Document
TABLE OF CONTENTS
PART IV
INDEX TO FINANCIAL STATEMENTS

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-K
(Mark One)
 
 
ý
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
Or
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to         
Commission file number 001-36080
IVERIC bio, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
(State or other jurisdiction of incorporation or organization)
 
20-8185347
(I.R.S. Employer Identification No.)
 
 
 
One Penn Plaza, 35th Floor
New York, NY
(Address of principal executive offices)
 
10119
(Zip Code)
 
 
 
(212) 845-8200
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.001 par value
ISEE
The Nasdaq Global Select Market
 
 
 
Securities registered pursuant to Section 12(g) of the Act: None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes    ý No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes    ý No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes    o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ý Yes    o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨
Accelerated filer x
Non-accelerated filer ¨
Smaller reporting company x
Emerging growth company ¨
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes    ý No
As of June 30, 2019, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $51.6 million, based on the closing price of the registrant's common stock on June 28, 2019.
The number of shares outstanding of the registrant's class of common stock, as of February 24, 2020: 49,688,230
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report incorporates by reference information from the definitive Proxy Statement for the registrant's 2020 Annual Meeting of Shareholders, which is expected to be filed with the Securities and Exchange Commission not later than 120 days after the registrant's fiscal year ended December 31, 2019.
 


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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Annual Report on Form 10-K, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words "anticipate," "believe," "goals," "estimate," "expect," "intend," "may," "might," "plan," "predict," "project," "target," "potential," "will," "would," "could," "should," "continue" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.
The forward-looking statements in this Annual Report on Form 10-K include, among other things, statements about:
the potential benefits of our business plan and strategy to develop our therapeutic and gene therapy product candidates and programs and pursue our collaborative gene therapy sponsored research programs;
our expectations regarding the impact of results from our OPH2003 pivotal clinical trial evaluating Zimura for the treatment of geographic atrophy secondary to dry age-related macular degeneration on our business strategy, including our plans to pursue further development of Zimura and/or seek potential collaboration or outlicensing opportunities;
the timing, costs, conduct and outcome of ISEE2008, our planned Phase 3 clinical trial evaluating Zimura for the treatment of geographic atrophy secondary to dry age-related macular degeneration, and expectations regarding the potential for Zimura to receive regulatory approval for the treatment of geographic atrophy secondary to dry age-related macular degeneration based on the clinical trial results we have received to date and future results from the ISEE2008 clinical trial and any other trials we may conduct;
the potential advantages of our product candidates and other technologies that we are pursuing, including the advantages and limitations of inhibition of complement factor C5 and HtrA1, including our hypotheses regarding complement inhibition as a mechanism of action to treat geographic atrophy, and of gene therapy, including the use of minigenes;
our estimates regarding the number of patients affected by the diseases our product candidates and development programs are intended to treat;
the timing, costs, conduct and outcome of our ongoing and planned clinical trials, including statements regarding the timing of the initiation and completion of, and the receipt of results from, such clinical trials, the costs to conduct such clinical trials, and the impact of the results of such clinical trials on our business strategy;
the timing, costs, conduct and outcome of our ongoing and planned research and preclinical development activities, including statements regarding the timing of the initiation and completion of, and the receipt of results from, such activities, the costs to conduct such activities, and the impact of the results of such activities on our business strategy;
our ability to establish and maintain arrangements and capabilities for the manufacture of our therapeutics and gene therapy product candidates, including scale up and validation of the manufacturing process for Zimura;
our expectations related to our use of available cash;
our estimates regarding expenses, future revenues, capital requirements and needs for, and ability to obtain, additional financing;
the timing of and our ability to obtain marketing approval of our product candidates, and the ability of our product candidates to meet existing or future regulatory standards;
our ability to consummate business development transactions, including potential collaboration or out-licensing opportunities for further development and potential commercialization of Zimura or in-license or other opportunities to acquire rights to additional product candidates or technologies to treat retinal diseases;
our estimates regarding the potential market opportunity for our product candidates;

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our sales, marketing and distribution capabilities and strategy;
the rate and degree of potential market acceptance and clinical utility of our product candidates, if approved;
the potential receipt of revenues from future sales of our product candidates, if approved;
our intellectual property position;
the impact of existing and new governmental laws and regulations; and
our competitive position.
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and our stockholders should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Annual Report on Form 10-K, particularly in the "Risk Factors" section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
You should read this Annual Report on Form 10-K and the documents that we have filed as exhibits to this Annual Report on Form 10-K completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Annual Report on Form 10-K are made as of the date of this Annual Report on Form 10-K, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
USE OF TRADEMARKS
The trademarks, trade names and service marks appearing in this Annual Report on Form 10-K are the property of their respective owners. We have omitted the ® and ™ designations, as applicable, for the trademarks named in this Annual Report on Form 10-K after their first reference in this Annual Report on Form 10-K.

PART I
Item 1.    Business
Overview and Our Strategy
We are a science-driven biopharmaceutical company focused on the discovery and development of novel treatment options for retinal diseases with significant unmet medical needs. We are currently developing both therapeutic product candidates for age-related retinal diseases and gene therapy product candidates for orphan inherited retinal diseases, or IRDs. In April 2019, we changed our name from Ophthotech Corporation to IVERIC bio, Inc. as we continued to broaden the focus of our company to include gene therapies.
We believe that both therapeutics and gene therapy serve important roles in drug development and providing potential treatment options for patients suffering from retinal diseases. Our most advanced therapeutic product candidate is Zimura® (avacincaptad pegol), a complement C5 inhibitor. In October 2019, we announced initial, top-line data from a randomized, controlled clinical trial of Zimura in geographic atrophy, or GA, secondary to dry age-related macular degeneration, or AMD, which we refer to as the OPH2003 trial. The top-line data confirmed that Zimura met the prespecified primary endpoint in the trial in reducing the rate of GA growth in patients with dry AMD. The reduction in the mean rate of GA growth over 12 months using the square root transformation was 0.110 mm (p-value = 0.0072) for the Zimura 2 mg group as compared to the corresponding sham control group and 0.124 mm (p-value = 0.0051) for the Zimura 4 mg group as compared to the corresponding sham control group, indicating an approximate 27% relative reduction in the mean rate of GA growth over 12 months when compared with sham for both dose groups. These data for both dose groups were statistically significant and we believe demonstrate a clinically relevant reduction in rate of GA growth. Based on our review of the safety data to date, Zimura was generally well tolerated over 12 months of administration in this clinical trial. Over this 12-month period, there were no investigator-reported ocular serious adverse events, no Zimura-related adverse events, no cases of Zimura-related intraocular inflammation, no cases of Zimura-related increased intraocular pressure, no cases of endophthalmitis, and no discontinuations

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attributed by investigators to Zimura. OPH2003 was designed to be a Phase 2b screening trial, with the potential to qualify as a pivotal trial depending on the magnitude and statistical significance of the potential benefit observed. We believe that the safety and efficacy results from the OPH2003 trial could potentially satisfy the U.S. Food and Drug Administration's, or FDA’s, requirements as one of the two pivotal clinical trials typically required for marketing approval of a pharmaceutical product. We are preparing for an international, randomized, double masked, sham controlled, multi-center Phase 3 clinical trial of Zimura in this indication, which we refer to as the ISEE2008 trial, with the goal of beginning patient enrollment during the first quarter of 2020.
We currently have two gene therapy product candidates in preclinical development and several collaborative gene therapy sponsored research programs ongoing. Subject to successful completion of preclinical development and manufacturing under current good manufacturing practices, or GMP, and regulatory review, we plan to initiate a Phase 1/2 clinical trial for IC-100, our lead gene therapy product candidate, during the fourth quarter of 2020.
We believe a number of factors provide us a competitive advantage in retinal drug development for therapeutics and gene therapies. These factors include:
Broad and deep portfolio of product candidates. We have built a broad and deep portfolio of therapeutic and gene therapy product candidates and programs that we believe are scientifically compelling, target diseases for which there are high unmet medical needs, and provide significant market opportunities. For our gene therapies, we are focused on using adeno-associated virus, or AAV, for gene delivery, which we believe holds tremendous promise for treating a number of IRDs for which there are no currently approved treatments.
Our clinical experience and growing capabilities. Our team has significant experience in the efficient execution of large-scale clinical trials for retinal diseases, and we intend to leverage that experience as we continue the clinical development of Zimura and prepare for the potential clinical development of our gene therapy product candidates. We are continuing to build our internal and external capabilities in various areas, such as preclinical research, manufacturing, analytical development, quality assurance and control, and regulatory affairs.
Collaborative relationships with clinical trial sites and leading academic institutions. We have deep relationships with global retina thought leaders and an extensive network of over 250 ophthalmic clinical trial sites worldwide with which we have worked. We have developed collaborative relationships with several leading academic institutions in gene therapy research, including the University of Massachusetts Medical School, or UMMS, the University of Pennsylvania, or Penn, and the University of Florida, or UF.
Our therapeutics portfolio consists of Zimura and our preclinical development program of High temperature requirement A serine peptidase 1 protein, or HtrA1, inhibitors. We are targeting the following diseases with Zimura:
GA, which is the advanced stage of AMD, and is characterized by marked thinning or atrophy of retinal tissue, leading to irreversible loss of vision; and
autosomal recessive Stargardt disease, or STGD1, which is characterized by progressive damage to the central portion of the retina, or the macula, and other retinal tissue of young adults, leading to loss of vision.
We are developing our HtrA1 inhibitor program for GA and potentially other age-related retinal diseases.
Our gene therapy portfolio consists of several ongoing research and preclinical development programs that use AAV for gene delivery. These AAV gene therapy programs are targeting the following orphan IRDs:
rhodopsin-mediated autosomal dominant retinitis pigmentosa, or RHO-adRP, which is characterized by progressive and severe bilateral loss of vision leading to blindness;
IRDs associated with mutations in the BEST1 gene, including Best vitelliform macular dystrophy, or Best disease, which is generally characterized by bilateral egg yolk-like lesions in the macula, which, over time, progress to atrophy and loss of vision;
Leber congenital amaurosis type 10, or LCA10, which is characterized by severe bilateral loss of vision at or soon after birth;
autosomal recessive Stargardt disease; and
IRDs associated with mutations in the USH2A gene, which include Usher syndrome type 2A, or Usher 2A, and USH2A-associated nonsyndromatic autosomal recessive retinitis pigmentosa.

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Research and Development Pipeline
We have summarized the current status of our ongoing research and development programs in the table below. We have given an IC number (IC-100 and IC-200) to our preclinical gene therapy product candidates. In the future, we intend to give an IC number to other product candidates that advance to preclinical development, whether from our collaborative gene therapy sponsored research programs or our HtrA1 inhibitor program or that we may otherwise in-license or acquire, in each case, once a lead product candidate is identified for a particular program.
https://cdn.kscope.io/82fc931d20ba1896e23990e931ad87aa-pipelinefor10k2020.jpg
* We have an option to exclusively in-license intellectual property resulting from ongoing sponsored research.
Therapeutic Development Programs
Zimura Clinical Programs
Zimura, our C5 complement inhibitor, is a chemically-synthesized, pegylated RNA aptamer. Aptamers are short molecules made up of a single stranded nucleic acid sequence or amino acid sequence that binds molecular targets with high selectivity and specificity.  We currently have two clinical trials for Zimura ongoing and are planning an additional, Phase 3 clinical trial for Zimura. The following is a brief description of these trials and their current status:
OPH2003 (GA secondary to dry AMD): an ongoing international, randomized, double masked, sham controlled, multi-center pivotal clinical trial evaluating the safety and efficacy of various doses of Zimura in patients with GA secondary to dry AMD. We enrolled a total of 286 patients in this trial. In October 2019, we announced initial, top-line data from this trial based on the first 12 months of this trial. This trial remains ongoing and, in accordance with the clinical trial protocol, patients will continue to be treated and followed through month 18. The primary purpose of the 18 month time point is to gather additional safety data. This trial is not designed to assess, and the prespecified statistical analysis plan for the trial does not include assessing, the statistical significance of the 18 month efficacy data for the treatment groups as compared to the corresponding sham control groups. Any analysis of the 18-month efficacy data will be descriptive only. We expect the month 18 data to be available by the end of the second quarter of 2020.

ISEE2008 (GA secondary to dry AMD): a planned international, randomized, double masked, sham controlled, multi-center Phase 3 clinical trial evaluating the safety and efficacy of Zimura 2 mg in patients with GA secondary to dry AMD. The primary efficacy endpoint for this trial will be the same as the primary efficacy endpoint for the OPH2003 trial, and, if data from this trial are positive, we expect this trial to potentially qualify

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as a second, pivotal clinical trial that may provide data, together with the data from our other Zimura clinical trials, to support a marketing application for Zimura in GA. We plan to enroll approximately 400 patients in this trial, with the goal of beginning patient enrollment during the first quarter of 2020.

OPH2005 (STGD1): an ongoing, randomized, double masked, sham controlled, multi-center Phase 2b clinical trial, which we refer to as the OPH2005 trial, evaluating the safety and efficacy of Zimura for the treatment of STGD1. Similar to OPH2003, OPH2005 was designed to be a Phase 2b screening trial, with the potential to demonstrate statistically significant results depending on the magnitude of the potential benefit observed, and which we believe could potentially serve as a pivotal clinical trial. We completed enrollment for this trial in February 2019 with a total of 95 patients enrolled. We expect that initial, top-line data from this clinical trial will be available during the second half of 2020.

HtrA1 Inhibitor Program
We are pursuing the preclinical development of our HtrA1 inhibitor program for the treatment of GA secondary to dry AMD and potentially other age-related retinal diseases. Our HtrA1 inhibitor program includes a number of small molecule compounds that show high affinity and specificity for HtrA1 when tested. We have identified a lead compound from this program. We are pursuing process development and formulation development with the goal of developing a manufacturing process and a formulation for intravitreal administration of this lead compound in the eye. If we are successful in developing a manufacturing process for and formulating this lead compound, we plan to initiate investigational new drug, or IND, enabling activities for this product candidate. Based on current timelines and subject to successful completion of preclinical development and GMP manufacturing, we plan to file an IND for a product candidate from this program during 2021.
Gene Therapy Research and Development Programs
IC-100: Product Candidate for RHO-adRP
We are pursuing the preclinical development of IC-100, our novel AAV gene therapy product candidate for the treatment of RHO-adRP, to which we acquired exclusive development and commercialization rights through a June 2018 license agreement with the University of Florida Research Foundation, or UFRF, and Penn. We and Penn are conducting preclinical studies of IC-100 and a natural history study of RHO-adRP patients. In parallel, we have engaged a gene therapy contract development and manufacturing organization, or CDMO, as the manufacturer for preclinical and Phase 1/2 clinical supply of IC-100. We are conducting Phase 1/2 clinical manufacturing and other IND-enabling activities, including toxicology studies. Based on current timelines and subject to successful completion of preclinical development and GMP manufacturing and regulatory review, we plan to initiate a Phase 1/2 clinical trial for IC-100 during the fourth quarter of 2020.
IC-200: Product Candidate for BEST1-Related IRDs
We are pursuing the preclinical development of IC-200, our novel AAV gene therapy product candidate for the treatment of BEST1-related IRDs, including Best disease, to which we acquired exclusive development and commercialization rights through an April 2019 license agreement with Penn and UFRF. We and Penn are conducting preclinical studies of IC-200 and natural history studies of patients with BEST1-related IRDs. In parallel, we have engaged a gene therapy CDMO as the manufacturer for preclinical and Phase 1/2 clinical supply of IC-200. We are planning for Phase 1/2 clinical manufacturing and other IND-enabling activities. Based on current timelines and subject to successful completion of preclinical development and GMP manufacturing and regulatory review, we expect to initiate a Phase 1/2 clinical trial for IC-200 during the first half of 2021.
Minigene Programs
AAV vectors are generally limited as a delivery vehicle by the size of their genetic cargo, which is restricted to approximately 4,700 base pairs of genetic code. The use of minigenes seeks to deliver a smaller but still functional form of a larger gene packaged into a standard-size AAV delivery vector.  The goal of minigene therapy is to deliver a gene expressing a protein that, although different from the naturally occurring protein, is nonetheless functional for purposes of treating the associated disease.
We are funding several sponsored research programs at UMMS seeking to use a minigene approach to develop new gene therapies for several orphan IRDs. The following is a summary of these minigene programs and their status:

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miniCEP290 (LCA10): This program, which we refer to as the miniCEP290 program, is targeting LCA10, which is associated with mutations in the CEP290 gene. In July 2019, we entered into a license agreement with the University of Massachusetts, or UMass, for exclusive development and commercialization rights to this program. The sponsored research, which is ongoing, has yielded a number of minigene constructs that show encouraging results when tested in a mouse model. UMMS is continuing to optimize constructs with the goal of identifying a lead construct by the middle of 2020.
miniABCA4 (STGD1): This program, which we refer to as the miniABCA4 program, is targeting STGD1, which is associated with mutations in the ABCA4 gene. UMMS has generated and is evaluating several ABCA4 minigene constructs in both in vitro and in vivo experiments. We have received preliminary results and expect to receive additional results from the miniABCA4 program during the second half of 2020.
miniUSH2A (USH2A-related IRDs): This program, which we refer to as the miniUSH2A program, is targeting IRDs associated with mutations in the USH2A gene, including Usher 2A and USH2A-associated nonsyndromatic autosomal recessive retinitis pigmentosa. We initiated this sponsored research with UMMS in July 2019 and expect to receive preliminary results during the second half of 2020.
In addition to the license agreement for the miniCEP290 program, UMMS has granted us an option to obtain an exclusive license to any patents or patent applications that result from any of these sponsored research programs.
Business Development and Financing Activities
Since early 2017, we have been pursuing a business development strategy to evaluate available technologies to treat ophthalmic diseases, particularly those in the back of the eye, and to explore opportunities to obtain rights to additional products and product candidates employing these technologies. As we evaluated numerous potential opportunities, we have come to believe that gene therapy, in addition to therapeutics, is a promising treatment modality for retina diseases for which there are significant unmet medical needs. Our efforts have resulted in the expansion of our research and development pipeline, including in 2018 and 2019, the addition of several gene therapy product candidates and collaborative gene therapy sponsored research programs as well as our HtrA1 inhibitor program.
In December 2019, we completed an underwritten public offering in which we sold approximately 7,750,000 shares of our common stock, which includes shares purchased pursuant to the underwriters' option to purchase additional shares of our common stock, at a public offering price of $4.00 per share. We also sold to certain investors pre-funded warrants to purchase 3,750,000 shares of our common stock at a public offering price of $3.999 per share underlying each warrant. We raised approximately $42.6 million in net proceeds from this offering. 
As we continue the development of our product candidates and programs and evaluate our overall strategic priorities, we will continue to pursue selective business development and financing opportunities that advance us toward our strategic goals. We have been, and plan to continue, exploring options for the future development and potential commercialization of Zimura, including potential collaboration and out-licensing opportunities, including for indications for which we previously developed Zimura such as wet AMD and idiopathic polypoidal choroidal vasculopathy, or IPCV. In addition, we expect to continue to evaluate, on a selective and targeted basis, opportunities to potentially obtain rights to additional product candidates and technologies for retinal diseases. We could also consider business development opportunities that also offer us a financing opportunity. We will continue to pursue capital raising opportunities when they are available on terms that are favorable to us and if the opportunity advances our strategic goals.
Eye Diseases
Eye diseases can be caused by many factors and can affect both the front or back of the eye. In more severe cases, eye diseases can result in total loss of vision. In the developed world, the most common eye diseases that can result in total loss of vision are those affecting the retina and optic nerve, including AMD, diabetic retinopathy and glaucoma. These diseases deprive patients of their sight and, as a result, impair their ability to live independently and perform daily activities. Any improvement in vision, or even a slowing of the rate of progression of vision loss, has a tremendous impact on the quality of life of people with impaired vision. There are many other eye diseases that are less common but still represent an unmet medical need, particularly orphan IRDs that are associated with mutations in a single gene, referred to as monogenic, that lead to retinal degeneration and vision loss, generally in younger patients. We believe that these disease areas present several potential opportunities for ophthalmic drug development. A 2014 report from Prevent Blindness, a patient advocacy group, estimated that the total real annual costs in the United States related to eye diseases and vision problems expressed in constant 2014 dollars would increase from $145 billion in 2014 to $376 billion by 2050.


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Age Related Macular Degeneration

AMD is an age-related disease characterized by progressive degenerative abnormalities in the macula, a small area in the central portion of the retina responsible for central vision. AMD is characteristically a disease of the elderly and is the leading cause of visual loss in individuals over 50 years of age in developed countries. Based on a 2016 epidemiology paper published in Eye and Vision, we estimate that currently approximately 11 million individuals in the United States and 170 million individuals worldwide have a form of AMD. Because of increasing life expectancy in developed and developing countries, the elderly population is expected to grow significantly in coming decades. Projections based on U.S. Census Bureau data suggest that the number of Americans over the age of 65 will more than double to approximately 80 million by the middle of this century. In the absence of adequate prevention or treatment measures, the number of cases of AMD with visual loss is expected to grow in parallel with the aging population, leading to a major public health challenge with significant socioeconomic implications.

AMD, at its early stages, presents with abnormalities in the retinal pigment epithelium, or the RPE, and yellow-white deposits under the RPE known as drusen. The RPE is a layer of cells within the retina on which photoreceptors, the cells in the retina that are responsible for capturing light and converting it to electrochemical signals to the brain, are dependent for nutrients, waste disposal and other needs. As the disease progresses with age to the advanced stage, it generally progresses as either the non-neovascular or dry form of AMD or the neovascular or wet form of the disease. In the dry form of AMD, the eventual loss of photoreceptors, RPE cells and associated capillary blood vessels in the macula results in marked thinning and/or atrophy of retinal tissue. This advanced stage of dry AMD is called GA. In the wet form of AMD, abnormal new blood vessels originate beneath the retina, in a layer called the choroid, and invade into the overlying retinal layers, through a process called choroidal neovascularization, or CNV. The macula of patients diagnosed with the wet form of AMD, who are usually treated with currently approved standard of care anti-vascular endothelial growth factor, or anti-VEGF, therapies, can continue to atrophy resulting in GA, which suggests that in many AMD patients, regardless of whether they have the dry or the wet form, the final anatomic outcome leading to loss of vision is GA.

GA is a significant cause of bilateral, irreversible and severe loss of functional vision. GA has a major impact on the functional vision, quality of life, and independence of affected individuals. The median time for development of central GA from the time of diagnosis is two and a half years with the condition expected to develop in the fellow eye within approximately seven years. Based on a comprehensive epidemiology study published in 2004 in Archives of Ophthalmology, we estimate that there are currently approximately 1.5 million people in the United States with GA. Furthermore, based on a study published in 2015 in the American Journal of Ophthalmology, we estimate that approximately 159,000 people in the United States develop GA each year. Although anti-VEGF therapy is available for treatment of wet AMD, no FDA or European Medicines Agency, or EMA, approved treatment is currently available for GA.

The absence of treatment options for GA secondary to dry AMD represents an area of urgent unmet medical need and a major public health concern for the expanding elderly population.


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Inherited Retinal Diseases
IRDs are a group of eye disorders caused by one or more inherited gene mutations that result in lack of functional proteins necessary for normal vision. Generally, IRDs are severe and progressive and will result in vision loss or blindness, either at birth or in early childhood, or gradually over time. IRDs are generally orphan diseases, meaning that these diseases affect fewer than 200,000 individuals in the United States. Partially due to their orphan nature, there are no approved treatment options available for most IRDs. Recently, gene therapies have emerged as potential therapies for monogenic IRDs, where a mutation to a single gene has been identified as the cause.
Humans generally inherit a complete set of genes from each of their parents, and therefore have two copies, or alleles, for each gene, either of which may carry a mutation, and either, or both, of which may be expressed in particular cells throughout the body. An inherited condition is referred to as autosomal recessive when the subject must inherit mutated alleles from each parent for the condition to manifest. An inherited condition is referred to as autosomal dominant when the subject must only inherit one mutated allele from either parent for the condition to manifest. The predominant or standard, non-mutated form of a gene is referred to as the wildtype form, and the protein resulting from expression of the wildtype gene is referred to as wildtype protein. In autosomal recessive conditions, because both alleles for a particular gene carry a mutation, the subject cannot produce any wildtype protein, and instead the proteins that are expressed, if any, have either limited or no function. In autosomal dominant conditions, a number of factors may contribute to the condition:
a subject may express only the mutant allele and not the wildtype allele, resulting in production of only protein with limited or no function and not the wildtype protein;
a subject may be expressing both alleles, but because of the mutation on one of the alleles, the amount of functional protein may not be sufficient; or
the protein expressed by the mutant allele may be toxic to the cells in which it is produced.
Stargardt Disease
Stargardt disease is an IRD that causes progressive damage to the macula and retina, leading to loss of vision in children and adolescents. The most common form of Stargardt disease is STGD1, the autosomal recessive form. STGD1 is caused by mutations in the ABCA4 gene, which is responsible for making a protein that helps to clear byproducts resulting from the visual cycle from inside photoreceptor cells in the eye.

Multiple sources, including the National Eye Institute and Genetics Home Reference, both of which are affiliated with the U.S. National Institutes of Health, or NIH, estimate the prevalence of Stargardt disease to be between 1 in 8,000 and 1 in 10,000, implying that in the United States and the EU5, which consists of France, Germany, Italy, Spain and the United Kingdom, the five major market countries for pharmaceutical treatments in Western Europe, on a combined basis there are currently a total of 62,000 to 77,000 affected persons. There are currently no therapies approved by the FDA or EMA to treat Stargardt disease. The FDA has recognized Stargardt disease as an orphan disease, with several treatments in development having received orphan drug designation from the FDA.

Rhodopsin-Mediated Autosomal Dominant Retinitis Pigmentosa

RHO-adRP is a form of retinitis pigmentosa, or RP. RP is the most prevalent IRD and is typically characterized by the initial degeneration of the rod photoreceptors, which are responsible for low light vision and peripheral vision. The degeneration of the rod photoreceptors over time leads to the degeneration of the cone photoreceptors, which are the photoreceptors in the central part of the retina that are responsible for color and sharp vision. This degeneration causes night blindness and severe and progressive visual impairment. Although often diagnosed during adolescence or young adulthood, most RP patients become legally blind by age 40.

Rhodopsin is a biological pigment found in the rod photoreceptors that is extremely sensitive to light and thus is crucial for low light vision. There are more than 150 identified mutations in RHO, the gene that encodes for rhodopsin. The presence of a mutated RHO gene is linked to the occurrence of RHO-adRP.

Based on disease prevalence rates contained in a study published in the Archives of Ophthalmology in 2007, we estimate that in the United States and EU5 on a combined basis, there are a total of approximately 11,000 affected persons with RHO-adRP. There is currently no FDA or EMA approved therapy to treat RHO-adRP.


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BEST1-Related IRDs

The BEST1 gene encodes for a multifunctional protein known as bestrophin-1, or BEST1, which regulates chemical transport and signaling in RPE cells and helps maintain homeostasis in the subretinal space, the space between the photoreceptors and the RPE. The most common BEST1-related IRD is Best disease, which is generally autosomal dominant and generally affects individuals in both eyes. In Best disease, the lack of functional BEST1 protein results in the formation of egg yolk-like lesions in the macula that, over time, progress to macular atrophy and permanent loss of vision. In addition, because there are over 200 known mutations in the BEST1 gene, there are other BEST1-related IRDs being studied, including autosomal recessive forms.

Based on disease prevalence rates contained in a study published in Ophthalmic Genetics in 2017, we estimate that in the United States and EU5 on a combined basis, there are a total of approximately 10,000 to 40,000 affected persons with BEST1-related IRDs, the substantial majority of whom we believe have the autosomal dominant form of Best disease. There are currently no FDA or EMA approved therapies to treat any BEST1-related IRD.

Leber Congenital Amaurosis Type 10

Leber Congenital Amaurosis, or LCA, is an IRD that manifests at birth or early in childhood. It is characterized by early onset of vision loss in children leading to blindness. Affected individuals often manifest symptoms such as roving eye movements, deep-set eyes and sensitivity to bright light. There are multiple types of LCA, which are associated with mutations in different genes. The most common type is LCA10, which is caused by mutations in the CEP290 gene. Mutations in the CEP290 gene are believed to lead to the abnormal function and potentially loss of photoreceptor cells.

Based on disease prevalence rates contained in a study published in the American Journal of Human Genetics in 2006, we estimate that in the United States and EU5 on a combined basis, there are a total of approximately 2,700 to 4,100 affected persons with LCA10. There is currently no FDA or EMA approved therapy to treat LCA10.

USH2A-Related IRDs

The USH2A gene encodes for a protein called usherin. Usherin is believed to be important in the development and maintenance of cells in the retina and the inner ear. There are two principal IRDs associated with mutations in the USH2A gene: Usher 2A and USH2A-associated nonsyndromatic autosomal recessive retinitis pigmentosa. Usher 2A is an autosomal recessive syndrome characterized by hearing loss from birth and progressive vision loss, due to RP, that begins in adolescence or adulthood. USH2A-associated nonsyndromatic autosomal recessive retinitis pigmentosa is a genetic condition that manifests as vision loss without associated hearing loss.

Based on a study published in Experimental Eye Research in 2004, we estimate that in the United States and EU5 on a combined basis, there are a total of approximately 20,000 to 62,000 affected persons with USH2A-related IRDs. There are currently no FDA or EMA approved therapies to treat Usher 2A or USH2A-associated nonsyndromatic autosomal recessive retinitis pigmentosa.

Zimura
We are currently developing our product candidate Zimura, a C5 complement inhibitor, for the treatment of two ophthalmic conditions: GA secondary to dry AMD and STGD1. Zimura is a chemically-synthesized, pegylated RNA aptamer. Aptamers are short molecules made up of a single stranded nucleic acid sequence or an amino acid sequence. The specific three-dimensional structure of an aptamer, which results from its specific sequence, allows it to bind molecular targets with high selectivity and specificity. Zimura is a pegylated aptamer, which means that polyethylene glycol, or PEG, a common biochemical compound attached to drugs to increase their duration of action in the human body and to decrease immune response, is linked to the chemically-synthesized strand of RNA.
The Complement System and Its Potential Role in GA and STGD1

The complement system consists of a series of proteins that are involved in the defense of the body against infectious agents, or pathogens, and other foreign proteins. The complement system modulates a variety of immune and inflammatory responses to these pathogens and foreign proteins. Under normal circumstances, complement proteins, together with antibodies and white blood cells, act beneficially to protect the body by removing the pathogens and foreign proteins, along with other cellular debris. The complement system is generally tightly regulated, achieving the proper balance of activation and inhibition depending on the body’s requirements. Poorly regulated or aberrant activation of the complement system, without a balanced or

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proportional inhibition of complement proteins, may result in a variety of pathological conditions. For example, in a study published in Histology and Histopathology in 2012, researchers found that human retinal drusen deposits, which are the hallmark of dry AMD, contained components of complement proteins.
 
The complement system is generally activated via one of three biological pathways commonly referred to as the classical pathway, the alternative pathway and the lectin pathway. These pathways eventually converge with the generation of an enzyme known as C3 convertase. C3 convertase cleaves, or separates, a serum protein called C3, into C3a and C3b. C3b is an important element of the body’s immune system, as it binds to pathogens and makes them susceptible to destruction by white blood cells. C3b also cleaves complement protein C5. The cleavage of C5 results in the formation of the terminal complement fragments C5a and C5b. A study published in the Journal of Biological Chemistry in 2015 concluded that C5a primes RPE cells for inflammasome activation in the presence of waste products from the visual cycle. Inflammasomes are intracellular protein structures that lead to cell death. Other studies have shown the presence of inflammasomes inside the RPE cells of post-mortem eyes of patients with GA. Formation of C5b, in combination with serum proteins C6, C7, C8 and C9, leads to the generation of C5b-9, referred to as membrane attack complex, or MAC, which has been shown to cause cell death. In particular, various studies have shown that MAC, together with the presence of lipofuscin, a yellow-brown waste byproduct from the visual cycle that is commonly found in the RPE cells of AMD patients, interferes with the proper functioning of RPE cells, leading to their dysfunction and death.

A simplified illustration of the complement system and the relationships between the complement proteins appears below:
https://cdn.kscope.io/82fc931d20ba1896e23990e931ad87aa-complementsystema03.jpg
Although the causes of AMD are not completely understood—in addition to advanced age, there are environmental and genetic risk factors that contribute to the development of AMD including ocular pigmentation, dietary factors, a positive family history for AMD, high blood pressure and smoking—a body of recent scientific literature suggests that complement system activation may also contribute to the pathogenesis of AMD. A study published in the Journal of Immunology in 2015 concluded that MAC accumulation in RPE cells leads to mitochondrial damage and cellular dysfunction, which we believe eventually leads to RPE cell death. Additionally, a study published in the American Journal of Ophthalmology in 2002 described the presence of MAC in post-mortem human donor eyes with dry AMD and GA. We believe these findings suggest that inhibition of the complement system, especially an inhibitor that prevents the cleavage of C5 into C5a and C5b, could prevent RPE cell death and potentially other pathological causes of AMD.

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The pathogenesis of STGD1, which is caused by a mutation in the ABCA4 gene, also may involve activation of the complement system. With a defective copy of the ABCA4 protein, waste byproducts that a normal ABCA4 protein would otherwise help to clear accumulate in the RPE. Waste byproducts that accumulate in the RPE are referred to as bisretinoids. We believe that the accumulation of bisretinoids in RPE cells leads to activation of the complement system and the accumulation of MAC. In RPE cells, MAC is normally cleared by lysosomes, which are organelles within cells responsible for waste degradation and disposal. Bisretinoid accumulation leads to lysosomal dysfunction, potentially preventing the clearance of MAC. MAC accumulation also negatively impacts energy production by mitochondria inside RPE cells. Bisretinoid and MAC accumulation may lead to RPE cell deterioration and contribute to the subsequent loss of photoreceptor cells, leading to a decrease in vision over time.
In April 2017, Proceedings of the National Academy of Sciences, or PNAS, published a study reporting on the effects of complement system modulation in the RPE of a mouse model of Stargardt disease. The researchers injected recombinant AAV containing the coding sequence for CRRY, a protein that inhibits complement system activation, into albino ABCA4 mutant mice, which led to a two-fold reduction in the accumulation of bisretinoids and a 30% increase in the number of photoreceptor nuclei at one year. The study findings indicate that the inhibition of complement activation in the albino ABCA4 mutant mice leads to healthier RPE cells as compared to RPE cells of untreated mice. Researchers at Duke University published a 2013 paper in Investigative Ophthalmology & Visual Science, in which they found in an in vitro experiment that RPE cell damage resulting from the combination of complement system activation and visual cycle waste was more damaging than either component individually. When complement factor C5 was blocked, there was a significant improvement in RPE cell viability in vitro. Based on the data from these in vitro and in vivo experiments, we believe molecules involved in the inhibition or regulation of the complement system and MAC activation are prime targets for therapeutic intervention in STGD1.

Zimura is designed to target and inhibit the cleavage of complement protein C5 and the formation of the terminal fragments, C5a and C5b. By inhibiting the formation of complement system terminal fragments, Zimura may decrease the activation of inflammasomes and decrease the formation of MAC, thereby potentially avoiding or slowing the degeneration of RPE cells and providing the rationale as a potential therapy for both GA and STGD1.
Our Zimura Clinical Programs
We currently have two clinical trials for Zimura ongoing and are planning an additional, Phase 3 clinical trial for Zimura. The following is a brief description of these trials and their current status:

OPH2003 (GA secondary to dry AMD): an ongoing international, randomized, double masked, sham controlled, multi-center pivotal clinical trial evaluating the safety and efficacy of various doses of Zimura in patients with GA secondary to dry AMD. We enrolled a total of 286 patients in this trial. In October 2019, we announced initial, top-line data from this trial based on the first 12 months of this trial. This trial remains ongoing and, in accordance with the clinical trial protocol, patients will continue to be treated and followed through month 18. The primary purpose of the 18 month time point is to gather additional safety data. This trial is not designed to assess, and the prespecified statistical analysis plan for the trial does not include assessing, the statistical significance of the 18 month efficacy data for the treatment groups as compared to the corresponding sham control groups. Any analysis of the 18-month efficacy data will be descriptive only. We expect the month 18 data to be available by the end of the second quarter of 2020.

ISEE2008 (GA secondary to dry AMD): a planned international, randomized, double masked, sham controlled, multi-center Phase 3 clinical trial evaluating the safety and efficacy of Zimura 2 mg in patients with GA secondary to dry AMD. The primary efficacy endpoint for this trial will be the same as the primary efficacy endpoint for the OPH2003 trial, and we expect this trial to potentially be a second, pivotal clinical trial that may provide data, together with the data from our other Zimura clinical trials, to support a marketing application for Zimura in GA. We plan to enroll approximately 400 patients in this trial, with the goal of beginning patient enrollment during the first quarter of 2020.

OPH2005 (STGD1): an ongoing, randomized, double masked, sham controlled, multi-center Phase 2b clinical trial evaluating the safety and efficacy of Zimura for the treatment of STGD1. Similar to OPH2003, OPH2005 was designed to be a Phase 2b screening trial, with the potential to demonstrate statistically significant results depending on the magnitude of the potential benefit observed, and which we believe could potentially serve as a pivotal clinical trial. We completed enrollment for this trial in February 2019 with a total of 95 patients enrolled. We expect that initial, top-line data from this clinical trial will be available during the second half of 2020.


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In addition to the above ongoing and planned Zimura clinical trials, we have completed four clinical trials of Zimura to date:

OPH2001: a Phase 1/2a clinical trial of Zimura monotherapy for the treatment of GA;

OPH2000: a Phase 1/2a clinical trial of Zimura administered in combination with Lucentis® for the treatment of wet AMD;

OPH2007: a Phase 2a clinical trial of Zimura administered in combination with Lucentis for the treatment of wet AMD; and

OPH2002: a very small Phase 2a clinical trial of Zimura in combination with anti-VEGF agents for the treatment of IPCV, in patients for whom anti-VEGF monotherapy had failed.

Over 160 patients have been treated with Zimura in these four completed trials, with treatment durations extending up to 48 weeks. All doses of Zimura administered in these trials were well-tolerated, with only a single adverse event, mild subcapsular cataract, assessed to be drug-related by participating investigators.

Although we are not currently pursuing further development of Zimura in wet AMD or IPCV, we may evaluate opportunities for further development of Zimura in these indications with a potential collaborator.

Zimura is administered by intravitreal injection. Patients receiving intravitreal injections typically receive topical numbing drops or injection of a numbing agent prior to the injection. The administering physician also typically rinses the ocular surface with an antiseptic solution. By injecting the active agent into the vitreous cavity, the physician delivers the agent in close vicinity to the active disease site while minimizing the risk for systemic exposure to non-ocular tissues.

An intravitreal injection results in elevation of intraocular pressure, or IOP, which is usually transient. In our clinical trials, the IOP is monitored after each intravitreal injection. Certain of the dosing regimens we are evaluating in our ongoing Zimura clinical trials involve multiple intravitreal injections administered on the same day. Based on our clinical experience to date, we have not seen any meaningful or sustained increase in IOP in clinical trials involving multiple intravitreal injections on the same day, and we believe that multiple intravitreal injections likely could be delivered safely on the same day.

Our Zimura clinical experience to date, as well as our ongoing and planned clinical trials for Zimura, are described in greater detail below.

Zimura - Dry AMD Trials
    
OPH2003: Ongoing Clinical Trial Assessing the Safety and Efficacy of Various Doses of Zimura for GA Secondary to Dry AMD
In October 2019, we announced initial, top-line data from OPH2003, an international, randomized, double masked, sham controlled, multi-center clinical trial evaluating the safety and efficacy of various doses of Zimura in patients with GA secondary to dry AMD. The primary efficacy analysis was performed at the 12-month time point, and the data we announced in October 2019 was for the first 12 months of the trial. Pursuant to the clinical trial protocol, patients will continue to be treated and followed through month 18 in order to collect additional data regarding Zimura in GA. Throughout the duration of the trial, we have been masked regarding the treatment group to which each individual patient was randomized and expect to remain masked until the patient reaches month 18. The prespecified statistical analysis plan for the trial does not include assessing the statistical significance of the 18 month efficacy data for the treatment groups as compared to the corresponding sham control groups. Any analysis of the month 18 efficacy data will be descriptive only.
Trial Design and Enrollment
A total of 286 patients were enrolled across two parts of the trial.
Part 1. In Part 1 of the trial, 77 patients were randomized into one of three treatment groups in a 1:1:1 ratio as follows:
Cohort
 
Zimura 1 mg
 
Zimura 2 mg
 
Sham
Patients
 
26
 
25
 
26

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In Part 1 of the trial, Zimura was administered by monthly intravitreal injections, while patients in the sham control group received monthly sham injections. In 2017, based on the announcement of positive data from a competitor studying a different complement inhibitor in a Phase 2 clinical trial in GA and following review of additional third-party clinical trial data and further statistical analysis, we modified the trial design to change the total number of patients to be enrolled, to change the primary efficacy endpoint from a vision endpoint to an anatomic endpoint, to shorten the time point for the primary efficacy analysis to month 12 and to include a Zimura 4 mg dose group. The patients who were enrolled in Part 1 remained in the trial following these modifications and we remained masked regarding the treatment group to which each patient was randomized.
Part 2. In Part 2 of the trial, we enrolled 209 additional patients, who were randomized into one of three treatment groups in a 1:2:2 ratio as follows:
Cohort
 
Zimura 2 mg
 
Zimura 4 mg
 
Sham
Patients
 
42
 
83
 
84
In Part 2 of the trial, patients in the Zimura 2 mg group received one intravitreal injection of Zimura 2 mg and one sham injection at each monthly visit; patients in the Zimura 4 mg group received two intravitreal injections of Zimura 2 mg at each monthly visit; and patients in the sham control group received two sham injections at each monthly visit. In its current formulation, doses of Zimura above 2 mg would require more than one intravitreal injection.
The primary efficacy endpoint was the mean rate of growth of GA over 12 months, while secondary efficacy endpoints evaluated mean changes in patients' visual acuity in different lighting conditions over the same period.
Key Inclusion and Exclusion Criteria
In order to determine eligibility to participate in the trial, the location and size of each patient’s GA was assessed using fundus autofluorescence, or FAF, images. FAF is a common imaging technique used by retina specialists for photographing and documenting the size of GA present in the back of the eye, or fundus. Autofluorescence refers to the natural emission of light by biological structures. In FAF images, areas of atrophy are characterized by lower autofluorescence. An independent masked reading center assessed FAF images throughout the trial, including at baseline to determine eligibility.
The fovea is the central portion of the macula where visual acuity is the highest. We sought to enroll patients whose GA was located, in whole or in part, within 1500 microns of the foveal center but that did not enter the foveal center. A disc area is the size of the area of the retina where a standard sized optic nerve emerges, which is generally accepted to be 2.5 mm2. We sought to enroll patients with a total GA area of between 1 and 7 disc areas (or 2.5 mm2 to 17.5 mm2) inclusive. If the GA was multifocal, meaning it was not continuous and had multiple locations, at least one focal lesion needed to measure at least 0.5 disc areas (or 1.25 mm2). Each patient's best corrected visual acuity, or BCVA, was also assessed using the Snellen equivalent scale, which equates the detail a patient can see at a distance of 20 feet with the detail an individual with 20/20 vision can see at a greater distance. For example, a patient with 20/50 vision sees at 20 feet what a person with 20/20 vision would see at 50 feet. To be eligible to participate in the trial, patients' BCVA in the study eye was initially required to be between 20/25 and 20/100 inclusive during Part 1 of the trial. As part of the modifications we made for Part 2 of the trial, we expanded the inclusion criteria to include patients whose BCVA in the study eye was between 20/25 and 20/320 inclusive. BCVA on the Snellen equivalent scale can be equated to a number of letters of vision on the Early Treatment of Diabetic Retinopathy Study, or ETDRS, chart. BCVAs of 20/25, 20/100 and 20/320 on the Snellen equivalent scale are equivalent to 80 ETDRS letters, 50 ETDRS letters and 25 ETDRS letters, respectively.
Patients were stratified across treatment groups by baseline BCVA, baseline GA area and the baseline pattern of autofluorescence at the margins of the GA lesion, referred to as the junctional zone. Stratification for baseline characteristics is a method for allocating patients to treatment groups to ensure that there are approximately the same ratio of patients with a given baseline characteristic in each treatment group as the overall randomization ratio. For vision, patients were stratified based on whether their vision was above or below 50 ETDRS letters. For GA area, patients were stratified based on whether their GA area was above or below 4 disc areas. For autofluorescence pattern, patients were stratified based on several well-known patterns that have been described in the scientific literature.
As part of the modifications for Part 2 of the trial, we amended the clinical trial protocol to provide that patients in any arm of the trial who developed CNV in the study eye would be removed from the trial and any future study treatments and assessments, since we did not believe that GA lesions for patients with CNV in the study eye could be reliably measured with FAF images.
Additionally, patients who had a prior history of intravitreal treatment for any indication in either eye were excluded, as well as patients with any ocular condition in the study eye that could affect central vision or otherwise confound assessments.

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Baseline Characteristics
We collected baseline characteristics for all patients participating in the trial. GA area was measured based on the area of GA in square millimeters (mm2). Reported scientific literature indicates that the rate of GA growth may be dependent on the baseline lesion size, with larger GA lesions generally growing faster than smaller lesions, subject to an overall plateau effect as the GA grows to consume almost the entire macula. For this reason, patients were stratified in this trial based on their baseline lesion size. To further mitigate for the impact of baseline lesion size on the growth of GA, a square root transformation was performed. It is reported in the scientific literature and accepted in the field that using the square root of the lesion size for calculating the mean change in size over time mitigates for the impact of the baseline lesion size. We used the square root transformation of GA area, measured in millimeters (mm), to perform the assessment of the primary efficacy endpoint in the OPH2003 trial.
Although GA can be associated with profound and irreversible vision loss, the vision loss that patients experience is not necessarily linearly correlated to the progression of GA. The specific location of the GA within patients' retinas can affect patients' vision differently. In general, patients whose GA expands into the fovea experience vision loss that is disproportionate to the vision loss experienced by patients whose GA does not expand into the fovea. Further, patients with GA may demonstrate good visual acuity but poor functional vision if their GA results in dark spots, referred to as scotomas, in their central visual field. Patients with scotomas may be able to read a vision chart letter-by-letter, especially if their GA has not entered the fovea, but they may have trouble reading a paragraph of text or driving, as these activities of daily living draw upon a field of vision that is broader than a single point of focus. For this reason, and based on our prior interactions with the FDA, we believe the efficacy assessment that is most likely to demonstrate clinical relevance for an investigational product across a heterogeneous GA patient population is reduced rate of growth in GA. If an investigational product can slow the growth of GA, it has the potential to preserve, or slow the loss of, functional vision for patients whose GA is expanding into critical areas of their central visual field, which would be clinically meaningful.
In addition to baseline GA area, it has been reported in the scientific literature that GA that is non-subfoveal, or that has not impacted the foveal center, is positively correlated with a higher rate of GA area progression and growth. We believe that once a GA lesion expands into the fovea, the rate of growth may be slowed. In addition, once GA expands to encompass the central fovea, additional progression can be limited in the central region of the retina, with any continued expansion occurring predominantly in the outer part of the retina.
In addition to measuring the area of GA, we followed patients for changes in their vision (BCVA), as measured both at a standard light level, or luminance, and lower light level, or low luminance (LL BCVA), measured in each case by ETDRS letters. Testing for visual acuity serves as an important safety assessment to assure that the decrease in visual acuity in the Zimura treatment groups was not different from the sham control groups. Because we believe that BCVA is not the optimal assessment to evaluate the impact of GA on patients’ functional vision, we included vision in the prespecified statistical analysis as a secondary, and not as a primary, endpoint.
For patients within each treatment group, where a numerical measurement was collected, we calculated the mean and standard deviation, or SD, for each measurement. SD is a statistical measure of the variability of a particular measurement within a patient population. Generally, two-thirds of all patients fall within approximately one SD, plus or minus, of the mean for any particular measurement.
The baseline characteristics are presented below for each treatment group in each Part of the trial. These baseline characteristics include the ITT, or intent-to-treat, population, which includes all patients who were randomized in the trial and who received at least one dose of study drug in the relevant treatment group. Based on these data, we believe that the baseline characteristics were generally balanced across the treatment groups.

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Part 1
 
Part 2
Cohort
 
Zimura 1 mg
(N = 26)
 
Zimura 2 mg
(N = 25)
 
Sham
(N = 26)
 
Zimura 2 mg
(N = 42)
 
Zimura 4 mg
(N = 83)
 
Sham 4 mg
(N = 84)
Mean age, years (SD)
 
73.8 (8.0)
 
77.7 (9.6)
 
78.1 (8.4)
 
79.4 (10.7)
 
79.2 (8.3)
 
78.2 (9.0)
Female gender, number (%)
 
15 (57.7%)
 
18 (72.0%)
 
18 (69.2%)
 
27 (64.3%)
 
58 (69.9%)
 
61 (72.6%)
Active smokers, number (%)
 
6 (23.1%)
 
10 (40.0%)
 
7 (26.9%)
 
15 (35.7%)
 
26 (31.3%)
 
29 (34.5%)
Caucasian race, number (%)
 
25 (96.2%)
 
25 (100%)
 
25 (96.2%)
 
42 (100%)
 
82 (98.8%)
 
82 (97.6%)
Iris color:
 
 
 
 
 
 
 
 
 
 
 
 
    Light
 
13 (50.0%)
 
16 (64.0%)
 
17 (65.4%)
 
29 (69.0%)
 
54 (65.1%)
 
57 (67.9%)
    Medium
 
7 (26.9%)
 
6 (24.0%)
 
7 (26.9%)
 
9 (21.4%)
 
22 (26.5%)
 
21 (25.0%)
    Dark
 
6 (23.1%)
 
3 (12.0%)
 
2 (7.7%)
 
4 (9.5%)
 
7 (8.4%)
 
6 (7.1%)
Mean intraocular pressure, mmHg (SD)
 
15.0 (1.9)
 
14.6 (2.6)
 
14.5 (2.8)
 
14.1 (2.4)
 
15.2 (2.5)
 
14.9 (2.5)
Non-subfoveal GA, number (%)
 
23 (88.5%)
 
20 (80.0%)
 
22 (84.6%)
 
42 (100%)
 
81 (97.6%)
 
82 (97.6%)
Mean GA area, mm2 (SD)
 
7.37 (4.32)
 
6.60 (3.35)
 
7.33 (3.73)
 
7.77 (4.01)
 
7.90 (4.18)
 
7.45 (3.89)
Mean Sq. Root of GA area, mm (SD)
 
2.591 (0.827)
 
2.471 (0.717)
 
2.623 (0.687)
 
2.705 (0.684)
 
2.715 (0.732)
 
2.636 (0.709)
Bilateral GA, number (%)
 
26 (100%)
 
25 (100%)
 
25 (96.2%)
 
42 (100%)
 
83 (100%)
 
83 (98.8%)
Mean BCVA, ETDRS letters (SD)
 
70.5 (8.0)
 
71.6 (7.5)
 
71.3 (7.5)
 
69.4 (11.3)
 
69.5 (9.8)
 
68.3 (11.0)
Mean LL BCVA, ETDRS letters (SD)
 
38.1 (22.7)
 
43.0 (19.7)
 
36.7 (21.2)
 
33.1 (21.3)
 
36.8 (20.9)
 
33.9 (18.8)
Patients with Hyperautofluorscence (%)
 
25 (96.2%)
 
25 (100%)
 
26 (100%)
 
41 (97.6%)
 
82 (98.8%)
 
83 (98.8%)
Height, cm (SD)
 
168.7 (12.0)
 
165.9 (8.6)
 
164.9 (12.1)
 
164.9 (11.0)
 
163.7 (10.6)
 
163.7 (9.3)
Weight, kg (SD)
 
81.9 (17.8)
 
75.6 (14.9)
 
74.7 (15.6)
 
80.8 (22.3)
 
76.2 (18.2)
 
78.4 (17.8)
12-Month Safety Data
    Based on our review of the safety data to date, Zimura was generally well tolerated after 12 months of administration. Over this 12-month time period, there were no investigator-reported ocular serious adverse events, no Zimura-related adverse events, no cases of Zimura-related intraocular inflammation, no cases of Zimura-related increased intraocular pressure, no cases of endophthalmitis, and no discontinuations attributed by investigators to Zimura in the trial. The numbers below are based on investigator-reported adverse events occurring up through the month 12 time point for all patients.

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The number of patients with one or more serious, systemic, treatment emergent adverse events, or TEAEs, organized by MedDRA system organ class, a standard method of reporting adverse events, are set forth in the table below:
Patients with One or More Serious TEAEs in Any Organ Class
 
 
Part 1
 
Part 2
 
 
Zimura 1 mg
(N = 26)
 
Zimura 2 mg
(N = 25)
 
Sham
(N = 26)
 
Zimura 2 mg
(N = 42)
 
Zimura 4 mg
(N = 83)
 
Sham 4 mg
(N = 84)
Cardiac disorders
 
1 (3.8%)
 
0
 
0
 
0
 
2 (2.4%)
 
3 (3.6%)
Gastrointestinal disorders
 
1 (3.8%)
 
1 (4.0%)
 
1 (3.8%)
 
0
 
2 (2.4%)
 
6 (7.1%)
General disorders and administration site conditions
 
0
 
0
 
0
 
1 (2.4%)
 
0
 
0
Hepatobiliary disorders
 
0
 
1 (4.0%)
 
1 (3.8%)
 
0
 
1 (1.2%)
 
0
Infections and infestations
 
0
 
1 (4.0%)
 
0
 
1 (2.4%)
 
6 (7.2%)
 
2 (2.4%)
Injury, poisoning and procedural complications
 
0
 
1 (4.0%)
 
0
 
1 (2.4%)
 
3 (3.6%)
 
2 (2.4%)
Metabolism and nutrition disorders
 
0
 
0
 
1 (3.8%)
 
0
 
0
 
0
Musculoskeletal and connective tissue disorders
 
1 (3.8%)
 
0
 
0
 
0
 
0
 
2 (2.4%)
Benign, malignant and unspecified neoplasms (including cysts and polyps)
 
0
 
0
 
0
 
0
 
1 (1.2%)
 
2 (2.4%)
Nervous system disorders
 
1 (3.8%)
 
1 (4.0%)
 
1 (3.8%)
 
1 (2.4%)
 
3 (3.6%)
 
1 (1.2%)
Psychiatric disorders
 
0
 
0
 
1 (3.8%)
 
0
 
0
 
1 (1.2%)
Respiratory, thoracic and mediastinal disorders
 
0
 
1 (4.0%)
 
0
 
0
 
2 (2.4%)
 
3 (3.6%)
The number of patients with one or more systemic TEAEs, including serious systemic TEAEs, identified by the investigator as related to the study drug (Zimura or sham) are set forth in the table below:
Reported Systemic TEAEs Related to Zimura or Sham
 
 
Part 1
 
Part 2
 
 
Zimura 1 mg
(N = 26)
 
Zimura 2 mg
(N = 25)
 
Sham
(N = 26)
 
Zimura 2 mg
(N = 42)
 
Zimura 4 mg
(N = 83)
 
Sham 4 mg
(N = 84)
Subjects with at least one TEAE
 
0
 
0
 
0
 
0
 
0
 
0
The number of patients with one or more ocular TEAEs in the study eye are set forth in the table below:
Reported Ocular TEAEs in Study Eyes
 
 
Part 1
 
Part 2
 
 
Zimura 1 mg
(N = 26)
 
Zimura 2 mg
(N = 25)
 
Sham
(N = 26)
 
Zimura 2 mg
(N = 42)
 
Zimura 4 mg
(N = 83)
 
Sham 4 mg
(N = 84)
Eye disorders
 
12 (46.2%)
 
8 (32.0%)
 
4 (15.4%)
 
24 (57.1%)
 
50 (60.2%)
 
33 (39.3%)
Eye disorders related to injection procedure
 
3 (11.5%)
 
4 (16.0%)
 
2 (7.7%)
 
14 (33.3%)
 
36 (43.4%)
 
23 (27.4%)

All of the above TEAEs that were not related to the injection procedure were also not related to the study drug. The number of patients with one or more ocular TEAEs in the study eye, identified by the investigator as related to the study drug (Zimura or sham) is set forth in the table below:
Reported Ocular TEAEs in the Study Eye Related to Zimura or Sham
 
 
Part 1
 
Part 2
 
 
Zimura 1 mg
(N = 26)
 
Zimura 2 mg
(N = 25)
 
Sham
(N = 26)
 
Zimura 2 mg
(N = 42)
 
Zimura 4 mg
(N = 83)
 
Sham 4 mg
(N = 84)
Subjects with at least one TEAE
 
0
 
0
 
0
 
0
 
0
 
0

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Incidence of CNV. During the first 12 months of this trial, the incidence of investigator reported CNV in the untreated fellow eyes was 10 patients (3.5%) and in the study eyes was 3 patients (2.7%) in the sham group, 1 patient (4.0%) in the Zimura 1 mg group, 6 patients (9.0%) in the Zimura 2 mg group, and 8 patients (9.6%) in the Zimura 4 mg group.
Statistical Analysis for Efficacy Measures
OPH2003 was designed as a Phase 2b screening trial based on the criteria described by Drs. Thomas Fleming and Barbara Richardson in their publication regarding clinical trial design in the context of microbicides for the prevention of HIV in the Journal of Infectious Disease in 2004. A screening trial uses the same primary efficacy endpoint as an anticipated Phase 3 clinical trial that would be used to support potential marketing approval. However, screening trials generally have a considerably smaller sample size than the anticipated Phase 3 clinical trial. Because it is particularly important to avoid false negative outcomes in a screening trial, screening trials may have higher false positive error rates than would typically be allowed in a Phase 3 trial.
A Phase 2b screening trial has three possible outcomes:
If the estimated effect size indicates low levels of benefit, the experimental intervention would be judged as not plausibly more efficacious than the sham control, and should be discarded in its current dosage in the indication evaluated;
If the estimated effect size is moderate but clinically relevant, with a relatively low likelihood of being achieved (for example, a probability of less than 10%) if there truly were no effect, the experimental intervention would be judged as plausibly more efficacious than the sham control and should be evaluated definitively in subsequent Phase 3 clinical trials; or
If the estimated effect size is clinically relevant and reaches the traditional threshold for statistical significance, as was the case in the OPH2003 trial for both the Zimura 2 mg and Zimura 4 mg dose groups as compared to the corresponding sham control groups, the trial could potentially serve as one of the two pivotal trials typically required for marketing approval.
A properly designed Phase 2b screening trial has a considerable likelihood of ruling out ineffective or harmful interventions, while providing encouraging (or even statistically significant) evidence of benefit that likely would require confirmation by one additional, independent Phase 3 trial.
For the primary and secondary efficacy analyses , we evaluated the ITT population in accordance with a prespecified statistical analysis plan.
The statistical evidence from the OPH2003 trial regarding the comparison of Zimura 2 mg to sham control is provided by data from both Part 1, with a 1:1 randomization ratio of patients receiving Zimura 2 mg (25 patients) and sham (26 patients), as well as data from Part 2, with a 1:2 randomization ratio of patients receiving Zimura 2 mg (42 patients) and sham (84 patients), for a total of 67 patients receiving Zimura 2 mg and 110 patients receiving sham. While we believe it is appropriate to use the aggregate data from Parts 1 and 2 in the analysis of the relative effects of Zimura 2 mg as compared to sham, it would not be appropriate to simply pool the data from patients in both Parts 1 and 2, in particular, because the randomization fraction differs across these two parts of the trial. However, based on the randomization procedures used in each part of the trial, for purposes of statistical comparisons, within Part 1 of the trial, the 25 patients receiving Zimura 2 mg should be comparable to the 26 patients receiving sham. Similarly, for purposes of statistical comparisons, within Part 2 of the trial, the 42 patients receiving Zimura 2 mg should be comparable to the 84 patients receiving sham. The efficacy of Zimura 2 mg was therefore evaluated through an analysis which included a regression factor by trial part. The statistical analysis for the Zimura 4 mg group as compared to sham compares data for patients from Part 2 of the trial only. Data from patients receiving Zimura 1 mg in Part 1 of the trial was not part of the prespecified statistical analysis for the efficacy endpoints.
The prespecified statistical analysis plan for the primary and secondary endpoints of this trial used the mixed-effects repeated measures model, or MRM, to compare data for the Zimura 2 mg and Zimura 4 mg groups to the corresponding sham groups. Repeated measures models are often used when the same outcome is measured at several time points for each patient. These models make use of all available data points to estimate the measurement of interest, the mean rate of change of GA growth, without making overly restrictive assumptions. In addition, these models are generally robust to missing data under the assumption that data are missing at random. During the course of a clinical trial, patients may withdraw from the clinical trial because their condition is asymptomatic, because patients believe that continued participation in the trial is not justified based on the time commitment or treatment burden, such as receiving monthly intravitreal injections, at the recommendation of the investigator or because the protocol requires it. Additionally, patients may not come to a scheduled visit at which key assessments are scheduled to be taken or patient data may not be evaluable because of poor image quality or data recording errors. Early withdrawal, missed visits and unevaluable data all result in data missing from the final data set for a clinical trial.

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Although the protocol called for collection of FAF images of GA at baseline, at month 6 and at month 12, for patients who withdrew from the trial before month 12, the study protocol required the collection of an FAF image to provide a measurement of GA at the time of withdrawal, which was included in the primary analysis so long as it was taken within the month prior to either the month 6 or month 12 time point. Because the MRM model would only need measurements from at least two different time points for analysis purposes, one of which must be the baseline, we were able to include in the primary analysis all patients who had GA measurements at baseline and within the month prior to either month 6 or month 12, or both.
The following table sets forth for the data in the primary statistical analysis the number of patients for whom GA measurements were missing for purposes of performing this analysis. Patients whose GA measurements were missing at baseline, or at both month 6 and month 12, could not be included in the primary analysis. All other patients were included in the primary analysis.
Cohort
 
Zimura 2 mg
(N = 67)
 
Sham 2 mg
(N = 110)
 
Zimura 4 mg
(N = 83)
 
Sham 4 mg
(N = 84)
Missing GA measurement at BL, M6 and M12
 
0 (0%)
 
0 (0%)
 
0 (0%)
 
0 (0%)
Missing GA measurement at M6 and M12 only
 
8 (11.9%)
 
11 (10.0%)
 
17 (20.5%)
 
5 (6.0%)
Missing GA measurement at BL only
 
0 (0%)
 
0 (0%)
 
1 (1.2%)
 
0 (0%)
Total patients excluded from MRM analysis
 
8 (11.9%)
 
11 (10%)
 
18 (21.7%)
 
5 (6.0%)
Missing GA measurement at M6 only
 
1 (1.5%)
 
7 (6.4%)
 
3 (3.6%)
 
6 (7.1%)
Missing GA measurement at M12 only
 
10 (14.9%)
 
9 (8.1%)
 
11 (13.3%)
 
7 (8.3%)
No missing GA measurements(a) 
 
48 (71.6%)
 
83 (75.5%)
 
51 (61.5%)
 
66 (78.6%)
Total patients included in MRM analysis
 
59 (88.0%)
 
99 (90.0%)
 
65 (78.3%)
 
79 (94.1%)
BL = Baseline; M6 = Month 6; M12 = Month 12
(a) = complete observations
In total, 53 (18.5%) patients withdrew from the trial during the first 12 months. Of the patients who withdrew during the first 12 months, 2 patients were from the Zimura 1 mg group (7.7% withdrawals), 12 patients were from the combined Zimura 2 mg group (17.9% withdrawals), 25 patients were from the Zimura 4 mg group (30.1% withdrawals) and 14 patients were from the combined sham group (12.7% withdrawals). GA measurements for patients who withdrew from the study prior to the 12 month time point may have been included in the MRM analysis, as detailed in the table above.
Sensitivity analyses. We performed several sensitivity analyses to assess the impact of missing data on the robustness of the OPH2003 trial results.  The analyses we performed were based on approaches that the FDA generally recommends sponsors of investigational products use to evaluate their clinical data. Based on these analyses, and accounting for the data missing from our data set because of patient withdrawals or for other reasons, the statistical analysis for the 12 month data from the OPH2003 trial appear to be robust. Descriptions of these sensitivity analyses and their outcomes are summarized below. For a description of the thresholds we used to determine statistical significance on the primary efficacy endpoint, see the paragraph below the tables below under "Primary Efficacy Endpoint Data."
A "shift imputation" approach, in which missing data are imputed, or replaced, by values calculated from similar patients with observed values, plus a defined shift. The analysis is repeated assuming a progressively larger shift with each iteration.  The analysis becomes increasingly conservative as the shift increases (because missing values are replaced by worse values than would have been observed, had the values not been missing). The shift is increased until a tipping point is reached and statistical significance is lost. If significance is lost for smaller shift values, the results of the analyses are sensitive to missing data, whereas if significance is lost for larger shift values, the results of the analyses are robust to missing data.
A shift of at least 0.05 mm in terms of square root of GA growth was required to lose statistical significance for both the Zimura 2 mg and Zimura 4 mg groups. The difference between the Zimura treatment groups and the corresponding sham groups, in terms of mean change of square root of GA growth, was 0.11 mm for the Zimura 2 mg group and 0.12 mm for the Zimura 4 mg group, so a shift of 0.05 mm represents more than 40% of the observed treatment effect, which is large.
Arbitrary imputation approaches, in which missing data are replaced by:
the mean value of the same treatment group, which seems a reasonable imputation approach since it replaces missing values by the mean of all observed values in the same treatment group;

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the mean value of the comparator treatment group, which is a very conservative approach. If there is a treatment effect, missing values in the sham control group are replaced by better values, on average, from the Zimura treatment group, while missing values in the Zimura treatment group are replaced by worse values, on average, from the sham control group;
the mean value of both treatment groups, which is a conservative approach because it assumes no treatment effect for missing values; and
the mean value of the sham control group, which is also a conservative approach because it draws only upon data from the sham control group, which by definition did not have any treatment benefit.
Statistical significance for the reduction in mean rate of GA growth for the Zimura 2 mg and Zimura 4 mg groups as compared to the corresponding sham groups was retained for all arbitrary imputation approaches.
A “pattern mixture model imputation” approach, which is a technically complex model and is especially useful when data are suspected to be missing “not at random”.
Statistical significance for the reduction in mean rate of GA growth for the Zimura 2 mg and Zimura 4 mg groups as compared to the corresponding sham groups was retained for the pattern mixture model imputation approach, which suggests again that the results of the analyses are robust to missing data, even if these data had been missing not at random.
Based on our sensitivity analyses, and accounting for the data missing from our data set because of patient withdrawals or for other reasons, we believe the statistical analysis for the 12 month data from the OPH2003 trial is robust.
Primary Efficacy Endpoint Data
The prespecified primary efficacy endpoint was an anatomic endpoint, the mean change in rate of GA growth over 12 months, as measured by FAF based on readings at three time points: baseline, month 6 and month 12, calculated using the square root transformation of the GA area. The readings were performed by an independent masked reading center. The primary efficacy endpoint data are summarized in the following table:
Mean Rate of Change in GA Area from Baseline to Month 12
(MRM Analysis) (Square Root Transformation)
Cohort
 
Zimura 2 mg
(N = 67)
 
Sham 2 mg
(N = 110)
 
Difference
 
P-value
 
% Difference
Mean Change in GA(a) (mm)
 
0.292(b)
 
0.402(b)
 
0.110
 
0.0072(c)
 
27.38%

Cohort
 
Zimura 4 mg
(N = 83)
 
Sham 4 mg
(N = 84)
 
Difference
 
P-value
 
% Difference
Mean Change in GA(a) (mm)
 
0.321
 
0.444
 
0.124
 
0.0051(c)
 
27.81%
(a)
= based on the least squares mean from the MRM model.
(b)
= these least squares means are estimates from the MRM model, drawing on all available data, including data from groups with different randomization ratios in Part 1 and Part 2, and should not be interpreted as directly observed data.
(c)
= reflects statistically significant p-value; Hochberg procedure was used for significance testing.
    

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The analysis of the mean change in GA growth for Zimura 2 mg as compared to Sham 2 mg was adjusted for the fact that this dose of Zimura was tested in the two parts of the trial, which had different randomization ratios. The least squares mean changes in GA in Part 1 and Part 2 are shown separately in the following table:
Mean Rate of Change in GA Area from Baseline to Month 12
(MRM Analysis) (Square Root Transformation)
Cohort
 
 
 
Zimura 2 mg
(N = 25)
 
Sham 2 mg
(N = 26)
 
Difference
Part 1
 
Mean Change in GA(a) (mm)
 
0.329
 
0.42249
 
0.093
(a)
= based on the least squares mean from the MRM model
Cohort
 
 
 
Zimura 2 mg
(N = 42)
 
Sham 2 mg
(N = 84)
 
Difference
Part 2
 
Mean Change in GA(a) (mm)
 
0.308
 
0.42245
 
0.114
(a)
= based on the least squares means from the MRM model
When the data from the Zimura 2 mg comparisons from each Part of the trial are analyzed using the MRM model, which includes a regression factor by part, the mean difference in GA growth over 12 months between the Zimura 2 mg and sham control groups is 0.110 mm.
Statistical significance is established by performing statistical analysis on a data set to assess the degree to which an observed outcome is likely to be associated with variability in the studied patient population or chance as compared to the impact of the investigational product being studied. A higher degree of statistical significance is associated with a lower p-value. Typically, a two-sided p-value of 0.05 or less represents statistical significance when performing only a single prespecified primary analysis for a single primary endpoint. However, when multiple doses of a drug are tested, a more stringent statistical method that accounts for multiple comparisons must be applied. For this purpose, we used the Hochberg multiple comparison procedure to assess the statistical significance of the results observed in the OPH2003 trial. Under the Hochberg procedure, it is necessary to use a stricter standard for statistical significance (a two-sided p-value of 0.025 or less) for any particular dose. For OPH2003, the results for the primary efficacy endpoint observed for both the Zimura 2 mg and Zimura 4 mg groups, as compared to the corresponding sham group, achieved p-values of 0.0072 and 0.0051, respectively, both of which are less than 0.025, indicating that both results were statistically significant.
Secondary Efficacy Endpoints Data
The prespecified secondary endpoints in this trial were the mean change in BCVA from baseline to month 12 and the mean change in LL BCVA from baseline to month 12, both as measured by ETDRS letters. Testing for visual acuity serves as an important safety assessment to assure that the decrease in visual acuity in the Zimura treatment groups was not different from the sham control groups. Because we believe that BCVA is not the optimal assessment to evaluate the impact of GA on patients’ functional vision, we included vision in the prespecified statistical analysis as a secondary, and not as a primary, endpoint.
The OPH2003 trial was not designed to reliably assess differences in mean changes in BCVA or LL BCVA with statistical significance. Data for the secondary endpoints are summarized in the following tables:
Mean Change in BCVA from Baseline to Month 12
(MRM Analysis) (ETDRS letters)
Cohort
 
Zimura 2 mg
(N = 67)
 
Sham 2 mg
(N = 110)
 
Difference
Mean Change in BCVA(a)
 
-7.90(b)
 
-9.29(b)
 
1.39
Cohort
 
Zimura 4 mg
(N = 83)
 
Sham 4 mg
(N = 84)
 
Difference
Mean Change in BCVA(a)
 
-3.79
 
-3.51
 
-0.28
(a)
= based on the least squares mean from the MRM model
(b)
= these least squares means are estimates from the MRM model, drawing on all available data, including data from groups with different randomization ratios in Part 1 and Part 2, and should not be interpreted as directly observed data.


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Mean Change in LL BCVA from Baseline to Month 12
(MRM Analysis) (ETDRS letters)
Cohort
 
Zimura 2 mg
(N = 67)
 
Sham 2 mg
(N = 110)
 
Difference
Mean Change in LL BCVA(a)
 
-1.03(b)
 
-1.41(b)
 
0.38
Cohort
 
Zimura 4 mg
(N = 83)
 
Sham 4 mg
(N = 84)
 
Difference
Mean Change in LL BCVA(a)
 
1.53
 
2.97
 
-1.44
(a)
= based on the least squares mean from the MRM model
(b) = these least squares means are estimates from the MRM model, drawing on all available data, including data from groups with different randomization ratios in Part 1 and Part 2, and should not be interpreted as directly observed data.

Zimura 1 mg 12-Month Efficacy Data
Efficacy data from patients receiving Zimura 1 mg was not part of the prespecified statistical analysis. The total number of patients randomized to the Zimura 1 mg group (26 patients) is relatively small, and the trial was not powered to reliably assess differences in outcomes for these patients as compared to patients in the sham control group in Part 1 (26 patients). However, we performed descriptive analyses on the 12 month data for patients in the Zimura 1 mg as compared to the patients in the sham control group in Part 1 of the trial to aid our assessment of whether a dose response relationship was present across treatment groups included in the clinical trial.
GA area data for the Zimura 1 mg group and the sham group from Part 1 of the trial are summarized in the following tables:
Summary of GA Area (mm) and Mean Percentage Change from Baseline to Month 12
(Square Root Transformation)
Cohort
 
Zimura 1 mg
(N = 26)
 
Sham Part 1
(N = 26)
Mean Sq. Root of GA at BL, mm (SD)
 
2.591 (0.827)
 
2.623 (0.687)
Mean Sq. Root of GA at M12, mm (SD)
 
3.055 (0.604)
 
3.021 (0.722)
Difference
 
0.464
 
0.398
Mean % Change(a) (SD)
 
14.48% (8.2%)
 
16.49% (7.2%)
BL = Baseline; M12 = Month 12
(a) Mean % Change in GA area is an average of the percentage change in GA area observed for each patient.
Although the sample size for the Zimura 1 mg group is small, we believe the apparent reduction in mean percentage change in GA area from baseline to month 12 in the Zimura 1 mg group as compared to the sham control group in Part 1, when combined with the statistically significant results observed for the primary efficacy endpoint for the Zimura 2 mg and Zimura 4 mg groups as compared to their corresponding sham control groups, suggest a potential dose response relationship across treatment groups.
Anticipated 18-Month Data
In accordance with the clinical trial protocol, we will continue to treat and follow patients over 18 months to collect additional data for Zimura in GA. Once all patients reach the 18 month time point, we expect that we will receive unmasked individual patient data for all evaluations performed throughout the trial, and, for each treatment group, mean change in the GA lesion area over 18 months, based on the MRM model, and mean BCVA and mean LL BCVA at month 18. The primary purpose of the 18 month time point is to gather additional safety data. This trial is not designed to assess, and the prespecified statistical analysis plan for the trial does not include assessing, the statistical significance of the 18 month efficacy data for the treatment groups as compared to the corresponding sham control groups. Any analysis of the 18-month efficacy data will be descriptive only. We expect the month 18 data to be available by the end of the second quarter of 2020.
Requirements for Regulatory Approval of Zimura in GA
To obtain regulatory approval for Zimura for the treatment of GA secondary to dry AMD, we expect that we will need to obtain favorable results from a total of two independent, adequate and well-controlled pivotal clinical trials, demonstrating the safety and efficacy of Zimura in this indication. To establish efficacy, we believe it would be sufficient to demonstrate

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robust, statistically significant results showing a clinically relevant reduction in the rate of growth of GA over 12 months, based on measurements over three time points (baseline, month 6 and month 12) in two independent trials. We selected this measure as the primary endpoint for the OPH2003 trial based on prior formal interactions with the FDA, as well as our understanding of clinical trials for other investigational products in development for the treatment of GA. We designed the OPH2003 trial as a well-controlled screening trial such that, in the event that the prespecified primary efficacy endpoint results were statistically significant, the trial could potentially serve as one of the two pivotal clinical trials typically required for marketing approval. Based on the results we have received, the statistical analysis that we have performed and informal discussions we have had with the FDA, we believe that the safety and efficacy results from our OPH2003 trial could potentially satisfy the FDA’s requirements as one of the two pivotal clinical trials typically required for marketing approval. In the paragraphs that follow, we describe in detail the basis for our belief.
Requirements for Safety Data
Zimura has generally been well tolerated in our clinical trials to date. Over the 12-month time point for all patients in the OPH2003 trial, there were no investigator reported ocular serious adverse events, Zimura-related adverse events, cases of Zimura-related intraocular inflammation, cases of Zimura-related increased intraocular pressure, cases of endophthalmitis, or discontinuations attributed by investigators to Zimura in the trial. We believe the investigator reported CNV rate in the study eye for patients receiving Zimura as compared to sham and the untreated fellow eyes during the first 12 months of the trial is within an acceptable range when compared to published clinical trial data for another complement inhibitor currently in development for GA. The most frequently reported ocular adverse events in the OPH2003 trial were related to the injection procedure.
To demonstrate the safety of Zimura to a degree sufficient to support marketing approval, we believe that the FDA and EMA would require data from a minimum of 300 patients having received the dose of Zimura for which we are seeking approval, or a higher Zimura dose, independent of indication, for a minimum of 12 months, with 24-month safety data available for some portion, but not all, of these 300 patients. Including patients randomized to the Zimura 4 mg group in the OPH2005 trial of Zimura for STDG1, we believe that we currently have 12-month safety data for approximately 140 patients who have received either monthly Zimura 2 mg or Zimura 4 mg for 12 months or more. Based on the safety profile of Zimura observed to date in these patients and the number of patients treated, we believe that the remaining minimum safety requirements could potentially be satisfied through a single additional, pivotal clinical trial providing for monthly administrations of Zimura 2 mg over 12 months, at which point the primary efficacy analysis would be performed, with treatment extending to 24 months for the overall safety analysis, with the potential for less frequent dosing after month 12.
Requirements for Efficacy Data
As described above, we believe that reduction in the rate of GA growth over 12 months, based on measurements over three time points (baseline, month 6 and month 12) is an efficacy endpoint that the FDA and EMA would likely accept in considering Zimura for approval for the treatment of GA secondary to dry AMD. The measurements for this endpoint are performed by a masked independent reading center to minimize the potential for bias.
Statistical Significance. In our OPH2003 trial, the reduction in the mean rate of GA growth over 12 months using the square root transformation was 0.110 mm (p-value = 0.0072) for the Zimura 2 mg group as compared to the corresponding sham control group and 0.124 mm (p-value = 0.0051) for the Zimura 4 mg group as compared to the corresponding sham control group, corresponding to an approximate 27% relative reduction in the mean rate of GA growth over 12 months when compared with sham. These data for both dose groups were statistically significant. See above under “Primary Efficacy Endpoint Data” for a discussion of the procedures we used to confirm the statistical significance of these data.
Clinical Relevance. Clinical relevance refers to an assessment of how meaningful the observed outcome is or would be for patients. The FDA and other regulatory authorities consult with clinicians in the field of study to advise on the relevance of an observed outcome for patients. Although there are no FDA or EMA approved therapies for the treatment of GA secondary to dry AMD, we understand that based on recent FDA guidance on human gene therapy products for retinal disorders, the FDA considers best curve fit analyses, such as an MRM model, that demonstrates a statistically significant reduction in the rate of photoreceptor loss, as determined based on FAF images, in a manner that includes measurements at baseline, month 6 and month 12, to be clinically meaningful. Our MRM uses a straight line analysis, which we believe satisfies the FDA's requirement for a best curve fit analysis. We also believe that our anatomic endpoint, reduction in the mean rate of GA growth, is an endpoint that the FDA would consider as a clinically relevant indicator of a reduced rate of photoreceptor loss. Since established literature and clinical experience indicates that patients' functional vision is impacted by the growth of the GA over time, which ultimately leads to severe vision loss, we believe that reduction of GA growth would have a meaningful impact on the patients’ well-being and quality of life and therefore is clinically relevant.

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To secure approval to market an investigational product, a sponsor must demonstrate to the applicable regulatory authority that the potential benefits to be conferred to patients outweigh the potential risks associated with a treatment.
Robustness. In addition to statistical significance and clinical relevance, data from pivotal clinical trials must be robust. The International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use defines robustness as a concept that refers to the sensitivity of the overall conclusions to various limitations of the data, assumptions, and analytic approaches to data analysis. OPH2003 is an international, randomized, double masked, sham controlled, multi-center clinical trial. The primary endpoint, the statistical analysis of which was prespecified, is an objective anatomic endpoint based on measurements performed by a masked independent reading center. The images are analyzed by two experienced image readers, with any discrepancy of greater than 10% arbitrated by the reading center director, who is a recognized expert in the field of GA. The patients, investigators, independent reading center and we as the sponsor each remain masked throughout the duration of the entire trial, which in the case of the OPH2003 trial, means each of us remains masked until after the 18-month time-point.
In clinical trials, it is common for data for some number of subjects to be missing for assessments performed throughout the trial. The degree of data that is missing from a clinical data set can impact the robustness of the data. See above under “Statistical Analysis for Efficacy Measures” for information regarding the GA measurement data that was missing from the analysis of the primary efficacy endpoint in the OPH2003 trial, as well as a description of the sensitivity analyses we have performed. Based on our sensitivity analyses, and accounting for the data missing from our data set because of patient withdrawals or for other reasons, we believe the statistical analysis for the 12 month data from the OPH2003 trial is robust.
Although we seek to apply our enrollment criteria consistently, there may be instances where an investigator proposes a patient to participate in the trial and the reading center determines that, although a patient may not meet all criteria precisely, participation in the trial is warranted based on the overall GA pattern and size. For example, this can result in the enrollment of patients with baseline GA area slightly below 1 disc area, as was the case with one patient in each of the Zimura 4 mg group and the Part 2 sham control group (which is part of the comparison for both the Zimura 2 mg and Zimura 4 mg groups). These patients have been included in the ITT analysis for our primary efficacy endpoint. The FDA, EMA or other regulatory authorities may not agree with the inclusion of these patients in our statistical analysis, which could impact the robustness of our conclusions.
Currently, the trial is ongoing and patients continue to be treated and followed for an additional six months after the 12-month time point. We do not expect to receive the full data set with individual patient data unmasked as to treatment group until after the month 18 visit is completed for all patients. It is possible that unexpected or inconsistent findings could emerge based on additional data we receive for the period between months 12 and 18 or based on the full data set with unmasked, individual patient data. We may uncover individual patient data that causes us to re-evaluate and potentially change our initial conclusions based on the data we have received and our sensitivity analyses performed to date. Ultimately, for the OPH2003 trial to be accepted as a pivotal trial, the FDA, EMA and other regulatory authorities would need to agree that the overall data package from the OPH2003 trial and a subsequent pivotal clinical trial meet the applicable requirements and are sufficiently robust to demonstrate an acceptable safety profile, together with a clinically relevant efficacy outcome with statistical significance, and support an overall favorable benefit-to-risk determination.
Based on the foregoing, assuming that Zimura’s safety profile remains consistent with findings observed to date and subject to regulatory review of the robustness of the OPH2003 trial results, we believe that one additional international, randomized, double masked, sham controlled, Phase 3 clinical trial is needed to demonstrate the safety and efficacy of Zimura in GA secondary to dry AMD in a manner sufficient to support an application for regulatory approval from the FDA and EMA in this indication. Our belief and understanding of the remaining clinical requirements to demonstrate the safety and efficacy of Zimura for the treatment of GA secondary to dry AMD in a manner sufficient to support an application for regulatory approval from the FDA and EMA is based on our review of initial, top-line data from the OPH2003 trial as well as informal discussions with the FDA. Our expectations regarding the minimum clinical requirements to demonstrate the safety and efficacy of Zimura for GA may change as 18-month clinical data from OPH2003 becomes available, and as new regulatory or third party information becomes available.
ISEE2008: Planned Phase 3 Clinical Trial Assessing Safety and Efficacy of Zimura 2 mg for GA Secondary to Dry AMD
We are in the startup phase for ISEE2008, an international, randomized, double masked, sham controlled, multi-center Phase 3 clinical trial evaluating the safety and efficacy of Zimura 2 mg in patients with GA secondary to dry AMD. We plan to enroll approximately 400 patients, who will be randomized into two groups: a first group receiving monthly administrations of Zimura 2 mg for 12 months, and a second group receiving monthly administrations of sham. The prespecified primary endpoint will be the mean rate of change in GA growth over 12 months, as measured by FAF based on readings at three time points: baseline, month 6 and month 12. At 12 months, we plan to re-randomize patients in the Zimura 2 mg arm to receive either

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monthly or every other month administrations of Zimura 2 mg, and all patients receiving monthly administrations of sham will continue to receive monthly administrations of sham. The protocol provides that patients will be treated and followed for 24 months.
The key ophthalmic inclusion criteria for ISEE2008 include the following:
non-foveal GA secondary to dry AMD;
total GA area between 2.5 mm2 and 17.5 mm2, inclusive;
if GA is multifocal, at least one focal lesion should measure 1.25 mm2 or greater;
GA in part within 1500 microns from the foveal center; and
Snellen equivalent BVCA in the study eye between 20/25 and 20/320, inclusive.
As discussed above, when we initiated the OPH2003 study, we did not believe that reliable measurements of GA by FAF images for patients with CNV in the study eye could be performed. Therefore, in the clinical trial protocol for the OPH2003 trial, we indicated that patients in any arm of the trial who developed CNV in the study eye, as observed by the investigator, would be removed from the trial and any future study treatments and assessments. Based on third-party clinical data published since the OPH2003 trial commenced and discussions with our independent reading center, we believe that GA for patients developing CNV in the study eye who receive standard of care anti-VEGF treatment for the CNV, could potentially be assessed by FAF. Based on the foregoing, the protocol for ISEE2008 will provide that patients who develop CNV in the study eye will remain in the trial and continue to receive either Zimura 2 mg or sham, together with standard of care anti-VEGF treatment at the investigator's discretion. Measurements of these patients' GA will be included in the primary efficacy analysis if their FAF images can be reliably assessed by the masked reading center.
We believe that we have adequate drug supply available to begin this trial. We are in the process of engaging clinical trial sites and completing other trial initiation activities for ISEE2008, and intend to begin patient enrollment in this trial during the first quarter of 2020.
OPH2001: Completed Phase 1/2a Clinical Trial of Zimura for GA Secondary to Dry AMD

In 2011, we completed a multicenter, uncontrolled, open label Phase 1/2a clinical trial to evaluate the safety and tolerability of Zimura administered as a monotherapy in patients with GA. We enrolled 47 patients in this trial. We randomly assigned patients in this trial to one of two dose groups. Patients received a total of five intravitreal injections of either 0.3 mg or 1 mg of Zimura over a 36-week treatment period. Patients received an intravitreal injection of Zimura at day 0, week 4, week 8, week 24 and week 36 of the trial, with a final follow-up visit at week 48.

Zimura was generally well-tolerated in this trial. We did not observe any evidence of drug related adverse events. We also did not observe any incidence of conversion to wet AMD in eyes treated with Zimura. Adverse events were primarily ocular adverse events in the study eye which were related to the injection procedure.

In addition, we performed assessments of visual acuity to detect any potential decrease in vision associated with intravitreal injections, the administered drug or natural progression of the disease if left untreated. We did not identify any drug related safety issues through measurements of visual acuity.    

Our Phase 1/2a clinical trial was an uncontrolled study with a small sample size and was not powered to detect a difference between Zimura dose groups, or the efficacy of Zimura monotherapy, with statistical significance. The primary purpose of the study was to assess safety and tolerability. However, during the more frequent dosing period, which is the first 24 weeks, we observed a trend, in favor of the higher of two dose groups, of a relative reduction in the mean growth of the GA lesion area, as measured by fundus autofluorescence images read by an independent reading center.

The mean growth from baseline in the GA lesion area during the first 24 weeks of the trial, when the injections were administered more regularly, was 1.00 mm2 for the 24 patients receiving the 0.3 mg dose and 0.78 mm2 for the 23 patients receiving the 1 mg dose. When the injections were administered on a reduced dosing schedule during the subsequent 24 weeks, this relative trend in reduced growth in GA lesion area was no longer present.

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The following graph sets forth the mean change in GA lesion area from baseline for the two treatment groups over the course of the trial.
https://cdn.kscope.io/82fc931d20ba1896e23990e931ad87aa-zimuragap12adataa03.jpg
We believe this apparent trend in the relative reduction of mean growth in GA lesion area when Zimura was dosed more frequently, together with the relative loss of the benefit when Zimura was dosed less frequently, may suggest a possible drug effect.

Zimura - STGD1 Trials    
    
OPH2005: Ongoing Phase 2b Clinical Trial of Zimura for STGD1

We are currently conducting a randomized, double masked, sham controlled, multi-center Phase 2b clinical trial evaluating the safety and efficacy of Zimura for the treatment of STGD1. We completed patient enrollment for this clinical trial in February 2019 with a total of 95 patients enrolled. The patients were randomized in a 1:1 ratio as follows:

Zimura 2 mg, followed by Zimura 2mg 14 days later, monthly for three months during an induction phase; followed by Zimura 4 mg, administered as two injections of Zimura 2 mg on the same day, monthly for 15 additional months during a maintenance phase; and

a sham injection, followed by a sham injection 14 days later, monthly for three months; followed by two sham injections on the same day, monthly for 15 months.

We plan to evaluate the primary efficacy endpoint in this trial at 18 months. The primary efficacy endpoint is an anatomic endpoint, the mean rate of change in the area of ellipsoid zone defect, as measured by en-face spectral domain optical coherence tomography, or SD-OCT. SD-OCT is an ultra-high resolution imaging technology commonly used to visualize the retinal tissue. SD-OCT is capable of rendering images in multiple dimensions and from multiple perspectives. This imaging technology allows the demonstration of various layers of the retinal tissue, including the ellipsoid zone, which is a part of the photoreceptor cells. Scientific literature correlates defects in the ellipsoid zone with the loss of visual acuity and visual dysfunction. The ellipsoid zone is rendered in SD-OCT images as a defined layer of photoreceptor cell segments. Areas of defects in the ellipsoid zone can be detected and measured by en-face SD-OCT, which shows an SD-OCT image from the perspective of looking at the retina head-on.

We previously engaged the Foundation Fighting Blindness to provide us with data from the Foundation's publicly available ProgStar study, the largest natural history study on Stargardt disease to date. We have used this natural history data, as well as the perspectives of the key opinion leaders involved in the ProgStar study, as resources to assist in the design of the OPH2005 trial. Furthermore, our work on this clinical trial has resulted in the expansion of our network of thought leaders and clinical trial sites to include leading research university hospitals around the world, where patients with orphan retinal diseases are often referred.


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We have not previously studied Zimura in STGD1 patients and thus do not have any clinical data regarding the effect of Zimura in STGD1. We had planned to enroll approximately 120 patients for this trial, which was the number of patients we believed could potentially be enrolled within a reasonable period of time. We decided, however, to cease patient enrollment during the first quarter of 2019 in light of the 18-month endpoint and our goal of providing initial top-line data from this trial during the second half of 2020. We completed patient enrollment in February 2019 with a total of 95 patients enrolled. As STGD1 is an orphan indication, to our knowledge there is only very limited natural history data currently available regarding the variability of the planned primary efficacy endpoint in the STGD1 patient population we enrolled in this trial. Given the information above, this trial could be underpowered to demonstrate a potential clinical benefit for Zimura in this indication.

Similar to OPH2003, OPH2005 was designed to be a Phase 2b screening trial, with the potential to demonstrate statistically significant results depending on the magnitude of the potential benefit observed. Depending on the results that are observed, OPH2005 may be a pivotal clinical trial for regulatory purposes.

This trial remains on track and we expect that initial, top-line data from this trial to be available during the second half of 2020.

Zimura - Wet AMD Trials    

OPH2000: Completed Phase 1/2a Clinical Trial of Zimura for Wet AMD

In 2009, we completed a multicenter, uncontrolled, ascending dose and parallel group, open-label, first in human Phase 1/2a clinical trial to evaluate the safety and tolerability of multiple intravitreal injections of Zimura given in combination with multiple doses of Lucentis 0.5 mg in patients with wet AMD. We enrolled 60 patients in this trial, of which 58 were treatment-naïve patients, and two were treatment-experienced patients.

Patients were treated at one of five Zimura dose levels: 0.03 mg, 0.3 mg, 1 mg, 2 mg and 3 mg. Zimura was generally well tolerated in this trial when tested in combination with Lucentis. None of the patients experienced any dose limiting toxicities at any of the dose levels tested. We observed only a single adverse event assessed by the investigators to be related to Zimura, mild subcapsular cataract in one patient in the group treated with Zimura 2 mg. Despite this event, this patient's visual acuity improved during the study. Adverse events were primarily ocular adverse events in the study eye which were related to the injection procedure. One patient from the 0.3 mg Zimura treatment group withdrew from the trial as a result of a serious adverse event of bacteremia unrelated to study drug or injection procedure, which resulted in a subsequent fatality. Another patient from the 0.3 mg treatment group withdrew from the trial due to the investigator's decision. Systemic adverse events in this trial were not frequently reported. No systemic adverse events were assessed as drug related.

Our Phase 1/2a clinical trial was an uncontrolled study with a small sample size and was not powered to detect a difference between Zimura dose groups or the efficacy of Zimura combination therapy with statistical significance. The primary purpose of the study was to assess safety and tolerability. In addition to our safety assessment, however, we also performed assessments of visual acuity. There was a general trend towards an improvement in visual acuity seen in all treatment groups. We focused our assessment of vision outcomes on the subgroup of 43 treatment-naïve patients who had received all six Zimura injections at the same dosage. We observed a mean increase in visual acuity from baseline at all time points for these patients, based on the number of ETDRS letters the patient could read. For this subgroup, at week 24 of the trial, we noted improvements in mean visual acuity from baseline as follows: 13.6 letters for the 13 patients receiving the 0.3 mg dose, 11.7 letters for the 15 patients receiving the 1 mg dose and 15.3 letters for the 15 patients receiving the 2 mg dose. In this subgroup, 22 patients (51%) gained at least 15 ETDRS letters, defined as significant visual gain, consisting of six patients (46%) in the 0.3 mg dose group, seven patients (47%) in the 1 mg dose group and nine patients (60%) in the 2 mg dose group.

OPH2004: Discontinued Phase 2a Trial of Zimura for Treatment-Experienced Wet AMD Patients

During the fourth quarter of 2015, we initiated an open-label Phase 2a clinical trial to evaluate Zimura’s potential role when administered in combination with anti-VEGF therapy for the treatment of wet AMD in anti-VEGF treatment-experienced patients who did not respond adequately to anti-VEGF monotherapy. In 2017, following our reassessment of our Zimura development programs, we stopped enrolling patients in this trial as we determined that we would initiate a new Zimura wet AMD trial, the OPH2007 trial described below, for treatment-naïve patients. One patient continued to receive treatment in this trial until the first half of 2018. This patient did not experience any drug-related adverse events and there were no unexpected safety issues.


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OPH2007: Completed Phase 2a Clinical Trial of Zimura for Treatment-Naïve Wet AMD Patients

In 2018, we completed a randomized, dose-ranging, open-label, multi-center Phase 2a clinical trial of Zimura in combination with Lucentis 0.5 mg to evaluate the safety of different dosing regimens of Zimura in combination with an anti-VEGF agent in treating wet AMD. We enrolled a total of 64 treatment-naïve patients for this trial. We assigned patients in this trial to one of four groups:

In Groups 1 and 2, consisting of ten patients in each group, patients received monthly combination therapy consisting of Lucentis 0.5 mg followed by, in Group 1, Zimura 4 mg two days later and in Group 2, Zimura 2 mg on the same day as the Lucentis treatment;

In Groups 3 and 4, consisting of 22 patients in each group, patients received dosages in two phases, consisting of:

first, an induction phase from day one to the second month, during which the patients received Lucentis 0.5 mg followed by Zimura 2 mg on the same day, followed by Zimura 2 mg fourteen days later; and

second, a maintenance phase from the third month to the fifth month, during which the patients received, in Group 3, Lucentis 0.5 mg followed by Zimura 2 mg on the same day and in Group 4, Zimura 2 mg followed two days later with Lucentis 0.5 mg and Zimura 2 mg.

From a safety perspective, Zimura combination therapy with Lucentis was generally well tolerated after six months of treatment. The most frequently reported ocular adverse events were related to the injection procedure. We did not observe any adverse events attributable to Zimura combination therapy.

Our Phase 2a clinical trial was an uncontrolled trial with a small sample size designed to assess safety at different dosages and to detect a potential efficacy signal. This trial was not designed to detect a statistically significant difference between Zimura dose groups or to evaluate the efficacy of Zimura combination therapy with statistical significance.

We evaluated the mean change in BCVA at the six-month timepoint as compared to baseline. The data are summarized as follows:

In Group 1, the mean change in visual acuity was 9.0 ETDRS letters with a median of 7.0 letters, and 40% of the patients gained greater than or equal to three lines of vision, or 15 ETDRS letters, defined as significant visual gain;

In Group 2, the mean change in visual acuity was 10.2 ETDRS letters with a median of 16.0 letters, and 60% of patients gained greater than or equal to 15 ETDRS letters;

In Group 3, the mean change in visual acuity was 10.7 ETDRS letters with a median of 10.0 letters, and 40.9% of patients gained greater than or equal to 15 ETDRS letters; and

In Group 4, the mean change in visual acuity was 9.9 ETDRS letters with a median of 11.0 letters, and 18.2% of patients gained greater than or equal to 15 ETDRS letters.

Zimura - IPCV Trials

OPH2002: Completed Phase 2a Clinical Trial of Zimura for IPCV
    
In late 2014, we initiated a very small, uncontrolled, open-label, Phase 2a clinical trial to evaluate Zimura’s potential role when administered in combination with anti-VEGF agents for the treatment of IPCV in treatment-experienced patients for whom anti-VEGF monotherapy failed. IPCV is an age-related disease that is similar to wet AMD and is commonly characterized by leakage under the RPE, subretinal hemorrhage and RPE detachment. We enrolled four patients in the trial. None of the patients had a greater than 15-ETDRS letter decrease in visual acuity, which is considered a significant loss in visual acuity, following treatment in this study. None of the patients experienced any drug-related adverse events and there were no unexpected safety issues from this trial.


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OPH2006: Discontinued Phase 2a Trial of Zimura for IPCV

In late 2017, we initiated a randomized, dose-ranging, open-label Phase 2a clinical trial of Zimura in combination with Eylea® (aflibercept), an anti-VEGF agent, in treatment-experienced patients with IPCV. We did not enroll any patients in this clinical trial and decided to discontinue this clinical trial.

HtrA1 Inhibitor Program

In October 2018, we acquired Inception 4, Inc., or Inception 4, a private biopharmaceutical company owned by funds controlled by Versant Ventures. We acquired Inception 4 through a merger with our subsidiary, Orion Ophthalmology LLC, or Orion. Through this acquisition, we obtained worldwide development and commercialization rights to certain HtrA1 inhibitors. We are currently developing this program for the treatment of GA secondary to dry AMD and may in the future evaluate HtrA1 inhibition as a potential treatment for other age-related retinal diseases, such as wet AMD or IPCV.

The HtrA1 gene encodes for an enzyme that may affect cellular structure, function and homeostasis, which is the dynamic equilibrium maintained in cells and tissue required for normal physiology. Genetic linkage studies, including a study published in Molecular Vision in 2017, show a correlation between the expression of HtrA1 and a certain set of genes conferring risk for AMD. A study of post-mortem eyes from subjects with AMD published in EBioMedicine in 2018 found overexpression of HtrA1 in RPE cells as compared to the eyes of non-AMD subjects. Additionally, the overexpression of HtrA1 was found, in an in vitro experiment published in the same article, to lead to alterations and disruptions in the morphology and function of RPE cells. Although the causal pathway between expression of HtrA1 and AMD is still not well understood, we believe that these findings suggest that HtrA1 overexpression may play a role in AMD and that molecules involved in the regulation and inhibition of HtrA1 may have therapeutic benefit in the treatment of dry AMD, including GA, as well as potentially other age-related retinal diseases.
Our HtrA1 inhibitor program includes a number of small molecule compounds that show high affinity and specificity for HtrA1 when tested in vitro and target engagement when tested in multiple animal models. We have identified a lead compound from this program. We are pursuing process development and formulation development with the goal of developing a manufacturing process and a formulation for intravitreal administration of this lead compound in the eye. If we are successful in developing a manufacturing process for and formulating this lead compound, we plan to initiate IND-enabling activities for this product candidate.
Based on current timelines and subject to successful completion of preclinical development and GMP manufacturing, we expect to file an IND for a product candidate from this program during 2021.
Gene Therapy Research and Development Programs
Since 2017, as we evaluated our strategic priorities and the market for orphan and age-related retinal diseases with unmet medical needs, as well as the available technologies in development to potentially address these needs, we have been particularly encouraged by the prospects for gene therapy as a potential treatment option for retinal diseases. Since 2018, we have in-licensed two gene therapy product candidates and established collaborative gene therapy sponsored research programs with three leading academic research institutions in the United States. These sponsored research programs are focused on generating data to support the preclinical development of our gene therapy product candidates and discovering and developing other novel gene therapy technologies to treat a number of orphan IRDs.
The Potential of Gene Therapies for Retinal Diseases
Gene therapy consists of delivering DNA encoding for a functional protein to a target tissue to facilitate protein synthesis using a recipient's existing cellular machinery. Gene therapy can be used to replace a non-functional protein produced innately by the subject as a result of a genetic mutation or as a means of producing and delivering a therapeutic protein that would not otherwise be produced within the body. Many IRDs are monogenic, meaning they are caused by mutations in a single gene, and therefore could potentially be addressed by a gene replacement approach. For genetic diseases where the mutant protein has toxic effect, we have been encouraged by the potential for a “knockdown” and “replace” approach in which gene therapy not only can introduce a wildtype version of the gene into the host body but also can suppress the expression of the mutant gene. Furthermore, because gene therapy may result in a lasting, or even permanent, addition to a host body's genetic code, gene therapy has potential for an extended treatment effect through a single administration. We therefore believe that gene therapy also holds promise as a potential treatment for age-related and other non-orphan retinal diseases, especially for diseases where patients might otherwise require chronic therapy over years, if not decades.

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Currently, most gene therapies for application in the eye are administered via subretinal injection. Subretinal injection is a surgical procedure in which the gene therapy vector is injected by a retinal surgeon into the potential space between the photoreceptors and the RPE and often as close as practicable to the site of desired protein expression. Once the vector is present in the target tissue area, the process by which the gene of interest is inserted into host cells by the delivery vehicle can begin. This process is referred to as transduction and the gene therapy delivery vehicle is referred to as a vector.
Gene Therapy Products and AAV Vectors
A gene therapy product typically includes the gene of interest, or transgene, together with a promoter sequence. The composition of the transgene may differ from that of the wildtype form of the gene—for example, the gene may be modified to increase the expression of the target protein. Promoters are DNA sequences that are linked to a gene and control the transcription of a gene into RNA in the host body's cells. There are cell-specific promoters, which tend to drive gene expression in particular cell or tissue types - for example, the RPE and photoreceptors. The choice of the specific promoter that is to be linked to a given transgene is an important consideration in constructing a gene therapy product.
The promoter-transgene combination is packaged together into a delivery vehicle to facilitate localization within the relevant tissue within the body. Gene therapies are typically delivered via viral vectors and among those, AAV has become the most common choice for gene therapy applications inside the eye. AAV is a small, non-pathogenic virus. To create the vector, the DNA encoding the AAV viral genes is removed, disarming the virus, and is replaced with the therapeutic gene sequence. In addition to AAV, other gene delivery vehicles include vectors derived from lentivirus and non-viral based vectors.
We are focused on AAV gene therapies, as AAV vectors have generally been found to transduce RPE, photoreceptors and other retinal cells at a high rate, and their safety profile in humans is relatively well-documented as compared to other delivery vehicles, such as lentiviral vectors. Gene editing approaches, such as CRISPR, in which the host DNA is modified, altered or removed via therapeutic intervention, are also emerging as a potential treatment options for genetic diseases. Unlike lentiviral vectors or gene editing approaches, with AAV gene therapy, the delivered genetic cargo does not incorporate into or alter the host cell's existing DNA and chromosomes, but rather remains separate in the host cell, where it can be transcribed by the host cell's existing machinery.
There are several naturally-occurring serotypes of AAV, including AAV2, AAV5, AAV8 and AAV9, as well as countless synthetic AAV serotypes. The AAV genome consists of two genetic sequences: a "Rep" gene that encodes for certain viral life-cycle proteins, and a "Cap" gene that encodes for proteins that form the viral capsid, which is the outer wall of the AAV. Recombinant AAV vectors can be created by combining the Rep sequence for one AAV serotype with the Cap sequence for another AAV serotype. For example, a recombinant AAV 2/5 vector is produced using the AAV2 Rep sequence and the AAV5 Cap sequence to package the transgene inside an AAV5 capsid. Because different capsid proteins have different transduction capabilities within different types of cells, the selection of the capsid serotype is an important consideration in constructing an AAV gene therapy product.
One of the primary limitations with AAV gene therapy is AAV's packaging capacity: an AAV vector can hold only up to approximately 4,700 base pairs of DNA, whereas the genes associated with a number of monogenic IRDs, such as the CEP290 gene associated with LCA10 and the ABCA4 gene associated with STGD1, exceed that size. A possible solution to the size limitation would be to develop a minigene form of transgene that would be small enough to fit within the packaging capacity of AAV, but large enough for the resulting protein to maintain its function. Another potential limitation for AAV and other viral vector gene therapies is the potential to trigger an immune response. Because many types of AAV are naturally occurring, gene therapy patients may have built up neutralizing antibodies to specific AAV serotypes prior to gene therapy administration, which may result in an inflammatory immune response and tissue damage. The safety profile of AAV, however, is well-documented, and furthermore, the relative isolation of the human eye and ocular immune system within the body may mitigate the potential immune response from the administration of AAV into the eye. Our current gene therapy programs, which are described in further detail below, use AAV vectors for delivery of the genetic cargo to cells within the retina.
IC-100: RHO-adRP Product Candidate
In June 2018, we entered into an exclusive global license agreement with UFRF and Penn for rights to develop and commercialize IC-100, our novel AAV gene therapy product candidate for the treatment of RHO-adRP. There are over 150 known mutations in the RHO gene that can result in RHO-adRP. In individuals with RHO-adRP, the rhodopsin that is produced by the mutant gene is toxic. The construct for our RHO-adRP product candidate combines in a single AAV2/5 vector:
a transgene for a highly-efficient, novel short hairpin RNA, or shRNA, designed to target and "knockdown" expression of the subject's innate rhodopsin, regardless of the specific mutation a subject has, with

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a transgene for a healthy rhodopsin protein that is resistant to the shRNA.
Our RHO-adRP construct was tested by investigators at Penn in a naturally occurring canine model of RHO-adRP, resulting in long term, i.e., over 8 months, anatomic and functional preservation of the photoreceptors, which was demonstrated with histology and electrophysiology. The investigators had initially tested a dual vector construct in which the shRNA and the healthy RHO transgenes were delivered by different AAV vectors. The investigators found, however, that the dual vector approach caused inflammation and other complications in the retina, leading the investigators to develop this single vector construct. The results from these experiments were published by scientists at Penn and UF in PNAS in August 2018 in a paper titled: "Mutation-independent Rhodopsin Gene Therapy by Knockdown and Replacement with a Single AAV Vector."
In addition to the exclusive license agreement, we also entered into a master sponsored research agreement with Penn, facilitated by the Penn Center for Innovation, or PCI, in June 2018, pursuant to which we, together with Penn, are conducting additional preclinical studies of IC-100 and a natural history study of RHO-adRP patients.
We have also engaged a CDMO for preclinical and Phase 1/2 clinical supply of IC-100. We are conducting Phase 1/2 clinical manufacturing and other IND-enabling activities, including toxicology studies. Based on current timelines and subject to successful completion of preclinical development and GMP manufacturing and regulatory review, we plan to initiate a Phase 1/2 clinical trial for IC-100 during the fourth quarter of 2020.
IC-200: Product Candidate for BEST1-Related IRDs
In April 2019, we entered into an exclusive global license agreement with Penn and UFRF for rights to develop and commercialize IC-200, our novel AAV gene therapy product candidate for the treatment of Best disease and other BEST1-related IRDs. We started developing this product candidate in late 2018 after we entered into an exclusive option agreement with Penn and UFRF for these rights, which we exercised in April 2019 through the license agreement. Investigators at Penn and UFRF tested IC-200 in a naturally occurring autosomal recessive canine model for Best disease, resulting in the reversal of subretinal lesions and micro-detachments associated with the canine disease. The results of this work were published in PNAS in February 2018 in a paper titled: "BEST1 gene therapy corrects a diffuse retina-wide microdetachment modulated by light exposure." We believe the results from these experiments in a naturally occurring canine disease model with distinct phenotypic similarities to human Best disease demonstrate the potential therapeutic benefit of IC-200 for BEST1-related IRDs.
In October 2018, we also entered into a master sponsored research agreement with Penn (which is separate from the master sponsored research agreement for IC-100), facilitated by PCI, pursuant to which we, together with Penn, are conducting additional preclinical studies of IC-200 as well as natural history studies of patients with autosomal dominant and autosomal recessive forms of BEST1-related IRDs.
We have engaged a CDMO as the manufacturer for preclinical and Phase 1/2 clinical supply of IC-200. We are planning for Phase 1/2 clinical manufacturing and other IND-enabling activities. Based on current timelines and subject to successful completion of preclinical development and GMP manufacturing and regulatory review, we expect to initiate a Phase 1/2 clinical trial for IC-200 during the first half of 2021.
Minigene Programs
We are funding several sponsored research programs at UMMS seeking to use a minigene approach to develop new gene therapies for orphan IRDs. We refer to each of these programs by reference to the transgene for which we are seeking to create a minigene therapy. We receive research results from these programs as they become available. UMMS has granted us an option to obtain an exclusive license to any patents or patent applications that result from these programs. We exercised our option rights for the miniCEP290 program and in July 2019 entered into a license agreement with UMass for exclusive development and commercialization rights to patent rights and know-how for this program.
miniCEP290 Program for LCA10
Our miniCEP290 program is targeting LCA10, which is associated with mutations in the CEP290 gene. The naturally occurring CEP290 gene is approximately 8,000 base pairs. In a 2018 publication in Human Gene Therapy, researchers at UMMS presented their findings that injection of a CEP290 minigene into a newborn mouse model for LCA10 resulted in rescue of photoreceptor cells, as evidenced by both anatomical and functional measures. The goal of the sponsored research, which we initiated in February 2018, was to create and evaluate other CEP290 minigene constructs in the mouse model and optimize the effect observed in that publication.
We have been encouraged by the preliminary results of the sponsored research we have received to date. One of the new minigene constructs has shown five times longer duration of functional rescue of the photorecptors as compared to what

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was observed in the 2018 publication. UMMS is continuing to optimize constructs with the goal of identifying a lead construct by the middle of 2020.
miniABCA4 Program for STGD1
Our miniABCA4 program is targeting STGD1, which is associated with mutations in the ABCA4 gene. The size of the naturally occurring ABCA4 gene is approximately 7,000 base pairs. UMMS has generated and is evaluating several ABCA4 minigene constructs in both in vitro and in vivo experiments. We have received preliminary results and expect to receive additional results from the miniABCA4 program during the second half of 2020.
miniUSH2A Program for USH2A-Related IRDs
In July 2019, we entered into a sponsored research agreement with UMMS for our miniUSH2A program. The miniUSH2A program seeks to develop a mutation independent, minigene therapy for the vision loss associated with USH2A mutations, including vision loss associated with Usher 2A and USH2A-associated nonsyndromatic autosomal recessive retinitis pigmentosa. We expect to receive preliminary results from this program during the second half of 2020.
Manufacturing
We do not currently own or operate manufacturing facilities for the production of clinical or commercial quantities of Zimura, our HtrA1 inhibitors, IC-100, IC-200 or any other product candidate we may develop. Although we rely and intend to continue to rely upon third-party contract manufacturing organizations, or CMOs, to produce our products and product candidates, we have personnel with experience to manage the third-party CMOs that we have engaged or may engage to produce our product candidates. We do not have any long-term supply arrangements other than as described below.
Manufacturing of pharmaceutical and biological products is a process that generally involves procurement of starting materials, such as raw materials, chemical or biological synthesis in controlled environments, purification and post-production testing and analysis before the product can be released. Manufacturing processes can be complex and difficult to develop, especially for biological products such as gene therapies. Even when a manufacturing process is successfully developed, there are challenges associated with scaling up a manufacturing process to produce quantities sufficient for clinical trials or potential commercial sales and producing high-quality materials consistently using a clearly defined manufacturing process. The manufacture of pharmaceutical and biological products is subject to FDA review and oversight. Having a well-defined process that can be validated is crucial to obtaining FDA approval of any product candidate we may bring forward.
Zimura Manufacturing
The process for manufacturing Zimura consists of chemical synthesis, pegylation, purification and finally freeze drying to form a powder, which is the active pharmaceutical ingredient, or API. Each of these steps involves a relatively common chemical engineering process. In a separate process that follows the freeze drying, the Zimura API is dissolved in a liquid solution that includes certain chemical buffers and then is aseptically filled into vials from which the intravitreal injection solution is drawn. This process of rendering the API into a liquid solution and placing it into vials is referred to as fill/finish services.
In early 2017, we completed the small scale manufacture of multiple batches of Zimura API that we plan to use to support clinical drug supply for the ISEE2008 trial. We are in the process of recommencing manufacturing activities with our contract manufacturer, with the goal of scaling up and validating the manufacturing process to support the potential commercialization of Zimura. We will need to demonstrate that Zimura API produced through the scaled-up process is analytically comparable to the Zimura we are currently using before API manufactured through the scaled-up process can be used for commercial drug supply. We also plan to make a change to the vial used for the finished Zimura drug product during the course of the ISEE2008 trial in order to support a more efficient fill/finish operation at a commercial scale. We may need to perform additional work beyond what we currently plan to establish manufacturing and analytical capabilities sufficient to support potential commercial operations.
We currently rely upon a single third-party manufacturer, Agilent Technologies, Inc., or Agilent, to supply us with API for Zimura and a different, single third-party manufacturer, Ajinomoto Bio-Pharma Services, or Ajinomoto, to provide fill/finish services for Zimura. We currently obtain Zimura API from Agilent on a purchase order basis. We plan to enter into a long-term supply agreement with Agilent for the API for Zimura. We have entered into a clinical and commercial services agreement with Ajinomoto for fill/finish services for Zimura. This agreement is summarized below. We obtain the PEG reagent used to make Zimura API from a single third-party manufacturer on a purchase order basis. We also plan to enter into a long-

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term supply agreement with this manufacturer for the PEG reagent. This manufacturer may need to scale up its purification process in order to support supply of PEG at a commercial scale.
Ajinomoto Clinical and Commercial Services Agreement
In October 2016, we and Ajinomoto entered into a Clinical and Commercial Services Agreement, which we refer to as the Fill/Finish Services Agreement. Pursuant to the Fill/Finish Services Agreement, Ajinomoto agreed to provide clinical and commercial fill/finish services for Zimura as well as any future product candidates that we and Ajinomoto may mutually agree. The Fill/Finish Services Agreement has an initial term that will expire at the end of 2027, absent termination by either party in accordance with the terms of the Fill/Finish Services Agreement. The initial term of the Fill/Finish Services Agreement may be extended by mutual agreement of the parties. The amount payable by us to Ajinomoto under the Fill/Finish Services Agreement is based on the volume of finished drug product that we order, subject to periodic adjustments over the term of the Fill/Finish Services Agreement.
We may cancel any purchase order under the Fill/Finish Services Agreement at any time, subject to the payment of specified cancellation fees. We may terminate the Fill/Finish Services Agreement, without cause, upon six months’ prior notice to Ajinomoto. Each party also has the right to terminate the Fill/Finish Services Agreement for other customary reasons such as material breach by the other party.
The Fill/Finish Services Agreement contains provisions relating to compliance by Ajinomoto with current Good Manufacturing Practices, cooperation by Ajinomoto in connection with marketing applications for our product candidates, indemnification, confidentiality, dispute resolution and other customary matters for an agreement of this kind.
Gene Therapy Manufacturing
The manufacture of AAV gene therapies requires the use of high quality reagents and substrates as starting materials, such as plasmids and cells.  Plasmids are circular double-stranded DNA sequences that exist separate and apart from a cell's chromosomes and which can be engineered to encode for a specific promoter-transgene combination or a specific AAV Rep-Cap combination.  Cell lines and banks are comprehensively tested, including for lack of microbial contamination, to ensure the safety and quality of the final, produced AAV vector.  The plasmids and cell lines are generally sourced from a limited number of qualified suppliers.
The process for producing AAV vectors typically consists of plasmid transfection of an appropriate cell line. In this step, specifically-designed plasmids are inserted into living cells, where the AAV Rep-Cap genes are expressed using the cell's existing machinery. Empty virus capsids are then synthesized and packaged together with the promoter-transgene combination sequence. The subsequent purification process is comprised of steps that are designed to remove process and product-related impurities present in the harvested material, including removal of empty virus capsids from AAV vectors containing the promoter-transgene combination sequence.  Each of these closely monitored purification steps involves a relatively common biochemical engineering process.  After formulation, the resulting purified AAV vector material is considered the drug substance for AAV gene therapies.  The AAV drug substance is then fill/finished into vials, which results in the finished drug product and from which the injection solution is drawn.
 
                We have engaged a gene therapy CDMO for preclinical and Phase 1/2 clinical supply of IC-100 and IC-200. We obtain the plasmids that are used for IC-100 and IC-200 from a single third-party supplier on a purchase order basis.

Sales and Marketing
We expect that our commercial strategy for any of our product candidates, including whether to retain commercial rights and market and sell the product candidate ourselves or to utilize collaboration, distribution or other marketing arrangements with third parties in some or all geographic markets, will be determined based on a variety of factors, including the size and nature of the patient population, the disease area, the particular indication for which the product candidate is approved, the territory in which the product candidate may be marketed and the commercial potential for such product candidate. We are developing Zimura and our HtrA1 inhibitor program for GA secondary to dry AMD, which is a condition affecting a relatively large number of individuals, and we are also developing Zimura for STGD1, which is a condition affecting a much more limited number of individuals. Our gene therapy programs are currently being developed for orphan IRDs with a limited number of affected individuals. If any of our product candidates are approved, the size and nature of the affected patient population will be an important factor in our commercial strategy.

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In addition, our commercial strategy will vary depending on whether the disease is typically treated by general ophthalmology practitioners, specialists, such as retina specialists, or other sub-specialists. For example, in the United States, retina specialists perform most of the medical procedures involving diseases of the back of the eye. Intravitreal injection and subretinal injection are specialized procedures. In the vast majority of cases in the United States, retina specialists perform intravitreal injections and highly specialized retina surgeons perform subretinal injections. We believe that retina specialists and retina surgeons in the United States are sufficiently concentrated such that we could effectively promote an approved product candidate to these specialists with a targeted specialty sales and marketing group. For example, retina specialists who see patients with IRDs, as well as their patients, are generally concentrated in a limited number of large, academic research institutions located throughout the United States.
Competition
The development and commercialization of new drug products is highly competitive. We face competition with respect to our product candidates from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies, as well as generic and biosimilar companies, worldwide. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization. Some of these competitive products and therapies are based on scientific approaches that are the same as or similar to our approaches, and others are based on entirely different approaches. We also will face similar competition with respect to any product candidates that we may seek to develop or commercialize in the future. In particular, many companies are pursuing gene therapy approaches for orphan and age-related retinal diseases.
Based on publicly available information, we are aware of the following research and development programs that may be competitive with programs we are pursuing. Other competitive programs may exist of which we are not aware.
Competitive considerations for dry AMD and GA:
There are a number of products in preclinical and clinical development by third parties to treat dry AMD or GA secondary to dry AMD. In general, these product candidates can be categorized based on their proposed mechanisms of action. The mechanisms of action for these product candidates include complement system and inflammation suppression, visual cycle modulators, antioxidants and neuroprotectants, cell and gene therapies and vascular perfusion enhancers. We are aware that Apellis Pharmaceuticals, Inc., or Apellis, Roche AG, Novartis AG and MorphoSys AG, Hemera Biosciences, Inc., Gemini Therapeutics, Inc., NGM Biopharmaceuticals Inc., Gyroscope Therapeutics, Achillion Pharmaceuticals, Inc., and Biogen Inc. each have complement inhibitors in development for dry AMD, including, in the cases of Hemera Biosciences and Gyroscope Therapeutics, complement inhibitor gene therapies. We believe that the most advanced of these programs is Apellis's pegylated, synthetic peptide targeting complement protein C3. As recently as January 2020, Apellis confirmed its expectation that it would finish patient enrollment in its Phase 3 program during the early part of 2020 with the goal of enrolling approximately 1,200 patients, which would enable a primary 12-month efficacy analysis as early as the middle of 2021. If Apellis's Phase 3 program for its C3 complement inhibitor product candidate is successful, it is likely that Apellis would obtain marketing approval for its product candidate in advance of when we could reasonably expect marketing approval for Zimura in GA or a product candidate from our HtrA1 inhibitor program in GA, if at all. Moreover, we are aware that several other companies, including Allergan Inc., Allegro Ophthalmics, LLC, Alkeus Pharmaceuticals Inc., EyePoint Pharmaceuticals, Inc., Lineage Cell Therapeutics, Inc. and Stealth BioTherapeutics Corp, working in collaboration with Alexion Pharmaceuticals, Inc., are pursuing development programs for the treatment of dry AMD or GA using different mechanisms of action outside of the complement system.
Competitive considerations for Stargardt disease:
There are a number of products in preclinical research and clinical development by third parties to treat Stargardt disease. We are aware that Sanofi, Acucela Inc., Alkeus Pharmaceuticals, Inc., Lin BioScience, Inc., Nightstar Therapeutics plc (prior to its acquisition by Biogen Inc.), ProQR Therapeutics N.V., Spark Therapeutics and Generation Bio Co. each have research or development programs in Stargardt disease. Three of these programs, Acucela, Alkeus and Lin BioScience, are exploring the use of oral therapeutics, while Sanofi, with technology provided by Oxford BioMedica plc, Nightstar and Spark are each using a gene therapy approach and ProQR is using an RNA based approach. Acucela’s product candidate is in Phase 3 development while Alkeus’s and Sanofi’s product candidates are each in Phase 2 development. Spark's program is in the research phase. In addition, several academic organizations have early stage programs in Stargardt disease.

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Competitive considerations for RHO-adRP:
We are aware that ProQR Therapeutics N.V. is developing an RNA-based therapeutic for RHO-adRP, for which it has filed an IND and plans to enroll patients this year. We are also aware that multiple academic institutions have early stage gene therapy development programs in RHO-adRP. In addition, prior to its acquisition by Biogen Inc., Nightstar Therapeutics plc had a preclinical AAV gene therapy program in RHO-adRP. Sanofi is also exploring a potential program in this disease.
Competitive considerations for BEST1-related IRDs:
We are aware that, prior to its acquisition by Biogen, Nightstar Therapeutics plc had a preclinical AAV gene therapy program for one or more BEST1-related IRDs.
Competitive considerations for LCA10:
We are aware that Editas Medicine, Inc. (in partnership with Allergan plc) has a gene editing program for LCA10, an IND for which was submitted in late 2018, ProQR Therapeutics N.V. is developing an RNA-based therapeutic for LCA10 that is currently in late-stage clinical development, Generation Bio Co. has a preclinical program that utilizes ceDNA technology to target LCA10 and Oxford Biomedica plc is developing a lentiviral gene therapy program for LCA10 that is in preclinical development. In addition, several academic institutions have preclinical programs in LCA10.
Competitive considerations for USH2A-related IRDs:
There are a number of products in preclinical research and clinical development by third parties to treat USH2A-related IRDs. We are aware that ProQR Therapeutics N.V. is pursuing two RNA based approaches for different mutations causing Usher 2A, one of which is currently in Phase 1/2 clinical development and the other of which is in preclinical development. We are also aware that Editas Medicine, Inc. and Odylia Therapeutics are exploring potential programs in USH2A-related IRDs.
 
Intellectual Property
Our success depends in part on our ability to obtain and maintain proprietary protection for our product candidates, technology and know-how, to operate without infringing the proprietary rights of others and to prevent others from infringing our proprietary rights. We seek to protect our proprietary position, among other methods and where patent protection is available, by filing U.S. and certain foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development of our business, and by maintaining our issued patents. For our collaborative gene therapy sponsored research programs, we are generally relying on our university collaborators to generate research and data to support new patent applications, and to file, prosecute and maintain any patents or patent applications resulting from the sponsored research. We also rely upon trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary position.
Our patent portfolio includes the following:
patents and patent applications in-licensed from Archemix Corp., or Archemix:
patents covering Zimura's composition-of-matter, which have issued in the United States, the countries covered by the European Patent Organisation, which we refer to as the EPO Countries, Japan and certain other jurisdictions, and which are expected to expire in Japan in 2026 and elsewhere in 2025; and patent applications covering Zimura's composition-of-matter, which are pending in certain other jurisdictions, and which, if granted, are expected to expire in 2025; and
patents covering the treatment of certain complement mediated disorders with Zimura, Zimura for use in a method of treating certain complement mediated disorders or a composition comprising Zimura for treating certain complement mediated disorders, which have issued in the United States, the EPO Countries, Japan and certain other jurisdictions, and which are expected to expire in the United States and Japan in 2026 and elsewhere in 2025; and

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patent applications owned by IVERIC bio, Inc.:
patent applications covering formulations, methods of use for treating GA, Stargardt disease and other conditions, and other proprietary technology relating to Zimura, which are pending in the United States, the EPO Countries, Japan and certain other jurisdictions, and which, if granted, are expected to expire in 2034; and
patent applications owned by our Orion subsidiary:
three families of composition-of-matter and method-of-treatment patent applications covering the lead and backup compounds in our HtrA1 inhibitor program, which are pending in the United States, the EPO Countries, Japan and certain other jurisdictions, and which, if granted, are expected to expire in 2037; and
patent applications in-licensed from UFRF and Penn:
two families of composition-of-matter and method-of-treatment patent applications relating to the proprietary RHO-adRP AAV technology of UFRF and Penn, which are pending in the United States, the EPO Countries, Japan and certain other jurisdictions, and which, if granted, are expected to expire in 2037 or 2039.
patent applications in-licensed from UMass:
two families of composition-of-matter and method-of-treatment patent applications relating to certain proprietary minigene technology for the treatment of diseases associated with mutations in the CEP290 gene, which are pending in the United States, the EPO Countries, Japan and certain other jurisdictions, and which, if granted, are expected to expire in 2038 or 2040.
The term of individual patents depends upon the legal term for patents in the countries in which they are granted. In most countries, including the United States, the patent term is generally 20 years from the earliest claimed filing date of a non-provisional patent application in the applicable country. In the United States, a patent’s term may, in certain cases, be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office in examining and granting a patent, or may be shortened if a patent or patent application claims patentably indistinct subject matter as another commonly owned patent or patent application having an earlier expiration date and the patentee terminally disclaims the portion of the term beyond such earlier expiration date. The Hatch-Waxman Act permits a patent term extension of up to five years beyond the expiration date of a U.S. patent as partial compensation for the length of time a drug is undergoing clinical development or under regulatory review while the patent is in force. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent applicable to each regulatory review period may be extended and only those claims covering the approved drug, a method for using it or a method for manufacturing it may be extended.
Similar provisions are available in the EPO Countries and certain other foreign jurisdictions to extend the term of a patent that covers an approved drug. In the future, if and when our product candidates receive approval by the FDA or foreign regulatory authorities, we expect to apply for patent term extensions on issued patents covering those products, depending upon the length of the clinical trials for each drug and other factors. The expiration dates referred to above are without regard to potential patent term extension or other market exclusivity that may be available to us. See "—Government Regulation and Product Approvals" below for a description of market exclusivity mechanisms that may be available to us.
We may rely, in some circumstances, upon trade secrets to protect our technology. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements with our employees, consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems.

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Licensing and Other Arrangements

We are party to a number of license, acquisition and other agreements that have granted us rights to develop our product candidates and conduct our research and development programs. These agreements generally impose license fee, milestone payment, royalty payment and diligence obligations on us. Our material in-license and acquisition agreements are described below.

In the future, we may enter into additional acquisition or license agreements, particularly if we choose to acquire or in-license additional product candidates or other technologies and further expand our product pipeline. We expect that any future acquisition or license agreements would impose similar obligations on us. In the future, we may also enter into agreements to out-license intellectual property to our collaboration and research partners to assist in the development and, if approved, commercialization of our product candidates. For example, we may out-license certain rights to Zimura if we believe the arrangement could assist us in the development or potential commercialization of Zimura and would otherwise help us pursue our business plan and strategic goals.

Zimura - Archemix C5 License Agreement

In September 2011, we entered into an amended and restated exclusive license agreement with Archemix relating to anti-C5 aptamers, which we refer to as the C5 License Agreement. The C5 License Agreement superseded a July 2007 agreement between us and Archemix. Under the C5 License Agreement, we hold exclusive worldwide licenses, subject to certain pre–existing rights, under specified patents and technology owned or controlled by Archemix to develop, make, use, sell, offer for sale, distribute for sale, import and export pharmaceutical products comprised of or derived from an anti-C5 aptamer for the prevention, treatment, cure or control of human indications, diseases, disorders or conditions of the eye, adnexa of the eye, orbit and optic nerve, other than certain expressly excluded applications.

Financial Terms

In connection with the C5 License Agreement, as amended, we paid Archemix an upfront licensing fee of $1.0 million and issued to Archemix an aggregate of 2,000,000 shares of our series A-1 preferred stock and 500,000 shares of our series B-1 preferred stock. We have paid Archemix an aggregate of $2.0 million in fees based on our achievement of specified clinical milestone events under the C5 License Agreement. This amount does not include the milestone payment obligation of $1.0 million triggered by the positive, initial top-line data from the OPH2003 trial.

Under the C5 License Agreement, for each anti-C5 aptamer product that we may develop under the agreement, including Zimura, we are obligated to make additional payments to Archemix of up to an aggregate of $56.5 million if we achieve specified development, clinical and regulatory milestones, with $30.5 million of such payments relating to a first indication, $23.5 million of such payments relating to second and third indications and $2.5 million of such payments relating to sustained delivery applications. Under the C5 License Agreement, we are also obligated to make additional payments to Archemix of up to an aggregate of $22.5 million if we achieve specified commercial milestones based on net product sales of all anti-C5 products licensed under the agreement. We are also obligated to pay Archemix a double-digit percentage of specified non-royalty payments we may receive from any sublicensee of our rights under the C5 License Agreement. We are not obligated to pay Archemix a running royalty based on net product sales in connection with the C5 License Agreement.

Diligence Obligations

We are required to exercise commercially reasonable efforts in developing and commercializing at least one anti-C5 aptamer product and in undertaking actions required to obtain regulatory approvals necessary to market such product in the United States, the European Union, and Japan, and in such other markets where we determine that it is commercially reasonable to do so.

Term and Termination

Unless earlier terminated, the C5 License Agreement will expire upon the latest of 12 years after the first commercial sale in any country of the last licensed product, the expiration of the last-to-expire valid claim of the licensed patents that covers a licensed product, and the date on which no further payments of sublicensing income are to be received by us.

Either we or Archemix may terminate the C5 License Agreement if the other party materially breaches the agreement and the breach remains uncured for a specified period. Archemix may also terminate the C5 License Agreement, or may convert our exclusive license under the agreement to a non-exclusive license, if we challenge or assist a third party in challenging the

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validity or enforceability of any of the patents licensed under the agreement. We may terminate the agreement at any time and for any or no reason effective at the end of a specified period following our written notice of termination to Archemix.

HtrA1 Inhibitor Program - Inception 4 Merger Agreement
In October 2018, we and Inception 4 entered into an agreement and plan of merger, which we refer to as the Inception 4 Merger Agreement, pursuant to which we acquired Inception 4 through a merger transaction, referred to as the Inception 4 Merger.  Prior to the Inception 4 Merger, Inception 4 was a privately held biotechnology company focused on the research and development of small molecule inhibitors of HtrA1 for age-related retinal diseases in humans.
As upfront consideration for the Inception 4 Merger, the former equityholders of Inception 4 received 5,044,201 shares of our common stock, and in December 2018, they received an additional 130,526 shares of our common stock following finalization of customary post-closing adjustments.  As part of the transaction, we received approximately $6.1 million in cash.
Contingent Consideration
In addition, pursuant to the Inception 4 Merger Agreement, the former equityholders of Inception 4 will be entitled to receive contingent future payments from us based on the achievement of certain clinical and regulatory milestones of up to an aggregate maximum amount of $105 million, with $45 million of such potential payments relating to GA and $60 million of such potential payments relating to wet AMD.  These future milestone payments will be payable in the form of shares of our common stock, calculated based on the price of our common stock over a five-trading day period preceding the achievement of the relevant milestone, unless and until the issuance of such shares would, together with all other shares issued in connection with the Inception 4 Merger, exceed an overall maximum limit of approximately 7.2 million shares, which is equal to 19.9% of the number of issued and outstanding shares of our common stock as of the close of business on the business day prior to the closing date of the Inception 4 Merger, and will be payable in cash thereafter.
Diligence Obligation
We agreed to use commercially reasonable efforts to perform the activities described in an agreed-upon development plan outlining certain activities for developing at least one HtrA1 inhibitor for the treatment of GA.  Our maximum aggregate liability for any and all breaches of our obligation under the Inception 4 Merger Agreement to use commercially reasonable efforts to develop an HtrA1 inhibitor is limited to $5 million.
Other Terms and Conditions
The Inception 4 Merger Agreement contains customary representations, warranties and covenants for both Inception 4 and our company as the purchaser. The representations and warranties generally survived until the first anniversary of the closing date, with certain specified representations and warranties surviving to 30 months after the closing date and other specified representations and warranties surviving to the expiration of the applicable statute of limitations. The Inception 4 Merger Agreement also contains customary indemnification provisions whereby the former equityholders of Inception 4 will indemnify us and certain affiliated parties for any losses arising out of breaches of the representations, warranties and covenants of Inception 4 under the Inception 4 Merger Agreement; pre-closing tax matters; appraisal claims of former Inception 4 stockholders; any pre-closing indebtedness or expenses not previously adjusted for at the closing; fraud with respect to representations and warranties of Inception 4; and certain other matters.
License Agreement with UFRF and Penn for IC-100
In June 2018, we entered into an exclusive global license agreement with UFRF and Penn, which we refer to as the RHO-adRP License Agreement. Under the RHO-adRP License Agreement, UFRF and Penn granted us a worldwide, exclusive license under specified patent rights and a worldwide, non-exclusive license under specified know-how, including specified preclinical data, to manufacture, develop and commercialize certain AAV gene therapy products for the treatment of rhodopsin-mediated diseases. The rights granted under the RHO-adRP License Agreement included certain patent rights covering IC-100, our novel AAV gene therapy product candidate intended to treat RHO-adRP.
We may grant sublicenses of the licensed patent rights and know-how without the consent of the UFRF and Penn to certain affiliates and to biopharmaceutical companies that have a minimum market capitalization at the time such sublicense is granted and may otherwise grant sublicenses of the licensed patent rights and know-how with the consent of UFRF and Penn, not to be unreasonably withheld.
Diligence Obligations
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marketing approval, to commercialize a licensed product in at least the United States and two major European countries. In addition, we agreed to meet specified development and commercial milestones with respect to a licensed product by specified dates, as the same may be extended under the terms of the RHO-adRP License Agreement.
Financial Terms
In June 2018, we paid a $0.5 million upfront license issuance fee in connection with entry into the agreement, as well as accrued patent prosecution expenses of approximately $30 thousand. Under the agreement, we agreed to pay an annual license maintenance fee in the low double-digit thousands of dollars, which will be payable on an annual basis until the first commercial sale of a licensed product. In addition, we agreed to reimburse UFRF for the costs and expenses of patent prosecution and maintenance related to the licensed patent rights.
We further agreed to pay UFRF, on behalf of both licensors, up to an aggregate of $23.5 million if we achieve specified clinical, marketing approval and reimbursement approval milestones with respect to a licensed product and additionally, up to an aggregate of $70.0 million if we achieve specified commercial sales milestones with respect to a licensed product.
We are also obligated to pay UFRF, on behalf of both licensors, royalties at a low single-digit percentage of net sales of licensed products. Such royalties are subject to customary reductions for lack of patent coverage and loss of regulatory exclusivity. In addition, such royalties with respect to any licensed product in any country may be offset by a specified portion of any royalty payments actually paid by us with respect to such licensed product in such country under third-party licenses for patent rights or other intellectual property rights that are necessary to manufacture, develop and commercialize the licensed product in such country. Our obligation to pay royalties under the RHO-adRP License Agreement will continue on a licensed product-by-licensed product and country-by-country basis until the latest of:
the expiration of the last-to-expire licensed patent rights covering a licensed product in the country of sale;
the expiration of regulatory exclusivity covering a licensed product in the country of sale; and
ten years from the first commercial sale of the applicable licensed product in the country of sale.
Beginning on the earlier of the calendar year following the first commercial sale of a licensed product and the first business day of 2031, we are also obligated to pay certain minimum royalties, not to exceed an amount in the low hundreds of thousands of dollars on an annual basis, which minimum royalties are creditable against our royalty obligation with respect to net sales of licensed products due for the year in which the minimum royalty is paid.
If we or an affiliate sublicenses any of the licensed patent rights to a third party, we will be obligated to pay UFRF, on behalf of both licensors, a low double-digit percentage of the consideration received in exchange for such sublicense, with the applicable percentage based upon the stage of development of the sublicensed product at the time we or the applicable affiliate enters into the sublicense.
If we receive a rare pediatric disease priority review voucher from the FDA in connection with obtaining marketing approval for a licensed product and we subsequently use such priority review voucher in connection with a different product candidate, we will be obligated to pay UFRF, on behalf of both licensors, aggregate payments in the low double-digit millions of dollars based on certain marketing approval and commercial sales milestones with respect to such other product candidate. In addition, if we sell such a priority review voucher to a third party, we will be obligated to pay UFRF, on behalf of both licensors, a low double-digit percentage of any consideration received from such third party in connection with such sale.
Term and Termination
Unless earlier terminated by us, the RHO-adRP License Agreement will expire upon the expiration of our obligation to pay royalties to UFRF on net sales of licensed products. We may terminate the agreement at any time for any reason upon prior written notice to UFRF. Penn or UFRF may terminate the agreement if we materially breach the agreement and do not cure such breach within a specified cure period, if we experience a specified insolvency event, if we cease to carry on the entirety of our business related to the licensed patent rights, if we cease for more than four consecutive quarters to make any payment of earned royalties on net sales of licensed products following the commencement of commercialization thereof, unless such cessation is based on safety concerns that we are actively attempting to address, or if we or an affiliate challenges or assists a third party in challenging the validity, scope, patentability, and/or enforceability of the licensed patent rights.
Following any termination of the agreement prior to expiration of the term of the agreement, all rights to the licensed patent rights and know-how granted to us will revert to UFRF and Penn.

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License Agreement with Penn and UFRF for IC-200

In April 2019, we entered into an exclusive global license agreement, which we refer to as the BEST1 License Agreement, with Penn and UFRF. We entered into the BEST1 License Agreement by exercising our exclusive option rights under an option agreement, or the Best1 Option Agreement, that we previously entered into with Penn and UFRF in October 2018. Under the BEST1 License Agreement, Penn and UFRF granted us a worldwide, exclusive license under specified patent rights and specified know-how and a worldwide, non-exclusive license under other specified know-how to research, develop, manufacture and commercialize certain AAV gene therapy products, including IC-200, for the treatment of Best disease and other BEST1-related IRDs.

We have agreed to use commercially reasonable efforts to pursue an agreed-upon development plan with the intent to develop a licensed product for sale within at least the United States and two major European countries and, subject to obtaining marketing approval, to commercialize such product in at least the United States and two major European countries. In addition, we have agreed to meet specified development and regulatory milestones with respect to a licensed product by specified dates, as the same may be extended under the terms of the agreement.

We may grant sublicenses of the licensed patent rights and know-how, without the consent of Penn or UFRF, to certain affiliates and to biopharmaceutical companies that have a minimum market capitalization at the time such sublicense is granted, and may otherwise grant sublicenses to the licensed patent rights and know-how with the consent of Penn and UFRF, not to be unreasonably withheld.
 
Financial Terms
 
In May 2019, we paid Penn, for the benefit of Penn and UFRF, a $0.2 million upfront license issuance fee, which was recorded as a research and development expense, and we paid UFRF accrued patent prosecution expenses of approximately $18 thousand, which was recorded as a general and administrative expense. We have also agreed to pay Penn, for the benefit of Penn and UFRF, an annual license maintenance fee in the low double-digit thousands of dollars, which fee will be payable on an annual basis until the first commercial sale of a licensed product. In addition, we have agreed to pay Penn, for the benefit of Penn and UFRF, a one-time patent grant fee in the low triple-digit thousands of dollars, upon the issuance of a U.S. patent that claims inventions disclosed in the licensed patent rights or know-how or inventions generated under certain related sponsored research agreements with Penn or UFRF, and that is exclusively licensed to us. Furthermore, we have agreed to reimburse Penn and UFRF for the costs and expenses of patent prosecution and maintenance related to the licensed patent rights.

We have further agreed to pay Penn, for the benefit of Penn and UFRF, up to an aggregate of $15.7 million if we achieve specified clinical, marketing approval and reimbursement approval milestones with respect to one licensed product, and up to an aggregate of an additional $3.1 million if we achieve these same milestones with respect to a different licensed product. In addition, we have agreed to pay Penn, for the benefit of Penn and UFRF, up to an aggregate of $48.0 million if we achieve specified commercial sales milestones with respect to one licensed product, and up to an aggregate of an additional $9.6 million if we achieve these same milestones with respect to a different licensed product.
 
We are also obligated to pay Penn, for the benefit of Penn and UFRF, royalties at a low single-digit percentage of net sales of licensed products. Such royalties are subject to customary deductions, credits, and reductions for lack of patent coverage and loss of regulatory exclusivity. In addition, such royalties with respect to any licensed product in any country may be offset by a specified portion of any royalty payments actually paid by us with respect to such licensed product in such country under third-party licenses to patent rights or other intellectual property rights that are necessary to research, develop, manufacture and commercialize the licensed product in such country. Our obligation to pay royalties under the BEST1 License Agreement will continue on a licensed product-by-licensed product and country-by-country basis until the latest of:
the expiration of the last-to-expire licensed patent rights covering the sale of the applicable licensed product in the country of sale;
the expiration of regulatory exclusivity covering the applicable licensed product in the country of sale; and
10 years from the first commercial sale of the applicable licensed product in the country of sale.
Beginning on the earlier of the calendar year following the first commercial sale of a licensed product and calendar year 2032, we are also obligated to pay certain minimum royalties, not to exceed an amount in the mid tens of thousands of dollars on an annual basis, which minimum royalties are creditable against our royalty obligation with respect to net sales of licensed products due in the year the minimum royalty is paid.

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If we or any of our affiliates sublicense any of the licensed patent rights to a third party, we will be obligated to pay Penn, for the benefit of Penn and UFRF, a high single-digit to a mid ten's percentage of the consideration received in exchange for such sublicense, with the applicable percentage based upon the stage of development of the sublicensed product at the time we or the applicable affiliate enters into the sublicense.
 
If we receive a rare pediatric disease priority review voucher from the FDA in connection with obtaining marketing approval for a licensed product and we subsequently use such priority review voucher in connection with a different product candidate outside the scope of the BEST1 License Agreement, we will be obligated to pay Penn, for the benefit of Penn and UFRF, aggregate payments in the low double-digit millions of dollars based on certain approval and commercial sales milestones with respect to such other product candidate. In addition, if we sell such a priority review voucher to a third party, we will be obligated to pay Penn, for the benefit of Penn and UFRF, a high single-digit percentage of any consideration received from such third party in connection with such sale.

Term and Termination
 
The BEST1 License Agreement, unless earlier terminated by us or Penn or UFRF, will expire upon the expiration of our obligation to pay royalties to Penn, for the benefit of Penn and UFRF, on net sales of licensed products. Before the effectiveness of an IND for a licensed product, we may terminate the BEST1 License Agreement with respect to such licensed product or in its entirety, at any time for any reason upon prior written notice to Penn and UFRF. Following the effectiveness of an IND for a licensed product, we may terminate the BEST1 License Agreement with respect to such licensed product by providing Penn prior written notice and a certification that we are ceasing all use, research and development and commercialization of such licensed product, subject to certain limited exceptions. We may also terminate the BEST1 License Agreement if Penn or UFRF materially breaches the BEST1 License Agreement and does not cure such breach within a specified cure period.

Penn or UFRF may terminate the BEST1 License Agreement if we materially breach the BEST1 License Agreement and do not cure such breach within a specified cure period, if we experience a specified insolvency event, if we cease to carry on the entirety of our business related to the licensed patent rights, if we cease for more than four consecutive quarters to make any payment of earned royalties on net sales of licensed products following the commencement of commercialization thereof, unless such cessation is based on safety concerns that we are actively attempting to address, or if we, any of our affiliates or any of our sublicensees challenge or assist a third party in challenging the validity, scope, patentability, and/or enforceability of the licensed patent rights. If we materially breach certain diligence obligations under the BEST1 License Agreement with respect to only one licensed product, then Penn and UFRF may only terminate our rights and licenses under the BEST1 License Agreement for such licensed product, but not for other licensed products.

Following any termination of the BEST1 License Agreement prior to expiration of the term of the BEST1 License Agreement, all rights to the licensed patent rights and know-how that Penn and UFRF granted to us will revert to Penn and UFRF.
License Agreement with UMass for the miniCEP290 Program
In July 2019, we entered into an Exclusive License Agreement, which we refer to as the miniCEP290 License Agreement, with UMass.  We entered into the miniCEP290 License Agreement by exercising our exclusive option rights under an option agreement and a sponsored research agreement that we previously entered into with UMass in February 2018. Under the miniCEP290 License Agreement, UMass granted us a worldwide, exclusive license under specified patent rights and specified biological materials and a non-exclusive license under specified know-how to make, have made, use, offer to sell, sell, have sold and import products for the treatment of diseases associated with mutations in the CEP290 gene, including LCA10. We may grant sublicenses of the licensed patent rights and know-how without the consent of UMass.

We have agreed to use diligent efforts to develop licensed products and to introduce such licensed products into the commercial market. Subject to obtaining marketing approval, we agreed to make any approved licensed product reasonably available to the public. In addition, we have agreed to meet specified development and regulatory milestones with respect to a licensed product by specified dates, as the same may be extended under the terms of the miniCEP290 License Agreement.

Financial Terms

In July 2019, we issued to UMass 75,000 shares of our common stock following execution of the miniCEP290 License Agreement pursuant to an exemption from registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended, or the Securities Act. In September 2019, we paid UMass a $0.4 million upfront license fee, which was recorded as a

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research and development expense, and we paid UMass accrued patent prosecution expenses of approximately $18 thousand, which was recorded as a general and administrative expense.

We have also agreed to pay UMass an annual license maintenance fee in the low double-digit thousands of dollars, which fee will be payable on an annual basis until the expiration of the royalty term for the licensed products. Furthermore, we have agreed to reimburse UMass for the costs and expenses of patent prosecution and maintenance related to the licensed patent rights.

We have further agreed to pay UMass up to an aggregate of $14.75 million in cash and issue up to 75,000 shares of our common stock if we achieve specified clinical and regulatory milestones with respect to a licensed product. In addition, we have agreed to pay UMass up to an aggregate of $48.0 million if we achieve specified commercial sales milestones with respect to a licensed product.

We are also obligated to pay UMass royalties at a low single-digit percentage of net sales of licensed products. Our obligation to pay royalties under the miniCEP290 License Agreement will continue on a licensed product-by-licensed product and country-by-country basis until the later of: (a) the expiration of the last-to-expire licensed patent rights covering the sale of the applicable licensed product in the country of sale, or (b) 10 years from the first commercial sale of the applicable licensed product in the country of sale. Beginning with the calendar year following receipt of marketing approval for a licensed product, we are also obligated to pay certain minimum royalties, not to exceed an amount in the mid-double-digit thousands of dollars on an annual basis, which minimum royalties are creditable against our royalty obligation with respect to net sales of licensed products due in the year the minimum royalty is paid.

If we or any of our affiliates sublicenses any of the licensed patent rights or know-how to a third party, we will be obligated to pay UMass a high single-digit to a mid-tens percentage of the consideration received in exchange for such sublicense, with the applicable percentage based upon the stage of development of the licensed products at the time we or the applicable affiliate enters into the sublicense.

If we receive a rare pediatric disease priority review voucher, or a priority review voucher, from the FDA in connection with obtaining marketing approval for a licensed product, and we subsequently use such priority review voucher in connection with a different product candidate outside the scope of the miniCEP290 License Agreement, we will be obligated to pay UMass a low-tens percentage of the fair market value of the priority review voucher at the time of approval of such product candidate and a low-twenties percentage of the fair market value of the priority review voucher at the time of achievement of a specified commercial sales milestone for such other product candidate. In addition, if we sell such a priority review voucher to a third party, we will be obligated to pay UMass a low-thirties percentage of any consideration received from such third party in connection with such sale.

Term and Termination

The miniCEP290 License Agreement, unless earlier terminated by us or UMass, will expire upon the expiration of our obligation to pay royalties to UMass on net sales of licensed products.  We may terminate the miniCEP290 License Agreement at any time for any reason upon prior written notice to UMass. We may also terminate the miniCEP290 License Agreement if UMass materially breaches the miniCEP290 License Agreement and does not cure such breach within a specified cure period.

UMass may terminate the miniCEP290 License Agreement if we materially breach the miniCEP290 License Agreement and do not cure such breach within a specified cure period.

Following any termination of the miniCEP290 License Agreement prior to expiration of the term of the miniCEP290 License Agreement, all rights to the licensed patent rights and know-how that UMass granted to us will revert to UMass.

Government Regulation and Product Approvals
Government authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions, including the European Union, extensively regulate, among other things, the research, development, testing, manufacture, pricing, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, and import and export of pharmaceutical products. The processes for obtaining marketing approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other legal requirements of regulatory authorities, require the expenditure of substantial time and financial resources.

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Review and Approval of Drugs and Biologics in the United States
In the United States, the FDA approves and regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations. Biologic products, including gene therapy products, are licensed for marketing under the Public Health Service Act, or PHSA. The failure to comply with requirements under the FDCA or PHSA and other applicable laws at any time during the product development process, approval process or after approval may subject an applicant and/or sponsor to a variety of administrative or judicial sanctions, including refusal by the FDA to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and other types of letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, or civil or criminal investigations and penalties brought by the FDA and the Department of Justice or other governmental entities, including state agencies.
A drug candidate must be approved by the FDA through a new drug application, or NDA. A biologic candidate is licensed by the FDA through approval of a biologic license application, or BLA. An applicant seeking approval to market and distribute a new product in the United States must typically undertake the following:
completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practice, or GLP, regulations;

completion of the manufacture, under current Good Manufacturing Practices, or cGMP, conditions, of the drug substance and drug product that the sponsor intends to use in human clinical trials along with required analytical and stability testing;

submission to the FDA of an IND, which must take effect before human clinical trials may begin;

approval by an independent institutional review board, or IRB, representing each clinical trial site before each clinical trial may be initiated at that clinical site;

performance of adequate and well-controlled human clinical trials in accordance with good clinical practices, or GCP, to establish the safety and efficacy of the proposed drug product for each indication for which the sponsor is seeking approval and the safety, potency and purity of a candidate biologic product for each indication for which the sponsor is seeking approval;

preparation and submission to the FDA of an application requesting marketing approval for one or more proposed indications;

review by an FDA advisory committee, where appropriate or if applicable;

satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or components thereof, are produced to assess compliance with cGMP requirements and to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity;

satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data;

payment of user fees and securing FDA approval of the application; and

compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy, or REMS, and the potential requirement to conduct post-approval studies.

Preclinical Studies
Before an applicant begins testing a drug or biologic with potential therapeutic value in humans, the product candidate must undergo preclinical testing. Preclinical studies include laboratory evaluation of product chemistry, toxicity and formulation, and the purity and stability of the substance, as well as in vitro and animal studies to assess the potential safety and activity of the product candidate for initial testing in humans and to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations.

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The IND and IRB Processes
An IND is an exemption from the FDCA that allows an unapproved product to be shipped in interstate commerce for use in an investigational clinical trial and a request for FDA authorization to administer an investigational product to humans. Such authorization must be secured prior to interstate shipment and administration of any product candidate that is not the subject of an approved application. In support of a request for an IND, applicants must submit a protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, the results of the preclinical tests, together with manufacturing information, analytical data and any available clinical data or literature and plans for clinical trials, among other things, are submitted to the FDA as part of an IND. The FDA requires a 30-day waiting period after the filing of each IND before clinical trials may begin. This waiting period is designed to allow the FDA to review the IND to determine whether human research subjects will be exposed to unreasonable health risks. At any time during this 30-day period, or thereafter, the FDA may raise concerns or questions about the conduct of the trials as outlined in the IND and impose a clinical hold or partial clinical hold. In this case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can begin or re-commence.
In addition to the foregoing IND requirements, an IRB representing each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct continuing review and re-approve the study at least annually. The IRB must review and approve, among other things, the study protocol and informed consent information to be provided to study subjects. An IRB must operate in compliance with FDA regulations. An IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the product candidate has been associated with unexpected serious harm to patients.
Additionally, some trials are overseen by an independent group of qualified experts organized by the trial sponsor, known as a data safety monitoring board or committee, or DSMB. This group provides authorization as to whether or not a trial may move forward at designated check points based on certain available data from the study to which only the DSMB may access. Suspension or termination of development during any phase of clinical trials can occur if it is determined that the participants are being exposed to an unacceptable health risk. Other reasons for suspension or termination may be made by the sponsor based on evolving business objectives and/or competitive climate.
Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health, or NIH, for public dissemination on its ClinicalTrials.gov website.
Human Clinical Trials in Support of an Application
Clinical trials involve the administration of an investigational product to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, the inclusion and exclusion criteria, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated.
Human clinical trials are typically conducted in four sequential phases, which may overlap or be combined:
Phase 1. The product candidate is initially introduced into a small number of healthy human subjects or, in certain indications, including those for which we are developing product candidates, patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness and to determine optimal dosage.

Phase 2. The product candidate is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage. Phase 2a clinical trials tend to be smaller pilot studies for the purpose of demonstrating biological activity and clinical "proof of concept." Phase 2b studies tend to be larger studies focused on finding the optimal dosage and may be controlled.

Phase 3. These clinical trials are commonly referred to as “pivotal” studies, which denotes a study that presents the data that the FDA or other relevant regulatory agency will use to determine whether or not to approve a product candidate. The product candidate is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically

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evaluate the efficacy and safety of the product for approval, identify adverse effects, establish the overall risk–benefit profile of the product and to provide adequate information for the labeling of the product.

Phase 4. Post-approval studies may be required to be conducted after initial marketing approval. These studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication.

Progress reports detailing the safety results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. In addition, IND safety reports must be submitted to the FDA for any of the following: serious and unexpected suspected adverse reactions; findings from other studies or animal or in vitro testing that suggest a significant risk to humans exposed to the product candidate; and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The FDA, the sponsor or the DSMB may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. The FDA will typically inspect one or more clinical sites to assure compliance with GCPs and the integrity of the clinical data submitted.
For a detailed discussion of how these regulatory requirements apply to Zimura and its potential approval for the treatment of GA secondary to dry AMD, please see the above section entitled, "Zimura - Zimura Dry AMD Trials - OPH2003 Ongoing Clinical Trial Assessing the Safety and Efficacy of Various Doses of Zimura for GA Secondary to Dry AMD - Requirements for Regulatory Approval of Zimura in GA".
Expanded Access to an Investigational Drug for Treatment Use

Expanded access, sometimes called “compassionate use,” is the use of investigational new drug products outside of clinical trials to treat patients with serious or immediately life-threatening diseases or conditions when there are no comparable or satisfactory alternative treatment options. Expanded access allows a patient to obtain an investigational new drug when enrolling in a clinical trial for that drug is difficult or not feasible for the patient. FDA regulations allow access to investigational drugs under an IND by the sponsor or the treating physician for treatment purposes on a case-by-case basis in certain circumstances, subject to FDA approval. There is no obligation for a sponsor to make its drug products available for expanded access; however, as required by the 21st Century Cures Act, or Cures Act, passed in 2016, if a sponsor has a policy regarding how it responds to expanded access requests, it must make that policy publicly available.
In addition, the Right to Try Act, signed into law in May 2018, provides a federal framework for certain patients to access certain investigational new drug products that have completed a Phase 1 clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without needing FDA approval under the expanded access program. There is no obligation for a drug manufacturer to make its drug products available to eligible patients under the Right to Try Act.
Special Regulations and Guidance Governing Gene Therapy Products

The FDA has defined a gene therapy product as one that mediates its effects by transcription and/or translation of transferred genetic material and/or by integrating into the host genome and which is administered as nucleic acids, viruses, or genetically engineered microorganisms. The products may be used to modify cells in vivo or transferred to cells ex vivo prior to administration to the recipient. Within the FDA, the Center for Biologics Evaluation and Research, or CBER, regulates gene therapy products. Within CBER, the review of gene therapy and related products is consolidated in the Office of Tissues and Advanced Therapies (OTAT), and the FDA has established the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER on its reviews. The NIH, including its Novel and Exceptional Technology and Research Advisory Committee, or NExTRAC, also advises the FDA on gene therapy issues and other issues related to emerging biotechnologies. The FDA and the NIH have published guidance documents relating to the development and submission of gene therapy protocols.
The FDA has issued various guidance documents regarding gene therapies, including recent final guidance documents released in January 2020 relating to chemistry, manufacturing and controls information for gene therapy INDs, long-term follow-up after the administration of gene therapy products, gene therapies for rare diseases and gene therapies for retinal disorders. Although the FDA has indicated that these and other guidance documents it previously issued are not legally binding, we believe that our compliance with them is likely necessary to gain approval for any gene therapy product candidate we may develop. The guidance documents provide additional factors that the FDA will consider at each of the above stages of development and relate to, among other things, the proper preclinical assessment of gene therapies; the proper design of tests to measure product potency in support of an IND or BLA application; and measures to observe delayed adverse effects in subjects who have been exposed to investigational gene therapies when the risk of such effects is high. Further, the FDA usually recommends that sponsors observe subjects for potential gene therapy-related delayed adverse events for a 15-year period,

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including a minimum of five years of annual examinations followed by 10 years of annual queries, either in person or by questionnaire.
Until 2019, most gene therapy clinical trials required pre-review by the predecessor of NExTRAC before being submitted for approval by the IRBs and any local biosafety boards. In 2019, the NIH eliminated the pre-review process and going forward, the review of future gene therapy clinical trial protocols would be largely handled by IRBs. Furthermore, in 2019, the NIH removed from public access the Genetic Modification Clinical Research Information System (GeMCRIS) database, which previously contained substantial amounts of safety and other patient information regarding human gene therapy studies performed to date.
Review of a Product Candidate by the FDA
If clinical trials are successful, the next step in the development process is the preparation and submission to the FDA of an application for marketing approval. The application is the vehicle through which applicants formally propose that the FDA approve a new drug for marketing and sale in the United States for one or more indications. The application must contain a description of the manufacturing process and quality control methods, as well as results of preclinical tests, toxicology studies, clinical trials and proposed labeling, among other things. Every new product must be the subject of an approved application before it may be commercialized in the United States. Under federal law, the submission of most applications is subject to an application user fee, which for federal fiscal year 2020 is $2,942,965 for an application requiring clinical data. The sponsor of an approved application is also subject to an annual program fee, which for fiscal year 2020 is $325,424. Certain exceptions and waivers are available for some of these fees, such as an exception from the application fee for products with orphan designation and a waiver for certain small businesses.
Following submission of an application, the FDA conducts a preliminary review of an application generally within 60 calendar days of its receipt and strives to inform the sponsor by the 74th day after the FDA’s receipt of the submission to determine whether the application is sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an application for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in depth substantive review. Under the Prescription Drug User Fee Act, or PDUFA, the FDA has agreed to specified performance goals and timelines in the review process of applications, which goals and timelines depend on the type of product candidate for which review is sought and whether the sponsor has applied for and received from the FDA any special review status for the particular product candidate allowing for expedited review. Special review status is available for certain products that are intended to address an unmet medical need in the treatment of a serious or life–threatening disease or condition under one of the following FDA-designations: fast track designation, breakthrough therapy designation, priority review designation and regenerative medicine advanced therapy designation. The review process and the PDUFA goal date may be extended by the FDA for three additional months to consider new information or clarification provided by the applicant to address an outstanding deficiency identified by the FDA following the original submission.
Before approving an application, the FDA typically will inspect the facility or facilities where the product is or will be manufactured, stored, packaged and tested. These pre–approval inspections may cover all facilities associated with an application submission, including component manufacturing (e.g., active pharmaceutical ingredients), finished product manufacturing, and control testing laboratories. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an application, the FDA will typically inspect one or more clinical sites to assure compliance with GCP.
In addition, as a condition of approval, the FDA may require an applicant to develop a REMS. REMS use risk minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the FDA will consider the size of the population likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness of known or potential adverse events, and whether the product is a New Molecular Entity.
The FDA is required to refer an application for a novel product candidate to an advisory committee or explain why such referral was not made. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

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Under the Pediatric Research Equity Act, or PREA, an application or supplement thereto must contain data that are adequate to assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. With enactment of the Food and Drug Administration Safety and Innovation Act, or FDASIA, in 2012, sponsors must also submit pediatric study plans prior to the submission of the assessment data required under PREA. These plans are subject to FDA review before beginning the pediatric study. Product candidates that have received orphan designation are generally exempt from the requirements of PREA. In addition, a sponsor may apply for a waiver of the PREA requirements, which the FDA has indicated it will automatically grant for certain diseases that do not affect pediatric populations, including AMD.
The FDA’s Decision on an Application
On the basis of the FDA’s evaluation of the application and accompanying information, including the results of the inspections of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the application, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
If the FDA approves a product, it may limit the approved indications for use of the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess the product’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, including REMS, which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post–market studies or surveillance programs.
Fast Track, Breakthrough Therapy, Priority Review and Regenerative Advanced Therapy Designations and Accelerated Approval; Rare Pediatric Disease Priority Review Voucher Program
The FDA is authorized to designate certain products for expedited review if they are intended to address an unmet medical need in the treatment of a serious or life–threatening disease or condition. These programs are fast track designation, breakthrough therapy designation, priority review designation and regenerative advanced therapy designation. The FDA may also approve certain products based on an accelerated basis.
Specifically, the FDA may designate a product for fast track review if it is intended, whether alone or in combination with one or more other products, for the treatment of a serious or life–threatening disease or condition, and if the product demonstrates the potential to address unmet medical needs for such a disease or condition. For fast track products, sponsors may have greater interactions with the FDA and the FDA may initiate review of sections of a fast track product’s application before the application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a fast track product may be effective. The sponsor must also provide, and the FDA must approve, a schedule for the submission of the remaining information. However, the FDA’s time period goal for reviewing a fast track application does not begin until the last section of the application is submitted. In addition, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.
FDASIA established a new regulatory scheme allowing for expedited review of products designated as “breakthrough therapies.” A product may be designated as a breakthrough therapy if it is intended, either alone or in combination with one or more other products, to treat a serious or life–threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The FDA may take certain actions with respect to breakthrough therapies, including holding meetings with the sponsor throughout the development process; providing timely advice to the product sponsor regarding development and approval; involving more senior staff in the review process; assigning a cross–disciplinary project lead for the review team; and taking other steps to design the clinical trials in an efficient manner.
The FDA may designate a product for priority review if it is a product that treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness. The FDA determines, on a case by case basis, whether the proposed product represents a significant improvement when compared with other available therapies. Significant improvement

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may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment–limiting product reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, and evidence of safety and effectiveness in a new subpopulation. A priority designation is intended to direct overall attention and resources to the evaluation of such applications, and to shorten the FDA’s goal for taking action on a marketing application from ten months to six months.
With passage of the Cures Act, Congress authorized the FDA to accelerate review and approval of products designated as regenerative advanced therapies. A product is eligible for this designation if it is a regenerative medicine therapy that is intended to treat, modify, reverse or cure a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product candidate has the potential to address unmet medical needs for such disease or condition. The benefits of a regenerative advanced therapy designation include early interactions with the FDA to expedite development and review, benefits available to breakthrough therapies, and potential eligibility for priority review and accelerated approval based on surrogate or intermediate endpoints.
The FDA may grant accelerated approval to a product for a serious or life–threatening condition that provides meaningful therapeutic advantage to patients over existing treatments based upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA may also grant accelerated approval for such a condition when the product has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality and that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Products granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditional approval.

Finally, the FDA may award priority review vouchers to sponsors of rare pediatric disease product applications that meet certain criteria. A rare pediatric disease is a rare disease where the disease is serious or life-threatening with the serious or life-threatening manifestations primarily affecting individuals from age zero to 18. A sponsor who receives approval for a drug or biologic for a rare pediatric disease may qualify for a priority review voucher, which the sponsor may redeem to receive priority review of a subsequent marketing application for a different product. In lieu of using the voucher for one of its own product candidates, a sponsor may sell that voucher for use by a third party. Current prices for these vouchers range in the hundreds of millions of dollars. The current rare pediatric disease priority review voucher program will expire in October 2020, unless Congress renews the program, although a drug designated as a rare pediatric disease treatment can still receive a priority review voucher if the marketing approval application for the drug is submitted and the drug is approved by October 2022.

Post-Approval Requirements
Products manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other label changes, or changing the manufacturing process for the approved product, are subject to additional testing and/or FDA review and approval.
In addition, manufacturers and other entities involved in the manufacture and distribution of approved products are required to register their establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third–party manufacturers that the sponsor may decide to use. Accordingly, sponsors and manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. Further, the FDA will conduct laboratory research related to the safety, purity, potency and effectiveness of pharmaceutical products.
Once an approval is granted, the FDA may restrict, suspend or withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:
fines, warning letters or holds on post-approval clinical trials;

product seizure or detention, or refusal to permit the import or export of products; or

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injunctions or the imposition of civil or criminal penalties.

The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Products may be promoted only for the approved indications and in accordance with the provisions of the approved label. Although health care providers may prescribe products for off-label uses in their professional judgment, drug manufacturers are prohibited from soliciting, encouraging or promoting unapproved uses of a product.
Generic Drugs and Exclusivity
Under the Hatch-Waxman Amendments to the FDCA, the FDA is authorized to approve generic drugs that are shown to contain the same active ingredients as, and is bioequivalent to, drugs previously approved by the FDA pursuant to NDAs, which are also known as reference listed drugs, or RLDs. To obtain approval of a generic drug, an applicant must submit an abbreviated new drug application, or ANDA, to the FDA. An ANDA applicant does not generally rely on its own preclinical or clinical data to demonstrate safety and effectiveness but instead can rely on preclinical and clinical testing previously conducted by the sponsor of the RLD. The ANDA applicant must show that the generic version is identical to the RLD with respect to a number of factors, including the active ingredient, and that the generic version is "bioequivalent" to the RLD. Physicians, pharmacists and third-party payors generally consider an approved generic drug to be fully substitutable for the RLD.
Sponsors of RLDs are required to list in the FDA's Orange Bank each patent with claims covering the RLD or approved methods of using the RLD. An ANDA applicant is required to certify to the FDA concerning any such patents, which may be a certification that the listed patent is invalid, unenforceable or will not be infringed by the new product, which is known as a Paragraph IV certification. An ANDA applicant that makes a Paragraph IV certification must notify the sponsor of the RLD, who may then initiate a patent infringement lawsuit in response to the notice of Paragraph IV certification. The filing of a lawsuit within 45 days of receipt of a Paragraph IV certification notice prevents the FDA from approving the ANDA until the earliest of 30 months after receipt of the Paragraph IV certification, expiration of the patent or a decision in the infringement case that is favorable to the ANDA applicant.
Market and data exclusivity provisions under the FDCA can delay the submission or the approval of certain drug applications for competing products, including generic drugs. The FDCA provides a five-year period of non-patent data exclusivity within the United States to the first applicant to gain approval of an NDA for a New Chemical Entity. A drug is a New Chemical Entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule responsible for the pharmacological activity of the drug substance. During the exclusivity period, the FDA may not accept for review an ANDA or an NDA under Section 505(b)(2) of the FDCA, or an 505(b)(2) NDA, submitted by another company that references the previously approved drug. However, an ANDA or 505(b)(2) NDA may be submitted after four years if it contains a Paragraph IV certification.
The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA, or supplement to an existing NDA or 505(b)(2) NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant, are deemed by the FDA to be essential to the approval of the application or supplement. Three-year exclusivity may be awarded for changes to a previously approved drug product, such as new indications, dosages, strengths or dosage forms of an existing drug. This three-year exclusivity covers only the conditions of use associated with the new clinical investigations and, as a general matter, does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for generic versions of the original, unmodified drug product. The five-year and three-year exclusivities will not delay the submission or approval of a full NDA; however, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.
Biosimilars and Exclusivity
The Patient Protection and Affordable Care Act, or ACA, included a subtitle called the Biologics Price Competition and Innovation Act of 2009, or BPCIA. The BPCIA established a regulatory scheme authorizing the FDA to approve biosimilars and interchangeable biosimilars. A biosimilar is a biological product that is highly similar to an existing FDA-licensed "reference product." As of January 1, 2020, the FDA had approved 26 biosimilar products for use in the United States. No interchangeable biosimilars, as described below, have been approved as of January 1, 2020. The FDA has issued several guidance documents outlining an approach to the review and approval of biosimilars.
Under the BPCIA, a manufacturer may submit an application for licensure of a biologic product that is biosimilar to a reference product. In order for the FDA to approve a biosimilar product, it must find that there are no clinically meaningful differences between the reference product and proposed biosimilar product in terms of safety, purity and potency. For the FDA

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to approve a biosimilar product as "interchangeable" with a reference product, the agency must find that the biosimilar product can be expected to produce the same clinical results as the reference product, and for products administered multiple times, that the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic.
Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date of approval of the reference product. The FDA may not approve a biosimilar product until 12 years from the date on which the reference product was approved. Even if a product is considered to be a reference product eligible for exclusivity, another company could market a competing version of that product if the FDA approves a full BLA for such product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of their product. The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. Since the passage of the BPCIA, many states have passed laws or amendments to laws, including laws governing pharmacy practices, which are state-regulated, to regulate the use of biosimilars.
Patent Term Extension
A patent claiming a new drug product, its method of use or its method of manufacture may be eligible for a limited patent term extension, also known as patent term restoration, under the Hatch-Waxman Amendments, which permits a patent restoration of up to five years for patent term lost during product development and FDA regulatory review. Patent term extension is generally available only for drug products whose active ingredient has not previously been approved by the FDA. The restoration period granted is typically one-half the time between the effective date of an IND and the submission date of a marketing approval application, plus the time between the submission date of a marketing approval application and the ultimate approval date. Patent term extension cannot be used to extend the remaining term of a patent past a total of 14 years from the product’s approval date. Only one patent applicable to an approved drug product is eligible for the extension, and the application for the extension must be submitted prior to the expiration of the patent in question. A patent that covers multiple drugs for which approval is sought can only be extended in connection with one of the approvals. The United States Patent and Trademark Office (USPTO) reviews and approves the application for any patent term extension in consultation with the FDA.
Orphan Drug Designation and Exclusivity
Under the Orphan Drug Act, the FDA may designate a product as an “orphan drug” if it is intended to treat a rare disease or condition, generally meaning that it affects fewer than 200,000 individuals in the United States, or more in cases in which there is no reasonable expectation that the cost of developing and making a product available in the United States for treatment of the disease or condition will be recovered from sales of the product. A company must request orphan drug designation before submitting an application for the product and the rare disease or condition. If the request is granted, the FDA will disclose the identity of the therapeutic agent and its potential use. Orphan drug designation does not shorten the PDUFA goal dates for the regulatory review and approval process, although it does convey certain advantages such as tax benefits and exemption from the PDUFA application fee.
If a product with orphan designation receives the first FDA approval for the disease or condition for which it has such designation or for a select indication or use within the rare disease or condition for which it was designated, the product generally will receive orphan drug exclusivity. Orphan drug exclusivity means that the FDA may not approve another sponsor’s marketing application for the same product for the same indication for seven years, except in certain limited circumstances. Orphan exclusivity does not block the approval of a different product for the same rare disease or condition, nor does it block the approval of the same product for different indications. In particular, the concept of what constitutes the "same product" for purposes of orphan drug exclusivity remains in flux in the context of gene therapies, and the FDA has issued recent draft guidance suggesting that it would not consider two gene therapy products to be different products solely based on minor differences in the transgenes or vectors. If a product designated as an orphan drug ultimately receives marketing approval for an indication broader than what was designated in its orphan drug application, it may not be entitled to exclusivity.
Orphan drug exclusivity will not bar approval of another product under certain circumstances, including if a subsequent product for the same indication is shown to be clinically superior to the approved product on the basis of greater efficacy or safety or provides a major contribution to patient care, or if the company with orphan drug exclusivity is not able to meet market demand.
Pediatric Exclusivity
Pediatric exclusivity is another type of non-patent exclusivity in the United States and, if granted, provides for an additional six months of marketing protection to the term of any existing regulatory exclusivity or patent protection, including

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the non-patent and orphan drug exclusivity. This six-month exclusivity may be granted if an application sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data do not need to show that the product is effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection covering the product are extended by six months. This is not a patent term extension, but it effectively extends the regulatory period during which the FDA cannot approve an ANDA or 505(b)(2) NDA that references the product. With regard to patents, the six-month pediatric exclusivity period will not attach to any patents for which an ANDA or 505(b)(2) applicant submitted a paragraph IV certification, unless the NDA sponsor or patent owner first obtains a court determination that the patent is valid and infringed by the proposed ANDA or 505(b)(2) product.
Review and Approval of Products in Europe and other Foreign Jurisdictions
In addition to regulations in the United States, a manufacturer is subject to a variety of regulations in foreign jurisdictions to the extent it chooses to conduct clinical trials or sell any products in those foreign countries. Even if a manufacturer obtains FDA approval of a product, it must still obtain the requisite approvals from regulatory authorities in foreign countries before beginning clinical trials or marketing the product in those countries. To obtain regulatory approval of an investigational product in the European Union, a manufacturer must submit a marketing authorization application, or MAA, to the EMA. For other countries outside of the European Union, such as countries in Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, clinical trials are to be conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.
Clinical Trial Approval in the European Union
Under the currently applicable Clinical Trials Directive 2001/20/EC and the Directive 2005/28/EC on Good Clinical Practice, an applicant must obtain prior approval from the competent national authority of the European Union Member State, or the EU Member State, in which the clinical trial is to be conducted. If the clinical trial is conducted in different EU Member States, the competent authorities in each of these EU Member States must provide their approval for the conduct of the clinical trial. Furthermore, the applicant may only start a clinical trial at a specific study site after the applicable ethics committee has issued a favorable opinion.
In April 2014, the European Union adopted a new Clinical Trials Regulation (EU) No 536/2014, which is set to replace the current Clinical Trials Directive 2001/20/EC. The new regulation aims at simplifying and streamlining the approval of clinical trials in the European Union. Under the new coordinated procedure for the approval of clinical trials, the sponsor of a clinical trial to be conducted in more than one EU Member State will only be required to submit a single application for approval of a clinical trial to a reporting EU Member State. The Clinical Trials Regulation also aims to streamline and simplify the rules on safety reporting for clinical trials. As of January 1, 2020, the website of the European Commission reported that the implementation of the Clinical Trials Regulation was dependent on the development of a fully functional clinical trials portal and database, which would be confirmed by an independent audit, and that the new regulation would come into effect six months after the European Commission publishes a notice of this confirmation. The website indicated that the audit was expected to commence in December 2020.
Marketing Authorization
In the European Union, marketing authorizations for medicinal products may be obtained through different procedures founded on the same basic regulatory process. A marketing authorization may be granted only to an applicant established in the European Union. As in the United States, marketing authorization holders and manufacturers of approved medicinal products are subject to comprehensive regulatory oversight by the EMA and the competent authorities of the individual EU Member States both before and after grant of marketing authorizations.
Centralized Procedure. The centralized procedure provides for the grant of a single marketing authorization by the European Commission that is valid across the European Economic Area, i.e. the European Union as well as Iceland, Liechtenstein and Norway. The centralized procedure is compulsory for medicinal products produced by certain biotechnological processes, products designated as orphan medicinal products, and products with a new active substance indicated for the treatment of certain diseases. It is optional for those products that are highly innovative or for which a centralized process is not in the interest of patients. Manufacturers must demonstrate the quality, safety, and efficacy of their products to the EMA, which provides an opinion regarding the MAA. The European Commission grants or refuses marketing authorization in light of the opinion delivered by the EMA.

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Specialized Procedures for Gene Therapies. The grant of marketing authorization in the European Union for gene therapy products is governed by Regulation 1394/2007/EC on advanced therapy medicinal products, read in combination with Directive 2001/83/EC of the European Parliament and of the Council, commonly known as the Community code on medicinal products for human use. Regulation 1394/2007/EC includes specific rules concerning the authorization, supervision, and pharmacovigilance of gene therapy medicinal products. All advanced therapy medicinal products are approved centrally through the EMA. The EMA's Committee for Advanced Therapies reviews and provides an opinion regarding each advanced therapy MAA for potential final approval by the European Commission.
Decentralized Procedure. The decentralized procedure provides for approval by one or more other concerned EU Member States of an assessment of an MAA conducted by one EU Member State, known as the reference EU Member State. In accordance with this procedure, an applicant submits an MAA to the reference EU Member State and the concerned EU Member States. This application is identical to the application that would be submitted to the EMA for authorization through the centralized procedure. Following receipt of a valid application, the reference EU Member State prepares a draft assessment and drafts of the related materials. The resulting assessment report is submitted to the concerned EU Member States which must decide whether to approve the assessment report and related materials.
If a concerned EU Member State cannot approve the assessment report and related materials due to concerns relating to a potential serious risk to public health, disputed elements may be referred to the European Commission, whose decision is binding on all EU Member States. Authorization in accordance with the decentralized procedure will result in authorization of the medicinal product only in the reference EU Member State and in the other concerned EU Member States.
Mutual Recognition Procedure. In accordance with the mutual recognition procedure, the sponsor applies for national marketing authorization in one EU Member State. Upon receipt of this authorization the sponsor can then seek the recognition of this authorization by other EU Member States.
Periods of Authorization and Renewals in the European Union
A marketing authorization is valid for five years, in principle, and it may be renewed after five years on the basis of a reevaluation of the risk-benefit balance by the EMA or by the relevant EU Member State. To seek renewal, at least six months prior to expiration of the marketing authorization, the holder must provide the EMA or the EU Member State with a consolidated version of the file detailing the continued quality, safety and efficacy of the product, including all variations introduced since the marketing authorization was granted. Once renewed, the marketing authorization is valid for an unlimited period, unless the European Commission or the relevant competent authority of the EU Member State decides, on justified grounds relating to pharmacovigilance, to proceed with one additional five-year renewal period. Any marketing authorization that is not followed by the marketing of the medicinal product on the European Union market, in the case of the centralized procedure, or in the market of the EU Member State which delivered the marketing authorization, in the case of the decentralized procedure, within three years after authorization ceases to be valid.
Patent Term Extensions in the European Union and Other Jurisdictions
The European Union also provides for patent term extension through Supplementary Protection Certificates, or SPCs. The rules and requirements for obtaining a SPC are similar to those in the United States. An SPC may extend the term of a patent for up to five years after its originally scheduled expiration date and can provide up to a maximum of fifteen years of marketing exclusivity for a drug. These periods can be extended for six additional months if pediatric exclusivity is obtained, which is described in detail below. Although SPCs are available throughout the European Union, sponsors must apply on a country-by-country basis. Similar patent term extension rights exist in certain other foreign jurisdictions outside the European Union.
Regulatory Data Exclusivity in the European Union
In the European Union, innovative medicinal products approved on the basis of a complete independent data package qualify for eight years of data exclusivity upon marketing authorization and an additional two years of market exclusivity. Data exclusivity prevents applicants for authorization of generics of these innovative products from referencing the innovator’s data in a generic (abridged) application for a period of eight years. During an additional two-year period of market exclusivity, a generic MAA can be submitted and authorized, and the innovator’s data may be referenced, but no generic medicinal product can be placed on the European Union market until the expiration of the market exclusivity. The overall ten-year period will be extended to a maximum of 11 years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications that are shown, during the scientific evaluation prior to authorization, to bring a significant clinical benefit in comparison with existing therapies. Even if a compound is considered to be an innovative medicinal product so that the innovator gains the additional prescribed period of marketing exclusivity, another company nevertheless could also market another version of the product if such company obtained marketing

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authorization based on an MAA with a complete independent data package of pharmaceutical tests, preclinical tests and clinical trials.
Orphan Drug Designation and Exclusivity in the European Union
Regulation (EC) No 141/2000 and Regulation (EC) No. 847/2000 provide that a product can be designated as an orphan medicinal product by the European Commission if its sponsor can establish that the product is intended for the diagnosis, prevention or treatment of: (1) a life-threatening or chronically debilitating condition affecting not more than five in ten thousand persons in the European Union when the application is made, or (2) a life-threatening, seriously debilitating or serious and chronic condition in the European Union and that without incentives the medicinal product is unlikely to be developed. For either of these conditions, the applicant must demonstrate that there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question that has been authorized in the European Union or, if such method exists, the medicinal product will be of significant benefit to those affected by that condition.
Once authorized, orphan medicinal products are entitled to ten years of market exclusivity in all EU Member States and, in addition, a range of other benefits during the development and regulatory review process, including scientific assistance for study protocols, authorization through the centralized marketing authorization procedure and a reduction or elimination of registration and marketing authorization fees. However, marketing authorization may be granted to a similar medicinal product with the same orphan indication during the ten year period with the consent of the marketing authorization holder for the original orphan medicinal product or if the manufacturer of the original orphan medicinal product is unable to supply sufficient quantities. Marketing authorization may also be granted to a similar medicinal product with the same orphan indication if the new product is safer, more effective or otherwise clinically superior to the original orphan medicinal product. The period of market exclusivity may, in addition, be reduced to six years if it can be demonstrated on the basis of available evidence that the original orphan medicinal product is sufficiently profitable to not justify maintenance of market exclusivity.
Pediatric Studies and Exclusivity
Before obtaining a marketing authorization in the European Union, applicants must demonstrate compliance with all measures included in an EMA-approved Pediatric Investigation Plan, or PIP, approved by the Pediatric Committee of the EMA, or PDCO, covering all subsets of the pediatric population, unless the EMA has granted a product-specific waiver, a class waiver, or a deferral for one or more of the measures included in the PIP. This requirement also applies when a company wants to add a new indication, pharmaceutical form or route of administration for a medicine that is already authorized. The PDCO may grant deferrals for some medicines, allowing a company to delay development of the medicine for children until there is enough information to demonstrate its effectiveness and safety in adults. The PDCO may also grant waivers when development of a medicine for children is not needed or is not appropriate, such as for diseases that only affect the elderly population. Before an MAA can be filed, or an existing marketing authorization can be amended, the EMA must determine that the applicant actually complied with the agreed studies and measures listed in each relevant PIP. If an applicant obtains a marketing authorization in all EU Member States, or a marketing authorization granted via the centralized procedure by the European Commission, and the study results for the pediatric population are included in the product information, even when negative, the medicine is then eligible for an additional six-month period of qualifying patent protection through extension of the term of the SPC.
Brexit and the Regulatory Framework in the United Kingdom
In June 2016, the electorate in the United Kingdom voted in favor of leaving the European Union, commonly referred to as “Brexit”. Following protracted negotiations, the United Kingdom left the European Union on January 31, 2020. There is a transitional period currently scheduled to remain in effect until December 31, 2020, during which the United Kingdom government and the European Union are attempting to agree to long-term trade and other agreements. Since the existing regulatory framework for pharmaceutical products in the United Kingdom is derived from European Union directives and regulations, which the United Kingdom could abandon or modify in the future, Brexit could materially impact the future regulatory regime for pharmaceutical products in the United Kingdom.
Pharmaceutical Insurance Coverage, Pricing and Reimbursement
In the United States and markets in many other countries, patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Significant uncertainty exists as to the coverage and reimbursement status of products approved by the FDA and other government authorities. Thus, even if a product candidate is approved, sales of the product will depend, in part, on the extent to which third-party payors, including government health programs in the United States such as Medicare and Medicaid,

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commercial health insurers and managed care organizations, provide coverage, and establish adequate reimbursement levels, for the product. Third-party payors are increasingly challenging the prices charged, examining the medical necessity, and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs. Third-party payors may limit coverage for a particular indication to specific products on an approved list, also known as a formulary, which might not include all of the approved products for such indication.
In order to secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to the studies required to obtain FDA or other comparable marketing approvals. Nonetheless, product candidates may not be considered medically necessary or cost effective by the payors. A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage and reimbursement for the product, and the level of coverage and reimbursement can differ significantly from payor to payor. Moreover, coverage policies and third-party reimbursement rates may change at any time.
The containment of healthcare costs also has become a priority of federal, state and foreign governments and the prices of pharmaceutical products have been a focus in this effort. Governments have shown significant interest in implementing cost-containment programs, including rebate programs, price controls, restrictions on reimbursement and requirements for substitution of generic products. For example, the Trump Administration has expressed an interest in authorizing and/or directing the Center for Medicare & Medicaid Services, or CMS, within HHS or other agencies of the U.S. government to negotiate prices for products covered by Medicare directly with pharmaceutical companies. If this were to occur, especially for products for AMD, for which a large portion of the patient population is elderly and is therefore covered by Medicare, there could be significant downward pressure on prices charged, not only for patients covered by Medicare, but also for patients covered by private insurers who may follow the government’s lead on price. In addition, in May 2018, the Trump Administration announced a plan that would include several initiatives designed to lower drug prices, and since then, similar proposals from HHS and CMS have followed. For example, on December 23, 2019, the Trump Administration published a proposed rulemaking that, if finalized, would allow states and certain other non-federal government entities to submit importation program proposals to the FDA for review and approval. Applicants would be required to demonstrate that their importation plans pose no additional risk to public health and safety and will result in significant cost savings for consumers. At the same time, the FDA issued draft guidance that would allow manufacturers to import their own FDA-approved drugs that are authorized for sale in other countries.

At the state level, individual states are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on access to certain products, and marketing cost disclosure and transparency measures, and, in some cases, measures designed to encourage importation from other countries and bulk purchasing. In addition, regional health care authorities and individual hospitals are increasingly using bidding procedures to determine which pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs. These measures could reduce the ultimate demand for our products, if and once approved, or put pressure on our product pricing.

Outside the United States, ensuring adequate coverage and payment for a product also involves challenges. Pricing of prescription pharmaceuticals is subject to governmental control in many countries. Pricing negotiations with governmental authorities can extend well beyond the receipt of regulatory marketing approval for a product and may require a clinical trial that compares the cost effectiveness of a product to other available therapies. The conduct of such a clinical trial could be expensive and result in delays in commercialization.

In the European Union, pricing and reimbursement schemes vary widely from country to country. Some countries provide that products may be marketed only after a reimbursement price has been agreed. Some countries may require the completion of additional cost effectiveness clinical studies. EU Member States may approve a specific price for a product or any of them may instead adopt a system of direct or indirect controls on the profitability of the company placing the product on the market. Other member states allow companies to fix their own prices for products, but monitor and control prescription volumes and issue guidance to physicians to limit prescriptions. Recently, many EU Member States have increased the amount of discounts required on pharmaceuticals and these efforts could continue as countries attempt to manage healthcare expenditures, especially in light of the severe fiscal and debt crises experienced by many countries in the European Union over the past decade. Reference pricing used by various EU Member States, and parallel trade, i.e., arbitrage between low-priced and high-priced member states, can further reduce prices.
In addition to initiatives specifically directed at lowering or containing prescription drug prices, legislative action in the United States at the national level has resulted in reduced funding levels for Medicare. For example, the Budget Control

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Act of 2011 led to aggregate reductions in Medicare payments to providers of up to 2% per fiscal year from 2013 through 2024, and the American Taxpayer Relief Act of 2012 reduced Medicare payments to several types of providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Any reduction in healthcare, including Medicare, funding may affect the prices we may obtain for any of our product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.

Moreover, the number of individuals covered by health insurance has a direct impact on the potential market for our product candidates, if approved. The ACA, passed in 2010, included the "individual mandate," which required most Americans to carry a minimal level of health insurance. Individuals who did not obtain required coverage were subject to a penalty. The individual mandate was repealed as part of the Tax Cuts and Jobs Act of 2017, or TCJA, with the repeal becoming effective on January 1, 2019. According to the Congressional Budget Office, the repeal of the individual mandate will cause 13 million fewer Americans to be insured in 2027 and premiums in insurance markets may rise. In addition, the Trump Administration has also taken executive actions that may impact the number of individuals in the United States that are covered by health insurance and the level of that coverage. For example, President Trump issued an executive order terminating the cost-sharing subsidies that reimburse insurers under the ACA. In addition, CMS has proposed regulations that would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces. Further, in June 2018, the U.S. Court of Appeals for the Federal Circuit ruled that the federal government was not required to pay more than $12 billion in ACA risk corridor payments to third-party payors who argued the payments were owed to them, and this proceeding is currently on appeal at the U.S. Supreme Court. If upheld by the Supreme Court, the effects of this gap in reimbursement on third-party payors, the viability of the ACA marketplace and providers will be uncertain.
In addition, in December 2018, the U.S. District Court of the Northern District of Texas ruled that the individual mandate portion of the ACA is an essential and non-severable feature of the ACA, and therefore because the mandate was repealed as part of the TCJA, the remaining provisions of the ACA are invalid as well. The Trump Administration and CMS have both stated that the ruling will have no immediate effect, and later in December 2018, the same court issued an order staying the judgment pending appeal. In December 2019, the U.S. Circuit Court of Appeals for the Fifth Circuit affirmed the lower court's ruling that the individual mandate portion of the ACA is unconstitutional and remanded the case to the district court for reconsideration of the severability question and additional analysis of the provisions of the ACA. In January 2020, the U.S. Supreme Court declined to review this decision on an expedited basis.
Healthcare Law and Regulation
Healthcare providers and third-party payors play a primary role in the recommendation and prescription of products that are granted marketing approval. Arrangements with providers, consultants, third-party payors and customers are subject to broadly applicable fraud and abuse, anti-kickback, false claims, reporting of payments to physicians and patient privacy laws and regulations and other healthcare laws and regulations that may constrain business and/or financial arrangements. Restrictions under applicable federal and state healthcare laws and regulations include the following:
the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, paying, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid;

federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary penalties laws, which prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false, fictitious or fraudulent or knowingly making, using or causing to made or used a false record or statement to avoid, decrease or conceal an obligation to pay money to the federal government;

the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which, among other things, prohibits knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their respective implementing regulations, which impose obligations, including mandatory contractual terms, relating to safeguarding the privacy, security and transmission of individually identifiable health information by certain covered entities and their business associates;

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the federal false statements statute, which prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services;

the federal Foreign Corrupt Practices Act, which, among other things, prohibits providing or offering to provide money or anything of value to a foreign government body, government official, or political candidate for the improper purpose of obtaining or keeping business;

federal transparency requirements such as the federal Physician Payments Sunshine Act, created under the ACA, which requires certain manufacturers of drugs, devices, biologics and medical supplies to report annually to CMS information related to payments and other transfers of value made by that entity to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and

analogous state and foreign laws and regulations, such as state anti–kickback and false claims laws, which may apply to healthcare items or services that are reimbursed by private insurers.

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 manufacturers to report information related to payments to physicians and other health care providers or marketing expenditures. State and foreign laws, such as the European Union's General Data Protection Regulation, also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

Employees
As of January 31, 2020, we had 38 full-time employees, including a total of 9 employees with M.D. or Ph.D. degrees. Of our workforce, 20 employees are engaged in research and development. None of our employees are represented by labor unions or covered by collective bargaining agreements.
Our Corporate Information
We were incorporated under the laws of the State of Delaware in 2007. We changed our corporate name from Ophthotech Corporation to IVERIC bio, Inc. in April 2019. Our principal executive offices are located at One Penn Plaza, 35th Floor, New York, NY 10119, and our telephone number is (212) 845–8200. Our Internet website is http://www.ivericbio.com.
Available Information
We make available free of charge through our website our Annual Report on Form 10–K, Quarterly Reports on Form 10–Q, Current Reports on Form 8–K and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We make these reports available through our website as soon as reasonably practicable after we electronically file such reports with, or furnish such reports to, the SEC. You can find, copy and inspect information we file at the SEC’s public reference room. You can review our electronically filed reports and other information that we file with the SEC on the SEC’s web site at http://www.sec.gov. We also make available, free of charge on our website, the reports filed with the SEC by our executive officers, directors and 10% stockholders pursuant to Section 16 under the Exchange Act as soon as reasonably practicable after copies of those filings are provided to us by those persons. The information contained on, or that can be accessed through, our website is not a part of or incorporated by reference in this Annual Report on Form 10–K.

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Item 1A.    Risk Factors.
The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations. Please see page 1 of this Annual Report on Form 10-K for a discussion of some of the forward-looking statements that are qualified by these risk factors. If any of the following risks occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected.
Risks Related to Our Business Plan, Financial Position and Need for Additional Capital
We are a development-stage company without any commercial products. The value of our company, therefore, is highly dependent on the success of our research and development efforts and the amount of our available cash. Our research and development programs, which are focused on novel therapies and technologies, carry significant scientific and other risks. If any of these programs are not successful, the value of your investment may decline.
We are a development-stage company without any approved products. Our growth prospects and the future value of our company are highly dependent on the progress of our research and development programs, including our ongoing and future clinical trials for Zimura, our preclinical development programs for IC-100 and IC-200, our collaborative gene therapy sponsored research programs, and our preclinical development program for our HtrA1 inhibitors. Drug development is a highly uncertain undertaking and carries significant scientific and other risks.
We may encounter unforeseen difficulties, complications, delays, expenses and other known and unknown factors. We may never be successful in developing or commercializing any of our product candidates or other programs. There is a high rate of failure in pharmaceutical research and development. Even if we have promising preclinical or clinical candidates, their development could fail at any time. Our failure could be due to unexpected scientific, safety or efficacy issues with our product candidates and other programs, invalid hypotheses regarding the molecular targets and mechanisms of action we choose to pursue or unexpected delays in our research and development programs resulting from applying the wrong criteria or experimental systems and procedures to our programs or lack of experience, with the possible result that none of our product candidates or other programs result in the development of marketable products. We have not yet demonstrated our ability to successfully complete the development of a pharmaceutical product, including completion of large-scale, pivotal clinical trials with safety and efficacy data sufficient to obtain marketing approval or activities necessary to apply for and obtain marketing approval, including the qualification of a commercial manufacturer through a pre-approval inspection with regulatory authorities. If successful in developing and obtaining marketing approval of one of our product candidates, we would need to transition from a company with a product development focus to a company capable of commercializing pharmaceutical products. We may not be successful in such a transition, as our company has never conducted the sales, marketing and distribution activities necessary for successful product commercialization.
Because the value of our company is largely based on the prospects for our research and development programs and their potential to result in therapies capable of achieving marketing approval and generating future revenues, any failure, delay or setback for these programs will likely have a negative impact on the value of your investment. In addition, because a number of our product candidates are in an early, preclinical stage, even if we are successful in advancing the research and development of those product candidates, the value of our common stock may not rise in a meaningful way, which could affect our ability to raise additional finances. As we continue to invest in these research and development programs to generate data to support further development, the amount of our available cash will continue to decline until we raise additional finances.
We have a history of significant operating losses. We expect to continue to incur losses until such time, if ever, that we successfully commercialize our product candidates and may never achieve or maintain profitability.
Since inception, we have experienced significant cash outflows in funding our operations. To date, we have not generated any revenues from commercial product sales and have financed our operations primarily through private placements of our preferred stock, venture debt borrowings, funds received under our prior Fovista royalty purchase and sale agreement with Novo Holdings A/S, our initial public offering, which we closed in September 2013, funds we received under our prior Fovista licensing and commercialization agreement with Novartis Pharma AG, funds we received in connection with our acquisition of Inception 4 in October 2018, and our follow-on public offerings, which we closed in February 2014 and December 2019. As of December 31, 2019, we had an accumulated deficit of $480.5 million. Our net loss was $58.9 million for the twelve months ended December 31, 2019 and we expect to continue to incur significant operating losses for the foreseeable future. 
Zimura is in clinical development, our gene therapy product candidates IC-100 and IC-200 and our HtrA1 inhibitor program are each in preclinical development, and we are funding multiple ongoing collaborative gene therapy sponsored

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research programs. We expect our research and development expenses to increase as we pursue these programs as currently planned and as we initiate ISEE2008, our planned Phase 3 clinical trial for Zimura in GA. We could also incur additional research and development expenses as we evaluate and potentially in-license or acquire, and undertake development of, additional product candidates, including any promising product candidates that emerge from our collaborative gene therapy sponsored research programs. Furthermore, if we successfully develop and obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, distribution and manufacturing. We are party to agreements with Archemix Corp. with respect to Zimura, UFRF and Penn with respect to IC-100 and IC-200, UMMS with respect to any potential product candidates from our miniCEP290 program, and the former equityholders of Inception 4 with respect to our HtrA1 inhibitor program, in each case, that impose significant milestone payment obligations on us if we achieve specified clinical, regulatory and commercial milestones with respect to these product candidates or programs, as well as certain royalties on net sales with respect to IC-100, IC-200 and any product candidates we choose to develop from our miniCEP290 program. It is likely that any future in-licensing or acquisition agreements that we enter into with respect to additional product candidates or technologies would include similar obligations.    
We expect that we will continue to incur significant expenses as we:
continue the development of Zimura in GA and STGD1;
continue the development of IC-100 and IC-200 and pursue our collaborative gene therapy sponsored research programs;
continue the preclinical development of our HtrA1 inhibitor program;
in-license or acquire the rights to, and pursue the development of, other product candidates or technologies;
maintain, expand and protect our intellectual property portfolio;
hire additional clinical, manufacturing, quality control, quality assurance and scientific personnel;
seek marketing approval for any product candidates that successfully complete clinical trials;
expand our outsourced manufacturing activities or establish commercial operations or sales, marketing and distribution capabilities, if we receive, or expect to receive, marketing approval for any of our product candidates; and
expand our general and administrative functions to support our future growth.
Our ability to become and remain profitable depends on our ability to generate revenue in excess of our expenses. Our ability to generate revenues from product sales is dependent on our obtaining marketing approval for and commercializing our product candidates or any product candidates we may in-license or acquire. We may be unsuccessful in our efforts to develop and commercialize product candidates or in our efforts to in-license or acquire additional product candidates. Even if we succeed in developing and commercializing one or more of our product candidates, we may never achieve sufficient sales revenue to achieve or maintain profitability. See “—Risks Related to Product Development and Commercialization” for a further discussion of the risks we face in successfully developing and commercializing our product candidates and achieving profitability.
We expect we will require substantial, additional funding in order to complete the activities necessary to develop and commercialize one or more of our product candidates. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts. We may require additional funding beyond what we currently expect or sooner than we currently expect.
As of December 31, 2019, we had cash and cash equivalents of $125.7 million. We believe that our cash and cash equivalents will be sufficient to fund our operations and capital expenditure requirements as currently planned into the beginning of 2022. In addition, we estimate that our year-end 2020 cash and cash equivalents will range between $60 million and $70 million. These estimates are based on our current business plan, including the continuation of our current research and development programs including the ISEE2008 trial. These estimates do not reflect any additional expenditures, including associated development costs, in the event we in-license or acquire any new product candidates or commence any new sponsored research programs. We have based these estimates on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.
We expect we will require substantial, additional funding in order to complete the activities necessary to develop and commercialize one or more of our product candidates. Although the future development of our product candidates is highly uncertain, we expect the development of our product candidates will continue for at least the next several years. At this time,

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we cannot reasonably estimate the total remaining costs necessary to complete development, to complete process development and manufacturing scale-up and validation activities and to potentially seek marketing approval for any of our product candidates.
Our future capital requirements will depend on many factors, including:
the scope, progress, costs and results of our current and planned Zimura clinical programs;
the scope, progress, costs and results of our efforts to develop IC-100 and IC-200, including activities to establish manufacturing capabilities and preclinical testing to enable us to file INDs for these product candidates;
the scope, progress, costs and results from our collaborative gene therapy sponsored research programs, including costs related to the in-license and future development of any promising product candidates and technologies that emerge from these programs;
the scope, progress, costs and results of our efforts to develop our HtrA1 inhibitor program, including activities to establish manufacturing capabilities and formulation development and other preclinical development activities to enable us to file an IND for a product candidate from this program;
the costs, progress and timing of process development, manufacturing scale-up and validation activities, analytical development and stability studies associated with our product candidates;
the extent to which we in-license or acquire rights to, and undertake research or development of, additional product candidates or technologies;
our ability to establish collaborations on favorable terms, if at all, if we choose to do so, including any collaboration for the further development and potential commercialization of Zimura;
the costs, timing and outcome of regulatory filings and reviews of our product candidates;
the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending intellectual property-related claims;
the timing, scope and cost of commercialization activities for any of our product candidates if we receive, or expect to receive, marketing approval for a product candidate; and
subject to receipt of marketing approval, net revenue received from commercial sales of any of our product candidates, after milestone payments and royalty payments that we would be obligated to make.
We do not have any committed external source of funds. Our ability to raise adequate additional financing when needed, and on terms acceptable to us, will depend on many factors. These factors include investors' perceptions of the potential success of our ongoing business, including the development of our product candidates and other programs, and the potential future growth of our business. Additionally, these factors include general market conditions that also affect other companies. These factors may make raising capital difficult, and may result in us accepting terms that are unfavorable to us, especially if we are in need of financing at the particular time. Although we were able to raise approximately $42.6 million in net proceeds through our December 2019 public offering, we may not be able to successfully raise additional capital in the future. The size of our company and our status as a company listed on The Nasdaq Global Select Market, or Nasdaq, may also limit our ability to raise financing. For example, our ability to raise adequate financing through a public offering may be limited by market conditions and SEC rules based on our current market capitalization. Nasdaq listing rules also generally limit the number of shares we may issue in a private placement to a number less than 20% of the number of shares of our common stock outstanding immediately prior to the transaction, unless we issue such shares at a premium, which investors may be unwilling to accept, or unless we obtain shareholder approval, which can be expensive and time-consuming and can add risk to our ability to complete the financing transaction. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate the development of our product candidates, our collaborative gene therapy sponsored research programs, or our future commercialization efforts.
We may require additional funding beyond what we currently expect due to unforeseen or other reasons. Our costs may exceed our expectations if we experience any unforeseen issue in our ongoing clinical trials, such as issues with patient enrollment, the retention of enrolled patients or the availability of drug supply, or in our preclinical development programs, such as inability to develop formulations or if we experience issues with manufacturing, or if we modify or further expand the scope of our clinical trials, preclinical development programs or collaborative gene therapy sponsored research programs. Our costs may also exceed our expectations for other reasons, for example, if we are required by the FDA, the EMA or regulatory authorities in other jurisdictions to perform clinical or nonclinical trials or other studies in addition to those we currently expect

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to conduct, if we experience issues with process development, establishing or scaling-up of manufacturing activities or activities to enable and qualify second source suppliers, or if we decide to increase preclinical and clinical research and development activities or build internal research capabilities or pursue internal research efforts. For example, we plan to begin the ISEE2008 trial, which is a single Phase 3 clinical trial evaluating Zimura for GA, with the expectation that data collected from such trial, if it is positive, together with data from our OPH2003 trial, will be sufficient to seek marketing approval in the United States and the European Union and we may subsequently decide to, or be required by regulatory authorities to, enroll additional patients in the ISEE2008 trial beyond our current expectations or conduct additional clinical trials for Zimura in GA in order to seek or maintain regulatory approval or qualify for reimbursement approval. As a result of any of the above, we may need or may seek to obtain additional funding for our continuing operations sooner or in greater amounts than expected.
Our need for additional financing may continue even if we are able to successfully develop one or more of our product candidates. Our future commercial revenues, if any, will be derived from sales of such product candidates, which may not be available for at least several years following completion of successful product development, if at all. In addition, if approved, our product candidates may not achieve commercial success. Even if those products are successful and we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Under most, if not all, of the foregoing circumstances, we may need to obtain substantial additional financing to achieve our business objectives.
Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.
Until such time, if ever, when we can generate substantial product revenues, we may need or may seek to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our existing stockholders' ownership interests would be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect our existing stockholders' rights as common stockholders. The dilutive effect of future equity issuances may be substantial, depending on the price of our common stock at the time of such capital raise, with a lower stock price translating to greater dilution for existing stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
In addition, we have issued, and may in the future issue additional, equity securities as consideration for business development transactions, which may also dilute our existing stockholders' ownership interests. For example, under the Inception 4 Merger Agreement pursuant to which we acquired Inception 4 and our HtrA1 inhibitor program, we issued an aggregate of 5,174,727 shares of our common stock as up-front consideration to the former equityholders of Inception 4. The Inception 4 Merger Agreement also requires us to make payments to the former equityholders of Inception 4 upon the achievement of certain clinical and regulatory milestones, subject to the terms and conditions set forth in the Inception 4 Merger Agreement. Those milestone payments will be in the form of shares of our common stock, calculated based on the price of our common stock over a five-trading day period preceding the achievement of the relevant milestone, unless and until the issuance of such shares would, together with all other shares issued under the Inception 4 Merger Agreement, exceed an overall maximum limit of approximately 7.2 million shares, which is equal to 19.9% of the number of issued and outstanding shares of our common stock as of the close of business on the business day prior to the closing date of our acquisition of Inception 4, and will be payable in cash thereafter. In July 2019, we also issued 75,000 shares of our common stock to UMMS as partial upfront consideration for the in-license of our miniCEP290 program, and are obligated to issue up to 75,000 additional shares to UMMS upon the achievement of a development milestone.
In August 2018, we entered into an agreement with Cowen and Company, LLC, or Cowen, as agent, pursuant to which we may offer and sell shares of our common stock for aggregate gross sale proceeds of up to $50.0 million from time to time through Cowen under an “at-the-market” offering program, subject to the terms and conditions described in the agreement and SEC rules and regulations.  We have not yet issued and sold any shares of common stock under our “at-the-market” offering program.  If we make sales under our “at-the-market” offering program, the sales could dilute our stockholders, reduce the trading price of our common stock or impede our ability to raise future capital.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, products or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

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Our strategy of obtaining additional rights to products, product candidates or technologies for the treatment of retinal diseases may not be successful.
An element of our strategy has been to expand our pipeline through in-licensing or acquiring the rights to products, product candidates or technologies that would complement our strategic goals as well as other compelling ophthalmology opportunities. Since early 2018, we have completed multiple acquisition, in-license, exclusive option and sponsored research arrangements for product candidates and other technologies intended to treat retinal diseases. We plan to continue to evaluate additional opportunities to in-license or acquire products, product candidates and technologies on a selective and targeted basis. We may also continue to consider other alternatives, including mergers or other transactions involving our company as a whole or other collaboration transactions, including collaboration or out-license opportunities for further development and potential commercialization of Zimura. Our business development efforts may fail to result in our acquiring rights to additional products, product candidates or technologies, or may result in our consummating transactions with which you do not agree.
We may be unable to in-license or acquire the rights to any such products, product candidates or technologies from third parties for several reasons. The success of this strategy depends partly upon our ability to identify, select and acquire or in-license promising product candidates and technologies. There are currently a limited number of available product candidates or technologies for the treatment of diseases affecting retina and the competition for those assets is intense. The process of proposing, negotiating and implementing a license or acquisition of a product candidate is lengthy and complex. With respect to potential product candidates or technologies for which we have entered into option agreements or sponsored research agreements for which we have option rights, our agreements generally do not have fixed economic or other key terms for definitive agreements, and we may not obtain favorable terms if and when we choose to exercise our options to acquire or in-license any product candidates or technologies.
The in-licensing and acquisition of pharmaceutical products is an area characterized by intense competition, and a number of companies (both more established and early stage biotechnology companies) are also pursuing strategies to in-license or acquire product candidates or technologies that we may consider attractive. We believe that other companies may be particularly active in pursuing opportunities to in-license or acquire priming gene therapy opportunities. More established companies may have a competitive advantage over us due to their size, cash resources and greater research, preclinical or clinical development or commercialization capabilities, while earlier stage companies may be more aggressive or have a higher risk tolerance. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to in-license or acquire the rights to the relevant product candidate or technology on terms that would allow us to make an appropriate return on our investment. Moreover, we may devote resources to potential acquisitions or in-licensing opportunities that are never completed, or we may fail to realize the anticipated benefits of such efforts or we may incorrectly judge the value of an acquired or in-licensed product candidate or technology.
Further, any product candidate that we acquire or in-license would most likely require additional development efforts prior to commercial sale, including extensive clinical testing and approval by the FDA and applicable foreign regulatory authorities. All product candidates are prone to risks of failure typical of pharmaceutical product development, including the possibility that a product candidate would not be shown to be sufficiently safe and effective for approval by regulatory authorities.
If we are unable to successfully obtain rights to suitable product candidates or technologies, our business, financial condition and prospects for growth could suffer. In addition, acquisitions and in-licensing arrangements for product candidates and technologies are inherently risky, and ultimately, if we do not complete an announced acquisition or license transaction or integrate an acquired or licensed product candidate or technology successfully and in a timely manner, we may not realize the benefits of the acquisition or license to the extent anticipated and the perception of the effectiveness of our management team and our company may suffer in the marketplace. In addition, even if we are able to successfully identify, negotiate and execute one or more transactions to acquire or in-license new product candidates or technologies, our expenses and short-term costs may increase materially and adversely affect our liquidity.
In addition, acquisitions and in-licenses may entail numerous operational, financial and legal risks, including:
exposure to known and unknown liabilities, including possible intellectual property infringement claims, violations of laws, tax liabilities and commercial disputes;
incurrence of substantial debt, dilutive issuances of securities or depletion of cash to pay for acquisitions;
higher than expected acquisition and integration costs;
difficulty in combining the operations and personnel of any acquired businesses with our operations and personnel;

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inability to maintain uniform standards, controls, procedures and policies;
restructuring charges related to eliminating redundancies or disposing of assets as part of any such combination;
large write-offs and difficulties in assessing the relative percentages of in-process research and development expense that can be immediately written off as compared to the amount that must be amortized over the appropriate life of the asset;
increased amortization expenses or, in the event that we write-down the value of acquired assets, impairment losses;
impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership;
inability to retain personnel, key customers, distributors, vendors and other business collaborators integral to an in-licensed or acquired product candidate or technology;
potential failure of the due diligence process to identify significant problems, liabilities or other shortcomings or challenges of an acquired or licensed product candidate or technology, including problems, liabilities or other shortcomings or challenges with respect to intellectual property, product quality, revenue recognition or other accounting practices, partner disputes or issues and other legal and financial contingencies and known and unknown liabilities; and
entry into therapeutic modalities, indications or markets in which we have no or limited direct prior development or commercial experience and where competitors in such markets have stronger market positions.
We and certain of our current and former board members and executive officers have been named as defendants in lawsuits that could result in substantial costs and divert management’s attention.
We and certain of our current and former executive officers have been named as defendants in a purported consolidated putative class action lawsuit initiated in 2017 that generally alleges that we and certain of our officers violated Sections 10(b) and/or 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder by making allegedly false and/or misleading statements concerning the results of our Phase 2b trial and the prospects of our Phase 3 trials for Fovista in combination with anti-VEGF agents for the treatment of wet AMD. Certain current and former members of our board of directors and current and former officers have also been named as defendants in a shareholder derivative action initiated in August 2018, which generally alleges that the defendants breached their fiduciary duties to our company by failing to oversee our business during the period of the Phase 2b and Phase 3 clinical trials of Fovista. These complaints seek equitable and/or injunctive relief, unspecified damages, attorneys’ fees, and other costs. In September 2019, the court issued an order dismissing some, but not all, of the allegations in the class action lawsuit and denied our motion to dismiss the shareholder derivative action. The class action lawsuit is currently in the discovery phase. We and the defendants continue to deny any and all allegations of wrongdoing and intend to vigorously defend against these lawsuits. We are unable, however, to predict the outcome of these matters at this time. Moreover, any conclusion of these matters in a manner adverse to us and for which we incur substantial costs or damages not covered by our directors’ and officers’ liability insurance would have a material adverse effect on our financial condition and business. In addition, the litigation could adversely impact our reputation and divert management and our board of directors’ attention and resources from other priorities, including the execution of our business plan and strategies that are important to our ability to grow our business, any of which could have a material adverse effect on our business. Additional lawsuits may be filed.
Risks Related to Product Development and Commercialization
Companies in our industry face a wide range of challenging activities, each of which entails separate, and in many cases substantial, risk.
The long-term success of our company, and our ability to become profitable as a biopharmaceutical company, will require us to be successful in a range of challenging activities, including:
designing, conducting and successfully completing preclinical research and development activities, including preclinical efficacy and IND-enabling studies, for our product candidates or product candidates we are interested in in-licensing or acquiring, including those we may evaluate as part of our collaborative gene therapy sponsored research programs;
making arrangements with third-party manufacturers and providers of starting materials for our product candidates, and having those manufacturers successfully develop manufacturing processes for drug substance and

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drug product and provide adequate amounts of drug product for preclinical and clinical activities in accordance with our expectations and regulatory requirements;
designing, conducting and completing clinical trials for our product candidates;
obtaining favorable results from required clinical trials, including for each ophthalmic product candidate, favorable results from two adequate and well-controlled pivotal clinical trials in the relevant indication;
applying for and receiving marketing approvals from applicable regulatory authorities for the marketing and sale of our product candidates;
making arrangements with third-party manufacturers for scale-up and commercial manufacturing, receiving regulatory approval of our manufacturing processes and our third-party manufacturers’ facilities and ensuring adequate supply of drug substance and drug product and starting materials used for the manufacture of drug substance and drug product;
establishing sales, marketing and distribution capabilities, either internally or through collaborations or other arrangements, to effectively market and sell our product candidates, if and when approved;
achieving acceptance of the product candidate, if and when approved, by patients, the medical community and third-party payors;
if our product candidates are approved, obtaining from governmental and third-party payors adequate coverage and reimbursement for our product candidates and, to the extent applicable, associated injection procedures conducted by treating physicians;
effectively competing with other therapies, including the existing standard of care, and other forms of drug delivery;
maintaining a continued acceptable safety profile of the product candidate during development and following approval;
obtaining and maintaining patent and trade secret protection and regulatory exclusivity, including under the Orphan Drug Act and the Hatch-Waxman Amendments to the Federal Food, Drug and Cosmetic Act, or FDCA, if we choose to seek such protections for any of our product candidates;
protecting and enforcing our rights in our intellectual property portfolio; and
complying with all applicable regulatory requirements, including FDA Good Laboratory Practices, or GLP, FDA Good Clinical Practices, or GCP, current Good Manufacturing Practices, or cGMP, and standards, rules and regulations governing promotional and other marketing activities.
Each of these activities has associated risks, many of which are detailed below and throughout this “Risk Factors” section. We may never succeed in these activities and, even if we do, may never generate revenues from product sales that are significant enough to achieve commercial success and profitability. Our failure to be commercially successful and profitable would decrease the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or continue our operations. A decrease in the value of our company would also cause our stockholders to lose all or part of their investment.
Drug development is a highly uncertain undertaking. Our research and development efforts may not be successful or may be delayed for any number of reasons, in which case potential clinical development, marketing approval or commercialization of our product candidates could be prevented or delayed.
Before obtaining approval from regulatory authorities for the sale of any product candidate, we must conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Prior to initiating clinical trials, a sponsor must complete extensive preclinical testing of a product candidate, including, in most cases, preclinical efficacy experiments as well as IND-enabling toxicology studies. Drug research, including the gene therapy research we are sponsoring with UMMS, may never yield a product candidate for preclinical or clinical development. Early stage and later stage research experiments and preclinical studies, including the ongoing preclinical studies pursuant to our sponsored research programs with Penn and other preclinical studies for IC-100 and IC-200, may fail at any point for any number of reasons, and even if completed, may be time-consuming and expensive. As a result of these risks, a potentially promising product candidate may never be tested in humans.

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Once it commences, clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. For example, our pivotal Phase 3 Fovista program for the treatment of wet AMD failed to produce positive safety and efficacy data that support the use of Fovista in wet AMD, despite the results from preclinical testing and earlier clinical trials of Fovista, including a large Phase 2b trial with statistically significant efficacy signal. Furthermore, our Phase 2a OPH2007 safety trial of Zimura in combination with the anti-VEGF agent Lucentis in wet AMD did not replicate the results of our Phase 1/2a OPH2000 trial. Additionally, although the results we have received to date from our OPH2003 trial confirm that Zimura met the prespecified primary endpoint in reducing the mean rate of GA growth in patients with dry AMD with statistical significance across both the Zimura 2 mg and Zimura 4 mg treatment groups when compared to the corresponding sham control groups, these results may be undermined by inconsistent data obtained from the final results from this clinical trial or may not be replicated in the planned ISEE2008 trial or any other future trial we may conduct for Zimura in GA. Preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.
We may experience numerous unforeseen events during drug development that could delay or prevent our ability to receive marketing approval or commercialize our product candidates. These risks include, but are not limited to, the following:
we may not be able to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation of clinical trials for any preclinical product candidates that we are developing or may wish to in-license or acquire; 
we or our contract manufacturers may be unable to develop a viable manufacturing process for any product candidates that we are developing;
the supply or quality of our product candidates or other materials necessary to conduct preclinical development and clinical trials of our product candidates may be insufficient or inadequate or we may face delays in the manufacture and supply of our product candidates for any number of reasons, including as a result of interruptions in our supply chain, including in relation to the procurement of starting materials, such as plasmids used for the manufacture of our gene therapy product candidates, and the packaging, distribution, storage and import/export of materials and products;
we or our contract research organizations may be unable to complete necessary analytical development for and testing of our product candidates, including assays for assessing the potency of our gene therapy product candidates;
regulators or institutional review boards may not agree with our clinical trial designs, including our selection of endpoints, or may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;
we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective contract research organizations or clinical trial sites, especially in cases where we are working with contract research organizations or clinical trial sites we have not worked with previously;
our contract research organizations, clinical trial sites, contract manufacturers, providers of starting materials and packagers and analytical testing service providers may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;
we, through our clinical trial sites, may not be able to locate and enroll a sufficient number of eligible patients to participate in our clinical trials as required by the FDA or similar regulatory authorities outside the United States, especially in our clinical trials for orphan or other rare diseases;
we may decide, or regulators or institutional review boards may require us, to suspend or terminate clinical trials for various reasons, including noncompliance with regulatory requirements, including GCPs, or a finding that the participants are being exposed to unacceptable health risks;
as there are no therapies approved for GA, Stargardt disease, RHO-adRP or Best disease, in either the United States or the European Union, the regulatory pathway for product candidates in those indications, including the selection of the primary efficacy endpoint for a pivotal clinical trial, is highly uncertain;
there may be changes in regulatory requirements and guidance or we may have changes in trial design that require amending or submitting new clinical trial protocols;

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there may be changes in the standard of care on which a clinical development plan was based, which may require new or additional trials;
we may decide, or regulators may require us, to conduct additional clinical trials beyond those we currently contemplate or to abandon product development programs;
the number of patients required for clinical trials of our product candidates to demonstrate statistically significant results may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate. These risks may be heightened for clinical trials in orphan diseases, for which the natural history of the disease is less understood, making it more difficult to predict the drug effect required to adequately demonstrate efficacy, and because there are fewer affected individuals available to participate in clinical trials; and
the cost of clinical trials of our product candidates may be greater than we anticipate.
If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:
be delayed in obtaining marketing approval for our product candidates;
not obtain marketing approval at all;
obtain approval for indications or patient populations that are not as broad as intended or desired;
obtain approval with labeling that includes significant use limitations, distribution restrictions or safety warnings, including boxed warnings;
be subject to additional post-marketing testing requirements; or
have the product removed from the market after obtaining marketing approval.
Despite our ongoing efforts, we may not complete any of our ongoing or planned development activities for our product candidates. The timing of the completion of, and the availability of results from, development activities, especially clinical trials, is difficult to predict. For clinical trials in particular, we do not know whether they will begin as planned, will need to be restructured or will be completed on schedule, or at all. Furthermore, our development plans may change based on feedback we may receive from regulatory authorities throughout the development process. For example, our expectations regarding the remaining clinical requirements to demonstrate the safety and efficacy of Zimura for the treatment of GA secondary to dry AMD in a manner sufficient to support an application for regulatory approval to the FDA and EMA are based on our review of initial, top-line data from the OPH2003 trial as well as informal discussions with the FDA. Although we have submitted the protocol for the ISEE2008 trial to the FDA, we do not currently plan to have any additional or formal interactions with the FDA before enrolling patients in the trial. Our expectations regarding the minimum clinical requirements to demonstrate the safety and efficacy of Zimura for GA could be incorrect or may change as we continue to review and analyze data from our OPH2003 trial, including the 18-month data set when it becomes available, as we continue to plan for and as we conduct our ISEE2008 trial, and as new regulatory or third party information, including third-party clinical data or information from prospective collaborators or licensees, becomes available. If we experience delays in manufacturing, testing or marketing approvals, our product development costs would increase. Significant product development delays also could allow our competitors to bring products to market before we do, could impair our ability to successfully commercialize our product candidates, including by shortening any periods during which we may have the exclusive right to commercialize our product candidates, and may otherwise harm our business and results of operations.
Our development of Zimura is based on a novel mechanism of action that is unproven in GA and STGD1 and poses a number of scientific and other risks, and we may not be successful in developing Zimura in the indications we are pursuing.
We are targeting GA, an advanced form of dry AMD, and STGD1 with Zimura. The causes of AMD are not completely understood. In addition to advanced age, there are environmental and genetic risk factors that contribute to the development of AMD including ocular pigmentation, dietary factors, a positive family history for AMD, high blood pressure and smoking. Although we believe there is a scientific rationale for pursuing the development of inhibitors for selective molecular targets, including complement C5, as potential pharmaceutical treatments for AMD, and that the 12-month top-line data from our OPH2003 trial of Zimura in GA support our view, this approach may not prove successful for treating AMD in a clinically meaningful way. Similarly, although there is non-clinical scientific literature supporting the potential use of inhibitors of the complement system for the treatment of STGD1, this approach may not prove clinically successful as well.

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Zimura is designed to inhibit complement C5. There are no FDA or EMA approved products that utilize C5 inhibition as a mechanism of action to treat GA or STGD1. There have been other investigational products using complement inhibition as a mechanism of action for the treatment of GA, including inhibition of C5, that proved to be unsuccessful, even in later stage clinical trials. Even though our OPH2003 trial of Zimura in GA met its prespecified primary endpoint, this mechanism of action may not prove safe and effective for the treatment of GA, STGD1 or any other indication for which we may develop Zimura.
The 12-month results we observed from the OPH2003 trial may not be supported by the final results of this trial or may not be fully replicated in the ISEE2008 trial. The 18-month results for OPH2003, for which we will not be evaluating the statistical significance of the efficacy data, may not be consistent with or comparable to the 12-month results. The ISEE2008 trial may yield results that are different from the 12-month results observed in the OPH2003 trial.
The 12-month results we observed from our OPH2003 trial of Zimura in GA may not be supported by the final results of this trial or may not be fully replicated in the ISEE2008 trial. In accordance with the OPH2003 trial protocol, we will continue to treat and follow patients through the 18-month time point to collect additional safety and efficacy data, including mean GA area and mean change in BCVA and LL BCVA by treatment group. Although we do not plan to perform any prespecified statistical analysis with respect to these data, these data may indicate an unexpected or unknown safety issue, including increased incidence of CNV, or may indicate the loss of efficacy for Zimura during the period between month 12 and month 18. After month 18, we expect to receive and analyze individual patient data on an unmasked basis following completion of the trial by all patients. We expect that the unmasked individual patient data will provide us a better understanding of the results and the variables affecting the results, although it may indicate that our initial conclusions were not well founded due to inconsistencies, data entry errors or because of unknown variables or patient sub-groups that could potentially be driving the results in one or more treatment groups. At this time, we cannot verify that GA images have been measured accurately or review the images for consistency with our hypotheses and the conclusions from this trial. Since the 18-month efficacy data analysis is descriptive only, it may not be relevant to draw any conclusions other than regarding the safety of Zimura. Additionally, patients may drop out from the trial between month 12 and month 18 in a greater number than we expect, which may also hamper our ability to draw conclusions from the 18-month data.
Unlike the OPH2003 trial, the ISEE2008 trial will include only one treatment arm, Zimura 2 mg, in addition to a control arm. Several Phase 3 clinical trials for ophthalmic product candidates that have been, or are currently being, conducted by other sponsors include multiple treatment arms, either different doses or treatment regimens, in addition to a control arm. The FDA has expressed that including multiple doses or treatment regimens within a single trial helps mitigate the risk of bias in the trial. We believe that the anatomical measure used as the primary efficacy endpoint in our OPH2003 trial, the mean rate of change in GA growth, as evaluated by an independent, masked reading center, is not subject to bias. We have decided to proceed with only one treatment arm in the ISEE2008 trial consisting of a single monthly administration of Zimura 2 mg, because the 12-month data from the OPH2003 trial suggested that monthly administration of Zimura 2 mg provides a similar benefit (approximately 27%) in reducing the mean rate of GA growth over 12 months as compared to the corresponding sham control group, as measured by our primary endpoint, as Zimura 4 mg and because we want to avoid the treatment burden associated with the Zimura 4 mg dose evaluated in our OPH2003 trial. Additionally, because we want to begin to evaluate the efficacy of a less frequent dosing regimen, we plan to re-randomize the patients in the monthly Zimura 2 mg treatment arm at 12 months and evaluate dosing Zimura 2 mg every other month, a dosing regimen which we have not previously studied, in half of those patients during the second 12 months of the trial. The ISEE2008 trial, however, is not designed to reliably assess any differences we observe between these treatment groups at 24 months with statistical significance and the label we would seek for Zimura in GA, if the results from the ISEE2008 trial are positive, would in all likelihood provide for monthly administration of Zimura.
We plan to conduct the ISEE2008 trial at many clinical centers that were not included in the OPH2003 trial.  The introduction of new centers, and the resulting involvement of new treating physicians, can introduce additional variability into the conduct of the trials in accordance with their protocols and may result in greater variability of patient outcomes, which could adversely affect our ability to detect statistically significant differences between patients treated with Zimura 2 mg and patients receiving sham control.
In addition, the 12-month data from the OPH2003 trial suggested there is an overall dose response relationship in which higher doses of Zimura corresponded to a greater reduction in the mean rate of GA growth as compared to the corresponding sham group. For our ISEE2008 trial, for the reasons stated above, we have decided to proceed with only a 2 mg dose treatment arm and not include a 4 mg dose treatment arm. The 2 mg dose may prove to not be efficacious in treating GA. Additionally, unlike the protocol for the OPH2003 trial, the protocol of the ISEE2008 trial will provide that patients who develop CNV in the study eye in the trial may, at the investigator's discretion, remain in the trial and receive standard of care anti-VEGF therapy, and that measurements of these patients' GA will be included in the primary efficacy analysis if their FAF images can be reliably assessed by the masked reading center. If a significant number of patients develop CNV in the study eye and these patients' FAF images are not reliably assessable, or if more patients than we anticipate drop out or their data is

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otherwise missing, it would reduce the number of patients from whom data is available for analyzing the primary endpoint for this trial and the ISEE2008 trial could be underpowered to demonstrate a potential clinical benefit for Zimura in GA with statistical significance.
Our intended regulatory pathway for generating sufficient safety and efficacy data to submit an NDA and potentially obtain marketing approval for Zimura for GA is subject to a number of assumptions, including that we may be able to rely on the results from our OPH2003 trial as one of two well-controlled, pivotal trials typically required by the FDA. The FDA, EMA and other regulatory authorities may not accept the results of the OPH2003 trial as a pivotal clinical trial, or may not agree with our selection of the primary endpoint for the OPH2003 and ISEE2008 trials or the statistical analysis we performed. We may decide to or may be required to enroll additional patients, collect additional safety data or conduct additional clinical trials to seek or obtain approval for Zimura in GA.
Based on the 12-month results we have received from our OPH2003 trial, additional statistical analysis we have performed and informal discussions we have had with the FDA, we believe that the efficacy results from this trial could potentially satisfy the FDA’s requirements as one of the two pivotal clinical trials typically required for marketing approval. This belief is based on many assumptions, including that a reduction in mean rate of GA growth is a primary endpoint of clinical relevance, in the absence of a demonstrated reduction in the loss of vision, and that data from the OPH2003 trial is robust. The FDA, the EMA or other regulatory authorities may not agree with our view that the observed reduction in the rate of GA growth is clinically relevant or meaningful, or may require us to correlate this reduction in rate of GA growth with another outcome more directly associated with visual function. We are not currently planning to include vision as a primary or secondary efficacy endpoint in the ISEE2008 trial and it will be assessed as a safety endpoint. The FDA, the EMA or other regulatory authorities may disagree with our conclusion regarding the robustness of the data from the OPH2003 trial based on our sensitivity analyses or may conduct their own sensitivity analyses yielding different results. We likely will not have an opportunity to obtain definitive confirmation from the FDA, EMA or other regulatory authorities regarding the robustness of the data from our clinical trials, including the OPH2003 trial, until such time as we submit an application for regulatory approval and receive a response from the applicable authority. If the OPH2003 trial results are not considered robust, in order to seek marketing approval we may need to conduct, in addition to the ISEE2008 trial, one or more additional, well-controlled clinical trials that meets the applicable regulatory requirements in order to obtain sufficiently robust data to support regulatory approval.
The FDA, EMA or other regulatory authorities may not agree with the methodologies we used to perform the statistical analysis of the OPH2003 trial results. In particular, they may not agree with how we performed the comparisons of patients receiving Zimura 2 mg with patients in the sham groups, as the comparisons draw upon patients that were enrolled into two different parts of the trial, using different randomization ratios and different vision criteria. In addition, they may not agree with the validity of our MRM analysis, which imputes the values of missing data based on observed data. We plan to use the same MRM analysis in the ISEE2008 trial. Moreover, the FDA, EMA or other regulatory authorities may disagree with our inclusion in our efficacy analysis of patients who do not strictly meet all eligibility criteria, or whose treatment or assessments in the clinical trial deviated from the clinical trial protocol on one or more occasions. The FDA, EMA or other regulatory authorities may take issue with the degree of data that are missing from the clinical data set from our OPH2003 trial, or with the rate at which patients withdrew from the trial.
Although we believe that our OPH2003 trial was well-controlled, with appropriate eligibility criteria and appropriate stratification for baseline characteristics, the FDA, EMA or other regulatory authorities may not agree with the methodologies we used to determine patient eligibility and randomize patients to the various treatment groups and therefore may not agree that the comparisons we have made for mean rate of GA growth are statistically valid. The FDA, EMA or other regulatory authorities may take issue with the number of modifications we introduced to the OPH2003 trial following its commencement, which they may view as introducing additional uncontrolled variables, invalidating the comparisons across groups. In particular, the FDA, EMA or other regulatory authorities may view the change in enrollment criteria applied in the various modifications as changing the nature of the patients enrolled, thus rendering the results of the trial as uninterpretable, or may disagree with our decision to remove patients who develop CNV in their study eye from future treatments and assessments as inappropriate, concluding that it may have resulted in unmitigated or uncontrolled bias in the efficacy results from the trial.
Based on informal discussions with the FDA, we believe we need to conduct one additional clinical trial with enough patients such that we will have safety data for a minimum of 300 patients having received the dose of Zimura for which we are seeking approval, or a higher Zimura dose, independent of indication, for a minimum of 12 months, with 24-month safety data available for some portion, but not all, of these 300 patients. This additional clinical trial would need to be well-controlled, with a primary efficacy analysis at the 12 month time point or later. We believe that if we were to file an application for marketing approval for Zimura for GA, we would be able to rely on safety data from our OPH2003 and ISEE2008 trials in GA, as well as our OPH2005 trial evaluating Zimura for STGD1. We also believe that, if the data from the ISEE2008 trial are positive, we would be able to submit our application following the primary efficacy analysis for the ISEE2008 study at the 12-month time

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point, without waiting for the full 24-month data package, that we could continue collecting data after submitting for marketing approval and that we could supplement our applications for marketing approval while they are pending. We have designed our ISEE2008 trial to meet these requirements, which, as we understand them, and if data from the ISEE2008 trial are positive, will permit us to seek marketing approval for Zimura in GA in the United States and potentially the European Union. We have not had formal interactions with either the FDA or the EMA regarding the ISEE2008 trial and may not do so before receiving results from the trial and submitting our applications for marketing approval. In addition, we may engage formally or informally with regulatory authorities, including competent authorities at the national level in Europe, during the trial and receive feedback that is not consistent with our expectations, including potential disagreements by the EMA and other regulatory authorities with what we are understand are the requirements of the FDA. Regulatory authorities may require us to enroll additional patients, collect additional safety data, conduct additional trials or take other actions, which would require us to revise our development plans for Zimura, including potentially changing the design of the ISEE2008 trial, increase the costs of our Zimura clinical programs and delay our expected timelines. In addition, we may experience a higher than anticipated drop out rate in our ISEE2008 trial, which could result in our not having safety data for a sufficient number of patients, even if the results from the ISEE2008 are otherwise positive.
Furthermore, our previous and ongoing Zimura clinical trials have evaluated Zimura dosing levels and regimens that we have studied only in cohorts consisting of a small number of patients. This approach may increase the risk that patients in our ongoing trials experience adverse events and/or serious adverse events (either ocular, systemic or both) that we have not observed or at rates that we have not observed in prior trials. Although we did not observe adverse events or serious adverse events attributable by the investigators to the drug product in our OPH2003 trial, previously unobserved adverse events and/or serious adverse events may manifest in the remaining portion of our OPH2003 trial, in our OPH2005 trial, in our planned ISEE2008 trial or in any other subsequent clinical trials we or a potential licensee or collaborator may undertake for Zimura. When we follow patients for a longer period of time or collect safety data from a greater number of patients, we may observe safety events that we have not previously observed. For a further discussion of the safety risks in our trials, see the risk factor herein entitled "If serious adverse or unacceptable side effects are identified during the development of our product candidates, we may need to abandon or limit our development of such product candidates."
Because the primary efficacy endpoint and the statistical analysis plan we would expect to use to analyze data for the primary efficacy endpoint for our ISEE2008 trial are similar to those of the OPH2003 trial, any disagreements by the FDA, EMA or other regulatory authorities with OPH2003 will likely affect ISEE2008 as well. Our ongoing and planned clinical trials and any other future clinical trials for Zimura that we or a potential future licensee or collaborator may undertake may fail to demonstrate sufficient safety or efficacy to justify further development or to ultimately seek or obtain marketing approval. Any negative results from our ongoing or planned or any other future clinical trials for Zimura could adversely affect our business and the value of your investment in our company.
We have no human clinical data regarding the safety and efficacy of Zimura as a treatment of STGD1. The drop-out rate may reduce the number of patients from whom we can collect and analyze data from our OPH2005 trial.
We have no human clinical data regarding the safety and efficacy of Zimura as a treatment for STGD1. In addition, although we initially determined the size of the OPH2005 trial in STGD1 based on the number of patients with STGD1 that we believed could potentially be enrolled within a reasonable period of time, we decided to cease patient enrollment during the first quarter of 2019 in light of the 18-month endpoint and our goal of providing initial top-line data from this trial during the second half of 2020. As STGD1 is an orphan indication, to our knowledge there is only very limited natural history data currently available regarding the variability for our planned primary efficacy endpoint in the STGD1 patient population we enrolled in this trial. Moreover, because Stargardt disease, like GA, is a degenerative disease, and in many cases, the rate of degeneration is slow, and because we are seeking to slow the progression of degeneration with Zimura, and not necessarily to reverse prior degeneration or restore visual function, patients participating in our OPH2005 trial, who may be younger and may experience vision loss that is more subtle than patients with GA or AMD, may not perceive a benefit from continuing to participate and therefore may drop out of this trial. Although we and the investigators and their staff take efforts to encourage continued patient participation, the drop-out rate may exceed our expectations. A higher than expected drop-out rate would reduce the number of patients from whom data is available for analyzing the primary endpoint for this trial. Given the information above, our OPH2005 trial could be underpowered to demonstrate a potential clinical benefit for Zimura in STGD1 with statistical significance.

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Gene therapy is an emerging field of drug development that poses many scientific and other risks. As a company, we have only limited prior experience in gene therapy research and manufacturing and no prior experience in gene therapy clinical development. Our lack of experience and the limited patient populations for our gene therapy programs may limit our ability to be successful or may delay our development efforts.
Gene therapy is an emerging field of drug development with only two gene replacement therapies having received FDA approval to date. Our gene therapy research and development programs, which we decided to undertake based on a review of a limited set of preclinical data, are still at an early stage. Even with promising preclinical data, there remains several areas of drug development risk, including translational science, manufacturing materials and processes, safety concerns, regulatory pathway and clinical trial design and execution, which pose particular uncertainty for our programs given the relatively limited development history of, and our limited prior experience with, gene therapies. Furthermore, the medical community's understanding of the genetic causes of many diseases continues to evolve and further research may change the medical community's views on what therapies and approaches are most effective for addressing certain diseases.
For example, while there are more than 200 known mutations to the BEST1 gene, the different types of mutations and their association with various BEST1-related IRDs are still not well-understood. Our product candidate for these diseases, IC-200, may only be effective in treating retinal diseases associated with certain mutations in the BEST1 gene and not other mutations. Additionally, we decided to in-license and pursue the development of IC-200 based on results observed in an autosomal recessive canine disease model. A majority of humans with BEST1-related IRDs, however, have the autosomal dominant form of the disease, commonly referred to as Best disease. If we choose to develop IC-200 for this patient population, using a construct previously studied in an autosomal recessive canine disease model, this approach may ultimately prove ineffective.
For our miniCEP290 program and other minigene programs, we are sponsoring research using a novel approach that is largely untested and presents various scientific and regulatory risks. To date, all the data generated for our miniCEP290 program are in a newborn mouse model for LCA10, and we do not know whether the effect we observed with these minigenes in mice will be replicated in other animals or humans. Furthermore, minigenes result in the expression of a protein that differs from the naturally occurring protein. The protein expressed by the minigene may have physiological effects, including toxic effects, that are not yet known. Because of the novelty of minigenes, the medical community's and regulators' receptiveness to this approach remains unknown. Our sponsored research may not fully elucidate all of the physiological risks associated with a particular minigene and the associated expressed protein. For these and other reasons, promising minigene candidates that emerge from our sponsored research programs with UMMS may not succeed in later stage preclinical and clinical development.
We have particularly focused on AAV gene therapy, as AAV vectors are relatively specific to retinal cells and their safety profile in humans is relatively well-documented as compared to other delivery vehicles and gene therapy technologies currently in development. However, AAV has a number of drawbacks, including its small packaging capacity: an AAV vector can hold only up to approximately 4,700 base pairs of DNA, whereas the genes that are associated with a number of diseases, such as LCA10, Stargardt disease and Usher 2A, exceed that size. Although AAV is the most commonly used vector in ocular gene therapy today, it may prove to pose safety risks that we are not aware of and other vector forms, such as retroviral or lentiviral and non-viral based vectors, or gene editing approaches, may prove to be safer and more effective.
Although we believe gene therapy is a promising area for retinal drug development, our gene therapy research and development experience is limited to only a few personnel hired to supervise our outside service providers. In pursuing this new technology, we have begun to establish our own gene therapy technical capabilities, but we will need to continue to build those capabilities by either hiring internally or seeking assistance from outside service providers. We believe that gene therapy is an area of significant investment by biotechnology and pharmaceutical companies and that there may be a scarcity of talent available to us in these areas. If we are not able to expand our gene therapy capabilities, we may not be able to develop in the way we intend or desire, IC-100, IC-200 or any promising product candidates that emerge from our miniCEP290 program or our other collaborative gene therapy sponsored research programs, which would limit our prospects for future growth.
We have not previously conducted any clinical development involving gene therapies. As we prepare for the potential initiation of our first gene therapy clinical trial, we will need to build our internal and external capabilities in designing and executing a gene therapy clinical trial. There are many known and unknown risks involved in translating preclinical development of gene therapies to clinical development, including selecting appropriate endpoints and dosage levels for dosing humans based on preclinical data. Furthermore, our gene therapy programs are targeting orphan diseases with relatively small populations, which limits the pool of potential subjects for our gene therapy clinical trials. Because gene therapy trials generally require subjects who have not previously received any other therapy for the same indication, we will also need to compete with our competitors who are also developing therapies for these same indications for the same group of potential clinical trial subjects. If we are unable to initiate and conduct our gene therapy clinical trials in a manner that satisfies our expectations or regulatory requirements, the value of our gene therapy programs may be diminished.

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For a further discussion of the risks associated with the manufacturing of gene therapy products, see the risk factor herein entitled "The manufacture of gene therapy products is complex with a number of scientific and technical risks, some of which are common to the manufacture of drugs and biologics and others are unique to the manufacture of gene therapies. We have limited experience with gene therapy manufacturing and are dependent on our third-party contract manufacturers and sole source suppliers".
Our development of our HtrA1 inhibitor program is also based on a novel mechanism of action that is unproven and poses a number of scientific and other risks. We may not be able to successfully formulate a product candidate from our HtrA1 inhibitors or identify a product candidate with a viable manufacturing process.
Our HtrA1 inhibitor program is in preclinical development. There are no FDA or EMA approved products that utilize HtrA1 inhibition as a mechanism of action for treating ophthalmic diseases, including GA and other age-related retinal diseases for which we may develop our HtrA1 inhibitor program, and this mechanism of action may not prove safe and effective for these diseases. We made the decision to acquire this program based on our interpretation of the scientific literature and rationale for this potential target that suggest an association between HtrA1 and the risk for AMD, as well as a limited set of preclinical data generated by Inception 4 prior to the acquisition. We note, however, the HtrA1 gene is in the same region of the 10q26 chromosome as the age-related maculopathy susceptibility 2, or ARMS2, gene. The ARMS2 and HtrA1 genes are linked, and variants in, or expression of, the ARMS2 gene may also be associated with the risk for AMD. The risk for AMD associated with ARMS2 may ultimately prove to be greater than the risk associated with HtrA1. In addition, even though genetic and histologic findings correlate HtrA1 with AMD, the development and progression of AMD may not be affected by HtrA1. Our assumption that targeting inhibition of HtrA1 as a method of treating AMD may be incorrect, which would likely adversely affect the value of our HtrA1 inhibitor program and its continued development.
Before we can commence IND-enabling studies for our HtrA1 inhibitor program, we need to conduct process development and formulation development with our selected lead compound in this program to determine whether we can identify a viable manufacturing process for and formulate the lead compound for intravitreal administration that is safe to advance into preclinical studies and, depending on the outcome of such studies, into clinical trials. For example, as part of formulation development, we need to determine which inactive formulation components should be used in the preparation of the product candidate, and derive a preparation that includes an adequate amount of drug substance with the necessary inactive ingredients to achieve the desired safety profile for intravitreal injection into the eye while providing for sufficient pharmacological activity. Process development and formulation development are inherently uncertain, and it is possible we may not be able to identify a viable manufacturing process for or formulate our lead compound or any backup compound into a preparation that is safe to advance into preclinical studies or clinical trials in the eye or that provides sufficient pharmacological activity, which would hinder our ability to pursue development of this program. Manufacturing, including process development, and formulation development can be time-consuming and our anticipated timelines for the development of this program may be delayed.
If serious adverse or unacceptable side effects are identified during the development of our product candidates, we may need to abandon or limit our development of such product candidates.
If any of our product candidates are associated with serious adverse events or undesirable side effects in preclinical studies or clinical trials or have characteristics that are unexpected, we may need to abandon their development or limit development to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Many compounds that initially showed promise in clinical or earlier stage testing have later been found to cause side effects that prevented further development of the compound.
To date, we currently have safety data from a total of 113 patients receiving monthly treatments of either Zimura 2 mg or Zimura 4 mg for a minimum of 12 months in the OPH2003 trial. In our completed clinical trials for Zimura, we have observed only a single adverse event, mild subcapsular cataract, from our OPH2000 trial, assessed to be drug-related by participating investigators. We have no data regarding the safety, tolerability or efficacy of Zimura administered for the treatment of STGD1. We have no human data regarding IC-100, IC-200 or any of our HtrA1 inhibitors.
Our clinical trials for Zimura involve dosing regimens that we have not studied extensively, which may increase the risk that patients in these trials experience adverse events and/or serious adverse events (either ocular, systemic or both) that we have not observed or at rates that we have not observed in prior trials. For example, although the reduced rate of growth in GA we observed in the OPH2003 trial has not been associated with disproportionate loss of vision in the treated groups as compared to the sham control groups over the first 12 months of the trial, we may observe increased loss of vision in the Zimura treatment groups, as compared to the corresponding sham control arms, during the period between month 12 and month 18 in the trial or in the ISEE2008 trial. In addition, although we view the rate of CNV incidence in the Zimura treatment groups, as compared to the corresponding sham control groups, as acceptable and within the range observed in other clinical trials of complement inhibitors in development for GA, the FDA, EMA, other regulatory authorities, treating physicians or

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patients may not agree, concluding that Zimura may increase the risk of patients developing CNV to an unacceptable degree. Moreover, our clinical trials for Zimura involve multiple intravitreal injections over an extended period of time and, as such, may involve risks regarding multiple and chronic intravitreal injections. For these reasons, there may be, among others, an increase in the rates of intraocular infections, or endophthalmitis, intraocular pressure, glaucoma, retinal tears, cataracts, retinal detachment, intraocular inflammation, retinal and/or choroidal circulation compromise, or hospitalizations in patients who receive Zimura. For our OPH2003 trial, once all patients reach the 18 month time point, we expect that we will receive complete safety data, including unmasked data covering the period between month 12 and month 18. An unforeseen or unexpected safety issue, or any safety finding that is inconsistent with our prior experience with Zimura, including during the first 12 months of the OPH2003 trial, from any of our clinical trials for Zimura may impact our ability to continue to develop Zimura or the long-term viability of Zimura as a potential treatment for GA, STGD1 or any other indication for which we may seek to develop Zimura.
As HtrA1 inhibition is a novel treatment approach for treating ocular disease, this treatment modality may present potentially unknown safety risks when tested in clinical trials that could not have been anticipated based on preclinical toxicology studies. In addition, if we are successful in formulating an HtrA1 product candidate, we intend to administer the product candidate by intravitreal injection, which poses the same safety risks outlined above with respect to intravitreal injections of Zimura.
In addition, there are several known safety risks specific to gene therapy, including inflammation resulting from a patient's immune response to the administration of viral vectors and the potential for toxicity as a result of chronic exposure to the expressed protein. Managing a host body's immune response to introduced viral vectors has been and remains a challenge for gene therapies. For AAV gene therapy, "vector shedding," or the dispersal of AAV vectors away from the target tissue to other parts of the body, which can trigger a more serious and extensive immune response, is a known safety issue. Although subretinal injection, which is the method often used to administer retinal gene therapies, helps to control vector shedding beyond the eye, subretinal injection is a surgical procedure that requires significant skill and training for the administering surgeon and involves its own risks separate from the gene therapy vectors, including the risk of retinal detachment. The margin for error with subretinal injections is extremely low and there are a limited number of retinal surgeons with experience in performing subretinal injections in the eye. In order to generate useful clinical data for gene therapy clinical trials, one or more retinal surgeon must repeat the same subretinal injection process in multiple patients with consistency across patients and surgeons. In addition, in order to avoid accelerating damage to a subject's retina, subretinal injection for RHO-adRP patients in particular must be conducted under extremely low light levels using infrared technology, further complicating the surgical procedure. In the event that we progress into clinical development with IC-100, IC-200 or any other gene therapy product candidate we may in-license or acquire, we may experience delays or other challenges for our gene therapy development programs as a result of safety issues.
In addition to the currently known safety risks, there may be unknown risks to human health from gene therapies. Because gene therapy involves the introduction of concentrated quantities of AAV, as well as the introduction of persistent foreign genetic material into the human body, any safety risks may not manifest until much later, if at all. Gene therapies have only recently been used in the treatment of human diseases and the scientific and medical understandings of safety or other risks to humans continue to evolve. The safety profile of minigenes and their associated proteins in humans remains largely unknown. If gene therapies prove to be unsafe for humans, we likely will need to curtail or eliminate our gene therapy development programs or gene therapy products in development or commercialization, if any.
We do not have any internal manufacturing capabilities and use third parties to manufacture our product candidates on a contract or purchase order basis. We may encounter manufacturing issues, including technical or quality issues, that could cause delays in our development programs or increase costs. We may experience delays in regulatory approval of our product candidates if we or our contract manufacturers do not satisfy applicable manufacturing regulatory requirements. If any of our product candidates is approved, a manufacturing issue could result in product shortages, which could impair our ability to commercialize our products and generate revenue.
We do not have internal manufacturing facilities and use or plan to use outside contract manufacturers to manufacture Zimura, IC-100, IC-200, our HtrA1 inhibitors and any other product candidates that we may acquire or in-license. We have a limited number of personnel hired to supervise these outside vendors. The manufacturing processes for our product candidates are technically complex. Problems with developing or executing the manufacturing process, even minor deviations from the established process, could result in product defects or manufacturing failures that result in lot failures, product recalls, product liability claims or insufficient inventory. We may encounter problems achieving adequate quantities and quality of clinical-grade materials that meet FDA, EMA or other applicable standards or specifications with consistent and acceptable production yields and costs.
In addition, in order to manufacture and supply any of our product candidates for later-stage clinical trials or on a commercial scale in the future, we will need to increase our manufacturing personnel and bolster our quality control and quality

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assurance capabilities. We may encounter problems hiring and retaining scientific, manufacturing and quality assurance and control personnel needed to oversee our manufacturing process, which could result in delays in our production or difficulties in maintaining compliance with applicable regulatory requirements. As we or any manufacturer we engage scales up manufacturing of any product candidate, we may encounter unexpected issues relating to the manufacturing processes or the quality, purity or stability of the product, and we may be required to refine or alter our manufacturing processes to address these issues. Resolving these issues could result in significant delays and may result in significantly increased costs. If we underestimate the demand for an approved product, given the long lead times required to manufacture or obtain regulatory approvals for our products, we could potentially face commercial drug product supply shortages. If we experience significant delays or other obstacles in producing any approved product at commercial scale, our ability to market and sell any approved products may be adversely affected and our business could suffer.
The manufacturing processes and the facilities of our third-party manufacturers are subject to inspection and approval by the FDA, referred to as a pre-approval inspection, before we can commence the commercial sale of any approved product candidate, and thereafter on an ongoing basis. None of our third-party manufacturers have undergone a pre-approval inspection by the FDA for Zimura or any of our other product candidates. Failure by our third-party manufacturers to pass such inspections and otherwise satisfactorily complete the FDA approval regimen with respect to our product candidates may result in delays in the approval of our applications for marketing approval, as well as regulatory actions such as the issuance of FDA Form 483 notices of observations, warning letters or injunctions or the loss of operating licenses. If any of our third-party manufacturers are found to have delayed, denied, limited or refused a drug inspection, our drug substance or drug product could be deemed adulterated. Based on the severity of the regulatory action, our clinical or commercial supply of drug substance or drug product could be interrupted or limited, which could have a material adverse effect on our business.
Any problems in our manufacturing process or our third-party contract manufacturers’ facilities could make us a less attractive collaborator for potential collaborations, including larger pharmaceutical companies and academic research institutions, which could limit our access to additional attractive development programs. Problems in our manufacturing process or facilities also could restrict our ability to meet market demand for our products.
For a further discussion of the risks associated with our reliance on third-party manufacturers, see the risk factor herein entitled, "We contract with third parties for the manufacture of and for providing starting materials for our product candidates for preclinical development activities and clinical trials and expect to continue to do so in the future. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or products, which could delay, prevent or impair our development or commercialization efforts."
Our experience manufacturing Zimura is limited. As we plan for and conduct our ISEE2008 trial, we and our third-party manufacturers will need to complete several activities to ensure the continued supply of drug product for the trial and adequate preparations to support potential future commercial supply of Zimura. Any delay or failure in completing these activities could cause delays for the development of Zimura or its potential approval or could result in inadequate commercial product supply.
We currently use a single third-party manufacturer, Agilent, to supply us with the chemically synthesized drug substance for Zimura and a different, single third-party manufacturer, Ajinomoto, to provide fill/finish services for Zimura. We obtain the PEG reagent used to make Zimura API from a single third-party manufacturer. In order to obtain and maintain regulatory approval for Zimura, our third-party manufacturers will be required to consistently produce the drug substance used in Zimura in commercial quantities and of specified quality and to execute fill/finish services on a repeated basis and document their ability to do so. If our third-party manufacturers are unable to satisfy this requirement, our business would be materially and adversely affected. To date, we have not yet scaled up the manufacturing process for Zimura beyond the scale used for developmental clinical batches, nor have we validated the manufacturing process.
In early 2017, we completed the small scale manufacture of multiple batches of Zimura API that we plan to use to support clinical drug supply for the ISEE2008 trial. Although we believe we have adequate drug supply for the ISEE2008 trial, this supply may not be sufficient for our needs. We are in the process of recommencing manufacturing activities with our contract manufacturer, with the goal of scaling up and validating the manufacturing process to support the potential commercialization of Zimura. We will need to demonstrate that Zimura API produced through the scaled-up process is analytically comparable to the Zimura we are currently using before API manufactured through the scaled-up process can be used for commercial drug supply. We also plan to make a change to the vial used for the finished Zimura drug product during the course of the ISEE2008 trial in order to support a more robust fill/finish operation at commercial scale. These activities are costly, time-consuming and uncertain in outcome. We may not be able to successfully scale up or validate our manufacturing process for Zimura, demonstrate analytical comparability of the Zimura API manufactured through the scaled up process with the previously manufactured Zimura API, or establish the long-term stability of the finished Zimura drug product stored in the new vial container. We may need to perform additional work beyond what we currently plan to establish manufacturing and analytical capabilities sufficient to obtain regulatory approval of our manufacturing process for Zimura and to support potential

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commercial operations. If any of the foregoing events occur, it could result in delays or increased costs to support our future development and commercialization of Zimura, even if we successfully complete any required clinical trials for Zimura and obtain sufficient and favorable safety and efficacy data.
Some of the standards of the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use, which establishes basic guidelines and standards for drug development in the United States, the European Union, Japan and certain other countries, do not apply to oligonucleotides, including aptamers. As a result, there are limited established generally accepted manufacturing or quality standards for the production of Zimura. The lack of uniform manufacturing and quality standards among regulatory agencies may delay regulatory approval of Zimura.
The manufacture of gene therapy products is complex with a number of scientific and technical risks, some of which are common to the manufacture of drugs and biologics and others of which are unique to the manufacture of gene therapies. We have limited experience with gene therapy manufacturing and are dependent on our third-party contract manufacturers and sole source suppliers.
Gene therapy drug products are complex and difficult to manufacture. We believe that the high demand for clinical gene therapy material and a scarcity of potential contract manufacturers may cause long lead times for establishing manufacturing capabilities for gene therapy drug development activities. Even after a manufacturer is engaged, any problems that arise during manufacturing, including during process development, may result in unanticipated delays to our timelines, including delays attributable to securing additional manufacturing time slots. There may also be long lead times to manufacture or procure starting materials such as plasmids and cell lines, especially for high-quality starting materials that are cGMP compliant. In particular, plasmids, cell lines and other starting materials for gene therapy manufacture are usually sole sourced, as there are a limited number of qualified suppliers. The progress of our gene therapy programs is highly dependent on these suppliers providing us or our contract manufacturers with the necessary starting materials that meet our requirements in a timely manner. A failure to procure or a shortage of necessary starting materials likely would delay our manufacturing and development timelines.
A number of factors common to the manufacturing of biologics and drugs could also cause production or quality issues for gene therapies, including raw material or starting material variability in terms of quality, cell line viability, productivity or stability issues, product and process impurities, shortages of any kind, shipping, distribution, storage and supply chain failures, growth media contamination, equipment malfunctions, operator errors, facility contamination, labor problems, natural disasters, disruption in utility services, terrorist activities, or acts of god that are beyond our or our contract manufacturer's control. It is often the case that early stage process development is conducted with materials that are not manufactured using cGMP starting materials, techniques or processes and which are not subject to the same level of analysis that would be required for clinical grade material. We may encounter difficulties in translating the manufacturing processes used to produce research grade materials to cGMP compliant processes, and any changes in the manufacturing process may affect the safety and efficacy profile of our product candidates. In particular, we and our contract manufacturers are developing our own manufacturing processes, which differ from those originally used by our university collaborators, for example, by using different starting materials. We may not be able to successfully translate the manufacturing process and our manufactured materials may not match the safety and efficacy profile of those used by the universities.
Because manufacturing for early stage research is often done under different conditions, using different starting materials and on a smaller scale than what is required for manufacturing for clinical supplies, we may face challenges in adapting the manufacturing processes that were used by our licensors and other academic collaborators and scaling up these processes as necessary to support supply for clinical trials. In order to progress the development of IC-100, IC-200 or any other gene therapy product candidate we may in-license or acquire, we will need to devote significant time and financial resources to establishing manufacturing processes that are sufficient for IND-enabling preclinical toxicology studies as well as clinical supplies. If we are not able to establish gene therapy manufacturing or related processes in a manner required for further development of our gene therapy product candidates, our development plans may be delayed or stalled and our business may be materially harmed.
An important part of manufacturing drug products is performing analytical testing. Analytical testing of gene therapies involves tests that are more numerous, more complex in scope and take a longer time to develop and to conduct as compared to those used for traditional drugs. We and our contract manufacturers need to expend considerable time and resources to develop assays and other analytical tests for our gene therapy product candidates, including assays to assess the potency of our gene therapy product candidates. Some assays need to be outsourced to specialized testing laboratories. Even when assays are developed, they need to be further tested, qualified and validated, which may take substantial time and resources. Because of the lagging nature of analytical testing, we may proceed with additional manufacturing and other development activities without having first fully characterized our manufactured materials. If the results of the testing fail to meet our expectations or applicable requirements, we may need to delay or repeat certain manufacturing and development activities.

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We are only in the early stages of establishing manufacturing capabilities for our HtrA1 inhibitor program.
We have recently engaged a CDMO to conduct process development, scale-up and GMP manufacture of the API for the lead compound from our HtrA1 inhibitor program for potential preclinical toxicology studies and clinical trials. The time and efforts required for us to fully establish manufacturing capabilities for our HtrA1 inhibitor program, including developing a viable manufacturing process, if any, may delay or impair our ability to develop this program in accordance with our expected timelines.
We face substantial competition, which may result in others developing or commercializing products before or more successfully than we do.
The development and commercialization of new drug products is highly competitive. We face competition with respect to our product candidates and other programs from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies, as well as generic and biosimilar companies, worldwide. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization. Some of these competitive products and therapies are based on scientific approaches that are the same as or similar to our approach, and others are based on entirely different approaches. We also will face similar competition with respect to any product candidates that we may seek to develop or commercialize in the future.
We have recently transitioned to a business strategy that includes a focus on the development of gene therapies for orphan inherited retinal diseases. There are many companies pursuing gene therapy approaches for orphan and age-related retinal diseases. Some of them have better name recognition, more resources and a longer history of developing gene therapies than we do. Competition in this field is intense and for many inherited retinal diseases, there is a limited number of potential patients. If any of our competitors obtains FDA, EMA or other regulatory approval for their products more rapidly than we may obtain approval for ours, our competitors could establish a strong market position before we are able to enter the relevant market, which may significantly limit the commercial opportunity for our product candidates.
Our commercial opportunity could also be reduced or eliminated if one or more of our competitors develop and commercialize products that are more effective, safer, have fewer or less severe side effects, are more convenient to use or are less expensive than our product candidates. For example, the method of administration of Zimura, intravitreal injection, is commonly used to administer ophthalmic drugs for the treatment of severe diseases and is generally accepted by patients facing the prospect of severe visual loss or blindness. A therapy that offers a less invasive or less frequent method of administration, however, might have a competitive advantage over one administered by monthly intravitreal injections, depending on the relative safety of the other method of administration. Furthermore, our ability to compete may be affected in many cases by insurers or other third-party payors, particularly Medicare, seeking to encourage the use of less expensive or more convenient products.
In the case of orphan diseases such as the IRDs for which we are researching and developing potential treatments, should we be successful in development, our commercialization efforts may rely on non-patent market exclusivity periods under the Orphan Drug Act and the Hatch-Waxman Act. The Orphan Drug Act only provides exclusivity periods for the specific drug granted orphan drug designation for a specific indication. In addition, there are limited circumstances under each of the Orphan Drug Act and the Hatch-Waxman Act that could result in our loss of data and marketing exclusivity, which could allow a competitor to enter the market. Failure to maintain either data or market exclusivity would have a material adverse effect on our ability to commercialize our product candidates.
Many of our competitors have significantly greater financial and human resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Smaller and other early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient enrollment for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our development programs. Our timelines may be delayed to the extent clinical trials conducted by our competitors are enrolling patients that would otherwise be eligible to participate in our trials at the same time we are seeking to enroll these patients.
Based on publicly available information, we are aware of the following research and development programs that may be competitive with programs we are pursuing. Other competitive programs may exist of which we are not aware.
Competitive considerations for dry AMD and GA:
There are a number of products in preclinical and clinical development by third parties to treat dry AMD or GA secondary to dry AMD. In general, these product candidates can be categorized based on their proposed mechanisms

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of action. The mechanisms of action for these product candidates include complement system and inflammation suppression, visual cycle modulators, antioxidants and neuroprotectants, cell and gene therapies and vascular perfusion enhancers. We are aware that Apellis Pharmaceuticals, Inc., or Apellis, Roche AG, Novartis AG and MorphoSys AG, Hemera Biosciences, Inc., Gemini Therapeutics, Inc., NGM Biopharmaceuticals Inc., Gyroscope Therapeutics, Achillion Pharmaceuticals, Inc., and Biogen Inc. each have complement inhibitors in development for dry AMD, including, in the cases of Hemera Biosciences and Gyroscope Therapeutics, complement inhibitor gene therapies. We believe that the most advanced of these programs is Apellis's pegylated, synthetic peptide targeting complement protein C3. As recently as January 2020, Apellis confirmed its expectation that it would finish patient enrollment in its Phase 3 program during the early part of 2020 with the goal of enrolling approximately 1,200 patients, which would enable a primary 12-month efficacy analysis as early as the middle of 2021. If Apellis's Phase 3 program for its C3 complement inhibitor product candidate is successful, it is likely that Apellis would obtain marketing approval for its product candidate in advance of when we could reasonably expect marketing approval for Zimura in GA or a product candidate from our HtrA1 inhibitor program in GA, if at all. Moreover, we are aware that several other companies, including Allergan Inc., Allegro Ophthalmics, LLC, Alkeus Pharmaceuticals Inc., EyePoint Pharmaceuticals, Inc., Lineage Cell Therapeutics, Inc. and Stealth BioTherapeutics Corp, working in collaboration with Alexion Pharmaceuticals, Inc., are pursuing development programs for the treatment of dry AMD or GA using different mechanisms of action outside of the complement system.
Competitive considerations for Stargardt disease:
There are a number of products in preclinical research and clinical development by third parties to treat Stargardt disease. We are aware that Sanofi, Acucela Inc., Alkeus Pharmaceuticals, Inc., Lin BioScience, Inc., Nightstar Therapeutics plc (prior to its acquisition by Biogen Inc.), ProQR Therapeutics N.V., Spark Therapeutics and Generation Bio Co. each have research or development programs in Stargardt disease. Three of these programs, Acucela, Alkeus and Lin BioScience, are exploring the use of oral therapeutics, while Sanofi, with technology provided by Oxford BioMedica plc, Nightstar and Spark are each using a gene therapy approach and ProQR is using an RNA based approach. Acucela’s product candidate is in Phase 3 development while Alkeus’s and Sanofi’s product candidates are each in Phase 2 development. Spark's program is in the research phase. In addition, several academic organizations have early stage programs in Stargardt disease.
Competitive considerations for RHO-adRP:
We are aware that ProQR Therapeutics N.V. is developing an RNA-based therapeutic for RHO-adRP, for which it has filed an IND and plans to enroll patients this year. We are also aware that multiple academic institutions have early stage gene therapy development programs in RHO-adRP. In addition, prior to its acquisition by Biogen Inc., Nightstar Therapeutics plc had a preclinical AAV gene therapy program in RHO-adRP. Sanofi is also exploring a potential program in this disease.
Competitive considerations for BEST1-related IRDs:
We are aware that, prior to its acquisition by Biogen, Nightstar Therapeutics plc had a preclinical AAV gene therapy program for one or more BEST1-related IRDs.
Competitive considerations for LCA10:
We are aware that Editas Medicine, Inc. (in partnership with Allergan plc) has a gene editing program for LCA10, an IND for which was submitted in late 2018, ProQR Therapeutics N.V. is developing an RNA-based therapeutic for LCA10 that is currently in late-stage clinical development, Generation Bio Co. has a preclinical program that utilizes ceDNA technology to target LCA10 and Oxford Biomedica plc is developing a lentiviral gene therapy program for LCA10 that is in preclinical development. In addition, several academic institutions have preclinical programs in LCA10.

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Competitive considerations for USH2A-related IRDs:
There are a number of products in preclinical research and clinical development by third parties to treat USH2A-related IRDs. We are aware that ProQR Therapeutics N.V. is pursuing two RNA based approaches for different mutations causing Usher 2A, one of which is currently in Phase 1/2 clinical development and the other of which is in preclinical development. We are also aware that Editas Medicine, Inc. and Odylia Therapeutics are exploring potential programs in USH2A-related IRDs.
If we are unable to establish sales, marketing and distribution capabilities or enter into sales, marketing and distribution agreements with third parties, we may not be successful in commercializing any of our product candidates that we develop if and when any such product candidate is approved.
As a company, we have no experience in the sale, marketing or distribution of pharmaceutical products. We currently do not have any sales, marketing or distribution infrastructure or dedicated personnel. To achieve commercial success for any approved product, we must either develop a sales, marketing and distribution organization or outsource those functions to third parties. We expect that our commercial strategy for any of our product candidates, including whether to retain commercial rights and market and sell the product candidate ourselves or to utilize collaboration, distribution or other marketing arrangements with third parties, would be determined based on a variety of factors, including the size and nature of the patient population, the disease area, the particular indications for which the product candidate is approved, the territories in which the product candidate may be marketed and the commercial potential for such product candidate. We are developing Zimura and our HtrA1 inhibitor program for GA secondary to dry AMD, which is a condition affecting a relatively large number of individuals. In contrast, our gene therapy programs are currently being developed for orphan IRDs with a limited number of affected individuals. If any of our product candidates is approved, the size and nature of the affected patient population will be an important factor in our commercial strategy. In addition, our commercial strategy would vary depending on whether the disease is typically treated by general ophthalmology practitioners, specialists, such as retinal specialists, or sub-specialists, such as retinal specialists with particular expertise in IRDs.
There are risks involved with establishing our own sales, marketing and distribution capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing and distribution 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 inhibit our efforts to commercialize our products on our own include:
our inability to recruit and retain adequate numbers of effective sales and marketing personnel;
the inability of sales personnel to obtain access to adequate numbers of physicians who may prescribe our products;
the lack of complementary products to be offered by our sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and
unforeseen costs and expenses associated with creating an independent sales and marketing organization.
If we enter into arrangements with third parties to perform sales, marketing and distribution services, our product revenues and our profitability, if any, are likely to be lower than if we were to market, sell and distribute ourselves any products that we develop. In addition, we may not be successful in entering into arrangements with third parties to sell, market and distribute our product candidates or may be unable to do so on terms that are favorable to us. 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 products effectively. If we do not establish sales, marketing and distribution capabilities successfully, either on our own or in collaboration with third parties, we would not be successful in commercializing our product candidates, if approved.
Even if any of our product candidates receives marketing approval, such product candidate may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success and the market opportunity for any of our products and product candidates may be smaller than we estimate.
The degree of market acceptance of any product candidate that we are developing or we may develop, if approved for commercial sale, will depend on a number of factors, including:
efficacy and potential advantages compared to alternative treatments, including the existing standard of care;

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any restrictions in the label on the use of our products in combination with other medications or with certain devices;
any restrictions in the label on the use of our products by a subgroup of patients, including, for example, for our gene therapy product candidates, if approved, restrictions on use of our product if a patient previously received another gene therapy product;
restrictions in the label imposing a waiting period in between intravitreal or subretinal injections;
our and any commercialization partner’s ability to offer our products at competitive prices;
availability of governmental and third-party payor coverage and adequate reimbursement;
increasing reimbursement pressures on treating physicians due to the formation of accountable care organizations and the shift away from traditional fee-for-service reimbursement models to reimbursement based on quality of care and patient outcomes;
willingness of the target patient population to try new therapies and of physicians to prescribe these therapies, particularly in light of the existing available standard of care or to the extent our product candidates require invasive procedures for administration, such as subretinal surgery;
prevalence and severity of any side effects or perceived safety concerns, especially for new therapeutic modalities such as gene therapy; and
whether competing products or other alternatives are more convenient or easier to administer, including whether co-formulated alternatives, alternatives that can be co-administered in a single syringe or alternatives that offer a less frequent dosing regimen than monthly intravitreal injections, in the case of Zimura, or a less invasive method of administration than subretinal injection, in the case of our gene therapy product candidates, come to market. For example, Apellis is testing its complement inhibitor product candidate for GA with both monthly and every other month dosing regimens, and may obtain a label with an every other month dosing regimen, while we expect that any label we may obtain for Zimura in GA will require monthly administrations. If so, physicians and patients may find Apellis's dosing regimen more convenient than ours.
Our development program for Zimura in GA uses an anatomical primary endpoint, the mean rate of change in GA growth. We believe that this efficacy assessment is most likely to demonstrate clinical relevance for an investigational product across a heterogeneous GA patient population and other potential assessments, such as comparisons of visual acuity, are not as clinically meaningful for patients with GA. However, to date there is no direct functional corollary to the anatomical measure that we are using as our primary endpoint. Although we evaluated vision as a secondary endpoint in the OPH2003 trial, the trial was not designed to reliably assess differences in mean changes in vision with statistical significance. Patients, physicians and payors may not recognize the value of, and we may not be able to obtain marketing or reimbursement approval for, Zimura without demonstrating a functional benefit to vision. To do so, we may need to conduct additional clinical trials, which may not ultimately demonstrate a functional benefit to vision.
For each of our Zimura trials where patients receive multiple intravitreal injections on the same day, we have provided for a delay in the second intravitreal injection to occur during the same office visit to minimize the risk of an unacceptable increase in intraocular pressure as a result of the volume of the multiple injections. If Zimura receives marketing approval for a particular indication and the approved label requires a waiting period between injections administered on the same day or a dosing regimen that requires multiple office visits per month, the potential market opportunity for Zimura may be limited to the extent that physicians and patients find such a waiting period or dosing regimen unacceptable.
In addition, the potential market opportunity for any product candidate is difficult to estimate precisely. Our estimates of the potential market opportunity for our product candidates include several key assumptions based on our expectations of the safety and effectiveness of the relevant product candidate, the expected patient population for our product candidates, our industry knowledge, the competitive landscape for the indications for which we are developing our product candidates and programs, market response to Spark Therapeutics's Luxturna®, Novartis AG's Zolgensma® and anti-VEGF agents currently approved for treatment of wet AMD, third-party research reports and other surveys. While we believe that our internal assumptions are reasonable, no independent source has verified such assumptions and any of these assumptions could prove to be inaccurate, and the actual market for such product candidates could be smaller than our estimates of our potential market opportunity.
There is a variety of factors that could contribute to the actual number of patients who receive an approved therapy being less than our estimates of the potential addressable market. With respect to our programs for orphan diseases, our understanding of both the number of people who have these diseases, as well as the subset of people with these diseases who

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have the potential to benefit from treatment with our product candidates, are based on estimates. These estimates may prove to be incorrect and new studies may reduce the estimated incidence or prevalence of these diseases. The number of patients in the United States, the European Union and elsewhere may turn out to be lower than expected, patients may not be amenable to treatment with our products or patients may become increasingly difficult to identify and access, all of which would adversely affect our business, financial condition, results of operations and prospects. Further, the severity of the progression of a disease up to the time of treatment, especially in certain degenerative conditions such as IRDs, likely will diminish the therapeutic benefit conferred by a gene therapy due to irreversible cell death. Certain patients’ immune systems and prior exposure to the virus used to deliver a gene therapy might inhibit the successful delivery of certain gene therapy products to the target tissue, thereby limiting eligibility for treatment or limiting treatment outcomes. If the number of patients that may benefit from the treatments we are seeking to develop is lower than we expect, our business, financial condition, results of operations and prospects may be adversely affected.
Even if we are able to commercialize any of the product candidates that we may develop, the product may become subject to unfavorable pricing regulations, pricing dynamics, third-party reimbursement practices or healthcare reform initiatives, which would harm our business.
The regulations that govern marketing approvals, pricing and reimbursement for new drug products vary widely from country to country.  Health care reform, including increasing scrutiny of drug prices, is an issue of intense political focus, particularly in the United States. Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals or in ways that could alter the mechanism by which pharmaceutical prices are negotiated or otherwise determined.  Many countries outside the United States require approval of the sale price of a drug before it can be marketed, and to apply for and obtain such an approval in certain countries, we or a commercialization partner may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control or negotiation even after initial approval is granted. In particular for Zimura in GA, we may need to demonstrate visual function in order to obtain reimbursement approval, although our clinical trials, which use an anatomic endpoint as the primary efficacy endpoint, are not designed to demonstrate a functional benefit with statistical significance. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our or any commercialization partner’s commercial launch of the product, possibly for lengthy time periods, which would negatively impact the revenues we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates obtain marketing approval and are widely accepted and prescribed or used by physicians.
In addition, even in countries where pharmaceuticals are not subject to strict pricing regulations through a governmental review and approval process, we may nonetheless face an unfavorable pricing environment as a result of political pressure or market dynamics. Because there are only two FDA-approved gene replacement therapy products, both of which launched in the United States within the past two years, the pricing environment for gene therapies is in the very early stages of its development. Gene therapies are generally intended to be one-time treatments or, at a minimum, to provide a benefit over an extended period lasting several years. If we are successful in obtaining marketing approval for any of our gene therapy product candidates, we will need to convince third-party payors of the value that our gene therapy product offers. Third-party payors may be unwilling to accept substantial upfront costs for a therapy where the benefits may not be realized or are realized over a period of years during which the patient may no longer be enrolled in the payor's plan. Although payors and manufacturers may be incentivized to agree to outcomes-based payment structures for gene therapies, where manufacturers provide rebates or a portion of the contract price is forgiven if an efficacy or durability threshold is not met for an individual patient, market dynamics in the United States currently do not facilitate these types of outcome-based payments, in particular because of rules that require that government payors, such as Medicaid, receive the “best price” for a drug, regardless of outcome. The perceived high cost for pharmaceutical products to treat orphan diseases, where manufacturers seek to recoup development costs and earn a profit for a therapy intended to treat a relatively small patient population, may attract increased political and public scrutiny. In particular, the $2.1 million list price for Zolgensma has generated significant public scrutiny over the prices of new pharmaceuticals coming to the market, including gene therapies, and as a result, Novartis has proposed permitting third-party payors to pay for Zolgensma in annual installments over five years instead of as a lump sum. Moreover, if we obtain marketing approval for a product candidate, such as Zimura, in more than one indication, including, for example in an orphan indication such as STGD1 and a non-orphan indication such as GA secondary to dry AMD, such a product candidate likely would only be sold at one price in any given country, regardless of the indications for which it is prescribed. This dynamic may result in our charging a price that does not generate profits in each indication for which the product is approved.
Our ability and the ability of any commercialization partner to commercialize a product candidate successfully also will depend in part on the extent to which reimbursement for these products and related treatments will be available from government health authorities, private health insurers and other organizations. Government authorities and third-party payors,

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such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. A major trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party payors, particularly Medicare, have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications and encouraging the substitution of lower cost or generic products. Pricing pressures recently experienced by the pharmaceutical industry may be further exacerbated by legislative and policy changes under consideration by the Trump Administration and many states.  For example, the Trump Administration, through the Center for Medicare & Medicaid Service, or CMS, announced in late 2018 an advance notice of proposed rulemaking describing a potential mandatory reference pricing model for Medicare Part B drugs under which the prices paid for these drugs will be adjusted in relation to an international pricing index that includes prevailing prices from other countries with strict price controls.  CMS is considering issuing a proposed rule that would describe the model in more detail, with the goal of starting the model in spring 2020.  The Trump Administration has also expressed an interest in authorizing and/or directing CMS or other agencies of the U.S. government to negotiate prices for drugs covered by Medicare directly with pharmaceutical companies.  If this were to occur, especially for AMD drugs where a large portion of the patient population is over the age of 65 and is therefore covered by Medicare, there could be significant downward pressure on prices charged, not only for patients covered by Medicare, but also for patients covered by private insurers who may follow the government’s lead on price. Moreover, increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for pharmaceutical products. We cannot be sure that coverage and reimbursement will be available for any product that we commercialize or any commercialization partner commercializes on our behalf, and, even if these are available, the level of reimbursement may not be satisfactory.
Reimbursement may affect the demand for, or the price of, any product candidate for which we obtain marketing approval. Obtaining and maintaining adequate reimbursement for our products may be particularly difficult because of the higher prices often associated with drugs administered under the supervision of a physician. We or any commercialization partner may be required to conduct expensive pharmacoeconomic studies to justify coverage and reimbursement or the level of reimbursement relative to other therapies that may be on the market. If coverage and adequate reimbursement are not available or reimbursement is available only at limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval.
There may be significant delays in obtaining reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or similar regulatory authorities outside the United States. For example, several insurers have limited the subpopulation for or imposed additional eligibility criteria for paying for Zolgensma, beyond the requirements of the approved FDA label, such as requiring that any eligible patients must receive another treatment first and demonstrate that the other treatment is ineffective before using Zolgensma. Moreover, eligibility for reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs, and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States, a policy that President Trump and certain members of the U.S. Congress have expressed interest in pursuing. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. Our and any commercialization partner’s inability to promptly obtain coverage and profitable payment rates from both government-funded and private payors for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.
For a further discussion of health care reform and other political factors affecting drug prices, see the risk factor herein entitled "Current and future legislation and regulations may increase the difficulty and cost for us and any future collaborators to obtain marketing approval of and commercialize our product candidates and affect the prices we or they may charge for such products, when and if approved."

Ethical, legal and social issues related to genetic testing may reduce demand for any gene therapy product candidates we develop and for which we seek marketing approval.

We anticipate that prior to receiving certain gene therapies, including as part of a clinical trial, patients would be required to undergo genetic testing. Genetic testing has raised concerns regarding the appropriate utilization and the confidentiality of information provided by genetic testing. The ownership of genetic data is an area of the law that is unclear and varies across jurisdictions. Genetic tests for assessing a person’s likelihood of developing a chronic disease have focused public attention on the need to protect the privacy of genetic information. For example, concerns have been raised that insurance carriers and employers may use these tests to discriminate on the basis of genetic information, resulting in barriers to

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the acceptance of genetic tests by consumers. This dynamic could lead to governmental authorities restricting genetic testing or calling for limits on or regulating the use of genetic testing, particularly for diseases for which there is no known cure, as well as the use of genetic data. Any of these scenarios could decrease the pool of patients willing to participate in a clinical trial for a gene therapy and the demand for a gene therapy once it is approved.

The novel coronavirus outbreak that began in Wuhan, China may affect our ability to recruit or retain patients for our clinical trials, disrupt our supply chains or have other adverse effects on our business and operations.

In December 2019, an outbreak of respiratory illness caused by a novel coronavirus began in Wuhan, China. As of February 2020, that outbreak has lead to tens of thousands of confirmed cases worldwide, with many countries throughout the world confirming cases. The World Health Organization has declared the outbreak a global public health emergency. In addition to those who have been directly affected, millions more have been affected by government efforts in China and around the world to slow the spread of the outbreak through quarantines, travel restrictions, heightened border scrutiny and other measures.  The outbreak and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. The future progression of the outbreak and its effects on our business and operations are uncertain. We seek to enroll patients for our clinical trials at sites located both in the United States and internationally. We may face difficulties recruiting or retaining patients in our ongoing and planned clinical trials if patients are affected by the virus or are fearful of traveling to our clinical trial sites because of the outbreak. We and our third-party contract manufacturers, contract research organizations and clinical sites may also face disruptions in procuring items that are essential for our research and development activities, including, for example, raw materials used in the manufacture of our product candidates, medical and laboratory supplies used in our clinical trials or preclinical studies or animals that are used for preclinical testing, in each case, that are sourced from abroad or for which there are shortages because of ongoing efforts to address the outbreak.
Product liability lawsuits against us or any future commercialization partner could divert resources, cause us to incur substantial liabilities and limit commercialization of any products that we may develop or in-license.
We face an inherent risk of product liability exposure related to the testing of any product candidate that we develop in human clinical trials, and we and any future commercialization partner will face an even greater risk if we commercially sell any products that we develop or in-license. If we become subject to or otherwise cannot successfully defend ourselves against claims that our product candidates or our products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
decreased demand for any product candidates or products that we may develop or in-license;
injury to our reputation and significant negative media attention;
withdrawal of clinical trial participants;
significant costs to defend the related litigation;
substantial monetary awards to trial participants or patients;
loss of revenue;
reduced time and attention of our management to pursue our business strategy; and
the inability to commercialize any products that we may develop or in-license.
We currently hold $10.0 million in product liability insurance coverage in the aggregate, with a per incident limit of $10.0 million, which may not be adequate to cover all liabilities that we may incur. We will need to increase our insurance coverage when and if we begin commercializing an approved product. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise, including coverage for any local jurisdictions where we conduct clinical trials. In addition, if a commercialization or collaboration partner were to become subject to product liability claims or were unable to successfully defend themselves against such claims, any such commercialization or collaboration partners could be more likely to terminate such relationship with us and therefore substantially limit the commercial potential of our products.

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Risks Related to Our Dependence on Third Parties
We contract with third parties for the manufacture of and for providing starting materials for our product candidates for preclinical development activities and clinical trials and expect to continue to do so in the future. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or product candidates of sufficient quality, which could delay, prevent or impair our development or commercialization efforts.
We do not currently own or operate manufacturing facilities for the production of clinical or commercial quantities of any of our product candidates and have a limited number of personnel hired to supervise outside contract manufacturers. We currently rely upon and expect to continue to rely upon third-party contract manufacturers to manufacture preclinical and clinical supplies of product candidates we are developing or may develop and commercial supplies of products if and when approved for marketing by applicable regulatory authorities. Furthermore, we and our contract manufacturers currently rely upon, and for the foreseeable future expect to continue to rely upon, sole-source suppliers of certain raw materials, plasmids and other specialized components of production used in the manufacture and fill/finish of our product candidates.
We currently rely exclusively upon, and purchase on a purchase order basis, a single third-party manufacturer to provide Zimura drug substance and a different single third-party manufacturer to provide fill/finish services for Zimura. Although we plan to enter into a long-term clinical and commercial supply agreement with our third-party manufacturer, we do not currently have any contractual commitments for the supply of Zimura drug substance and we may not be able to come to agreement with our third-party manufacturer for a long-term clinical or commercial supply agreement. We also do not currently have arrangements in place for redundant supply or a second source for drug substance for Zimura or a second source for fill/finish services for Zimura. We purchase the polyethylene glycol, or PEG, reagent used to modify the chemically synthesized aptamer in Zimura on a purchase order basis from a single third-party supplier. We do not currently have any contractual commitments for supply of the PEG reagent we use for Zimura. The prices for manufacturing activities that are not yet contractually committed may vary substantially over time and adversely affect our financial results.
We have engaged a gene therapy CDMO for preclinical and Phase 1/2 clinical supply of IC-100 and IC-200. For our HtrA1 inhibitor program, we have recently engaged a CDMO to conduct process development, scale-up and GMP manufacture of the API of our lead compound for potential preclinical toxicology studies and clinical trials.
Our current and anticipated future dependence upon others for the manufacture of the product candidates that we are developing or may develop may adversely affect our business plan and future growth. For example, any performance failure or differing priorities on the part of our existing or future manufacturers could delay preclinical or clinical development or marketing approval of our product candidates. Our dependence on third party manufacturers may limit our ability to commercialize on a timely and competitive basis any products that receive marketing approval.
Our third-party manufacturer for the API for Zimura and our CDMO for IC-100 and IC-200 are currently undergoing rapid expansion, including ramping up for production for existing clients, bringing on additional clients, opening new facilities, installing and validating new equipment, and hiring and training new personnel. Their expansion, including any issues that they may experience while expanding, could affect the timing, costs, progress, quality and outcome of our planned manufacturing activities with those manufacturers and delay or hinder our development plans.
If any of our third-party manufacturers, fill/finish providers or sole-source suppliers fail to fulfill our contracts or purchase orders, or if any of these manufacturers or suppliers should become unavailable to us for any reason, including as a result of capacity constraints, differing priorities, regulatory compliance issues, financial difficulties or insolvency, we believe that there are a limited number of potential replacement manufacturers or sole source suppliers, and we likely would incur added costs and delays in identifying or qualifying such replacements. We may be unable to establish agreements with such replacement manufacturers, fill/finish providers or sole-source suppliers or to do so on acceptable terms.
In addition, to the extent that we or our third party manufacturers rely on materials that are sourced outside the United States, our supplier relationships could be interrupted due to international supply disruptions, including those caused by geopolitical and other issues. For example, trade disputes, trade negotiations or the imposition of tariffs between the United States and its trading partners could cause delays or disruptions in our supply of starting materials for our product candidates.
Reliance on third-party manufacturers entails additional risks, including:
our product candidates may compete with other product candidates and products for access to a limited number of suitable manufacturing facilities that operate under cGMP conditions;
reliance on the third party for regulatory compliance, quality assurance and quality control;
the possible breach of the manufacturing agreement by the third party;

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the possible misappropriation of our proprietary information, including our trade secrets and know-how; and
the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.
Third-party manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products and harm our business and results of operations.
We rely upon third parties in conducting our preclinical development activities and clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such activities.
We are relying upon and expect in the future to rely upon third parties, such as contract research organizations, or CROs, clinical data management organizations, biostatisticians, medical institutions (including reading centers) and clinical investigators, in conducting our preclinical testing and clinical trials for our product candidates. These third parties may also have relationships with other entities, some of which may be our competitors. We or these third parties may terminate their engagements with us at any time for a variety of reasons, including a failure to perform by the third parties. If we need to enter into alternative arrangements, our product development activities could potentially be delayed and could potentially be very costly.
We also rely upon our university collaborators to conduct some of our preclinical studies. In particular, Penn has the canine disease model for two of the diseases we are aiming to treat: RHO-adRP and BEST1-related retinal diseases. Our preclinical development plans for both IC-100 and IC-200 include conducting certain preclinical studies using the associated canine disease models. If the canines that we are intending to use are not available to us for any reason, our development of IC-100 or IC-200 could potentially be delayed or otherwise adversely affected.
Our reliance on these third parties for preclinical testing and clinical development activities reduces our control over these activities but does not relieve us of our responsibilities. For example, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with GCPs for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. We also are required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database within specified timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.
Over the past few years, there has been increasing oversight by the FDA and other regulatory authorities on data integrity, especially in the research and development of novel therapies such as gene therapies. We rely upon the practices of and systems in place at our third party collaborators in generating data to support our preclinical and clinical development programs and for quality control over this data. Their practices and systems vary in scope and effectiveness and we have a limited number of personnel to supervise, including to perform quality assurance of, those practices and systems. Any failure of such practices or systems to comply with our stated protocols or regulatory requirements could adversely affect the quality of the data generated by these studies. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our preclinical studies or clinical trials in accordance with regulatory requirements or our stated protocols, we would not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates and would not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates.
We also rely upon other third parties to store, package, label and distribute drug supplies for our clinical trials and to store materials for our development activities. In particular, we rely on a limited number of third parties to store starting materials, drug substance and drug product for our product candidates and programs. Any performance failure on the part of these third parties could delay preclinical development, clinical development or marketing approval of our product candidates or commercialization of our products and adversely affect our results of operations.
We rely upon third-party researchers to advance our sponsored research programs. These arrangements may not ultimately yield any promising product candidates for preclinical or clinical development. We may not be able to fully realize the benefits of any intellectual property generated by these arrangements.
Part of our strategy involves collaborative sponsored research to be performed by third-party research institutions. Although we seek to direct this research and advise on the design of these projects as well as critical development decisions, this research is being performed by individuals who are not our employees and the timeline and quality of the research efforts are outside of our direct control. Academic investigators and other researchers may have different priorities than we do as a

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biopharmaceutical drug development company. The sponsored research agreements we enter into for these programs generally provide that any inventions resulting from the research will be owned by the research institution performing the research, and that we have an option to negotiate for a license to develop and exploit any such inventions. Confidential information and new inventions derived from these research efforts may be disclosed through publications or other means prior to our third-party research collaborators being able to protect such intellectual property through the filing of patent applications. Our third-party research collaborators may not be able to obtain or maintain full ownership of inventions that are derived from the research or associated rights, which may limit their ability to provide us with a license to all relevant intellectual property on terms and conditions that are acceptable to us. Even if our collaborative research efforts yield promising results or new technological advances, they may not ultimately result in our being able to protect, develop or exploit the resulting intellectual property.
If we are not able to establish collaborations to advance our development programs, we may have to alter our development and commercialization plans.
The development and potential commercialization of our product candidates is likely to require substantial additional cash to fund expenses. In addition, the commercialization of a product candidate in markets outside of the United States requires regulatory expertise and commercial capabilities that are specific to the local market. For some of our product candidates, we may seek to collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization of those product candidates. In particular, we continue to explore potential collaboration opportunities for the further development and potential commercialization of Zimura.
We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such collaboration could be more attractive than the one with us for our product candidate. For our gene therapy programs, we are party to in-license agreements that limit who we can collaborate with or require the approval of our licensor for us to enter into a collaboration, and any future license agreements that we may enter into may have similar restrictions. Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among pharmaceutical and biotechnology companies that have resulted in a reduced number of potential future collaborators.
If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to fund and undertake development or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop those product candidates or bring them to market and generate product revenue.
If we enter into collaborations with third parties for the development or commercialization of our product candidates, any such collaborations will carry numerous risks. If any of our collaborations are not successful, we may not be able to capitalize on the market potential of these product candidates.
We may utilize a variety of types of collaboration, distribution and other marketing arrangements with third parties to develop or commercialize our product candidates, either in the United States, or in markets outside the United States. We also may seek third-party collaborators for development and commercialization of other product candidates we may develop. Our likely collaborators for any sales, marketing, distribution, development, licensing or broader collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. If we do enter into any additional arrangements with third parties in the future, we would likely have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product candidates. Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities and efforts to successfully perform the functions assigned to them in these arrangements.

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Collaborations involving our product candidates could pose numerous risks to us, including the following:
collaborators, including marketing and distribution collaborators, have significant discretion in determining the efforts and resources that they will apply to these collaborations and may not perform their obligations as expected;
collaborators may deemphasize or not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus, changes in product candidate priorities or available funding or changes in priorities as a result of a merger, acquisition or other corporate restructuring or transaction;
collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;
collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;
we could grant exclusive rights to our collaborators, which would prevent us from collaborating with others;
disagreements or disputes with collaborators, including disagreements or disputes over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of products or product candidates, might lead to additional responsibilities for us with respect to product candidates or might result in litigation or arbitration, any of which would divert management attention and resources, be time-consuming and be expensive;
collaborators with marketing and distribution rights to one or more of our products may not commit sufficient resources to the marketing and distribution of such product or products;
collaborators may not properly maintain or defend our intellectual property rights, may infringe the intellectual property rights of third parties, may misappropriate our trade secrets or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to litigation and potential liability;
laws or practices in certain foreign jurisdictions may require that as a condition of working with a collaborator in such jurisdiction, we agree to certain foreign ownership restrictions, use certain local services or providers, share or license certain of our proprietary information or technology or other conditions that are not attractive to us; and
collaborations may be terminated for the convenience of the collaborator, our breach of the terms of the collaboration or other reasons and, if terminated, we may need to raise additional capital to pursue further development or commercialization of the applicable product candidates.
If a collaborator of ours were to be involved in a business combination or other transaction, the foregoing risks would be heightened, and the business combination or transaction may divert attention or resources or create competing priorities. The collaborator may delay or terminate our product development or commercialization program. If one of our collaborators terminates its agreement with us, we could find it more difficult to attract new collaborators and the perception of our company could be adversely affected.
Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all.
We depend on licenses and sublicenses for development and commercialization rights to Zimura, IC-100, IC-200 and our miniCEP290 program. These license arrangements, as well as the Inception 4 Merger Agreement, impose diligence obligations on us. We may enter into similar arrangements with respect to future product candidates or technologies. Termination of licenses or the failure by us or our licensees, including our potential future commercialization or collaboration partners, to comply with obligations under these or other agreements could materially harm our business and prevent us from developing or commercializing our products and product candidates.
We are party to a license agreement with Archemix on which we depend for rights to Zimura. We are party to two different license agreements, each with UFRF and Penn, on which we depend for rights to IC-100 and IC-200. We are also party to a license agreement with UMMS for our miniCEP290 program. These agreements generally impose diligence,

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development and commercialization timelines, milestone payment, royalty, insurance and other obligations on us. Generally, the diligence obligations contained in these agreements require us to use commercially reasonable efforts to develop, seek regulatory approval for and commercialize the applicable product candidate in the United States and certain territories outside of the United States, including the European Union, Japan and such other markets where it would be commercially reasonable to do so. Under the license agreements for our product candidates, we would not be able to avoid our payment obligations even if we believed a licensed patent right was invalid or unenforceable because the license agreements provide that our licenses to all licensed patent rights would terminate if we challenge the validity or enforceability of any licensed patent right. The Inception 4 Merger Agreement, pursuant to which we acquired our HtrA1 inhibitor program, also imposes specified diligence and milestone payment obligations on us. We may enter into acquisition or licensing agreements in the future that would impose similar obligations on us.
If we fail to comply with our obligations under current or future acquisition and licensing agreements, or otherwise breach an acquisition or licensing agreement as a result of our own actions or inaction or the actions or inactions of our commercialization or collaboration partners, our counterparties may have the right to terminate these agreements, in which event we might not have the rights or the financial resources to develop, manufacture or market any product that is covered by these agreements. Our counterparties also may have the right to convert an exclusive license to non-exclusive in the territory in which we fail to satisfy our diligence obligations, which could materially adversely affect the value of the product candidate being developed under any such agreement. Termination of these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new or restated agreements with less favorable terms, seek alternative sources of financing or cause us to lose our rights under these agreements, including our rights to Zimura, IC-100, IC-200, our miniCEP290 program, and other important intellectual property or technology. Any of the foregoing could prevent us from commercializing our product candidates, which could have a material adverse effect on our operating results and overall financial condition. In the case of our limited diligence obligation under the Inception 4 Merger Agreement, a potential breach of our obligation to use commercially reasonable efforts to develop an HtrA1 inhibitor could lead to a lawsuit with the former equityholders of Inception 4 and result in potential liability to us of up to $5 million.
In addition to the above risks, certain of our intellectual property rights are sublicenses under intellectual property owned by third parties, in some cases through multiple tiers. The actions of our licensors may therefore affect our rights to use our sublicensed intellectual property, even if we are in compliance with all of the obligations under our license agreements. Should our licensors or any of their upstream licensors fail to comply with their obligations under the agreements pursuant to which they obtain the rights that are sublicensed to us, or should such agreements be terminated or amended, our ability to develop and commercialize the relevant product candidates may be materially harmed. While the applicable agreements may contain contractual provisions that would in many instances protect our rights as a sublicensee in these circumstances, these provisions may not be enforceable and may not protect our rights in all instances. Further, we do not have the right to control the prosecution, maintenance and enforcement of all of our licensed and sublicensed intellectual property, and even when we do have such rights, we may require the cooperation of our licensors and their upstream licensors, which may not be forthcoming. Our business could be materially adversely affected if we are unable to prosecute, maintain and enforce our licensed and sublicensed intellectual property effectively.
Moreover, the license agreements for IC-100, IC-200 and our miniCEP290 program reserve for the licensing academic institutions the right to continue to practice for research purposes, the inventions covered by the intellectual property rights that we have in-licensed. These licensing institutions or their collaborators may generate scientific, preclinical or clinical data with respect to our product candidates, separate from our research and development efforts, that is inconsistent with other data for such product candidates, including additional preclinical and clinical data that we develop. Investigators at these institutions may publish, present, or otherwise publicly disclose this data, which may have an adverse impact on the prospects of the development of our product candidates and may harm our business. In addition, these institutions may use these data to support new patent applications which could result in the issuance of patents that may limit our freedom to operate without our obtaining additional licenses to these newly developed inventions.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain or do not maintain patent protection for our technology and products, or if the scope of the patent protection is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be adversely affected.
We currently rely and expect to continue to rely on patent rights to protect our competitive position. Once our patents expire, we may not be able to exclude competitors from commercializing products similar or identical to ours. The U.S. patent rights covering Zimura as a composition of matter are expected to expire in 2025. The U.S. patent rights covering methods of treating certain complement protein mediated disorders with Zimura are expected to expire in 2026. The European patent rights covering the composition of matter of Zimura and methods of treating certain complement protein mediated disorders

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with Zimura are expected to expire in 2025. We expect the clinical development of Zimura to continue for at least the next several years. If so, the patents covering Zimura may expire before the date by which we or a potential commercial partner would be able to commercialize Zimura in the United States or Europe if we seek and obtain marketing approval. Even if we are able to obtain marketing approval for and commercially launch Zimura prior to the expiration of these patents, the remaining term of those patents may be shorter than we anticipate. Although the patent rights under existing patent applications for IC-100, our miniCEP290 program and our HtrA1 inhibitors are not expected to expire until 2037 or after, we face the same risk with those product candidates and programs and any future product candidates that we may develop.
Our product candidate IC-200 is not currently covered by a patent or pending patent application. In developing and advancing this product candidate, we may seek to rely on the prospect of generating new intellectual property during development of the product candidate or the potential for non-patent market exclusivity, including regulatory exclusivity as a result of the Orphan Drug Act. If we, together with Penn and UFRF, are unable to generate data to support a patent or patent application to cover this product candidate or if we are unable to obtain non-patent market exclusivity, we may not be able to exclude competitors from marketing an identical or substantially similar product.
For our sponsored research agreements with UMMS and Penn, we are generally relying on our university collaborators to generate research and data to support new patent applications. The results of any sponsored research are uncertain and the interests of the universities and university researchers are not necessarily aligned with our interests as a commercial entity. The research may generate limited patentable results or data, or none at all. Furthermore, the universities generally control the filing, prosecution and maintenance of any patents or patent applications resulting from the sponsored research. Therefore, we may not be able to obtain any patent or other exclusivity protections as a result of our collaborative gene therapy sponsored research programs, which could materially diminish or eliminate the value of these programs.
Certain of our licensed patent rights for Zimura and IC-100 are method-of-treatment patents and patent applications. Method-of-treatment patents are more difficult to enforce than composition-of-matter patents because of the risk of off-label sale or use of a drug for the patented method. The FDA does not prohibit physicians from prescribing an approved product for uses that are not described in the product’s labeling. Although use of a product directed by off-label prescriptions may infringe our method-of-treatment patents, the practice is common across medical specialties, particularly in the United States, and such infringement is difficult to detect, prevent or prosecute. Off-label sales of other products having the same drug substance as Zimura or any other product candidates we may develop would limit our ability to generate revenue from the sale of Zimura or such other product candidates, if approved for commercial sale. In addition, European patent law generally makes the issuance and enforcement of patents that cover methods of treatment of the human body difficult. Further, once the composition-of-matter patents relating to Zimura or any other product candidate in a particular jurisdiction, if any, expire, competitors will be able to make, offer and sell products containing the same drug substance as Zimura or such other product candidate in that jurisdiction so long as these competitors do not infringe any of our other patents covering Zimura’s composition of matter or method of use or manufacture, do not violate the terms of any marketing or data exclusivity that may be granted to us by regulatory authorities and they obtain any necessary marketing approvals from applicable regulatory authorities. In such circumstances, we also may not be able to detect, prevent or prosecute off-label use of such competitors’ products containing the same drug substance as Zimura, even if such use infringes any of our method-of-treatment patents.
Depending on potential delays in the regulatory review process for any of our product candidates, we may be able to obtain patent term extension for one of our patents in the United States under the Hatch-Waxman Act, which permits a patent extension term of up to five years as partial compensation for patent term effectively lost during product development and the FDA regulatory review process occurring after the issuance of a patent, but we can provide no assurances that such an extension term will be obtained. Similar to the patent term extension available in the United States, the regulatory framework in the European Union and certain other foreign jurisdictions provides the opportunity to extend the term of a patent that covers an approved drug in certain circumstances. Notwithstanding the availability of patent term extension provisions, we may not be granted patent term extensions because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements, such as using diligent efforts to develop a drug candidate. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or the term or scope of any such extension is less than we request, any period during which we have the right to exclusively market our product would be shorter than we would otherwise expect, and our competitors may commercialize competing products following our patent expiration, and our revenue could be reduced, possibly materially.
The Hatch-Waxman Act also permits the manufacture, use, offer for sale, sale or importation of a patented invention other than a new animal drug or veterinary biological product, if the manufacture, use, offer for sale, sale or importation is solely for uses that are reasonably related to development of information that could be submitted to the FDA. For this reason, our competitors might be able under certain circumstances to perform activities within the scope of the U.S. patents that we

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own or under which we are licensed without infringing such patents. This might enable our competitors to develop during the lifetime of these patents drugs that compete with our product candidates.
Our issued patents may not be sufficient to provide us with a competitive advantage. For example, competitors may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner. Even if our owned or licensed patent applications issue as patents, they may not issue with a scope broad enough to provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage.
The issuance of a patent is not conclusive as to its inventorship, ownership, scope, term, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad. For example, if we receive marketing approval for our product candidates, other pharmaceutical companies may seek approval of generic or biosimilar versions of our products with the FDA or regulatory authorities in other jurisdictions. We may then be required to initiate proceedings against such companies in order to enforce our intellectual property rights. The risk of being involved in such proceedings is likely to increase if our products are commercially successful. In any such proceedings, the inventorship, ownership, scope, term, validity and enforceability of our patents may be challenged. These and other challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to prevent others from using or commercializing similar or identical technology and products or from launching generic or biosimilar versions of our products, or could limit the duration of the patent protection of our technology and products. The launch of a generic version of one of our products in particular would be likely to result in an immediate and substantial reduction in the demand for our product, which could have a material adverse effect on our business. 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. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
The patent prosecution process is expensive and time-consuming, is highly uncertain and involves complex legal and factual questions. Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.
Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our proprietary technology and products. We seek to protect our proprietary position by filing in the United States and in certain foreign jurisdictions patent applications related to our novel technologies and product candidates that are important to our business.
The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. In addition, we may not pursue or obtain patent protection in all major markets. Moreover, in some circumstances, we do not have the right to control the preparation, filing or prosecution of patent applications, or to maintain the patents, covering technology that we license from third parties or covering technology that a collaboration or commercialization partner may develop, the eventual commercialization of which could potentially entitle us to royalty payments. In some circumstances, our licensors may have the right to enforce the licensed patents without our involvement or consent, or to decide not to enforce or to allow us to enforce the licensed patents. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. If any such licensors fail to maintain such patents, or lose rights to those patents, the rights that we have licensed may be reduced or eliminated and our ability to develop and commercialize any of our products that are the subject of such licensed rights could be adversely affected.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. In addition, the laws of foreign jurisdictions may not protect our rights to the same extent as the laws of the United States. For example, European patent law restricts the patentability of methods of treatment of the human body more than United States law does. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we or our licensors were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we or our licensors were the first to file for patent protection of such inventions. Moreover, the U.S. Patent and Trademark Office, or USPTO, might require that the term of a patent issuing from a pending patent application be disclaimed and limited to the term of another patent that is commonly owned or names a common inventor. As a result, the issuance, scope, validity, term, enforceability and commercial value of our patent rights are highly uncertain.
Our pending and future patent applications, and any collaboration or commercialization partner’s pending and future patent applications, may not result in patents being issued which protect our technology or products, in whole or in part, or

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which effectively prevent others from commercializing competitive technologies and products. In particular, during prosecution of any patent application, the issuance of any patents based on the application may depend upon our or their ability to generate additional preclinical or clinical data that support the patentability of our proposed claims. We or any collaboration or commercialization partner may not be able to generate sufficient additional data on a timely basis, or at all. Moreover, changes in either the patent laws or interpretation of the patent laws in the United States or other countries may diminish the value of our or a collaboration or commercialization partner’s patents or narrow the scope of our or their patent protection.
Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. The Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law in September 2011, and many of the substantive changes became effective in March 2013. The Leahy-Smith Act revised United States patent law in part by changing the standard for patent approval from a “first to invent” standard to a “first to file” standard and developing a post-grant review system. This legislation changed United States patent law in a way that may weaken our ability to obtain patent protection in the United States for those applications filed after March 2013. For example, if we are the first to invent a new product or its use, but another party is the first to file a patent application on this invention, under the new law the other party may be entitled to the patent rights on the invention.