Stemline Therapeutics
Annual Report 2018

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K xx 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 oo TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934 For the transition period from to . Commission File Number: 001-35619 STEMLINE THERAPEUTICS, INC.(Exact name of registrant as specified in its charter) Delaware45-0522567(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number) 750 Lexington AvenueEleventh FloorNew York, New York 10022(Address of principal executive offices, including zip code) (646)-502-2311(Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $0.0001 per shareNASDAQ Capital Market(Title of Class)(Name of Each Exchange on Which Registered) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes x No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes x No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during 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 filingrequirements for the past 90 days. x Yes o No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).xYes o No 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, andwill 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. o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or anemerging 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 fileroAccelerated filerxNon-accelerated fileroSmaller reporting companyxEmerging growth companyo If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with anynew or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes x No The aggregate market value of voting common stock held by non-affiliates of the registrant (assuming, for purposes of this calculation, withoutconceding, that all executive officers and directors are “affiliates”) was $448,641,317 as of June 30, 2018, based on the closing sale price of such stock asreported on the NASDAQ Capital Market. There were 43,569,081 shares of the registrant’s common stock outstanding as of March 15, 2019. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s Proxy Statement for the 2019 Annual Meeting of Stockholders are incorporated by reference in Part III of this Annual Reporton Form 10-K. Table of Contents TABLE OF CONTENTS Part I1 Item 1. Business1 Item 1A. Risk Factors27 Item 1B. Unresolved Staff Comments62 Item 2. Properties62 Item 3. Legal Proceedings62 Item 4. Mine Safety Disclosures62 Part II63 Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities63 Item 6. Selected Financial Data65 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations66 Item 7A. Quantitative and Qualitative Disclosures about Market Risk77 Item 8. Financial Statements and Supplementary Data77 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure77 Item 9A. Controls and Procedures77 Item 9B. Other Information78 Part III79 Item 10. Directors, Executive Officers and Corporate Governance79 Item 11. Executive Compensation79 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters79 Item 13. Certain Relationships and Related Transactions and Director Independence79 Item 14. Principal Accounting Fees and Services79 Part IV80 Item 15. Exhibits, Financial Statements Schedules80 Item 16. Form 10-K Summary82 This Annual Report on Form 10-K contains trademarks and trade names of Stemline Therapeutics, Inc., including our name and logo. All other trademarks,service marks, or trade names referenced in this Annual Report on Form 10-K are the property of their respective owners. Table of Contents SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS This annual report on Form 10-K (“Form 10-K”) includes statements that are, or may be deemed, “forward-looking statements.” In some cases, these forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,”“plans,” “intends,” “may,” “could,” “might,” “will,” “should,” “approximately” or, in each case, their negative or other variations thereon or comparableterminology, although not all forward-looking statements contain these words. They appear in a number of places throughout this Form 10-K and includestatements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things, our history of netoperating losses and uncertainty regarding our ability to obtain capital and achieve profitability, our ability to develop and commercialize our productcandidates, our ability to advance our development programs, enroll our trials, and achieve clinical endpoints, our ability to use or expand our technology tobuild a pipeline of product candidates, our ability to obtain and maintain regulatory approval of our product candidates and comply with ongoing regulatoryrequirements, our ability to successfully operate in a competitive industry and gain market acceptance by physician, provider, patient, and payorcommunities, our reliance on third parties, unstable economic or market conditions, and our ability to obtain and adequately protect intellectual propertyrights for our product candidates. By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics, and healthcare, regulatoryand scientific developments and depend on the economic circumstances that may or may not occur in the future or may occur on longer or shorter timelinesthan anticipated. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Form 10-K, we caution you thatforward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and thedevelopment of the industry in which we operate may differ materially from the forward-looking statements contained in this Form 10-K. In addition, even ifour results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-lookingstatements contained in this Form 10-K, they may not be predictive of results or developments in future periods. Some of the factors that we believe could cause actual results to differ from those anticipated or predicted include: · the success and timing of our Marketing Authorization Application, or MAA, submission to the European Medicines Agency, or EMA;· the success and timing of our clinical trials and preclinical studies for our product candidates, including site initiation, institutional reviewboard approval, scientific review committee approval, patient accrual, safety, tolerability and efficacy data observed, and input from regulatoryauthorities, including the risk that the U.S. Food and Drug Administration, or FDA, EMA, or other ex-U.S. national drug authority, ultimatelydoes not agree with our data, find our data supportive of approval, or approve any of our product candidates;· the possibility that results of clinical trials are not predictive of safety and efficacy results of our products or product candidates in broaderpatient populations or of our products if approved· our ability to successfully file and obtain timely marketing approval from the FDA or comparable foreign regulatory agency for one or moreBiologics License Applications, or BLAs, or New Drug Applications, NDAs or comparable foreign marketing authorization submissions;· our ability to obtain and maintain marketing approval from regulatory agencies for our products in the U.S. and foreign countries;· our ability to adhere to ongoing compliance requirements of all health authorities, in the U.S. and foreign countries;· our ability to obtain and maintain adequate reimbursement for our products;· our ability to obtain the desired labeling of our products under any regulatory approval we might receive;· our plans to develop and commercialize our product candidates, including, but not limited to delays in arranging satisfactory manufacturingcapabilities and establishing commercial infrastructure for sale of our product candidates;· product efficacy or safety concerns resulting in product recalls or regulatory action;· the risk that estimates regarding the number of patients with the diseases that our products and product candidates may treat are inaccurate;· our products not gaining acceptance among patients (and providers or third party payers) for certain indications (due to cost or otherwise);· the risk that third party payors (including governmental agencies) will not reimburse for the use of ELZONRIS at acceptable rates or at all;· our ability to maintain or increase sales of ELZONRIS (tagraxofusp-erzs; SL-401);· our ability to develop and commercialize our products;· the adequacy of our pharmacovigilance and drug safety reporting processes;· the successful development and implementation of sales and marketing campaigns;· the loss of key scientific or management personnel;· the size and growth of the potential markets for our product candidates and our ability to serve those markets;· our ability to successfully compete in the potential markets for our product candidates, if commercialized; iTMTable of Contents · regulatory developments in the United States and foreign countries;· the rate and degree of market acceptance of any of our product candidates;· new products, product candidates or new uses for existing products or technologies introduced or announced by our competitors and the timingof these introductions or announcements;· market conditions in the pharmaceutical and biotechnology sectors;· our available cash and investments;· the accuracy of our estimates regarding expenses, future income or revenue, capital requirements and needs for additional financing;· our ability to obtain additional funding;· our ability to obtain and maintain intellectual property protection for our products and product candidates;· delays, interruptions, or failures in the manufacture and supply of our products and product candidates;· our ability to maintain the license agreements for our products and product candidates;· the success and timing of our preclinical studies, including those intended to support an Investigational New Drug, or IND, application;· the ability of our product candidates to successfully perform and advance in clinical trials;· our ability to obtain and maintain authorization from regulatory authorities for use of our product candidates for the initiation and conduct ofclinical trials;· the ability of our third-party manufacturers to manufacture and supply our products, gain access to products we plan to use in combinationstudies and the performance of, and reliance on, our third-party manufacturers and suppliers;· the performance of our clinical research organizations, clinical trial sponsors, and clinical trial investigators; and· our ability to successfully implement our strategy. Any forward-looking statements that we make in this Form 10-K speak only as of the date of such statement, and we undertake no obligation to update suchstatements to reflect events or circumstances after the date of this Form 10-K. You should also read carefully the factors described in the “Risk Factors”section of this Form 10-K to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements. As a resultof these risks and uncertainties, our actual results may differ materially from those reflected in the forward-looking statements in this Form 10-K. This Form 10-K includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studiesconducted by third-parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtainedfrom sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe these industrypublications and third-party research, surveys and studies are reliable, we have not independently verified such data. We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward-looking statements, we claimthe protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. iiTable of Contents Part I Unless the context requires otherwise, references in this report to “Stemline,” “Company,” “we,” “us” and “our” refer to Stemline Therapeutics, Inc. Item 1. Business Overview We are a commercial-stage biopharmaceutical company focused on discovering, acquiring, developing and commercializing innovative oncologytherapeutics. In December 2018, the U.S. Food and Drug Administration, or FDA, approved our first product, ELZONRIS (tagraxofusp-erzs; SL-401), atargeted therapy directed to CD123, for the treatment of blastic plasmacytoid dendritic cell neoplasm, or BPDCN, in adults and in pediatric patients two yearsand older. ELZONRIS has been commercially available in the U.S. since the end of January 2019, and patients are currently being treated with ELZONRIS inthe commercial setting. ELZONRIS regulatory and commercial ELZONRIS is a targeted therapy directed to the interleukin-3 receptor-a, or CD123. ELZONRIS was approved by the FDA in December 2018 for thetreatment of BPDCN in adults and in pediatric patients, two years and older. ELZONRIS is the first drug ever approved for this indication, the first CD123-targeted agent approved, and is commercially available to patients with BPDCN in the U.S. ELZONRIS was granted Breakthrough Therapy Designation, orBTD, for the treatment of BPDCN in August 2016. ELZONRIS was granted Orphan Drug Designation, or ODD, in the U.S. for AML in February 2011 andBPDCN in June 2013 and granted ODD in Europe for AML in September 2015 and BPDCN in November 2015. In November 2018, the European Medicines Agency, or EMA, granted accelerated assessment for the review of the marketing authorization application, orMAA, of ELZONRIS for the treatment of BPDCN. The MAA was submitted to, and validated by, the EMA in January 2019. ELZONRIS additional clinical activities We are also seeking to broaden the commercial potential of ELZONRIS, globally, through ongoing clinical trials in additional indications including chronicmyelomonocytic leukemia, or CMML, and myelofibrosis, or MF, acute myeloid leukemia, or AML, as well as planned trials in other indications. Additionalplanned trials include BPDCN maintenance post-stem cell transplant and AML subsets that have the BPDCN diagnostic signature and/or are enriched forCD123 expression. Additional pipeline candidates Our other pipeline candidates include: SL-801, a novel oral small molecule reversible inhibitor of XPO1, which is currently in a Phase 1 trial of patients withadvanced solid tumors and recent data were presented at the 2018 European Society of Medical Oncology, or ESMO, annual conference; SL-701, animmunotherapeutic, which has completed a Phase 2 trial in patients with second-line glioblastoma and recent data were presented at the 2018 Society forNeuro-Oncology, or SNO, annual conference; SL-901, an oral, small molecule kinase inhibitor, assessed in an abbreviated Phase 1 trial of patients with solidtumors in Europe, with a novel profile that could have potential in oncology and certain non-oncologic orphan diseases; and SL-1001, an oral, selectivesmall molecule RET (rearranged during transfection) kinase inhibitor that has demonstrated potent, selective, preclinical anti-cancer activity in RET-driventumor models. Our Company We were incorporated under the laws of the State of Delaware in August 2003. Our principal executive office is located at 750 Lexington Avenue, EleventhFloor, New York, New York 10022 and our telephone number is (646) 502-2311. Our website address is www.stemline.com. The information set forth on our website is not a part of this report. We will make available free of charge throughour website our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to these reports, as soonas reasonably practicable after we electronically file such material with, or furnish such material to, the Securities and Exchange Commission, or SEC. We arenot including the information on our website as a part of, nor incorporating it by reference into, this report. You may read and copy any materials we file atthe SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public ReferenceRoom by calling the SEC at 1-800-SEC-0330. Additionally, the SEC maintains a website that contains annual, quarterly, and current reports, proxystatements, and other information that issuers (including us) file electronically with the SEC. The SEC’s website address is http://www.sec.gov/. Management We are led by a team with extensive experience in the biopharmaceutical industry including: 1TMTable of Contents · Ivan Bergstein, M.D. — Chairman, Chief Executive Officer and President. Dr. Bergstein is Chief Executive Officer and Founder of StemlineTherapeutics. Dr. Bergstein has managed the company’s evolution from early-stage research and development to the FDA approval of its leadproduct, ELZONRIS. Prior to founding Stemline, Dr. Bergstein was Medical Director of Access Oncology, Inc., a clinical stage oncology-focused biotechnology company where he was a key member of a small team responsible for the acquisition and development of the company’sclinical stage assets and ultimately the sale of the company to Keryx Biopharmaceuticals, Inc. (Nasdaq: KERX). He received a BA inmathematics from the University of Pennsylvania, was elected to the Pi Mu Epsilon National Mathematics Honor Society, and was captain ofthe varsity wrestling team. He then received an MD from the Mount Sinai School of Medicine where he was elected to the Alpha Omega AlphaHonor Medical Society, received the Merck Award for Clinical Excellence, and subsequently completed an internship in general surgery. Hethen became the Jerome A. Urban Post-Doctoral Research Fellow at the Cornell University Medical College where he studied and publishedwork relating to Wnt genes in human breast cancer. He then completed an internal medicine residency and hematology-oncology fellowship atthe New York Presbyterian Hospital — Weill Medical College of Cornell University where he studied and published work on gene therapymanipulations of the sonic hedgehog pathway. · Kenneth Hoberman — Chief Operating Officer. Mr. Hoberman has extensive financial, accounting, investor relations, corporate governance andbusiness development experience including M&A, strategic alliances and partnerships both domestic and international. His operationalexpertise includes regulatory oversight, human resources, manufacturing and clinical development. He was previously Vice President ofCorporate and Business Development of Keryx Biopharmaceuticals, Inc. (Nasdaq: KERX), where he was instrumental in the success of thecompany. He also helped secure multiple sources of capital including over $200 million in equity investments through public and privateofferings. He also initiated and executed a $100 million strategic alliance and originated, negotiated and closed dozens of licensing andoperational contracts, helping to grow the company’s market capitalization to over $1 billion. He also led the team that originated, in-licensed,and developed Auryxia™ which was approved by the FDA in September 2014. He is on the Board of Directors of TG Therapeutics, Inc.(Nasdaq: TGTX). He received a B.S.B.A. in Finance from Boston University and completed post-baccalaureate studies at Columbia University. · David Gionco — Vice President of Finance and Chief Accounting Officer. Mr. Gionco was previously Vice President, Chief Financial Officerand Chief Accounting Officer of Savient Pharmaceuticals, Inc. where he oversaw the finance function for the organization and was instrumentalin helping to grow the company, raising over $350 million. Prior to this, Mr. Gionco held audit, corporate accounting, financial planning,finance and controller roles at companies including Merck & Co., Inc. (“Merck”) and, previously, Medco Health Solutions, Inc., which wasacquired by Merck during his tenure. At Merck, Mr. Gionco held various financial and accounting positions of increasing responsibility.Mr. Gionco also held senior financial positions at Progenics Pharmaceuticals, Inc. (Nasdaq: PGNX) and Odyssey Pharmaceuticals, Inc. (asubsidiary of Pliva, Inc., now Teva Pharmaceutical Industries Ltd. (NYSE: TEVA)). Mr. Gionco previously had seven (7) years of financialauditing experience with a major public accounting firm. Mr. Gionco holds a B.S. in Accounting from Fairleigh Dickinson University and anMBA in Finance from Rutgers University. Mr. Gionco is a Certified Public Accountant in the State of New York. · Robert Francomano — Senior Vice President and Global Head of Commercial. Mr. Francomano joined Stemline Therapeutics in 2016 and isresponsible for leading the transformation of the organization from a clinical-stage entity to one with a full commercial capability andinfrastructure. Mr. Francomano brings more than 25 years of biopharmaceutical experience to Stemline, with the majority of time spent in thehematology/oncology therapeutic area. Prior to Stemline, Robert held several key roles of increasing responsibility within the oncologydivisions of Baxalta, Pfizer, GlaxoSmithKline and AstraZeneca with workstreams that spanned the life cycle continuum from asset discoverythrough patent expiry. Mr. Francomano earned a bachelor’s degree in marketing/management from Siena College (NY) and an MBA from theUniversity of Albany with a concentration in pharmaceutical/chemical studies. Strategy Our goal is to build a leading biopharmaceutical company focused on improving the lives of patients by developing and commercializing innovativetherapeutics for difficult-to-treat cancers. The fundamental components of our business strategy to achieve this goal include the following: · Commercialize ELZONRIS in the U.S. On December 21, 2018, the FDA granted approval of ELZONRIS for the treatment of BPDCN in adultsand pediatric patients two years and older, in both treatment-naïve and previously-treated populations. ELZONRIS is the first treatmentapproved for BPDCN and the first approved CD123-targeted therapy. In an effort to optimize commercial success, we have invested andcontinue to invest in disease awareness and an infrastructure that includes sales professionals, marketing, medical affairs, and reimbursementspecialists. 2Table of Contents · Obtain approval and commercialize ELZONRIS in the E.U. Stemline submitted a Marketing Authorization Application, or MAA, inJanuary 2019 to the European Medicines Agency, or EMA, seeking approval of ELZONRIS for the treatment of adult patients with BPDCN. TheMAA was validated and is currently under review by the EMA. The MAA was granted accelerated assessment in November 2018 by the EMA.We are in the process of analyzing and planning to subsequently implement the medical and commercial infrastructure build-out in the regionshould ELZONRIS obtain approval. · Assess ELZONRIS in additional indications. We are also assessing ELZONRIS as monotherapy in additional indications including in Phase 1/2trials of patients with chronic myelomonocytic leukemia, or CMML, and myelofibrosis, or MF. ELZONRIS is also being assessed in Phase 1/2trials of other indications including acute myeloid leukemia, or AML, and multiple myeloma, in combination with other therapies. · Assess SL-801 in a variety of cancer types. We are assessing SL-801 in a Phase 1 trial of adult patients with advanced solid tumors. Patients arecurrently enrolling in this dose escalation study and we are assessing safety, including attempting to identify a recommended dose andadministration schedule, as well as potential efficacy. · Develop SL-701 in brain cancer. We have completed a Phase 2 trial of SL-701 in adult patients with second-line glioblastoma multiforme, orGBM. Patients received SL-701 alone, or in combination with bevacizumab, with immunostimulants. Data are being analyzed and we expect toprovide updates for the program later this year. · Advance the rest of our pipeline, including SL-901 and SL-1001. We plan to manufacture and conduct IND-enabling studies for SL-901 and SL-1001 in an effort to conduct clinical trials. ELZONRIS Overview ELZONRIS is a novel targeted therapy directed to the interleukin-3 receptor-a, or CD123, a target present on a wide range of malignancies as well as someautoimmune disorders. ELZONRIS has been approved by the FDA for the treatment of BPDCN in adults and in pediatric patients two years and older, in bothtreatment-naïve and previously-treated populations. ELZONRIS is the first treatment approved for BPDCN and the first approved CD123-targeted therapy.The ELZONRIS label contains a boxed warning for capillary leak syndrome, or CLS, which may be life-threatening or fatal. Physicians are advised to monitorfor signs and symptoms of CLS and take actions as recommended in the full prescribing information. BPDCN is an aggressive, orphan hematologic malignancy with historically poor outcomes. BPDCN may present with features similar to, and can be mistakenfor, certain diseases including acute myeloid leukemia, or AML, non-Hodgkin’s lymphoma, or NHL, acute lymphocytic leukemia, or ALL, myelodysplasticsyndrome, or MDS, and chronic myelomonocytic leukemia, or CMML, as well as other malignancies with skin manifestations or non-malignant cutaneousconditions. BPDCN typically presents in the bone marrow and/or skin, and may also involve lymph nodes and viscera. The diagnosis of BPDCN is based onthe immunophenotypic diagnostic triad of CD123, CD4, and CD56, as well as other markers including TCL-1. ELZONRIS is designed to specifically target CD123. CD123 is highly expressed on BPDCN and is a key marker, as a part of a triad of markers, that enablesproper diagnosis of BPDCN. Additionally, CD123 represents a potential target for therapeutic research in a variety of cancers beyond BPDCN as well ascertain autoimmune disorders. CD123 has been associated with poor outcomes in AML. ELZONRIS was granted Breakthrough Therapy Designation, or BTD, in by the FDA August 2016. ELZONRIS was granted Orphan Drug Designation, orODD, by the FDA for BPDCN in June 2013 and AML in February 2011 and was granted ODD by the EMA for BPDCN in November 2015 and AML inSeptember 2015. The ELZONRIS Biologics License Application, or BLA, was evaluated under Priority Review and approved by the FDA in December 2018,two months ahead of its Prescription Drug User Fee Act, or PDUFA, action date. ELZONRIS for blastic plasmacytoid dendritic cell neoplasm (BPDCN) ELZONRIS is the first treatment approved for BPDCN and the first approved CD123-targeted therapy. BPDCN is an aggressive hematologic cancer that carries a poor prognosis. BPDCN had been previously classified as blastic NK cell lymphoma, agranularCD4+/CD56+ hematodermic neoplasm, and plasmacytoid dendritic cell cancer. In 2008, this disease was 3Table of Contents renamed BPDCN by the World Health Organization, or WHO, due to the realization of its derivation from plasmacytoid dendritic cells, or pDCs, which arespecialized immune cells. BPDCN is an aggressive malignancy that most commonly affects middle-aged and older patients and is approximately three times more common in men thanwomen. This malignancy typically presents with skin lesions, as well as bone marrow involvement. BPDCN growth in the bone marrow results in decreasedblood cell counts, which can lead to serious infections, fatigue, bleeding, and death. BPDCN has had historically poor outcomes and was considered an areaof unmet medical need prior to the approval of ELZONRIS. ELZONRIS mechanism of action ELZONRIS is a novel targeted therapy directed to CD123. ELZONRIS is comprised of human IL-3 recombinantly fused to a truncated diphtheria toxin, orDT, payload engineered such that IL-3 replaces the native DT receptor-binding domain. In this way, the IL-3 domain of ELZONRIS directs the cytotoxic DTpayload to cells expressing CD123. Upon internalization, ELZONRIS irreversibly inhibits protein synthesis and induces apoptosis of the target cell. CD123 CD123 is normally expressed on certain maturing hematopoietic cells, including maturing myeloid cells, B cells, plasmacytoid dendritic cells, or pDCs, mastcells, basophils and eosinophils, and appears to be involved in cell maturation, differentiation, and survival. CD123 expression appears to be lower onnormal hematopoietic stem cells. CD123 is expressed on multiple malignancies, to varying extents, including BPDCN, AML, certain myeloproliferative neoplasms, or MPNs, myelodysplasticsyndrome, or MDS, CMML, B-cell acute lymphoid leukemia, or B-ALL, hairy cell leukemia, Hodgkin’s and certain non-Hodgkin’s lymphomas. In additionto expression on tumor bulk, CD123 expression has been reported on the cancer stem cells, or CSCs, of certain hematologic cancers including AML, CMML,MDS, and potentially T-cell ALL. In addition, elevated CD123 expression has been correlated with poor prognosis in certain hematologic cancers. CD123 plasmacytoid dendritic cells (pDCs) CD123 pDCs are the cell of origin for BPDCN. Notably, CD123 pDCs have also been reported in the microenvironment of several tumor types includingmultiple myeloma, CMML and other MPNs including myelofibrosis, or MF, and mastocytosis, as well as AML and some solid tumors where they may play atumor-promoting role. In several cases, including CMML and AML, tumor microenvironmental pDCs have been shown to be neoplastic and part of themalignant clone, indicating a potential need for therapeutic targeting. Accordingly, the potential to target neoplastic pDCs with ELZONRIS in a variety oftumor types, both hematologic and possibly solid, could provide significant label and market expansion opportunities. CD123 pDCs have also been implicated in the pathogenesis of certain autoimmune diseases, including scleroderma and cutaneous lupus, and is a potentialtherapeutic target for these conditions. We are conducting preclinical research in this area and preclinical data presented at the Annual European Congress ofRheumatology, or EULAR, demonstrated the cytotoxic activity of ELZONRIS against potentially pathogenic pDCs. This data suggests depleting pDCs orattenuation of pDC function could represent a potentially novel approach for the treatment of systemic sclerosis and certain other autoimmune disorders. ELZONRIS clinical trial design The ELZONRIS clinical trial, we believe, was the largest prospective trial ever conducted in BPDCN. This multicenter, multi-cohort, open-label, single-arm,clinical trial (STML-401-0114; NCT 02113982) enrolled 47 patients with BPDCN, including 32 treatment-naïve and 15 previously-treated patients, at sevensites in the U.S. Patients received ELZONRIS intravenously on days 1-5 of a 21-day cycle for multiple consecutive cycles. The trial consisted of three stages:Stage 1 (lead-in, dose escalation), Stage 2 (expansion) and Stage 3 (pivotal, confirmatory). Patients were also enrolled in an additional cohort (Stage 4) toenable uninterrupted access to ELZONRIS. ELZONRIS clinical trial results FDA approval was based on STML-401-0114 (NCT 02113982), which was conducted in patients with treatment-naïve or previously-treated BPDCN. Clinical data from Stages 1, 2, and 3 of Study STML-401-0114 (NCT 02113982) were presented at the American Society of Hematology, or ASH, 2018annual meeting. In 29 treatment-naïve patients who received ELZONRIS at 12 mcg/kg/day, the overall response rate (ORR) was 90 percent (26/29) (95% CI:72.6, 97.8). In these patients, the CR/CRc rate was 72 percent (21/29) (95% CI: 52.8, 87.3) with a median duration of CR/CRc not reached (range: 1.3 to 32.2months). Forty-five percent (13/29) of these patients were bridged to stem cell transplant, or SCT, following remission on ELZONRIS. In the Stage 3 (pivotal)cohort, 13 patients with 4++++Table of Contents treatment-naïve BPDCN received ELZONRIS at the labeled dose and schedule. Efficacy was based on the rate of complete response or clinical completeresponse (CR/CRc), with CRc defined as complete response with residual skin abnormality not indicative of active disease. In this pivotal cohort, theCR/CRc rate was 53.8 percent (7/13) (95% CI: 25.1, 80.8), and the median duration of CR/CRc was not reached (range: 3.9 to 12.2 months). The safety of ELZONRIS was assessed in 94 adults with treatment-naïve or previously-treated myeloid malignancies treated with ELZONRIS at the labeleddose and schedule. The most common adverse reactions (incidence >30%) were CLS, nausea, fatigue, peripheral edema, pyrexia, and weight increase. Themost common laboratory abnormalities (incidence >50%) were decreases in albumin, platelets, hemoglobin, calcium, sodium, and increases in glucose,alanine aminotransferase (ALT) and aspartate aminotransferase (AST). CLS, defined as any event reported as CLS during treatment with ELZONRIS or theoccurrence of at least two (2) of the following CLS manifestations within seven (7) days of each other: hypoalbuminemia, edema, or hypotension, in clinicaltrials was 55% in patients receiving ELZONRIS, including grades 1 or 2 in 46% (43/94), grade 3 in 6% (6/94), grade 4 in 1% (1/94), and two (2) fatal events(2/94, 2%). In an additional 76 patients treated with ELZONRIS at 12 mcg/kg/day in all schedules, there were the following investigator-assessed CLSevents: 3 grade 3 (4%), 1 grade 4 (1%) and 1 fatal event (1%). A myocardial infarction, grade 5, was reported in the grade 4 patient with CLS. As presented at ASH 2018, the median overall survival, or OS, among 29 treatment-naïve patients who received ELZONRIS at 12 mcg/kg/day was notreached at the time of analysis (range: 0.2 to 42.0 months, with median follow-up of 23.0 months [range: 0.2 to 41+ months]). ELZONRIS regulatory and commercial On December 21, 2018, the FDA granted full approval of ELZONRIS for the treatment of BPDCN in adult and in pediatric patients two years and older, inboth treatment-naïve and previously-treated populations. Previously, the FDA granted ELZONRIS breakthrough therapy designation, or BTD, and orphandrug designation, or ODD, and evaluated the ELZONRIS biologics license application, or BLA, under Priority Review. ELZONRIS is commercially availablein the U.S. Stemline is committed to helping patients with BPDCN in the U.S. access ELZONRIS through the Stemline ARC™ program. Stemline ARC is acomprehensive access program designed to provide support, information and assistance to patients prescribed ELZONRIS. Dedicated oncology nurseadvocates are available to provide personalized education about BPDCN and ELZONRIS to patients and their caregivers, and connect them with helpfultools and resources. Stemline ARC offers a copay assistance program for patients with commercial insurance who qualify. Stemline is also partnering withpatient advocacy groups to support the needs of patients with BPDCN. In January 2019, Stemline submitted a Marketing Authorization Application, or MAA, to the European Medicines Agency, or EMA, seeking approval ofELZONRIS for the treatment of adult patients with BPDCN. The MAA is currently under review by the EMA. Previously, the MAA was granted acceleratedassessment in November 2018 by the EMA. Stemline’s commercial group is focused on effectively launching ELZONRIS in the U.S., as well as preparing for a potential European launch. Thecommercial function is comprised of a wide range of functions including access & reimbursement, sales, marketing, and commercial operations. Additionally,the organization has established a medical affairs presence in the field which is predominantly staffed by medical science liasions. The aforementionedfunctions represent the necessary infrastructure to support a successful launch of ELZONRIS in BPDCN. Over the past several years, the organization hasbeen focused on preparing the market, the product, and the organization for the successful launch of ELZONRIS. In December 2017, we launched our BPDCNdisease awareness campaign at the American Society of Hematology, or ASH, Annual Meeting. One of the campaign’s primary goals is to try to ensure thatmultidisciplinary healthcare professionals, including hematologist-oncologists, dermatologists, pathologists, and allied healthcare professionals areappropriately testing for CD123 to bring the diagnosis of BPDCN to the forefront and to limit misdiagnoses and underdiagnoses. The campaign highlightsthe importance of CD123 as a key diagnostic marker for correct patient diagnosis. Access to ELZONRIS remains a top priority within our managed care groupwith key success criteria identified as removing hurdles to product access and reimbursement. We have set up a formal patient assistance program and havefunded an independent 501(c)(3) foundation for those medicare patients that require assistance. Marketing, sales and medical affairs staffing efforts are scaledup to the “right size.” As a next step, European staffing and infrastructure needs are being assessed to enact a similar “right size” approach to meet the needsof a potential EU launch. ELZONRIS Clinical Trials in Additional Indications We are also conducting additional clinical development activities with ELZONRIS including in Phase 1/2 clinical trials of patients with chronicmyelomonocytic leukemia, or CMML, patients with myelofibrosis, or MF, and patients with other indications. 5Table of Contents Chronic Myelomonocytic Leukemia (CMML) At the 2018 ASH annual conference in December 2018, we reported Phase 1/2 data from 20 patients with relapsed/refractory CMML who receivedELZONRIS in Stage 1 (lead-in, dose escalation stage) and Stage 2 (expansion stage). Stage 1 has completed enrollment, and Stage 2 is ongoing, with patientenrollment and follow-up continuing. In Stage 1, ELZONRIS at 12 mcg/kg/day for 3 days every 3-6 weeks was the highest tested dose for CMML, and amaximum tolerated dose, or MTD, was not reached. In Stage 2, patients are receiving ELZONRIS at 12 mcg/kg/day for three (3) days every 3-6 weeks. Median age was 69.5 years (range: 43-80); 80% were male. 50% (10/20) of patients had baseline splenomegaly by physical examination (measured incentimeters that spleen was palpable below the left costal margin). The most common treatment-related adverse events, or TRAEs, were hypoalbuminemiaand thrombocytopenia (each 35%), vomiting and nausea (each 30%), fatigue and edema peripheral (each 20%). CLS was reported in 15% (3/20) of patients;all three cases were grade 2. The most common TRAEs, grade 3, were thrombocytopenia (35%) and nausea (5%). ELZONRIS monotherapy demonstrated improvements in splenomegaly and bone marrow complete responses, or CRs, in patients with relapsed/refractoryCMML. 100% (10/10) of evaluable patients with baseline splenomegaly, by physical examination, had a spleen response: 80% (8/10) of these patients hadsplenomegaly reductions by at least 50%, and 67% (4/6) of these patients with baseline splenomegaly of 5 cm or more below the left costal margin hadsplenomegaly reductions of at least 50%. In addition, three patients had bone marrow CRs including one patient who was bridged to stem cell transplant, orSCT. Based on results observed in this trial thus far, the potential unmet medical need in relapsed/refractory CMML, and feedback from investigators, we areplanning to discuss registration-directed plans with the FDA mid-year, with the goal of initiating a registration-directed trial or cohort. The current ongoingtrial is continuing to enroll patients and we expect to provide periodic updates at upcoming conferences in 2019. Myelofibrosis (MF) At the 2018 ASH annual conference in December 2018, we reported Phase 1/2 data from 23 patients with relapsed/refractory MF who received ELZONRIS inStage 1 (lead-in, dose escalation stage) and Stage 2 (expansion stage). Stage 1 has completed enrollment, and Stage 2 is ongoing, with patient enrollment andfollow up continuing. In Stage 1, ELZONRIS at 12 mcg/kg/day was the highest tested dose for MF, and a MTD was not reached. In Stage 2, patients arereceiving ELZONRIS at 12 mcg/kg/day for three (3) days every 3-6 weeks. Median age was 69 years (range: 55-81); 61% were female. 70% (16/23) of patients had baseline splenomegaly by physical examination (measured by spleenthat is palpable >5 cm below costal margin). In Stage 1, no dose limiting toxicities, or DLT, were identified and a maximum tolerated dose, or MTD, was notreached. The most common TRAEs were headache and hypoalbuminaemia (each 22%). The most common TRAEs, grade 3, was thrombocytopenia (8%).There was also one case of CLS which was grade 3. ELZONRIS monotherapy demonstrated improvements in splenomegaly in patients with relapsed/refractory MF. 56% (9/16) of evaluable patients withbaseline spleen size >5 cm palpable by physical exam below the left costal margin experienced a reduction in splenomegaly: 44% (7/16) of patients hadsplenomegaly reduction by at least 29% and 25% (4/16) had splenomegaly reductions by at least 45%. In patients with MF, monocytosis (>1x10/L monocytes) is associated with rapid disease progression and short survival, and indicates an accelerated phase ofthe disease. In the trial, 100% (5/5) of evaluable patients treated with ELZONRIS and who had baseline monocytosis and spleen size >5cm, had reduction inbaseline splenomegaly, of which 80% (4/5) had reduction by >29% and 40% (2/5) had reduction by >45%. Based on results observed in the trial thus far, and the potential unmet medical need in relapsed/refractory MF, the next steps for the program are beingevaluated. These steps could include single agent, combination, and registration-directed trials in patients with relapsed/refractory MF. We expect to provide further updates around these plans later this year and into early next year in an effort to formulate a registration-directed strategy. Thecurrent ongoing trial is continuing to enroll patients and we expect to provide periodic updates at upcoming conferences in 2019. 6++9Table of Contents AML in complete remission with minimal residual disease, or MRD ELZONRIS is being assessed in a Phase 1/2 clinical trial in AML in complete remission with minimal residual disease, or MRD. This trial consists of a lead-in, dose escalation stage, 3x3 design (Stage 1) in which patients received ELZONRIS as a daily intravenous infusion at 7, 9, or 12 mcg/kg/day for days 1-5 ofa 21 or 28-day cycle. Stage 1 was followed by an expansion stage (Stage 2) which is enrolling AML patients in complete remission with MRD at the dose (12mcg/kg/day) determined in Stage 1. We plan to consider the information from this trial, moving forward, to inform key elements of a regimen for patients withMRD. Multiple Myeloma (MM) ELZONRIS, in combination with pomalidomide and dexamethasone, is being assessed in a Phase 1/2 clinical trial in relapsed/refractory multiple myeloma.This trial has a lead-in dose escalation stage (Stage 1) and an expansion stage (Stage 2) designed to enroll patients at the dose and regimen determined byStage 1. We plan to consider the information from this trial, moving forward, to inform key elements of a combination regimen to align administrationschedules with available agents. Other planned trials Additional planned trials for ELZONRIS include BPDCN maintenance post-stem cell transplant and AML subsets that have the BPDCN diagnostic signatureand/or are enriched for CD123 expression. Other potential indications for ELZONRIS In addition to BPDCN, CMML, MF and AML, additional potential indications for ELZONRIS include other hematologic cancers, solid tumors, and certainautoimmune disorders. . SL-801 SL-801 is a structurally novel, oral, small molecule, reversible inhibitor of Exportin-1, or XPO1, a nuclear transport protein implicated in a variety ofmalignancies. SL-801 has demonstrated preclinical in vitro and in vivo antitumor activity against a wide array of solid and hematologic cancers. SL-801’spotential ability to reversibly bind XPO1 may offer the possibility to mitigate side effects and optimize the therapeutic index. We are currently enrollingpatients with advanced solid tumors in a Phase 1 dose escalation trial of single agent SL-801. In October 2018, we presented an update on the ongoing SL-801 Phase 1 trial at the European Society of Medical Oncology, or ESMO, annual meeting inMunich, Germany. Forty-two patients with advanced solid tumors received SL-801 at escalating doses. Median age was 64 years (range: 39-83); 52% werefemale. The trial has largely enrolled a heavily pretreated patient population (72% of patients were third-line or greater), with a wide spectrum of tumor types,including gastrointestinal, breast, lung, neuroendocrine, ovarian, and others. No MTD has yet been identified. The most common TRAEs, through tencohorts, included nausea (64%), vomiting (48%), fatigue (38%), diarrhea (24%), and decreased appetite (24%). The most common TRAEs, grade 3, werenausea (7%), diarrhea (5%), fatigue (5%), and vomiting (2%). There was also one grade 3 TRAE of hypophosphatemia and one grade 3 TRAE of neutropenia. Through ten cohorts, stable disease was achieved in 29% (12/42) of patients. One patient with a heavily pretreated neuroendocrine tumor had a 20% tumorshrinkage. The dosing regimen for SL-801 is currently being revised in light of the occurrence of non-dose limiting gastrointestinal effects. Our plan is to resume dosingat 70 mg/day for days 1-2 every seven days of a 28-day cycle, and we expect to provide further data updates throughout 2019. SL-701 SL-701 is an immunotherapy designed to direct the immune system to attack targets present on brain cancer and other malignancies. SL-701 is comprised ofseveral short synthetic peptides that correspond to epitopes of targets including IL-13Rα2, EphA2, and survivin; two of these synthetic peptides (IL-13Rα2and survivin) are mutant and believed to enhance immune activity. We completed a Phase 2 trial of SL-701 in adult patients with second-line glioblastoma, or GBM. Phase 2 data suggest SL-701 is generating target specificCD8+ T-cell responses in patients, which may be translating into improved clinical outcomes, including improved OS, in a subset of patients. In October 2018, data from the trial were selected for oral presentation at the ESMO annual meeting in Munich, Germany. The trial consisted of two stages:Stage 1 and Stage 2. Stage 1 enrolled 46 patients and administered SL-701 as a single agent, with the 7Table of Contents immunostimulants GM-CSF and Imiquimod. Stage 2 enrolled 28 patients and administered SL-701 in combination with bevacizumab, and theimmunostimulant poly-ICLC. SL-701 was generally well-tolerated. The most common TRAEs were fatigue (22%) and injection site reaction (18%). The onlygrade 3+ TRAE was fatigue (3%). In Stage 1, one patient had a partial response, or PR, of 18+ month duration (ongoing), and there were 15 SDs, six (6) of which were at least five (5) monthsduration (range: 5 to 28+ months, ongoing). In Stage 2, two patients achieved CR and two (2) patients had PRs, for an ORR of 14% (6/28). In Stage 2, the median overall survival, or OS, was 11.7 months with a 50% 12-month OS rate including some long-term (>12 month) survivors. Long-termsurvivors in Stage 2 were comprised largely of patients who generated target-specific CD8+ T-cell responses, as determined by ex vivo assay of bloodsamples, suggesting that immunocompetent patients, in particular, may benefit from this treatment. Given the safety and efficacy data generated to date with SL-701 and bevacizumab in second-line GBM, we are considering next steps including leveragingthese results and the potential immune-related data in registration-directed trial designs. These next steps may involve conducting trials with enrichmentstrategies, larger studies, including randomized studies, single arm studies, further combination studies with novel agents (e.g., checkpoint inhibitors), thatcould be conducted alone or via partnerships, or cessation of the program. If additional studies are conducted, this may entail significant manufacturingcampaigns and commitments around SL-701 and certain immunostimulants depending upon the choice and availability of immunostimulants. SL-701 was awarded ODD from the FDA for the treatment of glioma in January 2015. We expect to provide further updates relating to this program later this year. SL-901 SL-901 is an oral, small molecule kinase inhibitor. In December 2017, we in-licensed this drug candidate from UCB Biopharma Sprl, or UCB. Prior to in-licensing, the agent had demonstrated preclinical activity in several tumor types, and was evaluated in an abbreviated Phase 1 clinical trial in Europe. Apartial response, or PR, was reported in one patient with advanced lung cancer. Neither a DLT nor MTD was reached in the trial and we believe further doseescalation is possible and warranted. We also believe SL-901 may have utility in certain non-oncologic orphan diseases and preclinical work in this area isongoing. We are currently evaluating plans to enable a new regulatory filing, including certain IND-enabling work, to continue clinical dose escalation. SL-1001 SL-1001 is an oral, selective small molecule RET (rearranged during transfection) kinase inhibitor. Genetic alterations in the RET kinase have been found ina diverse range of cancers and, we believe, RET kinase represents a clinically validated target in multiple oncology indications. In March 2019, we in-licensed this preclinical drug candidate from the CRT Pioneer Fund. The candidate was rationally designed by scientists at Cancer Research UK ManchesterInstitute (United Kingdom), and has demonstrated potent, selective, preclinical anti-cancer activity, both in vitro and in vivo, in RET-driven tumor models.IND-enabling studies are planned, and we expect SL-1001 to enter the clinic in 2020. SL-501 SL-501, a novel CD123-targeted therapy in preclinical development, is a high-affinity variant of ELZONRIS that has shown potency, in vitro and in vivo,against several hematologic tumor types, including AML, CMML, HL, and NHL. Patents and Proprietary Rights Our intellectual property portfolio consists of numerous issued patents and pending applications in the U.S. and worldwide of both in-licensed and Stemline-originated inventions. We continually assess our intellectual property strategy in order to fortify our position in our market space. To that end, we are prepared to file additionalpatent applications in any of the above families should our intellectual property strategy require such filings and/or where we seek to adapt to competition orseize business opportunities. Further, we are prepared to file patent applications relating to the other products in our pipeline soon after the experimental datanecessary for a strong application become available and our cost-benefit analyses justify filing such applications. In addition to filing and prosecuting patent applications in the United States, we typically file counterpart patent applications in Europe, Canada, Japan,Australia, and additional countries where we think such foreign filing is likely to be beneficial. 8Table of Contents We do not know if patents will be issued for all of the patent applications in our portfolio, and there is no assurance that they will be. Furthermore, for patentclaims now issued and for claims to be issued in the future, we do not know if such claims will provide significant proprietary protection to our drugcandidates and proprietary technologies or if they will be challenged, circumvented, or invalidated. Our success will in part depend on our ability to obtainand maintain patents protecting our drug candidates, technologies and inventions, to operate without infringing the proprietary rights of third-parties, and toenforce and defend our patents and ensure others do not infringe on our proprietary rights. The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, thepatent term is 20 years from the earliest date of filing a non-provisional patent application. In the United States, a patent’s term may be shortened if a patent isterminally disclaimed over another patent or as a result of delays in patent prosecution by the patentee, and a patent’s term may be lengthened by patent termadjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office in granting a patent. The term of a patent that covers an FDA-approved drug or biologic may also be eligible for patent term extension, which permits patent term restoration ascompensation for the patent term lost during the FDA regulatory review process. The Drug Price Competition and Patent Term Restoration Act of 1984, or theHatch-Waxman Act, permits a patent term extension of up to five years beyond the expiration of the patent. The length of the patent term extension is relatedto the length of time the drug or biologic is under regulatory review. Patent extension cannot extend the remaining term of a patent beyond a total of 14 yearsfrom the date of product approval and only one patent applicable to an approved drug or biologic may be extended. Similar provisions are available inEurope and other foreign jurisdictions to extend the term of a patent that covers an approved drug or biologic. In the future, if and when our pharmaceuticalproducts receive FDA approval, we expect to apply for patent term extensions on patents covering those products. We anticipate that some of our issuedpatents may be eligible for patent term extensions. For more information regarding U.S. patent laws, see “Business — Government Regulation.” In addition to the patent term extension rights described above, any of our product candidates that receive FDA approval may also be eligible for marketexclusivity protection under the Federal Food, Drug and Cosmetic Act or the Biologics Price Competition and Innovation Act of 2009. For more informationregarding market exclusivity laws, see “Business — Government Regulation.” Many pharmaceutical companies, biotechnology companies and academic institutions are competing with us in the field of oncology and filing patentapplications potentially relevant to our business. In order to contend with the inevitable possibility of third-party intellectual property conflicts, from time totime, we review and assess the third-party intellectual property landscape for competitive and other developments that may inform or impact our intellectualproperty development and commercialization strategies. From time to time, we may find it necessary or prudent to obtain licenses from third-party intellectual property holders. Where licenses are readily available atreasonable cost, such licenses are considered a normal cost of doing business. In other instances, however, where a third-party holds relevant intellectualproperty and is a direct competitor, a license might not be available on commercially reasonable terms or available at all. Accordingly, we attempt to managethe risk that such third-party intellectual property may pose by conducting, among other measures, freedom-to-operate studies to guide our early-stageresearch away from areas where we are likely to encounter obstacles in the form of third-party intellectual property. As our programs advance, we continue tomonitor the intellectual property landscape in an effort to assess the advisability of licensing third-party intellectual property or taking other appropriatesteps to address such freedom-to-operate or development issues in the manner we deem in the best interests of the Company. With respect to third-party intellectual property, it is impossible to establish with certainty that our product candidates or discovery platform will be free ofclaims by third-party intellectual property holders or whether we will require licenses from such third-parties. Even with modern databases and on-line searchengines, literature searches are imperfect and may fail to identify relevant patents and published applications. Even when a third-party patent is identified, wemay conclude, upon a thorough analysis, that we do not infringe the patent or that the patent is invalid. If the third-party patent owner disagrees with ourconclusion and we continue with the business activity in question, we might face patent litigation by the third-party. Alternatively, we might decide toinitiate litigation in an attempt to have a court declare the third-party patent invalid or not infringed by our activity. In either scenario, patent litigationtypically is costly and time-consuming, and the outcome is uncertain. The outcome of patent litigation is subject to uncertainties that cannot be quantified inadvance, for example, the credibility of expert witnesses who may disagree on technical interpretation of scientific data. Ultimately, in the case of an adverseoutcome in litigation, we could be prevented from commercializing a product or using certain aspects of our discovery platform as a result of patentinfringement claims asserted against us and/or face a significant monetary damages award. This could have a material adverse effect on our business. To protect our competitive position, it may be necessary to enforce our patent rights through litigation against infringing third-parties. Litigation to enforceour own patent rights is subject to the same uncertainties discussed above. In addition, however, litigation 9Table of Contents involving our patents carries the risk that one or more of our patents will be held invalid (in whole or in part, on a claim-by-claim basis) or heldunenforceable. Such an adverse court ruling could allow third-parties to commercialize our products or our platform technology, and then compete directlywith us, without payment to us. Patents and Proprietary Rights Covering Stemline’s Drug Candidates We have an exclusive worldwide license to ELZONRIS. These patent rights include issued U.S. Patents, 7,763,242, 8,470,307, 9,181,317, and 9,631,006covering methods of treating AML, BPDCN and MDS that expire in 2027, as well as seven issued foreign patents. We have applied for an extension of theU.S. patent term pursuant to the Hatch Waxman act for issued patents covering ELZONRIS. There are additional pending U.S. applications directed tomethods of using ELZONRIS to treat other diseases that, if issued, would also expire in 2027. In addition, we have filed foreign patent applications for themethod of using ELZONRIS to treat various diseases, although there can be no assurances that such patents will be issued. In addition to patent protection,we also have the exclusivity afforded by the FDA’s orphan designation of ELZONRIS for the treatment of both AML and BPDCN and by the provisions ofthe Biologics Price Competition and Innovation Act of 2009. See “Government Regulation — Orphan Drug Designation” and “— U.S. Patent TermRestoration and Marketing Exclusivity—Biologics Price Competition and Innovation Act of 2009.” We have an exclusive worldwide license (with the exception of Japan, Korea, Taiwan, and China) to patents covering SL-801. These patent rights includeissued U.S. Patents 8,084,454 and U.S. Patent 8,415,357 covering composition of matter and uses of SL-801 that expire in 2030 and 2028, respectively, aswell as nine issued foreign patents that expire in 2028. We also have additional pending patent applications directed to SL-801 which if issued, for whichthere can be no guarantee, would provide additional protection in certain non-U.S. territories and would be expected to expire in 2028. We have an exclusive worldwide license to patents covering the SL-701 component, IL-13Rα2 mutant, a non-exclusive worldwide license to patentscovering the SL-701 component, EphA2, and have filed U.S. and foreign patent applications covering the SL-701 component, survivin mutant. Thisintellectual property consists of an issued U.S. composition of matter patent (U.S. Patent 7,612,162) directed to an immunogenic mutant IL-13Rα2 peptideexpiring in 2026, an issued U.S. composition of matter patent (U.S. Patent 8,574,584) directed to an immunogenic EphA2 peptide expiring in 2024, issuedU.S. method of use patents (U.S. Patent 8,114,407, U.S. Patent 9,359,402, and U.S. Patent 10,131,699) directed to the use of EphA2 peptide expiring in 2024and 2025, issued U.S. method of use patent (U.S. Patent 8,859,488) directed to the combined use of IL-13Rα2 mutant and EphA2 peptides expiring in 2026,an issued European composition of matter patent (EP 2608799) directed to the combination of IL-13Rα2 mutant, EphA2, and survivin mutant peptidesexpiring in 2031, and additional pending U.S. and foreign patent applications directed to the use of an immunogenic mutant survivin peptide which, to theextent it issues, would be expected to expire in 2033. We also have additional pending patent applications directed to methods of using SL-701 componentsto treat certain diseases which, if issued (for which there can be no guarantee), would provide additional protection in the United States and certain non-U.S.territories and would expire in 2025, 2031, or 2033. In addition to patent protection, we also have the exclusivity afforded by the FDA’s orphan designationof SL-701 for the treatment of glioma and by the provisions of the Biologics Price Competition and Innovation Act of 2009. See “Government Regulation —Orphan Drug Designation” and “— U.S. Patent Term Restoration and Marketing Exclusivity—Biologics Price Competition and Innovation Act of 2009”. We have an exclusive worldwide license to patents covering SL-901. This intellectual property consists of the patent family derived from WO 2009/001089,issued in the US, Europe and other territories (expiring in 2028); the patent family derived from WO 2008/001076, issued in US and Europe (expiring in2029); and the patent family derived from WO 2006/114606, issued in the US, Europe and other territories, expiring in 2027. We also have additionalpending patent applications directed to SL-901 which, if issued (for which there can be no guarantee), would provide additional protection in the UnitedStates and certain non-U.S. territories and would expire in 2038. We have an exclusive worldwide license to pending patents covering the SL-1001 component. This intellectual property consists of the patent familyderived from PCT/GB2017/051076 (application date April 18, 2017, pending in the US, Europe and other territories); the patent family derived fromPCT/GB2017/051077 (application date April 18, 2017, pending in US, Europe and other territories); and the patent family derived fromPCT/GB2018/050986 (application date April 13, 2018, pending). We also in-licensed or own certain patent rights, which includes issued patents and pending patent applications in the U.S. and abroad, to our preclinicalassets. Patents and Proprietary Rights Covering Cancer Stem Cell, or CSC, Focused Intellectual Property We have exclusive worldwide rights to early and broad patents and patent applications in the CSC field covering CSC therapeutics, diagnostics, includingcompanion diagnostics, and drug discovery: 10Table of Contents · two pending U.S. patent applications filed in 2007 directed to CSC-directed therapies and regimens, including CSC-directed therapies andregimens for use in combination with companion diagnostics. Patent protection, to the extent it issues, would be expected to extend to 2027; · a pending patent application that covers oligonucleotide-based oncology therapies, including CSC-targeted therapeutics, which targetmicroRNA. Patent protection, to the extent it issues, would be expected to extend to 2022; · a family of intellectual property covering methods to treat cancer through use of antibody-based compounds directed to IL-3Rα as well ascomposition of matter covering IL-3Rα-targeted antibody conjugates, including U.S. Patent 6,733,743; U.S. Patent 7,651,678; U.S. Patent8,163,279; U.S. Patent 8,852,551; U.S. Patent 8,992,910; U.S. Patent 9,518,119; U.S. Patent 9,873,743; and other pending applications. Patentprotection, to the extent it has or may issue, would be expected to extend to 2021 or 2028, as applicable; and · a pending U.S. patent application covering CSC-focused drug discovery, including a novel high throughput screen to discover compounds thattarget CSCs. Patent protection, to the extent it issues, would be expected to extend to 2025. License and Research Agreements Scott and White Memorial Hospital Research and License Agreement (ELZONRIS) In June 2006, we entered into a research and license agreement with Scott and White Memorial Hospital (Temple, Texas) for ELZONRIS, our biologictargeted therapy directed to the IL-3R. Under the agreement, Scott and White has granted us an exclusive, royalty-bearing, worldwide license under certainpatent rights, know-how and materials to research, develop, make, have made, formulate, use, sell, offer to sell and import ELZONRIS, and any productscontaining or comprising such compound in finished dosage pharmaceutical form, for the diagnosis, prophylaxis and/or treatment of any disease or conditionin humans or animals. The patent rights exclusively licensed to us under the agreement are described in more detail above under “Business — Patents andProprietary Rights.” We must pay Scott and White royalties based on adjusted gross sales, by us or our sublicensees, of products containing the licensed compound for a period often years following the first commercial sale of each product in each country. The royalty rates for each product range from the low- to mid-single digits andare tiered based on our annual sales. We have sublicensing rights under the agreement, subject to our paying to Scott and White a percentage of the up-frontpayments we receive from a sublicensee. We must exercise commercially reasonable efforts to develop and commercialize a licensed product and to achieve certain regulatory milestones withincertain periods, subject to extensions based on unforeseen technical, scientific, intellectual property or regulatory issues. If we fail to comply with ourdiligence obligations with respect to at least one licensed product, then Scott and White may convert our exclusive license to a non-exclusive license. The agreement survives until the later of the expiration of the last to expire licensed patent or the date on which we owe no further payments to Scott andWhite, after which our license becomes fully paid, irrevocable, perpetual, non-exclusive and royalty-free. We may terminate the license in whole or on acountry-by-country and product-by-product basis upon prior written notice to Scott and White. If either we or Scott and White breach a material obligationunder the agreement, and such obligation is not cured within a specified period of time following written notice from the other party, then the non-breachingparty may terminate the agreement upon an additional written notice. In addition, the agreement provides for Scott and White to conduct a research program with ELZONRIS. In March 2010, the agreement was amended tofurther the regulatory advancement of ELZONRIS. We have made certain payments to Scott and White for such research services pursuant to the agreement,which to date total approximately $1.0 million in the aggregate. Additionally, we have been granted the exclusive right of reference to its IND for our ownregulatory filings. We may assign the agreement to an affiliate of ours, a purchaser of all or substantially all of our assets or in connection with a merger,change in control or similar transaction by us. 11Table of Contents CanBas, Ltd License for SL-801 On December 26, 2014, we entered into a license agreement with CanBas, Ltd. for SL-801. SL-801 is a small molecule, reversible inhibitor of XPO1. Underthe terms of the agreement, CanBas has granted us an exclusive, royalty-bearing, worldwide license, under certain patent rights, know-how and materials toresearch, develop, make, have made, formulate, use, sell, offer to sell and import SL-801, and any products containing or comprising such compound infinished dosage pharmaceutical form, for the treatment of any disease or condition in humans. The patent rights exclusively licensed to us under theagreement are described in more detail above under “Patents and Proprietary Rights Covering Stemline’s Drug Candidates.” We must pay CanBas tiered royalties based on aggregate net sales, by us or our sublicensees, of products containing the licensed compound until the latestdate of a period of ten years following the first commercial sale of each product in each country; the date upon which there are no more valid claims or theexpiration or termination of the last regulatory exclusivity period. The royalty rates start in the low single digits and are tiered up based on annual net sales.In the future, we may also be responsible, based on the achievement of specific clinical-development, regulatory and sales-based commercial milestones, forcertain payments to CanBas of up to $86 million. We have sublicensing rights under the agreement, subject to our paying to CanBas a standard royaltypercentage of the payments we receive from a sublicensee. We must exercise commercially reasonable efforts to develop and commercialize a licensed product and to achieve certain regulatory milestones withincertain periods, subject to extensions based on unforeseen technical, scientific, intellectual property or regulatory issues. The agreement survives until the later of ten years following the first commercial sale of each product in each country; the date upon which there are no morevalid claims; or the expiration or termination of the last regulatory exclusivity period, after which our license becomes fully paid, irrevocable, perpetual, non-exclusive and royalty-free. We may terminate the license for any or no reason upon 60 days advance written notice to CanBas. If either we or CanBas breach amaterial obligation under the agreement, and such obligation is not cured within a specified period of time following written notice from the other party, thenthe non-breaching party may terminate the agreement upon an additional written notice. University of Pittsburgh Exclusive License Agreement to IL-13Rα2 peptide (SL-701 component) In September 2009, we entered into an exclusive license agreement with the University of Pittsburgh, or the University, for the composition of matter, and usewith other components, of a proprietary immunogenic mutant analog peptide of IL-13Rα2, an active ingredient of SL-701, our brain cancer immunotherapycandidate. Under the agreement, the University grants us an exclusive worldwide license under certain patent rights to make, have made, use, sell and importbrain cancer peptide antigen immunotherapies 12Table of Contents (including SL-701, which has been developed by the University under a separate immunotherapy name designated by the University). The patent rightsexclusively licensed to us under the agreement are described in more detail above under “Business — Patents and Proprietary Rights.” The University retainsthe right to practice the licensed patent rights for non-commercial education and research purposes. The license is also subject to certain retained rights of theUnited States government. Our right to grant sublicenses to third parties is subject to the prior written approval of the University, which the University maynot unreasonably withhold or delay. We paid the University an initial license fee and will pay the University annual license maintenance fees until the first commercial sale of a licensed product.To date, we have paid an aggregate of approximately $0.7 million in fees to the University under the agreement. We must also pay the University a low-single digit royalty as a percentage of net sales of licensed products by us or our sublicensees, with standard provisions for royalty offsets to the extent weneed to obtain any rights from third-parties to commercialize the licensed products. We must also pay a minimum annual royalty following the firstcommercial sale of a licensed product, but only to the extent the minimum annual royalty amount is greater than the annual royalty otherwise due. We alsomust pay the University a percentage of non-royalty revenue we receive from our sublicensees, which decreases if we enter into the applicable sublicenseagreement after a certain clinical milestone has been met. We also must make certain payments to the University of up to approximately $4.2 million uponthe achievement of specific regulatory and commercial milestone events. We must use our commercially reasonable best efforts to develop or commercialize a licensed product as soon as practicable, and to continue active, diligentmarketing efforts throughout the term of the agreement. We also must adhere to certain specific regulatory milestones with respect to initiating clinical trialsand submitting an application for regulatory approval of a licensed product. If we fail to meet any such milestone through no fault of our own, we maynegotiate with the University a one-time extension of the applicable dates, subject to paying the University a fee. If we do not meet the extended milestonedates, then the University may terminate the agreement. The agreement survives until the expiration of the last to expire licensed patent. The University may terminate the agreement if we default in the performanceof any of our obligations and do not cure the default within a specified period of time after receiving notice from the University, or if we challenge thevalidity, enforceability or ownership of the license patent rights anywhere in the world. The University may also terminate the agreement if we cease to carryout our business or become bankrupt or insolvent. We may terminate the agreement for any reason upon prior written notice to the University and payment ofall amounts due to the University through the date of termination. Any sublicense agreement entered into prior to termination will survive, subject to certaincustomary conditions. We may assign the agreement to an affiliate of ours, a purchaser of all or substantially all of our assets or in connection with a merger,change in control or similar transaction by us. Non-Exclusive License Agreement to EphA2 peptide (SL-701 component) In March 2012, we entered into a non-exclusive license agreement with the University for the use of EphA2 epitopes, another active ingredient of SL-701.Under the agreement, the University grants us a non-exclusive worldwide license under certain patent rights to use the EphA2 peptide in or packaged withthe IL-13Rα2 peptide, as well as other immunotherapies we may develop and own or exclusively control, for the diagnosis, treatment or prevention ofdiseases and tumors of the brain in human patients. The patent rights licensed to us under the agreement are described in more detail above under“Business — Patents and Proprietary Rights.” The University retains the right to practice the licensed patent rights for non-commercial education andresearch purposes. The license grant is also subject to certain retained rights of the United States government. We may only grant sublicenses to third partieswho are permitted sublicensees under the exclusive IL-13Rα2 peptide license agreement with the University. We must pay the University an initial license fee, and will pay the University annual license maintenance fees until the net sales of a licensed product exceeda specified amount. To date, we have paid an aggregate of approximately $0.1 million in fees to the University under the agreement. We must also pay theUniversity a customary low-single digit royalty for the license as a percentage of net sales of licensed products by us or our sublicensees, with standardprovisions for royalty offsets to the extent we need to obtain any rights from third-parties to commercialize the licensed products. We must also pay aminimum annual royalty following the first commercial sale of a licensed product, but only to the extent the minimum annual royalty amount is greater thanthe annual royalty otherwise due. We must use our commercially reasonable best efforts to develop or commercialize a licensed product as soon as practicable, and to continue active, diligentmarketing efforts throughout the term of the agreement. We also must adhere to certain specific regulatory milestones with respect to initiating clinical trialsand submitting an application for regulatory approval of a licensed product. If we fail to meet any such milestone by certain specified dates, then theUniversity may terminate the agreement. 13Table of Contents The agreement survives until the expiration of the last to expire licensed patent. The University may terminate the agreement if we default in the performanceof any of our obligations and do not cure the default within a specified time period of receiving notice from the University. The University may alsoterminate the agreement if we cease to carry out our business or become bankrupt or insolvent. We may terminate the agreement for any reason upon priorwritten notice to the University and payment of all amounts due to the University through the date of termination. Any sublicense agreement entered intoprior to termination will survive, subject to certain customary conditions. We may assign the agreement to an affiliate of ours, a purchaser of all orsubstantially all of our assets or in connection with a merger, change in control or similar transaction by us. Non-Exclusive License Agreement to use and reference certain data, information and regulatory filings (SL-701) In March 2012, we entered into a non-exclusive license agreement with the University. Pursuant to the agreement, we acquired a non-exclusive, worldwidelicense to use and reference certain know-how, information and data that is contained in the INDs covering the clinical trials of SL-701 that were conductedby the University for the development, manufacture, regulatory approval and commercialization of pharmaceutical products. We may grant sublicenses inconjunction with a sublicense to a permitted sublicensee under the exclusive IL-13Rα2 peptide license agreement with the University. We paid the University an initial license fee, as well as payments following a regulatory milestone. To date, we have paid an aggregate of approximately$27,500 in fees to the University under the agreement. We also must pay the University a percentage of non-royalty revenue we receive from oursublicensees. We must use our commercially reasonable best efforts to develop or commercialize a product derived from the use of the licensed data orinformation as soon as practicable. We also must adhere to a specific regulatory milestone with respect to submitting an application for regulatory approvalthat incorporates the licensed data or information, and if we fail to meet the milestone, the University may terminate the agreement unless we have pre-paidthe milestone payment listed above. The term of the license agreement is 20 years, and the University may terminate the agreement earlier (i) if we default in the performance of any of ourobligations and do not cure the default within a specified time period, (ii) upon the termination of the exclusive IL-13Rα2 peptide license agreement with theUniversity, or (iii) if we cease to carry out our business or become bankrupt or insolvent. We may terminate the agreement at any time prior to incorporatingor referencing the data or University INDs, after a specified number of days following written notice. We may assign the agreement to an affiliate of ours, apurchaser of all or substantially all of our assets or in connection with a merger, change in control or similar transaction by us. Cambridge University Technical Services Limited Exclusive Patent and Non-Exclusive Know-How License Agreement (Platform Technology) In September 2004, we entered into a license agreement with Cambridge University Technical Services Limited, or CUTS, relating to our StemScreen®platform technology. Under the agreement, we acquired an exclusive, royalty-bearing, worldwide license under patent rights owned by CUTS to develop,manufacture, have manufactured, use, sell, offer to sell, market, have marketed, import, have imported, export and have exported products covered by thepatent rights, including a platform technology to discover and screen for compounds that target CSCs. The patent rights exclusively licensed to us under theagreement are described in more detail above under “Business — Patents and Proprietary Rights.” The license is subject to certain rights retained by CUTSfor academic research and teaching. We also acquired a non-exclusive, worldwide license to know-how related to the licensed patent rights. The agreementprovides us with full sublicensing rights. Under the agreement, we paid an upfront license fee and are obligated to make milestone payments of up to anaggregate of $1.7 million upon specified regulatory events, as well as pay royalties of less than 1% on sales of licensed products. CUTS may terminate theagreement, including our rights to the platform technology, for specified cause or upon certain events involving our bankruptcy or insolvency. Competition The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis onproprietary products. Additionally, there has been an increase in development of therapeutics targeting ultra orphan and rare oncologic indications, our mainarea of focus. While we believe that our scientific knowledge, technology, and development experience provide us with competitive advantages, we facepotential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academicinstitutions, governmental agencies and public and private research institutions. Any current and/or future product candidates that we successfully developand commercialize will compete with existing therapies and new therapies that may become available in the future. 14Table of Contents There are several biopharmaceutical companies whose primary focus appears to be developing therapies against CSCs, including Verastem, Inc., OncoMedPharmaceuticals, Inc., Sumitomo Dainippon Pharma Co. Ltd., Bionomics Limited and Stemcentrx, Inc. (an AbbVie, Inc., company). There are also severalbiopharmaceutical companies that do not appear to be primarily focused on CSCs, but may be developing at least one CSC-directed compound. Thesecompanies include Astellas Pharma US, Inc., Boehringer Ingelheim GmbH, Geron Corp., GlaxoSmithKline plc, Ignyta, Inc. (a Roche company),Macrogenics Inc., Micromet, Inc. (an Amgen, Inc. company), Pfizer Inc., Roche Holding AG, Sanofi U.S. LLC, and others. Additionally, there are a number ofcompanies working to develop new treatments for hematologic cancers, which may compete with ELZONRIS and SL-801, including AbbVie, Inc., AmbitBiosciences Corporation (a Daiichi Sankyo company), Amgen, Inc., Astex Pharmaceuticals (now an Otsuka Pharmaceutical company), CelatorPharmaceuticals, Inc. (a Jazz Pharmaceuticals company), Celgene Corporation, Cellectis, Cyclacel Pharmaceuticals, Inc., Eisai Co. Ltd., GenzymeCorporation (a Sanofi company), Immunogen, Inc., Janssen Pharmaceutical Companies of Johnson and Johnson, Karyopharm Therapeutics, Inc., KuraOncology, Inc., Novartis AG, Seattle Genetics, Inc., and Sunesis Pharmaceuticals, Inc., TG Therapeutics, Inc., among others. There are also a number of drugsused for the treatment of brain cancer that may compete with SL-701, including, Avastin® (Roche Holding AG), Gliadel® (Eisai Co. Ltd.), and Temodar®(Merck & Co., Inc.). There are a number of companies working to develop brain cancer therapeutics with programs in clinical testing, including Agenus Inc.,Bristol-Myers Squibb, Inc., Cortice Biosciences, Inc., Celldex Therapeutics, Inc., CytRx Corporation, Inspyr Therapeutics, Inc., GlaxoSmithKlineplc., Northwest Biotherapeutics, Inc., Novartis AG, Roche Holding AG and others. Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing,conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Thesecompetitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patientregistration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Small or early-stage companies may alsoprove to be significant competitors, particularly through collaborative arrangements with large and established companies. The key competitive factors affecting the success of all of our product candidates, if approved, are likely to be their efficacy, safety, convenience, price, thelevel of generic competition and the availability of reimbursement from government and other third-party payors. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have feweror less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or otherregulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong marketposition before we are able to enter the market. Also, if our competitors receive marketing approval for a product for which it has an orphan designation, wemay not be able to receive marketing approval for one of our products for the same indication unless it demonstrates clinical superiority to such product. Ourability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic products. If our therapeuticproduct candidates are approved, we expect that they will be priced at a significant premium over any competitive generic products. The most common methods of treating patients with cancer are surgery, radiation and drug therapy, including chemotherapy, hormone therapy and targeteddrug therapy. These therapies are numerous and varied in their design, therapeutic application and mechanism of action. As a result, they may providesignificant competition for any of our product candidates for which we obtain market approval. In addition to currently marketed oncology therapies, thereare also a number of products in late stage clinical development to treat cancer. These products in development may provide efficacy, safety, convenienceand other benefits that are not provided by currently marketed therapies. As a result, they may provide significant competition for any of our productcandidates for which we obtain market approval. Competition for ELZONRIS There are a number of companies working to develop new treatments for AML and other hematologic cancers, including Agios, Inc., Ambit BiosciencesCorporation (now a Daiichi Sankyo company), Astex Pharmaceuticals (an Otsuka Pharmaceutical company), Boehringer Ingelheim, CelatorPharmaceuticals, Inc. (a Jazz Pharmaceuticals company), Celgene Corporation, Cellectis, Cyclacel Pharmaceuticals, Inc., Eisai Co. Ltd., Epizyme, Inc.,Genzyme Corporation (a Sanofi company), Immunogen, Inc., Janssen Pharmaceutical Companies of Johnson and Johnson, Kura Oncology, Inc., SeattleGenetics, Inc., and Sunesis Pharmaceuticals, Inc., TG Therapeutics, Inc., among others. 15Table of Contents Competition for SL-801 Karyopharm Therapeutics is the only company, to our knowledge, that currently has XPO1 inhibitors in clinical development. Karyopharm’s selinexor isbeing evaluated in a number of clinical trials in both solid and hematologic cancers, with the most advanced clinical programs in AML, multiple myelomaand diffuse large B-Cell lymphoma, or DLBCL. Karyopharm has also advanced a second generation compound, KPT-8602, into clinical trials inrelapsed/refractory multiple myeloma. Competition for SL-701 There are a limited number of drugs used for the treatment of brain cancer, including Temodar® (Merck & Co., Inc.), nitrosoureas including Gliadel®(Eisai Co., Inc.), and Avastin® (Roche Holding AG). There are a number of companies working to develop brain cancer therapeutics with programs in clinicaltesting including Agenus Inc., Bristol-Myers Squibb, Inc., Cortice Biosciences, Inc., Celldex Therapeutics, Inc., CytRx Corporation, Inspyr Therapeutics, Inc.,GlaxoSmithKline plc., Northwest Biotherapeutics, Inc., Novartis AG, Roche Holding AG and others. Government Regulation Government authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among other things, the research,development, approval, manufacture, testing, quality control, packaging, labeling, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of products such as those we are developing. Any pharmaceutical candidate that wedevelop must be approved by the FDA before it may be legally marketed in the United States or by the appropriate foreign regulatory agency before it may belegally marketed in foreign countries. United States Drug Development Process In the United States, the FDA regulates drugs under the Federal Food, Drug and Cosmetic Act, or FDCA, and implementing regulations. Drugs are also subjectto other federal, state and local statutes and regulations. Biologics are subject to regulation by the FDA under the FDCA, the Public Health Service Act, or thePHSA, and related regulations, and other federal, state and local statutes and regulations. Biological products include, among other things, viruses,therapeutic serums, vaccines and most protein products. The process of obtaining regulatory approvals and the subsequent compliance with appropriatefederal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with theapplicable United States requirements at any time during the product development process, approval process or after approval, may subject an applicant toadministrative or judicial sanctions. FDA sanctions could include a clinical hold, refusal to approve pending applications, warning or untitled letters, productrecalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution,disgorgement of profits, civil or criminal penalties, or withdrawal of an approval. Any administrative action or judicial enforcement action could have amaterial adverse effect on us. The process required by the FDA before a drug or biological product may be marketed in the United States generally involves the following: · Completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices or other applicableregulations; · Submission to the FDA of an IND which FDA must clear before human clinical trials may begin; · Performance of adequate and well-controlled human clinical trials according to the FDA’s current Good Clinical Practices, or cGCPs, and inaccordance with human subject protection regulations, to establish the safety and efficacy of the proposed drug or biologic for its intended use; · Submission to the FDA of a NDA for a new drug product, or a BLA for a new biological product; · Satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities where the drug or biologic is to beproduced to assess compliance with the FDA’s current good manufacturing practice regulations, or cGMPs, to assure that the facilities, methodsand controls are adequate to preserve the drug’s or biologic’s identity, strength, quality and purity; 16Table of Contents · Potential FDA inspection of the nonclinical and clinical trial sites that generated the data in support of the NDA or BLA; and · FDA review and approval of the NDA or BLA and successful resolution of any questions that arise in the review process. The lengthy process of seeking required approvals and the continuing need for compliance with applicable statutes and regulations post-approval require theexpenditure of substantial resources. There can be no certainty that approvals will be granted. Before testing any compounds with potential therapeutic value in humans, the drug or biological candidate enters the preclinical testing stage. Preclinicaltests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and activity of thedrug or biological candidate. The conduct of the preclinical tests must comply with federal regulations and requirements including good laboratorypractices. The sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data orliterature and a proposed clinical protocol, to the FDA as part of the IND. The IND automatically becomes effective 30 days after receipt by the FDA, unlessthe FDA places the clinical trial on a clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstandingconcerns before the clinical trial can begin. The FDA may also impose clinical holds on a drug or biological candidate at any time before or during clinicaltrials due to safety concerns or non-compliance. Accordingly, we cannot assure that submission of an IND will result in the FDA allowing clinical trials tobegin, or that, once begun, issues will not arise that suspend or terminate such trial. Clinical trials involve the administration of the drug or biological candidate to healthy volunteers or patients having the disease being studied under thesupervision of qualified investigators; often these are physicians not employed by or under the trial sponsor’s control. Clinical trials are conducted underprotocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters tobe used to monitor subject safety. Each protocol must be submitted to the FDA as part of the IND. Clinical trials must be conducted in accordance with theFDA’s current good clinical practices, or cGCPs, requirements, regulations for the protection of human subjects and with applicable cGMP requirements. Further, each clinical trial must be reviewed and approved by an institutional review board, or IRB, at or servicing each institution at which the clinical trialwill be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether the risks to individualsparticipating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves trial recruitment materials andthe informed consent form that must be used as part of the informed consent process with each clinical trial subject or his or her legal representative and mustmonitor the clinical trial until it is completed. Human clinical trials prior to approval are typically conducted in three sequential Phases that may overlap or be combined: · Phase 1. The drug or biologic is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and excretion. In the case of some products for severe or life-threatening diseases, especially when the product may betoo inherently toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients having the specificdisease. · Phase 2. The drug or biologic is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarilyevaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance, optimal dosage and dosing schedule forpatients having the specific disease. · Phase 3. Clinical trials are undertaken to further evaluate the selected dose, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical trial sites. These pivotal clinical trials, which usually involve more subjects than earlier trials, are intended toestablish the overall risk/benefit ratio of the product and provide adequate data which serve as the basis to inform product labeling. Generally,at least two adequate and well-controlled Phase 3 clinical trials are required by the FDA for approval of an NDA or BLA. Post-approval studies, or Phase 4 clinical trials, may be conducted after initial marketing approval. These studies are used to gain additional experience fromthe treatment of patients in the intended therapeutic indication and may be required by the FDA as part of the approval process. 17Table of Contents Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and written IND safety reports must be submitted tothe FDA by the investigators for serious and unexpected adverse events or any finding from tests in laboratory animals that suggests a significant risk forhuman subjects. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA or the sponsoror its data safety monitoring board may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients arebeing exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is notbeing conducted in accordance with the IRB’s requirements or if the drug or biologic has been associated with unexpected serious harm to patients. Concurrent with clinical trials, companies usually complete additional animal studies and develop additional information about the chemistry and physicalcharacteristics of the drug or biologic as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMPrequirements. The manufacturing process must be capable of consistently producing quality batches of the drug or biological candidate. In addition,companies must develop and validate analytical methods for testing the identity, strength, quality and purity of raw materials, in-process material and thefinal drug or biologic. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drugor biological candidate does not undergo unacceptable deterioration over its shelf life. U.S. Review and Approval Processes The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted onthe drug or biologic, proposed packaging and labeling and other relevant information are submitted to the FDA as part of an NDA or BLA requestingapproval to market the product. The submission of an NDA or BLA is subject to the payment of substantial user fees; a waiver of such fees may be obtainedunder certain limited circumstances. We believe that we will be required to submit BLAs or NDAs for our product candidates. In addition, under the Pediatric Research Equity Act, or PREA, an NDA or a BLA, or supplement to an NDA or a BLA, that covers a new active ingredient,new indication, new dosage form, new dosing regimen, or new route of administration must contain data to assess the safety and effectiveness of the drug orbiologic for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation forwhich the product is safe and effective. The FDA may grant deferrals for submission of pediatric data or full or partial waivers. PREA does not apply to anydrug or biologic for an indication for which orphan designation has been granted unless FDA were to issue a regulation to require pediatric assessments. The FDA reviews all NDAs and BLAs submitted before it accepts them for filing and may request additional information rather than accepting an NDA orBLA for filing. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA or BLA. Under the goals and policies agreed to bythe FDA under the Prescription Drug User Fee Act, or PDUFA, the FDA has established a performance goal of ten months in which to complete its initialreview of a standard NDA or BLA and respond to the applicant, and a performance goal of six months for a priority NDA or BLA. The FDA does not alwaysmeet its PDUFA goal dates for standard and priority NDAs and BLAs. After the NDA or BLA submission is accepted for filing, the FDA reviews the NDA to determine, among other things, whether the proposed product is safeand effective for its intended use, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’s identity,strength, quality and purity. The FDA reviews a BLA to determine, among other things, whether the product is safe, pure and potent and the facility in whichit is manufactured, processed, packaged or held meets standards designed to assure the product’s continued safety, purity and potency. In addition to its ownreview, the FDA may refer applications for novel drug or biological products or drug or biological products which present difficult questions of safety orefficacy to an advisory committee, typically a panel that includes clinicians and other experts in the disease area, for review, evaluation and arecommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisorycommittee, but it considers such recommendations carefully when making decisions. On September 27, 2007, the Food and Drug AdministrationAmendments Act of 2007 was enacted, giving the FDA enhanced post-market authority, including the authority to require post-marketing studies and post-marketing clinical trials related to serious risks, labeling changes based on new safety information, and compliance with risk evaluation and mitigationstrategies, or REMS, approved by the FDA. The FDA’s exercise of this authority can result in delays or increased costs during the period of productdevelopment, clinical trials and regulatory review and approval, which may also increase costs related to complying with new post-approval regulatoryrequirements, and increase potential FDA restrictions on the sale or distribution of approved products. During the approval process, the FDA will determinewhether a REMS is necessary to assure the safe use of the drug or biologic post-approval. If the FDA concludes that a REMS is needed, the sponsor of theNDA or BLA must submit a proposed REMS; the FDA will not approve the NDA or BLA without a REMS, if required. 18Table of Contents Before approving an NDA or BLA, the FDA will inspect the facilities at which the product is to be manufactured. The FDA will not approve the productunless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent productionof the product within required specifications. In this inspection, the FDA also seeks to determine whether the manufacturing conforms with applicationcommitments, the authenticity and accuracy of data, and the adequacy of the company’s analytical methodology. Additionally, before approving an NDA orBLA, the FDA will typically inspect one or more clinical sites to assure compliance with current good clinical practices, or cGCPs. If the FDA determines theapplication, data, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often willrequest additional testing or information. The NDA or BLA review and approval process is lengthy and difficult and the FDA may refuse to approve an NDA or BLA if the applicable regulatory criteriaare not satisfied or the agency requires additional clinical data or other data and information. Even if such data and information is submitted, the FDA mayultimately decide that the NDA or BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and may besusceptible to varying interpretations, which could delay, limit or prevent regulatory approval. In addition, protocol deviations or data discrepancies coulddelay, limit or prevent regulatory approval. The FDA will issue a “complete response” letter if the agency decides not to approve the NDA or BLA. Thecomplete response letter usually describes all of the specific deficiencies in the NDA or BLA identified by the FDA. The deficiencies identified may be minor,for example, requiring labeling changes, or major, for example, requiring additional clinical trials. Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition forapproval. If a complete response letter is issued, the applicant may either resubmit the NDA or BLA, addressing all of the deficiencies identified in the letter,or withdraw the application. If a product receives regulatory approval, the approval may be limited to specific diseases and dosages or the indications for use may otherwise be limited,which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included inthe product labeling. In addition, the FDA may require Phase 4 testing which involves clinical trials designed to further assess a product’s safety andeffectiveness and may require testing and surveillance programs to monitor the safety of approved products that have been commercialized. Orphan Drug Designation Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biological product intended to treat a rare disease or condition, which isgenerally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States andfor which there is no reasonable expectation that the cost of developing and making a drug or biological product available in the United States for this typeof disease or condition will be recovered from sales of the product. Orphan product designation must be requested before submitting an NDA or BLA. Afterthe FDA grants orphan product designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphanproduct designation does not convey any advantage in or shorten the duration of the regulatory review and approval process. If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, theproduct is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug or biologicalproduct for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphanexclusivity. Competitors, however, may receive approval of different products for the indication for which the orphan product has exclusivity or obtainapproval for the same product but for a different indication for which the orphan product has exclusivity. Orphan product exclusivity also could block theapproval of one of our products for seven years if a competitor obtains approval of the same drug or biological product for the same indication as defined bythe FDA or if our drug or biological candidate is determined to be contained within the competitor’s product for the same indication or disease. If a drug orbiological product designated as an orphan product receives marketing approval for an indication broader than what is designated, it may not be entitled toorphan product exclusivity. Orphan drug status in the European Union has similar but not identical benefits in the European Union. The FDA granted ODD to ELZONRIS for the treatment of AML, in February 2011 and for BPDCN in June 2013. The European Medicines Agency, or EMA,granted ODD to ELZONRIS for the treatment of AML in October 2015 and for BPDCN in November 2015. In addition, we received ODD for SL-701 for thetreatment of glioma in January 2015. ELZONRIS was granted BTD by the FDA, for the treatment of patients with BPDCN in August 2016. On December 21,2018, the FDA granted approval of ELZONRIS for the treatment of BPDCN in adult and pediatric patients two years and older, in both treatment-naïve andpreviously-treated populations. 19Table of Contents Expedited Development and Review Programs The FDA has established a BTD program wherein a drug may receive this designation if it is intended to treat a serious condition where preliminary clinicalevidence indicates that the drug may demonstrate substantial improvement on a clinically significant endpoint(s) over available therapies. Drugs receivingFDA designation as breakthrough therapies typically receive intensive guidance from FDA’s review teams for efficient drug development, organizationalcommitment from FDA, and rolling review of applications submitted for approval, among other things. The FDA also has a Fast Track program that is intended to expedite or facilitate the process for reviewing new drug and biological products that meet certaincriteria. Specifically, new drug and biological products are eligible for Fast Track designation if they are intended to treat a serious or life-threateningcondition and demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to the drug product alone or incombination with one or more other drugs for the specific indication for which it is being studied. Unique to a Fast Track product, the FDA may considerreviewing sections of the NDA or BLA on a rolling basis before the complete application is submitted. In addition, the sponsor and FDA would agree on aschedule for the submission of the sections of the NDA or BLA. If the FDA agrees to a rolling review of a NDA or BLA, and determines that the schedule isacceptable, the sponsor pays any required user fees upon submission of the first section of the NDA or BLA. Any product submitted to the FDA for marketing approval, including those submitted to a Fast Track program, may also be eligible for other types of FDAprograms intended to expedite development and review, such as priority review and accelerated approval. Any product is eligible for priority review if it hasthe potential to provide safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in the treatment, diagnosis orprevention of a disease compared with marketed products. The FDA will attempt to direct additional resources to the evaluation of an application for a newdrug or biological product designated for priority review in an effort to facilitate the review with the goal of taking Agency action on a marketing applicationwithin six (6) months. Additionally, a product may be eligible for accelerated approval. Drug or biological products studied for their safety and effectiveness in treating serious orlife-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval, which means that theymay be approved on the basis of adequate and well-controlled clinical studies establishing that the product has an effect on a surrogate endpoint that isreasonably likely to predict a clinical benefit, or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity. As a conditionof approval, the FDA generally requires that a sponsor of a drug or biological product receiving accelerated approval perform adequate and well-controlledpost-marketing clinical studies to establish safety and efficacy for the approved indication. Failure to conduct such studies, or conducting such studies thatdo not establish the required safety and efficacy may result in revocation of the original approval. In addition, the FDA currently requires as a condition foraccelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch or subsequent marketing ofthe product. Fast Track designation, priority review and accelerated approval may expedite the development or approval process. Lastly, a product may be eligible for BTD and expedited development and review by FDA. A Breakthrough Therapy is defined as a drug that is intended,alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicatesthat the drug may demonstrate a substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantialtreatment effects observed early in clinical development. The benefits of BTD include more intensive FDA guidance on an efficient drug developmentprogram, an organizational commitment involving senior FDA managers, and eligibility for rolling review and priority review of marketing applications. Thereceipt of a BTD for a product candidate may not result in a faster development process, review or approval compared to drugs considered for approval underconventional FDA procedures and a BTD may be rescinded by FDA where subsequent data no longer support the BTD of the candidate. In August 2016, weannounced that the FDA granted BTD to ELZONRIS for the treatment of BPDCN. On December 21, 2018, the FDA granted approval of ELZONRIS for thetreatment of BPDCN in adult and pediatric patients two years and older, in both treatment-naïve and previously-treated populations. Post-Approval Requirements Any drug or biological products for which we receive FDA approvals are subject to continuing regulation by the FDA, including, among other things, cGMPcompliance, record-keeping requirements, reporting of nonconforming distributed products which would require field alert reports (FARs) for NDAs andbiological product deviation reports (BPDRs) for BLAs, reporting of adverse events, providing the FDA with updated safety and efficacy information on anannual basis or as required more frequently for specific events, product sampling and distribution requirements, complying with certain electronic recordsand signature requirements and complying with FDA promotion and advertising requirements, which include, among others, standards for direct-to-consumeradvertising, prohibitions against promoting drugs and biologics for uses or in patient populations that are not described in the drug’s or biologic’s approvedlabeling (known as “off-label promotion”), rules for conducting industry-sponsored scientific and educational activities, 20Table of Contents limitations on comparative or superiority claims and promotional activities involving data presentations. Failure to comply with FDA requirements can havenegative consequences, including for cause inspections; warning or untitled letters from the FDA, including demands for correction or removal ofnoncomplying product; adverse publicity; mandated corrective advertising or communications with doctors; and civil or criminal penalties. Althoughphysicians may prescribe legally available drugs and biologics for off-label uses, manufacturers may not market or promote such off-label uses. We rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of our product candidates. Manufacturers ofour product candidates are required to comply with applicable FDA manufacturing requirements contained in the FDA’s cGMP regulations. cGMPregulations require among other things, quality control and quality assurance as well as the corresponding maintenance of comprehensive records anddocumentation. We are required by law to establish adequate oversight and control over raw materials, components and finished products furnished by ourthird-party manufacturers, which we establish by contract, supplier qualification and periodic audits, but unforeseen circumstances could affect our third-party manufacturers’ compliance with applicable regulations and standards. Drug and biologic manufacturers and other entities involved in the manufactureand distribution of approved drugs and biologics are also required to register their establishments and list any products made there with the FDA and complywith related requirements in certain states, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance withcGMP and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintaincGMP compliance. Discovery of problems with a product after approval may result in serious and extensive restrictions on a product, manufacturer, or holderof an approved NDA or BLA, including suspension of a product until the FDA is assured that quality standards can be met, continuing oversight ofmanufacturing by the FDA under a “consent decree,” which frequently includes the imposition of penalties for failure to comply with the terms of the consentdecree, audits conducted by outside experts, extensive reporting requirements, and possible withdrawal of the product from the market. Historically, theminimum term of an FDA consent decree has been five years, and violation of consent decree terms can result in the extension of the consent decree term. Major changes to the manufacturing process and other types of major changes, such as adding new indications, require prior FDA approval before beingimplemented. Moderate and minor changes require FDA notification but not prior approval. The FDA also may require post-marketing testing, known as Phase 4 testing, risk minimization action plans and surveillance to monitor the effects of anapproved product or place conditions on an approval that could otherwise restrict the distribution or use of the product. On July 9, 2012, the Food and Drug Administration Safety and Innovation Act, among other things, renewed the drug user fee program, expanded the FDA’sinspection records access and required manufacturers to establish appropriate oversight and controls over their suppliers and the supply chain, including rawmaterial suppliers and contract manufacturers, as a part of cGMP compliance. On November 27, 2013, the Drug Quality and Security Act, which included theDrug Supply Chain Security Act, was enacted to, among other things, build an electronic, interoperable system to identify and trace certain prescription drugsas they are distributed in the United States. Requirements for the tracing of products through the pharmaceutical distribution supply chain took effect onJanuary 1, 2015 for manufacturers and building internal systems to ensure compliance with this law will require dedication of resources. In addition, this lawrequires engaging in transactions only with authorized trading partners and can limit the pool of available trading partners. On August 18, 2017, the FDAReauthorization Act of 2017, among other things, reauthorized and amended the user fee program eliminating the establishment fee and replacing thePrescription Drug Product Fee with a Prescription Drug Program Fee. U.S. Patent Term Restoration and Marketing Exclusivity Drug Price Competition and Patent Term Restoration Act of 1984 Depending upon the timing, duration and specifics of the FDA approval of the use of our drug and biologics candidates, some of our United States patentsmay be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as theHatch-Waxman Amendments. Although drafted to cover small-molecule drugs, as opposed to biologics, the Hatch-Waxman Amendments permit a patentrestoration term of up to five years as compensation for patent term lost during federal regulatory review preceding the FDA regulatory review process. TheFDA has been granting patent term extensions to biologics. However, patent term restoration cannot extend the remaining term of a patent beyond a total of14 years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and thesubmission date of an NDA or a BLA plus the time between the submission date of an NDA or a BLA and the approval of that application. Only one patentapplicable to an approved drug or biologic is eligible for the extension and the application for the extension must be submitted within 60 days of approvaland prior to the expiration of the patent. Further, to be eligible for patent term extension a drug must be the first permitted commercial marketing for whichthere was a regulatory review period. The United States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application forany patent term extension or 21Table of Contents restoration. In the future, we may apply for restoration of patent term for one of our currently owned or licensed patents to add patent life beyond its currentexpiration date, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant NDA. Federal Food, Drug and Cosmetic Act Market exclusivity provisions under the FDCA, which are independent of patent status and any patent-related extensions and can run concurrently with apatent or not, can also delay the submission or effective approval of certain applications of companies seeking to reference another company’s NDA. Thelength of time that the FDA grants depends on the type of exclusivity. If the new drug that is the subject of an approved NDA contains a new chemical entity, the FDCA provides a five-year period of non-patent marketingexclusivity within the United States that runs from the date of NDA approval. FDA regulations define “new chemical entity” as “a drug that contains noactive moiety that has been approved by FDA in any other NDA submitted under section 505(b) of the Federal Food, Drug, and Cosmetic Act.” 21 C.F.R.§ 314.108. During the five-year exclusivity period, no company may submit an ANDA or a 505(b)(2) NDA for a drug product that contains the same activemoiety as in the new chemical entity with one exception, however, such application may be submitted after four years if it contains a certification of patentinvalidity or noninfringement to one of the patents listed in FDA’s Orange Book by the innovator NDA holder. The FDCA also provides three years of marketing exclusivity for an NDA, or supplement to an existing NDA, that contained new clinical investigations(other than bioavailability studies) that were conducted or sponsored by the applicant and are deemed by FDA to be essential to the approval of the NDA orsupplement. Such new clinical investigations may support approval of, for example, new indications, dosages or strengths of an existing drug. This three-year exclusivity period runs from the date of approval of the NDA or supplement containing the new clinical investigations and covers only the conditionsassociated with the new clinical investigations. That is, it bars the FDA from approving an ANDA or 505(b)(2) NDA for those conditions of approval. UnlikeNCE exclusivity, exclusivity for new clinical investigations does not prohibit the submission of an ANDA or 505(b)(2) NDA by another company during thatthree-year period. Pediatric exclusivity is another type of regulatory market exclusivity in the United States. Pediatric exclusivity, if granted by the FDA, adds six months toexisting exclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may begranted based on the completion of a pediatric trial in accordance with an FDA-issued “Written Request” for such a trial. Biologic products that are subject tothe PHSA are not eligible for pediatric exclusivity under the FDCA. Biologics Price Competition and Innovation Act of 2009 The Biologics Price Competition and Innovation Act of 2009, or BPCIA, amended the PHSA to create a new licensure framework for biosimilar products,which could ultimately subject our biological product candidates to competition. Under the BPCIA, a manufacturer may submit an application for licensureof a biological product that is “biosimilar to” or “interchangeable with” a referenced, branded biologic product. Previously, there had been no licensurepathway for such biosimilar or interchangeable products. For purposes of the BPCIA, a reference product is defined as the single biological product licensedunder a full BLA against which a biological product is evaluated in an application submitted under a follow-on BLA. The BPCIA also created a 12-year period of reference product exclusivity, which can be extended to 12.5 years with pediatric exclusivity. The 12-yearexclusivity period begins on the date of first licensure of the reference product under the PHSA and during which the licensure of a follow-on application fora biosimilar or interchangeable product cannot be made effective. During the first four years (or four and one-half years with pediatric exclusivity) of the 12-year period, an application for a biosimilar or interchangeable version of the reference product cannot be submitted to the FDA. Members have recentlybegun introducing bills that would decrease the reference product exclusivity reference product exclusivity from 12 to seven years. Congress has not yetenacted such a change in the BPCIA, but could move to enact such a decrease in the reference product exclusivity period. 22Table of Contents The BPCIA includes limits on obtaining 12-year reference product exclusivity for certain changes or modifications to the reference product. A separate 12-year reference product exclusivity period does not apply to: · a BLA supplement for the product that is the reference product; · a subsequent BLA filed by the same reference product sponsor or manufacturer (or a licensor, predecessor in interest, or other related entity) for achange (not including a modification to the structure of the biological product) that results in a new indication, route of administration, dosingschedule, dosage form, delivery system, delivery device or strength; or · a modification to the structure of the biological product that does not result in a change in safety, purity or potency. In addition to creating a 12-year period of reference product exclusivity, the BPCIA clarifies the interaction of that exclusivity with orphan drug exclusivity,such that, if a reference product has been designated for a rare disease or condition the licensure of a biosimilar or interchangeable version of a referenceproduct for such disease or condition may only occur after the later of the expiration of any applicable seven-year orphan drug exclusivity or the 12-yearreference product exclusivity (or seven and one-half years and 12.5 years with pediatric exclusivity). Like pediatric exclusivity applicable to drug products approved under the FDCA, pediatric exclusivity applicable to biological reference products is subjectto an exception. Pediatric exclusivity will not apply to either the 12-year reference product or the seven-year orphan drug exclusivity periods if the FDA hasnot determined that the study reports a BLA sponsor submitted in response to a written request for pediatric studies met the terms of that request before ninemonths prior to the expiration of such period. Our biological product candidates, if approved, could be considered reference products entitled to 12-year exclusivity. Even if our products are considered tobe reference products eligible for exclusivity, another company could market a competing version of any of our biological products if the FDA approves afull BLA for such product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety,purity and potency of their product. The BPCIA also sets forth a complex mechanism for resolving patent disputes that involves a step-wise exchange of information prior to the initiation of apatent infringement lawsuit against a biosimilar or interchangeable product sponsor. Unlike the Hatch-Waxman Act, the BPCIA provides no automatic stayon approval of a biosimilar product application, except an interchangeable product receives the lesser of one year of exclusivity after the date of firstcommercial marketing or 18 months of exclusivity after a final court decision or dismissal of a patent challenge or, if the applicant has not been sued, afterapproval. The BPCIA does not prevent a competitor from conducting its own clinical trials and submitting a full BLA on the same or similar product. There is also currently substantial uncertainty as to how certain terms of the BPCIA will be interpreted by the Courts, which may affect the timing of the entryof a biosimilar or interchangeable product to market, and the required notice that the owner of the reference product exclusivity must be given by the ownerof the application of a biosimilar or interchangeable product. Should the courts resolve the interpretation issues in favor of the biosimilar or interchangeableproduct applicants, the BPCIA may offer more limited exclusivity to the reference product than currently believed. Other U.S. Healthcare Laws and Compliance Requirements In the United States, our activities are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including theCenters for Medicare and Medicaid Services, or CMS (formerly the Health Care Financing Administration), other divisions of the United States Department ofHealth and Human Services (e.g., the Office of Inspector General and the Office of Civil Rights), the United States Department of Justice and individualUnited States Attorney offices within the Department of Justice, state attorney generals and state and local governments. For example, sales, marketing andscientific/educational grant programs must comply with the federal Anti-Kickback Statute, the federal False Claims Act, the privacy and security provisionsof the Health Insurance Portability and Accountability Act, or HIPAA, as amended by the Health Information Technology for Economic and Clinical HealthAct (“HITECH”), and similar state laws, each as amended. Pricing and rebate programs must comply with the Medicaid rebate requirements of the OmnibusBudget Reconciliation Act of 1990, the Veterans Health Care Act of 1992, and the federal Anti-Kickback Statute, each as amended. If products are madeavailable to authorized users of the Federal Supply Schedule (FSS) of the General Services Administration, additional laws and requirements apply. Under theVeterans Health Care Act, or VHCA, drug companies are required to offer certain pharmaceutical products at a reduced price to four federal agenciesincluding the United States Department of Veterans Affairs, the United States Department of Defense, the Coast Guard, the Public Health Service and certainprivate Public Health Service designated entities (including the Indian Health Service) in order for reimbursement to be available for our product underMedicare and Medicaid. FSS pricing to these four agencies must be equal to or less than the federal ceiling price (“FCP”), which is, at a minimum, 24% offthe Non-Federal Average Manufacturer Price for the prior fiscal year. 23Table of Contents Participation under the VHCA requires submission of pricing data and calculation of discounts and rebates pursuant to complex statutory formulas, as well asthe entry into government procurement contracts governed by the Federal Acquisition Regulations. In order to distribute products commercially, we must comply with state laws that require the registration of manufacturers and wholesale distributors ofpharmaceutical products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers ordistributors have no place of business within the state. Some states also impose requirements on manufacturers and distributors to establish the pedigree ofproduct in the chain of distribution, including some states that require manufacturers and others to adopt new technology capable of tracking and tracingproduct as it moves through the distribution chain. Several states have enacted legislation requiring pharmaceutical companies to establish marketingcompliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities,and/or register their sales representatives, as well as to prohibit pharmacies and other healthcare entities from providing certain physician prescribing data topharmaceutical companies for use in sales and marketing, and to prohibit certain other sales and marketing practices. All of our activities are potentiallysubject to federal and state consumer protection and unfair competition laws. In addition, in August 2013, the federal Physician Payment Sunshine Act tookeffect and requires annual reporting by prescription drug manufacturers with at least one (1) approved product of certain payments and transfers of valuemade to physicians and teaching hospitals. Post-approval of any of our product candidates, we will need to ensure compliance with annual tracking andreporting of these payments and transfers of value to CMS. Europe and Worldwide Government Regulation In addition to regulations in the United States, we will be subject to a variety of regulations in other jurisdictions governing, among other things, clinicaltrials and any commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to thecommencement of clinical trials or marketing of the product in those countries. Certain countries outside of the United States have a similar process thatrequires the submission of a clinical trial application much like the IND prior to the commencement of human clinical trials. In the European Union, forexample, a clinical trial application, or CTA, must be submitted to each country’s national health authority and an independent ethics committee, much likethe FDA and IRB, respectively. Once the CTA is approved in accordance with a country’s requirements, clinical trials may proceed. The requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In allcases, the clinical trials are required to be in accordance with International Conference on Harmonisation (ICH) / WHO Good Clinical Practice standards andthe applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki. To obtain regulatory approval of an investigational drug or biological product under European Union regulatory systems, we must submit a marketingauthorization application to the EMA. The application used to file an NDA or a BLA in the United States is similar to that required in the European Union,with the exception of, among other things, country-specific document requirements. For example, the EMA has already established a number of guidelinesfor approval of various biosimilars. For other countries outside of the European Union, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct ofclinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, again, the clinical trials are conducted in accordancewith cGCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki. If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatoryapprovals, product recalls, seizure of products, operating restrictions and criminal prosecution. Pharmaceutical Coverage, Pricing and Reimbursement Significant uncertainty exists as to the coverage and reimbursement status of any drug or biological candidates for which we obtain regulatory approval. Inthe United States and markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend in part onthe availability of reimbursement from third-party payors. Third-party payors include government health administrative authorities, managed care providers,private health insurers and other organizations. The process for determining whether a payor will provide coverage for a drug or biological product may beseparate from the process for setting the price or reimbursement rate that the payor will pay for the drug or biological product. Third-party payors may limitcoverage to specific drug or biological products on an approved list, or formulary, which might not include all of the FDA-approved drug or biologicalproducts for a particular indication. Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness ofmedical products and services, in addition to their safety and efficacy. We may need to 24Table of Contents conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costsrequired to obtain the FDA approvals. Our drug or biological candidates may not be considered medically necessary or cost-effective. A payor’s decision toprovide coverage for a drug or biological product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursementmay not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. In 2003, the United States government enacted legislation providing a partial prescription drug benefit for Medicare recipients, which became effective at thebeginning of 2006. Government payment for some of the costs of prescription drugs and biologics may increase demand for any products for which wereceive marketing approval. However, to obtain payments under this program, we would be required to sell products to Medicare recipients throughprescription drug plans operating pursuant to this legislation. These plans will likely negotiate discounted prices for our products. Federal, state and localgovernments in the United States continue to consider legislation to limit the growth of healthcare costs, including the cost of prescription drugs andbiologics. Future legislation could limit payments for pharmaceuticals such as the drug or biological candidates that we are developing. Different pricing and reimbursement schemes exist in other countries. In the European Community, governments influence the price of pharmaceuticalproducts through their pricing and reimbursement rules and control of national healthcare systems that fund a large part of the cost of those products toconsumers. Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has beenagreed. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost-effectivenessof a particular drug or biological candidate to currently available therapies. Other member states allow companies to fix their own prices for medicines, butmonitor and control company profits. The downward pressure on healthcare costs in general, particularly prescription drugs and biologics, has become veryintense. As a result, increasingly high barriers are being erected to the entry of new products. 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 drug or biological candidates for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. In addition, emphasis on managed care in the United States has increased and we expectwill continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may change at any time. Even iffavorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policiesand reimbursement rates may be implemented in the future. Manufacturing We do not currently own or operate any manufacturing facilities for the clinical or commercial production of our drug candidates. For past investigatorsponsored studies, all drug substance and drug product for ELZONRIS and SL-701 was manufactured at academic and contract manufacturing organizations,or CMO, facilities, as directed by our academic collaborators. We have now developed manufacturing processes that are suitable for full-scale cGMPmanufacturing. Additionally, we have qualified FDA-audited third-party CMOs to produce sufficient quantities of ELZONRIS, SL-801, and SL-701 drugsubstance and drug product of suitable quality for our active and contemplated corporate sponsored clinical trials and commercialization. For ELZONRIS,commercial supplies have been manufactured in support of approval and routine resupply manufacturing is ongoing. Our manufacturing programs are beingmanaged with oversight by our manufacturing team, which is comprised of full-time employees and consultants with experience in manufacturingpharmaceutical drug substance and drug products. ELZONRIS Manufacturing and Supply ELZONRIS is a recombinant protein generated from an antibiotic-resistance driven DNA-based plasmid vector and manufactured by bacterial fermentation inE. coli. For past investigator sponsored studies, ELZONRIS was manufactured at Wake Forest University. We have optimized the protein expression,generated cGMP master and working cell banks, and developed the fermentation and purification steps of our manufacturing process to be suitable for scale-up in standard manufacturing equipment. This technology has been transferred to a third-party CMO with expertise in bacterial fermentation, which hasfurther optimized and scaled-up the process in their cGMP production suite. The ELZONRIS drug substance has now met standard industry qualityspecifications and is adequate to support commercial distribution as well as our ongoing and planned corporate sponsored clinical trials. The drug productformulation and manufacturing process has been transferred to a third-party CMO with expertise in sterile product manufacture for clinical and commercialsupply, and they have successfully produced drug product meeting cGMP requirements for use in clinical studies. We expect the same process, scale andCMOs will be used to manufacture drug substance and drug product for commercial supply. We have a lyophilized formulation of ELZONRIS, which iscurrently being developed. 25Table of Contents SL-801 Manufacturing and Supply SL-801 is a small molecule that is prepared via synthetic organic chemistry. We have completed process development and cGMP manufacturing at anadequate scale to supply our ongoing and planned corporate sponsored clinical studies. We have also developed a stable solid-oral tablet formulation thathas been produced using cGMP manufacturing equipment at our third-party CMO. We believe that the manufacturing scale and product quality proceduresand oversight ensure an adequate supply for our active and planned corporate sponsored clinical studies. SL-701 Manufacturing and Supply SL-701 is an immunotherapy that is comprised of several short synthetic peptides. Each of the component peptides of SL-701 is manufactured individuallyby solid-phase synthesis and all have been prepared to acceptable quality specifications in cGMP manufacturing equipment by our third-party CMO. Themanufacturing scale and product quality procedures and oversight ensure an adequate supply for our active and planned corporate sponsored clinical studies.We have also developed a stable formulation that combines the individual peptides in a single sterile solution to generate SL-701 drug product. Thismanufacturing process was transferred to a third-party CMO with expertise in sterile product manufacture. This CMO has produced multiple cGMP drugproduct batches of sufficient quality and quantity to supply our corporate sponsored clinical trials. SL-701 has been utilized with several different adjuvantsincluding Montanide, GM-CSF, Imiquimod, and poly-ICLC. We have been, and may continue to be, reliant on the availability of these adjuvants from theirrespective manufacturers. SL-901 SL-901 is a small molecule that is prepared via synthetic organic chemistry. We are engaged in process development to support cGMP manufacturing at anadequate scale to enable an IND, or foreign equivalent, submission and supply our planned clinical studies. We have also developed a stable capsuleformulation that will be produced using cGMP manufacturing equipment at our third-party CMO. We believe that the manufacturing scale and productquality procedures and oversight ensure an adequate supply for our planned clinical studies. Sales and Marketing We believe the infrastructure required to commercialize oncology products is cost-effective for us to internally develop, train, and deploy a marketing andsales force to support the U.S. launch of ELZONRIS. If ELZONRIS is approved by the EMA, we plan to potentially build the infrastructure to commercializethese products in Europe ourselves. However, we will remain opportunistic in seeking strategic partnerships in these and other markets when advantageous. The commercial infrastructure of specialty oncology products typically consists of a targeted, specialty sales force that calls on a limited and focused groupof physicians supported by sales management, internal sales support, an internal marketing group, and distribution support. Additional capabilities importantto the oncology marketplace include the management of key accounts, such as managed care organizations, group-purchasing organizations, specialtypharmacies, oncology group networks, and government accounts. As ELZONRIS is approved in, and our other compounds may initially be developed for,orphan indications with a relatively small number of treating physicians, we anticipate that a reduced infrastructure, including a small, targeted sales force, issufficient to support our sales and marketing objectives. We have allocated management resources and made significant financial investments to support thecommercial launch of ELZONRIS, including preparation of marketing and sales training materials in compliance with legal and regulatory requirements. We may elect in the future to utilize strategic partners, distributors, or contract sales forces to assist in the commercialization of our products. Research and Development Company sponsored research and development expenses totaled $47.7 million in 2018, $50.2 million in 2017 and $27.9 million in 2016. “Research anddevelopment expenses” consist of costs associated with the development of our product candidates and our platform technology, which include: clinical trialcosts, CMC-related costs, nonclinical costs, employee related expenses, external research and development expenses, license fees and milestone paymentsrelated to in-licensed products and technology, and facilities, depreciation and other allocated expenses. See “Item 7. Management’s Discussion andAnalysis of Financial Condition and Results of Operations—Overview.” Employees As of March 15, 2019, we had 92 full-time employees, 7 of whom hold Ph.D. or M.D. degrees. None of our employees is subject to a collective bargainingagreement or represented by a trade or labor union. We believe that we have a good relationship with our employees. 26Table of Contents Item 1A. Risk Factors You should carefully consider the following risks and uncertainties. If any of the following occurs, our business, financial condition and/or operating resultscould be materially harmed. These factors could cause the trading price of our common stock to decline, and you could lose all or a substantial part of yourinvestment. Risks Related to Development, Clinical Testing, Regulatory Approval, and Commercialization of Our Product Candidates We are heavily dependent on the success of our products and clinical product candidates and we cannot provide any assurance that any of our productcandidates will be approved, commercialized, or successfully marketed in the future. To date, we have invested a significant portion of our efforts and financial resources in the acquisition and development of our clinical drug candidates,which we plan to advance through clinical development. Our future success depends heavily on our ability to successfully manufacture, develop, obtainregulatory approval for, and commercialize these products and product candidates, which may never occur. We currently generate no income from ourclinical product candidates, and we may never be able to develop or commercialize a marketable drug from those clinical product candidates. Before we generate any income from sales of our products or product candidates in the United States or elsewhere, we must complete preclinical and clinicaldevelopment, conduct human subject research, submit clinical and manufacturing data to the U.S. Food and Drug Administration, or FDA (or foreignequivalent), qualify a third-party contract manufacturing organization, or CMO, satisfy the FDA that our CMO is capable of manufacturing the product incompliance with the FDA’s current good manufacturing practices, or CGMPs, submit a marketing application (e.g., Biologics License Application, or BLA(or foreign equivalent), or New Drug Application, or NDA (or foreign equivalent)), receive regulatory approval from the FDA or a foreign regulatory agency,build a commercial organization, make substantial investments, and undertake significant marketing efforts ourselves or in partnership with others to ensurecompliant marketing and market acceptance of any products we commercialize. We are not permitted to market or promote any of our product candidatesbefore we receive regulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receive such regulatory approval forsome of our product candidates. We cannot be certain that any further BLAs, NDAs or MAAs will be filed within a specified period of time, or that any BLA or NDA or similar foreignmarketing application will allow us to obtain or maintain marketing approval. In addition, any marketing approval we may obtain may be for uses morelimited than we expect or include contraindications or risk measures that limit market acceptance of the product subject to the marketing approval. We alsocannot be certain that our products or product candidates will be successful in clinical trials or that the clinical trials or data will support filing any furtherBLAs or NDAs in the U.S., or similar foreign marketing applications elsewhere. We also cannot be certain that any of our product candidates will receiveregulatory approval for trial initiation. Further, the FDA, an independent review committee, or IRC, or an oncologic drugs advisory committee, or ODAC, maynot agree with the interpretation by our investigators or us of the clinical safety and efficacy of our product candidates and our product candidates may notreceive regulatory approval. If we do not receive regulatory approvals for our product candidates, we may not be able to continue our operations. Even if we successfully obtainregulatory approvals to market our product candidates, our income will be dependent, in part, upon the prescribing information, adoption within clinicalpractice guidelines, and the size of the markets in the territories for which we gain regulatory approval and have commercial rights. In addition, our incomewill be dependent, in part, upon the market acceptance of our products once approved, as well as upon reimbursement and coverage, among other things. Ifthe markets for patient subsets that we plan to target are not as significant as we estimate, we may not generate significant income from sales of such products,if approved. We do not have the resources to conduct and directly oversee our product development programs without assistance from third parties. In the execution ofour product development programs, we may have to rely on collaborations with clinical partners as well as clinical research organizations, or CROs, CMOs,vendors and other service providers. Failure of these entities to satisfactorily conduct clinical research or to provide the services requested by us maynegatively impact our product development programs, including but not limited to program delays or preventing approval of our product candidates. Weplan to seek regulatory approval to commercialize our product candidates in the United States, and potentially in the European Union and additional foreigncountries. While the scope of regulatory review and approval can be similar in other countries, to obtain separate regulatory review and approval in manyother 27Table of Contents countries, we must comply with the numerous and varying regulatory requirements of such countries, including those regarding safety and efficacy, clinicaltrials, manufacturing, post-marketing commitments, and commercial sales, pricing and distribution of our product candidates, and we cannot predict successin these jurisdictions. If the incidence and/or prevalence of diseases, or disease areas, we are targeting for development and/or commercialization, and further growth, are low,including lower than our estimates or estimates of third-parties, this could significantly delay patient enrollment in our ongoing or future clinical trials and/orcould negatively impact commercial revenue. The true incidence and/or prevalence as well as market potential can be difficult to determine, ahead ofcommercial launch, for certain rare diseases, such as BPDCN, for which there had been limited epidemiologic and published data, and databases, and noprevious drug approvals and no prior product revenue data. Additionally, due to the unfamiliarity and/or rarity of certain diseases, such as BPDCN, healthcare providers may not be aware and/or may misdiagnose or underdiagnose such diseases leading to low trial enrollment and/or product revenue. Our diseaseawareness campaign, intended to raise awareness of the disease and increase patient identification, could fail to do so for many reasons. At this time, we haveno way of assuring the accuracy of any incidence/prevalence or revenue numbers, or the chances for revenue growth into related areas, thus if these are low,despite expectations to the contrary, this will negatively impact our revenue and future prospects for the company. Clinical drug development involves a lengthy and expensive process with an uncertain outcome. Clinical testing is expensive and can take a substantial amount of time to complete. Its outcome is inherently uncertain. In addition, failure can occur at anytime during clinical development, including after significant resources have been invested. We cannot predict whether we will encounter challenges with anyof our clinical trials that will cause us, or regulatory authorities, to delay, suspend or terminate current or future trials. Clinical trials can be delayed or halted for many reasons, including but not limited to: · delays or failures in reaching an agreement on acceptable terms with prospective CMOs, CROs, and clinical trial sites, the terms of which can besubject to extensive negotiation and may vary significantly depending on the circumstances; · failure of our third-party contractors, including CROs and CMOs, or our investigators, to comply with regulatory requirements or otherwisemeet contractual obligations in a timely manner; · delays or failure in obtaining the necessary approvals from regulators, institutional review boards, or IRBs, or scientific review committees, orSRCs, in order to commence or continue a clinical trial; · our inability to manufacture, or obtain from third-parties, adequate supply of drug substance, drug product or adjuvant therapies sufficient tocomplete our preclinical studies and clinical trials; · risk of loss of drug product, adjuvants and/or other components of the product, due to third-party storage and distribution of such supplies; · the FDA, or other regulatory authority, issuing a clinical hold or requiring alterations to any of our study designs, including extending a studyor requiring new studies, to our overall strategy or to our manufacturing plans; · delays in patient enrollment, variability in the number and types of patients available for clinical trials, poor accrual, or high drop-out rates ofpatients in our clinical trials; · clinical trial sites deviating from trial protocols or dropping out of a trial and our inability to add new clinical trial sites; · difficulty in maintaining contact with patients after treatment, resulting in incomplete data; · poor effectiveness of our product candidates during clinical trials; · safety issues, including serious adverse events associated with our product candidates and patient exposure to unacceptable health risks; · receipt by a competitor of marketing approval for a product targeting an indication that one of our product candidates targets, such that we arenot “first to market” with our product candidate; 28Table of Contents · governmental or regulatory delays and changes in regulatory leadership, requirements, policy and guidelines; · differing interpretations of data by the FDA or similar foreign regulatory authorities; or · the FDA, or similar regulatory body, may not agree with the endpoints we select or the interpretation of the results related to the endpoints inthe evaluation of our product candidates, thereby refusing to approve our product candidates for marketing approval, or withdrawing approval. We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRB where such trial is being conducted, by a Data SafetyMonitoring Board, or DSMB, if one is utilized for any such trial, or by the FDA or other regulatory authorities. Such authorities may suspend or terminate aclinical trial due to a number of factors, including, among other things, failure to conduct the clinical trial in accordance with regulatory requirements or ourclinical protocols, regulatory violations identified during an inspection of the clinical trial operations or trial site, imposition of a clinical hold by the FDA orother regulatory authorities, study subject safety concerns, adverse events or severe adverse events, including deaths, failure to demonstrate a benefit fromusing a drug, changes in governmental regulations or administrative actions, or lack of adequate funding to continue the clinical trial. For example, we haveobserved serious adverse events, including deaths, from or relating to capillary leak syndrome, or CLS, with ELZONRIS. The occurrence of these and otheradverse events could jeopardize or preclude our ability to develop ELZONRIS in additional indications including CMML, obtain or maintain marketingapproval for, or successfully commercialize, market, and sell any or all of our product candidates for one or more indications. We have also advanced SL-801, SL-701 and SL-901 into clinical trials. There are unknown risks for these product candidates, including with respect todosing, administration, pharmacokinetics, bioavailability, safety and efficacy, that we expect we will learn about during clinical development which couldhalt or delay this development program and/or alter our current strategy for the development of this product candidate. We may not have the necessary expertise or capabilities, including adequate staffing, to successfully manage the execution and completion of any of ourclinical trials, prepare clinical study reports and marketing authorization applications, and ultimately obtain marketing approval for our product candidatesin a timely manner, or at all. In any clinical trial of a product candidate, the results of such trial may not be adequate to support submission of a marketing application or marketingapproval. Because our product candidates are intended for use in life-threatening diseases, in many cases we ultimately intend to seek marketing approval foreach product candidate based on the results of a single clinical trial, which may be open-label and single-group in nature. As a result, these trials may receiveenhanced scrutiny from the FDA. For any such trial, if the FDA disagrees with our choice or definition of primary endpoint, or the results for the primaryendpoint are not robust or significant or clinically beneficial enough, including relative to a control or historical data, the FDA may refuse to approve a BLAor NDA based on such intended pivotal trial, despite meeting a primary endpoint of the study. In addition, the results of any such intended pivotal trial maybe subject to confounding factors, or may not be adequately supported by other study endpoints, possibly including overall survival, or OS, overall responserate, or ORR, rate of complete response, or CR, rate of clinical complete response, or CRc, and/or response duration, in which case the FDA may refuse toapprove a BLA or NDA based on such intended pivotal trial, despite meeting a primary endpoint of the study. The FDA may also require the completion ofadditional clinical trials before or as a condition for approving our product candidates. If we experience delays in the completion of, or a termination of, any clinical trial of our product candidates, the commercial prospects of our productcandidates will be harmed, which will have a negative impact on our ability to commence product sales and generate product income from any of our productcandidates. In addition, any delays in completing our clinical trials will increase our costs and slow down our product candidate development and approvalprocess and may negatively impact our ability to raise additional capital to support these increased costs. Delays in completing our clinical trials could alsoallow our competitors to obtain marketing approval before we do, or could shorten the patent protection period during which we may have the exclusiveright to commercialize our product candidates. Any of these occurrences may harm our business, financial condition and prospects significantly. 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 regulatoryapproval of our product candidates. Reports of adverse events or other safety concerns involving ELZONRIS and our clinical drug candidates could delay clinical development, delay orprevent us from obtaining or maintaining regulatory approvals, or negatively impact sales or the commercial prospects for our product candidates. Reports of adverse events or other safety concerns involving ELZONRIS and our clinical drug candidates could interrupt, delay or halt our clinical trials. Forexample, CLS is a known, sometimes fatal, and well-documented side effect of ELZONRIS. Reports of additional CLS cases, or other adverse events or othersafety concerns involving ELZONRIS or our other product candidates, could result in clinical trial delays including regulatory authorities placing trials onclinical hold or denying or withdrawing approval for trials of any or all indications. Further, patients receiving ELZONRIS or our other product candidateswith co-morbid diseases and/or 29Table of Contents indications not previously well-studied may experience new or different serious adverse events in the future. Likewise, reports of adverse events or othersafety concerns involving ELZONRIS or our other product candidates could interrupt, delay or halt ongoing or planned clinical trials of such productcandidates, could require redesign of study protocols and conduct of additional trials, could result in our inability to file for or obtain regulatory approvalsfor any of our product candidates, or negatively impact commercial prospects for our product candidates. Results of earlier clinical trials may not be predictive of the results of later-stage clinical trials. The results of preclinical studies and clinical trials, including early stage, late stage, and investigator-sponsored clinical trials of product candidates may notbe predictive of the results of subsequent later stage clinical trials, including corporate sponsored trials. Product candidates in later stage or larger clinicaltrials may fail to show the safety and efficacy results demonstrated in earlier studies despite having progressed through preclinical studies and earlier clinicaltrials. Many companies in the biopharmaceutical industry have suffered significant setbacks in later stage clinical trials, including canceling clinicaldevelopment programs, due to adverse safety profiles or lack of efficacy, notwithstanding promising results in earlier studies. Similarly, our clinical trials maynot be successful for these or other reasons. This drug development risk is heightened by any changes in ongoing and future clinical trials compared to completed clinical trials. As product candidatesare advanced through preclinical studies to early and late stage clinical trials and towards approval and commercialization, it is customary that variousaspects of the development program, such as manufacturing and methods of administration and dosing, are altered along the way in an effort to optimizeprocesses and results. While these types of changes are common and are intended to optimize the product candidates for later stage clinical trials, approvaland commercialization, such changes do carry the risk that they will not achieve these intended objectives. For example, the results of our ongoing and futureclinical trials may be adversely affected by the following changes: · As we optimize and scale-up production of our clinical drug candidates, there may be manufacturing, formulation, fill-finish and other processand analytical changes that are part of the optimization and scale-up necessary for producing drug substance and drug product of a quality,quantity and stability sufficient for later stage clinical development and commercialization. Delays, including failures, in any of these steps maydelay initiation and completion of clinical trials, regulatory submissions, or commercial launch. We may also need to demonstratecomparability between newly manufactured drug substances and/or drug products relative to previously manufactured drug substances and/ordrug products. Demonstrating comparability may cause us to incur additional costs or delay initiation or completion of our clinical trials,including the need or choice to initiate a dose escalation study, and, if unsuccessful, could require us to complete additional preclinical orclinical studies of our product candidates. Failure to demonstrate comparability could also result in delays in regulatory submissions orcommercial launch. We are also developing a new lyophilized formulation of ELZONRIS. In the event it does not demonstrate adequacy orcomparability with the current liquid/frozen formulation, ELZONRIS could be negatively impacted. · We have changed the treatment regimen of ELZONRIS to a multi-cycle regimen, in which patients will receive more than one treatment cycle,rather than a single-cycle treatment as used in the completed investigator-initiated clinical trial. Although we anticipate that patients receivingmultiple cycles of ELZONRIS may derive greater clinical benefit than from a single cycle, there is a risk of toxicity or a lack of efficacy arisingfrom multiple cycles. · We are, or may in the future be, treating patients with certain diseases or conditions that have not been previously treated with our productcandidates. In these instances, we may choose to treat patients at several different doses and use multi-cycle dosing regimens to determine theoptimal doses and schedules for both near-term and long-term safety and disease control in each indication. Use of our product candidates innew disease populations and at new dosing regimens could produce unforeseen adverse reactions and events that could impact the developmentand ability to obtain or maintain marketing approval for our product candidates. · We may determine, based on safety and efficacy, that certain doses and regimens of our product candidates for particular indications are optimalfor initial near-term therapy whereas the same, or other, doses and regimens are optimal for longer-term maintenance therapy. · We are developing SL-701 as an injection administered under the skin, or subcutaneously, in our trials. Two previous investigator-sponsoredtrials of an earlier version of SL-701 used this method of delivery. Another previous investigator-sponsored trial of an earlier version of SL-701used a different method of delivery, in which dendritic cells, which are a type of immune cell, were removed from the patient, exposed toimmunogenic peptides, and then re-injected into or near a lymph node of the patient (intra/peri-nodally). Our plan continues with thesubcutaneous injection method used in two of the previous studies and represents a change from one of the other previous studies. 30Table of Contents · We manufactured and formulated SL-701 as a mixture of IL-13Ra2 mutant peptide, EphA2 peptide, a new survivin mutant peptide, and atetanus toxoid peptide. An earlier version of this immunotherapy, which included IL-13Ra2 mutant and EphA2 peptides, was mixed withadditional peptides in previous studies, including a different survivin peptide in some studies. · In the initial stage of our SL-701 corporate-sponsored trial, we used granulocyte-macrophage-colony-stimulating factor, or GM-CSF, andimiquimod as the immunostimulants. In the second stage of our SL-701 trial, we used poly-ICLC as the immunostimulant, which was theimmunostimulant used, along with an earlier version of SL-701, in the previous investigator-sponsored study but is not currently commerciallyavailable. If the poly-ICLC regimen is found to be superior, it would require successful approval and commercialization of poly-ICLC inaddition to SL-701 to support product launch, which would entail a more complicated regulatory and commercialization strategy than requiredfor a single product launch. · In some of our current or future trials, we are, or may, combine our product candidates with each other or with other therapies such aschemotherapy, radiation, targeted therapy, or anti-angiogenic therapy which could result in unforeseen toxicities. We are currently combiningELZONRIS with pomalidomide in myeloma and have combined SL-701 with bevacizumab and immunostimulants in brain cancer. Any of the aforementioned, or other, changes could make the timing, including initiation, patient accrual, or results of our clinical trials less predictable andcould cause our product candidates to perform differently, including causing toxicities, which could delay or suspend completion of our clinical trials, delayor prevent approval of our product candidates, and/or jeopardize our ability to obtain regulatory approval, commence product sales and generate income. If we experience delays in the enrollment of patients in our clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented. We may not be able to continue clinical trials for our product candidates if we are unable to enroll a sufficient number of eligible patients to participate inthese trials, including as required by the FDA or other regulatory authorities. Patient enrollment, a significant factor in the timing of clinical trials, is affectedby many factors including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, thedesign of the clinical trial, competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied inrelation to other available therapies, including any new drugs that may be approved or may commence competing clinical trials for the indications we areinvestigating. Some of our product candidates are being developed in orphan indications (i.e., rare diseases) with small available study populations. There are very limitedindependently reported data on annual incidences of these orphan indications. If the prevalence of these diseases is very low, including lower than ourestimates or estimates of our third-party contractors, this could significantly delay patient enrollment in any one or more of our ongoing or future clinicaltrials. Further, if we fail to enroll and maintain the number of patients for which the clinical trial was designed, the statistical power of that clinical trial may bereduced, which would make it harder to demonstrate that the product candidate being tested in such clinical trial is safe and effective. Additionally,enrollment delays in our clinical trials may result in increased development costs for our product candidates, which would cause the value of our commonstock to decline and limit our ability to obtain additional financing. Our inability to enroll a sufficient number of patients for any of our current or futureclinical trials would result in significant delays to, or may require us to terminate or not initiate, one or more clinical trials. The regulatory review and approval processes of the FDA and comparable foreign authorities are lengthy, time-consuming and inherently unpredictable,and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed. The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable and depends upon numerous factors, including thesubstantial discretion of the regulatory authorities, which could include the prerequisite of an advisory panel, e.g. ODAC, review. In addition, approvalpolicies, regulations, or the type and amount of preclinical, CMC, clinical pharmacology, and clinical data necessary to gain approval may change during thecourse of a product candidate’s clinical development, and may vary among jurisdictions. We may be required to undertake and complete certain additionalpreclinical, CMC, clinical pharmacology, bioanalytical, immunogenicity, or clinical studies to generate additional data required to support the submission ofan IND, a BLA, or an NDA to the FDA or equivalent applications to comparable foreign authorities. An inadequacy in any of these areas, or a lack ofpersonnel, financial resources or performance, including by third parties, could result in a delayed or unsuccessful regulatory filing. For example, we intendto have a meeting with the FDA to discuss the clinical development of ELZONRIS in CMML and potentially other indications. The FDA feedback may bedifficult to implement or not implementable at all. Also, the FDA may require additional studies to support regulatory approval, which could result in a delayin our clinical programs and/or a delay or unsuccessful or no regulatory filing. 31Table of Contents We have only obtained FDA regulatory approval for one drug product, ELZONRIS, and it is possible that none of our other existing product candidates,additional indications for ELZONRIS, or any product candidates we may seek to develop in the future will ever obtain regulatory approval. Furthermore,approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authoritydoes not ensure approval by regulatory authorities in other foreign countries or by the FDA. Our product candidates, alone or in combination with any adjuvant, immunostimulant including GM-CSF or Imiquimod or poly-ICLC, or other agents withwhich we may combine our drug candidates, could fail to receive regulatory approval for many reasons, including but not limited to the following: · the FDA or comparable foreign regulatory authorities may disagree with the design, conduct or findings of our clinical trials; · the FDA or comparable foreign regulatory authorities may identify protocol deviations or data quality or integrity concerns with our preclinicalstudies or clinical trials; · we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe andeffective for its proposed indication; · the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authoritiesfor approval; · we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; · the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from, or the study design or execution of,preclinical studies or clinical trials; · the FDA or comparable foreign regulatory authorities may not accept our definition, or criteria, for the primary endpoints and/or other endpointsfor evaluation of efficacy and clinical benefit to patients and may withhold marketing approval, despite meeting the primary endpoint of a trial; · the data collected from clinical trials of our product candidates may not be sufficient to support the submission of a BLA, an NDA, or othersubmission or to obtain regulatory approval in the United States or elsewhere; · we may fail to secure an appropriate right of reference to the data from preclinical studies or clinical trials of our product candidates that we didnot conduct or sponsor; · the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturerswith which we currently contract for clinical supplies and plan to contract for commercial supplies; · the FDA or comparable foreign regulatory authorities may fail to approve any companion diagnostics we develop; and · the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner renderingour clinical data insufficient for approval. This lengthy and costly review process, as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval tomarket our product candidates that we may advance into and through clinical trials, which would significantly harm our business. In addition, even after obtaining approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than werequest or may grant approval contingent on the performance of costly post-marketing commitments, including additional clinical trials, observationalstudies, and/or pregnancy registries, which could impact market adoption and acceptance and exceed commercialization budgets. Regulatory authorities mayalso approve a product candidate with a label that includes labeling claims that may be undesirable for the successful commercialization of that productcandidate, including product contraindications, warnings or precautions, the need for inpatient versus outpatient administration, or limitations on theadministration schedule, such as the number of infusions or cycles. In addition, we may not be able to ultimately achieve the price we intend to charge for ourproduct candidates or obtain satisfactory reimbursement or coverage for our product candidates. Moreover, in many foreign countries, a 32Table of Contents product candidate must be approved for reimbursement before it can be approved for sale in that country and the reimbursement may be suboptimal. Any ofthe foregoing scenarios could materially harm the commercial prospects for our product candidates. Our approach to the discovery and development of product candidates includes the targeting of cancer stem cells (CSC), which is unproven, and we do notknow whether we will be able to develop any products of commercial value. Research on CSCs is an emerging field and, consequently, there is an ongoing debate regarding the importance of CSCs as an underlying cause of tumorinitiation, propagation, recurrence, resistance, and metastasis. In addition, there is some debate in the scientific community regarding the definingcharacteristics of these cells. Although there is a general consensus that some cancer cells have tumor-initiating capacity, there also is some debate in the scientific community regardingthe defining characteristics and the origin of these cells. Some believe that normal adult stem cells transform into CSCs. Others believe that normal tumorbulk can transform into CSCs and, therefore, a definitive CSC cannot be readily isolated or targeted. In addition, some believe that targeting CSCs should besufficient for a positive clinical outcome, while others believe that, at times or always, targeting CSCs should be coupled with targeting tumor bulk for apositive clinical outcome. Based on preclinical and clinical data, we believe that, for some cancers, ELZONRIS may target both tumor bulk and CSCs. However, it is conceivable thatELZONRIS and any other product candidates that we develop may not effectively target tumor bulk or CSCs or, even if they do, they may not have abeneficial or durable clinical outcome that outweighs the risks associated with the product. In addition, it is conceivable that our platform technology mayultimately fail to identify commercially viable drugs to treat human patients with cancer or any other disease or condition. If we are not successful in discovering, developing and commercializing additional product candidates, our ability to expand our business and achieve ourstrategic objectives may be impaired. Although we expect to focus a substantial amount of our efforts on the continued clinical testing and regulatory interactions for our clinical stage drugcandidates, another key element of our strategy is to identify and test additional compounds. A portion of the preclinical research that we are conductinginvolves new and unproven drug discovery methods, including our proprietary StemScreen® platform technology, as well as the preclinical testing of newcompounds and potential new uses of existing compounds. The drug discovery that we are conducting using our StemScreen® platform technology may notbe successful in identifying compounds that are useful in treating humans with cancer. Research programs designed to identify product candidates requiresubstantial technical, financial and human resources, whether or not any product candidates are ultimately identified. Even if our research programs mayinitially show promise in identifying potential product candidates, they may fail to yield product candidates for clinical development or commercializationfor many reasons, including the following: · the research methodology used may not be successful in identifying potential product candidates; · competitors may develop alternatives that render our product candidates obsolete; · a product candidate may, on further study, be shown to have harmful effects, to have characteristics that indicate it is unlikely to be safe andeffective, or to otherwise fail to meet applicable regulatory criteria; · a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and · a product candidate may not be accepted as safe and effective by regulatory authorities, patients, the medical community or third-party payors. If we are unable to identify additional compounds for preclinical and clinical development, we may not sufficient any product income, which could result insignificant harm to our financial position and adversely impact our stock price. If we obtain approval to market any products outside of the U.S., a variety of risks associated with international operations could materially adverselyaffect our business. If ELZONRIS is approved for marketing outside of the U.S., we intend to enter into agreements with third parties to market these products in certainjurisdictions. We expect that we will be subject to additional risks related to international operations or entering into international business relationships,including: · different regulatory requirements for drug approvals and rules governing drug commercialization in foreign countries; 33Table of Contents · reduced or no protection over 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 reimbursement, pricing, and insurance regimes; · foreign taxes; · foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doingbusiness in another country; · workforce uncertainty in countries where labor unrest is more common than in the U.S.; · potential noncompliance with the U.S. Foreign Corrupt Practices Act, the United Kingdom Bribery Act 2010, or similar antibribery andanticorruption laws in other jurisdictions as well as various regulations pertaining to data privacy, such as the GDPR; · 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. Also, see the Risk Factor titled “International expansion of our business exposes us to business, legal, regulatory, political, operational, financial, economic,and other risks associated with conducting business outside of the U.S.” We have no prior experience in these countries, and many biopharmaceuticalcompanies have found the process of marketing their products in foreign countries to be very challenging. International expansion of our business exposes us to business, legal, regulatory, political, operational, financial, economic, and other risks associatedwith conducting business outside of the U.S. Part of our business strategy involves international expansion, including establishing and maintaining operations outside of the U.S. and establishing andmaintaining relationships with health care providers, payors, government officials, distributors and manufacturers globally. Conducting businessinternationally involves a number of risks, including: · multiple conflicting and changing laws and regulations such as tax laws, export and import restrictions, employment laws, anti-bribery and anti-corruption laws, regulatory requirements and other governmental approvals, permits and licenses; · possible failure by us or our distributors to obtain appropriate licenses or regulatory approvals for the sale or use of our product candidates, ifapproved, in various countries; · difficulties in managing foreign operations; · complexities associated with managing multiple payor-reimbursement regimes or self-pay systems; · financial risks, such as longer payment cycles, difficulty enforcing contracts and collecting accounts receivable, and exposure to foreigncurrency exchange rate fluctuations; · reduced protection for intellectual property rights; · business interruptions resulting from geopolitical actions, economic instability, or natural disasters, including, but not limited to, wars andterrorism, political unrest, outbreak of disease, earthquakes, boycotts, curtailment of trade, and other business restrictions; 34Table of Contents · failure to comply with foreign laws, regulations, standards and regulatory guidance governing the collection, use, disclosure, retention, securityand transfer of personal data, including the European Union General Data Privacy Regulation, or GDPR, which introduces strict requirements forprocessing personal data of individuals within the European Union; and · failure to comply with the Foreign Corrupt Practices Act, including its books and records provisions and its anti-bribery provisions, the UnitedKingdom Bribery Act 2010, and similar antibribery and anticorruption laws in other jurisdictions, for example by failing to maintain accurateinformation and control over sales or distributors’ activities. Also, see the Risk Factor titled “If we obtain approval to market any products outside of the U.S., a variety of risks associated with international operationscould materially adversely affect our business.” Any of these risks, if encountered, could significantly harm our future international expansion and operationsand, consequently, negatively impact our financial condition, results of operations, and cash flows. We are subject to ongoing FDA regulatory requirements, related to ELZONRIS and our product candidates, both before and after regulatory approval,which requires significant resources. Additionally, our products and product candidates, if approved, could be subject to labeling and other restrictionsand market withdrawal and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems withour products. Any additional regulatory approvals that we or our potential strategic partners may receive for our product candidates may also be subject to limitations onthe approved indicated uses for which the product may be marketed or to the conditions of approval, may contain product contraindications, warnings, orprecautions that limit the use of our product candidates or may contain requirements for potentially costly post-marketing testing, including Phase 4 clinicaltrials, and surveillance to monitor the safety and efficacy of our product candidates. In addition, with regard to ELZONRIS or any product candidates, shouldthey become approved by the FDA, the manufacturing processes, testing, packaging, labeling, storage, distribution, field alert or biological product deviationreporting, adverse event reporting, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory compliancerequirements. These requirements include submissions of safety and other post-marketing information and reports, as well as continued compliance withcGMPs for commercial manufacturing and good clinical practices, or GCPs, for any clinical trials that we conduct post-approval. For example, we haveseveral post-marketing commitments related to the FDA approval of ELZONRIS. In addition, there are now and may be in the future manufacturing,formulation, fill-finish and other process and analytical changes required by the FDA related to producing drug substance and drug product of a quality,quantity and stability sufficient for commercial supply. Changes, delays or failures in any of these steps may negatively affect disposition of manufacturedbatches of drug substance and/or drug product and as a result may require production of additional batches of drug substance and/or drug product. Problemswith a product, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failureto comply with regulatory requirements, may result in, among other things: · restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or product recalls; · warning letters, untitled letters, or holds on clinical trials; · refusal by the FDA to approve pending applications or supplements to approved applications filed by us or our strategic partners, or suspensionor revocation of product license approvals; · product seizure or detention, or refusal to permit the import and export of products; · investigations or inspections by government entities, including, but not limited to, FDA or foreign health authorities; and · injunctions, fines, consent decrees, corporate integrity agreements, or the imposition of other civil penalties or criminal penalties. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in theUnited 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 notable 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 adversely affect our business. Risks Related to Commercialization of ELZONRIS and the Development and Commercialization of Our Product Candidates If we are unable to fully establish or implement our own sales, marketing, and distribution capabilities in a timely manner, or are unable to enter intolicensing or collaboration agreements for these purposes, we may not be successful in commercializing our products or product candidates. We have built our own commercial infrastructure to commercialize ELZONRIS, and potentially our product candidates, and may potentially enter intocontract research, contract sales, licensing or collaboration agreements to assist in the future development and commercialization of such product candidates. To develop internal sales, distribution and marketing capabilities, we would have to invest significant amounts of financial and management resources, someof which would be committed prior to knowing that our clinical drug candidates were approved. For product candidates for which we decide to perform sales,marketing, and distribution functions ourselves, we could face a number of additional risks, including: · our inability to recruit, train, and retain adequate numbers of effective sales and marketing personnel; · the inability of sales personnel to obtain access to physicians or effectively promote our approved products to physicians and other providers; 35Table of Contents · the lack of complementary drug products to be offered by sales personnel, which may put us at a competitive disadvantage relative tocompanies with more extensive product lines; · unforeseen costs and expenses associated with creating internal sales and marketing organizations; · our inability to build our own manufacturing and commercial infrastructures to manufacture, market and sell our product candidates; · our inability to build and staff, or enter into a partnership to support, commercial distribution organizations; and · the addressable market for our product candidates may result in unsatisfactory income. Where and when appropriate, we may elect to utilize contract sales forces or strategic partners to assist in the commercialization of product candidates forwhich we might receive marketing approval. If we enter into arrangements with third-parties to perform sales, marketing and distribution services for ourproducts, the resulting revenues or the profitability from these revenues to us are likely to be lower than if we had sold, marketed and distributed our productsourselves. In addition, we may not be successful in entering into arrangements with third-parties to sell, market and distribute our product candidates or maybe unable to do so on terms that are favorable to us. We may have limited control over such third-parties, and any of these third-parties may fail to devote thenecessary resources and attention to sell, market and distribute our products effectively and may engage in conduct that subjects us to significant regulatoryenforcement action, as well as civil and criminal liability. For those products that we commercialize on our own and build our own sales and marketingorganization, there is also a risk that our employees may engage in conduct that subjects us to significant regulatory enforcement action, as well as civil andcriminal liability. The sale of drug products is subject to numerous regulatory and legal restrictions on promotional statements that may be made regarding aproduct’s benefits and risks, in addition to certain restrictions and limitations on interactions with healthcare professionals. If we do not establish sales,marketing and distribution capabilities successfully and in compliance with legal and regulatory requirements, either on our own or in collaboration withthird-parties, we will not be successful in commercializing our product candidates. Our commercial success depends upon attaining significant market acceptance of ELZONRIS and our clinical drug candidates, if approved, amongphysicians and other healthcare providers, patients, third-party payors and, in the cancer market, acceptance by the operators of major cancer clinics. Even if our clinical drug candidates, or any other product candidate that we may develop or acquire in the future, obtains regulatory approval, the productmay not gain market acceptance among physicians, third-party payors, patients and the medical community. For example, current cancer treatments such aschemotherapy and radiation therapy are well established in the medical community, and doctors may continue to rely on these treatments. The degree ofmarket acceptance of any products for which we receive approval for commercial sale depends on a number of factors, including: · the efficacy and safety of our products, as demonstrated in clinical trials, and the degree to which our products represent a clinically meaningfulimprovement in care as compared with other available therapies; · the clinical indications for which our products are approved and any limiting contraindications, warnings, and precautions; · acceptance by physicians, operators of major cancer clinics and patients of our products as safe and effective treatments; · the willingness of the target patient populations to try new therapies and of physicians to prescribe these therapies; · the potential and perceived advantages of our products over alternative treatments; · the cost of treatment in relation to alternative treatments; · the availability of adequate reimbursement and pricing by third-parties and government authorities; · the continued projected growth of oncology drug markets; · relative convenience and ease of administration, including access to drug administration equipment such as syringe pumps; 36Table of Contents · the requirement for in-patient versus out-patient administration; · the prevalence and severity of adverse events and side effects; and · the effectiveness of our sales and marketing efforts. In addition, we must be able to successfully identify patient populations with sufficient numbers in order to successfully commercialize our products. Therecan be no guarantee that any of our programs will be effective at identifying target patient populations and the number of patients the markets in which mayreceive marketing approval (e.g., in the United States, Europe and elsewhere) may turn out to be lower than expected, may not be otherwise amenable totreatment with our products, all of which would adversely affect the results of our operations and our business. If we were to receive approval for any of our drug candidates and they failed to achieve market acceptance, we would not be able to generate significantrevenue. In addition, there are no guarantees that any approved product will be effective, or gain market acceptance, if we were to obtain approval foradditional indications. Our products or product candidates may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reforminitiatives, which would harm our business. The regulations that govern marketing approvals, pricing and reimbursement for new drug products vary widely from country to country and are subject tochanges interpretation, application and new legislative proposals at any time. Some countries require the approval of the sale price of a drug before it can bemarketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescriptionpharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketingapproval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthytime periods, and negatively impact the income we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinderour ability to recoup our investment in one or more product candidates, even if our product candidates obtain marketing approval. Our ability to commercialize any products successfully also will depend in part on the extent to which reimbursement for these products and relatedtreatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities andthird-party payors, such as private health insurers and health maintenance organizations, decide which medications they will cover and how much they willpay for them. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party payors haveattempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiringthat drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. We cannot besure that reimbursement will be available for any product that we commercialize and, if reimbursement is available, the level of reimbursement. Reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. Obtaining reimbursement for ourproducts may be particularly difficult because of the higher prices often associated with drugs administered under the supervision of a physician. Ifreimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize any product candidate for which weobtain marketing approval. There may be significant delays in obtaining reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which thedrug is approved by the FDA or similar regulatory authorities outside the United States. Moreover, eligibility for reimbursement does not imply that any drugwill be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim reimbursementlevels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according tothe use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporatedinto existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcareprograms or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower pricesthan in the United States. Third-party payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement policies.Our inability to promptly obtain coverage and profitable payment rates from both government-funded and private payors for any approved products that wedevelop could have a material adverse effect on our operating results, our ability to raise the capital needed to commercialize products and our overallfinancial condition. 37Table of Contents Healthcare policy changes may have a material adverse effect on us. Our business may be affected by the efforts of government and third-party payors to contain or reduce the cost of healthcare through various means. Forexample, the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010 (collectively, theACA), enacted in March 2010, substantially changed the way healthcare is financed by both governmental and private insurers, and significantly impactedthe pharmaceutical industry. With regard to pharmaceutical products, among other things, the ACA is expected to expand and increase industry rebates fordrugs covered under Medicaid programs and make changes to the coverage requirements under the Medicare Part D program. In 2012, the Supreme Courtupheld the ACA in response to a lawsuit alleging that the individual mandate was unconstitutional. The Supreme Court held that the individual mandate andcorresponding penalty was constitutional because it would be considered a tax by the federal government. The Supreme Court also upheld federal subsidiesfor purchasers of insurance through federally facilitated exchanges in a decision released in June 2015. Legislative proposals such as expanding theMedicaid drug rebate program to the Medicare Part D program, providing authority for the government to negotiate drug prices under the Medicare Part Dprogram and lowering reimbursement for drugs covered under the Medicare Part B program have been raised in Congress but have been met with strongopposition and have not been enacted so far. The administration can rely on its existing statutory authority to make policy changes that could have animpact on the drug industry. For example, the Medicare program has in the past proposed to test alternative payment methodologies for drugs covered underthe Part B program and finalized a proposal to pay hospitals less for Part B-covered drugs purchased through the 340B Drug Pricing Program effectiveJanuary 1, 2018. Modifications to or repeal of all or certain provisions of the ACA have been attempted in Congress as a result of the outcome of the recent presidential andcongressional elections, consistent with statements made by the incoming administration and members of Congress during the presidential and congressionalcampaigns and following the election. In January 2017, Congress voted to adopt a budget resolution for the fiscal year of 2017, or the Budget Resolution,that authorizes the implementation of legislation that would repeal portions of the ACA. The Budget Resolution is not a law. However, it is widely viewed as the first step toward the passage of legislation that would repeal certain aspects of theACA. Further, on January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under theACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden onstates, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. In March 2017, following the passage of thebudget resolution for the fiscal year of 2017, the U.S. House of Representatives passed legislation known as the American Health Care Act of 2017, which, ifenacted, would amend or repeal significant portions of the ACA. Attempts in the Senate in 2017 to pass similar ACA repeal legislation, including the BetterCare Reconciliation Act of 2017, were unsuccessful. However, in December 2017, the Tax Cuts and Jobs Act was enacted, which includes a provision thateffectively repeals the ACA’s individual mandate by reducing the tax penalty for failing to maintain minimum essential coverage to zero. Following thislegislation, Texas and 19 other states filed a lawsuit alleging that the ACA is unconstitutional as the individual mandate was repealed, undermining the legalbasis for the Supreme Court’s prior decision. This lawsuit is ongoing. Most recently, the Bipartisan Budget Act of 2018 (the BBA), passed in February 2018,set government spending levels for Fiscal Years 2018 and 2019 and revised certain provisions of the ACA. Specifically, beginning in 2019, the BBAincreased manufacturer point-of-sale discounts off negotiated prices of applicable brand drugs in the Medicare Part D coverage gap from 50% to 70%,ultimately increasing the liability for brand drug manufacturers. This mandatory manufacturer discount also applies to biosimilars beginning in 2019.Regardless of whether or not the ACA is changed or modified by Congress or the Supreme Court, we expect both government and private health plans tocontinue to require healthcare providers, including healthcare providers that may one day purchase our products, to contain costs and demonstrate the valueof the therapies they provide. 38Table of Contents Our products or product candidates for which we intend to seek approval as biological products may face competition sooner than expected. With the enactment of the Biologics Price Competition and Innovation Act of 2009, or BPCIA, as part of the ACA, an abbreviated pathway for the approvalof biosimilar and interchangeable biological products was created. The new abbreviated regulatory pathway establishes legal authority for the FDA to reviewand approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable.” The FDA defines an interchangeable biosimilar asa product that (1) can be expected to produce the same clinical result as the reference product in any given patient and (2), where the product is administeredmore than once, in terms of safety or diminished efficacy, presents no greater risk when switching between the biosimilar and its reference product than therisk of using the reference product alone. Under the BPCIA, an application for a biosimilar product cannot be submitted to the FDA until four years after, andapproval by the FDA cannot be made effective until 12 years after, the date of the first licensure of the reference product. The law is complex and is onlybeginning to be interpreted by the FDA and the courts. For example, in June 2017, the United States Supreme Court, in Sandoz, Inc. v. Amgen Inc., issued anopinion potentially impacting the previously understood effective market exclusivity period. The BPCIA’s ultimate impact, implementation and meaningare subject to uncertainty. While it is uncertain when this development and approval process may be fully adopted by the FDA, the manner in which FDAimplements the process could have a material adverse effect on the future commercial prospects for our biological products. We believe that ELZONRIS, or any of our product candidates that receive marketing approval by the FDA as a biological product under a BLA, shouldqualify for the 12-year period of exclusivity. However, there is a risk that the U.S. Congress could amend the BPCIA to significantly shorten this exclusivityperiod, potentially creating the opportunity for generic competition sooner than anticipated. Moreover, the extent to which a biosimilar, once approved, willbe substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, andwill depend on a number of marketplace and regulatory factors that are still developing. In addition, a competitor could decide to forego the biosimilar routeand submit a full BLA after completing its own preclinical studies and clinical trials. In such cases, any exclusivity to which we may be eligible under theBPCIA would not prevent the competitor from marketing its product as soon as it is approved. Risks Related to Our Financial Position and Capital Requirements We have incurred net operating losses since our inception and anticipate that we will continue to incur substantial operating losses for the foreseeablefuture. We may never achieve or sustain profitability, which would depress the market price of our common stock, and could cause you to lose all or a partof your investment. 39Table of Contents We have incurred net losses from operations from our inception through December 31, 2018 of approximately $300.8 million. We do not know whether orwhen we will become profitable. Our losses have resulted principally from costs incurred in development and discovery activities. We anticipate that ouroperating losses will substantially increase over the next several years as we execute our plan to expand our discovery, research, development andcommercialization activities. We believe that our existing cash, cash equivalents, short-term investments and long-term investments including the cashproceeds received from our follow-on public offering during the first quarter of 2019, will be sufficient to fund our operations and our capital expenditures forat least the next two years. If our cash is insufficient to meet future operating requirements, we will have to raise additional funds. If we are unable to obtainadditional funds on terms favorable to us or at all, we may be required to cease or reduce our operating activities or sell or license to third-parties some or allof our intellectual property. If we raise additional funds by selling additional shares of our capital stock, the ownership interests of our stockholders will bediluted. If we need to raise additional funds through the sale or license of our intellectual property, we may be unable to do so on terms favorable to us, if atall. In addition, if we do not continue to meet our diligence obligations under our license agreements for our clinical drug candidates that we have in-licensed, we will lose our rights to develop and commercialize those clinical drug candidates. If we do not successfully develop and obtain regulatory approval for our existing and future product candidates and effectively manufacture, market and sellour product candidates that are approved, we may never generate sales of those product candidates, and even if we do generate sales, we may never achieve orsustain profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the market price of our common stock andcould impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations. A decline in the market price of ourcommon stock also could cause you to lose all or a part of your investment. We will require additional financing to achieve our goals, and a failure to obtain this capital when needed could force us to delay, limit, reduce orterminate our product development or commercialization efforts. Since our inception, most of our resources have been dedicated to the discovery, acquisition and preclinical and clinical development of our productcandidates. We have expended and believe that we will continue to expend substantial resources for the development of our clinical drug candidates andmay expend additional resources on other product candidates and drug discovery and acquisition efforts. These expenditures will include costs associatedwith general administration, facilities, research and development, acquiring new technologies, manufacturing product candidates, conducting preclinicalexperiments and clinical trials, applying for regulatory approvals, and commercializing any products that might receive approval for sale, as well as costsassociated with operating as a public company. We do not expect to generate income until, and unless, we successfully commercialize one or more of our product compounds. As the outcome of ourongoing and future clinical trials is highly uncertain, our estimates of clinical trial costs necessary to successfully complete the development andcommercialization of our product candidates may differ significantly from our actual costs. In addition, other unanticipated costs may arise. As a result of these and other factors currently unknown to us, we may need to seek additional funds sooner than planned, through public or private equity,debt financings or other sources, such as strategic partnerships and alliances and licensing arrangements. In addition, we may seek additional capital due tofavorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. Our future capital requirements depend on many factors, including: · the number and characteristics of the product candidates we pursue; · the scope, progress, results and costs of researching and developing our product candidates, and conducting preclinical studies and clinicaltrials; · the ability of our product candidates to progress through clinical development successfully; · the timing of, and the costs involved in, seeking regulatory approvals for our product candidates; · the cost of commercialization activities for ELZONRIS, along with any of our other product candidates that may be approved for sale, includingmarketing, sales and distribution costs; · the cost associated with securing and establishing commercialization and manufacturing capabilities for our product candidates and anyproducts for which we might receive regulatory approval; 40Table of Contents · product sales of ELZONRIS; · our ability to establish and maintain strategic partnerships, licensing or other arrangements and the economic and other terms of suchagreements; · the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and theoutcome of such litigation; · the timing, receipt and amount of sales of, or royalties on, our future products, if any; · our need and ability to hire additional management and scientific, medical, sales, and marketing personnel; · the effect of competing technological and market developments; and · our need to implement additional internal systems and infrastructure, including financial and reporting systems. Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timelybasis, we may be required to: · delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for one or more of our productcandidates; · delay, limit, reduce or terminate manufacturing of our product candidates; or · delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary to commercializeany of our product candidates that received or might receive regulatory approval and ensure their acceptance by third-party payors and themarket. We will need to raise additional funds to complete our clinical trials and achieve positive cash flow. Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies orproduct candidates. We will likely seek to raise additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships andalliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownershipinterests of existing stockholders will be diluted, and the terms may include liquidation or other preferences that adversely affect stockholder rights. Debtfinancing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such as incurring debt,making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships and alliances and licensing arrangements withthird-parties, we may have to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms that are not favorable to us. If weare unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and marketourselves. Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price. There can be no assurance that deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general businessstrategy may be adversely affected by an economic downturn, a volatile business environment or an unpredictable and unstable market. If equity and creditmarkets deteriorate, it may make any necessary equity, debt, or other financing more difficult to secure, more costly, more dilutive, and less favorable toexisting shareholders. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growthstrategy, financial performance and stock price and could require us to delay or abandon our business and clinical development plans. In addition, there is arisk that one or more of our current service providers, manufacturers and other partners may not survive these difficult economic times, which could directlyaffect our ability to attain our operating goals on schedule and on budget. There is a possibility that our stock price may decline, due in part to the volatilityof the stock market and the general economic downturn. 41Table of Contents Although we received FDA approval for ELZONRIS, and even if we receive regulatory approval for any of our product candidates, sales of our productsdepend on reimbursement by government health administration authorities, private health insurers and other organizations. If we are unable to obtain, ormaintain at anticipated levels, reimbursement for our products, or coverage is reduced, our pricing may be affected or our product sales, results ofoperations or financial condition could be harmed. We may not be able to sell our products on a profitable basis or our profitability may be reduced if we are required to sell our products at lower thananticipated prices or reimbursement is unavailable or limited in scope or amount. Our products may be priced significantly more expensive than traditionaldrug treatments and almost all patients require some form of third party coverage to afford their cost. We anticipate that we will depend, to a significantextent, on governmental payers, such as Medicare and Medicaid in the U.S. or country specific governmental organizations in foreign countries, and privatethird-party payers to defray the cost of our products to patients. These entities may refuse to provide coverage and reimbursement, determine to provide alower level of coverage and reimbursement than anticipated, or reduce previously approved levels of coverage and reimbursement, including in the form ofhigher mandatory rebates or modified pricing terms. In certain countries where we sell or are seeking or may seek to commercialize our products, pricing, coverage and level of reimbursement or funding ofprescription drugs are subject to governmental control. We may be unable to timely or successfully negotiate coverage, pricing, and reimbursement on termsthat are favorable to us, or such coverage, pricing, and reimbursement may differ in separate regions in the same country. In some foreign countries, theproposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from country tocountry, which may include a combination of distinct potential payers, including private insurance and governmental payers as well as health technologyassessment of medicinal products for pricing and reimbursement methodologies. Therefore, we may not successfully conclude the necessary processes andcommercialize our products in every, or even most countries in which we seek to sell our products. A significant reduction in the amount of reimbursement or pricing for our products in one or more countries may reduce our profitability and adversely affectour financial condition. Certain countries establish pricing and reimbursement amounts by reference to the price of the same or similar products in othercountries. Therefore, if coverage or the level of reimbursement is limited in one or more countries, we may be unable to obtain or maintain anticipated pricingor reimbursement in current or new territories. In the U.S., the European Union member states, and elsewhere, there have been, and we expect there willcontinue to be, efforts to control and reduce healthcare costs. In the U.S. for example, the price of drugs has come under intense scrutiny by the U.S. Congress.Third party payers decide which drugs they will pay for and establish reimbursement and co-payment levels. Government and other third-party payers areincreasingly challenging the prices charged for healthcare products, examining the cost effectiveness of drugs in addition to their safety and efficacy, andlimiting or attempting to limit both coverage and the level of reimbursement for prescription drugs. Health insurance programs may restrict coverage of some products by using payer formularies under which only selected drugs are covered, variable co-payments that make drugs that are not preferred by the payer more expensive for patients, and by using utilization management controls, such asrequirements for prior authorization or failure first on another type of treatment. Payers may especially impose these obstacles to coverage for higher-priceddrugs, and consequently, our products may be subject to payer-driven restrictions. Additionally, U.S. payers are increasingly considering new metrics as thebasis for reimbursement rates. In countries where patients have access to insurance, their insurance co-payment amounts or other benefit limits may represent a barrier to obtaining orcontinuing use of our potential products. We anticipate providing support for non-profit organizations that assist patients in accessing treatment for certaindiseases. Such organizations assist patients whose insurance coverage imposes prohibitive co-payment amounts or other expensive financial obligations.Such organizations’ ability to provide assistance to patients is dependent on funding from external sources, and we cannot guarantee that such funding willbe provided at adequate levels, if at all. We also may provide our products without charge to patients who have no insurance coverage for drugs throughrelated charitable purposes. We are not able to predict the financial impact of the support we may provide for these and other charitable purposes; however,substantial support could have a material adverse effect on our profitability in the future. Our commercial success depends on obtaining and maintaining reimbursement at anticipated levels for our products. It may be difficult to project the impactof evolving reimbursement mechanics on the willingness of payers to cover our products. If we are unable to obtain or maintain coverage, or coverage isreduced in one or more countries, our pricing may be affected or our product sales, results of operations or financial condition could be harmed. 42Table of Contents Risks Related to Our Business and Industry We are a commercial-stage biopharmaceutical company with one FDA approved product, which makes it difficult to assess our future viability. We are a commercial-stage biopharmaceutical company with a limited operating history. We have not yet demonstrated an ability to successfully overcomemany of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the biopharmaceutical area. Forexample, to execute our business plan, we will need to successfully: · execute product candidate development activities; · obtain required regulatory approvals for the development and commercialization of our product candidates; · maintain, defend, leverage and expand our intellectual property portfolio; · build, deploy, and maintain sales, distribution and marketing capabilities, either on our own or in collaboration with strategic partners, shouldour products obtain market approval; · gain market and third-party payor acceptance for our products, should they obtain market approval; · develop and maintain cGMP compliant manufacturing and distribution capabilities sufficient to support the intended scope of our preclinicaland clinical development plans and the potential commercial demand for our product(s); · complete required process characterization and validation activities to support any planned regulatory submission, which historically hasincluded the manufacture of at least three (3) consecutive successful process validation batches for drug substance and at least three(3) consecutive successful process validation batches for drug product; · develop and maintain any strategic relationships we elect to enter into; · satisfy our obligations under our licensing agreement and other agreements; and · manage our spending as costs and expenses increase due to drug discovery, preclinical development, clinical trials, regulatory approvals,manufacturing and commercialization. If we are unsuccessful in accomplishing these objectives, we may not be able to develop product candidates, raise capital, expand our business or continueour operations. We face substantial competition, which may result in others discovering, developing or commercializing products before, or more successfully, than we do. Our future success depends on our ability to demonstrate and maintain a competitive advantage with respect to the design, development andcommercialization of product candidates. Our competitors may succeed in developing competing products before we do for the same indications we arepursuing, obtaining regulatory approval or gaining acceptance for products or for the same markets that we plan to target. If we are not “first to market” withour product candidates, our competitive position could be compromised because it may be more difficult for us to obtain marketing approval for that productcandidate and successfully market that product candidate as a competitor. Even if we are “first to market” with one or more of our product candidates, a competitor could develop an alternative therapy for our approvedindication(s) that demonstrates a superior efficacy and/or safety profile relative to our approved product(s). We expect any product candidate that we are able to commercialize will compete with products from other companies in the biotechnology andpharmaceutical industries. For example, there are a number of biopharmaceutical companies focused on developing therapeutics with which we maypotentially compete including Astellas Pharma U.S., Inc., Bionomics Limited, Boehringer Ingelheim GmbH, Geron Corp., GlaxoSmithKline plc, MacrogenicsInc., Micromet, Inc. (an Amgen, Inc. company), OncoMed Pharmaceuticals, Inc., Pfizer Inc., Roche Holding AG, Sanofi U.S. LLC, Stemcentrx, Inc. (an AbbViecompany), Sumitomo Dainippon Pharma Co. Ltd., Verastem, Inc., and others. Additionally, there are a number of companies working to develop newtreatments, which may compete with ELZONRIS and SL-801, including AbbVie, Agios, Inc., Ambit Biosciences Corporation (now a Daiichi Sankyocompany), Amgen, Astex Pharmaceuticals (now an Otsuka Pharmaceutical company), Celator Pharmaceuticals (now 43Table of Contents a Jazz Pharmaceuticals company), Celgene Corporation, Cellectis, CTI BioPharma, Cyclacel Pharmaceuticals, Inc., Eisai Co. Ltd., Genmab, GenzymeCorporation (now a Sanofi company), Humanigen, Inc., Immunogen, Incyte Corporation, Impact Biomedicines (now a Celgene company), JanssenPharmaceutical Companies of Johnson & Johnson, Karyopharm Therapeutics, Inc., Kura Oncology, Inc., MustangBio, Inc., Novartis AG, SeattleGenetics, Inc., Sunesis Pharmaceuticals, Inc., and Xencor, among others. There are also a number of drugs used for the treatment of brain cancer that maycompete with SL-701, including, Avastin® (Roche Holding AG), Gliadel® (Eisai Co. Ltd.), and Temodar® (Merck & Co., Inc.). There are a number ofcompanies working to develop brain cancer therapeutics with programs in clinical testing, including Agenus Inc., Bristol-Myers Squibb, Inc., CorticeBiosciences, Inc., CytRx Corporation, GenSpera, Inc., GlaxoSmithKline plc., ImmunoCellular Therapeutics, Ltd., Northwest Biotherapeutics, Inc., NovartisAG, Roche Holding AG, and others. Many of our competitors have substantially greater commercial infrastructures and financial, technical and personnel resources than we have. In addition,many are farther along in their clinical development programs. We may not be able to compete unless we successfully: · design and develop products that address an unmet medical need or demonstrate a superior benefit/risk profile to other products in the market; · conduct successful preclinical studies and clinical trials; · attract qualified scientific, medical, sales, marketing, and commercial personnel; · obtain patent and/or other intellectual property protections for our processes and product candidates; · obtain required regulatory approvals; and · collaborate with others in the design, development and commercialization of new products. Established competitors may invest heavily to quickly discover and develop novel compounds that could make our product candidates obsolete. In addition,any new product that competes with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in orderto overcome price competition and to be commercially successful. If we are not able to compete effectively against our competitors, our business will notgrow and our financial condition and operations will suffer. If we fail to attract and keep senior management and key scientific and marketing personnel, we may be unable to successfully develop our productcandidates, conduct our clinical trials and commercialize our product candidates. Our success depends in part on our continued ability to attract, retain and motivate highly qualified management, clinical and scientific personnel. We arehighly dependent upon our senior management as well as other employees, consultants and scientific and medical collaborators. As of March 15, 2019, wehad 92 full-time employees, which may make us more reliant on our individual employees than companies with a greater number of employees. Althoughnone of these individuals has informed us to date that he or she intends to retire or resign in the near future, the loss of services of any of these individuals orone or more of our other members of senior management could delay or prevent the successful development of our product pipeline, completion of ourongoing and future clinical trials or the commercialization and successful marketing launch of our product candidates. Although we have not historically experienced unique difficulties attracting and retaining qualified employees, we could experience such problems in thefuture. For example, competition for qualified personnel in the biotechnology and pharmaceuticals field is intense. We will need to hire additional personnelas we expand our clinical development and commercial activities. We may not be able to attract and retain quality personnel on acceptable terms. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development andcommercialization strategy. Our consultants and advisors may also be engaged with companies other than us and may have commitments under consulting oradvisory contracts with other entities that may limit their availability to us. 44Table of Contents If our employees or third parties acting on our behalf commit fraud or other misconduct, including noncompliance with regulatory standards andrequirements, our business may experience serious adverse consequences. We are exposed to the risk of fraud or other misconduct by employees and third parties acting on our behalf. Misconduct by employees or third parties couldinclude intentional failures to comply with FDA regulations, to provide accurate information to the FDA, to comply with manufacturing standards we haveestablished, to comply with federal and state healthcare fraud and abuse laws and regulations, to report financial information or data accurately or to discloseunauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws andregulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range ofpricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconductcould also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to ourreputation. We have adopted a Code of Business Conduct and Ethics, but it is not always possible to identify and deter employee and third-party 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 usfrom governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actionsare instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on ourbusiness, including the imposition of significant fines, penalties, other sanctions, and exclusion from government-funded healthcare programs. We may encounter difficulties in managing our growth and expanding our operations successfully. As we seek to advance our product candidates through the development process, we will need to expand our development, regulatory, manufacturing,marketing and sales capabilities or contract with third-parties to provide these capabilities for us. As our operations expand, we expect that we will need toidentify, commence and manage additional relationships with various strategic partners, qualified suppliers, manufacturers and other third-parties. Futuregrowth will impose significant added responsibilities on members of management. Our future financial performance and our ability to commercialize ourproduct candidates and to compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we must be able tomanage our development efforts and clinical trials effectively and hire, train and integrate additional management, administrative, sales, and marketingpersonnel. The hiring, training and integration of new employees may be more difficult, costly and/or time-consuming for us because we have fewer resourcesthan a larger organization. We may not be able to accomplish these tasks, or to accomplish them in a timely fashion, and our failure to accomplish any ofthem could prevent us from successfully growing our company. We expect to expand our development, regulatory and sales and marketing capabilities, and as a result, we may encounter difficulties in managing ourgrowth, which could disrupt our operations. In connection with our commercial launch of ELZONRIS and international expansion, we expect to experience significant growth in the number of ouremployees and the scope of our operations, particularly in the areas of drug development, regulatory affairs, quality, commercial compliance, medical affairs,and sales and marketing. For example, we plan to hire additional personnel in connection with our commercial launch of ELZONRIS in the United States andEurope and preparation for potential regulatory filings for ELZONRIS in other markets. To manage our anticipated future growth, we must continue toimplement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualifiedpersonnel. Due to the limited experience of our management team in managing a company with this anticipated growth, we may not be able to effectivelymanage the expansion of our operations or recruit and train additional qualified personnel. The physical expansion of our operations may lead to significantcosts and may divert our management and business development resources. We may not be able to effectively manage the expansion of our operations, whichcould delay the execution of our business plans or disrupt our operations. If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our productcandidates. We face an inherent risk of product liability as a result of the clinical testing and commercial sale of our product candidates and and products. For example,we may be sued if any product we develop allegedly causes or contributes to an injury or is found to be otherwise defective during product testing, clinicalstudy, clinical use, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects indesign, failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. Fraud-based claims as well as claims madepursuant to state consumer protection acts are also a possibility. If we cannot successfully defend ourselves against product liability claims, we may incursubstantial liabilities or be required to limit commercialization of our product candidates. Even successful defense would require significant financial andmanagement resources. Regardless of the merits or eventual outcome, liability claims may result in: · decreased demand for our product candidates or products that we may develop; 45Table of Contents · injury to our reputation; · withdrawal of clinical trial participants and inability to enroll future clinical trial participants; · costs to defend the related litigation; · a diversion of management’s time and our resources; · substantial monetary awards to trial participants or patients; · product recalls, withdrawals or labeling, marketing or promotional restrictions; · loss of income; · the inability to commercialize our product candidates; and · a decline in our stock price. Our inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims couldprevent or inhibit the commercialization of products we develop. Although we maintain liability insurance, any claim that may be brought against us couldresult in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurancecoverage. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We willhave to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, andwe may not have, or be able to obtain, sufficient capital to pay such amounts. Our relationships with customers and third-party payors in the United States and in foreign jurisdictions will be subject to applicable anti-kickback, fraudand abuse and other healthcare laws and regulations, which could expose us to criminal, civil or administrative sanctions, contractual damages,reputational harm and diminished profits and future earnings. Healthcare providers, physicians and third-party payors in the United States and in foreign jurisdictions play a primary role in the recommendation andprescription of any product candidates for which we obtain marketing approval. Our future arrangements with third-party payors and customers may exposeus to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements andrelationships through which we market, sell and distribute our products for which we obtain marketing approval. Restrictions under applicable federal, stateand foreign healthcare laws and regulations include the following: · the federal healthcare Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receivingor providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase,order or recommendation of, any good or service for which payment may be made under federal and state healthcare programs such as Medicareand Medicaid; · the federal False Claims Act imposes civil penalties, against individuals or entities for knowingly presenting, or causing to be presented, to thefederal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation topay money to the federal government and also includes provisions allowing for private, civil whistleblower or “qui tam” actions; · the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology forEconomic and Clinical Health Act (“HITECH”), imposes criminal and civil liability for executing a scheme to defraud any healthcare benefitprogram. HIPAA and HITECH also regulate the use and disclosure of identifiable health information by healthcare providers, health plans andhealthcare clearinghouses, and impose obligations, including mandatory contractual terms, with respect to safeguarding the privacy, securityand transmission of identifiable health information as well as requiring notification of regulatory breaches. HIPAA and HITECH violations mayprompt civil and criminal enforcement actions as well as enforcement by state attorneys general; 46Table of Contents · the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making anymaterially false statement in connection with the delivery of or payment for healthcare benefits, items or services; · the federal transparency requirements under the Affordable Care Act, or ACA, commonly referred to as the Sunshine Act, requires manufacturersof drugs, devices, biologics and medical supplies to report to the Department of Health and Human Services information related to U.S.-licensedphysician and teaching hospital payments and other transfers of value including research payments and ownership and investment interests; · analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements andclaims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and some statelaws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevantcompliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related topayments to physicians and other healthcare providers or marketing expenditures; and · the U.S. Foreign Corrupt Practices Act (FCPA) and other anti-corruption laws and regulations pertain to our financial relationships andinteractions with foreign government officials. The FCPA prohibits U.S. companies and their employees, officers, and representatives frompaying, offering to pay, promising, or authorizing the payment of anything of value to any foreign government official, government staffmember, political party, or political candidate to obtain or retain business or to otherwise seek favorable treatment. In many countries in whichwe operate or sell our products, the healthcare professionals with whom we interact may be deemed to be foreign government officials forpurposes of the FCPA; · the EU’s General Data Protection Regulation (GDPR) and implementing laws in the EU member states govern the collection and processing ofEU residents’ personal data and, among other requirements, imposes certain consent and data access rights. Such laws may impact our ability toconduct clinical trials that involve EU personal data and engage in other activities that require the processing of EU personal data. Outside ofthe U.S. and the EU, there are numerous other jurisdictions that have their own privacy and information security laws, and new laws andregulations are being considered and/or enacted globally, which may affect our ability to collect, process, and store their residents’ personaldata; and · analogous anti-kickback, fraud and abuse and healthcare laws and regulations in foreign countries. The ACA broadened the reach of fraud and abuse laws by, among other things, amending the intent requirement of the federal Anti-Kickback Statute and theapplicable criminal healthcare fraud statutes contained within 42 U.S.C. Section 1320a-7b. Pursuant to the statutory amendment, a person or entity no longerneeds to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. In addition, the ACA provides that thegovernment may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulentclaim for purposes of the civil False Claims Act or the civil monetary penalties statute. Many states have adopted laws similar to the federal Anti-KickbackStatute, some of which apply to the referral of patients for healthcare items or services reimbursed by any source, not only the Medicare and Medicaidprograms. Efforts to ensure that our business arrangements with third-parties will comply with applicable healthcare laws and regulations will involve substantial costs.It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations or case lawinvolving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any othergovernmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion fromgovernment funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians orother providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civilor administrative sanctions, including exclusion from government-funded healthcare programs. If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that couldhave a material adverse effect on the success of our business. We and our suppliers are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures andthe handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials,including chemicals and biological materials. Our operations also release hazardous waste. We generally contract with third-parties for the disposal of thesematerials and wastes. We cannot eliminate the risk 47Table of Contents of release, contamination or injury from these materials. In the event of release, contamination or injury resulting from our use of hazardous materials, wecould be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil orcriminal fines and penalties. Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from theuse of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmentalliability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials. In addition, we and our suppliers may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations.These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulationsalso may result in substantial fines, penalties or other sanctions. Our internal computer systems, or those of our third-party CMOs, CROs or other contractors or consultants, may fail or suffer security breaches, whichcould result in a material disruption of our product candidates’ development programs. Despite the implementation of security measures, our internal computer systems and those of our third-party CMOs, CROs and other contractors andconsultants are vulnerable to damage from computer viruses, unauthorized access, theft, natural disasters, terrorism, war and telecommunication and electricalfailures. While we have not experienced any such system failure, accident or security breach to date, if such an event were to occur and cause interruptions inour operations, it could result in a material disruption of our programs. For example, the loss of clinical trial data for our product candidates could result indelays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or securitybreach results in a loss of or damage to our data or applications or other data or applications relating to our technology or product candidates, orinappropriate disclosure or theft of confidential or proprietary information, we could incur liabilities and the further development of our product candidatescould be delayed. Europe has enacted a new data privacy regulation, the General Data Protection Regulation, a violation of which could subject us to significant fines. In May 2018, a new privacy regime, the General Data Protection Regulation, or GDPR, took effect across all member states of the European Economic Area,or EEA. The GDPR increases our obligations with respect to clinical trials conducted in the EEA by expanding the definition of personal data to includecoded data, and requiring changes to informed consent practices and more detailed notices for clinical trial subjects and investigators. In addition, the GDPRincreases the scrutiny that clinical trial sites located in the EEA should apply to transfers of personal data from such sites to countries that are considered tolack an adequate level of data protection, such as the United States. The GDPR imposes substantial fines for breaches of data protection requirements, whichcan be up to four percent of global turnover or 20 million Euros, whichever is greater, and it also confers a private right of action on data subjects for breachesof data protection requirements. Compliance with these directives is a rigorous and time-intensive process that may increase our cost of doing business, andthe failure to comply with these laws could subject us to significant fines. 48Table of Contents Risks Related to Our Dependence on Third-Parties Third-parties have conducted clinical trials of our product candidates in the past, and our ability to influence the design and conduct of such trials waslimited. Our current and future corporate-sponsored trials will also require us to rely on various third-parties. Any failure by a third-party to meet itsobligations with respect to the clinical and regulatory development of our product candidates may delay or impair our ability to obtain regulatoryapproval for our products. We are currently advancing our clinical-stage product candidates through multiple corporate-sponsored clinical trials under corporate-sponsored INDs andthrough investigator sponsored trials. Prior to sponsoring our INDs for our product candidates, faculty members at academic institutions and other companiesmay have conducted and sponsored the INDs and clinical trials relating to our drug candidates.As such, we did not control the design or conduct of any trialsconducted prior to the initiation of our corporate-sponsored INDs, and it is possible that the FDA will not view these previous trials as providing adequatesupport for future clinical trials or regulatory filings.. In addition, we have relied on contractual arrangements with academic institutions and investigators that provide us certain information rights with respect tothe completed investigator-sponsored trials, including access to, and the ability to use and reference the data, including for our own regulatory filings,resulting from the completed trials. If these obligations are breached by the investigators or institutions, or if the data prove to be inadequate, then our abilityto conduct our planned corporate-sponsored clinical trials may be adversely affected. Additionally, the FDA may disagree with our interpretation of theadequacy of the preclinical, manufacturing, and/or clinical data from these studies. If so, the FDA may require us to obtain and submit additional preclinical,manufacturing, and/or clinical data relating to our planned trials and/or may not accept such additional data as adequate for our regulatory filings. We rely on, and expect to continue to rely on, third-parties to monitor, support, conduct and/or oversee clinical trials of our product candidates and, insome cases, to maintain regulatory files for our product candidates. If we are not able to maintain or secure agreements with such third-parties onacceptable terms to monitor, support, conduct and/or oversee these clinical trials, if these third-parties do not perform their services as required, or if thesethird-parties fail to timely transfer any regulatory information held by them to us, we may not be able to obtain regulatory approval for, or commercialize,our product candidates. To conduct our preclinical and clinical studies, we rely on academic institutions, CROs, hospitals, clinics and other third-party collaborators who are outsideour direct control, which limits our control over the overall conduct of these studies and the ability to successfully complete them. In our corporate-sponsoredtrials and investigator sponsored trials of ELZONRIS and our clinical drug candidates, we have continued to engage various third-parties. If we are unable tomaintain or enter into agreements with these third-parties on acceptable terms, or if any such engagement is terminated, we may be unable to enroll patientson a timely basis or otherwise conduct our trials in the manner 49Table of Contents we anticipate. In addition, there is no guarantee that these third-parties will devote adequate time and resources to our studies or perform as required bycontract or in accordance with regulatory requirements. If these third-parties fail to meet expected deadlines, fail to adhere to protocols or fail to act inaccordance with regulatory requirements or our agreements with them, or if they otherwise perform in a substandard manner or in a way that compromises thequality or accuracy of their activities or the data they obtain, then trials of our product candidates may be extended, delayed, compromised or terminated, andas a result we may not be able to commercialize our product candidates. We may not be successful in establishing and maintaining strategic partnerships, which could adversely affect our ability to develop and commercializeproducts. We may seek to enter into strategic partnerships in the future, including alliances with other biotechnology or pharmaceutical companies, to enhance andaccelerate the development and commercialization of our products in territories outside the United States. We face significant competition in seekingappropriate strategic partners and the negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish astrategic partnership or other alternative arrangements for any future product candidates and programs because our research and development pipeline may beinsufficient, our product candidates and programs may be deemed to be at too early a stage of development for collaborative effort, and/or third-parties maynot view our product candidates and programs as having the requisite potential to demonstrate safety and efficacy. Even if we are successful in our efforts toestablish strategic partnerships, the terms that we agree upon may not be favorable to us, and we may not be able to maintain such strategic partnerships if, forexample, development or approval of a product candidate is delayed or sales of an approved product were disappointing. If we ultimately determine that entering into strategic partnerships is in our best interest but either fail to enter into, are delayed in entering into, or fail tomaintain such strategic partnerships: · the development of certain of our current or future product candidates may be terminated or delayed; · our cash expenditures related to the development of certain of our current or future product candidates would increase significantly and we mayneed to seek additional financing; · we may be required to hire additional employees or otherwise develop expertise, such as sales and marketing expertise, for which we have notbudgeted; · we will bear all of the risk related to the development of any such product candidates; · the competitiveness of any product candidate that is commercialized could be reduced; and · with respect to our platform technology, StemScreen®, we may not realize its potential as a means of identifying and validating new cancertherapies. We rely on third-party manufacturers to produce and supply our commercial products, clinical and preclinical product candidates. Any failure by a third-party manufacturer to produce supplies for us may delay or impair our ability to initiate or complete our clinical trials, commercialize our products orcontinue to sell any approved products. We do not currently own or operate any manufacturing facilities, and we lack sufficient internal staff and infrastructure to produce clinical and preclinicalproduct candidate supplies ourselves. As a result, we work with third-party CMOs to produce our products and clinical product candidates in acceptablequality and quantity for our ongoing and future clinical trials. If we are unable to maintain such third-party manufacturing sources, or fail to do so oncommercially reasonable terms or on a timely basis, we may not be able to successfully produce, develop, and market ELZONRIS or our clinical drugcandidates or may be delayed in doing so. We purchase and plan to purchase immunostimulants used with SL-701 from third-parties. Whereas GM-CSF andImiquimod are commercially available products, poly-ICLC (Hiltonol®) is a development stage candidate and not commercially available. We do not have aright to manufacture poly-ICLC directly or through our third-party CMOs and are wholly dependent on a third-party manufacturer of poly-ICLC for clinicalsupply. This third-party manufacturer currently has a limited supply and may be unable to provide adequate poly-ICLC to us in the future. We also expect to rely upon third-parties to produce drug substance and drug product required for the clinical trials and commercial supply of our productsand product candidates. If we are unable to arrange for third-party manufacturing sources, or to do so on commercially reasonable terms or on a timely basis,we may not be able to complete development of such other product candidates or market them, if eventually approved. Reliance on third-party manufacturersentails risks to which we would not be subject if we manufactured product candidates ourselves, including reliance on the third-party for regulatorycompliance and quality assurance, the 50Table of Contents possibility of breach of the manufacturing agreement by the third-party because of factors beyond our control (including a failure to synthesize andmanufacture our product candidates in accordance with our product specifications), and the possibility of termination or nonrenewal of the agreement by thethird-party, based on its own business priorities, at a time that is costly or damaging to us. We will be dependent on the ability of these third-partymanufacturers to produce adequate supplies of drug product to support our clinical development programs and future commercialization of any productcandidates for which we may receive regulatory approval. In addition, the FDA and other regulatory authorities require that our product candidates bemanufactured according to CGMP and similar standards for products manufactured for non-US markets. Any failure by our third-party manufacturers tocomply with CGMP or failure to scale up manufacturing processes, including any failure to deliver sufficient quantities of product or product candidates ofacceptable quality in a timely manner, could lead to a delay in, or failure to obtain, regulatory approval for trial initiation or marketing of any of our productcandidates. In addition, such failures could be the basis for action by the FDA to withdraw approvals for products previously granted to us and for otherregulatory action, which could result in or lead to recall, seizure, fines, imposition of operating restrictions, total or partial suspension of production,injunctions, consent decrees, or civil or criminal sanctions. We rely on our third-party manufacturers to purchase from third-party suppliers the materials necessary to produce our products and product candidates forour clinical studies. There are a small number of suppliers for certain capital equipment and materials that we use to manufacture and test our drugs. Suchsuppliers may not sell these materials to our third-party manufacturers at the times we need them or on commercially reasonable terms. We do not havecontrol over the process or timing of the acquisition of these materials by our third-party manufacturers. Moreover, we currently do not have any agreementsfor the commercial production of these materials. Although we generally do not begin a clinical trial unless we believe we have a sufficient supply of aproduct candidate to complete the clinical trial, any significant delay in the supply of a product candidate or the material components thereof for a clinicaltrial, including an ongoing clinical trial, due to the need to replace a third-party manufacturer, could considerably delay completion of our clinical studies,product testing and potential regulatory approval of our product candidates. If our third-party manufacturers or we are unable to purchase these materials afterregulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would be delayed or there would be ashortage in supply, which would impair our ability to generate revenues from the sale of our products or product candidates. We are working with our third-party manufacturers to optimize the manufacturing processes for our products and product candidates, including related drugsubstances, so that these products and product candidates may be routinely produced in adequate quantities of adequate quality, and at an acceptable cost, tosupport our clinical trials and ultimate commercialization of any products that might be approved. Our third-party manufacturers may not be able to controlbatch-to-batch variability below an acceptable threshold, increasing the risk of batch failures, which could cause significant delays and increased costs to ourprograms. Our third-party manufacturers may not be able to manufacture our products or product candidates at a cost, or in quantities, or in a timely mannernecessary, to develop and commercialize them. If we successfully commercialize any of our product candidates, we may be required to establish or accesslarge-scale commercial manufacturing capabilities. In addition, assuming that our drug development pipeline increases and matures, we will have a greaterneed for clinical trial and commercial manufacturing capacity. To meet our projected needs for commercial manufacturing, third-parties with whom wecurrently work may need to increase their scale of production and/or we may need to secure additional suppliers. Because of our reliance on contract manufacturers, we may choose to maintain a higher inventory of drug product and/or drug substance for any of ourproduct candidates or approved products that would be necessary if we had direct control of the manufacturing assets. We rely on a single third-party to manufacture and supply our drug substance and a single third-party to manufacture and supply our drug product for ourproducts and product candidates. Any problems experienced by our third-party manufacturers or their vendors could result in a delay or interruption inthe supply of our products or product candidates to us until the third-party manufacturer or its vendor cures the problem or until we locate and qualify analternative source of manufacturing and supply. The third-party manufacturers of our products and product candidates require specialized equipment and utilize complicated production processes that wouldbe difficult, time-consuming and costly to duplicate. Thus, we have multiple third-party manufacturers who supply our drug product candidates, one third-party manufacturer for each of our product candidates. Because of this arrangement, there is a greater risk that issues in execution or changes in business focusand/or product risk assessments at a third-party manufacturer could cause delays in the clinical development or manufacture of a product or productcandidate than if we used more than one third-party manufacturer for each product or product candidate. For each of our products and product candidates, wecurrently rely on third-party manufacturers to purchase from their third-party vendors the materials necessary to manufacture our products and productcandidates for our clinical studies. Any prolonged disruption in a third-party manufacturer’s vendor’s ability to supply materials for our manufacturing couldhave a significant negative impact on our third-party manufacturer’s their ability to manufacture our products or product candidates. This would cause us toseek additional third-party manufacturing contracts, thereby increasing our development costs and timelines and, if applicable, any commercialization costs.In addition, our third-party manufacturers may experience problems not related to their vendors that could also have a significant negative impact on theirability 51Table of Contents to manufacture our products and product candidates on our own and would cause us to seek additional third-party manufacturing contracts, therebyincreasing our development costs and timelines, if applicable, and any commercialization costs. Moreover, third-party manufacturers and third-partylaboratories performing analytical and other testing could receive inspection findings from regulatory authorities that require investigation and remediation,and this could result in business interruptions affecting the production of our product candidates. We may face losses related to the supply of drugsubstances, drug product, adjuvants and other components of the product due to third-party distribution and storage of such product. We may suffer lossesdue to third-party manufacturers’ shortages or supply shortages of their vendors. We may suffer losses as a result of business interruptions that exceedcoverage under our manufacturers’ insurance policies. Events beyond our control, such as natural disasters, fire, sabotage or business accidents could have asignificant negative impact on our operations by disrupting our product candidate development and commercialization efforts until our third-partymanufacturers can repair their facilities or we can qualify alternate third-party contract manufacturers to assume this manufacturing role, which we may not beable to do on reasonable terms, if at all. In addition, if we are required to change manufacturers for any reason, we will be required to verify that the newmanufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations and guidelines and that they cansuccessfully transfer our manufacturing processes to produce product of equivalent quality and quantity. FDA approval of any new manufacturer would alsobe required. The delays associated with the qualification of a new manufacturer or the requalification of an existing manufacturer could negatively affect ourability to develop product candidates or produce approved products in a timely manner. Any delay or interruption in our clinical studies or in thedevelopment, validation and commercialization of our product candidates could negatively affect our business. To the extent we elect to enter into licensing or collaboration agreements to develop and potentially commercialize our products or product candidates,our dependence on such relationships may adversely affect our business. Our global commercialization strategy for certain of our products or product candidates may depend on our ability to enter into agreements withcollaborators to obtain assistance and funding for the development and potential commercialization of these products or product candidates. Supportingdiligence activities conducted by potential collaborators and negotiating the financial and other terms of a collaboration agreement are long and complexprocesses with uncertain results. Even if we are successful in entering into one or more collaboration agreements, collaborations may involve greateruncertainty for us, as we have less control over certain aspects of our collaborative programs than we do over our proprietary development andcommercialization programs. We may determine that continuing to collaborate under the terms provided is not in our best interest, and we may terminatesuch collaboration. Our collaborators could delay or terminate their agreements, and our products subject to collaborative arrangements may never besuccessfully commercialized. Further, our future collaborators may develop alternative products or pursue alternative technologies either on their own or in collaboration with others,including our competitors, and the priorities or focus of our collaborators may shift, so that our programs receive less attention or resources than we wouldlike, or they may be terminated altogether. Any such actions by our collaborators, on issues may adversely affect our business prospects and ability to earnincome. In addition, we could have disputes with our future collaborators, on issues such as the interpretation of terms in our agreements. Any suchdisagreements could lead to delays in the development or commercialization of any potential products or could result in time-consuming and expensivelitigation or arbitration, which might not be resolved in our favor. Even with respect to certain other products that we intend to commercialize ourselves, we may enter into agreements with collaborators to share in the burdenof conducting clinical trials, manufacturing, and marketing our product candidates or products. In addition, our ability to apply our proprietary technologiesto develop proprietary compounds will depend on our ability to establish and maintain licensing arrangements or other collaborative arrangements with theholders of proprietary rights to such compounds. We may not be able to establish such arrangements on favorable terms or at all, and our future collaborativearrangements might not be successful. Risks Related to Our Intellectual Property Rights We could be unsuccessful in obtaining adequate patent protection for one or more of our products or product candidates. Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection in the U.S. and other countries withrespect to our products and product candidates or any future product candidate that we may license or acquire and the methods we use to manufacture them,as well as successfully defending these patents and trade secrets against third-party challenges. We seek to protect our proprietary position by filing patentapplications in the United States and abroad related to our novel technologies and products or product candidates, and by the maintenance of our tradesecrets through proper procedures. We will only be able to protect our technologies from unauthorized use by third parties to the extent that valid andenforceable patents or trade secrets cover them in the market they are being used or developed. We cannot be certain that patents will be issued, or that issuedor allowed patents will not later be found to be invalid and/or unenforceable. The patent prosecution process is expensive and 52Table of Contents time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It isalso possible that we will fail to identify any patentable aspects of our research and development output and methodology, and, even if we do, an opportunityto obtain patent protection may have passed. Given the uncertain and time-consuming process of filing patent applications and prosecuting them, it ispossible that our product(s) or process(es) originally covered by the scope of the patent application may have changed or been modified, leaving ourproduct(s) or process(es) without patent protection. The patent position of biotechnology and pharmaceutical companies is generally highly uncertain, involves complex legal and factual questions, and has inrecent years been the subject of much litigation. In addition, no consistent policy regarding the breadth of claims allowed in pharmaceutical orbiotechnology patents has emerged to date in the U.S. The patent situation outside the U.S. is even more uncertain. The laws of foreign countries may notprotect our rights to the same extent as the laws of the U.S., and we may fail to seek or obtain patent protection in all major markets. For example, Europeanpatent law restricts the patentability of methods of treatment of the human body more than U.S. law does. Publications of discoveries in the scientificliterature often lag behind the actual discoveries, and patent applications in the U.S. and other jurisdictions are typically not published until 18 months aftera first filing, or in some cases not at all. Therefore, we cannot know with certainty whether we or our licensors were the first to make the inventions claimed inpatents or pending patent applications that we own or licensed, or that we or our licensors were the first to file for patent protection of such inventions. In theevent that a third party has also filed a U.S. patent application relating to our product candidates or a similar invention, depending upon the priority datesclaimed by the competing parties, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office, orUSPTO, to determine priority of invention in the U.S. The costs of these proceedings could be substantial and it is possible that our efforts to establishpriority of invention would be unsuccessful, resulting in a material adverse effect on our U.S. patent position. 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 beingissued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies andproducts. Changes in either the patent laws or interpretation of the patent laws in the U.S. and other countries may diminish the value of our patents or narrowthe scope of our patent protection. For example, the federal courts of the U.S. have taken an increasingly dim view of the patent eligibility of certain subjectmatter, such as naturally occurring nucleic acid sequences, amino acid sequences and certain methods of utilizing same, which include their detection in abiological sample and diagnostic conclusions arising from their detection. Such subject matter, which had long been a staple of the biotechnology andbiopharmaceutical industry to protect their discoveries, is now considered, with few exceptions, ineligible in the first instance for protection under the patentlaws of the U.S. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or in those licensed from a third-party. Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement ordefense 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-SmithAct includes a number of significant changes to the United States patent law. These include changes to transition from a “first-to-invent” system to a “first-to-file” system and to the way issued patents are challenged. The formation of the Patent Trial and Appeal Board now provides a quicker and less expensiveprocess for challenging issued patents. The USPTO recently developed new regulations and procedures to govern the 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-inventor-to-file provisions, only becameeffective 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, theLeahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and theenforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition. 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. The costs of these proceedings could be substantial and it is possible that our efforts to establish priority of invention would be unsuccessful, resulting in amaterial adverse effect on our U.S. patent position. An adverse determination in any such submission, patent office trial, proceeding or litigation could reducethe scope of, render unenforceable, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly withus, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. In addition, if thebreadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us tolicense, develop or commercialize current or future product candidates. 53Table of Contents Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors fromcompeting with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our owned or licensed patents bydeveloping similar or alternative technologies or products in a non-infringing manner. Our patents and patent applications may not be sufficient to protect our products and product candidates from commercial competition. For example, wecannot obtain a composition of matter patent and are limited in the types of claims that we can obtain for ELZONRIS due to earlier published prior art. Wehave however obtained U.S. and foreign patents for certain methods of using ELZONRIS to treat AML, BPDCN, and myelodysplastic syndrome, or MDS. Inaddition, we have filed additional U.S. and foreign patent applications for the method of using ELZONRIS to treat AML, MDS, BPDCN, and other diseasesalthough there can be no assurances that such patents will issue. Failure to obtain patents directed to all approved uses of ELZONRIS may enable a competitor to market ELZONRIS for such approved but unpatentedindication(s), which could lead to price erosion for sales of ELZONRIS. With respect to SL-701, although we have licensed an issued U.S. patent directed tothe composition of matter for the mutant immunogenic IL-13Rα2 peptide, we currently do not have any foreign composition of matter patent protection. Wedo, however, have foreign pending patent applications, as well as an issued patents in Australia and Mexico and an allowed patent application in Europe,that would cover certain uses of this peptide. While we have a non-exclusive license to issued U.S. patents directed to methods of use for the EphA2 peptide,we currently do not have any composition of matter patent protection, although we do have rights to foreign pending patent applications that seek to covercertain uses of this peptide. While we have filed U.S. and foreign patent applications directed to methods of use of a new survivin mutant peptide for use inSL-701, we currently do not have any composition-of-matter patent protection. With respect to SL-801, we have licensed composition of matter patentsissued in the U.S. and abroad directed to the SL-801 compound. While we have an issued patent in Canada and a patent application pending in the U.S. andCanada directed to our StemScreen® technology, we currently have no issued patents covering StemScreen® in the U.S. Although we have various patentapplications pending in the U.S. and abroad that we anticipate may result in additional protection for ELZONRIS, our clinical drug candidates andStemScreen®, there can be no assurance that any of these applications will result in an issued patent, or that if they issue, they will provide additionalmeaningful protection for these assets. Our inability to obtain adequate patent protection for our product candidates or platform technology could adverselyaffect our business. Issued patents covering one or more of our products or product candidates could be found invalid or unenforceable if challenged in court. If we were to initiate legal proceedings against a third-party to enforce a patent covering one of our products or product candidates, the defendant couldcounterclaim that our patent is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/orunenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, for example,lack of patentable subject matter, novelty, obviousness, written description or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with the prosecution of the patent withheld relevant informationfrom the USPTO, or made a misleading statement, during prosecution. The outcome following legal assertions of invalidity and unenforceability duringpatent litigation is unpredictable. Furthermore, any claims asserted against accused infringers could provoke those parties to petition the USPTO to instituteinter partes review against the asserted patents, which may lead to a finding that all or some of the claims of the patent are invalid. With respect to the validityquestion, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner and we were unaware duringprosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patentprotection on one or more of our products or product candidates or certain aspects of our platform technology, StemScreen®. Such a loss of patent protectioncould have a material adverse impact on our business. Furthermore, adverse results on U.S. patents may affect related patents in our global portfolio. The issuance of a patent does not foreclose challenges to its inventorship, scope, validity or enforceability. Therefore, our owned and licensed patents may bechallenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or in patent claims beingnarrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar oridentical technology and products, or limit the duration of the patent protection of our technology and products. Given the amount of time required for thedevelopment, testing and regulatory review of new product candidates, patents protecting such product candidates might expire before or shortly after suchproduct candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others fromcommercializing products similar or identical to ours. 54Table of Contents Claims that our products or product candidates or StemScreen®, or the sale or use of our products or technology infringe the patent rights of third-partiescould result in costly litigation or could require substantial time and money to resolve, even if litigation is avoided. We cannot guarantee that our products or product candidates, the use of our products or product candidates, or our platform technology, StemScreen®, do notinfringe third-party patents or other intellectual property. Third-parties might allege that we are infringing their patent rights or that we have misappropriatedtheir trade secrets. Such third-parties might resort to litigation against us. The basis of such litigation could be existing patents or patents that issue in thefuture. Our failure to successfully defend against any claims that our product candidates or platform technology infringe the rights of third-parties could alsoadversely affect our business. Regardless of the outcome of any litigation, defending the litigation may be expensive, time-consuming and distracting tomanagement. For example, we are aware of third-party patents with certain claims directed to some of our product candidates, including one of the peptidesused in SL-701 and structures which may be related to SL-1001. We may need to seek a license with respect to one or more of these third-party patents inorder to commercialize our products. No assurance can be given that any such licenses will be available, or that they will be available on reasonable orcommercially acceptable terms or at all. Failure to obtain any required licenses could restrict our ability to commercialize our products in certain territories orsubject us to patent infringement litigation, could result in us having to cease commercialization of our products and/or subject us to money damages in suchterritories. It is also possible that we have failed to identify relevant patents or applications. Patent applications covering our products, product candidates, or platformtechnology could have been filed by others without our knowledge. Additionally, pending patent applications which have been published can, subject tocertain limitations, be later amended in a manner that could cover our platform technologies, our products, product candidates or the use of our products. In order to avoid or settle potential claims with respect to any patent rights of third-parties, we may choose or be required to seek a license from a third-partyand be required to pay license fees or royalties or both. These licenses may not be available on expected, reasonable, or acceptable terms, or at all. Even if weor any future strategic partners were able to obtain a license, the rights may be non-exclusive, which could result in our competitors gaining access to thesame intellectual property. Ultimately, we could be prevented from commercializing one or more of our products or product candidates, or be forced to cease some aspect of our businessoperations, if, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms. Patent litigation couldalso expose us to significant monetary damages. This could harm our business significantly. Defending against claims of patent infringement or misappropriation of trade secrets could be costly and time-consuming, regardless of the outcome. Thus,even if we were to ultimately prevail, or to settle at an early-stage, such litigation could burden us with substantial unanticipated costs. In addition, litigationor threatened litigation could result in significant demands on the time and attention of our management team, distracting them from the pursuit of otherCompany business. Unfavorable outcomes in intellectual property litigation could limit our research and development activities and/or our ability to commercialize certainproducts. If third-parties successfully assert intellectual property rights against us, we might be barred from using certain aspects of our platform technology or barredfrom developing and commercializing certain products. Prohibitions against using certain technologies, or prohibitions against commercializing certainproducts, could be imposed by a court or by a settlement agreement between a patent owner and us. In addition, if we are unsuccessful in defending againstallegations of patent infringement or misappropriation of trade secrets, we may be forced to pay substantial damage awards to the plaintiff. There is inevitableuncertainty in any litigation, including intellectual property litigation. There can be no assurance that we would prevail in any intellectual propertylitigation, even if the case against us is weak or flawed. If litigation leads to an outcome unfavorable to us, we may be required to obtain a license from thepatent owner, in order to continue our research and development programs or to market our product(s). It is possible that the necessary licenses will not beavailable to us on commercially acceptable terms, or at all. This could limit our research and development activities, our ability to commercialize certainproducts, or both. Most of our competitors are larger than we are and have substantially greater resources. They are, therefore, likely to be able to sustain the costs of complexpatent litigation longer than we could. In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise thefunds necessary to continue our clinical trials, continue our internal research programs, in-license needed technology, or enter into strategic partnerships thatwould help us bring our product candidates to market. Such litigation or proceedings could substantially increase our operating losses and reduce theresources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resourcesto conduct such litigation or proceedings adequately. 55Table of Contents In addition, any future patent litigation, interference or other administrative proceedings will result in additional expense and distraction of our personnel.An adverse outcome in such litigation or proceedings may expose us or any future strategic partners to loss of our proprietary position, expose us tosignificant liabilities, or require us to seek licenses that may not be available on commercially acceptable terms, if at all. Intellectual property litigation may lead to unfavorable publicity that harms our reputation and causes the market price of our common stock to decline. During the course of any patent litigation, there could be public announcements of the results of hearings, rulings on motions, and other interim proceedingsin the litigation. If securities analysts or investors regard these announcements as negative, the perceived value of our product candidates, platformtechnology, programs, or intellectual property could be diminished. Accordingly, the market price of our common stock may decline. ELZONRIS, our clinical drug candidates, as well as some of our other product candidates and our platform technologies, are protected by intellectualproperty licensed from third parties, including academic institutions. If the licensors terminate the licenses, or fail to prosecute, maintain, enforce, and/ordefend the licensed patents and patent applications, our competitive position, market share, and business prospects would be harmed. We are a party to several license agreements relating to certain patents and patent applications owned by third-parties, upon which certain aspects of ourbusiness depend. In particular, we hold an exclusive license from Scott and White Memorial Hospital, or Scott and White, for ELZONRIS and SL-501, and wehold three licenses, including an exclusive license and two non-exclusive licenses, from the University of Pittsburgh relating to SL-701. Our licenseagreement with Scott and White survives, unless earlier terminated, until the later of the expiration of the last to expire licensed patent or the date on whichwe owe no further payments to Scott and White. Our exclusive and our non-exclusive patent license agreements with the University of Pittsburgh survive,unless earlier terminated, until the expiration of the last to expire licensed patent, and our non-exclusive license with the University of Pittsburgh to use andreference certain clinical trial data and information survives for a term of twenty years unless earlier terminated. We hold an exclusive license fromCanBas, Ltd. for SL-801 in all worldwide territories other than Japan, Korea, Taiwan, and China. The agreement with CanBas, Ltd. survives until the later often years following the first commercial sale of each product in each country; the date upon which there are no more valid claims; or the expiration ortermination of the last regulatory exclusivity period, after which our license becomes fully paid, irrevocable, perpetual, non-exclusive and royalty-free. Wealso hold licenses from academic institutions relating to intellectual property underlying ELZONRIS and our product candidates and our StemScreen®platform technology. We expect to enter into additional license agreements as part of the development of our business. We depend on our licensors to protect the proprietary rights covering ELZONRIS and our product candidates and we have limited, if any, control over theamount or timing of resources that they devote on our behalf, or the priority they place on, maintaining patent rights and prosecuting patent applications toour advantage. Moreover, we have limited, if any, control over the strategies and arguments employed in the maintenance of patent rights and theprosecution of patent applications to our advantage. Our current or future licensors may not successfully prosecute certain patent applications under whichwe are licensed and on which our business depends. Even if patents issue from these applications, our licensors may fail to maintain these patents, may decidenot to pursue litigation against third-party infringers, may fail to prove infringement, or may fail to defend against counterclaims of patent invalidity orunenforceability. Moreover, and possibly unbeknownst to us, our licensors may experience serious difficulties related to their overall business or financialstability, and they may be unwilling or unable to continue to expend the financial resources required to maintain and prosecute these patents and patentapplications. While we intend to take actions reasonably necessary to enforce our patent rights, we depend, in part, on our licensors to protect a substantialportion of our proprietary rights and to inform us of the status of those protections and efforts thereto. Our licensors may also be notified of alleged infringement and be sued for infringement of third-party patents or other proprietary rights. We may havelimited, if any, control or involvement over the defense of these claims, and our licensors could be subject to injunctions and temporary or permanentexclusionary orders in the U.S. or other countries. Our licensors are not obligated to defend or assist in our defense against third-party claims of infringement.We have limited, if any, control over the amount or timing of resources, if any, that our licensors devote on our behalf or the priority they place on thedefense of such third-party claims of infringement. In addition, in spite of our best efforts, our licensors might conclude that we have materially breached our license agreements and might therefore seek toterminate the license agreements, thereby removing our ability to obtain regulatory approval and to market products covered by these license agreements.Our licensors may also seek to terminate the license agreements if we fail to satisfy our diligence obligations and/or meet specified milestones or uponinsolvency. From time to time, we have had to request extensions of our development obligations contained in some of our license agreements, and we mayneed to seek further extensions in the future. 56Table of Contents Although we have obtained such extensions in the past, there can be no assurance that our licensors will continue to extend the development timelines orother milestones contained in our license agreements. If these in-licenses are terminated, or if the underlying patents fail to provide the intended marketexclusivity, we could lose our rights to develop and commercialize ELZONRIS and the product candidates governed by the licenses, and competitors wouldhave the freedom to seek regulatory approval of, and to market, products identical to ours. This could have a material adverse effect on our competitivebusiness position and our business prospects. We could be unsuccessful in obtaining patent protection on one or more components of our platform technology. We believe that an important factor in our competitive position relative to other companies in the field of targeted-oncology therapeutics is our proprietaryinnovative platform technology, StemScreen®. We believe that this platform is useful for identifying new potential product candidates. We have an issuedCanadian patent and a pending U.S. patent application for StemScreen®, however, there is no guarantee that any of such pending patent applications willresult in issued patents, and, even if patents eventually issue, there is no certainty that the issued claims will have adequate scope to preserve our competitiveposition. In addition, by practicing our technology in jurisdictions where we do not have patent protection, third-parties could substantially weaken ourcompetitive position in oncology research and development. Confidentiality agreements with employees and third-parties may not prevent unauthorized disclosure of trade secrets and other proprietary information. In addition to patents, we rely on trade secrets, technical know-how, and proprietary information concerning our business strategy in order to protect ourcompetitive position in the field of oncology. In the course of our research and development activities and our business activities, we often rely onconfidentiality agreements to protect our proprietary information. Such confidentiality agreements are used, for example, when we talk to vendors oflaboratory or clinical development services or potential strategic partners. In addition, each of our employees is required to sign a confidentiality agreementupon joining our company. We take steps to protect our proprietary information, and our confidentiality agreements are carefully drafted to protect ourproprietary interests. Nevertheless, there can be no guarantee that an employee or an outside party will not make an unauthorized disclosure of ourproprietary confidential information. This might happen intentionally or inadvertently, and we may not be able to obtain adequate remedies for suchbreaches. It is possible that a competitor will make use of such information, and that our competitive position will be compromised, in spite of any legalaction we might take against persons making such unauthorized disclosures. Trade secrets are difficult to protect. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, or outsidescientific collaborators might intentionally or inadvertently disclose our trade secret information to competitors. Enforcing a claim that a third-party illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome isunpredictable. In addition, courts outside the United States sometimes are less willing than U.S. courts to protect trade secrets. Moreover, if any of our tradesecrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom theycommunicate it, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developedby a competitor, our competitive position would be harmed. Our research and development strategic partners may have rights to publish data and other information to which we have rights. In addition, we sometimesengage individuals or entities to conduct research relevant to our business. The ability of these individuals or entities to publish or otherwise publicly disclose data and other information generated during the course of their researchis subject to certain contractual limitations. These contractual provisions may be insufficient or inadequate to protect our confidential information. If we donot apply for patent protection prior to such publication, or if we cannot otherwise maintain the confidentiality of our proprietary technology and otherconfidential information, then our ability to obtain patent protection or to protect our trade secret information may be jeopardized. Intellectual property rights do not necessarily address all potential threats to our competitive advantage. The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may notadequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative: · others may be able to make compounds that are the same as or similar to our products or product candidates but that are not covered by theclaims of the patents that we own or have exclusively licensed; · we or our licensors or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pendingpatent application that we own or have exclusively licensed; 57Table of Contents · we or our licensors or any future strategic partners 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 intellectualproperty rights; · it is possible that our pending patent applications will not lead to issued patents; · it is possible that our applications for patent term extension for ELZONRIS pursuant to the Hatch Waxman Act will not result in added patentterm, or may result in a shorter patent term extension than we applied for or that is available under the Hatch Waxman Act; · the scope of our issued patents may not extend to competitive products developed or produced by others; · issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid orunenforceable, as a result of legal challenges by our competitors; · our competitors might conduct research and development activities in countries where we do not have patent rights, or where the applicablelaws provide a safe harbor exemption from infringement liability for certain research purposes, and then use the information learned from suchactivities to develop competitive products for sale in our major commercial markets; · we may not develop additional proprietary technologies that are patentable; and · the intellectual property rights of others may have an adverse effect on our business. Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect ELZONRIS and our productcandidates. As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining andenforcing patents in the biopharma industry involve both technological and legal complexities and is costly, time-consuming and inherently uncertain. Inaddition, in recent years, Congress has passed patent-reform legislation providing new or revised limitations on attaining, maintaining and enforcing patentrights in the U.S. Further, the Supreme Court has issued several decisions in patent cases in recent years, which either narrow the scope of patent protection orweaken 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 respectto the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governingpatents could change in unpredictable ways that could hinder our ability to obtain new patents or to enforce our existing patents and patents that we mightobtain in the future. 58Table of Contents Risks Related to Our Common Stock The market price of our common stock may be highly volatile and our stockholders could incur substantial losses. The market price of our common stock may be highly volatile, and could be subject to wide fluctuations in response to various factors, some of which arebeyond our control. Since our initial public offering which occurred in January 2013, the price of our common stock has ranged from $3.88 per share to$47.25 per share. The stock market in general and the market for biopharmaceutical companies, in particular have experienced extreme volatility that hasoften been unrelated to the operating performance of particular companies. The market price for our common stock may be influenced by many factors,including: · results from or delays of clinical trials of our products or product candidates, as well as results of regulatory reviews relating to the approval ofour product candidates; · our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial; · our dependence on third-parties, including clinical research organizations and contract manufacturing organizations, trial sites, clinical trialsponsors and clinical investigators; · our ability to commercialize our approved product; · the results of our efforts to discover, develop, acquire or in-license additional product candidates or products; · new products, product candidates or new uses for existing products or technologies introduced or announced by our competitors and the timingof these introductions or announcements; · regulatory or legal developments in the United States and other countries; · our ability to maintain the license agreements for our products or product candidates; · developments or disputes concerning patent applications, issued patents or other proprietary rights; · the recruitment or departure of key scientific or management personnel; · the level of expenses related to any of our products or product candidates or clinical development programs; · actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; · variations in our financial results or those of companies that are perceived to be similar to us; · sales of common stock by us or our stockholders in the future, as well as the overall trading volume of our common stock; · changes in the structure of healthcare payment systems and product pricing restrictions; · market conditions in the pharmaceutical and biotechnology sectors; · general economic, industry and market conditions and other factors that may be unrelated to our operating performance or the operatingperformance of our competitors, including changes in market valuations of similar companies; and · the other factors described in this “Risk Factors” section. Our executive officers, directors, and principal stockholders maintain the ability to exert substantial influence over all matters submitted to stockholdersfor approval. Our executive officers, directors and principal stockholders beneficially own shares representing approximately 19.4% of our outstanding capital stock. As aresult, if these stockholders were to choose to act together, they would be able to exert substantial influence over all matters submitted to our stockholders forapproval, as well as our management and affairs. For example, these 59Table of Contents persons, if they choose to act together, would exert substantial influence over the election of directors and approval of any merger, consolidation or sale of allor substantially all of our assets. This concentration of voting power could delay or prevent an acquisition of our company on terms that other stockholdersmay desire. Provisions in our corporate charter documents 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 corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholdersmay consider favorable, including transactions in which they might otherwise receive a premium for their shares. These provisions could also limit the pricethat investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. Among otherthings, these provisions: · 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 nominations to our board ofdirectors; · require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by writtenconsent; · limit who may call special stockholder meetings and the matters transacted at such meetings; · authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” thatwould work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by ourboard of directors; and · require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to amend or repeal certainprovisions of our charter or bylaws. Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, whichprohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date ofthe transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribedmanner. Any provision in our corporate charter or our bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit theopportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing topay for our common stock. If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results orprevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the tradingprice of our common stock. Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controlsand procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in theirimplementation, could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of theSarbanes-Oxley Act, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls overfinancial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identifyother areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information,which could have a negative effect on the trading price of our common stock. 60Table of Contents We do not expect to pay dividends on our capital stock in the foreseeable future. We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth anddevelopment of our business, and we do not anticipate paying any cash dividends on our capital stock in the foreseeable future. In addition, the terms of anyfuture 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 gainfor the foreseeable future. 61Table of Contents Item 1B. Unresolved Staff Comments None. Item 2. Properties Our corporate and executive office is located in New York, New York. Our New York facility consists of subleased space at 750 Lexington Avenue, EleventhFloor, New York, New York 10022. Item 3. Legal Proceedings From time to time, we are involved in legal proceedings in the ordinary course of our business. Refer to Note 13: Commitments and Contingencies for moreinformation on legal proceedings. Item 4. Mine Safety Disclosures Not applicable. 62Table of Contents Part II Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the NASDAQ Capital Market and trades under the symbol “STML” and has been publicly traded since January 31, 2013. Priorto that time, there was no public market for our common stock. The following table sets forth the high and low sales prices for our common stock as reportedon the NASDAQ Capital Market for the periods indicated. High Low2017First Quarter$14.25$5.50Second Quarter9.657.30Third Quarter11.707.30Fourth Quarter16.0010.202018First Quarter$18.75$13.05Second Quarter20.5514.15Third Quarter17.8513.90Fourth Quarter17.387.82 Holders The number of record holders of our common stock as of March 15, 2019, was 158. This number does not include beneficial owners whose shares are held bynominees in street name. Dividends We have never declared or paid any cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. Anyfuture determination to pay dividends will be at the discretion of our board of directors. Securities Authorized for Issuance under Equity Compensation Plans The following table contains information about our equity compensation plans as of December 31, 2018. Equity Compensation Plan Information Plan Category Number ofsecurities to beissued uponexercise ofoutstanding optionsand restricted stock Weighted-averageexercise price ofoutstandingoptions Number ofsecuritiesremainingavailable forfuture issuanceunder equitycompensationplans (excludingsecurities reflectedin column (a)) (a) (b) (c)Equity compensation plans approved by security holdersOptions3,514,018$9.591,727,513Restricted stock2,794,455N/A—Equity compensation plans not approved by security holders———Total6,308,473—1,727,513 63Table of Contents Common Stock Performance Graph The following graph compares the cumulative total stockholder return on our common stock for the period from January 28, 2013 through December 31,2018, with the cumulative total return over such period on (i) the U.S. Index of The NASDAQ Stock Market and (ii) the Biotechnology Index of TheNASDAQ Stock Market. The graph assumes an investment of $100 on January 28, 2013, in our common stock (at the closing market price) and in each of theindices listed above, and assumes the reinvestment of dividends. COMPARISON OF 5 YEARS CUMULATIVE TOTAL RETURN*Among Stemline Therapeutics, Inc., the NASDAQ Composite Indexand the NASDAQ Biotechnology Index * $100 invested on January 28, 2013 in stock or index, including reinvestment of dividends.Fiscal year ending December 31. 64Table of Contents Item 6. Selected Financial Data You should read the following selected financial data together with our financial statements and the related notes appearing at the end of this Form 10-K andthe “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this Form 10-K. We have derived the financialinformation from our audited financial statements. Our historical results for any prior period are not necessarily indicative of results to be expected in anyfuture period. Year Ended December 31,20182017 2016 2015 2014 Statement of operations data:Grant Income$500,000$898,199$1,041,354$654,160$335,287Operating expenses:Research and development$47,725,019$50,242,386$27,869,921$29,458,676$21,240,599General and administrative39,061,66719,214,20712,056,8908,828,8438,084,580Total operating expenses86,786,68669,456,59339,926,81138,287,51929,325,179Loss from operations(86,286,686)(68,558,394)(38,885,457)(37,633,359)(28,989,892)Other (expense) income(7,505)(6,330)11,4381,6093,607Interest expense(794)————Interest income1,270,620736,330545,718387,889156,310Net loss before income taxes$(85,024,365)$(67,828,394)$(38,328,301)$(37,243,861)$(28,829,975)Income tax benefit——25,296——Net loss$(85,024,365)$(67,828,394)$(38,303,005)$(37,243,861)$(28,829,975)Net (loss) / income attributable to commonstockholders per common share:Basic and Diluted$(2.99)$(2.94)$(2.15)$(2.15)$(2.23)Weighted average number of common shares:Basic and Diluted28,388,90123,056,92817,804,68117,289,02112,936,741 As of December 31,20182017 2016 2015 2014 Balance sheet data:Cash and cash equivalents$9,443,667$4,795,098$10,316,064$13,376,196$25,007,217Total assets$63,493,570$67,006,168$68,119,098$98,215,623$60,494,992Other liabilities$72,591$96,826$142,200$648,190$607,999Accumulated deficit$(289,088,064)$(204,275,690)$(135,742,607)$(97,439,602)$(60,195,741)Total stockholders’ equity$42,202,055$47,070,429$57,723,085$88,111,956$55,413,151 65Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Unless the context requires otherwise, references in this report to “Stemline,” “Company,” “we,” “us” and “our” refer to Stemline Therapeutics, Inc. The following discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the future. Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our resultscould differ materially from the results anticipated by our forward-looking statements as a result of many known or unknown factors, including, but notlimited to, those factors discussed in “Item 1A. Risk Factors.” See also the “Special Cautionary Notice Regarding Forward-Looking Statements” set forth atthe beginning of this report. You should read the following discussion and analysis in conjunction with “Item 6. Selected financial Data,” “Item 8. Financial Statements andSupplementary Data,” and our financial statements beginning on page F-1 of this report. Overview We are a commercial-stage biopharmaceutical company focused on discovering, acquiring, developing and commercializing innovative oncologytherapeutics. In December 2018, the U.S. Food and Drug Administration, or FDA, approved our first product, ELZONRIS (tagraxofusp-erzs; SL-401), atargeted therapy directed to CD123, for the treatment of adult and pediatric patients, two years and older, with blastic plasmacytoid dendritic cell neoplasm,or BPDCN. ELZONRIS is commercially available for patients with BPDCN in the U.S. Our pipeline of product candidates includes: SL-801, SL-701, SL-901, and SL-1001. FDA approved product ELZONRIS ELZONRIS is a targeted therapy directed to the interleukin-3 receptor-a, or CD123, a target present on a wide range of malignancies, to varying extents, aswell as some autoimmune disorders. ELZONRIS has been approved by the FDA for the treatment of BPDCN in adult and pediatric patients two years andolder, in both treatment-naïve and previously-treated populations. The ELZONRIS label contains a boxed warning for capillary leak syndrome, or CLS,which may be life-threatening or fatal, and can occur in patients receiving ELZONRIS. Physicians are advised to monitor for signs and symptoms of CLS andtake actions as recommended in the full prescribing information. ELZONRIS is the first treatment approved for BPDCN and the first approved CD123-targeted therapy. We are also seeking to broaden the commercial potential of ELZONRIS, globally, through ongoing clinical trials in additional indications including chronicmyelomonocytic leukemia, or CMML, and myelofibrosis, or MF, acute myeloid leukemia, or AML, as well as planned trials in other indications. Additionalplanned trials include BPDCN maintenance post-stem cell transplant and AML subsets that have the BPDCN diagnostic signature and/or enriched for CD123expression. Clinical pipeline product candidates SL-801 SL-801 is a structurally novel, oral, small molecule, reversible inhibitor of Exportin-1, or XPO1, a nuclear transport protein implicated in a variety ofmalignancies. SL-801 has demonstrated preclinical in vitro and in vivo antitumor activity against a wide array of solid and hematologic cancers. SL-801’spotential ability to reversibly bind XPO1 may offer the possibility to mitigate side effects and help optimize the therapeutic index. We are currently enrollingpatients with advanced solid tumors in a Phase 1 dose escalation trial of single agent SL-801. The dosing regimen for SL-801 is currently being revised inlight of the occurrence of non-dose limiting gastrointestinal effects. Our plan is to resume dosing at 70 mg/day for days 1-2 every seven days of a 28-daycycle and we expect to provide further data updates throughout 2019. SL-701 SL-701 is an immunotherapy designed to direct the immune system to attack targets present on brain cancer and other malignancies. SL-701 is comprised ofseveral short synthetic peptides that correspond to epitopes of targets including IL-13Ra2, EphA2, and survivin; two of these synthetic peptides (IL-13Ra2and survivin) are mutant and believed to enhance immune activity. We completed a Phase 2 trial of SL-701 in adult patients with second-line glioblastoma,or GBM. Phase 2 data suggest SL-701 is generating target specific CD8+ T-cell responses in patients, which may be translating into improved clinicaloutcomes, including improved OS, in a subset of patients. SL-701 was awarded ODD from the FDA for the treatment of glioma in January 2015. We expect toprovide further updates relating to this program later this year. 66TMTable of Contents SL-901 SL-901 is an oral, small molecule kinase inhibitor. In December 2017, we in-licensed this drug candidate from UCB Biopharma Sprl, or UCB. Prior to in-licensing, the agent had demonstrated preclinical activity in several tumor types, and was evaluated in an abbreviated Phase 1 clinical trial in Europe. Apartial response, or PR, was reported in one patient with advanced lung cancer. Neither a DLT nor MTD was reached in the trial and we believe further doseescalation is possible and warranted. We also believe that Sl-901 may have utility in certain non-oncologic orphan diseases and preclinical work in this areais ongoing. We are currently evaluating plans to enable a new regulatory filing, including certain IND-enabling work, to continue clinical dose escalation. SL-1001 SL-1001 is an oral, selective small molecule RET (rearranged during transfection) kinase inhibitor. Genetic alterations in the RET kinase have been found ina diverse range of cancers and, we believe, RET kinase represents a clinically validated target in multiple oncology indications. In March 2019, we in-licensed this preclinical drug candidate from the CRT Pioneer Fund. The candidate was rationally designed by scientists at Cancer Research UK ManchesterInstitute (United Kingdom), and has demonstrated potent, selective, preclinical anti-cancer activity, both in vitro and in vivo, in RET-driven tumor models.IND-enabling studies are planned, and we expect SL-1001 to enter the clinic in 2020. SL-501 SL-501, a novel CD123-targeted therapy in preclinical development, is a high-affinity variant of ELZONRIS that has shown potency, in vitro and in vivo,against several hematologic tumor types, including AML, CMML, HL, and NHL. Financings We have devoted substantially all of our resources to develop our products and product candidates, prepare for commercialization, commercialize,manufacture our products and product candidates, build our intellectual property portfolio, execute our business plan, raise capital, and provide general andadministrative support for these operations. Through December 31, 2018, we have generated minimal income to date, have not generated any income fromproduct sales, and have funded our operations primarily through public and private sales of common stock and private sales of convertible preferred stock toour investors. From inception through December 31, 2018, we have received net proceeds of $278.2 million from the sale of common stock, $12.5 millionfrom the sale of convertible preferred stock and $0.9 million from the issuance of convertible debt and $0.4 million from the exercise of our warrants. Theconvertible preferred stock was retired in March 2010 and the convertible debt was converted into common stock in April 2013. On January 18, 2019, we completed an underwritten follow-on public offering of 8,888,889 shares of our common stock, which included the underwriters’exercise in full of the option to purchase 1,333,333 additional shares, at a price of $9.00 per share. Aggregate gross proceeds from the follow-on publicoffering, including the exercise of the over-allotment option, were $92 million, and net proceeds received after underwriting fees and offering expenses wereapproximately $86.1 million. We have never been profitable and our net loss from operations was $85.0 million for the year ended December 31, 2018, $67.8 million for the year endedDecember 31, 2017 and $38.3 million for the year ended December 31, 2016. We expect to incur significant expenses and increasing operating losses for theforeseeable future. We expect our expenses to trend higher in connection with our ongoing activities, particularly as we advance our product candidatesthrough preclinical activities and clinical trials to seek regulatory approval and, if approved, commercialize such product candidates. Accordingly, we mayneed additional financing to support our continuing operations. We will seek to fund our operations through public or private equity or debt financings orother sources. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed wouldhave a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenues to achieveprofitability, and we may never do so. 67Table of Contents Litigation From time to time, we are involved in legal proceedings in the ordinary course of our business. Refer to Note 13: Commitments and Contingencies for moreinformation on legal proceedings. Financial Operations Overview Income We have not generated any income from product sales and we have generated minimal income to date, all relating to a $3.5 million research funding receivedto date from the Leukemia and Lymphoma Society, or LLS, where we recognized income of $0.5 million during 2018, $0.9 million during 2017 and, $1.0million during 2016. In the future, we may generate revenue from product sales, contingent on marketing approval for one of our product candidates andmarket acceptance of that product. In addition, to the extent we enter into licensing or collaboration arrangements, we may have additional sources ofincome. If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval for them, our ability to generate futurerevenue, and our results of operations and financial position, would be materially adversely affected. Research and Development Expenses The following table shows our research and development expenses for the years ended December 31, 2018, 2017 and 2016: Year Ended December 31,20182017 2016ELZONRIS$26,126,934$33,855,807$14,161,925SL-8013,110,6082,764,6942,387,036SL-701428,1651,211,2412,536,927Personnel expenses15,308,87710,276,9488,022,193Other expenses2,750,4352,133,696761,840 Total research and development expenses$47,725,019$50,242,386$27,869,921 Research and development expenses consist of costs associated with the development of our product candidates and our platform technology, which include: · clinical trial costs; · chemistry, manufacturing and controls, or CMC, related costs, particularly as they relate to process characterization and validation expenses forELZONRIS as required to support BLA submission requirements; · nonclinical costs; · regulatory costs including BLA related expenses; · employee-related expenses, including salaries, benefits, travel and stock-based compensation expense, and consultant costs; · costs associated with work contracted and conducted by third-party contract research organizations, or CROs, contract manufacturingorganizations, or CMOs, academic institutions and consultants; and · license fees and milestone payments related to in-licensed products and technology. We expense research and development costs to operations as incurred. Where milestone payments are due to third parties under research and developmentcollaboration arrangements or other contractual agreements, the milestone payment obligations are expensed when the milestone conditions are met and theamount of payment is reasonably estimable. We account for nonrefundable advance payments for goods and services that will be used in future research anddevelopment activities as expenses when the services have been performed or when the goods have been received, rather than when the payments are made. We use our employee and infrastructure resources across multiple research and development projects. We do not allocate employee-related expenses ordepreciation to any particular project. The components of our research and development costs are described in more detail in “Results of Operations.” 68Table of Contents We anticipate that our research and development expenses will trend higher in future periods as we seek to complete development of our most advancedproduct candidates,commercialize ELZONRIS, and continue to develop our other product candidates and our platform technology. We anticipate that themajority of our research and development expense will be devoted to the development of our product candidates. The successful development of our product candidates is highly uncertain. As of this time, other than as discussed above, we cannot reasonably estimate orknow the nature, timing and estimated costs of the efforts that will be necessary to complete development of our product candidates or the period, if any, inwhich material net cash inflows from our product candidates may commence. This is due to the numerous risks and uncertainties associated with developingdrugs, including the uncertainty of: · the scope, enrollment, rate of progress and costs of our planned, as well as any additional, clinical trials and other research and developmentactivities; · timing and results of future clinical trials; · the potential benefits of our product candidates over other therapies; · the potential safety risks of our product candidate compared to other therapies; · the costs, timing and outcome of regulatory submissions and approvals; · our ability to market and commercialize, either on our own or with strategic partners, and achieve market acceptance for any of our products orproduct candidates that we are developing or may develop in the future; · our ability to manufacture, at a reasonable expense, adequate supplies of our products or product candidates for use in planned and futureclinical trials and/or commercial distribution in the event of a successful regulatory approval; and · the costs of preparing, filing, prosecuting, defending and enforcing patents and other intellectual property. A change in the outcome of any of these or similar variables with respect to the development of a product or product candidate could mean a significantchange in the costs and timing associated with the development of that product or product candidate. For example, if the FDA or other regulatory authoritywere to require us to conduct clinical trials beyond those which we currently anticipate will be required for the completion of clinical development of aproduct candidate, we could be required to expend significant additional financial resources and time on the completion of clinical development. A similarresult could occur if we experience significant delays in the progress of, including enrollment in, any clinical trials. General and Administrative Expenses General and administrative expenses consist primarily of salaries and related costs for personnel, including stock-based compensation expense. The primaryfunctions included in our general and administrative expenses are legal, finance, human resources, investor relations, commercial operations and businessdevelopment departments. Other general and administrative expenses include facility costs, insurance expense and professional fees for legal, businessdevelopment, consulting and accounting services. We anticipate that our general and administrative expenses will be moderately higher in future periods to further support a commercial product launch forELZONRIS. Interest Income Interest income consists of interest earned on our cash, cash equivalents, short-term investments and long-term investments. Given the current interest rateenvironment and that our primary investment is in 100% U.S. Treasury and Agency securities and related money market funds coupled with FDIC-insuredbank certificates of deposits, we expect interest income to be minimal in future years. 69Table of Contents Critical Accounting Policies and Estimates To understand our financial statements, it is important to understand our critical accounting policies and estimates. We prepare our financial statements inaccordance with generally accepted accounting principles, or GAAP. The preparation of financial statements also requires us to make estimates andassumptions that affect the reported amounts of assets, liabilities, costs and expenses and related disclosures. We base our estimates on historical experienceand on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates madeby our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financialcondition, results of operations and cash flows will be affected. We believe that the accounting policies discussed below are critical to understanding ourhistorical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. Our significant accounting policies are described in more detail in the notes to our financial statements appearing at the end of this Form 10-K. However, webelieve that the following accounting policies are the most critical to aid you in fully understanding and evaluating our financial condition and results ofoperations. Accrued Research and Development Expenses As part of the process of preparing our financial statements, we are required to estimate our accrued expenses. This process involves reviewing quotations andcontracts, identifying services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for theservice when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears forservices performed or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date in our financialstatements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers andmake adjustments if necessary. The significant estimates in our accrued research and development expenses include fees paid to CROs and CMOs,consultants and other third-party organizations in connection with research and development and administrative activities for which we have not yet beeninvoiced. We base our expenses related to CROs and CMOs on our estimates of the services received and efforts expended pursuant to quotes and contracts with CROsand CMOs that conduct research and development on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract tocontract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services providedand result in a prepayment of the research and development expense. In accruing service fees, we estimate the time period over which services will beperformed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from ourestimate, we may adjust the accrual or prepaid accordingly. Although we do not expect our estimates to be materially different from amounts actuallyincurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and couldresult in us reporting amounts that are too high or too low in any particular period. Income Taxes We use the liability method of accounting for income taxes as set forth in the authoritative guidance for income taxes. Under this method, we recognizedeferred tax liabilities and assets for the expected future tax consequences of temporary differences between the respective carrying amounts and tax bases ofour assets and liabilities. We continue to assess our ability to realize our deferred tax assets, which primarily consist of net operating losses, or NOL, carry-forwards. In assessing ourability to realize these deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will berealized. We establish valuation allowances when necessary to reduce deferred tax assets to the amounts expected to be realized. The factors used to assessthe likelihood of realization include our latest forecast of future taxable income and available tax planning strategies that could be implemented to realizethe net deferred tax assets. As of December 31, 2018, 2017 and 2016, our deferred tax assets had full valuation allowances on them as we did not havesufficient positive evidence to recognize such deferred tax assets. The Internal Revenue Code of 1986, as amended (the “Code”), provides for a limitation of the annual use of net operating losses and other tax attributes(such as research and development tax credit carryforwards) following certain ownership changes (as defined by the Code) that could limit our ability toutilize these carryforwards. At this time, we have not completed a study to assess whether an ownership change under section 382 of the Code has occurred, orwhether there have been multiple ownership changes since our formation, due to the costs and complexities associated with such a study. We may haveexperienced various ownership changes, as defined by the Code, as a result of past financing transactions. Accordingly, our ability to utilize theaforementioned carryforwards may be limited. Additionally, U.S. tax laws limit the time during which these carryforwards may be applied against futuretaxes. Therefore, we may not be able to take full advantage of these carryforwards for federal or state income tax purposes. 70Table of Contents If any of our products are approved for commercial sale and we start to realize profitability, we may determine that there is sufficient positive evidence tosupport a reversal of, or decrease in, the valuation allowance on our deferred tax assets. If we were to reverse all or some part of our valuation allowance, ourfinancial statements in the period of reversal would likely reflect an increase in assets on our balance sheet and a corresponding tax benefit to our statementof operations in the amount of the reversal. As of December 31, 2018, we had net operating losses of $209.5 million for federal and $213.3 million for state purposes and research and developmentcredits of $39.0 million which expire in 2023 through 2038. We have applied Accounting Standards Codification (ASC) 740-10, Accounting for Uncertainty in Income Taxes — an Interpretation of FASB StatementNo. 109, on January 1, 2007. We analyzed our tax position in all jurisdictions where we are required to file an income tax return and concluded that we donot have any material unrecognized tax benefits. We file U.S. income tax returns as well as tax returns for any state jurisdiction in which we are authorized toconduct business. Our policy is to recognize interest and penalties accrued on any unrecognized tax benefit within the provision for income taxes on thestatement of operations. We have no interest or penalties accrued for any unrecognized tax benefits for any periods presented. Our annual provision for income taxes and the determination of the resulting deferred tax assets and liabilities involve a significant amount of managementjudgment. Management’s judgments, assumptions and estimates relative to the current provision for income taxes take into account current tax laws, ourinterpretation of current tax laws and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. We operate withinfederal, state and international taxing jurisdictions and are subject to audit in these jurisdictions. These audits can involve complex issues that may requirean extended period of time to resolve. During the fourth quarter of the 2018 financial statements, we completed our analysis and determined no additional changes were necessary to the previouslyrecorded provisional amounts. Stock-Based Compensation We account for stock-based compensation in accordance with the provisions of ASC 718, Compensation—Stock Compensation. Accordingly, compensationcosts related to equity instruments granted are recognized over the requisite service periods of the awards on a straight-line basis at the grant-date fair valuecalculated by either using a Black-Scholes option pricing model for stock option valuations or the closing stock price on date of grant for restricted stock. OnJanuary 1, 2017, we adopted ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, or ASU 2016-09, which amends AccountingStandards Codification, or ASC, Topic 718, Compensation — Stock Compensation. ASU 2016-09 simplifies several aspects of the accounting for share-basedpayment transactions, including the accounting for forfeitures, income tax consequences, classification of awards as either equity or liabilities, andclassification on the statement of cash flows. Upon adoption, we are accounting for forfeitures as they occur rather than estimate a forfeiture rate and we haverecorded a cumulative-effect adjustment in equity of $0.7 million on the date of initial adoption. In addition, the standard requires that excess tax benefitsand deficiencies that arise upon vesting or exercise of share-based payments be recognized as an income tax benefit and expense in the income statement. Previously, such amounts were recognized as an increase and decrease in additional paid-in capital. We have adopted this aspect of the standardprospectively, and accordingly the excess tax benefits arising from share-based payments was approximately $7.1 million, $0.6 million and $0 for the yearsended December 31, 2018, 2017 and 2016, respectively. On June 20, 2018, the FASB issued ASU No. 2018- 07, Compensation — Stock Compensation(Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of Topic 718 to include share-based paymenttransactions for acquiring goods and services from nonemployees. The Company early adopted ASU No. 2018-07 on April 1, 2018 and the net impactrelating to the adoption was a $0.2 million decrease to accumulated deficit for the impact prior to April 1, 2018 Income Recognition We have not yet generated any revenue from product sales. Our sole source of revenue is grant income related to $3.5 million of research grants received todate from the Leukemia and Lymphoma Society. Grant payments received prior to our performance of work required by the terms of the research grant arerecorded as deferred revenue and recognized as grant income once work is performed and qualifying costs are incurred. 71Table of Contents Results of Operations Comparison of Years Ended December 31, 2018 and 2017 Research and development expense. Research and development expense was $47.7 million for the year ended December 31, 2018, compared with $50.2million for the year ended December 31, 2017, which represents a decrease of $2.5 million. The lower costs were primarily driven by the wind-down andcompletion of the pivotal clinical trial for ELZONRIS partially offset by an increase in regulatory expenses to support the BLA filing for ELZONRIS. General and administrative expense. General and administrative expenses were $39.1 million for the year ended December 31, 2018, compared with $19.2million for the year ended December 31, 2017, which represents an increase of $19.9 million. The higher costs were primarily attributable to a $16.5 millionincrease in pre-launch expenses in support of preparing for commercialization of ELZONRIS in BPDCN. Additionally, the higher expense was also due to a$3.1 million increase in non-cash stock compensation expense due in part to an increase in headcount. We expect commercial related expense will increasefor the foreseeable future at a more modest rate to support the commercial launch of ELZONRIS. Interest income. Interest income was $1.3 million for the year ended December 31, 2018, compared with $0.7 million for the year ended December 31, 2017.The increase in income of $0.6 million is primarily due to higher market interest rates earned on our investment balances. Comparison of Years Ended December 31, 2017 and 2016 Research and development expense. Research and development expense was $50.2 million for the year ended December 31, 2017, compared with $27.9million for the year ended December 31, 2016, which represents an increase of $22.3 million. The higher costs were primarily driven by an increase of $14.4million in manufacturing expense to support clinical trials and a BLA filing for ELZONRIS. We also incurred $5.1 million in regulatory expenses to supporta potential BLA filing for ELZONRIS. Additionally, we incurred $2.2 million in higher cash and noncash stock-based compensation expense resulting froman increase in headcount. General and administrative expense. General and administrative expenses were $19.2 million for the year ended December 31, 2017, compared with $12.1million for the year ended December 31, 2016, which represents an increase of $7.1 million. The higher costs were primarily attributable to $3.2 million oflegal fees and by $2.3 million in pre-launch expenses in support of preparing for commercialization of ELZONRIS. Also driving the increase in costs was$1.7 million of cash compensation and non-cash stock-based compensation expense. Interest income. Interest income was $0.7 million for the year ended December 31, 2017, compared with $0.5 for the year ended December 31, 2016. Theincrease in income of $0.2 million is primarily due to higher average cash and investment balances during 2017 versus the prior year. Liquidity and Capital Resources Sources of Liquidity We have financed our operations to date primarily through proceeds from public sales of common stock via our 2013 IPO and subsequent follow-onofferings. To date, we have not generated any revenue from the sale of products. We have incurred losses and generated negative cash flows from operationssince inception. Since inception and through December 31, 2018, we received net proceeds of $278.2 million primarily from the public sale of common stock from our 2013IPO and four subsequent follow-on public offerings. On January 18, 2019, we completed an underwritten follow-on public offering of 8,888,889 shares of ourcommon stock, which included the underwriters’ exercise in full of the option to purchase 1,333,333 additional shares, at a price of $9.00 per share.Aggregate gross proceeds from the follow-on public offering, including the exercise of the over-allotment option, were $92 million, and net proceedsreceived after underwriting fees and offering expenses were approximately $86.1 million. For the year ended December 31, 2018, we received net proceeds of $8.2 million from an At-the-Market offering, selling 442,579 shares at an average price of$19.24 per share. As of December 31, 2018, our cash, cash equivalents and short and long-term investments totaled $60.1 million. We primarily invest our cash, cashequivalents, short-term investments and long-term investments in U.S. Treasury and Agency securities and related money market funds and FDIC-insuredbank certificates of deposit, with the balance in commercial bank operating accounts. We believe that our existing cash, cash equivalents, short-terminvestments and long-term investments including cash proceeds received from our follow-on offering in January 2019, will be sufficient to fund ouroperations for at least the next two years. 72Table of Contents Cash Flows The following table sets forth the primary sources and uses of cash for each of the periods set forth below: Year Ended December 31,20182017 2016 Net cash used in operating activities$(72,181,918)$(49,618,794)$(30,092,774)Net cash provided by (used in) investing activities10,796,584(4,437,050)26,676,870Net cash provided by financing activities66,033,90348,534,878355,772Net increase (decrease) in cash and cash equivalents$4,648,569$(5,520,966)$(3,060,132) Operating activities. The use of cash in all periods resulted primarily from our net losses adjusted for stock-based compensation expense, non-cashdepreciation expense and changes in the components of working capital. The net cash used in operating activities in 2018, 2017, and 2016 primarily resultedfrom research and development expenses as we continued our clinical trial activities relating to ELZONRIS, SL-801, and SL-701. Additional research anddevelopment costs also include CMC-related expenses for the manufacture of drug substance and drug product of our product candidates in development.During 2018, there was also cash used for pre-launch expenses in support of the commercial launch of ELZONRIS in the U.S. Investing activities. The net cash provided by and used in investing activities for 2018, 2017, and 2016 reflects purchases and redemptions of short-term andlong-term investments within our U.S. Treasury-related investment and bank certificate of deposit portfolios, net of maturities. Financing activities. The net cash provided by financing activities for 2018 resulted primarily from our January 2018 issuance and sale of 4,255,000 sharesof our common stock, which included the exercise in full of the option to purchase 555,000 additional shares, which generated gross cash proceeds of $59.6million ($55.7 million cash proceeds, net of expenses). In addition, for the year ended December 31, 2018, we received net proceeds of $8.2 million from anAt-the-Market offering, selling 442,579 shares at an average price of $19.24 per share. The net cash provided by financing activities for 2017 resultedprimarily from our January 2017 issuance and sale of 5,175,000 shares of our common stock which generated gross cash proceeds of $51.8 million ($48.2million cash proceeds, net of expenses). The net cash provided by financing activities for 2018, 2017 and 2016 was also impacted by the issuance of stockrelated to the 2015 Employee Stock Purchase Plan and exercise of employee and consultant stock options. Funding Requirements All of our product candidates are still in clinical or preclinical development. We expect to continue to incur significant expenses and increased operatinglosses for the foreseeable future. We anticipate that our expenses will increase if and as we: · continue the ongoing clinical trials, and initiate the planned clinical trials, of our product candidates; · continue the research and development of our other product candidates; · seek to identify additional product candidates; · acquire or in-license other products and technologies; · seek marketing approvals for our product candidates that successfully complete pre-market clinical trials; · establish, either on our own or with strategic partners, a manufacturing, sales, marketing and distribution infrastructure to commercialize anyproducts for which we may obtain marketing approval; · continue to incur legal expenses relating to our ongoing shareholder class action lawsuits; · maintain, leverage and expand our intellectual property portfolio; and · add operational, financial and management information systems and personnel, including personnel to support our product development andfuture commercialization efforts. 73Table of Contents Our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements for at least the next two years. Wehave based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, and the extent to whichwe may enter into collaborations with third-parties for development and commercialization of our product candidates, we are unable to estimate the amountsof increased capital outlays and operating expenses associated with completing the development of our current product candidates. Our future capitalrequirements will depend on many factors, including: · the progress and results of the ongoing and future clinical trials of our product candidates; · the scope, progress, results and costs of compound discovery, preclinical development, laboratory testing and clinical trials for our productcandidates now or in the future; · the extent to which we acquire or in-license other products and technologies; · the costs, timing and outcome of regulatory review of our product candidates; · the costs of future commercialization activities, including product sales promotion, marketing, manufacturing and distribution, for any of ourproduct candidates for which we receive marketing approval; · revenue to be received from commercial sales of ELZONRIS and possibly from our product candidates, should any of our other productcandidates receive marketing approval; · the progress of our ongoing shareholder class action lawsuits; · the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defendingintellectual property-related claims; and · our ability to establish any future collaboration arrangements on favorable terms, if 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, debtfinancings, collaborations, strategic alliances and licensing arrangements. We do not have any committed external source of funds. To the extent that we raiseadditional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of thesesecurities may include liquidation or other preferences that adversely affect the rights of a common stockholder. Debt financing, if available, may involveagreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expendituresor declaring dividends. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third-parties, we may have torelinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not befavorable 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 productdevelopment or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop andmarket ourselves. 74Table of Contents Expected Cash Requirements for Contractual Obligations The following table presents our expected cash requirements for contractual obligations for each of the following years subsequent to December 31, 2018: Contractual Obligations and Commitments The following table summarizes our contractual obligations at December 31, 2018: Less than 1-3 3-5 More than Total 1 year years years 5 years Operating lease obligations (1)$1,863,465$1,011,420$852,045$—$—Clinical trial CRO obligations (2)6,301,3625,612,224689,138——Bioprocessing Contracts (3)10,378,46810,378,468———License agreements (4)1,579,962475,740290,492310,492503,238Regulatory Contracts (5)3,023,3213,023,321———Commercial Contracts (6)9,064,7959,064,795———Collaboration agreement (7)4,350,0004,350,000———Other commitments (8)2,572,5762,409,891162,685——Total$39,133,949$36,325,859$1,994,360$310,492$503,238 (1) Operating lease obligations reflects our lease agreement with respect to our corporate offices at 750 Lexington Avenue, New York, New York, for amonthly rent of $69,750. The original term of this lease agreement was 42 months and it was set to expire on December 31, 2019. We exercised anoption to extend this lease agreement for an additional 12 months to December 31, 2020. In July 2018, we entered into a new leasing agreement foradditional office space at 750 Lexington Ave, New York, New York, for a monthly rent of $23,400. The term of this lease agreement is 12 monthsand it expires on July 31, 2019. (2) We have agreements in place with various contract research organizations (CROs) to facilitate research, clinical and data management services inconnection with our three clinical-stage product candidates: ELZONRIS, SL-801, and SL-701. (3) Includes commitments to our third party drug substance and drug product manufacturers. Also includes contractual obligations for stability testingon drug substance and drug product inventory. (4) We have executed several license agreements. Other than the payments noted in the table above, milestone and royalty payments associated withlicensing have not been included as management cannot reasonably estimate if or when they will occur. These agreements include the following: · Under a research and license agreement with Scott and White Hospital for ELZONRIS, we are required to pay royalties on annual sales oflicensed products. · Under three separate license agreements with the University of Pittsburgh, we are required to make aggregate development and regulatorymilestone payments associated with SL-701 and pay royalties on net sales of licensed products. · Under an exclusive patent and non-exclusive know-how license agreement with the Cambridge University Technical Services Limited, relatedto our StemScreen® platform technology, we are required to make milestone payments upon specified regulatory events and pay royalties onsales of licensed products. · On December 26, 2014, we entered into a license agreement with CanBas, Ltd for SL-801. SL-801 is a small molecule, reversible inhibitor ofXPO1. Under the terms of the agreement, CanBas has granted us an exclusive, royalty-bearing, worldwide (excluding Japan, Korea, China andTaiwan) license, under certain patent rights, know-how and materials to 75Table of Contents research, develop, make, have made, formulate, use, sell, offer to sell and import SL-801, and any products containing or comprising suchcompound in finished dosage pharmaceutical form, for the treatment of any disease or condition in humans. We are required to make milestonepayments upon the achievement of various clinical development, regulatory and commercial milestones. Additionally, we are required to paytiered royalties on net sales of licensed products. · On December 31, 2017, the Company entered into a license agreement with UCB Biopharma Sprl (“UCB”) for SL-901. SL-901 is a smallmolecule kinase inhibitor. UCB has granted the Company an exclusive, royalty-bearing, worldwide license, under certain patent rights, know-how and materials to research, develop, make, have made, formulate, use, sell, offer to sell and import SL-901, and any products containing orcomprising such compound in finished dosage pharmaceutical form. The Company may be responsible, based on the achievement of specificclinical development, regulatory and sales-based commercial milestones, for certain payments to UCB of up to $111 million, largely consistingof approval and post-approval payments. Additionally, the Company may be obligated to pay UCB tiered royalties based on aggregate net salesof products. (5) We have agreements in place with various regulatory consultants to assist us with our BLA filing for ELZONRIS. (6) We have an agreement in place with a marketing related agency to assist us in preparation for a commercial launch for ELZONRIS. (7) In October 2013, the Company entered into a contract relating to the Therapy Acceleration Program (“the TAP Agreement”) with The Leukemia andLymphoma Society (“LLS”). LLS is a national voluntary health agency, which, among other activities, encourages and sponsors research relating toblood cancers in order to develop therapies to cure or mitigate these diseases. Pursuant to the TAP Agreement, LLS agreed to provide funding to theCompany, not to exceed $3.5 million, to support the Company’s preclinical and clinical development activities as well as providing an educationalprogram to increase physician & patient awareness of BPDCN. Through December 31, 2018, the Company has received the full $3.5 million basedon milestones achieved. In addition, Stemline has paid $0.6 million pursuant to the agreement as funding for the education program to increaseawareness of BPDCN. The Company is required to make a one-time payment upon regulatory approval and commercialization of ELZONRIS.Additionally, the Company is required to make payments based on achievement of specific sale-based commercial milestones. (8) Other commitments include certain sponsored research. Certain contractual payment obligations will extend beyond five years until certain specified milestones are achieved. For purposes of this calculation,we have assumed that these payment obligations have only been made in the eighth year. However, these payments would continue each subsequentyear until the specified milestones are achieved. Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements during the periods presented, and we do not currently have any relationships with any organizations orfinancial partnerships, such as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheetarrangements or other contractually narrow or limited purposes. Tax Loss Carryforwards As of December 31, 2018, we had net operating losses of $209.5 million for federal and $213.3 million state purposes, which are available to reduce futuretaxable income. We also had federal tax credits of approximately $39.0 million, which may be used to offset future tax liabilities. The net operating loss andtax credit carryforwards will expire at various dates through 2038. Net operating loss and tax credit carryforwards are subject to review and possibleadjustment by the Internal Revenue Service and state tax authorities and may become subject to an annual utilization limitation pursuant to the change inownership rules of Internal Revenue Code Section 382 and 383. The amount of the annual limitation is determined based on the value of our companyimmediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. At December 31, 2018, werecorded a 100% valuation allowance against our net operating loss and tax credit carryforwards, as we believe it is more likely than not that the tax benefitswill not be fully realized. Recently Adopted Accounting Standards See Note 2 to our financial statements for recently adopted accounting standards. 76Table of Contents Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are exposed to market risk related to changes in interest rates. We had cash, cash equivalents, short-term investments and long-term investments of $60.1million as of December 31, 2018, $66.2 million as of December 31, 2017 and $67.6 million as of December 31, 2016, consisting of cash, U. S. Treasury andAgency securities and Treasury-related money market funds and FDIC-insured bank certificates of deposit. Our primary exposure to market risk is interestrate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are primarily in Treasury-relateddebt securities and bank certificates of deposit. Our available for sale securities are subject to interest rate risk and will fall in value if market interest ratesincrease. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 100 basis point change ininterest rates would not have a material effect on the fair market value of our portfolio. We contract with CROs and CMOs. We may be subject to fluctuations in foreign currency rates in connection with these agreements. Transactionsdenominated in currencies other than the functional currency are recorded based on exchange rates at the time such transactions arise. As of December 31,2018, 2017 and 2016, all of our liabilities were denominated in our functional currency. Item 8. Financial Statements and Supplementary Data Our financial statements and the notes thereto, included in Part IV, Item 15(a), part 1, are incorporated by reference into this Item 8. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer (principal executive officer) and Chief Accounting Officer (principal financial officer),evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2018. The term “disclosure controls and procedures”, as defined inRules 13a-15I and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that informationrequired to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, withinthe time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed toensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated andcommunicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisionsregarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achievingtheir objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based onthe evaluation of our disclosure controls and procedures as of December 31, 2018, our Chief Executive Officer and Chief Accounting Officer concluded that,as of such date, our disclosure controls and procedures were effective. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our company. Internal control overfinancial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, thecompany’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withGAAP and includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparationof financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of our company are being made onlyin accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition, use, or disposition of our company’s assets that could have a material effect on the financial statements. 77Table of Contents Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements prepared for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internalcontrol over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject tothe risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures maydeteriorate. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2018. In making this assessment, ourmanagement used the criteria set forth in the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of theTreadway Commission. Based on its assessment, management (including our Chief Executive Officer and our Chief Financial Officer) concluded that ourinternal control over financial reporting was effective as of December 31, 2018 based on those criteria. Attestation Report of Registered Public Accounting Firm The effectiveness of our internal controls over financial reporting as of December 31, 2018 has been audited by our independent registered accounting firm,Ernst & Young LLP, as stated in their attestation report. Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Stemline Therapeutics, Inc. Opinion on Internal Control Over Financial Reporting We have audited Stemline Therapeutics, Inc.’s internal control over financial reporting as of December 31, 2018, based on criteria established in InternalControl-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). Inour opinion, Stemline Therapeutics, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as ofDecember 31, 2018, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2018 financialstatements of the Company and our report dated March 15, 2019 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. the federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing andevaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considerednecessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate. /s/ Ernst & Young LLP Stamford, ConnecticutMarch 15, 2019 Changes in Internal Control over Financial Reporting No change in our internal control over financial reporting occurred during the quarter ended December 31, 2018 that has materially affected, or is reasonablylikely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. 78Table of Contents Part III Item 10. Directors, Executive Officers and Corporate Governance The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2019 Annual Meeting of Stockholders. Item 11. Executive Compensation The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2019 Annual Meeting of Stockholders. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2019 Annual Meeting of Stockholders. Item 13. Certain Relationships and Related Transactions and Director Independence. The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2019 Annual Meeting of Stockholders. Item 14. Principal Accounting Fees and Services. The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2019 Annual Meeting of Stockholders. 79Table of Contents Part IV Item 15. Exhibits, Financial Statements Schedules. (a) 1. Financial Statements The following financial statements of Stemline Therapeutics, Inc. are filed as part of this report. INDEX TO EXHIBITS Contents Page Report of Independent Registered Public Accounting FirmF-2 Balance Sheets as of December 31, 2018 and 2017F-3 Statements of Operations for the Years ended December 31, 2018, 2017 and 2016F-4 Statements of Comprehensive Loss for the Years ended December 31, 2018, 2017 and 2016F-5 Statements of Stockholders’ Equity (Deficit) for the Years ended December 31, 2018, 2017 and 2016F-6 Statements of Cash Flows for the Years ended December 31, 2018, 2017 and 2016F-7 Notes to the Financial StatementsF-8 2. Financial Statement Schedules All schedules are omitted as the information required is inapplicable or the information is presented in the financial statements or the related notes. 3. Exhibits Exhibit No. Description3.1Restated Certificate of Incorporation of Stemline Therapeutics, Inc., filed as Exhibit 3.1 to Form 8-K on February 6, 2013 (File No.001-35619) and incorporated herein by reference. 3.2Certificate of Amendment of Restated Certificate of Incorporation of Stemline Therapeutics, Inc., filed as Exhibit 3.2 to Form 10-Q onAugust 8, 2017 (File No. 001-35619) and incorporated herein by reference. 3.3Amended and Restated Bylaws of Stemline Therapeutics, Inc., filed as Exhibit 3.2 to Form 8-K on February 6, 2013 (File No. 001-35619)and incorporated herein by reference. 3.4Certificate of Amendment of Restated Certificate of Incorporation of Stemline Therapeutics, Inc., filed as Exhibit 3.3 to Form 10-Q onAugust 14, 2013 (File No. 001-35619) and incorporated herein by reference. 4.1Specimen certificate evidencing shares of common stock, filed as Exhibit 4.1 to Form S-1/A on June 20, 2012 (File No. 333-180515) andincorporated herein by reference. 4.2Form of Representative’s Warrant Agreement, filed as Exhibit 4.2 to Form S-1/A on November 14, 2012 (File No. 333-180515) andincorporated herein by reference. 10.1†Research and License Agreement by and among the Company, Scott and White Memorial Hospital, Scott, Sherwood and BrindleyFoundation and Arthur E. Frankel, M.D., dated June 15, 2006; as amended by that certain First Amendment to Research and LicenseAgreement dated December 9, 2008, that certain Second Amendment to Research and License Agreement dated March 17, 2010 and thatcertain Third Amendment to Research and License Agreement dated July 12, 2011, filed as Exhibit 10.1 to Form S-1/A on June 20, 2012(File No. 333-180515) and incorporated herein by reference. 80Table of Contents Exhibit No.Description10.2†Exclusive License Agreement between the Company and the University of Pittsburgh, dated September 30, 2009, filed as Exhibit 10.2 toForm S-1/A on June 20, 2012 (File No. 333-180515) and incorporated herein by reference. 10.3†Exclusive Patent and Non-Exclusive Know-How License Agreement between the Company and Cambridge University TechnicalServices Limited, commenced September 16, 2004, filed as Exhibit 10.3 to Form S-1/A on June 20, 2012 (File No. 333-180515) andincorporated herein by reference. 10.4†Non-Exclusive License Agreement between the Company and the University of Pittsburgh, dated March 30, 2012, filed as Exhibit 10.4to Form S-1/A on June 20, 2012 (File No. 333-180515) and incorporated herein by reference. 10.5†Non-Exclusive License Agreement between the Company and the University of Pittsburgh, dated March 21, 2012, filed as Exhibit 10.5to Form S-1 on April 2, 2012 (File No. 333-180515) and incorporated herein by reference. 10.6*Employment Agreement, dated June 15, 2012, between the Registrant and Ivan Bergstein, M.D., filed as Exhibit 10.8 to Form S-1/A onJune 20, 2012 (File No. 333-180515) and incorporated herein by reference. 10.7*Form of Indemnification Agreement between the Registrant and each director, filed as Exhibit 10.9 to Form S-1/A on June 20, 2012 (FileNo. 333-180515) and incorporated herein by reference. 10.8*Amended and Restated 2004 Employee, Director and Consultant Stock Plan, filed as Exhibit 10.10 to Form S-1on April 2, 2012 (FileNo. 333-180515) and incorporated herein by reference. 10.9*Form of Incentive Stock Option Agreement under Amended and Restated 2004 Employee, Director and Consultant Stock Plan, filed asExhibit 10.11 to Form S-1 on April 2, 2012 (File No. 333-180515) and incorporated herein by reference. 10.10*Form of Non-qualified Stock Option Agreement under Amended and Restated 2004 Employee, Director and Consultant Stock Plan, filedas Exhibit 10.12 to Form S-1 on April 2, 2012 (File No. 333-180515) and incorporated herein by reference. 10.11*2012 Equity Incentive Plan, filed as Exhibit 10.13 to Form S-1/A on July 19, 2012 (File No. 333-180515) and incorporated herein byreference. 10.12*Form of Incentive Stock Option Agreement under 2012 Equity Incentive Plan, filed as Exhibit 10.14 to Form S-1/A on July 19, 2012(File No. 333-180515) and incorporated herein by reference. 10.13*Form of Nonstatutory Stock Option Agreement under 2012 Equity Incentive Plan, filed as Exhibit 10.15 to Form S-1/A on July 19, 2012(File No. 333-180515) and incorporated herein by reference. 10.14Exclusive License Agreement between the Company and Dr. Ivan Bergstein M.D., effective as of December 1, 2003, filed asExhibit 10.18 to Form S-1/A filed on June 20, 2012 (File No. 333-180515) and incorporated herein by reference. 10.15Assignment Agreement between the Company and Ivan Bergstein, M.D., effective as of June 15, 2012, filed as Exhibit 10.20 to Form S-1/A on June 20, 2012 (File No. 333-180515) and incorporated herein by reference. 10.16*Offer Letter between the Company and Kenneth Zuerblis, dated March 8, 2012, filed as Exhibit 10.23 to Form S-1/A on June 20, 2012(File No. 333-180515) and incorporated herein by reference. 10.17Amendment No. 1 to Assignment Agreement between the Company and Ivan Bergstein, M.D., dated as of November 7, 2012, filed asExhibit 10.26 to Form S-1/A on November 14, 2012 (File No. 333-180515) and incorporated herein by reference. 10.18*Employment Agreement between the Company and David G. Gionco, dated January 16, 2014, filed as Exhibit 10.1 to Form 8-K onJanuary 23, 2014 (File No. 001-35619) and incorporated herein by reference. 10.19†License Agreement by and between Stemline Therapeutics, Inc. and the CanBas Co., Ltd, dated December 26, 2014, filed asExhibit 10.30 to Form 10-K on March 16, 2015 (File No. 001-35619) and incorporated herein by reference. 81Table of Contents Exhibit No.Description 10.20*Amendment No.1 to the 2012 Equity Incentive Plan, adopted March 13, 2015, filed as Exhibit 10.31 to Form 10-K on March 16, 2015(File No. 001-35619) and incorporated herein by reference. 10.21*Amendment No.1 to the Amended and Restated 2004 Employee, Director and Consultant Stock Plan, adopted March 13, 2015, filed asExhibit 10.32 to Form 10-K on March 16, 2015 (File No. 001-35619) and incorporated herein by reference. 10.22*Employment Agreement between the Company and Kenneth Hoberman, dated January 7, 2016, filed as Exhibit 10.1 to Form 8-K onJanuary 13, 2016 (File No. 001-35619) and incorporated herein by reference. 10.232016 Equity Incentive Plan, adopted May 25, 2016, filed as Appendix A to the Company’s Definitive Proxy Statement on April 8, 2016(File No. 001-35619) and incorporated herein by reference. 10.24Amendment No. 1 to the 2016 Equity Incentive Plan, adopted June 20, 2017, filed as Exhibit A to the Company’s Definitive ProxyStatement on May 1, 2017 (File No. 001-35619) and incorporated herein by reference. 21.1List of subsidiaries of Stemline Therapeutics, Inc. 23.1Consent of Ernst & Young LLP. 24.1Power of Attorney (included on signature page). 31.1Certificate of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2Certificate of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-OxleyAct of 2002. 32.1Certificate of principal executive officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002. 32.2Certificate of principal financial officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002. 101The following financial information from Stemline Therapeutics, Inc.’s Annual Report on Form 10-K for the year ended December 31,2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements ofOperations, (iii) Consolidated Statements of Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows, (v) the Notes toConsolidated Financial Statements. † Confidential treatment has been granted with respect to the omitted portions of this exhibit. Confidential materials omitted and filed separately with theSecurities and Exchange Commission. * Management contract or compensatory plan, contract or agreement. Item 16. Form 10-K Summary None. 82Table of Contents STEMLINE THERAPEUTICS, INC.Index to Financial Statements Contents Report of Independent Registered Public Accounting FirmF-2Balance Sheets as of December 31, 2018 and 2017F-3Statements of Operations for the Years Ended December 31, 2018, 2017 and 2016F-4Statements of Comprehensive loss for the Years Ended December 31, 2018, 2017 and 2016F-5Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2018, 2017 and 2016F-6Statements of Cash Flows for the Years Ended December 31, 2018, 2017 and 2016F-7Notes to Financial StatementsF-8 F-1Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Stemline Therapeutics, Inc. Opinion on the Financial Statements We have audited the accompanying balance sheets of Stemline Therapeutics, Inc. (the Company) as of December 31, 2018 and 2017, the related statements ofoperations, comprehensive loss, stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2018, and therelated notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, thefinancial position of the Company at December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the periodended December 31, 2018, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’sinternal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 15, 2019 expressed an unqualifiedopinion thereon. 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 financialstatements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Companyin 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 reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing proceduresto 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 includedevaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financialstatements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company’s auditor since 2011. /s/ Ernst & Young LLP Stamford, ConnecticutMarch 15, 2019 F-2Table of Contents STEMLINE THERAPEUTICS, INC.Balance Sheets December 31,2018 2017AssetsCurrent assets:Cash and cash equivalents$9,443,667$4,795,098Short-term investments50,662,18946,924,612Prepaid expenses and other current assets2,952,996469,067Total current assets63,058,85252,188,777Property and equipment, net222,413136,672Long-term investments—14,468,414Other Assets212,305212,305Total assets$63,493,570$67,006,168Liabilities and stockholders’ equityCurrent liabilities:Accounts payable and accrued expenses$21,153,062$19,742,087Other current liabilities65,86296,826Total current liabilities21,218,92419,838,913Other Liabilities72,59196,826Total liabilities21,291,51519,935,739Commitments and contingencies (Note 13)Stockholders’ equity:Preferred stock $0.0001 par value, 5,000,000 shares authorized, none issued and outstanding atDecember 31, 2018 and 2017——Common stock $0.0001 par value, 53,750,000 shares authorized at December 31, 2018 and December 31,2017. 31,943,186 shares issued and outstanding at December 31, 2018 and 25,313,595 sharesissued and outstanding at December 31, 20173,1942,531Additional paid-in capital331,343,484251,489,546Accumulated other comprehensive loss(56,559)(145,958)Accumulated deficit(289,088,064)(204,275,690)Total stockholders’ equity42,202,05547,070,429Total liabilities and stockholders’ equity$63,493,570$67,006,168 See accompanying notes. F-3Table of Contents STEMLINE THERAPEUTICS, INC.Statements of Operations Year Ended December 31,20182017 2016 Income:Grant Income$500,000$898,199$1,041,354Operating expenses:Research and development47,725,01950,242,38627,869,921General and administrative39,061,66719,214,20712,056,890Total operating expenses86,786,68669,456,59339,926,811Loss from operations(86,286,686)(68,558,394)(38,885,457)Other (expense) income(7,505)(6,330)11,438Interest expense(794)——Interest income1,270,620736,330545,718Net loss before income taxes(85,024,365)(67,828,394)(38,328,301)Income tax benefit——25,296Net loss$(85,024,365)$(67,828,394)$(38,303,005)Net loss per common share:Basic and Diluted$(2.99)$(2.94)$(2.15)Weighted-average shares outstanding:Basic and Diluted28,388,90123,056,92817,804,681 See accompanying notes. F-4Table of Contents STEMLINE THERAPEUTICS, INC.Statements of Comprehensive Loss Year Ended December 3120182017 2016 Net loss$(85,024,365)$(67,828,394)$(38,303,005)Other comprehensive loss:Unrealized gain (loss) on investments, net of tax81,894(52,308)65,326Reclassification adjustment for gain (loss) on investments included in net loss7,5056,152(11,438)Other comprehensive (loss) gain89,399(46,156)53,888Comprehensive loss$(84,934,966)$(67,874,550)$(38,249,117) F-5Table of Contents STEMLINE THERAPEUTICS, INC.Statements of Stockholders’ Equity (Deficit) Accumulated Additional Other TotalCommon StockPaid-in Comprehensive Earnings Stockholders’SharesCapitalCapital Income (Loss) (Deficit) Equity (Deficit) Balance, December 31, 201518,235,020$1,825$185,703,423$(153,690)$(97,439,602)$88,111,956Restricted stock grants920,44491(91)———Forfeiture of restricted stock grants(39,997)(4)4———Stock-based compensation——7,431,126——7,431,126ESPP compensation expense——73,348——73,348Issuance of common stock inconnection with the ESPP15,970191,575——91,576Issuance of common stock inconnection with the exercise ofstock options87,7869264,187——264,196Net loss————(38,303,005)(38,303,005)Other comprehensive income, net of tax———53,888—53,888Balance, December 31, 201619,219,223$1,922$193,563,572$(99,802)$(135,742,607)$57,723,085Restricted stock grants914,95091(91)———Forfeiture of restricted stock grants(42,048)(4)4———Stock-based compensation——8,618,520——8,618,520ESPP compensation expense——68,496——68,496Adoption of accounting standardupdate related to stock compensationaccounting (ASU 2016-09)——704,689—(704,689)—Issuance of common stock inconnection with the ESPP22,5182150,922——150,924Issuance of common stock inconnection with the exercise ofstock options23,9522141,738——141,740Issuance of common stock inconnection with follow-on publicoffering5,175,00051848,241,696——48,242,214Net loss————(67,828,394)(67,828,394)Other comprehensive loss———(46,156)—(46,156)Balance, December 31, 201725,313,595$2,531$251,489,546$(145,958)$(204,275,690)$47,070,429Restricted stock grants1,770,126177(177)———Forfeiture of restricted stock grants(63,353)(6)6———Stock-based compensation——13,942,611——13,942,611ESPP compensation expense——84,678——84,678Adoption of accounting standardupdate related to stock compensationaccounting (ASU 2018-07)——(211,991)—211,991—Issuance of common stock inconnection with ESPP24,5992194,212——194,214Issuance of common stock inconnection with the exercise ofstock options169,810171,583,780——1,583,797Issuance of common stock inconnection with the exercise ofwarrants30,8303352,525——352,528Issuance of common stock inconnection with follow-on publicoffering4,697,57947063,908,294——63,908,764Net loss————(85,024,365)(85,024,365)Other comprehensive income———89,399—89,399 Balance, December 31, 201831,943,186$3,194$331,343,484$(56,559)$(289,088,064)$42,202,055 See accompanying notes. F-6Table of Contents STEMLINE THERAPEUTICS, INC.Statements of Cash Flows Year Ended December 31,20182017 2016Cash flows from operating activitiesNet loss$(85,024,365)$(67,828,394)$(38,303,005)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation56,65714,64180,259Stock-based compensation expense13,942,6118,618,5207,431,126Employee Stock Purchase Plan compensation expense84,67868,49673,348Amortization of premium paid on marketable securities(96,723)140,385221,049Net loss (gain) on sale of marketable securities7,5056,152(11,438)Income tax benefit from other comprehensive income——(25,296)Changes in operating assets and liabilities:Prepaid expenses and other current assets(2,483,929)(178,320)361,142Other Assets——(212,305)Accounts payable and accrued expenses1,410,97510,457,573651,641Other current liabilities(37,366)25,72671,100Deferred grant income—(898,199)(541,354)Other liabilities(41,961)(45,374)110,959Net cash used in operating activities(72,181,918)(49,618,794)(30,092,774) Cash flows from investing activitiesPurchase of furniture and fixtures(112,870)(128,782)(7,129)Purchase of marketable securities(63,201,965)(61,893,074)(26,464,749)Sale and maturities of marketable securities74,111,41957,584,80653,148,748Net cash provided by (used in) investing activities10,796,584(4,437,050)26,676,870 Cash flows from financing activitiesPrincipal payments on finance lease liabilities(5,401)——Proceeds from issuance of common stock from follow-on public offering, net63,908,76448,242,214—Proceeds from issuance of common stock from ESPP194,215150,92491,576Proceeds from exercise of stock options1,583,797141,740264,196Proceed from exercise of warrants352,528——Net cash provided by financing activities66,033,90348,534,878355,772Net increase (decrease) in cash and cash equivalents4,648,569(5,520,966)(3,060,132)Cash and cash equivalents at beginning of period4,795,09810,316,06413,376,196Cash and cash equivalents at end of period$9,443,667$4,795,098$10,316,064 Stemline incurred a capital lease obligation of $29,529 during the twelve month period ended December 31, 2018. See accompanying notes. F-7Table of Contents STEMLINE THERAPEUTICS, INC.Notes To Financial StatementsDecember 31, 2018 1. Organization and Basis of Presentation Organization Stemline Therapeutics, Inc. (the “Company”) is a commercial-stage biopharmaceutical company focused on discovering, acquiring, developing andcommercializing proprietary oncology therapeutics. The Company’s activities to date have primarily consisted of commercializing ELZONRIS, preparing forcommercialization, advancing its clinical stage programs, expanding and strengthening its intellectual property portfolio, identifying and acquiringadditional product and technology rights and raising capital. The Company was incorporated in Delaware on August 8, 2003 and has its principal office inNew York, New York. The Company has incurred losses from operations since inception of $300.8 million. Since its inception, most of its resources have been dedicated to thediscovery, acquisition, preclinical and clinical development, and commercialization of its products and product candidates. In particular, it has expended andwill continue to expend substantial resources for the foreseeable future developing and commercializing its products and product candidates, as well as itspreclinical product candidates, drug discovery and acquisition efforts. These expenditures include costs associated with general and administrative costs,facilities costs, research and development, acquiring new technologies, manufacturing products and product candidates, conducting preclinical experimentsand clinical trials and obtaining regulatory approvals, as well as commercializing. The Company anticipates incurring additional losses until such time, ifever, that it can generate significant sales of its products and product candidates currently in development. The Company expects its research anddevelopment expenses to increase significantly in connection with its ongoing and planned clinical trials and related manufacturing efforts, as well as forexpenses related to the commercial launch of ELZONRIS. As a result, the Company expects to continue to incur significant and increasing operating lossesfor the foreseeable future. If adequate funds are not available to the Company on a timely basis, or at all, the Company may be required to terminate or delayclinical trials or other development activities, its marketing efforts for ELZONRIS, or product candidates, or for one or more indications for which it isdeveloping ELZONRIS, or product candidates, or delay its establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize its products or product candidates. ELZONRIS is a novel targeted therapy directed to the interleukin-3 receptor-a, or CD123, a target presenton a wide range of malignancies as well as some autoimmune disorders. ELZONRIS has been approved by the FDA for the treatment of blastic plasmacytoiddendritic cell neoplasm (“BPDCN”) in adults and in pediatric patients two years and older, in both treatment-naïve and previously-treated populations in theUnited States. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the U.S. (“U.S. GAAP”) requires management to makeestimates and assumptions that affect the reported financial position at the date of the financial statements and the reported results of operations during thereporting period. Such estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assetsand liabilities in the financial statements and accompanying notes. Actual results could differ from those estimates. Reclassifications Certain reclassifications have been made to footnote 8 “Accounts Payable and Accrued Expenses” for the period ended December 31, 2017 to conform to thepresentation under the period ended December 31, 2018. These reclassifications to adjust prior period presentation had no impact on previously reportedaccrued expenses. 2. Summary of Significant Accounting Policies Cash Equivalents Cash equivalents consist of highly liquid instruments purchased with an original maturity of three months or less. At December 31, 2018 and 2017, cashequivalents consisted of deposits in financial institutions and money market mutual funds invested in U.S. treasury securities. The Company maintains itscash deposits and cash equivalents with well-known and stable financial institutions. Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash equivalents. The Companyprimarily invests cash, cash equivalents, short-term investments and long-term investments in US Treasury and Agency securities and related money marketfunds and FDIC-insured bank certificates of deposits with the balance in commercial bank operating accounts. F-8Table of Contents The Company has not experienced any losses from credit risks. Inventory Inventories are recorded at the lower of cost or estimated realizable value. The Company determines the cost of inventory using the first-in, first-out, or FIFO,method. The Company will capitalize inventory costs associated with ELZONRIS after regulatory approval or when, based on management’s judgment,future commercialization is considered probable and the future economic benefit is expected to be realized. Otherwise, such costs are expensed as researchand development. As of December 31, 2018, the Company did not capitalize any amount of costs into inventory following the FDA approval of ELZONRISon December 21, 2018. The Company periodically analyzes inventory levels to identify inventory that may expire prior to expected sale or has a cost basis inexcess of its estimated realizable value, and write-down such inventories as appropriate. Investments The Company’s investments are considered to be available-for-sale and are carried at fair value. Unrealized gains and losses, if any, are reported as a separatecomponent of stockholders’ equity (deficit) and are not reflected in the statements of operations until a sale transaction occurs or when declines in fair valueare deemed to be other-than-temporary (“OTT”). The cost of investments classified as available-for-sale are adjusted for the amortization of premiums andaccretion of discounts to maturity and recorded in other expense and other income, respectively. Realized gains and losses, if any, are determined using thespecific identification method and are included in other income and other expense, respectively. Investments with original maturities beyond 90 days at thedate of purchase and which mature at, or less than twelve months from, the balance sheet date are classified as current. Investments with a maturity beyondtwelve months from the balance sheet date are classified as long-term. Fair Value of Financial Instruments The Company’s financial instruments consist principally of cash and cash equivalents, investments, other current assets, accounts payable and accruedliabilities. Cash and cash equivalents, and short and long-term investments are carried at fair value (see Note 7). Financial instruments including other currentassets, accounts payable and accrued liabilities are carried at cost, which approximate fair value given their short-term nature. Other-Than-Temporary Impairment Losses on Investments The Company regularly monitors its available-for-sale portfolio to evaluate the necessity of recording impairment losses for OTT declines in the fair value ofinvestments. Management makes this determination through the consideration of various factors such as management’s intent and ability to retain aninvestment for a period of time sufficient to allow for any anticipated recovery in market value. OTT impairment losses result in a permanent reduction of thecost basis of an investment. For the years ended December 31, 2018 and 2017, the Company did not realize any investment losses due to OTT declines in fairvalue. Property and Equipment Property and Equipment are stated at cost and depreciated on a straight-line basis over the shorter of their estimated useful lives or or related contract termsbeginning in the year the asset was placed into service. Normal repair and maintenance costs are expensed as incurred. The useful lives by asset category areas follows: Furniture and Fixtures3-5 yearsComputer Equipment5 yearsManufacturing Equipment7 years Leasehold improvements are amortized over the lesser of the lease terms or the estimated useful life of the improvements and such amortization is included indepreciation expense. F-9Table of Contents Impairment of Long-Lived Assets The Company reviews long-lived assets, (the Company’s furniture and fixtures), for impairment whenever events or changes in business circumstancesindicate that the carrying amount of the assets may not be fully recoverable. An impairment loss would be recognized when estimated undiscounted futurecash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. The impairment loss, if recognized, wouldbe based on the excess of the carrying value of the impaired asset over its respective fair value. The Company purchased fixed assets during 2018, 2017 and2016. For the years ended December 31, 2018, 2017 and 2016, the Company did not realize any impairment losses. Grant Income Recognition The Company has not generated any revenue from product sales up through December 31, 2018, and it has generated minimal revenues to date, all relating to$3.5 million in research grants received from the Leukemia and Lymphoma Society, or LLS. This research grant was awarded to the Company to supportfunding some of the costs for the ongoing ELZONRIS clinical trials. Grant payments received prior to the Company’s performance of work required by theterms of the research grant are recorded as deferred income and recognized as grant income once work is performed and qualifying costs are incurred. TheCompany has recognized approximately $0.5 million, $0.9 million and $1.0 million of income related to the LLS grant for the years ended December 31,2018, 2017 and 2016, respectively, which reflect twelve months of income recognized, respectively, on a straight-line basis, based on the Company’s bestestimates of the timing of work to be performed and qualifying costs incurred. Accrued Clinical Development Costs Outside research costs are a component of research and development expense. These expenses include fees paid to contract research organizations (“CROs”)and other service providers that conduct certain clinical and product development activities on behalf of the Company. Depending upon the timing ofpayments to the service providers, the Company recognizes prepaid expenses or accrued expenses related to these costs. These accrued or prepaid expensesare based on management’s estimates of the work performed under service agreements, milestones achieved and experience with similar contracts. TheCompany monitors each of these factors and adjusts estimates accordingly. Research and Development Costs Research and development costs are comprised primarily of costs for personnel, including salaries and benefits; clinical studies administered by third-partyinvestigators and managed by Stemline personnel; materials and supplies to support the Company’s clinical programs; contracted research; manufacturing;related consulting arrangements; costs related to upfront and milestone payments under license agreements; and other expenses incurred to sustain theCompany’s overall research and development programs. Where milestone payments are due to third parties under research and development collaborationarrangements or other contractual agreements, the milestone payment obligations are expensed when the milestone conditions are met and the amount ofpayment is reasonably estimable. Internal research and development costs are expensed as incurred. Third-party research and development costs areexpensed as the contracted work is performed. In certain circumstances, the Company is required to make advance payments to vendors for goods or servicesthat will be received in the future for use in research and development activities. In such circumstances, the advance payments are deferred and are expensedwhen activities have been performed or when the goods have been received. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequencesattributable to the differences between the financial statement carrying amounts of existing assets and liabilities and the respective tax bases and operatingloss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years inwhich those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates isrecognized in income in the period that includes the enactment date. The asset and liability method requires that deferred tax assets and liabilities be recorded without consideration as to the ability to realize them. The deferredtax asset primarily includes net operating loss and tax credit carryforwards, accrued expenses not currently deductible and the cumulative temporarydifferences related to certain research and patent costs, which have been charged to expense in the accompanying statements of operations but have beenrecorded as assets for income tax purposes. The portion of any deferred tax asset for which it is more likely than not that a tax benefit will not be realized mustthen be offset by recording a valuation allowance. A valuation allowance has been established against all of the deferred tax assets (see Note 12), as it is morelikely than not that these assets will not be realized given the history of operating losses. F-10Table of Contents The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not to be sustained upon examination based on thetechnical merits of the position. The amount of the accrual for which an exposure exists is measured as the largest amount of benefit determined on acumulative probability basis that the Company believes is more likely than not to be realized upon ultimate settlement of the position. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situation where acompany does not have the necessary information available , prepared, or analyzed in reasonable detail to complete the accounting for certain income taxeffects of the Tax Cuts and Jobs Act of 2017. It allows companies to record provisional amounts during a measurement period, which is not to extend beyondone year. Consistent with SAB 118, the Company was able to make reasonable estimates and recorded provisional amounts related to the remeasurement ofthe deferred tax asset in the fourth quarter 2017 consolidated financial statements. The recorded amount may require further adjustments due to evolvinganalysis and interpretations of law, including issuance by the IRS and other regulatory bodies, state tax conformity to federal changes, as well asinterpretations of how accounting for income taxes should be applied. During the fourth quarter of the 2018 financial statements, the Company completedtheir analysis and determined no additional changes were necessary to the previously recorded provisional amounts. Stock-Based Compensation The Company accounts for stock-based compensation in accordance with the provisions of ASC 718, Compensation—Stock Compensation. Accordingly,compensation costs related to equity instruments granted are recognized over the requisite service periods of the awards on a straight-line basis at the grant-date fair value calculated using a Black-Scholes option pricing model for stock options and the closing stock price on date of grant for restricted stock. OnJanuary 1, 2017, we adopted ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, or ASU 2016-09, which amends AccountingStandards Codification, or ASC, Topic 718, Compensation — Stock Compensation. ASU 2016-09 simplifies several aspects of the accounting for share-basedpayment transactions, including the accounting for forfeitures, income tax consequences, classification of awards as either equity or liabilities, andclassification on the statement of cash flows. Upon adoption, we are accounting for forfeitures as they occur rather than estimate a forfeiture rate and we haverecorded a cumulative-effect adjustment in equity of $0.7 million on the date of initial adoption. In addition, the standard requires that excess tax benefitsand deficiencies that arise upon vesting or exercise of share-based payments be recognized as an income tax benefit and expense in the income statement. Previously, such amounts were recognized as an increase and decrease in additional paid-in capital. We have adopted this aspect of the standardprospectively, and accordingly the excess tax benefits arising from share-based payments was approximately $7.1 million, $0.6 million and $0 for the yearsended December 31, 2018, 2017 and 2016, respectively. On June 20, 2018, the FASB issued ASU No. 2018- 07, Compensation — Stock Compensation(Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of Topic 718 to include share-based paymenttransactions for acquiring goods and services from nonemployees. The Company early adopted ASU No. 2018-07 on April 1, 2018 and the net impactrelating to the adoption was a $0.2 million decrease to accumulated deficit for the impact prior to April 1, 2018. The Company’s policy upon exercise of stock options is that shares will be issued as new shares drawing on the Company’s 2016 Stock Equity IncentivePlan (the “2016 Plan”) share pool that was adopted by the board of directors and approved by the stockholders in May 2016. During June 2017, anamendment was approved by the stockholders to increase the authorized shares under the 2016 plan by 1,200,000 shares. An amendment was approved bythe stockholders at the 2018 Annual Meeting of Stockholders on June 21, 2018, to increase the authorized shares under the 2016 plan by 2,900,000 shares.Under the provisions of the 2016 Plan, no option will have a term in excess of 10 years. In the event a modification is made to an equity award after the grant date, the Company records a change in stock-based compensation expense equal to theincremental fair value of the equity award immediately subsequent to the modification as compared to the fair value of the equity award immediatelypreceding the modification. During 2018 and 2016, the Company modified certain outstanding equity award held by employees and certain Directors. Thesemodifications resulted in incremental compensation cost of $1.1 million and $0.8 million for the years ended December 31, 2018, and 2016 respectively. Segment Information The Company reports segment information in accordance with applicable guidance on segment disclosures. The Company has one reportable segment. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”), issued a comprehensive new revenue recognition Accounting Standards Update, RevenueFrom Contracts With Customers (Topic 606) (ASU 2014-09). ASU 2014-09 provides guidance to clarify the principles for recognizing revenue.. Thisguidance includes the required steps to achieve the core principle that an entity should recognize income to depict the transfer of promised goods or servicesto customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance iseffective for fiscal years and interim periods beginning after December 15, 2017. Early adoption is permitted for fiscal years and interim periods beginningafter December 15, 2016. The Company adopted this guidance on January 1, 2018 using the full retrospective method. The accounting standard had noimpact on the financial position, results of operations or cash flows since the Company has no contracts with customers. Any future contracts with customerswill be accounted for under the new guidance effective January 1, 2018. F-11Table of Contents As noted below in Note 10 to the Company’s Financial Statements, the Company has received grant income from The Leukemia and Lymphoma Society(“LLS”) to fund the Company’s development program related to the Company’s preclinical and clinical product development activities. The Company hasdetermined that LLS is not a customer as defined by Topic 606. The Company recognizes grant income when there is reasonable assurance of compliancewith the conditions of the grant and reasonable assurance that the grant income will be received based on the Company’s best estimates of work performedand qualifying costs incurred. In January 2016, the FASB issued a new Accounting Standards Update, Recognition and Measurement of Financial Assets and Financial Liabilities (ASU2016-01). ASU 2016-01 amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Although the ASU retains manycurrent requirements, it significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and(2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirementsassociated with the fair value of financial instruments. The new standard is effective for fiscal years and interim periods within those fiscal years beginningafter December 15, 2017, with early adoption permitted for certain changes. The Company adopted this guidance on January 1, 2018 and it had no impact onthe financial position, results of operations or cash flows. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This ASU will require lessees to recognize most leases on their balance sheets aslease liabilities with corresponding right-of-use (“ROU”) assets. Recognition, measurement and presentation of expenses will depend on classification as afinance or operating lease. The Company adopted the standard as of January 1, 2019, using a modified retrospective approach and applying the standard’stransition provisions at January 1, 2019, the effective date. We elected the package of practical expedients permitted under the transition guidance, which among other things, allows us to carryforward the historicallease classification. In addition, we elected to combine the lease and non-lease components for the asset categories comprising our leases and are making anaccounting policy election to exclude from balance sheet reporting those leases with initial terms of 12 months or less. We estimate that adoption of the standard will result in recognition of additional lease ROU assets and lease liabilities of approximately $2 million. We donot expect adoption of the standard to materially affect our consolidated net income or cash flows. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. ASU2016-15 clarifies how entities should classify certain cash receipts and cash payments on the Statement of Cash Flows and amends certain disclosurerequirements of ASC 230. The guidance will generally be applied retrospectively and is effective for public business entities for fiscal years beginning afterDecember 15, 2017, and interim periods within those years. For all other entities, it is effective for fiscal years beginning after December 15, 2018, andinterim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity earlyadopts the guidance in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. Anentity that elects early adoption must adopt all of the guidance in the same period. The Company adopted this guidance on January 1, 2018 and it had noimpact to the Statement of Cash Flows. In January 2017, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, or ASU 2016-09, which amendsAccounting Standards Codification, or ASC, Topic 718, Compensation — Stock Compensation, and is effective for fiscal years beginning after December 15,2016, and interim periods within those fiscal years. ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, includingthe accounting for forfeitures, income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cashflows. Upon adoption, The Company is accounting for forfeitures as they occur rather than estimate a forfeiture rate and has recorded a cumulative-effectadjustment in equity of $0.7 million on the date of initial adoption. In addition, the standard requires that excess tax benefits and deficiencies that arise uponvesting or exercise of share-based payments be recognized as an income tax benefit and expense in the income statement. Previously, such amounts wererecognized as an increase and decrease in additional paid-in capital. We have adopted this aspect of the standard prospectively, and accordingly the excesstax benefits arising from share-based payments was approximately $7.1 million, $0.6 million and $0 for the years ended December 31, 2018, 2017 and 2016,respectively. In May 2017, the FASB issued ASU No. 2017-09, Compensation — Stock Compensation (Topic 718), Scope of Modification Accounting. ASU 2017-09provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to applymodification accounting. ASU 2017-09 is applied prospectively to awards modified on or after the effective date. The Company adopted ASU 2017-09 onJanuary 1, 2018. The adoption of this standard did not have a material impact to the Company’s Balance Sheets, Statement of Operations, or Statement ofCash Flows. On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJ Act” or the “Tax Act”) was enacted into law. The TCJ Act provides for significant changes to theU.S. Internal Revenue Code of 1986, as amended (the “Code”), that impact corporate taxation requirements, such as the reduction of the federal tax rate forcorporations from 35% to 21% and changes or limitations to certain tax deductions. The reduction in the corporate tax rate under the TCJ Act will alsorequire a one-time revaluation of certain tax-related assets to reflect their value at the lower corporate tax rate of 21%. As such, the Company currentlycalculates a reduction in the value of these assets of approximately $25.0 million, which is fully offset by a valuation allowance and has no impact on theincome tax provision. During the fourth quarter of the 2018 financial statements, that company has completed their analysis and determined no additionalchanges to the previous recorded provisional amounts. On June 20, 2018, the FASB issued ASU No. 2018-07, Compensation — Stock Compensation (Topic 718): Improvements to Nonemployee Share-BasedPayment Accounting, which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services fromnonemployees. Entities should apply the requirements of Topic 718 to nonemployee awards F-12Table of Contents except for specific guidance on inputs to an option pricing model and the period of time equity awards vest and the pattern of cost recognition over thatperiod. ASU No. 2018-07 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15,2018. Early adoption is permitted and the Company adopted ASU No. 2018-07 on April 1, 2018. The Company early adopted ASU No. 2018-07 on April 1,2018 and the net impact relating to the adoption was a $0.2 million decrease to accumulated deficit for the impact prior to April 1, 2018. In addition, theCompany has elected to account for forfeitures of nonemployee awards as they occur. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements. The ASU allows entities to not recast comparative periods intransition to ASC 842 and instead report the comparative periods presented in the period of adoption under ASC 840. The ASU also includes a practicalexpedient for lessors to not separate the lease and non-lease components of a contract. The amendments in this ASU are effective in the same time-frame asASU 2016-02 as discussed above. The Company is incorporating this ASU into its assessment and adoption of ASU 2016-02, as dicussed above. In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements forFair Value Measurement”, which adds disclosure requirements to Topic 820 for the range and weighted average of significant unobservable inputs used todevelop Level 3 fair value measurements. This ASU is effective for interim and annual reporting periods beginning after December 15, 2019. The adoption ofASU 2018-13 is not expected to have an impact on the Company’s financial statements. In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosurerequirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements onthe analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equitypresented in the balance sheets must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to theending balance of each period for which a statement of comprehensive income is required to be filed. As such, the Company adopted these SEC amendmentson November 5, 2018 and will present the analysis of changes in stockholders’ equity in its interim financial statements in its March 31, 2019 Form 10-Q.The Company does not anticipate that the adoption of these SEC amendments will have a material effect on the Company’s financial position, results ofoperations, cash flows or shareholders’ equity. In November 2018, ASU 2018-18 was issued to provide clarity on when transactions between entities in a collaborative arrangement should be accounted forunder the new revenue standard, ASC 606. In determining whether transactions in collaborative arrangements should be accounted under the revenuestandard, the update specifies that entities shall apply unit of account guidance to identify distinct goods or services and whether such goods and services areseparately identifiable from other promises in the contract. ASU 2018-18 also precludes entities from presenting transactions with a collaborative partnerwhich are not in scope of the new revenue standard together with revenue from contracts with customers. The accounting update is effective January 1, 2020and early adoption is permitted. The adoption of ASU 2018-18 is not expected to have an impact on the Company’s financial statements. In December 2018, the FASB issued ASU 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors, which addressed implementation questionsarising from stakeholders in regard to ASU 2016-02, Leases. Specifically addressed in this Update were issues related to 1) sales taxes and other similar taxescollected from lessees, 2) certain lessor costs, and 3) recognition of variable payments for contracts with lease and nonlease components. The amendments inthis ASU are effective in the same time-frame as ASU 2016-02 as discussed above. The Company is incorporating this ASU into its assessment and adoptionof ASU 2016-02. 3. Net Loss per Common Share The Company accounts for and discloses net loss per share using the treasury stock method. Net loss per common share, or basic loss per share, is computedby dividing net loss by the weighted-average number of common shares outstanding. Since the Company is in a net loss for all periods presented, diluted netloss per share is not presented since the common stock equivalents would have an anti-dilutive effect on the per share calculation. The following table sets forth the computation of basic and diluted net loss per share for the periods indicated: Year Ended December 31,20182017 2016Basic and Diluted loss per common share calculation:Net loss attributable to common shareholders — basic and diluted$(85,024,365)$(67,828,394)$(38,303,005)Basic and diluted weighted-average common shares28,388,90123,056,92817,804,681Basic and diluted net loss per share$(2.99)$(2.94)$(2.15) F-13Table of Contents The difference between basic and diluted weighted-average common shares generally results from the assumption that dilutive stock options outstandingwere exercised, dilutive restricted stock has vested and outstanding warrants are issued. For the years ended December 31, 2018, 2017 and 2016, theCompany reported a loss from operations and therefore, all potentially dilutive stock options, restricted stock, and outstanding warrants as of such date wereexcluded from the computation of diluted net loss per share as their effect would have been anti-dilutive. The total shares of stock options, restricted stock,and outstanding warrants that could potentially dilute earnings per share in the future, but which were not included in the calculation of diluted net loss pershare because their effect would have been anti-dilutive were as follows: Year Ended December 31 2018 2017 2016 Unvested restricted stock2,794,4551,724,8371,268,092Options outstanding3,514,0183,174,9643,090,752Warrants—99,52999,529Total6,308,4734,999,3304,458,373 4. Marketable Investments The following table summarizes the Company’s cash equivalents and available for sale securities: December 31, 2018 Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value Cash:Cash from operating accounts$2,482,621$—$—$2,482,621Cash equivalents:Money market funds6,961,046——6,961,046 Total cash and cash equivalents9,443,667——9,443,667 Short-term investments:Fixed-income treasury portfolio:Fannie Mae2,013,336—(1,146)2,012,190Federal home loan bank6,020,492—(10,646)6,009,846Freddie Mac2,512,252—(8,530)2,503,722U.S. Treasury Securities20,123,026767(11,553)20,112,240Other———— Certificate of Deposits20,024,346—(155)20,024,191 Total Short-term investments50,693,452767(32,030)50,662,189 Total$60,137,119$767$(32,030)$60,105,856 F-14Table of Contents December 31, 2017 Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses ValueCash:Cash from operating accounts$3,088,659$—$—$3,088,659Cash equivalents:Money market funds1,706,439——1,706,439Total cash and cash equivalents4,795,098——4,795,098 Short-term investments:Fixed-income treasury portfolio:Fannie Mae13,631,041—(31,396)13,599,645Federal farm credit bank1,249,823—(1,869)1,247,954Federal home loan bank5,923,497—(14,197)5,909,300Freddie Mac5,409,227—(19,182)5,390,045U.S. Treasury Securities6,282,231—(12,578)6,269,653Other1,019,302—(612)1,018,690 Certificate of Deposits13,489,24184—13,489,325 Total Short-term investments47,004,36284(79,834)46,924,612Long-term investments:Fixed-income treasury portfolio:Federal home loan bank2,753,337—(15,529)2,737,808Freddie Mac2,509,471—(13,635)2,495,836U.S. Treasury Securities1,503,030(11,748)1,491,282 Certificate of Deposits7,743,488——7,743,488 Total Long-term investments14,509,326—(40,912)14,468,414 Total$66,308,786$84$(120,746)$66,188,124 At December 31, 2018 and December 31, 2017, the remaining contractual maturities of available-for-sale investments classified as current on the balancesheet was less than 12 months, and remaining contractual maturities of available-for-sale investments classified as long-term were less than two years. There were no available-for-sale securities in a continuous unrealized loss position for greater than twelve months at December 31, 2018 and December 31,2017. The Company has the ability to hold such securities with an unrealized loss until its forecasted recovery. The Company determined that there was nomaterial change in the credit risk of the above investments. As a result, the Company determined it did not hold any investments with an other-than-temporary impairment as of December 31, 2018. 5. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following at December 31, 2018 and 2017: December 31, December 31,2018 2017Prepaid third-party vendor costs$1,851,553$131,286Deposits189,000—Prepaid insurance69,02144,065Deferred registration fees—143,924Other receivable843,422149,792Total$2,952,996$469,067 F-15Table of Contents 6. Property and Equipment, Net Property and equipment consist of the following at December 31, 2018 and 2017: December 31, December 31,2018 2017Office furniture and fixtures$519,675$519,675Manufacturing equipment107,25813,000Leasehold improvements82,69482,694Capital Lease Equipment29,529—Computer Equipment18,612—Property and equipment757,768615,369Less accumulated depreciation and amortization(535,355)(478,697)Property and equipment, net$222,413$136,672 Depreciation and amortization expense was $56,657, $14,641 and $80,259 for the years ended December 31, 2018, 2017 and 2016, respectively. 7. Fair Value Measurements 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 mostadvantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Assets and liabilities that aremeasured at fair value are reported using a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes theuse of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: Level 1 — Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 2 — Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly. Level 3 — Inputs that are unobservable for the asset or liability. The following fair value hierarchy table presents information about each major category of the Company’s financial assets and liability measured at fair valueon a recurring basis as of December 31, 2018 and 2017: December 31, 2018 Quoted Prices in Active Significant Markets for Other Significant Balance Identical Observable Unobservable at Assets Inputs Inputs December 31, (Level 1) (Level 2) (Level 3) 2018 Fixed-income treasury portfolio$30,637,998$—$—$30,637,998Certificate of Deposits—20,024,191—20,024,191Cash and cash equivalents9,443,667——9,443,667Total assets at fair value$40,081,665$20,024,191$—$60,105,856 December 31, 2017 Quoted Prices in Active Significant Markets for Other Significant Balance Identical Observable Unobservable at Assets Inputs Inputs December 31, (Level 1) (Level 2) (Level 3) 2017 Fixed-income treasury portfolio$40,160,213$—$—$40,160,213Certificate of Deposits—21,232,813—21,232,813Cash and cash equivalents4,795,098——4,795,098Total assets at fair value$44,955,311$21,232,813$—$66,188,124 F-16Table of Contents There were no transfers between levels in the fair value hierarchy during any of the periods presented herein. 8. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consist of the following: December 31, 2018 2017 Accrued research and development costs$8,790,920$14,841,071Accrued compensation5,515,0022,940,039Accrued legal687,042780,664Accrued Commercial Costs4,614,507590,530Accrued General and Administrative Costs1,545,591589,783Total accounts payable and accrued expenses$21,153,062$19,742,087 9. Capital Structure Initial Public Offering On January 31, 2013, the Company completed its initial public offering (the “IPO”), selling 3,317,644 shares at an offering price of $10.00 per share. OnJanuary 29, 2013, the underwriters exercised in full their over-allotment option to purchase an additional 497,647 shares at an offering price of $10.00 pershare. Aggregate gross proceeds from the IPO, including the exercise of the over-allotment option, were $38.2 million and net proceeds received afterunderwriting fees and offering expenses were approximately $32.3 million. Additionally, upon the closing of the IPO, certain transactions were triggeredbased on a successful completion of an IPO. Convertible debt of $1.4 million principal, plus accrued interest thereon, was converted into 166,769 shares ofcommon stock. The Company recorded approximately $1.5 million of compensation expense related to certain bonuses and salary increases payable uponcontinued employment and the occurrence of a specified financing, including the consummation of an initial public offering. Representative’s Warrants On October 1, 2012, the Company agreed to issue to the representative of the underwriters in the IPO warrants to purchase up to 99,529 shares of theCompany’s common stock in the event of a successful public offering. The warrants are exercisable for cash or on a cashless basis at a price per share equal to$15.00. The term of the warrants is five years and they expire on January 28, 2018. During the year ended December 31, 2018 warrants to purchase 99,529share of common stock were exercised, resulting in proceeds of approximately $0.4 million. A portion of these transactions were processed via cashlessexercises. As of December 31, 2018, there were no warrants outstanding. Based on a successful public offering in January of 2013, these warrants were issuedand accounted for as a cost of issuance. The Company has determined, based upon a Black-Scholes model, that the fair value of the warrants on the date ofIPO was $413,146. The Company has accounted for the fair value of the warrants as a cost of issuance of common stock from the IPO resulting in a chargedirectly to stockholder’s equity. Common Stock As of December 31, 2018, the Company was authorized to issue 53,750,000 shares of common stock. Dividends on common stock will be paid when, and if,declared by the board of directors. Each holder of common stock is entitled to vote on all matters and is entitled to one vote for each share held. TheCompany will, at all times, reserve and keep available, out of its authorized but unissued shares of common stock, sufficient shares to effect the conversion ofthe shares of the stock options. Follow-on Public Offerings On May 16, 2013, the Company completed a follow-on public offering selling 4,137,931 shares at an offering price of $14.50 per share. On May 22, 2013,the underwriters exercised in full their over-allotment option to purchase an additional 620,689 shares at an offering price of $14.50 per share. Aggregategross proceeds from the follow-on public offering, including the exercise of the over-allotment option, were $69.0 million, and net proceeds received afterunderwriting fees and offering expenses were approximately $64.5 million. Also, on January 8, 2015, the Company completed a second follow-on public offering, selling 3,800,000 shares at an offering price of $15.75 per share. OnFebruary 10, 2015, the underwriters exercised in full their over-allotment option to purchase an additional 553,877 shares at an offering price of $15.75 pershare. Aggregate gross proceeds from this follow-on public offering, including the F-17Table of Contents exercise of the over-allotment option, were $68.6 million, and net proceeds received after underwriting fees and offering expenses were approximately $64.1million. In addition, on January 20, 2017, the Company completed a third follow-on public offering, selling 4,500,000 shares at an offering price of $10 per share.Additionally, the underwriters exercised in full their over-allotment option to purchase an additional 675,000 shares at an offering price of $10 per share.Aggregate gross proceeds from this follow-on public offering, including the exercise of the over-allotment option, were $51.8 million, and net proceedsreceived after underwriting fees and offering expenses were approximately $48.2 million. On January 26, 2018, the Company completed a fourth follow-on public offering, selling 3,700,000 shares at an offering price of $14 per share. Additionally,the underwriters exercised in full their over-allotment option to purchase an additional 555,000 shares at an offering price of $14 per share. Aggregate grossproceeds from the follow-on public offering, including the exercise of the over-allotment option, were $59.6 million, and net proceeds received afterunderwriting fees and offering expenses were approximately $55.7 million. For the year ended December 31, 2018, the Company received net proceeds of $8.2 million from an At-the-Market offering, selling 442,579 shares at anaverage price of $19.24 per share. On January 18, 2019, the Company completed a fifth follow-on public offering, selling 8,888,889 shares at an offering price of $9 per share. Additionally, theunderwriters exercised in full their over-allotment option to purchase an additional 1,333,333 shares at an offering price of $9 per share. Aggregate grossproceeds from the follow-on public offering, including the exercise of the over-allotment option, were $92 million, and net proceeds received afterunderwriting fees and offering expenses were approximately $86.1 million. The Company may seek additional capital through a combination of private and public equity offerings, debt financings, collaborations and strategic andlicensing arrangements. 10. Grant Income In October 2013, the Company entered into a contract relating to the Therapy Acceleration Program (“the TAP Agreement”) with The Leukemia andLymphoma Society (“LLS”). LLS is a national voluntary health agency which, among other activities, encourages and sponsors research relating to bloodcancers to develop therapies to cure or mitigate these diseases. To further its mission, LLS provides research funding to entities that can demonstrate, afterLLS’s review process, that their proposed research projects have scientific promise to advance LLS’s effort to find treatments and cures for blood cancers andtheir complications. Pursuant to the TAP Agreement, LLS agreed to provide funding to the Company not to exceed $3.5 million to fund the Company’sdevelopment program related to the Company’s preclinical and clinical product development activities. Through December 31, 2018, the Company hasreceived $3.5 million based on milestones achieved. The Company has recognized approximately $0.5 million, $0.9 million and $1.0 million of incomerelated to the LLS grant for the years ended December 31, 2018, 2017, and 2016, respectively, which reflects income recognized, respectively, on a straight-line basis, based on the Company’s best estimates of work performed and qualifying costs incurred. The TAP agreement terminates when there are no longerany payment obligations. 11. Stock-Based Compensation The 2016 Plan was adopted by the board of directors and approved by the stockholders in May 2016. The 2016 Plan authorizes the Company to grant up to1,812,932 shares of common stock to eligible employees, directors, and non-employee consultants and advisors to the Company. During June 2017, anamendment was approved by the stockholders to increase the authorized shares under the 2016 plan by 1,200,000 shares. An amendment was approved bythe stockholders at the 2018 Annual Meeting of Stockholders on June 21, 2018, to increase the authorized shares under the 2016 plan by 2,900,000 shares.Under the provisions of the 2016 Plan, no option will have a term in excess of 10 years. The Company’s 2012 Stock Equity Incentive Plan (the “2012 Plan”), which was adopted by the board of directors and approved by the stockholders inJuly 2012, became effective immediately prior to the closing of the Company’s initial public offering. In addition, the Company’s 2004 Stock Option andGrant Plan (the “2004 Plan”) was terminated effective immediately prior to the closing of the Company’s initial public offering. The 2012 Plan authorizedthe Company to grant up to 1,663,727 shares of common stock to eligible employees, directors, and non-employee consultants and advisors to the Companyin the form of options to purchase common stock of the Company at a price not less than the estimated fair value at the date of grant. Under the provisions ofthe 2012 Plan, no option will have a term in excess of 10 years. With the adoption of the 2016 plan, all authorized but un-issued shares, totaling 12,932,under the 2012 plan were converted to the 2016 plan. All future awards will be granted out of the 2016 plan. As of December 31, 2018, there were 1,727,513 shares of common stock available for future grants under the 2016 Plan. F-18Table of Contents Total compensation cost that has been charged against operations related to the above plans was approximately $13.9 million, $8.6 million and $7.4 millionfor the years ended December 31, 2018, 2017 and 2016, respectively. The exercise of stock options and the vesting of restricted stock during the year endedDecember 31, 2018 generated an income tax deduction of approximately $11.8 million. In January 2017, the FASB issued ASU No. 2016-09, Improvementsto Employee Share-Based Payment Accounting, or ASU 2016-09, which amends Accounting Standards Codification, or ASC, Topic 718, Compensation —Stock Compensation, and is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. ASU 2016-09simplifies several aspects of the accounting for share-based payment transactions, including the accounting for forfeitures, income tax consequences,classification of awards as either equity or liabilities, and classification on the statement of cash flows. Upon adoption, The Company is accounting forforfeitures as they occur rather than estimate a forfeiture rate and has recorded a cumulative-effect adjustment in equity of $0.7 million on the date of initialadoption. In addition, the standard requires that excess tax benefits and deficiencies that arise upon vesting or exercise of share-based payments berecognized as an income tax benefit and expense in the income statement. Previously, such amounts were recognized as an increase and decrease inadditional paid-in capital. We have adopted this aspect of the standard prospectively, and accordingly the excess tax benefits arising from share-basedpayments was approximately $7.1 million, $0.6 million and $0 for the years ended December 31, 2018, 2017 and 2016, respectively. The following table summarizes stock-based compensation related to the above plans by expense category for the years ended December 31, 2018, 2017 and2016: Year Ended December 31,20182017 2016Research and development$5,965,089$3,732,742$3,186,783General and administrative7,977,5224,885,7784,244,343Total$13,942,611$8,618,520$7,431,126 Stock Options The Company grants stock options to employees, directors and non-employee consultants, with exercise prices equal to the closing price of the underlyingshares of the Company’s common stock on the date that the options are granted. Options granted have a term of 10 years from the grant date. Options grantedto employees generally vest over a four-year period from date of grant or if vesting based on market condition, awards vest based on the derived serviceperiod which is the estimated period of time that would be required to satisfy the market condition. Options granted to directors vest in equal yearlyinstallments over a three-year period from the date of grant. Options to directors are granted on an annual basis and represent compensation for servicesperformed on the Board of Directors. Compensation cost for stock options granted to employees and directors is charged against operations using thestraight-line attribution method between the grant date for the option and each vesting date. The Company estimates the fair value of stock options on thegrant date by applying the Black-Scholes option pricing valuation model. The application of this valuation model involves assumptions that are highlysubjective, judgmental and sensitive in the determination of compensation cost. The weighted-average key assumptions used in determining the fair value of options granted for the years ended December 31, 2018, 2017 and 2016, are asfollows: Year Ended December 31,2018 2017 2016Risk-free interest rate2.91%1.92%1.56%Expected volatility75.94%75.76%73.53%Dividend yield———Expected life6.26 years6.07 years6.03 years Due to the lack of trading history, the Company’s computation of stock-price volatility is based on the volatility rates of comparable publicly heldcompanies over a period equal to the estimated useful life of the options granted by the Company. The Company’s computation of expected life wasdetermined using the “simplified” method which is the midpoint between the vesting date and the end of the contractual term. The Company believes that itdoes not have sufficient reliable exercise data in order to justify the use of a method other than the “simplified” method of estimating the expected exerciseterm of employee stock option grants. The Company has paid no dividends to stockholders. The risk-free interest rate is based on the zero-coupon U.S.Treasury yield at the date of grant for a term equivalent to the expected term of the option. For the years ended December 31, 2018, 2017 and 2016 the Company issued 169,810 shares, 23,952 shares and 87,786 shares of the Company’s commonstock, respectively, upon the exercise of outstanding stock options and received proceeds of approximately $1,583,810, $141,740 and $264,196,respectively. For the years ended December 31, 2018, the company received a tax benefit of $7.1 million from the exercise of stock options, and for the yearsended December 31, 2017 and December 31, 2016, the Company realized no tax benefit from the exercise of stock options. As of December 31, 2018, therewas approximately $7.5 million of unrecognized F-19Table of Contents compensation cost related to unamortized stock option compensation which is expected to be recognized over a remaining weighted-average period ofapproximately 2.18 years. The Company’s stock options outstanding at December 31, 2018, 2017 and 2016 and changes during the years ended December 31, 2018, 2017 and 2016 arepresented below: Options Weighted-AverageExercise Price Weighted-AverageRemainingContractual Life AggregateIntrinsicValueOutstanding at December 31, 20152,121,726$10.74Options granted1,132,9725.29Options exercised(87,786)3.01Options forfeited(76,160)18.17Outstanding at December 31, 20163,090,752$8.78Options granted131,0008.40Options exercised(23,952)5.92Options forfeited(22,836)15.51Outstanding at December 31, 20173,174,964$8.74Options granted609,00015.21Options exercised(169,810)9.33Options forfeited(100,136)17.15Outstanding at December 31, 20183,514,018$9.596.08$10,087,201Options exercisable at December 31, 20182,248,633$9.014.83$7,712,045 The aggregate intrinsic value in the previous table reflects the total pretax intrinsic value (the difference between the Company’s closing stock price on thelast trading day of the period and the exercise price of the options, multiplied by the number of in-the-money stock options) that would have been receivedby the option holders had all option holders exercised their options on December 31, 2018. The intrinsic value of the Company’s stock options changesbased on the closing price of the Company’s common stock. The total intrinsic value of options exercised (the difference in the market price of theCompany’s common stock on the exercise date and the price paid by the optionee to exercise the option) was approximately $1.4 million, $0.2 million and$0.7 million for the years ended December 31, 2018, 2017 and 2016, respectively. Restricted Stock The Company grants restricted stock to its employees, directors, and non-employee consultants. Restricted stock is recorded as deferred compensation andcharged against income on a straight-line basis over the vesting period, which ranges from immediate to four years in duration. If vesting of the award isbased on a market condition, awards vest based on the derived service period which is the estimated period of time that would be required to satisfy themarket condition. Restricted stock to directors is granted on a yearly basis and represents compensation for services performed on the Company’s Board ofDirectors. Restricted stock awards to directors vest in equal installments over a three-year period from the grant date. Compensation cost for restricted stock isbased on the award’s grant date fair value, which is the closing market price of the Company’s common stock on the grant date, multiplied by the number ofshares awarded. The Company’s non-vested restricted stock at December 31, 2018, 2017 and 2016, and changes during the years ended December 31, 2018, 2017 and 2016are presented below: Number of Shares Weighted-Average GrantDate Fair ValuePer ShareOutstanding at December 31, 2015553,045$13.91Shares granted920,4444.93Shares vested(165,400)14.30Shares forfeited(39,997)11.80Outstanding at December 31, 20161,268,092$7.41Shares granted914,9508.91Shares vested(416,157)9.02Shares forfeited(42,048)6.92Outstanding at December 31, 20171,724,837$7.83Shares granted1,770,12616.28Shares vested(637,155)9.14Shares forfeited(63,353)12.22Outstanding at December 31, 20182,794,455$12.79 F-20Table of Contents For the year ended December 31, 2018, the Company granted 1,770,126 shares of restricted stock, at a weighted-average grant date fair value of $16.28 pershare amounting to approximately $28.8 million in total aggregate fair value. At December 31, 2018, approximately 2,794,455 shares remained unvested andthere was approximately $27.7 million of unrecognized compensation cost related to restricted stock which is expected to be recognized over a remainingweighted-average period of approximately 1.97 years. The total fair value of shares vested during 2018, 2017 and 2016 was approximately was approximately $5.8 million, $3.8 million, and $2.4 million. Performance Share Awards Subsequent to the closing of the IPO, certain options and restricted stock began to vest to directors, consultants and key employees. The Company recordedapproximately $1.4 million of stock-based compensation expense associated with 573,424 options with a weighted average exercise price of $2.38 and 8,625shares of restricted stock that fully vested upon consummation of the IPO. In addition, 281,895 options commenced vesting based upon the consummation ofthe IPO. The Company has recorded approximately $1.8 million on the vesting of these options over their expected lives. On August 2018, the FDA accepted the Company’s Biologics License Application, or BLA, for ELZONRIS for the treatment of BPDCN, in adults and inpediatric patients two years and older. As a result of the approval, the underlying performance condition associated with the performance share awards, orPSAs, were met and the Company recognized approximately $0.3 million of stock compensation expense related to the PSAs for twelve-month period endedDecember 31, 2018. In addition, ELZONRIS received FDA approval on December 21, 2018 for the treatment BPDCN. As a result of the approval, the underlying performancecondition associated with the PSAs were met and the Company recognized approximately $0.9 million of stock compensation expense related to the PSAs forthe three months ended December 31, 2018. The remaining $5.9 million of stock compensation expense is expected to be recognized through the remainingtime-based vesting criteria related to the PSAs are satisfied. For awards with performance conditions, such as obtaining FDA approval on a developed product, capital raises, a change in control or a sale of the company,no expense is recognized, and no measurement date can occur, until the occurrence of the event is probable. Awards Granted to Non-Employees The Company grants stock options, restricted stock, and unrestricted stock to non-employee consultants. On June 20, 2018, the FASB issued ASU No. 2018-07, Compensation — Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope ofTopic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The Company early adopted ASU No. 2018-07on April 1, 2018 and the net impact relating to the adoption was a $0.2 million decrease to accumulated deficit for the impact prior to April 1, 2018. Totalcompensation cost that has been charged against operations related to stock-based awards granted to non-employee consultants was approximately $1.9million, $0.8 million and $0.5 million for the years ended December 31, 2018, 2017 and 2016, respectively. Employee Stock Purchase Plan In September 2015, the Company adopted its 2015 Employee Stock Purchase Plan (the “2015 ESPP”). The 2015 ESPP is qualified as an employee stockpurchase plan under Section 423 of the Internal Revenue Code of 1986, as amended (the “IRC”). Under the 2015 ESPP, the Company will grant rights topurchase shares of common stock under the 2015 ESPP at prices not less than 85% of the lesser of (i) the fair value of the shares on the date of grant of suchrights or (ii) the fair value of the shares on the date such rights are exercised. Therefore, the 2015 ESPP is considered compensatory under FASB ASC 718since, along with other factors, it includes a purchase discount of greater than 5%. For the twelve months ended December 31, 2018, the Company recordedapproximately $84,678 of compensation expense, related to participation in the 2015 ESPP. 12. Income Taxes For the year ended December 31, 2018, 2017, and 2016, the Company recognized $0, $0, and $25,296, respectively. The $25,296 of income tax benefit in2016 was a result of the application of intraperiod tax allocation provisions of ASC 740, under which the Company is required to consider all items(including items recorded in other comprehensive income) in determining the amount of tax F-21Table of Contents benefit that should be allocated to net loss. The non-cash income tax benefit was offset in full by income tax expense recorded in other comprehensiveincome. For years shown, components of the Company’s income tax expense (benefit) were as follows: 2018 2017 2016 Deferred:Federal$(22,694,902)$(8,370,870)$(16,917,231)State and local7,039,2574,968,667(3,063,684)(15,655,645)(3,402,203)(19,980,915)Increase in valuation allowance15,655,6453,402,20319,955,619Total tax expense$—$—$(25,296) A reconciliation of the statutory U.S. federal rate to the Company’s effective tax rate is as follows: Year Ended December 31, 2018 2017 2016 Percent of pre-tax income:U.S. federal statutory income tax rate(21.0)%(34.0)%(34.0)%State taxes, net of federal benefit8.3(3.6)(7.5)Permanent items1.75.67.0R&D Credit(8.4)(14.8)(17.2)ASU 2016-09—(7.2)—Change in state deferred rate—10.8(0.5)Impact of tax reform—38.2—Deferred Tax Adjustment1.1——RTP Adjustment(0.1)——Change in valuation allowance18.45.052.1Effective income tax rate—%—%(0.1)% The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets were as follows: December 31,2018 2017Current deferred tax assets:Accrued expenses$—$—Valuation allowance——Total current deferred tax assets$—$— Noncurrent deferred tax assets:Accrued expenses$1,282,612$784,671Net operating loss carryforwards44,990,23834,220,690Research and Development39,005,87931,591,504Depreciable and Amortizable Assets7,484,10812,131,537Nonqualified stock compensation3,751,5443,079,23196,514,38181,807,633Valuation allowance(96,514,381)(81,807,633)Total noncurrent deferred tax assets$—$— In assessing its ability to realize deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred taxassets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods inwhich the temporary differences representing net future deductible amounts become deductible. Due to the Company’s history of losses, the deferred tax assets are fully offset by a valuation allowance at December 31, 2018, 2017 and 2016. F-22Table of Contents The following table summarizes carryforwards of net operating losses and tax credits as of December 31, 2018: Amount ExpirationFederal net operating losses (pre tax reform)$135,509,6372023-2037Federal net operating losses (post tax reform)$74,018,998UnlimitedState net operating losses$213,326,4662023-2038Research and development credits$39,005,8772023-2038 The Internal Revenue Code of 1986, as amended (the “Code”) provides for a limitation of the annual use of net operating losses and other tax attributes (suchas research and development tax credit carryforwards) following certain ownership changes (as defined by the Code) that could limit the Company’s abilityto utilize these carryforwards. At this time, the Company has not completed a study to assess whether an ownership change under section 382 of the Code hasoccurred, or whether there have been multiple ownership changes since the Company’s formation, due to the costs and complexities associated with such astudy. The Company may have experienced various ownership changes, as defined by the Code, as a result of past financing transactions. Accordingly, theCompany’s ability to utilize the aforementioned carryforwards may be limited. Additionally, U.S. tax laws limit the time during which these carryforwardsmay be applied against future taxes. Therefore, the Company may not be able to take full advantage of these carryforwards for federal or state income taxpurposes. The Company did not have unrecognized tax benefits as of December 31, 2018 and does not expect this to change significantly over the next twelve months.As of December 31, 2018, the Company has not accrued interest or penalties related to uncertain tax positions. The Company’s tax returns for the years endedDecember 31, 2009 through December 31, 2018 are still subject to examination by major tax jurisdictions. The Company will recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2018, 2017 and 2016, theCompany had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s consolidatedstatements of operations and comprehensive loss. For all years through December 31, 2018, the Company generated research credits but has not conducted a study to document the qualified activities. Thisstudy may result in an adjustment to the Company’s research and development credit carryforwards; however, until a study is completed and any adjustmentis known, no amounts are being presented as an uncertain tax position for any years. A full valuation allowance has been provided against the Company’sresearch and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the deferred tax asset established forthe research and development credit carryforwards and the valuation allowance. The Company is subject to taxation in the United States and various states. The 2015 US federal income tax return is currently under examination, theresolution of which is not expected to have a material adverse effect on the Company’s results of operations, cash flows or financial condition. 13. Commitments and Contingencies License Agreements The Company has entered into research and development agreements with third-parties for the development of oncology products. These agreements requirethe Company to fund the development of such products and potentially make milestone payments and royalties on net sales in the future based on theCompany’s successful development of the products. The timing and the amount of milestone payments in the future are not certain. Under the Company’s license agreements, the Company could be required to pay up to a total of $217.1 million upon achieving certain milestones, such asthe initiation of clinical trials or the granting of patents. From inception through December 31, 2018, the Company has paid or accrued $7.3 million inpayments resulting from the execution of certain agreements, patent approvals, the initiation of sponsor research agreements, and compound developmentagreements. Milestone payments will also be due upon the issuance of certain patents, the initiation of certain clinical trials, the submission of regulatoryapplications and certain regulatory approvals, in addition to sales milestones and single digit royalties payable on commercial sales if any occur. F-23Table of Contents Scott and White Memorial Hospital In June 2006, the Company entered into a research and license agreement, as amended in December 2008, March 2010 and July 2011 (collectively the “S&WAgreement”), with Scott and White Memorial Hospital and Scott, Sherwood and Brindley Foundation, and its affiliate Scott and White Clinic (collectively“S&W”) for the rights to ELZONRIS and SL-501. ELZONRIS is a targeted therapy directed to CD123, and is being developed to treat patients withhematologic cancers. SL-501 is a next generation CD123-targeted therapy and is in preclinical development. The Company have made certain payments toScott and White for such research services pursuant to the agreement, which through December 31, 2018, totals approximately $1.0 million in the aggregate.The Company is required to pay single-digit royalties on sales of these products, if any, and a percentage of upfront payments the Company may receive froma sublicensee. The S&W Agreement will expire in its entirety upon the later to occur of (i) the 10th anniversary of the first commercial sale of a product and(ii) the expiration of the last issued patent claiming or covering a product. The Company may terminate the S&W Agreement at its sole discretion at any timeafter a specified number of days following written notice and either party may terminate for a material breach of the agreement that is not cured within aspecified number of days. University of Pittsburgh In September 2009, the Company entered into an exclusive license agreement with the University of Pittsburgh (“UP”) that covers patent rights claimingcomposition of a shortened variant of the IL-13Rα2 peptide (the “UP Agreement”) utilized by the Company in its SL-701 composition. The Company paidUP an upfront license fee that was expensed to research and development cost for the year ended December 31, 2009. In addition to the upfront payment, theCompany is required to pay annual fees, milestone payments (which are contingent upon achievement of pre-defined clinical, regulatory and commercialevents), and, upon regulatory approval, single-digit royalty payments on net sales, and a percentage of non-royalty revenue from sublicensees, whichdecreases if the applicable sublicense agreement is entered into after a certain clinical milestone has been met. Through December 31, 2018, the Companyhave paid an aggregate of approximately $0.7 million in fees to the University under the agreement. The Company also must make certain payments to theUniversity of up to approximately $4.2 million upon the achievement of specific regulatory and commercial milestone events. The UP Agreement will expirein its entirety upon the expiration of the last issued patent claiming or covering the product. The Company may terminate the UP Agreement at its solediscretion at any time after a specified number of days following written notice and UP may terminate for a material breach of the agreement by the Companythat is not cured within a specified number of days. In March 2012, the Company entered into a non-exclusive license agreement with UP that covers patent rights claiming use of a shortened peptide of EphA2,which the Company may use for the diagnosis, treatment or prevention of diseases and tumors of the brain and which the Company is currently utilizing in itsSL-701 composition. The Company paid UP an initial license fee and is required to pay UP annual license maintenance fees until the first commercial sale ofa licensed product, a single-digit royalty on sales, and a minimum annual royalty following the first commercial sale of a licensed product. ThroughDecember 31, 2018, the Company have paid an aggregate of approximately $0.1 million in fees to the University under the agreement. The UP Agreementwill expire in its entirety upon the expiration of the last issued patent claiming or covering the product. The Company may terminate the UP Agreement at itssole discretion at any time after a specified number of days following written notice and UP may terminate for a material breach of the agreement by theCompany that is not cured within a specified number of days. In March 2012, the Company entered into a non-exclusive license agreement with UP for the right to use certain information and data contained in theapplications for investigational new drugs, or INDs, relating to clinical trials with an earlier version of SL-701 that were conducted by UP. The Company mayuse the information and data for the development, manufacture, regulatory approval and commercialization of pharmaceutical products. The Company paidUP an initial license fee and will be required to make a payment following a specified regulatory milestone, and a percentage of non-royalty revenue it mayreceive from any sublicensees. Through December 31, 2018, the Company has paid an aggregate of approximately $27,500 in fees to the University underthe agreement. The UP Agreement will expire in its entirety in March 2032 unless earlier terminated by a party. The Company may terminate the UPAgreement at its sole discretion at any time prior to incorporating or referencing the data or UP INDs, after a specified number of days following writtennotice, and UP may terminate for a material breach of the agreement by the Company that is not cured within a specified number of days or if the IL-13Rα2license agreement is terminated. Leukemia and Lymphoma Society In October 2013, the Company entered into a contract relating to the Therapy Acceleration Program (“the TAP Agreement”) with The Leukemia andLymphoma Society (“LLS”). LLS is a national voluntary health agency which, among other activities, encourages and sponsors research relating to bloodcancers to develop therapies to cure or mitigate these diseases. To further its mission, LLS provides research funding to entities that can demonstrate, afterLLS’s review process, that their proposed research projects have scientific promise to advance LLS’s effort to find treatments and cures for blood cancers andtheir complications. Pursuant to the TAP Agreement, F-24Table of Contents LLS agreed to provide funding to the Company not to exceed $3.5 million to fund the Company’s development program related to the Company’spreclinical and clinical product development activities as well as providing a educational program to increase physician & patient awareness of BPDCN.Through December 31, 2018, the Company has received the full $3.5 million based on milestones achieved. In addition, Stemline has paid 0.6 millionpursuant to the agreement as funding for the education program to increase awareness of BPDCN. In consideration of funding by LLS and transfer to the Company of any rights LLS may have to any project inventions developed during the term of theagreement, the Company may be required to pay LLS a cash multiple on the LLS funding, (LLS funding is the $3.5 million less any amount Stemlinecontributes to LLS to support the Company’s preclinical and clinical development activities to bring ELZONRIS to commercialization). The total amountpayable by the Company to LLS will not exceed three (3) times the amount of net funding received from LLS of $2.9 million. The Company is required tomake a one-time payment upon regulatory approval and commercialization of ELZONRIS. Additionally, the Company is required to make payments basedon achievement of specific sale-based commercial milestones. The Company may terminate the license for any or no reason upon 60 days advance writtennotice to LLS. If either party breaches a material obligation under the agreement and such obligation is not cured within a specified period of time followingwritten notice from the other party, the non-breaching party may terminate the agreement upon an additional written notice. CanBas, Ltd On December 26, 2014, the Company entered into a license agreement with CanBas, Ltd. (“CanBas”) for SL-801. SL-801 is a small molecule inhibitor ofXPO1. Under the terms of the agreement, CanBas has granted the Company an exclusive, royalty-bearing, worldwide (excluding Japan, Korea, China andTaiwan) license, under certain patent rights, know-how and materials to research, develop, make, have made, formulate, use, sell, offer to sell and import SL-801, and any products containing or comprising such compound in finished dosage pharmaceutical form. The patent rights exclusively licensed to theCompany under the agreement, which include issued patents in the U.S. and abroad, cover both composition of matter and use of SL-801. The Company hasadditional pending patent applications directed to SL-801 which would provide additional protection, should they issue, in certain non-U.S. territories. The Company must pay CanBas tiered royalties based on aggregate net sales, by the Company or its sublicensees, of products containing the licensedcompound until the latest date of a period of ten years following the first commercial sale of each product in each country; the date upon which there are nomore valid claims or the expiration or termination of the last regulatory exclusivity period. The royalty rates start in the low single digits and are tiered upbased on annual net sales. In the future, the Company may also be responsible, based on the achievement of specific clinical-development, regulatory andsales-based commercial milestones, for certain payments to CanBas of up to $86 million. The Company has sublicensing rights under this agreement, inwhich the Company would pay CanBas a standard percentage of the payments received by the Company from a sublicensee. The Company must exercise commercially reasonable efforts to develop and commercialize a licensed product and to achieve certain regulatory milestoneswithin certain periods, subject to extensions based on unforeseen technical, scientific, intellectual property or regulatory issues. The agreement survives until the later of ten years following the first commercial sale of each product in each country; the date upon which there are no morevalid claims; or the expiration or termination of the last regulatory exclusivity period, after which the Company’s license becomes fully paid, irrevocable,perpetual, non-exclusive and royalty-free. The Company may terminate the license for any or no reason upon 60 days advance written notice to CanBas. Ifeither party breaches a material obligation under the agreement and such obligation is not cured within a specified period of time following written noticefrom the other party, the non-breaching party may terminate the agreement upon an additional written notice. UCB Biopharma Sprl On December 31, 2017, the Company entered into a license agreement with UCB Biopharma Sprl (“UCB”) for SL-901. SL-901 is a small molecule kinaseinhibitor. Prior to in licensing, the agent had shown preclinical activity in several tumor models, and was evaluated in a small Phase 1 clinical trial in Europe.Neither a dose limiting toxicity (“DLT”) nor a maximum tolerated dose (“MTD”) was reached in the trial, and a partial response in one patient with advancedlung cancer was reported. We are currently evaluating plans to produce drug supply under good manufacturing practice (“GMP”) and conduct necessary non-clinical studies to enable a new regulatory filing to continue clinical dose escalation. UCB has granted the Company an exclusive, royalty-bearing, worldwide license, under certain patent rights, know-how and materials to research, develop,make, have made, formulate, use, sell, offer to sell and import SL-901, and any products containing or comprising such compound in finished dosagepharmaceutical form. In January 2018, the Company paid UCB an up-front consideration payment of $0.5 million. In the future, the Company may also beresponsible, based on the achievement of specific F-25Table of Contents clinical development, regulatory and sales-based commercial milestones, for certain payments to UCB of up to $111 million, largely consisting of approvaland post-approval payments. The Company has sublicensing rights under this agreement, in which the Company would pay UCB a standard percentage ofthe payments received by the Company from a sublicensee. Additionally, the Company may be obligated to pay UCB tiered royalties based on aggregate net sales, by the Company or its sublicensees, of productscontaining the licensed compound until the latest date of a period of ten years following the first commercial sale of each product in each country; the dateupon which there are no more valid claims or the expiration or termination of the last regulatory exclusivity period. The royalty rates are in the low doubledigits and are tiered up based on annual net sales. The Company must exercise commercially reasonable efforts to develop, obtain regulatory approval andcommercialize a licensed product in at least one indication in both the U.S. and EU. The licenses granted are contingent upon the Company achieving certainmilestone events within specific timeframes. The agreement survives until the date upon which the Company’s obligation to pay royalties has expired in each specific country, after which the Company’slicense becomes fully paid, irrevocable, perpetual, non-exclusive and royalty-free. The Company may terminate the license for breach upon 45 days advancewritten notice to UCB. If either party breaches a material obligation under the agreement and such obligation is not cured within a specified period of timefollowing written notice from the other party, the non-breaching party may terminate the agreement upon an additional written notice. Other The Company has also licensed rights to certain technologies or intellectual property in the field of oncology. The Company is generally required to makeupfront payments as well as other payments upon successful completion of preclinical, clinical, regulatory or sales milestones. In addition, these agreementsgenerally require the Company to pay royalties on sales of the products arising from these agreements. These agreements generally permit the Company toterminate the agreement with no significant continuing obligation. As part of the agreements discussed above, the Company has committed to make potential future milestone payments to third-parties as part of its licensingagreements. Payments generally become due and payable only upon the achievement of certain developmental, regulatory and/or commercial milestones.Because the achievement of these milestones is neither probable nor reasonably estimable, the Company has not recorded a liability on its balance sheet forany such contingencies. Contractual Agreements In February 2013, the Company entered into a bioprocessing services agreement with a vendor for approximately $2.9 million if all services are performedunder the contract. As of December 31, 2014, the contract services were performed on the initial work order and had been paid by the Company. During 2015through 2018, the Company entered into new work order agreements with this vendor totaling approximately $29.0 million, with services to be rendered onthese agreements through 2018. From inception through December 31, 2018, the Company has received and paid for services relating to these agreements inthe amount of $26.4 million. The Company has agreements in place with CROs in connection with its clinical programs. The Company’s total expenditures in the future would beapproximately $3.7 million assuming the successful advancement of its programs. F-26Table of Contents Lease Agreement In July 2013, the Company entered into a leasing agreement with respect to its corporate offices at 750 Lexington Avenue, New York, New York, for amonthly rent of $50,625. The term of this lease agreement was 36 months. In February 2016, the Company entered into a new leasing agreement with respect to its corporate offices at 750 Lexington Avenue, New York, New York, fora monthly rent of $69,750 and a 42-month term. The term of this lease agreement commenced on July 1, 2016 and is set to expire on December 31, 2019. TheCompany has exercised an option to extend this lease agreement for an additional 12 months to December 31, 2020. The aggregate minimum leasecommitment over the 42-month term of the lease is approximately $2.7 million. The Company has provided the landlord with a security deposit equal tothree months’ rent, totaling $209,250, recorded in other assets. In July 2018, the Company entered into a new leasing agreement for additional office space at 750 Lexington Avenue, New York, New York, for a monthlyrent of $23,400 and a 12-month term. The term of this lease agreement commences on August 1, 2018 and is set to expire on July 31, 2019. The aggregateminimum lease commitment over the 12-month term of the lease is approximately $0.3 million. The Company has provided the landlord with a securitydeposit, totaling $39,000. The Company’s future annual minimum lease payments for each of the following calendar years are as follows: 2019$1,011,4202020847,62020214,425Total minimum payments$1,863,465 Rent expense charged to operations was $0.9 million, $0.8 million, and $0.7 million for the years ended December 31, 2018, 2017, and 2016, respectively.Rent expense is included in general and administrative expenses in the Company’s Statements of Operations. Contingencies On March 15, 2018, the United States District Court for the Southern District of New York granted a motion to dismiss in its entirety a consolidatedshareholder action against the Company, its directors, certain of its officers, and the lead underwriter. This matter originated from lawsuits filed in February2017. On March 12, 2019, Lead Plaintiffs filed a joint stipulation of settlement in support of their motion for preliminary approval of a settlement of theconsolidated shareholder action with the United States District Court for the Southern District of New York, after the Plaintiffs voluntarily withdrew theirappeal pursuant to Local Rule 42.1. F-27Table of Contents 14. Subsequent Events On January 18, 2019, the Company completed a fifth follow-on public offering, selling 8,888,889 shares at an offering price of $9 per share. Additionally, theunderwriters exercised in full their over-allotment option to purchase an additional 1,333,333 shares at an offering price of $9 per share. Aggregate grossproceeds from the follow-on public offering, including the exercise of the over-allotment option, were $92 million, and net proceeds received afterunderwriting fees and offering expenses were approximately $86.1 million. In January 2019, the Company deployed its marketing and sales force to support the U.S. commercialization of ELZONRIS. As of the date of the financialstatements, the Company has generated revenue from the commercialization of ELZONRIS. 15. Selected Quarterly Financial Data (Unaudited) Quarters EndedMarch 31June 30 September 30 December 312018Net loss attributable to common stockholders$(18,416,753)$(18,928,703)$(21,043,996)$(26,634,914)Basic and diluted net loss per common share$(0.69)$(0.66)$(0.73)$(0.92)2017Net loss attributable to common stockholders$(14,566,010)$(15,456,936)$(16,056,147)$(21,749,301)Basic and diluted net loss per common share$(0.67)$(0.66)$(0.68)$(0.93) F-28Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to besigned on its behalf by the undersigned, thereunto duly authorized. Date: March 15, 2019STEMLINE THERAPEUTICS, INC. By:/s/ Ivan Bergstein, M.D.Ivan Bergstein, M.D.Chairman, President and Chief Executive Officer(Principal Executive Officer) Date: March 15, 2019By:/s/ David G. GioncoDavid G. GioncoVice President of Finance and Chief Accounting Officer(Principal Financial and Accounting Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Ivan Bergstein, M.D. his true andlawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and his name, place and stead, in any and all capacities, to signany or all amendments to this annual report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, withthe SEC, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to bedone in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or any of his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Form 10-K has been signed by the following persons on behalf of theRegistrant on March 15, 2019, and in the capacities indicated: Signatures Title /s/ Ivan Bergstein, M.D.Chairman, President and Chief Executive OfficerIvan Bergstein, M.D.(Principal Executive Officer) /s/ David G. GioncoVice President of Finance and Chief Accounting OfficerDavid G. Gionco(Principal Financial and Accounting Officer) /s/ Ron BentsurDirectorRon Bentsur /s/ Darren ClineDirectorDarren Cline /s/ Alan FormanDirectorAlan Forman /s/ Daniel HumeDirectorDaniel Hume /s/ Mark SardDirectorMark Sard /s/ Kenneth ZuerblisDirectorKenneth Zuerblis Exhibit 21.1 STEMLINE THERAPEUTICS, INC.List of Subsidiaries Stemline Therapeutics, Inc. does not have any subsidiaries. Exhibit 23.1 Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the following Registration Statements: (1) Registration Statement (Form S-8 No. 333-188115) pertaining to Stemline Therapeutics, Inc. 2012 Equity Incentive Plan and StemlineTherapeutics, Inc. Amended and Restated 2004 Employee, Director and Consultant Stock Plan, (2) Registration Statement (Form S-8 No. 333-206303) pertaining to Stemline Therapeutics, Inc. 2015 Employee Stock Purchase Plan, (3) Registration Statement (Form S-8 No. 333-211784) pertaining to Stemline Therapeutics, Inc. 2016 Equity Incentive Plan, (4) Registration Statement (Form S-3 No. 333-219794) of Stemline Therapeutics, Inc., (5) Registration Statement (Form S-8 No. 333-219796) pertaining to Stemline Therapeutics, Inc. 2016 Equity Incentive Plan, and (6) Registration Statement (Form S-8 No. 333-226049) pertaining to Stemline Therapeutics, Inc. 2016 Equity Incentive Plan; of our reports dated March 15, 2019, with respect to the financial statements of Stemline Therapeutics, Inc. and the effectiveness of internal control overfinancial reporting of Stemline Therapeutics, Inc. included in this Annual Report (Form 10-K) of Stemline Therapeutics, Inc. for the year ended December 31,2018. /s/ Ernst & Young LLP Stamford, ConnecticutMarch 15, 2019 Exhibit 31.1 CERTIFICATION OF PERIODIC REPORTPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Ivan Bergstein, M.D., certify that: 1. I have reviewed this annual report on Form 10-K of Stemline Therapeutics, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. Date: March 15, 2019/s/ Ivan Bergstein, M.D.Ivan Bergstein, M.D.Chief Executive OfficerPrincipal Executive Officer Exhibit 31.2 CERTIFICATION OF PERIODIC REPORT PURSUANT TO SECTION 302 OF THESARBANES-OXLEY ACT OF 2002 I, David G. Gionco, certify that: 1. I have reviewed this annual report on Form 10-K of Stemline Therapeutics, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. Date: March 15, 2019/s/ David G. GioncoDavid G. GioncoChief Accounting OfficerPrincipal Financial and Accounting Officer Exhibit 32.1 STATEMENT OF CHIEF EXECUTIVE OFFICER OFSTEMLINE THERAPEUTICS, INC.PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the annual report of Stemline Therapeutics, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2018 as filed withthe Securities and Exchange Commission (the “Report”), I, Ivan Bergstein, M.D., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.§1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge: 1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 15, 2019/s/ Ivan Bergstein, M.D.Ivan Bergstein, M.D.Chief Executive OfficerPrincipal Executive Officer Exhibit 32.2 STATEMENT OF CHIEF ACCOUNTING OFFICER OFSTEMLINE THERAPEUTICS, INC.PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the annual report of Stemline Therapeutics, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2018 as filed withthe Securities and Exchange Commission (the “Report”), I, David G. Gionco, Chief Accounting Officer of the Company, certify, pursuant to 18 U.S.C. §1350,as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge: 1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 15, 2019/s/ David G. GioncoDavid G. GioncoChief Accounting OfficerPrincipal Financial and Accounting Officer 

Continue reading text version or see original annual report in PDF format above