ALBO Albireo Pharma Inc

PROXY STATEMENT FOR 2016 ANNUAL MEETING OF STOCKHOLDERS

ABOUT THIS DOCUMENT

Biodel Inc., which we refer to herein as “Biodel,” is providing these proxy materials in connection with the solicitation by its board of directors of proxies to be voted at its annual meeting of stockholders to be held at 100 Saw Mill Road, Danbury, Connecticut 06810, on [●], 2016 at 9:00 a.m., local time, or at any adjournment or postponement thereof. This proxy statement and the enclosed proxy card will be mailed to each stockholder entitled to notice of, and to vote at, the annual meeting commencing on or about [●], 2016.

In this proxy statement, the term “Albireo” means Albireo Limited and its direct and indirect subsidiaries, unless the context otherwise provides.

You should rely only on the information contained in or incorporated by reference into this proxy statement. No one has been authorized to provide you with information that is different from that contained in or incorporated by reference into this proxy statement. This proxy statement is dated [●], 2016. You should not assume that the information contained in this proxy statement is accurate as of any other date, nor should you assume that the information incorporated by reference into this proxy statement is accurate as of any date other than the date of such incorporated document. The mailing of this proxy statement to Biodel’s stockholders will not create any implication to the contrary.

Except where specifically noted, the following information and all other information contained in this proxy statement does not give effect to the proposed reverse stock split described in Proposal No. 2, beginning on page 161 in this proxy statement.

This proxy statement does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

REFERENCES TO ADDITIONAL INFORMATION

This proxy statement incorporates important business and financial information about Biodel that is not included in or delivered with this document. You may obtain this information without charge through the Securities and Exchange Commission (“SEC”) website (www.sec.gov) or upon your written or oral request by contacting the Chief Financial Officer of Biodel Inc., 100 Saw Mill Road, Danbury, Connecticut 06810 or by calling (203) 796-5000.

To ensure timely delivery of these documents, any request should be made no later than [ ^· ], 2016 to receive them before the annual meeting.

You may also request information from Morrow Sodali Global LLC, Biodel’s proxy solicitor, at the following address and telephone number:

470 West Avenue

Stamford, Connecticut 06902

Stockholders Call Toll Free: 800-206-5879

For additional details about where you can find information about Biodel, please see the section entitled “Where You Can Find More Information” in this proxy statement.

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QUESTIONS AND ANSWERS ABOUT THE TRANSACTION

Except where specifically noted, the following information and all other information contained in this proxy statement does not give effect to the proposed 30:1 reverse stock split described in Biodel Proposal No. 2, beginning on page 161 in this proxy statement.

The following section provides answers to questions you may have about the Transaction. This section, however, provides only summary information. For a more complete response to these questions and for additional information, please refer to the cross-referenced sections.

At the closing of the Transaction, each ordinary share of Albireo will be sold to Biodel in exchange for 0.06999 shares of Biodel’s common stock, subject to potential adjustment to account for the actual net cash balances of Biodel and Albireo as of the date that is 10 days prior to the Biodel annual meeting, rounded to the nearest whole share of common stock after aggregating all fractional shares issuable to each Albireo shareholder.

Prior to the closing of the Transaction:

Upon the closing of the Transaction, based on an assumed exchange ratio of 0.06999, the owners of Albireo’s securities will own approximately two-thirds of the combined organization, and the owners of Biodel’s securities, whose shares of Biodel common stock and other securities will remain outstanding after the Transaction, will own approximately one-third of the combined organization. In addition, each holder of unexercised Albireo stock options or warrants will be offered, effective as of the closing of the Transaction, a replacement option exercisable for Biodel common stock or another equity-based awards based on shares of Biodel common stock.

Effective immediately after the completion of the Transaction, Biodel will change its corporate name to “Albireo Pharma, Inc.” as required by the Exchange Agreement.

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The approval of the issuance of shares of Biodel common stock pursuant to the Exchange Agreement by the stockholders of Biodel requires the affirmative vote of the holders of a majority of the shares of Biodel common stock present in person or represented by proxy at the Biodel annual meeting and entitled to vote. The approval of the 30:1 reverse stock split requires the affirmative vote of the holders of a majority of shares of Biodel common stock outstanding and entitled to vote on the record date for the Biodel annual meeting. The approval of the 30:1 reverse stock split is required in order to provide sufficient authorized and unissued shares of Biodel common stock to issue the Biodel shares in the Transaction and upon exercise of stock options to be outstanding following the Transaction and to assist Biodel in regaining compliance with the minimum bid price requirement set forth in NASDAQ rules for continued listing on The NASDAQ Capital Market. Therefore, if the requisite stockholders of Biodel approve the issuance of shares of Biodel common stock pursuant to the Exchange Agreement but do not approve the 30:1 reverse stock split, the Transaction will not be consummated.

Each of the Biodel officers and directors (who in the aggregate own less than 1% of the outstanding shares of Biodel common stock) is a party to a voting agreement with Albireo, whereby such officer or director has

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agreed to vote in favor of the adoption of the matters contemplated by the Exchange Agreement, including the issuance of shares of Biodel common stock, subject to the terms of the voting agreements.

Each holder of Albireo shares or notes convertible into Albireo shares is a party to the Exchange Agreement, so no meeting of the Albireo shareholders related to the Transaction is required or will be held.

For a more complete description of the closing conditions under the Exchange Agreement, Biodel urges you to read the section entitled “The Exchange Agreement—Conditions to the Completion of the Transaction” in this proxy statement.

For a more complete description of what owners of Albireo securities will receive in the Transaction, please see the sections titled “The Exchange Agreement— Transaction Consideration and Adjustment” and “The Exchange Agreement—Treatment of Albireo Stock Options and Warrants” in this proxy statement.

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However, the current officers and directors of Biodel (who collectively own less than 1% of the outstanding capital stock of Biodel as of August 15, 2016) have entered into lock-up agreements, and each holder of Albireo shares and notes convertible into Albireo shares has agreed to certain lock-up provisions in the Exchange Agreement, in each case pursuant to which such parties have agreed not to, except in limited circumstances, sell or transfer, or engage in swap or similar transactions with respect to shares of Biodel common stock until 180 days following the closing of the Transaction. The lock-up provisions apply to all shares of Biodel common stock received in the Transaction, except for shares of Biodel common stock received in exchange for Albireo ordinary shares issued upon conversion of the Albireo Series C voting preference shares issued in the Albireo Series C Investment.

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As a stockholder of Biodel, you may provide your proxy instructions in one of two different ways. First, you can mail your signed proxy card in the enclosed return envelope. Second, you may provide your proxy instructions via the Internet or by telephone by following the instructions on your proxy card or voting instruction form. Please provide your proxy instructions only once, unless you are revoking a previously delivered proxy instruction, and as soon as possible so that your shares can be voted at the annual meeting of Biodel stockholders.

If your shares of Biodel common stock are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in “street name,” and the proxy materials are being forwarded to you by your broker or other nominee together with a voting instruction card. As the beneficial owner, you are also invited to attend the Biodel annual meeting. Because a beneficial owner is not the stockholder of record, you may not vote these shares in person at the Biodel annual meeting unless you obtain a proxy from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the meeting.

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Biodel Inc.

100 Saw Mill Road

Danbury, Connecticut 06810

Tel: (203) 796-5000

Attn: Gary G. Gemignani, Chief Financial Officer and Interim Chief Executive Officer

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SUMMARY OF THE TRANSACTION

This summary highlights selected information from this proxy statement and may not contain all of the information that is important to you. To better understand the Transaction and the proposals being considered at the Biodel annual meeting, you should read this entire proxy statement carefully, including the Exchange Agreement attached as Annex A, the opinion of Ladenburg Thalmann & Co. Inc. attached as Annex B and the other annexes to which you are referred herein. For more information, please see the section entitled “Where You Can Find More Information” in this proxy statement.

The Companies

Biodel Inc.

100 Saw Mill Road

Danbury, Connecticut 06810

(203) 796-5000

Biodel Inc. (“Biodel”) is a specialty biopharmaceutical company that historically has been focused on the development and commercialization of innovative treatments for diabetes. Biodel is no longer actively engaged in product development activities. As of August 15, 2016, the Biodel workforce was comprised of five employees, all of whom are involved in financial and administrative roles.

Albireo Limited

50 Milk Street, 16th Floor

Boston, Massachusetts 02109

(857) 415-4774

Albireo Limited, together with its direct and indirect subsidiaries (collectively, “Albireo”), is a biopharmaceutical company focused on the development and commercialization of novel bile acid modulators to treat orphan pediatric liver diseases and gastrointestinal disorders where improper flow or absorption of bile causes serious medical conditions for which there is high unmet need. Albireo’s clinical pipeline includes three Phase 2 or later-stage product candidates. Albireo’s lead product candidate, A4250, is in development for the treatment of progressive familial intrahepatic cholestasis, or PFIC, a rare, life-threatening genetic disorder affecting young children for which there is currently no approved drug treatment.

The Transaction (see page 101)

If the Transaction is completed, Biodel will acquire all of the share capital of Albireo, and Albireo will survive as a wholly-owned subsidiary of Biodel. The Transaction is intended to constitute a tax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). Whether the Transaction will qualify as a tax-free reorganization is uncertain for reasons that are described elsewhere in this proxy statement under the caption “Material U.S. Federal Income Tax Consequences of the Transaction.”

Immediately after the Transaction, based on an assumed exchange ratio of 0.06999, the owners of Albireo’s securities will own approximately two-thirds of the combined organization, and the owners of Biodel’s securities, whose shares of Biodel common stock and other securities will remain outstanding after the Transaction, will own approximately one-third of the combined organization. This post-Transaction ownership split assumes that the exchange ratio is not adjusted, as described in “The Exchange Agreement—Transaction Consideration and Adjustment” below.

For a more complete description of the exchange ratio please see the section entitled “The Exchange Agreement” in this proxy statement.

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The closing of the Transaction will occur as soon as practicable after the Biodel annual meeting to be held on [●], 2016. However, because the Transaction is subject to a number of conditions, neither Biodel nor Albireo can predict exactly when the closing will occur or if it will occur at all. After completion of the Transaction, Biodel will be renamed “Albireo Pharma, Inc.”

Reasons for the Transaction (see pages 113 and 115)

Following the Transaction, the combined organization is intended to be a clinical-stage company focused on the development of novel bile acid modulators to treat orphan pediatric liver diseases, as well as other liver and gastrointestinal diseases and disorders. Albireo’s lead product candidate, A4250, is in development for the treatment of progressive familial intrahepatic cholestasis, or PFIC, a rare, life-threatening genetic disorder affecting young children for which there is currently no approved drug treatment. Biodel and Albireo believe that the combined organization will have the following potential advantages:

Each of the board of directors of Biodel and Albireo also considered other reasons for the Transaction, as described herein. For example, the board of directors of Biodel considered, among other things:

The board of directors of Albireo approved the Transaction based on a number of factors, including the following:

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Opinion of the Biodel Financial Advisor (see page 117)

Biodel’s board of directors engaged Ladenburg Thalmann & Co. Inc. (“Ladenburg Thalmann”), a financial advisor to Biodel, to render an opinion as to whether the exchange ratio in connection with the Transaction, as provided in the Exchange Agreement, was fair to Biodel stockholders from a financial point of view. Ladenburg Thalmann delivered to the board of directors of Biodel a written opinion dated May 24, 2016, addressed to the board of directors of Biodel, to the effect that, as of the date of the opinion and based on and subject to various assumptions, qualifications and limitations described in the opinion, the exchange ratio provided for in the Exchange Agreement was fair, from a financial point of view, to Biodel stockholders. The full text of this written opinion to the Biodel board of directors, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Annex B to this proxy statement and is incorporated by reference in its entirety into this proxy statement. Holders of Biodel common stock are encouraged to read the opinion carefully in its entirety. The Ladenburg Thalmann opinion was provided to the board of directors of Biodel in connection with its evaluation of the consideration provided for in the Transaction. It does not address any other aspect of the proposed Transaction or any alternative to the Transaction and does not constitute a recommendation as to how any stockholders of Biodel should vote or act in connection with the Transaction or otherwise.

Overview of the Exchange Agreement

Transaction Consideration and Adjustment (see page 142)

Immediately prior to the closing of the Transaction, all of the share capital of Albireo, including the Series C voting preference shares issued in the Albireo Series C Investment and Albireo Note Conversion, will be converted into a single class of ordinary shares of Albireo. At the effective time of the Transaction, each outstanding ordinary share of Albireo immediately prior to the effective time of the Transaction will be sold to Biodel in exchange for 0.06999 shares of Biodel common stock, herein referred to as the exchange ratio, which is subject to potential adjustment to account for the actual “net cash” balances of Biodel and Albireo as of the date that is 10 days prior to the Biodel annual meeting. The shares of Biodel common stock to be issued in the Transaction will not have been registered under the Securities Act as of the closing of the Transaction.

Immediately after the Transaction, based on an assumed exchange ratio of 0.06999, the owners of Albireo’s securities will own approximately two-thirds of the combined organization, and the owners of Biodel’s securities, whose shares of Biodel common stock and other securities will remain outstanding after the Transaction, will own approximately one-third of the combined organization.

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The Exchange Agreement does not include a price-based termination right, and there will be no adjustment to the total number of shares of Biodel common stock that Albireo shareholders will be entitled to receive for changes in the market price of Biodel common stock. Accordingly, the market value of the shares of Biodel common stock issued pursuant to the Transaction will depend on the market value of the shares of Biodel common stock at the time the Transaction closes and could vary significantly from the market value on the date of this proxy statement.

Treatment of Albireo Stock Options and Warrants (see page 145)

Prior to the closing of the Transaction, each holder of unexercised Albireo stock options or warrants will be offered, effective at or after the closing of the Transaction, a replacement option exercisable for shares of Biodel common stock or another equity-based award based on shares of Biodel common stock. The number of shares of Biodel common stock for which such replacement option is exercisable will be determined by multiplying the number of ordinary shares of Albireo that were subject to the Albireo option or Albireo warrant immediately prior to the closing by the exchange ratio. The per share exercise price of such replacement option will be determined by dividing the per share exercise price of ordinary shares of Albireo subject to the Albireo option or Albireo warrant immediately prior to the closing by the exchange ratio.

With respect to any other replacement equity-based awards, the number of shares of Biodel common stock subject to such award will be determined by multiplying the net number of ordinary shares of Albireo by the exchange ratio, rounded down to the nearest whole number. The net number of ordinary shares of Albireo will be equal to the number of ordinary shares of Albireo that were subject to such Albireo option or Albireo warrant immediately prior to the closing (the “Total Share Number”), less the number of ordinary shares of Albireo equal to the quotient obtained by dividing (A) the product of the Total Share Number and the exercise price per share of the Albireo option or Albireo warrant that is being replaced by the replacement award by (B) $0.8762.

Conditions to the Completion of the Transaction (see page 146)

To consummate the Transaction, Biodel stockholders must approve the issuance of shares of Biodel common stock pursuant to the Exchange Agreement and approve and adopt the amendment to the amended and restated certificate of incorporation of Biodel effecting the proposed 30:1 reverse stock split. In addition to obtaining such stockholder approvals and appropriate regulatory approvals, each of the other closing conditions set forth in the Exchange Agreement must be satisfied or waived.

No Solicitation (see page 151)

Each of Biodel and Albireo agreed that, subject to limited exceptions, Biodel and Albireo will not and will not authorize or permit any of their respective subsidiaries or authorize any of their affiliates or their respective subsidiaries’ or affiliates’ officers, directors, employees, partners, attorneys, advisors, agents or representatives, to, directly or indirectly:

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Termination of the Exchange Agreement (see page 157)

Either Biodel or Albireo can terminate the Exchange Agreement under certain circumstances, which would prevent the Transaction from being consummated.

Termination Fee (see page 159)

If the Exchange Agreement is terminated under certain circumstances, Biodel will be required to pay Albireo a termination fee of $1.1 million and, in some circumstances, reimburse Albireo and its selling shareholders for fees and expenses incurred in connection with the Transaction, up to a maximum of $250,000.

Albireo Series C Investment (see page 160)

Under the terms of the Exchange Agreement, prior to the closing of the Transaction, certain Albireo investors have agreed to purchase an aggregate of 9,708,740 Series C voting preference shares of Albireo at a price per share of $1.03 for an aggregate consideration of $10.0 million. Prior to the completion of the Transaction, each outstanding Series C voting preference share will convert into one ordinary share of Albireo.

Voting Agreements (see page 160)

In connection with the Transaction, Biodel’s executive officers and directors have entered into voting agreements with Albireo. Under the terms of the voting agreements, such stockholders agreed to vote, and these voting agreements grant a limited irrevocable proxy to Albireo to vote, the Biodel securities owned or subsequently acquired by such stockholders in favor of the proposal to approve the issuance of shares of Biodel common stock pursuant to the Exchange Agreement, the proposal to approve and adopt the amendment to the amended and restated certificate of incorporation to effect the reverse stock split and the proposal to approve the 2016 Equity Plan described elsewhere in this proxy statement. In addition, each such stockholder agreed to not, directly or indirectly, take any action in his or her capacity as a stockholder to, among other things, solicit, initiate, knowingly encourage, or take any action that would be reasonably expected to lead to an alternative acquisition proposal or that Biodel is otherwise prohibited from taking under the non-solicitation provisions of the Exchange Agreement. Each party to the voting agreements also agreed not to take any action which would have the effect of preventing or disabling such party from performing its obligations under the voting agreement. The parties to the voting agreements with Albireo are: Gary G. Gemignani, the Interim Chief Executive Officer and Chief Financial Officer of Biodel; Paul S. Bavier, the Interim President, Chief Administrative Officer, Vice President Corporate Development, General Counsel and Secretary; and Julia R. Brown, Barry Ginsberg, M.D., Ph.D., Ira W. Lieberman, Ph.D., Daniel Lorber, M.D., Arlene Morris and Davey S. Scoon, each a director of Biodel, holding, in the aggregate, less than 1% of the outstanding capital stock of Biodel as of August 15, 2016.

Lock-up Agreements (see page 160)

As a condition to the closing of the Transaction, the current officers and directors of Biodel (who collectively own less than 1% of the outstanding capital stock of Biodel as of August 15, 2016) have entered into

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lock-up agreements, and each holder of Albireo shares and notes convertible into Albireo shares has agreed to certain lock-up provisions in the Exchange Agreement, in each case pursuant to which such parties have agreed not to, except in limited circumstances, sell or transfer, or engage in swap or similar transactions with respect to shares of Biodel common stock until 180 days following the closing of the Transaction. The lock-up provisions apply to all shares of Biodel common stock received in the Transaction, except for shares of Biodel common stock received in exchange for Albireo ordinary shares issued upon conversion of the Albireo Series C voting preference shares issued in the Albireo Series C Investment.

Interests of the Biodel Directors and Executive Officers in the Transaction (see page 128)

Certain members of the board of directors and executive officers of Biodel have interests in the Transaction that are different from, or in addition to, interests they have as Biodel stockholders. The Biodel board of directors was aware of these interests and considered them, among other matters, in its decision to approve the Transaction. Upon completion of the Transaction, the employment of Gary Gemignani, Biodel’s Chief Financial Officer and Interim Chief Executive Officer, and Paul Bavier, Biodel’s Interim President, Chief Administrative Officer, Vice President Corporate Development, General Counsel and Secretary, will be terminated by Biodel without cause, and each will be entitled to certain severance payments and benefits and certain of their outstanding options will automatically vest in full. Additionally, Julia R. Brown and Davey S. Scoon, current members of Biodel’s board of directors, will continue to serve as members of the combined organization’s board of directors after the Transaction.

Material U.S. Federal Income Tax Consequences of the Transaction (see page 136)

Each of Biodel and Albireo intends the Transaction to qualify as a tax-free reorganization within the meaning of Section 368(a) of the Code. Whether the Transaction will qualify as a tax-free reorganization is uncertain for reasons that are described elsewhere in this proxy statement under the caption “Material U.S. Federal Income Tax Consequences of the Transaction.”

Risk Factors (see page 17)

Both Biodel and Albireo are subject to various risks associated with their businesses and their industries. In addition, the Transaction, including the possibility that the Transaction may not be completed, poses a number of risks to each company and its stockholders and shareholders, respectively, including the following risks:

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These risks and other risks are discussed in greater detail under the section entitled “Risk Factors” in this proxy statement. Biodel and Albireo both encourage you to read and consider all of these risks carefully.

Regulatory Approvals (see page 136)

In the United States, Biodel must comply with applicable federal and state securities laws and the rules and regulations of The NASDAQ Capital Market in connection with the issuance of shares of Biodel common stock and the filing of this proxy statement with the SEC.

NASDAQ Stock Market Listing (see page 140)

Prior to the closing of the Transaction, the parties intend to file an initial listing application for the combined organization with The NASDAQ Capital Market pursuant to applicable NASDAQ Stock Market LLC rules. If such application is accepted, Biodel anticipates that its common stock will be listed on The NASDAQ Capital Market following the closing of the Transaction under the trading symbol “ALBO.”

Anticipated Accounting Treatment (see page 140)

The Transaction will be treated as a reverse acquisition under the purchase method of accounting for business combinations in accordance with accounting principles generally accepted in the United States. For accounting purposes, Albireo is considered to be acquiring Biodel in the Transaction.

Appraisal Rights and Dissenters’ Rights (see page 141)

Under the Delaware General Corporation Law (“DGCL”), the stockholders of Biodel do not have appraisal rights in connection with the issuance of shares of Biodel common stock pursuant to the Exchange Agreement and the resulting change of control of Biodel. Albireo shareholders generally do not have appraisal rights under English law.

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Comparison of Rights of Holders of Biodel Stock and Albireo Shares (see page 289)

Biodel is incorporated under the laws of the State of Delaware, and the rights of stockholders of Biodel are currently, and will continue to be, governed by the DGCL. The internal affairs of Biodel are currently, and will continue to be, governed by Biodel’s amended and restated certificate of incorporation and bylaws. Albireo is registered in England and Wales, and the rights of Albireo shareholders are currently governed by the Companies Act 2006. The internal affairs of Albireo are currently governed by Albireo’s articles of association and the shareholders’ agreement between Albireo and its shareholders.

After the closing of the Transaction, Albireo shareholders will become stockholders of Biodel. Due to the differences between the governing laws and documents of Biodel and Albireo, the Transaction will result in Albireo shareholders having different rights once they become Biodel stockholders. The section of this proxy statement entitled “Comparison of Rights of Holders of Biodel Stock and Albireo Shares” sets forth a summary of the material differences between the current rights of Albireo shareholders and the rights of Biodel stockholders following the Transaction.

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MARKET PRICE AND DIVIDEND INFORMATION

Biodel common stock is listed on The NASDAQ Capital Market under the symbol “BIOD.” The following table presents, for the periods indicated, the range of high and low per share sales prices for Biodel common stock as reported on The NASDAQ Capital Market for each of the periods set forth below. Albireo is a private company and its share capital is not publicly traded. These per share sales prices do not give effect to the proposed 30:1 reverse stock split of Biodel common stock to be implemented prior to the closing of the Transaction.

The closing price of Biodel common stock on May 23, 2016 (which is the date immediately prior to public announcement of the Transaction), as reported on The NASDAQ Capital Market, was $0.39 per share. The closing price of Biodel common stock on [●], 2016, as reported on The NASDAQ Capital Market, was $[●] per share.

Assuming approval of Biodel Proposals Nos. 1 and 2 by Biodel’s stockholders and approval of the initial listing application by The NASDAQ Capital Market, following the closing of the Transaction, Biodel common stock is expected to be listed on The NASDAQ Capital Market and trade under Biodel’s new corporate name, “Albireo Pharma, Inc.,” and new trading symbol, “ALBO.”

As of [●], 2016, the record date for the Biodel annual meeting, Biodel had approximately [●] holders of record of its common stock. As of August 15, 2016, Albireo had seven holders of record of its ordinary shares, seven holders of its ordinary A shares and, after giving effect to the Albireo Note Conversion and Albireo Series C Investment, 17 holders of record of its preference shares. For detailed information regarding the beneficial ownership of certain stockholders of Biodel upon the closing of the Transaction, see the section entitled “Principal Stockholders of Combined Organization” in this proxy statement.

Dividends

Biodel has never paid or declared any cash dividends on its common stock and does not anticipate doing so in the foreseeable future. The combined organization intends to retain all available funds and any future earnings to fund the development and expansion of its business. Albireo is currently prohibited from making any dividend payments under the terms of its loan facility.

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RISK FACTORS

The combined organization will be faced with a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained in this proxy statement, you should carefully consider the material risks described below before deciding how to vote your shares of stock. You should also read and consider the other information in this proxy statement and the other documents incorporated by reference into this proxy statement. Please see the section entitled “Where You Can Find More Information” in this proxy statement.

Risks Related to the Transaction

The exchange ratio is not adjustable based on the market price of Biodel common stock, so the Transaction consideration at the closing may have a greater or lesser value than at the time the Exchange Agreement was signed.

The Exchange Agreement has set a fixed exchange ratio at which Albireo ordinary shares will be exchanged for shares of Biodel common stock in the Transaction, and the exchange ratio is only adjustable upward or downward if the net cash balance of either of Biodel or Albireo differs from certain negotiated parameters. Any changes in the market price of Biodel common stock before the completion of the Transaction will not affect the number of shares Albireo shareholders will be entitled to receive pursuant to the Exchange Agreement. Therefore, if before the completion of the Transaction the market price of Biodel common stock declines from the market price on the date of the Original Exchange Agreement, then Albireo shareholders could receive Transaction consideration with substantially lower value than the parties had negotiated for in the establishment of the exchange ratio. Similarly, if before the completion of the Transaction the market price of Biodel common stock increases from the market price on the date of the Original Exchange Agreement, then Albireo shareholders could receive Transaction consideration with substantially more value than the parties had negotiated for in the establishment of the exchange ratio. The Exchange Agreement does not include a price-based termination right. Because the exchange ratio does not adjust as a result of changes in the market value of Biodel common stock, for each percentage point that the market value of Biodel common stock rises or declines from the date of the Original Exchange Agreement, there is a corresponding one percentage point rise or decline in the value of the shares issued to Albireo shareholders (assuming no adjustment to the exchange ratio as a result of Biodel’s or Albireo’s net cash balance).

Failure to complete the Transaction may result in Biodel paying a termination fee or reimbursing fees and expenses incurred by Albireo and the selling shareholders and could harm the common stock price of Biodel and future business and operations of Biodel.

If the Transaction is not completed, Biodel is subject to the following risks:

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In addition, if the Exchange Agreement is terminated, the board of directors of Biodel may elect to, among other things, attempt to complete another strategic transaction like the Transaction, attempt to sell or otherwise dispose of the various assets of Biodel, or continue to operate the business of Biodel, any of which involves significant risks and uncertainties. See “Risks Related to Biodel—Biodel may not be able to complete the Transaction and may elect to pursue another strategic transaction similar to such Transaction, which may not occur on commercially reasonably terms or at all.”; “Risks Related to Biodel—In light of the challenges associated with building a sustainable business, if for any reason the Transaction does not close, the Biodel board of directors currently intends to attempt to complete another strategic transaction like the Transaction or sell or otherwise dispose of the various assets of Biodel. If the Biodel board of directors determines to sell or otherwise dispose of the various assets of Biodel, any remaining cash proceeds would be distributed to its stockholders, but there would be no assurances as to the amount of cash available to distribute to stockholders after paying its debts and other obligations.” and “Risks Related to Biodel—If the Transaction is not completed, and Biodel fails to acquire and develop other products or product candidates at all or on commercially reasonable terms, Biodel may be unable to build a sustainable business.”

If the conditions to the Transaction are not met, the Transaction will not occur.

Even if the Transaction is approved by the stockholders of Biodel, specified conditions must be satisfied or waived to complete the Transaction. These conditions are set forth in the Exchange Agreement and described in the section entitled “The Exchange Agreement—Conditions to the Completion of the Transaction” in this proxy statement. Biodel or Albireo cannot assure you that all of the conditions will be satisfied or waived. If the conditions are not satisfied or waived, the Transaction will not occur or will be delayed, the market price of Biodel may decline and Biodel and Albireo each may lose some or all of the intended benefits of the Transaction.

The Transaction may be completed even though material adverse changes may result from the announcement of the Transaction, industry-wide changes or other causes.

In general, either Biodel or Albireo can refuse to complete the Transaction if there is a material adverse change affecting the other party between May 24, 2016, the date of the Original Exchange Agreement, and the closing of the Transaction. However, certain types of changes do not permit either party to refuse to complete the Transaction, even if such change could be said to have a material adverse effect on Biodel or Albireo, including:

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If adverse changes occur and Biodel and Albireo still complete the Transaction, the combined organization’s stock price may suffer. This in turn may reduce the value of the Transaction to the stockholders of Biodel, the shareholders of Albireo or both.

Some Biodel officers and directors have interests in the Transaction that are different from yours and that may influence them to support or approve the Transaction without regard to your interests as Biodel stockholders.

Certain officers and directors of Biodel participate in arrangements that provide them with interests in the Transaction that are different from yours, including, among others, the continued service as a director of the combined organization, severance benefits, the acceleration of stock option vesting and continued indemnification. For example, Biodel has entered into certain employment and severance benefits agreements with certain of its executive officers that may result in the receipt by such executive officers of cash transaction bonuses as well as severance payments and other benefits with a total value of approximately $2,171,777 (collectively, not individually, and excluding the value of any accelerated vesting of stock option awards) and the acceleration of stock option awards held by those officers, including options to purchase shares of Biodel common stock, based on data available as of August 15, 2016 and assuming a covered termination of employment of such executive officer’s employment as of such date. The closing of the Transaction will also result in the acceleration of vesting of a portion of the stock awards, including options to purchase approximately 1,457,167 shares of Biodel common stock held by certain Biodel executive officers and directors (before giving effect to the proposed 30:1 reverse stock split of Biodel’s common stock, and assuming the Transaction closed on August 15, 2016). These interests, among others, may influence the officers and directors of Biodel to support or approve the Transaction. For more information concerning the interests of Biodel executive officers and directors, see the section entitled “The Transaction—Interests of the Biodel Directors and Executive Officers in the Transaction” in this proxy statement.

The market price of the combined organization’s common stock may decline as a result of the Transaction.

The market price of the combined organization’s common stock may decline as a result of the Transaction for a number of reasons including if:

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Biodel stockholders and Albireo shareholders may not realize a benefit from the Transaction commensurate with the ownership dilution they will experience in connection with the Transaction.

If the combined organization is unable to realize the full strategic and financial benefits currently anticipated from the Transaction, Biodel stockholders will have experienced substantial dilution of their ownership interests in Biodel, and Albireo shareholders will have experienced substantial dilution of their ownership interests in Albireo, without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined organization is able to realize only part of the strategic and financial benefits currently anticipated from the Transaction.

Certain provisions of the Exchange Agreement may discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the Exchange Agreement.

The terms of the Exchange Agreement prohibit each of Biodel and Albireo from soliciting alternative takeover proposals or cooperating with persons making unsolicited takeover proposals, except in limited circumstances when Biodel’s board of directors determines in good faith that an unsolicited alternative takeover proposal is or is reasonably likely to lead to a superior takeover proposal and is reasonably likely to be consummated and that failure to cooperate with the proponent of the proposal could reasonably be considered a breach of the board’s fiduciary duties. In addition, if Biodel or Albireo terminate the Exchange Agreement under certain circumstances, including Biodel terminating the Exchange Agreement because of a decision of Biodel’s board of directors to authorize Biodel to enter into an acquisition agreement with respect a superior proposal or Albireo terminating the Exchange Agreement because of a change in Biodel’s board of directors’ recommendation as a result of either its receipt of an acquisition proposal that Biodel’s board of directors determines in good faith constitutes a superior proposal or an intervening event, Biodel would be required to pay a termination fee of $1.1 million, plus certain transaction fees and expenses in certain cases, to Albireo. This termination fee may discourage third parties from submitting alternative takeover proposals to Biodel or its stockholders and may cause the Biodel board of directors to be less inclined to recommend an alternative proposal.

Because the lack of a public market for Albireo shares makes it difficult to evaluate the fairness of the Transaction, the shareholders of Albireo may receive consideration in the Transaction that is more or less than the fair market value of the Albireo shares.

The outstanding share capital of Albireo is privately held and is not traded in any public market. The lack of a public market makes it extremely difficult to determine the fair market value of Albireo. Because the percentage of Biodel equity to be issued to Albireo shareholders was determined based on negotiations between the parties, it is possible that the value of the Biodel common stock to be received by Albireo shareholders will be more or less than the actual fair market value of Albireo.

The shares of Biodel common stock issuable in the Transaction constitute restricted securities under federal securities laws and are subject to additional restrictions on transfer. As a result, the shares will not be freely tradable following the Transaction, and stockholders receiving them may never be able to achieve liquidity.

The shares of Biodel common stock issued in the Transaction will not immediately, or ever, be registered under the Securities Act. The shares of Biodel common stock will constitute “restricted stock” under the Securities Act and, therefore, such shares may not be sold unless the shares are registered or unless an exemption from the registration and prospectus delivery requirements of the Securities Act is available. As a general matter,

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holders of such shares will not be able to transfer any of their shares until at least six months after receiving shares of Biodel common stock, which is when the shares would first be eligible to be sold under Rule 144 promulgated under the Securities Act, assuming the conditions thereof are otherwise satisfied.

The combined organization may become involved in securities class action litigation that could divert management’s attention and harm the combined organization’s business and insurance coverage may not be sufficient to cover all costs and damages.

In the past, securities class action or shareholder derivative litigation often follows certain significant business transactions, such as the sale of a business division or announcement of a merger. The combined organization may become involved in this type of litigation in the future. Litigation often is expensive and diverts management’s attention and resources, which could adversely affect the combined organization’s business.

Risks Related to the Proposed 30:1 Reverse Stock Split

The 30:1 reverse stock split may not increase the combined organization’s stock price over the long-term.

The principal purpose of the 30:1 reverse stock split is to increase the per-share market price of Biodel’s common stock. It cannot be assured, however, that the 30:1 reverse stock split will accomplish this objective for any meaningful period of time. While it is expected that the reduction in the number of outstanding shares of common stock will proportionally increase the market price of Biodel’s common stock, it cannot be assured that the 30:1 reverse stock split will increase the market price of its common stock by a multiple of the proposed reverse stock split ratio, or result in any permanent or sustained increase in the market price of Biodel’s common stock, which is dependent upon many factors, including the combined organization’s business and financial performance, general market conditions, and prospects for future success. Thus, while the stock price of the combined organization might meet the continued listing requirements for The NASDAQ Capital Market initially, it cannot be assured that it will continue to do so.

The 30:1 reverse stock split may decrease the liquidity of the combined organization’s common stock.

Although the Biodel board of directors believes that the anticipated increase in the market price of the combined organization’s common stock could encourage interest in its common stock and possibly promote greater liquidity for its stockholders, such liquidity could also be adversely affected by the reduced number of shares outstanding after the 30:1 reverse stock split. The reduction in the number of outstanding shares may lead to reduced trading and a smaller number of market makers for Biodel’s common stock.

The 30:1 reverse stock split may lead to a decrease in the combined organization’s overall market capitalization.

Should the market price of the combined organization’s common stock decline after the 30:1 reverse stock split, the percentage decline may be greater, due to the smaller number of shares outstanding, than it would have been prior to the 30:1 reverse stock split. A reverse stock split may be viewed negatively by the market and, consequently, can lead to a decrease in the combined organization’s overall market capitalization. If the per share market price does not increase in proportion to the reverse stock split ratio, then the value of the combined organization, as measured by its stock capitalization, will be reduced. In some cases, the per-share stock price of companies that have effected reverse stock splits subsequently declined back to pre-reverse split levels, and accordingly, it cannot be assured that the total market value of Biodel’s common stock will remain the same after the reverse stock split is effected, or that the reverse stock split will not have an adverse effect on Biodel’s stock price due to the reduced number of shares outstanding after the reverse stock split.

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Risks Related to Biodel

Biodel’s business to date has been significantly dependent on the success of its product pipeline. Biodel is no longer actively engaged in further research and development and suspended patient enrollment in its clinical studies while pursuing strategic alternatives to increase stockholder value, and there is no guarantee that this strategic path will be successful.

In December 2015, Biodel’s board of directors approved a plan to explore strategic alternatives to further realize value from Biodel’s pipeline assets while preserving the company’s cash balance to the extent practicable. Biodel had previously devoted substantially all of its research, development and clinical efforts and financial resources to the development of its research and development and clinical programs for its product candidates, including specifically the development of its glucagon emergency rescue (“GEM”) product candidate and ultra-rapid-acting insulin product candidate, BIOD-531. As a result of the board’s decision, Biodel is no longer actively engaged in further research and development of its product pipeline and its pre-clinical programs to reduce operating expenses. Biodel’s Study 3-157 and Study 3-250 of BIOD-531, its concentrated ultra-rapid-acting insulin product candidate, were terminated. Upon the closing of the Transaction, the combined organization intends to entirely replace Biodel’s business and operations, including Biodel’s historical research and development activities, with Albireo’s business and operations, and the combined organization does not intend to resume research or development activity related to BIOD-531 or any of Biodel’s other product candidates. There can be no assurance that the proposed Transaction will be approved or consummated, or if consummated, that it would enhance stockholder value. If, for any reason, the Transaction does not close, the Biodel board of directors currently intends to attempt to complete another strategic transaction like the Transaction or sell or otherwise dispose of the various assets of Biodel. If the Biodel board of directors determines to sell or otherwise dispose of the various assets of Biodel, any remaining cash proceeds would be distributed to its stockholders.

Biodel may not be able to complete the Transaction and may elect to pursue another strategic transaction similar to such Transaction, which may not occur on commercially reasonably terms or at all.

Biodel cannot assure you that it will complete the Transaction in a timely manner or at all. The Exchange Agreement is subject to many closing conditions and termination rights, as set forth in more detail in “The Exchange Agreement—Conditions to the Completion of the Transaction” and “The Exchange Agreement—Termination” below. If the Transaction does not occur, Biodel’s board of directors may elect to attempt to complete another strategic transaction similar to the Transaction.

Attempting to complete another strategic transaction similar to the Transaction will be costly and time-consuming, and Biodel cannot make any assurances that a future strategic transaction will occur on terms that provide the same or greater opportunity for potential value to Biodel stockholders, or at all. Even if Biodel does complete the Transaction, the Transaction ultimately may not deliver the anticipated benefits or enhance stockholder value.

In light of the challenges associated with building a sustainable business, if for any reason the Transaction does not close, the Biodel board of directors currently intends to attempt to complete another strategic transaction like the Transaction or sell or otherwise dispose of the various assets of Biodel. If the Biodel board of directors determines to sell or otherwise dispose of the various assets of Biodel, any remaining cash proceeds would be distributed to its stockholders, but there would be no assurances as to the amount of cash available to distribute to stockholders after paying its debts and other obligations.

There can be no assurance that the Transaction will be completed. If, for any reason, the Transaction does not close, the Biodel board of directors currently intends to attempt to complete another strategic transaction like the Transaction or sell or otherwise dispose of the various assets of Biodel. If the Biodel board of directors determines to sell or otherwise dispose of the various assets of Biodel, any remaining cash proceeds would be distributed to its stockholders. The process of liquidation may be lengthy and, if initiated, Biodel cannot make

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any assurances regarding timing of completion. In addition, Biodel would be required to pay all of its debts and contractual obligations, and to set aside certain reserves for potential future claims. There can be no assurance as to the amount or timing of available cash remaining to distribute to stockholders after paying Biodel’s debts and

other obligations and setting aside funds for reserves. Accordingly, holders of its common stock could lose all or a significant portion of their investment in the event of a liquidation of the company.

If the Transaction is not completed, and Biodel fails to acquire and develop other products or product candidates at all or on commercially reasonable terms, Biodel may be unable to build a sustainable business.

If the Transaction is not completed, there also can be no assurance that Biodel will conduct research and development activities in the future. It may instead be required to rely on in-licensing as the source of any future product candidates for development and commercialization in order to build a sustainable business. Due to Biodel’s history, its limited operational and management capabilities, and the intense competition for pharmaceutical product candidates, even if Biodel finds promising product candidates, and generates interest in a collaborative or strategic arrangement to acquire such product candidates, it may not be able to acquire rights to additional product candidates or approved products on commercially reasonable terms that it finds acceptable, or at all. Proposing, negotiating and implementing an economically viable product acquisition or license is a lengthy and complex process. Biodel has historically competed for collaborative arrangements and license agreements with pharmaceutical and biotechnology companies and academic research institutions. Biodel’s competitors may have stronger relationships with third parties with whom they may be interested in collaborating, or which have greater financial, development and commercialization resources and/or more established histories of developing and commercializing products than Biodel. As a result, competitors may have a competitive advantage over Biodel in entering into collaborative arrangements with such third parties. In addition, even if Biodel finds promising product candidates, and generates interest in a collaborative or strategic arrangement to acquire such product candidates, it may not be able to acquire rights to additional product candidates or approved products on commercially reasonable terms that Biodel finds acceptable, or at all.

Biodel expects that any product candidate to which it acquires rights will require additional development and regulatory efforts prior to commercial sale, including extensive clinical testing and approval by the U.S. Food and Drug Administration, or FDA, and other non-U.S. regulatory authorities. All product candidates are subject to the risks of failure inherent in pharmaceutical product development, including the possibility that the product candidate will not be shown to be sufficiently safe and effective for approval by regulatory authorities and the possibility that, due to strategic considerations, Biodel will discontinue research or development with respect to a product candidate for which it has already incurred significant expense. Even if the product candidates are approved, Biodel cannot be sure that it would be capable of economically feasible production or commercial success.

Biodel has incurred significant losses since its inception and expects to incur losses for the foreseeable future.

Biodel has not generated any revenues to date. Since its inception in December 2003, Biodel has incurred significant operating losses. Biodel’s net losses were approximately $18.7 million for the fiscal year ended September 30, 2015 and approximately $12.2 million for the nine month period ended June 30, 2016. As of September 30, 2015, Biodel had an accumulated deficit of approximately $248.3 million. Its prior losses, combined with expected future losses, have had and may continue to have an adverse effect on its stockholders’ equity and working capital.

Prior to the recent suspension of its further research and clinical development activities, Biodel had devoted most of its financial resources to research and development, including developing its preclinical and clinical development activities. To date, Biodel has financed its operations primarily through the sale of equity securities. The amount of Biodel’s future net losses will depend, in part, on the rate of its future expenditures and its ability to obtain funding through equity or debt financings or strategic collaborations.

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The net losses Biodel incurs may fluctuate significantly from quarter-to-quarter and year-to-year, such that a period-to-period comparison of its results of operations may not be a good indication of its future performance. In any particular quarter or quarters, its operating results could be below the expectations of securities analysts or investors, which could cause its stock price to decline.

If Biodel does not complete the Transaction, it will require substantial additional funding in the event Biodel resumes its operations, and may need to curtail operations if it has insufficient capital.

Biodel’s operations have consumed substantial amounts of cash since inception. It had cash, cash equivalents and marketable securities of approximately $31.0 million at June 30, 2016. Biodel expects its negative cash flows from operations to continue for the foreseeable future.

Biodel currently believes that its available cash, cash equivalents and marketable securities and interest income will be sufficient to fund its anticipated levels of operations for at least 12 months after August 15, 2016. However, if Biodel does not successfully complete the Transaction, Biodel will require substantial additional funding in the event it resumes its operations, as drug development is expensive and time-consuming. Its future capital requirements will depend on many factors, including:

Any additional fundraising efforts may affect the ability of Biodel’s management to carry out the board of directors’ strategic plan. In addition, it cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to Biodel, if at all. It could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than would otherwise be ideal and it may be required to relinquish rights to some of its technologies, product candidates, or otherwise agree to terms unfavorable to it, any of which may have a material adverse effect on its business, operating results and prospects.

If Biodel is unable to obtain funding on a timely basis, it may be unable to deploy the capital necessary to resume its operations or otherwise capitalize on its business opportunities, as desired, any of which could materially adversely affect its business, financial condition and results of operations and could even require it to cease operations entirely.

Risks Related to the Development of Biodel’s Product Candidates

Biodel’s business to date has depended heavily on the success of its glucagon emergency rescue and ultra-rapid-acting mealtime insulin development programs; however, it has recently suspended all research and clinical development activities.

Biodel has invested a significant portion of its efforts and financial resources in the development of its glucagon emergency rescue and ultra-rapid-acting insulin product candidates. Biodel submitted an IND to the FDA for its GEM product candidate in the third calendar quarter of 2014, and in the first calendar quarter of 2015, Biodel announced positive topline results from Study 6-101. However, the timing of the development program for Biodel’s GEM product candidate was dependent on the ability of Unilife to deliver to Biodel at least three registration batches of the fully filled and finished GEM device so that Biodel could conduct the pivotal clinical study, human factors study and stability studies required for an NDA submission to the FDA. Previously, Biodel anticipated that Unilife would deliver the registration batches toward the end of the 2015 calendar year. However, Unilife informed

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Biodel that the projected GEM device development timelines were no longer accurate, and discussions with Unilife to resolve a dispute regarding the requirements of Biodel’s customization and commercial supply contract with Unilife were unsuccessful. Biodel initiated formal legal proceedings in Superior Court in the State of Connecticut and with the American Arbitration Association to address Unilife’s alleged violation of the Connecticut Unfair Trade Practices Act (“CUTPA”), and alleged breaches of contract in connection with the GEM program. These formal legal proceedings were withdrawn or dismissed with prejudice in September 2016 in connection with an asset purchase and license agreement pursuant to which (i) Unilife granted Biodel an option to purchase assets and intellectual property relating to Biodel’s GEM product candidate; (ii) Biodel and Unilife granted to each other a mutual general release; (iii) Biodel agreed to withdraw with prejudice its pending litigation against Unilife; and (iv) Biodel and Unilife agreed to dismiss with prejudice their pending arbitration proceeding. Furthermore, on September 2, 2016, Biodel and Unilife terminated the customization and commercial supply agreement between the parties pursuant to which Unilife was obligated to develop and supply the dual-chamber reconstitution devices to be used with Biodel’s GEM product candidate; neither Biodel nor Unilife has any further rights or obligations under this agreement. Biodel does not possess the expertise or resources required to manufacture registration batches of the dual-chamber reconstitution device on its own. Further, Biodel has been unable to engage a strategic partner in the advancement of formulations of its ultra-rapid-acting insulins into later stages of development, and Biodel has no plans pursue such activities on its own. As a result, Biodel has suspended further research and development of its GEM product candidate as well as research and development and clinical programs for its other product candidates and pre-clinical programs to reduce operating expenses. There can be no assurances that Biodel will conduct research and development activities, including clinical trials.

Even if Biodel resumes or initiates and completes any necessary preclinical studies and clinical trials for any product candidates it may choose to develop, it cannot predict when, or if, it will obtain regulatory approval to commercialize a product candidate or the approval may be for a more narrow indication than Biodel expects.

Even if Biodel resumes or initiates any necessary preclinical studies and clinical trials for any product candidates it may choose to develop, it cannot commercialize a product until the appropriate regulatory authorities have reviewed and approved the product candidate. Even if Biodel’s product candidates demonstrate safety and efficacy in clinical trials, the regulatory agencies may not complete their review processes in a timely manner, or Biodel may not be able to obtain regulatory approval. Additional delays may result if an FDA advisory committee or other regulatory authority recommends non-approval or restrictions on approval. In addition, Biodel may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory agency policy during the period of product development, clinical trials and the review process. Regulatory agencies also may approve a treatment candidate for fewer or more limited indications than requested or may grant approval subject to the performance of post-marketing studies. In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of any product candidate.

Risks Related to Biodel’s Dependence on Third Parties

Biodel relies on third parties to conduct, supervise and monitor its business operations. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, Biodel may not be able to conduct its business and operations and its status as a publicly traded company could be substantially harmed.

Biodel has historically relied on third party vendors to assist with development activities, and since the board of director’s approval of the strategic plan to explore strategic alternatives to further realize value from Biodel’s pipeline assets, certain administrative functions. Biodel’s vendors are not its employees, and there can be no assurance of any ability to directly monitor whether or not the vendors devote sufficient time and resources in furtherance of the company. These vendors may also have relationships with other parties that receive priority over the activities of Biodel. If Biodel’s vendors do not successfully carry out their contractual duties or obligations or fail to meet expected deadlines, Biodel’s financial results and the commercial prospects for its business would be harmed, its costs to regain compliance could increase and its ability to identify alternatives for its business and generate revenues would be delayed or significantly impaired.

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Risks Related to Biodel’s Intellectual Property

If Biodel is unable to obtain or protect its intellectual property rights, its competitors may develop and market similar or identical products that may reduce demand for any future Biodel products, and Biodel may not be able to compete effectively.

The following factors are important to Biodel’s success:

Biodel will be able to protect its proprietary rights from unauthorized use by third parties only to the extent that its proprietary rights are covered by valid and enforceable patents or are effectively maintained as trade secrets. Biodel tries to protect its proprietary position by filing U.S. and foreign patent applications related to its proprietary technology, inventions and improvements that are important to the development of its business. Because the patent position of pharmaceutical companies involves complex legal and factual questions, the issuance, scope and enforceability of patents cannot be predicted with certainty. Patents, if issued, may be challenged, invalidated or circumvented. Thus, any patents that Biodel owns or licenses from others may not provide any protection against competitors.

Biodel’s pending patent applications, those it may file in the future, or those it may license from third parties, may not result in patents being issued. If patents do not issue with claims encompassing Biodel’s products, Biodel’s competitors may develop and market similar or identical products that compete with Biodel’s products. Even if patents are issued, they may not provide Biodel with proprietary protection or competitive advantages against competitors with similar technology. Failure to obtain effective patent protection for Biodel’s technology and products may reduce demand for any future Biodel products and prevent Biodel from establishing collaborative relationships on favorable terms.

The individual active and inactive ingredients in Biodel’s ultra-rapid-acting insulin formulations and Biodel’s stable glucagon presentations have been known and used for many years and, therefore, are no longer subject to patent protection, except in proprietary combinations. Accordingly, Biodel’s patent and pending applications are directed to the particular formulations of these ingredients in Biodel’s products, and to their use. Although Biodel believes its formulations and their uses are or will be patented and provide a competitive advantage, Biodel’s patents may not prevent others from marketing formulations using the same active and inactive ingredients in different combinations.

Biodel also relies on trade secrets, know-how and technology, which are not protected by patents, to maintain its competitive position. Biodel tries to protect this information by entering into confidentiality agreements with parties that have access to it, such as potential corporate partners, collaborators, employees and consultants. Any of these parties may breach the agreements and disclose Biodel’s confidential information or Biodel’s competitors may learn of the information in some other way. Furthermore, others may independently develop similar technologies or duplicate any technology that Biodel has developed. If any trade secret, know-how or other technology not protected by a patent were to be disclosed to or independently developed by a competitor, Biodel’s business and financial condition could be materially adversely affected.

The laws of many foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States. Accordingly, the fact that Biodel has obtained certain patent rights in the United States

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does not guarantee that Biodel will be able to obtain the same or similar rights elsewhere. Even if Biodel is granted patents in foreign countries, it cannot guarantee that it will be able to enforce its rights effectively.

Biodel may become involved in lawsuits and administrative proceedings to protect, defend or enforce its patents that would be expensive and time-consuming.

In order to protect or enforce Biodel’s patent rights, Biodel may initiate patent litigation against third parties in the United States or in foreign countries. In addition, Biodel may be subject to certain opposition proceedings conducted in patent and trademark offices challenging the validity of its patents and may become involved in future opposition proceedings challenging the patents of others. For example, in late July 2013, a third party initiated administrative proceedings to oppose two of Biodel’s more recent patents that have been granted by the European Patent Office in connection with Biodel’s ultra-rapid-acting insulin formulations. While Biodel was successful in defending the opposition before the Opposition Division of the European Patent Office in October 2014, the decision in those proceedings has been appealed. The defense of intellectual property rights, including patent rights, through lawsuits, interference or opposition proceedings, and other legal and administrative proceedings can be costly and can divert Biodel’s technical and management personnel from their normal responsibilities. Such costs increase Biodel’s operating losses and reduce Biodel’s resources available for development activities. An adverse determination of any litigation or defense proceedings could put one or more of Biodel’s patents at risk of being invalidated or interpreted narrowly and could put Biodel’s patent applications at risk of not issuing.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of Biodel’s confidential information could be compromised by disclosure during this type of litigation. For example, during the course of this kind of litigation and despite protective orders entered by the court, confidential information may be inadvertently disclosed in the form of documents or testimony in connection with discovery requests, depositions or trial testimony. This disclosure could materially adversely affect Biodel’s business and financial results.

Claims by other parties that Biodel infringes or has misappropriated their proprietary technology may result in liability for damages, royalties, or other payments, or impair any future development and commercialization efforts.

Competitors and other third parties may initiate patent litigation against Biodel in the United States or in foreign countries based on existing patents or patents that may be granted in the future. Many of Biodel’s competitors may have obtained patents covering products and processes generally related to Biodel’s products and processes, and they may assert these patents against Biodel. Moreover, there can be no assurance that these competitors have not sought or will not seek additional patents that may cover aspects of Biodel’s technology. As a result, there is a greater likelihood of a patent dispute than would be expected if Biodel’s competitors were pursuing unrelated technologies.

While Biodel, from time to time, has conducted patent searches to determine whether the technologies used in its products infringe patents held by third parties, numerous patent applications are currently pending and may be filed in the future for technologies generally related to Biodel’s technologies. There are many patent applications that remain pending and there is inherent uncertainty in conducting patent searches. As a result, there can be no guarantee that Biodel will not violate third-party patent rights that it has not yet identified.

There may be U.S. and foreign patents issued to third parties that relate to aspects of Biodel’s product candidates. There may also be patent applications filed by these or other parties in the United States and various foreign jurisdictions that relate to some aspects of Biodel’s product candidates, which, if issued, could subject Biodel to infringement actions. The owners or licensees of these and other patents may file one or more infringement actions against Biodel. In addition, a competitor may claim misappropriation of a trade secret by an employee hired from that competitor. Any such infringement or misappropriation action could cause Biodel to

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incur substantial costs defending the lawsuit and could distract its management from its business, even if the allegations of infringement or misappropriation are unwarranted. A need to defend multiple actions or claims could have a disproportionately greater impact. In addition, either in response to or in anticipation of any such infringement or misappropriation claim, Biodel may enter into commercial agreements with the owners or licensees of these rights. The terms of these commercial agreements may include substantial payments, including substantial royalty payments on revenues received by Biodel in connection with the commercialization of its products.

Payments under such agreements could increase Biodel’s operating losses and reduce Biodel’s resources available for development activities. Furthermore, a party making this type of claim could secure a judgment that requires Biodel to pay substantial damages, which would increase its operating losses and reduce its resources available for development activities. A judgment could also include an injunction or other court order that could prevent Biodel from making, using, selling, offering for sale or importing its products or prevent its customers from using its products. If a court determined or if Biodel independently concluded that any of its products or manufacturing processes violated third-party proprietary rights, any Biodel clinical trials could be delayed and there can be no assurance that Biodel would be able to reengineer the product or processes to avoid those rights, or to obtain a license under those rights on commercially reasonable terms, if at all.

Risks Related to Regulatory Approval of Biodel’s Product Candidates

Any product for which Biodel obtains marketing approval could be subject to restrictions or withdrawal from the market and Biodel may be subject to penalties if it fails to comply with regulatory requirements or if it experiences unanticipated problems with its products, when and if any of them are approved.

Any product for which Biodel obtains marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to continual requirements of and review by the FDA and other state and federal regulatory authorities. These requirements include, in the case of the FDA, submissions of safety and other post-marketing information and reports, registration requirements, current good manufacturing practice (“cGMP”) requirements relating to quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping. Even if regulatory approval of a product is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to other conditions of approval, or may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product. In addition, if any of Biodel’s product candidates are approved, Biodel’s product labeling, advertising and promotion would be subject to regulatory requirements and continuing regulatory review. The FDA strictly regulates the promotional claims that may be made about prescription drug products. In particular, a drug may not be promoted in a misleading manner or for uses that are not approved by the FDA as reflected in the product’s approved labeling. The FDA and other state and federal entities actively enforce the laws and regulations prohibiting misleading promotion and the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.

Discovery after approval of previously unknown problems with Biodel’s products, manufacturers or manufacturing processes, or failure to comply with state or federal regulatory requirements, may result in actions such as:

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Risks Related to the Common Stock of Biodel

Biodel’s failure to meet continued listing compliance criteria in accordance with NASDAQ Stock Market rules could result in NASDAQ delisting Biodel’s common stock.

The NASDAQ Stock Market LLC (“NASDAQ”) listing rules require Biodel to maintain certain closing bid price, stockholders equity, and other financial metric criteria. On September 21, 2015, Biodel received a written notice from NASDAQ indicating that Biodel was not in compliance with the minimum bid price requirement set forth in NASDAQ rules for continued listing on The NASDAQ Capital Market. NASDAQ Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. Based on the closing bid price of Biodel’s common stock for the 30 consecutive business days from August 6, 2015 to September 16, 2015, Biodel no longer meets the minimum bid price requirement.

Pursuant to NASDAQ Listing Rule 5810(c)(3)(A), Biodel was granted a 180 calendar day compliance period, or until March 21, 2016, to regain compliance with the minimum bid price requirement. During the compliance period, Biodel’s common stock continued to be listed and traded on The NASDAQ Capital Market. To regain compliance, the closing bid of Biodel’s common stock needed to meet or exceed $1.00 per share for a minimum of 10 consecutive business days during the 180 calendar day grace period. On March 22, 2016, NASDAQ notified Biodel that while it had not regained compliance with the bid price rule, it was eligible for an additional 180-day grace period, or until September 19, 2016, to regain compliance. NASDAQ’s determination was based on Biodel’s having met the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on The NASDAQ Capital Market, with the exception of the bid price rule, and on Biodel’s written notice to NASDAQ of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. There can be no assurance that Biodel will be able to regain compliance with the minimum bid price requirement or will otherwise be in compliance with other NASDAQ listing criteria.

If Biodel does not regain compliance with the bid price rule by September 19, 2016, NASDAQ will provide written notification to Biodel that its common stock will be delisted. At that time, Biodel may appeal the delisting determination to a NASDAQ Hearings Panel. Biodel would remain listed pending the panel’s decision. There can be no assurance that, if Biodel does appeal the delisting determination that such appeal would be successful.

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In the event that Biodel is delisted from The NASDAQ Capital Market, its common stock would become significantly less liquid, which would likely adversely affect its value. Although Biodel’s common stock would likely be traded over-the-counter or on other less liquid trading platforms, these types of listings involve more risk and trade less frequently and in smaller volumes than securities traded on The NASDAQ Capital Market.

Provisions in Biodel’s corporate charter documents and under Delaware law could make an acquisition of Biodel, which may be beneficial to its stockholders, more difficult and may prevent attempts by Biodel’s stockholders to replace or remove Biodel’s current management.

Provisions in Biodel’s corporate charter and bylaws may discourage, delay or prevent a merger, acquisition or other change in control of Biodel that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of Biodel’s common stock, thereby depressing the market price of Biodel’s common stock. In addition, these provisions may frustrate or prevent any attempts by Biodel’s stockholders to replace or remove Biodel’s current management by making it more difficult for stockholders to replace members of Biodel’s board of directors. Because Biodel’s board of directors is responsible for appointing the members of Biodel’s management team, these provisions could in turn affect any attempt by Biodel’s stockholders to replace current members of Biodel’s management team.

Among others, these provisions:

In addition, because Biodel is incorporated in Delaware, it is governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a person who owns 15% or more of Biodel’s outstanding voting stock from merging or combining with Biodel for a period of three years after the date of the transaction in which the person acquired 15% or more of Biodel’s outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

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Because Biodel’s stock price is volatile, purchasers of Biodel’s common stock could incur substantial losses.

Biodel’s stock price has been and may continue to be volatile. The stock market in general and the market for biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. The market price for Biodel’s common stock may be influenced by many factors, including:

Biodel’s outstanding warrants may be exercised in the future, which would increase the number of shares in the public market and result in dilution to Biodel’s stockholders.

As a result of Biodel’s June 2012 private placement, Biodel has outstanding warrants to purchase 2,749,469 shares of its common stock at $2.66 per share. The warrants expire in June 2017. The exercise of these warrants for shares of common stock would be substantially dilutive to the outstanding shares of common stock. Any dilution or potential dilution may cause Biodel’s stockholders to sell their shares, which would contribute to a downward movement in the stock price of Biodel’s common stock.

Biodel has never paid any cash dividends on its common stock and Biodel does not anticipate paying any cash dividends in the foreseeable future.

Biodel has paid no cash dividends on its common stock to date. In addition, the terms of any future debt agreements may preclude Biodel from paying dividends. As a result, Biodel does not expect to pay any cash dividends in the foreseeable future, and payment of cash dividends, if any, will depend on Biodel’s financial condition, results of operations, capital requirements and other factors and will be at the discretion of Biodel’s board of directors. Furthermore, Biodel may in the future become subject to contractual restrictions on, or prohibitions against, the payment of dividends. Capital appreciation, if any, of Biodel’s common stock will be investors’ sole source of gain for the foreseeable future.

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Risks Related to Albireo

Risks Related to Albireo’s Financial Position and Need for Additional Capital

Albireo has incurred significant losses since its inception. Albireo expects to continue to incur losses and may never generate profits from operations or maintain profitability.

Since inception, Albireo has incurred significant operating losses. Albireo’s net loss was approximately $1.1 million for the six months ended June 30, 2016, $6.8 million for the year ended December 31, 2015 and $6.4 million for the year ended December 31, 2014. As of June 30, 2016, Albireo had an accumulated deficit of $10.7 million. To date, Albireo has financed its operations primarily through issuances of its preference shares or convertible loan notes, upfront fees paid upon entering into or amending license agreements, payments received upon the achievement of specified milestone events under the license agreements, grants and venture debt borrowings. Albireo has devoted substantially all of its efforts to research and development, including clinical trials. Albireo has not completed the development of any drugs. Albireo expects to continue to incur significant expenses and increasing operating losses for at least the next few years as the combined organization continues its development of, and seeks marketing approvals for, Albireo’s product candidates, prepares for and begins the commercialization of any approved products, and adds infrastructure and personnel to support its product development efforts and operations as a public company in the United States. The net losses Albireo incurs may fluctuate significantly from quarter to quarter and year to year.

Albireo’s ability to generate profits from operations and thereafter to remain profitable depends heavily on:

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Based on Albireo’s current plans, it does not expect to generate significant revenue unless and until it or a current or potential future licensee obtains marketing approval for, and commercializes, one or more of its product candidates, which it does not expect to occur for at least the next few years. Neither Albireo nor a licensee may ever succeed in obtaining marketing approval for, or commercializing, Albireo’s product candidates and, even if it does, may never generate revenues that are significant enough to generate profits from operations. Even if Albireo does generate profits from operations, it may not be able to sustain or increase profitability on a quarterly or annual basis. Albireo’s failure to generate profits from operations and remain profitable would decrease the value of the combined organization and could impair its ability to raise capital, expand its business, maintain its research and development efforts, diversify its product offerings or continue its operations. A decline in the value of the combined organization could also cause you to lose all or part of your investment.

Albireo’s limited operating history may make it difficult for you to evaluate the success of its business to date and to assess its future viability .

Albireo’s operations to date have been limited to organization and staffing, developing and securing its technology, entering into licensing arrangements for elobixibat, raising capital and undertaking preclinical studies and clinical trials of its product candidates. Albireo has not yet demonstrated its ability to successfully complete development of any product candidate, obtain marketing approval, manufacture a commercial scale product, or arrange for a third party to do so on its behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, any predictions you make about Albireo’s future success or viability may not be as accurate as they could be if Albireo had a longer operating history.

Assuming Albireo obtains marketing approval for any of its product candidates, Albireo will need to transition from a company with a research and development focus to a company capable of supporting commercial activities. Albireo may encounter unforeseen expenses, difficulties, complications and delays and may not be successful in such a transition.

Albireo’s independent registered public accounting firm has expressed doubt about Albireo’s ability to continue as a going concern.

Based on Albireo’s recurring losses and expectations to incur significant expenses and negative cash flows for the foreseeable future, Albireo’s independent registered public accounting firm has included an explanatory paragraph in its report on Albireo’s financial statements as of and for the years ended December 31, 2015 and December 31, 2014 expressing substantial doubt about Albireo’s ability to continue as a going concern. If the Transaction is not completed, Albireo will require significant additional funding to continue its operations. If Albireo is unable to continue as a going concern, it may be forced to liquidate its assets and the values it receives for its assets in liquidation or dissolution could be significantly lower than the values reflected in its financial statements.

The combined organization will need substantial additional funding and, in particular, may not have sufficient cash as of the completion of the Transaction to fund a planned pivotal clinical trial of A4250 for the treatment of progressive familial intrahepatic cholestasis to completion. If the combined organization is unable to raise capital when needed, it could be forced to delay, reduce or eliminate its product development programs or commercialization efforts.

Albireo expects its research and development expenses to increase substantially in future periods, particularly as it advances A4250 into planned pivotal clinical development for the treatment of progressive familial intrahepatic cholestasis, or PFIC. Albireo expects that its research and development expenses would increase even further if it conducts clinical trials of any or all of A4250 for the treatment of additional pediatric cholestatic liver diseases and disorders, elobixibat for the treatment of chronic idiopathic constipation, or CIC, or A3384 for the treatment of bile acid malabsorption, or BAM, continues its preclinical program in nonalcoholic steatohepatitis, or NASH, or initiates additional preclinical programs for future product candidates. In addition, if

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Albireo obtains marketing approval for any of its product candidates that are not then subject to licensing, collaboration or similar arrangements with third parties, it expects to incur significant commercialization expenses related to product sales, marketing, distribution and manufacturing. Furthermore, upon the completion of the Transaction, Albireo expects to incur additional costs associated with operating as a public company in the United States. Accordingly, the combined organization will need to obtain substantial additional funding in connection with its continuing operations. If the combined organization is unable to raise capital when needed or on attractive terms, it could be forced to delay, reduce or eliminate Albireo’s research and development programs or any future commercialization efforts.

Albireo believes that the net cash of the combined organization available upon completion of the Transaction, which Albireo anticipates will be at least approximately $30 million, will be sufficient to enable the combined organization to fund the initiation and completion of a planned pivotal clinical trial of A4250 for the treatment of PFIC. Albireo expects to complete the planned pivotal PFIC trial in mid 2018. Albireo’s expectation is based on the projected cost, timing and scope of its planned research and development activities, including the planned pivotal PFIC trial, the projected receipt of contingent milestone payments under its agreement with EA Pharma for elobixibat and other assumptions that may prove to be wrong, and the combined organization could use its capital resources sooner than Albireo currently expects. This estimate assumes, among other things, that the combined organization does not obtain any additional funding through grants and clinical trial support or through new licensing, collaboration or similar arrangements. Albireo’s ability to fund a pivotal clinical trial of A4250 for the treatment of PFIC through its completion, and Albireo’s future capital requirements generally, will depend on many factors, including:

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Conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and Albireo may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, Albireo’s product candidates, if approved, may not achieve commercial success. Albireo’s commercial revenues, if any, will be derived from sales of products that will not be commercially available for at least the next few years, if at all. Accordingly, the combined organization will need to continue to rely on additional financing to achieve its business objectives. In particular, if the combined organization does not have sufficient funds to complete the planned pivotal clinical trial of A4250 for the treatment of PFIC, the combined organization will be required to obtain additional financing in order to complete that trial. In addition, the combined organization may seek additional capital due to favorable market conditions or strategic considerations, even if it believes that it has sufficient funds for its current or future operating plans. Additional financing may not be available to the combined organization on acceptable terms, or at all. The unavailability of additional financing on acceptable terms, or at all, would have an adverse effect on your investment.

Limitations on the ability of smaller reporting companies to sell shares under a Form S-3 shelf registration statement may interfere with the combined organization’s ability to execute financing transactions quickly or at all.

The combined organization’s ability to raise capital using a shelf registration statement may be limited by, among other things, current SEC rules and regulations. Under these rules and regulations, the combined organization must meet certain requirements to use a Form S-3 registration statement to raise capital without restriction as to the amount of the market value of securities sold under the Form S-3 registration statement. One such requirement is that the market value of the combined organization’s outstanding common stock held by non-affiliates, or public float, be at least $75 million as of a date within 60 days prior to the date on which the securities are sold under the Form S-3 (and the date of any Form 10-K filing thereafter by the combined organization, which is deemed a re-evaluation date). If the combined organization does not meet that requirement, then the aggregate market value of securities sold by the combined organization in a primary offering under a Form S-3 in any 12-month period is limited to an aggregate of one-third of the combined organization’s public float. SEC rules and regulations require that the combined organization periodically re-evaluate the value of its public float, and if, at a re-evaluation date, its public float is less than $75 million, the combined organization would become subject to the one-third of public float limitation described above.

Following the closing of the Transaction, the combined organization’s public float is initially expected to be less than $75 million, so the combined organization’s ability to utilize a Form S-3 registration statement for a primary offering of its securities will be restricted under these rules, and any such offering under a Form S-3 will be limited to raising an aggregate of one-third of the combined organization’s public float. Alternately, the combined organization could elect to raise capital pursuant to an exemption from registration under the Securities Act, or under a Form S-1 registration statement, but either of these alternatives would likely increase the cost of

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raising additional capital when compared to the use of a Form S-3 registration statement. Furthermore, because of these limitations on primary securities offerings under a Form S-3 and the increased likelihood of greater costs and potential delays associated with the alternatives to using a Form S-3, the terms of any financing transaction that the combined organization is able to conduct may be less favorable or may cause it to be unable to obtain capital in a timely manner.

In addition, under current SEC rules and regulations, the combined organization’s common stock must be listed on a national securities exchange in order to utilize a Form S-3 registration statement (i) for a primary offering, if the combined organization’s public float is not at least $75 million as of a date within 60 days prior to the date on which the securities are sold under the Form S-3, or a re-evaluation date, whichever is later, and (ii) to register the resale of the combined organization’s securities by persons other than the combined organization. While the combined organization’s common stock is expected to be listed on the NASDAQ, there can be no assurance that it will be able to maintain such listing.

Raising additional capital may cause dilution to the combined organization’s investors, restrict its operations or require it to relinquish rights to its technologies or product candidates.

Until such time, if ever, as the combined organization can generate substantial product revenues, it expects to finance its cash needs through a combination of equity offerings, licensing, collaboration or similar arrangements, grants and debt financings. The combined organization does not have any committed external source of funds. The combined organization may seek to raise additional capital at any time, including a potential equity financing concurrently with or soon after completion of the Transaction. To the extent that the combined organization raises additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a holder of the combined organization’s common stock. Debt financing, if available, may involve agreements that include covenants limiting or restricting the combined organization’s ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends or other distributions.

If the combined organization raises additional funds through licensing, collaboration or similar arrangements, it may have to relinquish valuable rights to its technologies, future revenue streams, research and development programs or product candidates or to grant licenses on terms that may not be favorable to the combined organization. If the combined organization is unable to raise additional funds through equity or debt financings or other arrangements when needed, it may be required to delay, limit, reduce or terminate its product development or future commercialization efforts or grant rights to develop and market product candidates that it would otherwise prefer to develop and market itself.

Risks Related to the Development and Commercialization of Albireo’s Product Candidates

Albireo depends heavily on the success of its lead product candidate, A4250, which Albireo is developing initially for the treatment of PFIC and potentially also for other pediatric cholestatic liver diseases and disorders. Albireo also depends on the success of its product candidate elobixibat, which its licensee EA Pharma is developing in Japan for the treatment of CIC. If Albireo is unable to commercialize A4250 or experiences significant delays in doing so, or if EA Pharma is unable to commercialize elobixibat in Japan or experiences significant delays in doing so, Albireo’s business will be materially harmed.

A4250 is in Phase 2 clinical development. Elobixibat has begun Phase 3 clinical development, including an ongoing Phase 3 clinical trial in Japan. Albireo’s other clinical-stage product candidate, A3384, is in Phase 2 development. Albireo does not currently anticipate that it will conduct future clinical trials of elobixibat outside of EA Pharma’s licensed territory if Albireo does not identify and enter into a suitable licensing, collaboration or similar arrangement with a third party for a particular region. Albireo also does not anticipate conducting future clinical trials of A3384 unless and until, following the Transaction, it obtains additional capital, whether from its

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license agreement with EA Pharma for elobixibat, from potential future licensing, collaboration or similar arrangements or from any future offering of its debt or equity securities.

Albireo’s ability to generate product revenues, which may not occur for at least the next few years, if at all, will depend heavily on the successful development and commercialization of A4250 as a treatment of PFIC and potentially as a treatment for other pediatric cholestatic liver diseases and disorders. Albireo’s ability to generate product revenues may also depend on the successful development and commercialization of elobixibat in the United States to treat CIC and A3384 to treat BAM. The success of each of these product candidates will depend on a number of factors, including the following:

If Albireo does not achieve one or more of these factors in a timely manner or at all, Albireo could experience significant delays or an inability to successfully commercialize A4250, elobixibat or A3384, which would materially harm its business.

If clinical trials of Albireo’s product candidates fail to demonstrate safety and efficacy to the satisfaction of the U.S. Food and Drug Administration, or the FDA, or the European Medicines Agency, or the EMA, or do not otherwise produce favorable results, Albireo may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of A4250 or any other Albireo product candidate.

In connection with obtaining marketing approval from regulatory authorities for the sale of any product candidate, Albireo must complete preclinical development and then conduct extensive clinical trials to

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demonstrate the safety and efficacy of its product candidates in humans. Clinical trials are expensive, difficult to design and implement, can take many years to complete and are uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials. In particular, the small number of subjects and patients in Albireo’s early clinical trials may make the results of these clinical trials less predictive of the outcome of later clinical trials. The design of a clinical trial can determine whether its results will support approval of a product, and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced or completed. There is no assurance that Albireo will be able to design and execute a clinical trial to support marketing approval. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.

Albireo is developing A4250 initially for PFIC, and there is limited clinical experience in PFIC. Albireo may also conduct future development of A4250 for other pediatric cholestatic liver diseases and disorders for which there is likewise limited clinical experience. In some cases, Albireo’s ongoing or planned clinical trials have used and will use novel endpoints and measurement methodologies with which the FDA, EMA and other regulatory authorities have limited or no experience. The degree of novelty of these endpoints and methodologies may delay or prevent regulatory approval. For example, Albireo’s ongoing Phase 2 clinical trials of A4250 in children with chronic cholestasis and in adults with primary biliary cholangitis (formerly known as primary biliary cirrhosis), or PBC, each designates change in pruritus from baseline as an endpoint, and it is possible that change from baseline in pruritus will be the primary or a key secondary endpoint in future clinical trials of A4250. Change in pruritus from baseline is assessed using patient-reported or, in the case of young children, caregiver-reported outcome instruments. Because the assessment of pruritus relies on subjective patient or caregiver feedback, it is inherently difficult to evaluate and measure consistently. The measure of pruritus can be influenced by factors outside of Albireo’s control and can vary widely from measurement point to measurement point for a particular patient, from patient to patient and from site to site within a clinical trial. Moreover, patients given an inactive comparator, or placebo, in a clinical trial may experience a change in pruritus from baseline that is comparable to the change experienced by patients given A4250, which would obscure the effect of A4250.

If Albireo is required to conduct additional clinical trials or other testing of A4250, or any other Albireo product candidate beyond those that it currently contemplates, if Albireo is unable to successfully complete its clinical trials or other testing, or if the results of these clinical trials or tests are not positive or are only modestly positive or if there are safety concerns, Albireo may:

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The clinical trial designs, endpoints and outcomes that will be required to obtain marketing approval of a drug to treat PFIC, or to treat BAM, are uncertain. Albireo may never receive marketing approval for A4250 or A3384 as a treatment for these indications.

No product is currently approved for the treatment of either of PFIC or BAM. Accordingly, there is not a well-established development path that, with positive outcomes in clinical trials, would be reasonably assured of receiving marketing approval for these indications. In particular, if Albireo’s ongoing clinical trial of A4250 in children with chronic cholestasis is successful, Albireo plans to use the trial to support a potentially pivotal clinical trial designed to establish the efficacy of A4250 to support, together with additional long-term safety data, an application for regulatory approval as a treatment for PFIC. The FDA or any regulatory authority outside of the United States may determine that the designs or endpoints of any potentially pivotal trial that Albireo conducts, or that the outcome shown on any particular endpoint in any potentially pivotal trial that Albireo conducts, are not sufficient to establish a clinically meaningful benefit for A4250 in the treatment of PFIC or otherwise to support approval, even if the primary endpoint or endpoints of the trial is or are met with statistical significance. If this occurs, Albireo’s business would be materially harmed. Moreover, if the FDA requires Albireo to conduct additional clinical trials beyond the ones that Albireo currently contemplates in order to support regulatory approval in the United States of A4250 in PFIC, its business will be materially harmed.

Likewise, if Albireo conducts any future clinical trial designed to support marketing approval of A3384 as a treatment for BAM, the FDA or any regulatory authority outside of the United States may determine that the designs or endpoints of the trial, or that the outcomes shown on any particular endpoints in the trial, are not sufficient to establish a clinically meaningful benefit for A3384 in the treatment of BAM or otherwise to support approval, even if the primary endpoint or endpoints of the trial is met with statistical significance.

Preliminary data from completed cohorts of Albireo’s ongoing Phase 2 clinical trial of A4250 in children with chronic cholestasis may not be consistent with data from later cohorts of the trial.

Albireo is conducting an ongoing Phase 2 clinical trial of A4250 in children with chronic cholestasis, which is an open label study. Data from the trial becomes available on a cohort-by-cohort basis, but will not become final until the trial database is locked upon the completion of all cohorts. Because this is an open label study, preliminary data is available from the three cohorts that have completed as of August 15, 2016, in which the trial’s three lowest doses (0.01 mg/kg, 0.03 mg/kg and 0.06 mg/kg, respectively) were evaluated. These data show a dose-related trend in reduction of serum bile acids and a favorable trend in reduction of pruritus. In addition, A4250 has exhibited a favorable overall safety and tolerability profile through the first three cohorts of the trial. However, there can be no assurance that data from the remaining cohorts in the trial, which will evaluate higher doses of A4250, will be favorable. If data from the trial as a whole is, when completed, not favorable, Albireo will not be able to advance A4250 into a planned pivotal clinical trial in PFIC or any other indication, A4250 will not receive marketing approval for the treatment of PFIC or any other indication, and Albireo’s business will be materially harmed. Moreover, Albireo cannot assure you that the final results of the trial, even if favorable, will be replicated in the planned pivotal trial of A4250 in PFIC or in any future trials of A4250 in any other pediatric cholestatic liver disease or disorder.

Favorable results seen in the interim analysis of data from Albireo’s ongoing Phase 2 clinical trial of A4250 in PBC patients may not be predictive of final results of the trial, of results in later clinical trials of A4250 in a different indication or that involve a different number of patients, different dosing regimens and durations, different outcome measures or other differences in design or execution.

A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in later-stage clinical trials, even after promising results in earlier trials or in preclinical studies. Similarly, companies have experienced disappointing outcomes in later phases of a multiphase clinical trial, even after promising results in an early phase of the trial. Albireo is conducting an ongoing Phase 2 clinical trial of A4250 in PBC. In a planned interim analysis of data from the ongoing PBC trial, pruritus was substantially

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reduced for all five subjects who received A4250 and serum bile acid levels for the three subjects who completed the trial were reduced on average by approximately 50%. Any or all of the ongoing and planned future trials of A4250 may involve a greater number of patients, a different dosing regimen or duration and other differences in trial design, in addition to the difference in patient population, compared with Albireo’s ongoing PBC trial. If the favorable interim findings on pruritus and serum bile acids seen in the ongoing PBC trial or the favorable preliminary data on pruritus and serum bile acids from completed cohorts of Albireo’s ongoing Phase 2 trial of A4250 in children with chronic cholestasis are not replicated in the final data from Albireo’s ongoing chronic cholestasis trial or in planned future clinical trials of A4250 in PFIC or any other pediatric cholestatic liver disease or disorder, Albireo may not obtain marketing approval for A4250 to treat any of these indications, in which case Albireo’s business would be materially and adversely affected. Moreover, interim results of the ongoing PBC trial may not be predictive of the final results of the PBC trial itself.

Albireo is currently designing its planned pivotal trial of A4250 as a treatment for PFIC, including evaluating various potential endpoints to designate as the primary endpoint, whether alone or together with another co-primary endpoint. It is possible that change from baseline in pruritus will be the primary or a key secondary endpoint in the planned trial. It is customary to use patient-reported or caregiver-reported outcome measures to qualify and assess pruritus in clinical trials, but the specific measures can vary from trial to trial. For example, the pruritus scales that Albireo is using in its ongoing PBC trial are not the same as the scales Albireo is using in its ongoing trial in children with chronic cholestasis, except that the visual analogue scale of itching, known as VAS-itch, is common to both trials. If Albireo decides to use change from baseline in pruritus as a primary or a key secondary endpoint in its planned pivotal trial of A4250 as a treatment for PFIC, it will likely use one or more measures, including a patient-reported or caregiver-reported outcome measures that Albireo is currently developing for consideration by applicable regulatory authorities, that employ or rely on different questions or assessments or are otherwise different than the pruritus measures Albireo is using in its ongoing trials. Any decision by Albireo to use different measures of pruritus in future trials may reduce the likelihood that the preliminary data from the completed cohorts in its ongoing trial of A4250 in children with chronic cholestasis or the results observed in Albireo’s ongoing PBC trial of A4250 will be predictive of results in the future trials. Moreover, the FDA or foreign regulatory authorities may determine that the measure for pruritus that Albireo chooses for its planned pivotal trial in PFIC or any future trial in any other pediatric cholestatic liver disease or disorder was not applied by clinical investigators in the applicable trial sufficiently consistently, or was not sufficiently sensitive to detect varying degrees of pruritus in the applicable trial, to support regulatory approval of A4250 in any or all of these indications.

The likelihood that Albireo’s ongoing Phase 2 clinical trial of A4250 in children with chronic cholestasis will be sufficient to enable a single pivotal trial to support, together with additional long-term safety data, an application for marketing approval of A4250 as a treatment for PFIC is uncertain. The uncertainty will be greater if Albireo does not enroll a sufficient number of children with PFIC in its ongoing study.

If Albireo’s ongoing Phase 2 clinical trial of A4250 in children with chronic cholestasis is successful, Albireo plans to seek concurrence from the FDA and regulatory authorities outside the United States that a single pivotal clinical trial in patients with PFIC will be sufficient to establish the efficacy of A4250 to support, together with additional long-term safety data, an application for regulatory approval as a treatment for PFIC. The likelihood that the FDA or any regulatory authority outside the United States will concur with Albireo’s plan is uncertain. The FDA or any other regulatory authority may instead determine that multiple pivotal clinical trials are required to establish the efficacy of A4250 as a treatment for PFIC, even if the outcome of Albireo’s ongoing Phase 2 study in children is favorable. The risk that the FDA or any other regulatory authority will take this position may be even higher if Albireo selects a primary endpoint for its planned pivotal trial in PFIC for which there is only limited data generated in Albireo’s ongoing Phase 2 pediatric trial. If the FDA or a regulatory authority outside of the United States takes this position, it would result in a more expensive and potentially longer development program for A4250 than Albireo currently contemplates, which could delay Albireo’s ability to generate product revenues with A4250, interfere with Albireo’s ability to enter into any potential licensing or

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collaboration arrangements with respect to this program, cause the value of the combined organization to decline, and limit the combined organization’s ability to obtain additional financing.

In addition, Albireo is enrolling in its ongoing study children with chronic cholestasis caused by any of a number of different liver conditions, including PFIC, biliary atresia, Alagille syndrome, or ALGS, and sclerosing cholangitis. As a result of these enrollment criteria, the number of PFIC patients who will participate in the ongoing Phase 2 trial is uncertain. Through the first four cohorts of the ongoing trial, seven PFIC patients have been enrolled. If, following completion of the ongoing trial, the FDA or any regulatory authority outside of the United States determines that the number of patients with PFIC in the trial was insufficient, it is more likely that the applicable regulatory authority will require that Albireo conduct more than its planned single pivotal trial in PFIC to establish the efficacy of A4250 to support marketing approval for A4250 as a treatment for PFIC.

If Albireo experiences new or additional delays or difficulties in the enrollment of patients in its clinical trials of A4250, Albireo’s receipt of marketing approvals could be delayed or prevented.

Recruiting patients for orphan pediatric liver diseases is challenging, and Albireo has experienced enrollment delays in its clinical trials of A4250. If Albireo is unable to locate and enroll a sufficient number of eligible patients to participate in clinical trials of its product candidates, including in particular its ongoing pediatric trial of A4250 and its planned pivotal trial of A4250 as a treatment for PFIC, Albireo may not be able to initiate or continue the clinical trials. Potential clinical trial participants may not be adequately diagnosed or identified with the diseases that Albireo is targeting and may not meet the inclusion criteria for Albireo’s trials. Each of PFIC, any other pediatric cholestatic liver disease or disorder for which Albireo may develop A4250 and PBC is a rare disease or disorder with a limited patient population, which could result in slow enrollment of clinical trial participants. Further, there are only a limited number of specialist physicians that treat these diseases and disorders, and major clinical centers that treat these diseases and disorders are concentrated in a few geographic regions.

Patient enrollment is affected by many factors, including:

Enrollment delays in Albireo’s ongoing or planned clinical trials may result in increased development costs for its product candidates, which would cause the value of the combined organization to decline and limit the

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combined organization’s ability to obtain additional financing. Albireo’s inability to enroll a sufficient number of patients in its ongoing or planned clinical trials of A4250, or any other Albireo product candidate, would result in significant delays or may require Albireo to abandon one or more clinical trials altogether.

If the commercial opportunity in PFIC is smaller than Albireo anticipates, or if Albireo elects to develop A4250 to treat only a specific subpopulation of patients with PFIC, Albireo’s future revenue from A4250 will be adversely affected and Albireo’s business will suffer.

If the size of the commercial opportunities in any of Albireo’s target indications is smaller than Albireo anticipates, Albireo may not be able to achieve profitability and growth. Albireo is developing A4250 initially as a treatment for PFIC and potentially also as a treatment for other pediatric cholestatic liver diseases and disorders. PFIC and these other diseases and disorders are each rare, with a limited patient population. Moreover, Albireo expects that the PFIC patient candidates for A4250 are only a subset of the overall patient population, specifically patients who have not yet received partial external bile diversion, or PEBD, surgery or liver transplant surgery or patients who have had PEBD reversal surgery. In addition, there are different subtypes of PFIC and the beneficial effects of A4250 may vary among patients with different subtypes. For example, preliminary data from the first three completed cohorts in Albireo’s ongoing Phase 2 clinical trial of A4250 in children with chronic cholestasis showed a favorable trend in reduction of pruritus that was particularly strong in the three patients in the trial with PFIC, type 2. Albireo may ultimately elect to develop A4250 initially as a treatment for some but not all of the subtypes.

It is critical to Albireo’s ability to grow and become profitable that Albireo successfully identifies patients with these rare cholestatic liver diseases and disorders. Albireo’s projections of the number of people who have PFIC or Albireo’s other target cholestatic liver diseases and disorders, as well as the subset who have the potential to benefit from treatment with A4250, are based on a variety of sources, including third-party estimates and analyses in the scientific literature, and may prove to be incorrect. Further, new information may emerge that changes Albireo’s estimate of the prevalence of these diseases or the number of patient candidates for A4250. The effort to identify patients with PFIC or Albireo’s other potential target indications is at an early stage, and Albireo cannot accurately predict the number of patients for whom treatment might be possible. Additionally, the potentially addressable patient population for A4250 may be limited or may not be amenable to treatment with A4250, and new patients may become increasingly difficult to identify or gain access to, which would adversely affect Albireo’s results of operations and its business. Further, even if Albireo obtains significant market share for A4250, Albireo may never achieve profitability because the potential target patient population for A4250 is small.

If Albireo experiences any of a number of possible unforeseen events in connection with its clinical trials, potential marketing approval or commercialization of its product candidates, or entry into licensing, collaboration or similar arrangements, could be delayed or prevented.

Albireo may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent its ability to receive marketing approval or commercialize its product candidates, including:

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For example, in March 2015, Ferring International Center S.A., or Ferring, stopped early two Phase 3 clinical trials of elobixibat that Ferring had been conducting pursuant to a now-terminated license agreement with Albireo due to an issue related to the distribution of study drug to study sites that was unrelated to the performance of elobixibat. Albireo was unable as a result of the stopping of the trials to obtain data for the total number of patients for which the trials were designed, and the abbreviated trials are not sufficient to support an application for marketing approval.

Albireo’s product development costs will increase if Albireo experiences delays in testing or marketing approvals. Albireo does not know whether any preclinical tests or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant preclinical study or clinical trial delays also could shorten any periods during which Albireo may have the exclusive right to commercialize its product candidates or allow its competitors to bring products to market before Albireo does and impair Albireo’s ability to successfully commercialize its product candidates, which may harm Albireo’s business and results of operations.

The benefit of IBAT inhibition in the potential treatment for PFIC or any of Albireo’s other target indications is unproven, and Albireo does not know whether it will be able to develop any products of commercial value for these indications.

A4250 is an ileal bile acid transporter, or IBAT, inhibitor. There is no marketed drug that relies on IBAT inhibition for the treatment of PFIC or any other indication for which Albireo plans to develop A4250. Shire plc, or Shire, reported in 2015 and 2016 that its product candidate for the treatment of PFIC and other rare liver diseases, SHP625, which has been reported to be an IBAT inhibitor, failed to meet the respective primary endpoints of Phase 2 clinical trials in multiple adult and pediatric indications. Albireo cannot assure you that it will be able to replicate or improve upon its findings from preclinical studies and early clinical trials in later-stage clinical trials of A4250 for the treatment of PFIC or any of its other target indications or that its focus on IBAT inhibition as a medically useful mechanism of action will result in the development of a commercially viable drug that safely and effectively treats PFIC or any of Albireo’s other target indications.

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If the FDA concludes that A3384, which Albireo is developing for the treatment of BAM, does not satisfy the requirements under Section 505(b)(2) of the Federal Food Drug and Cosmetics Act, or Section 505(b)(2), or if the requirements for A3384 under Section 505(b)(2) are not as Albireo expects, the approval pathway for A3384 will likely take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and in either case may not be successful.

Albireo intends to seek FDA approval for A3384 through the Section 505(b)(2) regulatory pathway. The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, added Section 505(b)(2) to the Federal Food, Drug and Cosmetic Act. Section 505(b)(2) permits the filing of a new drug application, or NDA, where at least some of the information required for approval comes from studies that were not conducted by or for the applicant, and for which the applicant has not received a right of reference, which could expedite the development program for A3384 by potentially decreasing the amount of clinical and preclinical data that Albireo would need to generate in order to obtain FDA approval. If the FDA does not allow Albireo to pursue the Section 505(b)(2) regulatory pathway as anticipated, Albireo may need to conduct additional clinical trials, provide additional data and information, and meet additional standards for regulatory approval. If this were to occur, the time and financial resources required to obtain FDA approval for A3384, and complications and risks associated with A3384, would likely substantially increase. Moreover, inability to pursue the Section 505(b)(2) regulatory pathway could result in new competitive products reaching the market more quickly than A3384, which would likely harm Albireo’s competitive position and prospects. Even if Albireo is allowed to pursue the Section 505(b)(2) regulatory pathway, Albireo cannot assure you that A3384 will receive the requisite approvals for commercialization.

In addition, notwithstanding the approval of a number of products by the FDA under Section 505(b)(2) over the last few years, certain competitors and others have objected to the FDA’s interpretation of Section 505(b)(2). If the FDA’s interpretation of Section 505(b)(2) is successfully challenged, the FDA may be required to change its 505(b)(2) policies and practices, which could delay or even prevent the FDA from approving any NDA that Albireo submits under Section 505(b)(2). In addition, the pharmaceutical industry is highly competitive, and Section 505(b)(2) NDAs are subject to special requirements designed to protect the patent rights of sponsors of previously approved drugs that are referenced in a Section 505(b)(2) NDA. These requirements may give rise to patent litigation and mandatory delays in approval of Albireo’s 505(b)(2) NDA for up to 30 months depending on the outcome of any litigation. It is not uncommon for a manufacturer of an approved product to file a citizen petition with the FDA seeking to delay approval of, or impose additional approval requirements for, pending competing products. If successful, such petitions can significantly delay, or even prevent, the approval of the new product. However, even if the FDA ultimately denies such a petition, the FDA may substantially delay approval while it considers and responds to the petition. In addition, even if Albireo is able to utilize the Section 505(b)(2) regulatory pathway, there is no guarantee this would ultimately lead to faster product development or earlier approval.

Moreover, even if A3384 is approved under Section 505(b)(2), the approval may be subject to limitations on the indicated uses for which A3384 may be marketed or to other conditions of approval, or may contain requirements for costly post marketing testing and surveillance to monitor the safety or efficacy of the products.

BAM is not easily diagnosed and the number of patients suffering from BAM has not been established with precision. If the actual number of patients is smaller than Albireo estimates, Albireo may not be able to recruit patients into Albireo’s clinical trial in this indication in a timely manner or at all, and Albireo may not be able to obtain regulatory approval for A3384 to treat this condition.

BAM is not easily diagnosed. There is no patient registry or other method of establishing with precision the actual number of patients with BAM in any geography. The best diagnostic method currently, the 75Se-Homocholic Acid Taurine test, is not available in many countries and evaluation of bile acid synthesis markers, such as FGF19, and the bile acid intermediate C4 is not a routine diagnostic test. Albireo estimates the prevalence of BAM to be approximately 1.3 million people in the United States and approximately 2.2 million

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people in the European Union. Albireo derives its estimated prevalence from a reported estimate of the prevalence of irritable bowel syndrome with diarrhea, or IBS-D, and published third-party studies that suggest approximately one-third of IBS-D patients have BAM. If the estimates on which Albireo has relied are not accurate or if the results of studies on which Albireo has relied are outdated, Albireo’s estimate of the number of patients with BAM may be inaccurate, it may not be able to recruit patients into any future clinical trial of A3384 in BAM in a timely manner, or at all, and the commercial opportunity for A3384 may be smaller than Albireo anticipates.

If serious or unacceptable side effects are identified during the development of A4250, elobixibat or A3384 or any other product candidate, Albireo may need to abandon or limit its development of that product candidate.

All of Albireo’s product candidates are in clinical or preclinical development and their risk of failure is high. It is impossible to predict when or if any of Albireo’s product candidates will prove effective or safe in humans or will receive marketing approval. If Albireo’s product candidates are associated with undesirable side effects or have other unexpected, unacceptable characteristics, Albireo may need to abandon their development or limit development to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Many investigational products that initially showed promise in clinical or earlier stage testing have later been found to cause side effects or other safety issues that prevented further development.

For example, in Albireo’s ongoing Phase 2 clinical trial of A4250 in PBC, two of the five patients in the first cohort dropped out of the trial due to diarrhea, an effect consistent with the IBAT inhibition mechanism. If the diarrhea and associated dropout rate observed in the interim results of the ongoing PBC trial is predictive of an inadequate tolerability profile of A4250, the overall commercial opportunity for A4250 may be lower than Albireo expects. Even if Albireo receives regulatory approval for A4250, if the approved dose of A4250 is not well tolerated, A4250 may not achieve market acceptance by physicians, patients, third-party payors or others in the medical community, which would materially and adversely affect Albireo’s business.

Even if A4250, elobixibat or A3384 or any future product candidate of Albireo’s receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.

If A4250, elobixibat, A3384 or any future product candidate of Albireo’s receives marketing approval, the approved product may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. If an approved product does not achieve an adequate level of acceptance, Albireo may not generate significant product revenues or any profits from operations. The degree of market acceptance of Albireo’s product candidates, if approved for commercial sale, will depend on a number of factors, including:

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Albireo’s ability to negotiate, secure and maintain third-party coverage and reimbursement for its product candidates may be affected by political, economic and regulatory developments in the United States, the European Union and other jurisdictions. Governments continue to impose cost containment measures, and third-party payors are increasingly challenging prices charged for medicines and examining their cost effectiveness, in addition to their safety and efficacy. These and other similar developments could significantly limit the degree of market acceptance of A4250, elobixibat or A3384 or any of Albireo’s other future product candidates that receive marketing approval.

If Albireo is unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell A4250 or any of its other current or future product candidates, Albireo may not be successful in commercializing the applicable product candidate if it receives marketing approval .

Albireo does not have a sales or marketing infrastructure and has no experience as a company in the sale or marketing of pharmaceutical products. To achieve commercial success for any approved product, Albireo must either develop a sales and marketing organization or outsource these functions to third parties. If Albireo receives marketing approval in the United States or Europe for A4250 to treat PFIC or any other pediatric cholestatic liver disease or disorder, Albireo plans to build the capabilities to commercialize A4250 in the approved indication(s) in the applicable region with Albireo’s own focused, specialized sales force. Outside of the United States and Europe, Albireo plans to selectively utilize collaboration, distribution or other marketing arrangements with third parties to commercialize A4250. Also, Albireo intends to selectively seek licensing, collaboration or similar arrangements to assist it in furthering the development or commercialization of product candidates, such as elobixibat and A3384, targeting large primary care markets that must be served by large sales and marketing organizations. There are risks involved with establishing Albireo’s own sales and marketing capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which Albireo recruits a sales force and establishes marketing capabilities is delayed or does not occur for any reason, Albireo would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and Albireo’s investment would be lost if it cannot retain or reposition its sales and marketing personnel.

Factors that may inhibit Albireo’s efforts to commercialize its products on its own include:

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If Albireo enters into arrangements with third parties to perform sales and marketing services, Albireo’s product revenues or the profitability of these product revenues to Albireo is likely to be lower than if Albireo were to market and sell any products that Albireo develops itself. In addition, Albireo may not be successful in entering into arrangements with third parties to sell and market its product candidates or may be unable to do so on terms that are acceptable to Albireo. Albireo likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market Albireo’s products effectively. If Albireo does not establish sales and marketing capabilities successfully, either on Albireo’s own or in collaboration with third parties, Albireo will not be successful in commercializing its product candidates.

Albireo faces substantial competition, which may result in others discovering, developing or commercializing products to treat Albireo’s target indications or markets before or more successfully than Albireo does.

The development and commercialization of new drug products is highly competitive. Albireo faces competition with respect to its current product candidates and any products Albireo may seek to develop or commercialize in the future from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide.

Competitors may also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization. Many of Albireo’s competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining approvals from regulatory authorities and marketing approved products than Albireo does. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of Albireo’s competitors. Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with Albireo in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies that may be complementary to or necessary for Albireo’s programs.

Albireo’s commercial opportunities could be reduced or eliminated if Albireo’s competitors develop and commercialize products that are more effective, safer, have fewer or less severe side effects, are approved for broader indications or patient populations, or are more convenient or less expensive than any products that Albireo develops and commercializes. Albireo’s competitors may also obtain marketing approval for their products more rapidly than Albireo may obtain approval for its products, which could result in Albireo’s competitors establishing a strong market position before Albireo is able to enter the market.

In particular, Albireo is aware of other companies that are developing product candidates that, like Albireo’s product candidates A4250 and elobixibat, act via IBAT inhibition. Shire’s SHP625, formerly known as LUM001, is in Phase 2 development as a treatment for PFIC and ALGS. In June 2016, Shire announced that the FDA has granted breakthrough therapy designation for SHP625 for PFIC, type 2. GlaxoSmithKline’s GSK2330672 is in Phase 2 clinical development as a treatment for PBC. Shire’s SHP626 is in Phase 1 development as a treatment for NASH.

If approved, Albireo’s product candidates will compete for a share of the existing market with numerous other products. Albireo believe that the primary competitive products for use in indications that it is currently targeting with its most advanced product candidates include the following.

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•     For PFIC and many other cholestatic liver diseases, there are no approved drug treatments. First-line treatment for PFIC is typically off-label ursodeoxycholic acid, or UDCA, which is approved in the United States and elsewhere for the treatment of PBC. PFIC patients often require surgical intervention such as PEBD surgery or liver transplant. As referenced above, Shire’s SHP625 is in Phase 2 clinical development in PFIC. In addition, Intercept Pharmaceuticals’ obeticholic acid, which was recently approved by the FDA in combination with UDCA, or as a monotherapy for patients unable to tolerate UDCA, to treat PBC, is in Phase 2 development as a treatment for biliary atresia.

•     For the pruritus that is characteristic of many cholestatic liver diseases, symptomatic off-label treatment with: UDCA; bile acid sequestrants, such as generic cholestyramine (as Questran in the United States and as Colestyr, Efensol, Ipocol, Kolestran, Lipocol, Olestyr, Prevalite or Quantalan in various other countries), marketed by Upsher-Smith Laboratories, Inc., Par Pharmaceutical Companies, Inc. and Sandoz, the generic pharmaceuticals division of Novartis AG; rifampin, an antibiotic derivative; or naltrexone, an opioid antagonist.

•      For CIC: linaclotide, a guanylate cyclase-C agonist marketed by Ironwood Pharmaceuticals, Inc. and Allergan plc in the United States as Linzess and in Europe (for a related condition, irritable bowel syndrome with constipation, or IBS-C) as Constella and for which a marketing application has been filed by Astellas Pharma Inc. in Japan for IBS-C; lubiprostone, a type-2 chloride channel marketed as Amitiza by Takeda Pharmaceutical Company Limited in the United States and select countries in Europe and by Mylan N.V. in Japan; prucalopride, a motility agent marketed by Shire in the European Union as Resolor; and numerous OTC products, including psyllium husk (such as Metamucil), methylcellulose (such as Citrucel), calcium polycarbophil (such as FiberCon), lactulose (such as Cephulac), polyethylene glycol (such as MiraLax), sennosides (such as Exlax), bisacodyl (such as Ducolax), docusate sodium (such as Colace), magnesium hydroxide (such as Milk of Magnesia), saline enemas (such as Fleet) and sorbitol.

In addition, Synergy Pharmaceuticals, Inc. has a product candidate known as plecanatide, a guanylate cyclase-C agonist, for which it has filed an NDA in the United States to treat CIC and which is in Phase 3 development to treat IBS-C. Ardelyx, Inc. has a product candidate, tenapanor, a sodium transporter NHE3 inhibitor that is in Phase 3 clinical development to treat IBS-C.

•     For BAM, there is no approved drug treatment. Off-label treatments include: bile acid sequestrants, such as immediate release cholestyramine (which is approved in some countries in Europe to treat diarrhea associated with certain GI conditions), colestipol and colesevelam, a cholesterol-lowering medicine marketed by Daiichi Sankyo Inc. as Welchol in the United States and by Genzyme Europe B.V. as Cholestagel in the European Union. In addition, obeticholic acid has previously been studied by Intercept in a Phase 2 clinical trial as a treatment for BAM.

Patients with BAM following ileal resection surgery may be treated with a low-fat diet supplemented with medium-chain triglycerides or cholylsarcosine, a synthetic cholic acid conjugate. Patients with BAM secondary to Crohn’s ileitis may be treated with glucocorticoid, a steroid hormone. Microscopic colitis patients may be given budesonide, a glucocorticoid steroid. Patients with BAM secondary to small intestinal bacterial overgrowth may require antibiotic therapy.

Even if Albireo is able to commercialize A4250, elobixibat, A3384 or any other product candidate that Albireo develops, the product may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which would harm Albireo’s business.

The regulations that govern marketing approvals, pricing, coverage and reimbursement for new drug products vary widely from country to country. Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted and, in some markets, prescription

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pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, Albireo might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay Albireo’s commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenues Albireo is able to generate from the sale of the product in that country. Adverse pricing limitations may hinder Albireo’s ability to recoup its investment in one or more product candidates, even if Albireo’s product candidates obtain marketing approval.

Albireo’s ability to commercialize A4250, elobixibat, A3384 or any other product candidate successfully also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. A primary trend in the U.S. and E.U. healthcare industries and elsewhere is cost containment. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Albireo cannot be sure that coverage and reimbursement will be available for A4250, elobixibat, A3384 or any other product that Albireo commercializes and, if coverage and reimbursement is available, the level of reimbursement. Reimbursement may impact the demand for, or the price of, any product candidate for which Albireo obtains marketing approval. Obtaining and maintaining adequate reimbursement for A4250 may be particularly difficult because of the higher prices typically associated with drugs directed at smaller populations of patients. In addition, third-party payors are likely to impose strict requirements for reimbursement of a higher priced drug, and any launch of a competitive product is likely to create downward pressure on the price initially charged. If reimbursement is not available or is available only to a limited degree, Albireo may not be able to successfully commercialize any product candidate for which Albireo obtains marketing approval.

There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the applicable regulatory authority. Moreover, eligibility for coverage and reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers Albireo’s costs, including research, development, intellectual property, manufacturing, sale and distribution expenses. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover Albireo’s costs and may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs, and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. In the United States, third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. In the European Union, reference pricing systems and other measures may lead to cost containment and reduced prices. Albireo’s inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for any approved products that Albireo develops could have a material adverse effect on Albireo’s operating results, the combined organization’s ability to raise capital needed to commercialize products and Albireo’s overall financial condition.

Governments outside the United States tend to impose strict price controls, which may adversely affect Albireo’s revenues, if any.

In some countries, particularly the member states of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political, economic and regulatory developments may further complicate

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pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various E.U. member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. In some countries, Albireo may be required to conduct a clinical trial or other studies that compare the cost-effectiveness of Albireo’s product candidate to other available therapies in order to obtain or maintain reimbursement or pricing approval. Publication of discounts by third-party payors or authorities may lead to further pressure on prices or reimbursement levels within the country of publication and other countries. If reimbursement of Albireo’s products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, Albireo’s business could be adversely affected.

Product liability lawsuits against Albireo could cause it to incur substantial liabilities and to limit commercialization of any products that Albireo may develop.

Albireo faces an inherent risk of product liability exposure related to the testing of Albireo’s product candidates in human clinical trials and will face an even greater risk if Albireo commercially sells any products that it may develop. If Albireo cannot successfully defend itself against claims that Albireo’s product candidates or products caused injuries, Albireo will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

Albireo has separate liability insurance policies that cover each of Albireo’s ongoing clinical trials. These policies provide coverage in varying amounts, up to a maximum of €6.0 million in the aggregate for the applicable clinical trial. The amount of insurance that Albireo currently holds may not be adequate to cover all liabilities that it may incur. Albireo will need to increase its insurance coverage when and if it begins conducting more expansive clinical development of, or commercializing, A4250, elobixibat, A3384 or any future Albireo product candidate. Insurance coverage is increasingly expensive. Albireo may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.

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

Because Albireo has limited financial and managerial resources, Albireo focuses on specific product candidates. As a result, Albireo may forego or delay pursuit of opportunities with other product candidates that later could prove to have greater commercial potential. Albireo’s resource allocation decisions may cause it to fail to capitalize on viable commercial products or profitable market opportunities. Albireo’s spending on current and future research and development programs and product candidates may not yield any commercially viable products.

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Albireo has based its research and development efforts on IBAT inhibitors, including A4250 and elobixibat, to treat cholestatic liver diseases and CIC and on Albireo’s proprietary formulation of an established bile acid sequestrant, A3384, to treat BAM. Notwithstanding Albireo’s investment to date and anticipated future investment, Albireo has not yet developed, and may never successfully develop, any marketed drugs using these approaches. As a result of pursuing the development of product candidates using Albireo’s proprietary technologies, Albireo may fail to develop product candidates or address indications based on other scientific approaches that may offer greater commercial potential or for which there is a greater likelihood of success. Research programs to identify new product candidates require substantial technical, financial and human resources. These programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development.

If Albireo does not accurately evaluate the commercial potential or target market for a particular product candidate, Albireo may relinquish valuable rights to that product candidate through licensing, collaboration or other royalty or similar arrangements in cases in which it would have been more advantageous for Albireo to retain sole development and commercialization rights to such product candidate.

Risks Related to Albireo’s Dependence on Third Parties

Albireo relies on EA Pharma for the successful development and commercialization of elobixibat to treat chronic constipation in Japan and other select markets in Asia.

Albireo entered into a license agreement with EA Pharma for elobixibat in April 2012. Albireo cannot predict the ultimate success of the arrangement. The agreement provides for milestone payments to Albireo if specified regulatory and commercial milestone events are achieved and provides Albireo with royalty-based revenue if elobixibat is successfully commercialized. If elobixibat receives marketing approval in Japan, EA Pharma plans to co-market elobixibat in Japan with another company, Mochida Pharmaceutical Co., Ltd, or Mochida.

EA Pharma is responsible for all future development and potential commercialization of elobixibat in its licensed field (namely, all prophylactic or therapeutic uses of a pharmaceutical product for gastrointestinal diseases and disorders, symptoms of constipation of all causes or postoperative ileus, in colonoscopy cleansing procedures and, in specified circumstances, select liver diseases) in Japan, Indonesia, Korea, Taiwan, Thailand and Vietnam, and has substantial control over the conduct and timing of development efforts with respect to elobixibat in these countries. Albireo has little control over the amount and timing of resources that EA Pharma devotes, or Mochida devotes, to the development of elobixibat. If EA Pharma or Mochida fails to devote sufficient financial and other resources, the development and potential commercialization of elobixibat in Japan and otherwise in EA Pharma’s licensed territory would be adversely affected. This would result in a delay in milestone payments to Albireo and, if marketing approval for elobixibat in EA Pharma’s licensed territory is obtained, royalties that Albireo could receive on any future elobixibat product sales.

EA Pharma has the right to terminate the elobixibat agreement on a country-by-country basis or in its entirety for an uncured material breach by Albireo or in specified bankruptcy or similar events. EA Pharma also has the right, with 180 days’ notice, to terminate the agreement in its entirety or on a country-by-country basis (except for Japan) for any reason.

If EA Pharma terminates the elobixibat agreement at any time, for any reason, it would negatively impact Albireo’s development of elobixibat in Japan and otherwise in EA Pharma’s licensed territory, would materially harm Albireo’s business and could accelerate Albireo’s need for additional capital. In particular, Albireo would have to fund any further clinical development and commercialization of elobixibat in Japan on its own, seek another licensee or collaborator for clinical development and commercialization or abandon the development and commercialization of elobixibat in Japan.

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If Albireo is not able to identify and enter into a suitable licensing, collaboration or similar arrangement for the development and potential commercialization of elobixibat for the treatment of CIC in the United States or Europe, the revenue that Albireo will generate based on elobixibat may be lower.

In addition to its agreement with EA Pharma for elobixibat in Japan and other select markets in Asia, Albireo intends to seek to identify and enter into a licensing, collaboration or similar arrangement with one or more third parties for Phase 3 development and potential future commercialization of elobixibat in the United States and Europe. The cost and duration of the additional clinical trial or trials that will be required by the FDA and EMA to support marketing approval of elobixibat to treat CIC is currently uncertain, and the FDA has indicated to Albireo that it may require in particular placebo controlled safety data for elobixibat. The uncertain regulatory requirements may interfere with Albireo’s ability to establish licensing, collaboration or similar arrangements with third parties for elobixibat for the United States or Europe on acceptable terms, or at all. Albireo does not currently anticipate that it will conduct future clinical trials of elobixibat for the United States or Europe if it is not able to establish suitable third-party arrangements. If Albireo does not enter into suitable third-party arrangements and does not itself conduct clinical trials of elobixibat for the United States or Europe, the revenue that Albireo will generate based on elobixibat will be limited to payments it receives under its agreement with EA Pharma, which will reduce the overall commercial potential of elobixibat and may harm Albireo’s business.

Albireo relies on third parties to conduct its clinical trials and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such clinical trials.

Albireo does not independently conduct clinical trials for its product candidates. Albireo relies on third parties, such as contract research organizations, clinical data management organizations, medical institutions, clinical investigators and government agencies, to perform this function. Any of these third parties may terminate their engagements with Albireo at any time. If Albireo needs to enter into alternative arrangements, it would delay Albireo’s product development activities.

Albireo’s reliance on these third parties for clinical development activities reduces its control over these activities but does not relieve Albireo of its responsibilities. For example, Albireo remains responsible for ensuring that each of Albireo’s clinical trials is conducted in accordance with the general investigational plan and protocols for the clinical trial. Moreover, the FDA and foreign regulatory authorities require Albireo to comply with standards, commonly referred to as Good Clinical Practice, or GCP, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity of data and confidentiality of clinical trial participants are protected. Albireo also is required to register clinical trials subject to FDA regulation and, with some exceptions, post the results of completed clinical trials on a government-sponsored database, www.ClinicalTrials.gov, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions. The National Institutes of Health also has announced plans to require sponsors to post results of clinical trials for unapproved products, including unfavorable results in clinical trials for unapproved uses of approved products.

Furthermore, third parties that Albireo relies on for its clinical development activities may also have relationships with other entities, some of which may be Albireo’s competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct Albireo’s clinical trials in accordance with regulatory requirements or Albireo’s stated protocols, Albireo will not be able to obtain, or may be delayed in obtaining, marketing approvals for its product candidates and will not be able to, or may be delayed in its efforts to, successfully commercialize Albireo’s product candidates. Albireo’s product development costs will increase if Albireo experiences delays in testing or obtaining marketing approvals.

Albireo also relies on other third parties to store and distribute drug supplies for its clinical trials. Any performance failure on the part of Albireo’s distributors could delay clinical development or marketing approval of its product candidates or commercialization of Albireo’s products, producing additional losses and depriving Albireo of potential product revenue.

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Use of third parties to manufacture Albireo’s product candidates may increase the risk that Albireo will not have sufficient quantities of its product candidates or products or such quantities at an acceptable cost, which could delay, prevent or impair Albireo’s development or commercialization efforts.

Albireo does not own or operate manufacturing facilities for the production of clinical or commercial supplies of its product candidates. Albireo has limited personnel with experience in drug manufacturing and lacks the resources and the capabilities to manufacture any of its product candidates on a clinical or commercial scale. Albireo currently relies on third parties for supply of the active pharmaceutical ingredients, or API, in Albireo’s product candidates. Albireo’s strategy is to outsource all manufacturing of its product candidates and products to third parties.

Albireo does not currently have any agreements with third-party manufacturers for the long-term clinical or commercial supply of any of its product candidates. Albireo currently engages a single third-party manufacturer to provide API for A4250 and elobixibat. Albireo also currently engages single third-party manufacturers to provide fill and finish services for the final drug product formulation of A4250 that is being used in Albireo’s ongoing clinical trials and, in the case of elobixibat, clinical trials conducted by Albireo’s licensee. Albireo may in the future be unable to conclude agreements for commercial supply with third-party manufacturers on acceptable terms, or at all.

Even if Albireo is able to establish and maintain arrangements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:

Third-party manufacturers may encounter difficulties in achieving volume production, laboratory testing, quality control or quality assurance or suffer shortages of qualified personnel, any of which could result in its inability to manufacture sufficient quantities to meet clinical timelines for a particular product candidate, to obtain marketing approval for the product candidate or to commercialize the product candidate. In addition, third-party manufacturers may not be able to comply with current good manufacturing practice, or GMP, regulations or similar regulatory requirements outside the United States. Albireo’s failure, or the failure of Albireo’s third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on Albireo, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of Albireo’s product candidates.

Albireo’s product candidates and any products that it may develop may compete with other product candidates and products for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for Albireo.

If the third parties that Albireo engages to manufacture product for its preclinical tests and clinical trials cease to continue to do so for any reason, Albireo likely would experience delays in advancing these clinical trials while Albireo identifies and qualifies replacement suppliers and Albireo may be unable to obtain replacement supplies on terms that are favorable to it. In addition, if Albireo is not able to obtain adequate supplies of Albireo’s product candidates or the drug substances used to manufacture them, it will be more difficult for Albireo to develop its product candidates and compete effectively.

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Albireo’s current and anticipated future dependence upon others for the manufacture of its product candidates may adversely affect its future profit margins and its ability to develop product candidates and commercialize any products that receive marketing approval on a timely and competitive basis.

Albireo may depend on additional collaborations, licenses or similar arrangements with third parties for the development and commercialization of some of its product candidates. If those collaborations are not successful, Albireo may not be able to capitalize on the market potential of these product candidates.

Albireo has licensed rights to develop and commercialize elobixibat for CIC and other gastrointestinal diseases and disorders to EA Pharma in Japan and other select markets in Asia. Albireo may in the future enter into other licensing, collaboration or similar arrangements for the development and commercialization of A4250, elobixibat, A3384 or any future product candidate of Albireo’s for any or all indications and for any or all territories. For example, Albireo intends to seek to enter into a licensing, collaboration or similar arrangement with one or more third parties for Phase 3 development and potential commercialization of elobixibat in the United States and Europe.

Albireo’s likely counterparties for any licensing, collaboration or similar arrangement include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. Except for Albireo’s agreement with EA Pharma, Albireo is not currently party to any such arrangement for A4250, elobixibat or A3384. However, if Albireo does enter into any such arrangements with any third parties in the future, Albireo will likely have limited control over the amount and timing of resources that its collaborators dedicate to the development or commercialization of the applicable product candidate. Albireo’s ability to generate revenues from these arrangements will depend on its collaborators’ abilities and efforts to successfully perform the functions assigned to them in these arrangements.

Any licensing, collaboration or similar arrangement involving Albireo’s product candidates would pose numerous risks to Albireo, including the following:

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For example, in March 2015, Ferring terminated a 2012 license agreement with Albireo for the development and commercialization of elobixibat worldwide, excluding the territory licensed to EA Pharma. Ferring’s termination of the license agreement followed its stopping early two Phase 3 clinical trials of elobixibat that Ferring had been conducting due to an issue related to the distribution of study drug to study sites that was unrelated to the performance of elobixibat. As a result, to exploit the potential of elobixibat in the United States, Europe and otherwise outside of EA Pharma’s licensed territory, Albireo must either identify and enter into additional licensing, collaboration or similar arrangements or expend its own resources to conduct further development of elobixibat. Albireo does not currently anticipate that it will conduct future clinical trials of elobixibat on its own if it is not able to establish suitable third-party arrangements.

Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all. If a collaborator of Albireo’s were to be involved in a business combination, the continued pursuit and emphasis on Albireo’s product development or commercialization program could be delayed, diminished or terminated.

If Albireo is not able to establish additional collaborations, Albireo may have to alter its development and commercialization plans.

Albireo’s product development programs and the potential commercialization of its product candidates will require substantial additional cash to fund expenses. For some of Albireo’s product candidates, Albireo may decide to collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization of those product candidates. For example, Albireo intends to seek to identify and enter into a licensing, collaboration or similar arrangement with one or more third parties for Phase 3 development and potential commercialization of elobixibat in the United States and Europe.

Albireo faces significant competition in seeking appropriate collaborators. Whether Albireo reaches a definitive agreement for a collaboration will depend, among other things, upon Albireo’s assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by regulatory authorities, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to Albireo’s ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more

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attractive than the one with Albireo for Albireo’s product candidate. Albireo may also be restricted under future license agreements from entering into agreements on certain terms with potential collaborators. Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.

Albireo may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If Albireo is unable to do so, Albireo may have to curtail the development of a product candidate, reduce or delay its development program or one or more of Albireo’s other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase its expenditures and undertake development or commercialization activities at its own expense. For example, Albireo’s ability to conduct the Phase 3 program of elobixibat in the United States or Europe will depend on Albireo’s ability to enter into a licensing, collaboration or similar arrangement under which that Phase 3 program would be conducted. If Albireo elects to increase its expenditures to fund development or commercialization activities on its own, Albireo may need to obtain additional capital, which may not be available to Albireo on acceptable terms, or at all. If Albireo does not have sufficient funds, it may not be able to further develop its product candidates or bring them to market and generate product revenue.

The terms of Albireo’s loan facility agreement and the associated security agreements may restrict its ability to engage in certain transactions.

In December 2014, Albireo entered into a loan facility agreement with Kreos Capital IV (UK) Limited, or Kreos, which was revised in February 2016 and which will, subject to the satisfaction of specified conditions, be further amended and restated pursuant to a supplemental deed entered into in May 2016. Albireo has entered into, and has agreed that the combined organization will also enter into, certain security agreements with Kreos. Pursuant to the terms of the loan facility agreement and the associated security agreements, subject to certain exceptions, Albireo cannot engage in specified transactions unless certain conditions are met or Albireo receives the prior approval of Kreos. These transactions include:

If Kreos does not provide its consent to such actions, Albireo could be prohibited from engaging in transactions that could be beneficial to Albireo’s business and Albireo’s shareholders unless Albireo repays the loan, which may not be desirable or possible. The obligations under the loan facility agreement are secured by substantially all of Albireo’s assets. If Albireo defaults under the loan facility agreement or the associated security agreements, including for an inability to repay amounts as they become due, and Albireo is unable to

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obtain a waiver for such a default, Kreos would have a right to accelerate Albireo’s obligation to repay the entire loan and foreclose on the secured assets in order to satisfy Albireo’s obligations under the loan facility agreement. Any such action on the part of Kreos against Albireo could have a materially adverse impact on Albireo’s business, financial condition and results of operations.

Risks Related to Albireo’s Intellectual Property

If Albireo is unable to obtain and maintain patent protection for its technology and products, or if the scope of the patent protection is not sufficiently broad, Albireo’s competitors could develop and commercialize technology and products similar or identical to Albireo’s, and Albireo’s ability to successfully commercialize its technology and products may be adversely affected.

Albireo’s success depends in large part on its ability to obtain and maintain patent protection in the United States and other countries with respect to its proprietary technology and products. Albireo seeks to protect its proprietary position by filing patent applications in the United States, in Europe and in certain additional jurisdictions related to its novel technologies and product candidates that are important to its business. This process is expensive and time-consuming, and Albireo may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that Albireo will fail to identify patentable aspects of its research and development output before it is too late to obtain patent protection. Moreover, if Albireo licenses technology or product candidates from third parties in the future, these license agreements may not permit Albireo to control the preparation, filing and prosecution of patent applications, or to maintain or enforce the patents, covering the licensed technology or product candidates. These agreements could also give Albireo’s licensors the right to enforce the licensed patents without Albireo’s involvement, or to decide not to enforce the patents at all. Therefore, in these circumstances, these patents and applications may not be prosecuted or enforced in a manner consistent with the best interests of Albireo’s business.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of Albireo’s patent rights are highly uncertain. Albireo’s pending and future patent applications may not result in patents being issued which protect Albireo’s technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of Albireo’s patents, narrow the scope of Albireo’s patent protection or make enforcement more difficult or uncertain.

The laws of other countries may not protect Albireo’s patent rights to the same extent as the laws of the United States. For example, European patent law restricts the patentability of methods of treatment of the human body more than U.S. law does. In addition, for the foregoing reasons, Albireo may not pursue or obtain patent protection in all major markets or may not obtain protection that enables Albireo to prevent the entry of third parties onto the market.

Assuming the other requirements for patentability are met, currently, the first to file a patent application is generally entitled to the patent. However, prior to March 16, 2013, in the United States, the first to invent was entitled to the patent. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, Albireo cannot know with certainty whether Albireo was the first to make the inventions claimed in its U.S. patents or pending U.S. patent applications, or that Albireo was the first to file for patent protection of such inventions outside the United States or, since March 16, 2013, within the United States.

Moreover, Albireo may be subject to a third party preissuance submission of prior art to the U.S. Patent and Trademark Office, or the USPTO, or become involved in opposition, derivation, reexamination, reissue, inter

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partes review, post grant review, interference proceedings or other patent office proceedings, court litigation or International Trade Commission proceedings, in the United States or elsewhere, challenging Albireo’s patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation concerning Albireo’s patent rights could reduce the scope of or prevent the enforceability of, or invalidate, Albireo’s patent rights, allowing third parties to commercialize its technology or products, or equivalent or similar technology or products, and so to compete directly with Albireo, without payment to Albireo, or, where such proceedings involve third-party patents, result in Albireo’s inability to manufacture or commercialize products without infringing third-party patent rights. In addition, if the breadth or strength of protection provided by Albireo’s patents and patent applications is threatened or narrowed by operation of any of the foregoing, such an event could dissuade companies from collaborating with Albireo to license, develop or commercialize current or future product candidates.

Even if Albireo’s patent applications issue as patents, they may not issue in a form that will provide it with adequate protection to prevent competitors from competing with Albireo or otherwise to provide it with any competitive advantage. Albireo’s competitors may be able to circumvent Albireo’s owned or licensed patents by developing similar, improved or alternative technologies or products in a noninfringing manner. For example, although A3384 is the subject matter of pending patent applications that claim pharmaceutical formulations, patent protection is not available for composition-of-matter claims that only recite the API for A3384 without limitation to its formulation. Because A3384 lacks composition-of-matter protection for its API, competitors will, subject to obtaining marketing approval, be able to offer and sell products with the same API so long as these competitors do not infringe any issued patent of Albireo. Moreover, method-of-treatment patent claims are more difficult to enforce than composition-of-matter claims for reasons including off-label sale, potential divided infringement issues and use of the subject compound in noninfringing manners. Physicians are permitted to prescribe an approved product for uses that are not described in the product’s labeling. Although off-label prescriptions may infringe Albireo’s method-of-treatment patents, the practice is common across medical specialties and such infringement is difficult to prevent or prosecute. Off-label sales would limit Albireo’s ability to generate revenue from the sale of Albireo’s product candidates, if approved for commercial sale. In addition, if a third party were able to design around Albireo’s dosage-form and formulation patents and create a different formulation and dosage form that is not covered by Albireo’s patents or patent applications, Albireo would likely be unable to prevent that third party from manufacturing and marketing its product.

In addition, other companies may attempt to circumvent any regulatory data protection or market exclusivity, such as orphan drug exclusivity in the United States, that Albireo obtains under applicable legislation, which may require Albireo to allocate significant resources to preventing such circumvention. Legal and regulatory developments in the European Union and elsewhere may also result in clinical trial data submitted as part of a marketing authorization application becoming publicly available. Such developments could enable other companies to use Albireo’s clinical trial data to assist in their own product development and to obtain marketing authorizations in the European Union and in other jurisdictions. Such developments may also require Albireo to allocate significant resources to prevent other companies from circumventing or violating its intellectual property rights. Albireo’s attempts to prevent third parties from circumventing its intellectual property and other rights may ultimately be unsuccessful. Albireo may also fail to take the required actions or pay the necessary fees to maintain Albireo’s patents.

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and Albireo’s owned and licensed patents may be challenged in the courts or patent offices in the United States, Europe and elsewhere. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit Albireo’s ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of Albireo’s technology and products. Future changes in U.S. statutory or case law beyond Albireo’s control could affect some or all of the foregoing possibilities. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. This could be the case even after giving effect

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to patent term extensions and data exclusivity provisions preventing third parties from relying on clinical trial data filed by Albireo for marketing approval in support of their own applications for such approval. As a result, Albireo’s patent portfolio may not provide it with sufficient rights to exclude others from commercializing products similar or identical to Albireo’s.

In addition, Albireo has pledged certain of its patent rights related to A4250 and elobixibat as collateral under Albireo’s loan agreement with Kreos. See “Albireo Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

Albireo may become involved in lawsuits or other enforcement proceedings to protect or enforce its patents or other intellectual property, which could be expensive, time consuming and potentially unsuccessful.

Competitors may infringe Albireo’s patents, trademarks, copyrights or other intellectual property. To counter infringement or unauthorized use, Albireo may be required to file claims, which can be expensive and time consuming. Any claims Albireo asserts against perceived infringers could provoke these parties to assert counterclaims against Albireo alleging that it infringes their intellectual property or that Albireo’s patent and other intellectual property rights are invalid or unenforceable, including for antitrust reasons. As a result, in a patent infringement proceeding, a court or administrative body may decide that a patent of Albireo’s is invalid or unenforceable, in whole or in part, or may construe the patent’s claims narrowly and so refuse to stop the other party from using the technology at issue on the grounds that Albireo’s patents do not cover the competitor technology in question. Even if Albireo is successful in a patent infringement action, the unsuccessful party may subsequently raise antitrust issues and bring a follow-on action thereon. Antitrust issues may also provide a bar to settlement or constrain the permissible settlement terms. Further, settlement agreements in the pharmaceutical sector are the subject of ongoing review by the antitrust authorities in the European Union.

Third parties may initiate legal proceedings alleging that Albireo is infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of Albireo’s business.

Albireo’s commercial success depends upon its ability and the ability of its collaborators to develop, manufacture, market and sell Albireo’s product candidates and use Albireo’s proprietary technologies without infringing the intellectual property and other proprietary rights of third parties. There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries, and Albireo may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to Albireo’s products and technology, including interference, derivation, inter partes review, reexamination, reissue or post-grant review proceedings before the USPTO. The risks of being involved in such litigation and office proceedings may also increase as Albireo’s product candidates approach commercialization, and as Albireo’s business gains greater visibility operating as a publicly traded company in the United States. Third parties may assert infringement claims against Albireo based on existing or future intellectual property rights and so restrict Albireo’s freedom to operate. Third parties may also seek injunctive relief against Albireo, whereby they would attempt to prevent it from practicing Albireo’s technologies altogether pending outcome of any litigation against Albireo. Albireo may not be aware of all such intellectual property rights potentially relating to Albireo’s product candidates prior to their assertion against Albireo. For example, Albireo has not conducted an in depth freedom-to-operate search or analysis for A4250 or for A3384. Any freedom-to-operate search or analysis previously conducted may not have uncovered all relevant patents and pending patent applications, and there may be pending or future patent applications that, if issued, would block Albireo from commercializing A4250, elobixibat or A3384. Thus, Albireo does not know with certainty whether A4250, elobixibat, A3384 or any other product candidate or Albireo’s commercialization thereof, does not and will not infringe any third party’s intellectual property.

If Albireo is found to infringe a third party’s intellectual property rights, or in order to avoid or settle litigation, Albireo could be required to obtain a license to enable Albireo to continue developing and marketing

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its products and technology. However, Albireo may not be able to obtain any required license on commercially reasonable terms, or at all. Even if Albireo were able to obtain a license, it could be nonexclusive, thereby giving its competitors access to the same technologies as are licensed to Albireo, and could require Albireo to make substantial payments. Absent a license, Albireo could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, Albireo could be found liable for monetary damages, including treble damages and attorneys’ fees if Albireo is found to have willfully infringed a patent or other intellectual property right. A finding of infringement could prevent Albireo from commercializing its product candidates or force it to cease some of its business operations, which could materially harm its business. Claims that Albireo has misappropriated the confidential information or trade secrets of third parties, or claims that Albireo derived its inventions from another, could have a similar negative impact on Albireo’s business.

Albireo may be subject to claims by third parties asserting that Albireo or its employees have misappropriated their intellectual property, or claiming ownership of what Albireo regards as its own intellectual property.

Many of Albireo’s employees were previously employed at universities or other biotechnology or pharmaceutical companies. Although Albireo tries to ensure that its employees do not use the proprietary or otherwise confidential information or know-how of others in their work for Albireo, Albireo may be subject to claims that Albireo or these employees have without authorization used or disclosed intellectual property, including trade secrets or other proprietary or confidential information, of any such employee’s former employer. Litigation may be necessary to defend against these claims.

In addition, while Albireo typically requires its employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to Albireo and agreeing to cooperate and assist Albireo with securing and defending Albireo’s intellectual property, Albireo may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that Albireo regards as its own. These assignment agreements may not be self-executing or may be breached, and Albireo may be forced to bring claims against third parties, or defend claims they may bring against Albireo, to determine the ownership of what Albireo regards as its intellectual property.

If Albireo fails in prosecuting or defending any such claims, in addition to paying monetary damages, Albireo may lose valuable intellectual property rights or personnel. Even if Albireo is successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management.

Intellectual property litigation could cause Albireo to spend substantial resources and could distract Albireo’s personnel from their normal responsibilities.

Even if resolved in Albireo’s favor, litigation or other legal proceedings relating to intellectual property claims may cause Albireo to incur significant expenses, and could distract its technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of the combined organization’s common stock. Such litigation or proceedings could substantially increase Albireo’s operating losses and reduce the resources available for development, sales, marketing or distribution activities. Albireo may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of Albireo’s competitors may be able to sustain the costs of such litigation or proceedings more effectively than Albireo can because of their greater financial resources. Accordingly, costs and lost management time, as well as uncertainties resulting from the initiation and continuation of patent litigation or other proceedings, could have a material adverse effect on Albireo’s ability to compete in the marketplace.

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If Albireo does not obtain protection under the Hatch-Waxman Act and similar legislation outside of the United States by extending the patent terms and obtaining data exclusivity for Albireo’s product candidates, Albireo’s business may be materially harmed.

Depending upon the timing, duration and specifics of FDA marketing approval of A4250, elobixibat, A3384 and Albireo’s other product candidates, if any, one or more of Albireo’s U.S. patents may be eligible for limited patent term restoration under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, Albireo may not be granted an extension because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than Albireo requests. If Albireo is unable to obtain patent term extension or restoration or the term of any such extension is less than Albireo requests, the period during which it will have the right to exclusively market its products will be shortened and Albireo’s competitors may obtain approval of competing products following Albireo’s patent expiration, and Albireo’s revenue could be reduced, possibly materially. In the event that Albireo is unable to obtain any patent term extensions, the issued U.S. composition of matter patent for A4250 is expected to expire in 2022 assuming it withstands any challenge. In the event that Albireo is unable to obtain any patent term extensions, the issued U.S. composition of matter patent for elobixibat is expected to expire in 2022 and the issued U.S. patent for a method of using an IBAT inhibitor to treat CIC or IBS is expected to expire in 2024, in each case assuming it withstands any challenge. Albireo expects that the other U.S. patents and patent applications for A4250 and elobixibat, if issued, and if the appropriate maintenance, renewal, annuity or other governmental fees are paid, would expire from 2031 to 2035.

A3384 could be subject to competition arising from off-label use from immediate release cholestyramine.

Albireo has a patent pending covering pharmaceutical formulations of A3384. Even if this patent is granted, Albireo does not have patent rights covering the composition of matter of cholestyramine. As a result, Albireo may be limited in its ability to prevent others from exploiting cholestyramine, which could have a negative impact on the commercial potential of A3384. In addition, cholestyramine is currently approved in the United States and some countries in Europe for various indications, including in some countries in Europe for diarrhea associated with certain GI conditions. Physicians currently prescribe cholestyramine for other indications that are not approved by the FDA or regulatory authorities outside of the United States, such as BAM. If Albireo is unable to establish that A3384 is a superior drug to immediate release cholestyramine in the treatment of BAM, physicians may be likely to continue to prescribe immediate release cholestyramine and Albireo’s potential future revenue from sales of A3384 would likely be materially and adversely affected.

If Albireo is unable to protect the confidentiality of its trade secrets, Albireo’s business and competitive position would be harmed.

In addition to seeking patents for some of Albireo’s technology and products, Albireo also relies on trade secrets, including unpatented know-how, technology and other proprietary and confidential information, to maintain its competitive position. Albireo seeks to protect these trade secrets, in part, by entering into nondisclosure and confidentiality agreements with parties who have access to them, such as Albireo’s employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. However, Albireo cannot guarantee that it has executed these agreements with each party that may have or have had access to Albireo’s trade secrets or that the agreements Albireo has executed will provide adequate protection. Any party with whom Albireo has executed such an agreement may breach that agreement and disclose Albireo’s proprietary or confidential information, including Albireo’s trade secrets, and Albireo may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In

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addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of Albireo’s trade secrets were to be lawfully obtained or independently developed by a competitor, Albireo would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with Albireo. If any of Albireo’s trade secrets, particularly unpatented know-how, were to be obtained or independently developed by a competitor, Albireo’s competitive position would be harmed.

Risks Related to Regulatory Approval and Marketing of Albireo’s Product Candidates

A rare pediatric disease designation may not lead to the receipt of a Priority Review Voucher, even if A4250 is approved, due to the potential expiration of the FDA’s Rare Pediatric Disease Voucher program.

The FDA has awarded rare pediatric disease Priority Review Vouchers to sponsors of drug products intended to treat rare pediatric disease products if the treatment and product application meet certain criteria. Under this program, upon the approval of a qualifying NDA or biologics license application, BLA, for the treatment or prevention of a rare pediatric disease, the sponsor of the application may be eligible for a rare pediatric disease Priority Review Voucher that can be used to obtain priority review for a subsequent NDA or BLA. The Priority Review Voucher may be sold or transferred an unlimited number of times. Albireo anticipates that it will request rare pediatric disease designation for A4250 for PFIC. For purposes of this program, the FDA defines a “rare pediatric disease” as a disease that affects fewer than 200,000 individuals in the U.S. and more than 50% of those patients are under the age of 18 years old. There can be no assurance, however, that the FDA will agree with Albireo’s position that A4250 for the treatment of PFIC meets the criteria for a “rare pediatric disease.” If Albireo submits a voluntary request for a rare pediatric disease designation and the request is granted by FDA, the FDA’s rare pediatric disease designation would give Albireo the potential to receive a Priority Review Voucher if A4250 is approved for marketing. However, the rare pediatric disease Priority Review Voucher program is set to expire at the end of September 2016, so Albireo may not receive a Priority Review Voucher even if A4250 is approved to treat a rare pediatric disease. Legislation is pending in the U.S. Congress that could extend the Priority Review Voucher program for additional years, and other proposals and negotiations related to this program are presently taking place. There is no guarantee that any legislation to extend the program will pass prior to its current expiration in 2016. If the program is not extended, Albireo will not receive a Priority Review Voucher for A4250 even if it is approved by the FDA to treat a rare pediatric disease.

Because A4250 and elobixibat share a common mechanism of action, if both product candidates are ultimately approved and commercialized, there is a risk that physicians will elect to prescribe one of these products at the expense of the other.

Albireo is developing A4250 initially for the treatment of PFIC and potentially also for other pediatric cholestatic liver diseases and disorders and Albireo is developing elobixibat as a treatment for CIC. Both A4250 and elobixibat act by modulating bile acid levels in the body through IBAT inhibition. If both of these product candidates are approved and become available for commercial sale, physicians may decide to prescribe the lower-cost product off label for the treatment of conditions and disorders in which the modulation of bile acid levels may be medically useful, notwithstanding the specific indication for which Albireo will have conducted clinical trials and obtained regulatory approval for that product. If this were to occur, there would be an adverse effect on Albireo’s revenues, which could be material.

Even if Albireo completes the necessary clinical trials, the marketing approval process is expensive, time consuming and uncertain and may prevent Albireo from obtaining approvals for the commercialization of some or all of its product candidates. If Albireo is not able to obtain, or if there are delays in obtaining, required marketing approvals, Albireo will not be able to commercialize its product candidates, and Albireo’s ability to generate revenue will be materially impaired.

Albireo’s product candidates, including A4250, elobixibat and A3384, and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy,

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recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and by comparable authorities in other countries. Failure to obtain marketing approval for a product candidate will prevent Albireo from commercializing the product candidate. Albireo has not received approval to market A4250, elobixibat, A3384 or any other Albireo product candidate from regulatory authorities in any jurisdiction.

Albireo has only limited experience in filing and supporting the applications necessary to obtain marketing approvals for product candidates and expects to rely on third-party contract research organizations to assist Albireo in this process. Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and effectiveness. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities. Regulatory authorities may determine that A4250, elobixibat, A3384 or any other Albireo product candidate is not effective, is only moderately effective or has undesirable or unintended side effects, toxicities, safety profiles or other characteristics that preclude Albireo from obtaining marketing approval or that prevent or limit commercial use.

The process of obtaining marketing approvals is expensive, may take many years, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that Albireo’s data are insufficient for approval and require additional preclinical studies, clinical trials or other trials. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. Any marketing approval Albireo ultimately obtains may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable. If Albireo experiences delays in obtaining approval or if Albireo fails to obtain approval of its product candidates, the commercial prospects for Albireo’s product candidates may be harmed and its ability to generate revenues will be materially impaired.

Albireo’s failure to obtain marketing approval in jurisdictions other than the United States and Europe would prevent Albireo’s product candidates from being marketed in these other jurisdictions, and EA Pharma’s failure to obtain marketing approval of elobixibat in Japan would prevent elobixibat from being marketed in Japan. Any approval that Albireo is granted for its product candidates in the United States or Europe would not assure approval of product candidates in the other or in any other jurisdiction.

In order to market and sell A4250, elobixibat, A3384 or any future product candidate in jurisdictions other than the United States or Europe, Albireo or a current or potential future licensee must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ from that required to obtain FDA or EMA approval. The regulatory approval process outside the United States and Europe generally includes all of the risks associated with obtaining FDA and EMA approval. In addition, some countries outside the United States and Europe require approval of the sales price of a drug before it can be marketed. In many countries, separate procedures must be followed to obtain reimbursement. Albireo or a current or potential future licensee may not obtain marketing, pricing or reimbursement approvals outside the United States and Europe on a timely basis, if at all. In particular, EA Pharma may not obtain marketing, pricing or reimbursement approvals for elobixibat in Japan on a timely basis, if at all.

Approval by the FDA does not ensure approval by the EMA, approval by the EMA does not assure approval by the FDA, and approval of either or both of the FDA and EMA does not assure approval by regulatory authorities in other countries or jurisdictions. Likewise, approval by any regulatory authority in any country or

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jurisdiction outside the United States or Europe, such as Japan, does not assure approval by regulatory authorities in other countries or jurisdictions or by the FDA or EMA. Albireo and any current or potential future licensee may not be able to file for marketing approvals and may not receive necessary approvals to commercialize Albireo’s products in any market. Marketing approvals in countries outside the United States and Europe do not ensure pricing approvals in those countries or in any other countries, and marketing approvals and pricing approvals do not ensure that reimbursement will be obtained.

Albireo’s ability to obtain and maintain conditional marketing authorizations in the European Union is limited to specific circumstances and subject to several conditions and obligations. A failure to renew any conditional approval that Albireo obtains prior to full approval for the applicable indication would prevent Albireo from continuing to market its products.

Conditional marketing authorizations in the European Union based on incomplete clinical data may be granted for a limited number of listed medicinal products for human use, including products designated as orphan medicinal products under E.U. law, if (1) the risk-benefit balance of the product is positive, (2) it is likely that the applicant will be in a position to provide the required comprehensive clinical trial data, (3) unmet medical needs will be fulfilled and (4) the benefit to public health of the immediate availability on the market of the medicinal product outweighs the risk inherent in the fact that additional data are still required. Specific obligations, including with respect to the completion of ongoing or new studies or trials, and with respect to the collection of pharmacovigilance data, may be specified in the conditional marketing authorization. Conditional marketing authorizations are valid for one year and may be renewed annually, if the risk-benefit balance remains positive, and after an assessment of the need for additional or modified conditions. Even if Albireo obtains conditional approval for A4250 for the treatment of PFIC or any other pediatric cholestatic liver disease or disorder, Albireo may not be able to renew such conditional approval.

Even if Albireo obtains marketing approval for its product candidates, the terms of approvals and ongoing regulation of Albireo’s products may limit how it manufactures and markets its products and compliance with such requirements may involve substantial resources, which could materially impair Albireo’s ability to generate revenue.

Even if marketing approval of a product candidate is granted, an approved product and its manufacturer and marketer are subject to ongoing review and extensive regulation, including the possible requirement to implement a risk evaluation and mitigation strategy or to conduct costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the product. Albireo must also comply with requirements concerning advertising and promotion for any of its product candidates for which Albireo obtains marketing approval. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved labeling. Thus, Albireo will not be able to promote any products it develops for indications or uses for which they are not approved. In addition, manufacturers of approved products and those manufacturers’ facilities are required to ensure that quality control and manufacturing procedures conform to cGMP, which include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation and reporting requirements. Albireo and its contract manufacturers could be subject to periodic unannounced inspections by the FDA to monitor and ensure compliance with cGMP.

Accordingly, assuming Albireo receives marketing approval for one or more of its product candidates, Albireo and its contract manufacturers will continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production, product surveillance and quality control. If Albireo is not able to comply with post-approval regulatory requirements, Albireo could have the marketing approvals for its products withdrawn by regulatory authorities and Albireo’s ability to market any future products could be limited, which could adversely affect Albireo’s ability to achieve or sustain profitability. Thus, the cost of compliance with post-approval regulations may have a negative effect on Albireo’s operating results and financial condition.

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Any product candidate for which Albireo obtains marketing approval will be subject to strict enforcement of post-marketing requirements and Albireo could be subject to substantial penalties, including withdrawal of its products from the market, if Albireo fails to comply with all regulatory requirements or if Albireo experiences unanticipated problems with its products, when and if any of them are approved.

Any product candidate for which Albireo obtains marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements include, but are not limited to, restrictions governing promotion of an approved product, submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, and requirements regarding the distribution of samples to physicians and recordkeeping.

The FDA and other federal and state agencies, including the Department of Justice and state attorneys general, closely regulate compliance with all requirements governing prescription drug products, including requirements pertaining to marketing and promotion of drugs in accordance with the provisions of the approved labeling and manufacturing of products in accordance with cGMP requirements. Violations of such requirements may lead to investigations alleging violations of the Food, Drug and Cosmetic Act and other statutes, including the False Claims Act and other federal and state health care fraud and abuse laws as well as state consumer protection laws. Albireo’s failure to comply with all regulatory requirements, and later discovery of previously unknown adverse events or other problems with Albireo’s products, manufacturers or manufacturing processes, may yield various results, including:

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Noncompliance by Albireo or any future collaborator with regulatory requirements relating to safety monitoring or pharmacovigilance, to the development of products for the pediatric population or to the protection of personal information can lead to significant penalties and sanctions.

Albireo may not be able to obtain or maintain orphan drug exclusivity for its product candidates. If Shire is able to obtain orphan drug exclusivity for SHP625, or any of Albireo’s other competitors is able to obtain orphan drug exclusivity for any of its products that is the same drug as one of Albireo’s product candidates, or can be classified as a similar medicinal product within the meaning of E.U. law, Albireo may not be able to have competing products approved by the applicable regulatory authority for a significant period of time.

Regulatory authorities in some jurisdictions, including Europe and the United States, may designate drugs for relatively small patient populations as orphan drugs. The FDA has granted orphan drug designation to A4250, which is an IBAT inhibitor, for the treatment of PFIC, as well as PBC, and the EMA has designated A4250 as an orphan medicinal product for the treatment of PFIC, as well as PBC and ALGS. Generally, if a designated orphan drug product receives the first marketing approval for the orphan indication for which it has been designated, the product is entitled to a period of market exclusivity, which, subject to certain exceptions, precludes the EMA from accepting another marketing application for a similar medicinal product or the FDA from approving another marketing application for the same drug for the same indication for that period of exclusivity. The applicable market exclusivity period is seven years in the United States and 10 years in the European Union. The E.U. exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drug designation, including if the drug is sufficiently profitable so that market exclusivity is no longer justified.

In the European Union, a “similar medicinal product” is a medicinal product that contains a similar active substance or substances as contained in a currently authorized orphan medicinal product and that is intended for the same therapeutic indication. For a product candidate such as A4250, the FDA defines “same drug” as a drug that contains the same active moiety, which refers to the molecule which is responsible for the physiological or pharmacological action of the drug, and is intended for the same use. Obtaining orphan drug exclusivity for A4250 for PFIC, both in the United States and in Europe, may be important to the product candidate’s success. Shire’s product candidate for the treatment of PFIC and other rare liver diseases, SHP625, which has been reported to be an IBAT inhibitor, has also received orphan drug designation from the FDA and EMA, and SHP625 has been evaluated to date in a greater number of PFIC patients than A4250. If Shire or any other Albireo competitor obtains orphan drug exclusivity for, and approval of, a product for the same indication as A4250 before Albireo does and if the competitor’s product is the same drug or a similar medicinal product as Albireo’s, Albireo could be excluded from the market until that exclusivity period expires.

Moreover, Albireo may not be able to maintain orphan drug exclusivity for A4250 for PFIC or any other indication, or for any other product candidate and indication for which Albireo obtains orphan drug exclusivity in the future. For example, if a competitive product that is the same drug or a similar medicinal product as Albireo’s product candidate is shown to be clinically superior to Albireo’s product candidate, any orphan drug exclusivity Albireo has obtained will not block the approval of such competitive product. In addition, orphan drug exclusivity will not prevent the approval of a product that is the same drug as Albireo’s product candidate if the FDA finds that Albireo cannot assure the availability of sufficient quantities of the drug to meet the needs of the persons with the disease or condition for which the drug was designated. Finally, even if Albireo obtains orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drug products can be approved for the same condition.

Fast track designation by the FDA may not actually lead to a faster development or regulatory review or approval process.

If a drug is intended for the treatment of a serious or life threatening condition and the drug demonstrates the potential to address unmet medical needs for the condition, the drug sponsor may apply for FDA fast track designation. The designation offers the sponsor opportunities for interactions with the FDA review team and the

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possibility of a rolling review for certain portions of the marketing application. Albireo believes that A4250 meets the criteria to be designated as a fast track product. However, even if Albireo seeks and is granted a fast track designation for A4250, there is no assurance that A4250 will receive marketing approval from the FDA or that approval will be granted within any particular timeframe. Albireo may also seek fast track designation for other current or future product candidates. Even if the FDA grants fast track designation to one or more of these product candidates, Albireo may not experience a faster development process, review or approval compared to conventional FDA procedures. In addition, the FDA may withdraw fast track designation that may in the future be granted to any Albireo product candidate if it believes that the designation is no longer supported by data from Albireo’s clinical development program for that product candidate. Fast track designation alone does not guarantee qualification for the FDA’s priority review procedures.

Priority review designation by the FDA may not lead to a faster regulatory review or approval process and, in any event, does not assure FDA approval.

If the FDA determines that a product candidate intended to treat a serious disease, if approved, would provide a significant improvement in safety or effectiveness of the treatment of the disease, the FDA may designate the drug application for that product candidate for priority review. A priority review designation means that the goal for the FDA to review the marketing application is six months, rather than the standard review period of ten months. Albireo may request priority review for A4250 or other current or future product candidates at the time that the marketing application is submitted. The FDA has broad discretion with respect to whether or not to grant priority review status to an individual marketing application. As a result, even if Albireo believes a particular product candidate is eligible for such designation or status, the FDA may decide not to grant it. Moreover, a priority review designation does not necessarily mean a faster regulatory review process or necessarily confer any advantage with respect to approval compared to conventional FDA procedures. Receiving a priority review designation from the FDA does not guarantee approval of the drug application within the six-month review cycle or any time thereafter.

Albireo’s relationships with customers, healthcare providers and professionals and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose Albireo to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription of any product candidate, including A4250, elobixibat or A3384, for which Albireo obtains marketing approval. Albireo’s future arrangements with customers, healthcare providers and professionals, and third-party payors may expose Albireo to broadly applicable federal and state fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which Albireo markets, sells and distributes any product candidate for which Albireo obtains marketing approval.

The federal anti-kickback statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or paying remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid. This statute has been broadly interpreted to apply to manufacturer arrangements with prescribers, purchasers and pharmacy benefit managers, among others. Several other countries, including the United Kingdom, have enacted similar anti-kickback laws and regulations.

The federal False Claims Act imposes civil penalties, and provides for civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government. Both the government and qui tam relators have

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brought False Claims Act actions against pharmaceutical companies on the theory that their practices have caused false claims to be submitted to the government.

The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or for 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.

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH Act, and its implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information.

The federal Physician Payments Sunshine Act requirements under the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, referred to together as the Affordable Care Act, require manufacturers of FDA-approved drugs, devices, biologics and medical supplies covered by Medicare or Medicaid to report to the Department of Health and Human Services information related to payments and other transfers of value made to or at the request of covered recipients, such as physicians and teaching hospitals, and physician ownership and investment interests in such manufacturers. Among other payments, the law requires payments made to physicians and teaching hospitals for clinical trials be disclosed.

Analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by nongovernmental third-party payors, including private insurers. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines, or the relevant compliance guidance promulgated by the federal government, in addition to requiring drug manufacturers to report information related to payments to physicians and other health care providers or marketing expenditures to the extent that those laws impose requirements that are more stringent than the Physician Payments Sunshine Act. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

Efforts to ensure that Albireo’s business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that Albireo’s business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If Albireo’s operations are found to be in violation of any of these laws or any other governmental regulations that may apply to it, Albireo may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of Albireo’s operations. Violation of certain of these laws could also result in exclusion, suspension and debarment from government funded healthcare programs. Exclusion, suspension or debarment would significantly impact Albireo’s ability to commercialize, sell or distribute any product candidate for which Albireo obtains regulatory approval. If any of the physicians or other providers or entities with whom Albireo expects to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

Legislation may increase the difficulty and cost for Albireo to obtain marketing approval of and commercialize its product candidates and affect the prices Albireo may obtain for any product that receives marketing approval.

In the United States and in some other jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of

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A4250, elobixibat, A3384 or any future product candidate of Albireo, restrict or regulate post-approval activities, or affect Albireo’s ability to profitably sell any product candidates, including A4250, elobixibat or A3384, for which Albireo obtains marketing approval. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject Albireo to more stringent product labeling and post-marketing testing and other requirements.

In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the Medicare Modernization Act, changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for physician administered drugs. In addition, this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class. Cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that Albireo receives for any approved products. While the Medicare Modernization Act applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from the Medicare Modernization Act may result in a similar reduction in payments from private payors.

In March 2010, the Affordable Care Act became law in the United States. The Affordable Care Act is a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. Effective October 1, 2010, the Affordable Care Act revised the definition of “average manufacturer price” for reporting purposes, which could increase the amount of Medicaid drug rebates to states. Further, the law imposes a significant annual fee on companies that manufacture or import branded prescription drug products. Substantial provisions affecting compliance have also been enacted, which may affect Albireo’s business practices with health care practitioners. As implementation of the Affordable Care Act is ongoing, the law appears likely to continue the pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase Albireo’s regulatory burdens and operating costs. Similarly, there are a number of state and local legislative and regulatory efforts related to drug pricing, including a newly passed drug price transparency law in Vermont that applies to pharmaceutical manufacturers, that may have an impact on Albireo’s business.

In addition, the Drug Supply Chain Security Act imposes new obligations on manufacturers of pharmaceutical products related to product tracking and tracing. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. Albireo is unsure whether additional legislative changes will be enacted, or whether the current regulations, guidance or interpretations will be changed, or whether such changes will have any impact on Albireo’s business.

In the European Union, similar political, economic and regulatory developments may affect Albireo’s ability to profitably commercialize its products. In addition to continuing pressure on prices and cost containment measures, legislative developments at the European Union or E.U. member state level may result in significant additional requirements or obstacles that may increase Albireo’s operating costs.

Albireo is subject to anti-corruption laws, as well as export control laws, customs laws, sanctions laws and other laws governing Albireo’s operations. If Albireo fails to comply with these laws, it could be subject to civil or criminal penalties, other remedial measures and legal expenses, which could adversely affect Albireo’s business, results of operations and financial condition.

Albireo’s operations are subject to anti-corruption laws, including the U.S. Foreign Corrupt Practices Act, or the FCPA, and other anti-corruption laws that apply in countries where Albireo does business and may do business in the future. The FCPA and these other laws generally prohibit Albireo, Albireo’s officers, and

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Albireo’s employees and intermediaries from bribing, being bribed or making other prohibited payments to government officials or other persons to obtain or retain business or gain some other business advantage. Albireo may in the future operate in jurisdictions that pose a high risk of potential FCPA violations, and Albireo may participate in collaborations and relationships with third parties whose actions could potentially subject Albireo to liability under the FCPA or local anti-corruption laws. In addition, Albireo cannot predict the nature, scope or effect of future regulatory requirements to which Albireo’s international operations might be subject or the manner in which existing laws might be administered or interpreted.

Albireo is also subject to other laws and regulations governing its international operations, including regulations administered by the government of the United States and authorities in the European Union, including applicable export control regulations, economic sanctions on countries and persons, customs requirements and currency exchange regulations, collectively referred to as the Trade Control laws.

There is no assurance that Albireo will be completely effective in ensuring its compliance with all applicable anti-corruption laws, including the FCPA or other legal requirements, including Trade Control laws. If Albireo is not in compliance with the FCPA and other anti-corruption laws or Trade Control laws, it may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on Albireo’s business, financial condition, results of operations and liquidity. Likewise, any investigation of any potential violations of the FCPA, other anti-corruption laws or Trade Control laws by U.S. or other authorities could also have an adverse impact on Albireo’s reputation, its business, results of operations and financial condition.

Albireo relies significantly on information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cyber security incidents, could harm Albireo’s ability to operate its business effectively.

Despite the implementation of security measures, Albireo’s internal computer systems and those of third parties with which Albireo contracts are vulnerable to damage from cyber-attacks, computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. System failures, accidents or security breaches could cause interruptions in Albireo’s operations, and could result in a material disruption of Albireo’s clinical and commercialization activities and business operations, in addition to possibly requiring substantial expenditures of resources to remedy. The loss of clinical trial data could result in delays in Albireo’s regulatory approval efforts and significantly increase Albireo’s costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage to, Albireo’s data or applications, or inappropriate disclosure of confidential or proprietary information, Albireo could incur liability and its product research, development and commercialization efforts could be delayed.

Risks Related to Albireo’s Business Operations , Employee Matters and Managing Growth

In connection with the preparation of Albireo’s consolidated financial statements as of and for the years ended December 31, 2015 and 2014, Albireo and its independent registered public accounting firm identified a material weakness in Albireo’s internal control over financial reporting. If Albireo is not able to remediate the material weakness and otherwise to maintain an effective system of internal control over financial reporting, the reliability of the combined organization’s financial reporting, investor confidence in the combined organization and the value of the combined organization’s common stock could be materially and adversely affected.

Under standards established by the United States Public Company Accounting Oversight Board, a material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected and corrected on a timely basis.

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In connection with the audits of Albireo’s 2014 and 2015 financial statements, which were completed concurrently with each other, Albireo and its independent registered public accounting firm identified a material weakness in Albireo’s internal control over financial reporting, specifically a lack of controls over the identification and review of complex accounting issues involving significant judgment or estimates in the financial statement closing process resulting from Albireo’s limited in-house accounting and finance team. Albireo currently relies on external advisors to provide assistance with financial reporting in accordance with the requirements of generally accepted accounting principles in the United States, or U.S. GAAP, and the rules and regulations of the Securities and Exchange Commission, or SEC, and these external advisors may not have direct knowledge of all of Albireo’s business, transactions and contracts. Specifically, Albireo and its independent registered public accounting firm determined that Albireo did not have sufficient resources with U.S. GAAP and SEC financial reporting knowledge to ensure a timely and sufficient financial statement close process that includes resolution of complex accounting issues involving significant judgment and estimates.

Albireo is working to remediate the material weakness. In particular, Albireo recently hired a full-time chief financial officer and plans to hire a controller and to develop and implement formal policies, processes and documentation procedures relating to its financial reporting. However, Albireo cannot at this time estimate how long it will take to remediate the material weakness and Albireo may not ever be able to remediate the material weakness. If Albireo is unable to successfully remediate the material weakness and otherwise to establish and maintain an effective system of internal control over financial reporting, the reliability of the combined organization’s financial reporting, investor confidence in the combined organization and the value of the combined organization’s common stock could be materially and adversely affected.

If the combined organization fails to establish and maintain an effective system of internal control over financial reporting, it may not be able to accurately report its financial results or prevent fraud. As a result, stockholders could lose confidence in the combined organization’s financial and other public reporting, which would harm its business and the trading price of its common stock.

Effective internal controls over financial reporting are necessary for the combined organization to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause the combined organization to fail to meet its reporting obligations. In addition, any testing by the combined organization, as and when required, conducted in connection with Section 404 of the Sarbanes-Oxley Act, or Section 404, or any subsequent testing by the combined organization’s independent registered public accounting firm, as and when required, may reveal deficiencies in the combined organization’s internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to its financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in the combined organization’s reported financial information, which could have a negative effect on the trading price of its common stock.

Pursuant to Section 404, the combined organization will be required to furnish a report by its management on the effectiveness of its internal control over financial reporting and, if and at such time as the combined organization ceases to qualify as a “smaller reporting company” under applicable securities regulations, an attestation report on internal control over financial reporting issued by its independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, the combined organization will be engaged in a process to document and evaluate its internal control over financial reporting, which is both costly and challenging. In this regard, the combined organization will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite the combined organization’s efforts, there is a risk that it will not be able to conclude within the prescribed timeframe that its

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internal control over financial reporting is effective as required by Section 404. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of the combined organization’s financial statements. In addition, because the combined organization will upon completion of the Transaction qualify as a “smaller reporting company” under applicable securities regulations, an attestation report on internal control over financial reporting issued by its independent registered public accounting will not be required. An independent assessment of the combined organization’s internal control over financial reporting might detect deficiencies that management’s assessment does not.

Albireo’s future success depends on its ability to retain its chief executive officer and other key executives and to attract, retain and motivate qualified personnel.

Albireo is highly dependent on Ron Cooper, its President and Chief Executive Officer, Jan Mattsson, its Chief Operating Officer, and other principal members of its management and scientific teams. Although Albireo has formal employment agreements with each of its executive officers, these agreements do not prevent Albireo’s executives from terminating their employment with it at any time. Albireo does not maintain “key person” insurance on any of its executive officers. The unplanned loss of the services of any of these persons could materially impact the achievement of Albireo’s research, development and commercialization objectives.

Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel, including in the United States and Sweden, will also be critical to Albireo’s success. Albireo may not be able to attract and retain these personnel on acceptable terms given the competition among numerous biotechnology and pharmaceutical companies for similar personnel. Albireo also experiences competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, Albireo relies on consultants and advisors, including scientific and clinical advisors, to assist it in formulating Albireo’s research and development and commercialization strategy. Albireo’s consultants and advisors may be employed by employers other than Albireo and may have commitments under consulting or advisory contracts with other entities that may limit their availability to Albireo.

Albireo expects to expand its capabilities, and as a result, Albireo may encounter difficulties in managing its growth, which could disrupt its operations.

Albireo expects to experience significant growth in the number of its employees and the scope of its operations, particularly in the areas of drug development, regulatory affairs, finance and administration and, potentially, sales and marketing. To manage Albireo’s anticipated future growth, Albireo must continue to implement and improve its managerial, operational and financial systems, expand its facilities and continue to recruit and train additional qualified personnel. Due to Albireo’s limited financial resources and the limited experience of its management team in managing a company with such anticipated growth, Albireo may not be able to effectively manage the expansion of its operations or recruit and train additional qualified personnel. The physical expansion of Albireo’s operations may lead to significant costs and may divert its management and business development resources. Any inability to manage growth could delay the execution of Albireo’s business plans or disrupt its operations.

Albireo will incur increased costs as a result of operating as a company with common stock that is publicly traded in the United States, and Albireo’s management will be required to devote substantial time to new compliance initiatives.

Following completion of the Transaction, the combined organization will incur significant legal, accounting and other expenses that Albireo has not incurred as a private company. In addition, the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of the NASDAQ Stock Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to

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substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which Albireo operates its business in ways that are not currently anticipated. Albireo’s management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase Albireo’s legal and financial compliance costs and will make some activities more time-consuming and costly. For example, Albireo expects that these rules and regulations may make it more difficult and more expensive for the combined organization to obtain director and officer liability insurance and the combined organization will be required to incur substantial costs to maintain coverage. Albireo estimates that the combined organization will annually incur significant additional expenses to comply with the requirements imposed on it as a public company.

Albireo is exposed to risks related to currency exchange rates.

Albireo conducts a significant portion of its operations outside of the United States. Because Albireo’s financial statements are presented in U.S. dollars, changes in currency exchange rates have had and could have in the future a significant effect on Albireo’s operating results when Albireo’s operating results are translated into U.S. dollars. Exchange rate fluctuations between local currencies and the dollar create risk in several ways, including the following: weakening of the dollar may increase the cost of overseas research and development expenses and the cost of sourced product components outside the United States; strengthening of the dollar may decrease the value of Albireo’s revenues denominated in other currencies; the exchange rates on nondollar transactions and cash deposits can distort Albireo’s financial results; and affecting commercial pricing and profit margins.

Albireo’s employees, principal investigators, consultants and commercial partners may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insider trading, which could cause significant liability for Albireo and harm its reputation.

Albireo is exposed to the risk of fraud or other misconduct by its employees, principal investigators, consultants and collaborators, including intentional failures to comply with FDA or Office of Inspector General regulations or similar regulations of comparable non-U.S. regulatory authorities, provide accurate information to the FDA or comparable non-U.S. regulatory authorities, comply with manufacturing standards Albireo has established, comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable non-U.S. regulatory authorities, report financial information or data accurately or disclose unauthorized activities to Albireo. Misconduct by these parties could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to Albireo’s reputation. It is not always possible to identify and deter employee misconduct, and the precautions Albireo takes to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting Albireo from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws, standards or regulations. If any such actions are instituted against Albireo, and Albireo is not successful in defending itself or asserting its rights, those actions could have a significant impact on its business and results of operations, including the imposition of significant fines or other sanctions.

The vote by the United Kingdom electorate in favor of the United Kingdom’s exit from the European Union could adversely impact Albireo’s business, results of operations and financial condition.

The passage of the referendum on the United Kingdom’s membership in the European Union, referred to as “Brexit,” in favor of the exit of the United Kingdom from the European Union, could cause disruption to and create uncertainty surrounding Albireo’s business, which could have an adverse effect on Albireo’s business, financial results and operations. Over the next few months, negotiations are expected to commence to determine the terms of the United Kingdom’s relationship with the European Union in the future, including trade terms between the United Kingdom and countries comprising the European Union. The effects of Brexit will depend on any agreements the United Kingdom makes to retain access to markets in the European Union, either during a transitional period or more permanently.

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Assuming its implementation, Brexit would result in the United Kingdom no longer being a European Union Member State and a member of the European Union single market, which may result in increased trade barriers. Increased trade barriers could impact Albireo’s results of operations and the combined organization’s stock price. As Albireo’s parent company is registered in England and Wales and Albireo has operating subsidiaries organized operations in Sweden, Brexit could result in restrictions on the movement of capital within Albireo’s organization, the mobility of Albireo’s personnel and the potential future commercialization of Albireo’s product candidates and could change tax benefits or liabilities of Albireo, any of which could have a material adverse effect on Albireo’s business, results of operations or financial condition.

Risks Related to the Combined Organization

In determining whether you should approve the issuance of shares of Biodel common stock and other matters related to the Transaction, as the case may be, you should carefully read the following risk factors in addition to the risks described under “Risk Factors—Risks Related to the Transaction,” “Risk Factors – Risks Related to the Proposed 30:1 Reverse Stock Split,” “Risk Factors—Risks Related to Biodel” and “Risk Factors—Risks Related to Albireo,” which will also apply to the combined organization.

After completion of the Transaction, Albireo’s executive officers, directors and principal shareholders will maintain the ability to control or significantly influence all matters submitted to the combined organization’s stockholders for approval.

Upon the completion of the Transaction, based on an assumed exchange ratio of 0.06999, Albireo’s executive officers, directors and principal shareholders will, in the aggregate, beneficially own approximately 62.4% of the combined organization’s outstanding shares of common stock. As a result, if these shareholders were to choose to act together, they would be able to control or significantly influence all matters submitted to the combined organization’s stockholders for approval, as well as the combined organization’s management and affairs. For example, these persons, if they choose to act together, would control or significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of the combined organization’s assets. This concentration of voting power could delay or prevent an acquisition of the combined organization on terms that other stockholders may desire.

The combined organization will continue to be a smaller reporting company. The combined organization cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make the combined organization’s common stock less attractive to investors or otherwise limit the combined organization’s ability to raise additional funds.

Biodel is currently, and the combined organization will continue to be upon completion of the Transaction, a “smaller reporting company” under applicable securities regulations. A smaller reporting company is a company that has an aggregate market value of the company’s voting stock held by non-affiliates, or public float, of less than $75 million as of the last business day of its most recently completed second fiscal quarter and does not meet certain exceptions. SEC rules provide that smaller reporting companies may only sell shares under a Form S-3 shelf registration statement, during any 12-month period, in an amount less than or equal to one-third of the public float. If the combined organization does not meet this public float requirement, any offering by the combined organization under a Form S-3 will be limited to raising an aggregate of one-third of the combined organization’s public float in any 12-month period. You should also refer to the risk factor above entitled “Limitations on the ability of smaller reporting companies to sell shares under a Form S-3 shelf registration statement may interfere with the combined organization’s ability to execute financing transactions quickly or at all.” In addition, a smaller reporting company is able to provide simplified executive compensation disclosures in its filings, is exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that an independent registered public accounting firm provide an attestation report on the effectiveness of internal control over financial reporting, and has certain other reduced disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual

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reports. Reduced disclosure in the combined organization’s SEC filings due to its status as a smaller reporting company may make it harder for investors to analyze its results of operations and financial prospects.

The combined organization’s stock price is expected to be volatile, and the market price of its common stock may drop following the Transaction.

The market price of the combined organization’s common stock following the Transaction could be subject to significant fluctuations following the Transaction. Market prices for securities of early-stage pharmaceutical, biotechnology and other life sciences companies have historically been particularly volatile. Some of the factors that may cause the market price of the combined organization’s common stock to fluctuate include:

Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of the combined organization’s common stock.

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In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm the combined organization’s profitability and reputation.

The combined organization will incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies.

The combined organization will incur significant legal, accounting and other expenses that Albireo did not incur as a private company, including costs associated with public company reporting requirements. The combined organization will also incur costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act, as well as rules implemented by the SEC and The NASDAQ Stock Market LLC. For example, the combined organization’s management team will include the executive officers of Albireo prior to the Transaction. These executive officers and other personnel will need to devote substantial time regarding operations as a public company and compliance with applicable laws and regulations. These rules and regulations may also make it difficult and expensive for the combined organization to obtain directors’ and officers’ liability insurance. As a result, it may be more difficult for the combined organization to attract and retain qualified individuals to serve on the combined organization’s board of directors or as executive officers of the combined organization, which may adversely affect investor confidence in the combined organization and could cause the combined organization’s business or stock price to suffer.

Anti-takeover provisions in the combined organization charter documents and under Delaware law could make an acquisition of the combined organization more difficult and may prevent attempts by the combined organization stockholders to replace or remove the combined organization management.

Provisions in the combined organization’s certificate of incorporation and bylaws may delay or prevent an acquisition or a change in management. These provisions include a classified board of directors, a prohibition on actions by written consent of the combined organization’s stockholders and the ability of the board of directors to issue preferred stock without stockholder approval. In addition, because the combined organization will be incorporated in Delaware, it is governed by the provisions of Section 203 of the DGCL, which prohibits stockholders owning 15% or more of the outstanding combined organization voting stock from merging or combining with the combined organization under certain circumstances. Although Biodel and Albireo believe these provisions collectively will provide for an opportunity to receive higher bids by requiring potential acquirors to negotiate with the combined organization’s board of directors, they would apply even if the offer may be considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by the combined organization’s stockholders to replace or remove then current management by making it more difficult for stockholders to replace members of the board of directors, which is responsible for appointing the members of management.

Biodel and Albireo do not anticipate that the combined organization will pay any cash dividends in the foreseeable future.

The current expectation is that the combined organization will retain its future earnings to fund the development and growth of the combined organization’s business. In addition, Albireo is prohibited from making any dividend payments under the terms of its loan facility. As a result, capital appreciation, if any, of the common stock of the combined organization will be your sole source of gain, if any, for the foreseeable future.

The pro forma financial statements are presented for illustrative purposes only and may not be an indication of the combined organization’s financial condition or results of operations following the completion of the Transaction.

The pro forma financial statements contained in this proxy statement are presented for illustrative purposes only and may not be an indication of the combined organization’s financial condition or results of operations

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following the Transaction for several reasons. The pro forma financial statements have been derived from the historical financial statements of Biodel and Albireo and adjustments and assumptions have been made regarding the combined organization after giving effect to the Transaction. The information upon which these adjustments and assumptions have been made is preliminary, and these kinds of adjustments and assumptions are difficult to make with accuracy. Moreover, the pro forma financial statements do not reflect all costs that are expected to be incurred by the combined organization in connection with the Transaction. For example, the impact of any incremental costs incurred in integrating the two companies is not reflected in the pro forma financial statements. As a result, the actual financial condition of the combined organization following the Transaction may not be consistent with, or evident from, these pro forma financial statements. The assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect the combined organization’s financial condition following the Transaction. See “Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page F-90 of this proxy statement.

Future sales of shares by existing stockholders could cause the combined organization stock price to decline.

If existing stockholders of Biodel and Albireo sell, or indicate an intention to sell, substantial amounts of the combined organization’s common stock in the public market after the lock-up and other legal restrictions on resale discussed in this proxy statement lapse, the trading price of the common stock of the combined organization could decline. Based on shares outstanding as of August 15, 2016 and assuming an exchange ratio of 0.06999, upon completion of the Transaction, the combined organization is expected to have outstanding a total of approximately 6.3 million shares of common stock (after giving effect to the proposed 30:1 reverse stock split). Of these shares, only approximately 2.1 million shares of common stock will be freely tradable as of the completion of the Transaction, without restriction, in the public market.

The lock-up agreements entered into by the directors and officers of Biodel and the lock-up restrictions in the Exchange Agreement to which the holders of Albireo shares and notes convertible into Albireo shares agreed provide that the shares subject to the lock-up restrictions will be released from such restrictions 180 days from the closing date. In addition, the shares of Biodel common stock to be issued in the Transaction will be restricted securities under the Securities Act and any sale of such shares without registration will be subject to the requirements of Rule 144 promulgated under the Securities Act. Based on shares outstanding as of August 15, 2016 and assuming an exchange ratio of 0.06999, up to an additional approximately 4.2 million shares of common stock (after giving effect to the proposed 30:1 reverse stock split) will be eligible for sale in the public market, approximately 3.7 million of which will be held by directors, executive officers of the combined organization and other affiliates and will be subject to volume limitations under Rule 144 under the Securities Act, and various vesting agreements. In addition, approximately 357,000 shares of common stock that are subject to outstanding stock options of Albireo as of August 15, 2016 (after giving effect to the proposed 30:1 reverse stock split and assuming the acceptance of the replacement offer to holders of Albireo options and warrants and an exchange ratio of 0.06999) will become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements, the lock-up agreements and Rules 144 and 701 under the Securities Act. If these additional shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of the combined organization common stock could decline.

If the ownership of the combined organization common stock is highly concentrated, it may prevent you and other stockholders from influencing significant corporate decisions and may result in conflicts of interest that could cause the combined organization stock price to decline.

Executive officers and directors of the combined organization, and their affiliates, are expected to beneficially own or control approximately 49.6% of the outstanding shares of the combined organization common stock following the completion of the Transaction (after giving effect to the exercise of all outstanding vested and unvested options to purchase shares of the combined organization’s common stock following the closing of the Transaction). Accordingly, these executive officers, directors and their affiliates, acting as a group,

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will have substantial influence over the outcome of corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of the combined organization assets or any other significant corporate transactions. These stockholders may also delay or prevent a change of control of the combined organization, even if such a change of control would benefit the other stockholders of the combined organization. The significant concentration of stock ownership may adversely affect the trading price of the combined organization’s common stock due to investors’ perception that conflicts of interest may exist or arise.

Because the Transaction will result in an ownership change under Section 382 of the Internal Revenue Code of 1986, as amended, for Biodel, Biodel’s pre-exchange net operating loss carryforwards and certain other tax attributes will be subject to limitations. The net operating loss carryforwards and other tax attributes of Albireo and of the combined organization may also be subject to limitations as a result of ownership changes.

If a corporation undergoes an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”), the corporation’s net operating loss carryforwards and certain other tax attributes arising from before the ownership change are subject to limitations on use after the ownership change. In general, an ownership change occurs if there is a cumulative change in the corporation’s equity ownership by certain stockholders that exceeds fifty percentage points over a rolling three-year period. Similar rules may apply under state tax laws. The Transaction will result in an ownership change for Biodel and, accordingly, Biodel’s net operating loss carryforwards and certain other tax attributes will be subject to limitations on their use after the Transaction. Albireo’s net operating loss carryforwards may also be subject to limitation as a result of prior shifts in equity ownership and/or the Transaction. Additional ownership changes in the future could result in additional limitations on Biodel’s, Albireo’s and the combined organization’s net operating loss carryforwards. Consequently, even if the combined organization achieves profitability, it may not be able to utilize a material portion of Biodel’s, Albireo’s or the combined organization’s net operating loss carryforwards and other tax attributes, which could have a material adverse effect on cash flow and results of operations.

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FORWARD-LOOKING STATEMENTS

This proxy statement and the documents incorporated by reference into this proxy statement contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These forward-looking statements are based on current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from results expressed or implied by such forward-looking statements. These forward-looking statements should not be relied upon as predictions of future events as Biodel cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur. You can identify forward-looking statements by the use of forward-looking terminology including “believes,” “expects,” “anticipates,” “projects,” “forecasts,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “pro forma,” “estimates” or the negative of these words and phrases or other variations of these words and phrases or comparable terminology. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. For example, forward-looking statements include: any statements of the strategies, prospects, plans, expectations or objectives of management of Biodel or Albireo for future operations; the progress, scope or duration of the development of product candidates or programs; the benefits that may be derived from product candidates or the commercial or market opportunity in any target indication; the ability of Biodel or Albireo to protect intellectual property rights; the anticipated operations, financial position, revenues, costs or expenses of Biodel, Albireo or the combined organization; any statements regarding future economic conditions or performance; statements of belief and any statement of assumptions underlying any of the foregoing. Forward looking statements may also include any statements regarding the approval and closing of the Transaction, the timing of the closing of the Transaction, Biodel’s ability to solicit a sufficient number of proxies to approve the proposals necessary to complete the Transaction, other conditions to the closing of the Transaction, the expected benefits of the Transaction, any other matters related to the closing of the Transaction and any statement of assumptions underlying any of the foregoing.

For a discussion of the factors that may cause Biodel, Albireo or the combined organization’s actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied in such forward-looking statements, or for a discussion of risks associated with the ability of Biodel and Albireo to complete the Transaction and the effect of the Transaction on the business of Biodel, Albireo and the combined organization, see “Risk Factors” beginning on page 17. There can be no assurance that the Transaction will be completed or, if it is completed, that it will close within the anticipated time period or that the expected benefits of the Transaction will be realized.

If any of these risks or uncertainties materializes or any of these assumptions proves incorrect, the results of Biodel, Albireo or the combined organization could differ materially from results expressed or implied by any forward-looking statement. All forward-looking statements made in this proxy statement are current only as of the date of this proxy statement. Biodel and Albireo do not undertake any obligation to publicly update any forward-looking statement to reflect events or circumstances after the date on which any statement is made or to reflect the occurrence of unanticipated events.

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THE ANNUAL MEETING OF BIODEL STOCKHOLDERS

Date, Time and Place

The annual meeting of Biodel stockholders will be held at 100 Saw Mill Road, Danbury, Connecticut 06810 on [●] at 9:00 a.m., local time. Biodel is sending this proxy statement to its stockholders in connection with the solicitation of proxies by the Biodel board of directors for use at the Biodel annual meeting and any adjournments or postponements of the Biodel annual meeting. This proxy statement is first being furnished to stockholders of Biodel on or about [●], 2016.

Purposes of the Biodel Annual meeting

The purposes of the Biodel annual meeting are:

1. To consider and vote upon a proposal to approve the issuance of shares of Biodel common stock pursuant to the Amended and Restated Share Exchange Agreement, dated as of July 13, 2016, by and among Biodel, Albireo and the persons listed on Schedule I thereto, a copy of which is attached as Annex A to this proxy statement.

2. To approve an amendment to the amended and restated certificate of incorporation of Biodel, in the form attached as Annex C to this proxy statement, to effect a reverse stock split of Biodel common stock, in the ratio of one new share for every 30 shares outstanding.

3. To approve the 2016 Equity Plan, in the form attached as Annex D to this proxy statement, for use by Albireo Pharma, Inc. from and after the closing.

4. To elect two Class III directors for a term of three years.

5. To consider and vote upon an adjournment of the Biodel annual meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of any of Biodel Proposal Nos. 1 through 4.

6. To transact such other business as may properly come before the stockholders at the Biodel annual meeting or any adjournment or postponement thereof.

Recommendation of the Biodel Board of Directors

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Record Date and Voting Power

Only holders of record of Biodel common stock at the close of business on the record date, [●], 2016, are entitled to notice of, and to vote at, the Biodel annual meeting. At the close of business on the record date, [●] shares of Biodel common stock were issued and outstanding. Each share of Biodel common stock entitles the holder thereof to one vote on each matter submitted for stockholder approval. See the section entitled “Principal Stockholders of Biodel” in this proxy statement for information regarding persons known to the management of Biodel to be the beneficial owners of more than 5% of the outstanding shares of Biodel common stock.

Voting and Revocation of Proxies

The proxy accompanying this proxy statement is solicited on behalf of the board of directors of Biodel for use at the Biodel annual meeting.

If you are a stockholder of record of Biodel as of the record date referred to above, you may vote in person at the Biodel annual meeting or vote by proxy using the enclosed proxy card. Whether or not you plan to attend the Biodel annual meeting, Biodel urges you to vote by proxy to ensure your vote is counted. You may still attend the Biodel annual meeting and vote in person if you have already voted by proxy. As a stockholder of record:

If your Biodel shares are held by your broker as your nominee, that is, in “street name,” the enclosed voting instruction card is sent by the institution that holds your shares. Please follow the instructions included on that instruction card regarding how to instruct your broker to vote your Biodel shares. If you do not give instructions to your broker, your broker can vote your Biodel shares with respect to “discretionary” items but not with respect to “non-discretionary” items. Discretionary items are proposals considered routine under the rules of The New York Stock Exchange on which your broker may vote shares held in “street name” in the absence of your voting instructions. On non-discretionary items for which you do not give your broker instructions, the Biodel shares will be treated as broker non-votes. It is anticipated that all proposals to be voted on at the Biodel annual meeting will be non-discretionary items.

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All properly executed proxies that are not revoked will be voted at the Biodel annual meeting and at any adjournments or postponements of the Biodel annual meeting in accordance with the instructions contained in the proxy. If a holder of Biodel common stock executes and returns a proxy and does not specify otherwise, the shares represented by that proxy will be voted “FOR” Biodel Proposal Nos. 1 through 5.

Biodel stockholders of record, other than those Biodel stockholders who have executed voting agreements, may change their vote at any time before their proxy is voted at the Biodel annual meeting in one of three ways. First, a stockholder of record of Biodel can send a written notice to the Secretary of Biodel stating that the stockholder would like to revoke its proxy. Second, a stockholder of record of Biodel can submit new proxy instructions either on a new proxy card or via the Internet or by telephone. Third, a stockholder of record of Biodel can attend the Biodel annual meeting and vote in person. Attendance alone will not revoke a proxy. If a Biodel stockholder of record or a stockholder who owns Biodel shares in “street name” has instructed a broker to vote its shares of Biodel common stock, the stockholder must follow directions received from its broker to change those instructions.

Required Vote

The presence, in person or represented by proxy, at the Biodel annual meeting of the holders of a majority of the shares of Biodel common stock outstanding and entitled to vote at the Biodel annual meeting is necessary to constitute a quorum at the meeting. Votes of stockholders of record who are present at the annual meeting in person or by proxy, abstentions and broker non-votes with respect to any particular proposal will be counted towards determining whether a quorum exists for the annual meeting. Approval of Biodel Proposal Nos. 1, 3 and 5 requires the affirmative vote of the holders of a majority of the shares of Biodel common stock present in person or represented by proxy at the Biodel annual meeting and entitled to vote. Approval of Biodel Proposal No. 2 requires the affirmative vote of holders of a majority of shares of Biodel common stock outstanding on the record date for the Biodel annual meeting and entitled to vote. The affirmative vote of a plurality of the votes of the shares present in person or represented by proxy and entitled to vote at the Biodel annual meeting is required for approval of Proposal No. 4.

Votes will be counted by the inspector of election appointed for the meeting, who will separately count “FOR,” “AGAINST” and “WITHHOLD” votes, abstentions and broker non-votes. Broker non-votes will have no effect on Proposal Nos. 1, 3, 4 and 5, but will have the same effect as an “AGAINST” vote for Proposal No. 2. Abstentions will have no effect on Proposal No. 4, but will have the same effect as an “AGAINST” vote for Proposal Nos. 1, 2, 3 and 5.

Voting Agreements

In connection with the Transaction, Biodel’s executive officers and directors have entered into voting agreements with Albireo. Under the terms of the voting agreements, such persons agreed to vote, and these voting agreements grant a limited irrevocable proxy to Albireo to vote, the Biodel securities owned or subsequently acquired by such persons in favor of the proposal to approve the issuance of shares of Biodel common stock pursuant to the Exchange Agreement, the proposal to approve the amendment to the amended and restated certificate of incorporation to effect the 30:1 reverse stock split and the proposal to approve the 2016 Equity Plan described elsewhere in this proxy statement and against any Acquisition Proposal, as defined in “The Exchange Agreement – Biodel Acquisition Proposal and Acquisition Transaction.” In addition, each such Biodel executive officer and director agreed to not, directly or indirectly, take any action in his or her capacity as a stockholder to, among other things, solicit, initiate, knowingly encourage, or take any action that would be reasonably expected to lead to an alternative acquisition proposal or that Biodel is otherwise prohibited from taking under the non-solicitation provisions of the Exchange Agreement. Each party to a voting agreement also agreed not to take any action which would have the effect of preventing or disabling such party from performing its obligations under the voting agreement. As of August 15, 2016, Biodel is not aware of any affiliate of Albireo owning any shares of Biodel common stock entitled to vote at the Biodel annual meeting.

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Solicitation of Proxies

In addition to solicitation by mail, the directors, officers, employees and agents of Biodel or Albireo may solicit proxies from Biodel stockholders by personal interview, telephone, email or otherwise. Biodel has retained Morrow Sodali to act as a proxy solicitor in conjunction with the Biodel annual stockholders meeting at an estimated cost of $30,000. Biodel will pay the entire costs of such solicitation as well as the costs of printing and filing this proxy statement and proxy card.