Phathom Pharmaceuticals (PHAT) Risk Analysis

The stock market in general and the market for stock of biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their common stock at or above the price at which they paid. Our common stock has a limited trading history and the market price has fluctuated widely, and may in the future fluctuate widely, depending upon many factors such as those discussed in this "Risk Factors" section and many others, some of which are beyond our control, including the following: - achievement of expected product sales, market acceptance and profitability for VOQUEZNA and any future products;- changes in coverage, reimbursement, utilization management or pricing policies affecting VOQUEZNA and any future products, including changes in the structure of healthcare payment systems;- manufacturing, supply or distribution delays or shortages;- any changes to our relationships with manufacturers, suppliers, licensors, future collaborators or other strategic partners;- innovations, new products or generic alternatives introduced by our competitors;- market conditions in the biopharmaceutical sector and the issuance of securities analysts' reports or recommendations;- establishment of short positions by holders or non-holders of our common stock;- a relatively low-volume trading market for our shares of common stock that could cause trades of small blocks of shares to have a significant impact on the price of our shares of common stock;- sales of our common stock by insiders or other stockholders;- variations in our financial results or those of companies that are perceived to be similar to us;- an inability to obtain additional funding on acceptable terms or at all;- changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;- additional regulatory approvals of vonoprazan or any future product candidates, limitations on approved labeling or patient populations, or changes or delays in regulatory review processes that affect commercialization;- regulatory developments in the United States and foreign countries;- our ability to enroll patients in our ongoing and any future clinical trials and to generate data to support additional indications or formulations;- results of our clinical trials or other clinical studies, including studies supporting additional indications or formulations, as well as clinical results reported by Takeda, our competitors or other companies in our market sector;- the success or failure of our efforts to acquire, license or develop additional product candidates;- any termination or loss of rights under the Takeda License;- announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;- additions or departures of key personnel;- intellectual property, product liability or other litigation against us;- general economic, industry and market conditions, public health emergencies or other events or factors, many of which are beyond our control; and - changes in accounting standards, policies, guidelines, interpretations or principles. In addition, in the past, stockholders have initiated class action lawsuits against biopharmaceutical companies following periods of volatility in the market prices of these companies' stock. Such litigation, if instituted against us, could cause us to incur substantial costs and divert management's attention and resources, which could have a material adverse effect on our business, financial condition and results of operations.

Our executive officers, directors and greater than 5% stockholders, in the aggregate, own a majority of our outstanding common stock. As a result, such persons acting together have the ability to control or significantly influence all matters submitted to our board of directors or stockholders for approval, including the appointment of our management, the election and removal of directors and approval of any significant transaction, as well as our management and business affairs. This concentration of ownership may have the effect of delaying, deferring or preventing a change in control, impeding a merger, consolidation, takeover or other business combination involving us, or discouraging a potential acquiror from making a tender offer or otherwise attempting to obtain control of our business, even if such a transaction would benefit other stockholders.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could significantly reduce the value of our shares to a potential acquiror or delay or prevent changes in control or changes in our management without the consent of our board of directors. The provisions in our charter documents include the following: - a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors;- no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;- the exclusive right of our board of directors, unless the board of directors grants such right to the stockholders, to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;- the required approval of at least 66-2/3% of the shares entitled to vote to remove a director for cause, and the prohibition on removal of directors without cause;- the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror;- the ability of our board of directors to alter our amended and restated bylaws without obtaining stockholder approval;- the required approval of at least 66-2/3% of the shares entitled to vote to adopt, amend or repeal our amended and restated bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors;- a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;- an exclusive forum provision providing that the federal district courts will be the exclusive forum for actions and proceedings a cause of action arising under the Securities Act of 1933, as amended, and that the Court of Chancery of the State of Delaware will be the exclusive forum for certain other actions and proceedings;- the requirement that a special meeting of stockholders may be called only by the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and - advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders' meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror's own slate of directors or otherwise attempting to obtain control of us. We are also subject to the anti-takeover provisions contained in Section 203 of the Delaware General Corporation Law. Under Section 203, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other exceptions, the board of directors has approved the transaction.

Our amended and restated certificate of incorporation and amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf under Delaware statutory or common law, including any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine; provided, that, this provision would not apply to suits brought to enforce a duty or liability created by the Securities Act or the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction. To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. The choice of forum provisions in our amended and restated certificate of incorporation may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. By agreeing to these provisions, however, stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. Furthermore, the enforceability of similar choice of forum provisions in other companies' certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable. If a court were to find the choice of forum provisions in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.

If we fail to satisfy the continued listing requirements of the Nasdaq, such as the corporate governance requirements or the minimum closing bid price requirement, Nasdaq may take steps to delist our common stock. Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting, any action taken by us to restore compliance with listing requirements may not allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq's listing requirements.

We have incurred substantial losses during our history. Our ability to use our federal and state NOL carryforwards to offset potential future taxable income is dependent upon our generation of future taxable income before any applicable expiration dates of the NOL carryforwards, and we cannot predict with certainty when or whether we will generate sufficient taxable income to use all of our NOL carryforwards. To the extent that we continue to generate taxable losses, unused losses will carry forward and, subject to limitations, offset future taxable income, if any, until such unused losses expire (if at all). Under prevailing U.S. tax law, federal NOL, carryforwards generated in periods after December 31, 2017, may be carried forward indefinitely but may only be used to offset 80% of our taxable income annually. Our NOL carryforwards are subject to review and possible adjustment by the Internal Revenue Service, or the IRS, and state tax authorities. Under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, our federal NOL carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50 percentage points. Our ability to utilize our NOL carryforwards and other tax attributes to offset future taxable income or tax liabilities may be limited as a result of ownership changes, including changes in connection with our IPO or other offerings. Similar rules may apply under state tax laws. We have not yet determined the amount of the cumulative change in our ownership resulting from our IPO or other transactions, or any resulting limitations on our ability to utilize our NOL carryforwards and other tax attributes. If we earn taxable income, such limitations could result in increased future tax liability to us and our future cash flows could be adversely affected. We have recorded a full valuation allowance related to our NOLs and other deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets.

We have never declared or paid any cash dividend on our common stock. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. In addition, under the terms of the Loan Agreement, we are prohibited from paying any cash dividends without the consent of the lenders. Any return to stockholders will therefore be limited to the appreciation of their stock. Shares of our common stock may not appreciate in value or even maintain the price at which stockholders have purchased their shares.

Biopharmaceutical commercialization and product development both involve a substantial degree of risk. We launched VOQUEZNA, VOQUEZNA DUAL PAK and VOQUEZNA TRIPLE PAK in the fourth quarter of 2023. Prior to such launch, we had not conducted sales and marketing activities necessary for successful commercialization of a product or manufactured products on a commercial scale, or arranged for a third party to do so on our behalf. Consequently, predictions about our future success or viability may not be as accurate as they could be if we had a longer history of successfully developing and commercializing products. We expect our financial condition and operating results to continue to fluctuate from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. We may encounter unforeseen expenses, difficulties, complications and delays, and may not be successful in our commercialization or development efforts.

Our quarterly and annual operating results may fluctuate significantly, which makes it difficult for us to predict our performance. As a commercial-stage company with a limited product portfolio, a substantial portion of our revenue is derived from sales of our VOQUEZNA products, and our operating results are highly sensitive to factors affecting these products, and even modest changes in market acceptance, payer access, pricing, demand or supply could have a disproportionate impact on our operating results, particularly changes related to VOQUEZNA as a treatment for GERD. These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to: - variability in the level of demand VOQUEZNA for the treatment of GERD, including market acceptance, prescribing trends among gastroenterologists and primary care physicians, use of cash-pay or access programs, and seasonality;- the timing, cost and level of investment in our commercialization activities, including sales force deployment, marketing initiatives and payer access efforts;- pricing, coverage and reimbursement decisions and prior authorization requirements for our approved products, and potential changes in payer policies;- competitive dynamics affecting our approved products, including competition from generic therapies, new branded products, or alternative treatment approaches, and the impact of the introduction of competitive products on demand, market share, pricing, payor coverage, reimbursement and policies and other market dynamics;- the timing, cost of, and level of investment in, research, development and regulatory activities for any future indications or formulations of vonoprazan or new product candidates, which may change from time to time, and the results of such efforts;- the cost of manufacturing of our current products or any future product candidates, which may vary depending on the quantity of production and the terms of our agreements with Catalent, Evonik, Sandoz and any future third-party manufacturers;- business interruptions resulting from geopolitical actions, including war, such as the ongoing hostilities in the Ukraine or the Middle East, and terrorism, or natural disasters such as earthquakes, typhoons, floods and fires or public health emergencies or pandemics;- the timing and amount of the milestone or other payments we will be required to pay to Takeda pursuant to the Takeda License;- our obligations under our Loan Agreement with Hercules Capital and under our Revenue Interest Financing Arrangement, or RIFA, including required interest, royalty or other payments, compliance with financial and other covenants, and limitations on our operating flexibility, which may affect the timing and availability of capital and our ability to manage expenses and investments;- expenditures that we may incur to acquire, develop or commercialize additional product candidates and technologies; and - future accounting pronouncements or changes in our accounting policies. The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance. This variability and unpredictability could also result in our failing to meet our expectations or the expectations of industry or financial analysts or investors for any period. If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated revenue or earnings guidance we may provide.

Since our inception, we have incurred significant operating losses. Our net loss was $221.2 million and $334.3 million for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, we had an accumulated deficit of $1.5 billion. Given our limited history as a commercial-stage company, we face numerous risks associated with our ability to achieve operating profitability and cash flow positivity based on expected revenue and expense levels, and there is no certainty that we will achieve operating profitability or cash flow positivity on the timeline we expect or at all, or that, even if we achieve profitability, that we will be able to sustain it. The net losses we incur may fluctuate significantly from quarter to quarter and year to year. We expect to continue to incur significant expenses for the foreseeable future as we: - continue commercialization of VOQUEZNA, VOQUEZNA DUAL PAK and VOQUEZNA TRIPLE PAK, and in the future, potentially expand marketing and sales efforts to target more broadly those primary care physicians who treat GERD;- conduct clinical trials for new potential indications or formulations of vonoprazan or develop any future product candidates, including related support activities;- make required royalty payments under the Revenue Interest Financing Agreement, or RIFA, entered into in May 2022, as amended;- make required payments under the Loan and Security Agreement with Hercules Capital, Inc., or Loan Agreement, entered into in September 2021, as amended;- build a portfolio of product candidates through the acquisition or in-license of additional product candidates or technologies;- pursue regulatory approvals for new indications or formulations of vonoprazan or future product candidates, if we conduct and successfully complete clinical trials, seek approvals, and engage in commercialization activities related to such indications, formulations or future product candidates, if approved; and - incur additional legal, accounting and other expenses in connection with operating as a public company. To become profitable, we must successfully commercialize VOQUEZNA in the treatment of GERD. To build for long-term success, we must acquire, develop and gain approval of one or more product candidates with significant market potential. We may not be successful in these efforts. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, continue our product commercialization and development efforts, diversify our product candidate pipeline or even continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.

The FDA and comparable foreign regulatory authorities require us, Takeda (with respect to products containing vonoprazan) and any of our potential future collaborators, to collect, monitor and report certain information about adverse medical events associated with our approved products. These reporting obligations are subject to detailed regulatory requirements, including strict timelines that are generally triggered by when we or such third parties become aware of an adverse event and the nature and seriousness of the event. We plan to rely, in part, on third parties, including Takeda and any future collaborators, vendors or contract research organizations, to comply with these adverse event reporting requirements. Any failure by us or such third parties to accurately or timely report adverse events, or to maintain adequate pharmacovigilance systems and processes, could result in regulatory actions by the FDA or other regulatory authorities. Such actions may include warning letters, civil monetary penalties, seizure of products, requirements to modify labeling or conduct additional post-marketing studies, restrictions on commercialization, delays in approval of product candidates or, in severe cases, criminal prosecution. Any such actions could materially harm our business, financial condition, results of operations and prospects.

In September 2021, we entered into, and in December 2023 we increased the amounts available under and extended the maturity date of, a Loan Agreement with Hercules. We borrowed $100 million at the inception of the Loan Agreement, $40 million in December 2023, $10 million in March 2024, $25 million in June 2024, and $25 million in December 2024. In February 2026, we entered into an amendment to the Loan Agreement which provided for a new term loan tranche of $175 million with a new maturity date of February 1, 2029. We used the proceeds from the new loan tranche, along with cash on our balance sheet, to repay in full the existing secured obligations outstanding under the Loan Agreement among other changes. All obligations under the Loan Agreement are secured by a first priority lien on substantially all of our assets, excluding our licensed intellectual property and certain other assets. As a result, if we default on any of our obligations under the Loan Agreement, Hercules could foreclose on its security interest and liquidate some or all of the collateral, which would harm our business, financial condition and results of operations and could require us to reduce or cease operations. The Loan Agreement contains customary affirmative and negative covenants that limit our ability to engage in certain transactions that may be in our long-term best interest. The affirmative covenants include, among others, covenants requiring us to maintain certain levels of cash subject to a control agreement in favor of Hercules, and certain levels of trailing three-month net product revenue from the sale of VOQUEZNA and other products containing vonoprazan, deliver certain financial reports, maintain insurance coverage and satisfy certain requirements regarding our operating accounts. The negative covenants include, among others, limitations on our ability to incur additional indebtedness and liens, merge with other companies or consummate certain changes of control, acquire other companies, engage in new lines of business, make certain investments, pay dividends, transfer or dispose of assets, amend certain material agreements or enter into various specified transactions. While we believe we are currently in compliance with the covenants contained in the Loan Agreement, we may breach these covenants in the future. Our ability to comply with these covenants may be affected by events and factors beyond our control. In the event that we breach one or more covenants, the lenders may choose to declare an event of default and require that we immediately repay all amounts outstanding under the applicable agreement, terminate any commitment to extend further credit and foreclose on the collateral. The occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations. In order to service our current indebtedness and any additional indebtedness we may incur in the future, including meeting cash covenants, we need to generate cash from our operating activities or other financings. Our ability to generate cash is subject, in part, to our ability to successfully execute our business strategy, as well as general economic, financial, competitive, regulatory and other factors beyond our control. Our business may not be able to generate sufficient cash flow from operations, and future borrowings or other financings may not be available to us in an amount sufficient to enable us to service our indebtedness, meet our cash covenant obligations and fund our other liquidity needs. To the extent we are required to use cash from operations or the proceeds of any future financing to service our indebtedness or meet our cash covenant obligation instead of funding working capital or other general corporate purposes, we will be less able to plan for, or react to, changes in our business, industry and in the economy generally. This could place us at a competitive disadvantage compared to our competitors that have less indebtedness.

From time to time, we may consider strategic transactions, such as acquisitions of companies, asset purchases and out-licensing or in-licensing of intellectual property, products or technologies. Any future transactions could increase our near and long-term expenditures, result in potentially dilutive issuances of our equity securities, including our common stock, or the incurrence of debt, contingent liabilities, amortization expenses or acquired in-process research and development expenses, any of which could affect our financial condition, liquidity and results of operations. Additional potential transactions that we may consider in the future include a variety of business arrangements, including spin-offs, strategic partnerships, joint ventures, restructurings, divestitures, business combinations and investments. Future acquisitions may also require us to obtain additional financing, which may not be available on favorable terms or at all. These transactions may never be successful and may require significant time and attention of management. In addition, the integration of any business that we may acquire in the future may disrupt our existing business and may be a complex, risky and costly endeavor for which we may never realize the full benefits of the acquisition. Accordingly, although we may not undertake or successfully complete any additional transactions of the nature described above, any additional transactions that we do complete could have a material adverse effect on our business, results of operations, financial condition and prospects.

The success of our collaboration arrangements will depend heavily on the efforts and activities of our collaborators and partners. Collaborations and partnerships are subject to numerous risks, which may include that: - collaborators have significant discretion in determining the efforts and resources that they will apply to collaborations;- collaborators may not pursue development and commercialization of our products or may elect not to continue or renew development or commercialization programs based on trial or test results, changes in their strategic focus due to the acquisition of competitive products, availability of funding or other external factors, such as a business combination that diverts resources or creates competing priorities;- collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates;- a collaborator with marketing, manufacturing and distribution rights to one or more products may not commit sufficient resources to or otherwise not perform satisfactorily in carrying out these activities;- we could grant exclusive rights to our collaborators that would prevent us from collaborating with others;- collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability;- disputes may arise between us and a collaborator that causes the delay or termination of the research, development or commercialization of our current or any product candidates or that results in costly litigation or arbitration that diverts management attention and resources;- collaborations may be terminated, and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product or product candidate;- collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in such cases, we would not have the exclusive right to develop or commercialize such intellectual property; and - a collaborator's sales and marketing activities or other operations may not be in compliance with applicable laws resulting in civil or criminal proceedings.

The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products such as our currently approved products, and any additional product candidates containing vonoprazan and any future product candidates, if successfully developed and approved. In particular, a product may not be promoted for uses that are not approved by the FDA or such other regulatory agencies as reflected in the product's approved labeling. For example, the FDA has approved VOQUEZNA for the treatment for healing and maintenance of healing of all grades of erosive esophagitis and relief of heartburn associated with erosive esophagitis in adults, for the relief of heartburn associated with Non-Erosive GERD in adults and, in combination with either amoxicillin, or amoxicillin and clarithromycin, treatment of H. pylori infection in adults, and we are not currently permitted to promote this product for any other uses unless and until such uses are approved by the FDA. For any product for which we have obtained a marketing approval, however, physicians may nevertheless prescribe it to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may become subject to significant liability. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. If we cannot successfully manage the promotion of our current products or any product candidates we may successfully develop in the future, we could become subject to significant liability, which would materially adversely affect our business and financial condition.

We currently and may in the future rely on foreign CROs and CMOs, such as Evonik based in Germany and Sandoz based in Austria. Such foreign CROs and CMOs may be subject to U.S. legislation, sanctions, trade restrictions and other foreign regulatory requirements which could increase the cost or reduce the supply of material available to us, delay the procurement or supply of such material or have an adverse effect on our ability to secure significant commitments from governments to purchase potential therapies. For example, members of the U.S. Congress have introduced bills aimed at commercial supply of pharmaceutical products and the Trump Administration has announced tariffs on certain industries, such as steel and aluminum imports, and the intent to impose additional tariffs for other industries or countries. If these bills become law, or similar laws are passed, or if sanctions applicable to our commercial supply chain are imposed, they would have the potential to severely increase our costs or we may be required to shift manufacturing to other third parties which could be costly and cause supply disruptions which could adversely impact our operations. In addition, the U.S. BIOSECURE Act, which was enacted in December 2025, prohibits federal agencies from procuring or using any biotechnology equipment or services from "biotechnology companies of concern", or entering into, extending, or renewing any contracts with entities that use such biotechnology equipment or services from "biotechnology companies of concern". Congress has interpreted a "biotechnology company of concern" as an entity that is under the control of a foreign adversary and that poses a risk to national security based on its research or multiomic data collection (e.g., collection of genomic information). While the U.S. BIOSECURE Act has a grandfathering period of five years for existing contracts, and has carveouts for manufacture of drugs for supply under Medicaid and Medicare Part B, subject to the Secretary of Veteran Affairs' discretion, the impact of the U.S. BIOSECURE Act on the biotechnology industry is uncertain. If the foreign CROs and CMOs we rely on become subject to trade restrictions, sanctions, increased tariffs or other regulatory requirements by the U.S. government (including designation as a "biotechnology company of concern" under the U.S. BIOSECURE Act), or if the U.S. or Chinese or other foreign governments take retaliatory actions due to recent or increased tensions between the U.S. and China or other countries, it may have the potential to severely restrict the ability of U.S. biopharmaceutical companies like us to purchase services or products from, or otherwise collaborate with, certain "biotechnology companies of concern" without losing the ability to contract with, or otherwise receive funding from, the U.S. government.

Our business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payers, patient organizations and customers expose us to broadly applicable foreign, federal and state fraud and abuse and other healthcare laws and regulations. These laws may constrain the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell and distribute any products for which we obtain marketing approval. Such laws include, but are not limited to: - the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or providing any remuneration (including any kickback, bribe or certain rebates), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, or order, or arranging for or recommending the purchase, lease, or order of any good, facility, item or service, for which payment may be made, in whole or in part, under any U.S. federal healthcare program, such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it in order to have committed a violation;- the U.S. civil and criminal federal false claims laws, including the civil False Claims Act, which can be enforced through civil whistleblower or qui tam actions, and civil monetary penalties laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, to the federal government, claims for payment or approval that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly making or causing to be made a false statement to avoid, decrease or conceal an obligation to pay money to the U.S. federal government. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;- the U.S. federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items or services. Similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the healthcare fraud statute implemented under HIPAA or specific intent to violate it in order to have committed a violation;- the U.S. federal civil monetary penalties laws, which impose civil fines for, among other things, the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary's selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies;- the U.S. federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program (with certain exceptions) to report annually to CMS, information related to certain payments and other "transfers of value" made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) , certain non-physician practitioners (physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, anesthesiology assistants and certified nurse midwives) and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members; and - analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to our business practices, including but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payers, including private insurers, or by the patients themselves; state laws that require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; and state laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information or which require tracking gifts and other remuneration and items of value provided to physicians, other healthcare providers and entities. We may also be subject to additional regulation in the conduct of our business. For example, we may be subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, which prohibits, among other things, U.S. companies and their employees and agents from authorizing, promising, offering, or providing, directly or indirectly, corrupt or improper payments or anything else of value to foreign government officials, employees of public international organizations and foreign government owned or affiliated entities, candidates for foreign political office, and foreign political parties or officials thereof. Ensuring that our internal operations and business arrangements with third parties comply with applicable healthcare laws and regulations could involve substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of the laws described above or any other governmental laws and regulations that may apply to us, we may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, exclusion from U.S. government funded healthcare programs, such as Medicare and Medicaid, or similar programs in other countries or jurisdictions, disgorgement, imprisonment, contractual damages, reputational harm, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, diminished profits and the curtailment or restructuring of our operations. Further, defending against any such actions can be costly, time consuming and may require significant financial and personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired. If any of the physicians or other providers or entities with whom we expect to do business are found not to be in compliance with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusion from government funded healthcare programs and imprisonment. If any of the above occur, it could adversely affect our ability to operate our business and our results of operations.

In the United States and some foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes and proposed changes to the healthcare system, including cost-containment measures, that may reduce or limit coverage and reimbursement for newly approved drugs and affect our ability to profitably sell any product candidates for which we obtain marketing approval. In particular, there have been and continue to be a number of initiatives at the U.S. federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare. For example, in March 2010, the Patient Protection and Affordable Care Act, the Affordable Care Act, was enacted in the United States, which substantially changed the way healthcare is financed by both governmental and private insurers, and significantly affected the pharmaceutical industry. Among other things, the Affordable Care Act includes: - an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, which is apportioned among these entities according to their market share in certain government healthcare programs;- an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the AMP for branded and generic drugs, respectively;- a methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;- an extension of a manufacturers' Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;- expansion of the entities eligible for discounts under the 340B drug pharmaceutical pricing program;- a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research, along with funding for such research; and - establishment of a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending. While the Affordable Care Act remains in effect, more recent federal and state initiatives, including drug pricing reform, reimbursement constraints and coverage management tools, may have a more direct impact on the commercialization of branded pharmaceutical products such as vonoprazan. Since its enactment, there have been judicial and political challenges to certain aspects of the Affordable Care Act. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the Affordable Care Act without specifically ruling on the constitutionality of the Affordable Care Act. Thus, the Affordable Care Act remains in effect in its current form. In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. For example, beginning April 1, 2013, Medicare payments to providers were reduced under the sequestration required by the Budget Control Act of 2011, which will remain in effect through 2032, unless additional Congressional action is taken. Additionally, on January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. On March 11, 2021, the American Rescue Plan Act of 2021 was signed into law, which eliminated the statutory cap on manufacturers' Medicaid drug rebate liability, beginning January 1, 2024. Previously, the rebate was capped at 100% of a drug's AMP. Further, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs. At the federal level, such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. On August 16, 2022, the Inflation Reduction Act of 2022, or IRA, was signed into law. Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare, with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); and replaced the Part D coverage gap discount program with a new discounting program (which began in 2025). The IRA permits the Secretary of the Department of Health and Human Services, or HHS, to implement many of these provisions through guidance, as opposed to regulation, for the initial years HHS has and will continue to issue and update guidance as these programs are implemented. CMS has published the negotiated prices for the initial ten drugs, which went into effect in 2026, and the subsequent 15 drugs, which will first be effective in 2027, as well as the next set of 15 drugs that will be subject to negotiation, although program is currently subject to legal challenges. The impact of the IRA on the pharmaceutical industry cannot yet be fully determined, but is likely to be significant. The likelihood of implementation of these and other reform initiatives is uncertain. Even if our products are not selected for negotiation, the IRA may indirectly affect our business by influencing payer formulary decisions, coverage restrictions, utilization management practices and pricing expectations for branded drugs. In the coming years, additional legislative and regulatory changes could be made to governmental health programs that could significantly impact pharmaceutical companies and the success of our product candidates. The One Big Beautiful Bill Act, which was enacted in July 2025, imposes significant reductions in the funding of the Medicaid program. Such reductions are expected to decrease the number of persons enrolled in Medicaid and reduce the services covered by Medicaid, which could adversely affect our sales of VOQUEZNA, VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK or any other product candidate that we commercialize. The Trump administration is pursuing a two-fold strategy to reduce drug costs in the U.S. President Trump has threatened to impose significant tariffs on pharmaceutical manufacturers that do not adopt pricing policies such as most favored nation pricing, which would tie the price for drugs in the U.S. to the lowest price in a group of other countries. In response, multiple manufacturers have reportedly entered into confidential pricing agreements with the federal government. The Trump administration is also pursuing traditional regulatory pathways to impose drug pricing policies, and published two proposed regulations in December 2025, referred to as Globe and Guard. If finalized, these regulations would implement mandatory payment models under which manufacturers of eligible drugs would be required to pay rebates to the federal government on a portion of the units of their drugs that are reimbursed by Medicare, with the rebate amount based on most favored nation pricing. While the impact of the Globe and Guard proposed regulations, if finalized, cannot yet be determined, it is likely to be significant. Even regulatory proposals or executive actions that are ultimately deemed unlawful could negatively impact the U.S. pharmaceutical sector and our business. In addition, pharmaceutical pricing and marketing has long been the subject of considerable discussion in Congress and among policymakers, and it is possible that Congress could enact additional laws that negatively affect the pharmaceutical industry. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure, drug price reporting and other transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Some states have enacted legislation creating so-called prescription drug affordability boards, which ultimately may attempt to impose price limits on certain drugs in these states or impose additional administrative burdens that could delay access or complicate commercialization. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. Furthermore, there has been increased interest by third party payers and governmental authorities in reference pricing systems and publication of discounts and list prices. These reforms could reduce the ultimate demand for vonoprazan and any future product candidates, if approved, or put pressure on our product pricing, which could negatively affect our business, results of operations, financial condition and prospects. We expect that these healthcare reform measures that may be adopted in the future may result in more rigorous coverage criteria, new payment methodologies and additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payers. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize vonoprazan and any future product candidates, if approved. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payers, limit patient access, reduce prescribing or require additional discounts, any of which could materially adversely affect our ability to generate revenue, achieve or maintain profitability and successfully commercialize vonoprazan and any future products.

In connection with approval of a pharmaceutical product, regulatory authorities may impose ongoing requirements for potentially costly and time-consuming post-approval studies, post-market surveillance or clinical trials to monitor the safety and efficacy of the product. For example, with respect to VOQUEZNA our post-marketing requirements include pregnancy registries and pediatric studies. The FDA and comparable regulatory authorities may also require a risk evaluation and mitigation strategy, or REMS, or similar risk management measures as a condition of approval of any future product candidates, which could include requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. In addition, the manufacture, labeling, packaging, distribution, adverse-event reporting, storage, advertising, promotion, import, export and recordkeeping for our approved products, as well as for any future product candidates that may receive regulatory approval, are subject to extensive and ongoing regulatory requirements. These requirements include periodic safety reporting, facility registration, inspections, and continued compliance with current good manufacturing practices, or cGMPs, as well as good clinical practice, or GCP requirements for any clinical trials we conduct. The later discovery of previously unknown problems with our products, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things: - restrictions on the marketing or manufacturing of our products, withdrawal of the product from the market or voluntary or mandatory product recalls;- restrictions on product distribution or use, or requirements to conduct post-marketing studies or clinical trials;- fines, restitutions, disgorgement of profits or revenues, warning letters, untitled letters or holds on clinical trials;- refusal by the FDA or comparable foreign regulatory authority to approve pending applications or supplements to approved applications filed by us or suspension or revocation of approvals;- product seizure or detention, or refusal to permit the import or export of our products; and - injunctions or the imposition of civil or criminal penalties. The occurrence of any event or penalty described above may inhibit our ability to commercialize our current products or any future product candidates and impair our ability to generate revenue and could require us to expend significant time and resources in response or generate negative publicity. In addition, regulatory requirements and policies are subject to change. New laws,regulations or guidance, or changes in interpretation or enforcement of existing requirements, could increase the cost or complexity of maintaining compliance or pursuing additional indications, formulations or product candidates. If we are slow or unable to adapt to regulatory changes or maintain compliance, we could be subject to enforcement actions. Any of the consequences of these events could have a material adverse effect on our business, financial condition, results of operations and prospects.

We are not permitted to market a new product candidate or an approved product for a new indication or formulation until we receive the necessary regulatory approval from the relevant regulatory authority. Gaining regulatory approval of a product candidate is subject to extensive regulation by the FDA in the United States and by comparable foreign regulatory authorities in other foreign markets. The process of obtaining regulatory approval is expensive, often takes many years following the commencement of clinical trials and can vary substantially based upon the type, complexity and novelty of the product candidates involved, as well as the target indications and patient population. The ability of the FDA and foreign regulatory authorities to review and approve new products can be affected by a variety of factors, including government budget and funding levels and the ability to hire and retain key personnel. In addition, approval policies or regulations may change, and the FDA and EMA and comparable regulatory authorities have substantial discretion in the drug approval process, including the ability to delay, limit or deny approval of a product candidate for many reasons. Despite the time and expense invested in clinical development of product candidates, regulatory approval is never guaranteed. Prior to obtaining approval to commercialize a product candidate in the United States or internationally, we must demonstrate with substantial evidence from adequate and well-controlled clinical trials, and to the satisfaction of the FDA or comparable foreign regulatory authorities, that such product candidates are safe and effective for their intended uses. Results from nonclinical studies and clinical trials can be interpreted in different ways. Even if we believe the nonclinical or clinical data for additional regulatory approvals for vonoprazan or for any future product candidates are promising, such data may not be sufficient to support approval by the FDA and comparable foreign regulatory authorities. The FDA or comparable foreign regulatory authorities, as the case may be, may also require us to conduct additional preclinical studies or clinical trials either prior to or post- approval, or may object to elements of our clinical development program. The FDA, EMA or other comparable foreign regulatory authorities can delay, limit or deny approval of a product candidate for many reasons, including: - such authorities may disagree with the design or implementation of our clinical trials;- negative or ambiguous results from our clinical trials or results may not meet the level of statistical significance required by the FDA, EMA, or other comparable foreign regulatory agencies for approval;- serious and unexpected drug-related side effects may arise;- the population studied in the clinical trial may not be sufficiently broad or representative to assure safety in the full population for which we seek approval;- such authorities may not accept clinical data from trials which are conducted at clinical facilities or in countries where the standard of care is potentially different from that of the United States;- we may be unable to demonstrate to the satisfaction of such authorities that the product candidate is safe and effective for its proposed indication and that its clinical and other benefits outweigh its safety risks;- such authorities may disagree with our interpretation of data from preclinical studies or clinical trials;- such authorities may not agree that the data collected from clinical trials are acceptable or sufficient to support the submission of an NDA, sNDA or other submission or to obtain regulatory approval, and such authorities may impose requirements for additional preclinical studies or clinical trials;- such authorities may disagree regarding the proposed formulation, labeling and/or the specifications;- approval may be granted only for indications that are significantly more limited than what we apply for and/or with other significant restrictions on distribution and use;- such authorities may find deficiencies in the manufacturing processes or facilities of Evonik, Catalent, Sandoz, or any future third-party manufacturers with which we contract for clinical and commercial supplies;- regulations of such authorities may significantly change in a manner rendering our clinical data insufficient for approval; or - such authorities may not accept a submission due to, among other reasons, the content or formatting of the submission. With respect to foreign markets, approval procedures vary among countries and, in addition to the foregoing risks, may involve additional product testing, administrative review periods and agreements with pricing authorities. In addition, events raising questions about the safety of certain marketed pharmaceuticals may result in increased cautiousness by the FDA, EMA, and other comparable foreign regulatory authorities in reviewing new drugs, new indications or new formulations based on safety, efficacy, or other regulatory considerations and may result in significant delays in obtaining regulatory approvals. With respect to our approvals in the U.S., the FDA has granted approvals, and may grant future approvals, with the requirement that we perform additional costly clinical trials, including pediatric trials. Foreign regulatory authorities may also make their approvals contingent on similar requirements. The FDA or other comparable foreign regulatory authority also may approve a product candidate for a more limited indication or patient population than we originally requested, and the FDA or other comparable foreign regulatory authority may not approve the labeling that we believe is necessary or desirable for the successful commercialization of a product. Of the large number of drugs in development, only a small percentage successfully complete the FDA, EMA or foreign regulatory approval processes and are commercialized. The lengthy approval process as well as the unpredictability of future clinical trial results and regulatory decisions may result in our failing to obtain additional regulatory approvals to market vonoprazan in additional indications, or formulations or any future product candidates we may pursue. Any delay in obtaining, or inability to obtain, additional regulatory approvals, and any limitations on such approvals would delay or prevent commercialization of that indication or product candidate and would materially adversely impact our business and prospects, which would significantly harm our business, financial condition, results of operations and prospects.

We participate in various governmental pricing and reimbursement programs, including the Medicaid Drug Rebate Program, or MDRP, that impose extensive drug price reporting and payment obligations on pharmaceutical manufacturers. Medicaid is a joint federal and state program administered by the states for low-income and disabled beneficiaries, and Medicare is a federal program administered by the federal government for individuals age 65 and older and certain disabled individuals. Under the MDRP, as a condition of having federal funds being made available to the states for covered outpatient drugs under Medicaid and, if applicable, Medicare Part B, pharmaceutical manufacturers must enter into a rebate agreement with the Secretary of Health and Human Services and pay rebates to state Medicaid programs for each unit of covered outpatient drug dispensed to a Medicaid beneficiary and paid for by the state Medicaid program. Medicaid drug rebates are based on pricing data that pharmaceutical manufacturers report on a monthly and quarterly basis to the U.S. Centers for Medicare & Medicaid Services, or CMS, which is the federal agency that administers the MDRP and Medicare programs. For the MDRP, these data include the average manufacturer price, or AMP, for each drug and, in the case of innovator products, the Best Price, or BP, which represents the lowest price available from the manufacturer to any entity in the United States in any pricing structure, calculated to include all applicable sales and associated rebates, discounts and other price concessions. Manufacturers are required to submit pricing data on a monthly and quarterly basis and to correct and resubmit data for prior periods if inaccuracies are identified. If a manufacturer fails to provide information timely or is found to have knowingly submitted false information to the government, the manufacturer may be subject to civil monetary penalties and other sanctions, including termination from the MDRP. Participation in the MDRP also requires participation in the Public Health Service's 340B drug pricing program, or the 340B program, which is administered by the Health Resources and Services Administration, or HRSA. The 340B program requires participating manufacturers to agree to sell covered outpatient drugs to covered entities at or below a statutorily defined "ceiling price" which is calculated using MDRP pricing data. Manufacturers must report 340B ceiling prices to HRSA on a quarterly basis, and HRSA publishes them to 340B covered entities. Failure to comply with 340B requirements may subject manufacturers to civil monetary penalties, repayment obligations, and administrative dispute resolution proceedings. Legislative or regulatory changes could further expand the scope or obligations of the 340B program. In order to be eligible to have drug products paid for with federal funds under Medicaid and, if applicable, Medicare Part B, and purchased by certain federal agencies and grantees, a manufacturer must also participate in the U.S. Department of Veterans Affairs, or VA, Federal Supply Schedule, or FSS, pricing program. Under the VA/FSS program, a manufacturer must report the Non-Federal Average Manufacturer Price, or Non-FAMP, for its covered drugs to the VA and charge certain federal agencies no more than the Federal Ceiling Price, which is calculated based on Non-FAMP using a statutory formula. These federal agencies are the VA, the U.S. Department of Defense, the U.S. Coast Guard, and the U.S. Public Health Service (including the Indian Health Service). The manufacturer must also pay rebates on products purchased by military personnel and dependents through the TRICARE retail pharmacy program. If a manufacturer participating in the FSS program fails to provide timely information or is found to have knowingly submitted false information, the manufacturer may be subject to civil monetary penalties. Pricing and rebate calculations vary across products and programs, are complex, and are often subject to interpretation by pharmaceutical manufacturers, governmental or regulatory agencies, and the courts, which can change and evolve over time. Compliance with these requirements, including any necessary recalculations or restatements, may increase administrative burden and costs and could result in additional rebate liabilities or penalties for prior periods. We cannot assure you that our pricing submissions will not be found to be incomplete or incorrect, and any failure to comply with these requirements could materially adversely affect our business, results of operations and prospects Individual states continue to consider and have enacted legislation to limit the growth of healthcare costs, including the cost of prescription drugs and combination products. A number of states have either implemented or are considering implementation of drug price transparency legislation that may prevent or limit our ability to take price increases at certain rates or frequencies. Requirements under such laws include advance notice of planned price increases, reporting price increase amounts and factors considered by manufacturers in taking such increases, wholesale acquisition cost disclosure to prescribers, purchasers, and state agencies, and new product notice and reporting. Such legislation could limit the price or payment for certain drugs, and a number of states are authorized to impose civil monetary penalties or pursue other enforcement mechanisms against manufacturers who fail to comply with drug price transparency requirements, including the untimely, inaccurate, or incomplete reporting of drug pricing information. If we are found to have violated state law requirements, we may become subject to penalties or other enforcement mechanisms, which could have a material adverse effect on our business.

As is common in the biopharmaceutical industry, in addition to our employees, we engage the services of consultants to assist us in our activities. Many of these consultants, and many of our employees, were previously employed at, or may have previously provided or may be currently providing consulting services to, other biopharmaceutical companies including our competitors or potential competitors. We may become subject to claims that we, our employees or a consultant inadvertently or otherwise used or disclosed trade secrets or other information proprietary to their former employers or their former or current clients. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely affect our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to our management team and other employees.

We are exposed to the risk that our employees and independent contractors, including consultants, vendors, principal investigators or CROs, may engage in misconduct or other illegal activity. Misconduct by these parties could include intentional, reckless or negligent conduct or other unauthorized activities that violate applicable laws or regulations, including: (i) the laws and regulations of the FDA and other similar regulatory bodies, (ii) manufacturing standards, including cGMP and similar requirements, (iii) federal and state healthcare, security, fraud and abuse laws, data privacy and cybersecurity laws, and (iv) laws and regulations requiring the true, complete and accurate reporting of financial information, pricing data or other required disclosures. Activities subject to these laws also involve the improper use or misrepresentation of information obtained in the course of commercial activities, patient access programs, reimbursement support, sales and marketing activities, or clinical trials, the creation of fraudulent data in our preclinical studies or clinical trials, or illegal misappropriation of product, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. In addition, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and financial results, including, without limitation, the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other U.S. federal healthcare programs or healthcare programs in other jurisdictions, integrity oversight and reporting obligations to resolve allegations of non-compliance, imprisonment, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.