Theratechnologies (THTX) Risk Analysis

Healthcare fraud and abuse regulations are complex, and even minor irregularities can potentially give rise to claims that a statute or prohibition has been violated. The laws that may affect our ability to operate include: (a) the federal healthcare program's anti-kickback law, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs; (b) federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent; (c) the federal Health Insurance Portability and Accountability Act of 1996, which created federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; (d) the FFDCA and similar laws regulating advertisement and labeling; and (e) U.S. States' law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers. In the United States, the federal anti-kickback law has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers or formulary managers on the other. Although there are several statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce or reward prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Most American states also have statutes or regulations similar to the federal anti-kickback law and federal false claims laws, which apply to items and services covered by Medicaid and other state programs, or, in several states, apply regardless of the payor. Administrative, civil and criminal sanctions may be imposed under these federal and state laws. Further, the Health Care Reform Law, among other things, amends the intent requirement of the U.S. federal anti-kickback and criminal healthcare fraud statutes. A person or entity can now be found guilty under the federal anti-kickback law without actual knowledge of the statute or specific intent to violate it. In addition, the Health Care Reform Law provides that the U.S. 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 statutes. Possible sanctions for violation of these anti-kickback laws include monetary fines, civil and criminal penalties, exclusion from Medicare and Medicaid programs and forfeiture of amounts collected in violation of such prohibitions. Any violations of these laws, or any action against us for violation of these laws, even if we successfully defend against it, could result in a material adverse effect on our reputation, business, financial condition and operating results. To enforce compliance with the federal laws, the U.S. Department of Justice ("DOJ") scrutinizes interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Dealing with investigations can be time and resource consuming and can divert management's attention from the business. Additionally, if a healthcare provider settles an investigation with the DOJ or other law enforcement agencies, we may be forced to agree to additional onerous compliance and reporting requirements as part of a consent decree or corporate integrity agreement. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business. Over the past few years, a number of pharmaceutical and other healthcare companies have been prosecuted under these laws for a variety of promotional and marketing activities, such as: providing free trips or items and gifts of value to prescribers, "sham" consulting fees and grants and other monetary benefits to prescribers; reporting inflated average wholesale prices that were then used by federal programs to set reimbursement rates; engaging in off-label promotion; and submitting inflated best price information to the Medicaid Rebate Program to reduce liability for Medicaid rebates. In addition, there has been a recent trend of increased federal and state regulation on payments made to physicians for marketing. Some states, such as California, Massachusetts and Vermont, mandate implementation of commercial compliance programs, along with the tracking and reporting of gifts, compensation and other remuneration to certain healthcare professionals. The shifting commercial compliance environment and the need to build and maintain robust and expandable systems to comply with different compliance and/or reporting requirements in multiple jurisdictions increase the possibility that a healthcare company may run afoul of one or more of the requirements. If our activities are found to be in violation of these laws or any other federal and state fraud and abuse laws, we may be subject to penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring of our activities with regard to the commercialization of our products in the United States, which could harm the commercial sales of our products and materially affect our business, financial condition and results of operations. We cannot guarantee that we will be able to mitigate all operational risks. In addition, we cannot guarantee that we, our employees, our consultants or our contractors are or will be in compliance with all potentially applicable U.S. federal and state regulations and/or laws. Because of the far-reaching nature of these laws, we may be required to alter or discontinue one or more of our business practices to be in compliance with these laws. If we fail to adequately mitigate our operational risks or if we or our agents fail to comply with any of those regulations, laws and/or requirements, a range of actions could result, including, but not limited to, restrictions on EGRIFTA SV, Trogarzo or their respective manufacturing processes, withdrawal of EGRIFTA SV or Trogarzo from the market, significant fines, exclusion from government healthcare programs or other sanctions or litigation. Such occurrences could have a material adverse effect on our product sales, business and results of operations. The scope and enforcement of these laws is uncertain and subject to rapid change in the current environment of healthcare reform. U.S. federal or state regulatory authorities might challenge our current or future activities under these laws. Any such challenge could have a material adverse effect on our reputation, business, results of operations and financial condition. Any state or federal regulatory review of us or the third parties with whom we contract, regardless of the outcome, would be costly and time-consuming.

We rely on third-party service providers for distribution and manufacturing activities related to EGRIFTA SV and Trogarzo in the United States. We will rely on Ionis for the manufacture and supply of donidalorsen and olezarsen. Under our agreements with our third-party service providers as well as under the Ionis License Agreement, we have assumed certain obligations, undertakings and covenants which, if breached by us and not remedied within the agreed upon periods, could expose us to claims for damages and/or termination of these agreements. If we are unable to meet our obligations under any of our agreements with such third-party service providers which results in termination of such agreements, this will materially adversely affect our business, financial condition and operating results since we rely on single third-party service providers, each of whom performing key services for the success of our business plan. Additionally, if such third-party service providers do not meet their obligations under agreements and we decide to litigate any breach or dispute any amount owed under our agreements, this might materially adversely affect our relationship with such third-party services providers which, in turn, could adversely affect our capacity and ability to deliver on our business plan. As a publicly traded pharmaceutical company we have to comply with securities laws and various laws related to the commercialization of drug products, any violation of which could result in claims for damages and/or the imposition of fines, penalties and other sanctions. If we are subject to claims for damages and/or the imposition of fines, penalties, or other sanctions this could have the effect of diverting management's attention from the operation of the business, limit the financial resources available to the Corporation to execute its business plan and adversely affect the Corporation's reputation.

In January 2023, we announced that the research and development activities of sudocetaxel zendusortide would be stage-gated and dependent on the analysis of data generated by those activities. In March 2024, the Corporation announced that it would phase down its preclinical oncology research activities, while continuing its ongoing Phase 1 clinical trial of sudocetaxel zendusortide in patients with advanced ovarian cancer. In July 2024, the Corporation reported that it was reaching out to pharmaceutical companies to out-license the rights to sudocetaxel zendusortide and to its oncology platform. On December 9, 2024, the Corporation announced preliminary tolerability and efficacy data from the conduct of its Phase 1b dose ranging trial of sudocetaxel zendusortide in patients with advanced ovarian cancer. On November 21, 2024, the Corporation submitted a new amendment to the protocol to propose two additional study arms in Part 3 of the Phase 1 clinical trial (3.33 and 3.90 mg/kg/wk given days 1, 8 and 15 of a 28-day cycle) to further assess the safety and efficacy of sudocetaxel zendusortide. On January 31, 2025, the FDA agreed with the proposed amendments to the protocol and with the Corporation continuing enrolling patients as part of the Phase 1 clinical trial to pursue the assessment of the safety and efficacy of sudocetaxel zendusortide at a higher dose. There can be no assurance that the Corporation will continue the development of sudocetaxel zendusortide or its oncology platform unless it can partner its development. Additionally, there can be no assurance that a partner will be found or that a partnership agreement will be entered into on terms satisfactory to the Corporation. If a partner is not found, the Corporation may halt or cancel this program. The halt or the cancellation of the development of sudocetaxel zendusortide as well as any other research and development activities in oncology will materially adversely affect its pipeline of drug candidates, all of which could materially adversely affect the Corporation's long-term growth and prospects. The cancellation of the research and development program in oncology could also have a material adverse effect on the price of our Common Share.

The use of tesamorelin for the reduction of excess abdominal fat in HIV-infected adult patients with lipodystrophy is no longer patent protected in the United States. Tesamorelin, the active ingredient of EGRIFTA SV, is no longer patent protected and the formulation of EGRIFTA SV is not patent protected. If, and when approved, the Corporation will rely on the use of the F8 Formulation to benefit from patent protection until 2033 in the United States in connection with the sale of tesamorelin for the reduction of excess abdominal fat in HIV-infected adult patients with lipodystrophy. Although we are not aware that a company has filed any biosimilar version of tesamorelin with the FDA, nothing prevents a company from filing with the FDA a biosimilar version of tesamorelin using the same formulation as that of EGRIFTA SV and to seek the same indication as that of EGRIFTA SV. If such a filing was made and the FDA were to approve a biosimilar version of EGRIFTA SV, we would expect the price of that biosimilar to be lower than that of EGRIFTA SV and we could have to lower our price in order to be able to compete with such biosimilar. A lower price of EGRIFTA SV would reduce our revenue and would have an adverse effect on our operating results. Even if we were to introduce the F8 Formulation, such biosimilar version could still be a direct competitor to us, albeit with an older formulation of tesamorelin.

We do not have a long-term supply agreement with a supplier of SWFI. The Corporation provides SWFI to patients in the medication box along with other ancillary devices including alcohol swabs, syringes and needles in connection with EGRIFTA SV. As a result, we may run into supply issues because there exists no commitment to supply us with SWFI and we must order the SWFI on a case-by-case basis. If we are unable to purchase SWFI, we may have to change our offering to patients, and this could be perceived negatively and could adversely affect the sales, revenues, and operating results of the Corporation. We do not currently have plans to enter into a long-term supply agreement for SWFI since the Corporation plans on replacing the formulation used for EGRIFTA SV with the F8 Formulation if and when approved. The Prescription Drug User Fee Act ("PDUFA") goal date on the decision for the F8 Formulation has been set to March 25, 2025, and the F8 Formulation does not require the use of SWFI.

Market acceptance and sales of EGRIFTA SV and Trogarzo substantially depend on the availability of reimbursement from third-party payors such as governmental authorities, including U.S. Medicare and Medicaid, managed care providers, and private insurance plans and may be affected by healthcare reform measures in the United States. Third-party payors decide which medications they will pay for and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and these third-party payors are attempting to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors have been challenging the prices charged for products. Third-party payors may decrease the level of reimbursement of a product or cease such reimbursement and the occurrence of any of these events could materially adversely affect the sales of EGRIFTA SV and Trogarzo. Sales of EGRIFTA SV and Trogarzo to patients benefitting from U.S. Government funded reimbursement programs represent a significant part of our sales. Denial of coverage for any of those products under any of the current programs would materially adversely affect our revenues and operating results. If and when approved, sales of donidalorsen and olezarsen in Canada will also be highly dependent on the reimbursement of each of those drugs by the provinces. The failure to obtain reimbursement coverage in Canada could adversely affect their acceptance in the marketplace and the level of sales we expect to generate therefrom.

International business relationships in the United States, Europe, Ukraine, the Middle East, South Korea, Taiwan and elsewhere subject us to additional risks, including: (a) disruptions of important government services; (b) differing regulatory requirements for drug approvals in foreign countries; (c) potentially reduced protection for intellectual property rights, including unexpected changes in the rules governing patents and their enforcement; (d) potential third-party patent rights in foreign countries; (e) the potential for so-called parallel importing, which is what happens when a local seller, faced with high or higher local prices, opts to import goods from a foreign market, with low or lower prices, rather than buying them locally; (f) unexpected changes in tariffs, trade barriers and regulatory requirements; (g) economic weakness, including inflation, or political instability, particularly in foreign economies and markets; (h) compliance with tax, employment, immigration and labor laws for employees traveling abroad and for new talents we may desire to recruit; (i) foreign taxes; (j) foreign exchange contracts and foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; (k) workforce uncertainty in countries where labor unrest is more common than in the United States and Canada; (l) production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and (m) business interruptions resulting from geo-political actions, including war and terrorism, or natural disasters, including earthquakes, volcanoes, typhoons, floods, hurricanes and fires, or epidemic such as the one related to the coronavirus. These and other risks of international business relationships may have a material adverse effect on our business, financial condition and operating results.