This prospectus relates to the resale or other disposition by the selling
stockholders identified in this prospectus (the "Selling Stockholders"), from time to time, of up to 8,626,037 shares of our
common stock, par value $0.001 per share (the “Common Stock”).
We are not selling any shares of Common Stock under this prospectus
and will not receive any of the proceeds from the sale or other disposition of Common Stock by the selling stockholders.
The selling stockholders or their pledgees, assignees, permitted transferees
or other successors-in-interest may offer and sell or otherwise dispose of the shares of common stock described in this prospectus from
time to time through public or private transactions at fixed prices, at prevailing market prices, at prices related to prevailing market
prices, at varying prices determined at time of sale, or at privately negotiated prices. The selling stockholders will bear all commissions
and discounts, if any, attributable to the sales of shares. We will bear all costs, expenses and fees in connection with the registration
of the shares. See “Plan of Distribution” beginning on page 52 for more information about how the selling stockholders
may sell or dispose of their shares of Common Stock.
Our common stock is traded on the Nasdaq Capital Market under the symbol
“LQDA.” On September 21, 2021, the last reported sale of our Common Stock was $2.60 per share.
RISK FACTORS
Investing in our common stock involves a high degree of risk. You
should carefully consider the risks described below, as well as the other information included in and incorporated by reference into this
prospectus such as the information contained under the heading “Special Note Regarding Forward-Looking Statements”
before deciding whether to invest in our common stock. The occurrence of any of the events or developments described below could harm
our business, financial condition, results of operations and growth prospects. In such an event, the market price of our common stock
could decline and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we
currently deem immaterial also may impair our business operations. We may update these risk factors in our periodic and other filings
with the SEC.
The following is a summary of the principal risk factors described
in this section:
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We expect to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates through
clinical trials, seek regulatory approval and pursue commercialization of any approved product candidates. The future viability of our
company is dependent on our ability to raise additional capital to finance our future operations.
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We have a history of losses and our future profitability remains uncertain.
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We are primarily dependent on the success of our product candidate, LIQ861, for which we recently resubmitted an NDA with the FDA
in response to a CRL received from the FDA in November 2020, and this product candidate may fail to receive marketing approval (in
a timely manner or at all) or may not be commercialized successfully.
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United Therapeutics has initiated a lawsuit against us in which it claims that LIQ861 is infringing three of its patents, which may
result in our company being delayed in its efforts to commercialize LIQ861.
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Liquidia PAH does not hold the FDA regulatory approval for Injected Treprostinil or the RG Cartridge and is dependent on Sandoz and
Chengdu to manufacture and supply Injected Treprostinil and the RG Cartridge, respectively, in compliance with FDA requirements, and is
more broadly dependent on Sandoz’s and Chengdu’s FDA and healthcare compliance relative to Injected Treprostinil and the RG
Cartridge, respectively.
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Sales of Injected Treprostinil are dependent on market acceptance of generic treprostinil for parenteral administration and the medical
devices used for administration of Injected Treprostinil, including the RG Cartridge, by patients, health care providers and by third-party
payors, while interactions with these persons and entities are subject to compliance requirements. The commercial success of Injected
Treprostinil may also be impacted by increasing generic competition which may result in declining prices for Injected Treprostinil.
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We expect that we will need further financing for our existing business and future growth, which may not be available on acceptable
terms, if at all. Failure to obtain funding on acceptable terms and on a timely basis may require us to curtail, delay or discontinue
our product development efforts or other operations. The failure to obtain further financing may also prevent us from capitalizing on
other potential product candidates or indications which may be more profitable than LIQ861 or for which there may be a greater likelihood
of success.
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We face significant competition from large pharmaceutical companies, among others, in developing our products and in gaining regulatory
approval to bring them to market in time to achieve commercial success, and our operating results will suffer if we
are unable to compete effectively.
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Our credit facility with SVB contains operating and financial covenants that restrict our business and financing activities, and is
subject to acceleration in specified circumstances, which may result in SVB taking possession and disposing of any collateral.
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Our products may not achieve market acceptance.
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Our product candidates are based on our proprietary, novel technology, PRINT, which has not been used to manufacture any products
that have been previously approved by the FDA, making it difficult to predict the time and cost of development and of subsequently obtaining
regulatory approval.
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Our business and operations are likely to be adversely affected by the evolving and ongoing COVID-19 global pandemic.
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We may not be able to build a commercial operation, including establishing and maintaining marketing and sales capabilities or enter
into agreements with third parties to market and sell our drug products.
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We depend on third parties for clinical and commercial supplies, including single suppliers for the active ingredient, the device,
encapsulation and packaging of LIQ861.
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We rely on third parties to conduct our preclinical studies and clinical trials.
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We may become involved in litigation to protect our intellectual property, to enforce our intellectual property rights or to defend
against claims of intellectual property infringement by third parties, which could be expensive, time-consuming and may not be successful.
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We depend on skilled labor, and our business and prospects may be adversely affected if we lose the services of our skilled personnel,
including those in senior management, or are unable to attract new skilled personnel.
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We expect that the market price of our common stock may be volatile, and you may lose all or part of your investment.
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As a public company, we are obligated to develop and maintain proper and effective internal control over financial reporting and any
failure to do so may adversely affect investor confidence in us and, as a result, the trading price of our shares. The results of our
assessment of the effectiveness of internal control over financial reporting (“ICFR”) indicate that we had multiple material
weaknesses which have not been fully remedied as of June 30, 2021.
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Risks Related to our Financial Position and Need for Additional
Capital
We expect to incur significant expenses and operating losses
for the foreseeable future as we advance our product candidates through clinical trials, seek regulatory approval and pursue commercialization
of any approved product candidates. The future viability of our company is dependent on our ability to raise additional capital to finance
our future operations.
We are subject to risks and uncertainties common to early-stage companies
in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence
on key personnel, protection of proprietary technology, compliance with government regulations, the impact of the COVID-19 coronavirus,
and the ability to secure additional capital to fund operations. We expect to incur significant expenses and operating losses for the
foreseeable future as we advance product candidates through clinical trials, seek regulatory approval and pursue commercialization of
any approved product candidates. In addition, if we obtain marketing approval for any of our product candidates, we would incur significant
commercialization expenses related to product manufacturing, marketing, sales and distribution. These efforts require significant amounts
of additional capital, adequate personnel and infrastructure, and extensive compliance-reporting capabilities. Even if our development
efforts are successful, it is uncertain when, if ever, we will realize significant revenue from product sales. The future viability of
our company is dependent on its ability to raise additional capital to finance our future operations. We will seek additional funding
through public or private financings, debt financing or collaboration. The inability to obtain funding, as and when needed, would have
a negative impact on our financial condition and ability to pursue our business strategies.
We have a history of losses and our future profitability remains
uncertain.
We have incurred net losses of $15.7 million during the six months
ended June 30, 2021 and $59.8 million and $47.6 million during the years ended December 31, 2020 and 2019, respectively.
We also had negative operating cash flows for each of these periods. As of June 30, 2021, we had an accumulated deficit of $290.7 million.
Since our incorporation, we have invested heavily in the development
of our product candidates and technologies, as well as in recruiting management and scientific personnel. To date, we have not commenced
the commercialization of our product candidates and all of our pre-acquisition revenue has been derived from up-front fees and milestone
payments made to us in connection with licensing and collaboration arrangements we have entered into and the Promotion Agreement, under
which we share in the profit derived from the sale of Treprostinil Injection in the United States. These up-front fees and milestone payments
have been, and combined with revenue generated from Injected Treprostinil may continue to be, insufficient to match our operating expenses.
We expect to continue to devote substantial financial and other resources to the clinical development of our product candidates and, as
a result, must generate significant revenue to achieve and maintain profitability or raise additional capital to fund clinical development.
We may continue to incur losses and negative cash flow and may never transition to profitability or positive cash flow.
We expect that we will need further financing for our existing
business and future growth, which may not be available on acceptable terms, if at all. Failure to obtain funding on acceptable terms and
on a timely basis may require us to curtail, delay or discontinue our product development efforts or other operations. The failure to
obtain further financing may also prevent us from capitalizing on other potential product candidates or indications which may be more
profitable than LIQ861 or for which there may be a greater likelihood of success.
We anticipate that we will need to raise additional funds to meet our
future funding requirements for the continued research, development and commercialization of our product candidates and technology. In
the event that funds generated from our operations are insufficient to fund our future growth, we may raise additional funds through the
issuance of equity or debt securities or by borrowing from banks or other financial institutions. We cannot assure you that we will be
able to obtain such additional financing on terms that are acceptable to us, or at all. Global and local economic conditions could negatively
affect our ability to raise funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities,
your ownership interest will be diluted, and the terms of such securities may include liquidation or other preferences that adversely
affect your rights as a stockholder. Such financing, even if obtained, may be accompanied by restrictive covenants that may, among others,
limit our ability to pay dividends or require us to seek consent for payment of dividends, or restrict our freedom to operate our business
by requiring consent for certain actions.
If we fail to obtain additional financing on terms that are acceptable
to us, we will not be able to implement our growth plans, and we may be required to significantly curtail, delay or discontinue one or
more of our research, development or manufacturing programs or the commercialization of any approved product. Furthermore, if we fail
to obtain additional financing on terms that are acceptable to us, we may forgo or delay the pursuit of opportunities presented by other
potential product candidates or indications that may later prove to have greater commercial potential than the product candidates and
indications that we have chosen to pursue.
Our credit facility with SVB contains operating and financial
covenants that restrict our business and financing activities, and is subject to acceleration in specified circumstances, which may result
in SVB taking possession and disposing of any collateral.
Our credit facility contains restrictions that limit our flexibility
in operating our business. Under the terms of the loan and security agreement dated as of February 26, 2021 (“LSA”) with
SVB, pursuant to which SVB extended a $20.5 million term loan facility to us, of which $10.5 million was received on March 1, 2021
in an initial tranche and up to an aggregate of $10.0 million may be received in two equal tranches subject to our satisfaction of certain
conditions thereunder, we may not, among other actions, without the prior written consent of SVB, (a) pay any dividends or make any
other distribution or payment or redeem, retire or purchase any capital stock, except in certain prescribed circumstances, (b) create,
incur, assume, or be or be liable with respect to any indebtedness except certain permitted indebtedness, or make or permit any payment
on any subordinated debt, except under certain limited circumstances, or (c) merge or consolidate with any other person, other than
certain limited exceptions. Additionally, on August 26, 2021, we and our two wholly owned subsidiaries, Liquidia Technologies and
Liquida PAH, entered into the Loan Modification Agreement with SVB which amended the terms of the LSA to modify the cumulative “Cash
Burn” (as defined in the LSA) requirements for the periods ending September 30, 2021, December 31, 2021 and March 31,
2022 and for each calendar quarter thereafter to $56.1 million, $61.1 million and $65.6 million, respectively; provided, however, that
the above amounts shall be increased by an amount equal to 75% of the aggregate net cash proceeds received by us from the sale of our
equity securities on or after June 30, 2021 but on or prior to the last day of such calendar quarter; provided, further, that upon
the Funding Date of the Term C Loan Advance (as such terms are defined in the LSA), the Cash Burn covenant shall no longer apply. Our
facility with SVB is collateralized by all of our assets excluding our intellectual property, on which we have granted a negative pledge.
If we breach certain of our debt covenants and are unable to cure such
breach within the prescribed period or are not granted waivers in relation to such breach, it may constitute an event of default under
the LSA, giving SVB the right to require us to repay the then outstanding debt immediately, and SVB could, among other things, foreclose
on the collateral granted to them to collateralize such indebtedness, which excludes our intellectual property, if we are unable to pay
the outstanding debt immediately.
Our management has broad discretion in using the net proceeds
from prior equity offerings and may not use them effectively.
We are using the net proceeds of our April 2021 private offering
and prior public and private equity offerings for ongoing commercial development of LIQ861 and for general corporate purposes. Our management
has broad discretion in the application of such proceeds and could spend the proceeds in ways that do not improve our results of operations
or enhance the value of our equity. The failure by our management to apply these funds effectively could result in financial losses that
could have a material adverse effect on our business, diminish cash flows available to service our debt, cause the value of our equity
to decline and delay the development of our product candidates. Pending their use, we may invest such proceeds in short-term, investment-grade,
interest-bearing securities, which may not yield favorable returns.
Our ability to use our net operating loss carry forwards and
certain other tax attributes may be limited.
Under Section 382 of the Internal Revenue Code of 1986, as amended
(the “Code”), if a corporation undergoes an “ownership change”, generally defined as a greater than 50.0% change
(by value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss
carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income may be limited. With
our April 2021 private placement, the closing of the RareGen acquisition in November 2020, our July 2020 equity offering,
our December 2019 private placement, issuances under our prior at-the-market facility, our March 2019 follow-on equity offering
and our July 2018 initial public offering, as well as other past transactions, we may have already triggered an “ownership
change” limitation. We have not completed a formal study to determine if any “ownership changes” within the meaning
of IRC Section 382 have occurred. If “ownership changes” within the meaning of Section 382 of the Code have occurred,
and if we earn net taxable income, our ability to use our net operating loss carryforwards and research and development tax credits generated
since inception to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future
tax liability to us and could require us to pay U.S. federal income taxes earlier than would be required if such limitations were not
in effect. Similar rules and limitations may apply for state income tax purposes.
We are a late-stage clinical biopharmaceutical company with no
approved products and no historical revenue from the sale of our own products, which may make it difficult for you to evaluate our business,
financial condition and prospects.
We are a late-stage clinical biopharmaceutical company with no history
of commercial operations upon which you can evaluate our prospects other than the activities we have undertaken with respect to the Promotion
Agreement with Sandoz. Drug product development involves a substantial degree of uncertainty. Our operations to date have been limited
to engaging in promotional and nonpromotional activities under the Promotion Agreement with Sandoz, developing our PRINT technology, undertaking
preclinical studies and clinical trials for our product candidates and collaborating with pharmaceutical companies, including GSK, to
expand the applications for our PRINT technology through licensing as well as joint product development arrangements. We have not obtained
marketing approval for any of our product candidates and, accordingly, have not demonstrated an ability to generate revenue from our own
pharmaceutical products or successfully overcome the risks and uncertainties frequently encountered by companies undertaking drug product
development. Consequently, your ability to assess our business, financial condition and prospects may be significantly limited. Further,
the net losses that we incur may fluctuate significantly from quarter-to-quarter and year-to-year, such that a period-to-period comparison
of our results of operations may not be a good indication of our future performance. Other unanticipated costs may also arise.
Liquidia PAH does not hold the FDA regulatory approval for Injected
Treprostinil and is dependent on Sandoz to manufacture and supply Injected Treprostinil in compliance with FDA requirements, and is more
broadly dependent on Sandoz’s FDA and healthcare compliance relative to Injected Treprostinil.
Sandoz holds the FDA approval (the ANDA) for and controls Injected
Treprostinil and is responsible among other things for the compliant manufacture, distribution, labeling, and advertising of Injected
Treprostinil. Our role is one of a specialized service provider to Sandoz. As a result, we are dependent on Sandoz to manufacture and
supply Injected Treprostinil, and dependent on Sandoz for the continued FDA compliance of Injected Treprostinil. We do not have control
over Sandoz’s compliance with laws and regulations applicable to drug manufacturers and ANDA holders (for example, applicable current
good manufacturing practices (GMPs); FDA labeling, promotional labeling, and advertising requirements; pharmacovigilance and adverse event
reporting; and other ongoing FDA reporting and submission requirements), nor over its compliance with healthcare compliance and fraud,
waste, and abuse laws, or similar regulatory requirements and other laws and regulations, such as those related to environmental health
and safety matters. In addition, we have no control over the ability of Sandoz to maintain adequate quality control, quality assurance
and qualified personnel, or other personnel with roles related to the regulatory compliance of Injected Treprostinil and its labeling,
promotion, and advertising or of Sandoz’s activities in relation to government healthcare programs. If the FDA or a comparable foreign
regulatory authority finds deficiencies with the manufacture or quality assurance of Injected Treprostinil or identifies safety or efficacy
concerns related to Injected Treprostinil, or if Sandoz otherwise is unable to comply with applicable laws, regulations and standards,
Sandoz’s ability to manufacture, sell and supply Injected Treprostinil could be limited.
Sandoz’s ability to consistently manufacture and supply Injected
Treprostinil in a timely manner may also be interrupted by production shortages or other supply interruptions, including as a result of
the ongoing COVID-19 pandemic. Our share of net profits under the Promotion Agreement is reduced by certain manufacturing costs and other
write-offs related to Sandoz’s inability to sell Injected Treprostinil, including in the event that Injected Treprostinil expires
prior to sale. Currently, Injected Treprostinil expires 24 months after the date of manufacture.
Sales of Injected Treprostinil are dependent on market acceptance
of generic treprostinil for parenteral administration by patients, health care providers and by third-party payors, while interactions
with these persons and entities are subject to compliance requirements. The commercial success of Injected Treprostinil may also be impacted
by increasing generic competition which may result in declining prices for Injected Treprostinil.
Our ability to sell Injected Treprostinil is dependent on market acceptance
of generic treprostinil for parenteral administration by patients, health care providers and by third-party payors. If Injected Treprostinil
does not achieve an adequate level of acceptance, we may not generate sufficient revenue to offset our cost of revenue.
At the same time, arrangements with healthcare providers, physicians,
third-party payors and customers, and our sales, marketing and educational activities, may expose us to broadly applicable fraud and abuse
and other healthcare laws and regulations that may constrain its business or financial arrangements and relationships.
The degree of market acceptance of Injected Treprostinil will depend
on a number of factors, including:
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the efficacy, safety and potential advantages compared to alternative treatments;
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our ability to offer Injected Treprostinil for sale at competitive prices (generic drug prices, after initial generic entry, have
been observed to decline with the entrance of additional generic competition);
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the convenience and ease of administration compared to alternative treatments;
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product labeling or product insert requirements of the FDA or foreign regulatory authorities, including any limitations or warnings
contained in a product’s approved labeling, including any black box warning;
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the willingness of the target patient population to try new treatments, including the generic version of a brand, and of physicians
to prescribe such treatments;
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our ability to hire and retain sales and marketing personnel and their ability to support Sandoz under the Promotion Agreement;
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the strength of Sandoz’s manufacturing and distribution support;
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the requirement by third-party payors to use generic treprostinil for parenteral administration in place of Remodulin;
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the availability of third-party coverage and adequate reimbursement for Injected Treprostinil;
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the prevalence and severity of any side effects;
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any restrictions on the use of Injected Treprostinil together with other medications;
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our and Sandoz’s ability to maintain relationships with the specialty pharmacies; and
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the services provided by specialty pharmacies related to use of Injected Treprostinil.
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Our business may also be impacted by the need to maintain compliant
operations (including oversight and monitoring of personnel and our activities) in relation to interactions with the persons and parties
noted above, relative to FDA and healthcare law requirements, and with consideration of government and industry compliance best practices.
Medical devices, which we do not control, are necessary for the
administration of Injected Treprostinil.
In order for Injected Treprostinil to be administered to patients,
patients must use certain other medical equipment, including pumps, cartridges and infusion sets. We do not manufacture or control such
medical equipment, which is manufactured by third parties and owned and dispensed by specialty pharmacies, hospitals or other third parties.
Our ability to serve patients is dependent upon the ability of specialty pharmacies to maintain sufficient inventory of such medical equipment
to provide to patients. If manufacturers cease to manufacture or support medical equipment or if specialty pharmacies are unable to obtain
or maintain sufficient inventories of such medical equipment, our sales may be adversely impacted.
We have worked with Chengdu to develop the RG Cartridge, which recently
received FDA 510(k) clearance. The ability of patients to administer Injected Treprostinil through subcutaneous injection is dependent
on the continued availability of the RG Cartridge. Our ability to sell the Injected Treprostinil for subcutaneous administration is dependent
on market acceptance of the RG Cartridge by patients, health care providers and by third-party payors. If the RG Cartridge does not achieve
an adequate level of acceptance, our ability to provide Treprostinil Injection to patients who receive Treprostinil through subcutaneous
injection will be limited. The degree of market acceptance of the RG Cartridge will depend on a number of factors, including:
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the efficacy, safety and potential advantages or disadvantages compared to alternative cartridges;
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Chengdu’s ability to offer the RG Cartridge for sale at competitive prices;
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the strength of Chengdu’s manufacturing and distribution support; and
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Chengdu’s ability to maintain regulatory approvals necessary to manufacture and sell the RG Cartridge in the United States.
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We are also seeking to work with third parties to develop or procure
pumps that can be used to administer Injected Treprostinil in the future. Such pumps may require FDA 510(k) clearance before they
can be sold. There is no guarantee that we or a third party will receive FDA 510(k) clearance. Failure by us or third parties to
successfully develop or supply the medical equipment or to obtain or maintain regulatory approval or clearance of such medical equipment
could negatively impact the market acceptance of and sales of Injected Treprostinil.
Risks Related to the Commercialization of our Product Candidates
and Generic Treprostinil Injection
United Therapeutics has initiated a lawsuit against us in which
it claims that LIQ861 is infringing three of its patents, which may result in our company being delayed in its efforts to commercialize
LIQ861.
We are developing LIQ861 under the 505(b)(2) regulatory pathway
with Tyvaso as the reference listed drug. Accordingly, under the Hatch-Waxman Amendments to the Food, Drug and Cosmetic Act, we were required
to, in the NDA for LIQ861, certify that patents listed in the Orange Book for Tyvaso are invalid, unenforceable or will not be infringed
by the manufacture, use or sale of LIQ861. Two of these patents are U.S. Patent No. 9,604,901 (the “‘901 Patent”),
entitled “Process to Prepare Treprostinil, the Active Ingredient in Remodulin®”, and U.S. Patent No. 9,593,066 (the
“‘066 Patent”), entitled “Process to Prepare Treprostinil, the Active Ingredient in Remodulin®”, both
of which are owned by United Therapeutics. A notice of the paragraph IV certification was required to be provided to United Therapeutics
as the owner of the patents that are the subject of the certification to which the NDA for LIQ861 refers. On June 4, 2020, United
Therapeutics, as the holder of such patents, asserted a patent challenge directed to the ‘901 Patent and the ‘066 Patent by
filing a complaint against us in the U.S. District Court for the District of Delaware (Case No. 1:20-cv-00755-UNA) (the “Hatch-Waxman
Litigation”), thereby triggering an automatic 30-month regulatory stay on final approval of the NDA for LIQ861. As a result of United
Therapeutics’ patent challenge, the FDA is prohibited from approving the NDA for LIQ861 until the earliest to occur of the expiration
of the 30-month stay, which is projected to be in October 2022, expiration of the ‘901 Patent and ‘066 Patent, settlement
of the lawsuit or a decision in the infringement suit that is favorable to us as the NDA applicant. Accordingly, we may be subject to
significant delay and incur substantial costs in litigation before we are able to commercialize LIQ861, if at all.
On July 21, 2020, the U.S. Patent and Trademark Office (the USPTO)
issued U.S. Patent No. 10,716,793 (the “‘793 Patent”), entitled “Treprostinil Administration by Inhalation”,
to United Therapeutics. On July 22, 2020, United Therapeutics filed an amended complaint in the Hatch-Waxman Litigation asserting
infringement of the ‘793 Patent by the practice of LIQ861. The infringement allegations of the ‘793 Patent are separate from
the 30-month regulatory stay on final approval of the NDA for LIQ861, which is only associated with the infringement allegations of the
‘901 Patent and the ‘066 Patent. United Therapeutics’ motion to dismiss our invalidity defenses and counterclaims concerning
the ‘793 Patent was denied by the U.S. District Court for the District of Delaware on November 3, 2020.
On July 30, 2020, Judge Andrews, presiding over the Hatch-Waxman
Litigation, conducted a scheduling conference and set a claim construction hearing, which was held in June 2021, and a date for the
trial, which is currently scheduled to begin in March 2022. Following the claim construction hearing, the Court issued an order that
two of the terms under consideration would be given their plain and ordinary meaning and ruling in our favor regarding a third term. Two
of the terms that were under consideration at the claim construction hearing remain under consideration by the Court.
On June 4, 2021, United Therapeutics filed a motion seeking leave
to amend its complaint in the Hatch-Waxman Litigation. United Therapeutics alleges that we and a former United Therapeutics employee who
later joined us as an employee conspired to misappropriate certain trade secrets of United Therapeutics. We disagree with United Therapeutics’
allegations, deny any liability for misappropriation of any trade secrets and intend to vigorously defend against these new allegations.
On March 30, 2020, we filed two petitions for inter partes review
with the Patent Trial and Appeal Board (PTAB) of the USPTO. One petition was for inter partes review of the ‘901
Patent, seeking a determination that the claims in the ‘901 Patent are invalid, and a second petition is for inter partes review
of the ‘066 Patent, seeking a determination that the claims in the ‘066 Patent are invalid. Both the ‘901 Patent and
‘066 Patent are owned by United Therapeutics and are related to U.S. Patent No. 8,497,393 which was granted to United Therapeutics
and subsequently invalidated by the USPTO in an inter partes review instituted in 2016 by SteadyMed Ltd. On October 13,
2020, the PTAB instituted an inter partes review of the ‘901 Patent and concurrently denied institution on the ‘066
Patent, stating that the ‘066 petition has not established a reasonable likelihood that it would prevail in showing that at least
one of the challenged claims is unpatentable. On March 1, 2021, PTAB denied a request from United Therapeutics for a rehearing regarding
PTAB’s decision to institute an inter partes review of the ‘901 patent. The PTAB held a hearing with respect to the
inter partes review of the ‘901 patent on June 23, 2021. A final written decision determining the validity of the challenged
claims of the ‘901 Patent is expected within 12 months from institution.
On January 7, 2021, we filed a petition with the PTAB for inter
partes review of the ‘793 Patent, seeking a determination that the claims in the ‘793 Patent are invalid. In August 2021,
the PTAB instituted an inter partes review of the ‘793 Patent. A final written decision determining the validity of the challenged
claims of the ‘793 Patent is expected within 12 months from institution.
If we are found to infringe, misappropriate or otherwise violate a
United Therapeutics’ intellectual property rights, we could be required to obtain a license from United Therapeutics to continue
developing and marketing LIQ861. However, we may not be able to obtain any required license on commercially reasonable terms or at all.
We could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed
a patent or to have misappropriated a trade secret of United Therapeutics. A finding of infringement or misappropriation could also result
in an injunction that prevents us from commercializing LIQ861, which could materially harm our business. In addition, we may be forced
to redesign LIQ861 to avoid infringement.
We face significant competition from large pharmaceutical companies,
among others, in developing our products and in gaining regulatory approval to bring them to market in time to achieve commercial success,
and our operating results will suffer if we are unable to compete effectively.
We face significant competition from industry players worldwide, including
large multi-national pharmaceutical companies, other emerging or smaller pharmaceutical companies, as well as universities and other research
institutions. Many of our competitors have substantially greater financial, technical and other resources, such as a larger research and
development staff, and more experience in manufacturing and marketing, than we do. As a result, these companies may obtain marketing approval
for their product candidates more quickly than we are able to and/or be more successful in commercializing their products, including generic
treprostinil products, than us. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaboration
arrangements with large, established companies. We may also face competition as a result of advances in the commercial applicability of
new technologies and greater availability of capital for investment in such technologies. Our competitors may also invest heavily in the
discovery and development of novel drug products that could make our product candidates less competitive or may file FDA citizen petitions
which may delay the approval process for our product candidates. Furthermore, our competitors may succeed in developing, acquiring or
licensing, on an exclusive basis, pharmaceutical products that are easier to develop, more effective or less costly than any product candidates
that we are currently developing or that we may develop. Our competitors may also succeed in asserting existing patents or developing
new patents to which we do not have a license in an attempt to prevent us from marketing our products. These competitors may also compete
with us in recruiting and retaining qualified sales personnel.
Any new drug product that competes with a prior approved drug product
must demonstrate advantages in safety, efficacy, tolerability or convenience in order to overcome price competition and to be commercially
successful. Our products, if and when approved, are expected to face competition from drug products that are already on the market, as
well as those in our competitors’ development pipelines. We expect that our lead program, LIQ861, an inhaled treprostinil therapy
for the treatment of PAH, will face competition from the following inhaled treprostinil therapies that are either currently marketed or
in clinical development:
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Tyvaso, marketed by United Therapeutics, has been approved for the treatment of PAH in the United States since 2009. Tyvaso is the
reference listed drug in our NDA for LIQ861. Following patent litigation, United Therapeutics and Watson Pharmaceuticals reached a settlement
whereby Watson Pharmaceuticals will be permitted to enter the market with a generic version of Tyvaso beginning on January 1,
2026. In April 2021, United Therapeutics announced that Tyvaso was approved by FDA to include WHO group III PH-ILD patients.
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Ventavis®, marketed by Actelion, a division of Johnson & Johnson, has been approved for the treatment of PAH in the United
States since 2004.
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Tyvaso DPI, licensed from MannKind as TreT by United Therapeutics, is currently in development in the United States for the treatment
of PAH. Under the license agreement with MannKind, United Therapeutics is responsible for global development, regulatory and commercial
activities. MannKind will manufacture clinical supplies and initial commercial supplies of the product while long-term commercial supplies
will be manufactured by United Therapeutics. United Therapeutics announced that had submitted an NDA in April 2021 to support FDA
approval of Tyvaso DPI for the treatment of pulmonary arterial hypertension and pulmonary hypertension associated with interstitial lung
disease. United Therapeutics also announced that it had applied a priority review voucher to the NDA that could provide for an FDA decision
by October 2021. The NDA includes results from clinical studies evaluating safety and pharmacokinetics of switching PAH patients
from Tyvaso to Tyvaso DPI and data comparing the pharmacokinetics of Tyvaso DPI to Tyvaso in healthy volunteers. United
Therapeutics further reported that these are the only clinical studies necessary to support FDA approval and that the indicated population
for Tyvaso DPI will mirror that of Tyvaso, which United Therapeutics announced in April 2021 was approved by FDA to include WHO group
III PH-ILD patients. If Tyvaso DPI is approved by FDA before LIQ861 is approved, then there is a possibility that the FDA could grant
three years of market exclusivity to Tyvaso DPI as an inhaled dry-powder formulation of treprostinil that could delay the final approval
of LIQ861 until said exclusivity expires.
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Treprostinil Palmitil Inhalation Powder (TPIP), is a dry-powder formulation of a treprostinil prodrug being developed by Insmed. Insmed
announced the completion of an initial Phase 1 study in February 2021 which demonstrated that TPIP was generally safe and well tolerated,
with a pharmacokinetic profile that supports once-daily dosing. Insmed initiated a Phase 2 trial in May 2021 studying patients diagnosed
with PAH and intends to initiate trials to study PH-ILD and IPF. If the TPIP clinical program is successful in demonstrating less frequent
dosing with similar efficacy and safety to LIQ861 and Tyvaso DPI, then TPIP has the potential to be viewed as a more attractive option
and may take market share rapidly.
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In addition to these other inhaled treprostinil therapies, we expect
that LIQ861 will also face competition from other treprostinil-based drugs, including Orenitram, which is administered orally, and Remodulin,
which is administered parenterally, both of which are marketed by United Therapeutics. Branded pharmaceutical companies such as United
Therapeutics continue to defend their products vigorously through, among other actions, life cycle management, marketing agreements with
third-party payors, pharmacy benefits managers and generic manufacturers. These actions add increased competition in the generic pharmaceutical
industry, including competition for Injected Treprostinil.
Additionally, even though Sandoz launched the first-to-file fully substitutable
generic treprostinil for parenteral administration in March 2019 that is sold primarily through the specialty pharmacies, Teva Pharmaceutical
Industries Ltd. launched a generic treprostinil for parenteral administration in October 2019 that is sold primarily through a specialty
pharmacy and to hospitals, Par Pharmaceutical, Inc. launched a generic treprostinil for parenteral administration after receiving
approval in September 2019 that is sold primarily to hospitals, Dr. Reddy’s Laboratories Inc. received approval in May 2020
for generic treprostinil for parenteral administration, and Alembic received approval in February 2021 for generic treprostinil for
parenteral administration. Such increased competition may result in a smaller than expected commercial opportunity for us.
Generic drug prices may, and often do, decline, sometimes dramatically,
especially as additional generic pharmaceutical companies (including low-cost generic producers outside of the United States) receive
approvals and enter the market for a given product. The goals established under the Generic Drug User Fee Act, and increased funding of
the FDA’s Office of Generic Drugs, have led to more and faster generic approvals, and consequently increased competition for generic
products. The FDA has stated that it has established new steps to enhance competition, promote access and lower drug prices and is approving
record-breaking numbers of generic applications. The FDA’s changes may benefit our competitors. Our ability to sell Injected Treprostinil
and earn revenue is affected by the number of companies selling competitive products, including new market entrants, and the timing of
their approvals.
In addition to treprostinil-based therapies, other classes of therapeutic
agents for the treatment of PAH include the following:
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IP-agonists, such as selexipag, marketed by Actelion, and ralinepeg, licensed from Arena Pharmaceuticals, Inc.
by United Therapeutics, which is currently in clinical development;
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Endothelin receptor antagonists, such as bosentan and macitentan, both marketed by Actelion, and ambrisentan, marketed
by Gilead. Generic version of bosentan and ambrisentan are currently available.
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PDE-5 inhibitors, such as tadalafil, marketed by United Therapeutics, and sildenafil, marketed by Pfizer Inc. Generic
versions of both tadalafil and sildenafil are currently available.
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Soluble guanylate cyclase (sGC) stimulator, such as riociguat marketed by Bayer.
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We are also aware of several other agents in clinical development that
are exploring mechanisms of action which, if approved, could impact the standard of care for treating PAH in the United States, including
programs from Acceleron Pharma, Inc., Gossamer Bio, Inc., PhaseBio Pharmaceuticals, Inc. and Sumitovant Biopharma Ltd.,
among others.
There are a number of competitors seeking marketing approval and/or
regulatory exclusivity with respect to products that are or would be competitive to our product candidate. Thus, we face the risk
that one of our competitors will be granted marketing approval and/or regulatory exclusivity before we are able to obtain FDA approval
for our product candidate. In that case, as stated above, there is the possibility that such a competitor would be able to prevent
us from obtaining approval of and marketing our product candidate until the expiration of the competitor’s term of FDA regulatory
exclusivity, which could be a term of three years for so-called New Clinical Study exclusivity, or could conceivably be for longer periods
of time if the competitor is successful in being granted other forms of FDA regulatory exclusivity which might include, for example, Orphan
Disease Designation exclusivity (seven years), New Chemical Entity exclusivity (five years), or Pediatric exclusivity (six months beyond
other existing exclusivities or patent terms).
United Therapeutics has been granted New Clinical Study exclusivity
for Tyvaso through March 31, 2024 for the indication of treatment of pulmonary hypertension associated with interstitial lung disease
to improve exercise ability. Until the expiration of this exclusivity, we will be unable to receive FDA approval for LIQ861 for the indication
of treatment of pulmonary hypertension associated with interstitial lung disease to improve exercise ability. Because United Therapeutics
is also the sponsor of the NDA for Tyvaso DPI, the regulatory exclusivity granted to United Therapeutics with respect to Tyvaso will not
limit the indications for which the FDA may approve Tyvaso DPI. Thus, if FDA approves Tyvaso DPI, Tyvaso DPI may have a broader label
than the label for LIQ861 even if it is approved. If LIQ861 has a narrower label than other competitive products, it may affect our ability
to compete with such products.
The ability of competitors to utilize other regulatory incentive programs
could also expedite their FDA review and approval timeline, which could result in their products reaching the market before our product
candidate, and which could create further potential implications on exclusivity as noted above. For example, when a Priority Review
Voucher (PRV) is redeemed in connection with an NDA, the FDA’s goal review period would generally be expedited to six months, although
this timeframe is not guaranteed.
If we are unable to maintain our competitive position, our business
and prospects will be materially and adversely affected.
Our products may not achieve market acceptance.
We are currently focused on developing drug products that can be approved
under abbreviated regulatory pathways in the United States, such as the 505(b)(2) regulatory pathway, which allows us to rely on
existing knowledge of the safety and efficacy of the relevant reference listed drugs to support our applications for approval in the United
States. While we believe that it will be less difficult for us to convince physicians, patients and other members of the medical community
to accept and use our drug products as compared to entirely new drugs, our drug products may nonetheless fail to gain sufficient market
acceptance by physicians, patients, other healthcare providers and third-party payors. If any of our drug products fail to achieve sufficient
market acceptance, we may not be able to generate sufficient revenue to become profitable. The degree of market acceptance of our drug
products, if and when they are approved for commercial sale, will depend on a number of factors, including but not limited to:
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the timing of our receipt of marketing approvals, the terms
of such approvals and the countries in which such approvals are obtained;
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the safety, efficacy, reliability and ease of administration of our drug products;
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the prevalence and severity of undesirable side effects and adverse events;
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the extent of the limitations or warnings required by the FDA or comparable regulatory authorities in other countries to be contained
in the labeling of our drug products;
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the clinical indications for which our drug products are approved;
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the availability and perceived advantages of alternative therapies;
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any publicity related to our drug products or those of our competitors;
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the quality and price of competing drug products;
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our ability to obtain third-party payor coverage and sufficient reimbursement;
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the willingness of patients to pay out of pocket in the absence of third-party payor coverage; and
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the selling efforts and commitment of our commercialization collaborators.
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If our drug products, if and when approved, fail to receive a sufficient
level of market acceptance, our ability to generate revenue from sales of our drug products will be limited, and our business and results
of operations may be materially and adversely affected.
We may not be able to build a commercial operation, including
establishing and maintaining marketing and sales capabilities or enter into agreements with third parties to market and sell our drug
products.
In order to market and sell any of our drug products, if and when approved,
we will be required to build our marketing and sales capabilities with respect to such products. With the acquisition of Liquidia PAH,
we acquired a sales force to market generic treprostinil in accordance with the Promotion Agreement. We cannot assure you that we will
be successful in doing so or be able to do so in a cost-effective manner. In addition, we may enter into collaboration arrangements with
third parties to market our drug products. We may face significant competition for collaborators. In addition, collaboration arrangements
may be time-consuming to negotiate and document. We cannot assure you that we will be able to negotiate collaborations for the marketing
and sales of our drug products on acceptable terms, or at all. Even if we do enter into such collaborations, we cannot assure you that
our collaborators will be successful in commercializing our products. If we or our collaborators are unable to successfully commercialize
our drug products, whether in the United States or elsewhere, our business and results of operations may be materially and adversely affected.
As we seek to establish a commercial operation with respect to LIQ861
in anticipation of potential approval from the FDA, we also continue to evaluate additional drug candidates. There can be no assurance
that we will be able to successfully manage the balance of our research and development operations with our commercial activities. Potential
investors should be aware of the problems, delays, expenses and difficulties frequently encountered by companies balancing development
of product candidates, which can include problems such as unanticipated issues relating to clinical trials and receipt of approvals from
the FDA and foreign regulatory bodies, with commercialization efforts, which include problems relating to managing manufacturing and supply,
reimbursement, marketing problems, and other additional costs.
There are risks involved with building and expanding our sales, marketing,
and other commercialization capabilities. For example, recruiting and training a sales force is expensive and time-consuming and could
delay any drug launch. If the commercial launch of a drug candidate for which we recruit a sales force and establish marketing capabilities
is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This
may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
Factors that may impact our efforts to commercialize our drug candidates
on our own and generate product revenues include:
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our inability to recruit and retain adequate numbers of effective sales and marketing personnel over a large geographic area;
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the costs and time associated with the initial and ongoing training of sales and marketing personnel on legal and regulatory compliance
matters and monitoring their actions;
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understanding and training relevant personnel on the limitations on, and the transparency and reporting requirements applicable to,
remuneration provided to actual and potential referral sources;
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the clinical indications for which the products are approved and the claims that we may make for the products;
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limitations or warnings, including distribution or use restrictions, contained in the products’ approved labeling;
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the inability of sales personnel to obtain access to physicians or to effectively promote any future drugs;
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our ability to appropriately market, detail and distribute products in light of healthcare provider facility closures, quarantine,
travel restrictions and other governmental restrictions caused by COVID-19;
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the lack of complementary drugs to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies
with more extensive product lines;
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any distribution and use restrictions imposed by the FDA or to which we agree;
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liability for sales and marketing personnel who fail to comply with the applicable legal and regulatory requirements;
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our ability to maintain a healthcare compliance program including effective mechanisms for compliance monitoring; and
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unforeseen costs and expenses associated with creating a sales and marketing organization.
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In the future, we may choose to participate in sales activities with
collaborators for some of our drug candidates. However, there are also risks with entering into these types of arrangements with
third parties to perform sales, marketing and distribution services. For example, we may not be able to enter into such arrangements
on terms that are favorable to us. Our drug revenues or the profitability of these drug revenues to us are likely to be lower than
if we were to market and sell any drug candidates that we develop ourselves. In addition, we 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 our drug candidates effectively.
If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will
not be successful in commercializing our drug candidates. Further, our business, results of operations, financial condition and prospects
will be materially adversely affected.
We may be exposed to claims and may not be able to obtain or
maintain adequate product liability insurance.
Our business is exposed to the risk of product liability and other
liability risks that are inherent in the development, manufacture, clinical testing and marketing of pharmaceutical products. These risks
exist even if a product is approved for commercial sale by the FDA or comparable regulatory authorities in other countries and manufactured
in licensed facilities. Our current product candidate, LIQ861, and Treprostinil Injection are designed to affect important bodily functions
and processes. Any side effects, manufacturing defects, misuse or abuse associated with our products could result in injury to a patient
or even death.
Claims that are successfully brought against us could have a material
and adverse effect on our financial condition and results of operations. Further, even if we are successful in defending claims brought
against us, our reputation could suffer. Regardless of merit or eventual outcome, product liability claims may also result in, among others:
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a decreased demand for our products;
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a withdrawal or recall of our products from the market;
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a withdrawal of participants from our ongoing clinical trials;
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the distraction of our management’s attention from our core business activities to defend such claims;
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additional costs to us; and
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Our insurance may not provide adequate coverage against our potential
liabilities. Furthermore, we, our collaborators or our licensees may not be able to obtain or maintain insurance on acceptable terms,
or at all. In addition, our collaborators or licensees may not be willing to indemnify us against these types of liabilities and may not
themselves be sufficiently insured or have sufficient assets to satisfy any product liability claims. To the extent that they are uninsured
or uninsurable, claims or losses that may be suffered by us, our collaborators or our licensees may have a material and adverse effect
on our financial condition and results of operations.
Risks Related to the Development and Regulatory Approval of our
Product Candidates
We are primarily dependent on the success of our product candidate,
LIQ861, for which we recently resubmitted an NDA with the FDA in response to a CRL received from the FDA in November 2020, and this
product candidate may fail to receive marketing approval (in a timely manner or at all) or may not be commercialized successfully.
We do not have any products approved for marketing in any jurisdiction
and we have never generated any revenue from sales of our own products. Our ability to generate revenue from sales of our own products
and achieve profitability depends on our ability, alone or with strategic collaboration partners, to successfully complete the development
of, and obtain the regulatory and marketing approvals necessary to commercialize, one or more of our product candidates. We expect that
a substantial portion of our efforts and expenditure over the next few years will be devoted to our product candidate, LIQ861, a proprietary
inhaled dry powder formulation of treprostinil for the treatment of pulmonary arterial hypertension (PAH). We do not anticipate generating
revenue from sales of LIQ861 until 2022 at the earliest, if ever.
LIQ861 is being developed under the 505(b)(2) regulatory pathway
with Tyvaso as the reference listed drug. We commenced a Phase 3 clinical trial of LIQ861, which we refer to as INSPIRE, in the first
quarter of 2018. We completed the pivotal INSPIRE trial in August 2019. Final enrollment included 121 PAH patients to assess safety
and tolerability through Month 2, the primary endpoint of the trial. Of the 121 patients enrolled in the study, 55 were Transition patients
and 66 were Add-On patients. Add-On patients started on a dose of 26.5 mcg of LIQ861, with most (>80%) titrating to a 79.5 mcg dose
or higher within the first two months of treatment.
In April 2020, we reported final safety and tolerability results
from the two-month primary endpoint of the INSPIRE study. Of the 121 PAH patients, 113, or 93%, completed their two-month visit. The most
common reported TEAEs (reported in ≥ four percent) were cough (42%), headache (26%), throat irritation (16%), dizziness (11%),
diarrhea (9%), chest discomfort (8%), nausea (7%), dyspnea (5%), flushing (5%) and oropharyngeal pain (4%).
We submitted an NDA for LIQ861 to the FDA in January 2020. In
April 2020, the FDA accepted the NDA for review and provided a Prescription Drug User Fee Act (PDUFA) goal date of November 24,
2020. On November 25, 2020 we announced that the FDA issued a CRL for our NDA for LIQ861. The CRL did not cite the need to conduct
further clinical studies, nor did the FDA indicate that additional studies related to toxicology or clinical pharmacology would be necessary.
On May 7, 2021, we resubmitted the NDA for LIQ861 to the FDA. We believe that we have addressed the items raised in the CRL in the
resubmitted NDA. In June of 2021, the FDA accepted our resubmitted NDA for LIQ861 for review and established a PDUFA goal date of
November 7, 2021. The FDA also reconfirmed the need to conduct on-site pre-approval inspections (PAIs) of two U.S. manufacturing
facilities before our NDA can be approved. The FDA noted it had been unable to conduct these inspections during the initial review cycle
due to COVID-19 related travel restrictions. In August 2021, the FDA completed an on-site PAI of our Morrisville, North Carolina
facility, and no Form 483 Inspectional Observations were issued by the Agency. In July 2021, the FDA notified us that, due to
restrictions on travel related to COVID-19, the FDA may be unable to conduct the other PAI prior to the PDUFA goal date.
Expectations related to FDA approval and projected product launch timelines
are impacted by ongoing Hatch-Waxman Litigation following a lawsuit filed by United Therapeutics on June 4, 2020. Under the Hatch-Waxman
Act, as a result of the Hatch-Waxman Litigation commenced by United Therapeutics, the FDA may not issue a final approval for the LIQ861
NDA for up to 30 months, absent an earlier judgment unfavorable to United Therapeutics by the court. When the FDA is not permitted
to issue an approval for a 505(b)(2) application due to a 30-month stay, it is generally possible that the agency could issue “tentative
approval” if it determines that all regulatory requirements have been met. However, a drug product that is granted tentative
approval may be subject to additional review before final approval, particularly if tentative approval was granted more than three years
before the earliest lawful approval date. The FDA’s tentative approval of drug product would be based on information available
to FDA at the time of the tentative approval letter (i.e., information in the application and the status of current good manufacturing
practices of the facilities used in the manufacturing and testing of the drug product) and is therefore subject to change on the basis
of new information that may come to FDA’s attention. A new drug product may not be marketed until the date of final approval.
Expectations for LIQ861 also may be impacted by competing products,
including Tyvaso® DPI. See “Risk Factors - We face significant competition from large pharmaceutical companies,
among others, in developing our products and in gaining regulatory approval to bring them to market in time to achieve commercial success,
and our operating results will suffer if we are unable to compete effectively.”
If we successfully complete the clinical development of LIQ861, we
cannot assure you that we will receive marketing approval. The FDA or comparable regulatory authorities in other countries may delay,
limit or deny approval of our product candidate for various reasons. For example, such authorities may disagree with the design, scope
or implementation of our clinical trials, or with our interpretation of data from our preclinical studies or clinical trials. Further,
there are numerous FDA personnel assigned to review different aspects of an NDA, and uncertainties can be presented by their ability
to exercise judgment and discretion during the review process. During the course of review, the FDA may request or require additional
preclinical, clinical, chemistry, manufacturing, and control (CMC) or other data and information, and the development and information
may be time-consuming and expensive. Status as a combination product, as is the case for LIQ861, may complicate or delay the FDA
review process. Product candidates that the FDA deems to be combination products, such as LIQ861, or that otherwise rely on innovative
drug delivery systems, may face additional challenges, risks and delays in the product development and regulatory approval process. For
example, the CRL for LIQ861 identified the need for additional information and clarification on CMC data pertaining to the drug product
and device biocompatibility. Additionally, the FDA could delay approval of LIQ861 even if approvable after completing its review. For
example, if a competing product comprised of an inhaled dry-powder formulation of treprostinil is approved by FDA before LIQ861 is approved,
then there is a possibility that the FDA could grant three years of market exclusivity to the competitor that could delay the final approval
of LIQ861 until said exclusivity expires. Moreover, the applicable requirements for approval may differ from country to country.
If we successfully obtain marketing approval for LIQ861, we cannot
assure you that it will be commercialized in a timely manner or successfully, or at all. For example, LIQ861 may not achieve a sufficient
level of market acceptance, or we may not be able to effectively build our marketing and sales capabilities or scale our manufacturing
operations to meet commercial demand. The successful commercialization of LIQ861 will also, in part, depend on factors that are beyond
our control. Therefore, we may not generate significant revenue from the sale of such product, even if approved. Any delay or setback
we face in the commercialization of LIQ861 may have a material and adverse effect on our business and prospects, which will adversely
affect your investment in our company.
Our preclinical studies and clinical trials may not be successful
and delays in such preclinical studies or clinical trials may cause our costs to increase and significantly impair our ability to commercialize
our product candidates. Results of previous clinical trials or interim results of ongoing clinical trials may not be predictive of future
results.
Before we are able to commercialize our drug products, we are required
to undertake extensive preclinical studies and clinical trials to demonstrate that our drug products are safe and effective for their
intended uses. However, we cannot assure you that our drug products will, in preclinical studies and clinical trials, demonstrate safety
and efficacy as necessary to obtain marketing approval. Due to the nature of drug product development, many product candidates, especially
those in early stages of development, may be terminated during development. Although we believe we have completed clinical development
for LIQ861, we have not yet obtained approval for or commercialized any of our own product candidates and as a result do not have a track
record of successfully bringing our own product candidates to market. Furthermore, LIQ861 has, to date, been tested only in relatively
small study populations and, accordingly, the results from our earlier clinical trials may be less reliable than results achieved in larger
clinical trials, if required. Additionally, the outcome of preclinical testing and early clinical trials may not be predictive of the
success of later clinical trials, and preliminary and interim results of a clinical trial do not necessarily predict final results.
Preclinical studies and clinical trials may fail due to factors such
as flaws in trial design, dose selection and patient enrollment criteria. The results of preclinical studies and early clinical trials
may not be indicative of the results of subsequent clinical trials. Product candidates may, in later stages of clinical testing, fail
to show the desired safety and efficacy traits despite having progressed through preclinical studies and earlier clinical trials. Moreover,
there may be significant variability in safety or efficacy results between different trials of the same product candidate due to factors
including, but not limited to, changes in trial protocols, differences in the composition of the patient population, adherence to the
dosing regimen and other trial protocols and amendments to protocols and the rate of drop-out among patients in a clinical trial. If our
preclinical studies or clinical trials are not successful and we are unable to bring our product candidates to market as a result, our
business and prospects may be materially and adversely affected.
Furthermore, conducting preclinical studies and clinical trials is
a costly and time-consuming process. The length of time required to conduct the required studies and trials may vary substantially according
to the type, complexity, novelty and intended use of the product candidate. A single clinical trial may take up to several years to complete.
Moreover, our preclinical studies and clinical trials may be delayed or halted due to various factors, including, among others:
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delays in raising the funding necessary to initiate or continue a clinical trial;
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delays in manufacturing sufficient quantities of product candidates for clinical trials;
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delays in reaching agreement on acceptable terms with prospective contract research organizations (CROs) and clinical trial sites;
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delays in obtaining institutional review board approval at clinical trial sites;
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delays in recruiting suitable patients to participate in a clinical trial;
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delays in patients’ completion of clinical trials or their post-treatment follow-up;
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regulatory authorities’ interpretation of our preclinical and clinical data; and
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unforeseen safety issues, including a high and unacceptable severity, or prevalence, of undesirable side effects or adverse events
caused by our product candidates or similar drug products or product candidates.
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If our preclinical studies or clinical trials are delayed, the commercialization
of our product candidates will be delayed and, as a result, we may incur substantial additional costs or not be able to recoup our investment
in the development of our product candidates, which would have a material and adverse effect on our business.
Clinical trials and data analysis can be expensive, time-consuming
and difficult to design and implement. If we are unsuccessful in obtaining regulatory approval for LIQ861, or any required clinical studies
of LIQ861 do not provide positive results, we may be required to delay or abandon development of such product, which would have a material
adverse impact on our business.
Continuing product development requires additional and extensive clinical
testing. Human clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous
regulatory requirements. The clinical trial process is also time-consuming. We cannot provide any assurance or certainty regarding when
we might receive regulatory approval for LIQ861. Furthermore, failure can occur at any stage of the process, and we could encounter problems
that cause us to abandon an NDA filed with the FDA or repeat clinical trials. The commencement and completion of clinical trials for any
current or future development product candidate may be delayed by several factors, including:
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unforeseen safety issues;
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determination of dosing issues;
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lack of effectiveness during clinical trials;
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slower than expected rates of patient recruitment;
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inability to monitor patients adequately during or after treatment; and
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inability or unwillingness of medical investigators to follow our clinical protocols or amendments to our protocols.
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In addition, the FDA or an independent institutional review board (IRB)
may suspend our clinical trials at any time if it appears that we are exposing participants to unacceptable health risks or if the FDA
finds deficiencies in our IND submissions or the conduct of these trials. Therefore, we cannot provide any assurance or predict with certainty
the schedule for future clinical trials. Although clinical data is an essential part of NDA filings, NDAs must also contain a range of
additional data including CMC data to meet FDA standards for approval. In the event we do not ultimately receive regulatory approval for
LIQ861, we may be required to terminate development of our only product candidate.
The marketing approval processes of the FDA and comparable regulatory
authorities in other countries are unpredictable and our product candidates may be subject to multiple rounds of review or may not receive
marketing approval.
Pursuing marketing approval for a pharmaceutical product candidate
(for example, through the NDA process) is an extensive, lengthy, expensive and inherently uncertain process. We cannot assure you that
any of our product candidates will receive marketing approval. Regulatory authorities may delay, limit or deny approval of our product
candidates for many reasons, including, but not limited to, the following:
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the FDA or comparable regulatory authorities may, for a variety of reasons, take the view that the data collected from our preclinical
and clinical trials and human factors testing, or data that we otherwise submit or reference to support an application, are not sufficient
to support approval of a product candidate;
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the FDA or comparable regulatory authorities in other countries may ultimately conclude that our manufacturing processes or facilities
or those of our third-party manufacturers do not sufficiently demonstrate compliance with cGMP to support approval of a product candidate,
or that the drug CMC data or device biocompatibility data for our product candidates otherwise do not support approval;
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we may be unable to demonstrate to the satisfaction of the FDA or comparable regulatory authorities in other countries that our product
candidate is safe and effective for its proposed indication, or that its clinical and other benefits outweigh its safety risks;
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the approval policies of the FDA or comparable regulatory authorities in other countries may change in a manner that renders our data
insufficient for approval.
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Even if we obtain marketing approval, the FDA or comparable regulatory
authorities in other countries may approve our product candidates for fewer or more limited indications than those for which we requested
approval or may include safety warnings or other restrictions that may negatively impact the commercial viability of our product candidates.
Likewise, regulatory authorities may grant approval contingent on the performance of costly post-marketing clinical trials or other studies
or the conduct of an expensive REMS, which could significantly reduce the potential for commercial success or viability of our product
candidates. We also may not be able to find acceptable collaborators to manufacture our drug products, if and when approved, in commercial
quantities and at acceptable prices, or at all.
We may encounter difficulties in enrolling patients in our clinical
trials.
We may not be able to commence or complete clinical trials for our
product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials.
Patient enrollment may be affected by, among others:
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the severity of the disease under investigation;
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the design of the clinical trial protocol and amendments to a protocol;
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the size and nature of the patient population;
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eligibility criteria for the clinical trial in question;
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the perceived risks and benefits of the product candidate under clinical testing, including a high and unacceptable severity, or prevalence,
of undesirable side effects or adverse events caused by our product candidates or similar products or product candidates;
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the existing body of safety and efficacy data in respect of the product candidate under clinical testing;
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the proximity of patients to clinical trial sites;
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the number and nature of competing therapies and clinical trials; and
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other environmental factors such as the ongoing COVID-19 pandemic or other natural or unforeseen disasters.
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Any negative results we may report in clinical trials of our product
candidates may also make it difficult or impossible to recruit and retain patients in other clinical trials of that same product candidate.
We expect that if we initiate, as we are currently contemplating, a
clinical trial of LIQ861 in pediatric patients, we may encounter difficulties enrolling patients in such a trial because of the limited
number of pediatric patients with this disease. Furthermore, we are aware of a number of therapies for PAH that are being developed or
that are already available on the market, and we expect to face competition from these investigational drugs or approved drugs for potential
subjects in our clinical trials, which may delay enrollment in our planned clinical trials.
Delays or failures in planned patient enrollment or retention may result
in increased costs, program delays, or both. We may, as a result of such delays or failures, be unable to carry out our clinical trials
as planned or within the timeframe that we expect or at all, and our business and prospects may be materially and adversely affected as
a result.
Product candidates that the FDA deems to be combination products,
such as LIQ861, or that otherwise rely on innovative drug delivery systems, may face additional challenges, risks and delays in the product
development and regulatory approval process.
The FDA has indicated that it considers LIQ861, which is delivered
by a DPI, to be a drug-device combination product. Accordingly, the DPI was evaluated as part of our original NDA filing, and the CRL
we received from FDA, as announced November 25, 2020, identified the need for additional information pertaining to device biocompatibility.
When evaluating products that utilize a specific drug delivery system or device, the FDA will evaluate the characteristics of that delivery
system and its functionality, as well as the potential for undesirable interactions between the drug and the delivery system, including
the potential to negatively impact the safety or effectiveness of the drug. The FDA review process can be more complicated for combination
products, and may result in delays, particularly if novel delivery systems are involved. We rely on third parties for the design and manufacture
of the delivery systems for our products, including the DPI for LIQ861, and in some cases for the right to refer to their data on file
with the FDA or other regulators. Quality or design concerns with the delivery system, or commercial disputes with these third parties,
could delay or prevent regulatory approval and commercialization of our product candidates.
We are pursuing the FDA 505(b)(2) pathway for our current
product candidate. If we are unable to rely on the 505(b)(2) regulatory pathway to apply for marketing approval of our product candidates
in the United States, seeking approval of these product candidates through the 505(b)(1) NDA pathway would require full reports of
investigations of safety and effectiveness, and the process of obtaining marketing approval for our product candidates would likely be
significantly longer and more costly.
We are currently focused on developing drug products that can be approved
under abbreviated regulatory pathways in the United States, such as the 505(b)(2) regulatory pathway, which permits the filing of
an 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 obtained a right of reference. Section 505(b)(2), if applicable to us for a particular product
candidate, would allow an NDA we submit to the FDA to rely in part on data in the public domain or the FDA’s prior conclusions regarding
the safety and effectiveness of approved compounds, which could expedite the development program for a product candidate by potentially
decreasing the amount of clinical data that we would need to generate in order to obtain FDA approval. We plan to pursue this pathway
for our current product candidate, LIQ861, and have submitted a 505(b)(2) NDA. Even if the FDA allows us to rely on the 505(b)(2) regulatory
pathway, we cannot assure you that such marketing approval will be obtained in a timely manner, or at all.
The FDA may require us to perform additional clinical trials to support
any change from the reference listed drug, which could be time-consuming and substantially delay our receipt of marketing approval. Also,
as has been the experience of others in our industry, our competitors may file citizens’ petitions with the FDA to contest approval
of our NDA, which may delay or even prevent the FDA from approving any NDA that we submit under the 505(b)(2) regulatory pathway.
If an FDA decision or action relative to our product candidate, or the FDA’s interpretation of Section 505(b)(2) more
generally, is successfully challenged, it could result in delays or even prevent the FDA from approving a 505(b)(2) application for
our product candidates. Even if we are able to utilize the 505(b)(2) regulatory pathway, a drug approved via this pathway may be
subject to the same post-approval limitations, conditions and requirements as any other drug.
In addition, we may face Hatch-Waxman litigation in relation to our
NDAs submitted under the 505(b)(2) regulatory pathway, which may further delay or prevent the approval of our product candidates.
The pharmaceutical industry is highly competitive, and 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 505(b)(2) NDA. If the previously approved drugs referenced
in an applicant’s 505(b)(2) NDA are protected by patent(s) listed in the Orange Book, the 505(b)(2) applicant is
required to make a claim after filing its NDA that each such patent is invalid, unenforceable or will not be infringed. The patent holder
may thereafter bring suit for patent infringement, which will trigger a mandatory 30-month delay (or the shorter of dismissal of the lawsuit
or expiration of the patent(s)) in approval of the 505(b)(2) NDA application. For example, the LIQ861 NDA was filed under the 505(b)(2) regulatory
pathway with Tyvaso as the reference listed drug. Under the Hatch-Waxman Act, as a result of the Hatch-Waxman Litigation commenced by
United Therapeutics on June 4, 2020, the FDA is automatically precluded from approving the LIQ861 NDA for up to 30 months, absent
an earlier judgment unfavorable to United Therapeutics by the court. It is not uncommon for a manufacturer of an approved product, such
as United Therapeutics, 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.
If the FDA determines that our product candidates, including LIQ861,
do not qualify for the 505(b)(2) regulatory pathway, we would need to reconsider our plans and might not be able to commercialize
our product candidates in a cost-efficient manner, or at all. If we were to pursue approval under the 505(b)(1) NDA pathway, we would
be subject to more extensive requirements and risks such as conducting additional clinical trials, providing additional data and information
or meeting additional standards for marketing approval. As a result, the time and financial resources required to obtain marketing approval
for our product candidates would likely increase substantially and further complications and risks associated with our product candidates
may arise. Also, new competing products may reach the market faster than ours, which may materially and adversely affect our competitive
position, business and prospects.
We may be unable to continually develop a pipeline of product
candidates, which could affect our business and prospects.
A key element of our long-term strategy is to continually develop a
pipeline of product candidates by developing proprietary innovations to FDA-approved drug products using our PRINT technology. If we are
unable to identify off-patent drug products for which we can develop proprietary innovations using our PRINT technology or otherwise expand
our product candidate pipeline, whether through licensed or co-development opportunities, and obtain marketing approval for such product
candidates within the timeframes that we anticipate, or at all, our business and prospects may be materially and adversely affected.
We have conducted, and may in the future conduct, clinical trials
for our product candidates outside the United States and the FDA may not accept data from such trials.
Although the FDA may accept data from clinical trials conducted outside
the United States in support of safety and efficacy claims for our product candidates, if not conducted under an IND, this is subject
to certain conditions set out in 21 C.F.R. § 312.120. For example, in order for the FDA to accept data from such a foreign clinical
trial, the study must have been conducted in accordance with Good Clinical Practice (GCP) including review and approval by an independent
ethics committee and obtaining the informed consent from subjects of the clinical trials. The FDA must also be able to validate the data
from the study through an onsite inspection if the agency deems it necessary. In addition, foreign clinical data submitted to support
FDA applications should be applicable to the U.S. population and U.S. medical practice. Other factors that may affect the acceptance of
foreign clinical data include differences in clinical conditions, study populations or regulatory requirements between the United States
and the foreign country.
Risks Related to Our Dependence on Third Parties
We depend on third parties for clinical and commercial supplies,
including single suppliers for the active ingredient, the device, encapsulation and packaging of LIQ861.
We depend on third-party suppliers for clinical and commercial supplies
for the supply of materials and components necessary for clinical and commercial production of LIQ861, including the active pharmaceutical
ingredients which are used in our product candidates. These supplies may not always be available to us at the standards we require or
on terms acceptable to us, or at all, and we may not be able to locate alternative suppliers in a timely manner, or at all. If we are
unable to obtain necessary clinical or commercial supplies, our manufacturing operations and clinical trials and the clinical trials of
our collaborators may be delayed or disrupted and our business and prospects may be materially and adversely affected as a result.
For example, we currently rely on a sole supplier for treprostinil,
the active pharmaceutical ingredient of LIQ861, which sources treprostinil from a manufacturer in South Korea, with whom we have a long-term
supply agreement. If our supplier is unable to supply treprostinil to us in the quantities we require, or at all, or otherwise defaults
on its supply obligations to us, or if it ceases its relationship with us, we may not be able to obtain alternative supplies of treprostinil
from other suppliers on acceptable terms, in a timely manner, or at all. We also rely on a sole supplier for encapsulation and packaging
services, with whom we have a long-term contract. Furthermore, LIQ861 is administered using the RS00 Model 8 DPI, which is manufactured
by Plastiape, which is located in Italy. We purchase our RS00 Model 8 DPI supply pursuant to purchase orders and do not have a long-term
contract with Plastiape. In the event of any prolonged disruption to our supply of treprostinil, the encapsulation and packaging services,
or the manufacture and supply of RS00 Model 8 DPI or, our ability to develop and commercialize, and the timeline for commercialization
of, LIQ861 may be adversely affected.
Additionally, in December 2019, a novel strain of COVID-19 (coronavirus)
was reported to have surfaced in Wuhan, China and continues to be a global pandemic as of the date of this prospectus. The full impact
of the coronavirus is unknown and continues to rapidly evolve. Both South Korea, the country from which our supplier sources treprostinil,
and Italy, the country in which Plastiape is headquartered, have had significant outbreaks of this disease, which, in the case of Italy,
led to a lockdown of the entire country. The extent to which the coronavirus impacts our ability to procure sufficient supplies for the
development and commercialization of our products and product candidates, or the ability for the FDA to conduct required PAIs to obtain
sufficient assurance or verification of compliance with good manufacturing practice required by FDA regulations will depend on the severity,
location and duration of the spread of the coronavirus, and the actions undertaken to contain the coronavirus or treat its effects. As
announced on November 25, 2020, in the CRL for LIQ861 the FDA noted it had been unable to conduct required inspections during the
initial review cycle for the LIQ861 NDA due to COVID-related travel restrictions and, in July 2021, notified us that, due to restrictions
on travel related to COVID-19, the FDA may be unable to conduct certain necessary inspections prior to the PDUFA goal date. We cannot
predict when COVID-related travel restrictions will change or be lifted.
If we are unable to establish or maintain licensing and collaboration
arrangements with other pharmaceutical companies on acceptable terms, or at all, we may not be able to develop and commercialize additional
product candidates using our PRINT technology.
We have collaborated, and may consider collaborating, with, among others,
pharmaceutical companies to expand the applications for our PRINT technology through licensing as well as joint product development arrangements.
In addition, if we are able to obtain marketing approval for our product candidates from regulatory authorities, we may enter into strategic
relationships with collaborators for the commercialization of such products.
Collaboration and licensing arrangements are complex and time-consuming
to negotiate, document, implement and maintain. We may not be successful in our efforts to establish collaboration or other alternative
arrangements should we so choose to enter into such arrangements. In addition, the terms of any collaboration or other arrangements that
we may enter into may not be favorable to us or may restrict our ability to enter into further collaboration or other arrangements with
third parties. For example, collaboration agreements may contain exclusivity arrangements which limit our ability to work with other pharmaceutical
companies to expand the applications for our PRINT technology, as is the case in our collaboration agreement with GSK.
If we are unable to establish licensing and collaboration arrangements
or the terms of such agreements we enter into are unfavorable to us or restrict our ability to work with other pharmaceutical companies,
we may not be able to expand the applications for our PRINT technology or commercialize our products, if and when approved, and our business
and prospects may be materially and adversely affected.
Our collaboration and licensing arrangements may not be successful.
Our collaboration and licensing arrangements, as well as any future
collaboration and licensing arrangements that we may enter into, may not be successful. The success of our collaboration and licensing
arrangements will depend heavily on the efforts and activities of our collaborators, which are not within our control. We may, in the
course of our collaboration and licensing arrangements, be subject to numerous risks, including, but not limited to, the following:
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our collaborators may have significant discretion in determining the efforts and resources that they will contribute;
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our collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial, abandon
a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing. For
example, in July 2018, GSK notified us of its decision to discontinue development of the inhaled antiviral for viral exacerbations
in COPD, part of the GSK ICO Agreement, after completion of its related Phase 1 clinical trial and we do not believe that GSK is currently
advancing any program under our collaboration;
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our collaborators may independently, or in conjunction with others, develop products that compete directly or indirectly with our
product candidates;
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we may grant exclusive rights to our collaborators that would restrict us from collaborating with others. For example, we are currently
subject to certain restrictions with regard to our ability to enter into collaboration arrangements for the development of inhaled therapeutics
based upon our PRINT technology with third parties pursuant to our collaboration with GSK;
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our collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary
information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property
or proprietary information or expose us to potential liability;
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disputes may arise between us and our collaborators, which may cause a delay in or the termination of our research, development or
commercialization activities;
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our collaboration and licensing arrangements may be terminated, and if terminated, may result in our need for additional capital to
pursue further drug product development or commercialization. For example, our development and licensing agreement with G&W Laboratories, Inc.,
was mutually terminated in April 2018 and we are currently seeking the termination or amendment of our collaboration with GSK;
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our collaborators may own or co-own certain intellectual property arising from our collaboration and licensing arrangements with them,
which may restrict our ability to develop or commercialize such intellectual property; and
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our collaborators may alter the strategic direction of their business or may undergo a change of control or management, which may
affect the success of our collaboration arrangements with them.
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Risks Related to our Intellectual Property
We may be subject to claims from third parties that our products
infringe their intellectual property rights.
The pharmaceutical industry has experienced rapid technological change
and obsolescence in the past, and our competitors have strong incentives to stop or delay any introduction of new drug products or related
technologies by, among others, establishing intellectual property rights over their drug products or technologies and aggressively enforcing
these rights against potential new entrants into the market. We expect that we and other industry participants will be increasingly subject
to infringement claims as the number of competitors and drug products grows.
Our commercial success depends in large part upon our ability to develop,
manufacture, market and sell our drug products or product candidates without infringing on the patents or other proprietary rights of
third parties. It is not always clear to industry participants, including us, what the scope of a patent covers. Due to the large number
of patents in issue and patent applications filed in our industry, there is a risk that third parties will claim that our products or
technologies infringe their intellectual property rights.
Claims for infringement of intellectual property which are brought
against us, whether with or without merit, and which are generally uninsurable, could result in time-consuming and costly litigation,
diverting our management’s attention from our core business and reducing the resources available for our drug product development,
manufacturing and marketing activities, and consequently have a material and adverse effect on our business and prospects, regardless
of the outcome. Moreover, such proceedings could put our patents at risk of being invalidated or interpreted narrowly and our patent applications
at risk of not being issued. We also may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any,
may not be commercially meaningful. Uncertainties resulting from the initiation and continuation of litigation or other proceedings could
also have a material and adverse effect on our ability to compete in the market. Third parties making claims against us could obtain injunctive
or other equitable relief against us, which could prevent us from further developing or commercializing our product candidates.
In particular, under the Hatch-Waxman Act, the owner of patents listed
on the Orange Book and referenced by an NDA applicant may bring patent infringement suit against the NDA applicant after receipt of the
NDA applicant’s notice of paragraph IV certification. On June 4, 2020, United Therapeutics asserted a patent challenge directed
to the Orange Book listed patents for Tyvaso by filing a complaint against us in the U.S. District Court for the District of Delaware
(Case No. 1:20-cv-00755-UNA), thereby triggering an automatic 30-month regulatory stay on final approval of the NDA for LIQ861. As
a result of United Therapeutics’ patent challenge, the FDA is prohibited from approving the NDA for LIQ861 until the earliest to
occur of the expiration of the 30-month stay, which is currently in October 2022, expiration of the Orange Book listed patents, settlement
of the lawsuit or a decision in the infringement suit that is favorable to us as the NDA applicant. Accordingly, we may be subject to
significant delay and incur substantial costs in litigation before we are able to commercialize LIQ861, if at all.
In the event of a successful infringement claim against us, including
an infringement claim filed in response to a paragraph IV certification, we may be required to pay damages, cease the development or commercialization
of our drug products or product candidates, re-engineer or redevelop our drug products or product candidates or enter into royalty or
licensing agreements, any of which could have a material and adverse impact on our business, financial condition and results of operations.
Any effort to re-engineer or redevelop our products would require additional monies and time to be expended and may not ultimately be
successful.
Infringement claims may be brought against us in the future, and we
cannot assure you that we will prevail in any ensuing litigation given the complex technical issues and inherent uncertainties involved
in intellectual property litigation. Our competitors may have substantially greater resources than we do and may be able to sustain the
costs of such litigation more effectively than we can.
Our commercial success depends largely on our ability to protect
our intellectual property.
Our commercial success depends, in large part, on our ability to obtain
and maintain patent protection and trade secret protection in the United States and elsewhere in respect of our product candidates and
PRINT technology. If we fail to adequately protect our intellectual property rights, our competitors may be able to erode, negate or preempt
any competitive advantage we may have. To protect our competitive position, we have filed and will continue to file for patents in the
United States and elsewhere in respect of our product candidates and PRINT technology. The process of identifying patentable subject matter
and filing a patent application is expensive and time-consuming. We cannot assure you that we will be able to file the necessary or desirable
patent applications at a reasonable cost, in a timely manner, or at all. Further, since certain patent applications are confidential until
patents are issued, third parties may have filed patent applications for subject matters covered by our pending patent applications without
us being aware of such applications, and our patent applications may not have priority over patent applications of others. In addition,
we cannot assure you that our pending patent applications will result in patents being obtained. Once published, all patent applications
and publications throughout the world, including our own, become prior art to our new patent applications and may prevent patents from
being obtained or interfere with the scope of patent protection that might be obtained. The standards that patent offices in different
jurisdictions use to grant patents are not always applied predictably or uniformly and may change from time to time.
Even if we have been or are able to obtain patent protection for our
product candidates or PRINT technology, if the scope of such patent protection is not sufficiently broad, we may not be able to rely on
such patent protection to prevent third parties from developing or commercializing product candidates or technology that may copy our
product candidates or technology. The enforceability of patents in the pharmaceutical industry involves complex legal and scientific questions
and can be uncertain. Accordingly, we cannot assure you that third parties will not successfully challenge the validity, enforceability
or scope of our patents. A successful challenge to our patents may lead to generic versions of our drug products being launched before
the expiry of our patents or otherwise limit our ability to stop others from using or commercializing similar or identical products and
technology. A successful challenge to our patents may also reduce the duration of the patent protection of our drug products or technology.
In addition, we cannot assure you that we will be able to detect unauthorized use or take appropriate, adequate and timely actions to
enforce our intellectual property rights. If we are unable to adequately protect our intellectual property, our business, competitive
position and prospects may be materially and adversely affected.
Even if our patents or patent applications are unchallenged, they may
not adequately protect our intellectual property or prevent third parties from designing around our patents or other intellectual property
rights. If the patent applications we file or may file do not lead to patents being granted or if the scope of any of our patent applications
is challenged, we may face difficulties in developing our product candidates, companies may be dissuaded from collaborating with us, and
our ability to commercialize our product candidates may be materially and adversely affected. We are unable to predict which of our patent
applications will lead to patents or assure you that any of our patents will not be found invalid or unenforceable or challenged by third
parties. The patents of others may prevent the commercialization of product candidates incorporating our technology. In addition, given
the amount of time required for the development, clinical testing and regulatory review of new product candidates, any patents protecting
our product candidates may expire before or shortly after such product candidates might become approved for commercialization.
Moreover, the issuance of a patent is not conclusive as to the inventorship
of the patented subject matter, or its scope, validity or enforceability. We cannot assure you that all of the potentially relevant prior
art, that is, any evidence that an invention is already known, relating to our patents and patent applications, has been found. If such
prior art exists, it may be used to invalidate a patent or may prevent a patent from being issued.
In addition, we, our collaborators or our licensees may fail to identify
patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent
protection on them. As a result, we may miss potential opportunities to seek patent protection or strengthen our patent position.
If we are unable to protect our trade secrets, the value of our
PRINT technology and product candidates may be negatively impacted, which would have a material and adverse effect on our competitive
position and prospects.
In addition to patent protection, we rely on trade secret protection
to protect certain aspects of our intellectual property. While we require parties who have access to any portion of our trade secrets,
such as our employees, consultants, advisers, CROs, CMOs, collaborators and other third parties, to enter into non-disclosure and confidentiality
agreements with us, we cannot assure you that these parties will not disclose our proprietary information, including our trade secrets,
in breach of their contractual obligations. Enforcing a claim that a party has illegally disclosed or misappropriated a trade secret is
difficult, costly and time-consuming, and we may not be successful in doing so. If the steps we have taken to protect our trade secrets
are deemed by the adjudicating court to be inadequate, we may not be able to obtain adequate recourse against a party for misappropriating
our trade secrets.
Trade secrets can be difficult to protect as they may, over time, be
independently discovered by our competitors or otherwise become known despite our trade secret protection. If any of our trade secrets
were to be lawfully obtained or independently developed by our competitors, we would have no right to prevent such competitors, or those
to whom they communicate such technology or information, from using that technology or information to compete with us. Such competitors
could attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe our intellectual
property rights, design around our protected technology or develop their own competitive technologies that fall outside of our intellectual
property rights.
If our trade secrets were to be disclosed to or independently developed
by our competitors, our competitors may be able to exploit our PRINT technology to develop competing product candidates, and the value
of our PRINT technology and our product candidates may be negatively impacted. This would have a material and adverse effect on our competitive
position and prospects.
We rely on licenses to intellectual property that are owned by
third parties.
We have entered and may, in the future, enter into license agreements
with third parties to license the rights to use their technologies in our research, development and commercialization activities. License
agreements generally impose various diligence, milestone payments, royalty, insurance and other obligations on us, and if we fail to comply
with these obligations, our licensors may have the right to terminate these license agreements. Termination of these license agreements
or the reduction or elimination of our licensed rights or the exclusivity of our licensed rights may have an adverse impact on, among
others, our ability to develop and commercialize our product candidates. We cannot assure you that we will be able to negotiate new or
reinstated licenses on commercially acceptable terms, or at all.
In addition, we license certain patent rights for our PRINT technology
from UNC under the UNC License. Under the UNC License, UNC has the right to terminate our license if we materially breach the agreement
and fail to cure such breach within the stipulated time. In the event that UNC terminates our license and we have a product that relies
on that license, it may bring a claim against us, and if they are successful, we may be required to compensate UNC for the unauthorized
use of their patent rights through the payment of royalties.
Also, the agreements under which we license patent rights may not give
us control over patent prosecution or maintenance, so that we may not be able to control which claims or arguments are presented and may
not be able to secure, maintain or successfully enforce necessary or desirable patent protection from those patent rights. We do not have
primary control over patent prosecution and maintenance for certain of the patents we license, and therefore cannot assure you that these
patents and applications will be prosecuted or maintained in a manner consistent with the best interests of our business. We also cannot
assure you that patent prosecution and maintenance activities by our licensors, if any, will be conducted in compliance with applicable
laws and regulations or will result in valid and enforceable patents.
Pursuant to the terms of some of our license agreements with third
parties, some of our third-party licensors have the right, but not the obligation, in certain circumstances, to control the enforcement
of our licensed patents or defense of any claims asserting the invalidity of these patents. Even if we are permitted to pursue such enforcement
or defense, we will require the cooperation of our licensors, and we cannot assure you that we will receive such cooperation on commercially
acceptable terms, or at all. We also cannot assure you that our licensors will allocate sufficient resources or prioritize their or our
enforcement of these patents or defense of these claims to protect our interests in the licensed patents. If we cannot obtain patent protection,
or enforce existing or future patents against third parties, our competitive position, business and prospects may be materially and adversely
affected.
Further, licenses to intellectual property may not always be available
to us on commercially acceptable terms, or at all. In the event that the licenses we rely on are not available to us on commercially acceptable
terms, or at all, our ability to commercialize our PRINT technology or product candidates, and our business and prospects, may be materially
and adversely affected.
We may not be able to enforce our intellectual property rights
throughout the world.
Filing, prosecuting, enforcing and defending patents on our PRINT technology
and our product candidates throughout the world may be prohibitively expensive and may not be financially or commercially feasible. In
countries where we have not obtained patent protection, our competitors may be able to use our proprietary technologies to develop competing
product candidates.
Also, the legal systems of non-U.S. jurisdictions may not protect intellectual
property rights to the same extent or in the same manner as the laws of the United States, and we may face significant difficulty in enforcing
our intellectual property rights in these jurisdictions. The legal systems of certain developing countries may not favor the enforcement
of patents and other intellectual property rights. We may therefore face difficulty in stopping the infringement or misappropriation of
our patents or other intellectual property rights in those countries.
We need to protect our trademark, trade name and service mark
rights to prevent competitors from taking advantage of our goodwill.
We believe that the protection of our trademark, trade name and service
mark rights, such as Liquidia, the Liquidia logo and PRINT, is an important factor in product recognition, protecting our brand, maintaining
goodwill and maintaining or increasing market share. We may expend substantial cost and effort in an attempt to register new trademarks,
trade names and service marks and maintain and enforce our trademark, trade name and service mark rights. If we do not adequately protect
our rights in our trademarks, trade names and service marks from infringement, any goodwill that we have developed in those trademarks
could be lost or impaired.
Third parties may claim that the sale or promotion of our products,
when and if approved, may infringe on the trademark, trade name and service mark rights of others. Trademark, trade name and service mark
infringement problems occur frequently in connection with the sale and marketing of pharmaceutical products. If we become involved in
any dispute regarding our trademark, trade name and service mark rights, regardless of whether we prevail, we could be required to engage
in costly, distracting and time-consuming litigation that could harm our business. If the trademarks, trade names and service marks we
use are found to infringe upon the trademarks, trade names or service marks of another company, we could be liable for damages and be
forced to stop using those trademarks, trade names or service marks, and as a result, we could lose all the goodwill that has been developed
in those trademarks, trade names or service marks.
Risks Related to the Manufacturing of our Product Candidates
Our product candidates are based on our proprietary, novel technology,
PRINT, which has not been used to manufacture any products that have been previously approved by the FDA, making it difficult to predict
the time and cost of development and of subsequently obtaining regulatory approval.
Our future success depends on the successful development of our novel
PRINT technology and products based on it, including LIQ861. To our knowledge, no regulatory authority has granted approval to market
or commercialize drugs made using our PRINT technology. While our Morrisville, North Carolina facility was recently subject to a PAI by
the FDA, we have not yet received the final report from the FDA related to that inspection. We may never receive approval to market and
commercialize any product candidate that uses our PRINT technology.
Our operations are concentrated in Morrisville, North Carolina
and interruptions affecting us or our suppliers due to natural disasters or other unforeseen events could materially and adversely affect
our operations.
Most of our current operations are concentrated in Morrisville, North
Carolina. A fire, flood, hurricane, earthquake or other disaster or unforeseen event resulting in significant damage to our facilities
could significantly disrupt or curtail or require us to cease our operations. It would be difficult, costly and time-consuming to transfer
resources from one facility to another or to repair or replace our facility in the event that it is significantly damaged. In addition,
our insurance may not be sufficient to cover all of our losses and may not continue to be available to us on acceptable terms, or at all.
In addition, if one of our suppliers experiences a similar disaster or unforeseen event, we could face significant delays in obtaining
our supplies or be required to source supplies from an alternative supplier and may incur substantial costs as a result. Any significant
uninsured loss, prolonged or repeated disruption to operations or inability to operate, experienced by us or by our suppliers, could materially
and adversely affect our business, financial condition and results of operations.
Risk Related to our Employees
We depend on skilled labor, and our business and prospects may
be adversely affected if we lose the services of our skilled personnel, including those in senior management, or are unable to attract
new skilled personnel.
Our ability to continue our operations and manage our potential future
growth depends on our ability to hire and retain suitably skilled and qualified employees, including those in senior management, in the
long-term. Due to the specialized nature of our work, there is a limited supply of suitable candidates. We compete with other biotechnology
and pharmaceutical companies, educational and research institutions and government entities, among others, for research, technical, clinical
and sales and marketing personnel. In addition, in order to manage our potential future growth effectively, we will need to improve our
financial controls and systems and, as necessary, recruit sales, marketing, managerial and finance personnel. The loss of the services
of members of our sales team could seriously harm our ability to successfully implement our business strategy. If we are unable to attract
and retain skilled personnel, including in particular Damian deGoa, our Chief Executive Officer, our business and prospects may be materially
and adversely affected.
Risks Related to our Common Stock
Future sales of our common stock or securities convertible into
our common stock in the public market could cause our stock price to fall.
Our stock price could decline as a result of sales of a large number
of shares of our common stock or the perception that these sales could occur. These sales, or the possibility that these sales may occur,
also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
On April 13, 2021, the Company sold
8,626,037 shares of the Company’s common stock in a private placement. The purchasers of such shares of common stock have
agreed not to offer, sell, transfer or otherwise dispose of any such shares during the 6-month period following the closing. After
the expiration of such 6-month period, such shares will not have a lock-up restriction and may be freely sold in the public market
which could cause our stock price to decline.
Upon consummation of the Merger Transaction, we issued to RareGen’s
former members an aggregate of 5,550,000 shares of our common stock. Additionally, 616,666 shares of our common stock, which are referred
to in the Merger Agreement as “Holdback Shares”, are being withheld to satisfy potential indemnification obligations of former
RareGen members. In addition, we may issue up to 2,708,333 shares of our common stock in 2022, which are referred to in the Merger Agreement
as “Net Sales Earnout Shares”, if Liquidia PAH achieves at least $32.9 million of 2021 net sales (as calculated by Sandoz
net sales), with the number of Net Sales Earnout Shares to be issued to depend upon the actual amount of the 2021 net sales. The shares
issued to former RareGen members on the closing date of the Merger Transaction were subject to a six-month lock-up that expired on May 18,
2021. In the event that Holdback Shares are released or Net Sales Earnout Shares are issued, such shares will not have a lock-up restriction
and may be freely sold in the public market which could cause our stock price to decline.
As of July 15, 2021, 51,975,049 shares of our common stock were
outstanding, of which 40,702,993 shares of common stock, or 78.3% of our outstanding shares as of July 15, 2021, are freely tradable
without restriction or further registration under the Securities Act of 1933, as amended, or the Securities Act, unless held by our “affiliates,”
as that term is defined in Rule 144 under the Securities Act (“Rule 144”). The resale of the remaining 11,272,056
shares held by our stockholders as of July 15, 2021 is currently prohibited or otherwise restricted as a result of securities law
provisions. Shares issued upon the exercise of stock options outstanding under our equity incentive plans or pursuant to future awards
granted under those plans will become available for sale in the public market to the extent permitted by the provisions of applicable
vesting schedules, any applicable market standoff and lock-up agreements, and Rule 144 and Rule 701 under the Securities Act.
As of July 15, 2021, the holders of 10,513,974 shares, or 20.2%,
of our outstanding shares as of July 15, 2021, have rights, subject to some conditions, to require us to file registration statements
covering the sale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.
We have also registered the offer and sale of all shares of common stock that we may issue under our equity compensation plans, including
the employee stock purchase plan. Once we register the offer and sale of shares for the holders of registration rights, they can be freely
sold in the public market upon issuance or resale (as applicable), subject to lock-up agreements, if any.
We expect that the market price of our common stock may be volatile,
and you may lose all or part of your investment.
The trading prices of the securities of pharmaceutical and biotechnology
companies have been highly volatile. As such, the trading price of our common stock may be highly volatile and could be subject to wide
fluctuations in response to various factors, some of which are beyond our control. The market price for our common stock may be influenced
by many factors, including:
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results of any clinical trials of LIQ861 or any product candidate we may develop, or those of our competitors;
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the success of Sandoz’s generic version of Remodulin to which we have commercial rights to pursuant to the Promotion Agreement;
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the success of Chengdu’s launch of the RG Cartridge and the market acceptance of the RG Cartridge for the subcutaneous administration
of Treprostinil Injection;
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the success of competitive products or technologies;
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potential approvals of any product candidate we may develop for marketing by the FDA or equivalent foreign regulatory authorities
or any failure to obtain such approvals;
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our involvement in significant lawsuits, including stockholder or patent litigation, including inter partes review proceedings
and Hatch-Waxman litigation with originator companies or others which may hold patents, including United Therapeutics;
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regulatory or legal developments in the United States and other countries;
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the results of our efforts to commercialize any product candidate we may develop;
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developments or disputes concerning patents or other proprietary rights;
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the recruitment or departure of key personnel;
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the level of expenses related to any of our product candidates or clinical development programs;
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the results of our efforts to discover, develop, acquire or in-license additional product candidates or products;
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actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;
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variations in our financial results or those of companies that are perceived to be similar to us;
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changes in the structure of healthcare payment systems;
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market conditions in the pharmaceutical and biotechnology sectors and issuance of new or changed securities analysts’ reports
or recommendations;
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general economic, industry and market conditions; and
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the other factors described in this “Risk Factors” section.
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The stock market in general, and market prices for the securities of
pharmaceutical companies like ours in particular, have from time to time experienced volatility that often has been unrelated to the operating
performance of the underlying companies. These broad market and industry fluctuations may adversely affect the market price of our common
stock, regardless of our operating performance. Stock prices of many pharmaceutical companies have fluctuated in a manner unrelated or
disproportionate to the operating performance of those companies. In several recent situations when the market price of a stock has been
volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of
our stockholders were to bring a lawsuit against us, the defense and disposition of the lawsuit could be costly and divert the time and
attention of our management and harm our operating results.
Our principal stockholders and management own a significant percentage
of our stock and will be able to exercise significant influence over matters subject to stockholder approval.
Our executive officers, directors and principal stockholders, together
with their respective affiliates, beneficially owned 36.1% of our capital stock as of July 15, 2021. Accordingly, our executive officers,
directors and principal stockholders have significant influence in determining the composition of the Board, and voting on all matters
requiring stockholder approval, including mergers and other business combinations, and continue to have significant influence over our
operations. This concentration of ownership could have the effect of delaying or preventing a change in our control or otherwise discouraging
a potential acquirer from attempting to obtain control of us that you may believe are in your best interests as one of our stockholders.
This in turn could have a material adverse effect on our stock price and may prevent attempts by our stockholders to replace or remove
the Board or management.
As a public company, we are obligated to develop and maintain
proper and effective internal control over financial reporting and any failure to do so may adversely affect investor confidence in us
and, as a result, the trading price of our shares. The results of our assessment of the effectiveness of internal control over financial
reporting (ICFR) indicate that we had multiple material weaknesses which have not been fully remedied as of June 30, 2021.
Effective internal controls over financial reporting are necessary
for us 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 us to fail
to meet our reporting obligations. Inferior internal controls could also cause investors to lose confidence in our reported financial
information, which could have a negative effect on the trading price of our common stock. In addition, any future testing by us conducted
in connection with Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the Sarbanes-Oxley Act) or the subsequent testing by
our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are
deemed to be material weaknesses or that may require prospective or retroactive changes to our consolidated financial statements or identify
other areas for further attention or improvement.
As required by the Sarbanes Oxley Act of 2002 and commencing with the
fiscal year ended December 31, 2019, we were required to furnish a report by management on, among other things, the effectiveness
of our ICFR. In connection with the assessment of the effectiveness of our ICFR, our management identified material weaknesses that existed
as of December 31, 2019 and December 31, 2020 which have not been fully remedied as of June 30, 2021.
We are an “emerging growth company,”
as defined in the JOBS Act, and as a result of the reduced disclosure and governance requirements applicable to emerging growth
companies, our common stock may be less attractive to investors.
We are an “emerging growth company,” as defined in the
JOBS Act, and we take advantage of certain exemptions from various reporting requirements that are applicable to other public companies
that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic
reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and
stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock
less attractive because we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be
a less active trading market for our common stock and our stock price may be more volatile. We will take advantage of these reporting
exemptions until we are no longer an “emerging growth company.” We will remain an “emerging growth company” until
the earliest of (i) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or more, (ii) the
last day of 2023, (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three
years or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
Anti-takeover provisions in our charter documents and under Delaware
law could make an acquisition of us difficult, limit attempts by our stockholders to replace or remove our current management and adversely
affect our stock price.
Provisions of our certificate of incorporation and bylaws may delay
or discourage transactions involving an actual or potential change in our control or change in our management, including transactions
in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to
be in their best interests. Therefore, these provisions could adversely affect the price of our stock. Among other things, the certificate
of incorporation and bylaws:
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permit the Board to issue up to 10 million shares of preferred stock, with any rights, preferences and privileges as they may designate;
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provide that the authorized number of directors may be changed only by resolution of our Board;
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provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative
vote of a majority of directors then in office, even if less than a quorum;
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require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders
and may not be taken by written consent;
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create a staggered board of directors such that all members of our Board are not elected at one time;
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allow for the issuance of authorized but unissued shares of our capital stock without any further vote or action by our stockholders;
and
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establish advance notice requirements for nominations for election to the Board or for proposing matters that can be acted upon at
stockholders’ meetings.
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In addition, because we are incorporated in Delaware, we are governed
by the provisions of Section 203 of the Delaware General Corporation Law (“DGCL”) which generally prohibits a Delaware
corporation from engaging in any of a broad range of business combinations with any stockholder owning in excess of 15% of our outstanding
stock for a period of three years following the date on which the stockholder obtained such 15% equity interest in us.
The terms of our authorized preferred stock selected by our Board at
any point could decrease the amount of earnings and assets available for distribution to holders of our common stock or adversely affect
the rights and powers, including voting rights, of holders of our common stock without any further vote or action by the stockholders.
As a result, the rights of holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders
of any preferred stock that may be issued by us in the future, which could have the effect of decreasing the market price of our common
stock.
Any provision of our certificate of incorporation or bylaws or Delaware
corporate law that has the effect of delaying or deterring a change in control could limit opportunities for our stockholders to receive
a premium for their shares of common stock, and could also affect the price that investors are willing to pay for our common stock.
Our certificate of incorporation designates the Court of Chancery
of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders,
which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors,
officers or other employees.
Our certificate of incorporation provides that, to the fullest extent
permitted by law, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for: (i) any derivative action
or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors
or officers to us or our stockholders; (iii) any action asserting a claim against us arising pursuant to any provision of the DGCL,
our certificate of incorporation or our bylaws; or (d) any action asserting a claim against us governed by the internal affairs doctrine;
provided, that, this provision would not apply to suits brought to enforce a duty or liability created by the Securities Act or
Exchange Act. Furthermore, our bylaws designate the federal district courts of the United States as the exclusive forum for the resolution
of any complaint asserting a cause of action arising under the Securities Act. Any person or entity purchasing or otherwise acquiring
any interest in shares of our capital stock is deemed to have received notice of and consented to the foregoing provisions. This choice
of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds more favorable for disputes
with us or our directors or officers, which may discourage such lawsuits against us and our directors or officers. Alternatively, if a
court were to find this choice of forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types
of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely
affect our business, financial condition, prospects or results of operations.
Because we do not anticipate paying any cash dividends on our
common stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.
We have never declared or paid cash dividends on our equity securities.
We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition,
the terms of our existing LSA with SVB preclude us, and the terms of any future debt agreement may preclude us, from paying dividends.
As a result, capital appreciation, if any, of our equity securities will likely be your sole source of gain for the foreseeable future.
General Risk Factors
General Risks Related to the Commercialization of our Product Candidates
Our business and operations are likely to be adversely affected
by the evolving and ongoing COVID-19 global pandemic.
Our business and operations are likely to be adversely affected by
the effects of the recent and evolving COVID-19 virus, which was declared by the World Health Organization as a global pandemic. The COVID-19
pandemic has resulted in travel and other restrictions in order to reduce the spread of the disease, including state and local orders
across the United States that, among other things, directed individuals to shelter at their places of residence, directed businesses and
governmental agencies to cease non-essential operations at physical locations, prohibited certain non-essential gatherings and events
and ordered cessation of non-essential travel.
Remote work policies, quarantines, shelter-in-place and similar government
orders, shutdowns or other restrictions on the conduct of business operations related to the COVID-19 pandemic may negatively impact productivity
and our research and development activities, the magnitude of which will depend, in part, on the length and severity of the restrictions
and other limitations on our ability to conduct our business in the ordinary course. In addition, although our employees are accustomed
to working remotely, changes in internal controls due to remote work arrangements may result in control deficiencies in the preparation
of our financial reports, which could be material. Currently, many of our employees are continuing to work remotely, with only essential
personnel required to work on site as needed to produce LIQ861 and conduct other activities that cannot be conducted remotely.
Such orders may also impact personnel at third-party contract research
organizations that conduct clinical trials or research activities, which could impact our ability to continue or commence such activities,
or contract manufacturing facilities in the United States and other countries, or the availability or cost of materials, which would disrupt
our supply chain and could affect our ability to conduct ongoing and planned clinical trials and preparatory activities.
The spread of COVID-19, which has caused a broad impact globally, may
materially affect us economically. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess
or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital,
which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of
COVID-19 could materially affect our business and the value of our common stock.
The global pandemic of COVID-19 continues to rapidly evolve. The extent
to which the COVID-19 pandemic impacts our business and operations, including our clinical development and regulatory efforts, will depend
on future developments that are highly uncertain and cannot be predicted with confidence at the time of this prospectus, such as the ultimate
geographic spread of the disease, the severity and duration of future outbreaks (including from the spread of COVID-19 variants or mutant
strains), the duration and effect of business disruptions and the short-term effects, the administration, availability and efficacy of
vaccination programs and the ultimate effectiveness of travel restrictions, quarantines, social distancing requirements and business closures
in the United States and other countries to contain and treat the disease. For example, during the course of the pandemic the FDA has
at points delayed both domestic and foreign facility inspections. The agency announced in July 2020 that domestic facility inspections
will be conducted but prioritized through a risk-based approach, while foreign facility inspections remain delayed unless the FDA determines
they can be conducted based on an assessment of whether it is “mission-critical.” More recently, in April 2021, the FDA
announced that it may request to conduct “remote interactive evaluation,” which in a variety of circumstances is inclusive
of PAIs, where it is determined to be appropriate in accordance with the mission needs and any travel limitations. In addition, in July 2021,
the FDA notified us that, due to restrictions on travel related to COVID-19, the FDA may be unable to conduct the PAIs for LIQ861 prior
to the PDUFA goal date, although subsequent to receipt of such notice, the FDA conducted a PAI of our Morrisville, North Carolina facility.
We expect the impact of COVID-19 on the FDA’s operations will continue to evolve. Accordingly, we do not yet know the full extent
of potential delays or impacts on our business, our clinical and regulatory activities, healthcare systems or the global economy as a
whole. However, these impacts could adversely affect our business, financial condition, results of operations and growth prospects.
In addition, to the extent the ongoing COVID-19 pandemic adversely
affects our business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties described
in this “Risk Factors” section and the “Risk Factors” sections of the documents incorporated by reference herein.
The marketing approval processes of the FDA and comparable regulatory
authorities in other countries are unpredictable and our product candidates may be subject to multiple rounds of review or may not receive
marketing approval.
Pursuing marketing approval for a pharmaceutical product candidate
(for example, through the NDA process) is an extensive, lengthy, expensive and inherently uncertain process. We cannot assure you that
any of our product candidates will receive marketing approval. Regulatory authorities may delay, limit or deny approval of our product
candidates for many reasons, including, but not limited to, the following:
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the FDA or comparable regulatory authorities may, for a variety of reasons, take the view that the data collected from our preclinical
and clinical trials and human factors testing, or data that we otherwise submit or reference to support an application, are not sufficient
to support approval of a product candidate;
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the FDA or comparable regulatory authorities in other countries may ultimately conclude that our manufacturing processes or facilities
or those of our third-party manufacturers do not sufficiently demonstrate compliance with current good manufacturing practices (cGMP)
to support approval of a product candidate; or that the drug CMC data or device biocompatibility data for our product candidates otherwise
do not support approval;
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we may be unable to demonstrate to the satisfaction of the FDA or comparable regulatory authorities in other countries that our product
candidate is safe and effective for its proposed indication, or that its clinical and other benefits outweigh its safety risks;
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the approval policies of the FDA or comparable regulatory authorities in other countries may change in a manner that renders our data
insufficient for approval.
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Even if we obtain marketing approval, the FDA or comparable regulatory
authorities in other countries may approve our product candidates for fewer or more limited indications than those for which we requested
approval or may include safety warnings or other restrictions that may negatively impact the commercial viability of our product candidates.
Likewise, regulatory authorities may grant approval contingent on the performance of costly post-marketing clinical trials or other studies
or the conduct of an expensive REMS, which could significantly reduce the potential for commercial success or viability of our product
candidates. We also may not be able to find acceptable collaborators to manufacture our drug products, if and when approved, in commercial
quantities and at acceptable prices, or at all.
If the FDA or comparable regulatory authorities in other countries
approve generic versions of our product candidates, or do not grant our product candidates a sufficient period of market exclusivity before
approving their generic versions, our ability to generate revenue may be adversely affected.
Once an NDA is approved, the drug product covered will be listed as
a reference listed drug in the FDA’s Orange Book. In the United States, manufacturers of drug products may seek approval of generic
versions of reference listed drugs through the submission of abbreviated new drug applications (ANDAs). In support of an ANDA, a generic
manufacturer is generally required to show that its product has the same active pharmaceutical ingredient(s), dosage form, strength, route
of administration and conditions of use or labeling as the reference listed drug and that the generic version is bioequivalent to the
reference listed drug. Generic drug products may be significantly less expensive to bring to market than the reference listed drug, and
companies that produce generic drug products are generally able to offer them at lower prices. Thus, following the introduction of a generic
drug product, a significant percentage of the sales of any reference listed drug may be lost to the generic drug product.
The FDA will not approve an ANDA for a generic drug product until the
applicable period of market exclusivity for the reference listed drug has expired. The applicable period of market exclusivity varies
depending on the type of exclusivity granted. A grant of market exclusivity is separate from the existence of patent protection and manufacturers
may seek to launch generic versions of our drug products following the expiry of their respective marketing exclusivity periods, even
if our drug products are still under patent protection at the relevant time.
Any competition that our product candidates may face, if and when such
product candidates are approved for marketing and commercialized, from generic versions could substantially limit our ability to realize
a return on our investment in the development of our product candidates and have a material and adverse effect on our business and prospects.
General Risk Related to the Development and Regulatory Approval
of our Product Candidates
Even if we obtain marketing approval for our product candidates
in the United States, we or our collaborators may not obtain marketing approval for the same product candidates elsewhere.
We may enter into strategic collaboration arrangements with third parties
to commercialize our product candidates outside of the United States. In order to market any product candidate outside of the United States,
we or our collaborators will be required to comply with numerous and varying regulatory requirements of other countries regarding safety
and efficacy. Clinical trials conducted in one country may not be recognized or accepted by regulatory authorities in other countries,
and obtaining marketing approval in one country does not mean that marketing approval will be obtained in any other country. Approval
processes vary among countries and additional product testing and validation, or additional administrative review periods, may be required
from one country to the next.
Seeking marketing approval in countries other than the United States
could be costly and time-consuming, especially if additional preclinical studies or clinical trials are required to be conducted. We currently
do not have any product candidates approved for sale in any jurisdiction, including non-U.S. markets, and we do not have experience in
obtaining marketing approval in non-U.S. markets. We currently also have not identified any collaborators to market our products outside
of the United States and cannot assure you that such collaborators, even if identified, will be able to successfully obtain marketing
approval for our product candidates outside of the United States. If we or our collaborators fail to obtain marketing approval in non-U.S.
markets, or if such approval is delayed, our target market may be reduced, and our ability to realize the full market potential of our
products will be adversely affected.
General Risk Related to Healthcare Regulation
The pharmaceutical industry is subject to a range of laws and
regulations in areas including healthcare program requirements and fraud, waste, and abuse; healthcare and related marketing compliance
and transparency; and privacy and data security. Our failure to comply with these laws and regulations as they are, or in the future become,
applicable to us may have an adverse effect on our business.
Healthcare providers, physicians and third-party payors often play
a primary role in the recommendation and prescription of any drug products for which we may obtain marketing approval, or for which we
may provide contracted promotional services to third parties. Our current and future arrangements with healthcare providers, physicians,
third-party payors and customers, and our sales, marketing and educational activities, may expose us to broadly applicable fraud and abuse
and other healthcare laws and regulations (at the federal and state level) that may constrain our business or financial arrangements and
relationships through which we market, sell, or distribute drug products.
In addition, we may be subject to transparency laws and patient privacy
regulation by both the federal government and the states in which we conduct our business.
The laws that may affect our ability to operate include, but are not
limited to, the following examples:
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The federal Anti-Kickback Statute (AKS)prohibits, among other things, persons and entities including pharmaceutical manufacturers
from, among other things, knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, overtly
or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for or the purchase, lease,
or order of, or the arranging for an item or service for which payment may be made, in whole or in part, under federal healthcare programs
such as the Medicare and Medicaid programs.
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The federal civil and criminal false claims laws and civil monetary penalty laws impose a range of prohibitions and compliance considerations.
For example, the False Claims Act (FCA) prohibits individuals or entities from, among other things, knowingly presenting, or causing to
be presented, claims for payment to, or approval by, the federal government that are false, fictitious or fraudulent or knowingly making,
using or causing to be made or used, a false record or statement material to a false or fraudulent claim to avoid, decrease or conceal
an obligation to pay money to the federal government. Claims resulting from a violation of the federal AKS constitute a false or fraudulent
claim for purposes of the federal False Claims Act. Promotion that is deemed to be “off label” can be the basis of FCA
exposure.
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Federal law includes provisions (established under the Health Insurance Portability and Accountability Act of 1996) addressing healthcare
fraud and false statements relating to healthcare matters. The healthcare fraud statute prohibits knowingly and willfully executing, or
attempting to execute, a scheme to defraud any healthcare benefit program, including private payors. The false statements statute prohibits
knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent
statement in connection with the delivery of or payment for healthcare benefits, items or services. Violations of these statutes is a
felony and may result in fines, imprisonment or exclusion from governmental programs.
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Privacy and data security laws may apply to our business. Under the Federal Trade Commission Act (the FTCA) Section 5(a), the
FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer
information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.
Medical data is considered sensitive data that merits stronger safeguards. States may also impose requirements, for example the California
Consumer Privacy Act (CCPA) went into effect in January 2020 creating data privacy obligations for covered companies and providing
privacy rights to California residents, including the right to opt out of certain disclosures of their information.
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The federal physician payment transparency requirements, sometimes referred to as the “Physician Payments Sunshine Act,” requires
applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under government healthcare
programs to annually report to the Centers for Medicare and Medicaid Services (CMS) information related to certain payments or other transfers
of value made or distributed to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and
their immediate family members. Payments and transfers of value made to certain other providers such as nurse practitioners and physician
assistants beginning in 2021 will need to be reported under the Sunshine Act in 2022.
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For both investigational and commercialized products, interactions with or communications directed to healthcare professionals (HCPs),
patients or patient- or disease-advocates or advocacy groups, and payors, are subject to heightened scrutiny by the FDA. Relative to nonpromotional
communications, for example, there are specific and limited FDA accommodations for nonpromotional, truthful and non-misleading sharing
of information regarding products in development and off-label uses including dissemination of peer-reviewed reprints, support of independent
continuing medical education (CME), and healthcare economic discussions with payors. In a competitive environment, a company’s communications
about products in development may also be subject to heightened scrutiny.
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Analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to items or services reimbursed
by any third-party payor, including commercial insurers, and in some cases may apply regardless of payor (i.e., even for self-pay scenarios).
Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and
the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report pricing and
marketing information, including, among other things, information related to payments to physicians and other healthcare providers or
marketing expenditures, state and local laws that require the registration of pharmaceutical sales representatives. Many of these state
laws differ from each other in significant ways and may not have the same effect, and may apply more broadly or be stricter than their
federal counterparts, thus complicating compliance efforts; and
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Price reporting laws require the calculation and reporting of complex pricing metrics to government programs, where such reported
prices may be used in the calculation of reimbursements or discounts on our drug products. Participation in such programs and compliance
with their requirements may subject us to increased infrastructure costs and potentially limit our ability to price our drug products.
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Ensuring that our business and business arrangements with third parties
comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming
and can divert management’s attention from the business, even if the government ultimately finds that no violation has occurred.
If our operations are found to be in violation of any of the laws or
regulations described above or any other laws or government regulations that apply to us, we may be subject to penalties and potentially,
the curtailment or restructuring of our operations as well as additional governmental reporting obligations and oversight, any of which
could adversely affect our ability to operate our business and our results of operations.
General Risk Related to Our Dependence on Third Parties
We rely on third parties to conduct our preclinical studies and
clinical trials.
We currently rely on, and plan to continue to rely on, third-party
contract research organizations (CROs) to monitor and manage data for our preclinical studies and clinical trials. However, we are responsible
for ensuring that each of our trials is conducted in accordance with the applicable regulatory standards and our reliance on CROs does
not relieve us of our regulatory responsibilities.
The CROs on which we rely are required to comply with FDA regulations
(and the regulations of comparable regulatory authorities in other countries) regarding GCP. Regulatory authorities enforce GCP standards
through periodic inspections. If any of the CROs on which we rely fail to comply with the applicable GCP standards, the clinical data
generated in our clinical trials may be deemed unreliable. While we have contractual agreements with these CROs, we have limited influence
over their actual performance and cannot control whether or not they devote sufficient time and resources to our preclinical studies and
clinical trials. A failure to comply with the applicable regulations in the conduct of the preclinical studies and clinical trials for
our product candidates may require us to repeat such studies or trials, which would delay the process of obtaining marketing approval
for our product candidates and have a material and adverse effect on our business and prospects.
Some of our CROs have the ability to terminate their respective agreements
with us if, among others, it can be reasonably demonstrated that the safety of the patients participating in our clinical trials warrants
such termination. If any of our agreements with our CROs is terminated, and if we are not able to enter into agreements with alternative
CROs on acceptable terms or in a timely manner, or at all, the clinical development of our product candidates may be delayed and our development
expenses could be increased.
General Risks Related to Legal Compliance Matters
Even if we obtain regulatory approval for a product candidate,
our products and business will remain subject to ongoing regulatory obligations and review.
If our product candidates are approved, they will be subject to ongoing
regulatory requirements for manufacturing, labeling, packaging, storage, drug supply chain security surveillance and tracking, advertising,
promotion, sampling, record-keeping, conduct of post-marketing studies and submission of safety, efficacy and other post-market information,
including both federal and state requirements in the United States and comparable requirements outside of the United States. Accordingly,
we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing,
production and quality control. Any regulatory approvals that we may receive for our product candidates may also be subject to limitations
on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially
costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product candidate.
The FDA may also require a REMS as a condition of approval of our product candidates, which could include requirements for a medication
guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries
and other risk minimization tools. We will also be required to report certain adverse reactions and production problems, if any, to the
FDA or other regulatory agencies and to comply with requirements concerning advertising and promotion for our products. 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 label. As such, we may not promote our products for indications or uses for which they do not have FDA
or other regulatory agency approval. The holder of an approved NDA must also submit new or supplemental applications and obtain FDA approval
for certain changes to the approved product, product labeling, or manufacturing process. We could also be asked to conduct post-marketing
clinical studies to verify the safety and efficacy of our product candidates in general or in specific patient subsets. An unsuccessful
post-marketing study or failure to complete such a clinical study could result in the withdrawal of marketing approval. Furthermore, any
new legislation addressing drug safety issues could result in delays in product development or commercialization or increased costs to
assure compliance. Foreign regulatory authorities impose similar requirements. If a regulatory agency discovers previously unknown problems
with a product, such as adverse events of unanticipated severity or frequency, or disagrees with the promotion, marketing or labeling
of a product, such regulatory agency may impose restrictions on that product or us, including requiring withdrawal of the product from
the market. If we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may, among other
things:
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issue warning letters asserting that we are in violation of the law;
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seek an injunction or impose civil or criminal penalties or monetary fines;
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suspend or withdraw regulatory approval;
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suspend any of our ongoing clinical trials;
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refuse to approve pending applications or supplements to approved applications submitted by us or our strategic partners;
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restrict the marketing or manufacturing of our products;
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seize or detain products, or require a product recall;
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refuse to permit the import or export of our product candidates; or
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refuse to allow us to enter into government contracts.
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Any government investigation of alleged violations of law could require
us to expend significant time and resources in response and could generate negative publicity. Any failure to comply with ongoing regulatory
requirements may significantly and adversely affect our ability to commercialize and generate revenue from our product candidates. If
regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely
affected.
We also cannot predict the likelihood, nature or extent of government
regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. If we
are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able
to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability,
which would adversely affect our business, prospects, financial condition and results of operations.
General Risks Related to our Intellectual Property
We may become involved in litigation to protect our intellectual
property or enforce our intellectual property rights, which could be expensive, time-consuming and may not be successful.
Competitors may infringe our patents or misappropriate or otherwise
violate our intellectual property rights. To counter infringement or unauthorized use, we may engage in litigation to, among others, enforce
or defend our intellectual property rights, determine the validity or scope of our intellectual property rights and those of third parties,
and protect our trade secrets. Such actions may be time-consuming and costly and may divert our management’s attention from our
core business and reduce the resources available for our clinical development, manufacturing and marketing activities, and consequently
have a material and adverse effect on our business and prospects, regardless of the outcome.
In addition, in an infringement proceeding, a court may decide that
a patent owned by, or licensed to, us is invalid or unenforceable, or may refuse to stop the other party from using the technology in
question on the ground that our patents do not cover such technology. An adverse result in any litigation proceeding could put one or
more of our patents at risk of being invalidated, held unenforceable or interpreted narrowly. Furthermore, because of the substantial
amount of discovery required in connection with intellectual property litigation, there is a risk that our confidential information may
be compromised by disclosure.
Patent terms may be inadequate to protect our competitive position
on our product candidates for an adequate amount of time.
Patents have a limited lifespan. In the United States, the natural
expiration of a patent is generally 20 years after it is filed. While various extensions may be available, the life of a patent, and the
protection it affords, is limited. 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.
We intend to seek extensions of patent terms in the United States and,
if available, in other countries where we prosecute patents. In the United States, the Hatch-Waxman Act permits patent owners to request
a patent term extension, based on the regulatory review period for a product, of up to five years beyond the normal expiration of the
patent, which is limited to one patent claiming the approved drug product or use in an indication (or any additional indications approved
during the period of extension). However, the applicable authorities, including the FDA and the USPTO, in the United States, and comparable
regulatory authorities in other countries, may not agree with our assessment of whether such extensions are available, and may refuse
to grant extensions to our patents, or grant more limited extensions than we had requested. In such event, our competitors may be able
to take advantage of our investment in development and clinical trials by referencing our preclinical and clinical data in their marketing
approval applications with the FDA to launch their drug product earlier than might otherwise be the case.
General Risk Related to the Manufacturing of our Product Candidates
Our facilities are subject to extensive and ongoing regulatory
requirements and failure to comply with these regulations may result in significant liability.
Our company and our facilities are subject to payment of fees, registration
and listing requirements, ongoing review and periodic inspections by the FDA and other regulatory authorities for compliance with quality
system regulations, including the FDA’s cGMP requirements. These regulations cover all aspects of the manufacturing, testing, quality
control and record-keeping of our drug products. Furthermore, the facilities where our product candidates are manufactured are subject
to PAIs by the FDA. A PAI has been conducted for our Morrisville, North Carolina facility with respect to the NDA for LIQ861, for which
we are awaiting a final report. In addition to the completed inspection of our Morrisville site, the FDA has notified us that a PAI will
also be required for the third-party provider of encapsulation and packaging services for LIQ861. At this time, we have not been notified
of when this additional PAI may be completed. If LIQ861 or any of our product candidates receive marketing approval from the FDA, the
sites where such products are manufactured will remain subject to periodic inspection even after our product candidates have received
marketing approval. Suppliers of components and materials, such as active pharmaceutical ingredients, used to manufacture our drug products
are also required to comply with the applicable regulatory standards.
The manufacture of pharmaceutical products is complex and requires
significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. We
and any contract manufacturers that we may engage in the future must comply with cGMP requirements. Manufacturers of pharmaceutical products
often encounter difficulties in production, particularly in scaling up and validating initial production and contamination controls. These
problems include difficulties with production costs and yields, quality control, including stability of the product, quality assurance
testing, operator error, shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations.
Furthermore, if microbial, viral or other contaminations are discovered in our product candidates or in the manufacturing facilities in
which our product candidates are made, such manufacturing facilities may need to be closed for an extended period of time to investigate
and remedy the contamination.
Compliance with these regulatory standards often requires significant
expense and effort. If we or our suppliers are unable to comply with the applicable regulatory standards or take satisfactory corrective
steps in response to adverse results of an inspection, this could result in enforcement action, including, among others, the issue of
a public warning letter, a shutdown of or restrictions on our or our suppliers’ manufacturing operations, delays in approving our
drug products and refusal to permit the import or export of our drug products. Any adverse regulatory action taken against us could subject
us to significant liability and harm our business and prospects.