Millendo Therapeutics, Inc.000154422710-QMar 31, 2020false--12-31YesYesAccelerated 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x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

¨			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Delaware						45-1472564
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)
110 Miller Avenue, Suite 100 Ann Arbor, Michigan						48104
(Address of Principal Executive Offices)						(Zip Code)

Title of each class			Trading Symbol(s)			Name of each exchange on which registered
Common Stock, $0.001 par value			MLND			The Nasdaq Capital Market, LLC

Large accelerated filer			¨			Accelerated filer			x
Non-accelerated filer			¨			Smaller reporting company			x
Emerging growth company			¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

						Page
			PART I — FINANCIAL INFORMATION			4
Item 1.			Financial Statements (unaudited):			4
			Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019			4
			Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2020 and 2019			5
			Consolidated Statements of Stockholders’ Equity (Deficit) for the Three Months Ended March 31, 2020 and 2019			6
			Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019			7
			Notes to Unaudited Interim Consolidated Financial Statements			8
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			17
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			24
Item 4.			Controls and Procedures			24
			PART II — OTHER INFORMATION			26
Item 1.			Legal Proceedings			26
Item 1A.			Risk Factors			27
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			66
Item 3.			Defaults Upon Senior Securities			66
Item 4.			Mine Safety Disclosures			66
Item 5.			Other Information			66
Item 6.			Exhibits			67
Signatures						68

			March 31, 2020						December 31, 2019
Assets
Current assets:
Cash and cash equivalents			$	58,007					$	62,478
Short-term restricted cash			870						1,034
Prepaid expenses and other current assets			4,211						6,344
Refundable tax credit			1,536						1,276
Total current assets			64,624						71,132
Operating lease right-of-use assets			2,866						3,331
Other assets			555						507
Total assets			$	68,045					$	74,970
Liabilities and stockholders’ equity
Current liabilities:
Current portion of debt			$	258					$	208
Accounts payable			2,773						1,495
Accrued expenses			6,738						9,066
Operating lease liabilities — current			1,442						1,751
Total current liabilities			11,211						12,520
Debt, net of current portion			110						168
Operating lease liabilities			2,078						2,395
Other liabilities			7						16
Total liabilities			13,406						15,099
Commitments and contingencies (Note 6)
Stockholders’ equity:
Preferred stock, $0.001 par value: 5,000,000 shares authorized; no shares issued and outstanding			—						—
Common stock, $0.001 par value: 100,000,000 shares authorized; 18,998,252 and 18,266,545 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively			19						18
Additional paid-in capital			274,340						267,018
Accumulated deficit			(220,652)						(208,654)
Accumulated other comprehensive income			123						165
Total stockholders’ equity attributable to Millendo Therapeutics, Inc.			53,830						58,547
Equity attributable to noncontrolling interests			809						1,324
Total stockholders’ equity			54,639						59,871
Total liabilities and stockholders’ equity			$	68,045					$	74,970

			Three Months Ended March 31,
			2020						2019
Operating expenses:
Research and development			$	7,540					$	6,204
General and administrative			4,595						4,453
Loss from operations			12,135						10,657
Other expenses:
Interest expense (income), net			$	(162)					$	(315)
Other loss			25						24
Net loss			$	(11,998)					$	(10,366)
Net loss per share of common stock, basic and diluted			$	(0.65)					$	(0.78)
Weighted-average shares of common stock outstanding, basic and diluted			18,448,507						13,357,999
Other comprehensive income (loss):
Foreign currency translation adjustment			$	(42)					$	(9)
Comprehensive loss			$	(12,040)					$	(10,375)

			Three Months Ended March 31, 2020
			Common Stock																		Additional Paid-in Capital						Accumulated Deficit						Accumulated Other Comprehensive Income						Total Stockholders’ Equity (Deficit) attributable to Millendo Therapeutics, Inc.						Total Equity Attributable to Noncontrolling Interests						Total Stockholders’ Equity (Deficit)
			Shares						Amount
Balance at January 1, 2020			18,266,545						$	18					$	267,018					$	(208,654)					$	165					$	58,547					$	1,324					$	59,871
Issuance of common stock, net of issuance costs			719,400						1						5,649						—						—						5,650						—						5,650
Exercise/forfeiture of BSPCE warrants			12,307						—						593						—						—						593						(515)						78
Stock-based compensation expense			—						—						1,080						—						—						1,080						—						1,080
Foreign currency translation adjustment			—						—						—						—						(42)						(42)						—						(42)
Net income (loss)			—						—						—						(11,998)						—						(11,998)						—						(11,998)
Balance at March 31, 2020			18,998,252						$	19					$	274,340					$	(220,652)					$	123					$	53,830					$	809					$	54,639

			Three Months Ended March 31, 2019
			Common Stock																		Additional Paid-in Capital						Accumulated Deficit						Accumulated Other Comprehensive Income						Total Stockholders’ Equity (Deficit) attributable to Millendo Therapeutics, Inc.						Total Equity Attributable to Noncontrolling Interests						Total Stockholders’ Equity (Deficit)
			Shares						Amount
Balance at Balance at Balance at January 1, 2019			13,357,999						$	13					$	234,876					$	(164,086)					$	148					$	70,951					$	2,171					$	73,122
Stock-based compensation expense			—						—						939						—						—						939						—						939
Foreign currency translation adjustment			—						—						—						—						(9)						(9)						—						(9)
Net income (loss)			—						—						—						(10,366)						—						(10,366)						—						(10,366)
Balance at March 31, 2019			13,357,999						$	13					$	235,815					$	(174,452)					$	139					$	61,515					$	2,171					$	63,686

			Three Months Ended March 31,
			2020						2019
Operating activities:
Net loss			$	(11,998)					$	(10,366)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			37						8
Stock-based compensation expense			1,080						939
Amortization of right-of-use asset			243						76
Changes in operating assets and liabilities:
Prepaid expenses and other current assets			1,807						(162)
Other assets			(1)						(59)
Accounts payable			1,329						398
Accrued expenses and other liabilities			(2,255)						(1,291)
Operating lease liabilities			(403)						(144)
Cash used in operating activities			(10,161)						(10,601)
Investing activities:
Purchase of property and equipment			(26)						(10)
Proceeds from sale of marketable securities			—						2,986
Cash (used in) provided by investing activities			(26)						2,976
Financing activities:
Repayment of debt			—						(45)
Payment of financing costs			(197)						(15)
Proceeds from the issuance of common stock, net of issuance costs			5,718						—
Proceeds from option and warrant exercises			78						—
Repayment of principal on finance lease			(10)						—
Cash provided by (used in) financing activities			5,589						(60)
Effect of foreign currency exchange rate changes on cash			(37)						(14)
Net decrease in cash, cash equivalents and restricted cash			(4,635)						(7,699)
Cash, cash equivalents and restricted cash at beginning of period			63,512						73,770
Cash, cash equivalents and restricted cash at end of period			$	58,877					$	66,071
Supplemental schedule of non-cash investing and financing activities:
Financing costs in accounts payable and accrued expenses			$	68					$	60

With the global spread of the ongoing COVID-19 pandemic in the first quarter of 2020, the Company has implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on its business. The Company anticipates that the COVID-19 pandemic will have an impact on clinical and preclinical development activities. The

			March 31,
			2020						2019
Stock options			3,340,732						2,381,288
Common stock warrants			17,125						17,125
BSA and BSPCE warrants			58,415						156,719
			3,416,272						2,555,132

In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). ASU 2020-01 states any equity security transitioning from the alternative method of accounting under Topic 321 to the equity method, or vice versa, due to an observable transaction will be remeasured immediately before the transition. In addition, the ASU clarifies the accounting for certain non-derivative forward contracts or purchased call options to acquire equity securities stating such instruments will be measured using the fair value principles of Topic 321 before settlement or exercise. The ASU is effective for fiscal years beginning after December 15, 2020, and will be applied on a prospective basis. Early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies the accounting for income taxes by removing exceptions within the general principles of Topic 740 regarding the calculation of deferred tax liabilities, the incremental approach for intraperiod tax allocation, and calculating income taxes in an interim period. In addition, the ASU adds clarifications to the accounting for franchise tax (or similar tax), which is partially based on income, evaluating tax basis of goodwill recognized from a business combination, and reflecting the effect of any enacted changes in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The ASU is effective for fiscal years beginning after December 15, 2020, and will be applied either retrospectively or prospectively based upon the applicable amendments. Early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 resulted in certain modifications to fair value

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Additionally, ASU 2016-13 requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected through the use of an allowance of expected credit losses. In May 2019, the FASB issued ASU 2019-05, Financial Instruments - Credit Losses (Topic 326) Targeted Transition Relief, which amends ASU 2016-13 by providing entities with an option to irrevocably elect the fair value option to be applied on an instrument-by-instrument basis for eligible financial instruments that are within the scope of Topic 326. The fair value option election does not apply to held-to-maturity debt securities. In November 2019, the FASB issued ASU 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which finalized effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses, leases, and hedging standards. Also, in November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which provides clarity about certain aspects of the amendments in ASU 2016-13. ASU 2016-13, as amended, is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and requires a modified retrospective approach. The Company is in the process of evaluating the impact of this new guidance on its consolidated financial statements and related disclosures.

			March 31, 2020
			(Level 1)						(Level 2)						(Level 3)
Assets
Money market funds (included in cash and cash equivalents)			$	51,585					$	—					$	—

			December 31, 2019
			(Level 1)						(Level 2)						(Level 3)
Assets
Money market funds (included in cash and cash equivalents)			$	59,382					$	—					$	—

			March 31, 2020						December 31, 2019
Compensation and related benefits			$	760					$	2,042
Professional fees			2,266						2,929
Preclinical and clinical costs			2,129						1,820
Insurance premiums			831						1,423
Other			752						852
Total			$	6,738					$	9,066

2020 (excluding the three months ended March 31, 2020)			$	1,293
2021			760
2022			783
2023			806
2024			302
Thereafter			—
Total			$	3,944
Present Value Adjustment			(424)
Lease liability at March 31, 2020			$	3,520

			Three Months Ended March 31,
			2020						2019
Research and development			$	300					$	423
General and administrative			780						516
Total			$	1,080					$	939

			Shares						Weighted average exercise price per share						Weighted-average remaining contractual life (years)
Outstanding at December 31, 2019			2,498,606						$	17.18					7.7
Granted			857,875						7.72
Forfeited			(15,749)						14.65
Outstanding at March 31, 2020			3,340,732						$	14.76					8.0
Vested and exercisable at March 31, 2020			1,230,674						$	23.08					5.8
Vested and expected to vest at March 31, 2020			3,340,732						$	14.76					8.0

			Three Months Ended March 31, 2020						Three Months Ended March 31, 2019
Expected term (in years)			6.08						6.05
Expected volatility			78		%				80		%
Risk-free interest rate			1.36		%				2.55		%
Expected dividend yield			0		%				0		%

In connection with the discontinuation of the livoletide program in PWS, the Company is currently evaluating its business strategy to prioritize and allocate resources towards the advancement of its current product candidates and potential future pipeline assets. In an effort to streamline costs, the Company is also in the process of eliminating employee positions representing approximately 30% of its prior headcount, with the majority of the reduction in personnel completed in April 2020. The Company estimates that it will incur one-time costs of approximately $1.0 million in the form of termination benefits related to this plan in the second quarter of 2020.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

In connection with the discontinuation of the livoletide program in PWS, we are currently evaluating our business strategy to prioritize and allocate resources towards the advancement of current product candidates and potential future pipeline assets. In an effort to streamline costs, we are also in the process of eliminating employee positions representing approximately 30% of our prior headcount, with the majority of the reduction in personnel completed in April 2020.

The Phase 2b clinical study of nevanimibe for the treatment of CAH is an open-label, intra-subject dose-escalation trial designed to enroll a total of 10 or more patients with CAH for each of the two distinct cohorts of patients, across approximately 10 to 12 sites. Due to the COVID-19 pandemic, new patients are not being actively enrolled in the study, and we may experience a disruption or delay in our ability to assess already-enrolled patients. We expect to conduct an interim review of the dataset for enrolled patients by the third quarter of 2020.

With respect to clinical development, we have taken measures to implement remote and virtual approaches, including remote patient monitoring and home delivery of drug treatments where possible, to maintain patient safety and trial continuity and to preserve study integrity. For our ongoing Phase 2b clinical trial of nevanimibe, we are experiencing, and expect to continue to experience, a disruption or delay in our ability to enroll and assess patients. As the COVID-19 pandemic continues, we anticipate an impact on our ability to initiate trial sites and maintain patient enrollment. We could also see an impact on our ability to acquire supplies of study drug, report trial results or interact with regulators, ethics committees or other important agencies due to limitations in regulatory authority employee resources or otherwise. In addition, we rely on contract research organizations or other third parties to assist us with clinical trials, and we cannot guarantee that they will continue to perform their contractual duties in a timely and satisfactory manner as a result of the COVID-19 pandemic. If the COVID-19 pandemic continues and persists for an extended period of time, we could experience significant disruptions to our clinical development timelines, which would adversely affect our business, financial condition, results of operations and growth prospects.

•personnel expenses, including salaries, benefits and stock-based compensation expense;

•costs of funding research performed by third-parties, including pursuant to agreements with contract research organizations, (“CROs”), as well as investigative sites and consultants that conduct our preclinical studies and clinical trials;

•expenses incurred under agreements with contract manufacturing organizations (“CMOs”), including manufacturing scale-up expenses and the cost of acquiring and manufacturing preclinical study and clinical trial materials;

•payments made under our third-party licensing agreements;

•consultant fees and expenses associated with outsourced professional scientific development services;

•expenses for regulatory activities, including filing fees paid to regulatory agencies; and

•allocated expenses for facility costs, including rent, utilities, depreciation and maintenance.

			Three Months Ended March 31,
			2020						2019
			(dollars in thousands)
Livoletide expenses			$	4,846					$	3,003
Nevanimibe expenses			252						818
MLE-301 expenses			430						—
Personnel expenses			1,774						1,879
Other expenses			238						504
Total			$	7,540					$	6,204

•the ongoing COVID-19 pandemic, including the potential impact on various aspects and stages of the clinical development process;

•the number of clinical sites included in the trials;

•the length of time required to enroll suitable patients;

•the number of patients that ultimately participate in the trials;

•the number of doses patients receive;

•the duration of patient follow-up and number of patient visits;

•the results of our clinical trials;

•the establishment of commercial manufacturing capabilities;

•the receipt of marketing approvals; and

•the commercialization of product candidates.

			Three Months Ended March 31,
			2020						2019						Change
			(dollars in thousands)
Operating expenses:
Research and development			$	7,540					$	6,204					$	1,336					21.5		%
General and administrative			4,595						4,453						142						3.2
Loss from operations			12,135						10,657						1,478						13.9
Other expenses:
Interest expense (income), net			(162)						(315)						153						(48.6)
Other loss			25						24						1						4.2
Net loss			$	(11,998)					$	(10,366)					$	(1,632)					15.7		%

			Three Months Ended March 31,
			2020						2019						Change
			(dollars in thousands)
Preclinical and clinical development expense			$	5,528					$	4,093					$	1,435					35.1		%
Compensation expense, other than stock-based compensation			1,474						1,456						18						1.2
Stock-based compensation expense			300						423						(123)						(29.1)
Other expenses			238						232						6						2.6
Total research and development expense			$	7,540					$	6,204					$	1,336					21.5		%

•a $1.4 million increase in preclinical and clinical development expense mainly related to the development of livoletide; and

•a $0.1 million decrease in stock-based compensation expenses primarily related to certain changes in headcount.

			Three Months Ended March 31,
			2020						2019
			(in thousands)
Net cash used in operating activities			$	(10,161)					$	(10,601)
Net cash (used in) provided by investing activities			(26)						2,976
Net cash provided by (used in) financing activities			5,589						(60)
Effect of foreign currency exchange rate changes on cash			(37)						(14)
Net decrease in cash, cash equivalents and restricted cash			$	(4,635)					$	(7,699)

•the scope, progress, results and costs of preclinical studies and clinical trials;

•the scope, prioritization and number of our research and development programs;

•the costs, timing and outcome of regulatory review of our product candidates;

•our ability to establish and maintain collaborations on favorable terms, if at all;

•the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs under collaboration agreements, if any;

•the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

•the extent to which we acquire or in-license other product candidates and technologies;

•the costs of securing manufacturing arrangements for commercial production; and

•the costs of establishing or contracting for sales and marketing capabilities if we obtain regulatory approvals to market our product candidates.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Item 4.  Controls and Procedures

Item 1.  Legal Proceedings

On March 24, 2017, a purported shareholder class action lawsuit was filed in the U.S. District Court for the District of Massachusetts (Dahhan v. OvaScience, Inc., No. 1:17-cv-10511-IT (D. Mass.)) against OvaScience and certain former officers and directors of OvaScience alleging violations of Sections 10(b) and 20(a) of the Exchange Act (the "Dahhan Action"). On July 5, 2017, the court entered an order approving the appointment of Freedman Family Investments LLC as lead plaintiff, the firm of Robins Geller Rudman & Dowd LLP as lead counsel and the Law Office of Alan L. Kovacs as local counsel. Plaintiff filed an amended complaint on August 25, 2017. We filed a motion to dismiss the amended complaint, which the court denied on July 31, 2018. On August 14, 2018, we answered the amended complaint. On December 9, 2019, the Court granted leave for plaintiff to file a second amended complaint under seal and permitted defendants to file a motion to strike the second amended complaint. On December 30, 2019, the Court granted the parties’ joint motion to stay all proceedings in the case pending mediation. On March 3, 2020, the parties conducted a mediation session. As the mediation was unsuccessful, the parties are resuming discovery, and the Company filed a motion to strike the second amended complaint on May 1, 2020. We believe that the amended complaint and the second amended complaint are without merit and intend to defend against the litigation. There can be no assurance, however, that we will be successful. A resolution of this lawsuit adverse to the Company or the other defendants could have a material effect on the Company's consolidated financial position and results of operations. At present, we are unable to estimate potential losses, if any, related to the lawsuit.

Item 1A.  Risk Factors

•continuing the ongoing and planned clinical development of nevanimibe;

•continuing the preclinical development and potential clinical development of MLE-301;

•initiating preclinical studies and clinical trials for any additional diseases for our current product candidates and any future product candidates that we may pursue;

•building a portfolio of product candidates through the acquisition or in-license of drugs or product candidates and technologies;

•developing, maintaining, expanding and protecting our intellectual property portfolio;

•manufacturing, or having manufactured, clinical and commercial supplies of our product candidates;

•seeking marketing approvals for our current and future product candidates that successfully complete clinical trials;

•establishing a sales, marketing and distribution infrastructure to commercialize any product candidate for which we may obtain marketing approval;

•hiring additional administrative, clinical, regulatory and scientific personnel; and

•continuing to incur additional costs associated with operating as a public company.

•timely and successful completion of development activities of our current product candidates;

•obtaining and maintaining regulatory and marketing approvals for nevanimibe, MLE-301 and any future product candidates for which we successfully complete clinical trials;

•launching and commercializing any product candidates for which we obtain regulatory and marketing approval by establishing a sales force, marketing and distribution infrastructure or, alternatively, collaborating with a commercialization partner;

•qualifying for coverage and adequate reimbursement by government and third-party payors for our current or any future product candidates, if approved, both in the United States and internationally, and reaching acceptable agreements with such government and third-party payors on pricing terms;

•developing, validating and maintaining a commercially viable, sustainable, scalable, reproducible and transferable manufacturing process for nevanimibe, MLE-301 or any future product candidates that are compliant with current good manufacturing practices, or cGMP;

•establishing and maintaining supply and manufacturing relationships with third-parties that can provide an adequate amount and quality of drugs and services to support our planned clinical development, as well as the market demand for nevanimibe, MLE-301 and any future product candidates, if approved;

•obtaining market acceptance, if and when approved, of nevanimibe, MLE-301 or any future product candidates as a viable treatment option by physicians, patients, third-party payors and others in the medical community;

•effectively addressing any competing technological and market developments;

•implementing additional internal systems and infrastructure, as needed;

•negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter, and performing our obligations pursuant to such arrangements;

•maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how;

•avoiding and defending against third-party interference or infringement claims; and

•attracting, hiring and retaining qualified personnel.

Nevanimibe is still in development and will require additional clinical testing before we are prepared to submit an NDA or other similar application for regulatory approval. MLE-301 is currently in preclinical studies but will also require clinical testing before we are prepared to submit an NDA or other similar application for regulatory approval. We cannot predict with any certainty if or when we might submit an NDA for regulatory approval for nevanimibe or MLE-301 for the treatment of the indications we are pursuing or whether any such application will be approved by the relevant regulatory authority. Human clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. For instance, the FDA or foreign regulatory authorities may not agree with our proposed endpoints for any clinical trials of nevanimibe or MLE-301, even if validated in prior clinical trials of similar product candidates, which may delay the commencement of our future clinical trials. The FDA or foreign regulatory authorities may also not agree with our proposed trial designs or dosing regimens, which may likewise prevent or delay the commencement of our future clinical trials. The clinical trial process is also time-consuming. We estimate that clinical trials of nevanimibe and MLE-301 for the indications we are pursuing will take the next several years to complete. Failure can occur at any stage of the trials, and we could encounter problems that cause us to abandon or repeat clinical trials. For example, we discontinued the development of livoletide as a potential treatment of patients with PWS after receiving results from the Phase 2b trial in April 2020. Further, we may encounter challenges in the clinical development of product candidates for reasons unrelated to the observed safety or efficacy of such product candidates in prior clinical trials. For example, and as previously disclosed, in our Phase 2 clinical trial for the treatment of Cushing’s syndrome ("CS"), we experienced slower than anticipated enrollment, which could have made impractical further development of nevanimibe for the treatment of CS. As a result of the difficulty in enrolling this trial, we discontinued this Phase 2 clinical trial in August 2019 and suspended development of nevanimibe for the treatment of CS. In addition, because we may at times pursue the treatment of multiple indications for a single product candidate, setbacks or failures in, or termination of, clinical development for one indication may have a negative impact on the clinical development for the treatment of other indications.

Success in preclinical testing and early clinical trials does not ensure that later and/or pivotal clinical trials will generate the same results, or otherwise provide adequate data to demonstrate the safety and efficacy of a product candidate. Frequently, product candidates that have shown promising results in early clinical trials have subsequently suffered significant setbacks in later or pivotal clinical trials. For example, we expended substantial time and resources on a previous product candidate, MLE4901, an NK3R antagonist, which we ceased developing in 2017 due to concerns relating to elevated liver enzymes observed in clinical trials that weren’t observed in preclinical testing or early clinical trials. Our approach to targeting endocrine diseases where current therapies do not exist or are insufficient, is novel and unproven, and as such, the cost and time needed to develop nevanimibe and MLE-301 is difficult to predict and our efforts may not be successful. If we do not observe favorable results in future or planned clinical trials of nevanimibe or MLE-301, we may decide to delay or abandon development of nevanimibe or MLE-301, which could harm our business, financial condition and results of operations. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials.

•direct and indirect effects of the ongoing COVID-19 pandemic on various aspects and stages of the clinical development process;

•significant reprioritization and diversion of healthcare resources away from the conduct of clinical trials as a result of the ongoing COVID-19 pandemic, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

•failure to obtain regulatory approval to commence a trial;

•unforeseen safety issues;

•determination of dosing issues;

•lack of effectiveness during clinical trials;

•inability to reach agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites;

•slower than expected rates of patient recruitment, failure to recruit adequate numbers of suitable patients to participate in our clinical trials or failure to maintain participation of recruited patients in clinical trials;

•interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel, quarantines or social distancing protocols imposed or recommended by federal or state governments, employers and others in connection with the ongoing COVID-19 pandemic;

•failure to manufacture sufficient quantities of a product candidate for use in clinical trials;

•inability to monitor patients adequately during or after treatment; and

•inability or unwillingness of medical investigators to follow our clinical protocols.

We are aware of four other companies developing treatments for patients with CAH: Diurnal Group PLC is developing an exogenous cortisol treatment with a modified release intended to more closely match the physiological release profile of cortisol but recently announced a failed Phase 3 study and placed their United States development activities on hold. Diurnal Group PLC submitted a Market Authorization Application to the EMA in December of 2019. Both Spruce Biosciences, Inc and Neurocrine Biosciences, Inc. are developing CRF1 antagonists and have completed Phase 2 studies in adults with CAH. Neurocrine Biosciences, Inc. has announced the initiation of a Phase 2 study in a pediatric CAH population and announced their intention to start an adult Phase 3 CAH study of their product candidate crinecerfont in mid-2020. Spruce Biosciences has announced intentions to conduct two Phase 2b studies in adults with CAH as well as initiate a pediatric Phase 2 study. Preclinically, BridgeBio Pharma, Inc. is evaluating a gene therapy program (BBP-631) to treat CAH and has announced plans to file an IND in 2020.

•the FDA or the applicable foreign regulatory agency’s disagreement with the design or implementation of our clinical trials;

•negative or ambiguous results from our clinical trials or results that may not meet the level of statistical significance required by the FDA or comparable foreign regulatory agencies for approval;

•serious and unexpected drug-related side effects experienced by participants in our clinical trials or by individuals using drugs similar to our product candidates;

•our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory body that our product candidates are safe and effective for the proposed indication;

•the FDA’s or the applicable foreign regulatory agency’s disagreement with the interpretation of data from preclinical studies or clinical trials;

•our inability to demonstrate the clinical and other benefits of our product candidates outweigh any safety or other perceived risks;

•the FDA’s or the applicable foreign regulatory agency’s requirement for additional preclinical studies or clinical trials;

•the FDA’s or the applicable foreign regulatory agency’s disagreement regarding the formulation, labeling or the specifications of our product candidates;

•the FDA’s or the applicable foreign regulatory agency’s failure to approve the manufacturing processes or facilities of third-party manufacturers with which we contract, including failure of such manufacturers to pass the required pre-approval inspections; or

•the potential for approval policies or regulations of the FDA or the applicable foreign regulatory agencies to significantly change in a manner rendering our clinical data insufficient for approval.

•be delayed in obtaining marketing approval for nevanimibe or MLE-301, if at all;

•obtain approval for indications or patient populations that are not as broad as intended or desired;

•obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;

•be subject to additional post-marketing testing requirements;

•be required to perform additional clinical trials to support approval or be subject to additional post-marketing testing requirements;

•have regulatory authorities withdraw, or suspend, their approval of the drug or impose restrictions on its distribution in the form of REMS;

•be subject to the addition of labeling statements, such as warnings or contraindications;

•be sued; or

•experience damage to our reputation.

•issue a warning letter asserting that we are in violation of the law;

•seek an injunction or impose administrative, civil or criminal penalties or monetary fines;

•suspend or withdraw regulatory approval;

•suspend any ongoing clinical trials;

•refuse to approve a pending NDA or comparable foreign marketing application (or any supplements thereto) submitted by us or our strategic partners;

•restrict the marketing or manufacturing of the drug;

•seize or detain the drug or otherwise require the withdrawal of the drug from the market;

•refuse to permit the import or export of product candidates; or

•refuse to allow us to enter into supply contracts, including government contracts.

•the efficacy and potential advantages compared to alternative treatments;

•the success of our efforts to educate physicians, patients, third-party payors and others in the medical community on the benefits of our products;

•effectiveness of sales and marketing efforts;

•the cost of treatment in relation to alternative treatments, including any similar generic treatments;

•our ability to offer our drugs, once approved, for sale at competitive prices;

•the convenience and ease of administration compared to alternative treatments;

•the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

•the strength of marketing and distribution support;

•the availability of third-party coverage and adequate reimbursement, and patients’ willingness to pay out-of-pocket in the absence third-party coverage or adequate reimbursement;

•the prevalence and severity of any side effects; and

•any restrictions on the use of our drugs, once approved, together with other medications

•our inability to raise additional capital through equity or debt financings or through lending and licensing arrangements;

•our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;

•the inability of sales personnel to obtain access to educate adequate numbers of physicians as to the benefits or our drug products;

•the inability of reimbursement professionals to negotiate arrangements, for formulary access, reimbursement, and other acceptance by payors;

•restricted or closed distribution channels that make it difficult to distribute our products to segments of the patient population;

•the lack of complementary medicines to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and

•unforeseen costs and expenses associated with creating an independent sales and marketing organization.

•different regulatory requirements for approval of therapies in foreign countries;

•reduced protection for intellectual property rights;

•unexpected changes in tariffs, trade barriers and regulatory requirements;

•economic weakness, including inflation, or political instability in particular foreign economies and markets;

•compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

•foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country;

•foreign reimbursement, pricing and insurance regimes;

•workforce uncertainty in countries where labor unrest is more common than in the United States;

•changes in diplomatic and trade relationships;

•anti-corruption laws, including the FCPA, and its equivalent in foreign jurisdictions, such as the UK Bribery Act;

•production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

•business interruptions resulting from pandemics and public health emergencies, including those related to the COVID-19 pandemic, geopolitical actions, including war and terrorism or natural disasters including earthquakes, typhoons, floods and fires.

•decreased demand for any product candidate that we may develop;

•loss of revenue;

•substantial monetary awards to trial participants or patients;

•significant time and costs to defend the related litigation;

•withdrawal of clinical trial participants;

•the inability to commercialize any product candidate that it may develop;

•injury to our reputation and significant negative media attention; and

•increased marketing costs to attempt to overcome any injury to our reputation or negative media attention.

•the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, in return for the purchase, recommendation, leasing or furnishing of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand, and prescribers, purchasers, formulary managers, and others on the other hand. In addition, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively PPACA, amended the intent requirement of the federal Anti-Kickback Statute, establishing that a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation;

•federal civil and criminal false claims laws, including the federal civil False Claims Act, and civil monetary penalty laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid or other government payors that are false or fraudulent. PPACA provides, and recent government cases against pharmaceutical and medical device manufacturers support the view, that federal Anti-Kickback Statute violations and certain marketing practices, including off-label promotion, may implicate the federal civil False Claims Act;

•the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal civil and criminal statutes that prohibit a person from knowingly and willfully executing a scheme or from making false or fraudulent statements to defraud any healthcare benefit program, regardless of the payor (e.g., public or private);

•HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization by entities subject to the rule, such as health plans, health care clearinghouses and certain health care providers, known as covered entities, and their business associates who create, use or disclose individually identifiable health information on their behalf;

•federal transparency laws, including the federal Physician Payments Sunshine Act, that require certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to CMS information related to: (i) payments or other “transfers of value” made to physicians, as defined by such law, and teaching hospitals and (ii) ownership and investment interests held by physicians and their immediate family members;

•state and foreign law equivalents of each of the above federal laws, such as state anti-kickback, self-referral, and false claims laws which may apply to our business practices, including but not limited to, research, distribution, sales and marketing arrangements as well as submitting claims involving healthcare items or services reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical manufacturers to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government that otherwise restricts payments that may be made to healthcare providers; state laws that require pharmaceutical manufacturers to file reports with states regarding marketing information, such as the tracking and reporting of gifts, compensation and other remuneration and items of value provided to healthcare professionals and entities; state laws that require the reporting of information related to drug pricing; and state and local laws requiring the registration of pharmaceutical sales representatives; and

•state and foreign laws that 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.

We expect that PPACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we are able to charge for any approved drug in the United States. For example, there have been several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare, and reform government program reimbursement methodologies for drugs. At the federal level, the Trump administration’s budget proposal for fiscal year 2021 includes a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. On March 10, 2020, the Trump administration sent “principles” for drug pricing to Congress, calling for legislation that would, among other things, cap Medicare Part D beneficiary out-of-pocket pharmacy expenses, provide an option to cap Medicare Part D beneficiary monthly out-of-pocket expenses, and place limits on pharmaceutical price increases. Moreover, the Trump administration previously released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products, and reduce the out of pocket costs of drug products

In addition, other legislative changes have been adopted since PPACA was enacted. These changes include aggregate reductions in Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, following passage of the Bipartisan Budget Act of 2018, among other legislative amendments, will remain in effect through 2030 unless additional Congressional action is taken. The Coronavirus Aid, Relief and Economic Security Act, or CARES Act, which was signed into law in March 2020 and is designed to provide financial support and resources to individuals and businesses affected by the COVID-19 pandemic, suspended the 2% Medicare sequester from May 1, 2020 through December 31, 2020, and extended the sequester by one year, through 2030. The American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several types of providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on our customers and, accordingly, our financial operations.

•lose our rights to develop and market our current and any future product candidates;

•lose our rights to patent protection for our current or any future product candidates;

•experience significant delays in the development or commercialization of our current or any future product candidates;

•not be able to obtain any other licenses on acceptable terms, if at all; or

•incur liability for damages.

•others may be able to make compounds, nevanimibe or MLE-301 formulations that are similar to our nevanimibe or MLE-301 formulations but that are not covered by the claims of the patents that we own or control;

•we or any strategic partners might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own or control;

•we might not have been the first to file patent applications covering certain of our inventions;

•others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;

•it is possible that our pending patent applications will not lead to issued patents;

•issued patents that we own or control may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges;

•our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for certain research and development activities, as well as in countries where we do not have patent rights and then use the information learned from such activities to develop competitive drugs for sale in our major commercial markets;

•we may not develop additional proprietary technologies that are patentable; and

•the patents of others may have an adverse effect on our business.

•inability to meet our product specifications and quality requirements consistently;

•delay or inability to procure or expand sufficient manufacturing capacity;

•issues related to scale-up of manufacturing;

•costs and validation of new equipment and facilities required for scale-up;

•failure to comply with cGMP and similar foreign standards;

•inability to negotiate manufacturing agreements with third-parties under commercially reasonable terms;

•termination or nonrenewal of manufacturing agreements with third-parties in a manner or at a time that is costly or damaging to us;

•reliance on a limited number of sources, and in some cases, single sources for product components;

•lack of qualified backup suppliers for those materials that are currently purchased from a sole or single source supplier;

•operations of our third-party manufacturers or suppliers could be disrupted by conditions unrelated to our business or operations, including public health emergencies, such as the COVID-19 pandemic, natural disasters, such as earthquakes, fires or floods, or the bankruptcy of the manufacturer or supplier;

•inability to find replacement manufacturers or suppliers, if necessary, on terms favorable to us, in a timely manner, or at all;

•carrier disruptions or increased costs that are beyond our control; and

•failure to deliver our products under specified storage conditions and in a timely manner.

•diversion of management attention from ongoing business concerns to integration matters;

•coordinating clinical and preclinical development plans;

•consolidating and rationalizing information technology and accounting platforms and administrative infrastructures;

•complexities associated with managing the geographic separation of the combined businesses and consolidating multiple physical locations;

•reconciling different corporate cultures; and

•retaining scientific and other key employees.

We are highly dependent on the services of our key executives and personnel, including Julia C. Owens, Ph.D., our chief executive officer, Christophe Arbet-Engels, our chief medical officer, and Ryan Zeidan, Ph.D., our chief development officer, and if we are not able to retain these members of our management team or recruit and retain additional management, clinical and scientific personnel, our business will be harmed.

We are highly dependent on Drs. Owens, Arbet-Engels, and Zeidan. The employment agreements we have with these officers do not prevent such persons from terminating their employment with us at any time. Further, these officers may be unable to perform their duties or have limited availability due to COVID-19 or other health emergencies. The temporary or permanent loss of the services of any of these persons could impede the achievement of our research, development and commercialization objectives.

To succeed, we must recruit, develop, retain, manage and motivate qualified clinical, scientific, technical, general and administrative and management personnel while facing significant competition for experienced personnel. In April 2020, we announced our decision to discontinue the development of livoletide as a potential treatment for PWS. In connection with the discontinuation of the livoletide program in PWS, we are in the process of eliminating employee positions representing approximately 30% of our prior headcount, with the majority of the reduction in personnel completed in April 2020, or the restructuring. The restructuring could harm our ability to attract and retain qualified personnel. The restructuring could also result in reduced morale and productivity among our remaining personnel. Our inability or failure to successfully attract and retain qualified personnel, particularly at the management level, could adversely affect our ability to execute our business plan and harm our operating results. In particular, the loss of one or more of our executive officers could be detrimental if we cannot recruit suitable replacements in a timely manner. The competition for qualified personnel in the pharmaceutical field is intense and we may be unable to continue to attract and retain qualified personnel necessary for the development of our business or to recruit suitable replacement personnel.

•the commencement, enrollment or results of our clinical trials or changes in the development status of our product candidates;

•any delay in our regulatory filings for any product candidate we may develop, and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter or a request for additional information;

•adverse results from, delays in or termination of clinical trials;

•adverse regulatory decisions, including failure to receive regulatory approval of our product candidates;

•unanticipated serious safety concerns related to the use of our product candidates;

•changes in financial estimates by us or by any securities analysts who might cover our stock;

•conditions or trends in our industry;

•changes in the structure of healthcare payment systems;

•changes in the market valuations of similar companies;

•stock market price and volume fluctuations of comparable companies and, in particular, those that operate in the biopharmaceutical industry;

•publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities analysts;

•announcements by us or our competitors of significant acquisitions, strategic partnerships or divestitures;

•announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us;