Strongbridge Biopharma plc
Annual Report 2016

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 20-F (Mark One)REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2016 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to OR SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report Commission file number 001-37569 STRONGBRIDGE BIOPHARMA plc(Exact name of Registrant as specified in its charter) N/A(Translation of Registrant’s name into English) Ireland(Jurisdiction of incorporation or organization)900 Northbrook DriveSuite 200Trevose, PA 19053+1 610‑254‑9200(Address of principal executive offices)Stephen Long, Chief Legal OfficerStrongbridge Biopharma plc900 Northbrook DriveSuite 200Trevose, PA 19053+1 610‑254‑9200(Name, telephone, email and/or facsimile number and address of Company contact person)Securities registered or to be registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registeredOrdinary shares, par value $0.01 per share The NASDAQ Global Select Market Securities registered or to be registered pursuant to Section 12(g) of the Act: None(Title of Class) Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None(Title of Class) Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the Annual Report: 35,335,026 ordinary shares were issued and outstanding as of March 10, 2017. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☒ No Note—checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those sections. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): Large Accelerated Filer Accelerated Filer Non-Accelerated Filer ☒ Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP L ☒International Financial Reporting Standards as issuedby the International Accounting Standards Board Other If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 Item 18 If this is an Annual Report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No Table of ContentsStrongbridge Biopharma plcTable of Contents PageIntroduction 3 Forward-Looking Statements 4 Part I. 6 Item 1. Identity of Directors, Senior Management and Advisers 6 Item 2. Offer Statistics and Expected Timetable 6 Item 3. Key Information 6 Item 4. Information on the Company 43 Item 4A. Unresolved Staff Comments 79 Item 5. Operating and Financial Review and Prospects 79 Item 6. Directors, Senior Management and Employees 93 Item 7. Major Shareholders and Related Party Transactions 109 Item 8. Financial Information 111 Item 9. The Offer and Listing 111 Item 10. Additional Information 112 Item 11. Quantitative and Qualitative Disclosures About Market Risk 123 Item 12. Description of Securities Other Than Equity Securities 123 Part II. 124 Item 13. Defaults, Dividend Arrearages and Delinquencies 124 Item 14. Material Modifications to the Rights of Security Holders 124 Item 15. Controls and Procedures 124 Item 16 Reserved 125 Item 16A. Audit Committee Financial Experts 125 Item 16B. Code of Ethics 125 Item 16C. Principal Accountant Fees and Services 126 Item 16D. Exemptions From The Listing Standards For Audit Committees 126 Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers 126 Item 16F. Change In Registrant’s Certifying Accountant 127 Item 16G. Corporate Governance 127 Item 16H Mine Safety Disclosure 127 Part III. 127 Item 17. Financial Statements 127 Item 18. Financial Statements 127 Item 19. Exhibits 128 SIGNATURES 130 Table of ContentsIntroductionAs used herein, “Strongbridge Biopharma”, the “Company”, “we”, “our” and “us” refer to Strongbridge Biopharmaplc and its consolidated subsidiaries, unless the context requires otherwise. The consolidated financial statements and other financial data contained in this Annual Report on Form 20-F arepresented in United States dollars (“$”) and are prepared in accordance with generally accepted accounting principles in theUnited States (U.S. GAAP).Solely for convenience, the trademarks and trade names in this Annual Report on Form 20-F are referred to withoutthe and ™ symbols, but absence of such references should not be construed as any indicator that their respective ownerswill not assert, to the fullest extent under applicable law, their rights thereto. The trademarks, trade names and service marksappearing in this Annual Report on Form 20-F are the property of their respective owners.3 ®Table of ContentsCAUTIONARY STATEMENT REGARDING FORWARD‑LOOKING STATEMENTSThis Annual Report on Form 20-F contains forward‑looking statements that involve substantial risks anduncertainties. The forward‑looking statements are contained principally in the sections of this Annual Report on Form 20-Ftitled “Risk Factors,” “Information on the Company,” and “Operating and Financial Review and Prospects.” All statements,other than statements of historical facts, contained in this Annual Report on Form 20-F, including statements regarding ourfuture results of operations and financial position, business strategy, prospective products, product approvals, research anddevelopment costs, timing and likelihood of success, plans and objectives of management for future operations, and futureresults of current and anticipated products, are forward‑looking statements. These statements relate to future events or to ourfuture financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actualresults, performance or achievements to be materially different from any future results, performance or achievementsexpressed or implied by the forward‑looking statements. The words “anticipate,” “assume,” “believe,” “contemplate,”“continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “might,” “objective,” “plan,” “potential,” “predict,”“project,” “positioned,” “seek,” “should,” “target,” “will,” “would,” or the negative of these terms or other similarexpressions are intended to identify forward‑looking statements, although not all forward‑looking statements contain theseidentifying words. These forward‑looking statements are based on current expectations, estimates, forecasts and projectionsabout our business and the industry in which we operate and management’s beliefs and assumptions, are not guarantees offuture results, performance or developments and involve known and unknown risks, uncertainties and other factors. Otherfactors that may cause our actual results or developments to differ materially from the expectations contained in the forward-looking statements include, but are not limited to:·our ability to successfully commercialize Keveyis;·the timing, progress and results of clinical and preclinical trials for our product candidates, including statementsregarding the timing of initiation and completion of these trials, enrollment of patients, dosing of subjects andthe period during which the results of these trials will become available; ·our estimates regarding future revenue, expenses, capital requirements and needs for additional financing; ·our ability to become profitable;·our ability to effectively manage our anticipated growth; ·our ability to secure additional financing when needed on acceptable terms; ·the implementation of our business model, as well as strategic plans for our business, product candidates andtechnology; ·our strategy to in‑license, acquire and develop new product candidates and our ability to execute that strategy; ·potential product liability claims and our ability to obtain adequate insurance; ·potential development and commercial synergies from having multiple product candidates for relatedindications; ·potential benefits of the clinical development and commercial experience of our management team; ·our ability to attract or retain key employees, advisors or consultants; ·our ability to successfully commercialize our product candidates; 4 Table of Contents·our commercialization, marketing and manufacturing capabilities and strategy; ·our ability to rely on orphan drug designation for market exclusivity; ·our ability to effectively market any product candidates that receive regulatory approval with a small, focusedsales force; ·the timing, scope or likelihood of regulatory filings and approvals for our product candidates; ·our ability to develop and maintain relationships with manufacturers, clinical research organizations and otherimportant contractors and consultants; ·our ability to advance our product candidates through various stages of development, especially throughpivotal safety and efficacy trials; ·our expectation regarding the safety and efficacy of our product candidates; ·the potential clinical utility and benefits of our product candidates; ·developments and projections relating to our competitors or our industry; ·the impact of government laws and regulations in the United States and foreign countries; ·our estimates regarding the potential market opportunity for our products and product candidates; ·our ability to expand, protect and enforce our intellectual property rights; ·our ability to defend against assertions or claims by third parties that we infringe on their intellectual propertyrights; ·our expectations regarding the time during which we will be an emerging growth company under the JOBS Act;and ·our status as a foreign private issuer under the Securities Exchange Act of 1934, as amended (the “ExchangeAct”).We have included important factors in this Annual Report on Form 20-F, particularly the risks discussed in thesection of this Annual Report on Form 20-F titled “Risk Factors,” that we believe could cause actual results or events to differmaterially from the forward-looking statements that we make. You should not place undue reliance on our forward‑lookingstatements because actual results could differ materially from our intentions, plans, expectations, anticipations, projections,estimations, predictions, outlook, assumptions and beliefs about the future. Moreover, our forward‑looking statements do notreflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. You should read this Annual Report on Form 20-F as well as the documents that we reference herein and have filedas exhibits to this Annual Report on Form 20-F. The forward‑looking statements contained in this Annual Report on Form20-F are made as of the date of this Annual Report on Form 20-F, and we do not assume any obligation to update anyforward‑looking statements, except as required by applicable law. 5 Table of ContentsPART I ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable. ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLENot applicable. ITEM 3. KEY INFORMATIONA.SELECTED FINANCIAL DATAThe following tables set forth a summary of our consolidated financial data. We have derived the consolidatedstatement of operations data for the years ended December 31, 2016, 2015, 2014 and 2013 and the balance sheet data as ofDecember 31, 2016, 2015 and 2014 from our consolidated audited financial statements. You should read this data togetherwith the consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 20-F and thesection in this filing titled “Operating and Financial Review and Prospects.” The historical results are not necessarilyindicative of the results to be expected for any future periods. All of our operations are continuing operations and we havenot proposed or paid dividends in any of the periods presented. December 31, 2016 2015 2014 2013 (in thousands, except share and per share data)Consolidated Statement of Operations Data: Operating expenses: Research and development $20,023 $20,135 $5,844 $2,534General and administrative 14,875 22,719 4,588 2,658Impairment of intangible assets 15,828 — — —Total operating expenses 50,726 42,854 10,432 5,192Operating loss (50,726) (42,854) (10,432) (5,192)Other income (expense), net: Foreign exchange loss (69) (124) (204) (570)Unrealized gain on fair value of warrants 638 — — —Interest Expense (20) — — —Other (expense) income, net (1,180) (1,105) 486 282Total other (expense) income, net (631) (1,229) 282 (288)Loss before income taxes (51,357) (44,083) (10,150) (5,480)Income tax benefit 2,638 450 480 93Net loss (48,719) (43,633) (9,670) (5,387)Net loss attributable to non‑controlling interest 122 53 — —Net loss attributable to Strongbridge Biopharma $(48,597) $(43,580) $(9,670) $(5,387) Net loss attributable to ordinary shareholders: Basic $(48,597) $(43,580) $(9,670) $(5,387)Diluted $(49,236) $(43,580) $(9,670) $(5,387)Net loss per share attributable to ordinary shareholders: Basic $(2.26) $(2.62) $(1.20) $(0.88)Diluted $(2.27) $(2.62) $(1.20) $(0.88)Weighted-average shares used in computing net loss pershare attributable to ordinary shareholders: Basic 21,550,353 16,606,669 8,043,175 6,017,895Diluted 21,655,564 16,606,669 8,043,175 6,017,895 6 Table of Contents December 31, 2016 2015 2014 (in thousands)Consolidated Balance Sheet Data: Cash and cash equivalents $66,837 $51,623 $15,632Total assets 137,531 97,330 23,698Total liabilities 70,559 6,403 4,868Total shareholders’ equity 66,972 90,927 18,821 B. CAPITALIZATION AND INDEBTEDNESSNot applicable.C. REASONS FOR THE OFFER AND USE OF PROCEEDSNot applicable.D. RISK FACTORSCertain factors may have a material adverse effect on our business, financial condition and results ofoperations. You should carefully consider the risks and uncertainties described below, in addition to other informationcontained in this Annual Report on Form 20-F, including our consolidated financial statements and related notes. Ourbusiness, financial condition or results of operations could be materially and adversely affected if any of these risks occursand, as a result, the market price of our ordinary shares could decline and you could lose all or part of your investment.Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may have similaradverse effects on us.Risks Related to Our Limited Operating HistoryWe have a limited operating history on which to assess our business, have incurred significant losses over the last severalyears, and anticipate that we will continue to incur losses until we successfully commercialize Keveyis and one or more ofour product candidates.Until we acquired the U.S. marketing rights to Keveyis®, in December 2016, we were a development-stagebiopharmaceutical company with a limited operating history. We have not yet demonstrated an ability to successfullycomplete a large-scale, pivotal clinical trial, obtain regulatory approval or manufacture and commercialize a productcandidate. Consequently, we have no meaningful commercial operations upon which to evaluate our business andpredictions about our future success or viability may not be as accurate as they could be if we had a history of successfullydeveloping and commercializing pharmaceutical products.Since inception, we have incurred significant operating losses. Our net loss was $48.6 million and $43.6 million forthe years ended December 31, 2016 and 2015, respectively. As of December 31, 2016 we had an accumulated deficit of$129.4 million. We have devoted substantially all of our financial resources to identifying, in-licensing, acquiring anddeveloping our product candidates, including conducting clinical trials as well as providing general and administrativesupport for these operations. To date, we have financed our operations primarily through private placements of equity securities and the proceedsfrom our initial public offering of ordinary shares in the United States in October 2015. The amount of our future net losseswill depend, in part, on whether we successfully commercialize Keveyis and the rate of our future expenditures as well as ourability to obtain funding through strategic collaborations or grants. To become and remain profitable, we must successfullycommercialize Keveyis and develop and eventually commercialize one or more of our product candidates with significantmarket potential.7 Table of Contents Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree ofrisk. It may be several years, if ever, before we receive regulatory approval and have a product candidate other than Keveyisapproved for commercialization. Our future revenue from Keveyis and from any other product candidates approved forcommercialization will depend upon the size of the markets in which our product candidates are marketed, or in which theymay receive approval, and our ability to achieve market acceptance and adequate market share for our product candidates inthose markets. We expect to continue to incur significant expenses and increasing operating losses until we successfullycommercialize Keveyis and one or more of our product candidates. We anticipate that our expenses will increasesubstantially if and as we: ·establish a sales, marketing and distribution infrastructure to commercialize Keveyis and any other products forwhich we may obtain regulatory approval;·continue research and nonclinical and clinical development of our product candidates, including advancing ourprograms from preclinical development into clinical trials and increasing the number and size of our currentclinical trials and preclinical studies;·make up‑front, milestone or other payments under any asset acquisition, supply, or license arrangements;·seek to identify, assess, in‑license, acquire and develop additional product candidates;·change or add manufacturers or suppliers;·seek regulatory approvals for our product candidates that successfully complete clinical trials;·seek to maintain, protect and expand our intellectual property portfolio;·seek to attract and retain skilled personnel;·create additional infrastructure to support our operations as a U.S. listed company and our product developmentand planned future commercialization efforts; and·experience any delays or encounter issues with any of the above, including, but not limited to, failed preclinicalstudies or clinical trials, complex results, safety issues or other regulatory challenges that may require eitherlonger follow‑up of existing preclinical studies or clinical trials or limitation of additional preclinical studies orclinical trials in order to pursue regulatory approval.Further, the net losses we incur may fluctuate significantly from quarter‑to‑quarter and year‑to‑year, such that aperiod‑to‑period comparison of our results of operations may not be a good indication of our future performance. Moreover,if we incur substantial losses, we could be liquidated, and the value of our shares might be significantly reduced or the sharesmight be of no value.We have never generated any revenue from product sales and may never be profitable.We have only one product approved for commercialization, and two product candidates in development, and havenever generated any revenue from product sales. We will not generate revenue from product sales unless and until we launchKeveyis or successfully complete the development of, obtain regulatory approval for and commercialize one or more of ourproduct candidates. Our ability to generate future revenue from product sales and become profitable depends heavily on oursuccess in many areas, including, but not limited to: ·integrating Keveyis and any other products or product candidates that we in-license or acquire, as well ascompleting research, formulation and process development, and preclinical or clinical development, asapplicable, of those product candidates, including successfully completing clinical trials of those productcandidates;8 Table of Contents·obtaining regulatory approval of our product candidates;·incurring additional costs as we advance our product candidates;·developing a sustainable and scalable manufacturing process for our product candidates, if approved;·maintaining supply and manufacturing relationships with third parties that can conduct the manufacturingprocess development and provide adequate, in amount and quality, products to support clinical developmentand the market demand for our product candidates, if approved;·obtaining market acceptance of Keveyis and our product candidates as viable treatment options;·addressing any competing technological and market developments;·identifying, assessing, in‑licensing, acquiring and/or developing new product candidates;·negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter;·maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, tradesecrets and know‑how; and·attracting, hiring and retaining qualified personnel.Given the numerous risks and uncertainties associated with pharmaceutical product development, we are unable toaccurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Ourexpenses could increase beyond expectations if we are required by the FDA or the EMA, or any comparable foreignregulatory agency, to perform nonclinical and preclinical studies or clinical trials in addition to those that we currentlyanticipate.We anticipate incurring significant costs associated with commercializing Keveyis and any other productcandidates that are approved. Further, our revenue will be dependent, in part, upon the size of the markets in the territories forwhich we have received regulatory approval, the accepted price for the product, the ability to obtain coverage and adequatereimbursement, and whether we own the commercial rights for that territory. If the number of our addressable patients is notas significant as we estimate, the indication approved by regulatory authorities is narrower than we expect, or the treatmentpopulation is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenuefrom sales of our product candidates. If we are not able to generate sufficient revenue from the sale of any approved products,we may never become profitable. Even if we do achieve profitability, we may not be able to sustain or increase profitabilityon a quarterly or annual basis. Our failure to successfully execute any of the foregoing would decrease the value of ourcompany and could impair our ability to raise capital, expand our business or continue our operations. A decline in the valueof our company could cause you to lose all or part of your investment. We expect that we will need substantial additional funding before we can expect to complete the development of our twoproduct candidates.We are currently advancing two product candidates through clinical development, Recorlev (levoketoconazole andformerly called COR-003) and veldoreotide (formerly called COR-005). Development of product candidates is expensive,and we expect our research and development expenses to increase in connection with our ongoing activities, particularly aswe continue our ongoing trials and initiate new nonclinical studies and clinical trials of Recorlev, veldoreotide and anyother product candidates we may seek to develop. We expect that we will require additional capital to obtain regulatoryapproval for, and to commercialize, our product candidates. As of December 31, 2016, we had cash and cash equivalents of $66.8 million. We currently believe that our existingcash and cash equivalents, excluding any additional borrowings under the credit facility, is sufficient to fund plannedoperations into 2019. However, this estimate is based on assumptions that may prove to be incorrect, our operating plans maychange as a result of many factors that may currently be unknown to us, and we may need to seek9 Table of Contentsadditional funds sooner than planned. Our future funding requirements will depend on many factors, including, but notlimited to:·the amount of revenue that we receive from sales of Keveyis;·the cost and timing of establishing sales, marketing, distribution and administrative capabilities;·the scope, rate of progress, results and cost of our clinical trials, nonclinical testing, and other related activities;·the cost of formulation, process development, manufacturing of clinical supplies, and establishing commercialsupplies of our product candidates and any other product candidates that we may develop, in‑license or acquire;·whether we borrow any additional amounts under our $40 million credit facility; ·the number and characteristics of product candidates that we pursue, including any additional productcandidates we may in‑license or acquire;·the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;·the cost of defending potential intellectual property disputes, including patent infringement actions brought bythird parties against us or our product candidates;·the cost, timing and outcomes of regulatory approvals;·the terms and timing of any collaborative, licensing and other arrangements that we may establish, includingany required milestone and royalty payments thereunder; and·the emergence of competing technologies and their achieving commercial success before we do or other adversemarket developments.Any additional fundraising efforts may divert our management from their day‑to‑day activities, which maycompromise our ability to develop and commercialize our product candidates, if approved. In addition, we cannot guaranteethat future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of anyfinancing may adversely affect the holdings or the rights of our shareholders and the issuance of additional securities,whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our ordinary shares todecline.If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay ordiscontinue one or more of our research or development programs or the commercialization of any product candidates, ifapproved, or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired.Raising additional capital may cause dilution to our shareholders, restrict our operations or require us to relinquish rightsto our intellectual property or future revenue streams.Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs througha combination of product revenue, equity offerings, debt financings, grants, and license and development agreements inconnection with any collaborations. Although we have borrowed only $20 million available under our $40 million creditfacility, the remainder may be borrowed only if certain product revenue and clinical data milestones are achieved. We do nothave any committed external source of funds. In the event we seek additional funds, we may raise additional capital throughthe sale of equity or convertible debt securities. In such an event, the ownership interests of our current shareholders will bediluted, and the terms of these securities may include liquidation or other preferences that would adversely affect their rightsas shareholders. Debt financing, if available, could result in increased fixed payment obligations and may involveagreements that include restrictive covenants, such as limitations on our ability to10 Table of Contentsincur additional debt, make capital expenditures, acquire, sell or license intellectual property rights or declare dividends, andother operating restrictions that could hurt our ability to conduct our business.Further, if we raise additional funds through collaborations, strategic alliances, or marketing, distribution orlicensing arrangements with third parties, we may have to relinquish valuable rights to our intellectual property or futurerevenue streams. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce orterminate our product development or future commercialization efforts, or grant rights to develop and market productcandidates that we would otherwise prefer to develop and market ourselves.We are expanding our organization and may experience difficulties in managing this growth, which could disrupt ouroperations.As our development, commercialization, in‑licensing, and acquisition plans and strategies develop, and as wecommercialize Keveyis and advance the clinical and preclinical development of our product candidates, we expect toexperience significant growth in the number of our employees and the scope of our operations, particularly in the areas ofmanagerial, operational, sales, marketing, financial, legal and other resources. To manage our anticipated future growth, wemust continue to implement and improve our managerial, operational and financial systems, expand our facilities, andcontinue to recruit and train additional qualified personnel. Our management may need to divert a disproportionate amountof its attention away from our day‑to‑day activities and devote a substantial amount of time to managing these growthactivities. Due to our limited financial resources, we may not be able to effectively manage the expansion of our operations,which may result in weaknesses in our infrastructure, operational mistakes, loss of business opportunities, loss of employeesand reduced productivity among remaining employees. Any such growth could require significant capital expenditures andmay divert financial resources from other projects, such as the in‑licensing, acquisition and development of additionalproduct candidates. If our management is unable to effectively manage our growth, our expenses may increase more thanexpected, our ability to generate or grow revenue could be reduced and we may not be able to implement our businessstrategy. Our future financial performance and our ability to compete effectively will depend, in part, on our ability toeffectively manage any future growth.In order to increase adoption and sales of Keveyis and other product candidates we may commercialize, we will need tocontinue developing our commercial organization as well as recruit and retain qualified sales representatives.Part of our strategy is to continue to build a biopharmaceutical company to successfully execute thecommercialization of our products. We may not be able to successfully commercialize our products in the United States or inany other territories where we have commercial rights. We do not have any experience commercializing products on ourown. In order to commercialize any approved products, we must continue to build our sales, marketing, distribution,managerial and other non-technical capabilities. Although we intend to establish an initial sales force consisting ofapproximately twelve orphan disease sales representatives, we currently have limited resources compared to some of ourcompetitors, and the continued development of our own commercial organization to market our products and any additionalproducts we may acquire will be expensive and time-consuming. We also cannot be certain that we will be able to continueto successfully develop this capability.If we are unable to effectively train and equip our sales force, our ability to successfully commercialize our products will beharmed.As we recently acquired U.S. marketing rights to Keveyis and hired our sales force, the members of our sales forcewill have limited experience promoting Keveyis. As a result, we will be required to expend significant time and resources totrain our sales force to be effective in their sales efforts for Keveyis. For example, we must train our sales force to ensure that aconsistent and appropriate message about Keveyis is being delivered to our potential customers. Our sales representativesmay also experience challenges promoting Keveyis when we call on physicians and their office staff. We are likely toexperience turnover of the sales representatives that we have hired or will hire, requiring us to train new sales representatives.If we are unable to effectively train our sales force and equip them with effective materials, including medical and salesliterature to help them inform and educate physicians about the benefits of our products and their proper administration andlabel indication, as well as our patient access programs, our efforts to11 Table of Contentssuccessfully commercialize our products could be put in jeopardy, which could have a material adverse effect on ourfinancial condition, share price and operations.We may not be successful in executing our research programs or business development efforts.Research programs and business development efforts to identify new product candidates require substantialtechnical, financial and human resources. We may focus our efforts and resources on potential programs or productcandidates that ultimately prove to be unsuccessful. Our research programs, business development efforts or licensingattempts may fail to yield additional complementary or successful product candidates for clinical development andcommercialization for a number of reasons, including, but not limited to, the following:·our research or business development methodology or search criteria and process may be unsuccessful inidentifying potential product candidates with a high probability of success for development progression;·we may not be able or willing to assemble sufficient resources or expertise to in‑license, acquire or discoveradditional product candidates;·for product candidates we seek to in‑license or acquire, we may not be able to agree to acceptable terms with thelicensor or owner of those product candidates;·our product candidates may not succeed in preclinical studies or clinical trials;·we may not succeed in formulation or process development;·our product candidates may be shown to have harmful side effects or may have other characteristics that maymake the products unmarketable or unlikely to receive regulatory approval;·competitors may develop alternatives that render our product candidates obsolete or less attractive;·product candidates that we develop may be covered by third parties’ patents or other exclusive rights;·product candidates that we develop may not allow us to leverage our expertise and our development andcommercial infrastructure as currently expected;·the market for a product candidate may change during our program so that such a product may becomeunreasonable to continue to develop;·a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or atall; and·a product candidate may not be accepted as safe and effective by patients, the medical community or third‑partypayors.If any of these events occurs, we may not be successful in executing our growth strategy or our growth strategy maynot deliver the anticipated results.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize onproduct candidates or indications that may be more profitable or for which there is a greater likelihood of success.We have limited financial and managerial resources. As a result, we may forego or delay pursuit of opportunitieswith other product candidates or for other indications that later prove to have greater commercial potential. Our resourceallocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Ourspending on current and future research and development programs and product candidates for specific indications may notyield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for aparticular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing orother royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.12 Table of ContentsIf we acquire other businesses or in‑license or acquire other product candidates and are unable to integrate themsuccessfully, our financial performance could suffer.If we are presented with appropriate opportunities, we may acquire other businesses or product candidates. We havehad limited experience integrating other businesses or product candidates, or in-licensing or acquiring other productcandidates. The recent acquisition of the U.S. marketing rights of Keveyis and our June 2015 acquisition of veldoreotide arestill being integrated into our business. The integration process following these or any future transactions may produceunforeseen operating difficulties and expenditures, and may absorb significant management attention that would otherwisebe directed to the ongoing development of our business. Also, in any future in-licensing or acquisition transactions, we mayissue shares of stock that would result in dilution to existing shareholders, incur debt, assume contingent liabilities or createadditional expenses related to amortizing intangible assets, any of which might harm our financial results and cause ourstock price to decline. Any financing we might need for future transactions may be available to us only on terms that restrictour business or impose costs that reduce our net income.We are highly dependent on our key personnel, including our chief executive officer and chief medical officer, as well asour ability to recruit, retain and motivate additional qualified personnel.We are highly dependent on Matthew Pauls, our President and Chief Executive Officer, and Dr. Fredric Cohen, ourChief Medical Officer. Some members of our management team, including Mr. Pauls, have only been our employees sinceAugust 2014. As a result, they have limited experience working for us and working together as a team. Any member ofmanagement or employee can terminate his or her relationship with us at any time. Although we have included non‑competeprovisions in their respective employment or consulting agreements, as the case may be, such arrangements might not besufficient for the purpose of preventing such key personnel from entering into agreements with any of our competitors. Theinability to recruit and retain qualified personnel, or the loss of Mr. Pauls or Dr. Cohen, could result in competitive harm aswe could experience delays in reaching our in‑licensing, acquisition, development and commercialization objectives.We also depend substantially on highly qualified managerial, sales and technical personnel who are difficult to hireand retain. There is currently a shortage of skilled personnel in our industry, which is likely to continue. As a result,competition for skilled personnel is intense and the turnover rate can be high. We may not be able to attract and retainpersonnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies forindividuals with similar skill sets. In addition, failure to succeed in preclinical studies or clinical trials may make it morechallenging to recruit and retain qualified personnel. Recruiting and retaining other qualified employees, consultants andadvisors for our business, including scientific and technical personnel, will be critical to our success.Our business and operations would suffer in the event of system failures.Our computer systems, as well as those of our clinical research organizations, or CROs, and other contractors andconsultants, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, including hurricanes,terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in ouroperations, it could result in a material disruption of our product development programs. For example, the loss of preclinicalstudy or clinical trial data from completed, ongoing or planned preclinical studies or clinical trials could result in delays inour regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that anydisruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure ofpersonal, confidential or proprietary information, we could incur liability and the further development of our productcandidates could be delayed.13 Table of ContentsRisks Related to Our BusinessWe depend entirely on the success of Keveyis and two product candidates, which are still in clinical development. If we donot obtain regulatory approval for and successfully commercialize one or more of our product candidates or we experiencesignificant delays in doing so, we may never become profitable.We currently have one product approved for sale and two product candidates in development. We have invested,and continue to expect to invest, a significant portion of our efforts and financial resources in the development of our twoproduct candidates, which are still in clinical development. Our ability to generate product revenues will depend heavily onour successful commercialization of Keveyis and our eventual commercialization, if approved, of one or more of our productcandidates currently in development. We are not permitted to market or promote any product candidate before we receiveregulatory approval from the FDA, EMA or any comparable foreign regulatory agency, and we may never receive suchregulatory approval for our product candidates currently in development. The success of Recorlev and veldoreotide willdepend on several additional factors, including, but not limited to, the following:·successfully completing clinical trials that demonstrate the efficacy and safety of our product candidates;·successfully completing formulation and process development activities;·acceptance of our product candidates by patients and the medical community;·a continued acceptable safety profile following approval;·obtaining and maintaining healthcare coverage and adequate reimbursement; and·competing effectively with other therapies, including with respect to the sales and marketing of our productcandidates, if approved.Many of these factors are beyond our control, including clinical development, the regulatory submission process,potential threats to our intellectual property rights and changes in the competitive landscape. If we do not achieve one ormore of these factors in a timely manner or at all, we could experience significant delays or an inability to successfullycomplete clinical trials or eventually commercialize our product candidates, if approved.Clinical trials are very expensive, time consuming and difficult to design and implement, and involve uncertain outcomes.Furthermore, results of earlier preclinical studies and clinical trials may not be predictive of results of future preclinicalstudies or clinical trials.To obtain the requisite regulatory approvals to market and sell any of our product candidates, we must demonstratethrough extensive preclinical studies and clinical trials that our products are safe and effective in humans. Clinical testing isexpensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time duringthe clinical trial process. The results of preclinical studies and earlier clinical trials may not be predictive of the results oflater‑stage clinical trials. For example, the results generated to date in preclinical studies or clinical trials for our productcandidates do not ensure that later preclinical studies or clinical trials will demonstrate similar results. Further, we havelimited clinical data for each of our product candidates and have not completed Phase 3 clinical trials for any of our productcandidates. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despitehaving progressed through preclinical studies and initial clinical trials.Companies in the biopharmaceutical industry may suffer setbacks in advanced clinical trials due to lack of efficacyor adverse safety profiles, notwithstanding promising results in earlier clinical trials. For example, levoketoconazole waspreviously studied for the treatment of type 2 diabetes. In December 2005, prior to the initiation of the first clinical trial byDiObex, our licensee, the FDA placed a clinical hold relating to a safety concern for use of a dosage above 600 mg/day.DiObex modified the clinical trial protocol to limit the highest dose to 600 mg/day, and the clinical hold was lifted by theFDA in February 2006. Furthermore, levoketoconazole did not demonstrate a reduction in blood glucose levels in a smallPhase 2 clinical trial in patients with type 2 diabetes mellitus, the original indication for which it was being developed. Wemay experience delays in our ongoing or future preclinical studies or clinical trials,14 Table of Contentsand we do not know whether future preclinical studies or clinical trials will begin on time, need to be redesigned, enroll anadequate number of subjects or patients on time or be completed on schedule, if at all. Clinical trials may be delayed,suspended or terminated for a variety of reasons, including delay or failure to:·obtain authorization from regulators or institutional review boards, or IRBs, to commence a clinical trial at aprospective clinical trial site;·reach agreements on acceptable terms with prospective CROs and clinical trial sites, the terms of which can besubject to extensive negotiation and may vary significantly among different CROs and clinical trial sites;·recruit and enroll a sufficient number of patients in clinical trials to ensure adequate statistical power to detectstatistically significant treatment effects;·address any noncompliance with regulatory requirements or safety concerns that arise during the course of aclinical trial;·have patients complete clinical trials or return for post‑treatment follow‑up;·have CROs or other third parties comply with regulatory requirements, adhere to the trial protocol or meetcontractual obligations in a timely manner or at all;·identify a sufficient number of clinical trial sites and initiate them within the planned timelines; and·manufacture sufficient quantities of the product candidate to complete clinical trials.Positive or timely results from preclinical or early stage clinical trials do not ensure positive or timely results in latestage clinical trials or regulatory approval by the FDA, EMA or any comparable foreign regulatory agency. In addition, manyof the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead tothe denial of regulatory approval of our product candidates. Preclinical and clinical data are often susceptible to varyinginterpretations and analyses. Many companies that believed their product candidates performed satisfactorily in preclinicalstudies and clinical trials have nonetheless failed to obtain regulatory approval for the product candidates. The FDA, EMAand any comparable foreign regulatory agency have substantial discretion in the approval process and in determining whenor whether regulatory approval will be obtained for any of our product candidates. Even if we believe the data collected fromclinical trials of our product candidates are promising, such data may not be sufficient to support approval by the FDA, EMAor any comparable foreign regulatory agency.In some instances, there can be significant variability in safety or efficacy results between different clinical trials ofthe same product candidate due to numerous factors, including changes in clinical trial procedures set forth in protocols,differences in the size and type of the patient populations, adherence to the administration regimen and other clinical trialprotocols, and the rate of dropout among clinical trial participants. In the case of our late stage clinical product candidates,results may differ in general on the basis of the larger number of clinical trial sites and additional countries involved inPhase 3 clinical trials. Different countries have different standards of care and different levels of access to care for patients,which in part drives the heterogeneity of the patient populations that enroll in our studies.In June 2015, we acquired veldoreotide and were not involved in and had no control over the preclinical andclinical development of this product candidate prior to such acquisition. As a result, we are dependent on the prior researchand development of veldoreotide having been conducted in accordance with the applicable protocol, legal, regulatory andscientific standards, the accuracy of reported results of all clinical trials conducted prior to our acquisition and the correctinterpretation of collected data from these clinical trials. These factors could result in increased costs and delays in thedevelopment of veldoreotide, which could hurt our ability to generate future revenues from this product candidate.15 Table of ContentsThe regulatory approval process of the FDA, EMA or any comparable foreign regulatory agency may be lengthy, timeconsuming and unpredictable.Our future success is dependent upon our ability to successfully develop, obtain regulatory approval for and thensuccessfully commercialize one or more of our product candidates. Although certain of our employees have prior experiencewith submitting marketing applications to the FDA, EMA and comparable foreign regulatory agencies, we, as a company,have not submitted such applications for our product candidates. We cannot be certain that any of our product candidateswill be successful in clinical trials or receive regulatory approval. Applications for any of our product candidates could fail toreceive regulatory approval for many reasons, including, but not limited to, the following:·the FDA, EMA or any comparable foreign regulatory agency may disagree with the design or implementation ofour clinical trials or our interpretation of data from nonclinical trials or clinical trials;·the population studied in the clinical program may not be sufficiently broad or representative to assure safety inthe full population for which we seek approval, including reliance on foreign clinical data;·the data collected from clinical trials of our product candidates may not be sufficient to support a finding thathas statistical significance or clinical meaningfulness or support the submission of a new drug application, orNDA, or other submission, or to obtain regulatory approval in the United States or elsewhere;·we may be unable to demonstrate to the FDA, EMA or any comparable foreign regulatory agency that a productcandidate’s risk‑benefit ratio for its proposed indication is acceptable;·the FDA, EMA or any comparable foreign regulatory agency may fail to approve the manufacturing processes,test procedures and specifications or facilities of third‑party manufacturers with which we contract for clinicaland commercial supplies; and·the approval policies or regulations of the FDA, EMA or any comparable foreign regulatory agency maysignificantly change in a manner rendering our clinical data insufficient for approval.Any of our current or future product candidates could take a significantly longer time to gain regulatory approvalthan expected or may never gain regulatory approval. This could delay or eliminate any potential product revenue bydelaying or terminating the potential commercialization of our product candidates.Several elements of the SONICS Phase 3 clinical trial design for Recorlev were informed by the clinicaldevelopment pathway of currently approved drug therapies in the United States and the European Union. Additionally, weincorporated advice from the CHMP and FDA into the design of the clinical trial. In communication we had with the FDA,they recommended use of a concurrent control group in SONICS. However, SONICS utilizes an open‑label, single‑arm designbecause use of a placebo control in a parallel-arm monotherapy design was considered unethical or infeasible to enroll,depending on the specific country or clinical trial site under consideration. Studies lacking an active control group are morelikely to be subject to unanticipated variability in study results that can potentially lead to flawed conclusions because theydo not allow for discrimination of patient outcomes. As a result, even if we achieve the clinical trial’s endpoints, the FDA orother regulatory authorities could view our study results as potentially biased.We intend to seek formal advice and guidance from the FDA and the EMA prior to advancing veldoreotide intofurther studies and pivotal clinical trials. If the feedback we receive is different from what we currently anticipate, this coulddelay the development and regulatory approval process for this product candidate.We generally plan to seek regulatory approval to commercialize our product candidates in the United States, theEuropean Union and other key global markets. To obtain regulatory approval in other countries, we must comply withnumerous and varying regulatory requirements of such other countries regarding safety, efficacy, chemistry, manufacturingand controls, clinical trials, commercial sales, pricing and distribution of our product candidates. Even if we are successful inobtaining approval in one jurisdiction, we cannot ensure that we will obtain approval in any other jurisdictions. Failure toobtain marketing authorization for our product candidates will result in our being unable to market and sell such products. Ifwe fail to obtain approval in any jurisdiction, the geographic market for our product16 Table of Contentscandidates could be limited. Similarly, regulatory agencies may not approve the labeling claims that are necessary ordesirable for the successful commercialization of our product candidates.If we or others identify previously unknown, serious side effects of Keveyis, we may be required to perform lengthyadditional clinical trials, change the labeling of Keveyis or withdraw it from the market. If we or others identify previously unknown, serious side effects of Keveyis:·regulatory authorities may withdraw their approvals;·we may be required to conduct additional clinical trials, make changes in labeling, implement changes to orobtain re-approvals of facilities that manufacture Keveyis;·we may experience a significant drop in the sales of Keveyis;·our reputation in the marketplace may suffer; and·we may become the target of lawsuits, including class action lawsuits.Any of these events could harm or prevent sales of Keveyis or could increase the costs and expenses ofcommercializing and marketing Keveyis. Physicians may accept Keveyis slowly or may never accept it, which would adversely affect our financial results.Physicians will prescribe Keveyis only if they determine, based on experience, clinical data, side effect profiles andother factors, that it is preferable to other treatments, even if those products are not approved for primary periodicparalysis. Because primary periodic paralysis is rare, most physicians are inexperienced in the care of patients with the illnessand it may be difficult to persuade them to prescribe Keveyis.Other factors that may affect the commercial success of Keveyis include:··the preference of some physicians for more familiar, long-standing, off-label treatments for primary periodicparalysis, such as acetazolamide;·competition from alternative therapies, such as potassium supplements, diuretics, beta receptor agonists,mexiletine and other sodium channel blockers;·the cost-effectiveness of Keveyis and the availability of third-party insurance coverage and reimbursement; and·the product labeling required by the FDA.The failure of Keveyis to achieve commercial success could prevent us from generating sufficient revenue to fullyfund our commercial and development activities.If serious adverse, undesirable or unacceptable side effects are identified during the development of our productcandidates or following regulatory approval, if any, we may need to abandon our development of such product candidates.If our product candidates are associated with serious adverse, undesirable or unacceptable side effects, we may needto abandon their development or limit development to certain uses or sub‑populations in which such side effects are lessprevalent, less severe or more acceptable from a risk‑benefit perspective. Many compounds that initially showed promise inpreclinical or early stage testing have later been found to cause side effects that restricted their use and prevented furtherdevelopment of the compound for larger indications.For example, in our clinical trials of Recorlev to date, adverse events have included headache, nausea, back pain,dizziness, diarrhea and liver enzyme elevations. For veldoreotide, which is given by subcutaneous injections,17 Table of Contentsadverse events have included injection site reaction such as swelling, itching and pain. In addition, headache andgastrointestinal effects such as nausea and diarrhea were observed for veldoreotide. These adverse events can bedose‑dependent and may increase in frequency and severity if we increase the dose to increase efficacy. Occurrence of serioustreatment‑related side effects could impede clinical trial enrollment, require us to halt the clinical trial, and prevent receipt ofregulatory approval from the FDA, EMA or any comparable foreign regulatory agency. They could also adversely affectphysician or patient acceptance of our product candidates.Discovery of previously unknown problems, or increased focus on a known problem, with an approved product mayresult in restrictions on its permissible uses, including withdrawal of the medicine from the market. Currently, ketoconazoleis required to include a “black box” warning on its label for use as an antifungal related to liver toxicity in the United States.Manufactured ketoconazole consists of two enantiomers, 2R,4S‑ketoconazole and 2S,4R‑ketoconazole, that are found inequal amounts, and is therefore referred to as a racemate mixture. Recorlev is a single‑enantiomer drug, a pure form of one ofthe two enantiomers (2S,4R‑ketoconazole) of ketoconazole. If Recorlev is required to include a similar “black box” warningon its label, it may limit our ability to commercialize the product, if approved.Additionally, if one or more of our product candidates receives regulatory approval, and we or others later identifyundesirable side effects caused by such product(s), a number of potentially significant negative consequences could result,including, but not limited to:·withdrawal by regulatory authorities of approvals of such product;·seizure of the product by regulatory authorities;·recall of the product;·restrictions on the marketing of the product;·requirement by regulatory authorities of additional warnings on the label, such as a black box warning;·requirement that we create a medication guide outlining the risks of such side effects for distribution to patients;·commitment to expensive additional safety studies prior to launch as a prerequisite of approval by regulatoryauthorities of such product;·commitment to expensive post‑marketing studies as a prerequisite of approval by regulatory authorities of suchproduct;·initiation of legal action against us claiming to hold us liable for harm caused to patients; and·harm to our reputation and resulting harm to physician or patient acceptance of our products.Any of these events could prevent us from achieving or maintaining market acceptance of the particular productcandidate, if approved, and could significantly harm our business, financial condition, and results of operations.We may find it difficult to enroll patients in our clinical trials given the limited number of patients who have the diseasesfor the treatment of which our product candidates are being studied. Difficulty in enrolling patients in our clinical trialscould delay or prevent clinical trials of our product candidates.Successful and timely completion of clinical trials will require that we enroll a sufficient number of patientcandidates. Clinical trials may be subject to delays as a result of patient enrollment taking longer than anticipated or patientwithdrawal. Patient enrollment depends on many factors, including the size and nature of the patient population, eligibilitycriteria for the clinical trial, the proximity of patients to clinical sites, the design of the clinical protocol, the availability ofcompeting clinical trials, the availability of new drugs approved for the indication the clinical trial is investigating, andclinicians’ and patients’ perceptions as to the safety and potential advantages of the product candidate being studied inrelation to other available therapies.18 Table of ContentsBecause we are focused on addressing rare diseases, there are limited patient pools from which to draw in order tocomplete our clinical trials in a timely and cost‑effective manner. Delays in the completion of any clinical trial of our productcandidates will increase our costs, slow down our product candidate development and approval process, and delay orpotentially jeopardize our ability to commence product sales and generate revenue. In addition, many of the factors that maylead to a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatoryapproval of our product candidates.We may become exposed to costly and damaging liability claims, either in connection with the sale of Keveyis or otherapproved products or when testing our product candidates in the clinic, and our product liability insurance may not coverall damages from such claims.We are exposed to potential product liability and professional indemnity risks that are inherent in the research,development, manufacturing, marketing, and use of pharmaceutical products. Our first commercial product is Keveyis. Thecurrent and future use of product candidates by us in clinical trials, and the sale of Keveyis and any approved products, mayexpose us to liability claims. These claims might be made by patients that use the product, healthcare providers,pharmaceutical companies, or others selling such products. Any claims against us, regardless of their merit, could be difficultand costly to defend, and could compromise the market acceptance of Keveyis, our product candidates or any prospects forcommercialization of our product candidates, if approved.Although the clinical trial process is designed to identify and assess potential side effects, it is always possible that adrug, even after regulatory approval, may exhibit unforeseen side effects. If Keveyis or any of our product candidates were tocause adverse side effects during clinical trials or after approval of the product candidate, we may be exposed to substantialliabilities. Physicians and patients may not comply with any warnings that identify known potential adverse effects andpatients who should not use Keveyis or our product candidates.We have limited product liability insurance that offers coverage we believe to be appropriate for a companymarketing a single pharmaceutical product and developing others. We intend to extend our product liability insurancecoverage to any product candidate for which we obtain marketing approval. However, this insurance may be prohibitivelyexpensive or may not fully cover our potential liabilities. Our inability to obtain adequate insurance coverage at anacceptable cost could prevent or inhibit the commercialization of Keveyis or our product candidates, or result in meaningfulunderinsured or uninsured liability. Defending a lawsuit could be costly and significantly divert management’s attentionfrom conducting our business. If we were sued successfully, our liability could exceed our total assets.We have never commercialized a product candidate and we may lack the necessary expertise, personnel and resources tosuccessfully commercialize any of our products that receive regulatory approval on our own or together with suitablepartners.We have never commercialized a product candidate. Our operations to date have been limited to organizing andstaffing our company, business planning, raising capital, in-licensing or acquiring our product candidates, identifyingpotential product candidates and undertaking preclinical studies and clinical trials of our product candidates. We currentlyhave a very limited sales force and marketing and distribution capabilities. To achieve commercial success of Keveyis andany product candidates that are approved, we will have to develop our own sales, marketing and supply capabilities oroutsource these activities to a third party.Factors that may affect our ability to commercialize Keveyis and our product candidates on our own includerecruiting and retaining adequate numbers of effective sales and marketing personnel, obtaining access to or persuadingadequate numbers of physicians to prescribe our product candidates and other unforeseen costs associated with creating anindependent sales and marketing organization. Developing a sales and marketing organization requires significantinvestment, is time consuming and could delay the launch of our product candidates. We may not be able to build aneffective sales and marketing organization in the United States, the European Union or other key global markets. If we areunable to build our own distribution and marketing capabilities or to find suitable partners for the commercialization ofKeveyis and our product candidates, we may not generate revenues from them.19 Table of ContentsWe operate in a highly competitive and rapidly changing industry, which may result in our competitors discovering,developing or commercializing competing products before or more successfully than we do, or our entering a market inwhich a competitor has commercialized an established competing product, and we may not be successful in competing withthem.The development and commercialization of new drug products is highly competitive and subject to significant andrapid technological change. Our success is highly dependent upon our ability to in‑license, acquire, develop and obtainregulatory approval for new and innovative drug products on a cost‑effective basis and to market them successfully. In doingso, we face and will continue to face intense competition from a variety of businesses, including large, fully integrated,well‑established pharmaceutical companies who already possess a large share of the market, specialty pharmaceuticalcompanies and biopharmaceutical companies, academic institutions, government agencies and other private and publicresearch institutions in Europe, the United States and other jurisdictions.Keveyis is an oral carbonic anhydrase inhibitor, that was approved in the United States to treat hyperkalemic,hypokalemic and related variants of primary periodic paralysis (PPP). Acetazolamide, another oral carbonic anhydraseinhibitor, is used frequently off-label for the prophylactic and sometimes acute treatment of PPP. Potassium supplements,are indicated for use in hypokalemic periodic paralysis in the United States and are frequently used either chronically or foremergency treatment of episodes in that form of PPP. Several other types of drugs have been reported to have benefits forchronic or acute use in one or more than one PPP variant, including potassium-sparing diuretics, beta receptor agonists,mexelitine and other sodium channel blockers, and others. We are not aware of drugs currently in development forprophylactic chronic treatment of PPP. A Phase 2 clinical study of bumetanide, a loop diuretic, is underway in England foracute treatment of paralytic attacks.We are currently aware of various companies that are marketing existing drugs that may compete with Recorlev suchas Corcept Therapeutics and Novartis. The treatment of endogenous Cushing’s syndrome patients who fail or are ineligiblefor surgery in the United States and Europe are: Korlym (mifepristone) marketed by Corcept Therapeutics in the UnitedStates; Signifor (pasireotide) marketed by Novartis in the United States and European Union; and ketoconazole, metyraponeand mitotane marketed by HRA in the European Union. Novartis has submitted an NDA/MAA for Signifor (pasireotide) LARin Cushing’s disease. Additionally, LCI‑699 (osilodrostat) is currently in Phase 3 clinical development by Novartis inCushing’s disease patients. Corcept is developing CORT125134, a second-generation glucorticoid receptor modulator;currently in Phase 2. HRA Pharma is developing metyrapone for the US market; currently in Phase 2. Millendo is developingATR-101, a selective acyl-CoA:cholesterol acyltransferase 1 (ACAT) inhibitor, currently in Phase 2. In addition,Ketoconazole is the most commonly prescribed drug therapy for the treatment of endogenous Cushing’s syndrome, eventhough it is not approved for this use in the United States. Regulatory approval of ketoconazole in the United States for thetreatment of endogenous Cushing’s syndrome could significantly increase competition for Recorlev due to their similarmechanisms of action.We are currently aware of various companies that are marketing existing drugs that may compete with veldoreotidesuch as Novartis, Ipsen and Pfizer. In addition, a number of acromegaly therapies are in various stages of development. Thereare currently three approved SSA therapies for acromegaly in the United States: Sandostatin LAR (octreotide) marketed byNovartis; Signifor LAR (pasireotide) marketed by Novartis; and Somatuline Depot (lanreotide) marketed by Ipsen. There isone growth hormone receptor antagonist, Somavert (pegvisomant), marketed by Pfizer. Chiasma had filed an NDA in the U.S.for RG-3806 (Mycapssa®), an oral octreotide formulation in 2015, and received a Complete Response Letter wherein FDAstated that it did not believe the company’s application had provided substantial evidence of efficacy to warrant approval,and advised Chiasma that it would need to conduct another clinical trial in order to overcome this deficiency. Fouradditional therapies are in Phase 2 clinical development for acromegaly: octreotide long‑acting depot (CAM‑2029)developed by Novartis and Camurus; ITF‑2984 developed by Italfarmaco; BIM-23B065 developed by Ipsen; and ATL-1103developed by Antisense Therapeutics.We anticipate this competition to increase in the future as new companies enter the neuromuscular, endocrinologyand rare diseases markets. In addition, the health care industry is characterized by rapid technological change, and newproduct introductions or other technological advancements could make some or all of our products obsolete.20 Table of ContentsThe highly competitive nature of and rapid technological changes in the biotechnology and pharmaceuticalindustries could render our product candidates or our technology obsolete or non‑competitive. Our competitors may, amongother things:·have similar or better product candidates or technologies;·possess greater financial and human resources as well as supporting clinical data;·develop and commercialize products that are safer, more effective, less expensive, or more convenient or easierto administer;·obtain regulatory approval more quickly;·establish superior proprietary positions;·have access to greater manufacturing capacity;·seek patent protection that competes with our product candidates;·implement more effective approaches to sales and marketing; or·enter into more advantageous collaborative arrangements for research, development, manufacturing andmarketing of products.Additional competitors could enter the market with generic versions of our products, which may result in a decline in salesof affected products. Under the Hatch‑Waxman Act, a pharmaceutical manufacturer may file an abbreviated new drug application, orANDA, seeking approval of a generic copy of an approved innovator product. Under the Hatch‑Waxman Act, a manufacturermay also submit an NDA under section 505(b)(2) that references the FDA’s prior approval of the innovator product. A 505(b)(2) NDA product may be for a new or improved version of the original innovator product. Hatch‑Waxman also provides forcertain periods of regulatory exclusivity, which preclude FDA approval, or, in some circumstances, FDA filing and reviewing,of an ANDA or 505(b)(2) NDA. These include, subject to certain exceptions, the period during which an FDA‑approved drugis subject to orphan drug exclusivity. Although Recorlev is being developed as a new chemical entity, or NCE, we intend torely on orphan drug exclusivity rather than NCE exclusivity for nonpatent protection of Recorlev. In addition to the benefitsof regulatory exclusivity, an innovator NDA holder may have patents claiming the active ingredient, product formulation oran approved use of the drug, which would be listed with the product in the FDA publication, “Approved Drug Products withTherapeutic Equivalence Evaluations,” known as the “Orange Book.” If there are patents listed in the Orange Book, a genericor 505(b)(2) applicant that seeks to market its product before expiration of the patents must include in the ANDA what isknown as a “Paragraph IV certification,” challenging the validity or enforceability of, or claiming non‑infringement of, thelisted patent or patents. Notice of the certification must be given to the innovator, too, and if within 45 days of receivingnotice the innovator sues to protect its patents, approval of the ANDA is stayed for 30 months, or as lengthened or shortenedby the court.Accordingly, if Recorlev or any of our other product candidates is approved, competitors could file ANDAs forgeneric versions of our product candidates, or 505(b)(2) NDAs that reference our product candidates, respectively. If there arepatents listed for our product candidates in the Orange Book, those ANDAs and 505(b)(2) NDAs would be required to includea certification as to each listed patent indicating whether the ANDA applicant does or does not intend to challenge thepatent. We cannot predict whether any patents issuing from our pending patent applications will be eligible for listing in theOrange Book, how any generic competitor would address such patents, whether we would sue on any such patents or theoutcome of any such suit.We may not be successful in securing or maintaining proprietary patent protection for products and technologies wedevelop or license. Moreover, if any patents that are granted and listed in the Orange Book are successfully challenged byway of a Paragraph IV certification and subsequent litigation, the affected product could immediately face genericcompetition and its sales would likely decline rapidly and materially. Should sales decline, we21 Table of Contentsmay have to write off a portion or all of the intangible assets associated with the affected product and our ability to generaterevenue could be compromised.The successful commercialization of our product candidates will depend in part on the extent to which governmentalauthorities and health insurers establish adequate coverage and reimbursement levels and pricing policies.The successful commercialization of Keveyis and our product candidates, if approved, will depend, in part, on theextent to which coverage and reimbursement for our products will be available from government and health administrationauthorities, private health insurers and other third‑party payors. To manage healthcare costs, many governments andthird‑party payors increasingly scrutinize the pricing of new therapies and require greater levels of evidence of favorableclinical outcomes and cost‑effectiveness before extending coverage and adequate reimbursement to such new technologies.In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the MedicareModernization Act, changed the way Medicare covers and pays for pharmaceutical products. The legislation expandedMedicare coverage for drug purchases by the elderly under a new Part D and introduced a new reimbursement methodologybased on average sale prices for physician‑administered drugs. In addition, this legislation provided authority for limiting thenumber of drugs that will be covered in any therapeutic class. Cost‑reduction initiatives and other provisions of thislegislation could decrease the coverage and reimbursement that we receive for any approved products. While the MedicareModernization Act applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coveragepolicy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement thatresults from the Medicare Modernization Act may result in a similar reduction in payments from private payors. In light ofsuch challenges to prices and increasing levels of evidence of the benefits and clinical outcomes of new technologies, wecannot be sure that coverage will be available for Keveyis and/or any product candidate that we commercialize, and, ifavailable, that the reimbursement rates will be adequate. If we are unable to obtain adequate levels of coverage andreimbursement for Keveyis and/or our product candidates, our ability to generate revenue will be compromised.Because each third‑party payor individually approves coverage and reimbursement levels, obtaining coverage andadequate reimbursement is a time consuming, costly and sometimes unpredictable process. We may be required to providescientific and clinical support, medical necessity or both for the use of Keveyis or any product to each third‑party payorseparately with no assurance that approval would be obtained, and we may need to conduct expensive pharmacoeconomicstudies in order to demonstrate the cost‑effectiveness, medical necessity or both of our products. This process could delay themarket acceptance of any product and could have a negative effect on our future revenues and operating results.Third‑party payors may deny coverage and reimbursement status altogether of a given drug product, or cover theproduct, but may also establish prices at levels that are too low to enable us to realize an appropriate return on our investmentin product development. Because the rules and regulations regarding coverage and reimbursement change frequently, insome cases on short notice, even when there is favorable coverage and reimbursement, future changes may occur thatadversely impact such favorable coverage and reimbursement status. Further, the net reimbursement for drug products may besubject to additional reductions if there are changes to laws that presently restrict imports of drugs from countries where theymay be sold at lower prices than in the United States.The unavailability or inadequacy of third‑party coverage and reimbursement could negatively affect the marketacceptance of Keveyis and our product candidates and the future revenues we may expect to receive from these products. Inaddition, we are unable to predict what additional legislation or regulation relating to the healthcare industry or third‑partycoverage and reimbursement may be enacted in the future, or what effect such legislation or regulation would have on ourbusiness.22 Table of ContentsOur products may not gain market acceptance, in which case we may not be able to generate product revenues.Even if the FDA, EMA or any comparable foreign regulatory agency approves the marketing of any productcandidates that we develop, physicians, healthcare providers, patients or the medical community may not accept or use them.Efforts to educate the medical community and third‑party payors on the benefits of our products or product candidates mayrequire significant resources and may not be successful. If Keveyis, Recorlev, veldoreotide or any other product candidatethat we develop does not achieve an adequate level of acceptance, we may not generate significant product revenues or anyprofits from operations. The degree of market acceptance of Keveyis, Recorlev, veldoreotide or any other product candidatesthat are approved for commercial sale will depend on a variety of factors, including, but not limited to:·whether clinicians and potential patients perceive our products or product candidates to have better efficacy,safety and tolerability profile, and ease of use compared with alternative therapies;·the timing of market introduction;·the number of competing products;·our ability to provide acceptable evidence of safety and efficacy;·the prevalence and severity of any side effects;·relative convenience and ease of administration;·cost‑effectiveness;·patient diagnostics and screening infrastructure in each market;·marketing and distribution support; and·availability of coverage, reimbursement and adequate payment from health maintenance organizations andother third‑party payors, both public and private.In addition, the potential market opportunity for Keveyis, Recorlev, veldoreotide or any other product candidate wemay develop is difficult to estimate precisely. Our estimates of the potential market opportunity are predicated on several keyassumptions such as industry knowledge and publications, third‑party research reports and other surveys. While we believethat our internal assumptions are reasonable, these assumptions may be inaccurate. If any of the assumptions proves to beinaccurate, then the actual market for Keveyis, Recorlev or our other product candidates could be smaller than our estimatesof the potential market opportunity. If the actual market for Keveyis, Recorlev or our other product candidates is smaller thanwe expect, or if the products fail to achieve an adequate level of acceptance by physicians, health care payors and patients,our product revenue may be limited and we may be unable to achieve or maintain profitability. Further, given the limitednumber of treating physicians, if we are unable to convince a significant number of such physicians of the value of ourproducts or product candidates, we may be unable to achieve a sufficient market share to make our products profitable.The Orphan Drug designation for Keveyis and our product candidates may not prevent competition from companies thatdevelop other compounds for the treatment of the same condition. These companies may have significantly more resourcesthan we do. Competition from them could limit our revenue from the commercialization of Keveyis and/or our otherproduct candidates. Although Keveyis and our product candidates have received Orphan Drug designation in the United States, and inthe case of Recorlev and veldoreotide in Europe, we cannot be assured that we will realize the potential benefits of thedesignation. Even after an orphan drug is approved for its orphan indication, the FDA or EMA can subsequently approve adifferent drug for the same condition if it concludes that the later drug is safer, more effective or makes a major contributionto patient care. Upon expiration of the orphan drug exclusivity period, we may be subject to competition from manufacturersoffering a generic form of Keveyis or our other products at a lower price, in which case our business could be harmed.23 Table of ContentsFor example, Corcept’s Korlym has an Orphan Drug designation in the United States and is approved for the controlof hyperglycemia secondary to hypercortisolism in patients with endogenous Cushing’s syndrome who have type 2 diabetesor glucose intolerance and have failed surgery or are not candidates for surgery. However, in 2012 Novartis received approvalin both the United States and the European Union (EU) to market its somatostatin analogue Signifor for adult patients withCushing’s disease (a subset of Cushing’s syndrome that accounts for approximately 70 percent of all Cushing’s syndromepatients) for whom pituitary surgery is not an option or has not been curative. Laboratoire HRA Pharma (HRA) received Orphan Drug designation in the United States and the EU for the use ofmifepristone to treat a subtype of Cushing’s syndrome. HRA began and terminated a Phase 2 clinical trial in Europe and theUnited States for this indication. Exelgyn Laboratories, which operates as a subsidiary of Medi Challenge (Pty) Ltd., receivedOrphan Drug designation for mifepristone to treat Cushing’s syndrome in the EU, but it has stated that it has not yetconducted any clinical trials.The terms of our credit facility place restrictions on our operating and financial flexibility.The Loan Agreement with Oxford and Horizon includes affirmative and negative covenants applicable to us andany subsidiaries we create in the future. The affirmative covenants include, among others, covenants requiring us to maintainour legal existence and good standing and governmental approvals necessary for us and our subsidiaries to perform ourrespective businesses and obligations under the Loan Agreement, deliver certain financial reports to the Lenders, maintaininsurance coverage, comply with certain financial covenants, dissolve our subsidiary, BioPancreate Inc., within six months ofthe effective date of the Loan Agreement, and enter into an intercompany license or other agreement with our subsidiary,Strongbridge U.S. Inc., pursuant to which Strongbridge U.S. Inc. will have the exclusive right to market and sell Keveyisproducts in the United States. The negative covenants include, among others, restrictions on our transferring collateral,changing our business, management, ownership or business location, engaging in mergers or acquisitions, incurringadditional indebtedness, paying dividends or making other distributions, making investments, creating liens, or entering intotransactions with affiliates, in each case subject to certain exceptions. The Loan Agreement also includes events of default, the occurrence and continuation of which could cause interestto be charged at the rate that is otherwise applicable plus 5.0% and would provide Oxford, as collateral agent, with the rightto exercise remedies against us and the collateral securing the credit facility, including foreclosure against our propertiessecuring the credit facilities, including our cash. These events of default include, among other things, our failure to pay anyamounts due under the Loan Agreement, a breach of covenants under the Loan Agreement, a material adverse change, ourinsolvency, the occurrence of a default under any agreement with a third party that would result in a payment by us or oursubsidiaries of greater than $100,000, and/or one or more judgments against us or our subsidiaries in an amount greater than$100,000 individually or in the aggregate. Our ability to make scheduled payments on or to refinance our indebtedness depends on our future performance andability to raise additional sources of cash, which is subject to economic, financial, competitive and other factors beyond ourcontrol. If we are unable to generate sufficient cash to service our debt, we may be required to adopt one or more alternatives,such as selling assets, restructuring our debt or obtaining additional equity capital on terms that may be onerous or highlydilutive. If we desire to refinance our indebtedness, our ability to do so will depend on the capital markets and our financialcondition at such time. We may not be able to engage in any of these activities or engage in these activities on desirableterms, which could result in a default on our debt obligations. Risks Related to Our Reliance on Third PartiesWe have no manufacturing capabilities and currently depend on one supplier to manufacture Keveyis. We also depend ona limited number of other suppliers to manufacture our product candidates for use in clinical trials. If these suppliers areunable or unwilling to continue manufacturing for us and we are unable to contract quickly with alternative sources, or ifthese third-party manufacturers fail to comply with FDA regulations or otherwise fail to meet our requirements, ourbusiness will be harmed.Taro Pharmaceuticals North America, Inc., Inc. produces all of our requirements of Keveyis. We rely on other third-parties to manufacture our product candidates for use in clinical trials. If any of these vendors is unable or24 Table of Contentsunwilling to meet our future requirements, we may not be able to manufacture our products in a timely manner. Our currentarrangements with these manufacturers are terminable by such manufacturers, subject to certain notice provisions. The facilities used by our vendors to manufacture our product and product candidates must be approved by theFDA. We do not control the manufacturing processes of, and are completely dependent on, our contract manufacturingpartners for compliance with the regulatory requirements known as current good manufacturing practices (cGMPs). If ourcontract manufacturers cannot successfully manufacture material that conforms to our specifications and the strictrequirements of the FDA or others, they will not be able to maintain regulatory approval for their manufacturing facilities. Inaddition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, qualityassurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilitiesfor the manufacture of our products or if it withdraws any such approval, we may need to find alternative manufacturingfacilities, which would significantly hamper our ability to develop, obtain regulatory approval for or market our products. Inaddition, sanctions could be imposed on us, including fines, injunctions, civil penalties, failure of regulatory authorities togrant marketing approval of our product candidates, delays, suspension or withdrawal of approvals, seizures or recalls ofproducts, operating restrictions and criminal prosecutions, any of which could harm our business. If our suppliers fail tomanufacture Keveyis or our product candidates on a timely basis in the quantities that we require, or fail to maintainmanufacturing capabilities that meet FDA standards, we may exhaust our Keveyis inventory and not be able to generaterevenue, or clinical development programs may be delayed.We and our collaborators and contract manufacturers are subject to significant regulation with respect to manufacturingof Keveyis and our product candidates. The manufacturing facilities on which we rely may not continue to meet regulatoryrequirements or may not be able to meet supply demands.All entities involved in the preparation of therapeutics for clinical trials or commercial sale, including our existingcontract manufacturers for our products and product candidates, are subject to extensive regulation. Components of afinished therapeutic product approved for commercial sale or used in late‑stage clinical trials must be manufactured inaccordance with cGMP. These regulations govern manufacturing processes and procedures, including record keeping, andthe implementation and operation of quality systems to control and assure the quality of investigational products andproducts approved for sale. Poor control of production processes can lead to the introduction of contaminants or toinadvertent changes in the properties or stability of our product candidates that may not be detectable in final producttesting. We, our collaborators or our contract manufacturers must supply all necessary documentation in support of an NDAor foreign equivalent on a timely basis and must adhere to GLP and cGMP regulations enforced by the FDA and otherregulatory agencies through their facilities inspection program. Some of our contract manufacturers have never produced acommercially-approved pharmaceutical product and therefore have not obtained the requisite regulatory authority approvalsto do so. The facilities and quality systems of some or all of our collaborators and third‑party contractors must pass apre‑approval inspection for compliance with the applicable regulations as a condition of regulatory approval of our productcandidates or any of our other potential products. In addition, the regulatory authorities may, at any time, audit or inspect amanufacturing facility involved with the preparation of our product candidates or our other potential products or theassociated quality systems for compliance with the regulations applicable to the activities being conducted. Although weoversee the contract manufacturers, we cannot control the manufacturing process of, and are completely dependent on, ourcontract manufacturing partners for compliance with the regulatory requirements. If these facilities do not pass a pre‑approvalplant inspection, regulatory approval of the products may not be granted or may be substantially delayed until anyviolations are corrected to the satisfaction of the regulatory authority, if ever.The regulatory authorities also may, at any time following approval of a product for sale, audit the manufacturingfacilities of our collaborators and third‑party contractors. If any such inspection or audit identifies a failure to comply withapplicable regulations or if a violation of our product specifications or applicable regulations occurs independent of such aninspection or audit, we or the relevant regulatory authority may require remedial measures that may be costly and/or timeconsuming for us or a third party to implement, and that may include the temporary or permanent suspension of a clinicaltrial or commercial sales or the temporary or permanent closure of a facility.25 Table of ContentsIf we, our collaborators or any of our third‑party manufacturers fail to maintain regulatory compliance, the FDA oranother applicable regulatory authority could impose regulatory sanctions including, among other things, refusal to approvea pending application our product candidates, withdrawal of an approval or suspension of production.Additionally, if the supply from one approved manufacturer is interrupted, an alternative manufacturer would needto be qualified through an NDA supplement or equivalent foreign regulatory filing, which could result in further delay. Theregulatory agencies may also require additional studies if a new manufacturer is relied upon for commercial production.Switching manufacturers may involve substantial costs and is likely to result in a delay in our desired clinical andcommercial timelines.These factors could cause us to incur higher costs and could cause the delay or termination of clinical trials,regulatory submissions, required approvals or commercialization of our product candidates. Furthermore, if our suppliers failto meet contractual requirements and we are unable to secure one or more replacement suppliers capable of production at asubstantially equivalent cost, our clinical trials may be delayed or we could lose potential revenue.We rely on third parties to conduct our nonclinical and clinical trials and if these third parties perform in an unsatisfactorymanner, our business could be substantially harmed.We have relied upon and plan to continue to rely upon third‑party CROs to conduct and monitor and manage datafor our ongoing nonclinical and clinical programs, and may not currently have all of the necessary contractual relationshipsin place to do so. Once we have established contractual relationships with such third‑party CROS, we will have only limitedcontrol over their actual performance of these activities. Nevertheless, we are responsible for ensuring that each of our trials isconducted in accordance with the applicable protocol, legal, regulatory, environmental and scientific standards and ourreliance on the CROs does not relieve us of our regulatory responsibilities.We and our CROs and other vendors are required to comply with current Good Manufacturing Practices, or cGMP,current Good Clinical Practices, or cGCP, and Good Laboratory Practice, or GLP, which are regulations and guidelinesenforced by the FDA, the Competent Authorities of the Member States of the European Union and any comparable foreignregulatory agency for all of our product candidates in nonclinical and clinical development. Regulatory authorities enforcethese regulations through periodic inspections of study sponsors, principal investigators, trial sites and other contractors. Ifwe or any of our CROs or vendors fail to comply with applicable regulations, the data generated in our nonclinical andclinical trials may be deemed unreliable and the FDA, EMA or any comparable foreign regulatory agency may require us toperform additional nonclinical and clinical trials before approving our marketing applications. We cannot assure you thatupon inspection by a given regulatory authority, such regulatory authority will determine that all of our clinical trialscomply with cGCP regulations. In addition, our clinical trials must be conducted with products produced under cGMPregulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay theregulatory approval process.Our business involves the controlled use of hazardous materials, chemicals, biologicals and radioactive compounds.Substantially all such use is outsourced to third‑party CRO manufacturers and clinical sites. Although we believe that ourthird‑party CROs safety procedures for handling and disposing of such materials comply with industry standards, there willalways be a risk of accidental contamination or injury. By law, radioactive materials may only be disposed of at certainapproved facilities. If liable for an accident, or if it suffers an extended facility shutdown, we or our CROs could incursignificant costs, damages or penalties.Our CROs are not our employees, and except for remedies available to us under our agreements with such CROs, wecannot control whether or not they devote sufficient time and resources to our ongoing nonclinical and clinical programs. Ifour CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to bereplaced or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our protocols,regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated, and we may not beable to obtain regulatory approval for or successfully commercialize our product candidates. Our CROs may also generatehigher costs than anticipated. As a result, our results of operations and the commercial prospects for our product candidateswould be harmed, our costs could increase, and our ability to generate revenue could be delayed.26 Table of ContentsIf any of our relationships with these third‑party CROs terminates, we may not be able to enter into arrangementswith alternative CROs or to do so on commercially reasonable terms. If we are able to replace a CRO, switching or addingadditional CROs involves additional cost and requires management time and focus and there is a natural transition periodwhen a new CRO commences work. As a result, delays could occur, which could hurt our ability to meet our desired clinicaldevelopment timelines. Though we carefully manage our relationships with our CROs, there can be no assurance that we willnot encounter similar challenges or delays in the future.Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor willdiscover them or that our trade secrets will be misappropriated or disclosed.Because we rely on third parties to develop and manufacture our product candidates, we must, at times, share tradesecrets with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, ifapplicable, material transfer agreements, collaborative research agreements, consulting agreements or other similaragreements with our collaborators, advisors, employees, and consultants prior to beginning research or disclosing proprietaryinformation. These agreements typically limit the rights of the third parties to use or disclose our confidential information,such as trade secrets. Despite the contractual provisions employed when working with third parties, the need to share tradesecrets and other confidential information increases the risk that such trade secrets become known by our competitors, areinadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given thatour proprietary position is based, in part, on our know‑how and trade secrets, a competitor’s discovery of our trade secrets orother unauthorized use or disclosure would impair our competitive position and may harm our business.Risks Related to Our Intellectual PropertyIf we or our licensors are unable to obtain and maintain effective patent rights for our technologies, product candidates orany future product candidates, or if the scope of the patent rights obtained is not sufficiently broad, we may not be able tocompete effectively in our markets.In addition to the exclusivity provided for Keveyis and our product candidates with regulatory orphan drug status,we rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectualproperty related to our technologies and product candidates. Our success depends in large part on our and our licensors’ability to obtain and maintain patent and other intellectual property protection in the United States and in other countrieswith respect to our proprietary technology and product candidates.We have sought to protect our proprietary position by filing, where possible, patent applications in the UnitedStates and abroad related to our novel technologies and products that are important to our business. This process is expensiveand time consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at areasonable cost, in a timely manner or in all jurisdictions. It is also possible that we will fail to identify patentable aspects ofour research and development and manufacturing processes before it is too late to obtain patent protection. Moreover, insome circumstances, we do not have the right to control the preparation, filing and prosecution of patent applications, or tomaintain the patents, covering technology that we license from third parties. Therefore, these patents and applications maynot be prosecuted and enforced in a manner consistent with the best interests of our business.The patent position of biotechnology and pharmaceutical companies generally is highly uncertain and involvescomplex legal and factual questions for which legal principles remain unsolved. The patent applications that we own orin‑license may fail to result in issued patents with claims that cover our products or product candidates in the United States orin foreign countries. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patentapplications in the United States and other jurisdictions remain confidential for a period of time after filing, and some remainso until issued. Therefore, we cannot be certain that we were the first to file any patent application related to our products orproduct candidates, or whether we were the first to make the inventions claimed in our owned patents or pending patentapplications, nor can we know whether those from whom we license patents were the first to make the inventions claimed orwere the first to file. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights arehighly uncertain. There is no assurance that all potentially relevant prior art27 Table of Contentsrelating to our patents and patent applications has been found, which can invalidate a patent or prevent a patent from issuingfrom a pending patent application. Even if patents do successfully issue, and even if such patents cover our products orproduct candidates, third parties may challenge their validity, enforceability or scope, which may result in such patents beingnarrowed, found unenforceable or invalidated, which could allow third parties to commercialize our technology or productsand compete directly with us, without payment to us, or result in our inability to manufacture or commercialize productswithout infringing third‑party patent rights. Furthermore, even if they are unchallenged, our patents and patent applicationsmay not adequately protect our intellectual property, provide exclusivity for our products or product candidates, preventothers from designing around our claims or provide us with a competitive advantage. Any of these outcomes could impairour ability to prevent competition from third parties.We and/or our licensors or partners have filed several patent applications covering various aspects of our productsand product candidates. We cannot offer any assurances about which, if any, patents will issue, the breadth of any suchpatent, or whether any issued patents will be found invalid and unenforceable or will be challenged by third parties. Anysuccessful opposition to these patents or any other patents owned by or licensed to us after patent issuance could deprive usof rights necessary for the successful commercialization of any products or product candidates that we may develop. Further,if we encounter delays in regulatory approvals, the period of time during which we could market a product or productcandidate under patent protection could be reduced.We may not have sufficient patent terms to effectively protect our products and business.Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it isfirst filed. Although various extensions may be available, the life of a patent, and the protection it affords, is limited. Giventhe amount of time required for the development, testing and regulatory review of new product candidates, patents protectingsuch candidates might expire before or shortly after such product candidates are commercialized. As a result, our owned andlicensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similaror identical to ours or otherwise provide us with a competitive advantage. Even if patents covering our products or productcandidates are obtained, once the patent life has expired for a product, we may be open to competition from genericmedications.Although patent term extensions in the United States and under supplementary protection certificates in theEuropean Union may be available to extend the patent exclusivity term for our products or product candidates, we cannotprovide any assurances that any such patent term extension will be obtained and, if so, for how long.Patent policy and rule changes could increase the uncertainties and costs surrounding the prosecution of our patentapplications and the enforcement or defense of our issued patents.Changes in either the patent laws or interpretation of the patent laws in the United States and other countries maydiminish the value of our patents or narrow the scope of our patent protection. The laws of foreign countries may not protectour rights to the same extent as the laws of the United States. Assuming the other requirements for patentability are met, inthe United States prior to March 15, 2013, the first to invent the claimed invention is entitled to the patent, while outside theUnited States, the first to file a patent application is entitled to the patent. After March 15, 2013, under the Leahy‑SmithAmerica Invents Act, or the AIA, enacted on September 16, 2011, the United States has moved to a first inventor to filesystem. The AIA also includes a number of significant changes that affect the way patent applications will be prosecuted andmay also affect patent litigation. The effects of these changes are currently unclear as the United States Patent and TrademarkOffice, or the USPTO, is still implementing various regulations, the courts have yet to address many of these provisions andthe applicability of the act and new regulations on specific patents discussed herein have not been determined and wouldneed to be reviewed. In general, the AIA and its implementation could increase the uncertainties and costs surrounding theprosecution of our patent applications and the enforcement or defense of our issued patents. In addition, recent U.S. SupremeCourt rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights ofpatent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in thefuture, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending onfuture actions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents couldchange in unpredictable ways that28 Table of Contentswould weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in thefuture.Third‑party claims of intellectual property infringement may expose us to substantial liability or prevent or delay ourdevelopment and commercialization efforts.Our commercial success depends in part on our ability to develop, manufacture, market and sell Keveyis and ourproduct candidates, if approved, and use our proprietary technology without alleged or actual infringement,misappropriation or other violation of the patents and proprietary rights of third parties. There have been many lawsuits andother proceedings involving patent and other intellectual property rights in the biotechnology and pharmaceuticalindustries, including patent infringement lawsuits, interferences, oppositions and reexamination proceedings before theUSPTO, and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications,which are owned by third parties, exist in the fields in which we will market Keveyis and are developing product candidates.Some claimants may have substantially greater resources than we do and may be able to sustain the costs of complexintellectual property litigation to a greater degree and for longer periods of time than we could. In addition, patent holdingcompanies that focus solely on extracting royalties and settlements by enforcing patent rights may target us. As thebiotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our products andproduct candidates may be subject to claims of infringement of the intellectual property rights of third parties.Third parties may assert that we are employing their proprietary technology without authorization. There may bethird‑party patents or patent applications with claims to compositions, formulations, methods of manufacture or methods oftreatment related to the use or manufacture of Keveyis or our product candidates. We cannot be sure that we know of eachand every patent and pending application in the United States and abroad that is relevant or necessary to thecommercialization of Keveyis or our product candidates. Because patent applications can take many years to issue, there maybe currently pending patent applications that may later result in issued patents upon which our products or productcandidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologiesinfringes upon these patents. If any third‑party patents were held by a court of competent jurisdiction to cover themanufacturing process of any of our products or product candidates, any compositions formed during the manufacturingprocess or any final product itself, the holders of any such patents may be able to block our ability to commercialize suchproduct or product candidate unless we obtained a license under the applicable patents, or until such patents expire or arefinally determined to be invalid or unenforceable. Similarly, if any third‑party patents were held by a court of competentjurisdiction to cover aspects of our compositions, formulations, or methods of treatment, prevention or use, the holders of anysuch patents may be able to block our ability to develop and commercialize the applicable product or product candidateunless we obtained a license or until such patent expires or is finally determined to be invalid or unenforceable. In eithercase, such a license may not be available on commercially reasonable terms, or at all. Even if we were able to obtain a license,it could be non‑exclusive, thereby giving our competitors access to the same technologies licensed to us.Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block ourability to further develop and commercialize Keveyis or one or more of our product candidates, if approved. Defense of theseclaims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion ofemployee resources from our business. In the event of a successful claim of infringement against us, we may have to paysubstantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign ourinfringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time andmonetary expenditure.Although we are not currently involved in any litigation, we may be involved in lawsuits to protect or enforce our patentsor the patents of our licensors, which could be expensive, time consuming and unsuccessful.Competitors may infringe upon our patents or the patents of our licensors. Although we are not currently involvedin any litigation, if we or one of our licensing partners were to initiate legal proceedings against a third party to enforce apatent covering one of our products or product candidates, the defendant could counterclaim that the patent covering ourproduct or product candidate is invalid and/or unenforceable, or request declaratory judgment that there is29 Table of Contentsno infringement. In patent litigation in the United States, defendant counterclaims alleging invalidity, noninfringementand/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of severalstatutory requirements, including lack of novelty, nonobviousness or non‑lack of enablement. Grounds for anunenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld materialrelevant information from the USPTO, or made a misleading statement, during prosecution. The outcome following legalassertions of invalidity and unenforceability is unpredictable.Interference or derivation proceedings provoked by third parties or brought by us or declared by the USPTO may benecessary to determine the priority of inventions with respect to our patents or patent applications or those of our licensors.An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from theprevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonableterms, or at all. Our defense of litigation or interference proceedings may fail and, even if successful, may result in substantialcosts, and distract our management and other employees. In addition, the uncertainties associated with litigation couldcompromise our ability to successfully market Keveyis, raise the funds necessary to continue our clinical trials, continue ourresearch programs, and license necessary technology from third parties or enter into development partnerships that wouldhelp us bring our product candidates to market, if approved.Furthermore, because of the substantial amount of discovery required in connection with intellectual propertylitigation, there is a risk that some of our confidential information could be compromised by disclosure during this type oflitigation. There could also be public announcements of the results of hearings, motions or other interim proceedings ordevelopments. If securities analysts or investors perceive these results to be negative, it could hurt the market price of ourordinary shares.Failure to secure or maintain adequate protection for our trademarks could adversely affect our business.We have filed a U.S., Canadian, Brazilian and International (Madrid Protocol) trademark application designatingAustralia, China, European Community, India, Israel, Japan, Mexico and Turkey for the mark, “Strongbridge Biopharma.” Ifthe U.S. or any foreign trademark offices raise any objections, we may be unable to overcome such objections. In addition, inthe USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to opposepending trademark applications and to seek to cancel registered trademarks. Oppositions or cancellation proceedings havebeen filed and may in the future be filed against our trademarks, and our trademarks may not survive such proceedings.Furthermore, third parties may allege in the future, that a trademark or trade name that we elect to use for our productcandidates may cause confusion in the marketplace. We evaluate such potential allegations in the course of our business, andsuch evaluations may cause us to change our commercialization or branding strategy for our product candidates, which mayrequire us to incur additional costs. Moreover, any name we propose to use with our product candidate in the United Statesmust be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark. The FDAtypically conducts a review of proposed product names, including an evaluation of potential for confusion with otherproduct names. If the FDA objects to any of our proposed proprietary product names, we may be required to expendsignificant additional resources in an effort to identify a suitable substitute name that would qualify under applicabletrademark laws, not infringe the existing rights of third parties and be acceptable to the FDA.At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to buildbrand identity and possibly leading to market confusion. Over the long term, if we are unable to establish name recognitionbased on our trademarks and trade names, then we may not be able to compete effectively and our business may be adverselyaffected. Our efforts to enforce or protect our proprietary rights related to trademarks, domain names or copyrights may beineffective and could result in substantial costs and diversion of resources.In addition, there could be potential trade name or trademark infringement claims brought by owners of otherregistered trademarks alleging that the use of a corporate name or logo, product names or other signs by which we distinguishour products and services are infringing their trademark rights. The outcome of such claims is uncertain and30 Table of Contentsmay adversely affect our freedom to use our corporate name or other relevant signs. If litigation arises in this area, it may leadto significant costs and diversion of management and employee attention.We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosedconfidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets oftheir former employers.We may employ individuals who were previously employed at universities or other biotechnology orpharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that ouremployees, consultants and independent contractors do not use the proprietary information or know‑how of others in theirwork for us, and we are not currently subject to any claims that our employees, consultants or independent contractors havewrongfully used or disclosed confidential information of third parties, we may in the future be subject to such claims.Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to payingmonetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defendingagainst such claims, litigation could result in substantial costs and be a distraction to management and other employees.We may be subject to claims challenging the inventorship of our patents and other intellectual property.Although we are not currently experiencing any claims challenging the inventorship of our patents or ownership ofour intellectual property, we may in the future be subject to claims that former employees, collaborators or other third partieshave an interest in our patents or other intellectual property as an inventor or co‑inventor. For example, we may haveinventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our productcandidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If we fail indefending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, suchas exclusive ownership of, or right to use, valuable intellectual property. Even if we are successful in defending against suchclaims, litigation could result in substantial costs and be a distraction to management and other employees.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on our products or product candidates in all countries throughout theworld would be prohibitively expensive, and our intellectual property rights in some countries outside the United States canbe less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectualproperty rights to the same extent as federal and state laws in the United States. Further, licensing partners may not prosecutepatents in certain jurisdictions in which we may obtain commercial rights, thereby precluding the possibility of laterobtaining patent protection in these countries. Consequently, we may not be able to prevent third parties from practicing ourinventions in all countries outside the United States, or from selling or importing products made using our inventions in andinto the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have notobtained patent protection to develop their own products and may also export infringing products to territories where wehave patent protection, but enforcement is not as strong as that in the United States. These products may compete with ourproducts, and our patents or other intellectual property rights may not be effective or sufficient to prevent them fromcompeting.Many companies have encountered significant problems in protecting and defending intellectual property rights inforeign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor theenforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnologyproducts, which could make it difficult for us to stop the infringement of our patents or marketing of competing products inviolation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions, whether or notsuccessful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could putour patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing, and couldprovoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or otherremedies awarded, if any, may not be commercially meaningful.31 Table of ContentsAccordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain asignificant commercial advantage from the intellectual property that we develop or license.Risks Related to Government Oversight and RegulationWe will be subject to ongoing obligations and continued regulatory requirements, which may result in significantadditional expense.Keveyis and any of our product candidates that obtain regulatory approval will remain subject to continualregulatory review. Any regulatory approvals that we receive for our product candidates may be subject to limitations on theapproved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements forpotentially costly post-marketing testing, including Phase 4 clinical trials and surveillance to monitor the safety and efficacyof the product candidate. In addition, if the FDA, the EMA or any comparable foreign regulatory authority approves any ofour product candidates, we will be subject to ongoing regulatory obligations and oversight by regulatory authorities,including with respect to the manufacturing processes, labeling, packing, distribution, adverse event reporting, storage,advertising and marketing restrictions, and recordkeeping and, potentially, other post-marketing obligations, all of whichmay result in significant expense and limit our ability to commercialize such products. These requirements includesubmissions of safety and other post-marketing information and reports, registration, as well as continued compliance withcGMPs and cGCPs for any clinical trials that we conduct post-regulatory approval. Because our two Phase 3 clinical trials ofRecorlev will collect safety data for approximately 125 patients, we currently expect that we would be required by the FDAand the EMA to collect additional safety data post-approval.In addition, approved products, manufacturers and manufacturers’ facilities are subject to continual review andperiodic inspections. Later discovery of previously unknown problems with a product, including adverse events ofunanticipated severity or frequency, or with our third‑party manufacturers or manufacturing processes, or failure to complywith 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 voluntary or mandatory product recalls;·fines, disgorgement of profits or revenues, warning letters or holds on clinical trials;·refusal by the FDA to approve pending applications or supplements to approved applications filed by us;·suspension or revocation of product approvals;·product seizure or detention, or refusal to permit the import or export of products; and·injunctions or the imposition of civil or criminal penalties.If any of these events occurs, our ability to sell such product may be impaired, and we may incur substantialadditional expense to comply with regulatory requirements. The policies of the FDA, the EMA or any comparable foreignregulatory agency may change, and additional government regulations may be enacted that could prevent, limit or delayregulatory approval of our product candidates. If we are slow or unable to adapt to changes in existing requirements or theadoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose anyregulatory approval that we may have obtained, which would compromise our ability to achieve or sustain profitability.Although we have obtained orphan drug designation for Keveyis and our key product candidates from the FDA and EMA,orphan drug designation may not ensure that we will enjoy market exclusivity in a particular market, and if we fail toobtain or maintain orphan drug exclusivity for Keveyis or our product candidates, we may be subject to earlier competitionand our potential revenue will be reduced.Under the Orphan Drug Act of 1983, the FDA may designate a product as an orphan drug if it is intended to treat anorphan disease or condition, defined as a patient population of fewer than 200,000 in the United States, or a32 Table of Contentspatient population greater than 200,000 in the United States where there is no reasonable expectation that the cost ofdeveloping the drug will be recovered from sales in the United States. In the European Union, the EMA’s Committee forOrphan Medicinal Products grants orphan drug designation to promote the development of products that are intended for thediagnosis, prevention, or treatment of a life‑threatening or chronically debilitating condition affecting not more than 5 in10,000 persons in the European Union. Additionally, designation is granted for products intended for the diagnosis,prevention or treatment of a life‑threatening, seriously debilitating or serious and chronic condition when, withoutincentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investmentin developing the drug or biological product or where there is no satisfactory method of diagnosis, prevention or treatment,or, if such a method exists, the medicine must be of significant benefit to those affected by the condition.In the United States, orphan drug designation entitles a party to financial incentives, such as opportunities for grantfunding towards clinical trial costs, tax advantages and user‑fee waivers. In addition, if a product receives the first FDAapproval for the indication for which it has orphan drug designation, the product is entitled to orphan drug exclusivity,which means the FDA may not approve any other application to market the same drug for the same indication for a period ofseven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphanexclusivity or where the manufacturer is unable to assure sufficient product quantity. In the European Union, orphan drugdesignation entitles a party to financial incentives such as a reduction of fees or fee waivers and ten years of marketexclusivity following drug or biological product approval. This period may be reduced to six years if the orphan drugdesignation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justifymaintenance of market exclusivity. Keveyis has been granted orphan drug designation for the treatment of hyperkalemic, hypokalemic, and relatedvariants of primary periodic paralysis in the United States. Recorlev has been granted orphan drug designation for thetreatment of endogenous Cushing’s syndrome in the United States and Europe. Veldoreotide has been granted orphan drugdesignation for the treatment of acromegaly in the United States and in Europe. Even though we have obtained orphan drugdesignation for our key product candidates, we may not be the first to obtain regulatory approval for any particular orphanindication due to the uncertainties associated with developing biopharmaceutical products. For example, ketoconazole wasgranted orphan drug exclusivity in Europe and is now being marketed for the treatment of endogenous Cushing’ssyndrome. Therefore, Recorlev will need to show significant benefit compared to ketoconazole in order to be marketed inEurope prior to the expiration of the ketoconazole orphan drug exclusivity. Further, even though we have obtained orphandrug designation for our key product candidates, that exclusivity may not effectively protect the product from competitionbecause different drugs with different active moieties can be approved for the same condition. Orphan drug designationneither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatoryreview or approval process.Enacted and future legislation may increase the difficulty and cost for us to obtain regulatory approval of andcommercialize our product candidates, and may affect the prices we may set. In the United States and the European Union, there have been a number of legislative, regulatory and proposedchanges regarding the healthcare system. These changes could prevent or delay regulatory approval of our productcandidates, restrict or regulate post‑approval activities, and affect our ability to sell profitably any products for which weobtain regulatory approval and begin to commercialize.As a result of legislative proposals and the trend toward managed health care in the United States, third‑party payorsare increasingly attempting to contain healthcare costs by limiting both coverage and the level of reimbursement of newdrugs. In the United States, the Medicare Modernization Act changed the way Medicare covers and pays for pharmaceuticalproducts. The legislation expanded Medicare coverage for drug purchases by the elderly under a new Part D and introduced anew reimbursement methodology based on average sale prices for physician‑administered drugs. In addition, this legislationprovided authority for limiting the number of drugs that will be covered in any therapeutic class. Cost‑reduction initiativesand other provisions of this legislation could decrease the coverage and reimbursement that we receive for any approvedproducts. While the Medicare Modernization Act applies only to drug benefits for Medicare beneficiaries, private payorsoften follow the Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, anyreduction in reimbursement that results from the Medicare Modernization Act may result in a similar reduction in paymentsfrom private payors.33 Table of ContentsIn March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by theHealth Care and Education Reconciliation Act, or collectively, PPACA, a sweeping law intended, among other things, tobroaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraudand abuse, add new transparency requirements for health care and health insurance industries, impose new taxes and fees onthe health industry, and impose additional health policy reforms. PPACA, among other things: increased the statutoryminimum Medicaid rebates a manufacturer must pay under the Medicaid Drug Rebate Program; addressed a newmethodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs thatare inhaled, infused, instilled, implanted or injected; and established a new Medicare Part D coverage gap discount programin which manufacturers must provide 50% point‑of‑sale discounts on negotiated prices of applicable brand drugs to eligiblebeneficiaries during their coverage gap period as a condition for the manufacturer’s outpatient drugs to be covered underPart D and implemented payment system reforms, including a national pilot program on payment bundling to encouragehospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare servicesthrough bundled payment models. Further, the PPACA imposed a significant annual nondeductible fee on entities thatmanufacture or import specified branded prescription drug products and biologic agents, apportioned among these entitiesaccording to their market share in certain government healthcare programs. We expect that additional healthcare reformmeasures will likely be adopted in the future, any of which may increase our regulatory burdens and operating costs and limitthe amounts that federal, state and foreign governments will reimburse for healthcare products and services, which couldresult in reduced demand for our products, if approved, or additional pricing pressures.Moreover, other legislative changes have also been proposed and adopted in the United States since PPACA wasenacted. On August 2, 2011, the Budget Control Act of 2011, among other things, created measures for spending reductionsby Congress. A Joint Select Committee on Deficit Reduction tasked with recommending a targeted deficit reduction of atleast $1.2 trillion for the years 2013 through 2021 was unable to reach required goals, thereby triggering the legislation’sautomatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providersof up to 2% per fiscal year, which went into effect on April 1, 2013 and will stay in effect through 2024 unless additionalCongressional action is taken. On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of2012, which, among other things, further reduced Medicare payments to several providers, including hospitals, imagingcenters and cancer treatment centers, and increased the statute of limitations period for the government to recoveroverpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and otherhealth care funding, which could compromise the ability of patients and third‑party payors to purchase our productcandidates.In 2017, the U.S. Congress has been assessing new legislation designed to repeal and replace core sections of thePPACA. We expect the U.S. Congress to continue to review and assess this legislation, referred to as the American HealthCare Act (AHCA), along with other alternative health care reform proposals throughout 2017. Recent Congressional effortssuch as the AHCA proposal adds to the uncertainty of the legislative changes enacted as part of PPACA. These changes willlikely take time to unfold, and could have an impact on coverage and reimbursement for healthcare items and servicescovered by plans that were authorized by the PPACA. There is no assurance that the PPACA, as currently enacted or asamended in the future, will not adversely affect our business and financial results, and we cannot predict how future federal orstate legislative or administrative changes relating to healthcare reform will affect our business.In the European Union, proposed new clinical trial regulations will centralize clinical trial approval, whicheliminates redundancy, but in some cases this may extend timelines for clinical trial approvals due to potentially longer waittimes. Proposals to require specific consents for use of data in research, among other measures, may increase the costs andtimelines for our product development efforts. Austerity measures in certain European nations may also affect the prices weare able to seek if our products are approved, as discussed below.Both in the United States and in the European Union, legislative and regulatory proposals have been made toexpand post‑approval requirements and restrict sales and promotional activities for pharmaceutical products. We do notknow whether additional legislative changes will be enacted, whether the regulations, guidance or interpretations will bechanged, or what the impact of such changes on the regulatory approvals of our product candidates, if any, may be.34 Table of ContentsPricing for pharmaceutical products has come under increasing scrutiny by governments, legislative bodies andenforcement agencies. These activities may result in actions that have the effect of reducing our revenue or harming ourbusiness or reputation. Pharmaceutical product pricing is subject to enhanced government and public scrutiny and calls for reform. Therehas recently been intense publicity regarding the pricing of pharmaceutical products generally, including publicity andpressure resulting from the prices charged for new products as well as price increases for older products that the governmentand public deem excessive. We may experience downward pricing pressure on the price of our products due to social orpolitical pressure to lower the cost of drugs, which could reduce our revenue and future profitability. In addition, manycompanies in our industry have received governmental requests for documents and information relating to drug pricing andpatient support programs. If we were to become subject to similar requests, we could incur significant expense andexperience reputational harm, as well as reduced market acceptance and demand for our products, which could harm ourability to market our products in the future. These factors could also result in changes in our product pricing and distributionstrategies, reduced demand for our products and/or reduced reimbursement of products, including by federal health careprograms such as Medicare and Medicaid and state health care programs. In addition, the Trump Administration hasindicated an interest in taking measures pertaining to drug pricing, including potential proposals relating to Medicare pricenegotiations, and importation of drugs from other countries. At this time, it is unclear whether any of these proposals will bepursued and how they would impact our products or our future product candidates.Our relationships with customers, consultants and payors will be subject to applicable fraud and abuse, privacy andsecurity, transparency and other healthcare laws and regulations, which, if violated, could expose us to criminal sanctions,civil penalties, exclusion from government healthcare programs, contractual damages, reputational harm and diminishedprofits and future earnings.Healthcare providers, physicians and others play a primary role in the recommendation and prescription of anyproducts for which we may in the future obtain regulatory approval and commercialize. Our current and future arrangementswith third‑party payors, consultants, customers, physicians and others may expose us to broadly applicable fraud and abuseand other healthcare federal and state laws and regulations, including in the United States, that may constrain the business orfinancial arrangements and relationships through which we market, sell and distribute our products for which we obtainregulatory approval. Potentially applicable healthcare laws and regulations include, but are not limited to, the following:·the U.S. federal Anti‑Kickback Statute, which prohibits, among other things, persons or entities from knowinglyand willfully soliciting, offering, receiving or paying remuneration, directly or indirectly, overtly or covertly, incash or in kind, to induce or in return for, purchasing, leasing, ordering, arranging for, or recommending thepurchase, lease, or order of, any good, facility, item or service for which payment may be made under U.S.government healthcare programs such as Medicare and Medicaid;·the federal civil and criminal false claims laws and civil monetary penalties laws, including civil whistlebloweror qui tam actions, which prohibit, among other things, any person or entity from knowingly presenting, orcausing to be presented, a false or fraudulent claim for payment or approval to the federal government orknowingly making, using or causing to be made or used a false record or statement material to a false orfraudulent claim to the federal government, or knowingly concealing or knowingly and improperly avoiding ordecreasing an obligation to pay or transmit money or property to the federal government;·the Privacy Rule or the Security Rule of the Health Insurance Portability and Accountability Act of 1996, orHIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH,and its implementing regulations, which impose various obligations with respect to safeguarding the privacy,security and transmission of individually identifiable health information;·the health care fraud provisions of HIPAA, which impose criminal liability for, among other things, knowinglyand willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program,including private third‑party payors, or to obtain, by means of false or fraudulent pretenses,35 Table of Contentsrepresentations or promises, any of the money or property owned by, or under the custody or control of, anyhealthcare benefit program, and knowingly and willfully falsifying, concealing or covering up a material fact ormaking any materially false, fictitious or fraudulent statement in connection with the delivery of, or paymentfor, healthcare benefits, items or services;·the federal Physician Payments Sunshine Act under PPACA and its implementing regulations, which requirescertain manufacturers of drugs, devices, biologics and medical supplies to annually report to the Centers forMedicare & Medicaid Services information related to payments and other transfers of value made by suchmanufacturers to physicians and teaching hospitals, and ownership and investment interests held by physiciansor their immediate family members; and·analogous laws and regulations, such as state anti‑kickback and false claims laws, which may apply to sales ormarketing arrangements, research, distribution and claims involving healthcare items or services reimbursed bystate governmental and non‑governmental third‑party payors, including private insurers, state laws that requirepharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines andthe relevant compliance guidance promulgated by the federal government, and state requirements formanufacturers to report information related to payments to physicians and other health care providers ormarketing expenditures and other restrictions on drug manufacturer marketing practices.Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available underthe U.S. federal Anti‑Kickback Statute and analogous state laws, it is possible that some of our current and future businessactivities could be subject to challenge under one or more of such laws. In addition, recent health care reform legislation hasstrengthened these laws. For example, PPACA, among other things, amends the intent requirement of the U.S. federalAnti‑Kickback Statute and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge ofthese statutes or specific intent to violate them in order to be in violation. Moreover, PPACA provides that the governmentmay assert that a claim including items or services resulting from a violation of the U.S. federal Anti‑Kickback Statuteconstitutes a false or fraudulent claim for purposes of the federal False Claims Act.Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws andregulations will involve substantial costs. It is possible that governmental authorities will conclude that our businesspractices may not comply with current or future statutes, regulations, agency guidance or case law involving applicablehealthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmentalregulations that may apply to us, we may be subject to, without limitation, significant civil, criminal and administrativepenalties, damages, fines, exclusion from U.S. government funded healthcare programs, such as Medicare and Medicaid,imprisonment, disgorgement, enhanced government reporting and oversight, contractual damages, reputational harm,diminished profits and future earnings and/or the curtailment or restructuring of our operations. Any action against us forviolation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses or divertour management’s attention from the operations of our business. If any of the physicians or other providers or entities withwhom we expect to do business are found to be not in compliance with applicable laws, they may be subject to similarpenalties, including, without limitation, criminal, civil or administrative sanctions, including exclusions fromgovernment‑funded healthcare programs.We are subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti‑corruption laws andanti‑money laundering laws and regulations. Compliance with these legal standards could impair our ability to compete indomestic and international markets. We can face criminal liability and other serious consequences for violations whichcan harm our business.We are subject to export control and import laws and regulations, including the U.S. Export AdministrationRegulations, U.S. Customs regulations, various economic and trade sanctions regulations administered by the U.S. TreasuryDepartment’s Office of Foreign Assets Controls, the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S.domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act and other state andnational anti‑bribery and anti‑money laundering laws in the countries in which we conduct activities. Anti‑corruption lawsare interpreted broadly and prohibit companies and their employees, agents, contractors and other partners from authorizing,promising, offering, or providing, directly or indirectly, improper payments or anything else36 Table of Contentsof value to recipients in the public or private sector. We may engage third parties for clinical trials outside of the UnitedStates, to sell our products abroad once we enter a commercialization phase and/or to obtain necessary permits, licenses,patent registrations and other regulatory approvals. We have direct or indirect interactions with officials and employees ofgovernment agencies or government‑affiliated hospitals, universities and other organizations. We can be held liable for thecorrupt or other illegal activities of our employees, agents, contractors and other partners, even if we do not explicitlyauthorize or have actual knowledge of such activities. Any violations of the laws and regulations described above may resultin substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, taxreassessments, breach of contract and fraud litigation, reputational harm and other consequences.Risks Related to Our Ordinary SharesThe price of our ordinary shares may be volatile and may fluctuate due to factors beyond our control.The market price of our ordinary shares may be volatile and subject to wide fluctuations in response to a variety offactors, many of which are beyond our control, including:·revenues from sales of Keveyis; ·positive or negative results of testing and clinical trials by us, strategic partners or competitors;·delays in in‑licensing or acquiring additional complementary product candidates;·any delay in the commencement, enrollment and the ultimate completion of clinical trials;·technological innovations or commercial product introductions by us or competitors;·failure to successfully develop and commercialize any of our product candidates, if approved;·changes in government regulations;·developments concerning proprietary rights, including patents and litigation matters;·public concern relating to the commercial value or safety of any of our product candidates;·financing or other corporate transactions, or inability to obtain additional funding;·failure to meet or exceed expectations of the investment community;·announcements of significant licenses, acquisitions, strategic partnerships or joint ventures by us or ourcompetitors;·publication of research reports or comments by securities or industry analysts; or·general market conditions in the pharmaceutical industry or in the economy as a whole.The share price of publicly traded emerging biopharmaceutical and drug discovery and development companies hasbeen highly volatile and is likely to remain highly volatile in the future. In addition, the stock market in general hasexperienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operatingperformance of individual companies. Broad market and industry factors may hurt the market price of companies’ stock,including ours, regardless of actual operating performance.37 Table of ContentsIf securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about ourbusiness, the price of our ordinary shares and our trading volume could decline.The trading market for our ordinary shares depends in part on the research and reports that securities or industryanalysts publish about us or our business. If too few securities or industry analysts commence or continue coverage of ourcompany, the trading price for our ordinary shares would likely be negatively affected. In the event securities or industryanalysts initiate coverage, if one or more of the analysts who cover us downgrade our ordinary shares or publish inaccurate orunfavorable research about our business, the price of our ordinary shares would likely decline. If one or more of theseanalysts cease coverage of our company or fail to publish reports on us regularly, demand for our ordinary shares coulddecrease, which might cause the price of our ordinary shares and trading volume to decline.Future sales, or the possibility of future sales, of a substantial number of our ordinary shares could adversely affect theprice of our ordinary shares.Future sales of a substantial number of our ordinary shares, or the perception that such sales will occur, could cause adecline in the market price of our ordinary shares. We currently have 35,335,026 ordinary shares outstanding. We have alsofiled a Registration Statement on Form S-8, registering all ordinary shares that we may issue under our equity compensationplans. These ordinary shares can be freely sold in the public market upon issuance, subject to volume limitations applicableto affiliates and the lock‑up agreements. If a large number of our ordinary shares or securities convertible into our ordinaryshares are sold in the public market after they become eligible for sale, the sales could reduce the trading price of ourordinary shares and impede our ability to raise future capital.An active market in our ordinary shares may not be liquid enough for investors to resell our ordinary shares.The listing of our ordinary shares on the NASDAQ Global Select Market does not assure that a meaningful,consistent and liquid trading market exists. In general trading volume in our ordinary shares has been limited and an activetrading market for our shares may not be sustained. If an active market for our ordinary shares is not sustained, it may bedifficult for investors to sell their shares without depressing the market price for the shares or at all.We have never paid cash dividends, do not expect to pay dividends in the foreseeable future and our ability to paydividends, or repurchase or redeem our ordinary shares, is limited by law.We have not paid any dividends since our inception and do not anticipate paying any dividends on our ordinaryshares in the foreseeable future. Even if future operations lead to significant levels of distributable profits, we currentlyintend that any earnings will be reinvested in our business and that dividends will not be paid until we have an establishedrevenue stream to support continuing dividends. The proposal to pay future dividends to shareholders will in additioneffectively be at the sole discretion of our board of directors after taking into account various factors our board of directorsdeems relevant, including our business prospects, capital requirements, financial performance and new product development.In addition, payment of future dividends is subject to certain limitations under the Irish Companies Act 2014, or the IrishCompanies Act. The Irish Companies Act, among other requirements, requires Irish companies to have distributable reservesavailable for distribution equal to or greater than the amount of the proposed dividend. See Part I, Item 10A “AdditionalInformation-Share Capital.” Accordingly, investors cannot rely on dividend income from our ordinary shares and any returnson an investment in our ordinary shares will likely depend entirely upon any future appreciation in the price of our ordinaryshares.We believe we were classified as a passive foreign investment company ("PFIC") for U.S. federal income tax purposes inpast years and we may be classified as a PFIC in future years , which could result in adverse U.S. federal income taxconsequences to U.S. Holders of our ordinary shares.A non‑U.S. corporation generally will be classified as a passive foreign investment company, or PFIC, for U.S.federal income tax purposes for any taxable year if either (1) 75% or more of its gross income for such year consists of certaintypes of “passive” income or (2) 50% or more of the value of its assets (determined on the basis of a quarterly average) duringsuch year produce or are held for the production of passive income. For this purpose, “passive income” generally includes,among other items of income, dividends, interest, royalties, rents and gains from commodities and38 Table of Contentssecurities transactions and from the sale or exchange of property that gives rise to passive income, and a non‑U.S. corporationis treated as owning a proportionate share of the assets and earning a proportionate share of the income of any othercorporation in which such non‑U.S. corporation owns, directly or indirectly, more than 25% of the value of such othercorporation’s stock. Based on our income, assets and activities in past years, we believe that we were a PFIC in past years, andwe may be classified as a PFIC for the current taxable year and for future years depending on the income, assets, and activitiesin such taxable years. A U.S. Holder that holds ordinary shares during any taxable year in which we are a PFIC would besubject to substantially increased U.S. federal income tax liability, including upon the receipt of any “excess distributions”from us and upon the sale or other disposition of our ordinary shares. Although certain elections may be available to mitigatethe adverse impact of the PFIC rules, such elections may result in a current U.S. federal tax liability prior to any distributionon or disposition of our ordinary shares. Further, there can be no assurances that we will supply U.S. Holders with informationthat such U.S. Holders are required to report under the rules governing such elections. Accordingly, the acquisition of ourordinary shares may not be an appropriate investment for certain holders that are not tax‑exempt organizations. U.S. Holdersshould consult their tax advisers regarding the application of the PFIC rules to an investment in our ordinary shares. We are a foreign private issuer and, as a result, we are not subject to U.S. proxy rules and are subject to Exchange Actreporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.We report under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as a non‑U.S. company withforeign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act and although we aresubject to Irish laws and regulations with regard to such matters and intend to furnish quarterly financial information to theU.S. Securities and Exchange Commission (the “SEC), we are exempt from certain provisions of the Exchange Act that areapplicable to U.S. domestic public companies, including: (1) the sections of the Exchange Act regulating the solicitation ofproxies, consents or authorizations with respect to a security registered under the Exchange Act; (2) the sections of theExchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiderswho profit from trades made in a short period of time; and (3) the rules under the Exchange Act requiring the filing with theSEC of quarterly reports on Form 10‑Q containing unaudited financial and other specified information, or current reports onForm 8‑K upon the occurrence of specified significant events. In addition, foreign private issuers are not required to file theirannual report on Form 20‑F until four months after the end of each financial year, while U.S. domestic issuers that areaccelerated filers are required to file their annual report on Form 10‑K within 75 days after the end of each fiscal year. Foreignprivate issuers are also exempt from the Regulation Fair Disclosure, aimed at preventing issuers from making selectivedisclosures of material information. As a result of the above, you may not have the same protections afforded to shareholdersof companies that are not foreign private issuers.As a foreign private issuer and as permitted by the listing requirements of NASDAQ, we may rely on certain home countrygovernance practices rather than the corporate governance requirements of NASDAQ.We are a foreign private issuer. As a result, in accordance with NASDAQ Listing Rule 5615(a)(3), we comply withhome country governance requirements and certain exemptions thereunder rather than complying with certain of thecorporate governance requirements of NASDAQ.Irish law does not require that a majority of our board of directors consist of independent directors. Our board ofdirectors therefore may include fewer independent directors than would be required if we were subject to NASDAQ ListingRule 5605(b)(1). In addition, we are not subject to NASDAQ Listing Rule 5605(b)(2), which requires that independentdirectors must regularly have scheduled meetings at which only independent directors are present.Our Articles of Association (hereinafter referred to as our Articles) provide that at any meeting of shareholders, ashareholder may designate another person to attend, speak and vote at the meeting on their behalf by proxy, but no suchproxy shall be voted or acted upon at any subsequent meeting, unless the proxy expressly provides for this. Irish law does notrequire shareholder approval for the issuance of securities in connection with the establishment of or amendments toequity‑based compensation plans for employees. To this extent, our practice varies from the requirements of NASDAQListing Rule 5635, which generally requires an issuer to obtain shareholder approval for the issuance of securities inconnection with such events.39 Table of ContentsSee Part I, Item 10B “Additional Information-Memorandum and Articles of Association.” As a result of the above,you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.We may lose our foreign private issuer status, which would then require us to comply with the Exchange Act’s domesticreporting regime and cause us to incur significant legal, accounting and other expenses.We are a foreign private issuer and therefore we are not required to comply with all of the periodic disclosure andcurrent reporting requirements of the Exchange Act applicable to U.S. domestic issuers. Losing our status as a foreign privateissuer would require us to comply with all of the periodic disclosure and current reporting requirements of the Exchange Actapplicable to U.S. domestic issuers. In order to maintain our current status as a foreign private issuer, either (1) a majority ofour ordinary shares must be either directly or indirectly owned of record by non‑residents of the United States or (2)(A) amajority of our executive officers or directors may not be United States citizens or residents, (B) more than 50% of our assetscannot be located in the United States and (C) our business must be administered principally outside the United States. If welose this status, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S.domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also berequired to make changes in our corporate governance practices in accordance with various SEC and stock exchange rules.The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reportingrequirements applicable to a U.S. domestic issuer may be significantly higher than the cost we would incur as a foreignprivate issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financialcompliance costs and would make some activities highly time consuming and costly. We also expect that if we were requiredto comply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult and expensivefor us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incursubstantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attractand retain qualified members of our board of directors.Our shareholder’s rights are governed by Irish law and differ from the rights of shareholders under U.S. law.We are a public limited company incorporated under the laws of Ireland. Therefore, the rights of holders of ordinaryshares are governed by Irish law and by our memorandum and articles of association. These rights differ from the typicalrights of shareholders in U.S. corporations. In certain cases, facts that, under U.S. law, would entitle a shareholder in a U.S.corporation to claim damages may not give rise to a cause of action under Irish law entitling a shareholder in an Irishcompany to claim damages. For example, the rights of shareholders to bring proceedings against us or against our directors orofficers in relation to public statements are more limited under Irish law than under the civil liability provisions of the U.S.securities laws.Our shareholders may have difficulties enforcing, in actions brought in courts in jurisdictions located outside theUnited States, judgments obtained in the U.S. courts under the U.S. securities laws. In particular, if a shareholder sought tobring proceedings in Ireland based on U.S. securities laws, the Irish court might consider that:·it did not have jurisdiction;·it was not the appropriate forum for such proceedings;·applying Irish conflict of laws rules, U.S. laws (including U.S. securities laws) did not apply to the relationshipbetween you and us or our directors and officers; or·the U.S. securities laws were of a penal nature or violated Irish public policy and should not be enforced by theIrish court.Our shareholders should also be aware that Irish law does not allow for any form of legal proceedings directlyequivalent to the class action available in the United States.40 Table of ContentsBecause the PCAOB is not permitted to inspect registered public accounting firms in Ireland, you do not have the benefit ofsuch inspections to the extent our financial statements are audited by a registered public accounting firm in Ireland.Auditors of U.S. public companies, including our independent registered public accounting firm, are required by thelaws of the United States to undergo periodic PCAOB inspections to assess their compliance with U.S. law and professionalstandards in connection with performance of audits of financial statements filed with the SEC. The laws of certain EuropeanUnion countries, including Ireland, do not currently permit the PCAOB to conduct inspections of accounting firmsestablished and operating in such European Union countries. Accordingly, to the extent our financial statements will beaudited by a registered public accounting firm in Ireland, the PCAOB would be prevented from fully evaluating theeffectiveness of our independent registered public accounting firm’s audit procedures or quality control procedures. Unlikeshareholders or potential shareholders of most U.S. public companies, our shareholders would be deprived of the possiblebenefits of such PCAOB inspections.A future transfer of our ordinary shares, other than one effected by means of the transfer of book‑entry interests in DTC,may be subject to Irish stamp duty.The rate of Irish stamp duty, when applicable, on the transfer of shares in an Irish‑incorporated company is 1% of theprice paid, or the market value of the shares acquired, whichever is greater. Payment of Irish stamp duty is generally a legalobligation of the transferee. We expect that most of our ordinary shares will be traded through the Depositary TrustCompany, or DTC, or through brokers who hold such shares on behalf of customers through DTC. As such, the transfer ofordinary shares should be exempt from Irish stamp duty based on established practice of the Irish Revenue Commissioners.We received written confirmation from the Irish Revenue Commissioners on June 22, 2015 that a transfer of our ordinaryshares held through DTC and transferred by means of a book‑entry interest would be exempt from Irish stamp duty. However,if you hold your ordinary shares directly of record, rather than beneficially through DTC, or through a broker that holds yourordinary shares through DTC, any transfer of your ordinary shares may be subject to Irish stamp duty. The potential for Irishstamp duty to arise could adversely affect the price and liquidity of our ordinary shares. In addition, the terms of oureligibility agreement with DTC requires us to provide certain indemnities relating to Irish stamp duty to third parties. Ifliability were to arise as a result of the indemnities provided under the terms of the eligibility agreement, we may facesignificant unexpected costs.Anti‑takeover provisions in our Articles and under Irish law could make an acquisition of us more difficult, limit attemptsby our shareholders to replace or remove our current directors and management team, and limit the market price of ourordinary shares.Our Articles contain provisions that may delay or prevent a change of control, discourage bids at a premium over themarket price of our ordinary shares and adversely affect the market price of our ordinary shares and the voting and otherrights of the holders of our ordinary shares. These provisions include:·dividing our board of directors into three classes, with each class serving a staggered three‑year term;·permitting our board of directors to issue preference shares without shareholder approval, with such rights,preferences and privileges as they may designate;·provisions which allow our board of directors to adopt a shareholder rights plan upon such terms and conditionsas it deems expedient and in our best interests;·establishing an advance notice procedure for shareholder proposals to be brought before an annual meeting,including proposed nominations of persons for election to our board of directors; and·the ability of our board of directors to fill vacancies on our board in certain circumstances.These provisions do not make us immune from takeovers. However, these provisions will apply even if the offer maybe considered beneficial by some shareholders. In addition, these provisions may frustrate or prevent any attempts by ourshareholders to replace or remove our current management team by making it more difficult for41 Table of Contentsshareholders to replace members of our board of directors, which is responsible for appointing the members of ourmanagement.Irish law differs from the laws in effect in the United States with respect to defending unwanted takeover proposals andmay give our board of directors less ability to control negotiations with hostile offerors.We are subject to the Irish Takeover Rules. Under the Irish Takeover Rules, our board of directors is not permitted totake any action that might frustrate an offer for our ordinary shares once our board of directors has received an approach thatmay lead to an offer or has reason to believe that such an offer is or may be imminent, subject to certain exceptions.Potentially frustrating actions such as (1) the issue of shares, options, restricted share units or convertible securities,(2) material acquisitions or disposals, (3) entering into contracts other than in the ordinary course of business or (4) anyaction, other than seeking alternative offers, which may result in frustration of an offer, are prohibited during the course of anoffer or at any earlier time during which our board of directors has reason to believe an offer is or may be imminent. Theseprovisions may give our board of directors less ability to control negotiations with hostile offerors than would be the case fora corporation incorporated in the United States. See Part I, Item 10B “Additional Information-Memorandum and Articles”.We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to“emerging growth companies” will make our ordinary shares less attractive to investors.We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an “emerginggrowth company,” we may take advantage of exemptions from various reporting requirements that are applicable to otherpublic companies that are not “emerging growth companies,” including not being required to comply with the auditorattestation requirements of Section 404 of the Sarbanes-Oxley Act, exemptions from the requirements to provide certainexecutive compensation disclosures, exemptions from the requirements of holding a nonbinding advisory vote on executivecompensation or seeking shareholder approval of any golden parachute payments not previously approved. As an “emerginggrowth company,” in our initial registration statement, we were required to report only two years of financial results andselected financial data compared to three and five years, respectively, for comparable data reported by other publiccompanies. We could be an “emerging growth company” for up to five years, although circumstances could cause us to losethat status earlier, including if the market value of our ordinary shares held by non‑affiliates exceeds $700 million as of anyJune 30 before that time, in which case we would no longer be an “emerging growth company” as of the followingDecember 31, our fiscal year end. We cannot predict if investors will find our ordinary shares less attractive because we mayrely on these exemptions. If some investors find our ordinary shares less attractive as a result, there may be a less activetrading market for our ordinary shares and the price of our ordinary shares may be more volatile.Certain provisions of the warrants issued in the 2016 Private Placement could impede a sale of the Company. In the event of a sale of the Company, the terms of the warrants issued to the 2016 Investors in the 2016 PrivatePlacement require us to use our best efforts to ensure the holders of such warrants will have a continuing right to purchaseshares of the acquirer and, if our efforts are unsuccessful, to make a payment to such warrant holders based on a Black-Scholes valuation (using variables as specified in the warrant agreements). Such payment must be made in cash in the eventthat the acquisition results in our shareholders receiving cash from the acquirer at the closing of the transaction, and must bemade in shares of the Company (with the value of each ordinary share determined according to the calculation specified inthe warrant agreements) in the event that the acquisition results in our shareholders receiving shares in the acquirer or otherentity at the closing of the transaction. In the event that our shareholders receive both cash and shares at the closing of thetransaction, such payment to the warrant holders shall also be made in both cash and shares in the same proportion as theconsideration received by the shareholders. Notwithstanding the foregoing, in the event that as a result of an acquisition the warrants will be exercisable foranything other than shares or securities that are listed on a regulated market (within the meaning of the Markets in FinancialInstruments Directive (2004/39(EC))) or a United States national securities exchange, the warrant holders will be entitled todemand to receive a cash payment in an amount equal to the Black-Scholes Value per warrant (calculated in accordance withthe warrants) contemporaneously with or promptly after the consummation of such acquisition.42 Table of Contents We have identified a material weakness in our internal control over financial reporting. If we fail to remediate theidentified material weakness, or if we otherwise fail to maintain effective internal control over financial reporting anddisclosure controls and procedures, we may not be able to accurately report our financial results, detect or prevent fraud,or file our periodic reports in a timely manner, which may, among other adverse consequences, cause investors to loseconfidence in our reported financial information and lead to a decline in our stock price. The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financialreporting and disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensurethat information required to be disclosed by a company in the reports that it files or submits under the Exchange Act isrecorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosurecontrols and procedures include, without limitation, controls and procedures designed to ensure that information required tobe disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicatedto the company’s management, including its principal executive and principal financial officers, as appropriate to allowtimely decisions regarding required disclosure. We are required under Section 404(a) of the Sarbanes-Oxley Act to furnish areport by management on, among other things, the effectiveness of our internal control over financial reporting. Thisassessment includes disclosure of any material weaknesses identified by our management in our internal control overfinancial reporting.In connection with the preparation of our consolidated financial statements for the year ended December 31, 2016,we concluded that there was a material weakness in the design and operating effectiveness of our internal control over ourvaluation of the warrants issued in connection with our December 31, 2016 private placement of ordinary shares. As definedin SEC Regulation S-X, a material weakness is a control deficiency, or combination of deficiencies, in internal control overfinancial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financialstatements will not be prevented or detected on a timely basis. The initial calculation was performed with incorrect inputs,which resulted in an adjustment to our consolidated financial statements included in this Form 20-F. As a consequence ofthis material weakness, management concluded that our internal control over financial reporting, and consequently ourdisclosure controls and procedures, were not effective as of December 31, 2016. ITEM 4. INFORMATION ON THE COMPANYCorporate InformationStrongbridge Biopharma plc, an Irish public limited company, was established on May 26, 2015 under the nameCortendo plc. On September 4, 2015, Cortendo plc changed its name to Strongbridge Biopharma plc. We also have a whollyowned subsidiary, Cortendo AB, organized under the laws of Sweden. See Part I, Item 10I “Subsidiary Information” a for listof subsidiaries of the Company.Our principal executive offices are located at 900 Northbrook Drive, Suite 200, Trevose, Pennsylvania, 19053 andour telephone number is +1 610‑254‑9200. For the purposes of Irish law, our registered office is Arthur Cox Building, TenEarlsfort Terrace, Dublin 2, Ireland.Our website is www.strongbridgebio.com. The information on, or that can be accessed through, our website is notpart of and should not be incorporated by reference into this Annual Report on Form 20-F.OverviewWe are a global commercial-stage biopharmaceutical company focused on the development and commercializationof therapies for rare diseases with significant unmet needs. Our first commercial product is Keveyis® (dichlorphenamide), the first and only treatment approved by the U.S.Food and Drug Administration (FDA) for hyperkalemic, hypokalemic, and related variants of primary periodic paralysis(“PPP”) ,a group of rare hereditary disorders that cause episodes of muscle weakness or paralysis. Keveyis, for43 Table of Contentswhich we hold the U.S. marketing rights, has orphan drug exclusivity status in the United States through August 7, 2022.In addition to this neuromuscular disease product, we have two clinical-stage product candidates for rare endocrinediseases, Recorlev® and veldoreotide. Recorlev (levoketoconazole, and formerly called COR-003) is a cortisol synthesisinhibitor currently being studied for the treatment of endogenous Cushing's syndrome. Veldoreotide (formerly called COR-005) is a next-generation somatostatin analog (“SSA”) being investigated for the treatment of acromegaly, with potentialadditional applications in Cushing's syndrome and neuroendocrine tumors. Both Recorlev and veldoreotide have receivedorphan designation from the FDA and the European Medicines Agency (EMA).Given the well-identified and concentrated prescriber base addressing our target markets, we intend to use a small,focused sales force to effectively market Keveyis and other products and product candidates, if approved, in the UnitedStates, the European Union and other key global markets. We believe that our ability to execute on this strategy is enhancedby the significant commercial and clinical development experience of key members of our management team. Since the introduction of our new management team in August 2014, we have been building a rare disease,franchise‑based business model focused on expansion through a disciplined in‑licensing and acquisition strategy. In pursuitof our growth strategy, we have raised over $140 million in equity and debt financings since December 2014. We willcontinue to identify and evaluate the acquisition of products and product candidates that would be complementary to ourexisting rare neuromuscular and endocrine franchises or that would form the basis for new rare disease franchises. We believethis approach will enable us to maximize our commercial potential by further leveraging our existing resources and expertise. Recent Developments Acquisition of Keveyis Marketing Rights and Supply Agreement with Taro Pharmaceuticals Industries Ltd (“Taro”) In December 2016, we acquired the U.S. marketing rights to Keveyis (dichlorphenamide) from a subsidiary of Taro.Keveyis has received orphan drug exclusivity status in the U.S through August 7, 2022. Under the terms of the AssetPurchase Agreement, dated December 12, 2016, we paid Taro an upfront payment in two installments of $1 million inDecember 2016 and $7.5 million in March 2017, and will pay an aggregate of $7.5 million in potential milestones upon theachievement of certain product sales targets. Taro has agreed to continue to manufacture Keveyis for us under an exclusivesupply agreement through the orphan exclusivity period (the “Supply Agreement”). We are obligated to purchase certainannual minimum amounts of product totaling approximately $29 million over a six-year period from Taro. The SupplyAgreement may extend beyond the orphan exclusivity period unless terminated by either party pursuant to the terms of theagreement. If terminated by Taro at the conclusion of the orphan exclusivity period, we have the right to manufacture theproduct on our own or have the product manufactured by a third party on our behalf. Private Placement On December 22, 2016, we raised $35 million in aggregate proceeds in a private placement (the "2016 PrivatePlacement"). According to the terms of the Securities Purchase Agreement, dated December 22, 2016, we issued and sold14,000,000 ordinary shares at a purchase price of $2.50 per ordinary share, as well as warrants to purchase 7,000,000 ordinaryshares (the "Investor Warrants") to the investors (the "2016 Investors"). The Investor Warrants are exercisable at a price of$2.50 per share beginning on June 28, 2017 and expire in five years from June 28, 2017. In connection with the 2016 PrivatePlacement, we entered into a registration rights agreement with the 2016 Investors pursuant to which we agreed to file aregistration statement for the purpose of registering for resale (i) the ordinary shares purchased by the 2016 Investors in the2016 Private Placement; (ii) the ordinary shares exercisable upon exercise of the Investor Warrants acquired by the 2016Investors in the 2016 Private Placement; and (iii) any other ordinary shares held by a 2016 Investor that beneficially ownedat least 1,000,000 ordinary shares following the closing of the 2016 Private Placement that qualified as "RegistrableSecurities" as defined therein (the "Registration Rights Agreement"). 44 Table of ContentsLoan Agreement with Oxford Finance LLC and Horizon Technology Finance Corporation On December 28, 2016, we entered into a loan and security agreement (the "Loan Agreement") with OxfordFinance LLC ("Oxford") and Horizon Technology Finance Corporation ("Horizon") (collectively, the “Lenders”). The LoanAgreement provided for a $40 million credit facility, of which $20 million was borrowed initially. Under the LoanAgreement, we have access to two additional tranches of $10 million each which are available to us subject to theachievement of certain specified milestones. The borrowings pursuant to the Loan Agreement mature after 48 months. TheLoan Agreement provides for interest-only payments initially for the first 18 months of the loan followed by an amortizationperiod of 30 months, a final payment fee equal to 8% of the amount borrowed and interest payable at an annual rate equal tothe sum of 8.22% plus the greater of 0.53% or the 30-day US LIBOR rate. The credit facility provides that if we satisfy certainmilestones and borrow the final $10 million tranche, the interest-only period would be extended by an additional six monthsand the amortization period would be 24 months. We have granted a security interest in substantially all of our existingassets and assets acquired by us in the future, including intellectual property. The Loan Agreement contains facility andprepayment fees, customary affirmative and negative covenants and events of default. Upon the execution of the Loan Agreement, we issued warrants to the Lenders to purchase an aggregate of 428,571ordinary shares at an exercise price equal to $2.45 per share (the “Lender Warrants”). The Lender Warrants are immediatelyexercisable and expire after ten years. The Lender Warrants issued to the Lenders include a provision requiring us to file aregistration statement to provide for the public resale of the ordinary shares to be issued upon exercise of the LenderWarrants. On March 31, 2017 we entered into an amendment to the Loan Agreement that was made effective as of January 27,2017 and provided for an extension to the dates by which the Company’s Swedish subsidiary was required to enter intosecurity documents granting security interests on certain of its assets in favor of Oxford, as collateral agent for the Lender,and to increase the amount of debt the Company can incur under, and the amount of cash collateral it can provide forpurposes of, its corporate credit card program from $100,000 to $250,000. In connection with the amendment, the Companypaid $150,000 to the Lenders. Our Products and Product Candidates ·Keveyis® (dichlorphenamide), an oral carbonic anhydrase inhibitor and the only therapy approved in theUnited States to treat hyperkalemic, hypokalemic and related variants of primary periodic paralysis. PPP is arare genetic, neuromuscular disorder that can cause extreme muscle weakness and/or paralysis. It often interfereswith daily activities and, as patients get older, it can lead to permanent muscle weakness. The two most commonforms of this disorder are “hyperkalemic” and “hypokalemic” periodic paralysis. Keveyis was approved bythe FDA in August 2015, and has received orphan drug exclusivity status in the U.S through August 7, 2022.Since May 2016, Taro has been supplying Keveyis on a non-commercial basis to patients through a singlespecialty pharmacy in the United States. We expect to commercially launch Keveyis in the United States inApril 2017.·Recorlev™ (levoketoconazole, and formerly called COR-003), a cortisol synthesis inhibitor, in Phase 3 clinicaldevelopment for the treatment of endogenous Cushing’s syndrome. Endogenous Cushing’s syndrome is a rareendocrine disorder characterized by sustained elevated cortisol levels that most commonly result from a benigntumor of the pituitary gland. We believe that Recorlev, which is the isolated, “left-handed” mirror image, orenantiomer, of ketoconazole, has the potential to become the new standard of care for the drug therapy ofendogenous Cushing’s syndrome. We are currently conducting SONICS, a pivotal, multinational Phase 3clinical trial for Recorlev, and anticipate that the study will be fully enrolled in the second quarter of 2017, withtop-line data for the primary efficacy analysis available in the first quarter of 2018. In addition, we plan toinitiate LOGICS, a second pivotal Phase 3 clinical trial of Recorlev for the treatment of endogenous Cushing'ssyndrome. The LOGICS study will supplement the long-term efficacy and safety data from the ongoing SONICSstudy in a randomized, double-blind, placebo-controlled study that will enroll approximately 35 patients, ofwhich approximately two-thirds will45 Table of Contentshave completed the SONICS study. Enrollment in the LOGICS study is anticipated to begin mid-year 2017 andtop-line data are expected in the third quarter of 2018. Upon completion of the clinical development program, we intend to file for marketing authorizations in theUnited States and elsewhere. Following consultations with the FDA, we have determined that the 505(b)(2)approval pathway, which permits a New Drug Application “NDA” applicant to rely on data from studies thatwere not conducted by or for the applicant and for which the applicant has not obtained a right of reference, isthe appropriate pathway for a Recorlev NDA. Because NDA approval can rely in part on data already acceptedby the FDA or otherwise publicly available, an abbreviated and reduced development program may be possible.We intend to rely on published literature and the FDA’s prior findings concerning the safety and/oreffectiveness of ketoconazole in our NDA for Recorlev. A similar marketing authorization pathway is availablein most of the rest of the world, and we anticipate that the studies supporting U.S. approval will likewise supportapprovals to market Recorlev elsewhere, including in the European Union. ·Veldoreotide (formerly called COR‑005), a novel somatostatin analogue (SSA), in Phase 2 clinicaldevelopment for the treatment of acromegaly. Based on the differentiated activation pattern to veldoreotide bysomatostatin receptor subtypes (“SSTRs”) and its emerging preclinical and clinical profile, we believe thatveldoreotide may offer an improved efficacy and safety profile relative to existing drug therapies foracromegaly. Veldoreotide has been granted orphan drug designation by the FDA and the EMA. We havecompleted the screening of potential long-acting release (“LAR”) technologies for veldoreotide and haveselected a lead formulation based upon PLGA microspheres. PLGA is a well-known polymer, which has beenwidely applied in LAR formulations due to its biocompatibility, biodegradability, and favorable releasekinetics. Additional veldoreotide development activities will be sequenced to ensure that the Company’sexisting cash resources are sufficient to fund planned operations at least through 2018.Our StrategyOur goal is to transform the lives of patients by building a leading franchise‑based, commercially orientedbiopharmaceutical company addressing rare diseases with significant unmet medical needs. We are focused on developing,in‑licensing, acquiring and eventually commercializing products and product candidates that target rare diseases acrossseveral complementary therapeutic areas.To achieve our goal, we are pursuing the following strategies:·Focus on rare diseases. We are developing treatments for rare diseases, initially PPP, endogenous Cushing’ssyndrome and acromegaly. Rare diseases typically have a high unmet need for innovative treatment options.Drug development for the treatment of rare diseases often requires smaller clinical trials and has the potential foraccelerated regulatory review. Product candidates focused on rare diseases also often qualify for orphan drugdesignation, which in the United States provides for seven years of market exclusivity and in the EuropeanUnion provides for 10 years of market exclusivity after regulatory approval has been granted.·Independently commercialize Keveyis and other products in the United States and the European Union. Weare preparing to independently commercialize Keveyis in the United States and intend to do likewise with ourtwo rare disease product candidates, if approved, in the United States, the European Union, and, selectively, inother key global markets. Given the well-identified and concentrated prescriber base for Keveyis, and our twoproduct candidates, we believe we can use a small, focused sales force to effectively promote our products. Weplan to create an initial sales force of approximately 12 representatives in the United States to market Keveyis,and opportunistically expand the sales force with the growth of Keveyis. We anticipate a sales force ofapproximately 30 representatives in the United States as well as in the European Union to market our two raredisease product candidates, if approved. We believe that the activities involved in our commercialization ofKeveyis will provide synergies to our commercialization of Recorlev if successful. We further believe thatveldoreotide, if successful, will benefit from significant46 Table of Contentsdevelopment and commercial synergies with our lead product candidate, Recorlev, because both Cushing’ssyndrome and acromegaly are typically caused by benign pituitary tumors and are mainly treated byneuroendocrinologists. We believe that our ability to execute on this strategy is enhanced by the significantprior commercial experience of key members of our management team. Prior to joining our company, membersof our management team were involved in the launch or commercialization of over 20 pharmaceutical products.·Expand our portfolio through a disciplined in‑licensing and acquisition strategy. We plan to source newproduct candidates by in‑licensing or acquiring them. Our management team seeks to mitigate the potentialrisks of this strategy by adhering to our disciplined criteria of focusing on in‑licensing or acquisitionopportunities of products that are already commercially available or that have human clinical data that webelieve suggest a high probability of success for development progression and an attractive potential return oninvestment. As a result of our management team’s experience in sourcing, selecting, in‑licensing and acquiringproduct candidates, we were successful in acquiring the U.S. rights to Keveyis as well as augmenting our rareendocrine franchise by adding veldoreotide to our product pipeline.·Utilize a franchise model built on rare disease therapeutic areas. We intend to build our company byin‑licensing and acquiring products and product candidates that target rare diseases in therapeutically alignedfranchises with significant commercial opportunity. We believe that complementary products and productcandidates will allow us to significantly leverage our expertise as well as our development and commercialinfrastructure. For example, Keveyis serves as the basis of our rare neuromuscular franchise, and our productcandidates for the treatment of endogenous Cushing’s syndrome and acromegaly, if approved, will serve as thebasis for our rare endocrine franchise.·Expand indications of products and product candidates within our franchises. In addition to identifyingproducts and product candidates that can form the basis of new rare disease franchises, we also intend toleverage opportunities to develop potential products and product candidates for additional indications withintheir respective therapeutic franchises. We believe that this approach will enable us to maximize ourcommercial potential by further leveraging our existing resources and expertise.Our Product Candidate PipelineThe following table illustrates our product candidates by stage:Our Rare Neuromuscular FranchiseIn December 2016, we initiated our rare neuromuscular franchise by acquiring the U.S. marketing rights to Keveyis®(dichlorphenamide) from Taro Pharmaceuticals U.S.A., Inc., the U.S. subsidiary of Taro Pharmaceutical Industries Ltd. (“TaroU.S.”). Keveyis is the first and only therapy approved in the United States to treat hyperkalemic,47 Table of Contentshypokalemic and related variants of PPP, a group of rare hereditary disorders that cause episodes of muscle weakness orparalysis. Overview of PPP and Keveyis PPP is a rare, genetic, neuromuscular disorder related to a defect in muscle ion channels. The disease is characterizedby episodes of muscle weakness and paralysis. It often interferes with daily activities and, as patients get older, it can lead topermanent muscle weakness. Primary periodic paralysis may be localized (“focal”) or more widespread (“generalized”), and itoften goes underdiagnosed and/or undertreated. Types of periodic paralyses are differentiated by criteria includingunderlying genetic mutations and changes in blood potassium during an episode. The two most common forms of PPP arehypokalemic, when episoses can be induced by low blood levels of potassium, and hyperkalemic, when episodes areassociated with elevated levels of blood potassium. Primary periodic paralysis is thought to affect as many as 5,000 to 6,000individuals in the U.S. Keveyis is an oral carbonic anhydrase inhibitor, and was approved in the United States in August 2015 to treathyperkalemic, hypokalemic and related variants of PPP. The exact mechanism(s) through which oral carbonic anhydraseinhibitors are thought to decrease the frequency and severity of periodic paralysis attacks is unknown. However, it isbelieved that their effects are mediated both locally and systemically. It is not known whether their effects are disease-modifying. Keveyis has received orphan drug exclusivity status in the U.S through August 7, 2022. Following FDA approval in August 2015, Keveyis was marketed by Taro U.S.A., Inc.. In May 2016, Taroannounced the cessation of their commercial sales and related promotional activities for Keveyis. Since May 2016, Tarosupplied Keveyis to patients on a non-commercial basis through a single specialty pharmacy in the United States. Since ouracquisition of the U.S. marketing rights to Keveyis from Taro in December 2016, we have been conducting the activitiesnecessary to prepare for our commercial launch, which is expected in April 2017. We intend to launch and sell Keveyis using experienced sales representatives. Because a large percentage of thepeople who suffer from PPP remain undiagnosed or inadequately treated, we intend to develop programs to educate themedical community and patients about this illness. In addition, we plan to establish a field-based force of medical scienceliaisons. We intend to use a specialty pharmacy model to provide reimbursement, clinical and distribution support forKeveyis, and to develop cost-sharing and patient assistance programs to support qualified, commercially insured patients,federal- and state-insured patients, and uninsured or under-insured patients. We may also donate money to independentcharitable foundations dedicated to this cause. Our ultimate goal is to ensure that no PPP patient is denied access to Keveyisfor financial reasons. Our Rare Endocrine FranchiseWe have two product candidates in our rare endocrine franchise. Recorlev is being developed for the treatment ofendogenous Cushing’s syndrome, and veldoreotide is being developed for the treatment of acromegaly. We believe thatthese clinical product candidates, if successful, will benefit from significant development and commercial synergies based onthe fact that both endogenous Cushing’s syndrome and acromegaly are typically caused by benign pituitary tumors and aremainly treated by neuroendocrinologists. We believe that we can address the markets for both of these product candidates bytargeting the endocrinologists that are focused on the treatment of rare pituitary disorders.Recorlev—Phase 3 Product Candidate for the Treatment of Endogenous Cushing’s SyndromeOverviewOur lead product candidate, Recorlev (levoketoconazole, and formerly called COR-003) is a cortisol synthesisinhibitor and is a single enantiomer of ketoconazole that we are developing for the treatment of endogenous Cushing’ssyndrome, a rare endocrine disorder characterized by excessive production of the stress hormone cortisol. In endogenousCushing’s syndrome, elevated circulating cortisol gives rise to a severe disease with variable clinical signs and symptoms,including weight gain, characteristic changes in fat distribution, diabetes mellitus, hypertension, osteoporosis, muscle lossand depression. The active pharmaceutical ingredient in Recorlev, levoketoconazole (a purified enantiomer48 Table of Contentsof ketoconazole, and also known as 2S,4R-ketoconazole) is a small molecule and exerts its effect by blocking the synthesisof cortisol in the adrenal glands, leading to the reduction and, ideally, the normalization of blood cortisol. Recorlev has beengranted orphan drug designation by the FDA and the EMA and is being developed for twice daily oral administration. Ketoconazole, used off‑label in the United States, is the most frequently prescribed drug therapy for endogenousCushing’s syndrome. It is used to reduce blood cortisol and ameliorate comorbidities associated with Cushing’s syndrome.Molecules of ketoconazole form as mirror images, referred to as enantiomers. Manufactured ketoconazole consists of twoenantiomers, 2R,4S‑ketoconazole and 2S,4R‑ketoconazole, that are found in equal amounts, and is therefore referred to as aracemate. Recorlev is a single‑enantiomer drug, a pure form of one (2S,4R‑ketoconazole) of the two enantiomers(2S,4R‑ketoconazole) of ketoconazole. Single‑enantiomer drugs may offer safety and efficacy advantages over the racematebecause one of the enantiomers in the racemate can have safety issues or be less effective in the treatment of the disorder ordisease.Recorlev, like ketoconazole, is a cortisol synthesis inhibitor that inhibits the cortisol synthesis pathway at severalpoints. In light of the shared mechanism of action with ketoconazole and the data from Phase 2 clinical trials, which wereconducted in diabetes patients, we believe Recorlev may have a similar beneficial impact on the reduction of significantcomorbidities of endogenous Cushing’s syndrome, including those associated with cardiovascular‑related mortality risk,such as diabetes, weight gain, hypertension and elevation in cholesterol. In addition, based on preclinical results, we believethat Recorlev may offer an improved safety profile relative to existing approved drug therapies. Therefore, we believe thatRecorlev has the potential to become a new standard of care for the chronic drug therapy of endogenous Cushing’ssyndrome.Overview of Cushing’s SyndromeThere are two variants of Cushing’s syndrome: exogenous, which is caused by factors outside the body (e.g.,corticosteroid or cortisol-like medications); and endogenous, which is caused by factors within the body. The symptoms forboth are the same. The more common form is exogenous Cushing’s syndrome, which is often found in people takingcortisol‑like medications for long periods of time, typically at high dosages or in very potent forms. Cortisol‑likemedications are often used to treat inflammatory disorders such as asthma and rheumatoid arthritis. Unlike the endogenousvariant, exogenous Cushing’s syndrome is temporary and most clinical signs and symptoms subside after the patient hasfinished taking the cortisol‑like medication.Endogenous Cushing’s syndrome is a rare endocrine disorder characterized by sustained blood cortisol. Cortisol is ahormone produced in the adrenal gland and is naturally secreted as an end product of the activity of thehypothalamic‑pituitary‑adrenal axis, a major part of the endocrine system. Corticotropin‑releasing‑hormone (“CRH”) issecreted from the hypothalamus and stimulates the secretion and release of adrenocorticotropin (“ACTH”) from the pituitarygland, which in turn stimulates cortisol secretion from the adrenal gland. Cortisol itself exerts negative feedback control onboth CRH in the hypothalamus and ACTH in the pituitary gland, thereby reducing CRH and ACTH secretion and keepingcortisol levels in a normal range.The most common form of endogenous Cushing’s syndrome is called Cushing’s disease, which is typically causedby a benign pituitary tumor that secretes ACTH. Cushing’s disease represents approximately 70% to 80% of patients withendogenous Cushing’s syndrome. Other causes of endogenous ACTH-dependent Cushing’s syndrome include extrapituitarytumors producing ACTH, or ectopic ACTH or CRH syndrome. The source of ectopic ACTH/CRH secretion is most oftensmall‑cell carcinoma of the lung or bronchial carcinoid tumors, but can also arise with almost any endocrine tumor frommany different organs. In a smaller number of cases, approximately 20%, endogenous Cushing’s syndrome can beACTH‑independent, resulting from excess secretion of cortisol by unilateral adrenocortical tumors, either benign ormalignant, or by non‑malignant enlargement of the adrenal glands.In patients with endogenous Cushing’s syndrome, the normal feedback mechanism of thehypothalamic‑pituitary‑adrenal axis is disrupted as a result of a tumor secreting ACTH, CRH or cortisol. This causes chronicexposure to high circulating cortisol levels that give rise to the clinical state of Cushing’s syndrome. The most common signsand symptoms include: weight gain, especially in the upper body with a rounded face (“moon face”) and49 Table of Contentsextra fat on the upper back and above the collarbones; high blood sugar or diabetes mellitus; high blood pressure orhypertension; thin bones or osteoporosis; muscle loss or sarcopenia and weakness; thin, fragile skin that bruises easily;purple‑red stretch marks called striae, usually over the abdomen and under the arms; depression and difficulty thinkingclearly; too much facial hair, or hirsutism, usually noticed only in women; irregular or absent menstrual periods andinfertility; reduced sex drive or libido; and in children, poor height growth.An estimated 25,000 patients in the United States and 40,000 patients in Europe are diagnosed with endogenousCushing’s syndrome. When first diagnosed, patients are most commonly adults aged 20 to 50 and five times more oftenwomen than men. However, endogenous Cushing’s syndrome is believed to be underdiagnosed due to lack of diseaserecognition, which often leads to a delay in diagnosis of six years on average. Endogenous Cushing’s syndrome patients arebelieved to have a mortality risk up to five times that of the age-and-gender-matched general population, with cardiovasculardisease, venous thrombosis and infections being the primary causes of death.Current Treatment Landscape and Limitations on Current Treatment OptionsTreatment of endogenous Cushing’s syndrome varies depending on the cause of the disease. For patients withCushing’s disease, representing the majority of patients with endogenous Cushing’s syndrome, initial treatment is almostalways the attempted surgical removal of the pituitary tumor. In anticipation of surgery and when surgery is not effective ornot feasible, drug or radiation therapy, or both, is used to suppress excessive cortisol production and the accompanyingclinical symptoms.A typical approach of drug therapy is to inhibit cortisol biosynthesis through the oral administration of an inhibitorof enzymes of adrenal cortisol synthesis. Ketoconazole is the most widely used drug therapy for endogenous Cushing’ssyndrome. Although approved in the European Union for this indication, ketoconazole is not approved for this indication inthe United States. The percentage of endogenous Cushing’s syndrome patients treated with ketoconazole monotherapy whoachieve normalized levels of cortisol, assessed by measuring urinary free cortisol (“UFC”) has been reported fromretrospective, uncontrolled studies, with varying definitions of normalization, to between 33% and 100%. Data from a recentretrospective study of 200 patients in 14 French centers solely treated with ketoconazole for endogenous Cushing’ssyndrome between 1995 and 2012 suggested that ketoconazole controlled cortisol in approximately 50% of patients andlikewise improved clinical symptoms. Also, beneficial effects of oral ketoconazole on clinical symptoms and signs that drivethe morbidity and mortality of endogenous Cushing’s syndrome have been reported, such as reduction in high bloodpressure, improvement of diabetes, and normalization of hypokalemia, or low potassium blood levels. However, a significantproportion of patients treated with ketoconazole experience tolerability issues and, in some cases, liver injury (orhepatotoxicity). As a result of the hepatotoxicity risk the FDA has issued a boxed warning to prescribers concerning the useof ketoconazole to treat fungal infections, the only approved indication for ketoconazole in the United States. Althoughelevations in liver enzymes associated with ketoconazole are generally mild to moderate and reversible upon cessation ofdrug, in rare cases, severe hepatotoxicity may occur (one in every 10,000 to 15,000 patients). In extremely rare cases,ketoconazole-related liver injury may be irreversible and result in death or require liver transplantation. In July 2013, theCHMP recommended that ketoconazole be withdrawn for use as an antifungal agent in the European Union. The EMAadopted the CHMP recommendation in August 2013 and the recommendation was subsequently confirmed by the EuropeanCommission. In September 2014, HRA Pharma received a recommendation of approval from the EMA of ketoconazole forthe treatment of endogenous Cushing’s syndrome, based on the well‑established use of ketoconazole in medical practice aswell as documentation in scientific literature.An alternative approach to treatment of Cushing’s syndrome is the use of drugs that target pituitary tumors thatproduce ACTH. This approach is only useful for those patients whose endogenous Cushing’s syndrome is caused by apituitary tumor, or Cushing’s disease. Among Cushing’s disease patients, the dopamine agonist cabergoline, which is notapproved for use in Cushing’s disease in the United States, has been shown to achieve normalization of UFC levels in about30% of patients. The SSA pasireotide, which is marketed as Signifor for the treatment of Cushing’s disease in the UnitedStates, has shown normalization of UFC levels in 15% of patients at a 600 µg twice-daily dose and in 26% of patients at a900 µg twice-daily dose. Certain SSAs, including Signifor, are known to have undesirable side effects on glucosemetabolism. Forty percent of patients with Cushing’s disease treated with Signifor in its Phase 3 clinical trial50 Table of Contentsreported the occurrence of hyperglycemia‑related adverse events, and in the cohort receiving Signifor 900 µg twice-daily,HbA1c increased from 5.8% at baseline to 7.3% at Month 6.Another alternative, Korlym, or mifepristone, works by inhibiting the action of cortisol at the cortisol-receptor level,but does not lower cortisol levels in the blood, which actually tend to increase during therapy. As a result of this mechanismof action, it is not possible to monitor response by measuring UFC levels, which is the standard way clinicians monitor 24-hour blood cortisol for physicians who treat endogenous Cushing’s syndrome. Korlym has been approved in the UnitedStates to control hyperglycemia secondary to hypercortisolism in patients with endogenous Cushing’s syndrome. Korlym iscontra‑indicated in pregnant women and in women with a history of unexplained vaginal bleeding, as its side effects includetermination of pregnancy, endometrial thickening and vaginal bleeding.We believe that the efficacy limitations and safety concerns associated with currently available drug therapies forendogenous Cushing’s syndrome are an important reason why a significant unmet medical need exists among endogenousCushing’s syndrome patients with persistent or recurrent disease post-surgery. In a survey we commissioned in 2014 of 89U.S. physicians treating patients with Cushing’s syndrome, when asked, “Of your patients on medication to manage cortisollevels, what percentage are well controlled?”, the physicians estimated that only approximately 37% of such patients werewell controlled. Thus, we believe that our potential addressable market for Recorlev would be the estimated one‑third of alldiagnosed endogenous Cushing’s syndrome patients that at any time are eligible for drug therapy, a figure that representspatients anticipating surgery, for whom surgery or radiation is not feasible, is contraindicated or has been unsuccessful. Thisunmet need may also be impacted by what we believe to be the current lack of disease awareness among physicians andpatients, resulting in a relatively low rate of diagnosis.Our Solution—RecorlevWe believe that Recorlev has the potential to become a new standard of care for the drug therapy of endogenousCushing’s syndrome because it may provide a favorable efficacy, safety and tolerability profile compared to current drugtherapies, including ketoconazole, the most commonly used drug therapy for the treatment of endogenous Cushing’ssyndrome. We believe Recorlev, based on its similar mechanism of action to that of ketoconazole, may reduce UFC andblood pressure, in contrast to Korlym, and may have an anti‑hyperglycemic effect, in contrast to Signifor. In addition, webelieve Recorlev may have an improved safety profile, compared with that of ketoconazole.Recorlev, like ketoconazole, is a cortisol synthesis inhibitor that inhibits the cortisol synthesis pathway at multiplepoints. The following graphic illustrates the cortisol synthesis pathway: 51 Table of ContentsOur preclinical and pharmacokinetic data suggest that Recorlev might have an efficacy profile at least as favorableas ketoconazole and might also confer less risk of liver injury:·In in vitro studies, Recorlev was found to have higher potency than ketoconazole and itsmirror‑image enantiomer, 2R,4S‑ketoconazole, in inhibiting the key enzymes in cortisol synthesis (CYP11B1,CYP17, and CYP 21). Thus, we believe Recorlev may have the same or higher efficacy compared toketoconazole at lower dosages, which may in turn reduce typical drug exposure and potentially contribute toimproved safety and tolerability.·The pharmacokinetics of the enantiomers also suggest potentially a potentially larger therapeutic index ofRecorlev relative to ketoconazole. The two enantiomers found within ketoconazole are present in equalamounts, but in a Phase 1 clinical trial in healthy subjects, it was observed that administration of ketoconazoleresulted in integrated blood concentrations (i.e., exposure) of the single enantiomer, 2S,4R‑ketoconazole (i.e.,Recorlev) that exceeded those of the other enantiomer, 2R,4S‑ketoconazole, by approximately three times. Thisobservation suggests that t 2R,4S‑ketoconazole is extracted by the liver to a greater extent than the other singleenantiomer, 2S,4R‑ketoconazole (i.e., Recorlev), and may therefore contribute more than Recorlev to theobserved liver toxicity of ketoconazole.·Compared with racemic ketoconazole, it was observed in in vitro studies that Recorlev is less potent than theother enantiomer (its antipode) in inhibiting the activity of CYP7A. CYP7A is the first and rate‑limiting enzymefor production of bile acids in the liver. While a role of CYP7A in liver injury is not established, this findingsuggests a possible differential effect of the ketoconazole enantiomers on metabolic and detoxifying enzymesin the liver contributing to reduced hepatotoxicity potential of Recorlev.Previously, levoketoconazole (then called DIO-902) was studied clinically for the treatment of type 2 diabetes.DiObex, our licensee from 2004 to 2008, initiated five clinical trials to investigate the use of levoketoconazole for type 2diabetes. In December 2005, prior to the initiation of the first clinical trial by DiObex, the FDA placed a clinical hold onlevoketoconazole relating to a safety concern for use of a dosage above 600 mg/day. DiObex modified the clinical trialprotocol to limit the highest dose in Phase 2 to 600 mg/day, and the clinical hold was lifted by the FDA in February 2006. Ina Phase 2 clinical trial of type 2 diabetes patients, levoketoconazole demonstrated a significant dose response to reductemean blood concentration levels of C‑reactive protein (“CRP”), whereas for ketoconazole, an increase in CRP wasobserved. CRP tends to increase in the presence of inflammation. Thus, we believe that Recorlev may be associated with adecrease in inflammatory processes compared to ketoconazole. Recorlev, with the same mechanism of action as ketoconazoleto reduce blood cortisol, may also have beneficial effects on cardiovascular risk factors including weight loss, reduction inblood sugar, lowering of cholesterol and reduction in blood pressure. Cardiovascular disease is the leading cause of excessmortality in endogenous Cushing’s syndrome.Clinical and Preclinical Development of RecorlevIn the United States, Recorlev is considered a new molecular entity (“NME”). Upon completion of the clinicaldevelopment program, we intend to file for marketing authorizations in the United States and elsewhere. In the United States,a NDA, which is a prerequisite to marketing authorization, can be submitted under one of a number of approval paths definedin the Federal Food, Drug, and Cosmetic Act. Following consultations with the FDA, we determined that the 505(b)(2)approval pathway, which permits an NDA applicant to rely on data from studies that were not conducted by or for theapplicant and for which the applicant has not obtained a right of reference, is the appropriate pathway for a RecorlevNDA. Because NDA approval can rely in part on data already accepted by the FDA or otherwise publicly available, anabbreviated and reduced development program may be possible. In the case of Recorlev, we intend to rely in our NDA onpublished literature and FDA’s prior findings concerning the safety and/or effectiveness of ketoconazole. A similarmarketing authorization path is available in most of the rest of the world, and we anticipate that the studies supporting U.S.approval will likewise support approvals to market Recorlev elsewhere, including in the European Union. The FDA hasacknowledged that no additional preclinical investigations will be required for Recorlev prior to an NDA filing. The EMA’sCommittee for Medical Products for Human Use (“CHMP”), has requested a study of reproductive toxicity that may becompleted prior to filing for marketing authorization in Europe, pending further discussions.52 Table of ContentsWe are currently conducting SONICS, a pivotal, multinational Phase 3 clinical trial for Recorlev investigating thesafety and efficacy of Recorlev in subjects with endogenous Cushing’s syndrome, and anticipate that the study will be fullyenrolled in the second quarter of 2017, with top-line data for the primary efficacy analysis available in the first quarter of2018. In addition, we plan to initiate LOGICS, a second pivotal Phase 3 study of Recorlev for the treatment of endogenousCushing's syndrome. The LOGICS study will supplement the long-term efficacy and safety data from the ongoing SONICSstudy in a randomized, double-blind, placebo-controlled study that will enroll approximately 35 patients, of whichapproximately two-thirds will have completed the SONICS study. Enrollment in the LOGICS study is anticipated to beginmid-year 2017 and top-line data are expected in the third quarter of 2018.If SONICS can (1) demonstrate consistent and significant clinical benefit by meeting the primary endpoint of thetrial, specifically the responder rate measured as normalization of UFC levels and (2) show consistent improvement ofobjectively quantifiable biomarkers of endogenous Cushing’s syndrome comorbidities, such as blood glucose, blood lipids,blood pressure and weight, and improvement of other clinical signs and symptoms of endogenous Cushing’s syndrome, webelieve this would be regarded by regulators as adequate proof of efficacy in this rare disease with a high unmet medicalneed. Therefore, we consider LOGICS as a mechanism for providing independent evidence of efficacy of Recorlev, ratherthan serving as sole or primary evidence of efficacy for Recorlev in endogenous Cushing’s syndrome. Furthermore, ifsuccessful, LOGICS has the potential to provide adequate evidence of efficacy durability beyond one year of therapy in thesubset of subjects who were previously enrolled in SONICS. Finally, we believe that the combination of SONICS andLOGICS will provide an adequate demonstration of the long-term safety and tolerability of Recorlev in patients withendogenous Cushing’s syndrome. In total over 100 unique subjects with this condition will have been treated with Recorlevduring SONICS and LOGICS, and some subjects will be treated with a therapeutic dose of Recorlev for as long as 1.5 years atthe time of first NDA submission. In addition to LOGICS, we intend to initiate a long-term open-label extension study with Recorlev to capture evenlonger-term safety, tolerability and efficacy data from subjects who complete either SONICS or LOGICS and who choose tocontinue therapy with Recorlev. The open-label extension, preliminarily named OPTICS, is planned to begin enrollment inthe second half of 2017 and will continue to accrue data indefinitely, at least until the drug is first marketed. Because ourPhase 3 clinical trial will collect safety data from about 100 unique patients with endogenous Cushing’s syndrome, weexpect that we might be required by the FDA and the EMA to collect additional safety data post‑approval. Phase 3 Clinical TrialsSONICS Phase 3 Clinical TrialWe are conducting SONICS in up to 90 clinical sites in approximately 19 countries, including in the United States,Canada, the European Union and the Middle East. This clinical trial is being conducted pursuant to an IND we filed in April2013. We enrolled our first patient in the clinical trial in August 2014. Our U.S. IND for Recorlev for the treatment ofendogenous Cushing’s syndrome took effect in May 2013. We plan to recruit 90 patients and collect safety and efficacy dataover a treatment period of at least one year. If we are able to confirm a favorable safety profile of Recorlev in clinical use, weplan to discuss differentiated safety and tolerability labeling from ketoconazole with regulatory authorities.Following a screening phase, SONICS has three distinct treatment phases. During the dose titration phase, patientsstart at 150 mg twice daily dosing (300 mg total daily dose) and titrate in 150 mg increments up to a maximum 600 mg twicedaily dosing (1,200 mg total daily dose). Following the dose titration phase, once the therapeutic dose has been reached, thepatient enters the maintenance phase, during which the dose will be fixed and cannot be changed other than for safetyreasons, including loss of efficacy At the end of the six month maintenance phase, UFC levels are measured and theresponder rate, which is the primary endpoint of the clinical trial, is determined. Patients who have53 Table of Contentscompleted the maintenance phase may enter the extended evaluation phase, which we expect will provide additional safetyand efficacy data. Throughout the entire clinical trial, various measurements for safety and efficacy are taken.·The primary endpoint of the clinical trial is the proportion of subjects with response to Recorlev, defined as areduction in mean 24‑hour UFC levels to levels that are equal to or less than the upper level of normal rangefollowing six months of treatment in the maintenance phase without a dose increase.·Key secondary endpoints include the number of patients with at least a 50% decrease in UFC levels, as well aschanges in blood sugar, blood pressure, cholesterol and weight compared to baseline, and effects on clinicalsigns and symptoms of endogenous Cushing’s syndrome, quality of life measures obtained from theendogenous Cushing’s syndrome quality of life questionnaire and the severity of depression obtained from theBeck’s Depression Inventory II.·The clinical trial is also designed to investigate the pharmacokinetics of Recorlev in patients with endogenousCushing’s syndrome.Below is a diagram of the SONICS clinical trial design:If we can (1) demonstrate consistent and significant clinical benefit by meeting the primary endpoint of the trial,specifically the responder rate measured as normalization of UFC levels and (2) show consistent improvement of objectivelyquantifiable biomarkers of endogenous Cushing’s syndrome comorbidities, such as blood glucose, blood lipids, bloodpressure and weight, and improvement of other clinical signs and symptoms of endogenous Cushing’s syndrome, we believethis would be regarded by regulators as adequate proof of efficacy in this rare disease with a high unmet medical need.Several elements of the SONICS clinical trial design were informed by the clinical development pathway ofcurrently approved drug therapies in the United States and the European Union. Additionally, we incorporated advice fromthe CHMP and FDA into the design of the clinical trial. In communication we had with the FDA, they recommended use of aconcurrent control group in SONICS. However, SONICS utilizes an open‑label, single‑arm design because use of a placebocontrol in a parallel-arm monotherapy design was considered unethical or infeasible to enroll, depending on the specificcountry or clinical trial site under consideration. Studies lacking an active control group are more likely to be subject tounanticipated variability in study results that can potentially lead to flawed conclusions because they do not allow fordiscrimination of patient outcomes. As a result, even if we achieve the clinical trial’s endpoints, the FDA or other regulatoryauthorities could view our study results as potentially biased.LOGICS Phase 3 Clinical Trial Rather than alter the design of SONICS to facilitate regulatory authority requests for a concurrent control group withwhich to compare the efficacy and safety of Recorlev, we plan to initiate LOGICS, a second Phase 3 pivotal study. LOGICSwill include a concurrent comparison of Recorlev to matching placebo using a randomized, double-blind design that webelieve will be both feasible to enroll and ethical to conduct everywhere that SONICS is being conducted. LOGICS willenroll approximately 35 subjects, of which approximately two-thirds will have previously completed the SONICS study.Enrollment in the LOGICS study is anticipated to begin mid-year 2017 and top-line data are expected in the third quarter of2018. Specifics of the LOGICS design are currently under development.54 Table of ContentsClinical Trials in Type 2 DiabetesHistorically, levoketoconazole (then called DIO-902) was studied as a treatment for type 2 diabetes. An IND wasfiled in 2005 for investigation of the use of levoketoconazole in diabetes. DiObex, our licensee at the time, initiated fiveclinical trials to investigate the use of levoketoconazole for type 2 diabetes. A total of 159 subjects received at least one doseof levoketoconazole in these clinical trials, including 41 healthy subjects during Phase 1 clinical trials, and 118 patientswith type 2 diabetes during Phase 2 clinical trials. Doses of levoketoconazole were administered over the range of 200 mg to600 mg once a day, or QD, and 400 mg twice a day, or BID, for a single patient for up to 14 days, and 150 mg to 450 mg QDfor up to four months.The pharmacokinetics of levoketoconazole were studied in patients with type 2 diabetes and in normal volunteersin whom the effects of levoketoconazole on the pharmacokinetics of felodipine, a drug used to treat high blood pressure, andatorvastatin (Lipitor), a drug used to lower cholesterol, were evaluated. These drugs were chosen specifically as probes forinteraction, because they were intended to be frequently used concomitantly during treatment of type 2 diabetes. In thecompleted Phase 2a clinical trial, dose dependent reductions from baseline in cholesterol levels contained in lipoproteins, inthe form of low‑density lipoprotein-cholesterol (“LDL-chol”), and cholesterol incorporated into high‑density lipoprotein(“HDL-chol”), as well as total cholesterol were observed, but no differences in measures of glycemic control relative toplacebo were detected. A Phase 2b randomized, double-blind, placebo-controlled, study in diabetes (DIO-502) was initiatedto test doses of levoketoconazole up to 450 mg daily plus metformin as compared with atorvastatin 10 mg plus metformin incombination or placebo. Additionally, an open-label extension study (DIO-503) was started in parallel. However, in 2008, inlight of negative safety reports for other diabetes treatments such as Avandia, DiObex made the decision to voluntarilyterminate the development of levoketoconazole for the treatment of diabetes due to the perceived high regulatory andcommercial hurdles for its approval and use in type 2 diabetes and considering the emerging efficacy and safety profile oflevoketoconazole in type 2 diabetes (as described below). Thereafter, the IND was closed and DiObex terminated the twoongoing Phase 2 clinical trials. DiObex conducted the following five clinical trials with Recorlev in type 2 diabetes pursuantto an IND filed by them in November 2005:Clinical TrialNumber Clinical Trial Description SubjectsEnrolled Year andStatus Location DoseDIO‑501 Phase 1/2a, Trial of Levoketoconazole orPlacebo in Patients with Type 2 DiabetesMellitus 37 2006/2007Completed. Studyreport issued. United States 200‑600 mg QD;400 mg BIDDIO‑502 Phase 2b Trial of Levoketoconazole orPlacebo in Addition to Metformin andAtorvastatin or Atorvastatin Placebo for Type 2Diabetes Mellitus 133 2007/2008Terminated early.Study report issued. United States,Australia, NewZealand 150‑450 mg QDDIO‑503 Phase 2 Open‑Label Trial andPharmacodynamic for 24‑Week Study withLevoketoconazole in Combination withMetformin and Atorvastatin in Patients withType 2 Diabetes Mellitus 13 2007/2008Terminated early.Study report issued. United States,Australia, NewZealand 150‑450 mg QDAA34509 Phase 1 Pharmacokinetic Drug Interaction Trialof Levoketoconazole with Felodipine inHealthy Adult Volunteers Under FastingConditions 18 2006/2007Completed. Studyreport issued. United States 400 mg QDAA34510 Phase 1 Pharmacokinetic Drug Interaction Trialof Levoketoconazole and Ketoconazole withAtorvastatin in Healthy Adult VolunteersUnder Fasting Conditions 24 2006/2007Completed. Studyreport issued. United States 400 mg QD Phase 2 Clinical TrialsDIO‑501 Clinical TrialThe DIO-501 clinical trial was a double‑blind, placebo‑controlled, parallel‑group clinical trial conducted in patientsaged 18 to 70 with a diagnosis of type 2 diabetes. A total of 35 patients were treated: 21 with levoketoconazole55 Table of Contents(10 at 200 mg QD, six at 400 mg QD, four at 600 mg QD and one at 400 mg BID); eight with ketoconazole (400 mg QD); andsix with placebo. Trial drugs were administered for 14 days.In this clinical trial, the mean 12‑hour plasma cortisol area under the concentration‑time curve, or AUC, levels weremodestly reduced in the levoketoconazole treatment groups at day 15 compared to baseline, which is consistent with theknown mechanism of action of levoketoconazole. However, counter‑regulation in diabetic patients with a normalhypothalamic pituitary adrenal axis may have limited the observed cortisol suppression. Similarly, only a small,nonsignificant effect on glycated hemoglobin (“HbA1c”), and fasting glucose levels was observed. Consistent with theknown inhibitory effect of ketoconazole on cholesterol synthesis, total cholesterol, LDL-chol, and to a lesser extent HDL-chol levels, but not triglycerides, were significantly decreased in a dose‑dependent manner by levoketoconazole. The meanchange from baseline in total cholesterol, LDL-chol and HDL-chol at a dose of 400 mg QD was similar to those observed in400 mg QD ketoconazole and higher in the 600 mg QD levoketoconazole group. Also, for the levoketoconazole treatmentgroups, there was a statistically significant dose response in the reduction in mean levels of CRP on day 15 compared withbaseline, with a p-value of 0.027. In contrast, mean levels of CRP increased in the ketoconazole‑treated group and less so inthe placebo group. CRP is an indicator of systemic inflammation, including vascular inflammation. The reduction incholesterol and CRP observed in patients with type 2 diabetes may indicate a potential beneficial effect of levoketoconazoleon cardiovascular risk factors. Notably, patients with endogenous Cushing’s syndrome tend to have elevated circulatingCRP.Plasma AUC and maximum concentration in blood (“Cmax”), increased in a non‑proportional manner over the doserange of 200 mg to 400 mg on days one and 14. Clearance values were similar for the 200 mg and 400 mg doses oflevoketoconazole, but significantly decreased at the 600 mg levoketoconazole dose, on days one and 14.Levoketoconazole was generally well‑tolerated. Headache and nausea were the most frequently reported adverseevents, some of which were considered drug‑related. There were no serious adverse events, and no clinically meaningfulchanges in hematology, blood chemistry and urinalysis were noted in any treatment group. No treatment‑related changes inliver function tests (“LFTs”), were detected.DIO‑502 and DIO‑503 Clinical TrialsThe DIO-502 clinical trial was a four‑month, double‑blind, randomized, placebo‑controlled, dose‑ranging study oflevoketoconazole with metformin and atorvastatin that enrolled 133 of a planned 200 patients with type 2 diabetes,consisting of males and females between the ages of 18 and 70. Enrolled subjects were already receiving metformin treatmentwith a minimum daily dose of 500 mg and had an HbA1c level of 7% to 10%. Additionally, all patients were treated with 10mg atorvastatin or its placebo to evaluate the effect of levoketoconazole on lipid profiles given cholesterol‑lowering drugs.Thus, patients were randomized into eight separate arms in the clinical trial: placebo or levoketoconazole at 150 mg; 300mg; and 450 mg with either atorvastatin 10 mg or atorvastatin placebo; all received metformin concomitantly.The DIO-503 clinical trial was an open‑label, extension to DIO‑502 to evaluate safety, tolerability andpharmacodynamics after 24 weeks of dosing with levoketoconazole in combination with metformin, with and withoutatorvastatin in subjects with type 2 diabetes.DiObex terminated these clinical trials prior to their planned completion milestones. At the time of trial termination,a total of 133 patients were enrolled in the DIO‑502 and DIO‑503 trials, and 129 patients in total had been treated with astudy drug, of which 97 patients received at least one dose of levoketoconazole. The investigators subsequently elected todefer efficacy and pharmacokinetics inferences based on incomplete datasets. The frequency of adverse events reported wasgenerally similar across treatment arms. Diarrhea was the most frequently reported adverse event overall with administrationof levoketoconazole. No serious adverse events were reported in the terminated studies.A safety signal of elevated liver enzymes was identified in 10 of the 129 treated patients in the DIO‑502 andDIO‑503 trials. No case of Hy’s law (i.e., an increase of liver transaminases at or above three times the upper level of normalvalues; increase in total bilirubin at or above two times the upper level of the normal value; no or little sign of cholestasis;and absence of other reasons for liver injury, such as viral hepatitis) was observed. An observation of Hy’s Law would haveindicated a high risk of potentially serious drug-related hepatotoxicity. Three of the treated patients56 Table of Contentswere withdrawn from the clinical trials as required in the safety monitoring plan. In these three patients, LFT levels returnedto normal after study drug was discontinued. In addition, three other patients had modest elevations in LFT levels. Whilethese levels did not require termination by the trial protocol, the investigators elected to terminate these patients from theclinical trial. LFTs in these patients also returned to normal after the study drug was discontinued. Four additional patientsrequired close monitoring per the protocol, and had resolution of their LFT abnormalities while on the study drug. The firstcase of elevated liver enzymes occurred in a patient who admitted to excessive alcohol consumption. The remaining casesdeveloped over the following three months. An independent external safety review committee recommended continuation ofthe studies with no modifications.Due to the design of these clinical trials, the independent data safety monitoring board for the trials stated that it wasimpossible to interpret which of the two drugs, levoketoconazole or atorvastatin, was primarily associated with the side effectprofile observed (i.e. LFT abnormalities) in these trials. A more detailed analysis of the liver transaminase elevations in thisclinical trial by an expert panel showed that there was no correlation between the dose of levoketoconazole and abnormalliver transaminases.Phase 1 Clinical TrialsAA34509 Clinical TrialThe AA34509 clinical trial was designed primarily to evaluate the effect of levoketoconazole on thepharmacokinetics of concurrently administered felodipine. Healthy volunteers were administered 400 mg oflevoketoconazole or placebo QD for eight days. On the fifth day of the trial, subjects received a single 5 mg dose offelodipine. Beginning on day five, pharmacokinetics of levoketoconazole were monitored for 24 hours, andpharmacokinetics of felodipine were monitored for 72 hours. The trial was a cross‑over trial involving 18 subjects, 16 ofwhom completed the trial.AA34510 Clinical TrialThis clinical trial was designed primarily to evaluate the effect of concomitant administration of levoketoconazoleor ketoconazole on the pharmacokinetics of atorvastatin. Healthy volunteers were administered 400 mg of levoketoconazole,400 mg of ketoconazole or placebo daily for seven days. On day five, all subjects received a single 80 mg dose ofatorvastatin. After administration of the racemate, ketoconazole, pharmacokinetics of the two single enantiomers2R,4S‑ketoconazole and 2S,4R‑ketoconazole, were evaluated for 24 hours on day five using a chiral bioanalytical method,to distinguish the enantiomers in plasma (blood). Pharmacokinetics of atorvastatin were evaluated for 60 hours starting at thetime of administration on day five. The trial was a cross‑over trial involving 24 subjects, all of whom completed the clinicaltrial.Key Findings from the Clinical Trials of Recorlev (levoketoconazole)Phase 2 Efficacy and Safety Trials in Diabetic Patients:·AUC and Cmax values were approximately 50% higher with levoketoconazole in comparison withketoconazole at the same dose of 400 mg. All pharmacokinetic parameters were highly variable, in the sensethat they differed within and among subjects.·Following administration of ketoconazole, plasma levels (AUC or Cmax) of levoketoconazole (2S,4R-ketoconazole) were approximately three times those of the other enantiomer, 2R,4S‑ketoconazole. Possibleexplanations could be reduced absorption of 2R,4S-ketoconazole or decreased uptake and metabolism oflevoketoconazole in the liver compared to the other enantiomer.·Levoketoconazole produced a decrease in some lipid measures, or blood fat, including reduced totalcholesterol, LDL-chol and HDL-chol.·A significant dose‑related effect of levoketoconazole for reduction of CRP was observed.57 Table of Contents·Trends for reductions in serum cortisol, measured as AUC (0-12 hours), were found after 14 days of treatmentwith levoketoconazole in diabetic patients.·In the DIO‑501 clinical trial, headache and nausea were the most frequently reported adverse events. Notreatment related changes in LFTs were detected. In the DIO‑502/503 clinical trials, diarrhea was the mostfrequently reported adverse event.·LFTs were elevated in the DIO‑502/503 clinical trials in 10 out of the 129 patients treated with either thecombination of levoketoconazole and atorvastatin or levoketoconazole alone, in each case co‑administeredwith metformin. The independent data safety monitoring board for the trial stated that it was impossible tointerpret which of drugs was primarily associated with the side effect profile observed in the trial.Phase 1 Drug Interaction Clinical Trials in Normal Volunteers:·The AUC and the Cmax of felodipine were 10‑fold higher when taken with levoketoconazole compared withfelodipine alone.·The AUC of atorvastatin was increased by 50% when administered with levoketoconazole compared withatorvastatin alone.·A small, but statistically significant decrease of serum cortisol (AUC zero to six hours) was found forlevoketoconazole compared with placebo and ketoconazole.·Headache, nausea, dizziness and back pain were reported as the most frequent adverse events across the twostudies.·In the drug interaction study with atorvastatin, two subjects had elevated LFT values. The subjects had receivedlevoketoconazole plus atorvastatin or ketoconazole plus atorvastatin in the immediately previous study periodsin this cross‑over study.Veldoreotide—Phase 2 Product Candidate for the Treatment of AcromegalyOverviewIn June 2015, we acquired veldoreotide (formerly called COR-005, and previously DG3173), a novel SSA that hasthe potential to provide a new and differentiated treatment option for patients with acromegaly, from AspireoPharmaceuticals Ltd. We are developing veldoreotide for the treatment of acromegaly. We acquired veldoreotide as part ofour strategy to build our rare endocrine franchise. Acromegaly is a rare endocrine disorder that most commonly results from abenign tumor of the pituitary gland, leading to excess production of growth hormone (“GH”) and Insulin-like growth factor 1(“IGF‑1”). The treatment goal is the normalization of GH and IGF‑1, which is the main cause of the detrimental clinical signsand symptoms of acromegaly.Veldoreotide is a novel SSA in Phase 2 clinical development for the treatment of acromegaly patients who have notadequately responded to surgery, or acromegaly patients for whom surgery is not appropriate. SSAs are peptides that areadministered as deep subcutaneous or intramuscular injections, typically as long-acting formulations for monthlyinjections. They are the most commonly used drug therapy for the treatment of acromegaly and work by binding to specificsubtypes of SSTRs that are expressed by the tumor. Binding of SSAs to these SSTRs leads to the beneficial inhibition of GHsecretion, but can also result in the unwanted inhibition of secretion of other endocrine hormones such as insulin andglucagon in the pancreas and elsewhere. Like other SSAs, veldoreotide is a peptide that we are developing for subcutaneousinjection. Based on the differentiated activation pattern of veldoreotide upon binding to SSTR subtypes and preclinical andclinical data, we believe that veldoreotide may offer an improved efficacy and safety profile relative to existing drugtherapies for acromegaly. In the five clinical studies completed to date in healthy subjects and patients with acromegalyoutside the United States, a beneficial reduction of GH was observed, and, when compared with immediate releasesubcutaneous octreotide, there was less blunting of insulin in response to a mixed meal or oral glucose load. In addition to adose ranging clinical trial, we anticipate that our clinical program will include at least one multinational pivotal clinical trialfor registration, comparing veldoreotide to established treatments or placebo, including58 Table of Contentsat least six months of controlled treatment to evaluate efficacy and at least one year of observation to evaluatesafety. Veldoreotide has been granted orphan drug designation by the FDA and the EMA. We have completed the screeningof potential long-acting release (LAR) technologies for veldoreotide and have selected a formulation based upon PLGAmicrospheres. PLGA is a well-known polymer, which has been widely applied in LAR formulations due to itsbiocompatibility, biodegradability, and favorable release kinetics. We are in the process of securing intellectual propertyprotection for the lead formulation, which could, if granted by the relevant patent authorities, extend the period of marketingexclusivity for the finished drug product. Additional veldoreotide development activities will be sequenced to ensure thatthe Company’s existing cash resources are sufficient to fund planned operations at least through 2018. Overview of AcromegalyAcromegaly is a rare endocrine disorder that most commonly results from a benign tumor of the pituitary gland, oradenoma, leading to excess production of GH and IGF‑1, key regulators of growth and metabolism. High levels of GHover‑activate GH receptors resulting in excess IGF‑1 in patients with acromegaly. A common criterion for the successfultreatment of acromegaly is normalization of IGF‑1 levels, since reduction of excess IGF‑1 correlates closely with relief ofclinical symptoms.The progression of acromegaly is typically slow, and acromegaly often is not clinically diagnosed for 10 years ormore. As the disease advances, patients typically exhibit abnormal growth throughout the body. Acromegaly mostcommonly affects middle‑aged patients with the mean age of onset being 40 to 45 years. In adults, the condition results inexpansion of the circumference of and increased density of bones and surrounding soft tissues as well as cartilage, causingpain and altered appearance. This altered appearance is most apparent in the head and face, but also impacts the entire body.Patients may experience enlargement of visceral organs and cardiovascular disease. Upper airway obstruction with sleepapnea occurs in approximately 40% to 50% of patients, and is associated with both soft tissue laryngeal airway obstructionand central sleep dysfunction. Patients may also experience metabolic disruptions such as insulin resistance and diabetes,which is estimated to develop in 10% to 15% of patients. In addition, some patients with large tumors experience symptomscaused by the tumor itself, including headaches, vision problems, impotence, low sex drive and changes in the menstrualcycle. These problems, if left untreated, lead to disfigurement, disability, and ultimately premature death.We estimate the acromegaly drug therapy market in 2014, including octreotide and lanreotide for acromegaly andtotal pegvisomant, was approximately $990 million worldwide. Based on recent publications, we estimate the diagnosedprevalence of acromegaly to be approximately 24,000 in the United States, and approximately 43,000 in the EuropeanUnion. Prevalence estimates vary considerably and it is believed that acromegaly is underdiagnosed. Estimates of themortality rate in patients with acromegaly varies, with published estimates reporting values as high as 2.7 times normal.Current Treatment Landscape and Limitations on Current Treatment OptionsInitial treatment for acromegaly is usually surgery with or without radiation therapy. An estimated 80% of patientsare eligible for surgery. The initial surgical cure rate is estimated at approximately 80% to 90% for patients withmicroadenomas, which are tumors less than 10 mm in diameter, and less than 50% for patients with macroadenomas, whichare tumors greater than 10 mm in diameter. Three percent to 10% of patients will experience a recurrence in the yearsfollowing an initially successful surgery. An estimated 40% to 50% of acromegaly patients will be prescribed drug therapy,including those for whom surgery is infeasible, is contraindicated or has been unsuccessful. The goal of drug therapy isprimarily to normalize IGF‑1 levels and GH levels. Currently, SSAs are the most commonly used drug therapy for thetreatment of patients with acromegaly. Less than one‑half of treated patients do not adequately respond to SSAs with fullIGF‑1 normalization and need alternative or adjunctive drug therapies.Somatostatin is a naturally occurring cyclic peptide. Somatostatin inhibits the secretion of a broad array ofhormones secreted by the pituitary gland, the pancreas and the gastrointestinal tract, or the GI tract, including GH, insulinand glucagon. It also modulates the rate of gastric emptying, the flow of bile from the gallbladder and intestinal blood flow,and inhibits the growth of normal and tumor cells. These functions are mediated primarily by the binding of59 Table of Contentssomatostatin to a family of five SSTRs. There is considerable overlap between activation of these different receptors and theireffects on biological functions. GH secretion is inhibited by activation of some of these receptors.Pituitary adenomas express various patterns of SSTRs depending on whether they produce primarily GH, ACTH orother pituitary hormones. This excessive production leads to acromegaly, Cushing’s disease or other diseases, respectively.SSAs are structurally similar to somatostatins and have a therapeutic effect in pituitary adenomas, since they bind to theSSTRs on these tumors and inhibit secretion of hormones such as GH or ACTH. Currently approved SSAs used to treatacromegaly are: octreotide which is available in two formulations, an immediate-release form that is typically injected threetimes a day (“TID”), subcutaneously (Sandostatin), and a second that is a long‑acting intramuscular depot for monthlyinjection (Sandostatin LAR); lanreotide (Somatuline), a slow release or autogel formulation for deep subcutaneous injectiononce a month; and pasireotide available as a long‑acting intramuscular depot for monthly injection (Signifor LAR).There is a significant unmet need in the treatment of acromegaly. Although long‑acting SSAs are the mostcommonly used drugs, they have several limitations, including:·Variable efficacy: Estimates of responder rate vary significantly by study design, but the proportion of patientswho are effectively managed on SSA monotherapies is now believed to be substantially less than 50%.·Disruption of glucose metabolism: SSAs can inhibit insulin and glucagon secretion, among other hormones,potentially leading to an exacerbation of glucose control issues already experienced by some acromegalypatients. Clinical trials with all approved SSAs for acromegaly showed increased rates of hyperglycemia andhypoglycemia, and pasireotide also showed an increased rate of diabetes.·Tolerability issues due to gastrointestinal side effects: Up to one‑third of patients experience gastrointestinalside effects, which can often be transient, but sometimes may require the adjustment of dosing or choice of drug.Up to 62% of patients have gallbladder complications, such as gallstones or sludge in the gallbladder.Physicians we surveyed estimate that approximately 38% of their SSA patients take medication to preventgallstones and approximately 20% have had gallbladder surgery in the last five years.·Convenience: All of the long-acting SSA formulations in the United States require administration by a healthcare professional, and often necessitate monthly office visits to receive injections.While long‑term monthly administration controls GH hypersecretion in up two‑thirds of treated patients, mostpatients do not respond to SSAs with full IGF‑1 normalization and need to move to other drug therapies, which are used asalternatives to or in combination with SSAs. These additional drug therapies also aim to reduce IGF‑1. Somavert(pegvisomant) is a human GH receptor antagonist that binds to the GH receptor, but does not activate the mediators leadingto IGF‑1 production and secretion, thereby acting as a functional GH receptor antagonist, or blocker. The resulting clinicaleffect is a dose‑dependent inhibition of IGF‑1. However, because it is administered as a subcutaneous injection on a dailybasis, we believe patient acceptance and compliance may be reduced. Dopamine receptor agonists such as cabergoline alsoinhibit GH secretion by pituitary adenomas expressing the dopamine receptor, which leads to a moderate inhibition of IGF‑1.This class of drugs is not approved by the FDA for the treatment of acromegaly.A number of products are currently in development for the treatment of acromegaly that may potentially competeagainst veldoreotide. The majority of compounds in development for the treatment of acromegaly are reformulations ofoctreotide acetate that potentially offer improved convenience to patients and physicians. These compounds are unlikely toaddress the market’s key unmet need for drugs with improved efficacy and safety profile.Our Solution— Veldoreotide, a Novel Somatostatin AnalogVeldoreotide is a novel multi‑receptor targeted SSA in Phase 2 clinical development for the treatment ofacromegaly. In contrast to approved SSAs, veldoreotide activates a different subset of SSTRs. Like pasireotide, it activatesSSTR2 and SSTR5. However, in contrast to pasireotide, it possesses a similar affinity for SSTR2 than SSTR5.60 Table of ContentsVeldoreotide is also the only SSA with a high affinity for SSTR4. veldoreotide does not bind to SSTR3 or the opiate receptorat pharmacological concentrations. While the functional consequences of the binding of SSAs to the opiate receptor are notfully understood, it has been suggested as a mechanism contributing to inhibition of insulin secretion by SSAs and may alsoinfluence their effect on gastrointestinal motility. In vitro data suggest that a higher number of adenomas are a target for GHinhibition by veldoreotide as compared to octreotide, which is referred to as a single receptor targeted SSA that binds andactivates predominantly via SSTR2, potentially resulting in an increased responder rate. Preclinical data from animal studies,and clinical data in healthy subjects and patients with acromegaly, showed that insulin secretion was less inhibited,potentially resulting in reduced side effects on blood glucose and an improved safety and tolerability profile. Preclinical datafurther suggest a reduced effect on gallbladder motility, or flow from the gallbladder.In four clinical trials with single subcutaneous injections or infusion and in one six‑day clinical trial, all of whichwere conducted with an immediate release formulation of veldoreotide in healthy subjects or patients with acromegaly,veldoreotide was observed to have a tolerability profile comparable to that of octreotide. However, unlike octreotide,subjects treated with veldoreotide were observed to have less or no reduction in peak insulin secretion after a meal. Webelieve these preliminary clinical findings corroborate the profile of veldoreotide observed in preclinical studies, whichsuggested inhibition of GH secretion without detrimental effects on post‑meal insulin or glucose metabolism. These studieswere too short to assess the effect on flow from the gallbladder. These preliminary findings contrast favorably with thewell‑described insulin and glucose perturbations caused by octreotide, lanreotide and pasireotide, and we intend to conductadditional clinical trials to evaluate the clinical profile of veldoreotide and its differentiation from existing SSAs. With thepotentially superior efficacy, safety and tolerability profile suggested by preclinical studies and early clinical trials, webelieve veldoreotide has the potential to become the standard‑of‑care SSA, with distinct therapeutic advantages relative tocurrently approved SSAs as treatment of acromegaly.Completed Clinical TrialsFive clinical trials of veldoreotide have been performed to date: three in healthy male volunteers and two in patientswith acromegaly, all of which employed an immediate release, short‑acting formulation injected subcutaneously. At the timethe clinical trials described below were conducted, veldoreotide was named DG3173. These trials were conducted by AspireoPharmaceuticals Ltd., other than DG3173‑I‑001, which was conducted by Develogen AG.61 Table of ContentsThe following table summarizes these trials.Clinical TrialNumber Clinical Trial Descriptions SubjectsEnrolled Year and Status Location DoseDG3173‑II‑02 Phase 2 The Effect ofSubcutaneous Infusion of ThreeDoses of Veldoreotide onGrowth Hormone Levels inUntreated Acromegaly Patients 8 2013/2014 Completed.Bioanalytical reportissued. Ukraine 920‑5520 µgcontinuousinfusion over23 hoursDG3173‑II‑01 Phase 2 Trial of the Effect ofVeldoreotide and 300 µgOctreotide on Human GrowthHormone Levels in UntreatedAcromegaly Patients 20 2012 Completed. Studyreport issued. Ukraine 300‑1800 µg QDDG3173‑I‑003 Phase 1 Placebo‑Controlled,Phase 1 Trial to Assess thePharmacodynamics Effect onGlucose Metabolism of SingleDoses Compared toVeldoreotide Octreotide andPlacebo in Healthy MaleSubjects 8 2013 Completed. Studyreport issued. Switzerland 300‑1800 µg QDDG3173‑I‑002 Phase 1 Trial to Compare theSafety and PharmacologicActivity of Repeated Doses ofVeldoreotide andVeldoreotide Plus Octreotidewith Octreotide and Placebo andEstablish Their PharmacokineticInteraction in Healthy MaleSubjects 42 2012/2013 Completed.Study report issued. Switzerland 100‑1800 µg TIDDG3173‑I‑001 Phase 1 Double‑Blind Trial toInvestigate Safety, Tolerabilityand Pharmacokinetics of SingleEscalating Dosing ofVeldoreotide in Healthy MaleSubjects 72 2008 Completed. Studyreport issued. Germany 10‑2000 µg QD The clinical trials involved 122 healthy subjects in the Phase 1 trials and 28 patients with acromegaly in the Phase 2clinical trials. No serious adverse events were observed, and mostly mild adverse events typical for SSAs such as injectionsite reactions and gastrointestinal side effects were reported. There was no evidence that veldoreotide adversely affects theliver, kidneys or other organ systems, including the cardiovascular system. Data from the multiple ascending dose clinicaltrial in healthy subjects (Study I‑002) showed inhibition of GH comparable to octreotide, but no or less inhibition of insulinsecretion and less effect on glucose levels. The single ascending dose trial in patients with acromegaly (Study II‑01) and thecontinuous infusion study in patients with acromegaly (Study II‑02) confirmed that veldoreotide also suppresses excessivelyproduced growth hormone to a similar maximal extent as octreotide.62 Table of ContentsPhase 2 Clinical TrialsDG3173‑II‑02 Clinical TrialThis clinical trial was an open‑label, crossover, active‑ and placebo‑controlled, randomized dose‑ranging clinicaltrial in eight male or female acromegaly patients aged 31 to 54 years that was intended to assess the effect on GH levels of23-hour constant subcutaneous infusions of different doses of veldoreotide or placebo and three subcutaneous injections of astandard dose of octreotide, administered over the same timeframe. Postprandial insulin and glucose were also assessed over a4-hour period following a standardized midday meal on the second study day. Pharmacokinetics, safety, and tolerability werealso assessed.Veldoreotide at doses of 920 µg, 2760 µg, and 5520 µg per 23 hours were infused in a random visit sequence at arate of 0.04 mg, 0.12 mg, and 0.24 mg per hour spaced one week apart. The placebo, saline, was always infused one weekprior to veldoreotide, and octreotide at a dose of 300 µg was injected TID one week after the last veldoreotide dose. Patientshad not received any specific treatment for acromegaly in the 12 months prior to the clinical trial and had to have bloodIGF‑1 concentration greater than or equal to 1.2 times the upper limit of normal reference range adjusted for age plus randomblood GH greater than or equal to 5 µg/L in the 12 months prior to the clinical trial and increased values at screening.There was a decrease in AUC11-23h for serum GH following veldoreotide treatment compared to baseline (placebo).The decrease in AUC11-23h was greater with octreotide than with placebo and the lower and middle doses of DG3173. Thereduction in GH of the 5520 µg dose of veldoreotide closely approached that of octreotide (mean percentage reduction 67%vs. 73%). Six of 8 patients receiving the mid or high dose of veldoreotide achieved at least a 50% reduction in GH AUC11-23h versus placebo, compared with 7 of 8 achieving the same threshold reduction during octreotide injections.Prior to eating a standardized meal begun 19 hours after the treatments were started, glucose levels were reduced ascompared to pre-dose baseline glucose values among placebo and the two lower veldoreotide treatment groups (medianpercent reductions of 12%, 8.8%, 4.2%, respectively), whereas they were similar to pre-dose values in the highestveldoreotide group (median increase 3.4%) and had increased in the octreotide group above baseline (median increase 24%).Following the standardized meal, serum glucose increased to a similar extent in placebo and the two lower veldoreotide dosegroups (median percent change 27% to 33% above pre-dose baseline), whereas the maximal excursions were somewhathigher in the highest veldoreotide dose group (median 46% above pre-dose) and in the octreotide group (median 63% abovepre-dose). Pre-dose insulin values were reduced by all treatments prior to receiving the standardized meal, placebo (medianreduction of 25%) less so than the active drugs (median reductions of 49% to 74%), presumably reflecting improved glucosecontrol among active treatments. Insulin excursions following the meal were highly variable and no apparent effect oftreatment was readily discernible.There were no serious adverse events or adverse events leading to withdrawal during the study; all adverse eventswere mild or moderate in severity. There was no notable effect of veldoreotide dose on overall incidence of adverse events inthis small number of patients. Four events in one patient, all following octreotide treatment, were assessed as having asuspected relationship to study treatment, all other events were assessed as having no suspected relationship. The onlyadverse event reported by more than one patient was headache, reported by four patients receiving veldoreotide. There wereno trends or clinically meaningful changes over time in laboratory safety analytes, vital signs or the incidence of abnormalECGs following veldoreotide or octreotide treatment, overall or in any individual.DG3173‑II‑01 Clinical TrialThis clinical trial was an open‑label, single‑center, single‑dose, active‑controlled, cross‑over clinical trial in 20 maleor female acromegaly patients. In a fixed sequence with one week washout between treatments, untreated patients receivedoctreotide 300 µg and then each of four doses of subcutaneous veldoreotide (100 µg, 300 µg, 900 µg, 1800 µg in thatsequence).63 Table of ContentsPatients had not received any specific treatment for acromegaly in the 12 months prior to the trial and had to haveblood IGF‑1 concentration greater than or equal to 1.2 times the upper limit of normal reference range adjusted for age, plusrandom blood growth hormone greater than or equal to 5 µg/L in the six months prior to the trial. Mean age was 48 years,90% were female, and mean body mass index was 29. Thirteen patients had received prior treatment for acromegaly,including nine with prior surgery (three of these with subsequent radiation therapy), and nine with medications.GH values were obtained at baseline, or prior to treatment, and at intervals over eight hours following eachtreatment. GH was rapidly suppressed by all treatments, and the effect of veldoreotide was dose‑dependent, both in terms ofsuppression extent and duration of effect. The 1800 µg dose of veldoreotide and octreotide maximally suppressed GH to asimilar extent (mean percentage change 60% for each), with a slightly lesser maximal suppression with the 900 µg dose ofveldoreotide. This suppression resulted in a similar proportion of patients achieving GH levels less than or equal to 2.5ng/mL among the two highest doses of veldoreotide and octreotide (37% to 42%). Also, the time to achieve maximalsuppression was shorter for the two highest doses of veldoreotide than for octreotide (median two hours for octreotidecompared to one hour for the maximally effective veldoreotide dose). However, the duration of GH suppression followingsingle dosing was longer for octreotide than veldoreotide at all doses, resulting in greater suppression by octreotide of GH asmeasured by AUC 0 to 8 hours (octreotide 60% mean percentage suppression compared to veldoreotide 1800 µg 37% meanpercentage suppression). We intend to optimize the formulation of veldoreotide to prolong exposure, which should lead tosustained GH suppression.Fasting glucose was assessed at screening and at eight hours after each single dose of study drug. Mean glucoseconcentrations during veldoreotide treatments were similar to the screening values, but were elevated by approximately2.8 mmol/L after eight hours of treatment with octreotide. At the time of glucose sampling, growth hormone levels were stillclose to maximally suppressed by octreotide (median 74% below baseline) but had returned to baseline levels in allveldoreotide dose groups except the highest dose group (1800 µg), which was suppressed by a median of 17% belowbaseline. Glucose values for octreotide were always determined shortly after clinical trial entry. In contrast, glucose values forthe higher doses of veldoreotide were drawn several weeks after trial entry. Participation in the clinical trial per se would beexpected to result in improved glucose control due to observed behavioral changes in trial participants.There were no serious adverse events. Three out of the 20 patients reported a combined total of three adverse events.One adverse event, a moderately severe headache reported in a 62 year old female as encephalopathy exacerbation, led toearly clinical trial discontinuation after the 300 µg dose of veldoreotide follow‑up visit. The patient who discontinued earlyhad long‑standing acromegaly with a very high IGF‑1 at baseline (5.5x upper limit of normal, or ULN) and a history ofencephalopathy. The investigator considered the relationship to study drug as unassessable. Pharmacokinetic outcomes forveldoreotide were similar to those from Phase 1 clinical trials.Phase 1 Clinical TrialsDG3173‑I‑003 Clinical TrialThis clinical trial was a single‑blind, placebo‑ and active‑controlled, single ascending dose, randomized cross‑overclinical trial in eight healthy male subjects, aged 18 to 45 years. Octreotide at a dose of 300 µg and veldoreotide at doses of300 µg, 900 µg and 1800 µg were injected subcutaneously in random order following a mixed meal test, with four‑ tofive‑day washouts between administrations.Relative to placebo, both veldoreotide and octreotide were associated with a delay in the time to peak post‑mealinsulin. However, the magnitude of peak insulin was similar between placebo and veldoreotide. In contrast, octreotidedelayed and suppressed insulin release during the meal, with peak insulin diminished by 81% and AUC by 62% relative toplacebo. The differences in all of these measures, including time to peak, magnitude of peak and AUC, between veldoreotideand octreotide were statistically significant with a p‑value of less than 0.02 for all parameters. Relative to placebo, all fourdrug injections were associated with post‑meal glucose excursions. The effect of veldoreotide on glucose AUC wasdose‑related. Glucose was maintained at a high level for a longer time following octreotide relative to veldoreotide. Theglucose AUC for octreotide during the test was elevated relative to all doses of veldoreotide.64 Table of ContentsPeak post‑meal glucagon was not influenced appreciably by veldoreotide, whereas a suppression by 50% relative toplacebo was observed for octreotide. There was a modest effect of veldoreotide at 900 µg and 1800 µg doses, with up to 28%suppression of glucagon AUC. In contrast, octreotide had a pronounced effect on glucagon AUC, suppressed by 63% relativeto placebo.There were no serious adverse events. Adverse events were mostly mild in severity and did not result in anydiscontinuations. Injection site redness or itching and gastrointestinal system‑related complaints (most commonly diarrhea)were the most commonly reported adverse events for both octreotide and veldoreotide.DG3173‑I‑002 Clinical TrialThis clinical trial was a single‑blind, placebo‑ and active‑controlled, multiple escalating dose clinical trial in 42healthy male subjects, aged 18 to 45 years. Veldoreotide was given TID eight hours apart from days two through eight. Therewere seven clinical trial groups, with six subjects total per group. In the first four clinical trial groups, four subjects receivedveldoreotide in doses that ranged from 100 µg to 1800 µg TID, one received octreotide 300 µg TID, and one receivedplacebo. In the three remaining clinical trial groups, four subjects received veldoreotide plus octreotide, one receivedplacebo plus placebo and one received octreotide plus placebo.The effects of veldoreotide with or without added octreotide on GH, insulin and glucose levels were ascertainedusing a growth hormone‑releasing hormone (“GHRH”), test on days one (pretreatment) and three. veldoreotide and octreotidegiven as monotherapy for four doses both suppressed the GHRH‑induced rise in GH, with 900 µg of veldoreotideapproximately equivalent to 300 µg of octreotide, with mean AUC reductions compared to pre‑drug administrations of 65%and 70%, respectively, whereas the 1800 µg dose of veldoreotide gave somewhat better reduction, with mean AUC reductionof 85%. When the two drugs were used in combination, a maximum suppression of GH response was noted duringadministration of the veldoreotide 900 µg. The highest dose of veldoreotide 1800 µg was not tested in combination withoctreotide. Insulin levels were suppressed following treatment with octreotide by 50% from pre‑drug, whereas no such effectwas noted during veldoreotide administrations. Blood glucose concentrations were mostly stable following GHRH infusion.Glucose levels were observed to be similar before and after administrations of both veldoreotide and octreotide. There was noclear effect of either drug or saline given alone or in combination with the exception of veldoreotide 300 µg, for whichglucose levels tended to be lower after administration, both alone and in combination with octreotide.Veldoreotide was generally well‑tolerated and a maximum tolerated dose was not reached. Adverse events weremostly mild in severity. Injection site redness, itching and gastrointestinal system‑related complaints (most commonlydiarrhea) were the most commonly reported adverse events and appeared to occur in similar percentages of octreotide‑ andveldoreotide ‑treated subjects. There was small to no accumulation of veldoreotide in plasma after repeated doses. Exposureto veldoreotide was dose proportional and linear after the first and last doses. When veldoreotide was given concomitantlywith octreotide 300 µg TID, veldoreotide pharmacokinetics were similar to veldoreotide given alone.DG3173‑I‑001 Clinical TrialThis clinical trial was a double‑blind, placebo controlled, single ascending dose clinical trial in 72 healthy malesubjects, age 18 to 45 years. A single subcutaneous dose ranging between 10 µg to 2000 µg of veldoreotide or placebo wasadministered under fasting conditions. Veldoreotide was generally well‑tolerated, and the maximum tolerated dose was notreached.There were no serious adverse events. There were 21 adverse events reported in 15 subjects of which twenty wereregarded as mild in severity and one was moderate (diarrhea, 800 µg dose). The time to maximum drug concentration inblood was generally within one hour. Maximum drug concentration in blood generally increased proportionally with dose.The cumulative urinary excretion of drug was proportional to dose ingested, and fractional excretion was consistently about4% to 5% of the respective doses administered.65 Table of ContentsIn an exploratory pharmacodynamic analysis, GH plasma concentrations were consistent with the suppression of GHby veldoreotide.Anticipated Clinical TrialsWe expect additional clinical trials of veldoreotide to be designed to establish the optimal dosage range fornormalization of IGF‑1 in chronic treatment of acromegaly using a proprietary subcutaneous‑injection PLGA formulation werecently developed. We expect to conduct a pre‑IND meeting with the FDA and a Scientific Advice meeting in Europe priorto advancing veldoreotide into further clinical studies, beginning with Phase 1 safety and proof-of-concept studies in healthyvolunteers and patients with acromegaly. In addition to at least one dose-ranging Phase 2 clinical trial, we anticipate that ourclinical program will include at least one multinational Phase 3 clinical trial for registration, comparing veldoreotide to othertreatments and/or placebo, including at least six months of controlled treatment to evaluate efficacy and at least one year oftreatment to evaluate safety. We may also need to assess pharmacokinetics, safety and efficacy in special populations,including patients with liver or kidney disease and perform a thorough-QT study in healthy volunteers.As a next generation SSA with potential growth‑inhibitory effects on other tumor types and neovascularization (andpresumably also vasoactive effects), veldoreotide may also have utility in treating other serious rare endocrine and non-endocrine diseases. We plan therefore to explore the utility of veldoreotide in other conditions either in small pilot studies inthe respective patient populations and/or in relevant preclinical disease models.Commercialization Strategy for Keveyis and Our Two Products Candidates in DevelopmentOur existing commercial infrastructure is limited and is focused on Keveyis. We intend to independentlycommercialize Keveyis in the United States and believe that we can address the market by targeting physicians who aremanaging patients with PPP, including neuromuscular specialists, general neurologists and primary care physicians. We planto initially create a sales force of approximately 12 representatives in the United States to market Keveyis. In building ourKeveyis sales force, we have recruited representatives with experience marketing orphan drug designated products. Given the current stage of product development of our product candidates, we do not have a commercializationinfrastructure for those product candidates, although we do plan to leverage our Keveyis current commercial infrastructurewhen possible. As with Keveyis, we intend to independently commercialize our rare disease‑focused product candidates, ifapproved, in the United States, the European Union and other key global markets. We believe that we can address themarkets of our current product candidates by targeting endocrinologists that are focused on the diagnosis and treatment ofrare pituitary disorders primarily stemming from benign tumors. Given the relatively concentrated specialty prescriber base,we plan to create a sales force of approximately 30 representatives in the United States as well in the European Union tomarket our endocrine product candidates, if approved. In building our sales force, we intend to recruit representatives withexperience calling on endocrinologists and marketing orphan drug designated products. Our commercial strategy for our product candidates, if approved, will encompass promoting their unique benefits, aswell as a concerted effort to raise awareness about the underlying disease among the physician/patient community with thegoal of increasing the rate of diagnosis when the symptoms may otherwise be overlooked. We believe the combination of ourcommercial efforts and our product candidate profiles will facilitate our ability to successfully penetrate our target markets. ManufacturingWe do not have internal manufacturing capabilities and intend to continue to rely on third parties to produceKeveyis and our product candidates. We have a supply agreement with Taro to produce Keveyis. We are obligated topurchase certain annual minimum amounts of product totaling approximately $29 million over a six-year period from Taro.The supply agreement may extend beyond the orphan exclusivity period unless terminated by either party pursuant to theterms of the agreement. If terminated by Taro at the conclusion of the orphan exclusivity period, we have the right66 Table of Contentsto manufacture the product on our own or have the product manufactured by a third party on our behalf. The manufacturing, packaging and distribution of Recorlev drug product for clinical trials following GoodManufacturing Practices (“GMPs”), is currently outsourced under contracts to experienced contract manufacturers. We expectto enter into similar arrangements for veldoreotide.Intellectual Property of our Product Candidates in DevelopmentWe actively seek to protect the intellectual property and proprietary technology that we believe is important to ourbusiness, including seeking, maintaining, enforcing and defending patent rights for our product candidates and methods oftreatment, whether developed internally or licensed from third parties. Our success will depend on our ability to obtain andmaintain patent and other protection including data or market exclusivity for our product candidates and methods oftreatment, preserve the confidentiality of our know‑how and operate without infringing the valid and enforceable patents andproprietary rights of third parties.Our policy is to seek to protect our proprietary position generally by filing patent applications initially at theUSPTO. After this initial phase, patent applications claiming priority to the initial application are filed in various countries,including the United States, Europe and Canada. In each case, we determine the strategy and territories required afterdiscussion with our patent professionals with the goal of obtaining relevant coverage in territories that are commerciallyimportant to us and our product candidates. We will additionally rely on data exclusivity and patent term extensions whenavailable, including the relevant exclusivity through orphan drug designation. We also rely on trade secrets and know‑howrelating to our underlying product technologies. Prior to making any decision on filing any patent application, we considerwith our patent professionals whether patent protection is the most sensible strategy for protecting the invention concernedor whether the invention should be maintained as confidential.We own or license 55 granted patents, of which two are U.S. issued patents, and 17 pending patent applications, ofwhich 6 are U.S. patent applications.We have one pending United States, one pending Canadian, one pending Brazilian and one pending International(Madrid Protocol) trademark application designating Australia, China, European Community, India, Israel, Japan, Mexico,and Turkey for the mark “Strongbridge Biopharma.”KeveyisWe have acquired U.S. marketing rights to Keveyis. We are not aware of any issued patents or pending patentapplications related to Keveyis. Although we intend to rely primarily on orphan exclusivity for Keveyis, we also expect toexplore additional life cycle management opportunities.RecorlevWe own 44 granted patents related to our product candidate, Recorlev. Issued claims in these patents are directed tomethods of treatment of various diseases or conditions associated with elevated cortisol levels or activity usingRecorlev. The patents have been granted in major territories including Europe, China and Japan. We have three pending U.S.patent applications and one pending PCT application directed to methods of treating a disease or condition associated withelevated cortisol levels or activity with Recorlev. We also have an issued patent in the U.S. directed to reducing C-reactiveprotein levels and systemic inflammation through administration of a once-daily dose of Recorlev. Additionally, we havethree pending US applications and eight pending foreign applications in Canada, Europe and Japan for next‑generationproduct candidates, including new chemical entities. Patents in this portfolio, if and when issued, are expected to expire in2026, 2027 and 2030 if there are no patent term adjustments or extensions.VeldoreotideWhile we own granted patents related to our product candidate veldoreotide in the United States and other majorterritories, including Europe and Canada, the terms of these patents may not extend beyond the launch date of this67 Table of Contentsproduct candidate. We have also filed a PCT application in 2017 directed to various methods and formulations ofveldoreotide. To the extent we are not able to obtain further patent exclusivity as a result of the PCT application or otherfuture patent filings, we intend to rely on orphan and data/marketing exclusivity for veldoreotide.Laws and Regulations Regarding Patent TermsThe term of individual patents depends upon the legal term of the patents in the countries in which they areobtained. In most countries in which we file, the patent term is 20 years from the earliest date of filing a non‑provisionalapplication. In the United States, a patent term may be shortened if a patent is terminally disclaimed over another patent or asa result of delays in a patent prosecution by the patentee. A patent’s term may be lengthened by a patent term adjustment,which compensates a patentee for administrative delays by the USPTO in granting a patent. The patent term of a Europeanpatent is 20 years from its effective filing date, which, unlike in the United States, is not subject to patent term adjustments inthe same way as U.S. patents.The term of a patent that covers a FDA‑approved drug or biologic may also be eligible for patent term extension,which permits patent term restoration as compensation for the patent term lost during the FDA regulatory review process. TheDrug Price Competition and Patent Term Restoration Act of 1984, or the Hatch‑Waxman Act, permits a patent term extensionof up to five years beyond the expiration of the patent. The length of the patent term extension is related to the length of timethe drug or biologic is under regulatory review. Patent extensions cannot extend the remaining term of a patent beyond atotal of 14 years from the date of product approval and only one patent applicable to an approved drug may be extended.Similar provisions are available in Europe and other jurisdictions to extend the term of a patent that covers an approved drug,for example Supplementary Protection Certificates. In the future, if and when our products receive FDA approval, we expectto apply for patent term extensions on patents covering those products. We anticipate that some of our issued patents may beeligible for patent term extensions but such extensions may not be available and therefore our commercial monopoly may berestricted.CompetitionThe biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intensecompetition and a strong emphasis on proprietary products. While we believe that our scientific knowledge, technology, anddevelopment experience provide us with competitive advantages, we face potential competition from many different sources,including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions,governmental agencies and public and private research institutions. Any product candidates that we successfully developand commercialize will compete with existing products and new products that may become available in the future. Many ofour competitors, alone or with their strategic partners, have greater experience than we do in conducting preclinical studiesand clinical trials, and obtaining FDA, EMA and other regulatory approvals, and have substantially greater financial,technical and other resources than we do, such as larger research and development, clinical, marketing and manufacturingorganizations. As a result, these companies may obtain regulatory approval for competing products more rapidly than we areable and may be more effective in selling and marketing their products. Companies that complete clinical trials, obtainrequired regulatory authority approvals and commence commercial sale of their drugs before their competitors may achieve asignificant competitive advantage, and our commercial opportunity could be reduced or eliminated if competitors developand commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or areless expensive than any products that we may develop. Drugs resulting from our research and development efforts or from ourjoint efforts with collaboration partners therefore may not be commercially competitive with our competitors’ existingproducts or products under development.We are aware of several companies focused on developing or marketing therapies for rare neuromuscular andendocrine disorders. For our product candidates, the main competitors include:·Keveyis: Acetazolamide, another oral carbonic anhydrase inhibitor, is used frequently off-label for theprophylactic and sometimes acute treatment of PPP. Potassium supplements, are indicated for use inhypokalemic periodic paralysis in the United States and are frequently used either chronically or for emergencytreatment of episodes in that form of PPP. Several other types of drugs have been reported to have benefits forchronic or acute use in one or more than one PPP variant, including potassium-sparing68 Table of Contentsdiuretics, beta receptor agonists, mexelitine and other sodium channel blockers, and others. We are not aware ofdrugs currently in development for prophylactic chronic treatment of PPP. A Phase 2 clinical study ofbumetanide, a loop diuretic, is underway in England for acute treatment of paralytic attacks.·Recorlev: A number of therapies are currently approved and in various stages of development for endogenousCushing’s syndrome. Currently, the marketed therapies for the treatment of endogenous Cushing’s syndromepatients who fail or are ineligible for surgery in the United States and Europe are: Korlym (mifepristone)marketed by Corcept Therapeutics in the United States; Signifor (pasireotide) marketed by Novartis in theUnited States and European Union; and ketoconazole, metyrapone and mitotane marketed by HRA in theEuropean Union. Novartis has submitted a NDA/MAA for Signifor (pasireotide) LAR in Cushing’s disease.Additionally, LCI‑699 (osilodrostat) is currently in Phase 3 clinical development by Novartis in Cushing’sdisease patients. Corcept is developing CORT125134, a second-generation glucorticoid receptor modulator;currently in Phase 2. HRA Pharma is developing metyrapone for the US market; currently in Phase 2. Millendois developing ATR-101, a selective acyl-CoA:cholesterol acyltransferase 1 (ACAT) inhibitor, currently in Phase2.·Veldoreotide: A number of acromegaly therapies are currently approved and in various stages ofdevelopment. There are currently three approved SSA therapies for acromegaly in the United States:Sandostatin LAR (octreotide) marketed by Novartis; Signifor LAR (pasireotide) marketed by Novartis; andSomatuline Depot (lanreotide) marketed by Ipsen. There is one growth hormone receptor antagonist, Somavert(pegvisomant), marketed by Pfizer. Chiasma had filed an NDA in the United States for RG-3806 (Mycapssa®),an oral octreotide formulation in 2015, and received a Complete Response Letter wherein FDA stated that it didnot believe the company’s application had provided substantial evidence of efficacy to warrant approval, andadvised Chiasma that it would need to conduct another clinical trial in order to overcome this deficiency. Fouradditional therapies are in Phase 2 clinical development for acromegaly: octreotide long‑acting depot(CAM‑2029) developed by Novartis and Camurus; ITF‑2984 developed by Italfarmaco; BIM-23B065developed by Ipsen; and ATL-1103 developed by Antisense Therapeutics.Discontinued License AgreementsAntisense TherapeuticsIn April 2016, we executed an agreement (the "Settlement Agreement") with Antisense Therapeutics ("Antisense") toterminate the exclusive license agreement (the "Antisense License Agreement") that we and Antisense entered into in May2015. The Antisense License Agreement provided us with development and commercialization rights to Antisense's productcandidate, ATL1103, for endocrinology applications (specifically excluding the treatment of any form of cancer and thetreatment of any complications of diabetes). Pursuant to the terms of the Settlement Agreement, we have made a one-timepayment of approximately $770,000 to Antisense and returned to Antisense, for no consideration, the shares of Antisenseowned by us. We also agreed to transfer to Antisense all data, reports, records and materials resulting from our developmentactivities and all ATL1103 drug compound in our possession. The Settlement Agreement provides for the release by eachparty of all obligations and liabilities under the Antisense License Agreement. Cornell Center for Technology Enterprise and Commercialization In October 2016, our wholly owned subsidiary, BioPancreate Inc., provided a notice to Cornell University, throughits Cornell Center for Technology Enterprise and Commercialization ("CCTEC"), in accordance with the terms of itsagreement with CCTEC entered into in March 2011, of the termination of the agreement. The notice was provided inaccordance with our decision to terminate our development program for BP-2002, a gene-modified probiotic in pre-clinicaldevelopment for the potential treatment of type 1 and 2 diabetes that was the subject of the agreement. Because we had notyet reported our financial results for the three and six months ended June 30, 2016 at the time of providing the notice oftermination, we recorded an impairment charge of $5.2 million in June 2016 since the conditions that caused the impairmentexisted as of June 30, 2016. The impairment charge represented the value of the intangible asset we had previouslycapitalized related to the license agreement.69 Table of ContentsGovernment RegulationProduct Approval ProcessThe safety, clinical testing, manufacturing, quality, labeling, storage, distribution, record keeping, advertising,promotion, import, export and marketing, among other things, of our product candidates are subject to extensive regulationby governmental authorities in the United States and other countries. The FDA under the Federal Food, Drug, and CosmeticAct regulates pharmaceutical products in the United States. The steps required before a drug may be approved for marketingin the United States generally include:·the completion of preclinical laboratory tests and animal tests conducted under Good Laboratory Practices,(“GLPs”), and other applicable regulations;·the submission to the FDA of an IND application for human clinical testing, which must be reviewed by theFDA and become effective before human clinical trials commence;·the successful performance of adequate and well‑controlled human clinical trials conducted in accordance withcGCP to establish the safety and efficacy of the product candidate for each proposed indication;·analysis of clinical trial data and preparation of submission to the FDA of an NDA;·the submission to the FDA of an NDA;·the FDA’s acceptance of the NDA;·satisfactory completion of an FDA inspection of the manufacturing facilities at which the product is made toassess compliance with cGMPs to assure that the facilities, methods and controls are adequate to preserve thedrug’s identity, strength, quality and purity;·satisfactory completion of FDA inspections of clinical trial sites and GLP toxicology studies; and·the FDA’s review and approval of an NDA prior to any commercial marketing or sale of the drug in the UnitedStates.The testing and approval process requires substantial time, effort and financial resources, and the receipt and timingof any approval is uncertain.Preclinical studies include laboratory evaluations of the product candidate, as well as animal studies to assess thepotential safety and efficacy of the product candidate. The results of the preclinical studies, together with manufacturinginformation, analytical data and a proposed clinical trial protocol, are submitted to the FDA as part of the IND, which mustbecome effective before clinical trials may be commenced. The IND will become effective automatically 30 days after receiptby the FDA, unless the FDA raises concerns or questions about the conduct of the clinical trials as outlined in the IND priorto that time and places the IND on clinical hold. In this case, the IND sponsor and the FDA must resolve any outstandingconcerns before clinical trials can proceed. A clinical hold may occur at any time during the life of an IND, due to safetyconcerns or non‑compliance, and may affect one or more specific studies or all studies conducted under the IND.Clinical trials involve the administration of the product candidates to healthy volunteers or patients with the diseaseto be treated under the supervision of a qualified principal investigator. Clinical trials are conducted under protocolsdetailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety, and theefficacy criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must besubmitted to the FDA as part of the IND. Further, each clinical trial must be reviewed and approved by an independentinstitutional review board (“IRB”), either centrally or individually at each institution at which the clinical trial will beconducted. The IRB will consider, among other things, ethical factors, the safety of human subjects and the possible liabilityof the institution. Progress reports detailing the status of the clinical trials must be submitted to the FDA annually. Sponsorsmust also report to the FDA serious and unexpected adverse reactions, any clinically important70 Table of Contentsincrease in the rate of a serious suspected adverse reaction over that listed in the protocol or investigation brochure, or anyfindings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the drug. Thereare also requirements governing the reporting of ongoing clinical trials and clinical trial results to public registries.Clinical trials are typically conducted in three sequential phases prior to approval, but the phases may overlap.These phases generally include the following:·Phase 1.Phase 1 clinical trials represent the initial introduction of a product candidate into human subjects,frequently healthy volunteers. In Phase 1, the product candidate is usually tested for safety, including adverseeffects, dosage tolerance, absorption, distribution, metabolism, excretion and pharmacodynamics.·Phase 2.Phase 2 clinical trials usually involve studies in a limited patient population to (1) evaluate the efficacy ofthe product candidate for specific indications, (2) determine dosage tolerance and optimal dosage, and (3) identifypossible adverse effects and safety risks.·Phase 3.Phase 3 clinical trials are conducted to further demonstrate clinical efficacy, optimal dosage and safetywithin an expanded patient population at geographically dispersed clinical trial sites, and to provide sufficient datafor the statistically valid evidence of safety and efficacy.Phase 4 clinical trials are conducted after approval to gain additional experience from the treatment of patients inthe intended therapeutic indication and to document a clinical benefit in the case of drugs approved under acceleratedapproval regulations, or when otherwise requested by the FDA in the form of post‑market requirements or commitments.Failure to promptly conduct any required Phase 4 clinical trials could result in withdrawal of approval. Clinical trials are inherently uncertain and any phase may not be successfully completed. A clinical trial may besuspended or terminated by the FDA, IRB or sponsor at any time on various grounds, including a finding that the subjects orpatients are being exposed to an unacceptable health risk. Additionally, some clinical trials are overseen by an independentgroup of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee.This group provides ongoing oversight and safety reviews to determine whether or not a clinical trial may move forward atdesignated check points based on access to certain data from the clinical trial. We may also suspend or terminate a clinicaltrial based on evolving business objectives and/or competitive climate.Sponsors have the opportunity to meet with the FDA at certain points during the development of a new drug to shareinformation about the data gathered to date and for the FDA to provide advice on the next phase of development. Thesemeetings may be held prior to the submission of an IND, at the end of Phase 2 and/or before an NDA is submitted. Meetingsmay be requested at other times as well.The results of preclinical studies and clinical trials, including negative or ambiguous results as well as positivefindings, together with detailed information on the manufacture, composition and quality of the product, proposed labelingand other relevant information are submitted to the FDA in the form of an NDA requesting approval to market the product.The NDA must be accompanied by a significant user fee payment. The FDA has substantial discretion in the approval processand may refuse to accept any application, for example if the NDA is not sufficiently complete, or decide that the data isinsufficient for approval and require additional preclinical, clinical or other studies.In addition, under the Pediatric Research Equity Act (“PREA”), an NDA or supplement to an NDA must contain datato assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and tosupport dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA maygrant deferrals for submission of data or full or partial waivers. Unless otherwise required by regulation, PREA does not applyto any drug for an indication for which orphan drug designation has been granted. However, if only one indication for aproduct has orphan drug designation, a pediatric assessment may still be required for any applications to market that sameproduct for the non‑orphan indication(s).Once the NDA submission has been submitted, the FDA has 60 days after submission of the NDA to conduct aninitial review to determine whether it is sufficient to accept for filing. NDAs receive either a standard or priority review.71 Table of ContentsUnder the Prescription Drug User Fee Act, the FDA sets a goal date by which it plans to complete its review. For a standardreview, this is typically 10 months from the date of submission of the NDA application. The review process is often extendedby FDA requests for additional information or clarification. Before approving an NDA, the FDA will inspect the facilities atwhich the product is manufactured and will not approve the product unless the manufacturing facility complies with cGMPsand may also inspect clinical trial sites for integrity of data supporting safety and efficacy. The FDA may also convene anadvisory committee of external experts to provide input on certain review issues relating to risk, benefit and interpretation ofclinical trial data. The FDA is not bound by the recommendations of an advisory committee, but generally follows suchrecommendations in making its decisions. The FDA may delay approval of an NDA if applicable regulatory criteria are notsatisfied and/or the FDA requires additional testing or information. The FDA may require post‑marketing testing andsurveillance to monitor safety or efficacy of a product.After the FDA evaluates the NDA and conducts inspections of manufacturing facilities where the drug productand/or its API will be produced, it may issue an approval letter or a Complete Response Letter. An approval letter authorizescommercial marketing of the drug with specific prescribing information for specific indications. A Complete Response Lettergenerally outlines the deficiencies in the NDA submission and may require substantial additional clinical testing, such as anadditional pivotal Phase 3 clinical trial(s), clinical data, and/or other significant, expensive and time consumingrequirements related to clinical trials, preclinical studies or manufacturing. Even if such additional information is submitted,the FDA may ultimately decide that the NDA does not satisfy the criteria for approval.The FDA may approve the NDA with a Risk Evaluation and Mitigation Strategy (“REMS”), plan to mitigate risks,which could include medication guides, physician communication plans, or elements to assure safe use, such as restricteddistribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, amongother things, changes to proposed labeling, development of adequate controls and specifications, or a commitment toconduct one or more post‑market studies or clinical trials. Such post‑market testing may include Phase 4 clinical trials andsurveillance to further assess and monitor the product’s safety and effectiveness after commercialization.Orphan Drug DesignationUnder the Orphan Drug Act of 1983, the FDA may grant orphan drug designation to a drug or biological productintended to treat an orphan disease or condition, which is a disease or condition that affects fewer than 200,000 individualsin the United States, or if it affects more than 200,000 individuals in the United States, there is no reasonable expectation thatthe cost of developing and making a drug product available in the United States for this type of disease or condition will berecovered from sales of the product. Orphan product designation must be requested before submitting an NDA. After the FDAgrants orphan product designation, the identity of the therapeutic agent and its potential orphan use are disclosed publiclyby the FDA. Orphan product designation does not convey any advantage in or shorten the duration of the regulatory reviewand approval process.If a product that has orphan drug designation subsequently receives the first FDA approval for the disease orcondition for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDAmay not approve any other applications to market the same drug or biological product for the same indication for sevenyears, except in limited circumstances, such as demonstrating clinical superiority to the product with orphan exclusivity. Thedesignation of such drug also entitles a party to financial incentives, such as opportunities for grant funding towards clinicaltrial costs, tax advantages and user‑fee waivers. Competitors, however, may receive approval of different products for theindication for which the orphan product has exclusivity or obtain approval for the same product but for a different indicationfor which the orphan product has exclusivity. Orphan product exclusivity also could block the approval of one of ourproducts for seven years if a competitor obtains approval of the same drug or biological product as defined by the FDA or ifour product candidate is determined to be contained within the competitor’s product for the same indication or disease. If adrug product designated as an orphan product receives regulatory approval for an indication broader than that for which it isdesignated, it may not be entitled to orphan product exclusivity. Orphan drug status in the European Union has similar butnot identical benefits in that jurisdiction.72 Table of ContentsPost‑Approval RequirementsDrugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation bythe FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product distribution,advertising and promotion, and reporting of adverse experiences with the product. After approval, most changes to theapproved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval andmay require additional clinical trials and NDA submissions. There also are continuing, annual user fee requirements for anymarketed products and the establishments at which such products are manufactured, as well as new application fees forsupplemental applications with clinical data.In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugsare required to register their establishments with the FDA and state agencies, and are subject to periodic unannouncedinspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturingprocess are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also requireinvestigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon thesponsor and any third‑party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue toexpend time, money, and effort in the area of production and quality control to maintain cGMP compliance.Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements andstandards is not maintained, or if problems occur after the product reaches the market. Later discovery of previously unknownproblems with a product, including adverse events of unanticipated severity or frequency, with manufacturing processes, orfailure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safetyinformation, imposition of post‑market studies or clinical trials to assess new safety risks, or imposition of distribution orother restrictions under a REMS program. Other potential consequences include, but are not limited to:·restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from themarket or product recalls;·fines, warning letters or holds on post‑approval clinical trials;·refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation ofproduct license approvals;·product seizure or detention, or refusal to permit the import or export of products; or·injunctions or the imposition of civil or criminal penalties.The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market.Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. TheFDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off‑label uses, and a companythat is found to have improperly promoted off‑label uses may be subject to significant liability.Moreover, the recently enacted federal Drug Supply Chain Security Act imposes new obligations on manufacturersof pharmaceutical products, among others, related to product tracking and tracing. Among the requirements of this newfederal legislation, manufacturers will be required to provide certain information regarding the drug product to individualsand entities to which product ownership is transferred, label drug product with a product identifier, and keep certain recordsregarding the drug product. Further, under this new legislation, manufacturers will have drug product investigation,quarantine, disposition, and notification responsibilities related to counterfeit, diverted, stolen, and intentionally adulteratedproducts, as well as products that are the subject of fraudulent transactions or which are otherwise unfit for distribution suchthat they would be reasonably likely to result in serious health consequences or death.73 Table of ContentsForeign RegulationIn order to market any product outside of the United States, we would need to comply with numerous and varyingregulatory requirements of other countries and jurisdictions regarding quality, safety and efficacy and governing, amongother things, clinical trials, marketing authorization, commercial sales and distribution of our products. Whether or not weobtain FDA approval for a product, we would need to obtain the necessary approvals by the comparable foreign regulatoryauthorities before we can commence clinical trials or marketing of the product in foreign countries and jurisdictions.Although many of the issues discussed above with respect to the United States apply similarly in the context of the EuropeanUnion, the approval process varies between countries and jurisdictions and can involve additional product testing andadditional administrative review periods. The time required to obtain approval in other countries and jurisdictions mightdiffer from and be longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction doesnot ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country orjurisdiction may negatively impact the regulatory process in others.Other Healthcare LawsIn addition to FDA restrictions on the marketing of pharmaceutical products, federal and state healthcare lawsrestrict certain business practices in the biopharmaceutical industry. Although we currently do not have any products on themarket, we may be subject, and once our product candidates are approved and we begin commercialization, will be subject toadditional healthcare laws and regulations enforced by the federal government and by authorities in the states and foreignjurisdictions in which we conduct our business. These laws include, but are not limited to, anti‑kickback, false claims, dataprivacy and security, and transparency statutes and regulations.The federal Anti‑Kickback Statute prohibits, among other things, knowingly and willfully offering, paying,soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in returnfor, purchasing, leasing, arranging for, ordering or recommending any good, facility, item or service for which payment ismade, in whole or in part, under Medicare, Medicaid or any other federal healthcare programs. The term “remuneration” hasbeen broadly interpreted to include anything of value, including for example, gifts, discounts, the furnishing of supplies orequipment, credit arrangements, payments of cash, waivers of payment, ownership interests and providing anything at lessthan its fair market value. The federal Anti‑Kickback Statute has been interpreted to apply to arrangements betweenpharmaceutical manufacturers on the one hand, and prescribers, purchasers and formulary managers on the other. Althoughthere are a number of statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution,the exceptions and safe harbors are drawn narrowly, and our future practices may not in all cases meet all of the criteria for astatutory exception or safe harbor protection. Practices that involve remuneration that may be alleged to be intended toinduce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safeharbor. Failure to meet all of the requirements of a particular applicable regulatory safe harbor does not make the conduct perse illegal under the federal Anti‑Kickback Statute. Instead, the legality of the arrangement will be evaluated on acase‑by‑case basis based on a cumulative review of all of its facts and circumstances. Several courts have interpreted thestatute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referralsof federal healthcare program covered business, the statute has been violated. Additionally, the Patient Protection andAffordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, PPACA, amended theintent requirement under the Anti‑Kickback Statute and criminal healthcare fraud statutes (discussed below) such that aperson or entity no longer needs to have actual knowledge of the statute or the specific intent to violate it in order to havecommitted a violation. In addition, PPACA provides that the government may assert that a claim including items or servicesresulting from a violation of the federal Anti‑Kickback Statute constitutes a false or fraudulent claim for purposes of the civilFalse Claims Act (discussed below). Due to the breadth of these federal and state anti‑kickback laws, and the potential foradditional legal or regulatory change in this area, it is possible that our current and future sales and marketing practicesand/or our future relationships with physicians might be challenged under these laws, which could cause harm to us.The civil monetary penalties statute imposes penalties against any person or entity who, among other things, isdetermined to have presented or caused to be presented a claim to a federal health program that the person knows or shouldknow is for an item or service that was not provided as claimed or is false or fraudulent.74 Table of ContentsThe federal false claims laws prohibit, among other things, any person or entity from knowingly presenting, orcausing to be presented, a false or fraudulent claim for payment or approval to the federal government or knowingly making,using or causing to be made or used a false record or statement material to a false or fraudulent claim to the federalgovernment. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes “anyrequest or demand” for money or property presented to the U.S. government. Recently, several pharmaceutical and otherhealthcare companies have been prosecuted under these laws for, among other things, allegedly providing free product tocustomers with the expectation that the customers would bill federal programs for the product. Other companies have beenprosecuted for causing false claims to be submitted because of the companies’ marketing of the product for unapproved, andthus non‑covered, uses.The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), created new federal criminal statutesthat prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud or obtain, by means of false orfraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of,any healthcare benefit program, including private third‑party payors, and knowingly and willfully falsifying, concealing orcovering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the deliveryof, or payment for, healthcare benefits, items or services.In addition, we may be subject to data privacy and security regulation by both the federal government and the statesin which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and ClinicalHealth Act (“HITECH”), and its implementing regulations, imposes certain requirements relating to the privacy, security andtransmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s securitystandards directly applicable to business associates—independent contractors or agents of covered entities that receive orobtain protected health information in connection with providing a service on behalf of a covered entity. HITECH alsocreated four new tiers of civil monetary penalties, and newly empowered state attorneys general with the authority to enforceHIPAA. In January 2013, the Office for Civil Rights of the U.S. Department of Health and Human Services issued the FinalOmnibus Rule under HIPAA pursuant to HITECH that makes significant changes to the privacy, security, and breachnotification requirements and penalties. The Final Omnibus Rule generally took effect in September 2013 and enhancescertain privacy and security protections, and strengthens the government’s ability to enforce HIPAA. The Final OmnibusRule also enhanced requirements for both covered entities and business associates regarding notification of breaches ofunsecured protected health information. In addition, state laws govern the privacy and security of health information incertain circumstances, many of which differ from each other in significant ways. These state laws may not have the sameeffect and often are not preempted by HIPAA, thus complicating compliance efforts.Additionally, PPACA also included the federal Physician Payments Sunshine Act, which requires certainmanufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaidor the Children’s Health Insurance Program (with certain exceptions) to report annually information related to certainpayments or other transfers of value made or distributed to physicians and teaching hospitals, or to entities or individuals atthe request of, or designated on behalf of, the physicians and teaching hospitals and to report annually certain ownership andinvestment interests held by physicians and their immediate family members. Failure to comply with required reportingrequirements could subject applicable manufacturers and others to substantial civil money penalties.Also, many states have similar healthcare statutes or regulations that apply to items and services reimbursed underMedicaid and other state programs, or, in several states, apply regardless of the payor. Certain states require pharmaceuticalcompanies to implement a comprehensive compliance program that includes a limit or outright ban on expenditures for, orpayments to, individual medical or health professionals and/or require pharmaceutical companies to track and report giftsand other payments made to physicians and other healthcare providers.Because we intend to commercialize products that could be reimbursed under federal and other governmentalhealthcare programs, we plan to develop a comprehensive compliance program that establishes internal controls to facilitateadherence to the rules and healthcare program requirements. Although compliance programs and adherence thereto maymitigate the risk of violation of and subsequent investigation and prosecution for violations of the above laws, the riskscannot be entirely eliminated. If our operations are found to be in violation of any of the health care laws75 Table of Contentsor regulations described above or any other laws that apply to us, we may be subject to penalties, including potentiallysignificant criminal, civil and/or administrative penalties, damages, fines, disgorgement, individual imprisonment, exclusionof products from reimbursement under government programs, contractual damages, reputational harm, administrativeburdens, diminished profits and future earnings and/or the curtailment or restructuring of our operations, any of which couldadversely affect our ability to operate our business and our results of operations. To the extent that any of our products willbe sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance,applicable post‑marketing requirements, including safety surveillance, fraud and abuse laws, and implementation ofcorporate compliance programs and reporting of payments or transfers of value to healthcare professionals.Pharmaceutical Coverage, Pricing and ReimbursementIn both domestic and foreign markets, our sales of any future approved products, if and when commercialized, willdepend in part on the availability of coverage and adequate reimbursement from third‑party payors. Third‑party payorsinclude government authorities, managed care providers, private health insurers and other organizations. Patients who areprescribed treatments for their conditions and providers performing the prescribed services generally rely on third‑partypayors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our products, if approved, unlesscoverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products. Sales of ourproducts will therefore depend substantially, both domestically and abroad, on the extent to which the costs of our productswill be paid by third‑party payors. These third‑party payors are increasingly focused on containing healthcare costs bychallenging the price and examining the cost‑effectiveness of medical products and services.In addition, significant uncertainty exists as to the coverage and reimbursement status of newly approved healthcareproduct candidates. The market for our product candidates for which we may receive regulatory approval will dependsignificantly on access to third‑party payors’ drug formularies, or lists of medications for which third‑party payors providecoverage and reimbursement. The industry competition to be included in such formularies often leads to downward pricingpressures on pharmaceutical companies. Also, third‑party payors may refuse to include a particular branded drug in theirformularies or otherwise restrict patient access to a branded drug when a less costly generic equivalent or other alternative isavailable. Furthermore, third‑party payor reimbursement to providers for our product candidates may be subject to a bundledpayment that also includes the procedure administering our products. To the extent there is no separate payment for ourproduct candidates, there may be further uncertainty as to the adequacy of reimbursement amounts. Because each third‑partypayor individually approves coverage and reimbursement levels, obtaining coverage and adequate reimbursement is a timeconsuming, costly and sometimes unpredictable process. We may be required to provide scientific and clinical support forthe use of any product to each third‑party payor separately with no assurance that approval would be obtained, and we mayneed to conduct expensive pharmacoeconomic studies in order to demonstrate the cost‑effectiveness and/or medicalnecessity of our products. This process could delay the market acceptance of any product and could have a negative effect onour future revenues and operating results. We cannot be certain that our product candidates will be considered cost‑effectiveor medically necessary. Because coverage and reimbursement determinations are made on a payor‑by‑payor basis, obtainingacceptable coverage and reimbursement from one payor does not guarantee the Company will obtain similar acceptablecoverage or reimbursement from another payor. A payor’s decision to provide coverage for a product does not imply that anadequate reimbursement rate will be approved. If we are unable to obtain coverage of, and adequate reimbursement andpayment levels for, our product candidates from third‑party payors, physicians may limit how much or under whatcircumstances they will prescribe or administer them and patients may decline to purchase them. This in turn could affect ourability to successfully commercialize our products and impact our profitability, results of operations, financial condition andfuture success.Furthermore, in many foreign countries, particularly the countries of the European Union, the pricing of prescriptiondrugs is subject to government control. In some non‑U.S. jurisdictions, the proposed pricing for a drug must be approvedbefore it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. Forexample, the European Union provides options for its member states to restrict the range of medicinal products for whichtheir national health insurance systems provide reimbursement and to control the prices of medicinal products for human use.A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirectcontrols on the profitability of the company placing the medicinal product on the market. We76 Table of Contentsmay face competition for our product candidates from lower‑priced products in foreign countries that have placed pricecontrols on pharmaceutical products. In addition, there may be importation of foreign products that compete with our ownproducts, which could negatively impact our profitability.Healthcare ReformIn the United States and foreign jurisdictions, there have been, and we expect there will continue to be, a number oflegislative and regulatory changes to the healthcare system that could affect our future business and operations if and whenwe begin to directly commercialize our products.In particular, there have been and continue to be a number of initiatives at the U.S. federal and state level that seekto reduce healthcare costs. Initiatives to reduce the federal deficit and to reform healthcare delivery are increasingcost‑containment efforts. We anticipate that Congress, state legislatures and the private sector will continue to review andassess alternative controls on healthcare spending through limitations on the growth of private health insurance premiumsand Medicare and Medicaid spending, the creation of large insurance purchasing groups, price controls on pharmaceuticalsand other fundamental changes to the healthcare delivery system. Any proposed or actual changes could limit or eliminateour spending on development projects and affect our ultimate profitability.In March 2010, PPACA was signed into law. PPACA has substantially changed the way healthcare is financed byboth governmental and private insurers. PPACA, among other things: established an annual, nondeductible fee on any entitythat manufactures or imports certain branded prescription drugs and biologic agents, apportioned among these entitiesaccording to their market share in certain government healthcare programs; revised the methodology by which rebates owedby manufacturers for covered outpatient drugs under the Medicaid Drug Rebate Program are calculated; increased thestatutory minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program; addressed anew methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated fordrugs that are inhaled, infused, instilled, implanted, or injected; extended the Medicaid Drug Rebate Program toprescriptions of individuals enrolled in Medicaid managed care organizations; required manufacturers to offer 50%point‑of‑sale discounts on negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gapperiod, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; and implementedpayment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians andother providers to improve the coordination, quality and efficiency of certain healthcare services through bundled paymentmodels.In 2017, the U.S. Congress has been assessing new legislation designed to repeal and replace core sections of thePPACA. We expect the U.S. Congress to continue to review and assess this legislation, referred to as the American HealthCare Act (AHCA), along with other alternative health care reform proposals throughout 2017. Recent Congressional effortssuch as the AHCA proposal adds to the uncertainty of the legislative changes enacted as part of PPACA. In the future, there may continue to be additional proposals relating to the reform of the U.S. healthcare system,some of which could further limit the prices we will be able to charge for our product candidates, or the amounts ofreimbursement available for our product candidates. If future legislation were to impose direct governmental price controlsand access restrictions, it could have a significant adverse impact on our business. Managed care organizations, as well asMedicaid and other government agencies, continue to seek price discounts. Some states have implemented, and other statesare considering, measures to reduce costs of the Medicaid program, and some states are considering implementing measuresthat would apply to broader segments of their populations that are not Medicaid‑eligible. Due to the volatility in the currenteconomic and market dynamics, we are unable to predict the impact of any unforeseen or unknown legislative, regulatory,payor or policy actions, which may include cost containment and healthcare reform measures. Such policy actions couldhave a material adverse impact on our profitability.77 Table of ContentsProperties and FacilitiesWe lease 14,743 square feet of office space at 900 Northbrook Drive, Suite 200, Trevose, Pennsylvania 19053 forresearch and development and administrative activities. We believe that our existing facility is adequate to meet our currentneeds, and that suitable additional alternative spaces will be available in the future on commercially reasonable terms. Wealso lease 3,173 square feet of office space in Radnor, Pennsylvania, which was subleased in September 2015. Corporate InformationStrongbridge Biopharma plc, an Irish public limited company, was established on May 26, 2015 under the nameCortendo plc. On September 4, 2015, Cortendo plc changed its name to Strongbridge Biopharma plc. We also have a whollyowned subsidiary, Cortendo AB, organized under the laws of Sweden. See Part I, Item 10I “Subsidiary Information” a for listof subsidiaries of the Company.Cortendo AB was established in October 1996 under the name Stefan Kronvall Medical AB and registered inSweden in December 1996 for the purpose of developing medically innovative products for pharmaceutical diagnostics andother health care products. Stefan Kronvall Medical AB changed its name to Cortendo AB in 1997, to Cortendo Invest AB in2003 and then to Cortendo AB (publ) in 2011.In order to effect a corporate reorganization, on September 8, 2015 we settled an exchange offer, which we refer to asthe Exchange Offer, pursuant to which holders of 99.449% of the outstanding shares of Cortendo AB exchanged their sharesfor beneficial interests in ordinary shares of Strongbridge Biopharma plc in the form of depositary receipts on a 1‑for‑1 basisand non‑accredited holders of Cortendo AB shares located within the United States, representing 0.133% of the outstandingshares of Cortendo AB, agreed to exchange their shares for cash, which cash settlement occurred on September 14, 2015.Non‑accredited U.S. holders of ordinary shares of Cortendo AB received cash in an amount equivalent to the value of oneordinary share of Strongbridge Biopharma plc for each share of Cortendo AB validly exchanged. Pursuant to individualagreements with the holders of options to purchase shares of Cortendo AB, the outstanding options of Cortendo AB wereconverted to options to purchase an equivalent number of ordinary shares of Strongbridge Biopharma plc. In September2016, we acquired the non-controlling interest in Cortendo AB, after which Cortendo AB became a wholly owned subsidiaryof Strongbridge Biopharma plc.Following the settlement of the Exchange Offer, Strongbridge Biopharma plc became the parent of Cortendo ABand its subsidiaries. As a result of the settlement of the Exchange Offer, the historical financial statements of Cortendo ABbecame, for financial reporting purposes, the historical consolidated financial statements of Strongbridge Biopharma plc andits subsidiaries as a continuation of the predecessor. During the period from the settlement date of the Exchange Offerthrough the acquisition of all the shares of Cortendo AB not tendered in the Exchange Offer, the 0.418% interest in CortendoAB was accounted for as a non-controlling interest.Implications of Being an “Emerging Growth Company”We qualify as an “emerging growth company,” as defined in the Jumpstart our Business Startups Act of 2012 or theJOBS Act. An emerging growth company may take advantage of specified reduced reporting and regulatory requirements incontrast to those otherwise applicable generally to public companies. These provisions include:·exemption from the auditor attestation requirement in the assessment of our internal control over financialreporting pursuant to Section 404 the Sarbanes‑Oxley Act of 2002;·an exemption from the requirement to provide certain executive compensation disclosure;·an exemption from the requirement to hold a non-binding advisory vote on executive compensation or to seekshareholder approval of any golden parachute payments not previously approved;·an exemption from any requirements adopted by the Public Oversight Board (PCAOB) requiring mandatoryaudit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provideadditional information about the audit and the financial statements of the issuer.78 Table of ContentsWe may take advantage of these reduced reporting and other regulatory requirements for up to five years or suchearlier time that we are no longer an emerging growth company. We will remain an “emerging growth company” until theearliest of: (1) the last day of the fiscal year in which we have total annual gross revenues of $1 billion or more; (2) the lastday of the fiscal year following the fifth anniversary of the date of the completion of our initial public offering; (3) the dateon which we have issued more than $1 billion in nonconvertible debt during the previous three years; and (4) the date onwhich we are deemed to be a large accelerated filer under the rules of the SEC. In addition, the JOBS Act provides that anemerging growth company may delay adopting new or revised accounting standards until those standards apply to privatecompanies. We have irrevocably elected not to avail ourselves of this delayed adoption of new or revised accountingstandards and, therefore, we will be subject to the same new or revised accounting standards as public companies that are notemerging growth companies. If we choose to take advantage of any of these reduced reporting burdens, the information thatwe provide shareholders may be different than you might get from other public companies.Implications of Being a Foreign Private IssuerAs a foreign private issuer under the Exchange Act, we are exempted from certain provisions of the Exchange Actthat are applicable to U.S. domestic public companies, including:•the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of asecurity registered under the Exchange Act;•the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and tradingactivities and liability for insiders who profit from trades made in a short period of time; and•the rules under the Exchange Act requiring the filing with the Securities and Exchange Commission of quarterlyreports on Form 10‑Q containing unaudited financial and other specified information, or current reports onForm 8‑K upon the occurrence of specified significant events. ITEM 4A. UNRESOLVED STAFF COMMENTSNone ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTSThe following discussion summarizes the significant factors affecting the operating results, financial condition,liquidity and cash flows of our company as of and for the periods presented below. The following discussion and analysisshould be read in conjunction with “Selected Consolidated Financial Information” and the financial statements and therelated notes thereto included elsewhere in this 2016 Annual Report on Form 20-F. The statements in this discussionregarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and allother non‑historical statements in this discussion are forward‑looking statements and are based on the beliefs of ourmanagement, as well as assumptions made by, and information currently available to, our management. Actual results coulddiffer materially from those discussed in or implied by forward‑looking statements as a result of various factors, includingthose discussed below and elsewhere in this Annual Report on Form 20-F, particularly in the section titled “Risk Factors.”OverviewWe are a global commercial-stage biopharmaceutical company focused on the development and commercializationof therapies for rare diseases with significant unmet needs. Our first commercial product is Keveyis® (dichlorphenamide), thefirst and only treatment approved by the U.S. Food and Drug Administration (“FDA”) for hyperkalemic, hypokalemic, andrelated variants of primary periodic paralysis. Keveyis, for which we hold the U.S. marketing rights, has orphan drugexclusivity status in the United States through August 7, 2022. In addition to this neuromuscular disease product, we havetwo clinical-stage product candidates for rare endocrine diseases, Recorlev and levoketoconazole. Recorlev(levoketoconazole, and formerly called COR-003) is a cortisol synthesis inhibitor currently being studied for the treatment ofendogenous Cushing's syndrome. Veldoreotide (formerly called COR-005) is a next-generation somatostatin analog (SSA)being investigated for the treatment of acromegaly, with potential additional79 Table of Contentsapplications in Cushing's syndrome and neuroendocrine tumors. Both Recorlev and veldoreotide have received orphandesignation from the FDA and the European Medicines Agency (“EMA”). Given the well-identified and concentrated prescriber base addressing our target markets, we intend to use a small,focused sales force to effectively market our products, in the United States, the European Union and other key globalmarkets. We believe that our ability to execute on this strategy is enhanced by the significant commercial and clinicaldevelopment experience of key members of our management team. We will continue to identify and evaluate the acquisitionof products and product candidates that would be complementary to our existing rare neuromuscular and endocrinefranchises or that would form the basis for new rare disease franchises. We believe this approach will enable us to maximizeour commercial potential by further leveraging our existing resources and expertise. We have never been profitable and have incurred net losses since our inception in 1996. Our operations to date havebeen focused on identifying, in‑licensing, acquiring and developing our product candidates, organizing and staffing ourcompany, business planning and raising capital. We have funded our operations primarily through equity offerings. Weincurred a net loss attributable to Strongbridge Biopharma of $48.6 million and $43.6 million for the years endedDecember 31, 2016 and 2015, respectively. At December 31, 2016, our accumulated deficit was $129.4 million.See Part 1, Item 4 “Information on the Company – Overview – Recent Developments” for a description of ouracquisition of Keveyis from Taro Pharmaceutical Industries Ltd., our Private Placement and our Loan Agreement with OxfordFinance LLC and Horizon Technology Finance Corporation.Financial Operations OverviewThe following discussion sets forth certain components of our statements of operations as well as factors that impactthose items.RevenuesWe have not generated any revenue during the periods presented. Our ability to generate product revenue andbecome profitable depends upon our ability to obtain regulatory approval for and to successfully commercialize our productcandidates.Research and Development ExpensesOur research and development expenses consist primarily of costs incurred in connection with the development ofour product candidates, including:·personnel‑related costs, such as salaries, bonuses, benefits, travel and other related expenses, includingstock‑based compensation;·expenses incurred under our agreements with CROs, clinical sites, contract laboratories, medical institutionsand consultants that plan and conduct our preclinical studies and clinical trials, including, in the case ofconsultants, stock‑based compensation;·costs associated with regulatory filings;·upfront and milestone payments under in‑license agreements with third parties;·costs of acquiring preclinical study and clinical trial materials, and costs associated with formulation andprocess development;·depreciation, maintenance and other facility‑related expenses; and·costs to secure an exclusive license agreement with Antisense Therapeutics.80 Table of ContentsWe expense all research and development costs as incurred. Clinical development expenses for our productcandidates are a significant component of our current research and development expenses as we progress our productcandidates into and through clinical trials. Product candidates in later stage clinical development generally have higherresearch and development costs than those in earlier stages of development, primarily due to increased size and duration ofthe clinical trials. We recognize costs for each grant project, preclinical study or clinical trial that we conduct based on ourevaluation of the progress to completion, using information and data provided to us by our external research anddevelopment vendors and clinical sites.Through the first half of 2014, we were focused on product candidates that are now outside the scope of our strategicfocus, specifically the development of Crespine, an osteoarthritis program, and a next generation cortisol inhibitor, or NGCI,program. By the end of 2014, we changed our strategic focus to rare endocrine diseases and other rare diseases, specificallythe development of Recorlev. As a result, we significantly reduced activities to develop the Crespine and NGCI programs.We returned our commercial rights to Crespine to the originator in the first half of 2014. We expect to spend only suchamounts as are necessary to maintain our intellectual property on the NGCI program.We expect our research and development expenses to increase in absolute dollars in the future as we continue toin‑license or acquire product candidates and as we advance our existing and any future product candidates into and throughclinical trials and pursue regulatory approval of our product candidates. The process of conducting the necessary clinicalresearch to obtain regulatory approval of a product candidate is costly and time consuming. The probability that any of ourproduct candidates receives regulatory approval and eventually is able to generate revenue depends on a variety of factors,including the quality of our product candidates, early clinical data, investment in our clinical program, competition,manufacturing capability and commercial viability. As a result of these uncertainties, we are unable to determine the durationand completion costs of our research and development projects or if, when and to what extent we will generate revenue fromthe commercialization and sale of any of our product candidates, if approved. We may never succeed in achieving regulatoryapproval for any of our product candidates.We do not allocate personnel‑related research and development costs, including stock‑based compensation or otherindirect costs, to specific programs, as they are deployed across multiple projects under development.General and Administrative ExpensesGeneral and administrative expenses include personnel costs, costs for outside professional services and otherallocated expenses. Personnel costs consist of salaries, bonuses, benefits, travel and stock‑based compensation. Outsideprofessional services consist of legal, accounting and audit services, commercial evaluation and strategy services, and otherconsulting services. We expect to incur additional general and administrative costs as a result of operating as a publiccompany, including expenses related to compliance with the rules and regulations of the SEC and those of any nationalsecurities exchange on which our securities are traded, additional insurance expenses, investor relations activities and otheradministrative and professional services.Interest Expense Interest expense primarily represents interest payable to Oxford and Horizon, amortization of our debt discount, andissuance costs associated with loan and security agreement. Unrealized Gain on Fair Value of Warrants We classified the warrants issued in connection with our December 2016 Private Placement as a liability. Werecorded the fair value of the warrants upon issuance using the Black-Scholes Model and are required to revalue the warrantsat each reporting date with any changes in fair value recorded on our statement of operations and comprehensive loss. Thedecrease in the fair value of the warrants between the issuance date and December 31, 2016 resulted in a unrealized gain of$0.6 million during the 12 months ended December 31, 2016. 81 Table of ContentsOther Income (Expense), NetOther income (expense), net, consists of interest income generated from our cash and cash equivalents, gains fromthe revaluation of foreign currency forward contracts, foreign exchange gains and losses and gains and losses on investments.Our consolidated financial statements are reported in U.S. dollars, which is also our functional currency.Transactions in foreign currencies are remeasured into our functional currency at the rate of exchange prevailing at the dateof the transaction. Any monetary assets and liabilities arising from these transactions are remeasured into our functionalcurrency at exchange rates prevailing at the balance sheet date or on settlement. Resulting gains and losses are recorded inforeign currency gain (loss) in other income (expense) in our consolidated statements of operations.Historically, our cash and cash equivalents have been held primarily in foreign currencies. However, most of ourexpenses have been U.S. dollar denominated. To reduce our currency exposure, we used a hedging program from the fourthquarter of 2013 through the second quarter of 2015. The foreign currency forward contracts used in our hedging programwere not entered into for speculative purposes and, although we believe they served as effective economic hedges, we did notseek to qualify for hedging accounting. In 2014, our operations continued to shift to the United States, but a large portion ofour cash and cash equivalents were still held in foreign currencies. In the first half of 2015, all of our forward contractsexpired.Critical Accounting Policies and Significant Judgments and EstimatesThis operating and financial review of our financial condition and results of operations is based on our consolidatedfinancial statements, which have been prepared in accordance with U.S. generally accepted accounting principles(U.S. GAAP). The preparation of these consolidated financial statements requires us to make estimates and assumptions thataffect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of thefinancial statements, as well as expenses incurred during the reporting periods. Our estimates are based on our historicalexperience and on various other factors that we believe are reasonable under the circumstances, the results of which form thebasis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our financial statements appearingelsewhere in this Annual Report on Form 20-F, we believe the following accounting policies to be the most critical to thejudgments and estimates used in the preparation of our financial statements. Warrant LiabilityThe fair values of certain outstanding warrants were measured using the Black-Scholes option-pricing model. Inputsused to determine estimated fair value of the warrant liabilities include the estimated fair value of the underlying stock at thevaluation date, the estimated term of the warrants, risk-free interest rates, expected dividends and the expected volatility ofthe underlying stock. The significant unobservable inputs used in the fair value measurement of the warrant liabilities werethe fair value of the underlying stock at the valuation date and the estimated term of the warrants. Generally, increases(decreases) in the fair value of the underlying stock and estimated term would result in a directionally similar impact to thefair value measurement.Business CombinationsWhen acquiring new enterprises over which we obtain control, the acquisition method is applied. Under thismethod, we identify assets and liabilities of these enterprises and measure them at fair value at the acquisition date.Allowance is made for the tax effect of the adjustments made.The excess of the consideration transferred, the amount of the non‑controlling interest in the acquiree and theacquisition date fair value of previous equity interest in the acquiree over the fair value of the identifiable net assets acquiredis recorded as goodwill.82 Table of ContentsIntangible AssetsCertain intangible assets were acquired as part of an asset purchase, and have been capitalized at their acquisitiondate at fair value. Acquired definite life intangible assets are amortized using the straight line method over their respectiveestimated useful lives or another appropriate method. The Company evaluates the potential impairment of intangible assets ifevents or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable or that theuseful lives of these assets are no longer appropriate.In connection with the Asset Purchase and Supply Agreement we entered into with Taro Pharmaceutical IndustriesLtd, we have paid Taro an upfront payment in two installments of $1 million in December 2016 and $7.5 million in March2017. We have concluded that the supply price payable by us exceeds fair value and, therefore, have used a discounted cashflow method with a probability assumption to value the payments in excess of fair value at $29.3 million, for which we haverecorded an intangible asset and corresponding liability. This liability will be amortized as we purchase inventory over theterm of the agreement. In addition, we incurred transaction costs of $2.4 million resulting in the recording of an IntangibleAsset of $40.2 million. This asset will be amortized as units are sold over an estimated 8 year period.Purchased identifiable intangible assets with indefinite lives, such as our in‑process research and development, areevaluated for impairment annually in accordance with our policy and whenever events or changes in circumstances indicatethat it is more likely than not that the fair value of these assets has been reduced. To test these assets for impairment, wecompare the fair value of the asset to its carrying value. The method we use to estimate the fair value measurements ofindefinite‑lived intangible assets is based on the income approach. For the impairment analysis for the year endedDecember 31, 2016, significant unobservable inputs used in the income approach valuation method include discount rates,royalty rates and probabilities of product candidate advancement from one clinical trial phase to the next. The probabilitiesof product candidate advancement we used were based on standalone statistical analysis on a phase‑by‑phase basis.During the first half of 2015, as a result of our acquisition of Aspireo Pharmaceuticals Ltd.’s veldoreotide, ourintangible assets increased by $31.3 million.As of December 31, 2016, there were material events that led to the impairment of our intangible assets. We recordeda $5.2 million impairment relating to our BioPancreate IPR&D and a $10.6 million impairment for our veldoreotide IPR&Dfor the year ended December 31, 2016.GoodwillWe test goodwill for impairment on an annual basis or whenever events occur that may indicate possibleimpairment. This analysis requires us to make a series of critical assumptions to (1) evaluate whether any impairment existsand (2) measure the amount of impairment.Because we have one operating segment, when testing for a potential impairment of goodwill, we are required toestimate the fair value of our business as a whole and determine the carrying value. If the estimated fair value is less than thecarrying value of our business, then we are required to estimate the fair value of all identifiable assets and liabilities in amanner similar to a purchase price allocation for an acquired business. Only after this process is completed can the goodwillimpairment be determined, if any.We did not record a charge for impairment for the years ended December 31, 2016, 2015 and 2014. During the firsthalf of 2015, our goodwill increased by $5.1 million as a result of our acquisition of veldoreotide from AspireoPharmaceuticals Ltd. As of December 31, 2016, there were no events or changes in circumstances indicating possibleimpairment.83 Table of ContentsStock‑Based CompensationWe account for stock based compensation awards in accordance with FASB ASC Topic 718, Compensation—StockCompensation (ASC 718). ASC 718 requires all stock based payments including grants of stock options and restricted stockand modifications to existing stock options, to be recognized in the consolidated statements of operations based on their fairvalues.Our stock based awards are subject to either service based or performance based vesting conditions. Vesting ofcertain awards could also be accelerated upon achievement of defined market based vesting conditions. Certain awards alsocontain a combination of service and market conditions or performance and market conditions.We account for employee stock based awards at grant date fair value. If we issue awards with an exercise pricedenominated in a currency other than our functional currency, trading currency or the currency for which we compensate ouremployee, we account for these as liabilities. We account for non employee and liability-classified stock based awards basedon the then current fair values at each financial reporting date until the performance is complete for non employee awards, oruntil the award is settled (exercised) for liability-classified awards. Changes in the amounts attributed to these awardsbetween the reporting dates are included in stock based compensation expense (credit) in our statements of operations. Weinclude liability-classified stock options in non current liabilities in our balance sheets as their settlement (exercise) does notrequire use of cash, cash equivalents or other current assets.We record compensation expense for service based awards over the vesting period of the award on a straight linebasis. Compensation expense related to awards with performance based vesting conditions is recognized over the requisiteservice period using the accelerated attribution method to the extent achievement of the performance condition isprobable. For those awards in which the performance condition was the completion of our initial public offering (IPO), wedid not recognize compensation expense until the close of the IPO as we did not deem the IPO probable until it occurred. Compensation expense for awards with service and market based vesting conditions is recognized using theaccelerated attribution method over the shorter of the requisite service period or the implied period associated withachievement of the market based vesting provisions.We estimate the fair value of our awards with service conditions using the Black Scholes option pricing model,which requires the input of subjective assumptions, including (i) the expected stock price volatility, (ii) the expected term ofthe award, (iii) the risk-free interest rate and (iv) expected dividends. Due to the lack of historical and implied volatility dataof our common stock, we based our estimate of expected volatility on the historical volatility of a group of similar companiesthat are publicly traded. We selected companies with comparable characteristics to us, including enterprise value, riskprofiles and position within the industry, and with historical share price information sufficient to meet the expected term ofthe stock based awards. We compute historical volatility data using the daily closing prices for the selected companies’shares during the equivalent period of the calculated expected term of the stock based awards.We estimate the fair value of our awards with market conditions using a Monte Carlo simulation to determine theprobability of satisfying the market condition. We make this estimate using the conditions that exist at the grant date. Thederived service period, which may be the requisite service period, is also determined at this time. Compensation cost for ourawards with a market condition is recognized ratably using the accelerated attribution method if the award is subject tograded vesting over the requisite service period. The compensation cost for our awards with a market condition is notreversed if the market condition is not satisfied.We have estimated the expected term of employee service-based stock options using the “simplified” method,whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option,due to our lack of sufficient historical data. We have estimated the expected term of employee awards with service andmarket conditions using a Monte Carlo simulation model. This approach involves generating random stock price pathsthrough a lattice type structure. Each path results in a certain financial outcome, such as accelerated vesting or specificoption payout. We have estimated the expected term of nonemployee service and performance based awards based on theremaining contractual term of such awards.84 Table of ContentsThe risk free interest rates for periods within the expected term of the option are based on the Swedish GovernmentBond rate or the U.S. Treasury Bond rate with a maturity date commensurate with the expected term of the associatedaward. We have never paid dividends, and do not expect to pay dividends in the foreseeable future.We are also required to estimate forfeitures at the time of grant, and revise those estimates in subsequent periods ifactual forfeitures differ from estimates. We record stock based compensation expense only for those awards that are expectedto vest. To the extent that actual forfeitures differ from our estimates, the differences are recorded as a cumulative adjustmentin the period the estimates were revised. Historical forfeitures have been insignificant.Income TaxesWe use the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities aredetermined based on the differences between the financial reporting and tax bases of assets and liabilities, and are measuredusing the enacted tax rates and laws that will be in effect when the differences are expected to reverse. We assess thelikelihood that the resulting deferred tax assets will be realized. A valuation allowance is provided when it is more likelythan not that some portion or all of a deferred tax asset will not be realized.We have evaluated the positive and negative evidence bearing upon the realizability of our deferred tax assets.Based on our history of operating losses in Ireland and Sweden, we have concluded that it is more likely than not that thebenefit of our deferred tax assets will not be realized. Currently, as a result of intercompany service agreements which providea source of taxable income going forward, the Strongbridge U.S. Inc. is more likely than not to realize its deferred tax assets.Separately, as a result of writing off its intellectual property, BioPancreate will have a full valuation allowance against itsprior separate company federal attributes and all existing state attributes.Results of OperationsComparison of the Years Ended December 31, 2016 and 2015The following table sets forth our results of operations for the years ended December 31, 2016 and 2015. Year Ended December 31, Change 2016 2015 $ (in thousands) Operating expenses: Research and development $20,023 $20,135 $(112) General and administrative 14,875 22,719 (7,844) Impairment of intangible assets 15,828 — 15,828 Total operating expenses 50,726 42,854 7,872 Operating loss (50,726) (42,854) (7,872) Other (expense) income, net (631) (1,229) 598 Loss before income taxes (51,357) (44,083) (7,274) Income tax benefit 2,638 450 2,188 Net loss (48,719) (43,633) (5,086) Net loss attributable to non‑controlling interest 122 53 69 Net loss attributable to Strongbridge $(48,597) $(43,580) $(5,017) 85 Table of ContentsResearch and Development ExpensesThe following table summarizes our research and development expenses during the years ended December 31, 2016and 2015: Year Ended December 31, Change 2016 2015 $ (in thousands) Product development and supporting activities $16,183 $13,537 $2,646 Antisense Therapeutics license fee — 3,899 (3,899) Compensation and other personnel costs 3,239 1,906 1,333 Stock-based compensation expense 601 793 (192) Total research and development expenses $20,023 $20,135 $(112) Research and development expenses were $20.0 million for the year ended December 31, 2016, a $0.1 milliondecrease compared to the year ended December 31, 2015. The $2.6 million increase in product development and supportingactivities was primarily attributed to a $3.0 million increase in expense to the ongoing clinical trials for Recorlev, and a $1.4million increase due to the initiation of the development activity for veldoreotide, partially offset by reduced developmentspend due to discontinued programs for COR-004 and BioPancreate. Research and development expenses for the year endedDecember 31, 2015 included $3.9 million of the $5.0 million in aggregate cash paid to Antisense Therapeutics upon enteringinto a license agreement in May 2015, with the remaining $1.1 million of cash paid recorded as the initial carrying value ofour investment in the equity of Antisense Therapeutics. Compensation and related costs increased by $1.3 million, for theyear ended December 31, 2016 as compared to the same period in 2015 due to increased headcount of research anddevelopment personnel during the 2016 period. Non-cash stock-based compensation decreased $0.2 million due to thedeparture of certain research and development personnel.General and Administrative ExpensesThe following table summarizes our general and administrative expenses during the years ended December 31, 2016and 2015: Year Ended December 31, Change 2016 2015 $ (in thousands) Outside professional services $5,626 $8,054 $(2,428) IPO preparation costs — 4,007 (4,007) Corporate development and licensing transaction costs — 3,390 (3,390) Compensation and other personnel costs 4,888 3,783 1,105 Stock-based compensation expense 4,006 3,147 859 Facility costs 355 338 17 Total general and administrative expenses $14,875 $22,719 $(7,844) General and administrative expenses were $14.9 million for the year ended December 31, 2016, a decrease of$7.8 million compared to the year ended December 31, 2015. The $2.4 million decrease in outside professional andconsulting services was primarily due to decreased legal fees in support of general corporate matters, employee recruitingfees, and consulting fees for general business efforts. General and administrative expenses for the year ended December 31,2015 also included $4.0 million of legal and accounting fees related to the redomiciliation of the Company from Sweden toIreland and the indirect activities necessary to prepare the Company’s financial records for the U.S. initial public offeringcompleted in October 2015. General and administrative expenses for the year ended December 31, 2015 also included $3.4million of transaction fees and expenses related to the acquisition of veldoreotide from Aspireo Pharmaceuticals, the licenseof COR-004 from Antisense Therapeutics, and other business development activities. Compensation and related personnelcosts increased by $1.1 million, and non-cash stock-based compensation by $0.9 million, during the year ended December31, 2016 due to increased headcount of administrative personnel during the 2016 period. 86 Table of ContentsOther Income (Expense), NetThe following table summarizes our other income (expense), net, during the years ended December 31, 2016 and2015: Year Ended December 31, Change 2016 2015 $ (in thousands) Foreign exchange (loss) $(69) $(124) $55 Interest expense (20) — $(20) Unrealized gain on fair value of warrants 638 — $638 Loss on termination of license agreement with AntisenseTherapeutics (1,051) — $(1,051) Other expense, net (129) (1,105) $976 Total other (expense) income, net $(631) $(1,229) $598 Other income (expense), net, increased for the year ended December 31, 2016 as compared to the year endedDecember 31, 2015. The decrease in other expense, is mostly due to the impairment of our Antisense investment in 2015 of$.5 million as well loss on our Radnor lease of $.2 million, where as in 2016 we returned the license to Antisense andincurred a loss on termination charge of $1.1 million. We also recorded an unrealized gain on the fair value of our warrants.Income Tax BenefitWe recorded income tax benefit of $2.6 million for the year ended December 31, 2016 and $0.5 million for the yearended December 31, 2015. For the year ended December 31, 2016, the benefit was primarily due to BioPancreate’s write offof intellectual property and certain permanent deductions at Strongbridge U.S. Inc.. Additionally, Strongbridge U.S. Inc. ismore likely than not to recognize it’s deferred tax assets. In December 31, 2015 the benefit was due to the generation of U.S.state and federal net operating loss carry forwards and federal tax credit carry forwards. The income tax benefit for U.S. stateand federal net operating loss carry forwards and the federal tax credit carry forwards has been recognized to the extent it issupported by the deferred tax liabilities recorded in connection with the acquisition of BioPancreate.Net Loss Attributable to Non-Controlling InterestWe recorded a net loss attributable to non-controlling interest of $122,000 for the year ended December 31,2016. The non-controlling interest results from the 0.418% of Cortendo AB shares not acquired by Strongbridge Biopharmaplc pursuant to the exchange offer that expired September 3, 2015. In September 2016, the non-controlling interest wasacquired by the Company.87 Table of ContentsComparison of the Years Ended December 31, 2015 and 2014The following table sets forth our results of operations for the years ended December 31, 2015 and 2014. Year Ended December 31, Change 2015 2014 $ (in thousands) Operating expenses: Research and development $20,135 $5,844 $14,291 General and administrative 22,719 4,588 18,131 Total operating expenses 42,854 10,432 32,422 Operating loss (42,854) (10,432) (32,422) Other (expense) income, net (1,229) 282 (1,511) Loss before income taxes (44,083) (10,150) (33,933) Income tax benefit 450 480 (30) Net loss (43,633) (9,670) (33,963) Net loss attributable to non‑controlling interest 53 — 53 Net loss attributable to Strongbridge $(43,580) $(9,670) $(33,910) Research and Development ExpensesThe following table summarizes our research and development expenses during the years ended December 31, 2015and 2014: Year Ended December 31, Change 2015 2014 $ (in thousands) Clinical development and supporting activities $13,537 $5,412 $8,125 Antisense Therapeutics license fee 3,899 — 3,899 Compensation and other personnel costs 1,906 164 1,742 Stock-based compensation expense 793 268 525 Total research and development expenses $20,135 $5,844 $14,291 Research and development expenses were $20.1 million for the year ended December 31, 2015, an increase of$14.3 million compared to the year ended December 31, 2014. The $8.2 million increase in clinical development andsupporting activities was primarily attributed to a $4.8 million increase in expenses related to the ongoing clinical trials forRecorlev, and a $3.4 million increase due to the initiation of the development activity for Recorlev and veldoreotide.Research and development expenses for the year ended December 31, 2015 included $3.9 million of the $5.0 million inaggregate cash paid to Antisense Therapeutics upon entering into a license agreement in May 2015, with the remaining $1.1million of cash paid recorded as the initial carrying value of our investment in the equity of Antisense Therapeutics. Compensation and related costs increased by $1.7 million, and non-cash stock-based compensation increased $0.5 million,for the year ended December 31, 2015 as compared to the same period in 2014 due to increased headcount of research anddevelopment personnel during the 2015 period. 88 Table of ContentsGeneral and Administrative ExpensesThe following table summarizes our general and administrative expenses during the years ended December 31, 2015and 2014: Year Ended December 31, Change 2015 2014 $ (in thousands) Outside professional services $8,054 $3,335 $(4,719) Redomiciliation and IPO preparation costs 4,007 — (4,007) Corporate development and licensing transaction costs 3,390 — (3,390) Compensation and other personnel costs 3,783 1,165 (2,618) Stock-based compensation expense 3,147 (17) (3,164) Facility costs 338 105 (233) Total general and administrative expenses $22,719 $4,588 $(18,131) General and administrative expenses were $22.7 million for the year ended December 31, 2015, an increase of$18.1 million compared to the year ended December 31, 2014. The $4.7 million increase in outside professional andconsulting services was primarily due to increased legal fees in support of general corporate matters, employee recruitingfees, audit fees, market analysis costs, and consulting fees for business development efforts. General and administrativeexpenses for the year ended December 31, 2015 also included $4.0 million of legal and accounting fees related to theredomiciliation of the Company from Sweden to Ireland and the indirect activities necessary to prepare the Company’sfinancial records for the U.S. initial public offering completed in October 2015. General and administrative expenses for theyear ended December 31, 2015 also included $3.4 million of transaction fees and expenses related to the acquisition ofveldoreotide from Aspireo Pharmaceuticals, the license of COR-004 from Antisense Therapeutics, and other businessdevelopment activities. Compensation and related personnel costs increased by $2.6 million, and non-cash stock-basedcompensation by $3.2 million, during the year ended December 31, 2015 due to increased headcount of administrativepersonnel during the 2015 period. Facility costs increased by $0.2 million primarily as a result of entering into a lease forour Trevose, Pennsylvania office space in April 2015.Other Income (Expense), NetThe following table summarizes our other income (expense), net, during the years ended December 31, 2015 and2014: Year Ended December 31, Change 2015 2014 $ (in thousands) Foreign exchange loss $(124) $(204) $(80) Other income, net (1,105) 486 1,591 Total other (expense) income, net $(1,229) $282 $1,511 Other income (expense), net, changed from expense of $0.3 million in 2014 to expense of $1.2 million in 2015. Thechange was primarily due to the charges related to the wind down of our previous foreign currency hedging program and thewrite down of our investment in Antisense equity to market value.Income Tax BenefitWe recorded income tax benefit of $0.5 for the years ended December 31, 2015 and 2014, due to the generation ofU.S. state and federal net operating loss carry forwards and federal tax credit carry forwards. The income tax benefit for U.S.state and federal net operating loss carry forwards and the federal tax credit carry forwards has been recognized to the extentit is supported by the deferred tax liabilities recorded in connection with the acquisition of BioPancreate.89 Table of ContentsNet Loss Attributable to Non‑Controlling InterestWe recorded a net loss attributable to non-controlling interest of $53,000 for the year ended December 31, 2015. The non-controlling interest results from the 0.418% of Cortendo AB shares not acquired by Strongbridge Biopharma plcpursuant to the exchange offer that expired September 3, 2015.Liquidity and Capital ResourcesOur operations have been financed primarily by net proceeds from the issuance of ordinary shares and the issuanceof debt. Our primary uses of capital have been third‑party expenses associated with the planning and conduct of clinicaltrials, costs of process development services and manufacturing of our product candidates, and compensation‑relatedexpenses. We expect our funding requirements for operating activities to increase in 2017 and possibly beyond due toexpenses associated with the commercialization of Keveyis, the execution of the Phase 3 SONICS and LOGICS clinical trialsfor Recorlev, and selling, general and administrative expenses. We also expect our cash needs to increase to fund potentialin‑licenses, acquisitions or similar transactions as we pursue our strategy. These expenses may be offset only in part by salesof Keveyis. In addition, beginning in June 2018, we will be required to make monthly principal payments to repay amountsborrowed under our credit facility.Cash used to fund operating expenses is affected by the timing of when we pay expenses, as reflected in the changein our outstanding accounts payable and accrued expenses. We believe that our cash resources will be sufficient to allow usto fund planned operations at least into 2019, which is after the expected receipt of data from the Recorlev SONICS andLOGICS Phase 3 clinical trials.Our future funding requirements will depend on many factors, including the following:·the amount of revenue that we receive from sales of Keveyis; the cost and timing of establishing sales,marketing, distribution and administrative capabilities;·the scope, rate of progress, results and cost of our clinical trials testing and other related activities;·whether we borrow any additional amounts under our credit facility;·the number and characteristics of product candidates that we pursue, including any additional productcandidates we may in‑license or acquire;·the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;·the cost of defending potential intellectual property disputes, including patent infringement actions brought bythird parties against us or our product candidates;·the cost, timing and outcomes of regulatory approvals;·the terms and timing of any collaborative, licensing and other arrangements that we may establish, includingany required milestone and royalty payments thereunder; and·the emergence of competing technologies and their achieving commercial success before we do or other adversemarket developments.We expect to continue to incur losses. Our ability to achieve and maintain profitability is dependent upon thesuccessful commercialization of Keveyis, the development, regulatory approval and commercialization of our productcandidates and achieving a level of revenues adequate to support our cost structure. We may never achieve profitability, andunless and until we do, we will continue to need to raise additional capital. If we need to raise additional capital to90 Table of Contentsfund our operations and complete our ongoing and planned clinical trials, funding may not be available to us on acceptableterms, or at all.We plan to continue to fund our operations and capital funding needs through equity or debt financing, along withrevenues from Keveyis. The sale of additional equity would result in additional dilution to our shareholders. The incurrenceof debt financing would result in debt service obligations and the instruments governing such debt could provide foroperating and financing covenants that would restrict our operations. If we are not able to secure adequate additionalfunding, we may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets wherepossible or suspend or curtail planned programs. In addition, lack of funding would limit any strategic initiatives toin‑license or acquire additional product candidates or programs.Cash FlowsComparison for the Years Ended December 31, 2016 and 2015: Year Ended December 31 2016 2015 Net cash (used in) provided by: Operating activities $(31,714) $(37,360) Investing activities (3,392) (4,294) Financing activities 50,320 77,404 15,214 35,750 Effect of exchange rate changes on cash and cash equivalents — 241 Net increase in cash and cash equivalents $15,214 $35,991 Operating ActivitiesNet cash used in operating activities was $31.7 million for the year ended December 31, 2016, compared to$37.4 million for the year ended December 31, 2015. The decrease in net cash used was primarily due to businessdevelopment activities and fees related to indirect activities necessary to redomicile the Company and to prepare theCompany’s financial records for the U.S. initial public offering that occurred in 2015.Investing ActivitiesThe $3.4 million of cash used in 2016 investing activities related to the purchase of Keveyis. The $4.3 million ofcash used in 2015 investing activities primarily related to the acquisition of veldoreotide and the license of COR-004 in2015.Financing ActivitiesNet cash provided by financing activities for the year ended December 31, 2016 was $50.3 million and consisted of$32.7 million of proceeds from the issuance of ordinary shares and warrants in a private placement financing and $19.3million proceeds from the issuance of debt and warrants. Net cash provided by financing activities for the year endedDecember 31, 2015 was $77.4 million, which consisted of proceeds from the issuance of ordinary shares in private placementfinancings and our IPO in October of 2015.91 Table of ContentsContractual Obligations and Other CommitmentsThe following table summarizes our future minimum commitments at December 31, 2016: Payments due by period Less than More than 1 year 1 to 3 years 3 to 5 years 5 years Total (in thousands) Minimum contractpurchases $5,003 $5,058 $11,022 $8,025 $29,108 Debt Payments $ — $12,667 $7,333 $ — $20,000 Operating leases $311 $503 $ — $— $814 Total contractualobligations $5,314 $18,228 $18,355 $8,025 $49,922 We enter into agreements in the normal course of business with CROs for clinical trials and with vendors forpreclinical studies and other services and products for operating purposes, which are cancelable at any time by us, generallyupon 30 days prior written notice. Future payment obligations under these agreements are not included in this table ofcontractual obligations.We are obligated to make future payments to third parties under in‑license agreements, including sublicense fees,royalties and payments that become due and payable upon the achievement of development and commercializationmilestones. As the amount and timing of sublicense fees and the achievement and timing of these milestones are not probableand estimable, such commitments have not been included on our consolidated balance sheets or in the contractualobligations table above. See footnote 6 of the consolidated financial statements for a description of our license agreements.Off‑Balance Sheet ArrangementsWe do not have variable interests in variable interest entities or any off‑balance sheet arrangements.Quantitative and Qualitative Disclosures About Market RiskAt December 31, 2016, we had cash and cash equivalents of $66.8 million, which consisted of 100% of bankdeposits in the United States. As part of our cash and investment management processes, we perform periodic evaluations ofthe credit standing of the financial institutions with which we deposit our cash or purchase cash equivalents, and we have notsustained any credit losses from instruments held at these financial institutions.Recent Accounting PronouncementsSee Note 2 Summary of significant accounting policies and basis of presentation - Recently adopted accountingpronouncements to our consolidated financial statements.92 Table of Contents ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Executive Officers and Board of DirectorsThe following table presents information about our officers and directors as of March 1, 2017.NAME AGE POSITION Executive Officers Matthew Pauls 46 Chief Executive Officer andDirector A. Brian Davis 50 Chief Financial Officer Fredric Cohen, M.D. 52 Chief Medical Officer Stephen Long 51 Chief Legal Officer Robert Lutz 48 Chief Business Officer Non‑Employee Directors John H. Johnson 59 Director, Chairman of the Board Richard S. Kollender 47 Director Garheng Kong, M.D., Ph.D. 41 Director Jeffrey W. Sherman, M.D., FACP 61 Director Mårten Steen, M.D., Ph.D. 41 Director Hilde H. Steineger, Ph.D. 50 Director Unless otherwise indicated, the current business addresses for our executive officers and directors is 900 NorthbrookDrive, Suite 200, Trevose, Pennsylvania 19053, United States.Executive OfficersMatthew Pauls has served as our Chief Executive Officer since August 2014 and as a member of our board ofdirectors since September 2015. Mr. Pauls has served as a member of the board of directors of Mast Therapeutics, Inc., apublicly traded biopharmaceutical company, since October 2015. Prior to joining Strongbridge, Mr. Pauls was ChiefCommercial Officer of Insmed, Inc., a publicly traded biopharmaceutical company, from April 2013 to August 2014. Prior toInsmed, Mr. Pauls worked at Shire Pharmaceuticals, a publicly traded specialty biopharmaceutical company, beginning in2007 until March 2013, most recently as Senior Vice President, Head of Global Commercial Operations. Mr. Pauls also heldpositions at Bristol‑Myers Squibb, a publicly traded pharmaceutical company, in Brand Management and Payor Marketing,and at Johnson & Johnson, a publicly traded medical devices, pharmaceutical and consumer packaged goods manufacturer,in various U.S. and global commercial roles. He is a volunteer board member of the Pennington School in Pennington, NewJersey, and the Boys & Girls Clubs of Philadelphia. Mr. Pauls holds B.S. and M.B.A. degrees from Central MichiganUniversity and a J.D. from Michigan State University College of Law.A. Brian Davis has served as our Chief Financial Officer since March 2015. Prior to joining Strongbridge, Mr. Davisserved as Senior Vice President and Chief Financial Officer at Tengion, Inc., a publicly traded regenerative medicinecompany, from August 2010 to December 2014. In December 2014, Tengion, Inc. filed a petition for relief under Chapter 7 ofTitle 11 of the United States Bankruptcy Code. From 2009 to July 2010, Mr. Davis served in a consulting capacity as ChiefFinancial Officer of Neose Technologies, Inc., a biopharmaceutical company. Mr. Davis worked at Neose Technologies, Inc.from 1994 to 2009, where he held several positions of increasing responsibility, including Senior Vice President and ChiefFinancial Officer. Mr. Davis is licensed as a certified public accountant, and received a B.S. in accounting from Trenton StateCollege and an M.B.A. from The Wharton School at the University of Pennsylvania.Fredric Cohen, M.D. has served as our Chief Medical Officer since November 2016. Dr. Cohen joined Strongbridgein August 2015 and held roles of increasing responsibility, including Senior Vice President, Global Research andDevelopment, and Vice President, Clinical Research and Development, prior to his promotion to Chief Medical Officer. Fredis an endocrinologist by training with more than 20 years of drug and business development experience, most recentlyfocused in development and commercialization of rare disease and specialty products. Prior to joining Strongbridge, Fredprovided strategic and operational counsel to life science companies, actively supporting their93 Table of Contentsdevelopment and licensing functions. Prior to that, he served as Executive Director, Clinical Pipeline, at Aptalis Pharma,where he was responsible for innovation strategy as well as building and advancing the company’s specialty pharmapipeline. He has also held research and development positions with Johnson & Johnson and Eli Lilly & Company. Fred holdsan M.D. from Pennsylvania State University College of Medicine and an A.B. in biology from Franklin and MarshallCollege.Stephen Long has served as our Chief Legal Officer since March 2015 and as Company Secretary since September2015. Prior to joining Strongbridge, Mr. Long served as Counsel at the law firm of Reed Smith LLP, from April 2013 toFebruary 2015. He previously served at C.R. Bard, Inc., a medical device manufacturing company, from October 2000 to May2012 in the roles of Vice President, General Counsel, as Vice President, and Secretary, and as Associate General Counsel.Mr. Long also served as Assistant General Counsel, Consumer Healthcare, at Warner‑Lambert Company, and as Counsel forthe company’s pharmaceutical division from February 1998 to September 2000. Mr. Long held positions earlier in his careerat the law firm of Willkie Farr & Gallagher and Bankers Trust Company. Mr. Long received his B.S. from the School ofIndustrial and Labor Relations at Cornell University and his J.D. from Albany Law School of Union University.Robert Lutz has served as our Chief Business Officer since October 2014. Prior to joining Strongbridge, he workedas a full‑time consultant at Medgenics, a publicly traded, early‑stage, gene‑therapy and rare disease biotech company, fromMay 2014 to September 2014. Mr. Lutz worked at Shire Pharmaceuticals, a publicly traded specialty biopharmaceuticalcompany, from November 2012 to April 2014, where he most recently served as Vice President and held key leadershippositions in the Neurosciences Business unit. Prior to Shire Pharmaceuticals, Mr. Lutz worked in a variety of roles, includingVice President and Senior Associate, for Cinergy Corp., an electric and gas utility company. Mr. Lutz worked as a SeniorAnalyst at Alan B. Slifka and Co., a hedge fund, after having started his career at Goldman Sachs, where he served as aFinancial Analyst in their principal investment area. He holds a B.A. in economics and computer science from AmherstCollege and an M.B.A. from the Kellogg School of Management.Non‑Employee DirectorsJohn H. Johnson has served as Chairman of our board of directors since March 2015. From January 2012 untilAugust 2014, Mr. Johnson served as the President and Chief Executive Officer of Dendreon Corporation and as its Chairmanfrom January 2012 until June 2014. From January 2011 until January 2012, he served as the Chief Executive Officer and amember of the board of Savient Pharmaceuticals, Inc. From November 2008 until January 2011, Mr. Johnson served as SeniorVice President and President of Eli Lilly and Company’s Oncology unit. He was also Chief Executive Officer of ImCloneSystems Incorporated, which develops targeted biologic cancer treatments, from August 2007 until November 2008, andserved on ImClone’s board of directors until it was acquired by Eli Lilly in November 2008. From 2005 to 2007, Mr. Johnsonserved as Company Group Chairman of Johnson & Johnson’s Worldwide Biopharmaceuticals unit, President of its OrthoBiotech Products LP and Ortho Biotech Canada units from 2003 to 2005, and Worldwide Vice President of its CNS,Pharmaceuticals Group Strategic unit from 2001 to 2003. Prior to joining Johnson & Johnson, he also held several executivepositions at Parkstone Medical Information Systems, Inc., Ortho‑McNeil Pharmaceutical Corporation and Pfizer, Inc.Mr. Johnson is the former Chairman of Tranzyme Pharma, Inc. Mr. Johnson currently serves as a member of the board ofdirectors of Cempra Pharmaceuticals, Inc., Histogenics Corporation, Portola Pharmaceuticals, Inc. and SucampoPharmaceuticals, Inc. He previously served as a member of the board of directors for the Pharmaceutical Research andManufacturers of America and the Health Section Governing Board of Biotechnology Industry Organization. Mr. Johnsonholds a B.S. from the East Stroudsburg University of Pennsylvania.Richard S. Kollender has served as a member of our board of directors since March 2015. Since August 2016, Mr.Kollender has served as Chief Business Officer and Chief Financial Officer of Rapid Micro Biosystems. Since January 2011,Mr. Kollender has served as a Partner and Executive Manager of Quaker Partners Management, LP, a healthcare investmentfirm, which Mr. Kollender initially joined in 2003 and was promoted to partner in 2005. Mr. Kollender serves as a director ofTarsa Therapeutics. Mr. Kollender previously served as a director of Celator Pharmaceuticals, Inc., Rapic Micro Biosystems,Inc., Insmed, Transave, Inc., Nupathe, Inc., TargetRx, Inc., Precision Therapeutics, Inc., Transport Pharmaceuticals, Inc. andCorridor Pharmaceuticals. Mr. Kollender has held positions in sales, marketing and worldwide business development atGlaxoSmithKline or GSK, and served as investment manager at94 Table of ContentsS.R. One, the corporate venture capital arm of GSK. Mr. Kollender holds a B.A. in accounting from Franklin and MarshallCollege and a MBA and Health Administration and Policy Degree with honors from the University of Chicago, and haspracticed as a certified public accountant for six years at public accounting firms, including KPMG. Garheng Kong, M.D., Ph.D. has served as a member of our board of directors since September 2015. In July 2013, hefounded, and has since served as managing partner of, HealthQuest Capital, a healthcare venture growth fund focused onmedical products, devices, diagnostics, consumer health and healthcare IT. Dr. Kong was a general partner at SofinnovaVentures, a venture firm focused on life sciences, from September 2010 to December 2013. From May 2000 to September2010, he worked at Intersouth Partners, a venture capital firm, serving most recently as a general partner. Dr. Kong currentlyserves as a director of Cempra, Inc., Histogenics Corporation, Alimera Sciences, Inc. and Laboratory Corporation of AmericaHoldings. Dr. Kong holds a B.S. from Stanford University and an M.D., Ph.D. and M.B.A. from Duke University.Jeffrey W. Sherman, M.D., FACP, has served as a member of our board of directors since October 2016. He currentlyserves as the chief medical officer and Executive Vice President of Research and Development at Horizon Pharma plc. He hasmore than 25 years of research, clinical development, regulatory and commercialization experience within thebiopharmaceutical industry. He is a member of a number of professional societies, a diplomat of the National Board ofMedical Examiners and the American Board of Internal Medicine, and also serves on the Board of Advisors of the Center forInformation and Study on Clinical Research Participation (CISCRP). He previously held senior leadership positions at IDMPharma Takeda Global Research and Development, Neopharma, Searle/Pharmacia, Bristol-Myers Squibb, and is pastpresident of the Drug Information Association (DIA). Dr. Sherman earned his M.D. from the Rosalind Franklin University ofMedicine and Science/The Chicago Medical School. He completed internship and residency programs at NorthwesternUniversity Feinberg School of Medicine, where he currently serves as an adjunct assistant professor, and a fellowshipprogram at the University of California San Francisco. He received a B.A. in Biology from Lake Forrest College.Mårten Steen, M.D., Ph.D. has served as a member of our board of directors since December 2014. Since April 2010,he has served as a Partner of HealthCap, a venture capital firm investing in life science companies. Prior to HealthCap, fromFebruary 2008 until March 2010, Dr. Steen served as director at Merck Serono SA, a biopharmaceutical company. Currently,he serves as a member of the board of directors of Wilson Therapeutics AB, Altimmune Inc. and BioClin Therapeutics Inc. Hepreviously served on the boards of Ultragenyx Inc. and FerroKin Biosciences. Dr. Steen holds a B.Sc. in BusinessAdministration, an M.D., and a Ph.D. in Clinical Chemistry, all from Lund University.Hilde H. Steineger, Ph.D. has served as a member of our board of directors since January 2014. She is currentlyconsultant for the Strategic Innovation Management in the Nutrition & Health Division of BASF. She previously served asthe Head of Strategic Innovation Management and Head of Global Omega‑3 Innovation Management at Pronova BioPharmaASA, a BASF company, from April 2013 to May 2015. From August 2007 to June 2010, Dr. Steineger was Head of InvestorRelations for Pronova BioPharma and Vice President Business Development in Pronova BioPharma from November 2009 toApril 2013. Dr. Steineger is a board member and Head of the Audit Committee of Nordic Nanovector ASA. Dr. Steineger alsoserves as a director of PCI Biotech ASA. She previously served as a member of the boards of directors of Aifew AS, AlgetaASA, Weifa AS, Invent2 AS, Alertis AS, Clavis Pharma ASA and Biotech Pharmacon ASA. Dr. Steineger holds a Ph.D. inmedical biochemistry from University of Oslo.Board CompositionThe Irish Companies Act provides for a minimum of two directors for public limited companies. Our Articles ofAssociation provide for a minimum of two directors and a maximum of 13 directors. Our shareholders may from time to timeincrease or reduce the maximum number, or increase or reduce the minimum number (subject to the minimum requirements ofthe Irish Companies Act), of directors by special resolution. Our board of directors determines the number of directors withinthe range of two to 13. Our board currently consists of seven directors.95 Table of ContentsOur Articles divide our board of directors into three classes, with members of each class being elected to staggeredthree‑year terms. At each annual general meeting, directors will be elected for a full term of three years to succeed thosedirectors of the relevant class whose terms are expiring. A nominee is elected to the board of directors by a plurality of votescast. Our Class I directors, consisting of Drs. Steineger and Steen, were elected at our annual general meeting in May 2016 fora term ending in May 2019. Our Class II directors, consisting of Messrs. Johnson and Kollender, and Dr. Sherman, areexpected to be nominated for election at our annual general meeting in May 2017 for a term ending in May 2020. Our ClassIII directors, consisting of Dr. Kong and Mr. Pauls, are expected to be nominated for election at our annual general meeting inMay 2018 for a term ending in May 2021.Holders of our ordinary shares are entitled to one vote for each share at all meetings at which directors are elected.Our Articles provide for a minimum of two directors. In the event that an election results in only one director beingelected, that director shall be elected and shall serve for a three‑year term, and the nominee receiving the next greatestnumber of votes in favor of his or her election shall hold office until his or her successor shall be elected.Any vacancy on our board of directors, including a vacancy resulting from an increase in the number of directors orfrom the death, resignation, retirement, disqualification or removal of a director, shall be deemed a casual vacancy. Subject tothe terms of any one or more classes or series of preferred shares, any casual vacancy shall only be filled by the decision of amajority of our board of directors then in office, provided that a quorum is present and provided that the appointment doesnot cause the number of directors to exceed any number fixed by or in accordance with our Articles as the maximum numberof directors.Any director of a class of directors elected to fill a vacancy resulting from an increase in the number of directors ofsuch class shall hold office for the remaining term of that class. Any director elected to fill a vacancy not resulting from anincrease in the number of directors shall have the same remaining term as that of his predecessor. A director retiring at ameeting shall retain office until the close or adjournment of the meeting.Our Articles provide that our shareholders may, by an ordinary resolution, remove a director from office before theexpiration of his or her term. Additionally, our Articles provide that a director may be removed with or without cause at therequest of not less than 75% of the other directors.We are a foreign private issuer. As a result, in accordance with the NASDAQ stock exchange listing requirements ofThe NASDAQ Global Select Market, or NASDAQ, we may rely on home country governance requirements and certainexemptions thereunder rather than relying on the stock exchange corporate governance requirements. For an overview of ourcorporate governance principles, see “Description of Share Capital and Articles of Association” in the Company’sRegistration Statement on Form F-3 filed January 12, 2017 (file number 333-215531) which is incorporated herein byreference. Director IndependenceBased upon information requested from and provided by each director concerning their background, employmentand affiliations, including family relationships, our board of directors has determined that each of Messrs. Johnson andKollender and Drs. Kong, Sherman, Steen and Steineger, representing six of our seven directors, is independent under theapplicable rules and regulations of NASDAQ. In making such determinations, the board of directors considered therelationships that each such non‑employee director has with the Company and all other facts and circumstances the board ofdirectors deemed relevant in determining their independence.Committees of the Board of DirectorsThe standing committees of our board of directors consist of a nomination and governance committee, an auditcommittee and a compensation committee. Each committee operates under a charter. Copies of each committee’s charter areposted on the Investors section of our website, which is located at www.strongbridgebio.com.96 Table of ContentsNomination and Governance CommitteeThe current members of our nomination and governance committee are Mårten Steen, John H. Johnson and GarhengKong, with Dr. Steen serving as chairman. Our board of directors has determined that each member of our nomination andgovernance committee is independent under the applicable listing requirements of NASDAQ.Audit CommitteeThe current members of our audit committee are, Richard S. Kollender, Hilde H. Steineger and Jeffrey Sherman, withMr. Kollender serving as chairman. Our board of directors has determined that each member of our audit committee isindependent under Rule 10A‑3 of the Exchange Act and the applicable listing requirements of NASDAQ, and that eachmember of our audit committee satisfies the other listing requirements of NASDAQ for audit committee membership. Ourboard of directors has also determined that two of the three members of our audit committee, Mr. Kollender and Dr. Steineger,qualify as an “audit committee financial expert,” as such term is defined by the SEC, and that he or she has the requisite levelof financial sophistication required by the continued listing standards of NASDAQ.Compensation CommitteeThe current members of our compensation committee are John H. Johnson, Garheng Kong and Richard S. Kollender,with Mr. Johnson serving as chairman. Our board of directors has determined that each member of our compensationcommittee is independent under the applicable listing requirements of NASDAQ.B. COMPENSATIONSummary Compensation TableThe following table sets forth information concerning cash and non-cash compensation paid for 2016 and 2015 tocertain of our executive officers (referred to herein as “our executive officers”). Salary Bonus Name and position Year ($) ($) Total Matthew Pauls 2016 $468,000 $198,900 $666,900 Chief Executive Officer 2015 $428,653 $241,250 $669,903 A. Brian Davis (2) 2016 $334,750 $123,858 $458,608 Chief Financial Officer 2015 $248,522 $145,250 $393,772 Fredric Cohen, M.D. (3) 2016 $318,747 $134,900 $453,647 Chief Medical Officer (1)The amounts in this column represent the discretionary bonuses paid with respect to 2016 and 2015 performance. (2)Mr. Davis’s employment commenced in March 2015.(3)Dr. Cohen’s employment commenced in August 2015 and he was promoted to Chief Medical Officer in November 2016.Narrative to Summary Compensation TableWe have entered into employment agreements with Matthew Pauls, A. Brian Davis and Fredric Cohen. Theemployment agreements outline the terms of the employment relationship, including any potential severance benefits. Webelieve that the employment agreements provide certainty to our management team and help to retain the leadershipnecessary for our company to succeed.97 (1)Table of ContentsEmployment AgreementsWe entered into an employment agreement with (1) Mr. Pauls effective August 23, 2014, for his service as ourPresident and Chief Executive Officer, (2) Mr. Davis effective March 23, 2015, for his service as our Chief Financial Officer,and (3) Dr. Cohen effective August 5, 2015, for his service as our Chief Medical Officer. Dr. Cohen was originally hired asVice President, Clinical Research and Development. The term of the employment agreement for Mr. Pauls is throughAugust 23, 2017, the term of the employment agreement with Mr. Davis is through March 23, 2018, and the term of theemployment agreement for Dr. Cohen is through August 5, 2017. The employment agreements will automatically renew forone‑year terms unless either party gives notice of non‑renewal at least 90 days prior to the end of the term. The agreementsalso provide for annual incentive bonus targets for Messrs. Pauls and Davis, and Dr. Cohen of 50%, 40% and 40%,respectively.Under their agreements, our executive officers are entitled to participate in benefits offered by us for similarlysituated employees, including the Company’s paid time-off policy.Each employment agreement provides for severance benefits detailed below under “Potential Payments uponTerminations of Employment or Following a Change in Control.” Each employment agreement also contains anon‑competition provision, which applies during the term of employment and for one year following termination, and arestrictive covenant with respect to non‑disclosure of confidential information, which remains in effect during the term ofemployment and at all times thereafter.Other BenefitsOur executive officers are eligible to participate in our employee benefit plans on the same basis as our otheremployees, including our health and welfare plans and our 401(k) plan. Under our 401(k) plan, participants may elect tomake both pre‑ and post‑tax contributions to their accounts in the plan, and we do not match these contributions. Ourexecutive officers are not eligible for retirement benefits other than under our 401(k) plan. The company is not required to,and had not, set a side any amounts relating to pension or retirements.98 Table of ContentsOutstanding Equity Awards at March 1, 2017The following table includes certain information with respect to option awards that were outstanding as of March 1,2017 for our executive officers. Option Awards Number of Number of Securities Securities Underlying Underlying Unexercised Unexercised Option Options Options Exercise Option (#) (#) Price Grant Expiration Name Exercisable Unexercisable ($) Date Date Matthew Pauls 72,727 — $8.06 8/23/2014 8/23/2019 72,727 — $10.74 8/23/2014 8/23/2019 — 81,818 $13.43 8/23/2014 8/23/2019 123,176 331,369 $15.71 5/26/2015 5/26/2025 56,250 168,750 $3.94 2/26/2016 2/26/2026 — 375,000 $2.90 2/23/2017 2/23/2027 A. Brian Davis 14,773 39,772 $15.71 5/26/2015 5/26/2025 44,455 88,908 $18.80 7/21/2015 7/21/2020 16,250 48,750 $3.94 2/26/2016 2/26/2026 — 180,000 $2.90 2/23/2017 2/23/2027 Fredric Cohen, M.D. 30,682 51,136 $18.12 8/5/2015 8/5/2025 7,500 22,500 $3.94 2/26/2016 2/26/2026 — 40,000 $4.16 6/13/2016 6/13/2016 — 10,000 $3.95 11/23/2016 11/23/2026 — 173,000 $2.90 2/23/2017 2/23/2027 (1)These options vest in three equal annual tranches. The first tranche of these options vested on August 23, 2015. The second tranche vests onAugust 23, 2016. The third tranche vests on August 23, 2017. These options will fully vest and become exercisable upon a change ofcontrol provided that the executive is employed on the date of such change of control.(2)These stock options vest in three separate tranches. The first tranche vests in 16 equal quarterly installments commencing the first quartersubsequent to the grant date; the second tranche vests in 16 equal quarterly installments commencing on the date on which our shares begintrading on NASDAQ; and the third tranche vests one-half on the date on which the closing price of our shares as reported on NASDAQequals $33.66 for Mr. Pauls, and $31.46 for Mr. Davis, for 20 consecutive trading days, so long as this occurs prior to May 26, 2019, andone-half on the one year anniversary of such initial vesting date. All of these options will fully vest and become exercisable upon a changeof control provided that the executive is employed on the date of such change in control.(3)These options vest in 16 equal quarterly installments commencing with the first quarter subsequent to the grant date. These options will fullyvest and become exercisable upon a change of control provided that the executive is employed on the date of such change of control.(4)These options vest in three equal annual tranches. The first tranche of these options vested on March 23, 2016. The second tranche vests onMarch 23, 2017. The third tranche vests on March 23, 2018. These options will fully vest and become exercisable upon a change of controlprovided that the executive is employed on the date of such change of control.(5)These options vest with respect to one-fourth of the shares to vest on the one-year anniversary of the Date of Grant and the remaining three-fourths of shares to vest in 12 equal, quarterly installments after the one-year anniversary of the Date of Grant. These options will fully vestand become exercisable upon a change in control provided that the executive is employed on the date of such change in control.Prior to September 3, 2015, we did not have an equity compensation plan. Grants of stock options to the executiveofficers and other individuals were made through individual grant agreements.Restricted Stock Units GrantsOn February 26, 2016, our board of directors approved grants of restricted stock units, or RSUs, to Messrs. Pauls andDavis, and Dr. Cohen in the amounts of 40,000, 20,000 and 13,000, respectively. On June 13, 2016 and November 23, 2016,our board of directors approved grants of RSUs for Dr. Cohen in the amounts of 5,000 and 4,000,99 (1)(1)(1)(2)(3)(3)(2)(4)(3)(3)(5)(3)(5)(5)(3)Table of Contentsrespectively. These RSUs vest, with respect to 100% of the grants, on the second anniversary following the date of grant,provided that the executive is employed by the Company on such vesting date. All RSUs will fully vest upon a change ofcontrol of our company. If and when the RSUs vest, the Company will issue to the executive one ordinary share of theCompany for each whole RSU that has vested, subject to satisfaction of the executive’s tax withholding obligations. TheRSUs will cease to be outstanding upon such issuance of shares.Potential Payments Upon Terminations of Employment or Following a Change of ControlThe employment agreements with Messrs. Pauls and Davis, and Dr. Cohen provide that, upon a termination ofemployment by our company without “cause,” or by the executive for “good reason,” subject to the execution of a release ofclaims, he or she will be entitled to (1) an amount equal to the sum of 18 months of base salary and the target bonus forMr. Pauls, or 12 months of base salary and the target bonus for our other executive officers, paid in installments over the18‑month period following termination for Mr. Pauls or the 12‑month period following termination for our other executiveofficers, (2) a pro rata portion of the annual bonus that he or she would have been entitled to receive for the calendar year thatincludes the termination date, based on the actual achievement of the applicable performance goals, and (3) medical anddental benefits provided by us that are at least equal to the level of benefits provided to other similarly situated activeemployees until the earlier of (a) 18 months following the termination date for Mr. Pauls, or 12 months following thetermination date for our other executive officers and (b) the date the executive becomes covered under a subsequentemployer’s medical and dental plans.If any of our other executive officers is terminated due to our election not to renew the term of the employmentagreement, subject to the execution of a release of claims, he will be entitled to (1) an amount equal to the sum of 12 monthsof base salary and the target bonus for Mr. Pauls, or six months of base salary and one‑half of the target bonus for our otherexecutive officers, paid in installments over the 12‑month period following termination for Mr. Pauls or the six‑month periodfollowing termination for our other executive officers, (2) a pro rata portion of the annual bonus that he or she would havebeen entitled to receive for the calendar year that includes the termination date, based on the actual achievement of theapplicable performance goals, and (3) medical and dental benefits provided by us that are at least equal to the level ofbenefits provided to other similarly situated active employees until the earlier of (a) 12 months following the terminationdate for Mr. Pauls, or six months following the termination date for our other executive officers and (b) the date the executivebecomes covered under a subsequent employer’s medical and dental plans.In the event there is a change of control of our company and, during the 24‑month period following the change ofcontrol, any of our executive officers is terminated by us without cause, by the executive for good reason, or due to ourelection not to renew the term of the employment agreement, he or she will be entitled to the severance benefits detailedbelow and all unvested equity or equity‑based awards held by the executive will accelerate and vest. The severance benefitsinclude (1) an amount equal to the sum of 24 months base salary and the target bonus for Mr. Pauls, or the sum of 18 monthsbase salary and the target bonus for our other executive officers, paid in installments over the 24‑month period followingtermination for Mr. Pauls or the 18‑month period following termination for our other executive officers; and (2) the medicaland dental benefits provided by us until the earlier of (a) 18 months following the termination date for Mr. Pauls or one yearfollowing the termination date of our other executive officers and (b) the date the executive becomes covered under asubsequent employer’s medical and dental plans.Under the employment agreements, “cause” is defined as (1) the conviction of, or plea of guilty or nolo contendereto, any felony or any crime involving theft, embezzlement, dishonesty or moral turpitude, (2) any act constituting willfulmisconduct, deliberate malfeasance, dishonesty, or gross negligence in the performance of the individual’s duties, (3) thewillful and continued failure to perform any of the individual’s duties, which has not been cured within 30 days followingwritten notice from us, or (4) any material breach by the individual of the employment agreement or any other agreementwith us, which has not been cured within 30 days following written notice from us. “Good reason” is defined as any of thefollowing reasons unless cured by us within a specified period: (1) a material reduction of the individual’s base salary, otherthan a reduction that is applicable to other senior executives in the same manner and proportion, (2) the assignment of dutiesor responsibilities which are materially inconsistent with the individual’s position, (3) a change in the principal location atwhich the individual performs his or her duties to a new location that is more than 50 miles from the prior location or (4) amaterial breach of the employment agreement by us. “Change of control ” is defined as the occurrence of any of thefollowing: (a) any person or group of persons becomes100 Table of Contentsthe beneficial owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of thecombined voting power of the Company’s then outstanding securities; provided that if the person or group of persons isalready deemed to own more than 50% of the total fair market value or total voting power, then the acquisition of additionalstock by such person or group of persons shall not constitute an additional change of control; (b) the stockholders of theCompany approve a plan of complete liquidation of the Company; (c) the sale or disposition of all or substantially all of theCompany’s assets; or (d) a merger, consolidation or reorganization of the Company with or involving any other entity, otherthan a merger, consolidation or reorganization that would result in the voting securities of the Company outstandingimmediately prior thereto continuing to represent (either by remaining outstanding or by being converted into votingsecurities of the surviving entity) at least a 50% of the combined voting power of the Company (or such surviving entity)outstanding immediately after such merger, consolidation or reorganization owned in approximately the same proportion ofsuch ownership by each of the prior shareholders as prior to the transaction. The following acquisitions are not considered tobe a change of control of the Company: (A) an acquisition by the Company or entity controlled by the Company, or (B) anacquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company.The employment agreements also provide that, in the event that any of our other executive officers is subject to theexcise tax under Section 4999 of the Code, the payments that would be subject to the excise tax will be reduced to the levelat which the excise tax will not be applied unless such executive would be in a better net after‑tax position by receiving thefull payments and paying the excise tax.Director CompensationOur directors received fees in cash in 2016 and 2015 for their service on the board as summarized below: Fees earned orpaid in cash Name Year ($) John H. Johnson 2016 $96,713 2015 $65,050 Richard S. Kollender 2016 $57,795 2015 $33,126 Garheng Kong, M.D., Ph.D. 2016 $46,685 2015 $12,934 Jeffrey W. Sherman, M.D., FACP 2016 $ — 2015 $ — Mårten Steen, M.D., Ph.D. 2016 $47,780 2015 $35,833 Hilde H. Steineger, Ph.D. 2016 $47,780 2015 $35,833 H. Joseph Reiser 2015 $18,749 Espen Tidemann Jørgensen 2015 $14,348 Ernest Eichenberg III 2015 $10,938 Joseph M. Mahady 2015 $22,029 Eigil Stray Spetalen 2015 $21,349 (1)Messrs. Reiser, Eichenberg, Jørgensen, Spetalen and Mahady resigned from the board of directors of Cortendo AB in 2015.(2)Dr. Sherman joined the board of directors in October 2016.101 (2)(1)(1)(1)(1)(1)Table of ContentsThe following table includes certain information with respect to option awards that were outstanding as of March 1,2017 for our current non‑employee directors. Option Awards Number of Number of Securities Securities Underlying Underlying Unexercised Unexercised Option Options Options Exercise Option (#) (#) Price Grant Expiration Name Exercisable Unexercisable ($) Date Date John H. Johnson 18,181 — $10.74 3/17/2015 3/17/2020 — 18,181 $13.43 3/17/2015 3/17/2020 — 18,181 $16.11 3/17/2015 3/17/2020 13,224 — $17.55 10/16/2015 10/16/2025 — 40,000 $5.50 5/12/2016 5/12/2026 Richard S. Kollender 9,090 — $10.74 3/17/2015 3/17/2020 — 9,090 $13.43 3/17/2015 3/17/2020 — 9,090 $16.11 3/17/2015 3/17/2020 9,918 — $17.55 10/16/2015 10/16/2025 40,000 $5.50 5/12/2016 5/12/2026 Garheng Kong, M.D., Ph.D. 11,110 13,890 $17.55 10/16/2015 10/16/2025 9,385 — $17.55 10/16/2015 10/16/2025 40,000 $5.50 5/12/2016 5/12/2016 Jeffrey W. Sherman, M.D., FACP — 60,000 $5.22 10/1/2016 10/1/2026 Mårten Steen, M.D., Ph.D. 11,110 13,890 $17.55 10/16/2015 10/16/2025 9,918 — $17.55 10/16/2015 10/16/2025 — 40,000 $5.50 5/12/2016 5/12/2016 Hilde H. Steineger, Ph.D. 11,110 13,890 $17.55 10/16/2015 10/16/2025 9,918 — $17.55 10/16/2015 10/16/2025 — 40,000 $5.50 5/12/2016 5/12/2026 (1)These options vest in three equal annual tranches. The first tranche of these options vested on March 17, 2016. The second tranche vests onMarch 17, 2017. The third tranche vests on March 17, 2018. These options will fully vest and become exercisable upon a change of controlprovided that the individual is a member of our board of directors on the date of such change of control.(2)These options vested on April 30, 2016. These options will fully vest and become exercisable upon a change of control provided that theindividual is a member of our board of directors on the date of such change of control.(3)These stock options vest with respect to one-third of the shares on October 16, 2017. The remaining two-thirds of the stock options vest inequal monthly installments over the 24-month period commencing after October 16, 2017. All of these options will fully vest and becomeexercisable upon a change of control provided that the individual is a member of our board of directors on the date of such change ofcontrol.(4)These options vest on the earlier of May 12, 2017 or the date of the company’s 2017 Annual General Meeting. These options will fully vestand become exercisable upon a change of control provided that the individual is a member of our board of directors on the date of suchchange of control.(5)These options vest in three equal annual tranches. The first tranche vest on October 1, 2017; the remaining two tranches vest equally onOctober 1, 2018 and 2019. All of these options will fully vest and become exercisable upon a change of control provided that theindividual is a member of our board of directors on the date of such change of control.102 (1)(1)(1)(2)(4)(1)(1)(1)(2)(4)(3)(2)(4)(5)(3)(2)(4)(3)(2)(4)Table of ContentsOur board of directors’ compensation program provides for the following:·Annual Cash Retainer—$40,000·Additional Annual Cash Retainers·Non‑Executive Chairman of the Board Retainer—$35,000·Audit Committee Chair Retainer—$15,000·Compensation Committee Chair Retainer—$10,000·Governance Committee Chair Retainer—$7,500·Audit Committee Member (other than Chairman) Retainer—$7,500·Compensation Committee Member (other than Chairman) Retainer—$5,000·Governance Committee Member (other than Chairman) Retainer—$3,750·Equity Compensation·Initial Equity Grant—Option to purchase 60,000 shares, with one-third of the shares vesting on the firstanniversary of the date of grant and the remaining two-thirds of the shares vesting in equal monthlyinstallments over the 24‑month period that follows the first anniversary of the date of grant, providedthat the director continues to provide services as a member of our board of directors continuously fromthe date of grant through the applicable vesting date·Annual Equity Grant—Option to purchase 40,000 shares with such option vesting in full on the firstanniversary of the date of grant, provided that the director continues to provide services as a member ofour board of directors continuously from the date of grant through the vesting dateNon‑Employee Director Equity Compensation PlanOur board of directors has adopted and our shareholders have approved, the Non‑Employee Director EquityCompensation Plan (the Non‑Employee Director Plan). The Non‑Employee Director Plan provides for the grant ofnonstatutory stock options, stock awards, and restricted stock units to our non‑employee directors. The Non‑EmployeeDirector Plan is effective as of September 3, 2015.Authorized Shares. A total of 628,155 shares of our common stock have been reserved for issuance pursuant to theNon‑Employee Director Plan. The shares of our common stock that we have reserved for issuance pursuant to theNon‑Employee Director Plan (the “Share Pool”) will be increased on the first day of each fiscal year, in an amount equal toone‑half percent (0.5%) of the outstanding shares of our common stock on the last day of the immediately preceding fiscalyear. The Share Pool will be reduced on the date of grant, by one share of our common stock for each award under theNon‑Employee Director Plan; provided that awards that are valued by reference to shares of our common stock but arerequired to be paid in cash pursuant to their terms will not reduce the Share Pool. If and to the extent options terminate,expire, or are canceled, forfeited, exchanged, or surrendered without having been exercised, or if any stock awards or awardsof restricted stock units (including restricted stock received upon the exercise of options) are forfeited, the shares of ourcommon stock subject to such awards will again be available for awards under the Share Pool. Notwithstanding theforegoing, shares tendered by individual grantees, or withheld by us, as full or partial payment to us upon the exercise ofoptions will not become available for issuance again under the Non‑Employee Director Plan.103 Table of ContentsPlan Administration. Our board administers the Non‑Employee Director Plan. Subject to the provisions of theNon‑Employee Director Plan, our board has the power to determine the terms of the awards, including the exercise price, thenumber of shares of our common stock subject to each such award, the exercisability of the awards and the form ofconsideration, if any, payable upon exercise. To the maximum extent permitted by law, no member of our board will be liablefor any action taken or decision made in good faith relating to the Non‑Employee Director Plan or any award grantedthereunder.Stock Options. The exercise price of options granted under the Non‑Employee Director Plan may be equal to orgreater than the fair market value of our common stock on the date of grant. The term of an option may not exceed ten years.After the termination of service of a non‑employee director for any reason other than death, disability or cause (as defined inthe Non‑Employee Director Plan), he or she may exercise the vested portion of his or her option for 90 days. If termination isdue to death (or death occurs within 90 days after the director’s termination date) or disability, the vested portion of theoption will remain exercisable for one year. However, in no event may an option be exercised later than the expiration of itsterm. The entire option is forfeited upon a termination for Cause. In addition, if a non‑employee director has engaged inconduct that constitutes cause, any shares acquired upon exercise of an option for which we have not yet delivered the sharecertificates shall be automatically forfeited to us in exchange for payment of the exercise price paid for such shares.Stock Awards. Stock awards may be granted under the Non‑Employee Director Plan. Stock awards are grants ofshares of our common stock that vest in accordance with terms and conditions established by the board. The board willdetermine the number of shares granted as stock awards to a non‑employee director and the consideration, if any, to be paidfor such shares. The board may impose whatever conditions to vesting it determines to be appropriate (for example, the boardmay set restrictions based on the achievement of specific performance goals or continued service to us); provided, however,that the board, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed. Shares ofcommon stock subject to stock awards that do not vest are subject to forfeiture.Restricted Stock Units. Restricted stock units may be granted under the Non‑Employee Director Plan. Restrictedstock units are bookkeeping entries representing an amount equal to the fair market value of one share of our common stock.The board determines the terms and conditions of restricted stock units, including the vesting criteria (which may includeaccomplishing specified performance criteria or continued service to us) and the form and timing of payment. The amountpayable as a result of the vesting of a restricted stock unit will be distributed as soon as practicable following the vesting dateand in no event later than the fifteenth date of the third calendar month of the year following the vesting date of the restrictedstock unit (or as otherwise permitted under Section 409A of the Internal Revenue Code); provided, however, that anindividual grantee may, if and to the extent permitted by our board, elect to defer payment of restricted stock units in amanner permitted by Section 409A of the Internal Revenue Code. Notwithstanding the foregoing, the board, in its solediscretion, may accelerate the time at which any restrictions will lapse or be removed.Non‑Transferability of Awards. Unless our board provides otherwise, the Non‑Employee Director Plan generallydoes not allow for the transfer of awards and only the recipient of an award may exercise an award during his or her lifetime.Certain Adjustments. In the event of certain changes in our capitalization, to prevent diminution or enlargement ofthe benefits or potential benefits available under the Non‑Employee Director Plan, the board will adjust the number and classof shares that may be delivered under the Non‑Employee Director Plan and/or the number, class and price per share of sharescovered by each outstanding award.Change of Control. The Non‑Employee Director Plan provides that in the event of a change of control, as definedin the Non‑Employee Director Plan, where we are not the surviving corporation (or we survive only as a subsidiary of anothercorporation), unless our board determines otherwise, all outstanding awards will be assumed by, or replaced with comparableawards by, the surviving corporation (or a parent or subsidiary of the surviving corporation). In the event the survivingcorporation in such change of control (or a parent or subsidiary of the surviving corporation) does not assume or replace theoutstanding awards with comparable awards, (i) we will provide written notice of such change of control to each individualgrantee with outstanding awards; (ii) all outstanding options will automatically accelerate and become fully vested andexercisable; (iii) all outstanding stock awards will become vested and deliverable 104 Table of Contentsin accordance with the Non‑Employee Director Plan; and (iv) all outstanding restricted stock units will become vested anddeliverable in accordance with the Non‑Employee Director Plan.Notwithstanding the foregoing, if there is a change of control, our board may require that grantees surrenderoutstanding options in exchange for a payment of cash or stock equal to the amount by which the fair market value of theshares exceeds the exercise price and/or, after giving grantees an opportunity to exercise options, terminate all unexercisedoptions, with such surrender or termination taking place as of the date of the change of control or such other date that ourboard specifies.Amendment; Termination. Our board has the authority to amend, suspend or terminate the Non‑Employee DirectorPlan provided such action does not impair the existing rights of any participant. The Non‑Employee Director Planautomatically terminates in 2025, unless we terminate it sooner. We will obtain shareholder approval of any amendment tothe Non‑Employee Director Plan as required by applicable law or listing requirements.Equity Compensation PlanOur board of directors has adopted, and our shareholders have approved, the 2015 Equity Compensation Plan (the“2015 Plan”). The 2015 Plan provides for the grant of incentive stock options, within the meaning of Section 422 of theInternal Revenue Code, to our employees and any parent or subsidiary corporations’ employees, and for the grant ofnonstatutory stock options, stock awards, and restricted stock units to our employees, directors and consultants and ourparent or subsidiary corporations’ employees and consultants. The 2015 Plan is effective as of September 3, 2015.Authorized Shares. A total of 3,343,434 shares of our common stock have been reserved for issuance pursuant to the2015 Plan. The shares of our common stock that we have reserved for issuance pursuant to the 2015 Plan (the “Share Pool”),will be increased on the first day of each fiscal year, in an amount equal to four percent (4.0%) of the outstanding shares ofour common stock on the last day of the immediately preceding fiscal year. A maximum of 1,000,000 shares of our commonstock may be subject to awards made under the 2015 Plan to any individual during a calendar year, subject to adjustment asprovided in the 2015 Plan. The maximum number of shares that may be issued under the 2015 Plan as incentive stockoptions is 3,343,434. The Share Pool will be reduced on the date of grant, by one share of our common stock for each awardunder the 2015 Plan; provided that awards that are valued by reference to shares of our common stock but are required to bepaid in cash pursuant to their terms will not reduce the Share Pool. If and to the extent options terminate, expire, or arecanceled, forfeited, exchanged, or surrendered without having been exercised, or if any stock awards or awards of restrictedstock units (including restricted stock received upon the exercise of options) are forfeited, the shares of our common stocksubject to such awards will again be available for awards under the Share Pool. Notwithstanding the foregoing, the followingshares of our common stock will not become available for issuance under the 2015 Plan: (i) shares tendered by individualgrantees, or withheld by us, as full or partial payment to us upon the exercise of options granted under the 2015 Plan and(ii) shares withheld by, or otherwise remitted to us to satisfy an individual grantee’s tax withholding obligations upon thelapse of restrictions on stock awards, or the exercise of options granted under the 2015 Plan.Plan Administration. Our compensation committee administers the 2015 Plan. Subject to the provisions of the 2015Plan, our compensation committee has the power to determine the terms of the awards, including the exercise price, thenumber of shares of our common stock subject to each such award, the exercisability of the awards and the form ofconsideration, if any, payable upon exercise. To the maximum extent permitted by law, no member of our board or ourcompensation committee will be liable for any action taken or decision made in good faith relating to the 2015 Plan or anyaward granted thereunder.Stock Options. The exercise price of options granted under the 2015 Plan may be equal to or greater than the fairmarket value of our common stock on the date of grant. The term of an option may not exceed ten years, except that the termof an incentive stock option granted to any employee who owns more than 10% of the voting power of all classes of ouroutstanding stock must not exceed five years and the exercise price must equal to at least 110% of the fair market value ofour common stock on the grant date. After the termination of service of an employee, director or consultant for any reasonother than death, disability or cause (as defined in the 2015 Plan), he or she may exercise the vested portion of his or heroption for 90 days. If termination is due to death (or death occurs within 90 days after the individual’s termination date) ordisability, the vested portion of the option will remain exercisable for one year. However, in no event may an option beexercised later than the expiration of its term. The entire option is forfeited upon105 Table of Contentsa termination for Cause. In addition, if an employee, director or consultant has engaged in conduct that constitutes cause, anyshares acquired upon exercise of an option for which we have not yet delivered the share certificates shall be automaticallyforfeited to us in exchange for payment of the exercise price paid for such shares.Stock Awards. Stock awards may be granted under the 2015 Plan. Stock awards are grants of shares of our commonstock that vest in accordance with terms and conditions established by the compensation committee. The compensationcommittee will determine the number of shares of granted as stock awards to any employee, director, or consultant and theconsideration, if any, to be paid for such shares. The compensation committee may impose whatever conditions to vesting itdetermines to be appropriate (for example, the compensation committee may set restrictions based on the achievement ofspecific performance goals or continued service to us); provided, however, that the compensation committee, in its solediscretion, may accelerate the time at which any restrictions will lapse or be removed. Shares of our common stock subject tostock awards that do not vest are subject to forfeiture.Restricted Stock Units. Restricted stock units may be granted under the 2015 Plan. Restricted stock units arebookkeeping entries representing an amount equal to the fair market value of one share of our common stock. Thecompensation committee determines the terms and conditions of restricted stock units, including the vesting criteria (whichmay include accomplishing specified performance criteria or continued service to us) and the form and timing of payment.The amount payable as a result of the vesting of a restricted stock unit will be distributed as soon as practicable following thevesting date and in no event later than the fifteenth date of the third calendar month of the year following the vesting date ofthe restricted stock unit (or as otherwise permitted under Section 409A of the Internal Revenue Code); provided, however,that an individual grantee may, if and to the extent permitted by our compensation committee, elect to defer payment ofrestricted stock units in a manner permitted by Section 409A of the Internal Revenue Code. Notwithstanding the foregoing,the compensation committee, in its sole discretion, may accelerate the time at which any restrictions will lapse or beremoved.Performance‑Based Awards. Certain stock awards or restricted stock units granted under the 2015 Plan may begranted in a manner that should be deductible by us under Section 162(m) of the Internal Revenue Code. These awards,referred to as performance‑based awards, will be determined based on the attainment of written performance goals approvedby the compensation committee. The performance‑based awards will be based upon one or more of the following objectivecriteria: (i) consolidated earnings before or after taxes (including earnings before interest, taxes, depreciation andamortization); (ii) net income; (iii) operating income; (iv) earnings per share; (v) return on shareholders’ equity;(vi) attainment of strategic and operational initiatives; (vii) customer income; (viii) economic value‑added models;(ix) maintenance or improvement of profit margins; (x) stock price (including total shareholder return), including, withoutlimitation, as compared to one or more stock indices; (xi) market share; (xii) revenues, sales or net sales; (xiii) return onassets; (xiv) book value per share; (xv) expense management; (xvi) improvements in capital structure; (xvii) costs; and(xviii) cash flow. The foregoing criteria may relate to the company, one or more of our subsidiaries or one or more of ourdivisions or units, or any combination of the foregoing, and may be applied on an absolute basis and/or be relative to one ormore peer group companies or indices, or any combination thereof, all as determined by the compensation committee. Inaddition, to the degree consistent with the Internal Revenue Code, the performance criteria may be calculated without regardto extraordinary, unusual and/or non‑recurring items. With respect to performance‑based awards, (i) the compensationcommittee will establish the objective performance goals applicable to a given period of service while the outcome for thatperformance period is substantially uncertain and no later than 90 days after the commencement of that period of service (butin no event after 25% of that period of service has elapsed) and (ii) no awards will be granted to any participant for a givenperiod of service until the compensation committee certifies that the objective performance goals (and any other materialterms) applicable to that period have been satisfied.Non‑Transferability of Awards. Unless our compensation committee provides otherwise, the 2015 Plan generallydoes not allow for the transfer of awards and only the recipient of an award may exercise an award during his or her lifetime.Certain Adjustments. In the event of certain changes in our capitalization, to prevent diminution or enlargement ofthe benefits or potential benefits available under the 2015 Plan, the compensation committee will adjust the number andclass of shares that may be delivered under the 2015 Plan and/or the number, class and price per share of shares covered byeach outstanding award, and the numerical share limits set forth in the 2015 Plan.106 Table of ContentsChange of Control. The 2015 Plan provides that in the event of a change of control, as defined in the 2015 Plan,where we are not the surviving corporation (or we survive only as a subsidiary of another corporation), unless ourcompensation committee determines otherwise, all outstanding awards will be assumed by, or replaced with comparableawards by, the surviving corporation in such change of control (or a parent or subsidiary of the surviving corporation). In theevent the surviving corporation (or a parent or subsidiary of the surviving corporation) in such change of control does notassume or replace the outstanding awards with comparable awards, (i) we will provide written notice of such change ofcontrol to each individual grantee with outstanding awards; (ii) all outstanding options will automatically accelerate andbecome fully vested and exercisable; (iii) all outstanding stock awards will become vested and deliverable in accordancewith the 2015 Plan; and (iv) all outstanding restricted stock units will become vested and deliverable in accordance with the2015 Plan.Notwithstanding the foregoing, if there is a change of control, our board may require that grantees surrenderoutstanding options in exchange for a payment of cash or stock equal to the amount by which the fair market value of theshares exceeds the exercise price or, after giving grantees an opportunity to exercise options, terminate all unexercisedoptions, with such surrender or termination taking place as of the date of the change of control or such other date that ourboard specifies.Amendment; Termination. Our board has the authority to amend, suspend or terminate the 2015 Plan provided suchaction does not impair the existing rights of any participant. The 2015 Plan automatically terminates in 2025, unless weterminate it sooner. We will obtain shareholder approval of any amendment to the 2015 Plan as required by applicable law orlisting requirements.2017 Inducement PlanOn February 23, 2017, our board of directors adopted the 2017 Inducement Plan (the “Inducement Plan”), pursuantto which we (along with our affiliates and subsidiaries) may grant equity-based awards to new employees. The purpose of theInducement Plan is to attract valued employees by offering them a greater stake in our success and a closer identity with us,and to encourage ownership of our ordinary shares by such employees. The Inducement Plan was adopted without shareholder approval pursuant to Rule 5635(c)(4) of the NASDAQListing Rules. In accordance with Rule 5635(c)(4) of the NASDAQ Listing Rules, awards under the Inducement Plan mayonly be made to individuals who were not previously an employee or a non-employee director of the Company or any of oursubsidiaries (or who had a bona fide period of non-employment with the Company and our subsidiaries) who is hired by theCompany or a subsidiary. Subject to adjustments described in the Inducement Plan, we may issue up to 1,000,000 of ourordinary shares in the form of stock options, stock awards and restricted stock units to eligible recipients.Administration. Our compensation committee administers the Inducement Plan and is authorized to determine,among other things, the persons to whom inducement awards will be made and the terms of such awards.Stock Options. The exercise price of options granted under the Inducement Plan will be equal to or greater than thefair market value of our ordinary shares on the date the options are granted and the term of any option will not exceed tenyears from the date of the grant. After a termination of service for any reason other than death, disability or cause (as definedin the Inducement Plan), the grantee of an option award may exercise the vested portion of his or her option for 90 days. Iftermination is due to death (or death occurs within 90 days after the individual’s termination date) or disability, the vestedportion of the option will remain exercisable for one year. However, in no event may an option be exercised later than theexpiration of its term. The entire option will be forfeited upon a termination for cause. In addition, if an employee, director orconsultant has engaged in conduct that constitutes cause, any shares acquired upon exercise of an option for which we havenot yet delivered the share certificates will be automatically forfeited to us in exchange for payment of the exercise price paidfor such shares.Stock Awards and Restricted Stock Units. Ordinary shares issued or transferred pursuant to stock awards may beissued or transferred for consideration or for no consideration, and may be subject to restrictions or no restrictions, asdetermined by the compensation committee. Each restricted stock unit will be granted with respect to one ordinary share107 Table of Contentsor will have a value equal to the fair market value of one ordinary share. Restricted stock units will be paid in cash, ordinaryshares, or other securities, other awards or other property, as determined by the compensation committee, upon the lapse ofthe restrictions applicable thereto. The amount payable as a result of the vesting of a restricted stock unit will be distributedas soon as practicable following the vesting date and in no event later than the fifteenth date of the third calendar month ofthe year following the vesting date of the restricted stock unit (or as otherwise permitted under Section 409A of the InternalRevenue Code); provided, however, that an individual grantee may, if and to the extent permitted by our compensationcommittee, elect to defer payment of restricted stock units in a manner permitted by Section 409A of the Internal RevenueCode. Except as otherwise set forth in an award agreement, if a grantee ceases to be employed by, or provide services to, us,any stock award or restricted stock units held by the grantee that are subject to transfer restrictions will be forfeited.Non‑Transferability of Awards. Except as otherwise permitted by an award agreement or by our compensationcommittee, the Inducement Plan generally does not allow for the transfer of awards made under the Inducement Plan, exceptby will or by the laws of descent and distribution.Certain Adjustments. In the event of certain changes in our capitalization, to prevent dilution or enlargement of thebenefits or potential benefits available under the Inducement Plan, the compensation committee will adjust the number andclass of shares that may be delivered under the Inducement Plan and/or the number, class and price per share of sharescovered by each outstanding award, and the numerical share limits set forth in the Inducement Plan.Change of Control. The Inducement Plan provides that in the event of a change of control, as defined in theInducement Plan, where we are not the surviving corporation (or we survive only as a subsidiary of another corporation),unless our compensation committee determines otherwise, all outstanding awards will be assumed by, or replaced withcomparable awards by, the surviving corporation in such change of control (or a parent or subsidiary of the survivingcorporation). In the event the surviving corporation (or a parent or subsidiary of the surviving corporation) in such change ofcontrol does not assume or replace the outstanding awards with comparable awards, (i) we will provide written notice of suchchange of control to each individual grantee with outstanding awards; (ii) all outstanding options will automaticallyaccelerate and become fully vested and exercisable; (iii) all outstanding stock awards will become vested and deliverable inaccordance with the Inducement Plan; and (iv) all outstanding restricted stock units will become vested and deliverable inaccordance with the Inducement Plan.Notwithstanding the foregoing, if there is a change of control, our board may require that grantees surrenderoutstanding options in exchange for a payment of cash or stock equal to the amount by which the fair market value of theshares exceeds the exercise price or, after giving grantees an opportunity to exercise options, terminate all unexercisedoptions, with such surrender or termination taking place as of the date of the change of control or such other date that ourboard specifies.Amendment; Termination. Our board has the authority to amend or terminate the Inducement Plan at any time;provided, however, that the board will not amend the Inducement Plan without shareholder approval if such approval isrequired in order to comply with applicable laws or stock exchange requirements. The Inducement Plan automaticallyterminates in 2027, unless we terminate it sooner.D. EMPLOYEESAs of December 31, 2016, we had 24 full‑time employees, each of whom is working in the United States. Of thesefull‑time employees, 9 were engaged in research and development and 15 were engaged in general and administrativeactivities.E. SHARE OWNERSHIPThe following table sets forth certain information as of March 1, 2017 regarding beneficial ownership of ourordinary shares by all of our current directors and executive officers. The number of ordinary shares beneficially owned byeach entity, person, executive officer or director is determined in accordance with the rules of the SEC, and the information isnot necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes anyordinary shares over which the individual has sole or shared voting power or investment power108 Table of Contentsas well as any ordinary shares that the individual has the right to acquire within 60 days of March 1, 2017 through theexercise of any option or other right. Except as otherwise indicated, and subject to applicable community property laws, thepersons named in the table have sole voting and investment power with respect to all ordinary shares held by that person.Executive Officers and Directors No. of Shares % of totalShares Matthew Pauls 338,465 * Fredric Cohen, M.D. 38,182 * A. Brian Davis 123,030 * Stephen Long 122,536 * Robert Lutz 98,543 * John H. Johnson 49,586 * Richard S. Kollender 28,098 * Garheng Kong, M.D., Ph.D. 21,885 * Jeffrey W. Sherman, M.D., F.A.C.P. 0 * Mårten Steen, M.D., Ph.D. 22,418 * Hilde H. Steineger, Ph.D. 22,418 * All Current Executive Officers and Directors as a Group (11 persons) 865,161 2.4% *Indicates beneficial ownership of less than 1% of the total outstanding ordinary shares. ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.PRINCIPAL SHAREHOLDERSThe number of ordinary shares beneficially owned by each entity, person, executive officer or director is determinedin accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for anyother purpose. Under such rules, beneficial ownership includes any ordinary shares over which the individual has sole orshared voting power or investment power as well as any ordinary shares that the individual has the right to acquire within60 days of March 1, 2017 through the exercise of any option or other right. Except as otherwise indicated, and subject toapplicable community property laws, the persons named in the table below have sole voting and investment power withrespect to all ordinary shares held by that person.Ordinary shares that a person has the right to acquire within 60 days of March 1, 2017 are deemed outstanding forpurposes of computing the percentage ownership of the person holding such rights, but are not deemed outstanding forpurposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of allexecutive officers and directors as a group. The percentage of beneficial ownership of our ordinary shares prior to the offeringis based on an aggregate of 35,335,026 shares outstanding as of March 1, 2017.The following table presents information relating to the beneficial ownership of our ordinary shares as of March 1,2017.Name of Beneficial Owner No. of Shares % oftotalSharesCaxton Alternative Management LP 5,394,994 15.3%Growth Equity Opportunities Fund III, LLC 4,141,308 11.7%HealthCap VI, L.P. 3,236,008 9.2%Vivo Capital VIII, LLC 3,000,000 8.5%Broadfin 2,894,581 8.2%(1)Based on the information disclosed in a Schedule 13G filed with the SEC on December 30, 2016 by Caxton Corporation (“Caxton”), CDKAssociates, L.L.C. (“CDK”) and Bruce Kovner, in which Caxton, the manager of CDK, and Mr. Kovner, the Chairman and sole shareholderof Caxton, each reported shared voting and dispositive power with respect to 5,394,994 ordinary shares and CDK reported shared votingand109 (1)(2)(3)(4)(5)Table of Contentsdispositive power with respect to 5,102,433 ordinary shares. Caxton and Mr. Kovner disclaim beneficial ownership of the ordinary sharesreported except to the extent of their pecuniary interest therein. The address of Caxton and CDK is 731 Alexander Road, Princeton, NJ,08540. The business address of Mr. Kovner is 1001 North U.S. Highway 1, Jupiter, FL 33477.(2)Based on the information disclosed in a Schedule 13D/A filed with the SEC on January 6, 2017 by Growth Equity Opportunities Fund III,LLC (“GEO”), New Enterprise Associates 14, L.P. (“NEA 14”), NEA Partners 14, L.P. (“NEA Partners 14”), NEA 14 GP, LTD (“NEA 14GP”), M. James Barrett, Peter J. Barris, Forest Baskett, Anthony A. Florence, Jr., Patrick J. Kerins, David M. Mott, Scott D. Sandell, Peter W.Sonsini, and Ravi Viswanathan, in which each reporting person reported shared voting and dispositve power with respect to 4,141,308ordinary shares.. NEA 14 is the sole member of GEO, NEA Partners 14 is the sole general partner of NEA 14, and NEA 14 GP is the solegeneral partner of NEA Partners 14. Messrs. Barrett, Barris, Baskett, Florence, Kerins, Mott, Sandell, Sonsini and Viswanathan are thedirectors of NEA 14 GP. Each reporting person disclaims beneficial ownership of the ordinary shares reported other than those ordinaryshares which such person owns of record. The address of each of GEO, NEA 14, NEA Partners 14, and NEA 14 GP is New EnterpriseAssociates, 1954 Greenspring Drive, Suite 600, Timonium, MD 21093. The address of the principal business office for each of Messrs.Barris, Florence, Kerins and Mott is New Enterprise Associates, 5425 Wisconsin Avenue, Suite 800, Chevy Chase, MD 20815. The addressof the principal business officer for each of Messrs. Baskett, Sandell, Sonsini and Viswanathan is New Enterprise Associates, 2855 Sand HillRoad, Menlo Park, CA 94025.(3)Based on the information disclosed in a Schedule 13G/A filed with the SEC on January 17, 2017 by HealthCap VI, L.P. (“HealthCap”) andHealthCap VI GP S.A. (“HealthCap GP”), in which each reporting person reported shared voting and dispositive power with respect to,3,236,008 ordinary shares. HealthCap GC is the sole general partner of HealthCap. The address of HealthCap and HealthCap GP is 18,Avenue d’Ouchy, 1006 Lausanne, Switzerland. (4)Based on the information disclosed in a Schedule 13G filed with the SEC on January 9, 2017 by Vivo Capital VIII, LLC (“Vivo”), in whichVivo reported sole voting and dispositive power with respect to 3,000,000 ordinary shares. According to the Schedule 13G, the ordinaryshares are held of record by Vivo Capital Fund VIII, L.P. (2,636,000 ordinary shares) and Vivo Capital Surplus Fund VIII, L.P. (364,000ordinary shares). Vivo serves as the general partner for each of these entities. The address of Vivo is 505 Hamilton Street, Palo Alto, CA,94301. (5)Based on the information disclosed in a Schedule 13G/A filed with the SEC on February 10, 2017 by Broadfin Capital, LLC (“BroadfinCapital”), Broadfin Healthcare Master Fund, Ltd., (“Broadfin Fund”) and Kevin Kotler, in which each reporting person reported sharedvoting and dispositive power with respect to, 3,494,581 ordinary shares (including 600,000 ordinary shares issuable upon the exercise ofwarrants). The number reported in the table above for Broadfin Capital does not include the 600,000 ordinary shares issuable upon theexercise of the warrants, as these shares are not exercisable within 60 days of March 1, 2017. Mr. Kotler is the managing member ofBroadfin Capital and a director of Broadfin Fund. The address of Broadfin Capital and Mr. Kotler is Broadfin Capital, 300 Park Avenue,25th floor, New York, N.Y. 10022. The address of Broadfin Fund is 20 Genesis Close, Ansbacher House, Second Floor, PO Box 1344,Grand Cayman KY1-1108, Cayman Islands.B.RELATED PARTY TRANSACTIONSOn December 22, 2016, we entered into a Share Purchase Agreement to sell $35 million of our shares in a privateplacement (14,000,000 shares at a subscription price of $2.50 per share). Certain of our existing 5% shareholders thatbeneficially own more than 5% of our ordinary shares and/or their affiliates purchased ordinary shares in this transaction,including New Enterprise Associates, Broadfin, Eigil Stray Spetalen and HealthCap VI, LP, of which Dr. Steen, one of ourdirectors, is a partner.Policies and Procedures for Related Party TransactionsWe have adopted a policy that our executive officers, directors, nominees for election as a director, beneficialowners of more than 5% of any class of our voting securities and any members of the immediate family of any of theforegoing persons are not permitted to enter into a related person transaction with us without the prior consent of our auditcommittee. Any request for us to enter into a transaction with an executive officer, director, nominee for election as a director,beneficial owner of more than 5% of any class of our voting securities or any member of the immediate family of any of theforegoing persons, in which the amount involved exceeds $120,000 and such person would have a direct or indirect materialinterest, must first be presented to our audit committee for review, consideration and approval. In approving or rejecting anysuch proposal, our audit committee is to consider the material facts of the transaction, including, but not limited to: thebenefits to the Company; the impact on a director’s independence in the event the transaction involves a director, animmediate family member of a director or an entity in which a director is a general partner, shareholder or executive officer;the availability of other sources for comparable products or services; the terms of the transaction; and the terms available tounrelated third parties or to employees generally. All of the transactions described above were entered into prior to theadoption of such policy, but after presentation, consideration and approval by our board of directors. 110 Table of ContentsC.INTERESTS OF EXPERTS AND COUNSELNot applicable. ITEM 8. FINANCIAL INFORMATIONFinancial StatementsOur audited Consolidated Financial Statements are filed as part of this Annual Report pursuant to Item18-“Financial Statements” and are found immediately following the text of this Annual Report.No significant change has occurred since the date of our annual financial statements, included in this Annual Reporton Form 20-F per Item 8.B.Legal ProceedingsWe are not currently a party to any material legal proceedings.DividendsWe have not paid cash dividends on our ordinary shares and do not intend to pay cash dividends on our ordinaryshares in the foreseeable future. ITEM 9. THE OFFER AND LISTINGA. Offering and Listing DetailsNot applicable.B. Plan of DistributionNot applicable.C. MarketOur shares were quoted on the Norwegian Over‑The‑Counter Market until October 20, 2015 when trading ceased. OnOctober 15, 2015, a registration statement was declared effective by the U.S. Securities and Exchange Commission and onOctober 16, 2015 our initial U.S. public offering of 2,500,000 ordinary shares at a price to the public became effectivecommencing our listing and trading on The NASDAQ Global Select Market under the symbol "SBBP". The following table sets forth the monthly high and low sale prices of our ordinary shares as quoted on The NASDAQGlobal Select Market since our shares began trading on October 16, 2015: High Low October 16, 2015 through October 31 2015 $14.30 $6.90 November 2015 $8.80 $6.32 December 2015 $7.83 $5.00 March 2016 $6.33 $3.80 June 2016 $4.83 $3.30 September 2016 $6.24 $4.45 December 2016 $3.85 $2.05 111 Table of ContentsD. Selling ShareholdersNot applicable.E. DilutionNot applicable.F. Expenses of the issueNot applicable. ITEM 10. ADDITIONAL INFORMATIONA. Share CapitalNot applicable.B. Memorandum and articles of associationThe information contained under the caption of “Description of Share Capital and Articles of Association” in theCompany’s Registration Statement on Form F-1 filed October 16, 2015 (file number 333-206654) is incorporated herein byreference.C. Material ContractsSee Part I, Item 6B “Directors, Senior Management and Employees—Compensation—Employment Agreements” fora description of employment agreements with our executive officers.See Part I, Item 4 “Information on the Company – Overview – Recent Developments” for a description of our AssetPurchase Agreement and Supply Agreement with Taro Pharmaceutical Industries Ltd.See Part I, Item 4 “Information on the Company – Overview – Recent Developments” for a description of ourPrivate Placement, Securities Purchase Agreement and Registration Rights Agreement.See Part I, Item 4 “Information on the Company – Overview – Recent Developments” for a description of our LoanAgreement with Oxford Finance LLC and Horizon Technology Finance Corporation.On June 30, 2015, we acquired veldoreotide from Aspireo Pharmaceuticals Ltd., an Israeli company. Veldoreotidewas formerly called COR-005 by us and DG3173 by Aspireo Pharmaceuticals. Under the terms of the acquisition agreement,we issued to Aspireo Pharmaceuticals 2,062,677 common shares, which had a value of $33.2 million on June 30, 2015. Inconnection with this acquisition, we made a payment to OCS in the amount of $3.0 million, which represents the repaymentof amounts previously granted by OCS to Aspireo Pharmaceuticals, plus interest, that were used in support of research anddevelopment conducted by Aspireo Pharmaceuticals for the development of veldoreotide. The approval by OCS of thetransfer of the assets relating to veldoreotide by Aspireo to the Company was subject to the repayment of the original grantplus interest.See Part I, Item 4 “Information on the Company – Discontinued License” for a description of our SettlementAgreement with Antisense Therapeutics.112 Table of ContentsSee Part I, Item 4 “Information on the Company – Discontinued License” for a description of our agreement with theCornell Center for Technology Enterprise and Commercialization.D. Exchange ControlsNone.E. TaxationThe following summary contains a description of the material Irish and U.S. federal income tax consequences of theacquisition, ownership and disposition of our ordinary shares, but it does not purport to be a comprehensive description ofall the tax considerations that may be relevant. The summary is based upon the tax laws of Ireland and regulationsthereunder and on the tax laws of the United States and regulations thereunder as of the date hereof, which are subject tochange.Irish Tax ConsiderationsScope of DiscussionThe following is a summary of the material Irish tax considerations applicable to certain investors who are thebeneficial owners of our ordinary shares. This summary is based on existing Irish tax law and our understanding of thepractices of the Irish Revenue Commissioners. Legislative, administrative or judicial changes may modify the taxconsequences described in this summary, possibly with retroactive effect. Furthermore, we can provide no assurances that thetax consequences contained in this summary will not be challenged by the Irish Revenue Commissioners or will be sustainedby an Irish court if they were to be challenged.This summary does not constitute tax advice and is intended only as a general guide. This summary is notexhaustive and shareholders should consult their own tax advisers about the Irish tax consequences (and the taxconsequences under the laws of other relevant jurisdictions), which may arise as a result of being a shareholder in ourcompany including the acquisition, ownership and disposition of our ordinary shares. Furthermore, this summary appliesonly to shareholders who will hold our ordinary shares as capital assets and does not apply to all categories of shareholders,such as dealers in securities, trustees, insurance companies, collective investment schemes, pension funds or shareholderswho have, or who are deemed to have, acquired their shares by virtue of an office or employment performed or carried on inIreland.Irish Tax on Chargeable GainsNon–Resident ShareholdersShareholders who are not resident or ordinarily resident in Ireland for Irish tax purposes should not be liable to Irishtax on chargeable gains realized on a disposal of our ordinary shares unless such shares are used, held or acquired for thepurpose of a trade or business carried on by such a shareholder in Ireland through a branch or an agency.A shareholder who is an individual and who is temporarily not resident in Ireland may, under Irish anti‑avoidancelegislation, still be liable to Irish tax on any chargeable gain realized on a disposal of our ordinary shares during the period inwhich the individual is a non‑resident.Irish Dividend Withholding TaxOur company does not anticipate paying dividends for the foreseeable future. However, if in the future we were topay a dividend or make a distribution to our shareholders, that distribution may be subject to dividend withholding tax, orDWT, at the standard rate of Irish income tax (currently 20%) unless one of the exemptions described below applies.113 Table of ContentsFor DWT and Irish income tax purposes, a dividend includes any distribution made to shareholders, including cashdividends, non‑cash dividends and any additional shares taken in lieu of a cash dividend. Where an exemption from DTWdoes not apply in respect of a distribution made to a particular shareholder, we are responsible for withholding DWT atsource in respect of the distributions made and remitting the tax withheld to the Irish Revenue Commissioners.General ExemptionsCertain shareholders, both individual and corporate, are entitled to an exemption from DWT. In particular,dividends paid to a non‑Irish resident shareholder will not be subject to DWT where the shareholder is beneficially entitledto the dividend and is:•an individual shareholder resident for tax purposes in Ireland and that is resident for tax purposes in a “relevantterritory” and the individual is neither resident nor ordinarily resident in Ireland;•a corporate shareholder that is not resident for tax purposes in a “relevant territory,” but is not under the control,whether directly or indirectly, of a person or persons who is or are resident in Ireland;•a corporate shareholder that is not resident for tax purposes in Ireland and that is ultimately controlled, directlyor indirectly, by persons resident in a “relevant territory;”•a corporate shareholder that is not resident for tax purposes in Ireland and whose principal class of shares, orthose of its 75% direct or indirect parent, is substantially and regularly traded on a stock exchange in Ireland,on a recognized share exchange in a “relevant territory” or on such other share exchange as may be approved bythe Irish Minister for Finance; or•a corporate shareholder that is not resident for tax purposes in Ireland and is wholly‑owned, directly orindirectly, by two or more companies where the principal class of shares of each of such companies issubstantially and regularly traded on a stock exchange in Ireland, on a recognized share exchange in a “relevantterritory” or on such other share exchange as may be approved by the Irish Minister for Finance;and provided, in all cases noted above (but subject to “Shares Held by U.S. Resident Shareholders” below),Strongbridge Biopharma plc or, in respect of Strongbridge Biopharma plc shares held through DTC, any qualifyingintermediary appointed by Strongbridge Biopharma plc, has received from the shareholder, where required, therelevant Irish DWT declaration forms prior to the payment of the dividend. In practice, in order to ensure sufficienttime to process the receipt of relevant Irish DWT declaration forms, the Strongbridge Biopharma plc shareholderwhere required should furnish the relevant Irish DWT declaration forms to:•its broker (and the relevant information is further transmitted to any qualifying intermediary appointed byStrongbridge Biopharma plc) before the record date for the dividend (or such later date before the dividendpayment date as may be notified to the shareholder by the broker) if its shares are held through DTC; or•Strongbridge Biopharma plc’s transfer agent at least seven business days before the record date for the dividendif its shares are held outside of DTC.114 Table of ContentsA list of “relevant territories” for the purposes of DWT, is set forth below and this list is subject to change:AlbaniaCzech RepublicItalyNetherlandsSloveniaArmeniaDenmarkJapanNew ZealandSouth AfricaAustraliaEgyptRepublic of KoreaNorwaySpainAustriaEstoniaKuwaitPakistanSwedenBahrainEthiopiaLatviaPanamaSwitzerlandBelarusFinlandLithuaniaPolandThailandBelgiumFranceLuxembourgPortugalTurkeyBosnia andHerzegovinaGeorgiaMacedoniaQatarUkraineBotswanaGermanyMalaysiaRomaniaUnited Arab EmiratesBulgariaGreeceMaltaRussiaUnited KingdomCanadaHong KongMexicoSaudi ArabiaUnited States of AmericaChileHungaryMoldovaSerbiaUzbekistanChinaIcelandMontenegroSingaporeVietnamCroatiaIndiaMoroccoSlovak RepublicZambiaCyprusIsrael It is the responsibility of each individual shareholder to determine whether or not they are a “resident” for taxpurposes in a “relevant territory.”Prior to paying any future dividend, our company will enter into an agreement with an institution which isrecognized by the Irish Revenue Commissioners as a “qualifying intermediary” and which satisfies the requirements fordividends to be paid to certain shareholders free from DWT where such shareholders hold their shares through DTC, asdescribed below. The agreement will generally provide for certain arrangements relating to distributions in respect of thoseshares that are held through DTC. The agreement will provide that the “qualifying intermediary” shall distribute or otherwisemake available to Cede & Co., as nominee for DTC, any cash dividend or other cash distribution to be made to holders of thedeposited securities, after we deliver or cause to be delivered to the “qualifying intermediary” the cash to be distributed.We will rely on the information received directly or indirectly from brokers and their transfer agent in determiningwhere shareholders reside and whether they have furnished the required U.S. tax information, as described below.Shareholders who are required to furnish Irish DWT declaration forms in order to receive their dividends without DWTshould note that those declarations forms are only valid until 31 December of the fifth year after the year of issue/certificationof the forms and new DWT declarations forms must be completed and filed before the expiration of that period to enable theshareholder continue to receive dividends without DWT.Shares Held by U.S. Resident ShareholdersDividends paid on our ordinary shares that are owned by residents of the United States should not be subject toDWT, subject to the completion and delivery of the relevant forms to us.Residents of the United States who hold their shares through DTC should be entitled to receive dividends withoutDWT provided that the address of the beneficial owner of the shares in the records of the broker holding such shares is in theUnited States. We would strongly recommend that such shareholders ensure that their information has been properly recordedby their brokers so that such brokers can further transmit the relevant information to a qualifying intermediary appointed byus.Residents of the United States who hold their shares outside of DTC will be entitled to receive dividends withoutDWT provided that the shareholder has completed the relevant Irish DWT declaration form and this declaration form remainsvalid. Such shareholders must provide the relevant Irish DWT declaration form to our transfer agent at least seven businessdays before the record date of the dividend payment to which they are entitled. We would strongly115 Table of Contentsrecommend that such shareholders complete the relevant Irish DWT declaration form and provide them to our transfer agentas soon as possible after acquiring shares in our company.If a U.S. resident shareholder is entitled to an exemption from DWT, but receives a dividend subject to DWT, thatshareholder may be entitled to claim a refund of DWT from the Irish Revenue Commissioners, subject to certain time limitsand provided the shareholder is beneficially entitled to the dividend.Shares Held by Residents of “Relevant Territories” Other Than the United StatesShareholders who are residents of “relevant territories” other than the United States, and who are entitled to anexemption from DWT, must complete the relevant Irish DWT declaration form in order to receive dividends without DWT.Shareholders must provide the relevant Irish DWT declaration form to their brokers so that such brokers can furthertransmit the relevant information to a qualifying intermediary appointed by us before the record date of the dividend towhich they are entitled, in the case of shares held through DTC, or to our transfer agent at least seven business days beforesuch record date, in the case of shares held outside of DTC. We would strongly recommend that such shareholders completethe relevant Irish DWT declaration form and provide that form to their brokers or our transfer agent as soon as possible afteracquiring shares in our company.If a shareholder who is resident in a “relevant territory” and is entitled to an exemption from DWT receives adividend subject to DWT, that shareholder may be entitled to claim a refund of DWT from the Irish Revenue Commissioners,subject to certain time limits and provided the shareholder is beneficially entitled to the dividend.Notwithstanding the foregoing, the General Exemptions from DWT referred to above do not apply to an individualshareholder that is resident or ordinarily resident in Ireland or to a corporate entity that is resident in Ireland or that is underthe control, whether directly or indirectly, of a person or persons who is or who are resident in Ireland. However, otherexemptions from DWT may still be available to such shareholder.In addition, it may also be possible for certain shareholders to rely on a double tax treaty to limit the applicableDWT.Shares Held by Other PersonsA shareholder that does not fall within one of the categories specifically mentioned above may nonetheless fallwithin other exemptions from DWT provided that the shareholder has completed the relevant Irish DWT declaration form andthis declaration form remains valid.If any such shareholder is exempt from DWT but receives a dividend subject to DWT, that shareholder may beentitled to claim a refund of DWT from the Irish Revenue Commissioners, subject to certain time limits.Income Tax on Dividends PaidIrish income tax may arise for certain shareholders in respect of any dividends received from us.Non‑Irish Resident ShareholdersA shareholder that is not resident or ordinarily resident in Ireland for Irish tax purposes and who is entitled to anexemption from DWT generally has no liability to Irish income tax or other similar charges with respect to any dividendsreceived from us. An exception to this position may apply where a shareholder holds our ordinary shares through a branch oragency in Ireland through which a trade is carried on.A shareholder that is not resident or ordinarily resident in Ireland for Irish tax purposes and who is not entitled to anexemption from DWT generally has no additional liability to Irish income tax or other similar charges on any dividendsreceived from us. In these circumstances, the shareholder’s liability to Irish tax is effectively limited to the116 Table of Contentsamount of SWT withheld by us. An exception to this position may apply where a shareholder holds our ordinary sharesthrough a branch or an agency in Ireland through which a trade is carried on.Capital Acquisitions TaxCapital acquisitions tax, or CAT, consists principally of gift tax and inheritance tax. A gift or inheritance of ourordinary shares, including where such shares are held in DTC, may attract a charge to CAT irrespective of the place ofresidence, ordinary residence or domicile of the transferor or the transferee of the shares. This is because a charge to CAT mayarise on a gift or inheritance which comprises of property situated in Ireland. Our ordinary shares are regarded as propertysituated in Ireland for CAT purposes because our share register must be retained in Ireland. The person who receives the giftor inheritance is primarily liable for any CAT that may arise.CAT is levied at a rate of 33% above certain tax‑free thresholds. The appropriate tax‑free threshold is dependentupon (1) the relationship between the donor and the donee and (2) the aggregation of the values of previous gifts andinheritances received by the donee from persons within the same group threshold. Gifts and inheritances passing betweenspouses are exempt from CAT. Shareholders should consult their own tax advisers as to whether CAT is creditable ordeductible in computing any domestic tax liabilities.Irish Stamp DutyThe rate of Irish stamp duty, where applicable, on the transfer of shares in an Irish incorporated company is 1% of theprice paid or the market value of the shares acquired, whichever is greater. Where a charge to Irish stamp duty applies it isgenerally a liability for the transferee. Irish stamp duty may, depending on the manner in which our ordinary shares are held,be payable in respect of the transfer of our ordinary shares.Shares held through DTCOn the basis that most of our shares are expected to be held through DTC, or through brokers who hold shares onbehalf of their customers through DTC, the transfer of such shares should be exempt from Irish stamp duty based onestablished practice of Irish Revenue Commissioners. We received written confirmation from the Irish RevenueCommissioners on June 22, 2015 that a transfer of our shares held through DTC and transferred by means of a book‑entryinterest would be exempt from Irish stamp duty.Shares Held Outside of DTC or Transferred Into or Out of DTCA transfer of our ordinary shares where any of the parties to the transfer hold the shares outside of DTC may besubject to Irish stamp duty. A shareholder should be entitled to transfer our ordinary shares into, or out of, DTC withoutgiving rise to Irish stamp duty provided (1) there is no change in beneficial ownership of the shares and (2) at the time of thetransfer into, or out of, DTC, is not effected in contemplation of a subsequent sale of such shares by the beneficial owner to athird party.To avoid Irish stamp duty on transfers of our ordinary shares any directly registered shareholder may wish toconsider opening a broker account, and any person who wishes to acquire our ordinary shares may wish to consider holdingsuch shares through DTC.DTC RequirementIn order for DTC, Cede & Co. and National Securities Clearing Corporation, or NSCC, which provides clearingservices for securities that are eligible for the depository and book‑entry transfer services provided by DTC and registered inthe name of Cede & Co., which entities are referred to collectively as the DTC Parties, to agree to provide services withrespect to our ordinary shares, we have entered into a composition agreement with the Irish Revenue Commissioners underwhich we have agreed to pay or procure the payment of any obligation for any Irish stamp duty or similar Irish transfer ordocumentary tax with respect to our ordinary shares, on (1) transfers to which any of the DTC Parties is a party or (2) whichmay be processed through the services of any of the DTC Parties and the DTC Parties have117 Table of Contentsreceived confirmation from the Irish Revenue Commissioners that during the period that such composition agreementremains in force, the DTC Parties shall not be liable for any Irish stamp duty with respect to our ordinary shares.In addition, to assure the DTC Parties that they will not be liable for any Irish stamp duty or similar Irish transfer ordocumentary tax with respect to our ordinary shares under any circumstances, including as a result of a change in applicablelaw, and to make other provisions with respect to our ordinary shares required by the DTC Parties, we and our transfer agenthave entered into a Special Eligibility Agreement for Securities with DTC, Cede & Co. and NSCC, or the DTC EligibilityAgreement.The DTC Eligibility Agreement provides for certain indemnities of the DTC Parties by us and Computershare, Inc.(as to which we indemnify Computershare, Inc.) and provides that DTC may impose a global lock on our ordinary shares orotherwise limit transactions in the shares, or cause the shares to be withdrawn, and NSCC may, in its sole discretion, excludeour ordinary shares from its continuous net settlement service or any other service, and any of the DTC Parties may take otherrestrictive measures with respect to our ordinary shares as it may deem necessary and appropriate, without any liability on thepart of any of the DTC Parties, (1) at any time that it may appear to any of the DTC Parties, in any such party’s sole discretion,that to continue to hold or process transactions in our ordinary shares will give rise to any Irish stamp duty or similar Irishtransfer or documentary tax liability with respect to our ordinary shares on the part of any of the DTC Parties or (2) otherwiseas DTC’s rules or NSCC’s rules provide.Notwithstanding our entry into a composition agreement with the Irish Revenue Commissioners and the indemnitiesgiven pursuant to the DTC Eligibility Agreement, any stamp duty liability resulting from a transfer of our shares will be forthe “accountable person” under Irish law (generally the transferee) and, to the extent we or a subsidiary of our companydischarges such liability, on any transferee’s behalf, we will seek payment or reimbursement of such liability. For furtherdetails on this point, shareholders should read the discussion under “Transfer and Registration of Shares” above.THE IRISH TAX CONSIDERATIONS SUMMARIZED ABOVE ARE FOR GENERAL INFORMATION ONLY. EACHSHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR TAXCONSEQUENCES THAT MAY APPLY TO SUCH SHAREHOLDER.Material U.S. Federal Income Tax Considerations for U.S. HoldersThe following is a description of the material U.S. federal income tax consequences to the U.S. Holders describedbelow of owning and disposing of our ordinary shares, but it does not purport to be a comprehensive description of all taxconsiderations that may be relevant to a particular person’s decision to acquire the ordinary shares. This discussion appliesonly to a U.S. Holder that holds ordinary shares as capital assets for tax purposes. In addition, it does not describe all of thetax consequences that may be relevant in light of the U.S. Holder’s particular circumstances, including alternative minimumtax consequences, any state or local tax considerations, any U.S. federal gift, estate or generation‑skipping transfer taxconsequences and tax consequences applicable to U.S. Holders subject to special rules, such as:•certain financial institutions;•brokers;•dealers or traders in securities who use a mark‑to‑market method of tax accounting;•real estate investment trusts;•insurance companies;•persons holding ordinary shares as part of a hedging transaction, straddle, wash sale, conversion transaction orintegrated transaction or persons entering into a constructive sale with respect to the ordinary shares;•regulated investment companies;•persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;118 Table of Contents•entities classified as partnerships or other pass‑through entities for U.S. federal income tax purposes, includingpersons that will hold our ordinary shares through such an entity;•tax‑exempt entities, including an “individual retirement account” or “Roth IRA;”•persons that own or are deemed to own ten percent or more of our voting stock;•persons that are U.S. expatriates;•persons who acquired our ordinary shares pursuant to the exercise of an employee stock option or otherwise ascompensation; or•persons holding shares in connection with a trade or business conducted outside of the United States.If an entity that is classified as a partnership for U.S. federal income tax purposes holds ordinary shares, the U.S.federal income tax treatment of a partner will generally depend on the status of the partner and the activities of thepartnership. Partnerships holding ordinary shares and partners in such partnerships should consult their tax advisers as totheir particular U.S. federal income tax consequences of holding and disposing of the ordinary shares.This discussion is based on the U.S. Internal Revenue Code of 1986, as amended, or the Code, administrativepronouncements, judicial decisions, and final, temporary and proposed Treasury regulations, all as of the date hereof, any ofwhich is subject to change, possibly with retroactive effect.A “U.S. Holder” is a holder who, for U.S. federal income tax purposes, is a beneficial owner of ordinary shares whois:•an individual who is a citizen or resident of the United States;•a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the UnitedStates, any state therein or the District of Columbia;•an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of itssource; or•a trust if (1) a U.S. court is able to exercise primary supervision over the administration of the trust and one ormore U.S. persons have authority to control all substantial decisions of the trust or (2) the trust has a validelection in effect under applicable Treasury Regulations to be treated as a U.S. person.U.S. Holders should consult their tax advisers concerning the U.S. federal, state, local and foreign tax consequencesof owning and disposing of ordinary shares in their particular circumstances.Passive Foreign Investment Company RulesWe believe we were classified as a passive foreign investment company “ PFIC”, in the past and we may beclassified as a PFIC for our current taxable year and for the foreseeable future. In addition, we may, directly or indirectly, holdequity interests in other PFICs, or Lower‑tier PFICs. In general, a non‑U.S. corporation will be considered a PFIC for anytaxable year in which (1) 75% or more of its gross income consists of passive income or (2) 50% or more of the averagequarterly value of its assets consists of assets that produce, or are held for the production of, passive income. For purposes ofthe above calculations, a non‑U.S. corporation that directly or indirectly owns at least 25% by value of the shares of anothercorporation is treated as if it held its proportionate share of the assets of the other corporation and received directly itsproportionate share of the income of the other corporation. Passive income generally includes dividends, interest, rents,royalties and capital gains.We must determine our PFIC status annually based on tests which are factual in nature, and our status will dependon our income, assets and activities each year.Under attribution rules, if we are a PFIC, U.S. Holders will be deemed to own their proportionate shares of Lower‑tierPFICs and will be subject to U.S. federal income tax according to the rules described in the following119 Table of Contentsparagraphs on (1) certain distributions by a Lower‑tier PFIC and (2) a disposition of shares of a Lower‑tier PFIC, in each caseas if the U.S. Holder held such shares directly, even though holders have not received the proceeds of those distributions ordispositions directly.If we are a PFIC for any taxable year during which a U.S. Holder holds our shares, the U.S. Holder may be subject tocertain adverse tax consequences. Unless a holder makes a timely “mark‑to‑market” election or “qualified electing fund”election each as discussed below, gain recognized on a disposition (including, under certain circumstances, a pledge) ofordinary shares by the U.S. Holder, or on an indirect disposition of shares of a Lower‑tier PFIC, will be allocated ratably overthe U.S. Holder’s holding period for the shares. The amounts allocated to the taxable year of disposition and to years beforewe became a PFIC will be taxed as ordinary income. The amounts allocated to each other taxable year will be subject to taxat the highest rate in effect for that taxable year for individuals or corporations, as appropriate, and an interest charge will beimposed on the tax attributable to the allocated amounts. Further, to the extent that any distribution received by a U.S.Holder on our ordinary shares (or a distribution by a Lower‑tier PFIC to its shareholder that is deemed to be received by a U.S.Holder) exceeds 125% of the average of the annual distributions on the shares received during the preceding three years orthe U.S. Holder’s holding period, whichever is shorter, the distribution will be subject to taxation in the same manner as gain,described immediately above and lower rates of taxation applicable to long‑term capital gains with respect to dividends paidto certain non‑corporate U.S. Holders would not apply.If we are a PFIC for any year during which a U.S. Holder holds ordinary shares, we generally will continue to betreated as a PFIC with respect to the holder for all succeeding years during which the U.S. Holder holds ordinary shares, evenif we cease to meet the threshold requirements for PFIC status. U.S. Holders should consult their tax advisers regarding thepotential availability of a “deemed sale” election that would allow them to eliminate this continuing PFIC status undercertain circumstances.If the ordinary shares are “regularly traded” on a “qualified exchange,” a U.S. Holder may make a mark‑to‑marketelection that would result in tax treatment different from the general tax treatment for PFICs described above. The ordinaryshares will be treated as “regularly traded” in any calendar year in which more than a de minimis quantity of the ordinaryshares is traded on a qualified exchange on at least 15 days during each calendar quarter. The NASDAQ Global SelectMarket, to which we intend to apply for the listing of our ordinary shares, is a qualified exchange for this purpose. U.S.Holders should consult their tax advisers regarding the availability and advisability of making a mark‑to‑market election intheir particular circumstances. In particular, U.S. Holders should consider carefully the impact of a mark‑to‑market electionwith respect to their ordinary shares given that we may have Lower‑tier PFICs for which a mark‑to‑market election may not beavailable.If a U.S. Holder makes the mark‑to‑market election, the holder generally will recognize as ordinary income anyexcess of the fair market value of the ordinary shares at the end of each taxable year over their adjusted tax basis, and willrecognize an ordinary loss in respect of any excess of the adjusted tax basis of the ordinary shares over their fair market valueat the end of the taxable year (but only to the extent of the net amount of income previously included as a result of themark‑to‑market election). If a U.S. Holder makes the election, the holder’s tax basis in the ordinary shares will be adjusted toreflect the income or loss amounts recognized. Any gain recognized on the sale or other disposition of ordinary shares in ayear when we are a PFIC will be treated as ordinary income and any loss will be treated as an ordinary loss (but only to theextent of the net amount of income previously included as a result of the mark‑to‑market election). Distributions paid onordinary shares will be treated as discussed below under “—Taxation of Distributions.”Alternatively, a U.S. Holder can make an election, if we provide the necessary information, to treat us and eachLower‑tier PFIC as a qualified electing fund, or a QEF Election, in the first taxable year that we are treated as a PFIC withrespect to the holder. A U.S. Holder must make the QEF Election for each PFIC by attaching a separate properly completedIRS Form 8621 for each PFIC to the holder’s timely filed U.S. federal income tax return. U.S. Holders should be aware thatthere can be no assurances that we will satisfy the record keeping requirements that apply to a QEF, or that we will supplyU.S. Holders with information that such U.S. Holders are required to report under the QEF rules, in the event that we are aPFIC. Thus, U.S. Holders may not be able to make a QEF Election with respect to their ordinary shares. Further, no assurancecan be given that such QEF information will be available for any Lower‑tier PFIC. Each U.S. Holder should consult its owntax advisers regarding the availability of, and procedure for making, a QEF Election.120 Table of ContentsIf a U.S. Holder makes a QEF Election with respect to a PFIC, the holder will be taxed on a current basis on its prorata share of the PFIC’s ordinary earnings and net capital gain (at ordinary income and capital gain rates, respectively) foreach taxable year that the entity is classified as a PFIC and for which the QEF election is in place and properly maintained. Ifa U.S. Holder makes a QEF Election with respect to us, any distributions paid by us out of our earnings and profits that werepreviously included in the holder’s income under the QEF Election would not be taxable to the holder. A U.S. Holder willincrease its tax basis in its ordinary shares by an amount equal to any income included under the QEF Election and willdecrease its tax basis by any amount distributed on the ordinary shares that is not included in the holder’s income. Inaddition, a U.S. Holder will recognize capital gain or loss on the disposition of ordinary shares in an amount equal to thedifference between the amount realized and the holder’s adjusted tax basis in the ordinary shares. U.S. Holders should notethat if they make QEF Elections with respect to us and Lower‑tier PFICs, they may be required to pay U.S. federal income taxwith respect to their ordinary shares for any taxable year significantly in excess of any cash distributions received on theshares for such taxable year. U.S. Holders should consult their tax advisers regarding making QEF Elections in their particularcircumstances.Furthermore, as discussed below, if we were a PFIC or, with respect to a particular U.S. Holder, were treated as a PFICfor the taxable year in which we paid a dividend or the prior taxable year, the 20% preferential tax rate with respect todividends paid to certain non‑corporate U.S. Holders would not apply.If we were a PFIC for any taxable year during which a U.S. Holder held ordinary shares, such U.S. Holder would berequired to file an annual information report with such U.S. Holder’s U.S. Federal income tax return on IRS Form 8621.U.S. Holders should consult their tax advisers concerning our PFIC status and the tax considerations relevant to aninvestment in a PFIC.Taxation of DistributionsSubject to the passive foreign investment company rules described above, distributions paid on ordinary shares,other than certain pro rata distributions of ordinary shares, will be treated as dividends to the extent paid out of our current oraccumulated earnings and profits (as determined under U.S. federal income tax principles). Because we do not maintaincalculations of our earnings and profits under U.S. federal income tax principles, it is expected that distributions generallywill be reported to U.S. Holders as dividends. The amount of a dividend will include any amounts withheld by us in respectof Irish taxes. The amount of the dividend will be treated as foreign‑source dividend income to U.S. Holders and will not beeligible for the dividends‑received deduction generally available to U.S. corporations under the Code. Dividends will beincluded in a U.S. Holder’s income on the date of the U.S. Holder’s receipt of the dividend. The amount of any dividendincome paid in Euros will be the U.S. dollar amount calculated by reference to the exchange rate in effect on the date ofreceipt, regardless of whether the payment is in fact converted into U.S. dollars. If the dividend is converted into U.S. dollarson the date of receipt, a U.S. Holder should not be required to recognize foreign currency gain or loss in respect of thedividend income. A U.S. Holder may have foreign currency gain or loss if the dividend is converted into U.S. dollars after thedate of receipt, which will be “U.S. source” ordinary income or loss.Dividends paid by us may be taxable to a non‑corporate U.S. Holder at the special reduced rate normally applicableto long‑term capital gains, provided we are not a PFIC in the taxable year in which the dividends are received or in thepreceding taxable year, so long as certain holding period requirements are met. As discussed above under “Passive ForeignInvestment Company Rules,” we expect to be a PFIC and, as a result, the special reduced rate is unlikely to be available withrespect to dividends paid by us.Subject to applicable limitations, some of which vary depending upon the U.S. Holder’s circumstances, Irish incometaxes withheld from dividends on ordinary shares may be creditable against the U.S. Holder’s U.S. federal income taxliability. The rules governing foreign tax credits are complex, and U.S. Holders should consult their tax advisers regardingthe creditability of foreign taxes in their particular circumstances. In lieu of claiming a foreign tax credit, U.S. Holders may, attheir election, deduct foreign taxes, including the Irish tax, in computing their taxable income, subject to generallyapplicable limitations under U.S. law. An election to deduct foreign taxes instead of claiming foreign tax credits applies toall foreign taxes paid or accrued in the taxable year.121 Table of ContentsSale or Other Disposition of Ordinary SharesSubject to the passive foreign investment company rules described above, for U.S. federal income tax purposes, gainor loss realized on the sale or other disposition of ordinary shares will be capital gain or loss, and will be long‑term capitalgain or loss if the U.S. Holder held the ordinary shares for more than one year The amount of the gain or loss will equal thedifference between the U.S. Holder’s tax basis in the ordinary shares disposed of and the amount realized on the disposition,in each case as determined in U.S. dollars. This gain or loss will generally be U.S.‑source gain or loss for foreign tax creditpurposes.Net Investment Income TaxU.S. Holders that are individuals or estates or trusts that do not fall into a special class of trusts that is exempt fromsuch tax, will be required to pay an additional 3.8% tax on the lesser of (1) the U.S. Holder’s “net investment income” for therelevant taxable year and (2) the excess of the U.S. Holder’s modified adjusted gross income for the taxable year over acertain threshold (which in the case of individuals will be between US $125,000 and US $250,000, depending on theindividual’s circumstances). A U.S. Holder’s “net investment income” will generally include, among other things, dividendsand capital gains. Such tax will apply to dividends and to capital gains from the sale or other disposition of the ordinaryshares, unless derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consistsof certain passive or trading activities). Special rules apply and certain elections are available for certain U.S. Holders that aresubject to the 3.8% tax on net investment income and hold shares in a PFIC. Potential investors should consult with theirown tax advisers regarding the application of the net investment income tax to them as a result of their investment in ourordinary shares.Information Reporting and Backup WithholdingPayments of dividends and sales proceeds that are made within the United States or through certain U.S.‑relatedfinancial intermediaries generally are subject to information reporting, and may be subject to backup withholding, unless(1) the U.S. Holder is a corporation or other exempt recipient or (2) in the case of backup withholding, the U.S. Holderprovides a correct taxpayer identification number and certifies that it is not subject to backup withholding.Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited againstsuch holder’s U.S. federal income tax liability, and such holder may obtain a refund of any excess amounts withheld underthe backup withholding rules by filing an appropriate claim for refund with the IRS and furnishing any required informationin a timely manner. U.S. Holders of ordinary shares should consult their tax advisers regarding the application of the U.S.information reporting and backup withholding rules.Information With Respect to Foreign Financial AssetsCertain U.S. Holders who are individuals (and, under proposed regulations, certain entities) may be required toreport information relating to an interest in our ordinary shares, subject to certain exceptions (including an exception forordinary shares held in accounts maintained by certain U.S. financial institutions). U.S. Holders should consult their taxadvisers regarding the effect, if any, of this requirement on their ownership and disposition of the ordinary shares.122 Table of ContentsF. DividendsNot applicable.G. Statement by expertsNot applicable.H. Documents on displayWe are subject to the informational requirements of the Exchange Act and are required to file reports and otherinformation with the SEC. Shareholders may read and copy any of our reports and other information at, and obtain copiesupon payment of prescribed fees from, the Public Reference Room maintained by the SEC at 100 F Street N.E., Washington,D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the U.S. Securitiesand Exchange Commission at 1-800-SEC-0330. We are a "foreign private issuer" as such term is defined in Rule 405 under the Securities Act, and are not subject tothe same requirements that are imposed upon U.S. domestic issuers by the SEC. Under the Exchange Act, we are subject toreporting obligations that, in certain respects, are less detailed and less frequent than those of U.S. domestic reportingcompanies. As a result, we do not file the same reports that a U.S. domestic issuer would file with the SEC, although we arerequired to file or furnish to the SEC the continuous disclosure documents that we are required to file in Ireland under Irishsecurities laws.We will provide without charge to each person, including any beneficial owner, on the written or oral request ofsuch person, a copy of any or all documents referred to above which have been or may be incorporated by reference in thisAnnual Report (not including exhibits to such incorporated information that are not specifically incorporated by referenceinto such information). Requests for such copies should be directed to us at the following address: 900 Northbrook Drive,Suite 200, Trevose, PA 19053, Attention: Chief Legal Officer, phone number: (610) 254-9225. Additionally, our documentsare available for free via our website at www.strongbridgebio.comI. Subsidiary informationAs of March 1, 2017, the Company had the following subsidiaries:Name Nature of Business GroupShare % Registered Office andCountry of IncorporationBioPancreate Inc.Operating100%900 Northbrook Drive Suite 200 Trevose, Pennsylvania19053 U.S.A.Cortendo AB (publ)Operating100%Box 47 433 21 Partille Gothenburg SwedenCortendo Cayman LtdOperating100%Maples Corporate Services PO Box 309 Ugland House GrandCayman KY1-1104Strongbridge U.S. Inc.Operating100%Corporate Trust Center Lmt 1209 Orange Street Wilmington,Delaware 19801 U.S.A. ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKAt December 31, 2016, we had cash and cash equivalents of $66.8 million, which consisted 100% of bank depositsin the United States. As part of our cash and investment management processes, we perform periodic evaluations of the creditstanding of the financial institutions with which we deposit our cash or purchase cash equivalents, and we have not sustainedany credit losses from instruments held at these financial institutions. ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESNot applicable.123 Table of Contents PART II ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone. ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSThe effective date of the registration statement (File no. 333-206654) for our initial public offering of ordinaryshares was October 15, 2015. The offering closed on October 21, 2015.We received and used net proceeds of approximately $23.5 million from our initial public offering. We havedisbursed $1.0 million of the IPO proceeds to fund our purchase of the U.S. marketing rights of Keveyis from TaroPharmaceuticals. An additional $10.0 million has been used to fund general and administrative expenses. None of the net proceeds of the offering was paid directly or indirectly to any director, officer, general partner ofours or to their associates, persons owning ten percent or more of any class of our equity securities, or to any of our affiliates. ITEM 15. CONTROLS AND PROCEDURESDisclosure Controls and ProceduresWe maintain disclosure controls and procedures that are designed to ensure that information required to bedisclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the rules andregulations thereunder, is recorded, processed, summarized and reported within the time periods specified in the SEC's rulesand forms and that such information is accumulated and communicated to our management, including our principalexecutive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. Indesigning and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures,no matter how well designed and operated, can provide only reasonable assurance of achieving the desired controlobjectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controlsand procedures.As required by Rule 13a-15(b) under the Exchange Act, our management, under the supervision and with theparticipation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the designand operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under theExchange Act) as of December 31, 2016. Based on such evaluation, our management concluded that the Company’sdisclosure controls and procedures were not effective as of December 31, 2016.Management’s Annual Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting asdefined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting refers to a processdesigned by, or under the supervision of, the principal executive and principal financial officer and effected by the board ofdirectors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accountingprinciples and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurancethat transactions are recorded as necessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance withauthorizations of management and directors of the Company; and (iii) provide reasonable124 Table of Contentsassurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assetsthat could have a material effect on the financial statements. Under the supervision and with the participation of management, including the Chief Executive Officer and ChiefFinancial Officer, the Company carried out an evaluation of the effectiveness of its internal control over financial reportingas of December 31, 2016, based on the Internal Control-Integrated Framework (2013) issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO). Based on this assessment and in connection with the preparation of ourconsolidated financial statements for the year ended December 31, 2016, our management concluded that there was amaterial weakness in the design and operating effectiveness of our internal control over the valuation of warrants issued inconnection with our December 2016 private placement of ordinary shares. Accordingly, our management concluded that theCompany’s internal control over financial reporting was not effective as of December 31, 2016. Because of its inherent limitations, internal control over financial reporting may not prevent or detect allmisstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls maybecome inadequate due to changes in conditions, or that the degree of compliance with the policies or procedures maydeteriorate. Attestation Report of the Registered Public Accounting Firm This annual report does not include an attestation report of our independent registered public accounting firmregarding internal control over financial reporting because the Jumpstart Our Business Startups Act provides an exemptionfrom such requirement as we qualify as an emerging growth company.Changes in Internal Control over Financial Reporting There were no changes in the Company's internal control over financial reporting that occurred during the periodcovered by this annual report that have materially affected, or are reasonably likely to materially affect, the Company'sinternal control over financial reporting. ITEM 16. [RESERVED] ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERTOur Board has determined that two of the three members of our audit committee, Mr. Kollender and Dr. Steineger,qualify as an “audit committee financial expert” as defined in Item 16A of Form 20-F under the Exchange Act and that eachmember is “independent” in accordance with The NASDAQ Global Select Market corporate governance requirements andRule 10A-3 of the Exchange Act. For information relating to qualifications and experience of each audit committee member,see “Item 6. Directors, Senior Management and Employees.” ITEM 16B. CODE OF ETHICSWe have adopted a Code of Business Conduct and Ethics applicable to all of our directors and employees,including our President and Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer orother persons performing similar functions, which is a “code of ethics” as defined in Item 16B of Annual Report on Form 20-F and as required by The NASDAQ Global Select Market Listing Rules, which refers to Section 406(c) of the Sarbanes-OxleyAct.The full text of the Code of Business Conduct and Ethics is posted on our website at www.strongbridgebio.com.Information contained on, or that can be accessed through, our website does not constitute a part of this Annual Report onForm 20-F and is not incorporated by reference herein. We will provide a copy of such code of ethics without charge uponrequest by mail or by telephone. If we make any amendment to the Code of Business Conduct and Ethics or grant anywaivers, including any implicit waiver, from a provision of the Code of Business Conduct and Ethics, we will125 Table of Contentsdisclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of theSEC. We have not made any amendments to our Code of Business Conduct and Ethics or granted any waivers, including anyimplicit waivers, from a provision of the Code of Business Conduct and Ethics. ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICESPrincipal Accountant Fees and ServicesThe following table sets forth the aggregate fees billed by Ernst & Young our independent registered publicaccounting firm as described below: 2016 2015 Fee Category: (in thousands) Audit Fees $619 $1,309 Audit-Related Fees — 70 Tax Fees 118 71 All Other Fees — 365 Total Fees $737 $1,815 (1)Audit fees consist of fees for the audit of our financial statements, the review of our interim financial statements andstatutory audits. For 2015, it also included the audit of Aspireo in 2015 and services associated with our registrationstatement on Form F-1.(2)Audit-related fees incurred consist of other services not audited related.(3)Tax fees consists of fees incurred for tax compliance, tax advice and tax planning and includes fees for tax returnpreparation and tax consulting.(4)Other fees consist of fees incurred for the Irish redomicile and other services.The aggregate fees included in the Audit Fees are billed for the fiscal year. The aggregate fees included in the Audit-related fees and Tax Fees are fees billed in the fiscal year.All such accountant services and fees were pre-approved by our audit committee in accordance with the “Pre-Approval Policies and Procedures” described below.Pre-approval policies and proceduresThe audit committee of our board of directors has adopted policies and procedures for the pre-approval of audit andnon-audit services for the purpose of maintaining the independence of our independent auditor. We may not engage ourindependent auditor to render any audit or non-audit service unless either the service is approved in advance by the auditcommittee, or the engagement to render the service is entered into pursuant to the audit committee’s pre-approval policiesand procedures. ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable. ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNone.126 (1)(2)(3)(4)Table of Contents ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTSee item 16F of our Annual Report on Form 20-F for the year ended December 31, 2015. ITEM 16G. CORPORATE GOVERNANCEWe are a foreign private issuer. As a result, in accordance with NASDAQ Listing Rule 5615(a)(3), we may complywith home country governance requirements and certain exemptions thereunder rather than complying with certain of thecorporate governance requirements of NASDAQ.Irish law does not require that a majority of our board of directors consist of independent directors. Our board ofdirectors therefore may include fewer independent directors than would be required if we were subject to NASDAQ ListingRule 5605(b)(1). In addition, we are not subject to NASDAQ Listing Rule 5605(b)(2), which requires that independentdirectors must regularly have scheduled meetings at which only independent directors are present.Our articles of association provide that at any meeting of shareholders, a shareholder may designate another personto attend, speak and vote at the meeting on their behalf by proxy, but no such proxy shall be voted or acted upon at anysubsequent meeting, unless the proxy expressly provides for this. Irish law does not require shareholder approval for theissuance of securities in connection with the establishment of or amendments to equity‑based compensation plans foremployees. To this extent, our practice varies from the requirements of NASDAQ Listing Rule 5635, which generally requiresan issuer to obtain shareholder approval for the issuance of securities in connection with such events. ITEM 16H. MINE SAFETY DISCLOSURENot applicable. PART III ITEM 17. Financial Statements.See Item 18-“Financial Statements”. ITEM 18. Financial Statements.Please refer to the financial statements beginning on page F-1. The financial statements and related notes are filed aspart of this Annual Report on Form 20-F, together with the reports of our independent registered public accounting firms. 127 Table of Contents ITEM 19. EXHIBITSEXHIBIT INDEX3.1* Constitution of Strongbridge Biopharma plc, incorporated by reference to Exhibit 3.1 to the Company’s FormF-1/A filed September 9, 20153.2* Articles of Association of Strongbridge Biopharma plc, incorporated by reference to Exhibit 3.2 to theCompany’s Form F-1/A filed September 9, 201510.1* Sublease Agreement, dated March 30, 2015, by and between Insight Pharmaceuticals LLC and Cortendo AB,incorporated by reference to Exhibit 10.1 to the Company’s Form F-1/A filed August 28, 201510.2* Securities Purchase Agreement, dated December 22, 2016 by and among Strongbridge Biopharma plc and theseveral purchasers signatory thereto, incorporated by reference to Exhibit 10.1 to the Company’s Form 6-Kfiled December 23, 201610.3* Asset Purchase Agreement, dated as of May 14, 2015, by and among Cortendo AB, and AspireoPharmaceuticals, Ltd. and TVM V Life Science Ventures GmbH & Co. KG, incorporated by reference toExhibit 10.3 to the Company’s Form F-1/A filed August 28, 201510.4†* Asset Purchase Agreement, dated December 12, 2016, between Taro Pharmaceutical North America, Inc. andStrongbridge plc, incorporated by reference to Exhibit 10.3 to the Company’s Form F-3 filed January 12, 201710.5†* Supply Agreement, dated December 12, 2016, between Taro Pharmaceutical North America, Inc. andStrongbridge plc, incorporated by reference to Exhibit 10.4 to the Company’s Form F-3 filed January 12, 201710.6*Amended and Restated Employment Agreement, effective August 23, 2014, by and between Cortendo AB andMatthew Pauls, incorporated by reference to Exhibit 10.6 to the Company’s Form 20-F filed March 24, 201610.7* Amended and Restated Employment Agreement, effective March 23, 2015, by and between Cortendo AB andA. Brian Davis, incorporated by reference to Exhibit 10.7 to the Company’s Form 20-F filed March 23, 201510.8†* Loan and Security Agreement, dated December 28, 2016, among Oxford Finance LLC, Horizon TechnologyFinance Corporation, the other Lenders listed therein, and Strongbridge Biopharma plc, Cortendo CaymanLtd, Cortendo AB (publ) and Strongbridge U.S. Inc., incorporated by reference to Exhibit 10.5 to theCompany’s Form F-3 filed January 12, 201710.9** Amended and Restated Employment Agreement, effective August 5, 2015, by and between Cortendo AB andFredrick Cohen, M.D.10.10* Share Purchase Agreement, dated as of January 12, 2015, by and among Cortendo AB, BioPancreate Inc.,Cortendo Invest AB and the Investors listed therein, incorporated by reference to Exhibit 10.10 to theCompany’s Form F-1/A filed August 28, 201510.11* Investors’ Rights Agreement, dated as of February 10, 2015, by and among Cortendo AB and the Investorslisted therein, incorporated by reference to Exhibit 10.11 to the Company’s Form F-1/A filed August 28, 201510.12* Share Purchase Agreement, dated as of May 14, 2015, by and among Cortendo AB, BioPancreate Inc.,Cortendo Invest AB and the Investors named therein, incorporated by reference to Exhibit 10.12 to theCompany’s Form F-1/A filed August 28, 201510.13* Form of Indemnification Agreement, incorporated by reference to Exhibit 10.13 to the Company’s Form F-1/Afiled September 25, 201510.14* Strongbridge Biopharma Plc 2015 Equity Compensation Plan, incorporated by reference to Exhibit 10.14 tothe Company’s Form 20-F filed March 24, 201610.15* Strongbridge Biopharma Plc Non-Employee Director Equity Compensation Plan, incorporated by reference toExhibit 10.15 to the Company’s Form 20-F filed March 24, 2016128 Table of Contents10.16* Form of Stock Option Agreement under the Strongbridge Biopharma Plc Non-Employee Director EquityCompensation Plan, incorporated by reference to Exhibit 10.16 to the Company’s Form 20-F filed March 24,201610.17* Form of Nonqualified Stock Option Agreement under the Strongbridge Biopharma Plc 2015 EquityCompensation Plan, incorporated by reference to Exhibit 10.17 to the Company’s Form 20-F filed March 24,201610.18* Form of Restricted Stock Unit Award Agreement under the Strongbridge Biopharma Plc 2015 EquityCompensation Plan, incorporated by reference to Exhibit 10.18 to the Company’s Form 20-F filed March 24,2016 10.19* Form of Warrant Securities Agreement, by and among Strongbridge Biopharma plc and the several purchaserssignatory thereto, incorporated by reference to Exhibit 10.3 to the Company’s Form 6-K filed December 23,201610.20** Form of Warrant Securities Agreement, by and among Oxford Finance LLC, Horizon Technology FinanceCorporation, the other Lenders listed therein, and Strongbridge Biopharma plc, Cortendo Cayman Ltd,Cortendo AB (publ) and Strongbridge U.S. Inc.10.21** Strongbridge Biopharma plc 2017 Inducement Plan12.1** Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) as adoptedpursuant to Section 302 of the Sarbanes-Oxley Act of 200212.2** Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) as adoptedpursuant to Section 302 of the Sarbanes-Oxley Act of 200213.1** Certification of Chief Executive Officer and Chief Financial Officer pursuant to Exchange Act Rules 13a-14(b) and 15d-14(b) and 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 200221.1** Subsidiaries of the Company23.1** Consent of Ernst & Young LLP23.2** Consent of Ernst & Young AB101.INS** XBRL Instance Document101.SCH** XBRL Taxonomy Extension Schema Document101.CAL** XBRL Taxonomy Extension Calculation Linkbase Document101.LAB** XBRL Taxonomy Extension Label Linkbase Document101.PRE** XBRL Taxonomy Extension Presentation Linkbase Document101.DEF** XBRL Taxonomy Extension Definitions Linkbase Document * Previously filed.** Filed herewith.† Portions of the exhibit are omitted pursuant to a confidential treatment request with the U.S. Securities and ExchangeCommission. 129 Table of Contents SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Annual Report on Form 20-F and that ithas duly caused and authorized the undersigned to sign this annual report on its behalf. STRONGBRIDGE BIOPHARMA PLC By: /s/ A. BRIAN DAVIS Name: A. Brian Davis Title: Chief Financial Officer Date: April 4, 2017 130 Table of ContentsINDEX TO CONSOLIDATED FINANCIAL STATEMENTS 9 PageConsolidated Financial Statements Reports of Independent Registered Public Accounting Firm F‑2Consolidated Balance Sheets F‑4Consolidated Statements of Operations and Comprehensive Loss F‑5Consolidated Statements of Shareholders’ Equity F‑6Consolidated Statements of Cash Flows F‑7Notes to Consolidated Financial Statements F‑8 F-1 Table of ContentsReport of Independent Registered Public Accounting FirmThe Board of Directors and Shareholders of Strongbridge Biopharma plcWe have audited the accompanying consolidated statements of operations, shareholders’ equity and cash flows ofStrongbridge Biopharma plc for the year ended December 31, 2014. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statements based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internalcontrol over financial reporting. Our audits included consideration of internal control over financial reporting as a basis fordesigning audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An auditalso includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,assessing the accounting principles used and significant estimates made by management, and evaluating the overall financialstatement presentation. We believe that our audit provides a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidatedresults of operations, shareholders’ equity and cash flows of Strongbridge Biopharma plc for the year ended December 31,2014, in conformity with U.S. generally accepted accounting principles./s/ Ernst & Young ABGothenburg, SwedenAugust 17, 2015 except for Note 1, as to which the date is September 9, 2015 F-2 Table of ContentsReport of Independent Registered Public Accounting FirmThe Board of Directors and Shareholders of Strongbridge Biopharma plcWe have audited the accompanying consolidated balance sheets of Strongbridge Biopharma plc (the Company) asof December 31, 2016 and 2015, and the related consolidated statements of operations and comprehensive loss, changes inshareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2016. These financialstatements are the responsibility of the Company's management. Our responsibility is to express an opinion on thesefinancial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internalcontrol over financial reporting. Our audits included consideration of internal control over financial reporting as a basis fordesigning audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An auditalso includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,assessing the accounting principles used and significant estimates made by management, and evaluating the overall financialstatement presentation. We believe that our audits provide a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidatedfinancial position of Strongbridge Biopharma plc at December 31, 2016 and 2015, and the consolidated results of itsoperations and its cash flows for each of the two years in the period ended December 31, 2016, in conformity with U.S.generally accepted accounting principles. /s/ Ernst & Young LLPPhiladelphia, PennsylvaniaApril 4, 2017 F-3 Table of Contents STRONGBRIDGE BIOPHARMA plcConsolidated Balance Sheets(In thousands, except share and per share data) December 31, December 31, 2016 2015 ASSETS Current assets: Cash and cash equivalents $66,837 $51,623 Prepaid expenses and other current assets 764 1,253 Total current assets 67,601 52,876 Property and equipment, net 25 35 Deferred tax asset 1,599 — Intangible assets, net 60,900 36,551 Goodwill 7,256 7,256 Other assets 150 612 Total assets $137,531 $97,330 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $1,089 $2,792 Accrued liabilities 14,868 2,685 Total current liabilities 15,957 5,477 Long-term debt 18,434 — Warrant liability 11,090 — Supply agreement liability, noncurrent 25,078 — Deferred tax liabilities — 926 Total liabilities 70,559 6,403 Commitments and contingencies (Note 8) Stockholders’ equity: Deferred shares, $1.098 par value, 40,000 shares authorized, issued and outstanding atDecember 31, 2016 and December 31, 2015 44 44 Ordinary shares, $0.01 par value, 600,000,000 shares authorized at December 31, 2016and December 31, 2015; 35,335,026 and 21,205,382 shares issued and outstanding atDecember 31, 2016 and December 31, 2015 353 212 Additional paid-in capital 195,975 170,910 Accumulated deficit (129,400) (80,803) Non-controlling interest — 564 Total stockholders’ equity 66,972 90,927 Total liabilities and stockholders’ equity $137,531 $97,330 The accompanying notes are an integral part of these consolidated financial statements.F-4 Table of ContentsSTRONGBRIDGE BIOPHARMA plcConsolidated Statements of Operations and Comprehensive Loss(In thousands, except share and per share data) Year Ended December 31, 2016 2015 2014 Operating expenses: Research and development $20,023 $20,135 $5,844 General and administrative 14,875 22,719 4,588 Impairment of intangible assets 15,828 — — Total operating expenses 50,726 42,854 10,432 Operating loss (50,726) (42,854) (10,432) Other (expense) income, net: Foreign exchange loss (69) (124) (204) Unrealized gain on fair value of warrants 638 — — Interest expense (20) — — Other (expense) income, net (1,180) (1,105) 486 Total other (expense) income, net (631) (1,229) 282 Loss before income taxes (51,357) (44,083) (10,150) Income tax benefit 2,638 450 480 Net loss (48,719) (43,633) (9,670) Net loss attributable to non-controlling interest 122 53 — Net loss attributable to Strongbridge Biopharma $(48,597) $(43,580) $(9,670) Other comprehensive loss — — — Comprehensive loss $(48,597) $(43,580) $(9,670) Net loss attributable to ordinary shareholders: Basic $(48,597) $(43,580) $(9,670) Diluted $(49,236) $(43,580) $(9,670) Net loss per share attributable to ordinary shareholders: Basic $(2.26) $(2.62) $(1.20) Diluted $(2.27) $(2.62) $(1.20) Weighted-average shares used in computing net loss per share attributableto ordinary shareholders: Basic 21,550,353 16,606,669 8,043,175 Diluted 21,655,564 16,606,669 8,043,175 The accompanying notes are an integral part of these consolidated financial statements.F-5 Table of ContentsSTRONGBRIDGE BIOPHARMA plcConsolidated Statements of Shareholders’ Equity(In thousands except share amounts) Strongbridge Biopharma plc Shareholders Additional Non- Total Ordinary Shares Deferred Shares Paid-In Accumulated Controlling Shareholders’ Shares Amount Shares Amount Capital Deficit Interest Equity Balance—January 1, 2014 7,939,608 $79 — — $45,273 $(27,553) $24 $17,823 Net loss — — — — — (9,670) — (9,670) Shares exchanged forBioPancreate non-controllinginterest 5,272 — — — 19 — (24) (5) Stock-based compensation — — — — 480 — — 480 Issuance of shares 1,755,909 18 — — 10,175 — — 10,193 Balance—December 31, 2014 9,700,789 97 — — 55,947 (37,223) — 18,821 Net loss — — — — — (43,580) (53) (43,633) Stock-based compensation — — — — 3,581 — — 3,581 Reclass of stock-basedliability award to equity — — — — 1,542 — — 1,542 Issuance of shares 9,108,169 91 — — 91,418 — — 91,509 U.S. non-accredited sharesrepurchased (24,955) — — — (412) — — (412) Issuance of shares in initialpublic offering, net 2,500,000 25 — — 19,450 — — 19,475 Non-controlling interestresulting from exchangeoffer (78,621) (1) — — (616) — 617 — Beneficial shares issued — — 40,000 $44 — — — 44 Balance—December 31, 2015 21,205,382 $212 40,000 $44 $170,910 $(80,803) $564 $90,927 Net loss — — — — — (48,597) (122) (48,719) Stock-based compensation — — — — 4,606 — — 4,606 Acquisition of non-controlling interest — — — — (972) — (442) (1,414) Issuance of shares, net ofoffering costs 14,000,000 140 — — 20,430 — — 20,570 Exercise of stock options 129,644 1 — — 119 — — 120 Issuance of warrants relatedto the loan agreement — — — — 882 — — 882 Balance—December 31, 2016 35,335,026 $353 40,000 $44 $195,975 $(129,400) $ — $66,972 The accompanying notes are an integral part of these consolidated financial statements.F-6 Table of ContentsSTRONGBRIDGE BIOPHARMA plcConsolidated Statements of Cash Flow(In thousands) Year Ended December 31, 2016 2015 2014 Cash flows from operating activities: Net loss $(48,719) $(43,633) $(9,670) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 10 11 9 Stock-based compensation 4,606 3,940 251 Deferred income tax benefit (2,638) (450) (480) Impairment of intangible assets 15,828 — Impairment/loss on investment in Antisense Therapeutics 550 551 — Change in fair value of warrant liability (638) — — Change in fair value of foreign currency forward contracts — 438 (279) Changes in operating assets and liabilities: Accounts payable (1,702) 1,737 236 Accrued liabilities and other liabilities 475 1,263 736 Other assets (88) (52) 2 Prepaid expenses and other current assets 602 (1,165) (309) Net cash used in operating activities (31,714) (37,360) (9,504) Cash flows from investing activities: Payments for acquisitions (3,392) (3,168) — Investment in Antisense Therapeutics — (1,101) — Purchase of equipment — (25) (24) Net cash used in investing activities (3,392) (4,294) (24) Cash flows from financing activities: Proceeds from initial public offering, net — 19,475 — Proceeds from issuance of ordinary shares and warrants, net 32,298 58,341 10,193 Proceeds from exercise of stock options 120 — — Proceeds from long-term debt 19,316 — — Acquisition of non-controlling interest (1,414) (412) — Net cash provided by financing activities 50,320 77,404 10,193 Effect of exchange rate changes on cash and cash equivalents — 241 70 Net increase in cash and cash equivalents 15,214 35,991 735 Cash and cash equivalents—beginning of period 51,623 15,632 14,897 Cash and cash equivalents—end of period $66,837 $51,623 $15,632 Supplemental Disclosures of Cash Flow Information Cash paid during the year for: Income taxes other, net of refunds Interest $20 $ — $ — Supplemental non-cash investing and financing activities: Ordinary shares issued for acquisition of COR-005 $— $33,211 $ — Ordinary shares exchanged for BioPancreate $ — $ — $43 Supply agreement liability for intangible asset $29,285 $ — $ — The accompanying notes are an integral part of these consolidated financial statements.F-7 Table of ContentsSTRONGBRIDGE BIOPHARMA plcNotes to Consolidated Financial Statements1. OrganizationStrongbridge Biopharma plc is a global commercial-stage biopharmaceutical company focused on the developmentand commercialization of therapies for rare diseases with significant unmet needs. Our first commercial product is Keveyis®(dichlorphenamide), the first and only treatment approved by the U.S. Food and Drug Administration ("FDA") forhyperkalemic, hypokalemic, and related variants of primary periodic paralysis. Keveyis, for which we hold the U.S.marketing rights, has orphan drug exclusivity status in the United States through August 7, 2022. In addition to thisneuromuscular disease product, we have two clinical-stage product candidates for rare endocrine diseases, Recorlev andveldoreotide. Recorlev (levoketoconazole, and formerly called COR-003) is a cortisol synthesis inhibitor currently beingstudied for the treatment of endogenous Cushing's syndrome. Veldoreotide (formerly called COR-005) is a next-generationsomatostatin analog (SSA) being investigated for the treatment of acromegaly, with potential additional applications inCushing's syndrome and neuroendocrine tumors. Both Recorlev and veldoreotide have received orphan designation from theFDA and the European Medicines Agency ("EMA").Given the well-identified and concentrated prescriber base addressing our target markets, we intend to use a small,focused sales force to effectively market our products, if approved, in the United States, the European Union and other keyglobal markets. We believe that our ability to execute on this strategy is enhanced by the significant commercial and clinicaldevelopment experience of key members of our management team. We will continue to identify and evaluate the acquisitionof products and product candidates that would be complementary to our existing rare neuromuscular and endocrinefranchises or that would form the basis for new rare disease franchises. We believe this approach will enable us to maximizeour commercial potential by further leveraging our existing resources and expertise.On October 15, 2015, a registration statement was declared effective by the U.S. Securities and ExchangeCommission and on October 16, 2015 we initiated our initial U.S. public offering (IPO) of 2,500,000 ordinary shares at aprice of $10.00 per share. The aggregate net proceeds received by us from the IPO were $19.5 million. Our shares begantrading on The NASDAQ Global Select Market under the symbol "SBBP". On October 20, 2015, trading ceased on theNorwegian Over‑The‑Counter Market, or NOTC.Exchange offerOn May 26, 2015, Strongbridge Biopharma plc (then named Cortendo plc), was incorporated under the laws ofIreland.On August 7, 2015, Strongbridge Biopharma plc initiated an exchange offer for the outstanding shares of CortendoAB. The exchange offer was structured as a one‑for‑one exchange offer in which shareholders of Cortendo AB exchangedtheir common shares, with a par value of $0.15, for beneficial interests in ordinary shares of Strongbridge Biopharma plc,with a par value of $0.01, in the form of Norwegian depositary receipts and, as the case may be, Swedish depositary receipts(except for non‑accredited investors who hold Cortendo AB shares located in the United States, who were offered cash in anamount equivalent to the value of the Strongbridge Biopharma plc shares such investors would otherwise receive for theirCortendo AB shares exchanged).The exchange offer was settled on September 8, 2015, and Cortendo AB became a subsidiary with 99.582% of itsshares being owned by Strongbridge Biopharma plc. Accordingly, Strongbridge Biopharma plc is a continuation of CortendoAB, the predecessor, and the consolidated financial statements represent the assets, liabilities and results of operations ofCortendo AB, for all periods presented.On September 8, 2015, Strongbridge Biopharma plc effected a 1‑for‑11 reverse stock split of its ordinary shares.Accordingly, the consolidated financial statements and notes retroactively reflect the capital structure of StrongbridgeBiopharma plc after giving effect to the exchange offer and the reverse stock split. With affect from September 8, 2015, the0.418% of Cortendo AB not owned by Strongbridge Biopharma plc, is accounted for as a non‑controlling interest. InSeptember 2016, we acquired the non-controlling interest in Cortendo AB, after whichF-8 Table of ContentsCortendo AB became a wholly-owned subsidiary of Strongbridge Biopharma plc. Total consideration paid per share was$13.66 resulting in an aggregate payment of $1.4 million.LiquidityWe believe that our cash resources of $66.8 million at December 31, 2016 will be sufficient to allow us to fundplanned operations into 2019, which is after the expected receipt of data from the Recorlev SONICS and LOGICS Phase 3clinical trials. We expect our funding requirements for operating activities to increase in 2017 and possibly beyond due toexpenses associated with the commercialization of Keveyis, the execution of the Phase 3 SONICS and LOGICS clinical trialsfor Recorlev, and selling, general and administrative expenses. We also expect our cash needs to increase to fund potentialin‑licenses, acquisitions or similar transactions as we pursue our strategy. These expenses may be offset only in part by salesof Keveyis. In addition, beginning in June 2018, we will be required to make monthly principal payments to repay amountsborrowed under our credit facility.We may never achieve profitability, and unless and until we do, we will continue to need to raise additionalcapital. We plan to continue to fund our operations and capital funding needs through equity or debt financing along withrevenues from Keveyis. There can be no assurances, however, that additional funding will be available on terms acceptable tous.Our loan and security agreement, under which outstanding borrowings were $20.0 million at December 31, 2016,contains financial and non-financial covenants including minimum amounts of net revenue in 2017 and beyond. Failure tocomply with the covenants could result in the lenders declaring the loan immediately due and payable. Our liquidityrequirements are predicated on maintaining compliance with the debt covenants and repaying outstanding borrowings inaccordance with the 48 month loan term (see Note 6).2. Summary of significant accounting policies and basis of presentationBasis of presentation and principles of consolidationThe accompanying consolidated financial statements include the accounts of our wholly owned subsidiaries,BioPancreate Inc. (Trevose, Pennsylvania, United States), Cortendo AB (Gothenburg, Sweden) and Cortendo Cayman(Georgetown, Cayman Islands). All intercompany balances and transactions have been eliminated in consolidation. Theseaudited consolidated financial statements have been prepared in conformity with generally accepted accounting principlesin the United States (U.S. GAAP). Any reference in these notes to applicable guidance is meant to refer to the authoritativeU.S. GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of theFinancial Accounting Standards Board (FASB).Foreign currency translationThe consolidated financial statements are reported in United States dollars, which is the functional currency of oursubsidiaries and Cortendo AB. Transactions in foreign currencies are remeasured into our functional currency at the rate ofexchange prevailing at the date of the transaction. Any monetary assets and liabilities arising from these transactions areremeasured into our functional currency at exchange rates prevailing at the balance sheet date or on settlement. Resultinggains and losses are recorded in foreign exchange loss in our consolidated statements of operations.Use of estimatesThe preparation of financial statements in conformity with U.S. GAAP requires us to make estimates andassumptions that affect the reported amounts in the financial statements and accompanying notes. We must apply significantjudgment in this process. Actual results could materially differ from those estimates.F-9 Table of ContentsSegment informationOperating segments are identified as components of an enterprise about which separate discrete financialinformation is available for evaluation by the chief operating decision maker, or decision making group, in making decisionson how to allocate resources and assess performance. We view our operations and manage our business in one operatingsegment. Our material long‑lived assets, which primarily consists of in‑process research and development, reside in theUnited States, Sweden and Cayman Islands.Cash and cash equivalentsWe consider all short‑term highly liquid investments with an original maturity at the date of purchase of threemonths or less to be cash equivalents. Cash and cash equivalents consist of account balances at banks and money marketaccounts, respectively.Concentration of credit risk and other risks and uncertaintiesAs part of our cash and investment management processes, we perform periodic evaluations of the credit standing ofthe financial institutions with which we deposit our cash or purchase cash equivalents, and we have not sustained any creditlosses from instruments held at these financial institutions.Fair value of financial instrumentsFair value accounting is applied for all financial assets and liabilities and non‑financial assets and liabilities that arerecognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).We are required to disclose information on all assets and liabilities reported at fair value that enables an assessmentof the inputs used in determining the reported fair values. FASB ASC Topic 820, Fair Value Measurements and Disclosures(ASC 820), establishes a hierarchy of inputs used in measuring fair value that maximizes the use of observable inputs andminimizes the use of unobservable inputs by requiring that the observable inputs be used when available. Observable inputsare inputs that market participants would use in pricing the asset or liability based on market data obtained from sourcesindependent of us. Unobservable inputs are inputs that reflect our assumptions about the inputs that market participantswould use in pricing the asset or liability, and are developed based on the best information available in the circumstances.The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investmentsand is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described as follows:Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that wehave the ability to access at the measurement date.Level 2—Valuations based on quoted prices for similar assets or liabilities, or quoted prices in markets that are notactive, and for which all significant inputs are observable, either directly or indirectly.Level 3—Valuations that require inputs that reflect our own assumptions that are both significant to the fair valuemeasurement and unobservable. To the extent that valuation is based on models or inputs that are less observable orunobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree ofjudgment we exercise in determining fair value is greatest for instruments categorized in Level 3. A financialinstrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to thefair value measurement.In December 2016, we issued warrants in connection with our private placement of ordinary shares. Pursuant to theterms of the warrant agreement, the Company could be required to settle the warrants in cash in the event of an acquisition ofthe Company and, as a result, the warrants are required to be measured at fair value and reported as a liability in theconsolidated balance sheet. We recorded the fair value of the warrants upon issuance using the Black-Scholes Model and arerequired to revalue the warrants at each reporting date with any changes in fair value recorded onF-10 Table of Contentsour statement of operations.. We consider both the initial valuation as well as our year-end valuation under Level 3 of the fairvalue hierarchy. The change in the fair value of the level 3 warrant liabilities is reflected in the statement of operations andcomprehensive loss for the year ended December 31, 2016.Through June 30, 2015, we entered into foreign currency forward contracts to offset some of the foreign exchangerisks we bear on operating expenses that were not denominated in U.S. dollars. These instruments were not entered into forspeculative purposes and, although we believe they served as effective economic hedges, we did not seek to qualify forhedge accounting. The forward contracts settled on June 30, 2015, and we have not entered into new forward contracts.These forward contracts were recorded at fair value on the accompanying consolidated balance sheets as prepaidexpenses and other current assets. These forward contracts were measured using observable quoted prices for similarinstruments. The gain and loss recognized in other income, net, for these forward contracts was a loss of $0.4 million and again of $0.3 million for the years ended December 31, 2015 and 2014, respectively. These amounts represent the net gain orloss on the forward contracts and do not include changes in the related exposures, which generally offset a portion of the gainor loss on the forward contracts. We considered our foreign currency forward contracts under Level 2 of the fair valuehierarchy.On May 13, 2015, as part of our agreement to acquire an exclusive license agreement from Antisense TherapeuticsLimited (Antisense), we purchased 15,025,075 shares of Antisense common stock that had a fair value of $0.095 per share,which was the quoted market price of the Antisense common stock on the Australian Securities Exchange (ASX). Because wewere contractually prohibited from selling the shares for 24 months from the date of purchase, we estimated a discount for thelack of marketability of $0.022 per share using an option pricing model that estimated the value of a protective put optionusing inputs that included quoted market prices and observable inputs other than quoted market prices. We initiallyrecorded the net fair value amount of $1.1 million as a non-current other asset in our consolidated balance sheet. As ofDecember 31, 2015, the non-current other asset was valued using the ASX closing market price of $0.051 per share and anupdated discount for the lack of marketability of $0.014 per share using an option pricing model, resulting in an impairmentcharge recorded as a valuation allowance against the non-current other asset of $550,000. We considered both the initialvaluation as well as our year-end valuation under Level 2 of the fair value hierarchy. In April 2016, we executed anagreement (the "Settlement Agreement") with Antisense to terminate the exclusive license agreement. Pursuant to the terms ofthe Settlement Agreement, we made a one-time payment of approximately $770,000 to Antisense and returned to Antisense,for no consideration, the shares of Antisense owned by us. Therefore no remeasurement was needed as of December 31, 2016.Property and equipment, netProperty and equipment, net, consists of office equipment such as furniture, fixtures and computers. Depreciationexpense for the years ended December 31, 2016 and 2015 was not significant. The following useful lives were used for thevarious classifications of property and equipment, net: Amortization Periods Computer hardware 3-5years Computer software 2-5years Furniture and fixtures 2-5years Business combinationsWhen acquiring new enterprises over which we obtain control, the acquisition method is applied. Under thismethod, we identify assets and liabilities of these enterprises and measure them at fair value at the acquisition date.Allowance is made for the tax effect of the adjustments made.F-11 Table of ContentsThe excess of the consideration transferred, the amount of the non‑controlling interest in the acquiree and theacquisition date fair value of previous equity interest in the acquiree over the fair value of the identifiable net assets acquiredis recorded as goodwill.Intangible AssetsCertain intangible assets were acquired as part of an asset purchase, and have been capitalized at their acquisitiondate fair value. Acquired definite life intangible assets are amortized using the straight line method over their respectiveestimated useful lives. The Company evaluates the potential impairment of intangible assets if events or changes incircumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of theseassets are no longer appropriate.Purchased identifiable intangible assets with indefinite lives, such as our in‑process research and development, areevaluated for impairment annually in accordance with our policy and whenever events or changes in circumstances indicatethat it is more likely than not that the fair value of these assets may not be recovered.To test these assets for impairment, we compare the fair value of the asset to its carrying value. Themethod we use to estimate the fair value measurements of indefinite‑lived intangible assets is based on theincome approach. For the impairment analysis for the year ended December 31, 2016, significantunobservable inputs used in the income approach valuation method including a discount rates, royalty ratesand probabilities of product candidate advancement from one clinical trial phase to the next. Thedetermination of fair value of indefinite lived assets is considered Level 3 for fair value measurement. GoodwillWe test goodwill for impairment on an annual basis or whenever events occur that may indicate possibleimpairment. This analysis requires us to make a series of critical assumptions to (1) evaluate whether any impairment existsand (2) measure the amount of impairment.Because we have one operating segment, when testing for a potential impairment of goodwill, we are required toestimate the fair value of our business and determine the carrying value. If the estimated fair value is less than the carryingvalue of our business, then we are required to estimate the fair value of all identifiable assets and liabilities in a mannersimilar to a purchase price allocation for an acquired business. Only after this process is completed can the goodwillimpairment be determined, if any.To estimate the fair value of the business, primarily a market‑based approach is applied, utilizing our public marketvalue. We did not record a charge for impairment for the years ended December 31, 2016, 2015 and 2014.Research and development expensesResearch and development costs are expensed as incurred. Research and development expenses consist of internaland external expenses. Internal expenses include compensation and related expenses. External expenses includedevelopment, clinical trials, report writing and regulatory compliance costs incurred with clinical research organizations andother third‑party vendors. At the end of the reporting period, we compare payments made to third‑party service providers tothe estimated progress toward completion of the research or development objectives. Such estimates are subject to change asadditional information becomes available. Depending on the timing of payments to the service providers and the progressthat we estimate has been made as a result of the service provided, we may record net prepaid or accrued expense relating tothese costs. Upfront and milestone payments made to third parties who perform research and development services on ourbehalf are expensed as services are rendered.Stock‑based compensationWe account for stock‑based compensation awards in accordance with FASB ASC Topic 718, Compensation—StockCompensation (ASC 718). ASC 718 requires all stock‑based payments including grants of stock options andF-12 Table of Contentsrestricted stock and modifications to existing stock options, to be recognized in the consolidated statements of operationsbased on their fair values.Our stock‑based awards are subject to either service‑based or performance‑based vesting conditions. Vesting ofcertain awards could also be accelerated upon achievement of defined market‑based vesting conditions. Certain awards alsocontain a combination of service and market conditions or performance and market conditions.We account for employee stock‑based awards at grant‑date fair value. If we issue awards with an exercise pricedenominated in a currency other than our functional currency, trading currency or the currency for which we compensate ouremployee, we account for these as liabilities. We account for non‑employee and liability‑classified stock‑based awards basedon the then‑current fair values at each financial reporting date until the performance is complete for non‑employee awards, oruntil the award is settled (exercised) for liability‑classified awards. Changes in the amounts attributed to these awardsbetween the reporting dates are included in stock‑based compensation expense (credit) in our statements of operations. Weinclude liability‑classified stock options in non‑current liabilities in our balance sheets as their settlement (exercise) does notrequire use of cash, cash equivalents or other current assets.We record compensation expense for service‑based awards over the vesting period of the award on a straight‑linebasis. Compensation expense related to awards with performance‑based vesting conditions is recognized over the requisiteservice period using the accelerated attribution method to the extent achievement of the performance condition isprobable. For those awards in which the performance condition was the completion of our IPO, we did not recognizecompensation expense until the close of the IPO as we did not deem the IPO probable until it occurred. Compensation expense for awards with service and market‑based vesting conditions is recognized using theaccelerated attribution method over the shorter of the requisite service period or the implied period associated withachievement of the market‑based vesting provisions.We estimate the fair value of our awards with service conditions using the Black‑Scholes option pricing model,which requires the input of subjective assumptions, including (i) the expected stock price volatility, (ii) the expected term ofthe award, (iii) the risk‑free interest rate and (iv) expected dividends. Due to the lack of historical and implied volatility dataof our common stock, we based our estimate of expected volatility on the historical volatility of a group of similar companiesthat are publicly traded. We selected companies with comparable characteristics to us, including enterprise value, riskprofiles and position within the industry, and with historical share price information sufficient to meet the expected term ofthe stock‑based awards. We compute historical volatility data using the daily closing prices for the selected companies’shares during the equivalent period of the calculated expected term of the stock‑based awards.We estimate the fair value of our awards with market conditions using a Monte Carlo simulation to determine theprobability of satisfying the market condition. We make this estimate using the conditions that exist at the grant date. Thederived service period, which may be the requisite service period, is also determined at this time. Compensation cost for ourawards with a market condition is recognized ratably using the accelerated attribution method if the award is subject tograded vesting over the requisite service period. The compensation cost for our awards with a market condition is notreversed if the market condition is not satisfied.We have estimated the expected term of employee service‑based stock options using the “simplified” method,whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option,due to our lack of sufficient historical data. We have estimated the expected term of employee awards with market conditionsusing a Monte‑Carlo simulation model. This approach involves generating random stock‑price paths through a lattice‑typestructure. Each path results in a certain financial outcome, such as accelerated vesting or specific option payout. We haveestimated the expected term of nonemployee service‑ and performance‑based awards based on the remaining contractual termof such awards.The risk‑free interest rates for periods within the expected term of the option are based on the Swedish GovernmentBond rate or the U.S. Treasury Bond rate with a maturity date commensurate with the expected term of the associatedaward. We have never paid dividends, and do not expect to pay dividends in the foreseeable future.We are also required to estimate forfeitures at the time of grant, and revise those estimates in subsequent periods ifactual forfeitures differ from estimates. We record stock‑based compensation expense only for those awardsF-13 Table of Contentsthat are expected to vest. To the extent that actual forfeitures differ from our estimates, the differences are recorded as acumulative adjustment in the period the estimates were revised.Income taxesWe use the asset and liability method of accounting for income taxes in accordance with FASB ASC Topic 740,Income Taxes (ASC 740). Under this method, income tax expense is recognized for the amount of (1) taxes payable orrefundable for the current year and (2) deferred tax consequences of temporary differences resulting from matters that havebeen recognized in an entity’s financial statements or tax returns.Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in theyears in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets andliabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. Avaluation allowance is provided to reduce the deferred tax assets reported if, based on the weight of the available positiveand negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statementsand prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement ofa tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on de‑recognition,classification, interest and penalties, accounting in interim periods, disclosure and transition. We have no material uncertaintax positions for any of the reporting periods presented.We recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31,2016, 2015 and 2014, we had no accrued interest or penalties related to uncertain tax positions and no amounts have beenrecognized in our statements of operations.Net loss per shareBasic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weightedaverage number of shares of common stock outstanding during the period. Diluted net loss per share is calculated bydividing the net loss attributable to common stockholders by the weighted‑average number of shares of common stockoutstanding for the period, including any dilutive effect from outstanding stock options or other equity-based awards. Sharesused in the diluted net loss per share calculations exclude anti‑dilutive common equivalent shares, which currently consist ofoutstanding stock options and warrants. Due to the Company operating at a net loss these anti‑dilutive shares of commonstock totaled 3,249,784 shares, 2,591,520 shares and 925,077 shares for the years ended December 31, 2016, 2015 and 2014,respectively. While these common equivalent shares are currently anti‑dilutive, they could be dilutive in the future.Recently adopted accounting pronouncementsIn May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires entities torecognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects theconsideration to which the entity expects to be entitled to in exchange for those goods or services. The new guidance alsorequires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising fromcustomer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred toobtain or fulfill a contract. The FASB has subsequently issued ASU No. 2016-10, Revenue from Contracts with Customer (Topic 606): Identifying Performance Obligations and Licensing, to address issues arising from implementation of the newrevenue recognition standard. ASU 2014-09 and ASU 2016-10 are effective for interim and annual periods beginningJanuary 1, 2018, and may be adopted earlier. The revenue standards are required to be adopted by taking either a fullretrospective or a modified retrospective approach. The Company currently is evaluating the effect that this guidance mayhave on its consolidated financial statements as it relates to our launch of Keveyis.F-14 Table of ContentsIn September 2014, the FASB issued ASU No. 2014‑15, Presentation of Financial Statements—Going Concern:Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The new guidance addressesmanagement’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a goingconcern and to provide related footnote disclosures. Management’s evaluation should be based on relevant conditions andevents that are known and reasonably knowable at the date that the financial statements are issued. The Company adoptedASU 2014‑15 and it did not have an impact on our financial position or results of operations.In September 2015, the FASB issued ASU 2015-16, Business Combinations—Simplifying the AccountingMeasurement-Period Adjustments that eliminates the requirement to restate prior period financial statements for measurementperiod adjustments for business combinations. The new guidance requires that the cumulative impact of a measurementperiod adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment isidentified. The guidance is effective for fiscal years beginning on or after December 15, 2015, and interim periods withinthose years and should be applied prospectively to measurement period adjustments that occur after the effective date. TheCompany will prospectively apply the guidance to applicable transactions. In November 2015, the FASB issued ASU 2015-17, Income Taxes: Balance Sheet Classification of DeferredTaxes that amends the balance sheet classification of deferred taxes. The new guidance requires that deferred tax liabilitiesand assets be classified as noncurrent on the balance sheet. Previous guidance required deferred tax liabilities and assets to beseparated into current and noncurrent amounts on the balance sheet. The guidance is effective for fiscal years beginning onor after December 15, 2016, and interim periods within those years. The Company is currently evaluating the impact that thenew guidance will have on our consolidated financial statements.In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall: Recognition andMeasurement of Financial Assets and Financial Liabilities, that modifies certain aspects of the recognition, measurement,presentation, and disclosure of financial instruments. The accounting standard update is effective for fiscal years, and interimperiods within those years, beginning after December 15, 2017, and early adoption is permitted. The Company are currentlyassessing the impact that adopting this new accounting guidance will have on our consolidated financial statements.In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation: Improvements to EmployeeShare-Based Payments Accounting, which effects all entities that issue share-based payment awards to their employees. Theamendments in this ASU cover such areas as the recognition of excess tax benefits and deficiencies, the classification ofthose excess tax benefits on the statement of cash flows, an accounting policy election for forfeitures, the amount anemployer can withhold to cover income taxes and still qualify for equity classification and the classification of those taxespaid on the statement of cash flows. This ASU is effective for annual and interim periods beginning after December 15, 2016.This guidance can be applied either prospectively, retrospectively or using a modified retrospective transition method. Earlyadoption is permitted. The Company does not expect that this new guidance will have a material impact on the Company’sConsolidated Financial Statements.In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain CashReceipts and Cash Payments, which simplifies certain elements of cash flow classification. The new guidance is intended toreduce diversity in practice in how certain transactions are classified in the statement of cash flows. The ASU is effective forannual periods beginning after December 15, 2017. The Company is currently evaluating the impact the adoption of the ASUwill have on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, Business Combinations - Clarifying the Definition of a Business,which clarified the definition of a business to assist entities with evaluating whether transactions should be accounted for asacquisitions of assets or businesses. The guidance is effective for interim and annual periods beginning after December 31,2017, and early adoption is permitted. The Company elected to early adopt this guidance in the current period and hasapplied it to its evaluation of our asset purchase from Taro Pharmaceutical Industries Ltd. (see note 4). In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other: Simplifying the Accounting forGoodwill Impairment. ASU 2017-04 removes Step 2 of the goodwill impairment test, which requires a hypothetical purchaseprice allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying valueF-15 Table of Contentsexceeds its fair value, not to exceed the carrying amount of goodwill. This standard, which will be effective for the Companybeginning in the first quarter of fiscal year 2021, is required to be applied prospectively. Early adoption is permitted forinterim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currentlyevaluating the impact this standard will have on its financial statements.3. Fair value measurementThe following table sets forth the fair value measurements by level within the fair value hierarchy, that are measuredon a recurring basis. The noncurrent asset comprising of our investment in Antisense common stock, up until the time ourinvestment was returned to Antisense was classified as Level II as we discounted the active market quoted price of thesecurity to reflect our contractual restriction on selling the investment. Level 3 instruments consist of the common stockwarrant liability. The fair values of the outstanding warrants were measured using the Black-Scholes option-pricing model.Inputs used to determine estimated fair value of the warrant liabilities include the estimated fair value of the underlying stockat the valuation date, the estimated term of the warrants, risk-free interest rates, expected dividends and the expectedvolatility of the underlying stock. The significant unobservable inputs used in the fair value measurement of the warrantliabilities were the volatility rate and the estimated term of the warrants. Generally, increases (decreases) in the fair value ofthe underlying stock and estimated term would result in a directionally similar impact to the fair value measurement. Because of their short term nature, the amounts reported in the balance sheet for cash and cash equivalents, andaccounts payable approximate fair value.The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basisfor the periods presented (in thousands): As of December 31, 2016 Level I Level II Level III Total Warrant Liabilities — — 11,090 11,090 Total liabilities $ — $ — $11,090 $11,090 As of December 31, 2015 Level I Level II Level III Total Assets Cash equivalents $45,296 $— $— $45,296 Noncurrent asset — 550 — 550 Total assets $45,296 $550 $ — $45,846 4. Intangible assets and goodwillThe gross carrying amount of in‑process research and development, acquired developed product rights and goodwillis as follows (in thousands): As of December 31, 2016 Beginning of Period Additions Impairment End of Period IPR&D $36,551 $ — $(15,828) $20,723 Acquired product rights — 40,177 — 40,177 Goodwill 7,256 — — 7,256 Total $43,807 $40,177 $(15,828) $68,156 F-16 Table of Contents As of December 31, 2015 Beginning of Period Additions Impairment End of Period IPR&D $5,228 $31,323 $ — $36,551 Acquired product rights — — — — Goodwill 2,200 5,056 — 7,256 Total $7,428 $36,379 $— $43,807 Goodwill and in‑process research and development as of December 31, 2016 and 2015 resulted from our acquisitionof BioPancreate and our 2015 acquisition of veldoreotide (formerly called COR-005) from Aspireo Pharmaceuticals, Ltd. (seeNote 8). In‑process research and development is initially measured at its fair value and is not amortized untilcommercialization. Once commercialization occurs, in‑process research and development will be amortized over itsestimated useful life. We recorded $5.2 million of impairment relating to our BioPancreate IPR&D (See note 8) and $10.6million impairment for our veldoreotide IPR&D during the year ended December 31, 2016. The significant inputs to the fairvalue measurement were future revenues expected to be generated, estimated costs to manufacture and appropriate riskadjusted discount rate. The impairment of veldoreotide is due to increased costs estimated and longer time lines related to thedevelopment process; resulting in a decrease in the valuation of our intangible asset.Our finite lived intangible asset consist of acquired developed product rights obtained from the asset acquisition ofKeveyis® (dichlorphenamide) from a subsidiary of Taro Pharmaceutical Industries Ltd. (“Taro”). Keveyis is approved in theU.S. to treat hyperkalemic, hypokalemic and related variants of primary periodic paralysis, a group of rare hereditarydisorders that cause episodes of muscle weakness or paralysis. Keveyis has received orphan drug exclusivity status in the U.Sthrough August 7, 2022. In connection with the Asset Purchase and Supply Agreement we entered into with TaroPharmaceutical Industries Ltd, we have paid Taro an upfront payment in two installments of $1 million in December 2016and $7.5 million in March 2017. We have concluded that the supply price payable by us exceeds fair value and, therefore,have used a discounted cash flow method with a probability assumption to value the payments in excess of fair value at$29.3 million, for which we have recorded an intangible asset and corresponding liability. This liability will be amortized aswe purchase inventory over the term of the agreement. In addition, we incurred transaction costs of $2.4 million resulting inthe recording of an Intangible Asset of $40.2 million. This asset will be amortized as units are sold over an estimated 8 yearperiod. 5. Accrued liabilitiesAccrued liabilities consist of the following (in thousands): December 31, December 31, 2016 2015 Consulting and professional fees $1,110 $1,288 Accrued payable due Taro Pharmaceuticals Industries Ltd. 7,500 — Supply agreement - current portion 4,207 — Employee compensation 1,554 1,172 Other 497 225 Total accrued liabilities $14,868 $2,685 6. Long Term DebtOn December 28, 2016, the Company entered into a loan and security agreement (the “Loan Agreement”) withOxford Finance LLC (“Oxford”) and Horizon Technology Finance Corporation (“Horizon”). The Loan Agreement providedfor a $40 million credit facility, of which $20 million was borrowed initially. Under the Loan Agreement, the Company hasaccess to two additional tranches of $10 million each, which would be available to the Company subject to the achievementof certain specified milestones.F-17 Table of ContentsThe borrowings pursuant to the Loan Agreement mature after 48 months. The Loan Agreement provides for interest-only payments initially for the first 18 months of the loan followed by an amortization period of 30 months, a final paymentfee equal to 8% of the amount borrowed, and interest payable at an annual rate equal to the sum of 8.22% plus the greater of0.53% or the 30-day US LIBOR rate. The credit facility provides that if the Company satisfies certain milestones and borrowsthe final $10 million tranche, the interest-only period would be extended by an additional six months and the amortizationperiod would be 24 months. The Company has granted a security interest in substantially all of its existing assets and assetsacquired by the Company in the future, including intellectual property. The Loan Agreement contains facility andprepayment fees, and customary affirmative and negative covenants, including a financial covenant regarding minimumamounts of net revenue and events of default and restricts the payment of cash dividends. The Loan Agreement contains amaterial adverse change clause whereby a material adverse change in the Company’s business, operations or financialcondition would be considered an event of default whereby the lenders could declare all amounts under the Loan Agreementas immediately due and payable. We incurred $1.3 million in debt discounts and $0.3 million of debt issuance costs relatingto this Loan Agreement which have been recorded as a reduction to the long-term debt. These amounts will be amortizedover the outstanding period of the debt to interest expense using the effective interest rate method.In connection with the execution of the Loan Agreement, we issued warrants to the Lenders to purchase anaggregate of 428,571 ordinary shares at an exercise price equal to $2.45 per share. The warrants are immediately exercisableand expire after ten years. We accounted for these warrants as equity, and the fair value was recorded into APIC.Future principal payments due under the Loan Agreement are as follows (in thousands): Principal Payments 2017 $ — 2018 4,667 2019 8,000 2020 7,333 Total future payments $20,000 7. WarrantsCommon stock warrants are accounted for in accordance with applicable accounting guidance provided in ASCTopic 815, Derivatives and Hedging — Contracts in Entity’s Own Equity (ASC Topic 815), as either derivative liabilities oras equity instruments depending on the specific terms of the warrant agreement. Warrants outstanding and warrant activity for the year ended December 31, 2016 is as follows: Exercise Expiration Warrants Warrants December31, Classification Price Date Issued Exercised 2016 Warrants in connection with private equityplacement Liability $2.50 6/28/2022 7,000,000 — 7,000,000 Warrants in connection with loan agreement Equity $2.45 12/28/2026 428,571 — 428,571 7,428,571 7,428,571 8. Commitments and contingencies(a) LeaseOn April 22, 2014, we entered into a 48‑month building lease for approximately 3,000 square feet of space inRadnor, Pennsylvania. The lease has annual rent escalations. We obtained access to the newly leased space on August 1,F-18 Table of Contents2014, and this was considered the lease commencement date for accounting purposes. Thus, rent expense began on this dateand is recognized on a straight‑line basis over the term of the lease.In March 2015, the Company entered into a 52‑month building sublease agreement for 14,743 square feet of officespace in Trevose, Pennsylvania. The lease has annual rent escalations and is recognized on a straight‑line basis over the termof the lease. As a result of this lease, we vacated the previously leased Radnor, Pennsylvania facility as of April 13, 2015 anddetermined that the Radnor, Pennsylvania facility was not likely to be utilized during the remaining lease term and as suchwe commenced efforts to sublease the facility. The Company recorded a liability as of the April 13, 2015 cease‑use date of$0.1 million for the estimated fair value of its obligations under the lease. The most significant assumptions used indetermining the amount of the estimated liability are the potential sublease revenues and the credit‑adjusted risk‑free rateutilized to discount the estimated future cash flows.As of December 31, 2016, future minimum commitments under facility operating leases were as follows (inthousands): Operating leases 2017 $311 2018 319 2019 184 Total minimum lease payments $814 Rent expense recognized under our operating lease, including additional rent charges for utilities, parking,maintenance and real estate taxes, was $275,000, $254,000 and $83,000 for the years ended December 31, 2016, 2015 and2014, respectively.(b) License AgreementsCornell Center for Technology Enterprise and CommercializationIn 2011, a license agreement was executed between BioPancreate and the Cornell Center for Technology Enterpriseand Commercialization (CCTEC). Under the terms of the license agreement, BioPancreate obtained certain rights from theCCTEC for commercial development, use and sale of products that use the technology associated with the license. We areobligated to make milestone payments upon the achievement of certain regulatory and clinical milestones up to $2.6 millionin the aggregate. For years in which licensed products are sold, we are required to pay a royalty based on a low single‑digitpercentage of net sales. The minimum annual royalty in such years is $100,000. In the event the product is sublicensed, upto $3.5 million of certain fees we receive that are not earned royalties or reimbursements for direct costs are due to CCTECupon achievement of certain regulatory and clinical milestones.In October 2016, our wholly owned subsidiary, BioPancreate Inc., provided a notice to Cornell University, throughits Cornell Center for Technology Enterprise and Commercialization ("CCTEC"), in accordance with the terms of itsagreement with CCTEC entered into in March 2011, of the termination of the agreement. The notice was provided inaccordance with our decision to terminate our development program for BP-2002, a gene-modified probiotic in pre-clinicaldevelopment for the potential treatment of type 1 and 2 diabetes that was the subject of the agreement. We recorded animpairment charge of $5.2 million during the year ended December 31, 2016, which represented the value of the intangibleasset we had previously capitalized related to the license agreement.Antisense TherapeuticsIn May 2015, we entered into an exclusive license agreement, or the Antisense License Agreement, with AntisenseTherapeutics that provided us with development and commercialization rights to Antisense Therapeutics’ product candidate,ATL1103, for endocrinology applications (specifically excluding the treatment of any form of cancer and the treatment ofany complications of diabetes). We refer to this product candidate as COR‑004. Under the terms ofF-19 Table of Contentsthe Antisense License Agreement, we paid Antisense Therapeutics an initial upfront license fee of $3.0 million in cash whichwas recorded as research and development expenses. We also invested $2.0 million in Antisense Therapeutics equity whichwas initially recorded as a non-current other asset for $1.1 million with the difference constituting the cost of the licensewhich was recorded as research and development expense. The terms of the Antisense License Agreement provided that wecould terminate the Antisense License Agreement upon 90 days’ prior written notice to Antisense Therapeutics if webelieved the further development and commercialization of COR‑004 was no longer feasible due to a material change thatwas beyond our control. If, however, it is determined that we terminated the Antisense License Agreement for convenience,we would be required to pay Antisense Therapeutics a $2.0 million termination fee.In April 2016, we executed an agreement (the "Settlement Agreement") with Antisense Therapeutics ("Antisense") toterminate the exclusive license agreement (the "Antisense License Agreement") that we and Antisense entered into in May2015. Pursuant to the terms of the Settlement Agreement, we have made a one-time payment of approximately $770,000 toAntisense and returned to Antisense, for no consideration, the shares of Antisense owned by us. We also agreed to transfer toAntisense all data, reports, records and materials resulting from our development activities and all ATL1103 drug compoundin our possession. The settlement agreement provides for the release by each party of all obligations and liabilities under theAntisense License Agreement. In connection with the settlement and return of shares, we recorded $1.1 million of expensewithin other (expense)/income.(c) Commitments to Taro Pharmaceuticals Industries Ltd.In December 2016, we acquired the U.S. marketing rights to Keveyis® (dichlorphenamide) from a subsidiary of TaroPharmaceutical Industries Ltd. (“Taro”). Keveyis is approved in the U.S. to treat hyperkalemic, hypokalemic and relatedvariants of primary periodic paralysis, a group of rare hereditary disorders that cause episodes of muscle weakness orparalysis. Keveyis has received orphan drug exclusivity status in the U.S through August 7, 2022. Under the terms of anasset purchase agreement, we paid Taro an upfront payment in two installments of $1 million in December 2016 and $7.5million in March 2017, and will pay an aggregate of $7.5 million in potential milestones upon the achievement of certainproduct sales targets. Taro has agreed to continue to manufacture Keveyis for us under an exclusive supply agreementthrough the orphan exclusivity period. We are obligated to purchase certain annual minimum amounts of product totalingapproximately $29 million over a six-year period. The supply agreement may extend beyond the orphan exclusivity periodunless terminated by either party pursuant to the terms of the agreement. If terminated by Taro at the conclusion of theorphan exclusivity period, we have the right to manufacture the product on our own or have the product manufactured by athird party on our behalf. 9. Business combinationsBioPancreateOn October 29, 2013, we exercised our option to acquire the remaining interest in BioPancreate. As considerationfor this acquisition of shares, we issued 336,136 shares of our ordinary shares in October 2013 and an additional 5,272ordinary shares in January 2014. The transaction was recorded as an equity transaction and the previously heldnon‑controlling interest in BioPancreate was reclassified to equity.Aspireo Pharmaceuticals Ltd. AcquisitionOn June 30, 2015, we acquired veldoreotide from Aspireo Pharmaceuticals Ltd., an Israeli company. Veldoreotidewas formerly called COR-005 by us and DG3173 by Aspireo Pharmaceuticals. We also acquired from Aspireo the rights andobligations to the on‑going research and development contracts, which combined with veldoreotide represented“substantially all” of the Aspireo business. Under the terms of the acquisition agreement, we issued to Aspireo 2,062,677common shares, which had a value of $33.2 million on June 30, 2015. In connection with this acquisition, we also made apayment to the Office of the Chief Scientist of the Israeli Ministry of Economy, or OCS, in the amount of $3.0 million, whichrepresents the repayment of amounts granted by the OCS to Aspireo, plus interest, that were used in support of research anddevelopment conducted by Aspireo for the development of DG3173.F-20 Table of ContentsThe acquisition was accounted for using the acquisition method of accounting for business combinations. The totalconsideration transferred was allocated to the assets acquired and liabilities assumed based on their respective fair values.The fair value of $16.10 per ordinary share of the 2,062,677 ordinary shares issued was determined based on the closingmarket price on the NOTC of our ordinary shares on the acquisition date. To determine the fair value of the acquiredin‑process research and development intangible asset, we applied the income approach using the multi‑period excessearnings method. The following table summarizes the fair values of the assets acquired and liabilities assumed (inthousands):In process research and development $31,323Liabilities assumed: Other liabilities (net) (195)OCS liability (2,973)Total fair values of assets and liabilities 28,155Fair value of total consideration transferred (33,211)Goodwill $(5,056)The excess of the consideration transferred over net assets acquired was assigned to goodwill in an amount of$5.1 million and is primarily related to expected synergies. A deferred tax liability was not recorded for the differencebetween the book and cost basis of the in‑process research and development intangible asset because the asset is domiciledin the Cayman Islands and therefore we do not expect to pay income tax. The goodwill is not deductible for income taxpurposes.We incurred $2.2 million in acquisition‑related transaction costs for the period ended December 31, 2015, which isincluded as general and administration expense in the accompanying consolidated statements of operations.10. Income taxesFor the years ended December 31, 2016, 2015 and 2014, the components of loss before income taxes were as follows(in thousands): Year Ended December 31, 2016 2015 2014 Sweden $(16,433) $(33,960) $(9,165) Ireland (11,653) (191) — Cayman Islands (19,550) (8,722) — U.S. (3,721) (1,210) (985) Total $(51,357) $(44,083) $(10,150) F-21 Table of ContentsThe components of income tax expense (benefit) for the years ended December 31, 2016, 2015 and 2014 were asfollows (in thousands): Year Ended December 31, 2016 2015 2014 Current tax expense (benefit): Sweden $— $— $— Ireland 22 — — U.S. Federal 151 — — State 73 — — Total $246 $— $— Deferred tax expense (benefit): Sweden $ — $212 $(648) Ireland — (24) — U.S. Federal (5,793) (17,543) (2,433) State (678) (1,233) (720) Change in valuation allowance 3,587 18,138 3,321 Total $(2,638) $(450) $(480) With the exception of Strongbridge U.S. Inc., we have incurred net operating losses since inception. For the Irelandand Swedish operations, we have not reflected any benefit of net operating loss carryforwards (NOLs) in the accompanyingfinancial statements. For Strongbridge U.S. Inc., as a result of the intercompany service agreements, it is more likely than notthis entity will have taxable income and recognize all deferred tax assets. Due to the recording of a full impairment of theBioPancreate intellectual property in the current year at BioPancreate, we have established a full valuation allowance againstall prior deferred tax assets. Deferred taxes are recognized for temporary differences between the bases of assets and liabilities for financialstatement and income tax purposes. The tax effect of temporary differences that give rise to significant portions of thedeferred tax assets are as follows (in thousands): Year Ended December 31, 2016 2015 Deferred tax assets: Net operating loss carryforwards $24,433 $22,039 Stock based compensation 1,870 — Other deferred activity 96 — Tax credits 9,135 9,135 Capitalized research and development costs 161 161 Total deferred tax assets 35,695 31,335 Valuation allowance (33,738) (30,150) Deferred tax assets recognized 1,957 1,185 Deferred tax liabilities: Warrants (358) — Acquired intangible assets — (2,111) Total deferred tax liabilities (358) (2,111) Net deferred tax assets (liabilities) $1,599 $(926) We have evaluated the positive and negative evidence bearing upon the realizability of our deferred tax assets.Based on our history of operating losses in Ireland and Sweden, we have concluded that it is more likely than not that thebenefit of our deferred tax assets will not be realized. Currently, as a result of intercompany service agreements that provide asource of taxable income going forward, Strongbridge U.S. Inc. is more likely than not to realize its deferredF-22 Table of Contentstax assets. Separately, as a result of recording a full impairment of the BioPancreate intellectual property, we have recorded afull valuation allowance against the prior federal attributes and all existing state attributes related to BioPancreate. Thevaluation allowance increased by approximately $3.6 million and $18.1 million during the year ended December 31, 2016and 2015, respectively, due primarily to net operating losses.The Company’s effective income tax rate differs from the ultimate parent company, Strongbridge Biopharma plc,Irish domestic statutory rate of 12.5% for the year ended December 31, 2016 and 2015. In December 31, 2014, the effectiveincome tax rate differs from the previous ultimate parent company, Cortendo AB’s, Swedish domestic tax rate of 22% asfollows: Year Ended December 31, 2016 2015 2014 Ireland statutory income tax rate 12.50% 12.50% — Swedish statutory income tax rate — — 22.00%Foreign tax differential between Sweden, U.S., Cayman Island andIreland 2.28 15.70 (4.60) Federal tax credits — 12.10 20.90 Change in valuation allowance (6.69) (41.20) (32.70) State income taxes 0.92 — — Permanent differences 1.59 — — Fx remeasurement of Swedish DTS (5.42) (5.41) — Other (0.04) 7.31 (0.90) Effective income tax rate 5.14% 1.00% 4.70%At December 31, 2016, we had approximately $70.4 million of Swedish NOLs and approximately $12.5 million ofIreland NOLs, which have an indefinite life, and approximately $37.1 million of U.S. federal and $37.2 million of state NOLs,which begin to expire in 2031. Through December 31, 2015 we operated through a permanent establishment in both Swedenand the United States. Relief is granted by way of crediting the U.S. tax against the Swedish tax. This tax credit can neverexceed the Swedish tax on the income. Since the tax rate is higher in the United States than in Sweden, the Swedish taxablecarryforward losses of $70.4 million can only generate a tax benefit if income is derived from sources other than thepermanent establishment in the United States. Beginning January 1, 2016, the US operations that were not part ofBioPancreate Inc occurred in a newly formed US corporation. There were no operating losses generated during 2016 in theU.S. except for a minor state NOL at BioPancreate.At December 31, 2016, we had $8.9 million of U.S. federal orphan drug tax credit carryforwards, which begin toexpire in 2032, and $167,000 of U.S. federal research and development tax credit carryforwards, which begin to expire in2031. The orphan drug credit carryforward is attributable to the permanent establishment of the Swedish entity within theU.S.Utilization of the NOLs may be subject to limitations under Swedish tax regulations or U.S. Internal Revenue CodeSection 382 if there is a greater than 50% ownership change as determined under applicable regulations.11. Ordinary sharesVoting rights and privilegesAs of December 31, 2016, and December 31, 2015, there are 600,000,000 authorized shares and 35,335,026 and21,205,382 outstanding shares, respectively.The holders of shares of our ordinary shares are entitled to one vote for each ordinary share held at all meetings ofshareholders without limitation and written actions in lieu of meetings. The holders are entitled to receive dividends if andwhen declared by our Board of Directors. No dividends have been declared or paid since our inception. The holdersF-23 Table of Contentsare entitled to share ratably in our assets available for distribution to stockholders, in the event of any voluntary orinvoluntary liquidation. In addition, on May 26, 2015 the Company issued 40,000 deferred shares with a €1.00 euro par value per share(US$1.098). The deferred shares are issued in order to satisfy an Irish legislative requirement to maintain a minimum level ofissued share capital denominated in euro. The deferred shares carry no voting rights and are not entitled to any dividend ordistribution.Equity financingsOn December 22, 2016, we raised $32.7 million, net of transaction costs, in a private placement of ordinary sharesand warrants. We issued and sold 14,000,000 ordinary shares of common stock at a purchase price of $2.50 per ordinary shareas well as warrants to purchase 7,000,000 shares. The warrants are exercisable at a price of $2.50 per share beginning onJune 28, 2017 and expire in five years from June 28, 2017. In the event of a sale of the Company, the terms of the warrantsrequire us to use our best efforts to ensure the holders of such warrants will have a continuing right to purchase shares of theacquirer and, if our efforts are unsuccessful, to make a payment to such warrant holders based on a Black-Scholes valuation(using variables as specified in the warrant agreements). Therefore we are required to account for these warrants as liabilitiesand record at fair value at each reporting period. Fair value for these warrants was initially determined upon issuance usingthe Black-Scholes Model and were revalued at fair value as of December 31, 2016. The resulting decrease in fair valueresulted in an unrealized gain of $0.6 million. As of December 31, 2016, the fair value of these warrants of $11.1 million wasrecorded as a long-term liability on our consolidated balance sheet.On October 22, 2015, we closed on our initial U.S. public offering of 2,500,000 ordinary shares at a price to thepublic of $10.00 per ordinary share for aggregate gross proceeds of $25 million, before deducting the underwritingcommission and estimated offering expenses of $5.5 million. In June 2015, we raised $32.6 million, net of transaction costs,in a private placement of 2,284,414 shares of our common stock. The subscription price was $14.54 per share. In February2015, we raised $25.8 million, net of transaction costs, in a private placement of 4,761,078 shares of our common stock. Thesubscription price was $5.54 per share.Shares reserved for issuanceThere were 1,951,022 and 2,591,520 shares of common stock reserved for future issuance upon exercise of stockoptions as of December 31, 2016 and 2015, respectively. As of December 31, 2016, we have 7,428,571 shares reserved foroutstanding warrants.12. Stock‑based compensationThe Board of Directors approve the granting of awards to our officers, directors, employees and thirdparty‑consultants. Under these grants, the beneficiaries are given the right to acquire new shares of common stock at apre‑determined option price. The purpose of the grants is to assist us in attracting, retaining and motivating officers,employees, directors and consultants. In addition, these awards provide us with the ability to provide incentives that aredirectly linked to the performance of our business and the related increase in shareholder value.Our awards have terms that range from five to ten years. As determined by our Board of Directors, our awards vestover service periods ranging up to four years or upon achievement of defined performance or market criteria such as thevesting of certain awards upon our IPO or awards that are accelerated when the fair value of our stock price reaches definedtargets.The exercise price for each stock option is determined by the Board of Directors based upon considerations such asthe fair value of the underlying ordinary shares and certain market conditions. For options granted prior to our October 22,2015, IPO, the determination of the fair value of our common stock takes into account the price at which our shares werebeing quoted on the NOTC, recent equity financings and our valuations calculated with the assistance of third‑parties.F-24 Table of ContentsOn July 21, 2015, we cancelled 465,262 of our options for certain employees that were not vested and for whichservice was expected to be rendered and concurrently replaced these with 586,710 options. We accounted for thecancellation and replacement as a modification whereby we determined value of the original options based on currentassumptions, without regard to the assumptions made on the grant date. We then compared the fair value of the modifiedaward to the fair value of the original options immediately before the terms were modified, measured based on the share priceand other pertinent factors on the date of the modification The incremental value of $468,000 was recorded over theremaining requisite service periods as these awards are expected to vest. On September 8, 2015, we effected a 1-for-11 reverse stock split of our ordinary shares. In conjunction with thereverse stock split, we adjusted our outstanding stock options by the same ratio.On October 22, 2015, we converted all of our Cortendo AB awards which were previously denominated in SwedishKrona (SEK) and Norwegian Kroner (NOK), into awards to acquire shares in Strongbridge Biopharma plc which weredenominated in U.S. dollars. For the stock options denominated in NOK, the calculation was based on 8.1935 NOK per U.S.dollars. Due to the effects of foreign exchange related to the exercise price, we accounted for the conversion as a modificationwhereby we determined value of the original options based on current assumptions, without regard to the assumptions madeon the grant date. We then compared the fair value of the modified award to the fair value of the original options immediatelybefore the terms were modified, measured based on the share price and other pertinent factors on the date of the modification.Because the effected options were vested, the incremental value of $325,000 was recorded as expense during the periodended December 31, 2015.For the awards denominated in SEK which were classified as liability awards, we accounted for the conversion as amodification whereby we determined the value of the original options based on current assumptions, without regard to theassumptions made on the grant date. We then compared the fair value of the modified award to the fair value of the originaloptions immediately before the terms were modified, measured based on the share price and other pertinent factors on thedate of the modification. The incremental value was recorded as expense in the statement of operations. The liability awardswere fully vested as of October 22, 2015 and therefore the resulting liability after modification of $1.5 million, wasreclassified from liability to additional paid-in capital on October 22, 2015. As these stock options are now equity-classifiedand fully vested, we will not remeasure these stock options in the future.A summary of the outstanding stock options activity for the year ended December 31, 2016 is as follows: Options Outstanding Weighted- Average Weighted- Remaining Average Contractual Number of Exercise Term Aggregate Shares Price (Years) Intrinsic Value (in thousands) Outstanding—January 1, 2016 2,591,520 $13.59 5.97 $1,844 Granted 1,169,600 $4.28 Forfeited and cancelled (329,518) $12.85 Expired — — Exercised 181,818 $1.32 Outstanding—December 31, 2016 3,249,784 $11.00 6.89 $ — Vested and exercisable—December 31, 2016 1,158,660 $11.37 4.91 $ — Vested and expected to vest—December 31, 2016 2,860,743 $10.73 6.52 $ — Included in the stock options outstanding at December 31, 2016, are unvested stock options to purchase 88,909shares at a weighted average exercise $18.80 per share for which the vesting of certain tranches will accelerate if the fairvalue per share of our stock reaches $16.11, $31.46 or $37.62 for the respective grantee. In addition, the options outstandinginclude 97,652 shares that vest upon a market appreciation event so long as it occurs prior to May 26, 2019 of which all wereunvested as of December 31, 2016 and 97,652 shares that will vest upon the one year anniversary of the market appreciationevent of which all were unvested as of December 31, 2016. The market appreciation event isF-25 Table of Contentsdefined as the last trading day in the period in which the closing stock price on each of 20 consecutive trading days reportedon NASDAQ has been at least $30.14 or $33.66 for the respective grantee.The aggregate intrinsic values of options outstanding, vested and exercisable, and vested and expected to vest werecalculated as the difference between the exercise price of the options and the estimated fair value of our common stock as ofDecember 31, 2016, since the estimated fair value is less than the exercise price for all stock options, there is not any intrinsicvalue.Stock‑based compensation expenseWe recognized stock‑based compensation expense for employees and non‑employees in the accompanyingconsolidated statements of operations as follows (in thousands): Year Ended December 31, 2016 2015 2014 Research and development $601 $793 $268 General and administrative 4,005 3,147 (17) Total stock-based compensation $4,606 3,940 $251 Included in these amounts was stock compensation expense (credit) attributed to liability‑classified awards of, $0,$359,000 and $(229,000), for the years ended December 31, 2016, 2015 and 2014, respectively. The total income tax benefitrecognized in the income statement for share-based compensation arrangements was $1.9 million, $0, and $0 for 2016, 2015and 2014, respectively.As of December 31, 2016, the total unrecognized compensation expense related to unvested options, net ofestimated forfeitures, was $6.8 million, which we expect to recognize over an estimated weighted‑average period of2.46 years.In determining the estimated fair value of the stock‑based awards, we use the Black‑Scholes option‑pricing modeland assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment.The fair value of stock option awards was estimated with the following assumptions: Year Ended December 31, 2016 2015 2014 Expected term (in years)5.93.233.23Risk-free interest rate 1.21% - 2.23% 0.0% - 0.6% 0.0% - 0.6% Expected volatility 78.1% - 83.6% 79.0% - 83.1% 68.3% - 80.7% Dividend rate —% —% —% F-26Exhibit 10.20THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTEREDUNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OFANY STATE AND, EXCEPT AS SET FORTH IN SECTIONS 5.3 AND 5.4 BELOW, MAY NOT BEOFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTEREDUNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM ANDSUBSTANCE SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE, PLEDGE OR OTHERTRANSFER IS EXEMPT FROM SUCH REGISTRATION.WARRANT TO SUBSCRIBE FOR SHARES Company:STRONGBRIDGE BIOPHARMA PUBLIC LIMITED COMPANY, a public limitedcompany incorporated under the laws of IrelandNumber of Shares: Class of Share:Ordinary Shares of nominal value US$0.01Warrant Price:$2.45 per ShareIssue Date:December 28, 2016Expiration Date:December 28, 2026 See also Section 5.1(b).Credit Facility:This Warrant to Subscribe for Shares (“Warrant”) is issued in connection with that certainLoan and Security Agreement, dated December 28, 2016, by and among Oxford FinanceLLC, as Lender and Collateral Agent, the Lenders from time to time party thereto, including__________ and the Company (as modified, amended and/or restated from time to time, the“Loan Agreement”). THIS WARRANT CERTIFIES THAT, for good and valuable consideration, ___________ (“_______” and,together with any successor or permitted assignee or transferee of this Warrant or of any shares issued upon exercisehereof, “Holder”) is entitled to subscribe for the number of fully paid and non-assessable (which term, when usedherein, means that no further sums are required to be paid in connection with such Shares by the holder(s) thereof)shares (the “Shares”) of the above-stated Class of Shares (the “Class”) of the above-named company (the“Company”) at the above-stated Warrant Price, all as set forth above and as adjusted pursuant to Section 2 of thisWarrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. The Company has, byresolution of its board of directors, agreed to issue this Warrant to ________ to subscribe for the Shares on the terms setout in this Warrant.SECTION 1. EXERCISE.1.1 Method of Exercise. Holder may at any time and from time to time exercise this Warrant, inwhole or in part, by delivering to the Company the original of this Warrant together with a duly executed Notice ofExercise in substantially the form attached hereto as Appendix 1 and a check, wire transfer of same-day funds (to anaccount designated by the Company), or other form of payment acceptable to the Company for the aggregate price tobe paid for the Shares being subscribed for pursuant to such exercise as determined pursuant to Section 1.2 below (the"Subscription Price"). Thereupon, the Company shall issue to the Holder such number of fully paid and non-assessable shares determined in accordance with Section 1.2 below. 1.2 Exercise. On any exercise of this Warrant:(a) if Holder does not elect in the applicable Notice of Exercise to effect that exercise pursuant toSection 1.2(b) below, the number of Shares to be issued by the Company pursuant to that exercise shall be the numberof Shares specified in paragraph 1 of the applicable Notice of Exercise and the Subscription Price payable in respect ofthat exercise shall be the product of the Warrant Price multiplied by the number specified in paragraph 1 of theapplicable Notice of Exercise; and(b) if Holder does elect in the applicable Notice of Exercise to effect that exercise pursuant to thisSection 1.2(b), the number of Shares to be issued by the Company pursuant to that exercise shall be calculated inaccordance with the following formula:X = S – Ywhere:X is the number of Shares to be issued by the Company pursuant to that exercise;S is the number of Shares specified in paragraph 1 of the applicable Notice of Exercise; andY is calculated in accordance with the following formula:Y = S(WP – N)/FMVwhere:S is the number of Shares specified in paragraph 1 of the applicable Notice of Exercise;WP is the Warrant Price;N is the then nominal value of a Share; andFMV is the Fair Market Value (as determined pursuant to Section 1.3 below) of one Share,and the Subscription Price payable in respect of that exercise shall be the product of the then nominal value of a Sharemultiplied by the number specified in paragraph 1 of the applicable Notice of Exercise.1.3 Fair Market Value. If the Company’s ordinary shares are then traded or quoted on a nationallyrecognized securities exchange, inter-dealer quotation system or over-the-counter market (a “Trading Market”) andthe Class is ordinary shares, the fair market value of a Share shall be the closing price or last sale price of an ordinaryshare of the Company reported for the Business Day immediately before the date on which Holder delivers thisWarrant together with its Notice of Exercise to the Company. If the Company’s ordinary shares are then traded in aTrading Market, the fair market value of a Share shall be the closing price or last sale price of an ordinary share of theCompany reported for the Business Day immediately before the date on which Holder delivers this Warrant togetherwith its Notice of Exercise to the Company. If the Company’s ordinary shares are not traded in a Trading Market, the Board of Directors of the Company shall determine the fair market value of a Share in its reasonable good faithjudgment.1.4 Delivery of Certificate and New Warrant. Within a reasonable time after Holder exercises thisWarrant in the manner set forth in Sections 1.1 and 1.2 above, the Company shall deliver to Holder a certificaterepresenting the Shares issued to Holder upon such exercise and, if this Warrant has not been fully exercised and hasnot expired, a new warrant of like tenor representing the Shares not so acquired.1.5 Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of theloss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of anindemnity agreement reasonably satisfactory in form, substance and amount to the Company or, in the case ofmutilation, on surrender of this Warrant to the Company for cancellation, the Company shall, within a reasonable time,execute and deliver to Holder, in lieu of this Warrant, a new warrant of like tenor and amount.1.6 Treatment of Warrant Upon Acquisition of Company.(a) Acquisition. For the purpose of this Warrant, “Acquisition” means any transaction or series ofrelated transactions involving: (i) the sale, lease, exclusive license, or other disposition of all or substantially all of theassets of the Company (ii) any merger or consolidation of the Company into or with another person or entity (otherthan a merger or consolidation effected exclusively to change the Company’s domicile), or any other corporatereorganization, in which the stockholders of the Company in their capacity as such immediately prior to such merger,consolidation or reorganization, own less than a majority of the Company’s (or the surviving or successor entity’s)outstanding voting power immediately after such merger, consolidation or reorganization (or, if such Companystockholders beneficially own a majority of the outstanding voting power of the surviving or successor entity as ofimmediately after such merger, consolidation or reorganization, such surviving or successor entity is not the Company);or (iii) any one or more offers by any person or group of persons acting in concert (in either case, the "Offeror") whichis publicly disclosed and which, if completed, would result in the Offeror holding or controlling more than 50% of thevoting and other equity securities of the Company.(b) Treatment of Warrant at Acquisition. In the event of an Acquisition in which the considerationto be received by the Company’s shareholders consists solely of cash, solely of Marketable Securities or a combinationof cash and Marketable Securities (a “Cash/Public Acquisition”), either (i) Holder shall exercise this Warrant pursuantto Section 1.1 and 1.2 and such exercise will be deemed effective immediately prior to and contingent upon theconsummation of such Acquisition or (ii) if Holder elects not to exercise the Warrant, this Warrant will expireimmediately prior to the consummation of such Acquisition.(c) The Company shall provide Holder with written notice of its request relating to the Cash/PublicAcquisition (together with such reasonable information as Holder may reasonably require regarding the treatment ofthis Warrant in connection with such contemplated Cash/Public Acquisition giving rise to such notice), which is to bedelivered to Holder not less than twenty-one (21) days prior to the closing of the proposed Cash/Public Acquisition. Inthe event the Company does not provide such notice, then if, immediately prior to the Cash/Public Acquisition, the fairmarket value of one Share (or other security issuable upon the exercise hereof) as determined in accordance withSection 1.3 above would be greater than the Warrant Price in effect on such date, then this Warrant shall automaticallybe deemed on and as of such date to be exercised pursuant to Section 1.2(b) above as to all Shares (or such othersecurities) for which it shall not previously have been exercised, and the Company shall promptly notify the Holder ofthe number of Shares (or such other securities) issued upon such exercise to the Holder and Holder shall pay to theCompany in the manner prescribed in Section 1.1 above an amount equal to the Subscription Price in respect of suchexercise and be deemed to have restated each of the representations and warranties in Section 4 of the Warrant as thedate thereof.(d) Upon the closing of any Acquisition other than a Cash/Public Acquisition defined above, theacquiring, surviving or successor entity shall assume the obligations of this Warrant, and this Warrant shall thereafter beexercisable for the same securities and/or other property as would have been paid for the Shares issuable upon exerciseof the unexercised portion of this Warrant as if such Shares were outstanding on and as of the closing of suchAcquisition, subject to further adjustment from time to time in accordance with the provisions of this Warrant.(e) As used in this Warrant, “Marketable Securities” means securities meeting all of the followingrequirements: (i) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of theSecurities Exchange Act of 1934, as amended (the “Exchange Act”), and is then current in its filing of all requiredreports and other information under the Act and the Exchange Act; (ii) the class and series of shares or other security ofthe issuer that would be received by Holder in connection with the Acquisition were Holder to exercise this Warrant onor prior to the closing thereof is then traded in Trading Market, (iii) the issuer thereof has a market cap of at least FiveHundred Million Dollars ($500,000,000) and (iv) following the closing of such Acquisition, Holder would not berestricted from publicly re-selling all of the issuer’s shares and/or other securities that would be received by Holder insuch Acquisition were Holder to exercise or convert this Warrant in full on or prior to the closing of such Acquisition,except to the extent that any such restriction (x) arises solely under federal or state securities laws, rules or regulations,and (y) does not extend beyond six (6) months from the closing of such Acquisition.SECTION 2. ADJUSTMENTS TO THE SHARES AND WARRANT PRICE.2.1 Stock Dividends, Splits, Etc. If the Company declares, pays or makes a dividend, distributionor bonus issue on the issued shares of the Class payable in shares or other securities or property (other than cash), thenupon exercise of this Warrant, for each Share acquired, Holder shall receive, without additional cost to Holder, the totalnumber and kind of securities and property which Holder would have received had Holder owned the Shares of recordas of the date the dividend or distribution occurred. If the Company subdivides the issued shares of the Class byreclassification or otherwise into a greater number of shares, the number of Shares subscribable hereunder shall beproportionately increased and the Warrant Price shall be proportionately decreased. If the issued shares of the Class arecombined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall beproportionately increased and the number of Shares shall be proportionately decreased. 2.2 Reclassification, Exchange, Combinations or Substitution. Upon any event whereby all of theissued shares of the Class are reclassified, exchanged, combined, substituted, or replaced for, into, with or by Companysecurities of a different class and/or series, then from and after the consummation of such event, this Warrant will beexercisable for the number, class and series of Company securities that Holder would have received had the Sharesbeen in issue on and as of the consummation of such event, and subject to further adjustment thereafter from time totime in accordance with the provisions of this Warrant. The provisions of this Section 2.2 shall similarly apply tosuccessive reclassifications, exchanges, combinations substitutions, replacements or other similar events.2.3 Intentionally Left Blank.2.4 Intentionally Left Blank.2.5 No Fractional Share. No fractional Share shall be issuable upon exercise of this Warrant andthe number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional Share interestarises upon any exercise of the Warrant, the Company shall eliminate such fractional Share interest by paying Holderin cash the amount computed by multiplying the fractional interest by (i) the fair market value (as determined inaccordance with Section 1.3 above) of a full Share, less (ii) the then-effective Warrant Price.2.6 Notice/Certificate as to Adjustments. Upon each adjustment of the Warrant Price, Class and/ornumber of Shares, the Company, at the Company’s expense, shall notify Holder in writing within a reasonable timesetting forth the adjustments to the Warrant Price, Class and/or number of Shares and facts upon which suchadjustment is based. The Company shall, upon written request from Holder, furnish Holder with a certificate of itsChief Financial Officer, including computations of such adjustment and the Warrant Price, Class and number of Sharesin effect upon the date of such adjustment and each reference in this Warrant to the Warrant Price, Class and/or numberof Shares shall, unless expressly provided otherwise herein, be construed as a reference to the Warrant Price, Classand/or number of Shares respectively as adjusted in accordance with the terms of this Warrant.SECTION 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.3.1 Representations and Warranties. The Company represents and warrants to, and agrees with, theHolder as follows:(a) The Company has full power and authority to execute and deliver this Warrant and to complywith the provisions of, and perform its obligations under, this Warrant.(b) The Company has taken all necessary action to authorize the execution, delivery andperformance of this Warrant and this Warrant constitutes legal, valid and binding obligations enforceable against it.(c) The execution of this Warrant and the performance by the Company of its obligations hereunderdo not and will not conflict with its constitution or law or regulation applicable to it. (d) The initial Warrant Price referenced on the first page of this Warrant is not greater than the priceper share at which shares of the Class were last sold and issued prior to the Issue Date hereof in an arms-lengthtransaction in which at least $500,000 of such shares were sold.(e) All Shares which may be issued upon the exercise of this Warrant, and all securities, if any,issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and non-assessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or underapplicable federal and state securities laws and shall rank pari passu in all respects with all other Shares in issue on thedate of such issuance and conform to the rights attached to such shares set out in the constitution of the Company. TheCompany covenants that it shall at all times cause to be reserved and kept available out of its authorized and unissuedshare capital such number of shares of the Class, ordinary shares and other securities as will be sufficient to permit theexercise in full of this Warrant and the conversion of the Shares into ordinary shares or such other securities.(f) The Company’s capitalization table attached hereto as Schedule 1 is true and complete, in allmaterial respects, as of the Issue Date.3.2 Notice of Certain Events. If the Company proposes at any time to:(a) declare, pay or make any dividend, distribution or bonus issue upon the issued shares of theClass or its ordinary shares, whether in cash, property, stock, or other securities and whether or not a regular cashdividend;(b) offer for subscription or sale pro rata to the holders of the issued shares of the Class anyadditional shares of any class or series of the Company’s share capital (other than pursuant to contractual pre-emptiverights);(c) effect any reclassification, exchange, combination, substitution, reorganization or recapitalizationof the issued shares of the Class; or(d) effect an Acquisition or to liquidate, dissolve or wind up;then, in connection with each such event, the Company shall give Holder:(1) at least seven (7) Business Days prior written notice of the date on which a record willbe taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders ofoutstanding shares of the Class will be entitled thereto) or for determining rights to vote, if any, in respect of the mattersreferred to in (a) and (b) above; and(2) in the case of the matters referred to in (c) and (d) above at least seven (7) Business Daysprior written notice of the date when the same will take place (and specifying the date on which the holders ofoutstanding shares of the Class will be entitled to exchange their shares for the securities or other property deliverableupon the occurrence of such event). Reference is made to Section 1.6(c) whereby this Warrant will be deemed to be exercised pursuant to Section 1.2(b)hereof if the Company does not give written notice to Holder of a Cash/Public Acquisition as required by the termshereof. Company will also provide information requested by Holder that is reasonably necessary to enable Holder tocomply with Holder’s accounting or reporting requirements.SECTION 4. REPRESENTATIONS, WARRANTIES OF THE HOLDER.The Holder represents and warrants to the Company as follows:4.1 Acting for Own Account. This Warrant and the securities to be acquired upon exercise of thisWarrant by Holder are being acquired for investment for Holder’s account, not as a nominee or agent, and not with aview to the public resale or distribution within the meaning of the Act. Holder also represents that it has not beenformed for the specific purpose of acquiring this Warrant or the Shares.4.2 Disclosure of Information. Holder is aware of the Company’s business affairs and financialcondition and has received or has had full access to all the information it considers necessary or appropriate to make aninformed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holderfurther has had an opportunity to ask questions and receive answers from the Company regarding the terms andconditions of the offering of this Warrant and its underlying securities and to obtain additional information (to theextent the Company possessed such information or could acquire it without unreasonable effort or expense) necessaryto verify any information furnished to Holder or to which Holder has access.4.3 Investment Experience. Holder understands that the purchase of this Warrant and its underlyingsecurities involves substantial risk. Holder has experience as an investor in securities of companies in the developmentstage and acknowledges that Holder can bear the economic risk of such Holder’s investment in this Warrant and itsunderlying securities and has such knowledge and experience in financial or business matters that Holder is capable ofevaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexistingpersonal or business relationship with the Company and certain of its officers, directors or controlling persons of anature and duration that enables Holder to be aware of the character, business acumen and financial circumstances ofsuch persons.4.4 Accredited Investor Status. Holder is an “accredited investor” within the meaning of RegulationD promulgated under the Act.4.5 The Act. Holder understands that this Warrant and the Shares issuable upon exercise hereofhave not been registered under the Act in reliance upon a specific exemption therefrom, which exemption dependsupon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein. Holderunderstands that this Warrant and the Shares issued upon any exercise hereof must be held indefinitely unlesssubsequently registered under the Act and qualified under applicable state securities laws, or unless exemption fromsuch registration and qualification are otherwise available. Holder is aware of the provisions of Rule 144 promulgatedunder the Act. 4.6 No Voting Rights. Holder, as a Holder of this Warrant, will not have any voting rights until theexercise of this Warrant.SECTION 5. MISCELLANEOUS.5.1 Term; Automatic Exercise Upon Expiration.(a) Term. Subject to the provisions of Section 1.6 above, this Warrant is exercisable in whole or inpart at any time and from time to time on or before 6:00 PM, Eastern time, on the Expiration Date and shall be voidthereafter.(b) Automatic Exercise upon Expiration. In the event that, upon the Expiration Date, the fairmarket value of one Share (or other security issuable upon the exercise hereof) as determined in accordance withSection 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically bedeemed on and as of such date to be exercised pursuant to Section 1.2(b) above as to all Shares (or such othersecurities) for which it shall not previously have been exercised, and, subject to receipt by the Company of theSubscription Price in respect of the Shares issuable pursuant to such exercise in accordance with Section 1.1, theCompany shall, within a reasonable time deliver a certificate representing the Shares (or such other securities) issuedupon such exercise to Holder.5.2 Legends. Each certificate evidencing Shares (and each certificate evidencing the securitiesissued upon conversion of any Shares, if any) shall be imprinted with a legend in substantially the following form:THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEENREGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE“ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SETFORTH IN THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BYTHE ISSUER TO _______ DATED DECEMBER 28, 2016, MAY NOT BEOFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESSAND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THEOPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCESATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHERTRANSFER IS EXEMPT FROM SUCH REGISTRATION.5.3 Compliance with Securities Laws on Transfer. This Warrant and the Shares issued uponexercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) maynot be transferred or assigned in whole or in part except in compliance with applicable federal and state securities lawsby the transferor and the transferee (including, without limitation, the delivery of investment representation letters andlegal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shallnot require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder, provided that any suchtransferee is an “accredited investor” as defined in Regulation D promulgated under the Act. Additionally, theCompany shall also not require an opinion of counsel if there is no material question as to the availability of Rule 144promulgated under the Act. 5.4 Transfer Procedure. After receipt by Holder of the executed Warrant, Holder may transfer allor part of this Warrant to one or more of Holder’s affiliates (each, a “Holder Affiliate”), by execution of anAssignment substantially in the form of Appendix 2. Subject to the provisions of Section 5.3 and upon providing theCompany with written notice, Holder, any such Holder Affiliate and any subsequent Holder, may transfer all or part ofthis Warrant or the Shares issuable upon exercise of this Warrant (or the Shares issuable directly or indirectly, uponconversion of the Shares, if any) to any other transferee, provided, however, in connection with any such transfer, theHolder Affiliate(s) or any subsequent Holder will give the Company notice of the portion of the Warrant beingtransferred with the name, address and taxpayer identification number of the transferee and Holder will surrender thisWarrant to the Company for reissuance to the transferee(s) (and Holder if applicable).5.5 Warrant Register. The Company will maintain a register in respect of this Warrant on whichshall be entered the name(a) and addresse(s) of the Holders and the particulars of this Warrant held by them and of allcancellations and transfers (in accordance with Section 5.4 above) and exercise of this Warrant.5.6 Notices. All notices and other communications hereunder from the Company to the Holder, orvice versa, shall be deemed delivered and effective (i) when given personally, (ii) on the third (3rd) Business Day afterbeing mailed by first-class registered or certified mail, postage prepaid, (iii) upon actual receipt if given by facsimile orelectronic mail and such receipt is confirmed in writing by the recipient, or (iv) on the first Business Day followingdelivery to a reliable overnight courier service, courier fee prepaid, in any case at such address as may have beenfurnished to the Company or Holder, as the case may be, in writing by the Company or such Holder from time to timein accordance with the provisions of this Section 5.6. All notices to Holder shall be addressed as follows until theCompany receives notice of a change of address in connection with a transfer or otherwise:____________________________________________________________________Attn:Telephone:Facsimile:Email:Notice to the Company shall be addressed as follows until Holder receives notice of a change in addressSTRONGBRIDGE BIOPHARMA PUBLIC LIMITED COMPANY900 Northbrook DriveSuite 200Trevose, Pennsylvania 19053Attn: Chief Legal OfficerFax: 215-355-7389Email: s.long@strongbridgebio.com With a copy (which shall not constitute notice) to:Reed Smith LLP599 Lexington AvenueNew York, New York 10022Attn: Lee Ann DillonFax: 212-521-5450Email: ldillon@reedsmith.com5.7 Waiver. This Warrant and any term hereof may be changed, waived, discharged or terminated(either generally or in a particular instance and either retroactively or prospectively) only by an instrument in writingsigned by the party against which enforcement of such change, waiver, discharge or termination is sought.5.8 Attorneys’ Fees. In the event of any dispute between the parties concerning the terms andprovisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costsincurred in such dispute, including reasonable attorneys’ fees.5.9 Counterparts; Facsimile/Electronic Signatures. This Warrant may be executed in counterparts,all of which together shall constitute one and the same agreement. Any signature page delivered electronically or byfacsimile shall be binding to the same extent as an original signature page with regards to any agreement subject to theterms hereof or any amendment thereto.5.10 Governing Law. This Warrant shall be governed by and construed in accordance with thelaws of the State of Delaware, without giving effect to its principles regarding conflicts of law.5.11 Headings. The headings in this Warrant are for purposes of reference only and shall not limitor otherwise affect the meaning of any provision of this Warrant.5.12 Business Days. “Business Day” is any day that is not a Saturday, Sunday or a day on which___________ is closed.5.13 Rights as Shareholders; Information. No holder of this Warrant, as such, shall be entitled tovote or receive dividends or be deemed the holder of Ordinary shares which may at any time be issuable upon theexercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of thisWarrant, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors orupon any matter submitted to shareholders at any meeting thereof, or to receive notice of meetings, or to receivedividends or subscription rights or otherwise until this Warrant shall have been exercised and the Shares purchasableupon the exercise hereof shall have become deliverable, as provided herein. Notwithstanding the foregoing, theCompany will transmit to the holder of this Warrant such information, documents and reports as are generallydistributed to the holders of any class or series of the securities of the Company concurrently with the distributionthereof to the shareholders. 5.14 Binding Effect on Successors. This Warrant shall be binding upon any corporation succeedingthe Company by merger, consolidation or acquisition of all or substantially all of the Company’s assets, and all of theobligations of the Company relating to the Shares issuable upon the exercise or conversion of this Warrant shall survivethe exercise, conversion and termination of this Warrant and all of the covenants and agreements of the Company shallinure to the benefit of the successors and assigns of the holder hereof.5.15 Registration Rights. The Shares issuable hereunder initially shall be exempt from registrationunder the Act. Following the Date of Grant, and in any case within ninety (90) days thereof, Company shall promptlyprepare, file and use its reasonable efforts to cause to become effective as soon as practicable thereafter, a registrationstatement on Form F-3 or such other form as may be appropriate to be filed with the SEC by Company under the Act(together with any amendments or supplements thereto, whether prior to or after the effective date thereof, the“Registration Statement”) covering the public resale in the United States of the Shares to be issued pursuant to thisWarrant, and Company shall use its reasonable efforts to keep the Registration Statement continuously effective duringthe Term. Any such registration shall be subject to the customary terms and conditions used in connection with resaleprospectuses. Company’s obligations under this Section are contingent upon Holder providing promptly allinformation concerning such Holder and its proposed plan of distribution as Company may reasonably request inconnection with any of the foregoing.[Remainder of page left blank intentionally][Signature page follows] IN WITNESS WHEREOF, the parties have caused this Warrant to Subscribe for Shares to be executed bytheir duly authorized representatives effective as of the Issue Date written above."Company"STRONGBRIDGE BIOPHARMA PUBLIC LIMITED COMPANYBy: ________________________________Name: Stephen LongTitle: Chief Legal Officer IN WITNESS WHEREOF, the parties have caused this Warrant to Subscribe for Shares to be executed bytheir duly authorized representatives effective as of the Issue Date written above."COMPANY"STRONGBRIDGE BIOPHARMA PLCBy: _________________________Name: _________________________ (Print)Title: _________________________ "HOLDER"________________________________By: _________________________Name: _________________________ (Print)Title: _________________________ APPENDIX 1NOTICE OF EXERCISE1. The undersigned Holder hereby exercises its right to subscribe for _______ ordinary shares in the capitalof Strongbridge Biopharma plc (the “Company”) in accordance with the attached Warrant To Subscribe for Shares,and tenders payment of the aggregate Warrant Price for such shares as follows:[ ] check in the amount of $_______ payable to order of the Company enclosed herewith[ ] Wire transfer of immediately available funds to the Company’s account[ ] Net issuance exercise pursuant to Section 1.2(b) of the Warrant[ ] Other [Describe] ____________________________________________2. [Please issue a certificate or certificates representing the Shares in the name specified below:]____________________________________Holder’s Name________________________________________________________________________(Address)3. By its execution below and for the benefit of the Company, Holder hereby restates each of therepresentations and warranties in Section 4 of the Warrant to Subscribe for Shares as of the date hereof.HOLDER:______________________________________By:___________________________________Name:_________________________________Title:__________________________________Date:__________________________________ APPENDIX 2ASSIGNMENTFor value received, ___________ hereby sells, assigns and transfers untoName: [_______ TRANSFEREE]Address: __________________________________Tax ID: ___________________________________]that certain Warrant to Subscribe for Shares issued by Strongbridge Biopharma plc (the “Company”), on[DATE] (the “Warrant”) together with all rights, title and interest therein.[_______________]By:___________________________________Name:_________________________________Title:__________________________________Date:__________________________________By its execution below, and for the benefit of the Company, [TRANSFEREE] makes each of the representations andwarranties set forth in Article 4 of the Warrant and agrees to all other provisions of the Warrant as of the date hereof.[TRANSFEREE]By:___________________________________Name:_________________________________Title:_________________________________] SCHEDULE 1Company Capitalization Table21,205,382 Ordinary shares were issued and outstanding as of March 10, 2016.Exhibit 10.21STRONGBRIDGE BIOPHARMA PLC2017 INDUCEMENT PLANThe purpose of the Strongbridge Biopharma plc 2017 Inducement Plan is to assist StrongbridgeBiopharma plc and its affiliates and subsidiaries in attracting valued employees by offering them agreater stake in the Company’s success and a closer identity with it, and to encourage ownership of theCompany’s stock by such employees.1. DefinitionsAs used herein, the following definitions shall apply:(a) “Award” means a grant of Options, Stock Awards or Restricted Stock Units under thePlan.(b) “Award Agreement” means the written agreement, instrument or document evidencingan Award.(c) “Board” means the Board of Directors of the Company.(d) “Change of Control” means, after the Effective Date, any of the following events:(i) Any “person” (as such term is used in sections 13(d) and 14(d) of theExchange Act) (other than persons who are shareholders on the Effective Date) becomes a “beneficialowner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of theCompany representing more than 50% of the voting power of the then outstanding securities of theCompany; provided that a Change of Control shall not be deemed to occur as a result of a change ofownership resulting from the death of a shareholder, and a Change of Control shall not be deemed tooccur as a result of a transaction in which the Company becomes a subsidiary of another corporationand in which the shareholders of the Company, immediately prior to the transaction, will beneficiallyown, immediately after the transaction, shares entitling such shareholders to more than 50% of all votesto which all shareholders of the parent corporation would be entitled in the election of directors(without consideration of the rights of any class of stock to elect directors by a separate class vote); or(ii) The consummation of (i) a merger or consolidation of the Company withanother corporation where the shareholders of the Company, immediately prior to the merger orconsolidation, will not beneficially own, immediately after the merger or consolidation, shares entitlingsuch shareholders to more than 50% of all votes to which all shareholders of the surviving corporationwould be entitled in the election of directors (without consideration of the rights of any class of stock toelect directors by a separate class vote); (ii) a sale or other disposition of all or substantially all of theassets of the Company; or (iii) a liquidation or dissolution of the Company.(iii) Notwithstanding the foregoing, the following acquisitions shall not constitute aChange of Control: (A) an acquisition by the Company or entity controlled by the Company, or (B) an acquisition by an employee benefit plan (or related trust) sponsored or maintainedby the Company.(e) “Code” means the Internal Revenue Code of 1986, as amended, and the Treasuryregulations promulgated thereunder. A reference to any provision of the Code or the Treasuryregulations promulgated thereunder shall include reference to any successor provision of the Code orthe Treasury regulations.(f) “Committee” means the committee designated by the Board to administer the Planunder Section 2. The Committee shall consist of at least two members and each member shall be aNon-Employee Director and an “independent director” within the meaning of Rule 5605(a)(3) of theNasdaq Stock Market Equity Rules.(g) “Company” means Strongbridge BioPharma plc.(h) “Company Stock” means the ordinary shares of the Company, par value US$0.01 pershare each.(i) “Effective Date” has the meaning set forth in Section 17.(j) “Eligible Individual” means any individual who was not previously an employee or aNon-Employee Director of the Company or any of its subsidiaries (or who had a bona fide period ofnon-employment with the Company and its subsidiaries) who is hired by the Company or asubsidiary.(k) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and therules promulgated thereunder. A reference to any provision of the Exchange Act or rule promulgatedunder the Exchange Act shall include reference to any successor provision or rule.(l) “Fair Market Value” means: (x) if the principal trading market for the Company Stockis a national securities exchange or the Nasdaq National Market, the last reported sale price thereof onthe relevant date or (if there were no trades on that date) the latest preceding date upon which a salewas reported, or (y) if the Company Stock is not principally traded on such exchange or market, themean between the last reported “bid” and “asked” prices of Company Stock on the relevant date, asreported on Nasdaq or, if not so reported, as reported by the National Daily Quotation Bureau, Inc. oras reported in a customary financial reporting service, as applicable and as the Committee determines.(m) “Grantee” means an Eligible Individual who receives an Award under the Plan. (n) “Non-Employee Director” means a member of the Board who meets the definition of a“non-employee director” under Rule 16b-3(b)(4) promulgated by the Exchange Act.(o) “Option” means a right to purchase a specified number of Company Stock at aspecified price awarded by the Committee as described in Section 6 of the Plan.(p) “Plan” means the Strongbridge BioPharma plc 2017 Inducement Plan.-2- (q) “Restricted Stock Unit” means the right to a payment in Company Stock or in cash, orin a combination thereof, awarded by the Committee under Section 7 of the Plan.(r) “Stock Award” means the right to payment in Company Stock awarded by theCommittee under Section 7 of the Plan.2. Administration(a) Administration and Authority. The Plan shall be administered by the CompensationCommittee. The Committee shall have the sole authority to (i) determine the Eligible Individuals towhom Awards shall be made under the Plan; (ii) determine the type, size, and terms of the Award tobe made to each such Eligible Individual; (iii) determine the time when the Awards will be made andthe duration of any applicable exercise or restriction period, including the criteria for exercisability andthe acceleration of exercisability; (iv) amend the terms of any previously issued Award; (v) acceleratethe vesting, exercisability, or lapse of any forfeiture condition with respect to an Award; and (vi) dealwith any other matters arising under the Plan.(b) Committee Determinations. The Committee shall have full power and authority toadminister, construe and interpret the Plan, correct any defect, supply any omission, or reconcile anyinconsistency in the Plan or any Award or Award Agreement, make factual determinations and adoptor amend such rules, regulations, agreements, and instruments for implementing the Plan and for theconduct of its business as it deems necessary or advisable, in its sole discretion. The Committee’sinterpretations of the Plan and all determinations made by the Committee pursuant to the powersvested in it hereunder shall be conclusive and binding on all persons having any interest in the Plan orin any Awards granted hereunder. All powers of the Committee shall be executed in its solediscretion, in the best interest of the Company, not as a fiduciary, and in keeping with the objectives ofthe Plan and need not be uniform as to similarly situated individuals.(c) Limitation of Liability. To the maximum extent permitted by law, no member of theCommittee shall be liable for any action taken or decision made in good faith relating to the Plan orany Award thereunder. The Committee may employ counsel, consultants, accountants, appraisers,brokers or other persons. The Committee, the Company, and the officers and directors of theCompany shall be entitled to rely upon the advice, opinions or valuations of any such persons.3. AwardsAwards under the Plan may consist of grants of Options as described in Section 6, as StockAwards as described in Section 7, and Restricted Stock Units as described in Section 7. All Awardsshall be subject to the terms and conditions set forth herein and to such other terms and conditionsconsistent with the Plan as the Committee deems appropriate and as are specified in the AwardAgreement. The Committee shall approve the form and provisions of each AwardAgreement. Awards under a particular Section of the Plan need not be uniform as among theGrantees. -3- 4. Shares Subject to the Plan(a) Shares Authorized. Subject to adjustment as described below, the Company Stockavailable for Awards under the Plan is 1,000,000 (the “Share Pool”). The shares may be authorizedbut unissued shares of Company Stock or reacquired shares of Company Stock, including sharespurchased by the Company on the open market for purposes of the Plan.(b) Adjustments to Share Pool. The Share Pool shall be reduced, on the date of grant, byone share for each Award granted under the Plan; provided that Awards that are valued by referenceto shares of Company Stock but are required to be paid in cash pursuant to their terms shall not reducethe Share Pool. If and to the extent Options terminate, expire, or are canceled, forfeited, exchanged, orsurrendered without having been exercised, or if any Stock Awards or Restricted Stock Units(including restricted stock received upon the exercise of Options) are forfeited, the shares of CompanyStock subject to such Awards shall again be available for Awards under the Share Pool.Notwithstanding the foregoing, the following shares of Company Stock shall not become available forissuance under the Plan: (A) shares tendered by Grantees, or withheld by the Company, as full orpartial payment to the Company upon the exercise of stock options granted under the Plan; and (B)shares withheld by, or otherwise remitted to, the Company to satisfy a Grantee’s tax withholdingobligations upon the lapse of restrictions on Stock Awards or the exercise of Options granted underthe Plan. (c) Adjustments. If there is any change in the number or kind of shares of CompanyStock outstanding (i) by reason of a stock dividend, spinoff, recapitalization, stock split, orcombination or exchange of shares; (ii) by reason of a merger, reorganization, or consolidation; (iii) byreason of a reclassification or change in par value; or (iv) by reason of any other extraordinary orunusual event affecting the outstanding Company Stock as a class without the Company’s receipt ofconsideration, or if the value of outstanding shares of Company Stock is substantially reduced as aresult of a spinoff or the Company’s payment of an extraordinary dividend or distribution, themaximum number of shares of Company Stock available for Awards, the maximum number of sharesof Company Stock that any individual participating in the Plan may be granted in any year, thenumber of shares covered by outstanding Awards, the kind of shares issued under the Plan, and theprice per share of such Awards shall be adjusted by the Committee to reflect any increase or decreasein the number of, or change in the kind or value of, issued shares of Company Stock to preclude theenlargement or dilution of rights and benefits under such Awards; provided, however, that anyfractional shares resulting from such adjustment shall be eliminated. Any adjustments determined bythe Committee shall be final, binding, and conclusive.5. Eligibility for ParticipationAny Eligible Individual shall be eligible to participate in the Plan. The Committee shall selectthe Eligible Individuals to receive Awards and shall determine the number of shares of CompanyStock subject to a particular Award in such manner as the Committee determines.-4- 6. Granting of OptionsThe Company may grant Options to purchase shares of Company Stock to EligibleIndividuals. The following provisions are applicable to Options.(a) Number of Shares. The Committee shall determine the number of shares of CompanyStock that shall be subject to each Award of Options.(b) Price. The purchase price (the “Exercise Price”) of Company Stock subject to anOption shall be determined by the Board and shall be equal to or greater than the Fair Market Value ofa share of Company Stock on the date the Option is granted.(c) Option Term. The Committee shall determine the term of each Option. The term ofany Option shall not exceed ten years from the date of grant.(d) Exercisability of Options. Options shall become exercisable in accordance with suchterms and conditions, consistent with the Plan, as may be determined by the Committee and specifiedin the Award Agreement. The Committee may accelerate the exercisability of any or all outstandingOptions at any time for any reason. The Committee may provide in an Award Agreement that theGrantee may elect to exercise part or all of an Option before it otherwise has becomeexercisable. Any shares so purchased shall be restricted shares and shall be subject to a repurchaseright in favor of the Company during a specified restriction period, with the repurchase price equal tothe lesser of (A) the Exercise Price, or (B) the Fair Market Value of such shares at the time ofrepurchase, and (C) any other restrictions determined by the Company.(e) Termination of Employment, Disability, or Death.(i) Except as provided below, an Option may only be exercised while the Granteeis employed by, or providing service to, the Employer (as defined below) as an Eligible Individual. Inthe event that a Grantee ceases to be employed by, or provide service to, the Employer for any reasonother than Disability, death, or termination for Cause, any Option which is otherwise exercisable by theGrantee shall terminate unless exercised within 90 days after the date on which the Grantee ceases tobe employed by, or provide service to, the Employer (or within such other period of time as may bespecified by the Committee), but in any event no later than the date of expiration of the Optionterm. Except as otherwise provided by the Committee or in the Award Agreement, any of theGrantee’s Options that are not otherwise exercisable as of the date on which the Grantee ceases to beemployed by, or provide service to, the Employer shall terminate as of such date. (ii) In the event the Grantee ceases to be employed by, or provide service to, theEmployer on account of a termination for Cause by the Employer, any Option held by the Granteeshall terminate as of the date the Grantee ceases to be employed by, or provide service to, theEmployer. In addition, notwithstanding any other provisions of this Section 6, if the Committeedetermines that the Grantee has engaged in conduct that constitutes Cause at any time while theGrantee is employed by, or providing service to, the Employer or after the Grantee’s termination ofemployment or service, any Option held by the Grantee shall immediately terminate, and the Granteeshall automatically forfeit all shares underlying any exercised portion of an Option for which theCompany has not yet delivered the share certificates, upon refund by-5- the Company of the Exercise Price paid by the Grantee for such shares. Upon any exercise of anOption, the Company may withhold delivery of share certificates pending resolution of an inquiry thatcould lead to a finding resulting in a forfeiture.(iii) In the event the Grantee ceases to be employed by, or provide service to, theEmployer because the Grantee is Disabled (as defined below), any Option which is otherwiseexercisable by the Grantee shall terminate unless exercised within one year after the date on which theGrantee ceases to be employed by, or provide service to, the Employer (or within such other period oftime as may be specified by the Committee), but in any event no later than the date of expiration of theOption term. Except as otherwise provided by the Committee, any of the Grantee’s Options which arenot otherwise exercisable as of the date on which the Grantee ceases to be employed by, or provideservice to, the Employer shall terminate as of such date.(iv) If the Grantee dies while employed by, or providing service to, the Employeror within 90 days after the date on which the Grantee ceases to be employed or provide service onaccount of a termination specified in Section 6(e)(i) above (or within such other period of time as maybe specified by the Committee), any Option that is otherwise exercisable by the Grantee shall terminateunless exercised within one year after the date on which the Grantee ceases to be employed by, orprovide service to, the Employer (or within such other period of time as may be specified by theCommittee), but in any event no later than the date of expiration of the Option term. Except asotherwise provided by the Committee, any of the Grantee’s Options that are not otherwise exercisableas of the date on which the Grantee ceases to be employed by, or provide service to, the Employershall terminate as of such date.(v) For purposes of this Plan:(A) The term “Employer” shall mean the Company and its parent and subsidiarycorporations or other entities, as determined by the Committee.(B) “Employed by, or provide service to, the Employer” shall mean employmentor service as an Eligible Individual (so that, for purposes of exercising Options and satisfyingconditions with respect to Stock Awards or Restricted Stock Units, a Grantee shall not beconsidered to have terminated employment or service until the Grantee ceases to be anEligible Individual, unless the Committee determines otherwise.(C) “Disability” shall mean a Grantee’s becoming disabled within the meaningof section 22(e)(3) of the Code, within the meaning of the Employer’s long-term disabilityplan applicable to the Grantee, or as otherwise determined by the Committee.(D) “Cause” shall mean, except to the extent specified otherwise by theCommittee or as defined in any other agreement between the Grantee and the Company, afinding by the Committee that the Grantee has (i) been convicted of a felony or crimeinvolving moral turpitude; (ii) disclosed trade secrets or confidential information of theEmployer to persons not entitled to receive such information; (iii) breached any writtennoncompetition or nonsolicitation agreement between the Grantee and the Employer; or-6- (iv) engaged in willful and continued negligence in the performance of the duties assigned tothe Grantee by the Employer, after the Grantee has received notice of and failed to cure suchnegligence.(f) Exercise of Options. A Grantee may exercise an Option that has become vested andexercisable, in whole or in part, by delivering a notice of exercise to the Company. The Grantee shallpay the Exercise Price for an Option by the Committee (i) in cash; (ii) by delivering shares ofCompany Stock owned by the Grantee (including Company Stock acquired in connection with theexercise of an Option, subject to such restrictions as the Committee deems appropriate) and having aFair Market Value on the date of exercise equal to the Exercise Price or by attestation (on a formprescribed by the Committee) to ownership of shares of Company Stock having a Fair Market Valueon the date of exercise equal to the Exercise Price; (iii) payment through a broker in accordance withprocedures permitted by Regulation T of the Federal Reserve Board; or (iv) by such other method asthe Committee may approve. In addition, the Grantee may elect to settle the Option on a “net basis”by taking delivery of the number of Company Stock equal to Fair Market Value of the shares subjectto any Option less the exercise price, any tax (or other governmental obligation) or otheradministration fees due. The Grantee shall pay the Exercise Price and the amount of any withholdingtax due (pursuant to Section 8) as specified by the Committee.7. Stock Awards and Restricted Stock UnitsThe Company may issue or transfer shares of Company Stock to an Eligible Individual under aStock Award or Restricted Stock Unit, upon such terms as the Committee deems appropriate. Thefollowing provisions are applicable to Stock Awards and Restricted Stock Units:(a) General Requirements. Shares of Company Stock issued or transferred pursuant toStock Awards may be issued or transferred for consideration or for no consideration, and subject torestrictions or no restrictions, as determined by the Committee. The Committee shall determine thenumber of shares of Company Stock subject to a Stock Award and the number of Restricted StockUnits to be granted to a Grantee, the duration of the period during which, and the conditions, if any,under which, the Stock Award and Restricted Stock Units may vest or may be forfeited to theCompany and the other terms and conditions of such Awards. The Committee may require differentperiods of service wiith respect to different Grantees holding different Stock Awards or RestrictedStock Units or to separate, designated portions of shares constituting Stock Awards.(b) Transfer Restrictions and Legend on Stock Certificate. Stock Awards and RestrictedStock Units may not be sold, assigned, transferred, pledged or otherwise encumbered except asprovided in the Plan or as may be provided in the applicable Award Agreement; provided, however,that the Committee may determine that Stock Awards and Restricted Stock Units may be transferredby the Grantee. Each certificate for Stock Awards shall contain a legend giving appropriate notice ofthe restrictions in the Award. The Grantee shall be entitled to have the legend removed from the stockcertificate covering the shares subject to restrictions when all restrictions on such shares havelapsed. The Committee may determine that the Company shall not issue certificates for Stock Awardsuntil all restrictions on such shares have lapsed, or that the Company shall retain possession ofcertificates for Stock Awards until all restrictions on such shares have lapsed. Upon the lapse of therestrictions applicable to a Stock Award, the Company-7- or other custodian, as applicable, shall deliver such certificates to the Grantee or the Grantee’s legalrepresentative.(c) Payment/Lapse of Restrictions. Each Restricted Stock Unit shall be granted withrespect to one share of Company Stock or shall have a value equal to the Fair Market Value of oneshare of Company Stock. Restricted Stock Units shall be paid in cash, shares of Company Stock,other securities, other Awards or other property, as determined in the sole discretion of the Committee,upon the lapse of restrictions applicable thereto, or otherwise in accordance with the applicable AwardAgreement. The amount payable as a result of the vesting of an Restricted Stock Unit shall bedistributed as soon as practicable following the vesting date and in no event later than the fifteenth dateof the third calendar month of the year following the vesting date of the Restricted Stock Unit (or asotherwise permitted under Section 409A of the Code); provided, however, that a Grantee may, if andto the extent permitted by the Committee, elect to defer payment of Restricted Stock Units in a mannerpermitted by Section 409A of the Code.(d) Termination of Employment or Service. Except as otherwise set forth in the AwardAgreement, if the Grantee ceases to be employed by, or provide service to, the Employer (as definedin Section 6(e)), any Stock Award or Restricted Stock Units held by the Grantee that are subject to thetransfer restrictions set forth in Section 7(b) above at such time shall be forfeited. The Committee may,however, provide for complete or partial exceptions to this requirement as it deems appropriate.(e) No Right to Vote and to Receive Dividends. Prior to the lapse of the transferrestrictions set forth in Section 7(b) above, the Grantee shall not have the right to vote shares subject toStock Awards or to receive any dividends or other distributions paid on such shares, subject to anyrestrictions deemed appropriate by the Committee.8. Withholding of Taxes(a) Required Withholding. All Awards under the Plan shall be subject to applicablefederal (including FICA), state, and local tax (or other governmental obligation) withholdingrequirements or other administration fees due. The Employer may require that the Grantee or otherperson receiving or exercising Awards pay to the Employer the amount of any federal, state, or localtaxes (or other governmental obligations) that the Employer is required to withhold or anyadministration fees due with respect to such Awards, or the Employer may deduct from other wagespaid by the Employer the amount of any withholding taxes, governmental obligations oradministration fees due with respect to such Awards.(b) Election to Withhold Shares. If the Board so permits, a Grantee may elect to satisfythe Employer’s income tax (or other governmental obligation) withholding requirement and anyadministration fees due with respect to an Award by having shares withheld up to an amount that doesnot exceed the Grantee’s minimum applicable withholding rate for federal (including FICA), state, andlocal tax (and other governmental obligation) liabilities plus any other administration fees due. Theelection must be in a form and manner prescribed by the Committee and may be subject to the priorapproval of the Committee.-8- 9. Transferability of Awards(a) Nontransferability of Awards. Except as provided below, only the Grantee mayexercise rights under an Award during the Grantee’s lifetime. A Grantee may not transfer those rightsexcept by will or by the laws of descent and distribution. When a Grantee dies, the personalrepresentative or other person entitled to succeed to the rights of the Grantee may exercise suchrights. Any such successor must furnish proof satisfactory to the Company of his or her right toreceive the Award under the Grantee’s will or under the applicable laws of descent and distribution.(b) Transfer of Stock Options. Notwithstanding the foregoing, the Committee mayprovide, in an Award Agreement, that a Grantee may transfer Options to family members, or one ormore trusts or other entities for the benefit of or owned by family members, consistent with applicablesecurities laws, according to such terms as the Committee may determine; provided that the Granteereceives no consideration for the transfer of an Option and the transferred Option shall continue to besubject to the same terms and conditions as were applicable to the Option immediately before thetransfer.10. Consequences of a Change of Control(a) Assumption of Awards. Upon a Change of Control where the Company is not thesurviving corporation (or survives only as a subsidiary of another corporation), unless the Committeedetermines otherwise, all outstanding Awards shall be assumed by, or replaced with comparableAwards by, the surviving corporation (or a parent or subsidiary of the surviving corporation).(b) Termination of Awards. Upon a Change of Control where the Company is not thesurviving corporation (or survives only as a subsidiary of another corporation), in the event thesurviving corporation (or a parent or subsidiary of the surviving corporation) does not assume orreplace the Awards with comparable Awards, (i) the Company shall provide each Grantee withoutstanding Awards written notice of such Change of Control; (ii) all outstanding Options shallautomatically accelerate and become fully vested and exercisable; (iii) all outstanding Stock Awardsshall become vested and deliverable in accordance with Section 7(b); and (iv) all outstandingRestricted Stock Units shall become vested and deliverable in accordance with Section 7(c).(c) Other Alternatives. Notwithstanding the foregoing, in the event of a Change ofControl, the Committee may take one or both of the following actions: the Committee may (i) requirethat Grantees surrender their outstanding Options in exchange for a payment by the Company, in cashor Company Stock as determined by the Committee, in an amount equal to the amount by which thethen Fair Market Value of the shares of Company Stock subject to the Grantee’s unexercised Optionsexceeds the Exercise Price of the Options; or (ii) after giving Grantees an opportunity to exercise theiroutstanding Options, terminate any or all unexercised Options at such time as the Committee deemsappropriate. Such surrender or termination shall take place as of the date of the Change of Control orsuch other date as the Committee may specify.-9- 11. Requirements for Issuance or Transfer of Shares(a) Shareholder’s Agreement. The Committee may require that a Grantee execute ashareholder’s agreement, with such terms as the Committee deems appropriate, with respect to anyCompany Stock issued or distributed pursuant to the Plan.(b) Limitations on Issuance or Transfer of Shares. No Company Stock shall be issued ortransferred in connection with any Award hereunder unless and until all legal requirements applicableto the issuance or transfer of such Company Stock have been complied with to the satisfaction of theCommittee. The Committee shall have the right to condition any Award made to any Granteehereunder on such Grantee’s undertaking in writing to comply with such restrictions on his or hersubsequent disposition of such shares of Company Stock as the Committee shall deem necessary oradvisable, and certificates representing such shares may be legended to reflect any suchrestrictions. Certificates representing shares of Company Stock issued or transferred under the Planshall be subject to such stop-transfer orders and other restrictions as may be required by applicablelaws, regulations, and interpretations, including any requirement that a legend be placed thereon.(c) Lock-Up Period. If so requested by the Company or any representative of theunderwriters (the “Managing Underwriter”) in connection with any underwritten offering of securitiesof the Company under the Securities Act of 1933, as amended (the “Securities Act”), a Grantee(including any successor or assigns) shall not sell or otherwise transfer any shares or other securities ofthe Company during the 30-day period preceding and the 180-day period following the effective dateof a registration statement of the Company filed under the Securities Act for such underwriting (orsuch shorter period as may be requested by the Managing Underwriter and agreed to by theCompany) (the “Market Standoff Period”). The Company may impose stop-transfer instructions withrespect to securities subject to the foregoing restrictions until the end of such Market Standoff Period.12. Amendment and Termination of the Plan(a) Amendment. The Board may amend or terminate the Plan at any time; provided,however, that the Board shall not amend the Plan without shareholder approval if such approval isrequired in order to comply with the Code or other applicable laws or to comply with applicable stockexchange requirements.(b) Termination of Plan. The Plan shall terminate on the day immediately preceding thetenth anniversary of its effective date, unless the Plan is terminated earlier by the Board or is extendedby the Board.(c) Termination and Amendment of Outstanding Awards. A termination or amendmentof the Plan that occurs after an Award is made shall not materially impair the rights of a Grantee unlessthe Grantee consents or unless the Board acts under Section 20(b). The termination of the Plan shallnot impair the power and authority of the Committee with respect to an outstanding Award. Whetheror not the Plan has terminated, an outstanding Award may be terminated or amended under Section20(b) or may be amended by agreement of the Company and the Grantee consistent with the Plan.Notwithstanding the foregoing, any such amendment or-10- termination shall be subject to the approval of the Company’s stockholders if such stockholderapproval is required by any federal or state law or regulation or the rules of any stock exchange orautomated quotation system on which the Company Stock may then be listed or quoted, in each case.(d) Governing Document. The Plan shall be the controlling document. No otherstatements, representations, explanatory materials or examples, oral or written, may amend the Plan inany manner. The Plan shall be binding upon and enforceable against the Company and its successorsand assigns.13. Funding of the PlanThe Plan shall be unfunded. The Company shall not be required to establish any special orseparate fund or to make any other segregation of assets to assure the payment of any Awards underthe Plan. In no event shall interest be paid or accrued on any Award, including unpaid installments ofAwards.14. Rights of ParticipantsNothing in the Plan shall entitle any Eligible Individual or other person to any claim or right tobe granted an Award under the Plan. Neither the Plan nor any action taken hereunder shall beconstrued as giving any individual any rights to be retained by or in the employ of the Employer or anyother employment rights. 15. No Fractional SharesNo fractional shares of Company Stock shall be issued or delivered pursuant to the Plan or anyAward. The Committee shall determine whether cash, other awards or other property shall be issuedor paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall beforfeited or otherwise eliminated.16. HeadingsSection headings are for reference only. In the event of a conflict between a title and thecontent of a Section, the content of the Section shall control.17. Effective Date of the PlanThe Plan shall be effective on February 23, 2017.18. Miscellaneous(a) Awards in Connection with Corporate Transactions and Otherwise. Nothingcontained in the Plan shall be construed to (i) limit the right of the Committee to make Awards underthe Plan in connection with the acquisition, by purchase, lease, merger, consolidation, or otherwise, ofthe business or assets of any corporation, firm or association; or (ii) limit the right of the Company togrant stock options or make other awards outside of the Plan.-11- (b) Compliance with Law. The Plan, exercise of Options, restrictions of Stock Awardsand obligations of the Company to issue or transfer shares of Company Stock under Awards shall besubject to all applicable laws and to approvals by any governmental or regulatory agency as may berequired. With respect to persons subject to section 16 of the Exchange Act, it is the intent of theCompany that the Plan and all transactions under the Plan comply with all applicable provisions ofRule 16b-3 or its successors under the Exchange Act. In addition, it is the intent of the Company thatthe Plan and applicable Awards under the Plan comply with the applicable provisions of section 409Aof the Code. To the extent that any legal requirement of section 16 of the Exchange Act or section409A of the Code as set forth in the Plan ceases to be required under section 16 of the Exchange Actor section 409A of the Code, that Plan provision shall cease to apply. The Committee may revokeany Award if it is contrary to law or modify an Award to bring it into compliance with any valid andmandatory government regulation. The Committee may also adopt rules regarding the withholding oftaxes on payments to Grantees. The Committee may, in its sole discretion, agree to limit its authorityunder this Section.(c) Employees Subject to Taxation Outside the United States. With respect to Granteeswho are subject to taxation in countries other than the United States, the Committee may makeAwards on such terms and conditions as the Committee deems appropriate to comply with the laws ofthe applicable countries, and the Committee may create such procedures, addenda, and subplans andmake such modifications as may be necessary or advisable to comply with such laws.(d) Governing Law. The validity, construction, interpretation, and effect of the Plan andAward Agreements issued under the Plan shall be governed and construed by and determined inaccordance with the laws of the State of Delaware, without giving effect to the conflict of lawsprovisions thereof.-12-Exhibit10.9AMENDED AND RESTATED EMPLOYMENT AGREEMENTTHIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the“Agreement”) is made by and between Strongbridge U.S. Inc. (the “Company”), and Fredric J. Cohen(“Executive”) as of November 23, 2016.W I T N E S S E T H:WHEREAS, Cortendo AB, an affiliate of the Company, and Executive entered into an originalemployment agreement dated August 5, 2015 (the “Effective Date”), which agreement wassubsequently assigned to the Company (such agreement, the “Prior Agreement”); WHEREAS, the Company desires to continue to retain the services of Executive as set forth inthis Agreement, and Executive desires to serve the Company in such capacity, subject to the terms andconditions of this Agreement; and WHEREAS, the Company and Executive intend for this Agreement to replace the PriorAgreement except as otherwise set forth herein. NOW, THEREFORE, for and in consideration of the mutual promises, covenants andobligations contained herein, Company and Executive agree as follows:ARTICLE I EMPLOYMENT AND DUTIESSection 1.01 Employment and Term. Executive shall be employed by the Company forthe period commencing on the Effective Date and expiring on the second anniversary of the EffectiveDate, unless sooner terminated as set forth in this Agreement (the “Term”); provided, however, that theTerm shall thereafter be automatically extended for additional one-year periods unless, at least ninety(90) days prior to expiration of the Term, either (a) the Company gives notice to Executive not toextend the Term or (b) Executive gives notice to the Company not to extend the Term.Section 1.02 Position and Duties. Executive shall serve as the Chief Medical Officer of theCompany, or in such other positions as the parties may agree. Executive shall have the duties andresponsibilities customarily associated with such position and will perform such other duties asreasonably directed by the Chief Executive Officer of the Company (the “CEO”) consistent with suchposition(s).Section 1.03 Scope. Executive will devote substantially all of his business time, attention,skills and efforts to the performance of his duties. Executive acknowledges that his duties and responsibilities require Executive’s full-time business efforts and agrees to not engage in anyother business activity or interests which materially interfere or conflict with the performance ofExecutive’s duties. Notwithstanding the foregoing, Executive may (a) serve on corporate, civic orcharitable boards or committees of entities that do not compete with the Company, with the approval ofthe CEO, (b) deliver a reasonable number of lectures or fulfill speaking engagements, with theapproval of the CEO, or (c) manage personal investments, so long as such activities do not significantlyinterfere with the performance of Executive’s duties.ARTICLE II COMPENSATION AND BENEFITSSection 2.01 Base Salary. During the Term, the Company will pay Executive a base salary(the “Base Salary”) at an initial rate of $380,000 per year in accordance with the Company’s standardpayroll practices. The Base Salary will be reviewed at least annually by the Board of Directors of theCompany (the “Board”) or a committee thereof and may be adjusted (in which case such adjustedamount shall be the “Base Salary”). Section 2.02 Annual Incentive. During Executive’s employment with the Company, and asdetermined by the Board in its sole discretion, Executive shall be eligible for an annual cash incentive(the “Annual Incentive”) with a target of 40% of the Base Salary (such percentage, the “Target AnnualIncentive”). The Annual Incentive shall be based on the achievement of predetermined performancegoals as determined annually by the CEO and the Board. The actual Annual Incentive earned in anyparticular year may be greater or lower than the Target Annual Incentive, depending on the level ofachievement of the applicable performance goals and the discretion of the Board. The AnnualIncentive shall be paid to Executive as soon as practicable, but in no event later than the date that istwo-and-one-half months following the end of the taxable year (of Executive, or the Company,whichever is later) in which such incentive is earned.Section 2.03 Long Term Incentive Plans. Executive shall be eligible to receive grantsunder the Company’s long term incentive plans (including stock option, restricted stock and otherequity compensation plans and any other long-term incentive plans) at the discretion of the CEO andthe Board.Section 2.04 Business and Entertainment Expenses. Subject to the Company’s standardpolicies and procedures for expense reimbursement as applied to its executive employees generally, theCompany shall reimburse Executive for, or pay on behalf of Executive, reasonable out-of-pocketbusiness expenses incurred by Executive on behalf of the Company.Section 2.05 Other Company Benefits. Executive shall be entitled to participate in allemployee benefit plans, practices and programs maintained by the Company and made available to itssimilarly situated executives, including the Company’s paid time-off policy. Executive shall also beentitled to paid time-off for all holidays in the U.S. in accordance with the applicable Company policy. ARTICLE III TERMINATIONSection 3.01 General. The Company may terminate Executive’s employment for anyreason or no reason, and Executive may terminate his employment for any reason or no reason, ineither case subject only to the terms of this Agreement. For purposes of this Agreement, the followingterms have the following meanings:(a) “Accrued Obligations” shall mean: (i) Executive’s earned but unpaid BaseSalary through the Termination Date; (ii) payment of any annual, long-term, or other incentive awardwhich relates to a completed fiscal year or performance period, as applicable, and is payable (but notyet paid) on or before the Termination Date; (iii) a lump-sum payment in respect of accrued but unusedvacation days at Executive’s per-business-day Base Salary rate in effect as of the Termination Date;and (iv) any unpaid expense or other reimbursements due pursuant to Section 2.04 hereof.(b) “Cause” shall mean (i) Executive’s conviction of, or plea of guilty or nolocontendere to, any felony or any crime involving theft, embezzlement, dishonesty or moral turpitude;(ii) any act by Executive constituting willful misconduct, deliberate malfeasance, dishonesty, unethicalconduct or gross negligence in the performance of his duties; (iii) Executive’s willful and continuedfailure to perform any of the duties of his position (which has not been cured within thirty (30) daysfollowing the first written notice from the Company describing such failure in reasonable detail); or (iv)any material breach (which has not been cured within thirty (30) days following the first written noticefrom the Company describing such breach in reasonable detail) by Executive of this Agreement or anyother agreement between Executive and the Company or any of its affiliates.(c) “Change in Control” shall mean the occurrence of any of the following:(i) any person or group of persons becomes the beneficial owner, directlyor indirectly, of securities of the Company representing more than fifty percent (50%) of thecombined voting power of the Company’s then outstanding securities (a “Majority of theSecurities”); provided that if the person or group of persons is already deemed to own morethan 50% of the total fair market value or total voting power, then the acquisition of additionalstock by such person or group of persons shall not constitute an additional Change in Control;(ii) the stockholders of the Company approve a plan of complete liquidationof the Company;(iii) the sale or disposition of all or substantially all of the Company’s assets;(iv) a merger, consolidation or reorganization of the Company with orinvolving any other entity, other than a merger, consolidation or reorganization that wouldresult in the voting securities of the Company outstanding immediately prior thereto continuingto represent (either by remaining outstanding or by being converted into voting securities of thesurviving entity) at least a 50% of the combined voting power of the Company (or suchsurviving entity) outstanding immediately after such merger, consolidation or reorganizationowned in approximately the same proportion of such ownership by each of the prior shareholders as priorto the transaction.(v) Notwithstanding the foregoing, the following acquisitions shall notconstitute a Change in Control: (A) an acquisition by the Company or entity controlled by theCompany, or (B) an acquisition by an employee benefit plan (or related trust) sponsored ormaintained by the Company.(d) “Disability” shall mean Executive’s becoming incapacitated for a period of atleast one hundred eighty (180) days by accident, sickness or other circumstance that renders Executivementally or physically incapable of performing the material duties and services required of Executivehereunder on a full-time basis during such period. A termination of Executive’s employment due to aDisability shall be effective only if the party terminating Executive’s employment first gives at leastfifteen (15) days’ written notice of such termination to the other party.(e) “Good Reason” shall mean, without Executive’s express written consent, theoccurrence of any one or more of the following: (i) a material diminution by the Company ofExecutive’s Base Salary, other than any diminution that is also applicable in a substantially similarmanner and proportion to the other senior executives of the Company; (ii) the assignment to Executiveof duties or responsibilities which are materially inconsistent with Executive’s position; (iii) a change inthe principal location at which Executive performs his duties for the Company to a new location that ismore than fifty (50) miles from the prior location; or (iv) an action or inaction that constitutes a materialbreach of this Agreement by the Company. A termination of employment by Executive for Good Reason shall be effectuated by giving theCompany written notice (“Notice of Termination for Good Reason”), not later than thirty (30) daysfollowing the occurrence of the circumstance that constitutes Good Reason, setting forth in reasonabledetail the specific conduct of the Company that constitutes Good Reason and the specific provision(s)of this Agreement on which Executive relied. The Company shall be entitled, during the forty-five(45) day period following receipt of a Notice of Termination for Good Reason, to cure thecircumstances that gave rise to Good Reason, provided that the Company shall be entitled to waive itsright to cure or reduce the cure period by delivery of written notice to that effect to Executive (suchforty-five (45) day or shorter period, the “Cure Period”). If, during the Cure Period, such circumstanceis remedied, Executive will not be permitted to terminate employment for Good Reason as a result ofsuch circumstance. If, at the end of the Cure Period, the circumstance that constitutes Good Reasonhas not been remedied, Executive will be entitled to terminate employment for Good Reason during thethirty (30) day period that follows the end of the Cure Period. If Executive does not terminateemployment during such thirty (30) day period, Executive will not be permitted to terminateemployment for Good Reason as a result of such event. (f) “Pro-Rata Annual Incentive” shall mean an amount equal to (i) the AnnualIncentive that Executive would have been entitled to receive for the calendar year that includes theTermination Date if his employment hereunder had continued (as determined by the Board based uponthe actual achievement of the applicable performance goals), multiplied by (ii) a fraction, the numerator of which is the number of days he was employed hereunder during such year and thedenominator of which is the number of days in such year.(g) “Termination Date” shall mean the date on which Executive’s employmenthereunder terminates (which, in the case of a notice of non-renewal of the Term in accordance withArticle I hereof, shall mean the date on which the Term expires, provided that Executive’s employmentis terminated on such date due to the non-renewal of the Term).Section 3.02 Termination Without Cause or by Executive With Good Reason. If theCompany terminates Executive’s employment without Cause, or Executive terminates for GoodReason, the Term shall expire on the Termination Date and Executive shall be entitled to: (a) theAccrued Obligations; (b) an amount equal to the sum of (i) twelve (12) months of the annual BaseSalary as in effect immediately prior to the Termination Date and (ii) the Target Annual Incentive, paidin equal installments on the normal payroll cycle over the twelve (12) month period that begins on thesixtieth (60) day following the Termination Date; (c) the Pro-Rata Annual Incentive, payable in a cashlump sum to Executive on the date Company pays its annual incentive compensation bonuses for theyear that includes the Termination Date if Executive’s employment continued; and (d) medical, dentalbenefits provided by the Company to Executive and Executive’s spouse and dependents (in each case,as provided in any applicable plan) at least equal to the levels of benefits provided to other similarlysituated active employees of the Company and its subsidiaries until the earlier of (i) the one-yearanniversary of the Termination Date or (ii) the date that Executive becomes covered under asubsequent employer’s medical and dental plans.Section 3.03 Termination Due to Non-Renewal of the Term by the Company. IfExecutive’s employment is terminated due to the non-renewal of the Term by the Company pursuantto Section 1.01, Executive shall be entitled to: (a) the Accrued Obligations; (b) an amount equal to thesum of (i) six (6) months of the annual Base Salary as in effect immediately prior to the TerminationDate and (ii) one-half of the Target Annual Incentive, paid in equal installments on the normal payrollcycle over the six (6) month period that begins on the sixtieth (60) day following the TerminationDate; (c) the Pro-Rata Annual Incentive, payable in a cash lump sum to Executive on the dateCompany pays its annual incentive compensation bonuses for the year that includes the TerminationDate if Executive’s employment had continued; and (d) medical, dental benefits provided by theCompany to Executive and Executive’s spouse and dependents (in each case, as provided in anyapplicable plan) at least equal to the levels of benefits provided to other similarly situated activeemployees of the Company and its subsidiaries until the earlier of (i) the six-month anniversary of theTermination Date or (ii) the date that Executive becomes covered under a subsequent employer’smedical and dental plans.Section 3.04 Termination Without Cause, by Executive With Good Reason, or Due toNon-Renewal of the Term by the Company following a Change in Control of the Company. Ifthe Company terminates Executive’s employment without Cause, Executive terminates for GoodReason, or Executive’s employment is terminated due to the non-renewal of the Term by the Companypursuant to Section 1.01, in any case, within twenty four (24) months following the occurrence ofChange in Control, the Term shall expire on the Termination Date and, in lieu of the benefits set forthin Section 3.02 or 3.03, Executive shall be entitled to: (a) the Accrued Obligations; (b) an amountequal to the sum of (i) eighteen (18) months of the annual Base Salary as in effect immediately prior tothe Termination Date and (ii) the Target Annual ththIncentive, paid in equal installments on the normal payroll cycle over the eighteen (18) month periodthat begins on the sixtieth (60) day following the Termination Date; (c) the Pro-Rata AnnualIncentive, payable in a cash lump sum to Executive on the date Company pays its annual incentivecompensation bonuses for the year that includes the Termination Date if Executive’s employmentcontinued; (d) medical, dental benefits provided by the Company to Executive and Executive’s spouseand dependents (in each case, as provided in any applicable plan) at least equal to the levels of benefitsprovided to other similarly situated active employees of the Company and its subsidiaries until theearlier of (i) the one-year anniversary of the Termination Date or (ii) the date that Executive becomescovered under a subsequent employer’s medical and dental plans; and (e) the acceleration of vesting ofall unvested equity or equity-based awards held by Executive as of the Termination Date.Section 3.05 Other Terminations. If Executive’s employment hereunder is terminated (a)by Executive without Good Reason; (b) by the Company for Cause; (c) due to non-renewal of theTerm by Executive; or (d) due to Executive’s death or Executive’s Disability, the Term shall expire asof the Termination Date and Executive and/or Executive’s estate or beneficiaries shall be entitled to theAccrued Obligations. Section 3.06 Release. Executive’s entitlement to the payments (other than the AccruedObligations) and benefits described in this Article III is expressly contingent upon Executive providingthe Company with a signed release that is attached hereto as Attachment A (the “Release”). To beeffective, such Release must be delivered by Executive to the Company no later than forty-five (45)days following the Termination Date and must not be revoked during the seven (7) days followingsuch delivery. If such Release is not executed in a timely manner or is revoked, all such payments andbenefits shall immediately cease and Executive shall be required to repay to the Company any suchpayments that have already been paid to Executive.ARTICLE IV RESTRICTIVE COVENANTSSection 4.01 Confidentiality. (a) Company Information. Executive agrees at all times during the Term of thisAgreement and thereafter, to hold in strictest confidence, and not to use, except in connection with theperformance of Executive's duties, and not to disclose to any person or entity without writtenauthorization of the Company, any Confidential Information of the Company. As used herein,“Confidential Information” means any Company proprietary or confidential information, technicaldata, trade secrets or know-how, including, but not limited to, research, product plans, products,services, customer lists and customers, markets, software, developments, inventions, processes,formulas, technology, designs, drawings, engineering, marketing, distribution and sales methods andsystems, sales and profit figures, finances and other business information disclosed to Executive by theCompany, either directly or indirectly in writing, orally or by drawings or inspection of documents orother tangible property. However, Confidential Information does not include any of the foregoingitems which has become publicly known and made generally available through no wrongful act ofExecutive. th(b) Executive-Restricted Information. Executive agrees that during the Term ofthis Agreement Executive will not improperly use or disclose any proprietary or confidentialinformation or trade secrets of any person or entity with whom Executive has an agreement or duty tokeep such information or secrets confidential.(c) Third Party Information. Executive recognizes that the Company has receivedand in the future will receive from third parties their confidential or proprietary information subject to aduty on the Company's part to maintain the confidentiality of such information and to use it only forcertain limited purposes. Executive agrees at all times during the Term of this Agreement andthereafter, to hold in strictest confidence, and not to use, except in connection with the performance ofExecutive's duties, and not to disclose to any person or entity, or to use it except as necessary inperforming Executive’s duties, consistent with the Company's agreement with such third party. Section 4.02 Non-Competition. (a) Executive acknowledges that, during the Term, Executive has had access toinformation concerning the Company’s critical business strategies, engineering and technologydevelopment plans, competitive analyses, organizational structure. Accordingly, in consideration of thecompensation provided under this Agreement, Executive agrees that during the Term and for the one(1) year period thereafter, Executive will not directly or indirectly, own, manage, operate, control(including indirectly through a debt or equity investment), provide services to, or be employed by, anyperson or entity engaged in any business that is (i) located in or provides services or products to aregion in which the Company does business, and (ii) competitive with the business activities of theCompany as they existed during the period that Executive provided services to the Company.(b) Executive acknowledges that the restrictions contained under this Section 4.02are reasonable and necessary to protect the legitimate interests of the Company, that the Companywould not have executed this Agreement in the absence of such restrictions, and that any violation ofany provision of this paragraph will result in irreparable injury to the Company. In the event theprovisions under this Section 4.02 shall ever be deemed to exceed the time, scope or geographiclimitations permitted by applicable laws, then such provisions shall be reformed to the maximum time,scope or geographic limitations, as the case may be, permitted by applicable laws.Section 4.03 Injunctive Relief. Executive agrees that it is impossible to measure in moneythe damages which will accrue to the Company by reason of a failure by Executive to perform any ofExecutive’s obligations under this Article IV. Accordingly, if Company or any of its affiliatesinstitutes any action or proceeding to enforce its rights under this Article IV, to the extent permitted byapplicable law, Executive hereby waives the claim or defense that the Company or its affiliates has anadequate remedy at law, and Executive shall not claim that any such remedy at law exists. ARTICLE V MISCELLANEOUSSection 5.01 Withholding. The Company shall withhold all applicable federal, state andlocal taxes, social security and workers’ compensation contributions and other amounts as may berequired by law with respect to compensation payable to Executive.Section 5.02 Modification of Payments. (a) In the event it shall be determined that any payment, right or distribution by theCompany or any other person or entity to or for the benefit of Executive pursuant to the terms of thisAgreement or otherwise, in connection with, or arising out of, his employment with the Company or achange in ownership or effective control of the Company or a substantial portion of its assets (a“Payment”) is a “parachute payment” within the meaning of Section 280G of the Internal RevenueCode of 1986, as amended (the “Code”) on account of the aggregate value of the Payments due toExecutive being equal to or greater than three times the “base amount,” as defined in Section 280G(b)(3) of the Code, (the “Parachute Threshold”) so that Executive would be subject to the excise taximposed by Section 4999 of the Code (the “Excise Tax”) and the net after-tax benefit that Executivewould receive by reducing the Payments to the Parachute Threshold is greater than the net after-taxbenefit Executive would receive if the full amount of the Payments were paid to Executive, then thePayments payable to Executive shall be reduced (but not below zero) so that the Payments due toExecutive do not exceed the amount of the Parachute Threshold, reducing first any Payments underSection 3.02(b) hereof.(b) The Company hereby agrees that, for purposes of determining whether anypayment and benefits set forth in Section 3.04 above would be subject to the Excise Tax, the non-compete set forth in in Section 4.02 above shall be treated as an agreement for the performance ofpersonal services. The Company hereby agrees to indemnify, defend, and hold harmless Executivefrom and against any adverse impact, tax, penalty, or excise tax resulting from the Company oraccountant’s attribution of a value to the non-compete set forth in in Section 4.02 above that is less thanthe total compensation amount that would be disclosed under Item 402(c) of Securities and ExchangeCommission Regulation S-K if Executive had been a “named executive officer” of the Company in theyear prior to year of the event that triggers the Excise Tax, to the extent the use of such lesser amountresults in a larger Excise Tax than Executive would have been subject to had the Company oraccountant attributed a value to the non-compete set forth in in Section 4.02 above that is at least equalto the total compensation amount disclosed under Item 402(c) of Securities and Exchange CommissionRegulation S-K for such year.Section 5.03 Section 409A. (a) Notwithstanding anything herein to the contrary, this Agreement is intended tobe interpreted and applied so that the payment of the benefits set forth herein either shall either beexempt from the requirements of Section 409A of the Code (“Section 409A”) or shall comply with therequirements of such provision. (b) Notwithstanding any provision of this Agreement to the contrary, if Executiveis a “specified employee” within the meaning of Section 409A, any payments or arrangements dueupon a termination of Executive’s employment under any arrangement that constitutes a “nonqualifieddeferral of compensation” within the meaning of Section 409A and which do not otherwise qualifyunder the exemptions under Treas. Regs. Section 1.409A-1 (including without limitation, the short-term deferral exemption or the permitted payments under Treas. Regs. Section 1.409A-1(b)(9)(iii)(A)),shall be delayed and paid or provided, without interest, on the earlier of (i) the date which is six (6)months after Executive’s “separation from service” (as such term is defined in Section 409A and theregulations and other published guidance thereunder) for any reason other than death, and (ii) the dateof Executive’s death. (c) After any Termination Date, Executive shall have no duties or responsibilitiesthat are inconsistent with having a “separation from service” within the meaning of Section 409A and,notwithstanding anything in the Agreement to the contrary, distributions upon termination ofemployment of nonqualified deferred compensation may only be made upon a “separation fromservice” as determined under Section 409A and such date shall be the Termination Date for purposesof this Agreement. Each payment under this Agreement or otherwise shall be treated as a separatepayment for purposes of Section 409A. In no event may Executive, directly or indirectly, designatethe calendar year of any payment to be made under this Agreement which constitutes a “nonqualifieddeferral of compensation” within the meaning of Section 409A and to the extent an amount is payablewithin a time period, the time during which such amount is paid shall be in the discretion of theCompany. Section 5.04 Merger Clause. Effective as of the date hereof, this Agreement contains thecomplete, full, and exclusive understanding of Executive and the Company as to its subject matter andshall, on such date, and supersede any prior employment agreement between Executive and theCompany (and its affiliates), including the Prior Agreement. Any amendments to this Agreement shallbe effective and binding on Executive and the Company only if any such amendments are in writingand signed by both Parties.Section 5.05 Assignment. (a) This Agreement is personal to Executive and, without the prior written consentof the Company, shall not be assigned by Executive otherwise than by will or the laws of descent anddistribution, and any assignment in violation of this Agreement shall be void.(b) Notwithstanding the foregoing Section 5.05(a), this Agreement and all rights ofExecutive hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or legalrepresentatives, executors, administrators, successors, heirs, distributees, devisees and legatees. IfExecutive should die while any amounts would still be payable to him or her hereunder if he or shehad continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordancewith the terms of this Agreement to Executive’s devisee, legatee or other designee or, should there beno such designee, to Executive’s estate.(c) The Company may assign this Agreement to any affiliate or subsidiary of theCompany without the consent of Executive and shall require any successor (whether direct or indirect,by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company (a “Successor”) to assume and agree to perform this Agreement in the samemanner and to the same extent that the Company would have been required to perform it if no suchsuccession had taken place. As used in this Agreement, (i) the term “Company” shall mean theCompany as hereinbefore defined and any Successor and any permitted assignee to which thisAgreement is assigned and (ii) the term “Board” shall mean the Board as hereinbefore defined and theboard of directors or equivalent governing body of any Successor and any permitted assignee to whichthis Agreement is assigned.Section 5.06 Dispute Resolution. Except for any proceeding brought pursuant to Section5.05 above, the parties agree that any dispute arising out of or relating to this Agreement or theformation, breach, termination or validity thereof, will be settled by binding arbitration by a panel ofthree arbitrators in accordance with the commercial arbitration rules of the American ArbitrationAssociation. The arbitration proceedings will be located in Philadelphia, Pennsylvania. The arbitratorsare not empowered to award damages in excess of compensatory damages and each party irrevocablywaives any damages in excess of compensatory damages. Judgment upon any arbitration award maybe entered into any court having jurisdiction thereof and the parties consent to the jurisdiction of anycourt of competent jurisdiction located in the Eastern District of Pennsylvania.Section 5.07 GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TOBE MADE IN THE COMMONWEALTH OF PENNSYLVANIA, INTERPRETATION,CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT IN ALL RESPECTSHALL BE GOVERNED BY THE LAWS OF THE COMMONWEALTH OFPENNSYLVANIA WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.Section 5.08 Amendment; No Waiver. No provision of this Agreement may be amended,modified, waived or discharged except by a written document signed by Executive and dulyauthorized officer of the Company. The failure of a party to insist upon strict adherence to any term ofthis Agreement on any occasion shall not be considered as a waiver of such party’s rights or deprivesuch party of the right thereafter to insist upon strict adherence to that term or any other term of thisAgreement. No failure or delay by any party in exercising any right or power hereunder will operateas a waiver thereof, nor will any single or partial exercise of any other right or power. No agreementsor representations, oral or otherwise, express or implied, with respect to the subject matter hereof havebeen made by any party, which are not set forth expressly in this Agreement.Section 5.09 Severability. If any term or provision of this Agreement is invalid, illegal orincapable of being enforced by any applicable law or public policy, all other conditions and provisionsof this Agreement shall nonetheless remain in full force and effect so long as the economic and legalsubstance of the transactions contemplated by this Agreement is not affected in any manner materiallyadverse to any party. Upon any such determination that any term or other provision is invalid, illegalor incapable of being enforced, the parties hereto shall negotiate in good faith to modify thisAgreement so as to effect the original intent of the parties as closely as possible in a mutuallyacceptable manner in order that the transactions contemplated hereby be consummated as originallycontemplated to the fullest extent possible. Section 5.10 Survival. The rights and obligations of the parties under the provisions of thisAgreement that relate to post-termination obligations shall survive and remain binding and enforceable,notwithstanding the expiration of the term of this Agreement, the termination of Executive’semployment with the Company for any reason or any settlement of the financial rights and obligationsarising from Executive’s employment hereunder, to the extent necessary to preserve the intendedbenefits of such provisions.Section 5.11 Notices. All notices and other communications required or permitted by thisAgreement will be made in writing and all such notices and communications will be deemed to havebeen duly given when delivered or (unless otherwise specified) mailed by United States certified orregistered mail, return receipt requested, postage prepaid, addressed, if to the Company, at its principaloffice, and if to Executive, at Executive’s last address on file with the Company. Either party maychange such address from time to time by notice to the other.Section 5.12 Headings and References. The headings of this Agreement are inserted forconvenience only and neither constitute a part of this Agreement nor affect in any way the meaning orinterpretation of this Agreement. When a reference in this Agreement is made to a Section, suchreference shall be to a Section of this Agreement unless otherwise indicated.Section 5.13 Counterparts. This Agreement may be executed in one or more counterparts(including via facsimile), each of which shall be deemed to be an original, but all of which togethershall constitute one and the same instrument.[signature page follows] IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the date firstwritten above. STRONGBRIDGE U.S. INC.By: /s/ Matthew PaulsName: Matthew PaulsTitle: President & CEO EXECUTIVE /s/ Fredric J. CohenFredric J. Cohen ATTACHMENT A GENERAL RELEASE 1. Fredric J. Cohen (“Executive”), for and in consideration of the commitments ofStrongbridge U.S. Inc. (the “Company”) as set forth in Article III of the Amended and RestatedEmployment Agreement dated as of November 23, 2016 (the “Employment Agreement”), andintending to be legally bound, does hereby REMISE, RELEASE AND FOREVER DISCHARGE theCompany and its present and former divisions, subsidiaries, parents, predecessor and successorcorporations, officers, directors, and their respective successors, predecessors, assigns, heirs, executors,and administrators (collectively, “Releasees”) from all causes of action, suits, debts, claims anddemands whatsoever in law or in equity, which Executive ever had, now has, or hereafter may have,whether known or unknown, or which Executive’s heirs, executors, or administrators may have, byreason of any matter, cause or thing whatsoever, up to the date of Executive’s execution of this GeneralRelease, particularly, but without limitation of the foregoing general terms, any claims arising from orrelating in any way to Executive’s employment relationship with the Company and Releasees, the termsand conditions of that relationship, and the termination of that relationship, including, but not limited to,any claims arising under any applicable Company employee benefit plan(s), the Age Discrimination inEmployment Act, the Older Workers’ Benefit Protection Act, Title VII of The Civil Rights Act of 1964,the Civil Rights Act of 1991, Sections 1981 through 1988 of Title 42 of the United States Code, theAmericans with Disabilities Act, the Employee Retirement Income Security Act of 1974, the Family andMedical Leave Act, the Worker Adjustment and Retraining Notification Act, Pennsylvania employmentlaws, and any other federal, state and local employment laws, as amended, and any other claims underany federal, state or local common law, statutory, or regulatory provision, now or hereafter recognized,and any claims for attorneys’ fees and costs. This General Release is effective without regard to thelegal nature of the claims raised and without regard to whether any such claims are based upon tort,equity, implied or express contract or discrimination of any sort.2. To the fullest extent permitted by law, and subject to the provisions of Paragraph 3below, Executive represents and affirms that (i) Executive has not filed or caused to be filed onExecutive’s behalf any claim for relief against the Company or any Releasee and, to the best ofExecutive’s knowledge and belief, no outstanding claims for relief have been filed or asserted againstthe Company or any Releasee on Executive’s behalf; and (ii) Executive has no knowledge of anyimproper, unethical or illegal conduct or activities that Executive has not already reported to anysupervisor, manager, department head, human resources representative, agent or other representative ofthe Company, to any member of the Company’s legal or compliance departments, or to the ethicshotline; and (iii) Executive will not file, commence, prosecute or participate in any judicial or arbitralaction or proceeding against the Company or any Releasee based upon or arising out of any act,omission, transaction, occurrence, contract, claim or event existing or occurring on or before the date ofexecution of this General Release.3. The release of claims described in Paragraph 1 of this General Release does notpreclude Executive from filing a charge with the U.S. Equal Employment OpportunityCommission. However, Executive agrees and hereby waives any and all rights to any monetary reliefor other personal recovery from any such charge, including costs and attorneys’ fees. 4. Subject to the provisions of Paragraph 3 of this General Release, in furtherconsideration of the commitments of the Company as described in the Employment Agreement,Executive agrees that Executive will not file, claim, sue or cause or permit to be filed, any civil action,suit or legal proceeding seeking equitable or monetary relief (including damages, injunctive,declaratory, monetary or other relief) for himself involving any matter released in Paragraph 1. In theevent that suit is filed in breach of this release of claims, it is expressly understood and agreed that thisrelease of claims shall constitute a complete defense to any such suit. In the event any Releasee isrequired to institute litigation to enforce the terms of this paragraph, Releasees shall be entitled torecover reasonable costs and attorneys' fees incurred in such enforcement. Executive further agreesand covenants that should any person, organization, or other entity file, claim, sue, or cause or permitto be filed any civil action, suit or legal proceeding involving any matter occurring at any time in thepast, Executive will not seek or accept personal equitable or monetary relief in such civil action, suit orlegal proceeding. Nothing in this General Release shall prohibit or restrict Executive from: (i) makingany disclosure of information required by law; (ii) providing information to, or testifying or otherwiseassisting in any investigation or proceeding brought by any federal regulatory or law enforcementagency or legislative body, any self-regulatory organization, or the Company’s designated legal,compliance or human resources officers; or (iii) filing, testifying, participating in or otherwise assistingin a proceeding relating to an alleged violation of any federal, state or municipal law relating to fraud,or any rule or regulation of the Securities and Exchange Commission or any self-regulatoryorganization.5. Executive understands and agrees that the payments, benefits and agreements providedin the Employment Agreement are being provided to Executive in consideration for Executive’sacceptance and execution of, and in reliance upon Executive’s representations in, the EmploymentAgreement and this General Release, and that they are greater than the payments, benefits andagreements, if any, to which Executive would have received if Executive had not executed theEmployment Agreement and this General Release. In addition, Executive acknowledges and agreesthat Executive has been paid all amounts owed to Executive as of the date of Executive’s signing of thisGeneral Release.6. Executive and the Company agree and acknowledge that the agreement by theCompany described in the Employment Agreement, and the settlement and termination of any assertedor unasserted claims against the Releasees, are not and shall not be construed to be an admission of anyviolation of any federal, state or local statute or regulation, or of any duty owed by any of the Releaseesto Executive.7. This General Release and the obligations of the parties hereunder shall be construed,interpreted and enforced in accordance with and be governed by the laws of Pennsylvania withoutreference to its conflicts of laws principles.8. Executive certifies and acknowledges as follows: a.that Executive has read the terms of this General Release, and that Executiveunderstands its terms and effects, including the fact that Executive has agreed toRELEASE AND FOREVER DISCHARGE the Company and each and every one ofits affiliated entities from any legal action arising out of Executive’s relationshipwith the Company and the termination of that relationship; b.that Executive has signed this Release voluntarily and knowingly in exchange forthe consideration described herein and in the Employment Agreement, whichExecutive acknowledges is adequate and satisfactory to Executive and to whichExecutive acknowledges that Executive would not otherwise be entitled;c.that Executive has been and is hereby advised in writing to consult with an attorneyprior to signing this General Release;d.that Executive does not waive rights or claims that may arise after the date thisGeneral Release is executed;e.that the Company has provided Executive with at least 21 (twenty-one) days withinwhich to consider this General Release, that any modifications, material orotherwise, made to this General Release have not restarted or affected in any mannerthe original 21 (twenty-one) day consideration period, and that Executive has signedon the date indicated below after concluding that this General Release is satisfactoryto Executive;f.that Executive acknowledges that this General Release may be revoked byExecutive within seven (7) days after Executive’s execution, and it shall not becomeeffective until the expiration of such seven day revocation period. If the last day ofthe revocation period is a Saturday, Sunday, or legal holiday in the state in whichExecutive resides, then the revocation period shall not expire until the nextfollowing day which is not a Saturday, Sunday, or legal holiday. In the event of atimely revocation by Executive, this General Release and the EmploymentAgreement will be deemed null and void and the Company will have no obligationshereunder; andg.that this General Release may not be signed prior to the third calendar day beforethe last day of the Term of the Employment Agreement. If this General Release issigned prior to the last day of the Term of the Employment Agreement, theCompany reserves the right to have Executive ratify the General Release on or afterthe last day of the Term. Intending to be legally bound hereby, Executive executed the foregoing General Release on the dateindicated below. Fredric J. Cohen _______________________________Signature Date:_______________________________ Exhibit 12.1 CERTIFICATIONI, Matthew Pauls, certify that: 1.I have reviewed this Annual Report on Form 20-F of Strongbridge Biopharma plc; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statementswere 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, fairlypresent in all material respects the financial condition, results of operations and cash flows of the Company as of,and for, the periods presented in this report; 4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controlsand procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures tobe designed under our supervision, to ensure that material information relating to the Company,including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared. b)Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the endof the period covered by this report based on such evaluation; and c)Disclosed in this report any change in the Company’s internal control over financial reporting thatoccurred during the period covered by the annual report that has materially affected, or is reasonablylikely to materially affect, the Company’s internal control over financial reporting; and 5.The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internalcontrol over financial reporting, to the Company’s auditors and the audit committee of the Company’s board ofdirectors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the Company’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 asignificant role in the Company’s internal control over financial reporting. Date: April 4, 2017 /s/ MATTHEW PAULSName:Matthew PaulsTitle:Chief Executive Officer (principal executive officer) Exhibit 12.2 CERTIFICATIONI, A. Brian Davis, certify that: 1.I have reviewed this Annual Report on Form 20-F of Strongbridge Biopharma plc; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a materialfact necessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading 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 inall material respects the financial condition, results of operations and cash flows of the Company as of, and for, theperiods presented in this report; 4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to bedesigned under our supervision, to ensure that material information relating to the Company, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during the period inwhich this report is being prepared. b)Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this reportour conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the periodcovered by this report based on such evaluation; and c)Disclosed in this report any change in the Company’s internal control over financial reporting that occurredduring the period covered by the annual report that has materially affected, or is reasonably likely to materiallyaffect, the Company’s internal control over financial reporting; and 5.The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or personsperforming the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarizeand report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant rolein the Company’s internal control over financial reporting. Date: April 4, 2017 /s/ A. BRIAN DAVIS Name: A. Brian Davis Title: Chief Financial Officer (principal financial officer and principal accounting officer) Exhibit 13.1 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT 2002 In connection with the Annual Report of Strongbridge Biopharma plc (the “Company”) on Form 20-F for the period endedDecember 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, MatthewPauls, Chief Executive Officer (principal executive officer) of the Company, and A. Brian Davis, Chief Financial Officer(principal financial officer and principal accounting officer) of the Company, certify, pursuant to 18 U.S.C. §1350, asadopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that: 1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934;and 2)The information contained in the Report fairly presents, in all material respects, the financial condition and resultsof operations of the Company. Date: April 4, 2017 By:/s/ MATTHEW PAULS Matthew Pauls Chief Executive Officer (principal executive officer) By:/s/ A. BRIAN DAVIS A. Brian Davis Chief Financial Officer (principal financial officer and principalaccounting officer) Exhibit 21.1Subsidiaries of the CompanyBioPancreate Inc.Cortendo AB (publ)Cortendo Cayman Ltd.Strongbridge U.S. Inc. Exhibit 23.1Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-215532 and Form F-3 No. 333-215531) of our report dated April 4, 2017, with respect to the consolidated financial statements ofStrongbridge Biopharma plc included in this Annual Report (Form 20-F) for the year ended December 31, 2016. /s/ Ernst & Young LLPPhiladelphia, PennsylvaniaApril 4, 2017 Exhibit 23.2Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the following Registration Statements: (1) Registration Statement (Form F-3 No. 333-215531) of Strongbridge BioPharma plc; and(2) Registration Statement (Form S-8 No. 333-215532) pertaining to the Employees’ Savings Plan of StrongbridgeBioPharma plc.of our report dated August 17, 2015, with respect to the consolidated financial statements of Strongbridge BioPharmaPlc For the year ended December 31, 2014, included in this Annual Report (Form 20-F) of Strongbridge BioPharma plc.for the year ended December 31, 2016. /s/ Ernst & Young ABGothenburg, SwedenApril 4, 2017 

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