taxation in more than one tax jurisdiction. As a result, our effective tax rate is derived from a 

combination of applicable tax rates in the various places that we operate. In preparing our financial statements, we 
estimate the amount of tax that will become payable in each of such places. Nevertheless, our effective tax rate may be 
different than experienced in the past due to numerous factors, including passage of the newly enacted federal income 
tax law, changes in the mix of our profitability from jurisdiction to jurisdiction, the results of examinations and audits of 
our tax filings, our inability to secure or sustain acceptable agreements with tax authorities, changes in accounting for 
income taxes and changes in tax laws. Any of these factors could cause us to experience an effective tax rate 
significantly different from previous periods or our current expectations and may result in tax obligations in excess of 
amounts accrued in our financial statements. 

We might not be able to utilize a significant portion of our net operating loss carryforwards. 

As of December 31, 2018, we had federal and state net operating loss carryforwards of $249.6 million and 

$249.2 million, respectively. The federal and state net operating loss carryforwards will begin to expire, if not utilized, 
by 2031. These net operating loss carryforwards could expire unused and be unavailable to offset future income tax 
liabilities. Under the newly enacted federal income tax law, federal net operating losses incurred in 2018 and in future 
years may be carried forward indefinitely, but the deductibility of such federal net operating losses is limited. It is 
uncertain how various states will respond to the newly enacted federal tax law. In addition, under Section 382 of the 
Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an 
“ownership change,” which is generally defined 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 net operating loss carryforwards and other pre-change 
tax attributes to offset its post-change income or taxes may be limited. We may experience ownership changes in the 
future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If an 
ownership change occurs and our ability to use our net operating loss carryforwards is materially limited, it would harm 
our future operating results by effectively increasing our future tax obligations. 

We do not anticipate paying any cash dividends on our common stock in the foreseeable future. 

You should not rely on an investment in our common stock to provide dividend income. We have not declared 

or paid cash dividends on our common stock to date. We currently intend to retain our future earnings, if any, to fund the 
development and growth of our business. In addition, the terms of any existing or future debt agreements may preclude 
us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain 
for the foreseeable future. Investors seeking cash dividends should not purchase our common stock. 

74 

 
ITEM 1B. UNRESOLVED STAFF COMMENTS 

None. 

ITEM 2. PROPERTIES 

Our corporate headquarters are located in Ann Arbor, Michigan, where we occupy approximately 5,000 square 
feet of office space under a lease expiring on March 31, 2019, at which time we have the option to extend the lease on a 
month-to-month basis. In October 2018, we entered into a new lease for approximately 10,000 square feet of office 
space, also located in Ann Arbor. The term of the new lease begins on July 1, 2019 and is set to expire on June 30, 2024. 
In addition, in February 2019, we entered into a lease for approximately 11,000 square feet of office space in the same 
building as the lease we entered into in October 2018. We also maintain a small office in Lyon, France. In connection 
with the Merger, the Company assumed a sublease agreement for its office space located in Waltham, Massachusetts. 
The sublease commences on January 15, 2019 and expires on November 30, 2020. 

We believe our existing facilities meet our current needs. We will need additional space in the future as we 

continue to build our development, commercial, and support teams, and we are actively seeking office space for a small 
office in or near Boston, Massachusetts. 

ITEM 3. LEGAL PROCEEDINGS 

Item 3. Legal Proceedings 

On November 9, 2016, a purported shareholder derivative action was filed in the Business Litigation Session of 

the Suffolk County Superior Court in the Commonwealth of Massachusetts (Cima v. Dipp, No. 16-3443-BLS1 (Mass. 
Sup. Ct.)) against certain former officers and directors of OvaScience and one current director of the Company (a former 
director of OvaScience) and OvaScience as a nominal defendant alleging breaches of fiduciary duty, unjust enrichment, 
abuse of control, gross mismanagement and corporate waste for purported actions related to OvaScience's January 2015 
follow-on public offering. On February 22, 2017, the court approved the parties' joint stipulation to stay all proceedings 
in the action until further notice. Following a status conference in December 2017, the stay was lifted. On January 25, 
2018, at the parties' request, the court entered a second order staying all proceedings in the action until further order of 
the court. We believe that the complaint is without merit and we intend to defend against the litigation. There can be no 
assurance, however, that we will be successful. At present, we are unable to estimate potential losses, if any, related to 
the lawsuit. 

On March 24, 2017, a purported shareholder class action lawsuit was filed in the U.S. District Court for the 

District of Massachusetts (Dahhan v. OvaScience, Inc., No. 1:17-cv-10511-IT (D. Mass.)) against certain former officers 
and directors of OvaScience and one of our current directors (a former director of OvaScience) alleging violations of 
Sections 10(b) and 20(a) of the Exchange Act, or the Dahhan Action. On July 5, 2017, the court entered an order 
approving the appointment of Freedman Family Investments LLC as lead plaintiff, the firm of Robins Geller Rudman & 
Dowd LLP as lead counsel and the Law Office of Alan L. Kovacs as local counsel. Plaintiff filed an amended complaint 
on August 25, 2017. We filed a motion to dismiss the amended complaint, which the court denied on July 31, 2018. On 
August 14, 2018, we answered the amended complaint. The parties presently are engaged in discovery. We believe that 
the amended complaint is without merit and we intend to defend against the litigation. There can be no assurance, 
however, that we will be successful. A resolution of this lawsuit adverse to us or the other defendants could have a 
material effect on our consolidated financial position and results of operations. At present, we are unable to estimate 
potential losses, if any, related to the lawsuit. 

On July 27, 2017, a purported shareholder derivative complaint was filed in the U.S. District Court for the 

District of Massachusetts (Chiu v. Dipp, No. 1:17-cv-11382-IT (D. Mass.)) against certain former officers and directors 
of OvaScience and one of our current directors (a former director of OvaScience) as a nominal defendant alleging breach 
of fiduciary duty, unjust enrichment and violations of Section 14(a) of the Exchange Act alleging that compensation 
awarded to the director defendants was excessive and seeking redress for purported actions related to OvaScience's 
January 2015 follow-on public offering and other public statements. On September 26, 2017, the plaintiff filed an 

75 

 
amended complaint which eliminated all claims regarding allegedly excessive director pay and additionally alleged 
claims of abuse of control and corporate waste. On October 27, 2017, the defendants filed a motion to dismiss the 
amended complaint. The court heard oral argument on the motion to dismiss on April 5, 2018. On April 13, 2018, the 
court granted the defendants' motion to dismiss the amended complaint for failure to state a claim for relief under 
Section 14(a). The court also dismissed the plaintiffs' pendent state law claims without prejudice, based on lack of 
subject matter jurisdiction. On April 25, 2018, the plaintiffs moved for leave to amend the complaint, and to stay this 
case pending the outcome of the Dahhan Action. We do not believe that the proposed amended complaint cures the 
defects in the current complaint, but informed plaintiffs' counsel that, in the interest of judicial economy, defendants 
would not oppose the proposed amendment if the court would consider staying the case pending the resolution of the 
Dahhan Action. On April 27, 2018, the court granted the plaintiffs' motion for leave to amend the complaint and for a 
stay. On April 30, 2018, the plaintiffs filed their second amended complaint. On May 23, 2018, the court entered an 
order staying this case pending the resolution of the Dahhan Action. We believe that the complaint is without merit and 
we intend to defend against the litigation. There can be no assurance, however, that we will be successful. At present, we 
are unable to estimate potential losses, if any, related to the lawsuit. 

Between October 16, 2018 and November 21, 2018, five putative class action lawsuits were filed in various 
federal District Courts against OvaScience and the OvaScience Board of Directors related to OvaScience’s proposed 
reverse merger with Millendo Therapeutics, Inc.: Cunningham v. Kroeger, et al., No. 1:18-cv-01595 (D. Del. filed 
Oct. 16, 2018); Adlard v. OvaScience, Inc., et al., No. 1:18-cv-12332 (D. Mass. filed Nov. 6, 2018); Wheby v. 
OvaScience, Inc., et al., No. 1:18-cv-1811 (D. Del. filed Nov. 16, 2018); Cuenca Aubets v. OvaScience, Inc., et al., 
No. 1:18-cv-10882 (S.D.N.Y. filed Nov. 20, 2018); and Kim v. OvaScience, Inc., et al., No. 1:18-cv-10939 (S.D.N.Y. 
filed Nov. 21, 2018). The Complaints each alleged violations of Section 14(a) of the Securities Exchange Act of 1934 
and Rule 14a-9 promulgated thereunder, and as against the individual defendants, violations of Section 20(a) of the 
Securities Exchange Act of 1934.  The Cunningham plaintiff alleged that OvaScience’s Form S-4 Registration Statement 
filed on September 26, 2018 omitted or misrepresented material information regarding OvaScience’s proposed reverse 
merger with Millendo Therapeutics, Inc.  The Adlard, Whelby, Cuenca Aubets and Kim plaintiffs alleged that 
OvaScience’s Definitive Proxy Statement on Schedule 14A filed on November 6, 2018, omitted or misrepresented 
material information regarding OvaScience’s proposed reverse merger with Millendo Therapeutics, Inc. OvaScience 
subsequently supplemented its disclosures. The Cunningham plaintiff voluntarily dismissed his complaint on 
December 10, 2018, and the Wheby, Jr. plaintiff voluntarily dismissed his complaint on February 28, 2019. On 
March 18, 2019, the court dismissed the Cuenca Aubets and Kim actions for failure to serve. We are currently in 
negotiation with counsel for the plaintiffs regarding their demands for attorneys’ fees. There can be no assurance that the 
negotiations will be successful. If the negotiations are not successful, we may be required to litigate the fee applications 
and/or the underlying actions. 

In addition to the matters described above, we may be a party to litigation and subject to claims incident to the 

ordinary course of business from time to time. Regardless of the outcome, litigation can have an adverse impact on us 
because of defense and settlement costs, and diversion of management resources.  

ITEM 4. MINE SAFETY DISCLOSURES 

Not applicable. 

PART II 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS 
AND ISSUER PURCHASE OF EQUITY SECURITIES 

Stockholders 

As of March 1, 2019, we had 13,357,999 shares of common stock outstanding held by 78 holders of record. The 
actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial 
owners but whose shares are held in street name by brokers and other nominees. This number of holders of record also 
does not include stockholders whose shares may be held in trust by other entities. 

76 

 
Recent Sales of Unregistered Securities 

Following the closing of the Merger, on December 7, 2018, we issued and sold an aggregate of 1,230,158 

shares of our common stock, or the Post-Closing Financing, to an institutional investor, at a price of $16.258065 per 
share, for total gross proceeds of approximately $20.0 million.  

We sold the shares of common stock issued in the Post-Closing Financing without registration under the 

Securities Act of 1933, as amended, or the Securities Act, or applicable state securities laws, in reliance on the 
exemptions provided by Section 4(a)(2) of the Securities Act promulgated thereunder, and in reliance on similar 
exemptions under applicable state securities laws for transactions by an issuer not involving any public offering. 

Purchases of Equity Securities by the Issuer and Affiliated Parties 

None. 

ITEM 6. SELECTED FINANCIAL DATA 

Not required for smaller reporting companies. 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
OF OPERATIONS 

You should read the following discussion and analysis of our financial condition and results of operations in 

conjunction with the financial statements and the related notes to those statements included later in this Annual Report. 
In addition to historical financial information, the following discussion contains forward-looking statements that reflect 
our plans, estimates, beliefs and expectations that involve risks and uncertainties. Our actual results and the timing of 
events could differ materially from those discussed in these forward-looking statements. Factors that could cause or 
contribute to these differences include those discussed below and elsewhere in this Annual Report, particularly in 
Item 1A. “Risk Factors” and “Special Note Regarding Forward-Looking Statements.” 

Overview 

We are a late-stage biopharmaceutical company focused on developing novel treatments for orphan endocrine 
diseases where current therapies do not exist or are insufficient. We are currently advancing two product candidates to 
treat three indications. Our most advanced product candidate, livoletide (AZP-531), is a potential treatment for Prader-
Willi syndrome, or PWS, a rare and complex genetic endocrine disease characterized by hyperphagia, or insatiable 
hunger, that contributes to serious complications, a significant burden on patients and caregivers and early mortality. In a 
randomized, double-blind, placebo-controlled Phase 2 clinical trial in 47 patients with PWS, we observed that 
administration of livoletide once daily was associated with a clinically meaningful improvement in hyperphagia, as well 
as a reduction in appetite. In a pre-specified analysis of 38 home-resident PWS patients from the Phase 2 trial, we 
observed a larger and statistically significant decrease in hyperphagia following administration of livoletide as compared 
to placebo. In March 2019, we announced that we initiated a pivotal Phase 2b/3 clinical trial of livoletide in PWS 
patients, with topline results from the Phase 2b portion of the study expected in the first half of 2020. We are also 
developing nevanimibe (ATR-101) with a primary focus on treating patients with classic congenital adrenal hyperplasia, 
or CAH, a rare, monogenic adrenal disease that requires lifelong treatment with exogenous cortisol, often at high doses. 
These chronic high doses of cortisol can result in side effects that include diabetes, obesity, hypertension and 
psychological problems. When on suboptimal doses of cortisol, female CAH patients can experience hirutism, infertility 
and menstrual irregularity, and male CAH patients can experience testicular atrophy, infertility and testicular tumors, 
making it difficult for physicians to appropriately treat CAH without causing adverse consequences. We reported results 
from our Phase 2 clinical trial of nevanimibe in patients with CAH in March 2018 and initiated a Phase 2b trial in the 
third quarter of 2018, with results expected in the first half of 2020. We are also investigating nevanimibe in a Phase 2 
clinical trial for the treatment of patients with endogenous Cushing’s syndrome, or CS, a rare endocrine disease 
characterized by excessive cortisol production from the adrenal glands. 

77 

 
 
Since our inception in January 2012, our operations have focused on organizing and staffing the business, 

business planning, raising capital, acquiring our product candidates and assets and conducting preclinical and clinical 
development of our product candidates. We have devoted substantial effort and resources to acquiring our two current 
product candidates, livoletide and nevanimibe, as well as our previous product candidate, MLE4901, which we ceased 
developing in 2017. We acquired livoletide in connection with our acquisition of Alizé Pharma SAS, or Alizé, in 
December 2017 and in-licensed nevanimibe from the Regents of the University of Michigan, or the University of 
Michigan, in June 2013. We do not have any product candidates approved for sale and have not generated any revenue 
from product sales. We have funded our operations primarily through the sale and issuance of common stock, preferred 
stock and convertible promissory notes, proceeds received from the Merger as well as borrowings under term loans. 

Since inception, we have incurred significant operating losses and negative operating cash flows and there is no 

assurance that we will ever achieve or sustain profitability. Our net losses were $27.2 million and $84.6 million for the 
years ended December 31, 2018 and 2017, respectively. As of December 31, 2018, we had an accumulated deficit of 
$164.1 million. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable 
future. We anticipate that our expenses will increase significantly in connection with our ongoing activities, including: 

• 

• 

• 

• 

continuing the ongoing and planned clinical development of livoletide and nevanimibe; 

initiating preclinical studies and clinical trials for any additional diseases for our current product candidates 
and any future product candidates that we may pursue; 

building a portfolio of product candidates through the acquisition or in-license of drugs or product 
candidates and technologies; 

developing, maintaining, expanding and protecting our intellectual property portfolio; 

•  manufacturing clinical and commercial supplies of our product candidates; 
• 

seeking marketing approvals for our current and future product candidates that successfully complete 
clinical trials; 

• 

• 

• 

establishing a sales, marketing and distribution infrastructure to commercialize any product candidate for 
which we may obtain marketing approval; 

hiring additional administrative, clinical, regulatory and scientific personnel; and 

incurring additional costs associated with operating as a public company. 

Recent Events 

Merger 

On December 7, 2018, OvaScience, Inc., or OvaScience, now known as Millendo Therapeutics, Inc. completed 

its reverse merger or, the Merger, with what was then known as “Millendo Therapeutics, Inc.,” or Private Millendo, in 
accordance with the terms of the Agreement and Plan of Merger and Reorganization dated as of August 8, 2018, as 
amended on September 25, 2018 and November 1, 2018, or the Merger Agreement.  OvaScience’s shares of common 
stock listed on The Nasdaq Capital Market, previously trading through the close of business on Friday, December 7, 
2018 under the ticker symbol “OVAS,” commenced trading on The Nasdaq Capital Market, under the ticker symbol 
“MLND,” on Monday, December 10, 2018. 

In August 2018, Private Millendo issued convertible promissory notes, or the Notes, to several of its existing 

investors and received cash proceeds of $8.0 million. The Notes accrued simple interest of 6.0% per annum.  
Additionally, immediately prior to the Merger, Private Millendo issued and sold an aggregate of 1,320,129 shares of 
Private Millendo common stock for total net proceeds of approximately $20.1 million, or the Pre-Closing Financing, to 
certain existing stockholders of Private Millendo.  

78 

In connection with the Merger, each outstanding share of Private Millendo capital stock converted into shares 

of OvaScience’s common stock, and each outstanding option or warrant to purchase Private Millendo capital stock 
converted into the right to receive shares of OvaScience’s common stock.  At the Closing of the Merger, Private 
Millendo stockholders received an aggregate of 8,789,628 shares of OvaScience common stock, which includes 
1,320,129 shares of common stock issued to the investors in the Pre-Closing Financing, Private Millendo option holders 
received options to purchase 1,874,158 shares of OvaScience common stock and Private Millendo warrant holders 
received warrants to purchase 17,125 shares of OvaScience common stock.  In addition, upon the Closing of the Merger, 
all principal and interest underlying the Notes converted into 499,504 shares of OvaScience common stock. 

Immediately following the Merger, Private Millendo became a wholly-owned subsidiary of OvaScience.  Upon 

consummation of the Merger, or the Closing, OvaScience adopted the business plan of Private Millendo and 
discontinued the pursuit of OvaScience’s business plan pre-Closing.  The Merger was accounted for as a reverse 
recapitalization with Private Millendo as the accounting acquirer. On the Merger date, the primary pre-combination 
assets of OvaScience was cash, cash equivalents and marketable securities.  At the time of the Merger, OvaScience had 
net assets of $38.0 million, which was comprised primarily of cash, cash equivalents and marketable securities.  See 
Note 3 of our consolidated financial statements for additional information regarding the Merger accounting treatment.       

Following the Closing of the Merger, on December 7, 2018, we issued and sold an aggregate of 1,230,158 

shares of common stock to an institutional investor for $16.258065 per share, for total net proceeds of 
approximately $18.7 million. 

Integration of OvaScience 

Leading up to the closing date of the Merger, OvaScience had agreed to terminate, assign or otherwise fully 
discharge substantially all obligations under all contracts to which OvaScience or its subsidiaries were a party, wind-
down the operations, and dissolve certain subsidiaries. OvaScience has closed their offices and all employees were 
terminated or resigned prior to or at the closing. All operations are drawing to a close that were not already wound down 
prior to closing. 

Acquisition of Alizé 

In December 2017, Private Millendo entered into agreements to acquire 100% of the outstanding ownership 

interests of Alizé, a privately held biotechnology company based in Lyon, France focused on the development of a 
treatment for patients with PWS through its lead product candidate, livoletide. 

At an initial closing on December 19, 2017, Private Millendo acquired 83.6% of Alizé’s issued and outstanding 

share capital. In connection with the initial closing of the acquisition, Private Millendo (1) issued to the former 
shareholders of Alizé an aggregate of 6,540,763 shares of Series A-1 preferred stock, 20,636,179 shares of Series B-1 
preferred stock and 6,237,138 shares of common-1 stock, with an aggregate fair value of $50.8 million and (2) paid a 
former shareholder of Alizé approximately $0.3 million in cash and paid approximately $0.7 million of transaction 
expenses on behalf of the acquired company. In December 2018, we acquired the remaining 16.4% of Alizé’s issued and 
outstanding share capital from Otonnale SAS, or Otonnale, and issued to Otonnale 442,470 shares of our common stock 
and paid Otonnale €0.7 million ($0.8 million) in cash. Additionally, in December 2018, we issued 7,901 shares of our 
common stock to Eumedix FR S.À R.L., or Eumedix, as consideration for advisory services that Eumedix performed for 
Otonnale in connection with the transaction. 

Additionally, Private Millendo assumed 6,219 warrants in the form of bons de souscription d’actions, or BSAs, 

and 5,360 warrants in the form of bons de souscription de parts de créateur d’entreprise, or BSPCEs, that were held by 
employees, directors and consultants of Alizé. The outstanding BSAs and BSPCEs were amended whereby, upon 
exercise, the holders will receive shares of our common stock.  

Upon the initial closing of the acquisition, Alizé was renamed “Millendo Therapeutics SAS.” We accounted for 

the acquisition of Alizé as an asset acquisition as Alizé did not meet the definition of a business under ASC 805, 
Business Combinations, as substantially all of the value was in the livoletide asset. 

79 

Components of Results of Operations 

Research and development expense 

Research and development expense consists primarily of costs incurred in connection with the development of 

our product candidates. We expense research and development costs as incurred. These expenses include: 

• 

• 

• 

• 

• 

• 

• 

personnel expenses, including salaries, benefits and stock-based compensation expense; 

costs of funding research performed by third parties, including pursuant to agreements with contract 
research organizations, or CROs, as well as investigative sites and consultants that conduct our preclinical 
studies and clinical trials; 

expenses incurred under agreements with contract manufacturing organizations, or CMOs, including 
manufacturing scale-up expenses and the cost of acquiring and manufacturing preclinical study and clinical 
trial materials; 

payments made under our third-party licensing agreements, other than amounts classified as acquired in-
process research and development expenses; 

consultant fees and expenses associated with outsourced professional scientific development services; 

expenses for regulatory activities, including filing fees paid to regulatory agencies; and 

allocated expenses for facility costs, including rent, utilities, depreciation and maintenance. 

Milestone payment obligations incurred prior to regulatory approval of a product candidate, which are accrued 

when the event requiring payment of the milestone occurs are included in research and development expense. 

We typically use our employee, consultant and infrastructure resources across our development programs. We 
track certain outsourced development costs by product candidate, but do not allocate all personnel costs or other internal 
costs to specific product candidates. 

The following table summarizes our research and development expenses by product candidate for the years 

ended December 31, 2018 and 2017: 

Year Ended  
December 31,  

2018 

2017 

MLE4901 expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 
Nevanimibe expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Livoletide expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Personnel expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 

(in thousands) 
 —    $ 

 4,108   
 4,921   
 4,616   
 780   
 14,425    $ 

 5,573 
 5,180 
 — 
 3,495 
 278 
 14,526 

We acquired livoletide through the acquisition of Alizé in December 2017 and did not incur research and 
development expenses related to livoletide in the year ended December 31, 2017. We do not expect to incur future 
material expenses related to MLE4901, our previous product candidate that we ceased developing in 2017. 

We expect our research and development expense will increase for the foreseeable future as we seek to advance 

development of our product candidates. The successful development of our product candidates is highly uncertain. At 
this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to 
complete the remainder of the development of livoletide or nevanimibe. We are also unable to predict when, if ever, 
material net cash inflows may commence from sales of livoletide, nevanimibe or any future product candidates that we 

80 

 
 
 
 
 
 
 
 
 
 
 
 
     
     
 
 
  
  
  
  
  
  
  
  
may develop due to the numerous risks and uncertainties associated with clinical development, including risks and 
uncertainties related to: 

• 

• 

• 

• 

• 

• 

• 

• 

• 

the number of clinical sites included in the trials; 

the length of time required to enroll suitable patients; 

the number of patients that ultimately participate in the trials; 

the number of doses patients receive; 

the duration of patient follow-up and number of patient visits; 

the results of our clinical trials; 

the establishment of commercial manufacturing capabilities; 

the receipt of marketing approvals; and 

the commercialization of product candidates. 

We may never succeed in obtaining regulatory approval for livoletide, nevanimibe or any future product 

candidates we may develop. Product candidates in later stages of clinical development, like livoletide, generally have 
higher development costs than those in earlier stages of clinical development, primarily due to the increased size and 
duration of later-stage clinical trials. 

Acquired in-process research and development expense 

Acquired in-process research and development expense consists of initial up-front payments incurred in 

connection with the acquisition or licensing of product candidates that do not meet the definition of a business under 
Accounting Standards Codification, or ASC Topic 805, Business Combinations. Our acquired in-process research and 
development expense reflects the fair market value of consideration ascribed to the livoletide product candidate in 
connection with our acquisition of Alizé in December 2017. 

General and administrative expense 

General and administrative expense consists primarily of personnel expenses, including salaries, benefits and 
stock-based compensation expense, for employees in executive, finance, accounting, business development, legal and 
human resource functions. General and administrative expense also includes corporate facility costs, including rent, 
utilities, depreciation and maintenance, not otherwise included in research and development expense, as well as legal 
fees related to intellectual property and corporate matters and fees for accounting, recruiting and consulting services. 

We anticipate that our general and administrative expense will increase as a result of increased headcount, 

expanded infrastructure and higher accounting, legal, consulting and investor relations fees, as well as increased director 
and officer insurance premiums, associated with being a public company. We also anticipate that our general and 
administrative expense will increase as we support additional clinical trials for livoletide and nevanimibe. In addition, if 
and when we believe that regulatory approval of livoletide or nevanimibe appears likely, we anticipate an increase in 
headcount and expense as a result of our preparation for commercial operations. 

Other general expenses 

Other general expenses consists of professional fees and severance costs incurred in connection with the Merger 

in 2018. 

81 

Interest expense (income), net 

Interest expense primarily consists of amounts amortized, accrued and paid under our term loans and 

convertible promissory notes. 

Change in fair value of preferred stock warrant liability 

Change in fair value of preferred stock warrant liability reflects the change in the fair value of our outstanding 

preferred stock warrants, which is primarily driven by changes in the fair value of the underlying preferred stock. 
Outstanding warrants to purchase shares of our preferred stock were classified as liabilities and were subject to re-
measurement at each balance sheet date until consummation of the Merger whereby the warrants were exchanged for 
warrants to receive shares of our common stock. Upon completing the exchange, the warrants were eligible for equity 
classification and no longer subject to re-measurement. 

Results of operations 

Comparison of the years ended December 31, 2018 and 2017 

Year Ended  
December 31,  

2018 

2017 

(in thousands) 

Operating expenses: 
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 
Acquired in-process research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Other general expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Other expenses: 
Interest expense, net  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
 288 
Foreign currency losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
 — 
Change in fair value of preferred stock warrant liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
 (28)
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $   (27,177)  $   (84,586)

 14,425    $ 
 —   
 8,691   
 3,758   
 26,874   

 14,526 
 63,844 
 5,956 
 — 
 84,326 

 134   
 209   
 (40) 

Research and development expense 

Research and development expense decreased by $0.1 million to $14.4 million for the year ended December 31, 

2018 from $14.5 million for the year ended December 31, 2017. The following table summarizes our research and 
development expenses for the years ended December 31, 2018 and 2017: 

Year Ended  
December 31,  

2018 

2017 

(in thousands) 

Preclinical and clinical development expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 
Compensation expense, other than stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . .   
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Total research and development expense  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 

 9,272    $ 
 4,010   
 606   
 537   
 14,425    $ 

 10,792 
 3,180 
 315 
 239 
 14,526 

The decrease in total research and development expense is attributable to: 

• 

a $1.4 million increase in compensation and stock-based compensation expenses as a result of our increase 
in research and development headcount which was offset by a $0.3 million increase in French research tax 
credits related to personnel; 

82 

 
 
 
 
 
 
 
 
 
 
 
 
    
     
 
 
 
 
 
 
  
  
  
  
 
 
  
  
 
  
     
  
   
  
  
 
 
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
     
     
 
 
  
  
  
  
  
  
• 

• 

a $0.3 million increase in other expense due to facility and other overhead expenses; and 

a $1.5 million decrease in preclinical and clinical development expense due to a $5.6 million reduction in 
MLE4901 expenses as we ceased the development of this product candidate in 2017, which was offset by a 
$5.2 million increase in preclinical and clinical development expense related to the development of 
livoletide and nevanimibe and a $1.1 million increase in French research tax credits. 

Acquired-in-process research and development 

We completed the acquisition of Alizé in December 2017 and treated it as an asset acquisition. The fair value of 
the livoletide product candidate was approximately $63.8 million and was expensed immediately as acquired in-process 
research and development. 

General and administrative expense 

General and administrative expense increased by $2.7 million to $8.7 million for the year ended December 31, 

2018 from $6.0 million for the year ended December 31, 2017. The increase was primarily due to a $1.3 million increase 
in professional fees incurred in connection with a previously contemplated financing and costs related to being a publicly 
traded company, a $1.0 million increase in compensation and stock-based compensation expense as a result of our 
increase in general and administrative headcount and changes to compensation arrangements, and a $0.4 million increase 
in insurance, rent and facility related expenses due to increased headcount and operating as a public company. 

Other general expenses 

In connection with the Merger in 2018, we incurred $3.8 million of transaction related costs mainly due to 

professional fees and severance. 

Interest expense, net 

Interest expense decreased by $0.2 million to $0.1 million for the year ended December 31, 2018 from $0.3 

million for the year ended December 31, 2017. The decrease was primarily due to the repayment of our term loan 
balance in 2017.   

Foreign currency losses 

Foreign currency losses increased by $0.2 million to $0.2 million for the year ended December 31, 2018 due to 

the exchange rate fluctuations on transactions denominated in a currency other than our functional currency. 

Change in fair value of preferred stock warrant liability 

During the years ended December 31, 2018 and 2017 we recorded income of $40,000 and $28,000, respectively 

related to the decrease in fair value of our preferred stock warrant liability. Upon consummation of the Merger, the 
preferred stock warrant liability was re-measured to fair value and immediately following the Merger, the warrants were 
reclassified to equity and are no longer subject to re-measurement. 

83 

Liquidity and Capital Resources 

The following table sets forth the primary uses of cash and cash equivalents for each year set forth below: 

Net cash used in operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $   (23,647)   $   (20,340)
 458 
Net cash provided by investing activities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
 (4,463)
Net cash provided by (used in) financing activities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Effect of foreign currency exchange rate changes on cash . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
 19 
 56,147    $   (24,326)
Net increase (decrease) in cash, cash equivalents and restricted cash . . . . . . . . . . . . . . . . . . .    $ 

 1,932   
 77,744   
 118   

Year Ended  
December 31,  

2018 

2017 

(in thousands) 

Uses of funds 

Operating activities 

During the year ended December 31, 2018, we used $23.6 million of cash in operating activities. Cash used in 

operating activities reflected our net loss of $27.2 million, offset by a net increase in operating assets and liabilities of 
$1.1 million and non-cash charges of $2.5 million, principally related to stock-based compensation, write-off of deferred 
financing costs, non-cash interest and changes in the fair value of our preferred stock warrant liability. 

During the year ended December 31, 2017, we used $20.3 million of cash in operating activities. Cash used in 

operating activities reflected our net loss of $84.6 million and a net decrease in operating assets and liabilities of $1.8 
million, offset by non-cash charges of $66.1 million, principally related to the value ascribed to the livoletide product 
candidate we acquired from Alizé, write-off of deferred financing costs, stock-based compensation, non-cash interest 
and changes in the fair value of our preferred stock warrant liability. 

Investing activities 

During the year ended December 31, 2018, we received $2.5 million in net proceeds from the sale of 
marketable securities and paid $0.5 million in acquisition costs previously accrued in connection with the asset 
acquisition of Alizé. 

During the year ended December 31, 2017, we received net cash of $0.5 million in connection with the asset 

acquisition of Alizé. 

Financing activities 

During the year ended December 31, 2018, financing activities provided $77.7 million in net cash, primarily 

attributable to cash acquired in connection with the Merger of $33.3 million and $38.8 million in net proceeds from the 
sale of our common stock in private placements of which $20.1 million was received prior to the Merger and $18.7 
million was received immediately following the consummation of the Merger. We also received $8.0 million in proceeds 
from the issuance of convertible promissory notes in August 2018 that were converted into shares of our common stock 
in December 2018 upon consummation of the Merger. These cash inflows were offset by payments of $1.4 million in 
related financing costs, payment of $0.8 million in connection with the repurchase of redeemable non-controlling 
interests, and repayments of $0.2 million of debt. 

During the year ended December 31, 2017, we used cash of $4.5 million in financing activities primarily 

comprising $6.0 million in additional borrowings under our term loan that were offset by the $10.0 million in principal 
term loan repayments as we repaid the term loan in its entirety. We also paid $0.4 million in deferred financing costs. 

84 

 
 
 
 
 
 
 
 
 
 
 
 
     
     
 
 
  
  
  
  
  
  
 
Funding requirements 

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the 

research and development of, continue or initiate clinical trials of, and seek marketing approval for, our product 
candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant 
commercialization expenses related to program sales, marketing, manufacturing and distribution to the extent that such 
sales, marketing and distribution are not the responsibility of potential collaborators. Furthermore, we expect to incur 
additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial 
additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on 
attractive terms, we may would be forced to delay, reduce or eliminate our research and development programs or future 
commercialization efforts. 

As of December 31, 2018, we had cash, cash equivalents and marketable securities of $77.7 million which we 

believe is sufficient to fund our planned operations into the second half of 2020.  Our existing cash, cash equivalents and 
marketable securities are currently expected to be sufficient to fund our current operating plans through the topline 
results of the Phase 2b portion of our livoletide pivotal Phase 2b/3 PWS study and completion of our nevanimibe 
Phase 2b CAH study. 

Our future capital requirements will depend on many factors, including: 

• 

• 

• 

• 

• 

• 

• 

• 

• 

the scope, progress, results and costs of preclinical studies and clinical trials; 

the scope, prioritization and number of our research and development programs; 

the costs, timing and outcome of regulatory review of our product candidates; 

our ability to establish and maintain collaborations on favorable terms, if at all; 

the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs under 
collaboration agreements, if any; 

the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual 
property rights and defending intellectual property-related claims; 

the extent to which we acquire or in-license other product candidates and technologies; 

the costs of securing manufacturing arrangements for commercial production; and 

the costs of establishing or contracting for sales and marketing capabilities if we obtain regulatory 
approvals to market our product candidates. 

Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-
consuming, expensive and uncertain process that takes many years to complete, and we may never generate the 
necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product 
candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from 
sales of product candidates that we do not expect to be commercially available for many years, if at all. Accordingly, we 
will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing 
may not be available to us on acceptable terms, or at all. 

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs 

through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing 
arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your 
ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that 
adversely affect your rights as a common stockholder. Debt financing, if available, may involve agreements that include 
covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital 
expenditures or declaring dividends. 

85 

If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third 
parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or 
product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional 
funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our 
product development or future commercialization efforts or grant rights to develop and market product candidates that 
we would otherwise prefer to develop and market ourselves. 

Contractual Obligations and Commitments 

The following table summarizes our commitments to settle contractual obligations at December 31, 2018: 

Less than 1 
Year 

1 to 3 
Years 

Year Ended December 31,  
3 to 5 
Years 
(in thousands) 

  More than 

5 Years 

Total 

Operating leases(1) . . . . . . . . . . . . . . . . . . . . .     $ 
Long-term debt(2) . . . . . . . . . . . . . . . . . . . . . .       
Licensing arrangements(3) . . . . . . . . . . . . . . .       
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $ 

 1,208    $ 
 189      
 20      
 1,417    $ 

 1,741    $ 
 383      
 60      
 2,184    $ 

 861    $ 
 —      
 20      
 881    $ 

 293      $ 
 —       
 —  (4)   
 293  (4)  $ 

 4,103     
 572     
 100  (4) 
 4,775  (4) 

(1)  Reflects obligations pursuant to our office leases in Ann Arbor, Michigan, Lyon, France, and Waltham, Massachusetts. 
(2)  Reflects obligations pursuant to our advance agreement with Bpifrance Financing. In December 2017, in connection with our 
acquisition of Alizé, we assumed €0.7 million of debt that Alizé had outstanding with Bpifrance Financing. No interest is 
charged or accrued with respect to the debt. We are required to make quarterly principal payments between €17,500 to €50,000 
per quarter through maturity. In addition to the quarterly payments, we could be obligated to pay, if applicable, no later than 
March 31 of each year starting from January 1, 2016, a reimbursement annuity equal to 20% of the proceeds generated by us 
from license, assignment or revenue-generating use of the livoletide program. We are permitted to repay the debt at any time. 
(3)  Reflects obligations pursuant to our license agreements with the University of Michigan, other than contingent obligations to 

make milestone and royalty payments where the amount, likelihood and timing of such payments are not fixed or determinable. 
Contingent payments to Erasmus University Medical Center are also excluded from the above table. 

(4)  We are obligated to pay the University of Michigan minimum royalties of $20,000 per year from 2019 to 2023 and $0.2 million 
per year beginning in 2024 through expiration of the term of the license agreement. All such amounts due after December 31, 
2023 are excluded from the table above because the duration of the license agreement is not determinable. 

The commitment amounts in the table above are associated with contracts that are enforceable and legally 
binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or 
variable price provisions, and the approximate timing of the actions under the contracts. The table does not include 
obligations under agreements that we can cancel without a significant penalty. 

Off-Balance Sheet Arrangements 

We do not have any relationships with unconsolidated entities or financial partnerships, including entities 
sometimes referred to as structured finance or special purpose entities that were established for the purpose of facilitating 
off-balance sheet arrangements or other contractually narrow or limited purposes. We do not engage in off-balance sheet 
financing arrangements. In addition, we do not engage in trading activities involving non-exchange traded contracts. We 
therefore believe that we are not materially exposed to any financing, liquidity, market or credit risk that could arise if 
we had engaged in these relationships. 

Critical Accounting Policies 

Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of our 

consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets 
and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the 
reported amounts of expenses during the reported period. We base our estimates on historical experience, known trends 
and events and various other factors that we believe to be reasonable under the circumstances, the results of which form  

86 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
     
     
     
 
 
 
 
 
 
the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other 
sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these 
estimates under different assumptions and conditions. 

Asset acquisitions 

Accounting for transactions as asset acquisitions is significantly different than business combinations. For 

example, acquired in-process research and development is expensed for asset acquisitions and capitalized for business 
combinations. Goodwill is only recognized in business combination transactions. The fair value of contingent 
consideration is recognized in business combination transactions and may be recognized in asset acquisitions if payment 
is probable and the amount can be estimated. As a result, it is important to determine whether a business or an asset or a 
group of assets is acquired. A business is defined in ASC 805, Business Combinations, as an integrated set of inputs and 
processes that are capable of generating outputs that have the ability to provide a return to its investors or owners. 
Typical inputs include long-lived assets (including intangible assets or rights to use long-lived assets), intellectual 
property and the ability to obtain access to required resources. Typical processes include strategic, operational and 
resource management processes that are typically documented or evident through an organized workforce. 

In January 2017, FASB issued ASU 2017-01, Clarifying the Definition of a Business, or ASU 2017-01. A key 

provision within ASU 2017-01 is the single or similar asset threshold. When substantially all of the fair value of the 
gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the acquired set 
is not a business. We adopted this standard effective January 1, 2017. 

We considered all of the above factors when determining whether a business was acquired. In evaluating our 
acquisition of Alizé, we concluded that the fair value of consideration given to Alizé shareholders was concentrated in 
the acquired livoletide program. As such, we accounted for the transaction as an asset acquisition. The fair value 
allocated to the acquired livoletide development program was expensed and not capitalized. 

There are several methods that can be used to determine the fair value of the acquired livoletide program. We 
used the income approach to value the combined organization to determine the fair value of shares issued to determine 
the value of the livoletide program. This approach starts with our forecast of the expected future estimated cash flows of 
the combined organization, which we refer to as the Income Approach. The Income Approach requires several 
judgments and assumptions to determine the fair value of intangible assets, including growth rates, discount rates, 
probability of achieving commercialization, expected levels of cash flows and tax rates. A change in these assumptions 
would impact the consideration received and expensed in 2017. The change could be material. For example, a 1% 
change in the discount rate used would increase (decrease) the fair value of the equity issued by approximately 15%. We 
placed a weighting on multiple forecast scenarios when determining our enterprise values. The weighted average 
scenario selected was within 20% of the high and low ranges of our forecasts. 

Research and development expenses 

Research and development expense consists primarily of costs incurred in connection with the development of 

our product candidates. We expense research and development costs as incurred. 

At the end of each reporting period, we compare payments made to third-party service providers to the 
estimated progress toward completion of the applicable research or development objectives. Such estimates are subject 
to change as additional information becomes available. Depending on the timing of payments to the service providers 
and the progress that we estimate has been made as a result of the service provided, we may record net prepaid or 
accrued expense relating to these costs. As of December 31, 2018, we had not made any material adjustments to our 
prior estimates of accrued research and development expenses. 

87 

Acquired in-process research and development 

Acquired in-process research and development expense consists of the initial up-front payments incurred in 
connection with the acquisition or licensing of product candidates that do not meet the definition of a business under 
ASC 805, Business Combinations. 

Stock-based compensation 

We measure expense for all stock options based on the estimated fair value of the award on the grant date. We 
use the Black-Scholes option pricing model to value our stock option awards. We recognize compensation expense on a 
straight-line basis over the requisite service period, which is generally the vesting period of the award. We have not 
issued awards where vesting is subject to a market or performance condition; however, if we were to grant such awards 
in the future, recognition would be based on the derived service period. Expense for awards with performance conditions 
would be estimated and adjusted on a quarterly basis based upon our assessment of the probability that the performance 
condition will be met. 

Historically, for all periods prior to the Merger, the fair market values of the shares of common stock 
underlying our stock options were estimated on each grant date by the board of directors. In order to determine the fair 
market value of our common stock, our board of directors considered, among other things, contemporaneous valuations 
of our common and preferred stock prepared by unrelated third-party valuation firms in accordance with the guidance 
provided by the American Institute of Certified Public Accountants 2013 Practice Aid, Valuation of Privately-Held-
Company Equity Securities Issued as Compensation, or Practice Aid. Given the absence of a public trading market of 
our capital stock, the our board of directors exercised reasonable judgment and considered a number of objective and 
subjective factors to determine the best estimate of the fair market value of our common and preferred stock, including: 

• 

• 

• 

• 

• 

• 

contemporaneous third-party valuations of our common stock; 

the prices, rights, preferences and privileges of our preferred stock relative to the common stock; 

our business, financial condition and results of operations, including related industry trends affecting our 
operations; 

the likelihood of achieving a liquidity event, such as an IPO or sale of our company, given prevailing 
market conditions; 

the lack of marketability of our common stock; 

the market performance of comparable publicly traded companies; and 

•  U.S. and global economic and capital market conditions and outlook. 

Following the Merger, the fair market value of our common stock was determined based on the closing price of 

our common stock on the Nasdaq Capital Market. 

Recent Accounting Pronouncements 

See Note 2 to our consolidated financial statements for a description of recent accounting pronouncements 

applicable to its consolidated financial statements. 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 

Not required for smaller reporting companies. 

88 

 
 
 
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 

MILLENDO THERAPEUTICS, INC. 
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS 

Report of Independent Registered Public Accounting Firm  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   90

Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   91

Consolidated Statements of Operations and Comprehensive Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   92

Consolidated Statements of Convertible Preferred Stock, Redeemable Noncontrolling Interests and Stockholders’ 

Equity (Deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   93

Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   94

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   95

89 

 
 
 
 
 
 
 
 
 
 
 
Report of Independent Registered Public Accounting Firm 

To the Stockholders and the Board of Directors of Millendo Therapeutics, Inc.  

Opinion on the Financial Statements 
We  have  audited  the  accompanying  consolidated  balance  sheets  of  Millendo  Therapeutics,  Inc.  (the  Company)  as  of 
December  31,  2018  and  2017,  the  related  consolidated  statements  of  operations  and  comprehensive  loss,  convertible 
preferred stock, redeemable noncontrolling interests and stockholders’ (deficit) equity, and cash flows for each of the two 
years in the period ended December 31, 2018, and the related notes (collectively referred to as the “consolidated financial 
statements”).  In our opinion,  the  consolidated financial  statements  present  fairly,  in  all  material  respects,  the  financial 
position of the Company at December 31, 2018 and 2017, and the results of its operations and its cash flows for each of 
the two years in the period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles. 

Basis for Opinion 
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion 
on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public 
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the 
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and 
Exchange Commission and the PCAOB. 

We  conducted  our  audits  in  accordance  with  the  standards  of  the  PCAOB.  Those  standards  require  that  we  plan  and 
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, 
whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its 
internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control 
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal 
control over financial reporting. Accordingly, we express no such opinion.  

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether 
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a 
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating 
the  accounting  principles  used  and  significant  estimates  made  by  management,  as  well  as  evaluating  the  overall 
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. 

/s/ Ernst & Young LLP 

We have served as the Company’s auditor since 2016. 
Grand Rapids, Michigan 
March 29, 2019 

90 

 
 
 
 
 
 
 
 
 
Millendo Therapeutics, Inc. 

Consolidated balance sheets 

(in thousands except share and per share amounts) 

December 31,  

2018 

2017 

Assets 
Current assets: 

Cash and cash equivalents  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 
Short-term restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Prepaid expenses and other current assets  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Refundable tax credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Total current assets  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Long-term restricted cash  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   

Total assets  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 

 73,286   $ 
 45  
 4,385  
 3,373  
 2,333  
 83,422  
 439  
 213  
 84,074   $ 

 17,578 
 45 
 — 
 1,084 
 1,031 
 19,738 
 — 
 74 
 19,812 

Liabilities, convertible preferred stock, redeemable noncontrolling interests and stockholders’ 

equity (deficit) 
Current liabilities: 

Current portion of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Debt, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Preferred stock warrant liability  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Other liabilities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   

 189   $ 

 1,998  
 7,630  
 9,817  
 383  
 —  
 752  
 10,952  

 174 
 1,298 
 2,619 
 4,091 
 599 
 139 
 — 
 4,829 

Commitments and contingencies (Note 10) 
Convertible preferred stock, $0.001 par value: 

Series A preferred stock: No shares authorized, issued and outstanding at December 31, 2018; 

15,379,452 shares authorized, 15,269,452 shares issued and outstanding at December 31, 2017 . . . .   

Series A-1 preferred stock: No shares authorized, issued and outstanding at December 31, 2018; 

9,359,000 shares authorized, 6,540,763 shares issued and outstanding at December 31, 2017 . . . . . .   

Series B preferred stock: No shares authorized, issued and outstanding at December 31, 2018; 

48,600,000 shares authorized, 48,402,121 shares issued and outstanding at December 31, 2017 . . . .   

Series B-1 preferred stock: No shares authorized, issued and outstanding at December 31, 2018; 

29,525,000 shares authorized, 20,636,179 shares issued and outstanding at December 31, 2017 . . . .   
Total convertible preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Redeemable noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Stockholders’ equity (deficit): 

Preferred stock, $0.001 par value: 5,000,000 shares authorized; no shares issued and outstanding . . . .   
Common stock, $0.001 par value: 100,000,000 shares authorized; 13,357,999 shares and 246,347 

shares issued and outstanding at December 31, 2018 and 2017, respectively . . . . . . . . . . . . . . . . . . .   

Common-1 stock, $0.001 par value: No shares authorized, issued and outstanding at December 31, 

2018; 8,924,000 shares authorized, 464,043 shares issued and outstanding at December 31, 2017 . .   
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Total stockholders’ equity (deficit) attributable to Millendo Therapeutics, Inc. . . . . . . . . . . . . . . . . . . . . .   
Equity attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Total stockholders’ equity (deficit)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Total liabilities, convertible preferred stock, redeemable noncontrolling interests and stockholders’ 

 —  

 —  

 —  

 —  
 —  
 —  

 —  

 13  

 15,220 

 7,566 

 71,778 

 38,358 
 132,922 
 10,584 

 — 

 — 

 —  
 234,876  
    (164,086) 
 148  
 70,951  
 2,171  
 73,122  

 — 
 6,192 
    (136,894)
 8 
    (130,694)
 2,171 
    (128,523)

equity (deficit)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 

 84,074   $ 

 19,812 

See accompanying notes to consolidated financial statements 

91 

 
 
 
 
 
 
 
 
 
 
    
     
    
     
 
   
    
     
 
   
  
  
 
 
  
  
  
  
  
  
 
 
  
  
 
  
    
  
   
 
  
    
  
   
  
  
  
  
  
  
  
  
  
  
 
 
  
  
 
  
    
  
   
 
  
    
  
   
  
  
  
  
  
  
  
  
  
  
  
  
 
  
    
  
   
 
 
  
  
  
  
  
  
  
  
  
  
  
  
 
 
 
Millendo Therapeutics, Inc. 

Consolidated statements of operations and comprehensive loss 

(in thousands except share and per share amounts) 

Operating expenses: 

Research and development  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 
Acquired in-process research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
General and administrative  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Other general expenses  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   

 14,425    $ 
 —   
 8,691   
 3,758   
 26,874   

 14,526 
 63,844 
 5,956 
 — 
 84,326 

Other expenses: 

Year Ended December 31,  

2018 

2017 

Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Foreign currency losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Change in fair value of preferred stock warrant liability . . . . . . . . . . . . . . . . . . . . . . . . . .   
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Net (income) loss attributable to noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Net loss attributable to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 
Net loss per share of common stock, basic and diluted  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 
Weighted-average shares of common stock outstanding, basic and diluted . . . . . . . . . . . . .   
Other comprehensive income: 

 134   
 209   
 (40) 
 (27,177) 
 (15) 

 288 
 — 
 (28)
 (84,586)
 8 
 (27,192)  $   (84,578)
 (17.58)  $   (321.81)
 262,823 

    1,547,051   

 140    $ 

 10 
 (27,052)  $   (84,568)
 2 
 (27,052)  $   (84,570)

 —    $ 

Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 
Comprehensive loss  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 
Comprehensive income attributable to noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . .    $ 
Comprehensive loss attributable to Millendo Therapeutics, Inc. . . . . . . . . . . . . . . . . . . . . . .    $ 

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S

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Millendo Therapeutics, Inc. 

Consolidated statements of cash flows 

(in thousands) 

Year Ended  
December 31,  

2018 

2017 

Operating activities: 
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $   (27,177)   $   (84,586)
Adjustments to reconcile net loss to net cash used in operating activities: 

Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Stock-based compensation expense  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Write-off of deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Non-cash interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Acquired in-process research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Change in fair value of preferred stock warrant liability . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Changes in operating assets and liabilities: 

Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Cash used in operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   

Investing activities: 
Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Proceeds from sale of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Net cash (paid) acquired in Alizé asset purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Cash provided by investing activities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   

Financing activities: 
Cash acquired in connection with the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Proceeds from convertible promissory notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Proceeds from term loan and related warrants  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Repayment of debt  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Proceeds from sale of private placement, net of issuance costs . . . . . . . . . . . . . . . . . . . . . . . .   
Payment of financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Purchase of redeemable noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Proceeds from the exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Cash provided by (used in) financing activities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Effect of foreign currency exchange rate changes on cash . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Net increase (decrease) in cash, cash equivalents and restricted cash . . . . . . . . . . . . . . . . . . .   
Cash, cash equivalents and restricted cash at beginning of period  . . . . . . . . . . . . . . . . . . . . .   
Cash, cash equivalents and restricted cash at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 
Supplemental disclosure of cash flow information: 
Cash paid for interest  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 
Cash paid for taxes  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 
Supplemental schedule of non-cash investing and financing activities: 

 32   
 1,427   
 871   
 204   
 —   
 (40)  

 (2,524)  
 320   
 3,240   
 (23,647)  

 (36)  
 2,492   
 (524)  
 1,932   

 28 
 762 
 1,364 
 120 
 63,844 
 (28)

 1,002 
 (1,452)
 (1,394)
 (20,340)

 (4)
 — 
 462 
 458 

 33,316   
 8,000   
 —   
 (169)  
 38,756   
 (1,351)  
 (808)  
 —   
 77,744   
 118   
 56,147   
 17,623   
 73,770    $ 

 — 
 — 
 6,000 
 (10,042)
 — 
 (423)
 — 
 2 
 (4,463)
 19 
 (24,326)
 41,949 
 17,623 

 —    $ 
 4    $ 

 213 
 — 

Fair market value of securities issued in connection with Alizé asset purchase . . . . . . . .    $ 
 —    $ 
Conversion of convertible preferred stock into common stock  . . . . . . . . . . . . . . . . . . . . .    $   132,922    $ 
 99    $ 
Reclassification of preferred stock warrant liability  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 
 7,724    $ 
Conversion of convertible promissory note into common stock . . . . . . . . . . . . . . . . . . . . .    $ 
 9,790    $ 
Exchange of noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 
 —    $ 
Alizé acquisition costs included in accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 
 15    $ 
Financing costs in accounts payable and accrued expenses  . . . . . . . . . . . . . . . . . . . . . . . .    $ 

 63,002 
 — 
 — 
 — 
 — 
 524 
 — 

See accompanying notes to consolidated financial statements 

94 

 
 
 
 
 
 
 
 
 
 
 
 
     
     
  
 
      
 
   
 
  
     
  
   
  
  
  
  
  
  
  
  
  
  
  
  
 
  
     
  
   
  
  
  
  
  
  
  
  
 
  
     
  
   
  
  
 
 
  
  
  
  
 
  
     
  
   
 
 
 
 
  
  
  
  
  
  
  
  
 
 
  
  
  
  
  
  
  
  
  
  
 
  
     
  
   
 
  
     
  
   
 
 
 
Millendo Therapeutics, Inc. 

Notes to consolidated financial statements 

1. Organization and description of business 

Description of Business 

Millendo Therapeutics, Inc., a Delaware corporation, together with its subsidiaries, is a late-stage 
biopharmaceutical company focused on developing novel treatments for orphan endocrine diseases where current 
therapies do not exist or are insufficient. The Company is currently advancing two product candidates to treat three 
indications. The Company’s most advanced product candidate, livoletide (AZP-531), is a potential treatment for 
Prader-Willi syndrome, or PWS, a rare and complex genetic endocrine disease characterized by hyperphagia, or 
insatiable hunger. The Company is also developing nevanimibe (ATR-101) with a primary focus on treating patients 
with classic congenital adrenal hyperplasia, or CAH, a rare, monogenic adrenal disease that requires lifelong treatment 
with exogenous cortisol, often at high doses. The Company is also investigating nevanimibe for the treatment of patients 
with endogenous Cushing’s syndrome, or CS, a rare endocrine disease characterized by excessive cortisol production 
from the adrenal glands. 

The Company’s operations to date have focused on organization and staffing, business planning, raising capital, 

acquiring technology and assets, and conducting preclinical studies and clinical trials. The Company does not have any 
product candidates approved for sale and has not generated any revenue from product sales. The Company’s product 
candidates are subject to long development cycles and the Company may be unsuccessful in its efforts to develop, obtain 
regulatory approval for or market its product candidates. 

The Company is subject to a number of risks including, but not limited to, the need to obtain adequate 
additional funding for the ongoing and planned clinical development of its product candidates. Because of the numerous 
risks and uncertainties associated with pharmaceutical products and development, the Company is unable to accurately 
predict the timing or amount of funds required to complete development of its product candidates, and costs could 
exceed the Company’s expectations for a number of reasons, including reasons beyond the Company’s control. 

Merger with OvaScience 

In December 2018, OvaScience, Inc., a Delaware corporation (“OvaScience”), now known as Millendo 

Therapeutics, Inc. (the “Company”), completed its merger (the “Merger”) with privately-held Millendo Therapeutics, 
Inc. (“Private Millendo”), in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated 
August 8, 2018, as amended on September 25, 2018 and November 1, 2018 (the “Merger Agreement”), whereby Orion 
Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of OvaScience (the “Merger Sub”), merged with 
and into Private Millendo, with Private Millendo continuing as a wholly owned subsidiary of OvaScience.   

Under the terms of the Merger Agreement, OvaScience issued shares of its common stock to Private Millendo’s 

stockholders, at an exchange ratio of 0.0744 shares of OvaScience common stock, for each share of Private Millendo 
common stock outstanding immediately prior to the Merger.  OvaScience also assumed all of the stock options 
outstanding under the Private Millendo 2012 Equity Incentive Plan, as amended (the “Private Millendo Plan”), with such 
stock options henceforth representing the right to purchase a number of shares of OvaScience’s common stock equal to 
0.0744 multiplied by the number of shares of Private Millendo common stock previously represented by such options. 

The Company’s shares of common stock listed on The Nasdaq Capital Market, previously trading through the 

close of business on Friday, December 7, 2018 (the “Merger Date”) under the ticker symbol “OVAS,” commenced 
trading on The Nasdaq Capital Market, under the ticker symbol “MLND,” on Monday, December 10, 2018.  See 
discussions of the transactions in connection with the Merger within Note 3. 

The Merger was accounted for as a reverse acquisition and recapitalization, with Private Millendo being treated 

as the accounting acquirer. As such, the results of operations and cash flows prior to the Merger Date, relate to Private 

95 

Millendo and its subsidiaries. Subsequent to the Merger Date, the information relates to the consolidated entities of 
Millendo Therapeutics, Inc. All share and per share amounts in the consolidated financial statements and related notes 
have been retroactively adjusted, where applicable, for all periods presented to give effect to the exchange ratio applied 
in connection with the Merger. 

Liquidity 

The Company has incurred net losses since inception and it expects to generate losses from operations for the 

foreseeable future primarily due to research and development costs for its potential product candidates.  As of 
December 31, 2018, the Company had cash, cash equivalents and marketable securities of $77.7 million.   

The Company will likely require additional capital in the future through equity or debt financings, partnerships, 

collaborations, or other sources to carry out the Company’s planned development activities. If additional capital is not 
secured when required, the Company may need to delay or curtail its operations until such funding is received. Various 
internal and external factors will affect whether and when the Company’s product candidates become approved drugs. 
The regulatory approval and market acceptance of the Company’s proposed future products (if any), length of time and 
cost of developing and commercializing these product candidates and/or failure of them at any stage of the drug approval 
process will materially affect the Company’s financial condition and future operations. The Company believes its cash, 
cash equivalents and marketable securities at December 31, 2018 is sufficient to fund operations into the second half of 
2020. 

2. Basis of presentation and summary of significant accounting policies 

Basis of presentation and consolidation principles 

The accompanying consolidated financial statements include the accounts of Millendo Therapeutics, Inc. and its 

subsidiaries, and all intercompany amounts have been eliminated. The consolidated financial statements have been 
prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). Any reference in these notes to 
applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and 
Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). 

The consolidated financial statements include the accounts of the Company’s subsidiaries in which the 

Company holds a controlling financial interest as of the financial statement date. 

Use of estimates 

The preparation of the consolidated financial statements in conformity with GAAP requires management to 
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent 
assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. 
Actual results could differ from those estimates. Due to the uncertainty of factors surrounding the estimates or judgments 
used in the preparation of the consolidated financial statements, actual results may materially vary from these estimates. 
Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the financial statements 
in the period they are determined to be necessary. 

Concentration of credit risk 

Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash, 
cash equivalents, and marketable securities. The Company generally invests its cash in deposits with high credit quality 
financial institutions. Deposits at banks may exceed the insurance provided on such deposits.  Additionally, the 
Company performs periodic evaluations of the relative credit standing of these financial institutions. 

96 

Cash and cash equivalents 

The Company considers all highly liquid investments that have maturities of three months or less when 
acquired to be cash equivalents. Cash equivalents as of December 31, 2018 and 2017 consisted of money market funds. 

Marketable securities 

The Company classifies its marketable securities as available-for-sale securities and the securities are stated at 

fair value. At December 31, 2018, the balance in the Company’s accumulated other comprehensive income included 
activity related to the Company’s available-for-sale marketable securities. There were no material realized gains or 
losses recognized on the maturity of available-for-sale securities during the year ended December 31, 2018 and, as a 
result, the Company did not reclassify any amount out of accumulated other comprehensive loss for the same period.  

Restricted cash 

Restricted cash relates to amount used to secure the Company’s credit card facility balances held on deposit 

with major financial institutions and to collateralize a letter of credit in the name of the Company’s landlord pursuant to 
a certain operating lease agreement. The following table provides a reconciliation of the components of cash, cash 
equivalents, and restricted cash reported in the Company's consolidated balance sheets to the total of the amount 
presented in the consolidated statements of cash flows: 

Cash and cash equivalents  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $  73,286    $  17,578 
 45 
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
 — 
Long-term restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Total cash, cash equivalents, and restricted cash shown in the 

 45   
 439   

consolidated statements of cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . .    $  73,770    $  17,623 

December 31,  

2018 

2017 

(in thousands) 

Refundable tax credit 

In connection with the acquisition of Alizé (see Note 4), the Company obtained French research tax credits 

(crédit d’impôt recherche) or (“CIR”). CIR earned are refundable or they can offset French corporate income tax due. 
Since the French research tax credit can be recovered in cash, the Company has elected to treat this as a grant. During 
the year ended December 31, 2018 and 2017, the Company recognized a reduction of research and development 
expenses of $1.4 million and $35,000, respectively, and had a research tax credit receivable of $2.3 million and $1.0 
million at December 31, 2018 and 2017, respectively. On January 15, 2019, the Company received a payment of $1.0 
million for the 2017 refundable tax credit. 

Fair value of financial instruments 

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price 

that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous 
market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation 
techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable 
inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three 
levels of the fair value hierarchy, of which the first two are considered observable and the last is considered 
unobservable: 

•  Level 1—Quoted prices in active markets for identical assets or liabilities. 
•  Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for 
similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or 
liabilities, or other inputs that are observable or can be corroborated by observable market data. 

97 

 
 
 
 
 
 
 
 
 
 
     
     
 
 
  
  
 
 
 
•  Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to 
determining the fair value of the assets or liabilities, including pricing models, discounted cash flow 
methodologies and similar techniques. 

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest 

level of any input that is significant to the fair value measurement. 

The carrying amounts reflected in the Company’s consolidated balance sheets for cash equivalents, marketable 

securities, restricted cash, prepaid expenses and other current assets, accounts payable and accrued expenses 
approximate their fair values due to their short term nature. The carrying value of the Company’s preferred stock warrant 
liability at December 31, 2017 is the estimated fair value of the liability. The carrying value of the Company’s debt 
assumed from Alizé approximates fair value as of December 31, 2018 and 2017. 

Preferred stock warrants 

The Company accounts for its warrants issued in connection with financing transactions based upon the 
characteristics and provisions of the instrument. The preferred stock warrants are recorded at fair value at each reporting 
period and classified as liabilities in the Company’s consolidated balance sheets. Any changes to fair value are recorded 
as a component of other expense within the Company’s consolidated statements of operations and comprehensive loss. 

Redeemable noncontrolling interests 

Redeemable noncontrolling interest represented the 16.4% interest in Alizé that was held by other investors 

until December 2018. The Company was subject to a put call agreement (see Note 4) with these investors, that was 
settled in December 2018, resulting in the Company acquiring the remaining issued and outstanding share capital of 
Alizé in exchange for cash and shares of the Company’s common stock. The exchange ratio of shares was fixed at the 
amounts determined on the acquisition date.  There were no redeemable noncontrolling interests outstanding as of 
December 31, 2018. 

Other assets 

Other assets includes property and equipment and other assets. Property and equipment, less accumulated 
depreciation, are recorded at cost and are depreciated on a straight-line basis over their estimated useful lives which 
range from three to five years except for leasehold improvements which are amortized over the shorter of the asset life or 
lease term. Repairs and maintenance costs are expensed as incurred. Long-lived assets are reviewed for impairment 
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The 
Company has not recognized any impairment or disposition of long-lived assets through December 31, 2018. 

Deferred offering costs 

The Company capitalizes costs that are directly associated with in-process equity financings until such 

financings are consummated, at which time such costs are recorded against the gross proceeds from the applicable 
financing. If a financing is abandoned, deferred offering costs are expensed. During the years ended December 31, 2018 
and 2017, the Company expensed $0.9 million and $1.4 million, respectively, in offering costs.  The expense was 
recorded as a component of general and administrative expenses. 

Research and development expenses 

Research and development costs are expensed as incurred and consist primarily of personnel expenses, costs of 

funding research performed by third parties, expenses incurred under agreements with contract manufacturing 
organizations, payments under third-party licensing agreements other than IPR&D, consultant fees and expenses 
associated with outsourced professional scientific development services, expenses related to regulatory activities and 
allocated expense for facility costs. Milestone payment obligations incurred prior to regulatory approval of the product, 
which are accrued when the event requiring payment of the milestone occurs, are included in research and development 

98 

expenses. Upfront milestone payments made to third parties who perform research and development services on the 
Company’s behalf are expensed as services are rendered. 

At the end of each reporting period, the Company compares payments made to third-party service providers to 

the estimated progress toward completion of the applicable research or development objectives. Such estimates are 
subject to change as additional information becomes available. Depending on the timing of payments to the service 
providers and the progress that the Company estimates has been made as a result of the service provided, the Company 
may record net prepaid or accrued expense relating to these costs. As of December 31, 2018 and 2017, the Company has 
not made any material adjustments to its prior estimates of accrued research and development expenses. 

Acquired in-process research and development (“IPR&D”) expense consists of the initial up-front payments 

incurred in connection with the acquisition or licensing of product candidates that do not meet the definition of a 
business under FASB ASC Topic 805, Business Combinations. The Company’s acquired IPR&D expense of 
$63.8 million reflects the fair value of consideration ascribed to the livoletide product candidate in connection with its 
acquisition of Alizé in December 2017 (see Note 4). 

Stock-based compensation 

The Company measures and recognizes compensation expense for all stock options awarded to employees and 

nonemployees based on the estimated fair market value of the award on the grant date. The Company uses the 
Black-Scholes option pricing model to value its stock option awards. The Company recognizes compensation expense 
on a straight-line basis over the requisite service period, which is generally the vesting period of the award. The 
Company accounts for forfeitures of stock options as they occur. Stock-based awards issued to nonemployees were 
revalued at each reporting period until the award vests. 

October 1, 2018, the Company early adopted ASU 2018-07, Compensation – Stock Compensation (Topic 718): 

Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based 
payments granted to nonemployees for goods and services. As a result of the adoption, stock-based awards issued to 
nonemployees are no longer required to be revalued at each reporting period.  The adoption of ASU No. 2018-07 did not 
have a material effect on the consolidated financial statements. 

Estimating the fair market value of options requires the input of subjective assumptions, including the estimated 

fair value of the Company’s common stock, the expected life of the options, stock price volatility, the risk-free interest 
rate and expected dividends. The assumptions used in the Company’s Black-Scholes option-pricing model represent 
management’s best estimates and involve a number of variables, uncertainties and assumptions and the application of 
management’s judgment, as they are inherently subjective. 

Income taxes 

On December 22, 2017 the President of the United States signed into law the Tax Cuts and Jobs Act (the “Tax 
Act”). This legislation makes significant changes in the U.S. tax laws including reducing the corporate rate from 34% to 
21% beginning in 2018 and creating a territorial tax system with a one-time mandatory tax on previously deferred 
foreign earnings of U.S. subsidiaries. The provisions of the Tax Act did not have any impact to the Company’s effective 
tax rate due to the full valuation allowance position. As a result of the reduced corporate rate, the Company’s deferred 
tax assets were revalued from 34% to 21%, which was fully offset by a reduction in the valuation allowance. 

The Company recognizes deferred tax assets and liabilities for temporary differences between the financial 

reporting basis and the tax basis of the Company’s assets and liabilities and the expected benefits of net operating loss 
carryforwards. The impact of changes in tax rates and laws on deferred taxes, if any, applied during the period in which 
temporary differences are expected to be settled, is reflected in the Company’s financial statements in the period of 
enactment. The measurement of deferred tax assets is reduced, if necessary, if, based on weight of the evidence, it is 
more likely than not that some, or all, of the deferred tax assets will not be realized. As of December 31, 2018 and 2017, 
the Company has concluded that a full valuation allowance is necessary for all of its net deferred tax assets. The 

99 

Company had no material amounts recorded for uncertain tax positions, interest or penalties in the accompanying 
consolidated financial statements. 

In accordance with guidance issued by Financial Accounting Standards Board (“FASB”), companies should 
make and disclose a policy election as to whether they will recognize deferred taxes for basis differences expected to 
reverse as Global Intangible Low Taxed Income (“GILTI”) or whether they will account for GILTI as period costs if 
and when incurred. The Company has elected to recognize the resulting tax with respect to the GILTI provision as a 
period cost. No costs were incurred by the Company through December 31, 2018 as a result of GILTI. 

Net loss per share 

Basic loss per share of common stock is computed by dividing net loss attributable to common stockholders by 
the weighted-average number of shares of common stock (including shares of common-1 stock) outstanding during each 
period. Diluted loss per share of common stock includes the effect, if any, from the potential exercise or conversion of 
securities, such as convertible debt, convertible preferred stock, preferred stock warrants, restricted stock, and stock 
options, which would result in the issuance of incremental shares of common stock. In computing the basic and diluted 
net loss per share, the weighted-average number of shares of common stock remains the same for both calculations due 
to the fact that when a net loss exists, dilutive shares are not included in the calculation as the impact is anti-dilutive. 

The following potentially dilutive securities have been excluded from the computation of diluted 

weighted-average shares of common stock outstanding, as they would be anti-dilutive (amounts shown as common stock 
equivalents): 

  Year ended December 31,  

Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      1,764,287    
Convertible preferred stock  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Common stock warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Preferred stock warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
BSA and BSPCE warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    

2018 

2017 
 703,479 
 —      6,759,109 
 — 
 17,125 
 156,719 
    1,938,131      7,636,432 

 17,125   
 —    
 156,719    

Segment information 

Operating segments are defined as components of an enterprise about which separate discrete information is 
available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate 
resources and in assessing performance. The Company views its operations and manages its business in one segment. 

Foreign currency 

Results of foreign operations are translated from their functional currency into U.S. dollars (reporting currency) 

using average exchange rates in effect during the year, while assets and liabilities are translated into U.S. dollars using 
exchange rates in effect at the balance sheet date. The resulting translation adjustments are recorded in accumulated 
other comprehensive loss. Transaction gains and losses resulting from exchange rate changes on transactions 
denominated in currencies other than the functional currency are included in income in the period in which the change 
occurs and reported within other expenses in the consolidated statements of operations and comprehensive loss.  

Recent accounting pronouncements 

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework - Changes to the Disclosure 

Requirements for Fair Value Measurement.  ASU 2018-13 resulted in certain modifications to fair value measurement 
disclosures, primarily related to level 3 fair value measurements. The new standard is effective for fiscal years, and 
interim periods within those fiscal years, beginning after December 15, 2019, and early adoption is permitted. The 
Company is currently evaluating the potential impact of the adoption of this standard on its disclosures. 

100 

 
 
 
 
 
 
 
    
    
 
 
In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): 

Improvements to Non-employee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce the cost and 
complexity and to improve financial reporting for non-employee share-based payments. The ASU expands the scope 
of Topic 718, Compensation-Stock Compensation (which currently only includes share-based payments to employees), 
to include share-based payments issued to non-employees for goods or services. Consequently, the accounting for share-
based payments to non-employees and employees will be substantially aligned. This update is effective for annual and 
interim periods beginning after December 15, 2018 with early adoption permitted. Upon transition, entities will 
remeasure unsettled liability-classified awards and any unmeasured equity-classified awards for non-employees at fair 
value as of the adoption date. A cumulative-effect adjustment to retained earnings will be required as of the beginning of 
the fiscal year of adoption. The Company adopted ASU No. 2018-07 on October 1, 2018, which did not have a material 
effect on the consolidated financial statements. 

In March 2018, the FASB issued ASU 2018-05, which amends Income Taxes (Topic) 740 by incorporating the 

Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin 118 (“SAB 118”) issued on December 22, 
2017. SAB 118 provide guidance on accounting for the effects of the Tax Act. The Company recognized the income tax 
effects of the Tax Act in the 2017 consolidated financial statements in accordance with SAB 118. See Note 13 of the 
consolidated financial statements for additional disclosures. 

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230). ASU No. 2016-
18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and 
amounts generally described as restricted cash or restricted cash equivalents. The new standard is effective for fiscal 
years beginning after December 15, 2017. The Company adopted ASU 2016-18 in 2018 and as a result there was no 
impact to the prior periods. 

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) Classification of Certain 

Cash Receipts and Cash Payments, which will make eight targeted changes to how cash receipts and cash payments are 
presented and classified in the statement of cash flows. This standard is effective January 1, 2019 and will require 
adoption on a retrospective basis unless it is impracticable to apply, in which case the Company would be required to 
apply the amendments prospectively as of the earliest date practicable. The Company is currently evaluating the 
potential impact of the adoption of this standard on its consolidated financial statements and related disclosures. 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), which 
replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit 
losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss 
estimates.  Additionally, ASU 2016-13 requires a financial asset measured at amortized cost basis to be presented at the 
net amount expected to be collected through the use of an allowance of expected credit losses.  ASU 2016-13 is effective 
for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and requires a 
modified retrospective approach.  The Company is in the process of evaluating the impact of this new guidance on its 
consolidated financial statements and disclosures. 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires the Company as the 

lessee to recognize most leases on the balance sheet thereby resulting in the recognition of right of use assets and lease 
obligations for those leases currently classified as operating leases. ASU 2016-02 became effective for the Company on 
January 1, 2019 and the Company elected the optional transition method as well as the package of practical expedients 
upon adoption. While the Company is still finalizing its adoption procedures, the Company estimates the primary impact 
to the consolidated financial position upon adoption will be the recognition, on a discounted basis, of the minimum 
commitments under noncancelable operating leases on the consolidated balance sheets resulting in the recording of right 
of use assets of approximately $0.9 million and lease obligations for approximately $2.0 million. 

In January 2016, the FASB issued authoritative guidance under ASU 2016-01, Financial Instruments—Overall 

(Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 revises 
the classification, measurement and disclosure of investments in equity securities. The Company adopted this standard 
effective January 1, 2018. The adoption of ASU 2016-01 did not have an impact on the Company’s consolidated 
financial statements. 

101 

Subsequent events 

Subsequent events were evaluated through the filing date of this Annual Report. 

In February 2019, the Company entered into a five-year lease agreement for office space commencing April 1, 

2019. Annual rent payments range from $374,000 in the first year and escalates to $421,000 in the fifth year. 

3. OvaScience Merger 

As described in Note 1, Private Millendo merged with the Company in December 2018. The Merger was 

accounted for as a reverse recapitalization with Private Millendo as the accounting acquirer. The primary pre-
combination assets of OvaScience was cash, cash equivalents and marketable securities. Under reverse recapitalization 
accounting, the assets and liabilities of OvaScience were recorded at their fair value which approximated book value due 
to the short-term nature of the instruments. No goodwill or intangible assets were recognized.  Consequently, the 
consolidated financial statements of Millendo reflect the operations of OvaScience for accounting purposes together with 
a deemed issuance of shares, equivalent to the shares held by the former stockholders of the legal acquirer and a 
recapitalization of the equity of the accounting acquirer.  

As part of the reverse recapitalization, the Company obtained approximately $40.2 million of cash and 
marketable securities. The Company also obtained prepaids and other assets of $1.3 million and assumed payables and 
accruals of approximately $3.5 million, which includes a $1.4 million lease termination liability. All of the development 
programs have been terminated and were deemed to have no value at the transaction date and the Company is winding 
down the legacy OvaScience operations. 

Additionally, the Company incurred approximately $1.8 million in severance costs as a result of resignations of 
executive officers immediately prior to the Merger and approximately $43,000 in share based compensation expense as a 
result of the acceleration of vesting of stock options at the time of Merger. 

4. Alizé Pharma SAS Acquisition 

In December 2017, the Company entered into agreements to acquire 100% of the outstanding ownership 
interests of Alizé, a privately held biotechnology company based in Lyon, France focused on the development of a 
treatment for patients with PWS, through its lead product candidate, livoletide. 

On December 19, 2017, the Company acquired 83.6% of the issued and outstanding share capital of Alizé 

pursuant to a Share Sale and Contribution Agreement. The consideration included an upfront payment of $1.0 million 
(including approximately $0.3 million to a former shareholder of Alizé and approximately $0.7 million of transaction 
expenses on behalf of the acquired company), the issuance of 6,540,763 shares of the Company’s Series A-1 preferred 
stock, 20,636,179 shares of the Company’s Series B-1 preferred stock and 464,043 shares of the Company’s common-1 
stock with an aggregate fair market value of $50.8 million. Upon consummation of the Merger the Series A-1 preferred 
stock, Series B-1 preferred stock, and common-1 stock were converted to 2,486,003 shares of common stock. 

The remaining 16.4% of Alizé was held by Otonnale SAS (“Otonnale”) and was subject to a put-call agreement 

until December 2018 when it was settled and the Company purchased the remaining 16.4% of Alizé in exchange for a 
cash payment of $0.8 million and the issuance of 442,470 shares of the Company’s common stock. Additionally, the 
Company issued 7,901 shares of common stock to Eumedix FR S.À R.L. (“Eumedix”) as consideration for advisory 
services that Eumedix performed for Otonnale in connection with the transaction. 

Additionally, the Company assumed 6,219 warrants in the form of bons de souscription d’actions (“BSAs”) and 

5,360 warrants in the form of bons de souscription de parts de créateur d’entreprise (“BSPCEs”) that were held by 
employees, directors and consultants of Alizé. The outstanding BSAs and BSPCEs were amended whereby, upon 
exercise, the holders will receive shares of the Company’s preferred stock and common stock. The estimated aggregate 
fair value of the amended BSAs and BSPCEs was $2.2 million and included in the consideration to acquire Alizé. 

102 

 
 
The Share and Contribution Agreement with Alizé was accounted for as an asset acquisition as substantially all 
of the fair value of the gross assets acquired was concentrated in the livoletide development program. The $63.8 million 
in estimated fair value allocated to livoletide was expensed, as the Company determined the asset has no alternative 
future use. 

The purchase price was calculated as follows (amounts in thousands): 

Fair market value of Millendo securities issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 
Fair value of noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Acquisition costs and payments to sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Less: cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   

Total consideration given, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 

     Consideration
 52,985 
 10,017 
 1,570 
 (1,508)
 63,064 

The following table summarizes the assets acquired and liabilities assumed as of the acquisition date (amounts 

in thousands): 

     Assets Acquired and
  Liabilities Assumed 

Assets acquired: 

Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $ 
Refundable tax credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
In-process research and development asset  . . . . . . . . . . . . . . . . . . . . . . . . . .    
Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    

Liabilities assumed: 

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Accrued expenses and other current liabilities . . . . . . . . . . . . . . . . . . . . . . .    
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Net assets acquired  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $ 

 472 
 981 
 14 
 63,844 
 65,311 

 1,150 
 294 
 803 
 2,247 
 63,064 

The estimated fair market value of the Millendo securities issued to Alizé was based on the present value of the 

future estimated cash flows of the combined company (“Income Approach”). The Income Approach starts with the 
forecast of the expected future estimated cash flows of the combined company and requires several judgments and 
assumptions to determine the fair value of intangible assets, including growth rates, discount rates, probability of 
achieving commercialization, expected levels of cash flows and tax rates. A change in these assumptions would impact 
the consideration received and expensed in 2017. The change could be material. For example, a 1% change in the 
discount rate used would increase (decrease) the fair value of the equity issued by approximately 15%. The Company 
placed a weighting on multiple forecast scenarios when determining its enterprise value. The weighted average scenario 
selected was within 20% of the high and low ranges of the Company’s forecasts. These non-recurring fair value 
measurements are Level 3 measurements in the fair value hierarchy. 

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5. Marketable securities 

The following summarizes the available-for-sale securities held as of December 31, 2018 (amounts in 

thousands): 

U.S. government agency . . . . . . . . . .    $ 
Corporate debt securities  . . . . . . . . .    $ 

December 31, 2018 
  Amortized cost    Unrealized gains   Unrealized losses    Fair value 
 —    $   2,994 
 —    $ 
 —    $   1,391 
 —    $ 

 2,994    $ 
 1,391    $ 

Marketable securities were acquired in connection with the Merger. There were immaterial unrealized losses 

recorded from the date of Merger through December 31, 2018. The Company does not have any marketable securities as 
of December 31, 2017. No available-for-sale securities held as of December 31, 2018 had remaining maturities greater 
than one year. 

6. Fair value measurements 

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring 

basis (amounts in thousands): 

(Level 1) 

December 31, 2018 
(Level 2) 

(Level 3) 

Assets 
Money market funds (included in cash and cash 

equivalents). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
Marketable securities - U.S. government agency .  
Marketable securities - Corporate debt securities .  

  $ 
  $ 
  $ 

 25,145    $ 
 —    $ 
 —    $ 

 —    $ 
 2,994    $ 
 1,391    $ 

 — 
 — 
 — 

Liabilities 
Preferred stock warrant liability . . . . . . . . . . . . . . .    $ 

 —    $ 

 —    $ 

 — 

(Level 1) 

December 31, 2017 
(Level 2) 

(Level 3) 

Assets 
Money market funds (included in cash and cash 

equivalents). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
Marketable securities - U.S. government agency .  
Marketable securities - Corporate debt securities .  

  $ 
  $ 
  $ 

 —    $ 
 —    $ 
 —    $ 

 —    $ 
 —    $ 
 —    $ 

 — 
 — 
 — 

Liabilities 
Preferred stock warrant liability . . . . . . . . . . . . . . .    $ 

 —    $ 

 —    $ 

 139 

The Company’s preferred stock warrants were classified as liabilities, recorded at fair value and subject to 

re-measurement at each balance sheet date until they were converted into common stock warrants in connection with the 
completion of the Merger. The common stock warrants are equity classified as of the Merger date and are no longer 
subject to remeasurement. 

104 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
     
     
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
      
 
      
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
     
     
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
      
 
      
 
   
The reconciliation of the preferred stock warrant liability measured at fair value, until the reclassification into 

equity at the time of the Merger, on a recurring basis using significant unobservable inputs (Level 3) was as follows 
(amounts in thousands): 

Balance at January 1, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Change in fair value  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Balance at December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Change in fair value  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Reclassification to equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Balance at December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    

$ 

      Preferred stock 
  warrant liability
 167 
 — 
 (28)
 139 
 (40)
 (99)
 — 

$ 

The Series A and Series B preferred stock warrant liabilities are estimated using an option pricing model. The 

significant assumptions used in valuing the warrants include expected term, expected volatility, risk-free interest rate and 
expected dividend yield. As of Merger date, immediately prior to reclassifying the warrants to equity, and as of 
December 31, 2017 the significant weighted-average assumptions were as follows: 

Expected term (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     
Expected volatility  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     
Risk free rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     

 1.75    

 71  %   
 2.58  %   
 —  %   

      2018 

2017 
 1.41   

 72  % 
 1.76  % 
 —  % 

Year ended  
December 31,  

7. Accrued expenses 

Accrued expenses consist of (amounts in thousands): 

Compensation and related benefits  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $  3,537    $  1,365 
 695 
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
 390 
Preclinical and clinical costs  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
 — 
Lease termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Other  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
 169 
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $  7,630    $  2,619 

    1,140   
    1,811   
 630   
 512   

December 31,  

2018 

2017 

8. Debt 

Bpifrance Reimbursable Advance 

In December 2017, in connection with its acquisition of Alizé (see Note 4), the Company assumed €0.7 million 
of debt that Alizé had outstanding with Bpifrance Financing (“Bpifrance”). The original advance amount of €0.8 million 
(“the Bpifrance Advance”) was provided to Alizé as an innovation aid that required Alizé to carry out certain activities 
related to its livoletide clinical development program and incur a certain level of program expenditures. No interest is 
charged or accrued under the advance. 

The Company is required to make quarterly principal payments, which began in December 2016 and continue 
through September 2021. The quarterly principal payments escalate over the repayment period beginning with €17,500 
per quarter and increasing to €50,000 through maturity. In addition to the quarterly payments, the Company could be 
obligated to pay on an accelerated basis the principal payments, if applicable, no later than March 31st of each year 

105 

 
 
 
 
 
 
  
  
  
  
  
 
 
 
 
 
 
 
 
  
 
 
  
 
     
  
 
 
 
 
 
 
 
 
 
 
 
 
     
     
  
  
 
 
  
  
 
 
starting from January 1, 2016, a reimbursement annuity equal to 20% of the proceeds generated by the Company from 
license, assignment or use of the livoletide. Under no circumstance would the Company be required to reimburse to 
Bpifrance principal amounts greater than the original advance it received. 

The Company is permitted to repay the Bpifrance Advance at any time, at which point it would be released 

from all commitments and obligations under the Bpifrance Advance agreement. The Bpifrance Advance Agreement does 
not contain any ongoing financial covenants. 

At December 31, 2018, the balance outstanding was $0.6 million (€0.5 million). 

Convertible promissory notes 

In August 2018, the Company issued convertible promissory notes (as amended) to several of its existing 
investors and received cash proceeds of $8.0 million. The notes accrued simple interest of 6.0% per annum and all 
principal and interest was due at maturity, if not converted. Upon consummation of the Merger, the outstanding principal 
and interest converted into 499,504 shares of the Company’s common stock.  The Company recorded debt issuance costs 
of $0.5 million in connection with the promissory notes.  The debt discount was amortized into interest expense over the 
term of the promissory notes using the effective interest method.  At the time of conversion, the unamortized debt 
discount of $0.4 million was reclassified to equity.  For the year ended December 31, 2018, the Company recognized 
interest expense of $0.2 million of which $52,000 was attributable to the amortization of the debt discount. 

Comerica Bank Term Loan agreement 

The Company entered into, and subsequently amended, a Loan and Security Agreement (the “Loan 

Agreement”) with Comerica bank and borrowed $4.0 million with an option to borrow an additional $6.0 million which 
the Company was eligible for in 2017 and completed. Borrowings under the amended Loan Agreement bore interest at a 
variable rate equal to the prime rate, but in no event less than 2.5% per annum, plus 1.5% per annum.   The Company 
was obligated to make monthly principal payments beginning in July 2017 and the loan matured in December 2019.  In 
July 2017, the Company repaid the $10.0 million loan balance in full and wrote off $91,000 of unamortized debt 
discount.  

9. License agreements 

University of Michigan License Agreement 

In June 2013, the Company entered into a license agreement with the Regents of the University of Michigan 

(the “University of Michigan”) for a worldwide, exclusive, sublicensable license to the University of Michigan’s interest 
in certain patent rights jointly owned with the Company, covering the use of ATR-101 for the treatment of certain 
indications (the “UM License Agreement”). The Company is obligated to make payments to the University of Michigan 
totaling up to $2.5 million upon the achievement of certain development and commercial milestones. There was no 
expense recognized during the year ended December 31, 2018 related to milestone payments. The Company recognized 
$0.1 million of expense in connection with the achievement of certain milestones under the license agreement during 
the year ended December 31, 2017. The Company is also required to pay the University of Michigan a low-single digit 
royalty percentage on net sales of applicable products, if any. 

In addition, $20,000 in annual minimum royalties are due under the UM License Agreement for each of 2019 

through 2023. Further, beginning in 2024, the Company is required to pay an annual fee of $0.2 million which is 
creditable against royalties due, if any, until the expiration or termination of the UM License Agreement. 

Assignment agreement with Erasmus University Medical Center and the University of Turin 

In connection with its acquisition of Alizé, the Company assumed Alizé’s obligations under an assignment 

agreement with Erasmus University Medical Center, the University of Turin and certain individuals (collectively “the 
Assignors”), for certain patents and patent applications relating to livoletide. 

106 

In connection with the assignment, the Company agreed to pay the Assignors a flat, low single digit royalty on 

net commercial sales of products containing livoletide that are covered by the claims of the assigned intellectual 
property. Further, upon approval of livoletide by the FDA or EMA, the Company is required to pay the Assignors 
CDN$100,000, which amount will be deducted from any future royalty payments due to the Assignors. The Company 
also agreed to pay the Assignors a low single digit percentage of any amounts received in connection with its license of 
the assigned intellectual property or products containing livoletide that are covered by the claims of the assigned 
intellectual property. 

AstraZeneca License Agreement 

In August 2015, the Company entered into a license agreement with AstraZeneca for a worldwide, exclusive 
license to certain patent rights and know-how to make, use, sell, offer for sale and import MLE4901 (the “AZ License 
Agreement”). The Company terminated the AZ License Agreement in July 2017 and, as of December 31, 2017, had no 
further obligations thereunder. 

10. Commitments 

Operating leases 

The Company leases its office and operating space under operating leases expiring at various dates through 

December 2025. Rent expense under the leases totaled $0.2 million and $0.1 million for the years ended December 31, 
2018 and 2017, respectively. 

The Company recognizes rent expense on a straight-line basis over the lease period and has accrued for rent 

expense incurred but not yet paid. Future minimum rental payments under operating leases with noncancelable terms as 
of December 31, 2018 are as follows (amounts in thousands): 

Year Ending December 31, 
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $   1,208 
 1,327 
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
 414 
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
 425 
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
 436 
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
 293 
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $   4,103 

In connection with the Merger, the Company assumed a sublease agreement for its office space located in 

Waltham, Massachusetts. The sublease commences on January 15, 2019 and expires on November 30, 2020. The total 
minimum sublease rentals to be received under the agreement is $0.6 million. 

Employment benefit plan 

The Company maintains a defined contribution 401(k) plan in which employees may contribute up to 100% of 

their salary and bonus, subject to statutory maximum contribution amounts. The Company contributes a safe harbor 
minimum contribution equivalent to 3% of employees’ compensation. The Company generally assumes all 
administrative costs of the plan. For the years ended December 31, 2018 and 2017, the expense relating to the 
contributions made was $0.1 million and $0.1 million, respectively. 

Litigation 

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources 

are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.  

107 

 
 
 
 
      
   
  
  
  
  
  
On November 9, 2016, a purported shareholder derivative action was filed in the Business Litigation Session of 

the Suffolk County Superior Court in the Commonwealth of Massachusetts (Cima v. Dipp, No. 16-3443-BLS1 (Mass. 
Sup. Ct.)) against certain former officers and directors of OvaScience and one current director of the Company (a former 
director of OvaScience) and OvaScience as a nominal defendant alleging breaches of fiduciary duty, unjust enrichment, 
abuse of control, gross mismanagement and corporate waste for purported actions related to OvaScience’s January 2015 
follow-on public offering. On February 22, 2017, the court approved the parties’ joint stipulation to stay all proceedings 
in the action until further notice. Following a status conference in December 2017, the stay was lifted. On January 25, 
2018, at the parties’ request, the court entered a second order staying all proceedings in the action until further order of 
the court. The Company believes that the complaint is without merit and intends to defend against the litigation. There 
can be no assurance, however, that the Company will be successful. At present, the Company is unable to estimate 
potential losses, if any, related to the lawsuit. 

On March 24, 2017, a purported shareholder class action lawsuit was filed in the U.S. District Court for the 

District of Massachusetts (Dahhan v. OvaScience, Inc., No. 1:17-cv-10511-IT (D. Mass.)) against certain former officers 
and directors of OvaScience and one current director of the Company (a former director of OvaScience) alleging 
violations of Sections 10(b) and 20(a) of the Exchange Act (the "Dahhan Action"). On July 5, 2017, the court entered an 
order approving the appointment of Freedman Family Investments LLC as lead plaintiff, the firm of Robins Geller 
Rudman & Dowd LLP as lead counsel and the Law Office of Alan L. Kovacs as local counsel. Plaintiff filed an 
amended complaint on August 25, 2017. The Company filed a motion to dismiss the amended complaint, which the 
court denied on July 31, 2018. On August 14, 2018, the Company answered the amended complaint. The parties 
presently are engaged in discovery. The Company believes that the amended complaint is without merit and intends to 
defend against the litigation. There can be no assurance, however, that the Company will be successful. A resolution of 
this lawsuit adverse to the Company or the other defendants could have a material effect on the Company’s consolidated 
financial position and results of operations. At present, the Company is unable to estimate potential losses, if any, related 
to the lawsuit.  

On July 27, 2017, a purported shareholder derivative complaint was filed in the U.S. District Court for the 

District of Massachusetts (Chiu v. Dipp, No. 1:17-cv-11382-IT (D. Mass.)) against certain former officers and directors 
of OvaScience and one current director of the Company (a former director of OvaScience) as a nominal defendant 
alleging breach of fiduciary duty, unjust enrichment and violations of Section 14(a) of the Exchange Act alleging that 
compensation awarded to the director defendants was excessive and seeking redress for purported actions related to 
OvaScience’s January 2015 follow-on public offering and other public statements. On September 26, 2017, the plaintiff 
filed an amended complaint which eliminated all claims regarding allegedly excessive director pay and additionally 
alleged claims of abuse of control and corporate waste. On October 27, 2017, the defendants filed a motion to dismiss 
the amended complaint. The court heard oral argument on the motion to dismiss on April 5, 2018. On April 13, 2018, the 
court granted the defendants' motion to dismiss the amended complaint for failure to state a claim for relief under 
Section 14(a). The court also dismissed the plaintiffs' pendent state law claims without prejudice, based on lack of 
subject matter jurisdiction. On April 25, 2018, the plaintiffs moved for leave to amend the complaint, and to stay this 
case pending the outcome of the Dahhan Action. The Company does not believe that the proposed amended complaint 
cures the defects in the current complaint, but informed plaintiffs' counsel that, in the interest of judicial economy, 
defendants would not oppose the proposed amendment if the court would consider staying the case pending the 
resolution of the Dahhan Action. On April 27, 2018, the court granted the plaintiffs' motion for leave to amend the 
complaint and for a stay. On April 30, 2018, the plaintiffs filed their second amended complaint. On May 23, 2018, the 
court entered an order staying this case pending the resolution of the Dahhan Action. The Company believes that the 
complaint is without merit and intends to defend against the litigation. There can be no assurance, however, that the 
Company will be successful. At present, the Company is unable to estimate potential losses, if any, related to the lawsuit. 

Between October 16, 2018 and November 21, 2018, five putative class action lawsuits were filed in various 

federal District Courts against OvaScience, Inc. and the OvaScience Board of Directors related to OvaScience’s 
proposed merger with Millendo Therapeutics, Inc.:  Cunningham v. Kroeger, et al., No. 1:18-cv-01595 (D. Del. filed 
Oct. 16, 2018); Adlard v. OvaScience, Inc., et al., No. 1:18-cv-12332 (D. Mass. filed Nov. 6, 2018); Wheby v. 
OvaScience, Inc., et al., No. 1:18-cv-1811 (D. Del. filed Nov. 16, 2018); Cuenca Aubets v. OvaScience, Inc., et al., No. 
1:18-cv-10882 (S.D.N.Y. filed Nov. 20, 2018); and Kim v. OvaScience, Inc., et al., No. 1:18-cv-10939 (S.D.N.Y. filed 
Nov. 21, 2018). The Complaints each alleged violations of Section 14(a) of the Securities Exchange Act of 1934 and 

108 

Rule 14a-9 promulgated thereunder, and as against the individual defendants, violations of Section 20(a) of the 
Securities Exchange Act of 1934.  The Cunningham plaintiff alleged that OvaScience’s Form S-4 Registration Statement 
filed on September 26, 2018 omitted or misrepresented material information regarding OvaScience’s proposed merger 
with Millendo Therapeutics, Inc.  The Adlard, Whelby, Cuenca Aubets and Kim plaintiffs alleged that OvaScience’s 
Definitive Proxy Statement on Schedule 14A filed on November 6, 2018, omitted or misrepresented material 
information regarding OvaScience’s proposed merger with Millendo Therapeutics, Inc.  OvaScience subsequently 
supplemented its disclosures.  The Cunningham plaintiff voluntarily dismissed his complaint on December 10, 2018, and 
the Wheby, Jr. plaintiff voluntarily dismissed his complaint on February 28, 2019. On March 18, 2019, the court 
dismissed the Cuenca Aubets and Kim actions for failure to serve. The Company currently is in negotiation with counsel 
for the plaintiffs regarding their demands for attorneys’ fees.  There can be no assurance that the negotiations will be 
successful. If the negotiations are not successful, the Company may be required to litigate the fee applications and/or the 
underlying actions. 

In addition to the matters described above, the Company may be a party to litigation and subject to claims 

incident to the ordinary course of business from time to time. Regardless of the outcome, litigation can have an adverse 
impact on the Company because of defense and settlement costs, diversion of management resources and other factors. 

11. Common stock and convertible preferred stock 

Common stock 

Upon completion of the Merger in December 2018, the Company issued shares of its common stock to Private 

Millendo’s stockholders, at an exchange ratio of 0.0744 shares of the Company’s common stock, for each share of 
Private Millendo common stock outstanding immediately prior to the Merger. In addition, the Company sold 1,230,158 
shares of common stock at $16.26 per share and received $18.7 million in net proceeds. Concurrent with the Merger, the 
Company issued 499,504 shares upon conversion of the promissory notes (see Note 8).   

In connection with the acquisition of the remaining 16.4% of Alizé, the Company issued 450,371 shares of its 

common-1 stock.  Upon consummation of the Merger, the common-1 shares were converted into common stock on a 1:1 
basis.   

During the year ended December 31, 2018 there were no exercises of stock options. During the year ended 

December 31, 2017, the Company issued 608 shares of common stock in connection with the exercise of stock options. 

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s 

stockholders. Subject to preferences that may apply to any outstanding preferred stock, holders of common stock are 
entitled to receive ratably any dividends that the Company’s board of directors may declare out of funds legally available 
for that purpose on a non-cumulative basis. No dividends had been declared through December 31, 2018. 

Convertible preferred stock 

In connection with the Alizé acquisition, the Company issued 6,540,763 and 20,636,179 shares of its Series A-1 

and Series B-1 preferred stock, respectively. No shares were issued and outstanding as of December 31, 2018. 

The Company had Series A, Series A-1, Series B and Series B-1 convertible preferred stock, that were 
classified outside of stockholders’ equity (deficit) because the shares contain deemed liquidation rights that were 
contingent redemption features not solely within the control of the Company. As a result, all of the Company’s 
convertible preferred stock was classified as temporary equity. 

Upon completion of the Merger in December 2018, all of the outstanding shares of the Company's convertible 
preferred stock were converted into an aggregate of 6,759,109 shares of common stock.  As of December 31, 2018, no 
preferred stock was issued or outstanding. 

Dividends 

109 

The holders of Series B and Series B-1 preferred stock, in preference to holders of any other class or series of 

the Company’s stock, were entitled to non-cumulative dividends at a rate of 8.0%, if and when declared by the 
Company’s board of directors. After payment to the holders of the Series B and Series B-1 preferred stock, the holders 
of Series A and Series A-1 preferred stock, in preference to holders of any other class or series of the Company’s stock, 
were entitled to non-cumulative dividends at a rate of 8.0%, if and when declared by the Company’s board of directors. 
In the event a dividend was declared to common stockholders, holders of Series A, Series A-1, Series B and Series B-1 
preferred stock would also receive an equivalent dividend on an “as-converted” basis. No dividends were declared or 
paid during the years ended December 31, 2018 and 2017. 

Voting 

The holders of Series A, Series A-1, Series B and Series B-1 preferred stock were entitled to one vote for each 

share of common stock into which their shares of preferred stock may have converted and, subject to certain preferred 
stock class votes specified in the Company’s certificate of incorporation or as required by law, the holders of the 
preferred stock and common stock voted together on an as-converted basis. 

Liquidation preference 

In the event of a liquidation, dissolution or winding up of the Company, either voluntary or involuntary, or in 
the event of a deemed liquidation event, which includes a sale of the Company as defined in the Company’s articles of 
incorporation, holders of Series A, Series A-1, Series B, and B-1 preferred stock are entitled to receive, in preference to 
all other stockholders, an amount equal to their original investment amount plus any declared and unpaid dividends. If 
upon the occurrence of such event, the assets and funds available for distribution are insufficient to pay such holders the 
full amount to which they are entitled, then the entire assets and funds legally available for distribution shall be 
distributed ratably among the holders of the Series B and Series B-1 preferred stock in proportion to the full amounts to 
which they would otherwise be entitled. 

After payment in full of the liquidation preference of the Series B and Series B-1 preferred stock, holders of 

Series A and Series A-1 preferred stock are entitled to receive, in preference to all holders of common stock, an amount 
equal to their original investment amount plus any declared and unpaid dividends. If upon the occurrence of such event, 
the assets and funds available for distribution are insufficient to pay such holders the full amount to which they are 
entitled, then the entire remaining assets and funds legally available for distribution shall be distributed ratably among 
the holders of the Series A and Series A-1 preferred stock in proportion to the full amounts to which they would 
otherwise be entitled. 

After payment of the liquidation preference on shares of Series A, Series A-1, Series B, and Series B-1 
preferred stock has been made, any remaining assets shall be distributed ratably to common and preferred stockholders, 
on an as converted basis, until such time as each holder of preferred stock has received an aggregate amount per share 
equal to three times the original issue price of such share. Thereafter, the remaining assets of the company available for 
distribution shall be distributed ratably to holders of common stock. 

Conversion 

Each share of Series A, Series A-1, Series B, and Series B-1 preferred stock was convertible into common stock 

at any time at the option of the holder thereof at the conversion price then in effect. All shares of Series A, Series A-1, 
Series B and Series B-1 preferred stock were convertible into common stock at the affirmative election of the holders of 
at least a majority of the outstanding shares of preferred stock at the conversion price then in effect. The conversion price 
for the Series A and Series A-1 preferred stock was $1.00 and the conversion price for the Series B and Series B-1 
preferred stock was $1.49776 (each subject to adjustments upon the occurrence of certain dilutive events). Upon any 
automatic conversion, any declared and unpaid dividends would be payable to the holders of preferred stock. 

110 

 
Convertible preferred stock warrants 

Prior to completing the Merger in December 2018, the Company had issued warrants to purchase up to 110,000 

shares of Series A preferred stock (Series A warrants) and up to 120,179 shares of Series B preferred stock (Series B 
warrants). The Series A warrants and Series B warrants expire in April 2024 and July 2026, respectively.   

The warrants were liability classified because they were exercisable for contingently redeemable preferred 
stock, and the value of the warrants were remeasured at each reporting period (see Note 6). Upon completion of the 
Merger, the warrants automatically converted into warrants for common stock.  As of December 31, 2018, there were 
17,125 common stock warrants outstanding with a weighted average exercise price of $16.93 per share. 

12. Stock-based compensation 

In December 2018, the Company assumed Private Millendo’s 2012 Stock Plan, as amended (the “Millendo 

Plan”).  There were 1,494,431 authorized shares of common stock to be issued under the Millendo Plan. In addition, the 
Company’s 2012 Stock Incentive Plan, as amended (the “2012 Plan”) will continue.  The number of shares of the 
Company’s common stock that are reserved for issuance under the 2012 Plan is equal to the sum of (1) 96,883 shares of 
common stock issuable under the 2012 Plan plus the number of shares of the Company’s common stock subject to 
outstanding awards under the 2011 Stock Incentive Plan (the “2011 Plan”), that expire, terminate or are otherwise 
surrendered, canceled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual 
repurchase right (up to 45,308 shares) plus (2) an annual increase, to be added on the first day of each year beginning in 
2013 and each subsequent anniversary until the expiration of the 2012 Plan, equal to the lowest of 65,000 shares of its 
common stock, 4.0% of the number of shares of the Company’s common stock outstanding on the first day of the year 
and an amount determined by the Company’s board of directors.  

The Millendo Plan and the 2012 Plan provide for the issuance of stock options, stock appreciation rights, 

restricted stock units and other stock-based or cash awards to purchase shares of common stock to eligible employees, 
officers, directors and consultants.  As of December 31, 2018 there were 838,329 shares of common stock available for 
future issuance under both plans in the aggregate. The amount, terms of grants, and exercisability provisions are 
determined and set by the Company’s board of directors. 

The Company measures employee and nonemployee stock-based awards at grant-date fair value and records 

compensation expense on a straight-line basis over the vesting period of the award. Stock-based awards issued to 
nonemployees are revalued until the award vests. 

The Company recorded stock-based compensation expense in the following expense categories of its 
accompanying consolidated statements of operations and comprehensive loss for the years ended December 31, 2018 
and 2017 (amounts in thousands): 

Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $ 
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Other general expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   

2018 
 606     $ 
 778   
 43   

Total  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $  1,427     $ 

2017 
 315 
 447 
 — 
 762 

Year Ended  
December 31,  

Options issued may have a contractual life of up to 10 years and may be exercisable in cash or as otherwise 

determined by the board of directors. Vesting generally occurs over a period of not greater than four years.  

111 

 
 
 
 
 
 
 
 
 
 
 
 
     
     
 
 
 
 
The following table summarizes the activity related to stock option grants to employees and nonemployees for 

the years ended December 31, 2018 and 2017: 

      Weighted-        Weighted- 

average 
exercise 
price 

  per share 

average 
  remaining 
  contractual 
life (years) 
8.8 

Outstanding at January 1, 2017  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Outstanding at December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Options assumed from OvaScience Merger  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Outstanding at December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Vested and exercisable at December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Vested and expected to vest at December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . .    

Shares 
720,402    $ 
 (608) 
 (16,315) 
 703,479   
 423,316   
 776,140   
 (72,049) 
 (66,599) 
 1,764,287    $ 
 925,343    $ 
 1,764,287    $ 

4.97    
3.41    
5.23    
4.91    
 78.70   
15.82   
 16.40    
 8.54    
 26.81    
 38.50    
 26.81    

7.8 

 8.0 
 4.9 
 8.0 

As of December 31, 2018, the unrecognized compensation cost related to 838,944 unvested stock options 

expected to vest was $6.8 million. This unrecognized compensation will be recognized over an estimated 
weighted-average amortization period of 3.29 years. There were no options exercised during the year ended 
December 31, 2018. The aggregate intrinsic value of options exercised during the year ended December 31, 2017 was 
$3,000. The aggregate intrinsic value of options outstanding and options exercisable as of December 31, 2018 was 
$2.2 million and $1.8 million, respectively. The options granted during the year ended December 31, 2018 had an 
estimated weighted average grant date fair value of $9.72. There were no options granted during 2017. 

The fair value of options is estimated using the Black-Scholes option pricing model, which takes into account 
inputs such as the exercise price, the value of the underlying common stock at the grant date, expected term, expected 
volatility, risk-free interest rate and dividend yield. The fair value of each grant of options during the year ended 
December 31, 2018 was determined using the methods and assumptions discussed below. 

•  The expected term of employee options with service-based vesting is determined using the “simplified” 
method, as prescribed in SEC’s Staff Accounting Bulletin (“SAB”) No. 107, whereby the expected life 
equals the arithmetic average of the vesting term and the original contractual term of the option due to the 
Company’s lack of sufficient historical data. The expected term of nonemployee options is equal to the 
contractual term. 

•  The expected volatility is based on historical volatilities of similar entities within the Company’s industry 

which were commensurate with the expected term assumption as described in SAB No. 107. 

•  The risk-free interest rate is based on the interest rate payable on U.S. Treasury securities in effect at the 

time of grant for a period that is commensurate with the assumed expected term. 

•  The expected dividend yield is 0% because the Company has not historically paid, and does not expect for 

the foreseeable future to pay, a dividend on its common stock. 

•  Prior to the Merger, the Company’s common stock was not publicly traded. The Company’s board of 

directors periodically estimated the fair value of the Company’s common stock considering, among other 
things, contemporaneous valuations of its common stock prepared by an unrelated third-party valuation 
firm in accordance with the guidance provided by the American Institute of Certified Public Accountants 
2013 Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. 
Following the Merger, the fair market value of the Company’s common stock will be determined based on 
the closing price of its common stock on the Nasdaq Capital Market. 

112 

 
 
 
 
 
 
 
 
 
     
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
   
  
   
  
 
 
 
 
  
   
  
   
The grant date fair value of each option grant was estimated throughout the year using the Black-Scholes 

option-pricing model using the following assumptions for the Plan: 

Expected term (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      
Expected volatility  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      
Fair market value of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 

 6.08   

 66  % 
 2.77  % 
 0  % 

 15.82   

      Year Ended    
  December 31,   
2018 

As discussed in Note 4, at the time of the Alizé acquisition, Alizé had 6,219 non-employee (BSA) warrants and 

5,360 employee (BSPCE) warrants outstanding, which have weighted-average exercise prices of €80.06 and €83.40, 
respectively. As of December 31, 2018, all BSAs and BSPCEs were vested. As of December 31, 2018, there were an 
aggregate of 156,719 shares of common stock issuable upon the exercise of the warrants with a weighted-average 
exercise price of $7.26 per share. These instruments are included in the equity attributable to noncontrolling interests. 

13. Income taxes 

As of December 31, 2018 and 2017, the Company had approximately $249.6 million and $58.4 million of 

federal net operating loss carryforwards and $12.2 million and $6.6 million of research tax credit carryforwards, 
respectively. The net operating loss carryforwards and research tax credit carryforwards begin to expire in 2031 and 
2029, respectively. As of December 31, 2018 and 2017, the Company had foreign net operating loss carryforwards of 
approximately $105.0 million and $21.3 million, respectively, which can be carried forward indefinitely. As of 
December 31, 2018 and 2017, the Company had state net operating losses of $249.2 million and $58.4 million, 
respectively, which begin to expire in 2031. 

Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”) provides for limitation on the use 

of net operating loss and research and development tax credit carryforwards following certain ownership changes (as 
defined in Code) that could limit the Company’s ability to utilize these carryforwards. Pursuant to Section 382 of the 
Code, an ownership change occurs when the stock ownership of a 5% stockholder increases by more than 50% over a 
three-year testing period. The Company may have experienced various ownership changes, as defined by the Code, as a 
result of past financings and may in the future experience an ownership change. Accordingly, the Company’s ability to 
utilize the aforementioned carryforwards may be limited. Additionally, U.S. tax laws limit the time during which these 
carryforwards may be applied against future taxes. 

On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provided 

guidance on accounting for the federal tax rate change and other tax effects of the Tax Act.  SAB 118 provided a 
measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete 
the accounting under ASC 740, Income Taxes.  In connection with the Company’s adoption of the Tax Act and in 
consideration of SAB 118, there were no material adjustments made to the provisional amounts recognized in 2017 in 
connection with the enactment of the Tax Reform Act. The accounting for the income tax effects of the Tax Reform Act 
is complete as of December 31, 2018. 

113 

 
 
 
 
 
 
 
 
 
  
The components of the net deferred income tax asset as of December 31, 2018 and 2017 are as follows 

(amounts in thousands): 

Deferred tax assets: 

December 31,  

2018 

2017 

Net operating loss carryforwards  . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 
Research and development credit carryforwards . . . . . . . . . . . . . . .   
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Accruals  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Capitalized start-up costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Gross deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
Less: valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   

Net deferred tax asset  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 

 87,446    $   20,978 
 6,582 
 12,196   
 168 
 5,209   
 260 
 1,233   
 1,109 
 1,031   
 8 
 936   
    108,051   
 29,105 
    (29,105)
    (108,051) 
 — 

 —    $ 

In assessing the realizability of deferred tax assets, the Company considers whether it is more-likely-than-not 
that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is 
dependent upon the generation of future taxable income during the periods in which the temporary differences 
representing net future deductible amounts become deductible. After consideration of all the evidence, both positive and 
negative, the Company has recorded a full valuation allowance against its net deferred tax assets as of December 31, 
2018 and 2017, respectively, because the Company has determined that is it more likely than not that these assets will 
not be fully realized due to historic net operating losses incurred. The valuation allowance increased by $78.9 million 
during the year ended December 31, 2018, primarily due to the Merger with OvaScience, Inc. and the generation of net 
operating losses and credit carry forwards during 2018. 

The Company does not have unrecognized tax benefits as of December 31, 2018 and 2017, respectively. The 

Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax 
expense. 

A reconciliation of income tax expense (benefit) at the statutory federal income tax rate and income taxes as 

reflected in the financial statements is as follows: 

Federal income tax benefit at statutory rate . . . . . . . . . . . . . . . . . . . . . . .       
State income tax, net of federal benefit . . . . . . . . . . . . . . . . . . . . . . . . . .     
Permanent differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     
Rate change  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     
Research and development credit benefit. . . . . . . . . . . . . . . . . . . . . . . . .     
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     

December 31,  

2017 

2018 
 21.0  %     34.0  %
 4.1  %   
 0.9  %
 (4.1)%     (26.6)%
 (9.3)%
 (3.3)%   
 4.3  %
 5.0  %   
 (3.3)%
 (22.7)%   
 —  %   
 —  %

The Company files income tax returns in the U.S. Federal, various states and foreign jurisdictions. The statute 
of limitations for assessment by the Internal Revenue Service (IRS) and state tax authorities is open for the Company’s 
2015 to 2017 tax years. Federal and state carryforward attributes that were generated prior to the tax year ended 
December 31, 2015 may still be adjusted upon examination by the IRS or state tax authorities if they either have been or 
will be used in a period for which the statute of limitations remains open. The statute of limitations for assessment by the 
authorities in the various foreign jurisdictions in which the Company files ranges from one to five years and is open for 
the Company’s 2015 to 2017 tax years. There are currently no federal, state or foreign income tax audits in progress. 

114 

 
 
 
 
 
 
 
 
 
 
     
  
 
 
     
 
   
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
  
 
 
 
  
14. Related party transactions 

During the year ended December 31, 2018, the Company received $8 million upon issuing convertible 

promissory notes to several of its existing preferred stock investors. The notes were converted in December 2018 in 
connection with the Merger. The Company also received gross proceeds of $21.5 million from those same investors 
from the sale of common stock immediately prior to the Merger. 

115 

 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
FINANCIAL DISCLOSURE 

None. 

ITEM 9A. CONTROLS AND PROCEDURES 

Disclosure Controls and Procedures 

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the 
Securities Exchange Act of 1934, as amended (the “Exchange Act”), refers to controls and procedures that are designed 
to ensure that information required to be disclosed by a company in the reports that it files or submits under the 
Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and 
forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that 
such information is accumulated and communicated to a company’s management, including its principal executive and 
principal financial officers, as appropriate to allow timely decisions regarding required disclosure. 

In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure 

controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, 
assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure 
controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit 
relationship of possible disclosure controls and procedures. The design of any system of controls also is based in part 
upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will 
succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate 
because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of 
the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected. 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has 
evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2018. Based on that evaluation, 
our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were 
effective as of the end of the period covered by this report at the reasonable assurance level. 

Management’s Report on Internal Control over Financial Reporting 

Our management is responsible for establishing and maintaining adequate internal control over financial 

reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, as amended. Our internal control system 
was designed to provide reasonable assurance to our management and board of directors regarding the preparation and 
fair presentation of published financial statements. Because of its inherent limitations, internal control over financial 
reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are 
subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of 
compliance with the policies or procedures may deteriorate. 

Notwithstanding that we do not qualify for the relief afforded by Instruction 1 to Item 308 of Regulation S-K to 
newly public companies, our management has not assessed nor attested to our internal control over financial reporting as 
is set forth in Item 308 of Regulation S-K promulgated under the Exchange Act, and Section 404 of the Sarbanes-Oxley 
Act as of December 31, 2018, the end of our last fiscal year. We will do so initially as of December 31, 2019. 

We were unable to conduct the required assessment due to the Merger occurring in the fourth quarter of 2018 

and the substantial change in operational focus, management and the internal control environment following the Merger. 
Following the Merger, Private Millendo’s historical operations, and not that of OvaScience pre-Merger, represent 
virtually the entirety of the combined business. In addition, following the Merger the accounting and financial systems of 
OvaScience, as well as personnel, were replaced by those of ours. Due to the extensive changes to our internal control 
environment, it was not possible for us to develop, implement, refine, test, assess our internal control environment and 

116 

produce management's assessment of internal control over financial reporting as required by Item 308 of Regulation 
S- K. 

Changes in Internal Control over Financial Reporting: 

Other than as referenced above regarding the Merger, there were no changes in our internal control over 
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the 
quarter ended December 31, 2018 which have materially affected, or are reasonably likely to materially affect, our 
internal control over financial reporting. 

ITEM 9B. OTHER INFORMATION 

Not applicable. 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 

Our Board of Directors 

PART III 

The following table sets forth information concerning our directors, including their ages as of March 1, 2019: 

Name 
Julia C. Owens, Ph.D. . . . . . . . . . . . . . . . . . . .      
Carol G. Gallagher, Pharm.D.(1) . . . . . . . . . . .    
Carole L. Nuechterlein, J.D.(2) . . . . . . . . . . . .    
John Howe, III, M.D.(3) . . . . . . . . . . . . . . . . . .    
James M. Hindman(3)  . . . . . . . . . . . . . . . . . . .    
Randall W. Whitcomb, M.D.(1) (3) . . . . . . . . . .    
Habib J. Dable(1)  . . . . . . . . . . . . . . . . . . . . . . .    
Mary Lynne Hedley, Ph.D.(2) . . . . . . . . . . . . .    

  Age 

Position(s) 

 46      Director, President and Chief Executive Officer 
 54     Chair of the Board of Directors 
 58     Director 
 76     Director 
 58     Director 
 64     Director 
 49     Director 
 56     Director 

(1)  Member of the compensation committee. 
(2)  Member of the nominating and corporate governance committee. 
(3)  Member of the audit committee. 

Class I Directors Continuing In Office Until Our 2019 Annual Meeting of Stockholders 

Julia C. Owens, Ph.D. is one of the co-founders of Private Millendo and served as Private Millendo’s President 
and Chief Executive Officer and as a member of Private Millendo’s board of directors since its inception in 2012. Since 
the closing of the Merger, Dr. Owens has served as our President and Chief Executive Officer and as a member of our 
board of directors. From 2010 to 2012, Dr. Owens served as the Senior Vice President of Corporate Development and 
Strategy at Lycera Corp., a biopharmaceutical company. Prior to that, from 2004 to 2010, Dr. Owens served in a number 
of business development positions at QuatRx Pharmaceuticals Co., a biopharmaceutical company, including as Head of 
Business Development from 2009 to 2010. From 1999 to 2004, Dr. Owens served in a number of business development 
positions at Tularik Inc., a biotechnology company, which was acquired by Amgen, Inc. in 2004. Prior to that, from July 
to October 1999, Dr. Owens served as a Licensing Officer in the Office of Technology Management at the University of 
California, San Francisco. Dr. Owens received a B.S. in Chemistry and a B.A. in Molecular and Cellular Biology from 
the University of California, Berkeley, and a Ph.D. in Biochemistry from the University of California, San Francisco. 
Our board of directors believes that Dr. Owens’ business and technical expertise along with her daily insight into 
corporate matters as our Chief Executive Officer qualify her to serve on our board of directors. 

Mary Lynne Hedley, Ph.D. served as a member of Private Millendo’s board of directors from March 2017 until 

the closing of the Merger, at which point she was appointed to our board of directors. Dr. Hedley has served as the 

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President and a member of the board of directors of TESARO, Inc., a pharmaceutical company (Nasdaq: TSRO), since 
co-founding the company in March 2010, which was acquired by GlaxoSmithKline plc in January 2019. From 
September 2017 to February 2019, Dr. Hedley also served as a director of bluebird bio (Nasdaq: BLUE), a clinical-stage 
gene therapy company. Dr. Hedley also served as a member of the board of directors of Receptos, Inc., a 
biopharmaceutical company (Nasdaq: RCPT), from April 2014 until it was acquired by Celgene Corp. in August 2015. 
Prior to that, from July 2009 to February 2010, Dr. Hedley served as Executive Vice President of Operations and Chief 
Scientific Officer of Abraxis BioScience, Inc., a biotechnology company. Dr. Hedley served as Executive Vice President 
of Eisai Corporation of North America from January 2008 until July 2009, following Eisai Co. Ltd.'s acquisition of MGI 
PHARMA, Inc. in January 2008. Dr. Hedley also served in various positions at MGI PHARMA, Inc. from 2004 through 
its acquisition in 2008, most recently as Executive Vice President and Chief Scientific Officer. Prior to that, Dr. Hedley 
co-founded and served as the President and Chief Executive Officer of ZYCOS, Inc., a biotechnology company, which 
was acquired by MGI PHARMA, Inc. in 2004. Prior to co-founding ZYCOS, Dr. Hedley completed two consecutive 
postdoctoral fellowships at Harvard University. Dr. Hedley received a B.S. in microbiology from Purdue University and 
a Ph.D. in Immunology from the University of Texas, Southwestern Medical Center. We believe that Dr. Hedley's 
extensive experience in the pharmaceutical and biotechnology industry qualifies her to serve on our board of directors. 

John Howe, III, M.D. has served as a member of our board of directors since June 2015. From 2001 through 
2015, he served as the President and Chief Executive Officer of Project HOPE, an international health education and 
humanitarian assistance foundation, which operates more than 70 programs in 45 countries on five continents. During 
Dr. Howe's tenure, Project HOPE expanded its areas of distributing medicine, treating infectious diseases and non-
communicable diseases, and promoting the health education and life improvement of women and children. Before 
Project HOPE, Dr. Howe held the Distinguished Chair in Health Policy at The University of Texas Health Science 
Center at San Antonio; he served as the Center's chief executive from 1985 through 2000 and is currently the President 
Emeritus. He is a board member of MAXIMUS Federal, Boston University and the Mary Christie Foundation. His board 
service record includes BB&T Bank, where he served as Chair of the Audit Committee and the Compensation 
Committee, Beverly Enterprises, the Texas Biomedical Research Institute and the United States Air Force Scientific 
Advisory Board. Among Dr. Howe's numerous honors and awards are the U.S. Army's Commander's Award for Public 
Service, the Surgeon General's Exemplary Service Award, and the Magnolia Award from the City of Shanghai, China. 
Dr. Howe is a published author of numerous articles, chapters and abstracts in medical journals, including the New 
England Journal of Medicine and the Annals of Internal Medicine, among others. Dr. Howe holds a B.A. from Amherst 
College and an M.D. from Boston University School of Medicine. We believe that Dr. Howe is qualified to serve on the 
Board due to his experience with global medicine and as a leader of international health initiatives. 

Class II Directors Continuing In Office Until Our 2020 Annual Meeting of Stockholders 

Carole L. Nuechterlein, J.D.  served as a member of Private Millendo’s board of directors from March 2017 
until the closing of the Merger, at which point she was appointed to our board of directors. Ms. Nuechterlein joined F. 
Hoffmann-La Roche Ltd. in 2002 and currently serves as a Deputy Director and head of Roche Venture Fund. Prior to 
that, from 1998 to 2001, Ms. Nuechterlein served as General Counsel for SangStat, Inc., a biopharmaceutical company. 
Ms. Nuechterlein has also served as a member of the boards of directors of each of Vivet Therapeutics SAS, a 
biotechnology company, since April 2017, CiVi BioPharma, Inc., a biopharmaceutical company, since March 2017, 
Lumos Pharma, Inc., a biopharmaceutical company, since January 2017, Mission Therapeutics Ltd., a biopharmaceutical 
company, since January 2017, Arch Oncology Inc., a biopharmaceutical company, since August 2016, Second 
Genome, Inc., a biopharmaceutical company, since April 2016, and Lysosomal Therapeutics Inc., a biotechnology 
company, since May 2014. She also served as a member of the board of directors of AveXis Inc., a biotechnology 
company (Nasdaq: AVXS), from October 2014 to May 2017. Ms. Nuechterlein received a B.A. from Valparaiso 
University and a J.D. from University of Michigan. We believe that Ms. Nuechterlein's extensive experience in the 
pharmaceutical and biotechnology industry and as an investor in life sciences companies qualifies her to serve on our 
Board. 

James M. Hindman served as a member of Private Millendo’s board of directors from June 2016 until the 

closing of the Merger, at which point he was appointed to our board of directors. Since August 2018, Mr. Hindman has 
served as a member of the board of directors of Sienna Biopharmaceuticals, Inc., a clinical-stage medical dermatology 
and aesthetics company (Nasdaq: SNNA). Since November 2018, Mr. Hindman has served as a member of the board of 

118 

directors of Aatru Medical, LLC, a privately held medical device company. From December 2017 to December 2018, 
Mr. Hindman provided financial consulting services to RANI Therapeutics, a privately held biotechnology company. 
Since July 2015, Mr. Hindman has also provided financial consulting services to Cidara Therapeutics Inc., a 
biotechnology company (Nasdaq: CDTX). Prior to that, from August 2014 to March 2015, Mr. Hindman has served as 
the Executive Vice President and Chief Financial Officer of Allergan, Inc., a multi-specialty healthcare company. From 
2002 to August 2014, Mr. Hindman served as Senior Vice President of Treasury, Risk and Investor Relations at 
Allergan, Inc. and from 1984 to 2002, served in a variety of other finance positions at Allergan, Inc., including Senior 
Vice President, Finance and Controller, Assistant Corporate Controller, Vice President, Financial Planning and Analysis. 
Since June 2015, Mr. Hindman has also served as a member of the Board of Regents at Loyola Marymount University, 
and from 2007 to June 2015, Mr. Hindman served on their Accounting Advisory Board. From 2009 to December 2015, 
Mr. Hindman served as a member of the board of directors of The Allergan Foundation, a private charitable foundation. 
Mr. Hindman received a B.S. in Accounting from Loyola Marymount University and an M.B.A. from Pepperdine 
University. We believe that Mr. Hindman's financial experience in the life sciences industry qualifies him to serve on our 
Board. 

Randall W. Whitcomb, M.D. served as a member of Private Millendo’s board of directors from April 2012 until 
the closing of the Merger, at which point he was appointed to our board of directors. Since 2007, Dr. Whitcomb has also 
served as a Senior Advisor to Frazier Healthcare Partners. From 2001 to 2006, Dr. Whitcomb co-founded and served as 
Chief Medical Officer of QuatRx Pharmaceuticals Company, a biopharmaceutical company. From 2001 to May 2015, 
Dr. Whitcomb served as a director of Insmed, Inc., a biopharmaceutical company (Nasdaq: INSM). Earlier, 
Dr. Whitcomb served in various management positions at Parke-Davis, the pharmaceutical division of Warner-Lambert, 
including as Vice President for Clinical Research and Drug Development. After Pfizer acquired Warner-Lambert, 
Dr. Whitcomb was VP of Global Project Management for Pfizer. Dr. Whitcomb received a B.A. in Biology and 
Chemistry from Tabor College and an M.D. from the University of Kansas. Dr. Whitcomb also completed a research 
fellowship at the National Institutes of Health. We believe that Dr. Whitcomb's experience both in the medical and life 
sciences industries and as a chief medical officer qualifies him to serve on our Board. 

Class III Directors Continuing In Office Until Our 2021 Annual Meeting of Stockholders 

Carol G. Gallagher, Pharm.D. served as a member of Private Millendo’s board of directors since September 
2012 until the closing of the Merger, at which point she was appointed to our board of directors. Since October 2014, 
Dr. Gallagher has also served as a Partner of New Enterprise Associates, Inc., a venture capital firm. Prior to that, from 
October 2013 to July 2014, Dr. Gallagher served as a venture partner with Frazier Healthcare Partners, a venture capital 
firm. From 2008 to April 2011, Dr. Gallagher served as the President and Chief Executive Officer of Calistoga 
Pharmaceuticals, Inc., a biotechnology company that was acquired by Gilead Sciences, Inc. in 2011. Prior to that, from 
2007 to 2008, Dr. Gallagher served as the President and Chief Executive Officer of Metastatix, Inc., a biopharmaceutical 
company. Since February 2013, Dr. Gallagher has served as a member of the board of directors and the compensation 
and nominating and corporate governance committees of Atara Biotherapeutics Inc., a biopharmaceutical company 
(Nasdaq: ATRA), since November, 2017, as a director at Metacrine, a biopharmaceutical company, and since December, 
2017, PIONYR Immunotherapeutics, a biopharmaceutical company. From November 2011 until March 2018, 
Dr. Gallagher served as a member of the board of directors of AnaptysBio, Inc., a biotechnology company (Nasdaq: 
ANAB). From February 2012 to August 2013, Dr. Gallagher served as a member of the board of directors of Aragon 
Pharmaceuticals, Inc., a pharmaceutical discovery and development company that was acquired by Johnson & Johnson 
in August 2013. Dr. Gallagher received a B.S. and a Pharm.D. from the College of Pharmacy at the University of 
Kentucky. We believe that Dr. Gallagher's extensive experience in the life sciences industry and as a chief executive 
officer of various companies qualifies her to serve on our Board. 

Habib J. Dable served as a member of Private Millendo’s board of directors from September 2018 until the 
closing of the Merger, at which point he was appointed to our board of directors. Mr. Dable has served as the Chief 
Executive Officer and President and a member of the board of directors of Acceleron Pharma Inc., a biopharmaceutical 
company (Nasdaq: XLRN) since December 2016. Prior to that, Mr. Dable served in roles of increasing responsibility at 
Bayer AG beginning in 1994, most recently serving as the President of Pharmaceuticals for Bayer in the U.S. from 
October 2015 until December 2016. From 2013 to 2015, Mr. Dable served as the Executive Vice President and Global 
Head of Specialty Medicine for Bayer HealthCare Pharmaceuticals, and from 2010 to 2012, he was the Vice President of 

119 

Ophthalmology & Global Launch Team Head for EYLEA. Mr. Dable earned both Bachelor's and Master's degrees of 
Business Administration from the University of New Brunswick in Canada. We believe that Mr. Dable's executive 
leadership experience and industry knowledge qualify him to serve as a member of our Board. 

Executive Officers 

The following table sets forth information regarding our executive officers, including their ages as of March 1, 

2019: 

Name 
Julia C. Owens, Ph.D. . . . . . . . . . . . . . . . . . . .    
Pharis Mohideen, M.D. . . . . . . . . . . . . . . . . . .    
Jeffery M. Brinza, J.D. . . . . . . . . . . . . . . . . . .    
Louis J. Arcudi, III  . . . . . . . . . . . . . . . . . . . . .    

     Age      

Position(s) 

 46     Director, President and Chief Executive Officer 
 54     Chief Medical Officer 
 57     Secretary, Chief Administrative Officer and General Counsel 
 58     Chief Financial Officer 

Julia C. Owens, Ph.D. Biographical information regarding Dr. Owens is set forth above under “Our Board of 

Directors.” 

Pharis Mohideen, M.D. served as our Chief Medical Officer of Private Millendo from October 2014 until the 

closing of the Merger, at which point he was appointed to serve as our Chief Medical Officer. Prior to that, from 2012 to 
October 2014, Dr. Mohideen served as the Vice President of Clinical Development at Shionogi Inc., a pharmaceutical 
company. From 2008 to 2012, Dr. Mohideen served as an Executive Director of Novartis Oncology, a business unit of 
Novartis International AG, a pharmaceutical company (NYSE: NVS), and from 2006 to 2008, served as a Senior 
Director of Novartis International AG. Dr. Mohideen received a B.A. in Biology from the University of Hawaii, an M.S. 
in Clinical Investigation from Vanderbilt University, an M.D. from the University of Hawaii and an M.S. in Human 
Physiology from the University of Hawaii. 

Jeffery M. Brinza served as the Chief Administrative Officer and General Counsel of Private Millendo from 

August 2015 until the closing of the Merger, at which point he was appointed to serve as our Chief Administrative 
Officer and General Counsel. In March 2019, Mr. Brinza notified us that he would be retiring on or about the end of 
August 2019 and has agreed to serve as a consultant for us after his retirement. From 2009 to August 2015, Mr. Brinza 
served as the General Counsel, Secretary and Chief Compliance Officer at RGIS LLC, an inventory service provider. 
From 2005 to 2009, Mr. Brinza served as the General Counsel at QuatRx Pharmaceuticals Co., a biopharmaceutical 
company. Earlier, Mr. Brinza served in various legal positions at Parke-Davis, the pharmaceutical division of Warner-
Lambert, including as Assistant General Counsel, Research and Development. Mr. Brinza received a joint B.A. in 
Computer and Communications Sciences and Economics from the University of Michigan and a J.D. from the 
University of Michigan Law School. 

Louis J. Arcudi III served as the Chief Financial Officer of Private Millendo from November 2018 until the 
closing of the Merger, at which point he was appointed to serve as our Chief Financial Officer. Mr. Arcudi brings us 
more than 20 years of financial and operational experience. From December 2007 through October 2018, he served as 
Senior Vice President of Operations and Chief Financial Officer at Idera Pharmaceuticals. Prior to Idera, from June 2002 
to December 2007, he served as Vice President of Finance and Administration for Peptimmune, Inc. where he handled 
all financial business and operations. Mr. Arcudi obtained an MBA from Bryant College and a B.S. in accounting and 
information systems from the University of Southern New Hampshire. 

There are no family relationships among any of our executive officers or directors. 

Certain Corporate Governance Matters 

Audit Committee 

We have a standing audit committee that is composed of three directors, Mr. Hindman and Drs. Whitcomb and 

Howe. Our board of directors has determined that each of Mr. Hindman and Drs. Whitcomb and Howe satisfies the 

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independence requirements for audit committee members under the listing standards of the Nasdaq Stock Market and 
Rule 10A-3 of the Exchange Act. Each member of our audit committee meets the financial literacy requirements of the 
listing standards of the Nasdaq Global Market. Mr. Hindman is the chairman of the audit committee and our board of 
directors has determined that Mr. Hindman is an “audit committee financial expert” as defined by Item 407(d) of 
Regulation S-K under the Securities Act. 

Code of Business Conduct and Ethics 

We have adopted a Code of Business Conduct and Ethics, or the Code of Conduct, applicable to all of our 

employees, executive officers, directors and independent contractors. The Code of Conduct is available on our website at 
www.millendo.com on the “Corporate Governance” page. Our board of directors is responsible for overseeing the Code 
of Conduct and must approve any waivers of the Code of Conduct for employees, executive officers and directors. If we 
make any substantive amendments to the Code of Conduct or we grant any waiver from a provision of the Code of 
Conduct to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our 
website. 

Procedures by Which Stockholders May Nominate Directors 

Our nominating and corporate governance committee will consider director candidates recommended by our 

stockholders. The nominating and corporate governance committee does not intend to alter the manner in which it 
evaluates a candidate for nomination to the board of directors based on whether or not the candidate was recommended 
by one of our stockholders. Company stockholders who wish to recommend individuals for consideration by the 
committee to become nominees for election to the board at an annual meeting of stockholders must do so by delivering 
no later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first 
anniversary of the preceding year’s annual meeting a written recommendation to the nominating and corporate 
governance committee c/o Millendo Therapeutics, Inc., 301 North Main Street, Suite 100, Ann Arbor, Michigan 48104, 
Attn: Secretary. Submissions must include: (1) the name and address of the Company stockholder on whose behalf the 
submission is made; (2) the number of Company shares that are owned beneficially by such stockholder as of the date of 
the submission; (3) the full name of the proposed candidate; (4) a description of the proposed candidate’s business 
experience for at least the previous five years; (5) complete biographical information for the proposed candidate; (6) a 
description of the proposed candidate’s qualifications as a director; and (7) such additional information as is required by 
our bylaws. Each submission must be accompanied by the written consent of the proposed candidate to be named as a 
nominee and to serve as a director if elected. 

Section 16(a) Beneficial Ownership Reporting Compliance 

Section 16(a) of the Exchange Act requires our directors, executive officers, and persons who beneficially own 

more than ten percent of our common stock to file reports on Forms 3, 4 and 5 with the Securities and Exchange 
Commission concerning their ownership of, and transactions in, our common stock. 

To our knowledge, based solely on our review of the copies of such reports furnished to us and on the 

representations of the reporting persons, all of these reports were timely filed for the fiscal year ended December 31, 
2018. 

121 

 
ITEM 11. EXECUTIVE COMPENSATION 

Summary Compensation Table 

The following table sets forth information regarding compensation earned with respect to the years ended 

December 31, 2018 and 2017 by our named executive officers, which include our principal executive officer and the 
next two most highly compensated executive officers in 2018 as well as two former executive officers of OvaScience. 

Name and 
Principal 
Position 
Julia C. Owens . . . . . . . . . . . . . . . .     2018     432,600   
Chief Executive Officer(5) 
   2017     420,000   

Salary 
($) 

  Year 

  Bonus 
($)(1) 

Option 
  Awards 

($)(2) 

 50,000     1,753,828   
 —   
 83,160   

      Non-Equity       
  Incentive Plan    All Other 
  Compensation   Compensation  

($)(3) 

 179,529   
 84,840   

Total 
($) 

($) 
 8,250 (4)    2,424,207 
 8,100 (4) 
 596,100 

Pharis Mohideen . . . . . . . . . . . . . .     2018     367,602   
Chief Medical Officer(5) 
   2017     356,895   

 —   
 49,466   

 410,470   
 —   

 106,788   
 50,465   

 35,021 (4) 
 25,064 (4) 

 919,881 
 481,890 

Jeffery M. Brinza . . . . . . . . . . . . . .     2018     308,117   
Chief Administrative Officer and 

General Counsel(5) 

 16,000   

 447,786   

 89,508   

 8,250 (4)  

 869,661 

Christopher Kroeger, M.D., 
M.B.A . . . . . . . . . . . . . . . . . . . . . . .     2018     513,836     330,000   
Former Chief Executive 

 403,733   

 —   

 810,594 (6)   2,058,163 

Officer(10)(11) 

   2017     292,127     131,457     1,990,080   

 —   

 16,424 (8)   2,430,088 

Jonathan Gillis, C.P.A. . . . . . . . . .     2018     252,247   
Former Senior Vice President, 

 94,500   

 104,253   

 —   

 203,783 (7) 

 654,783 

Finance(10)(12) 

   2017     229,008     187,500 (9) 

 51,493   

 —   

 8,977 (8) 

 476,978 

(1)  Amounts reflect discretionary bonuses for all named executive officers. 
(2)  In accordance with SEC rules, this column reflects the aggregate grant date fair value of the option awards granted 

during the applicable year computed in accordance with Financial Accounting Standard Board Accounting 
Standards Codification Topic 718 for stock-based compensation transactions, or ASC 718. Assumptions used in the 
calculation of these amounts are included in Note 2 to our audited financial statements included in this Annual 
Report. These amounts do not reflect the actual economic value that may be realized by the named executive officer 
upon the vesting of the stock options, the exercise of the stock options, or the sale of the common stock underlying 
such stock options. 

(3)  See “—Employment arrangements—2017 Bonus Opportunity” and “—Employment arrangements—2018 Bonus 
Opportunity” below for a description of the material terms of the programs pursuant to which this compensation to 
Millendo’s named executive officers was awarded. 

(4)  Amounts reflect the taxable commuting benefits provided to Dr. Mohideen in 2017 and 2018 inclusive of the tax 

gross-up paid in connection therewith. Amounts also reflect $8,100 and $8,250 in matching 401(k) plan 
contributions provided to each of Millendo’s named executive officers in 2017 and 2018, respectively. 

(5)  Each of Drs. Owens and Mohideen and Mr. Brinza commenced service with us on December 7, 2018 upon the 

closing of the Merger. Amounts disclosed for such officers include amounts paid for service with Private Millendo. 

(6)  This amount reflects a severance payment, a transaction bonus, life insurance premiums, accidental death and 
dismemberment premiums, short term disability and long term disability premiums and OvaScience company 
matches under OvaScience’s 401(k) plan, in the amounts of $550,000, $248,479, $32, $6, $1,786, $301 and $9,990, 
respectively. 

(7)  This amount reflects a severance payment, a transaction bonus, life insurance premiums, accidental death and 
dismemberment premiums, short term disability and long term disability premiums and OvaScience company  

122 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
     
     
     
    
     
    
     
     
     
     
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
  
 
 
 
  
     
     
     
     
     
     
   
 
 
 
 
  
 
 
 
 
 
 
 
  
 
 
 
 
 
matches under OvaScience’s 401(k) plan, in the amounts of $135,000, $62,120, $32, $6, $1,786, $301 and $4,538, 
respectively. 

(8)  This amount reflects the value of life insurance, accidental death and dismemberment, short term disability and long 

term disability premiums and OvaScience company matches under OvaScience’s 401(k) plan. 

(9)  This amount reflects Mr. Gillis’ 2017 annual bonus of $87,500 paid under the OvaScience 2017 annual bonus 
program and $100,000 paid as a retention bonus pursuant to Mr. Gillis’ amended employment agreement. 

(10) Based on information provided to us by OvaScience in connection with the closing of the Merger. 
(11) Dr. Kroeger’s employment with OvaScience as Chief Executive Officer Elect commenced on June 21, 2017, and he 
became OvaScience’s Chief Executive Officer on September 1, 2017. Dr. Kroeger resigned as Chief Executive 
Officer of OvaScience upon the closing of the Merger. 

(12) Mr. Gillis’s employment with OvaScience as Senior Vice President, Finance and as OvaScience’s Principal 
Financial Officer commenced on June 21, 2017. Mr. Gillis resigned as Senior Vice President, Finance of 
OvaScience upon the closing of the Merger. 

123 

Outstanding Equity Awards as of December 31, 2018  

The following table sets forth certain information about equity awards granted to our named executive officers 

that remained outstanding as of December 31, 2018, after giving effect to the reverse stock split and exchange ratio 
effected in connection with the Merger: 

Name and 
Principal Position 
  Grant Date   
Julia C. Owens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      8/30/2012     
   1/28/2016   
Chief Executive  
   8/24/2018 (2) 
Officer 

Option Awards(1) 
  Number of 
  Number of 
Securities 
  Securities 
  Underlying 
  Underlying 
  Unexercised    Unexercised 
  Options 
  Exercisable 
(#) 

Options 
  Unexercisable   
(#) 

 60,179      
 151,600    
 —    

 —      
 —    
 174,839    

  Option 
  Expiration 
Date 

  Option 
  Exercise 
Price 
($) 
 1.08      8/28/2022
 4.44     1/27/2026
 16.40     8/23/2028

Pharis Mohideen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     12/5/2014   
Chief Medical Officer 
   1/28/2016   
   8/24/2018 (2) 

 19,258    
 37,485    
—    

 —    
 —    
 40,919    

 2.69     12/4/2024
 4.44     1/27/2026
 16.40     8/23/2028

Jeffery M. Brinza . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     1/28/2016   
   8/24/2018 (2) 
Chief Administrative Officer and General Counsel 

 49,609    
 —    

 —    
 44,639    

 4.44     1/27/2026
 16.40     8/23/2028

Christopher Kroeger, M.D., M.B.A . . . . . . . . . . . . . . . . . .     6/21/2017 (3) 
   6/21/2017 (3) 
Former Chief 
   6/21/2017 (3) 
Executive Officer 
   5/10/2018   

 71,324    
 23,774    
 23,774    
 47,666    

Jonathan Gillis, C.P.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . .     9/10/2013   
   3/5/2014   
Former Senior Vice 
   3/3/2015   
President, Finance 
   3/3/2016   
   1/5/2017   
   3/2/2017   
   7/21/2017   
   2/8/2018   
   5/10/2018   

 375    
 500    
 500    
 266    
 66    
 1,000    
 2,000    
 8,576    
 5,000    

 —    
 —    
 —    
 —    

 —    
 —    
 —    
 —    
 —    
 —    
 —    
 —    
 —    

 21.90     12/7/2021
 21.90     3/7/2019 
 21.90     3/7/2019 
 13.98     12/7/2021

 214.05     12/7/2019
 151.35     12/7/2019
 631.50     12/7/2019
 104.40     12/7/2019
 24.60     12/7/2019
 22.35     12/7/2019
 21.90     12/7/2019
 13.95     12/7/2019
 13.98     12/7/2019

(1)  Unless otherwise noted, all of the option awards listed in the table above were granted under the Millendo 

Therapeutics 2012 Stock Plan other than options granted to Dr. Kroeger in 2018 and to Mr. Gillis in 2017 and 2018 
which were granted under the OvaScience, Inc. 2012 Stock Incentive Plan. 

(2)  The shares of common stock underlying this option vest and become exercisable over a four year period, with 25% 
of the option vesting on August 20, 2019 and the remaining shares underlying the option vesting in equal monthly 
installments over 36 months thereafter, subject to the recipient’s continued service through each vesting date. 
(3)  Represents a stock option award granted to the executive at the time of commencing employment with OvaScience. 

See “—Potential Payments upon Termination or Change of Control” for a description of vesting acceleration 

applicable to stock options held by our named executive officers. 

We may in the future, on an annual basis or otherwise, grant additional equity awards to our executive officers 

pursuant to the Millendo Therapeutics, Inc. 2012 Stock Plan and the OvaScience, Inc. 2012 Stock Incentive Plan. 

124 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employment, Severance and Change in Control Agreements 

Employment Arrangements 

Each of our named executive officers’ employment is “at will” and may be terminated at any time. Below is a 
description of our employment agreements or offer letters, as applicable, with each of our named executive officers, for 
the fiscal year ended December 31, 2018. 

Julia C. Owens, Ph.D. We entered into an employment agreement with Dr. Owens in July 2012 setting forth the 

terms of her employment. Dr. Owens was entitled to an initial annual base salary of $300,000, which has been 
subsequently increased, most recently as of January 1, 2019, to $478,900. In connection with her employment, 
Dr. Owens was granted a stock option to purchase 1,108,867 shares of our common stock (and, following the Merger, 
the outstanding 808,867 options converted into options to purchase an aggregate of 60,179 shares of our common stock) 
in August 2012, under which 25% of the shares underlying the option would vest after 12 months of employment, and 
the remaining shares underlying the option would vest in equal monthly installments over 36 months following July 25, 
2013, subject to Dr. Owens’ continued service, all shares of which were fully vested as of July 25, 2016. Dr. Owens was 
granted a stock option to purchase 2,037,648 shares of our common stock (which, following the Merger, converted into 
options to purchase an aggregate of 151,600 shares of our common stock) in January 2016, and a stock option to 
purchase 2,350,000 shares of our common stock (which, following the Merger, converted into options to purchase an 
aggregate of 174,839 shares of our common stock) in August 2018.  Both of these options will vest and become 
exercisable as follows: 25% of the option will vest and become exercisable on the one-year anniversary of the applicable 
vesting commencement date, and the remaining shares underlying the option will vest in equal monthly installments over 
36 months thereafter, subject to Dr. Owens’ continued service.  Dr. Owens’ 2016 option grant also included a right to 
early exercise before the option is fully vested, subject to our right to repurchase unvested shares at a price equal to the 
lesser of the exercise price or the fair market value of such unvested shares. Dr. Owens is also eligible to receive an 
annual performance bonus with a target bonus of $239,450 for 2019, less applicable withholdings, with any such bonus 
to be determined at the sole discretion of our board of directors. Dr. Owens’ employment agreement also provides for 
certain severance benefits, the terms of which are described below under “—Potential payments upon termination or 
change of control.” 

Pharis Mohideen, M.D. We entered into an offer letter with Dr. Mohideen in October 2014 setting forth the 

terms of his employment. Dr. Mohideen was entitled to an initial annual base salary of $330,000, which has been 
subsequently increased, most recently as of January 1, 2019, to $388,800. Pursuant to the agreement, Dr. Mohideen was 
granted a stock option to purchase 358,845 shares of our common stock (and, following the Merger, the outstanding 
258,845 options converted into options to purchase an aggregate of 19,258 shares of our common stock) in December 
2014, under which 25% of the shares underlying the option would vest after 12 months of employment, and the 
remaining shares underlying the option would vest in equal monthly installments over 36 months following October 27, 
2015, subject to Dr. Mohideen’s continued service, all shares of which were fully vested as of October 27, 2018. 
Dr. Mohideen was granted a stock option to purchase 503,847 shares of our common stock (which, following the 
Merger, converted into options to purchase an aggregate of 37,485 shares of our common stock) in January 2016, and a 
stock option to purchase 550,000 shares of our common stock (which, following the Merger, converted into options to 
purchase an aggregate of 40,919 shares of our common stock) in August 2018.  Both of these options will vest and 
become exercisable as follows: 25% of the option will vest and become exercisable on the one-year anniversary of the 
applicable vesting commencement date, and the remaining shares underlying the option will vest in equal monthly 
installments over 36 months thereafter, subject to Dr. Mohideen’s continued service. Dr. Mohideen’s 2016 option grant 
also included a right to early exercise before the option is fully vested, subject to our right to repurchase unvested shares 
at a price equal to the lesser of the exercise price or the fair market value of such unvested shares. Dr. Mohideen is also 
eligible to receive an annual performance bonus with a target bonus of $155,520 for 2019, less applicable withholdings, 
with any such bonus to be determined at the sole discretion of our board of directors. Dr. Mohideen's offer letter also 
provides for certain severance benefits, the terms of which are described below under “—Potential payments upon 
termination or change of control.” 

125 

Offer Letters with Our Named Executive Officers 

Jeffery Brinza, J.D. We entered into an offer letter with Mr. Brinza in July 2015 setting forth the terms of his 

employment. Mr. Brinza was entitled to an initial annual base salary of $255,000, which has been subsequently 
increased, most recently as of January 1, 2019, to $346,300. Pursuant to the agreement and as subsequently determined 
by our board of directors, Mr. Brinza was granted a stock option to purchase 666,800 shares of our common stock 
(which, following the Merger, converted into options to purchase an aggregate of 49,609 shares of our common stock) in 
January 2016. Mr. Brinza was granted a stock option to purchase 600,000 shares of our common stock (which, following 
the Merger, converted into options to purchase an aggregate of 44,639 shares of our common stock) in August 2018.  
Both of these options will vest and become exercisable as follows: 25% of the option will vest and become exercisable 
on the one-year anniversary of the applicable vesting commencement date, and the remaining shares underlying the 
option will vest in equal monthly installments over 36 months thereafter, subject to Mr. Brinza’s continued service. 
Mr. Brinza’s 2016 option grant also included a right to early exercise before the option is fully vested, subject to our 
right to repurchase unvested shares at a price equal to the lesser of the exercise price or the fair market value of such 
unvested shares. Mr. Brinza is also eligible to receive an annual performance bonus, with a target bonus of $138,520 for 
2019, less applicable withholdings, with any such bonus to be determined at the sole discretion of our board of directors.  

2017 Bonus Opportunity 

Drs. Owens and Mohideen, and each of our other executive officers, were eligible to receive a bonus in 2017. 

Bonuses were measured as of December 31, 2017 and paid in the first quarter of 2018. The bonus opportunity was 
designed to motivate and reward executives for the attainment of company-wide performance goals. The 2017 
performance targets were set as a percentage of the individual’s base salary for 2017 as follows: (1) Dr. Owens was set 
at 50% and (2) Dr. Mohideen was set at 35%.  Payment of 100% of the target bonus amount was subject to the 
achievement of company objectives determined by our board of directors. For 2017, Drs. Owens and Mohideen received 
$83,160 and $49,466, respectively. 

2018 Bonus Opportunity 

Drs. Owens and Mohideen and Mr. Brinza and each of our other executive officers, were eligible to receive a 

bonus in 2018. Bonuses were measured as of December 31, 2018 and paid in the first quarter of 2019. The bonus 
opportunity was designed to motivate and reward executives for the attainment of company-wide performance goals. 
The 2018 performance targets were set as a percentage of the individual’s base salary for 2018 as follows: (1) Dr. Owens 
was set at 50% and (2) Dr. Mohideen and Mr. Brinza were set at 35%.  Payment of 100% of the target bonus amount 
was subject to the achievement of company objectives as determined by our board of directors. Our named executive 
officers for 2018 were eligible to receive more than 100% of their target bonuses in the discretion of our board of 
directors. The Compensation Committee determined that performance goals under the 2018 bonus plan were achieved at 
the 83% level. For 2018, Dr. Owens received $179,529, Dr. Mohideen received $106,788 and Mr. Brinza received 
$89,508. 

2019 Bonus Opportunity 

In 2019, each of our executive officers is eligible to receive a bonus. The bonus opportunity is designed to 

motivate and reward executives for the attainment of company-wide performance targets. The 2019 performance targets 
were set as a percentage of the individual’s base salary for 2019 as follows: (1) Dr. Owens is set at 50% and 
(2) Dr. Mohideen and Mr. Brinza are set at 40%. The individuals are eligible to receive more than 100% of their target in 
the discretion of our board of directors. Target compensation is dependent upon our achievement of clinical development 
objectives and other corporate goals. 

Potential Payments upon Termination or Change of Control 

Julia C. Owens, Ph.D. Pursuant to Dr. Owens’ option awards, if Dr. Owens’ employment with us (or any parent 
or subsidiary or successor of the Company, including us) ends within six months prior to or within 12 months following 
a change in control of the Company due to her resignation for “good reason” or her termination by us other than for 

126 

“cause,” death or disability, then her January 2016 and August 2018 options will accelerate in full. Pursuant to her 
employment agreement, if Dr. Owens’ employment is terminated by the Company other than for “cause,” death or 
disability, prior to a change in control of the Company or within 12 months following a change in control, she is entitled 
to (1) continued payment of her base salary then in effect for six months following her termination (plus an additional 
month of severance for each full year of employment up to a maximum of 12 months) and (2) payment of premiums for 
continued health benefits to her and her dependents under COBRA for six months following her termination (plus an 
additional month of reimbursement for each full year of employment up to a maximum of 12 months of reimbursement). 
In addition, pursuant to her employment agreement, if Dr. Owens’ employment is terminated by the Company other than 
for “cause,” death or disability and upon or within 12 months following a change in control, she is entitled to 
aforementioned payments. Dr. Owens’ benefits are conditioned, among other things, on her complying with her post-
termination obligations under her employment agreement and signing a general release of claims in our favor. 

Pharis Mohideen, M.D. Pursuant to Dr. Mohideen’s option awards, if Dr. Mohideen’s employment with us (or 
any parent or subsidiary or successor of the Company, including us) ends within six months prior to or within 12 months 
following a change in control of the Company due to his resignation for “good reason” or his termination by us other 
than for “cause,” death or disability, then his January 2016 and August 2018 options will accelerate in full. Pursuant to 
his offer letter, if, immediately prior to a change in control of us or within 12 months following a change in control, 
Dr. Mohideen’s employment with us ends due to his resignation for “good reason,” his termination by us other than for 
“cause” or as a result of his death or disability, he is entitled to continued payment of his base salary then in effect for six 
months following his termination. Dr. Mohideen’s benefits are conditioned, among other things, on his complying with 
his post-termination obligations under his offer letter, signing a general release of claims in our favor and resigning from 
all positions that he holds with us. 

Jeffery Brinza, J.D. Pursuant to Mr. Brinza’s option awards, if Mr. Brinza’s employment with us (or any parent 
or subsidiary or successor of the Company, including us) ends within six months prior to or within 12 months following 
a change in control of the Company due to his resignation for “good reason” or his termination by us other than for 
“cause,” death or disability, then his January 2016 and August 2018 options will accelerate in full. 

401(k) Plan 

We maintain a defined contribution retirement plan that provides eligible U.S. employees with an opportunity 

to save for retirement on a tax advantaged basis. Eligible employees may defer eligible compensation on a pre-tax basis, 
up to the statutorily prescribed annual limits on contributions under the Internal Revenue Code of 1986, as amended, or 
the Code. Contributions are allocated to each participant's individual account and are then invested in selected 
investment alternatives according to the participants' directions. We contribute a safe harbor minimum contribution 
equivalent to 3% of employees’ compensation. Employees are immediately and fully vested in their contributions. The 
401(k) plan is intended to be qualified under Section 401(a) of the Code with the 401(k) plan's related trust intended to 
be tax exempt under Section 501(a) of the Code. As a tax-qualified retirement plan, contributions to the 401(k) plan and 
earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan. 

Director Compensation Table 

The following table sets forth information regarding the compensation earned for service on our board of 

directors during the year ended December 31, 2018 by our directors who were not also our employees, including 
directors of Private Millendo and OvaScience. Julia C. Owens, Ph.D., our President and Chief Executive Officer, is also 
a member of our board of directors, but did not receive any additional compensation for service as a director. The 

127 

compensation for Dr. Owens as an executive officer is set forth above under “Executive Compensation- Summary 
Compensation Table.” 

     Fees Earned or      Option 
  Paid in Cash    Awards(1)(2)(3)   

Name 
Carol G. Gallagher, Pharm.D.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
John Howe, III, M.D.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Carole L. Nuechterlein, J.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
James M. Hindman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Randall W. Whitcomb, M.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Habib J. Dable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Mary Lynne Hedley, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Richard Aldrich(4)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Jeffrey D. Capello(4)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Mary Fisher(4)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Marc Kozin(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
John Sexton, Ph.D.(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    

($) 
 5,774    
 164,944  (5)   
 2,989    
 49,020    
 48,341    
 13,031    
 48,307    
 39,728    
 46,739    
 37,391    
 71,745  (6) 
 144,891  (7) 

($) 

 —    

Total 
($) 
 5,774 
 7,832      172,776 
 —    
 2,989 
 37,315    
 86,336 
 85,656 
 37,315    
 149,982      163,014 
 186,577      234,884 
 47,560 
 7,832    
 54,571 
 7,832    
 45,223 
 7,832    
 7,832    
 79,577 
 7,832      152,723 

(1)  In accordance with SEC rules, this column reflects the aggregate grant date fair value of the option awards granted 
during 2018 computed in accordance with FASB ASC Topic 718. The assumptions we used in valuing the option 
awards are described in Note 2 to our consolidated financial statements included in this Annual Report. The 
aggregate grant date fair value does not take into account any estimated forfeitures related to service-vesting 
conditions. These amounts do not reflect the actual economic value that will be realized by director upon the vesting 
of the stock options, the exercise of the stock options or the sale of the common stock underlying such stock options. 

(2)  The table below shows the aggregate number of option awards and stock awards outstanding for each of our non-

employee directors as of December 31, 2018: 

     Option       
  Awards 
(#) 

  Stock Awards
(#) 

Name 
 —   
Carol G. Gallagher, Pharm.D.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
 3,776   
John Howe, III, M.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Carole L. Nuechterlein, J.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
 —   
James M. Hindman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      21,229   
Randall W. Whitcomb, M.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      25,158   
Habib J. Dable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      14,880   
Mary Lynne Hedley, Ph.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      18,600   
Richard Aldrich(4)(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
 3,929   
Jeffrey D. Capello(4)(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
 4,801   
Mary Fisher(4)(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
 4,506   
Marc Kozin(4)(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
 4,426   
John Sexton, Ph.D.(4)(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
 3,776   

 — 
 — 
 — 
 — 
 — 
 — 
 — 
 — 
 — 
 — 
 — 
 — 

(3)  Share numbers for directors of OvaScience have been adjusted to reflect a 1-for-15 reverse stock split. 
(4)  Resigned from the Company’s board of directors effective as of December 7, 2018, in connection with the closing 
of the Merger. Compensation information for 2018 is based on information provided to us by OvaScience in 
connection with the merger. 

(5)  Includes (i) annual fees earned for service on the OvaScience board of directors of $49,543; (ii) $112,174 for 

additional OvaScience board services, as approved by the OvaScience board of directors, in providing long-term 
strategic global regulatory guidance as part of OvaScience’s Global Strategy Committee; and (iii) $3,227 paid by 
Millendo to Dr. Howe in 2018 for his service as a member of the Millendo board of directors beginning on 
December 7, 2018. 

(6)  Represents (i) annual fees earned for services on the OvaScience board of directors of $43,702 and (ii) $28,043 for 
additional services to the OvaScience board, as approved by the OvaScience board, in guiding OvaScience in its 
long-term global regulatory strategy as part of OvaScience’s Global Strategy Committee. 

128 

 
 
 
 
 
 
 
 
    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(7)  Represents (i) annual fees earned for service on the OvaScience board of directors of $32,717 and (ii) $112,174 for 
additional services to the OvaScience board of directors, as approved by the OvaScience board of directors, in 
providing long-term strategic global regulatory guidance as part of OvaScience’s Global Strategy Committee. 

(8)  All outstanding stock options expired on March 7, 2019. 

Non-Employee Director Compensation 

Our board of directors has adopted a director compensation policy for non-employee directors, effective as of 

December 7, 2018. The policy provides for the compensation of non-employee directors with cash and equity 
compensation. Under the policy, each non-employee director will receive an annual board service retainer of $40,000. 
The non-executive chairperson will receive an additional service retainer of $30,000. The chairperson of each of our 
audit committee, our compensation committee and our nominating and corporate governance committee will receive 
additional annual committee chair service retainers of $15,000, $10,000 and $8,000, respectively. Other members of our 
audit committee, our compensation committee and our nominating and corporate governance committee will receive 
additional annual cash retainers of $7,500, $5,000 and $4,000, respectively, for each such committee of which they are a 
member. The annual cash compensation amounts set forth above are payable in equal quarterly installments, payable in 
arrears following the end of each calendar quarter in which the board service occurs, prorated for any partial months of 
service. We will also reimburse all reasonable out-of-pocket travel expenses incurred by non-employee directors in 
attending meetings of our board of directors or any committee thereof. 

In addition to cash compensation, each non-employee director is eligible to receive options to purchase our 
common stock. Each of our non-employee directors who are appointed in the future will receive a one-time grant of 
stock options with a grant date fair value of $145,550. Non-employee directors will also receive an annual grant of stock 
options with a grant date fair value of $72,720.  

Director Independence 

Our board of directors has undertaken a review of the independence of the directors and considered whether any 
director has a material relationship with us that could compromise his or her ability to exercise independent judgment in 
carrying out his or her responsibilities. Based upon information requested from and provided by each director concerning 
such director’s background, employment and affiliations, including family relationships, our board of directors 
determined that all of the directors, other than Dr. Owens, are “independent directors” as defined under current rules and 
regulations of the SEC and the listing standards of the Nasdaq Stock Market. In making these determinations, our board 
of directors considered the current and prior relationships that each non-employee director has with our company and all 
other facts and circumstances that our board of directors deemed relevant in determining their independence, including 
the beneficial ownership of our capital stock by each non-employee director and the transactions involving them 
described above. 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND 
RELATED STOCKHOLDER MATTERS 

The following table sets forth the beneficial ownership of our common stock as of March 1, 2019 for: 

• 

• 

• 

• 

each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our 
common stock; 

each of our named executive officers; 

each of our directors; and 

all of our executive officers and directors as a group. 

The percentage ownership information shown in the table below is based upon 13,357,999 shares of common 

stock outstanding as of March 1, 2019. 

We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally 
attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with 
respect to those securities. In addition, these rules require that we include shares of common stock issuable pursuant to 

129 

the vesting of restricted stock units and the exercise of stock options and warrants that are either immediately exercisable 
or exercisable within 60 days of March 1, 2019. These shares are deemed to be outstanding and beneficially owned by 
the person holding those options or warrants for the purpose of computing the percentage ownership of that person, but 
they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless 
otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to 
all shares shown as beneficially owned by them, subject to applicable community property laws. 

Except as otherwise noted below, the address for persons listed in the table is c/o Millendo Therapeutics, Inc., 

301 North Main Street, Suite 100, Ann Arbor, Michigan 48104. 

Name of Beneficial Owner 
5% or greater stockholders: 
Entities affiliated with New Enterprise Associates (1) 

     Number 
of Shares 

  Beneficially 

Owned 

      Percentage 
of Shares 
  Beneficially 
  Owned (%) 

c/o New Enterprise Associates, Inc. 
1954 Greenspring Drive, Suite 600 
Timonium, MD 21093 
Waltham, Massachusetts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      1,766,779   

Frazier Healthcare VI, L.P. (2) 

601 Union, Two Union Square, Suite 3200 
Seattle, WA 98101 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      1,396,615   

Great Point Partners, LLC (3) 
165 Mason Street, 3rd Floor 
Greenwich, CT 06830 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      1,288,093   

Fonds InnoBio FPCI (4) 

27-31 Avenue du Général Leclerc 
94700 Maisons-Alfort, France 
Attention: Bpifrance Investissement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      1,078,670   

Roche Finance Ltd (5) 

 13.2 

 10.5 

 9.6 

 8.1 

Grenzacherstrasse 122 4070 
Basel, Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    

SHAM Innovation Sante SAS 
18, Rue Edouard ROCHET 
69008 Lyon, France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    

 755,847   

 5.7 

 678,532   

 5.1 

Otonnale SAS 

15, chemin du Saquin 
Espace européen Bât G 
69130 Ecully, France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   

Named executive officers and directors: 
Julia C. Owens, Ph.D. (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Pharis Mohideen, M.D. (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Jeffery M. Brinza, J.D. (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Randall W. Whitcomb, M.D. (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Carol G. Gallagher, Pharm.D. (10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
James M. Hindman (11)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Mary Lynne Hedley, Ph.D. (12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
John Howe, III, M.D. (13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Carole L. Nuechterlein, J.D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
Habib J. Dable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    
All current executive officers and directors as a group (11 persons) (14) . . . . . . . . . . . . . . . . . . . .    

 665,366  

 286,180   
 64,184   
 49,609   
 37,222   
 31,933   
 12,402   
 10,020   
 3,776   
 —   
 —   
 495,326   

 5.0 

 2.1 
* 
* 
* 
* 
* 
* 
* 
* 
* 
 3.7 

*      Represents beneficial ownership of less than 1% 

130 

 
 
 
 
 
 
 
 
 
 
 
  
     
   
  
     
   
 
(1)  Includes (i) 302 shares held by NEA Ventures 2015, L.P. ("NEA Ventures") and (ii) 1,766,407 shares held by New 
Enterprise Associates 15, L.P. ("NEA 15"). The shares directly held by NEA 15 are indirectly held by each of (a) 
NEA Partners 15, L.P. ("NEA Partners 15"), the sole general partner of NEA 15, (b) NEA 15 GP, LLC ("NEA 15 
LLC"), the sole general partner of NEA Partners 15 and (c) each of the individual Managers of NEA 15 LLC. The 
individual managers of NEA 15 LLC (collectively, the “NEA 15 Managers”) are Peter J. Barris, Forest Baskett, 
Anthony A. Florence, Jr., Joshua Makower, David M. Mott, Scott D. Sandell, Peter Sonsini and Mohamad 
Makhzoumi. The shares directly held by NEA Ventures are indirectly held by Karen P. Welsh, the general partner 
of NEA Ventures. NEA 15, NEA Partners 15, NEA 15 LLC and the NEA 15 Managers share voting and dispositive 
power with regard to the shares held by NEA 15. Karen P. Welsh, the general partner of NEA Ventures, shares 
voting and dispositive power with regard to the shares held by NEA Ventures. Dr. Gallagher, a member of our board 
of directors, has no voting or dispositive power with regard to any shares held by NEA 15 or NEA Ventures. 
(2)  Represents shares of our common stock held by Frazier Healthcare VI, L.P. ("FHVI"). James Topper, Alan Frazier, 
Nader Naini, Nathan Every and Patrick Heron are the managing members of FHM VI, LLC, which is the general 
partner of FHM VI, LP, which is the general partner of FHVI. These individuals share voting and dispositive power 
over the shares held by FHVI. 

(3)  Based solely on a Schedule 13G/A filed with the Securities and Exchange Commission on February 14, 2019. 
(4)  The general partner of Fonds InnoBio FPCI ("InnoBio") is Bpifrance Investissement, a French simplified joint-stock 
company (société par actions simplifiée). InnoBio has the sole voting and investment power with respect to such 
shares. 

(5)  Roche Finance Ltd is a wholly owned subsidiary of Roche Holding Ltd, a publicly held corporation, and has sole 

voting and investment power with respect to such shares. 

(6)  Includes 211,780 shares issuable pursuant to stock options exercisable within 60 days of March 1, 2019. 
(7)  Includes 56,744 shares issuable pursuant to stock options exercisable within 60 days of March 1, 2019. 
(8)  Represents 49,609 shares issuable pursuant to stock options exercisable within 60 days of March 1, 2019. 
(9)  Includes 21,438 shares issuable pursuant to stock options exercisable within 60 days of March 1, 2019. 
(10) Includes (i) 23,684 shares held by the Gallagher Revocable Trust and (ii) 8,249 shares held by Dr. Gallagher. 
(11) Represents 12,402 shares issuable pursuant to stock options exercisable within 60 days of March 1, 2019. 
(12) Represents 10,020 shares issuable pursuant to stock options exercisable within 60 days of March 1, 2019. 
(13) Represents 3,776 shares issuable pursuant to stock options exercisable within 60 days of March 1, 2019. 
(14) Includes 365,769 shares issuable pursuant to stock options exercisable within 60 days of March 1, 2019. 

Equity Compensation Plan Information 

The following table provides certain information with respect to our equity compensation plans in effect as of 

December 31, 2018: 

Name 
Plan Category 

     Number of 
  Securities to be   Weighted- 
Average 

Issued upon   

     Number of Securities 
  Remaining Available 
for Future Issuance 
Under Equity 

  Exercise Price  

  Exercise of 
  Outstanding    of Outstanding  Compensation Plans 
(Excluding Securities
Reflected in  
Column (a))(c)(#) 

  Warrants and   Warrants and  
  Rights (a)(#)    Rights (b)($)   

Options,  

Options, 

Equity compensation plans approved by security holders(1)  . . . . . . . .    
Equity compensation plans not approved by security holders(2) . . . . .    
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    

 1,547,212    
 217,075    
 1,764,287    

 28.16    
 17.23    

 838,329 
 — 
 838,329 

(1)  Includes the OvaScience, Inc. 2012 and 2011 Stock Incentive Plans and the Millendo Therapeutics, Inc. 2012 Stock 
Plan.  Does not include 156,719 shares of common stock issuable upon the exercise of warrants at a weighted-
average exercise price of $7.26 per share, which are related to non-employee (BSA) warrants and employee 
(BSPCE) warrants previously granted by Alizé and assumed by Private Millendo in connection with Private 
Millendo’s acquisition of Alizé in December 2017. 

131 

 
 
 
 
 
 
 
 
 
    
 
 
 
 
 
 
 
 
 
 
 
 
  
      
      
   
      
 
(2)  This plan category consists of inducement grants provided to Dr. Kroeger, OvaScience's former Chief Executive 
Officer, James W. Lillie, OvaScience's former Chief Scientific Officer, and Louis Arcudi III, our Chief Financial 
Officer, pursuant to the terms of our stock option agreements with them. 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR 
INDEPENDENCE 

Millendo Transactions With Related Persons 

The following is a summary of transactions since January 1, 2017 to which we have been a participant in which 

the amount involved exceeded or will exceed $120,000, and in which any of our then directors, executive officers or 
holders of more than 5% of any class of our capital stock at the time of such transaction, or any members of their 
immediate family, had or will have a direct or indirect material interest, other than compensation arrangements which are 
described in “Item 11 – Executive Compensation” and “Item 11 – Director Compensation Table.”  With respect to 
OvaScience, the information below is based on information we received in connection with the Merger. 

Share sale and contribution agreement 

In December 2017, we entered into agreements to acquire 100% of the outstanding ownership interests of Alizé 

Pharma SAS (now known as Millendo Therapeutics SAS), or Alizé. At an initial closing on December 19, 2017, we 
acquired 83.6% of Alizé's issued and outstanding share capital pursuant to a Share Sale and Contribution Agreement, or 
the Contribution Agreement. Pursuant to the Contribution Agreement, we (i) issued to the former shareholders of Alizé 
an aggregate of 6,540,763 shares of Series A-1 preferred stock, 20,636,179 shares of Series B-1 preferred stock and 
6,237,138 shares of common-1 stock (which were converted to 464,043 shares of our common stock following the 
closing of the Merger) and (ii) paid a former shareholder of Alizé approximately $0.3 million in cash and paid 
approximately $0.7 million of transaction expenses on behalf of the acquired company. The recipients of consideration 
under the Contribution Agreement included the following holders of more than 5% of our capital stock. In connection 
with the Merger, the shares reflected below were exchanged for the number of shares reflected in the “Shares of 
common stock following the Merger” column below. 

Related Party 
Fonds InnoBio FPCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      2,112,874      6,666,139      2,014,794    
SHAM Innovation Sante SAS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      1,785,240      5,632,449      1,702,368    

stock 

stock 

      Shares of 
  Series A-1 
  preferred 

     Shares of 
  Series B-1 
  preferred 

Shares of 
common-1 
stock 

     Shares of 

  common stock 
following 
the Merger 
 803,059 
 678,532 

Advance agreement with Bpifrance Financing 

In December 2017, in connection with our acquisition of Alizé, we assumed €0.7 million of debt that Alizé had 

outstanding with Bpifrance Financing. Bpifrance Financing is affiliated with Fonds InnoBio FPCI, a holder of 5% or 
more of our capital stock. No interest is charged or accrued with respect to the debt. We are required to make quarterly 
principal payments of between €17,500 to €50,000 per quarter through maturity. In addition to the quarterly payments, 
we could be obligated to pay, if applicable, no later than March 31st of each year starting from January 1, 2016, a 
reimbursement annuity equal to 20% of the proceeds generated by us from license, assignment or revenue generating use 
of the livoletide program. We are permitted to repay the debt at any time. At December 31, 2018, the balance 
outstanding was $0.6 million (€0.5 million). 

Consulting agreement with Dr. Abribat 

In December 2017, in connection with our acquisition of Alizé, Alizé entered into a consulting agreement with 

TAB Consulting SARL, or TAB Consulting, an entity affiliated with Dr. Abribat, who was, until December 7, 2018, a 
member of Private Millendo’s board of directors. As consideration for the performance of the services under the 
consulting agreement, Alizé was obligated to pay TAB Consulting a fixed monthly retainer fee equal to €19,742. The 
consulting agreement expired on December 19, 2018. In addition, Dr. Abribat is a guarantor under our lease agreement 
for Alizé’s facility in Lyon, France. 

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Investors' rights, voting and co-sale agreements 

In connection with our preferred stock financings, we have entered into investors' rights, voting and right of 
first refusal and co-sale agreements containing registration rights, information rights, voting rights and rights of first 
refusal, among other things, with certain holders of our preferred stock and certain holders of our common stock. These 
stockholder agreements have terminated except for the registration rights granted under our investors' rights agreement. 

Employment arrangements 

We have entered into employment agreements or offer letter agreements with certain of our executive officers. 

For more information regarding these agreements with our named executive officers, see “Executive Compensation—
Employment Severance and Change in Control Arrangements.” 

Stock option grants to directors and executive officers 

We have granted stock options to certain of our directors and executive officers. For more information 

regarding the stock options and stock awards granted to our directors and named executive officers, see “Executive 
Compensation.” 

Separation pay agreements 

We have entered into separation pay agreements with certain of our executive officers. For more information 
regarding these arrangements with our named executive officers, see “Executive Compensation—Potential payments 
upon termination or change of control.” 

Otonnale Agreement 

In December 2018, we acquired the remaining 16.4% of Alizé’s issued and outstanding share capital from 

Otonnale SAS, or Otonnale, upon exercise of a put-call option. In connection with exercise of the put-call option, we 
(i) issued to Otonnale 442,470 shares of our common stock and (ii) paid Otonnale €699,735.34 million in cash. 
Additionally, we issued 7,901 shares of our common stock to Eumedix FR S.À R.L., or Eumedix, as consideration for 
advisory services that Eumedix performed for Otonnale in connection with the transaction. 

Convertible Promissory Notes 

In August 2018, we issued convertible promissory notes (as amended) to several of our existing investors, 

including the following holders of more than 5% of our capital stock and funds affiliated with certain of our directors: 
entities affiliated with New Enterprise Associates, Roche Finance Ltd, entities affiliated with Adams Street, Frazier 
Healthcare VI, L.P. and Osage University Partners I, L.P. We received cash proceeds of $8.0 million. The notes accrued 
simple interest of 6.0% per annum and, if not converted, were to mature in August 2020. All principal and interest was 
due at maturity. Upon closing of the Merger, all outstanding principal and interest automatically converted into shares of 
our common stock at a conversion price of $1.2096 per share. 

Pre-Closing Financing 

Prior to the closing of the Merger, we completed a private placement financing, or the Pre-Closing Financing, 

of our common stock. The securities issued in the Pre-Closing Financing were issued pursuant to an exemption from the 
registration requirements of the Securities Act, as amended. An aggregate of approximately $29.5 million shares of our 
common stock was issued to an investor syndicate that included New Enterprise Associates, Frazier Healthcare Partners, 
Roche Finance Ltd, Fonds Innobio managed by Bpifrance, Osage University Partners, Altitude Life Science Ventures, 
Adams Street Partners, and Longwood Fund, $8.0 million of which was already funded via the issuance of the 
convertible promissory notes discussed above. 

Post-Closing Financing 

On November 1, 2018, we entered into a Stock Purchase Agreement, as amended, or the Purchase Agreement, 

with OvaScience and Great Point Partners, LLC and its affiliates, or Great Point, which provided for the sale and 

133 

issuance of shares of our common stock to Great Point for an aggregate purchase price of approximately $20 million at a 
per share purchase price of $16.26. The consummation of this transaction and the other transactions contemplated by the 
Purchase Agreement were conditioned upon the satisfaction of the conditions set forth in the Purchase Agreement. 
Following the closing of the Merger, on December 7, 2018, we issued and sold an aggregate of 1,230,158 shares of our 
common stock to Great Point. Such shares were issued pursuant to an exemption from the registration requirements of 
the Securities Act of 1933, as amended. The resale of the shares by Great Point was registered for resale on a 
Registration Statement on Form S-3. 

Indemnification Agreements 

We have entered into indemnification agreements with each of our directors and executive officers. The 
indemnification agreements and our amended and restated certificate of incorporation and amended and restated bylaws 
require us to indemnify our directors and executive officers to the fullest extent permitted by Delaware law. 

Related Person Transaction Policy 

In December 2018, we adopted a related person transaction policy that sets forth our procedures for the 

identification, review, consideration and approval or ratification of related person transactions. For purposes of our 
policy only, a related person transaction is a transaction, arrangement or relationship, or any series of similar 
transactions, arrangements or relationships, in which we and any related person are, were or will be participants, in 
which the amount involves exceeds $120,000. Transactions involving compensation for services provided to us as an 
employee or director are not covered by this policy. A related person is any executive officer, director or beneficial 
owner of more than 5% of any class of our voting securities, including any of their immediate family members and any 
entity owned or controlled by such persons. 

Under the policy, if a transaction has been identified as a related person transaction, including any transaction 

that was not a related person transaction when originally consummated or any transaction that was not initially identified 
as a related person transaction prior to consummation, our management must present information regarding the related 
person transaction to our audit committee, or, if audit committee approval would be inappropriate, to another 
independent body of our board of directors, for review, consideration and approval or ratification. The presentation must 
include a description of, among other things, the material facts, the interests, direct and indirect, of the related persons, 
the benefits to us of the transaction and whether the transaction is on terms that are comparable to the terms available to 
or from, as the case may be, an unrelated third party or to or from our employees generally. Under the policy, we will 
collect information that we deem reasonably necessary from each director, executive officer and, to the extent feasible, 
significant stockholder to enable us to identify any existing or potential related-person transactions and to effectuate the 
terms of the policy. 

In addition, under our Code of Conduct, our employees and directors have an affirmative responsibility to 

disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest. 

In considering related person transactions, our audit committee, or other independent body of our board of 

directors, will take into account the relevant available facts and circumstances including, but not limited to: 

• 

• 

• 

• 

the risks, costs and benefits to us; 

the impact on a director’s independence in the event that the related person is a director, immediate family 
member of a director or an entity with which a director is affiliated; 

the availability of other sources for comparable services or products; and 

the terms available to or from, as the case may be, unrelated third parties or to or from employees 
generally. 

The policy requires that, in determining whether to approve, ratify or reject a related person transaction, our 
audit committee, or other independent body of our board of directors, must consider, in light of known circumstances, 

134 

 
whether the transaction is in, or is not inconsistent with, our best interests and those of our stockholders, as our audit 
committee, or other independent body of our board of directors, determines in the good faith exercise of its discretion. 

All of the transactions described above were entered into prior to the adoption of the written policy, but all were 

approved by our board of directors considering similar factors to those described above. 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 

Independent Registered Public Accounting Firm Fees and Services 

The following table sets forth the aggregate fees for professional service provided by our independent registered 

public accounting firm, Ernst & Young LLP, for the audit of Private Millendo’s financial statements for the year ended 
December 31, 2017 and for the audit of our financial statements for the year ended December 31, 2018 and other fees 
billed for other services rendered by Ernst  & Young LLP during those periods (in thousands): 

Audit fees(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      $  967,000      $ 342,000 
Audit-related fees(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
    98,000 
Tax fees(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
    24,000 
All other fees(3)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
 — 
Total fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 1,186,000    $ 464,000 

 97,000   
 122,000   
 —   

  Year Ended December 31,  

2018 

2017 

(1)  Fees represent services related to our annual audit, quarterly reviews, SEC offerings and accounting consultations 
(2)  Fees represent services related to due diligence services 
(3)  Fees represent services related to tax compliance and tax advisory services 

Prior to the completion of the merger, Ernst & Young LLP served as the independent registered public 
accounting firm, of OvaScience, Inc. for the year ended December 31, 2017 and for the 2018 period up to the completion 
of the merger on December 7, 2018. The fees billed by Ernst & Young LLP to OvaScience, Inc. during those periods (in 
thousands): 

Audit fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      $ 265,000      $  664,000 
 304,000 
Audit-related fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
 73,000 
Tax fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
All other fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   
 2,000 
Total fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 372,000    $ 1,043,000 

 —   
   107,000   
 —   

  Year Ended December 31,  

2018 

2017 

Pre-Approval Policies and Procedures 

The audit committee has adopted a pre-approval policy under which the audit committee approves in advance 

all audit and permissible non-audit services to be performed by the independent accountants (subject to a de minimis 
exception). These services may include audit services, audit-related services, tax services, and other non-audit services. 
As part of its pre-approval policy, the audit committee considers whether the provision of any proposed non-audit 
services is consistent with the SEC’s rules on auditor independence. In accordance with its pre-approval policy, the audit 
committee has pre-approved certain specified audit and non-audit services to be provided by our independent auditor. If 
there are any additional services to be provided, a request for pre-approval must be submitted to the audit committee for 
its consideration under the policy. The audit committee generally pre-approves particular services or categories of 
services on a case-by-case basis. Finally, in accordance with the pre-approval policy, the audit committee has delegated 
pre-approval authority to the chair of the audit committee. The chair must report any pre-approval decisions to the audit 
committee at its next meeting. 

135 

 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
 
All of the services of Ernst & Young LLP for 2017 and 2018 described above were in accordance with the audit 

committee pre-approval policy, to the extent required by applicable law. 

PART IV 

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 

We have filed the following documents as part of this Annual Report: 

(a)(1)     Financial Statements 

The financial statements are included in Item 8. “Financial Statements and Supplementary Data.” 

(a)(2)     Financial Statement Schedules 

All schedules are omitted as information required is inapplicable or the information is presented in the financial 

statements and the related notes. 

(a)(3)     Exhibits 

Exhibit 
Number 
2.1 

Agreement and Plan of Merger and Reorganization, dated as of August 8, 2018, by and among 
OvaScience, Inc., Orion Merger Sub, Inc. and Millendo Therapeutics, Inc. (incorporated by reference from 
Exhibit 2.1 to the Registration Statement on Form S-4 filed on November 1, 2018, File No. 333-227547) 

Description of Exhibit 

2.2 

2.3 

2.4 

3.1 

3.2 

3.3 

3.4 

First Amendment to Agreement and Plan of Merger and Reorganization, dated as of August 8, 2018, by and 
among OvaScience, Inc., Orion Merger Sub, Inc. and Millendo Therapeutics, Inc., dated as of 
September 25, 2018 (incorporated by reference from Exhibit 2.2 to the Registration Statement on Form S-4 
filed on November 1, 2018, File No. 333-227547) 

Second Amendment to Agreement and Plan of Merger and Reorganization, dated as of August 8, 2018, by 
and among OvaScience, Inc., Orion Merger Sub, Inc. and Millendo Therapeutics, Inc., dated as of 
November 1, 2018 (incorporated by reference from Exhibit 2.3 to the Registration Statement on Form S-4 
filed on November 1, 2018, File No. 333-227547) 

Form of Lock-up Agreement, by and between OvaScience, Inc. and Millendo Therapeutics, Inc. and certain 
stockholders of OvaScience, Inc. and Millendo Therapeutics, Inc. (incorporated by reference from Exhibit 
2.6 to the Registration Statement on Form S-4 filed on November 1, 2018, File No. 333-227547) 

Restated Certificate of Incorporation of the Registrant (incorporated by reference from Exhibit 3.1 to the 
Current Report on Form 8-K filed with the Securities and Exchange Commission on April 30, 2013, File 
No. 001-35890) 

Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant (incorporated by 
reference from Exhibit 3.1 to the Current Report on Form 8-K filed with the Securities and Exchange 
Commission on December 13, 2018, File No. 001-35890) 

Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant (incorporated by 
reference from Exhibit 3.2 to the Current Report on Form 8-K filed with the Securities and Exchange 
Commission on December 13, 2018, File No. 001-35890) 

Third Amended and Restated Bylaws, as Amended, of the Registrant (incorporated by reference from 
Exhibit 3.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on 
August 9, 2018 File No. 001-35890) 

136 

 
 
 
 
 
 
 
     
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.1 

Specimen Stock Certificate evidencing shares of Common Stock of the Registrant (incorporated by 
reference from Exhibit 4.1 to the Registration Statement on Form S-1 filed on August 29, 2012, File No. 
333-183602) 

10.1+ 

OvaScience, Inc. 2011 Stock Incentive Plan (incorporated by reference from Exhibit 10.1 to the Registration 
Statement on Form 10 filed on April 11, 2012, File No. 000-54647) 

10.2+ 

10.3+ 

10.4+ 

Form of Incentive Stock Option Agreement under the OvaScience, Inc. 2011 Stock Incentive Plan 
(incorporated by reference from Exhibit 10.2 to the Registration Statement on Form 10 filed on May 17, 
2012, File No. 000-54647) 

Form of Nonstatutory Stock Option Agreement under the OvaScience, Inc. 2011 Stock Incentive Plan 
(incorporated by reference from Exhibit 10.3 to the Registration Statement on Form 10 filed on May 17, 
2012, File No.000-54647) 

Form of Restricted Stock Agreement under the OvaScience, Inc. 2011 Stock Incentive Plan (incorporated by 
reference from Exhibit 10.4 to the Registration Statement on Form 10 filed on April 11, 2012, File No. 000-
54647). 

10.5+ 

OvaScience, Inc. 2012 Stock Incentive Plan (incorporated by reference from Exhibit 10.5 to the Registration 
Statement on Form 10 filed on April 11, 2012, File No. 000-54647) 

10.6+ 

10.7+ 

Form of Incentive Stock Option Agreement under the OvaScience, Inc. 2012 Stock Incentive Plan 
(incorporated by reference from Exhibit 10.6 to the Annual Report on Form 10-K filed on March 16, 2015, 
File No. 001-35890) 

Form of Nonstatutory Stock Option Agreement under the OvaScience, Inc. 2012 Stock Incentive Plan 
(incorporated by reference from Exhibit 10.7 to the Annual Report on Form 10-K filed on March 16, 2015, 
File No. 001-35890) 

10.8+ 

  Millendo Therapeutics, Inc. 2012 Stock Incentive Plan, as amended 

10.9+ 

  Form of Stock Option Agreement under the Millendo Therapeutics, Inc. 2012 Stock Incentive Plan 

10.10+ 

Sub Plan for French Residents to the Millendo Therapeutics, Inc. 2012 Stock Plan, as amended 
(incorporated by reference from Exhibit 10.5 to the Current Report on Form 8-K, as filed with the Securities 
and Exchange Commission on December 13, 2018, File No. 001-35890) 

10.11+ 

Form of Stock Option Agreement under the Sub Plan for French Residents to the Millendo Therapeutics, 
Inc. 2012 Stock Plan, as amended 

10.12# 

Amended and Restated License Agreement, by and between Millendo Therapeutics, Inc. and the Regents of 
the University of Michigan, dated November 9, 2015 (incorporated by reference from Exhibit 10.44 to the 
Registration Statement on Form S-4 filed on November 2, 2018, File No. 333-227547) 

10.13 

10.14 

Stock Purchase Agreement, by and among OvaScience, Inc., the purchasers set forth on Schedule I thereto 
and Millendo Therapeutics, Inc., dated November 1, 2018 (incorporated by reference from Exhibit 10.45 to 
the Registration Statement on Form S-4 filed on November 2, 2018, File No. 333-227547) 

First Amendment to Shareholders and Option Agreement, dated September 28, 2018 (incorporated by 
reference from Exhibit 4.9 to the Registration Statement on Form S-3, as filed with the Securities and 
Exchange Commission on November 6, 2018, File No. 333-228209) 

137 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.15 

10.16 

10.17 

10.18 

10.19 

10.20 

10.21 

10.22 

Registration Rights Agreement, by and among OvaScience, Inc. and the persons listed on Schedule A 
thereto, dated November 1, 2018 (incorporated by reference from Exhibit 10.46 to the Registration 
Statement on Form S-4 filed on November 2, 2018, File No. 333-227547) 

Second Amended and Restated Investor Rights Agreement by and among Millendo Therapeutics, Inc. and 
certain of its stockholders, dated December 19, 2017 (incorporated by reference from Exhibit 4.6 to the 
Registration Statement on Form S-3, as filed with the Securities and Exchange Commission on November 6, 
2018, File No. 333-228209) 

First Amendment to Second Amended and Restated Investor Rights Agreement, dated October 24, 2018 
(incorporated by reference from Exhibit 4.7 to the Registration Statement on Form S-3, as filed with the 
Securities and Exchange Commission on November 6, 2018, File No. 333-228209) 

Shareholders and Option Agreement, by and between Millendo Therapeutics, Inc. and Otonnale SAS, dated 
December 19, 2017 (incorporated by reference from Exhibit 4.8 to the Registration Statement on Form S-3, 
as filed with the Securities and Exchange Commission on November 6, 2018, File No. 333-228209) 

First Amendment to Shareholders and Option Agreement, dated September 28, 2018 (incorporated by 
reference from Exhibit 4.9 to the Registration Statement on Form S-3, as filed with the Securities and 
Exchange Commission on November 6, 2018, File No. 333-228209) 

Lease Agreement, by and between Millendo Therapeutics, Inc. and 301 N. Main Street, L.L.C., dated 
December 31, 2015 (incorporated by reference from Exhibit 10.1 to the Registration Statement on Form S-3, 
as filed with the Securities and Exchange Commission on November 6, 2018, File No. 333-228209) 

Lease Extension and Modification Agreement, by and between Millendo Therapeutics, Inc. and 301 N. 
Main Street, L.L.C., dated November 30, 2017 (incorporated by reference from Exhibit 10.2 to the 
Registration Statement on Form S-3, as filed with the Securities and Exchange Commission on November 6, 
2018, File No. 333-228209) 

Amended and Restated Lease Extension and Modification Agreement, by and between Millendo 
Therapeutics, Inc. and 301 N. Main Street, L.L.C., dated February 1, 2019 (incorporated by reference from 
Exhibit 10.2 to the Current Report on Form 8-K, as filed with the Securities and Exchange Commission on 
February 7, 2019, File No. 001-35890) 

10.23 

Lease Agreement, by and between Millendo Therapeutics, Inc. and Ann Arbor Real Estate Group, L.L.C., 
dated February 1, 2019 (incorporated by reference from Exhibit 10.1 to the Current Report on Form 8-K, as 
filed with the Securities and Exchange Commission on February 7, 2019, File No. 001-35890) 

10.24+ 

Form of Indemnity Agreement between Millendo Therapeutics, Inc. and each of its directors and executive 
officers (incorporated by reference from Exhibit 10.1 to the Current Report on Form 8-K, as filed with the 
Securities and Exchange Commission on December 13, 2018, File No. 001-35890) 

10.25 

10.26 

10.27 

Sublease Agreement by and between OvaScience, Inc. and Axial Biotherapeutics, Inc., dated as of 
December 6, 2018 (incorporated by reference from Exhibit 10.1 to the Current Report on Form 8-K, as filed 
with the Securities and Exchange Commission on December 13, 2018, File No. 001-35890) 

Contract No. A1308020, by and between Alizé Pharma SAS (n/k/a Millendo Therapeutics SAS) and 
Bpifrance Financement, dated January 27, 2014 (incorporated by reference from Exhibit 10.47 to the 
Registration Statement on Form S-4 filed on November 2, 2018, File No. 333-227547) 

Contract No. A1308020, by and between Alizé Pharma SAS (n/k/a Millendo Therapeutics SAS) and 
Bpifrance Financement, dated January 27, 2014 (English Translation) (incorporated by reference from 
Exhibit 10.48 to the Registration Statement on Form S-4 filed on November 2, 2018, File No. 333-227547) 

138 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.28 

10.29+ 

10.30+ 

10.31+ 

10.32+ 

Assignment Agreement, by and among Alizé Pharma SAS (n/k/a Millendo Therapeutics SAS), Erasmus 
University Medical Center and the University of Turin, dated April 25, 2007 (incorporated by 
reference from Exhibit 10.51 to the Registration Statement on Form S-4 filed on November 2, 2018, File 
No. 333-227547) 

Employment Agreement, by and between Millendo Therapeutics, Inc. and Julia C. Owens, Ph.D., dated 
July 25, 2012 (incorporated by reference from Exhibit 10.52 to the Registration Statement on Form S-4 filed 
on November 2, 2018, File No. 333-227547) 

Offer Letter, by and between Millendo Therapeutics, Inc. and Pharis Mohideen, M.D., dated October 10, 
2014 (incorporated by reference from Exhibit 10.53 to the Registration Statement on Form S-4 filed on 
November 2, 2018, File No. 333-227547) 

Offer Letter, by and between Millendo Therapeutics, Inc. and Jeffery M. Brinza, dated July 28, 2015 
(incorporated by reference from Exhibit 10.50 to the Registration Statement on Form S-4 filed on 
November 2, 2018, File No. 333-227547) 

Employment Terms between Louis Arcudi III and Millendo Therapeutics, Inc., dated as of November 1, 
2018 (incorporated by reference from Exhibit 10.1 to the Current Report on Form 8-K filed on 
November 26, 2018, File No. 001-35890) 

21.1 

  Subsidiaries of the Registrant. 

23.1 

  Consent of Ernst & Young LLP, independent registered public accounting firm 

24.1 

  Power of Attorney (included on signature page) 

31.1 

31.2 

32.1^ 

Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under 
the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 

Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under 
the Securities Exchange Act of 1934, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002 

Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-14(b) and 
15d-14(b) promulgated under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted 
pursuant to section 906 of The Sarbanes-Oxley Act of 2002 

101.INS    XBRL Instance Document 

101.SCH   XBRL Taxonomy Extension Schema Document 

101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document 

101.DEF   XBRL Taxonomy Extension Definition Linkbase Document 

101.LAB   XBRL Taxonomy Extension Label Linkbase Document 

101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document 

+     Indicates management contract or compensatory plan. 

139 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
#     Confidential treatment has been granted with respect to portions of this exhibit (indicated by asterisks) and those 

portions have been separately filed with the Securities and Exchange Commission. 

^     These certifications are being furnished solely to accompany this Annual Report pursuant to 18 U.S.C. Section 

1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and 
are not to be incorporated by reference into any filing of the Registrant, whether made before or after the date 
hereof, regardless of any general incorporation language in such filing. 

ITEM 16. FORM 10-K SUMMARY 

Not applicable. 

140 

 
 
 
 
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has 

duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. 

SIGNATURES 

March 29, 2019 

MILLENDO THERAPEUTICS, INC. 

By:    

/s/ Julia C. Owens, Ph.D. 
Julia C. Owens, Ph.D. 
President and Chief Executive Officer 

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes 

and appoints Julia C. Owens and Louis Arcudi III, jointly and severally, as his or her true and lawful attorneys-in-fact 
and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all 
capacities, to sign this Annual Report on Form 10-K of Millendo Therapeutics, Inc., and any or all amendments thereto, 
and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and 
Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each 
and every act and thing requisite or necessary to be done in and about the premises hereby ratifying and confirming all 
that said attorneys-in-fact and agents, or his, her or their substitute or substitutes, may lawfully do or cause to be done by 
virtue hereof. 

141 

 
 
 
 
 
 
   
 
 
 
 
 
 
  
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed 

below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. 

Signature 

    Title 

/s/ Julia C. Owens, Ph.D. 
Julia C. Owens, Ph.D. 

President, Chief Executive Officer and Director 
(Principal Executive Officer) 

/s/ Louis Arcudi III 
Louis Arcudi III 

Chief Financial Officer 
(Principal Financial Officer and Principal 
Accounting Officer) 

Date 

March 29, 2019 

   March 29, 2019 

/s/ Carol Gallagher, Pharm.D. 
Carol Gallagher, Pharm.D. 

/s/ Habib Dable 
Habib Dable 

/s/ Mary Lynne Hedley, Ph.D. 
Mary Lynne Hedley, Ph.D. 

/s/ James Hindman 
James Hindman 

/s/ John Howe, III, M.D. 
John Howe, III, M.D. 

/s/ Carole Nuechterlein, J.D. 
Carole Nuechterlein, J.D. 

/s/ James Hindman 
James Hindman 

/s/ Randall Whitcomb, M.D. 
Randall Whitcomb, M.D. 

Chairperson of the Board of Directors 

   March 29, 2019 

   March 29, 2019 

   March 29, 2019 

March 29, 2019 

   March 29, 2019 

   March 29, 2019 

March 29, 2019 

March 29, 2019 

Director 

Director 

Director 

Director 

Director 

Director 

Director 

142 

 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
  
  
  
 
 
 
 
  
  
 
 
 
  
  
 
 
 
  
  
 
 
 
  
  
 
 
 
  
  
  
 
 
 
  
  
 
 
 
  
  
 
 
 
  
  
  
 
 
 
  
  
  
 
 
Board of Directors 

Corporate Headquarters 

Millendo Therapeutics, Inc. 
301 N. Main St., Suite 100 
Ann Arbor, MI 48104 

Legal Counsel 
Cooley LLP 
500 Boylston Street 
Boston, MA 02116-3736 

Auditors 
 Ernst & Young LLP 
171 Monroe Ave NW # 600 
Grand Rapids, MI 49503 

Investor Relations Contact 
 Stephanie Ascher 
Stern Investor Relations 
212-362-1200 
stephanie.ascher@sternir.com 

Stock Transfer Agent 
 Computershare Trust Company, N.A. 
P.O. Box 43078 
Providence, RI 02940 
www.computershare.com 

Common Stock Listing 
 Nasdaq: MLND

Carol Gallagher, Pharm.D., Chairperson 
Partner, New Enterprise Associates

Habib J. Dable 
President and Chief Executive Officer, Acceleron Pharma

Mary Lynne Hedley, Ph.D. 
President and Chief Operating Officer, TESARO

James M. Hindman 
Former Executive Vice President and Chief Financial Officer, Allergan

John Howe, III, M.D. 
Former President and Chief Executive Officer of Project HOPE 

Carole L. Nuechterlein, J.D. 
Deputy Director and Head, Roche Venture Fund at F.Hoffmann-La Roche

Julia C. Owens, Ph.D. 
President and Chief Executive Officer, Millendo Therapeutics

Randall W. Whitcomb, M.D. 
Co-founder and former Chief Medical Officer of QuatRx Pharmaceuticals 

 Leadership Team 

Julia C. Owens, Ph.D. 
President and Chief Executive Officer

Louis J. Arcudi III 
Chief Financial Officer

Jeffery M. Brinza, J.D. 
Chief Administrative Officer and General Counsel

Pharis Mohideen, M.D.  
Chief Medical Officer

Thomas Hoover 
Senior Vice President, Commercial Strategy 

Andrew G. Spencer, Ph.D. 
Senior Vice President, Preclinical Research and Development 

Ryan Zeidan, Ph.D. 
Senior Vice President, Development

Forward-looking Statements

This  Annual  Report  contains  forward-looking  statements  within  the  meaning  of  Section  27A  of  the  Securities  Act  of  1933,  as  amended,  and  Section  21E  of  the 
Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by the 
words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue” 
and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known 
and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from 
the information expressed or implied by these forward-looking statements. The forward-looking statements in this Annual Report represent our views as of the 
date of this Annual Report. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update these 
forward-looking statements at some point in the future, we undertake no obligation to publicly update any forward looking statements, whether as a result of new 
information, future events or otherwise, except as required by law. You should, therefore, not rely on these forward-looking statements as representing our views as 
of any date subsequent to the date of this Annual Report. You should refer to the risk factor disclosure set forth in the periodic reports and other documents we file 
with the SEC available at www.sec.gov, including without limitation our Annual Report on Form 10-K for our fiscal year ended December 31, 2018.

 
 
 
 
 
 
 
 
 
 
Millendo Therapeutics, Inc.
Corporate Headquarters 
301 N. Main St., Suite 100

Ann Arbor, MI 48104

Phone: 734-845-9000 
www.millendo.com