20-F 1 prqr-20201231x20f.htm 20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

◻	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

⌧ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

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

◻	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report: Not applicable

For the transition period from to

Commission file number 001-36622

PROQR THERAPEUTICS N.V.

(Exact name of Registrant as specified in its charter)

The Netherlands

(Jurisdiction of incorporation or organization)

Zernikedreef 9

2333 CK Leiden

The Netherlands

(Address of principal executive offices)

Smital Shah, Chief Business and Financial Officer

Tel: +31 88 166 7000

sshah@proqr.com, Zernikedreef 9, 2333 CK Leiden, The Netherlands

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Ordinary Shares, nominal value € 0.04 per share		PRQR		NASDAQ Stock Market

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

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Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Ordinary shares, nominal value € 0.04 per share: 54,131,553

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

◻ Yes ⌧ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

◻ Yes ⌧ No

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

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.

⌧ Yes ◻ 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).

⌧ Yes ◻ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):


◻ Large accelerated filer				⌧ Accelerated filer		◻ Non-accelerated filer		◻ Emerging growth company

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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. ◻

†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report: ⌧

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

◻ U.S. GAAP

⌧ International Financial Reporting Standards as issued by the International Accounting Standards Board

◻ Other

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

◻ Item 17 ◻ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

◻ Yes ⌧ No

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ⌧ Yes ◻ No

Summary of the Material and Other Risks Associated with Our Business

Our business is subject to numerous material risks and uncertainties that you should be aware of in evaluating our business, including those described in Part I, Item 3.D: “Risk Factors” in this Annual Report on Form 20-F. These risks include, but are not limited to, the following:

●

We are a clinical stage biopharmaceutical company with a history of losses. We expect to continue to incur significant losses for the foreseeable future and may never achieve or maintain profitability, which could result in a decline in the market value of our ordinary shares.

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●

We will require additional capital to fund our operations and if we fail to obtain necessary financing, we will not be able to complete the development and commercialization of our product candidates.

●

We have a limited operating history, which may make it difficult to evaluate the success of our business to date and to assess our future viability.

●

COVID-19 may materially and adversely affect our business and our financial results.

●

We depend on the success of our product candidates, most of which are in early phases of development. We cannot be certain that we will be able to successfully complete the clinical development of, obtain regulatory approval for, or successfully commercialize our product candidates.

●

The regulatory approval processes of the FDA, the EMA and comparable foreign regulatory authorities are lengthy, time-consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.

●

Failures or delays in the commencement or completion of our preclinical studies or ongoing or planned clinical trials of our product candidates could result in increased costs to us and could delay, prevent or limit our ability to generate revenue and continue our business.

●

Positive results from early clinical trials and preclinical testing of our product candidates are not necessarily predictive of the results of later clinical trials for our product candidates. If we cannot achieve positive results in our clinical trials for our product candidates, we may be unable to successfully develop, obtain regulatory approval for and commercialize them.

●

If we are not able to obtain and maintain orphan product exclusivity for sepofarsen, QR-421a, QR-1123 or QR-411, or obtain such status for future product candidates for which we seek this status, or if our competitors are able to obtain orphan product exclusivity before we do, we may not be able to obtain approval for our competing products for a significant period of time.

●

Our development and commercialization strategy for our product candidates relies in part upon certain patent rights that we license from third parties, and termination of such license could have a materially adverse effect on our business, financial condition, results of operations and prospects.

●

We rely on third-party manufacturers and suppliers and we intend to rely on third parties to produce preclinical, clinical and commercial supplies of our product candidates.

●

We license patent rights from third-party owners or licensees and if we fail to comply with our obligations in our intellectual property licenses, we could lose rights that are fundamental to our business.

●

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

●

We or our licensors or any future collaborators or strategic partners may become subject to third party claims or litigation alleging infringement of patents or other proprietary rights or seeking to invalidate patents or other proprietary rights, and we may need to resort to litigation to protect or enforce our patents or other proprietary rights, all of which could be costly, time consuming, delay or prevent the development and commercialization of our product candidates, or put our patents and other proprietary rights at risk.

●

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

●

We face competition from entities that have developed or may develop product candidates for our target indications. If these companies develop technologies or product candidates more rapidly than we do or their technologies, including delivery technologies, are more effective, our ability to develop and successfully commercialize our product candidates may be adversely affected.

●

Even if we are able to commercialize any of our product candidates, the products may not receive coverage and adequate reimbursement from third-party payors, which could harm our business.

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●

Any inability to attract and retain qualified key management and technical personnel would impair our ability to implement our business plan.

●

Members of our management board and supervisory board and our principal shareholders and their affiliates have significant control over our company, which will limit other stakeholders’ ability to influence corporate matters and could delay or prevent a change in corporate control.

●

We are a foreign private issuer and, as a result, we are not subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.

●

Certain U.S. holders of our ordinary shares may suffer adverse tax consequences if we are characterized as a passive foreign investment company for U.S. federal income tax purposes.

●

The rights and responsibilities of our shareholders are governed by Dutch law and differ in some important respects from the rights and responsibilities of shareholders under U.S. law.

The material and other risks summarized above should be read together with the text of the full risk factors below and in the other information set forth in this Annual Report on Form 20-F, including our consolidated financial statements and the related notes, as well as in other documents that we file with the Securities and Exchange Commission. If any such material and other risks and uncertainties actually occur, our business, prospects, financial condition and results of operations could be materially and adversely affected. The risks summarized above or described in full below are not the only risks that we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial may also materially adversely affect our business, prospects, financial condition and results of operations.

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		Page

Introduction		4

Forward-looking statements		5

Part I		6

Item 1: Identity of Directors, Senior Management and Advisers		6

Item 2: Offer Statistics and Expected Timetable		6

Item 3: Key Information		6

	A. Selected financial data	6

	B. Capitalization and indebtedness	7

	C. Reasons for the offer and use of proceeds	7

	D. Risk factors	7

Item 4: Information on the Company		50

	A. History and development of the company	50

	B. Business overview	50

	C. Organizational structure	999

	D. Property, plants and equipment	100

Item 4A: Unresolved staff comments		100

Item 5: Operating and Financial Review and Prospects		100

	A. Operating results	100

	B. Liquidity and capital resources	106

	C. Research and development, patents and licenses, etc.	111

	D. Trend information	111

	E. Off-balance sheet arrangements	111

	F. Tabular disclosure of contractual obligations	111

	G. Safe harbor	111

Item 6: Directors, Senior Management and Employees		111

	A. Directors and senior management	111

	B. Compensation	115

	C. Board practices	116

	D. Employees	120

	E. Share ownership	120

Item 7: Major Shareholders and Related Party Transactions		120

	A. Major shareholders	120

	B. Related party transactions	123

	C. Interests of experts and counsel	123

Item 8: Financial Information		123

	A. Consolidated Statements and Other Financial Information	123

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	B. Significant Changes	123

Item 9: The Offer and Listing		124

	A. Offering and listing details	124

	B. Plan of distribution	124

	C. Markets	124

	D. Selling shareholders	124

	E. Dilution	124

	F. Expenses of the issue	124

Item 10: Additional Information		124

	A. Share capital	124

	B. Memorandum and articles of association	124

	C. Material contracts	133

	D. Exchange controls	133

	E. Taxation	133

	F. Dividends and paying agents	141

	G. Statement by experts	141

	H. Documents on display	141

	I. Subsidiary information	142

Item 11: Quantitative and Qualitative Disclosures about Market Risk		142

Item 12: Description of Securities other that Equity Securities		143

	A. Debt securities	143

	B. Warrants and rights	143

	C. Other securities	143

	D. American depositary shares	143

Part II

Item 13: Defaults, Dividend Arrearages and Delinquencies		144

Item 14: Material Modifications to the Rights of Security Holders and Use of Proceeds		144

Item 15: Controls and Procedures		144

	A. Disclosure controls and procedures	144

	B. Management’s annual report on internal control over financial reporting	144

	C. Attestation report of the registered public accounting firm	145

	D. Changes in internal control over financial reporting	146

Item 16A: Audit Committee Financial Expert		146

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Item 16B: Code of Ethics		146

Item 16C: Principal Accountant Fees and Services		146

Item 16D: Exemptions from the Listing Standards for Audit Committees		146

Item 16E: Purchases of Equity Securities by the Issuer and Affiliated Purchasers		146

Item 16F: Change in Registrant’s Certifying Accountant		146

Item 16G: Corporate Governance		147

Item 16H: Mine Safety Disclosure		147

Part III

Item 17: Financial Statements		148

Item 18: Financial Statements		148

Item 19: Exhibits		148

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Introduction

This document contains information required for the annual report on Form 20-F for the year ended December 31, 2020 of ProQR Therapeutics N.V. (the “2020 Form 20-F”). Unless the context specifically indicates otherwise, references in this 2020 Form 20-F to “ProQR Therapeutics N.V.”, “ProQR Therapeutics”, “ProQR”, “we”, “our”, “ours”, “us”, the “Company” or similar terms refer to ProQR Therapeutics N.V.

IFRS based information

The audited financial statements as at December 31, 2020 and 2019, and for the years ended December 31, 2020, December 31, 2019 and December 31, 2018, included in the 2020 Form 20-F have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Non-GAAP information

In presenting and discussing our financial position, operating results and cash flows, management uses certain non-GAAP financial measures. These non-GAAP financial measures should not be viewed in isolation as alternatives to the equivalent IFRS measure and should be used in conjunction with the most directly comparable IFRS measure(s).

Exchange rates

All references in this annual report to “U.S. dollars” or “$” are to the legal currency of the United States, and all references to “€” or “euro” are to the currency of the European Economic and Monetary Union. Our business to date has been conducted primarily in the European Union, and we maintain our books and records in euro. We present our financial statements in euro, which is the Company’s functional currency.

Fair value information

In presenting our financial position, fair values are used for the measurement of various items in accordance with the applicable accounting standards. These fair values are based on market prices, where available, and are obtained from sources that are deemed to be reliable. Readers are cautioned that these values are subject to changes over time and are only valid at the balance sheet date. When quoted prices or observable market values do not exist, fair values are estimated using valuation models, which we believe are appropriate for their purpose. They require management to make significant assumptions with respect to future developments which are inherently uncertain and may therefore deviate from actual developments. Critical assumptions used are disclosed in the financial statements. In certain cases, independent valuations are obtained to support management’s determination of fair values.

Trademarks

“ProQR” and “Axiomer” are our main trademarks. Other trademarks or trade names referred to in this annual report are the property of their respective owners. Solely for convenience, the trademarks and trade names in this annual report may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent permissible under applicable law, their rights thereto.

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Forward-looking statements

Pursuant to provisions of the United States Private Securities Litigation Reform Act of 1995, ProQR is providing the following cautionary statement.

This document contains certain forward looking statements with respect to the financial condition, results of operations and business of ProQR and certain of the plans and objectives of ProQR with respect to these items. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events, including our clinical development plans or our future financial performance, our development programs, including timing, plans, results and therapeutic potential with respect to our product candidates, our business operations, including timing of commencing clinical trials and enrollment of patients therein, the expected impact of the COVID-19 on our business operations, including our research and development plans and timelines and the supply chain for our clinical and development programs, and our financial position and cash runway, expressed or implied by these forward-looking statements. Forward-looking statements can be identified generally as those containing words as “aim,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” and similar expressions, although not all forward-looking statements contain these identifying words.

Known and unknown risks, uncertainties and other factors may cause our actual results, performance or achievements, including in relation to the clinical development of sepofarsen (formerly known as QR-110), QR-421a, QR-1123, QR-504a, or any other pipeline program, to be materially different from our expectations. These risks include, but are not limited to, the cost, timing and results of preclinical studies and clinical trials and other development activities by us and our collaborative partners, the impact on our operations and activities that may be slowed or halted by the COVID-19 pandemic; the likelihood of our clinical programs being executed on timelines provided and reliance on our contract research organizations and predictability of timely enrollment of subjects and patients to advance our clinical trials and maintain their own operations; our reliance on contract manufacturers to supply materials for research and development and the risk of supply interruption from a contract manufacturer; the potential for future data to alter initial and preliminary results of early-stage clinical trials; the unpredictability of the duration and results of the regulatory review of applications or clearances that are necessary to initiate and continue to advance and progress our clinical programs; the ability to secure, maintain and realize the intended benefits of collaborations with partners; the possible impairment of, inability to obtain, and costs to obtain intellectual property rights; possible safety or efficacy concerns that could emerge as new data are generated in research and development; and general business, financial and accounting risks and litigation, and the other risks discussed in further detail in Item 3.D: “Risk Factors”.

Forward-looking statements appear in a number of places in this Annual Report and include, but are not limited to, statements regarding our intent, belief or current expectations. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to management. By their nature, forward-looking statements involve risk and uncertainty, because they relate to events that depend on circumstances that will occur in the future. As a result, ProQR’s actual future results may differ materially from the plans, goals and expectations set forth in such forward-looking statements. For a discussion of factors that could cause future results to differ from such forward-looking statements, reference is made to the information in Item 3.D: “Risk Factors”.

Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

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Part I

Item 1: Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2: Offer Statistics and Expected Timetable

Not applicable.

Item 3: Key Information

A. Selected financial data

The following table sets forth selected financial data for ProQR Therapeutics N.V. for the periods indicated. We derived the selected financial data from our consolidated audited financial statements 2016 through 2020.

Our historical results for any prior period are not necessarily indicative of results to be expected in any future period. The information set forth below should be read in conjunction with the information in Item 5: “Operating and Financial Review and Prospects” and with our audited consolidated financial statements and notes thereto included elsewhere in this annual report. Our financial statements are prepared in accordance with IFRS as issued by the IASB.


	Year Ended		Year Ended		Year Ended		Year Ended		Year Ended
	December 31,		December 31,		December 31,		December 31,		December 31,
	2020		2019		2018		2017		2016

	(€ in thousands, except for per share data)
Statement of comprehensive loss data:
Other income		9,452		1,933		5,761		1,495		1,828
Research and development costs		(38,135)		(46,491)		(29,514)		(31,153)		(31,923)
General and administrative costs		(13,685)		(12,887)		(12,540)		(10,840)		(9,478)
Operating result		(42,368)		(57,445)		(36,293)		(40,498)		(39,573)
Finance income and expense		(3,716)		402		(792)		(3,175)		470
Results related to financial liabilities measured at fair value through profit or loss		(84)		—		—		—		—
Results related to associates		(322)		429		—		—		—
Corporate income taxes		(124)		(132)		(1)		(2)		—
Result for the year		(46,614)		(56,746)		(37,086)		(43,675)		(39,103)
Other comprehensive income		(340)		43		(28)		151		(16)
Total comprehensive loss (attributable to equity holders of the Company)		(46,954)		(56,703)		(37,114)		(43,524)		(39,119)
Share information
Weighted average number of shares outstanding		50,060,565		41,037,244		34,052,520		25,374,807		23,346,507
Basic and diluted loss per share attributable to the equity holders of the Company (expressed in Euro per share)	€	(0.93)	€	(1.38)	€	(1.08)	€	(1.72)	€	(1.67)


	As at December 31,
	2020	2019	2018	2017	2016

	(€ in thousands)
Statement of financial position data:
Cash and cash equivalents	75,838	111,950	105,580	48,099	94,865
Total assets	98,729	117,535	110,231	53,103	115,247
Total liabilities	42,183	23,702	17,546	13,778	5,843
Total shareholders’ equity	57,091	94,329	92,915	39,363	109,404

The selected financial data in the tables above include the effect of IFRS 16 Leases as of 2019.

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B. Capitalization and indebtedness

Not applicable.

C. Reasons for the offer and use of proceeds

Not applicable.

D. Risk factors

Our business is subject to numerous risks and uncertainties. If any of these risks actually occurs, our business, prospects, operating results and financial condition could suffer materially. These risks include, but are not limited to, the following:

Risks Related to Our Capital Needs and Financial Position

We are a clinical stage biopharmaceutical company with a limited operating history, engaged in the discovery and development of RNA-based therapeutics for the treatment of severe genetic disorders focused on inherited retinal diseases. Since our inception in February 2012, we have devoted a significant portion of our resources to the development of our product candidates in Leber congenital amaurosis (LCA), sepofarsen; Usher syndrome, QR-421a; autosomal dominant retinitis pigmentosa (adRP), QR-1123; and Fuchs endothelial corneal dystrophy, QR-504a, as well as other pipeline programs including eluforsen for cystic fibrosis and QR-313 for epidermolysis bullosa. We have had significant operating losses since our inception. Our net losses for the years ended December 31, 2018, December 31, 2019 and December 31, 2020 were, € 37,086,000, € 56,746,000 and € 46,614,000 respectively. At December 31, 2020, we had an accumulated deficit of € 257,747,000. Substantially all of our losses have resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations. Most of our continuing technologies and product candidates are in early stages of development – except for sepofarsen, which is in a late stage of development - and we are subject to the risks of failure inherent in the development of product candidates based on novel technologies.

To date, the only material income we have generated has been from the receipt of (government) research grants. Our ability to generate revenue and become profitable depends upon our ability to obtain regulatory approval and successfully commercialize sepofarsen, QR-421a, QR-1123 or any other product candidates that we may develop, in-license or acquire in the future.

Even if we are able to successfully achieve regulatory approval for these product candidates, we do not know when any of these product candidates will generate revenue for us, if at all. We have not generated, and do not expect to generate, any product revenue for the foreseeable future, and we expect to continue to incur significant operating losses for the foreseeable future due to the cost of research and development, preclinical studies and clinical trials and the regulatory approval process for product candidates. The amount of future losses is uncertain. Our ability to achieve profitability, if ever, will depend on, among other things, us or any future collaborators successfully developing product candidates, obtaining regulatory approvals to market and commercialize product candidates, manufacturing any approved products on commercially reasonable terms, establishing a sales and marketing organization or suitable third party alternatives for any approved product and raising sufficient funds to finance business activities. If we or any future collaborators are unable to develop and commercialize one or more of our product candidates or if sales revenue from any product candidate that receives approval is insufficient, we will not achieve profitability, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

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Our ability to generate revenue from our product candidates also depends on a number of additional factors, including our ability to:

●

successfully complete development activities, including the ongoing and planned preclinical and clinical studies for our product candidates;

●

complete and submit New Drug Applications (NDAs) to the U.S. Food and Drug Administration (FDA) and Marketing Authorization Applications (MAAs) to the European Medicines Agency (EMA), and obtain regulatory approval for indications for which there is a commercial market;

●

complete and submit applications to, and obtain regulatory approval from, other foreign regulatory authorities;

●

set a commercially viable price for any products for which we may receive approval;

●

obtain commercial quantities of our products at acceptable cost levels;

●

continue to develop a commercial organization capable of sales, marketing and distribution for the products we intend to sell ourselves in the markets in which we have retained commercialization rights;

●

find suitable partners to help us market, sell and distribute our approved products that we do not intend to sell ourselves in one or more markets;

●

achieve acceptance among patients, clinicians and advocacy groups for any product we develop; and

●

obtain coverage and adequate reimbursement for our products from third-parties, including government payors.

In addition, because of the numerous risks and uncertainties associated with product development, including the risk that our product candidates may not advance through development or be shown to be safe and effective for their intended uses, the FDA, the EMA or other regulatory agencies may require additional clinical trials or preclinical studies or impose post-approval requirements.

We are unable to predict the timing or amount of increased expenses, or when or if we will be able to achieve or maintain profitability. Even if we are able to complete the processes described above, we anticipate incurring significant costs associated with commercializing our product candidates. Moreover, commercialization of QR-421a will trigger payments of up to $ 37.5 million pursuant to our agreement with Foundation Fighting Blindness (FFB). Under our collaboration with Ionis related to our QR-1123 product candidate, we will be required to make payments to Ionis upon achievement of development and sales milestones, and royalty payments as a percentage of annual net sales. See “Item 5. Operating and Financial Review and Prospects” and the notes to the financial statements included elsewhere in this annual report for more details on these transactions.

Even if we are able to generate revenues from the sale of any of our product candidates, we may not become profitable and may need to obtain additional funding to continue operations. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations, which could result in a decline in the market value of our ordinary shares.

Our operations have consumed substantial amounts of cash since inception. We expect to continue to spend substantial amounts of cash to conduct further research and development and preclinical testing and clinical trials of our product candidates, to seek regulatory approvals for our product candidates and to launch and commercialize any product candidates for which we receive regulatory approval, including potentially building our own commercial organization to serve the United States, the European Union and certain other markets. As at December 31, 2020, we had € 75,838,000 in cash and cash equivalents. Based on our current operating plan, we believe that the existing cash and cash equivalents

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will be sufficient to fund our anticipated level of operations into 2023. However, our future capital requirements and the period for which our existing resources will support our operations may vary significantly from what we expect. Our monthly spending levels will vary based on new and ongoing development and corporate activities. Because the length of time and activities associated with successful development of our product candidates is highly uncertain, we are unable to estimate the actual funds we will require for development and any approved marketing and commercialization activities. Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:

●

the initiation, progress, timing, costs and results of preclinical studies and clinical trials for our product candidates, and the resumption of, and expenses associated with, our development activities that have been disrupted due to the COVID-19 pandemic;

●

the clinical development plans we establish for these product candidates;

●

the number and characteristics of product candidates that we develop or may in-license, or programs that we may pursue in our innovation unit;

●

the terms of any collaboration arrangements we may choose to enter into;

●

the outcome, timing and cost of meeting regulatory requirements established by the FDA, the EMA and other comparable foreign regulatory authorities;

●

the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;

●

the cost of defending any intellectual property disputes, including patent infringement actions brought by third parties against us or our product candidates;

●

the effect of competing technological and market developments;

●

the cost and timing of completion of commercial-scale outsourced manufacturing activities; and

●

the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own.

We cannot be certain that additional funding will be available on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our products or product candidates or one or more of our other research and development initiatives. We also could be required to seek collaborators for one or more of our current or future product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be acceptable or relinquish or license on unfavorable terms our rights to technologies or product candidates that we otherwise would seek to develop or commercialize ourselves.

We have a limited operating history, which may make it difficult to evaluate the success of our business to date and to assess our future viability.

We were founded in February 2012 and began operations in May 2012. Our operations to date have been limited to organizing and staffing our company, acquiring and developing product and technology rights, and conducting development activities for our product candidates. Consequently, any predictions about our future success, performance or viability may not be as accurate as they could be if we had a longer operating history, more experience with clinical development or approved products on the market.

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COVID-19 may materially and adversely affect our business and our financial results.

The continued effects of the COVID-19 pandemic could adversely impact our clinical trials or preclinical studies, including our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, have heightened exposure to COVID-19 . For instance, the COVID-19 pandemic has resulted in the delay of all of our ongoing and scheduled trials, including our ongoing pivotal trial of sepofarsen for LCA10. While we have implemented mitigation procedures designed to enable us to resume our development activities when the disruption resolves, there can be no assurance that these procedures will continue to be successful or that we can avoid a material and adverse disruption to our business in case a further spike in the number of infections would occur in countries where patients are expected to be enrolled or where they are located. As the pandemic continues, we have experienced the prioritization of hospital resources toward the treatment of COVID-19 patients and restrictions in travel. Furthermore, persons living with indications that are targeted by ProQR’s product candidates may be unwilling to enroll in our trials or be unable to comply with clinical trial protocols if quarantines or travel restrictions continue to impede patient movement or interrupt healthcare services. COVID-19 also negatively affects the operations of third-party contract research organizations (CROs) that we rely upon to carry out our clinical trials. Moreover, COVID-19 might impact the operations of our third-party manufacturers, which could result in delays or disruptions in the supply of our product candidates. Three vaccines for COVID-19 were granted Emergency Use Authorization by the FDA in late 2020 and early 2021, and more are likely to be authorized in the coming months. The resultant demand for vaccines and potential for manufacturing facilities and materials to be commandeered under the Defense Production Act of 1950, or equivalent foreign legislation, may make it more difficult to obtain materials or manufacturing slots for the products needed for our clinical trials, which could lead to delays in these trials. While we do not currently believe our supply chain has been affected, there can be no assurances that we will not experience supply disruptions in the future. The negative impact COVID-19 has had and may continue to have to patient enrollment or treatment or the timing and execution of our clinical trials could cause costly delays to our clinical trial activities, which could adversely affect our ability to obtain regulatory approval for and to commercialize our product candidates, increase our operating expenses and have a material adverse effect on our business and financial results.

In addition, COVID-19 has resulted in significant governmental measures being implemented to control the spread of the virus, including quarantines, travel restrictions and business shutdowns. We have taken and may continue to take temporary precautionary measures intended to help minimize the risk of the virus to our employees, including requiring most of our employees to work remotely, suspending all non-essential travel worldwide for our employees and attending industry events and in-person work-related meetings remotely. These measures could negatively affect our business. For instance, requiring employees to work remotely may result in decreased efficiency and effectiveness of our operations and increases the risk of a cybersecurity incident. COVID-19 has also caused volatility in the global financial markets and threatened a slowdown in the global economy, which may negatively affect our ability to raise additional capital on attractive terms or at all.

The extent to which COVID-19 continues to impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of any ongoing governmental measures and local lockdowns across the world, the potential occurrence of future spikes in the spread of the virus or the effectiveness of actions to contain and treat for COVID-19, including the speed and effectiveness of vaccine development and vaccination programs globally. We cannot presently predict the scope and severity of any potential business shutdowns or disruptions in case of potential future waves of increased infections, if any. If we or any of the third parties with whom we engage, however, experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively affected, which could have a material adverse impact on our business and our results of operation and financial condition.

Raising additional capital may cause dilution to our existing shareholders. Further, any future financing arrangements, as well as existing debt financing, may restrict our operations or require us to relinquish rights to our technologies or product candidates.

We may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, existing ownership interests may be diluted and the terms of such financings may

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include liquidation or other preferences that adversely affect the rights of existing shareholders. For instance, the debt financing we entered into in the third quarter of 2020 was coupled with equity conversion options and warrants to purchase shares, which could result in dilution of our existing shareholders’ ownership. As of the date of this report, we have drawn down €13,149,000 in indebtedness under this facility, which can be converted at a conversion rate of $ 7.88.

In addition, such indebtedness also results in increased fixed payment obligations and certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business and may result in liens being placed on our assets and intellectual property. If we were to default on such indebtedness, we could lose such assets and intellectual property. Also, if we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, or grant licenses on terms that are not favorable to us.

Risks Related to the Development and Regulatory Approval of our Product Candidates

We currently have no products on the market, and only one of our product candidates, sepofarsen, is currently in a Phase 2/3 pivotal trial. In July 2020, we reported results from our extension study of this lead product candidate, in which patients from the completed Phase 1/2 study were offered treatment in their second eye. There can be no assurance that we will complete the Phase 2/3 pivotal trial in the desired timeframe or at all.

Our business also depends on the successful clinical development, regulatory approval and commercialization of our other product candidates, and will require additional preclinical testing and substantial additional clinical development and regulatory approval efforts before we are permitted to commence their commercialization, if ever. It will be several years before we can complete a pivotal study for any of our other product candidates, if ever.

The clinical trials and manufacturing and marketing of our product candidates will be subject to extensive and rigorous review and regulation by numerous government authorities in the United States, the European Union and other jurisdictions where we intend to test and, if approved, market our product candidates. Before obtaining regulatory approvals for the commercial sale of any product candidate, we must demonstrate through preclinical testing and clinical trials that the product candidate is safe and effective for use in each target indication, and potentially in specific patient populations, including the pediatric population. This process can take many years and may include post-marketing studies and surveillance, which would require the expenditure of substantial resources beyond our existing funds. Of the large number of drugs in development for approval in the United States and the European Union, only a small percentage successfully complete the FDA or EMA regulatory approval processes, as applicable, and are commercialized. Accordingly, even if we are able to obtain the requisite financing to continue to fund our research, development and clinical programs, we cannot be certain that any of our product candidates will be successfully developed or commercialized.

We are not permitted to market our product candidates in the United States or the European Union until we receive an NDA approval from the FDA or an MAA approval from the European Commission, respectively, or in any other foreign countries until we receive the requisite approval from such countries. Prior to submitting an NDA to the FDA or an MAA to the EMA for approval of our product candidates, we will need to complete the ongoing preclinical and toxicology studies, as well as proof-of-concept studies and Phase 1, Phase 2 and Phase 3 clinical trials. While we intend to submit marketing applications for our product candidates that successfully complete clinical development, there can be no assurance that we will be able to do so in a timely manner or at all. Successfully initiating and completing clinical programs and obtaining approval of an NDA or a MAA is a complex, lengthy, expensive and uncertain process, and the

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FDA, the EMA or other comparable foreign regulatory authorities may delay, limit or deny approval of our product candidates for many reasons, including, among others:

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we may not be able to demonstrate that our product candidates are safe and effective in treating patients to the satisfaction of the FDA or the EMA;

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the results of our clinical trials may not meet the level of statistical or clinical significance required by the FDA or the EMA for marketing approval;

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the FDA or the EMA may disagree with the number, design, size, conduct or implementation of our clinical trials;

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the FDA or the EMA may require that we conduct additional clinical trials;

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the FDA or the EMA or other applicable foreign regulatory agencies may not approve the formulation, labeling or specifications of our product candidates;

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the CROs that we retain to conduct our clinical trials may take actions outside of our control that materially adversely impact our clinical trials;

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the FDA or the EMA may find the data from preclinical studies and clinical trials insufficient to demonstrate that the clinical and other benefits of our products outweigh their safety risks;

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the FDA or the EMA may disagree with our interpretation of data from our preclinical studies and clinical trials;

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the FDA or the EMA may not accept data generated at our clinical trial sites;

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if our NDAs or MAAs, if and when submitted, are reviewed by the FDA or the EMA, as applicable, these regulatory agencies may have difficulties scheduling the necessary review meetings in a timely manner, may recommend against approval of our application or may require, as a condition of approval, additional preclinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions;

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the FDA may require development of a Risk Evaluation and Mitigation Strategy as a condition of approval or post-approval, and the EMA may grant only conditional approval or impose specific obligations as a condition for marketing authorization, or may require us to conduct post-authorization safety studies;

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the FDA, the EMA or other applicable foreign regulatory agencies may not approve the manufacturing processes or facilities of third-party manufacturers with which we contract; or

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the FDA or the EMA may change their approval policies or adopt new regulations.

Any of these factors, many of which are beyond our control, could jeopardize our ability to obtain regulatory approval for and successfully market our product candidates. Any such setback in our pursuit of regulatory approval would have a material adverse effect on our business and prospects.

Successful completion of clinical trials is a prerequisite to submitting an NDA to the FDA or an MAA to the EMA and, consequently, the ultimate approval and commercial marketing of our product candidates. Clinical trials are expensive, difficult to design and implement, can take many years to complete and are uncertain as to outcome. A product candidate can unexpectedly fail at any stage of clinical development. The historical failure rate for product candidates is high due

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to scientific feasibility, safety, efficacy, changing standards of medical care and other variables. We do not know whether our clinical trials will begin or be completed on schedule, if at all, as the commencement and completion of clinical trials can be delayed or prevented for a number of reasons, including, among others:

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delays in reaching or failing to reach agreement on acceptable terms with (prospective) CROs and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

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inadequate quantity or quality of a product candidate or other materials necessary to conduct clinical trials;

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difficulties obtaining IRB or ethics committee approval to conduct a clinical trial at a prospective site or sites;

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challenges in recruiting and enrolling patients to participate in clinical trials, including the size and nature of the patient population, the proximity of patients to clinical sites, eligibility criteria for the clinical trial, the nature of the clinical trial protocol, the availability of approved effective treatments for the relevant disease and competition from other clinical trial programs for similar indications;

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severe or unexpected drug-related side effects experienced by patients in our clinical trials or by individuals using drugs similar to our product candidates;

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reports from preclinical or clinical testing of other RNA therapies that raise safety or efficacy concerns; or

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difficulties retaining patients who have enrolled in a clinical trial but may be prone to withdraw due to lack of efficacy, side effects, personal issues or loss of interest.

Clinical trials may also be delayed or terminated as a result of ambiguous or negative interim results. In addition, a clinical trial may be suspended or terminated by us, the FDA, the EMA, the IRBs at the sites where the IRBs are overseeing a clinical trial, a data safety monitoring board (DSMB), overseeing the clinical trial at issue or other regulatory authorities due to a number of factors, including, among others:

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failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;

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inspection of the clinical trial operations or trial sites by the FDA, the EMA or other regulatory authorities that reveals deficiencies or violations that require us to undertake corrective action, including the imposition of a clinical hold;

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unforeseen safety issues, including any that could be identified in our ongoing toxicology studies, adverse side effects or lack of effectiveness;

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changes in government regulations or administrative actions;

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problems with clinical supply materials; and

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lack of adequate funding to continue the clinical trial.

Positive results from early clinical trials and preclinical testing of our product candidates in vitro and in vivo may not necessarily be predictive of the results from later clinical trials. For example, the positive results that we observed from our Phase 1/2 clinical trial of sepofarsen may not be repeated in the ongoing Phase 2/3 clinical trial for this candidate, and the therapeutic activity observed in prior trials may not be replicated in future clinical trials. Similarly, the results

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observed from our Phase 1/2 clinical trial of QR-421a may not be replicated in future trials of this candidate. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in clinical trials after achieving positive results in preclinical and early clinical development, and we cannot be certain that we will not face similar setbacks. These setbacks have been caused by, among other things, preclinical findings made while clinical trials were underway or safety or efficacy observations made in clinical trials, including adverse events. For example, in our Phase 1/2 clinical trial of sepofarsen, adverse events observed after longer duration of treatment included mild cystoid macular edema and lens opacities. These events were considered likely related to study medication and are consistent with those seen for other ophthalmic and intravitreal oligonucleotide therapies. While these adverse events did not result in any trial discontinuations, there can be no assurance that adverse events that are more serious will not arise in ongoing or future clinical trials of our product candidates. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials nonetheless failed to obtain FDA or EMA approval. If we fail to produce positive results in our clinical trials for our lead product candidates, the development timeline and regulatory approval and commercialization prospects for those product candidates, and, correspondingly, our business and financial prospects would be materially adversely affected.

Additionally, some of our clinical trials utilize an “open-label” trial design. An “open-label” clinical trial is one where both the patient and investigator know whether the patient is receiving the investigational product candidate or either an existing approved drug or placebo. Most typically, open-label clinical trials test only the investigational product candidate and sometimes may do so at different dose levels. Open-label clinical trials are subject to various limitations that may exaggerate any therapeutic effect as patients in open-label clinical trials are aware when they are receiving treatment. Open-label clinical trials may be subject to a “patient bias” where patients perceive their symptoms to have improved merely due to their awareness of receiving an experimental treatment. Moreover, patients selected for early clinical studies often include the most severe sufferers and their symptoms may have been bound to improve notwithstanding the new treatment. In addition, open-label clinical trials may be subject to an “investigator bias” where those assessing and reviewing the physiological outcomes of the clinical trials are aware of which patients have received treatment and may interpret the information of the treated group more favorably given this knowledge.

Regulatory authorities in some jurisdictions, including the United States and the European Union, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals in the United States who have been diagnosed as having the disease or condition at the time of the submission of the request for orphan drug designation. With respect to the European Union, under Regulation No. (EC) 141/2000 on Orphan Medicinal Products, a medicinal product may be designated as an orphan medicinal product if, among other things, it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than five in 10,000 people in the European Union. Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of market exclusivity. This exclusivity precludes the EMA or the FDA, as applicable, from approving another marketing application for the same or, in the EU, a similar drug for the same indication for that time period, unless, among other things, the later product is clinically superior. The applicable period is seven years in the United States and ten years in the European Union following marketing approval. The EU exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drug designation, for example if the drug is sufficiently profitable so that market exclusivity is no longer justified.

Orphan drug exclusivity may be lost if the FDA or EMA determines that the request for designation was materially defective, or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition or if the incidence and prevalence of patients who are eligible to receive the drug in these markets materially increase. Although we have obtained orphan designation for several of our product candidates in the European Union and the United States, even after an orphan drug is approved, the same or, in the EU, a similar drug can

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subsequently be approved for the same condition if the competent regulatory agency concludes that the later drug is safer, more effective or otherwise clinically superior.

If we lose orphan drug exclusivity or if our competitors obtain orphan drug exclusivity for other rare diseases or conditions we are targeting before we do, we may lose out on the potential benefits of market exclusivity or we may be precluded from obtaining marketing authorization, as the case may.

We intend to seek Orphan Drug designation for our other product candidates, but we may not obtain such designation.

Changes in regulatory requirements or guidance from the FDA, EMA or other applicable regulatory authorities, or unanticipated events during our clinical studies may occur, which may result in changes to clinical study protocols or additional clinical study requirements, which could result in increased costs to us and could delay our development timeline.

Changes in regulatory requirements, or guidance from the FDA, EMA, or other applicable regulatory authorities, imposition of additional clinical study requirements by applicable regulatory authorities or unanticipated events during our clinical studies may force us to amend clinical study protocols or involve delays to our clinical trials. Amendments to our clinical study protocols may require resubmission to the applicable regulatory authorities, Institutional Review Boards (IRBs) and Ethics Committees for review and approval, which may adversely impact the cost, timing and/or successful completion of a clinical study. For example, while we have reached agreement with the FDA on the design of the Phase 2/3 pivotal trial for our lead product candidate sepofarsen, there can be no assurance that there will be no changes to the planned design of this trial or that we will not be required to conduct additional testing for this product candidate. If we experience delays completing - or if we terminate - any of our clinical studies, or if we are required to conduct additional clinical studies, the commercial prospects for our product candidates may be harmed and our ability to generate product revenue will be delayed.

Our RNA technologies are unproven in the disease indications they are being tested for and may not result in marketable products.

We are developing a pipeline of product candidates using our proprietary RNA technologies for severe genetic disorders. We believe that targeting the mRNA to restore the production of functional protein is a unique approach that offers advantages versus small molecule, gene therapy and other therapeutic approaches. However, the scientific research that forms the basis of our efforts to develop product candidates is both preliminary and limited. The mechanism of action of our compounds could be different from what we today hypothesize. Also, we may discover that the molecules we develop do not possess certain properties required for a drug to be effective, such as the ability to remain stable in the human body for the period of time required for the drug to reach the target tissue or the ability to cross the cell wall and enter into cells within the target tissue for effective delivery. We may spend substantial funds attempting to introduce these properties and may never succeed in doing so. For example, while we have discovered and are developing our novel Axiomer and TRIDENT RNA editing technologies, there can be no assurance that we will be able to leverage our technology to create viable product candidates to advance into the clinic, or develop those candidates to submit for regulatory approval. In addition, product candidates based on RNA technologies may demonstrate different chemical and pharmacological properties in humans than they do in laboratory studies or animals. Even if our product candidates have successful results in animal studies, they may not demonstrate the same chemical and pharmacological properties in humans and may interact with human biological systems or other existing treatments in unforeseen, ineffective or harmful ways. Our RNA technologies may provoke an unwanted immune response, or immunogenicity, which may neutralize the therapeutic effects of our product candidates and could result in harmful outcomes for patients. As a result, we may never succeed in developing a marketable product, and in turn we may not become profitable and the value of our ordinary shares would decline.

Furthermore, the FDA and the EMA have relatively limited experience with therapeutics based on RNA. This may increase the complexity, uncertainty and length of the regulatory approval process for our product candidates. Neither we nor any future collaborator may receive approval to market and commercialize any product candidate. Even if we or a collaborator were to obtain regulatory approval, the approval may be for disease indications or patient populations that are not as broad as we intended or may require labeling that includes significant use or distribution restrictions or safety warnings. We or a collaborator may be required to perform additional or unanticipated clinical trials to obtain approval

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or be subject to post-marketing testing requirements to maintain regulatory approval. If our RNA technology proves to be ineffective, unsafe or commercially unviable, our entire platform and pipeline would have little, if any, value, which would have a material adverse effect on our business, financial condition, results of operations and prospects.

Failure to obtain regulatory approval in jurisdictions outside the United States and the European Union would prevent our product candidates from being marketed in those jurisdictions.

In order to market and sell our products in jurisdictions other than the United States and the European Union, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The regulatory approval process outside the United States and the European Union generally includes all of the risks associated with obtaining FDA and EMA approval, but can involve additional testing. We may need to partner with third parties in order to obtain approvals outside the United States and the European Union. In addition, in many countries worldwide, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We may not obtain approvals from regulatory authorities outside the United States and the European Union on a timely basis, if at all. Even if we were to receive approval in the United States or the European Union, approval by the FDA or the EMA does not ensure approval by regulatory authorities in other countries or jurisdictions. Similarly, approval by one regulatory authority outside the United States and the European Union would not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA or the EMA. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market. If we are unable to obtain approval of our product candidates by regulatory authorities in other foreign jurisdictions, the commercial prospects of those product candidates may be significantly diminished and our business prospects could decline.

A breakthrough therapy designation by the FDA for our product candidates may not lead to a faster development or regulatory review or approval process, and it does not increase the likelihood that our product candidates will receive marketing approval.

We may seek a breakthrough therapy designation for sepofarsen, QR-421a, QR-1123 and QR-411, and we may do so for other product candidates as well. A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. For product candidates that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Product candidates designated as breakthrough therapies by the FDA are also eligible for accelerated approval.

Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe that any of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. The availability of breakthrough therapy designation was established with the passage of the Food and Drug Administration Safety and Innovation Act of 2012, and while the FDA has released guidance as to the criteria it uses in designating drugs as breakthrough therapies, we cannot be sure that our product candidates will meet the FDA’s qualifying criteria for such designation. In any event, the receipt of a breakthrough therapy designation for a product candidate may not result in a faster development process, review or approval compared to drugs considered for approval under conventional FDA procedures and also does not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that the products no longer meet the conditions for such qualification or decide that the time period for FDA review or approval will not be shortened.

A fast track designation by the FDA or PRIME designation by the EMA may not actually lead to a faster development, regulatory review or approval process.

We have obtained fast track designation from the FDA for sepofarsen for LCA due to the p.Cys998X mutation in the CEP290 gene, QR-421a for Usher syndrome and retinitis pigmentosa and QR-1123 for autosomal dominant retinitis pigmentosa caused by the P23H mutation in the rhodopsin gene. We also have obtained PRIME designation from the EMA for sepofarsen for LCA due to the p.Cys998X mutation in the CEP290 gene. We may seek fast track designation or PRIME designation for other product candidates as well. If a drug is intended for the treatment of a serious or life-

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threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition, the sponsor may apply for FDA fast track designation. To be accepted for PRIME, a drug has to show its potential to benefit patients with unmet needs based on early clinical data. The FDA and EMA have broad discretion whether or not to grant such designations, and even if we believe one or more of our product candidates is eligible for such a designation, we cannot be sure that the FDA or EMA would decide to grant it. Even if we do receive fast track or PRIME designation, we may not experience a faster development process, review or approval compared to conventional FDA or EMA procedures. The FDA and EMA may withdraw such designation if they believe that the designation is no longer supported by data from our clinical development program.

A rare pediatric disease designation may not lead to the receipt of a rare pediatric disease priority review voucher, even if sepofarsen or QR-421a is approved.

The FDA has awarded rare pediatric disease priority review vouchers (PRVs), to sponsors of drug products intended to treat rare pediatric disease products if the treatment and product application meet certain criteria. Under this program, upon the approval of a qualifying NDA or biologics license application (BLA) for the treatment or prevention of a rare pediatric disease, the sponsor of the application may be eligible for a PRV that can be used to obtain priority review for a subsequent NDA or BLA. The PRV may be sold or transferred an unlimited number of times. The FDA has granted rare pediatric disease designation for sepofarsen and QR-421a for LCA and for USH2A-associated retinitis pigmentosa, respectively. The authority for the FDA to award PVRs after September 30, 2024 is currently limited to product candidates that receive rare pediatric disease designation on or prior to September 30, 2024, and FDA may only award PVRs through September 30, 2026, but it is possible the authority for FDA to award PVRs will be further extended by Congress. There is no guarantee, however, that we will receive a PRV for sepofarsen or QR-421a even if either is approved by the FDA to treat a rare pediatric disease.

Risks Related to Our Dependence on Third Parties

Some of our RNA technologies rely in part upon certain patent rights that we license from third parties. Pursuant to our license agreements, we are obligated to use commercially reasonable efforts to develop and make available to the public products or processes, as well as to achieve certain specified development, regulatory and commercial milestones. If we do not meet the specified milestones, the third party may be able to terminate the license agreement. They may also terminate the license agreement if we are in breach of certain financial obligations or we are otherwise in default of certain obligations under the license agreement. If a license agreement were terminated, it could have a material adverse effect on our business, financial condition, results of operations and prospects.

We rely on third-party manufacturers and suppliers and we intend to rely on third parties to produce preclinical, clinical and commercial supplies of our product candidates.

We rely on third parties to supply the materials and components for, and manufacture, our research and development, preclinical and clinical trial supplies. We do not own manufacturing facilities or supply sources for such components and materials. There can be no assurance that our supply of research and development, preclinical and clinical development drugs and other materials will not be limited, interrupted, restricted in certain geographic regions or of satisfactory quality or continue to be available at acceptable prices. In particular, any replacement of our drug product formulation manufacturer could require significant effort and expertise because there may be a limited number of qualified replacements.

The manufacturing process for a product candidate is subject to FDA, EMA and other foreign regulatory authority review. Suppliers and manufacturers must meet applicable manufacturing requirements and undergo rigorous facility and process validation tests required by regulatory authorities in order to comply with regulatory standards such as cGMP. In the event that any of our suppliers or manufacturers fails to comply with such requirements or fails to perform its obligations to us in relation to quality, timing or otherwise, or if our supply of components or other materials becomes limited or interrupted for other reasons, we may be forced to manufacture the materials ourselves, for which we currently

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do not have the capabilities or resources, or enter into an agreement with another third party, which we may not be able to do on reasonable terms, if at all. In some cases, the technical skills or technology required to manufacture our product candidates may be unique or proprietary to the original manufacturer and we may have difficulty, or there may be contractual restrictions prohibiting us from, transferring such skills or technology to another third party and a feasible alternative may not exist. These factors would increase our reliance on such manufacturer or require us to obtain a license from such manufacturer in order to have another third party manufacture our product candidates. If we are required to change manufacturers for any reason, we will be required to verify that the new manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations and guidelines. We will also need to verify, such as through a manufacturing comparability study, that any new manufacturer or manufacturing process will produce our product candidate according to the specifications previously submitted to the FDA, the EMA or another regulatory authority. The delays associated with the verification of a new manufacturer or manufacturing process could negatively affect our ability to develop product candidates in a timely manner or within budget.

We expect to continue to rely on third party manufacturers if we receive regulatory approval for any product candidate. To the extent that we have existing, or enter into future, manufacturing arrangements with third parties, we will depend on these third parties to perform their obligations in a timely manner consistent with contractual and regulatory requirements, including those related to quality control and assurance. If we are unable to obtain or maintain third-party manufacturing for product candidates, or to do so on commercially reasonable terms, we may not be able to develop and commercialize our product candidates successfully. Our or a third party’s failure to execute on our manufacturing requirements could adversely affect our business in a number of ways, including:

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an inability to initiate or continue preclinical studies or clinical trials of product candidates under development;

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delay in submitting regulatory applications, or receiving regulatory approvals, for product candidates;

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loss of the cooperation of a collaborator;

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subjection of our product candidates to additional inspections by regulatory authorities;

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requirements to cease distribution or to recall batches of our product candidates; and

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in the event of approval to market and commercialize a product candidate, an inability to meet commercial demands for our products.

If third parties on which we depend to conduct our preclinical studies or any clinical trials do not perform as contractually required, fail to satisfy regulatory or legal requirements or miss expected deadlines, our development programs could be delayed with materially adverse effects on our business, financial condition, results of operations and prospects.

We rely on Contract Research Organizations (CROs), clinical data management organizations and consultants to design, conduct, supervise and monitor preclinical studies and clinical trials for our product candidates. We and our clinical investigators and CROs are required to comply with various regulations, including Good Clinical Practices (GCP) which are enforced by the FDA, and guidelines of the Competent Authorities of the Member States of the European Economic Area (EEA) and comparable foreign regulatory authorities to ensure that the health, safety and rights of patients are protected in clinical development and clinical trials, and that trial data integrity is assured. Regulatory authorities ensure compliance with these requirements through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our investigators or CROs fail to comply with applicable requirements, the clinical data generated in our clinical trials may be deemed unreliable and the FDA, the EMA or other comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot be certain that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with such requirements. In addition, our clinical trials must be conducted with products produced under current Good Manufacturing Practice (cGMP) requirements, which mandate the methods, facilities and controls used in manufacturing, processing and packaging of a drug product to ensure its safety and identity. Failure to comply with these regulations may require us to repeat preclinical studies and clinical trials, which would delay the regulatory approval process.

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Our CROs are not our employees, and except for remedies available to us under our agreements with such CROs, we cannot control whether or not they devote sufficient time and resources to our ongoing clinical and preclinical programs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines or if the quality or accuracy of the clinical data they obtain is compromised due to their failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, our operations and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed. Additionally, any significant delays could cause us to miss diligence milestones under our license agreements and could cause licensors to terminate the agreements, which would further harm our business, financial condition, results of operations and prospects.

Because we have relied and continue to rely on third parties, our internal capacity to perform these functions is limited. Outsourcing these functions involves a risk that third parties may not perform to our standards, may not produce results in a timely manner or may fail to perform at all. In addition, the use of third-party service providers requires us to disclose our proprietary information to these parties, which could increase the risk that this information will be misappropriated. We currently have a relatively small number of employees, which limits the internal resources we have available to identify and monitor our third-party service providers. To the extent we are unable to identify and successfully manage the performance of third-party service providers in the future, our business may be adversely affected. Even though we carefully manage our relationships with our CROs, there can be no assurance that we will not be impacted by these type of challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.

If we cannot contract with acceptable third parties on commercially reasonable terms, or at all, or if these third parties do not carry out their contractual duties, satisfy legal and regulatory requirements for the conduct of preclinical studies or clinical trials or meet expected deadlines, our clinical development programs could be delayed and otherwise adversely affected. In all events, we are responsible for ensuring that each of our preclinical studies and clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. The FDA and the EMA require clinical trials to be conducted in accordance with GCP, including 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 clinical trial participants are protected. Our reliance on third parties that we do not control does not relieve us of these responsibilities and requirements. Any such event could have a material adverse effect on our business, financial condition, results of operations and prospects.

If a collaborative partner terminates or fails to perform its obligations under an agreement with us, the commercialization of our product candidates, if approved, could be delayed or terminated.

We are party to, and we may from time to time in the future pursue, collaborative arrangements for the development and commercialization of our product candidates, if approved. For example, we entered into a collaboration with Ionis Pharmaceuticals, pursuant to which we in-licensed our product candidate QR-1123 in exchange for upfront, milestone and royalty payments. As such, the development of QR-1123 depends on our ability to maintain this collaboration. Further, there can be no assurance that we will realize the intended benefits of this arrangement, nor can there be any assurance that the consideration that we have paid and are obligated to pay in the future, as well as the investments that we have made and intend to make to develop QR-1123, will yield any returns.

In addition, we have executed and continue to consider strategic alternatives that include spinouts, out-licensing or collaborative partnerships to develop and commercialize our RNA technologies or programs. For example, in 2019, we spun out all our former dystrophic epidermolysis bullosa activities to Wings Therapeutics Inc. If any of our collaborative partners in future collaborative arrangements for the commercialization of our product candidates or similar arrangements does not devote sufficient time and resources to the collaboration arrangement with us, we may not realize the potential commercial benefits of the arrangement, and our results of operations may be materially adversely affected. In addition, if any such collaboration partner were to breach or terminate its arrangements with us, the commercialization of our product candidates could be delayed, curtailed or terminated.

Much of the potential revenue from current and future collaborations may consist of contingent payments, such as payments for achieving regulatory milestones or royalties payable on sales of drugs. The milestone and royalty revenue

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that we may receive under these collaborations will depend upon our collaborators’ ability to successfully develop, introduce, market and sell new products. In addition, collaborators may decide to enter into arrangements with third parties to commercialize products developed under collaborations using our technologies, which could reduce the milestone and royalty revenue that we may receive, if any. Future collaboration partners may fail to develop or effectively commercialize products using our products or technologies because they:

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decide not to devote the necessary resources due to internal constraints, such as limited personnel with the requisite expertise, limited cash resources or specialized equipment limitations, or the belief that other drug development programs may have a higher likelihood of obtaining marketing approval or may potentially generate a greater return on investment;

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decide to pursue other technologies or develop other product candidates, either on their own or in collaboration with others, including our competitors, to treat the same diseases targeted by our own collaborative programs;

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do not have sufficient resources necessary to carry the product candidate through clinical development, marketing approval and commercialization; or

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cannot obtain the necessary marketing approvals.

Moreover, competition may negatively impact a partner’s focus on, and commitment to, our product candidates and, as a result, could delay or otherwise negatively affect the commercialization of such product candidate. The failure of any current or future collaboration partners to develop or effectively commercialize our product candidates, if approved, for any of these reasons would have a material adverse effect on our operating results and financial condition.

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

Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our products for which we obtain marketing approval. As a biopharmaceutical company, even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors, certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our business. Restrictions under applicable federal and state healthcare laws and regulations that may affect our ability to operate include the following:

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the U.S. federal Anti-Kickback Statute prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or paying remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid. A person or entity can be found guilty of violating the statute without actual knowledge of the statute or specific intent to violate it. The term remuneration has been interpreted broadly to include anything of value. Further, courts have found that if “one purpose” of remuneration is to induce referrals, the federal Anti-Kickback statute is violated. Violations are subject to significant civil and criminal fines and penalties for each violation, plus up to three times the remuneration involved, imprisonment, and exclusion from government healthcare programs. In addition, a claim submitted for payment to any federal healthcare program that includes items or services that were made as a result of a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act, or FCA. The Anti-Kickback Statute has been interpreted to apply to arrangements between biopharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers, among others, on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, and on November 20, 2020, the Office of Inspector General (OIG) finalized further modifications to the federal Anti-Kickback Statute;

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federal civil and criminal false claims laws, including the FCA and civil monetary penalty laws, impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making a false statement or record to avoid, decrease or conceal an obligation to pay money to the federal government. A claim that includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim under the FCA. Manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims. The FCA also permits a private individual acting as a “whistleblower” to bring qui tam actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery or settlement. When an entity is determined to have violated the FCA, the government may impose civil fines and penalties for each false claim, plus treble damages, and exclude the entity from participation in Medicare, Medicaid and other federal healthcare programs;

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the U.S. federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program, and also created federal criminal laws that prohibit knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statements or using or making any false or fraudulent document in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity can be found guilty of violating HIPAA fraud provisions without actual knowledge of the statute or specific intent to violate it;

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HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH), also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information on certain covered healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their respective “business associates,”, being those independent contractors or agents of covered entities that create, receive, maintain, transmit or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, there may be additional federal, state and non-U.S. laws which govern the privacy and security of health and other personal information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts;

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the U.S. federal physician payment transparency requirements under the Patient Protection and Affordable Care Act (ACA), as amended by the Health Care and Education Reconciliation Act of 2010, collectively, the Affordable Care Act, require applicable manufacturers of covered drugs, devices, biologics and medical supplies to report annually to the Department of Health and Human Services (HHS) information related to direct or indirect payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), and teaching hospitals, and ownership and investment interests held by physicians and their immediate family members. Effective January 1, 2022, these reporting obligations will extend to include transfers of value made in the previous year to certain non-physician providers such as physician assistants and nurse practitioners; and

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analogous state, local and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payors, including 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 and may require drug manufacturers to report information related to payments and other transfers of value to physicians and certain other healthcare providers or marketing expenditures. Additionally, state and foreign laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

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The distribution of biopharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage and security requirements intended to prevent the unauthorized sale of biopharmaceutical products.

Comparable laws and regulations exist in the countries within the European Economic Area (EEA) and other countries where we may market our products in the future, including without limitation the United Kingdom, Canada and Brazil. Although in the EEA such laws are partially based upon European Union law, they may vary from country to country. Both healthcare and industry specific, as well as general EU and national laws, regulations and industry codes constrain, for example, our interactions with government officials and healthcare practitioners, and the handling of healthcare data. Non-compliance with any of these laws or regulations could lead to criminal or civil liability.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, reputational harm, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws. If any physicians or other healthcare providers or entities with whom we expect to do business are found to not be in compliance with applicable laws, they may be subject to similar penalties. In addition, the approval and commercialization of any product candidate we develop outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws. All of these could harm our ability to operate our business and our financial results.

Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDA or EMA regulations or similar regulations of other foreign regulatory authorities, to provide accurate information to the FDA, the EMA or other foreign regulatory authorities, to comply with certain manufacturing standards, to comply with U.S. federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable foreign regulatory authorities, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted and implemented a Code of Business Conduct and Ethics, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity, such as employee training on enforcement of the Code of Business Conduct and Ethics, may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions and any imposition of significant fines or other sanctions could have a significant impact on our business and results of operations.

Risks Related to Our Intellectual Property

We rely, and will continue to rely, on intellectual property rights licensed from third parties to protect our technology. We are a party to licenses that give us rights to third-party intellectual property that are necessary or useful for our business. For our LCA program we have a world-wide exclusive sublicensable and royalty-bearing license to patent

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rights owned by the Radboud University Medical Center (Radboud) and license to patent rights owned by Inserm Transfert (Inserm) for the commercial sale of antisense oligonucleotides that cause exon skipping in CEP290 pre-mRNA. For our Usher program we have a world-wide exclusive sublicensable and royalty-bearing license to patent rights owned by Radboud, for the commercial sale of antisense oligonucleotides that cause exon skipping in USH2A pre-mRNA. For our adRP program we have a world-wide exclusive license to patent rights owned by Ionis Pharmaceuticals, Inc. for the commercial use of gapmers that target mutated Rhodopsin (P23H) mRNA. For our FECD program we have a world-wide exclusive sublicensable and royalty-bearing license to patent rights owned by Vico Therapeutics B.V. for the prophylactic and therapeutic use of antisense oligonucleotides for the treatment of FECD.

Our licensing arrangements impose diligence, development, regulatory and commercialization milestones, and royalty, insurance and other obligations on us. If we fail to comply with these obligations, licensors may have the right to terminate these agreements, in which case we might not be able to develop, manufacture or market any product that is covered by these agreements or may face other penalties under the agreements. Such an occurrence could materially adversely affect the value of the product candidate being developed under any such agreement. Termination of any such agreement or reduction or elimination of our rights under any such agreement may result in our having to negotiate new or amended agreements with less favorable terms, or cause us to lose our rights under such agreement, including our rights to important intellectual property and technologies that form the basis of our RNA technology, which may then be in-licensed by one or more of our competitors, any of which could adversely affect our competitive business position and harm our business prospects.

Periodic maintenance fees on any issued patent are due to be paid to the United States Patent and Trademark Office (U.S. PTO) the European Patent Office (EPO) and other foreign patent agencies in several stages over the lifetime of the patent. The U.S. PTO, EPO and various foreign national or international patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be rectified by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of patent rights include, but are not limited to, failure to timely file national and regional stage patent applications based on our international patent application, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we or our licensors fail to maintain the patents and patent applications covering our product candidates, our competitors might be able to enter the market, which would have a material adverse effect on our business.

We or our licensors or any future collaborators or strategic partners may be subject to third-party claims for infringement or misappropriation of patent or other proprietary rights. We are generally obligated under our license or collaboration agreements to indemnify and hold harmless our licensors or collaborators for damages arising from intellectual property infringement by us. If we or our licensors, or any future collaborators or strategic partners, are found to infringe a third party patent or other intellectual property rights, we could be required to pay damages, potentially including treble damages, if we are found to have willfully infringed. In addition, we or our licensors, or any future collaborators or strategic partners, may choose to seek, or be required to seek, a license from a third party, which may not be available on acceptable terms, if at all. Even if a license can be obtained on acceptable terms, the rights may be non-exclusive, which could give our competitors access to the same technology or intellectual property rights licensed to us. If we fail to obtain a required license, we or any future collaborator may be unable to effectively market product candidates based on our technology, which could limit our ability to generate revenue or achieve profitability and possibly prevent us from generating revenue sufficient to sustain our operations. In addition, we may find it necessary to pursue claims or initiate

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lawsuits to protect or enforce our patent or other intellectual property rights. The cost to us in defending or initiating any litigation or other proceeding relating to patent or other proprietary rights, even if resolved in our favor, could be substantial, and litigation would divert our management’s attention for a significant amount of time. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could delay our research and development efforts and limit our ability to continue our operations.

Further, if we were to initiate legal proceedings against a third party to enforce a patent covering one of our products or our technology, the defendant could counterclaim that our patent is invalid or unenforceable. In patent litigation in the U.S. and in most European countries, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, for example, lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the U.S. PTO, or made a misleading statement, during prosecution. The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on one or more of our products or certain aspects of our platform technology. Such a loss of patent protection could have a material adverse impact on our business. Patents and other intellectual property rights also will not protect our technology if competitors design around our protected technology without legally infringing our patents or other intellectual property rights.

Our commercial success depends upon our ability to develop, manufacture, market and sell our product candidates, and to use our proprietary technologies without infringing the proprietary rights of third parties. We cannot guarantee that none of our product candidates, their manufacture, use, sale, offer for sale, or importation into the United States or into any country of the EEA will be held to infringe a third-party patent. As a result, we may become party to, or be threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology, including litigation in a Federal District court, or an interference or a post grant proceeding before the U.S. PTO or litigation in foreign courts or proceedings before foreign patent offices. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future.

Furthermore, in the event a thus far unidentified third party were to assert an infringement claim against us and we were ultimately found to infringe the third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developing and commercializing our products and technology. However, we may not be able to obtain an appropriate license on commercially reasonable terms or at all. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, in any such proceeding or litigation, we could be found liable for monetary damages. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. Any claims by third parties that we have misappropriated their confidential information or trade secrets could have a similar negative impact on our business.

If the third parties from whom we license patent rights do not properly or successfully obtain, maintain or enforce the patents underlying such licenses, or if they retain or license to others any competing rights, our competitive position and business prospects may be adversely affected.

Our success will further depend in part on the ability of our licensors to obtain, maintain and enforce patent protection for our licensed intellectual property, in particular, those patents to which we have secured exclusive rights. Ionis, Radboud, Inserm, and Vico as well as our other licensors, may not successfully prosecute the patent applications licensed to us. Even if patents are issued or granted, Ionis, Radboud, Inserm and Vico, or our other licensors may fail to maintain these patents, may determine not to pursue litigation against other companies that are infringing these patents, or may pursue litigation less aggressively than we would. Further, the license agreements may not provide us with a

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complete freedom to operate in the respective fields, which would allow for third parties to develop competing products. Without protection for, or exclusive right to, the intellectual property we license, other companies might be able to offer substantially identical products for sale, which could adversely affect our competitive business position and harm our business prospects.

If we are not able to adequately prevent disclosure of trade secrets and other proprietary information, the value of our technology and products could be significantly diminished.

We rely on trade secrets to protect our proprietary technologies, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees, consultants, outside scientific collaborators, sponsored researchers, contract manufacturers, vendors and other advisors to protect our trade secrets and other proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, we cannot guarantee that we have executed these agreements with each party that may have or has had access to our trade secrets.

Any party with whom we have executed a confidentiality agreement may breach that agreement and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they disclose such trade secrets, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor or other third-party, our competitive position could be harmed.

We may be subject to claims that we or our employees or consultants have wrongfully used or disclosed alleged trade secrets of our employees’ or consultants’ former employers or their clients. These claims may be costly to defend and if we do not successfully do so, we may be required to pay monetary damages and may lose valuable intellectual property rights or personnel.

Many of our employees were previously employed at universities or biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key research personnel or their work product could compromise our ability to commercialize, or prevent us from commercializing, our product candidates, which could severely harm our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting and defending patents on all of our product candidates throughout the world would be prohibitively expensive. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may be able to export otherwise infringing products to territories where we have patent protection but where enforcement is not as strong as that in the United States. These products may compete with our products in jurisdictions where we do not have any issued patents and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. For example, the Special 301 Report (April 2020) from the Office of the United States Trade Representative identified a number of countries, including India and China,

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where challenges to the procurement and enforcement of patent rights have been reported. Several countries, including India and China, have been listed in the report every year since 1989. As a result, proceedings to enforce our patent rights in certain foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business.

Risks Related to the Commercialization of Our Product Candidates

The development and commercialization of drugs is highly competitive. We compete with a variety of multinational pharmaceutical companies and specialized biotechnology companies, as well as technology being developed at universities and other research institutions. Our competitors have developed, are developing or may develop product candidates and processes competitive with our product candidates. Competitive therapeutic treatments include those that have already been approved and accepted by the medical community and any new treatments that may enter the market. We believe that a significant number of products are currently under development, and may become commercially available in the future, for the treatment of conditions for which we may try to develop product candidates. An overview of potential competitors is included in Item 4.B: “Business overview - Competition”.

Many of our competitors possess significantly greater financial, technical, manufacturing, marketing, sales and supply resources or experience than us. If we successfully obtain approval for any product candidate, we may face competition based on many different factors, including the safety and effectiveness of our products, the ease with which our products can be administered and the extent to which patients accept relatively new routes of administration, the timing and scope of regulatory approvals for these products, the availability and cost of manufacturing, marketing and sales capabilities, price, reimbursement coverage and patent position. Competing products could present superior treatment alternatives, including being more effective, safer, less expensive or marketed and sold more effectively than any products we may develop. Competitive products may make any products we develop obsolete or noncompetitive before we recover the expense of developing and commercializing our product candidates. Such competitors could also recruit our employees, which could negatively impact our level of expertise and our ability to execute our business plan. Furthermore, in our clinical studies we could be competing for the same patient population, resulting in a smaller population of suitable candidates and possibly delays and additional costs.

Even if we are able to commercialize any of our product candidates, the products may not receive coverage and adequate reimbursement from third-party payors, which could harm our business.

The availability of reimbursement by governmental and private payors is essential for most patients to be able to afford expensive treatments. Sales of any of our product candidates, if approved, will depend substantially on the extent to which the costs of these product candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administration authorities, private health coverage insurers and other third-party payors. If reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize any product candidate. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment. Further, due to the COVID-19 pandemic, millions of individuals have lost/will be losing employer-based insurance coverage, which may adversely affect our ability to commercialize our products.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services (CMS) an agency within the U.S. Department of Health and Human Services, as CMS decides whether and to what extent a new medicine will be covered and reimbursed under Medicare. Private payors tend to follow CMS to a substantial degree. It is difficult to predict what CMS will decide with respect to reimbursement for fundamentally novel products such as ours, as there is no body of established practices and precedents for these new products. Reimbursement agencies in Europe may be more conservative than CMS. For example, a number of cancer drugs have been approved for reimbursement in the United States and have not been approved for reimbursement in

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certain European countries. Factors payors consider in determining reimbursement are based on whether the product is: (i) a covered benefit under its health plan; (ii) safe, effective and medically necessary; (iii) appropriate for the specific patient; (iv) cost-effective; and (v) neither experimental nor investigational.

The intended use of a drug product by a physician can also affect pricing. For example, CMS could initiate a National Coverage Determination administrative procedure, by which the agency determines which uses of a therapeutic product would and would not be reimbursable under Medicare. This determination process can be lengthy, thereby creating a long period during which the future reimbursement for a particular product may be uncertain.

Outside the United States, particularly in member states of the European Union, the pricing of prescription drugs is subject to governmental control. In these countries, pricing negotiations or the successful completion of health technology assessment procedures with governmental authorities can take considerable time after receipt of marketing approval for a product. In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Certain countries allow companies to fix their own prices for medicines, but monitor and control company profits. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various European Union member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. In some countries, we or our collaborators may be required to conduct a clinical trial or other studies that compare the cost-effectiveness of our RNA technology candidates to other available therapies in order to obtain or maintain reimbursement or pricing approval. Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If reimbursement of any product candidate approved for marketing is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business, financial condition, results of operations or prospects could be adversely affected.

Moreover, efforts by governmental and other third-party payors, in the United States and abroad, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for our product candidates. We expect to experience pricing pressures in connection with the sale of any of our product candidates, due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.

If any of our product candidates is approved for marketing and commercialization and we are unable to develop sales, marketing and distribution capabilities on our own or enter into agreements with third parties to perform these functions on acceptable terms, we will be unable to successfully commercialize any such future products.

Even if any of our product candidates is approved, we currently have no sales, marketing or distribution capabilities or experience. In addition, we intend to consider out-licensing, spinouts or collaborative partnerships to develop and commercialize our RNA technologies or programs. If any of our product candidates is approved, we will need to develop internal sales, marketing and distribution capabilities to commercialize such products, which would be expensive and time-consuming, or enter into collaborations with third parties to perform these services. If we decide to market our products directly, we will need to commit significant financial and managerial resources to develop a marketing and sales force with technical expertise and supporting distribution, administration and compliance capabilities. If we decide to rely on third parties with such capabilities to market our products or decide to co-promote products with collaborators, we will need to establish and maintain marketing and distribution arrangements with such third parties, and there can be no assurance that we will be able to enter into such arrangements on acceptable terms or at all. In entering into third-party marketing or distribution arrangements, any revenue we receive will depend upon the efforts of the third parties and there can be no assurance that such third parties will establish adequate sales and distribution capabilities or be successful in gaining market acceptance of any approved product. If we are not successful in commercializing any product approved in the future, either on our own or through third parties, our business, financial condition, results of operations and prospects could be materially adversely affected.

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In addition, we have estimated the size of patient populations and market potential for certain of the indications that our product candidates are intended to target. While we have based our estimates on industry and market data that we obtained from sources, including scientific journals, that we believe to be reliable, actual potential may differ from these estimates.

Even if we receive marketing approval for any of our product candidates, it may not achieve broad market acceptance, which would limit the revenue that we generate from its sales.

The commercial success of any of our product candidates, if approved by the FDA, the EMA or other regulatory authorities, will depend upon the awareness and acceptance of the product among the medical community, including physicians, patients, patient advocacy groups and healthcare payors. Market acceptance of any of our product candidates, if approved, will depend on a number of factors, including, among others:

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our product candidates’ demonstrated ability to treat patients and to provide patients with incremental therapeutic benefits, as compared with other available treatments;

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the relative convenience and ease of administration of our product candidates, including as compared with other treatments for patients;

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the prevalence and severity of any adverse side effects;

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limitations or warnings contained in the labeling approved for our product candidates by the FDA, the EMA or other regulatory authorities;

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availability of alternative treatments;

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pricing and cost effectiveness;

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the effectiveness of our sales and marketing strategies or those of our collaborators;

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our ability to increase awareness of our product candidates through marketing efforts;

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our ability to obtain sufficient third-party coverage or reimbursement; and

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the willingness of patients to pay out-of-pocket in the absence of third-party coverage.

Moreover, commercialization of QR-421a will trigger payments of up to $ 37.5 million pursuant to our agreement with FFB. Under our collaboration with Ionis related to our QR-1123 product candidate, we will be required to make payments to Ionis upon achievement of development and sales milestones, and royalty payments as a percentage of annual net sales. We may not have sufficient funds to support our milestone payment obligations to FFB and Ionis, which could have a material adverse effect on our business and prospects.

Recently enacted and future legislation, including potentially unfavorable pricing regulations or other healthcare reform initiatives, may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and may negatively affect the prices we may obtain.

In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities or affect our ability to profitably sell any product candidates for which we obtain marketing approval.

In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the Medicare Modernization Act) established the Medicare Part D program and provided authority for limiting the number of drugs that will be covered in any therapeutic class thereunder. The Medicare Modernization Act, including its cost reduction

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initiatives, could decrease the coverage and reimbursement rate that we receive for any of our approved products. Furthermore, private payors often follow Medicare coverage policies and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from the Medicare Modernization Act may result in a similar reduction in payments from private payors.

In March 2010, the Affordable Care Act (ACA) was enacted, which substantially changed the way health care is financed by both governmental and private insurers, and significantly impacted the U.S. biopharmaceutical industry. The ACA imposes a significant annual fee on companies that manufacture or import branded prescription drug products. It also contains substantial new provisions intended to broaden access to health insurance, reduce or constrain the growth of health care spending, enhance remedies against healthcare fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, and impose additional health policy reforms, any of which could negatively impact our business. Among other things, it subjects biological products to potential competition by lower-cost biosimilars, expands the types of entities eligible for the 340B drug discount program, introduced a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, established annual fees and taxes on manufacturers of certain branded prescription drugs, and created a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (increased to 70% pursuant to the Bipartisan Budget Act of 2018, or BBA, effective as of January 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D. The ACA is likely to continue the downward pressure on pharmaceutical and medical device pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs.

Some of the provisions of the ACA have yet to be fully implemented, while certain provisions have been subject to judicial and Congressional challenges. Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, it has enacted laws that modify certain provisions of the ACA such as removing penalties, starting January 1, 2019, for not complying with the ACA’s individual mandate to carry health insurance and delaying the implementation of certain ACA-mandated fees. On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, or the Texas District Court Judge, ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the Tax Cuts and Jobs Act of 2017, the remaining provisions of the ACA are invalid as well. The Trump Administration and CMS both stated that the ruling will have no immediate effect, and on December 18, 2019, the Fifth Circuit U.S. Court of Appeals held that the individual mandate is unconstitutional and remanded the case to the lower court to reconsider its earlier invalidation of the full ACA. On March 2, 2020, the United States Supreme Court granted the petitions for writs of certiorari to review this case and held oral arguments on November 10, 2020. It is unclear how this decision and other efforts to repeal and replace the ACA will impact the ACA and our business.

Further, since January 2017, President Trump has signed two Executive Orders and other directives designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. One Executive Order directs federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. The second Executive Order terminates the cost-sharing subsidies, or CSRs, that reimburse insurers under the ACA. Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017. On August 14, 2020, the U.S. Court of Appeals for the Federal Circuit ruled in two separate cases that the federal government is liable for the full amount of unpaid CSRs for the years preceding and including 2017. For CSR claims made by health insurance companies for years 2018 and later, further litigation will be required to determine the amounts due, if any. Further, on June 14, 2018, 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 that such payments were owed to them. This decision was appealed to the U.S. Supreme Court, which on April 27, 2020, reversed the U.S. Court of Appeals for the Federal Circuit’s decision and remanded the case to the U.S. Court of Federal Claims, concluding the government has an obligation to pay these risk corridor payments under the relevant formula. The effects

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of this gap in reimbursement on third-party payors, the viability of the ACA marketplace, providers, and potentially our business, are not yet known.

In December 2018, the Centers for Medicare and Medicaid Services, or CMS, published a final rule permitting further collections and payments to and from certain ACA qualified health plans and health insurance issuers under the ACA risk adjustment program in response to the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment. In addition, CMS has published a final rule that, as of 2020, gives 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.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted. These changes include aggregate reductions to Medicare payments to providers of 2% per fiscal year pursuant to the Budget Control Act of 2011, which began in 2013, and due to subsequent legislative amendments to the statute, including the BBA, will remain in effect through 2030 unless additional Congressional action is taken. However, pursuant to the Coronavirus Aid, Relief and Economic Security Act, or CARES Act, and subsequent legislation, these Medicare sequester reductions will be suspended from May 1, 2020 through March 31, 2021 due to the COVID-19 pandemic. Proposed legislation, if passed, would extend this suspension until the end of the pandemic. The American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Additionally, the Bipartisan Budget Act of 2018, among other things, amended the ACA, effective January 1, 2019, by increasing the point-of-sale discount (from 50% under the ACA to 70%) that is owed by pharmaceutical manufacturers who participate in Medicare Part D and closing the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”.

There has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. At the federal level, the Trump administration’s budgets for fiscal year 2021 includes a $135 billion allowance (over a period of time) to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. On March 10, 2020, the U.S. government sent “principles” for drug pricing to Congress, calling for legislation that would, among other things, cap Medicare Part D beneficiary out-of-pocket pharmacy expenses, provide an option to cap Medicare Part D beneficiary monthly out-of-pocket expenses, and place limits on pharmaceutical price increases. Additionally, the Trump administration released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers. The U.S. Department of Health and Human Services, or HHS, has already started the process of soliciting feedback on some of these measures and, at the same time, is immediately implementing others under its existing authority. For example, in September 2018, CMS announced that it will allow Medicare Advantage Plans the option to use step therapy for Part B drugs beginning January 1, 2019. However, it is unclear whether the Biden administration will challenge, reverse, revoke or otherwise modify these executive and administrative actions.

In addition, there have been several changes to the 340B drug pricing program, which imposes ceilings on prices that drug manufacturers can charge for medications sold to certain health care facilities. On December 27, 2018, the District Court for the District of Columbia invalidated a reimbursement formula change under the 340B drug pricing program, and CMS subsequently altered the FYs 2019 and 2018 reimbursement formula on specified covered outpatient drugs (“SCODs”). The court ruled this change was not an “adjustment” which was within the Secretary’s discretion to make but was instead a fundamental change in the reimbursement calculation. However, most recently, on July 31, 2020, the U.S. Court of Appeals for the District of Columbia Circuit overturned the district court’s decision and found that the changes were within the Secretary’s authority. On September 14, 2020, the plaintiffs-appellees filed a Petition for Rehearing En Banc (i.e., before the full court), but was denied on October 16, 2020.

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On July 24, 2020 and September 13, 2020, President Trump signed several Executive Orders related to prescription drug pricing seeking to implement several of his administration's proposals. In response, the FDA released a final rule on September 24, 2020, which went into effect on November 30, 2020, providing guidance for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020 CMS issued an Interim Final Rule implementing the Most Favored Nation, or MFN, Model under which Medicare Part B reimbursement rates will be calculated for certain drugs and biologicals based on the lowest price drug manufacturers receive in Organization for Economic Cooperation and Development countries with a similar gross domestic product per capita. The MFN Model regulations mandate participation by identified Part B providers and were intended to apply in all U.S. states and territories for a seven-year period that began on January 1, 2021 and ends December 31, 2027. However, the Interim Final Rule has not been finalized and is subject to revision and challenge.

Additionally, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. Implementation of the amendments to the discount safe harbor have been delayed until at least January 1, 2023.

Although a number of these, and other proposed measures will require authorization through additional legislation to become effective, and the Biden administration may reverse or otherwise change these measures, Congress has indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints and discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

Further, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017 (the Right to Try Act) was signed into law. The law, among other things, 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 obtaining FDA permission under the FDA expanded access program. There is no obligation for a pharmaceutical manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act.

We expect that these and other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved drug, which could have an adverse effect on customers for our product candidates. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors.

There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products. Such reforms could have an adverse effect on anticipated revenue from product candidates that we may successfully develop and for which we may obtain regulatory approval and may affect our overall financial condition and ability to develop product candidates.

Even if any of our product candidates receive regulatory approval, they may still face future development and regulatory difficulties and any approved products will be subject to extensive post-approval regulatory requirements.

If we obtain regulatory approval for any of our product candidates, it would be subject to extensive ongoing requirements by the FDA, the EMA and foreign regulatory authorities governing the manufacture, quality control, further development, labeling, packaging, storage, distribution, safety surveillance, import, export, advertising, promotion, recordkeeping and reporting of safety and other post-market information. The safety profile of any product will continue to be closely monitored by the FDA, the EMA and comparable foreign regulatory authorities after approval. If the FDA, the EMA or comparable foreign regulatory authorities become aware of new safety information

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after approval of any of our product candidates, these regulatory authorities may require labeling changes or establishment of a risk management strategy, impose significant restrictions on a product’s indicated uses or marketing, impose ongoing requirements for potentially costly post-approval studies or post-market surveillance or impose a recall.

In addition, manufacturers of therapeutic products and their facilities are subject to continual review and periodic inspections by the FDA, the EMA and other regulatory authorities for compliance with cGMP regulations. If we or a regulatory agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing. If we, our product candidates or the manufacturing facilities for our product candidates fail to comply with applicable regulatory requirements, a regulatory agency may, among other things:

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issue untitled letters or warning letters;

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mandate modifications to promotional materials or require us to provide corrective information to healthcare practitioners;

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require us to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required due dates for specific actions and penalties for noncompliance;

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seek an injunction or impose civil or criminal penalties or monetary fines;

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suspend or withdraw regulatory approval;

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suspend any ongoing clinical studies;

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refuse to approve pending applications or supplements to applications filed by us;

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suspend or impose restrictions on operations, including costly new manufacturing requirements; or

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seize or detain products, refuse to permit the import or export of products, or require us to initiate a product recall.

The occurrence of any event or penalty described above may inhibit our ability to commercialize our products and generate revenue.

We are subject to anti-corruption laws, as well as export control laws, customs laws, sanctions laws and other laws governing our operations. If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures and legal expenses, which could adversely affect our business, results of operations and financial condition.

Our operations are subject to anti-corruption laws, including the U.K. Bribery Act 2010 (Bribery Act) the U.S. Foreign Corrupt Practices Act (FCPA) and other anti-corruption laws that apply in countries where we do business and may do business in the future. The Bribery Act, the FCPA and other similar laws generally prohibit us, our officers, and our employees and intermediaries from bribing, being bribed or making other prohibited payments to government officials or other persons to obtain or retain business or gain some other business advantage. We intend to operate in a number of jurisdictions that pose a high risk of potential Bribery Act or FCPA violations, and we may participate in collaborations and relationships with third parties whose actions could potentially subject us to liability under the Bribery Act, the FCPA or local anti-corruption laws. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted.

We are also subject to other laws and regulations governing our international operations, including regulations administered by the governments of the United Kingdom and the United States, and authorities in the European Union,

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including applicable export control regulations, economic sanctions on countries and persons, customs requirements and currency exchange regulations, collectively referred to as the Trade Control laws, and anti-money laundering laws.

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

If we receive regulatory approvals, we intend to market our product candidates in multiple jurisdictions where we have limited or no operating experience and may be subject to increased business and economic risks that could affect our financial results.

If we receive regulatory approvals, we plan to market our product candidates in jurisdictions where we have limited or no experience in marketing, developing and distributing our products. Certain markets have substantial legal and regulatory complexities that we may not have experience navigating. We are subject to a variety of risks inherent in doing business internationally, including:

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risks related to the legal and regulatory environment in non-U.S. jurisdictions, including with respect to privacy and data security, and unexpected changes in laws, regulatory requirements and enforcement;

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burdens of complying with a variety of foreign laws in multiple jurisdictions;

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potential damage to our brand and reputation due to compliance with local laws;

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fluctuations in currency exchange rates;

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political, social or economic instability;

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difficulty of effective enforcement of contractual provisions in local jurisdictions;

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differences in local business culture and practices, difference in customer attitudes and tendencies and general differences in culture and local trends;

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the potential need to recruit and work through local partners;

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reduced protection for or increased violation of intellectual property rights in some countries;

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inadequate protection against unfair commercial use;

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difficulties in managing global operations and legal compliance costs associated with multiple international locations;

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compliance with the Bribery Act, the FCPA, the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, and similar laws in other jurisdictions;

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natural disasters, including earthquakes, tsunamis and floods;

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inadequate local infrastructure;

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compliance with Trade Control laws and anti-money laundering laws;

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the effects of applicable foreign tax structures and potentially adverse tax consequences; and

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exposure to local banking, currency control and other financial-related risks.

If we are unable to manage our international operations successfully, our financial results could be adversely affected.

Recent federal legislation and actions by state and local governments may permit reimportation of drugs from foreign countries into the United States, including foreign countries where the drugs are sold at lower prices than in the United States, which could materially adversely affect our operating results.

We may face competition in the United States for our product candidates, if approved, from therapies sourced from foreign countries that have placed price controls on pharmaceutical products. In the United States, the Medicare Modernization Act contains provisions that may change U.S. importation laws and expand pharmacists’ and wholesalers’ ability to import cheaper versions of an approved drug and competing products from Canada, where there are government price controls. These changes to U.S. importation laws will not take effect unless and until the Secretary of the Human and Health Services (HHS) certifies that the changes will pose no additional risk to the public’s health and safety and will result in a significant reduction in the cost of products to consumers. On September 23, 2020, the Secretary of HHS made such certification to Congress, and on October 1, 2020, the FDA published a final rule that allows for the importation of certain prescription drugs from Canada. Under the final rule, States and Indian Tribes, and in certain future circumstances pharmacists and wholesalers, may submit importation program proposals to the FDA for review and authorization. On September 25, 2020, CMS stated drugs imported by States under this rule will not be eligible for federal rebates under Section 1927 of the Social Security Act and manufacturers would not report these drugs for “best price” or Average Manufacturer Price purposes. Since these drugs are not considered covered outpatient drugs, CMS further stated it will not publish a National Average Drug Acquisition Cost for these drugs. Separately, the FDA also issued a final guidance outlining a potential pathway for manufacturers to obtain an additional National Drug Code, or NDC, for an FDA-approved drug that was originally intended to be marketed in a foreign country and that was authorized for sale in that foreign country. The regulatory and market implications of the final rule and guidance are unknown at this time. Legislation or regulations allowing the reimportation of drugs, if enacted, could decrease the price we receive for any products for which we may receive marketing approval and adversely affect our future revenues and prospects for profitability.

The FDA, the EMA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. If we are found to have improperly promoted off-label uses, we may become subject to significant liability.

The FDA, the EMA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products if approved. In particular, a product may not be promoted for uses that are not approved by the FDA, the EMA or other similar regulatory agencies as reflected in the product’s approved labeling. If we receive marketing approval for our product candidates, physicians may nevertheless prescribe them to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may become subject to significant liability.

In the United States, engaging in impermissible promotion of our products for off-label uses can also subject us to false claims litigation under federal and state statutes, which can lead to civil and criminal penalties and fines and agreements that materially restrict the manner in which we promote or distribute those products. These false claims statutes include the federal False Claims Act, which allows any individual to bring a lawsuit against a pharmaceutical or medical device company on behalf of the federal government alleging submission of false or fraudulent claims, or causing to present such false or fraudulent claims, for payment by a federal program such as Medicare or Medicaid. If the government prevails in the lawsuit, the individual will share in any fines or settlement funds. Since 2004, these False Claims Act lawsuits against pharmaceutical and medical device companies have increased significantly in volume and breadth, leading to several substantial civil and criminal settlements based on certain sales practices promoting off-label drug uses. This growth in litigation has increased the risk that a company will have to defend a false claim action, pay settlement fines or restitution, agree to comply with burdensome reporting and compliance obligations, and be excluded from the Medicare, Medicaid, and other federal and state healthcare programs. If we do not lawfully promote our

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approved products, we may become subject to such litigation and, if we are not successful in defending against such actions, those actions may have a material adverse effect on our business, financial condition and results of operations.

Adverse decisions of tax authorities or changes in tax treaties, laws, rules or interpretations could have a material adverse effect on our business, results of operations, financial condition and cash flows.

The tax laws and regulations in the Netherlands, the jurisdiction of our incorporation and our current resident state for tax purposes, may be subject to change and there may be changes in enforcement of tax law. Additionally, European and other tax laws and regulations are complex and subject to varying interpretations. We cannot be sure that our interpretations are accurate or that the responsible tax authority agrees with our views. If our tax positions are challenged by the tax authorities, we could incur additional tax liabilities, which could increase our costs of operations and have a material adverse effect on our business, financial condition, and results of operations.

Further changes in the tax laws of the jurisdictions in which we operate could arise as a result of the base erosion and profit shifting (BEPS) project being undertaken by the Organisation for Economic Co-operation and Development (OECD). The OECD, which represents a coalition of member countries that encompass certain of the jurisdictions in which we operate, is undertaking studies and publishing action plans that include recommendations aimed at addressing what they believe are issues within tax systems that may lead to tax avoidance by companies. It is possible that the jurisdictions in which we do business could react to the BEPS initiative or their own concerns by enacting tax legislation that could adversely affect us or our shareholders through increasing our tax liabilities.

Risks Related to Our Organization, Structure and Operations

The holdings of the members of our management board and supervisory board and our principal shareholders and their affiliates, represent significant ownership, in the aggregate, of our outstanding ordinary shares (as set out in “Item 7.A. Major Shareholders”). As a result, these shareholders, if they act together, will be able to influence our management and affairs and control the outcome of matters submitted to our shareholders for approval, including the election of members of our management board and supervisory board and any sale, merger, consolidation, or sale of all or substantially all of our assets. These shareholders may have interests, with respect to their ordinary shares, that are different from other investors and the concentration of voting power among these shareholders may have an adverse effect on the price of our ordinary shares. In addition, this concentration of ownership might adversely affect the market price of our ordinary shares by:

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delaying, deferring or preventing a change of control of our Company;

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impeding a merger, consolidation, takeover or other business combination involving our Company; or

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discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our Company.

Please see “Item 7.A. Major Shareholders” for more information regarding the ownership of our outstanding ordinary shares by our management board and supervisory board and our principal shareholders and their affiliates.

Any inability to attract and retain qualified key management and technical personnel would impair our ability to implement our business plan.

Our success largely depends on the continued service of key management and other specialized personnel. The loss of one or more members of our management board or other key employees or advisors could delay our research and development programs and materially harm our business, financial condition, results of operations and prospects. The relationships that our key managers have cultivated within our industry make us particularly dependent upon their continued employment with us. Moreover, we are dependent on the continued service of our technical personnel because

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of the highly technical nature of our product candidates and technologies and the specialized nature of the regulatory approval process. Because our management board and key employees are not obligated to provide us with continued service, they could terminate their employment or services with us at any time without penalty, subject to providing any required advance notice. Our future success will depend in large part on our continued ability to attract and retain other highly qualified scientific, technical and management personnel, as well as personnel with expertise in clinical testing, manufacturing, governmental regulation and commercialization. We face competition for personnel from other companies, universities, public and private research institutions, government entities and other organizations.

We may experience difficulties in managing our growth and expanding our operations.

We have limited experience in drug development. As our product candidates enter and advance through preclinical studies and clinical trials, we will need to expand our development, regulatory and manufacturing capabilities or contract with other organizations to provide these capabilities for us. In the future, we expect to have to manage additional relationships with collaborators or partners, suppliers and other organizations. Our ability to manage our operations and future growth will require us to continue to improve our operational, financial and management controls, reporting systems and procedures. We may not be able to implement improvements to our management information and control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls.

Data collection and use in the European Union is governed by restrictive regulations governing the use, processing, and cross-border transfer of personal information.

The collection and use of personal health data in the European Union are governed by the General Data Protection Regulation (GDPR). This directive imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, notification of data processing obligations to the competent national data protection authorities and the processes and procedures implemented and maintained with respect to the security and confidentiality of personal data. GDPR also imposes strict rules on the transfer of personal data out of the European Union, including to the United States among other countries. Failure to comply with the requirements of GDPR and the related national data protection laws of the European Union Member States may result in fines and other administrative penalties. The reach of the GDPR includes any business, regardless of its location, that provides goods or services to residents in the European Union. This would incorporate any potential clinical trial activities in European Union member states. The GDPR imposes strict requirements on controllers and processors of personal data, including special protections for “sensitive information”, which includes health and genetic information of data subjects residing in the European Union. GDPR grants individuals the opportunity to object to the processing of their personal information, allows them to request deletion of personal information in certain circumstances, and provides the individual with an express right to seek legal remedies in the event the individual believes his or her rights have been violated. Further, GDPR imposes strict rules on the transfer of personal data out of the European Union to the United States or other regions that have not been deemed to offer “adequate” privacy protections. Failure to comply with the requirements of GDPR and the related national data protection laws of the European Union Member States, which may deviate slightly from GDPR, may result in fines of up to 4% of global revenues, or €20,000,000, whichever is greater. Any determination by a competent national data protection authority that we have failed to comply with the requirements of GDPR and any fine as a result could have a material adverse effect on our business, results of operation, financial condition and reputation.

We are increasingly dependent on information technology systems, and our systems and infrastructure face certain risks, including from cyber security breaches and data leakage, which in turn could lead to a determination that we have failed to comply with GDPR resulting in a fine.

We increasingly rely upon technology systems and infrastructure, including support provided by our partners and third parties, to support our business. For example, we routinely rely on our technology systems and infrastructure to aid us in the collection, use, storage and transfer, disclosure and other processing of voluminous amounts of data (including confidential, business, personal and other sensitive information). We also rely on systems for manufacturing, regulatory compliance and various other matters.

The increasing use and evolution of technology, including cloud-based computing, and reliance on third parties creates additional opportunities for the unintentional, intentional and/or unauthorized exposure, dissemination and/or destruction

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of confidential information stored in our technology systems, infrastructure and products. Our computer systems, servers and other technology systems (and those of third parties that we use) are vulnerable to breakdown, interruption, cyber and other security attacks, system malfunction, unauthorized access and other events. Security threats, including cyber and other attacks are becoming increasingly sophisticated, frequent, and adaptive. Any such vulnerability could compromise our technology systems and infrastructure and could expose personal and/or proprietary information (including sensitive personal information) to unauthorized third parties and/or cause permanent loss of such data. While we have invested in the protection of data and information technology, there can be no assurance that our efforts will prevent breakdowns, breaches in our systems or other incidents or ensure compliance with all applicable security and privacy laws, regulations and standards. For instance, in February 2021, an unauthorized third party compromised the email accounts of five employees and gained access to contact information of our employees and approximately 300 identified third party contacts who were sent a phishing email. We have filed the required reports with the data protection authority in the Netherlands and notified the affected parties of this phishing incident. In addition, we engaged a security specialist company to investigate this incident and deliver a report with its findings and have taken appropriate measures with the aim to minimize the risk of future incidents of this nature. These various types of incidents can lead to regulatory fines and penalties, business disruption, reputational harm, financial loss among other damages. We could also suffer strained relationships, increased costs (for security measures, remediation or otherwise), litigation (including class actions and stockholder derivative actions) or other negative consequences (including a decline in stock price) from breaches, cyber and other security attacks, industrial espionage, ransomware, email or phishing scams, malware or other cyber incidents, which may compromise our system infrastructure or lead to data leakage, either internally or at our third-party providers or other business partners. While we have invested in the protection of data and information technology and in related training, as the phishing incident described above demonstrates, there can be no assurance that our efforts will prevent significant breakdowns, attacks, breaches in our systems or other cyber incidents or ensure compliance with all applicable security and privacy laws, regulations and standards, including with respect to third-party service providers that utilize sensitive personal information, including protected health information on our behalf.

Our internal computer systems, or those of our CROs or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs, a determination that we have failed to comply with GDPR resulting in a fine, and adversely affect our business.

Despite the implementation of security measures, our information technology and other internal infrastructure systems and those of our CROs and other contractors and consultants are vulnerable to damage from computer viruses, cyberattacks and unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. A significant disruption in the availability of our information technology and other internal infrastructure systems could cause interruptions in our collaborations with our partners and delays in our research and development work. For instance, the loss of preclinical or clinical data involving our product candidates could result in delays in our development and regulatory filing efforts and significantly increase our costs. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data, or inappropriate disclosure of confidential or proprietary information, we could incur liability, including fines for failure to comply with GDPR, and the development of our product candidates could be delayed.

Our current operations are mainly concentrated in one location, and any events affecting this location may have material adverse consequences.

Our current operations are primarily located in our facilities in Leiden, the Netherlands. Any unplanned event, such as flood, fire, explosion, earthquake, extreme weather condition, medical epidemics, power shortage, telecommunication failure or other natural or manmade accidents or incidents that result in us being unable to fully utilize the facilities may have a material adverse effect on our ability to operate our business, particularly on a daily basis, and have significant negative consequences on our financial and operating conditions. Loss of access to these facilities may result in increased costs, delays in the development of our product candidates or interruption of our business operations. As part of our risk management policy, we maintain insurance coverage at levels that we believe are appropriate for our business. However, in the event of an accident or incident at these facilities, we cannot assure you that the amounts of insurance will be sufficient to satisfy any damages and losses. If our facilities are unable to operate because of an accident or incident or for any other reason, even for a short period of time, any or all of our research and development programs may be harmed.

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Our international operations subject us to various operational risks, and our failure to manage these risks could adversely affect our results of operations.

We face significant operational risks as a result of doing business internationally, such as:

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fluctuations in foreign currency exchange rates; potentially adverse and/or unexpected tax consequences, including penalties due to the failure of tax planning or due to the challenge by tax authorities on the basis of transfer pricing and liabilities imposed from inconsistent enforcement;

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potential changes to relevant accounting standards, which may impact our reported financial situation and results;

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being subject to the different, complex and changing laws, regulations and court systems of multiple jurisdictions and compliance with a wide variety of foreign laws, treaties and regulations;

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reduced protection of, or significant difficulties in enforcing, intellectual property rights in certain countries;

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difficulties in attracting and retaining qualified personnel due to the location of our operations;

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restrictions imposed by local labor practices and laws of jurisdictions where we have employees on our business and operations, including unilateral cancellation or modification of contracts;

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rapid changes in global government, economic and political policies and conditions, political or civil unrest or instability, terrorism or epidemics and other similar outbreaks or events, and potential failure in confidence of our suppliers or customers due to such changes or events; and

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tariffs, trade protection measures, import or export licensing requirements, trade embargoes and other trade barriers.

The United Kingdom’s withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business, which could reduce the price of our ordinary shares.

In June 2016, a majority of voters in the United Kingdom voted in favor of the United Kingdom withdrawing from the European Union in a national referendum, commonly referred to as Brexit. On March 29, 2017, the U.K. Prime Minister formally delivered the notice of withdrawal. In March and April 2019, the United Kingdom and the European Union agreed on two extensions of the withdrawal deadline. On October 28, 2019, a third extension of the withdrawal deadline was agreed to, in which the final withdrawal date was moved to January 31, 2020. Pursuant to Article 50 of the Treaty on European Union, the United Kingdom ceased being a Member State of the European Union on January 31, 2020. There was a transitional period, during which European Union’s rules continued to apply in the United Kingdom, however this ended on December 31, 2020 (the Transition Period). The United Kingdom and European Union have signed a European Union-United Kingdom Trade and Cooperation Agreement, which became provisionally applicable on January 1, 2021 and will become formally applicable once ratified by both the United Kingdom and the European Union. This agreement provides details on how some aspects of the United Kingdom and European Union’s relationship regarding medicinal products will operate, particularly in relation to Good Manufacturing Practice, however there are still many uncertainties.

We may also face new regulatory costs and challenges that could have an adverse effect on our operations as a result of Brexit. Following the end of the Transition Period, the UK has a stand-alone medicines and medical devices regulatory regime and the Medicines and Healthcare products Regulatory Agency (MHRA) is the UK’s stand-alone medicines and medical devices regulator. Within the UK, the regulatory framework is divided between Great Britain and Northern Ireland as, under the Northern Ireland Protocol, EU rules will continue to be applicable in Northern Ireland. Further high-level details about certain Brexit regulatory changes are set out in the sections below. Also, the United Kingdom will lose the benefits of global trade agreements negotiated by the European Union on behalf of its members, which may result in increased trade barriers that could make our doing business in the United Kingdom more difficult. We generally

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expect that, now the transition period has expired, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which European Union laws to replicate or replace, including those related to the regulation of medicinal products. Any of these effects of Brexit, and others we cannot anticipate, could negatively impact our business, prospects and results of operations in the United Kingdom.

Further, UK data privacy regulation may diverge from EU laws in relation to the processing of data relating to living persons, including the EU General Data Protection Regulation 2016/679 (the EU GDPR) – though the EU GDPR and other EU privacy legislation in force in the UK (at 31 December 2020) has been retained substantively into UK law. To the extent UK data protection laws diverge from EU laws in the future, we may need to implement additional procedures and processes to comply with data privacy laws in the UK and/or EU, including to facilitate data transfers from the EU to the UK. However, significant divergence between EU and UK data protection regulation is unlikely to occur (at least not in the short term), especially if the European Commission adopts a formal adequacy decision for the UK (in the context of the protection of personal data in accordance with the EU GDPR). For example, though the Transition Period has ended, the EU-UK Trade and Cooperation Agreement signed on 24 December 2020 (the TCA) provides for an interim period in which the UK is not considered a third country for the purposes of EU data protection laws, so long as UK data protection laws do not change. This interim period will end on the earlier of the 30 April 2021 (extendable by mutual agreement to 30 June 2021) or if the European Commission formally adopts an adequacy decision for the UK. In the event the European Commission does not formally adopt an adequacy decision within this interim period (in relation to the protection of personal data in the UK), and the UK becomes a third country for the purposes of EU data protection law, we may need to implement changes to our contractual, technical and operational procedures in order to carry out compliant data flows between the EU and UK.

In addition, these developments have had and may continue to have a significant adverse effect on global economic conditions and the stability of global financial markets, and could significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Many of the regulations that now apply in the United Kingdom following the Transition Period (including financial laws and regulations, tax, intellectual property rights, data protection laws, supply chain logistics, environmental, health and safety laws and regulations, medicine approval and regulations, immigration laws and employment laws), will likely be amended in future as the United Kingdom determines its new approach, which may result in significant divergence from European Union regulations. As a result of this uncertainty around such divergence and the economic and commercial impact that it could have, global financial markets could experience significant volatility, which could adversely affect the market price of our ordinary shares and our ability to access the equity and debt markets. Asset valuations, currency exchange rates and credit ratings may also be subject to increased market volatility. Also, the lack of clarity about future U.K. laws and regulations as the United Kingdom determines which European Union rules and regulations to replace or replicate, including financial laws and regulations, tax and free trade agreements, intellectual property rights, supply chain logistics, environmental, health and safety laws and regulations, immigration laws and employment laws, could decrease foreign direct investment in the United Kingdom, increase costs, and depress economic activity, which could adversely impact our business prospects in the United Kingdom. The long-term effects of Brexit will depend in part on how the European Union-United Kingdom Trade and Cooperation Agreement, and any future agreements signed by the United Kingdom and the European Union, take effect in practice. Such a withdrawal from the European Union is unprecedented, and it is unclear how the restrictions on the United Kingdom’s access to the European single market for goods, capital, services and labor within the European Union and the wider commercial, legal and regulatory environment, could impact our current and future operations and clinical activities in the United Kingdom.

Any of these effects of Brexit, among others, could materially adversely affect the business, business opportunities, and financial condition of our Company.

Inadequate funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result.

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In addition, government funding of other agencies on which our operations may rely, including those that fund research and development activities, is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA and other government employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, future shutdowns of other government agencies, such as the SEC, may also impact our business through review of our public filings and our ability to access the public capital markets. Similar developments at regulators (including the EMA) in other countries could have similar impacts on our applications for marketing approval and on our business.

Separately, in response to the global COVID-19 pandemic, foreign and domestic inspections by FDA have largely been on hold with FDA announcing plans in July 2020 to resume prioritized domestic inspections. Should FDA determine that an inspection is necessary for approval of a marketing application and an inspection cannot be completed during the review cycle due to restrictions on travel, FDA has stated that it generally intends to issue a complete response letter. Further, if there is inadequate information to make a determination on the acceptability of a facility, FDA may defer action on the application until an inspection can be completed. In 2020, several companies announced receipt of complete response letters due to the FDA's inability to complete required inspections for their applications. Regulatory authorities outside the U.S. may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic and may experience delays in their regulatory activities.

The investment of our cash and cash equivalents is subject to risks which may cause losses and affect the liquidity of these investments.

As at December 31, 2020 we had € 75,838,000 in cash and cash equivalents. To date, our cash and cash equivalents have been deposited primarily in savings and deposit accounts with original maturities of twelve months or less. Savings and deposit accounts generate small amounts of interest income, if any. In 2020, some of our euro savings accounts required us to incur small amounts of interest expenses. Any future investments may include term deposits, corporate bonds, money market funds and government securities, all in accordance with our cash management policy. These investments are subject to general credit, liquidity, market and interest rate risks. For example, interest rates may be negative in the European Union. We may realize losses in the fair value of these investments or a complete loss of these investments, which would have a negative effect on our financial statements.

In addition, should our investments cease paying or reduce the amount of interest paid to us, our interest income would suffer. The materialization of any of the market risks associated with our investment portfolio may have an adverse effect on our results of operations, liquidity and financial condition.

We may be exposed to significant foreign exchange risk.

We incur portions of our expenses, and may in the future derive revenues, in currencies other than our functional currency (i.e. the euro), in particular, the U.S. dollar. As a result, we are exposed to foreign currency exchange risk as our results of operations and cash flows are subject to fluctuations in foreign currency exchange rates. We currently do not engage in hedging transactions to protect against uncertainty in future exchange rates between particular foreign currencies and the euro. Therefore, for example, an increase in the value of the U.S. dollar against the euro could be expected to have a negative impact on our expenditures, although it is our policy to match the currency of our cash and cash equivalents with expected cash out flows as much as practically feasible. We cannot predict the impact of foreign currency fluctuations, and foreign currency fluctuations in the future may adversely affect our financial condition, results of operations and cash flows.

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Our business entails a significant risk of product liability and our ability to obtain sufficient insurance coverage could have a material effect on our business, financial condition, results of operations or prospects.

The use of our product candidates in preclinical studies, in clinical trials and the sale of any of our product candidates if approved, exposes us to the risk of product liability claims. Product liability claims might be brought against us by patients, healthcare providers or others selling or otherwise coming into contact with our product candidates. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, including as a result of interactions with alcohol or other drugs, negligence, strict liability, and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we become subject to product liability claims and cannot successfully defend ourselves against them, we could incur substantial liabilities. In addition, regardless of merit or eventual outcome, product liability claims may result in, among other things:

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withdrawal of patients from our clinical trials;

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substantial monetary awards to patients or other claimants;

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decreased demand for any of our current or future product candidates following marketing approval, if obtained;

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damage to our reputation and exposure to adverse publicity;

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increased FDA or EMA warnings on product labels;

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litigation costs;

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distraction of management’s attention from our primary business;

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loss of revenue; and

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the inability to successfully commercialize any of our current or future product candidates, if approved.

We will need to maintain product liability insurance coverage for our clinical trials. We may not be able to obtain such coverage at a reasonable cost or in sufficient amounts to protect us against losses, including if insurance coverage becomes increasingly expensive. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. The cost of any product liability litigation or other proceedings, even if resolved in our favor, could be substantial, particularly in light of the size of our business and financial resources. A product liability claim or series of claims brought against us could cause our share price to decline and, if we are unsuccessful in defending such a claim or claims and the resulting judgments exceed our insurance coverage, our financial condition, business and prospects could be materially adversely affected.

Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.

Our ability to use our net operating losses (NOLs) in the Netherlands is currently limited and may be further limited. Under Dutch income tax law, tax losses incurred up to and including 2018 may be carried forward for a period of nine years. Tax losses incurred as of 2019 may be carried forward for a period of six years. As at December 31, 2020, we had a total of € 254.2 million tax loss carry-forwards available for offset against future taxable profits. The first amount of the tax loss carry-forwards will expire in 2021. On October 5, 2020, the Dutch State Secretary for Finance submitted an amendment to the Tax Plan 2021 to the House of Representatives, which provides for changes in the loss offset rules. Effective from January 1, 2022, losses may be carried forward indefinitely. However, the offset of losses will be limited in a given year against the first €1 million of taxable profit. For taxable profit in excess of this amount, losses may only be offset up to 50% of this excess.

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There is also a risk that due to regulatory changes such as suspensions on the use for NOLs, our existing NOLs could expire or otherwise become unavailable to offset future income tax liabilities. For these reasons, we may not be able to use a material portion of the NOLs, even if we attain profitability.

Changes in accounting rules and regulations, or interpretations thereof, could result in unfavorable accounting charges or require us to change our compensation policies.

Accounting methods and policies for biopharmaceutical companies, including policies governing revenue recognition, research and development and related expenses and accounting for share-based compensation, are subject to review, interpretation and guidance from relevant accounting authorities, including the SEC. Changes to accounting methods or policies, or interpretations thereof, may require us to reclassify, restate or otherwise change or revise our financial statements, including those contained in this annual report.

Risks Related to Ownership of our Ordinary Shares

We cannot predict what the market price of our ordinary shares will be. As a result, it may be difficult for investors to sell our ordinary shares at or above the price at which they purchased them.

An active trading market for our shares may not be sustained. The market value of our ordinary shares may decrease from time to time. As a result of these and other factors, investors may be unable to resell our shares at or above the price at which they purchased them. The lack of an active market may impair investors’ ability to sell our shares at the time they wish to sell them or at a price that they consider reasonable. The lack of an active market may also reduce the fair market value of our shares. Further, an inactive market may also impair our ability to raise capital by selling our ordinary shares and may impair our ability to enter into strategic partnerships or acquire companies or products by using our ordinary shares as consideration. The market price of our shares may be volatile and investors could lose all or part of their investment.

The trading price of our ordinary shares is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. For example, the price of our ordinary shares, which reached its high record of $ 27.60 per share at the close of the trading on March 16, 2015, decreased as low as $ 2.75 per share at the close of the trading on December 12, 2017. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this annual report, these factors include:

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the presentation of data at industry conferences by us and/or our competitors;

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the responses to any of our IND applications with the FDA and any of our CTA applications with the EMA;

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any current or future preclinical or clinical trials of our product candidates, including any delays in enrollment rates or timing of these trials;

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regulatory actions with respect to our products or our competitors’ products;

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the recruitment or departure of key personnel;

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announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments;

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results of clinical trials of our competitors;

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the success of competitive products or technologies;

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actual or anticipated changes in our growth rate relative to our competitors;

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regulatory or legal developments in the United States, the European Union and other jurisdictions;

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developments or disputes concerning patent applications, issued patents or other proprietary rights;

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the level of expenses related to any of our product candidates or preclinical or clinical development programs;

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actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;

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variations in our financial results or those of companies that are perceived to be similar to us;

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fluctuations in the valuation of companies perceived by investors to be comparable to us;

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share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;

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announcement or expectation of additional financing efforts;

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sales of our ordinary shares by us, our insiders or our other shareholders;

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changes in the structure of healthcare payment systems;

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market conditions in the pharmaceutical and biotechnology sectors; and

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general economic, industry and market conditions.

In addition, the stock market in general, and pharmaceutical and biotechnology companies in particular, have experienced extreme price and volume fluctuations that have sometimes been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our ordinary shares, regardless of our actual operating performance. The realization of any of the above risks or any of a broad range of other risks, including those described in these “Risk Factors,” could have a dramatic and material adverse impact on the market price of our ordinary shares.

Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and trading price of our ordinary shares.

The global credit and financial markets have experienced extreme volatility and disruptions in the past several years, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. We believe that the state of global economic conditions are particularly volatile and uncertain, not only in light of the COVID-19 pandemic and the potential global recession resulting therefrom, but also due to recent and expected shifts in political, legislative and regulatory conditions concerning, among other matters, international trade and taxation, and that an uneven recovery or a renewed global downturn may negatively impact our ability to conduct clinical trials on the scale and timelines anticipated. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, volatile business or political environment or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, it may make obtaining any necessary debt or equity financing more difficult, more costly and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon clinical development plans. In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive an economic downturn, which could directly affect our ability to attain our operating goals on schedule and on budget. To the extent that our profitability and strategies are negatively affected by downturns or volatility in general economic conditions, our business and results of operations may be materially adversely affected.

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If securities or industry analysts publish inaccurate or unfavorable research or cease to publish research about our business, our share price and trading volume could decline.

The trading market for our ordinary shares depends in part on the research and reports that securities or industry analysts publish about us or our business. In the event securities or industry analysts who cover us downgrade our ordinary shares, publish inaccurate or unfavorable research about our business, our share price would likely decline. In addition, if one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our ordinary shares could decrease, which might cause our share price and trading volume to decline.

Sales of a substantial number of our ordinary shares by our existing shareholders in the public market could cause our share price to fall.

If our existing shareholders sell, or indicate an intention to sell, substantial amounts of our ordinary shares in the public market, the trading price of our ordinary shares could decline. In addition, a substantial number of ordinary shares subject to outstanding options are or will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules. If these additional ordinary shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of our ordinary shares could decline.

If we sell our ordinary shares in future financings, shareholders may experience immediate dilution and, as a result, our share price may decline.

We may from time to time issue additional ordinary shares or securities convertible into our ordinary shares, including in future financings that we may undertake. For example, in March 2020, we entered into a sales agreement for at-the-market offerings up to a maximum aggregate offering price of $75,000,000 of our ordinary shares with Citigroup Global Markets Inc. and Cantor Fitzgerald & Co. In January 2021, we issued 585,398 ordinary shares under this sales agreement, with gross proceeds amounting to $ 3,262,000. Due to this issuance and any future additional issuances of shares of our common stock or securities convertible into common stock, including pursuant to our shelf registration statement or our ATM facility, our shareholders may experience immediate dilution and, as a result, our stock price may decline.

In addition, under the terms of our collaboration with Ionis Pharmaceuticals Inc, we issued to them 112,473 ordinary shares in November 2018. Under the same collaboration agreement, we issued 371,306 ordinary shares to Ionis in December 2019. In the future, we may also make future milestone payments to Ionis, certain of which will be made in equity and others in cash or equity at our discretion.

In addition, in the third quarter of 2020, we entered into a loan facility with our senior lenders Pontifax Medison Finance and Kreos Capital for a total facility size of € 39,448,000. As of December 31, 2020, an aggregate of € 13,149,000 has been drawn down. The amounts outstanding under the facility may be convertible into ordinary shares at a price of $7.88 per share. Further, as part of this financing, we issued five-year warrants to purchase up to an aggregate of 302,676 ordinary shares, and may be required to issue additional warrants to purchase ordinary shares upon further drawdowns under the facility. If our ordinary shares are issued in connection with the conversion of the loan or exercise of warrants to purchase ordinary shares, our shareholders may experience dilution and, as a result, our stock price may decline.

Because we do not anticipate paying any cash dividends on our ordinary shares in the foreseeable future, capital appreciation, if any, will be the sole source of potential gain for our shareholders.

We have never declared or paid cash dividends on our ordinary shares. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, the terms of our loan facility with our senior lenders Pontifax Medison Finance and Kreos Capital preclude us from paying dividends and future debt agreements may have similar negative covenants. As a result, capital appreciation, if any, of our ordinary shares will be the sole source of gain for our shareholders for the foreseeable future.

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We have been a listed company since September 2014. Complying with all requirements, particularly since we are no longer an “emerging growth company” that enjoys reduced requirements, will increase our costs, require additional management resources and qualified accounting and financial personnel, and we may fail to meet all of these obligations.

We face substantial legal, accounting, administrative and other costs and expenses as a public company. Compliance with the Sarbanes-Oxley Act of 2002, the Dodd-Frank Act of 2010, the Dutch Financial Supervision Act and the rules promulgated thereunder, as well as rules of the SEC and NASDAQ and the Dutch Corporate Governance Code, or DCGC, for example, are expected to result in ongoing increases in our legal, audit and financial compliance costs. The Securities Exchange Act of 1934, as amended (the Exchange Act) requires, among other things, that we file certain periodic reports with respect to our business and financial condition. As we no longer qualify as an “emerging growth company,” we can no longer take advantage of reduced reporting requirements applicable to emerging growth companies. For example, we now must comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002. Complying with Section 404 is costly and management’s attention may be diverted from other business concerns, which could adversely affect our business and results of operations.

We currently do not have an internal audit group, and we will need to continue to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge, and it may be difficult to recruit and maintain such personnel. Implementing any appropriate changes to our internal controls may require specific compliance training for our directors, officers and employees, entail substantial costs to modify our existing accounting systems, and take a significant period of time to complete. Such changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements or other reports on a timely basis, could increase our operating costs and could materially impair our ability to operate our business.

If we fail to establish and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our ordinary shares.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act of 2002, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our ordinary shares.

Our management board is required to assess the effectiveness of our internal controls and procedures annually and, in case we become a domestic filer, we will be required to disclose changes to these controls on a quarterly basis. Our independent registered public accounting firm is required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

We are subject to certain reporting requirements of the Exchange Act. Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally,

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controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements or insufficient disclosures due to error or fraud may occur and not be detected.

Risks Related to Investing in a Foreign Private Issuer or a Dutch Company

We report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act and although we are subject to Dutch laws and regulations with regard to such matters and intend to furnish quarterly financial information to the SEC, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:

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the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;

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the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and

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the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events.

In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers are also exempt from the Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information. As a result of the above, our shareholders may not have the same protections afforded to shareholders of companies that are not foreign private issuers.

Certain U.S. holders of our ordinary shares may suffer adverse tax consequences if we are characterized as a passive foreign investment company for U.S. federal income tax purposes.

Generally, if, for any taxable year, at least 75% of our gross income is passive income, or at least 50% of the value of our assets is attributable to assets that produce passive income or are held for the production of passive income, including cash, we would be characterized as a passive foreign investment company (PFIC) for U.S. federal income tax purposes. For purposes of these tests, passive income includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. If we are characterized as a PFIC, our U.S. shareholders may suffer adverse tax consequences, including having gains realized on the sale of our ordinary shares treated as ordinary income, rather than capital gain, the loss of the preferential rate applicable to dividends received on our ordinary shares by individuals who are U.S. holders, and having interest charges apply to distributions by us and the proceeds of share sales. See Item 10.E: “Taxation” for more information.

The market value of our assets may be determined in large part by reference to the market price of our ordinary shares, which is likely to fluctuate and may fluctuate considerably given that market prices of technology companies have been especially volatile. In addition, the composition of our income and assets will be affected by how, and how quickly, we spend our cash, including any cash raised pursuant to prior offerings. Based on the average value of our gross assets and composition of our income, we believe that we were not a PFIC for the 2020 taxable year. However, our status as a PFIC is a fact-intensive determination made on an annual basis, and we cannot provide any assurance regarding our PFIC status for the current, prior or future taxable years.

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We do not currently intend to provide the information necessary for U.S. holders to make a “qualified electing fund,” (QEF) election if we are treated as a PFIC for any taxable year, and prospective investors should assume that a QEF election will not be available.

The rights and responsibilities of our shareholders are governed by Dutch law and differ in some important respects from the rights and responsibilities of shareholders under U.S. law.

Our corporate affairs are governed by our articles of association, our internal rules and by the laws governing companies incorporated in the Netherlands. The rights of our shareholders and the responsibilities of members of our supervisory board under Dutch law are different than under the laws of some U.S. jurisdictions. In the performance of their duties, our management board and our supervisory board are required by Dutch law to consider the interests of ProQR Therapeutics, its shareholders, its employees and other stakeholders and not only those of our shareholders. Also, as a Dutch company, we are not required to solicit proxies or prepare proxy statements for general meetings of shareholders. Dutch law does not have a regulatory regime for U.S.-style proxy solicitations and, even though Dutch law accommodates voting by proxy, the solicitation of proxies is not a widely used business practice in the Netherlands. In addition, the rights of holders of shares and many of the rights of shareholders as they relate to, for example, the exercise of shareholder rights, are governed by Dutch law and our articles of association and differ from the rights of shareholders under U.S. law. For example, Dutch law does not grant appraisal rights to a company’s shareholders who wish to challenge the consideration to be paid upon a merger or consolidation of the company.

We may lose our foreign private issuer status which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur significant legal, accounting and other expenses.

We are a foreign private issuer and therefore we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers. In order to maintain our current status as a foreign private issuer, either:

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a majority of our ordinary shares must be either directly or indirectly owned of record by non-residents of the United States; or

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a majority of our “executive officers” or directors may not be U.S. citizens or residents, more than 50% of our assets cannot be located in the United States and our business must be administered principally outside the United States.

If we lose this status, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers.

We may also be required to make changes in our corporate governance practices in accordance with various SEC and NASDAQ rules. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the costs we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial compliance costs and would make some activities more time consuming and costly. We also expect that if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult and expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified members of our supervisory board.

We currently report our financial results under IFRS, which differ in certain significant respect from U.S. GAAP.

Currently we report our financial statements under International Financial Reporting Standards (IFRS). There have been and there may in the future be certain significant differences between IFRS and U.S. GAAP, including differences related to revenue recognition, share-based compensation expense, income tax and earnings per share. As a result, our financial information and reported earnings for historical or future periods could be significantly different if they were prepared in accordance with U.S. GAAP. In addition, we do not intend to provide a reconciliation between IFRS and

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U.S. GAAP unless it is required under applicable law. As a result, you may not be able to meaningfully compare our financial statements under IFRS with those companies that prepare financial statements under U.S. GAAP.

Provisions of our articles of association or Dutch corporate law might deter acquisition bids for us that might be considered favorable and prevent or frustrate any attempt to replace or remove the management board and supervisory board.

Certain provisions of our articles of association may make it more difficult for a third party to acquire control of us or effect a change in our management board or supervisory board. These provisions include:

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the authorization of a class of preferred shares that may be issued against payment of 25% of the nominal value thereof to a protection foundation, for which we have granted a perpetual and repeatedly exercisable call option to such protection foundation, for up to such number of preferred shares as equals, at the time of exercise of the call option, the lesser of: (i) the total number of shares equal to our issued share capital at that time minus the number of preferred shares already held by the protection foundation at that time (if any) or (ii) the maximum number of preferred shares that may be issued under our authorized share capital under our articles of association from time to time;

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a provision that our management board members and supervisory board members may only be appointed upon a binding nomination by our supervisory board, which can be set aside by a two-thirds majority of our shareholders representing more than half of our issued share capital;

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a provision that our management board members and supervisory board members may only be removed or suspended by our general meeting of shareholders by a two-thirds majority of votes cast representing more than 50% of our issued share capital (unless the removal was proposed by the supervisory board); and

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a requirement that certain matters, including an amendment of our articles of association, may only be brought to our shareholders for a vote upon a proposal by our management board that has been approved by our supervisory board.

As indicated above, we have adopted an anti-takeover measure by granting a perpetual and repeatedly exercisable call option to the protection foundation, which confers upon the protection foundation the right to acquire, under certain conditions, the number of preferred shares described above. The issuance of such preferred shares will occur upon the protection foundation’s exercise of the call option and will not require shareholder consent. Such a measure has the effect of making a takeover of us more difficult or less attractive and as a result, our shareholders may be unable to benefit from a change of control and realize any potential change of control premium which may materially and adversely affect the market price of our ordinary shares.

We are not obligated to and do not comply with all the best practice provisions of the Dutch Corporate Governance Code. This may affect our shareholders’ rights.

As a Dutch company we are subject to the Dutch Corporate Governance Code (DCGC). The DCGC contains both principles and best practice provisions that regulate relations between the management board, the supervisory board and the shareholders (i.e. the general meeting of shareholders). The DCGC is based on a “comply or explain” principle. Accordingly, companies are required to disclose in their annual reports, filed in the Netherlands, whether they comply with the provisions of the DCGC. If they do not comply with those provisions (e.g., because of a conflicting NASDAQ requirement), we are required to give the reasons for such non-compliance.

The DCGC applies to all Dutch companies listed on a government-recognized stock exchange, whether in the Netherlands or elsewhere, including NASDAQ. We do not comply with all the best practice provisions of the DCGC. This may affect our shareholders’ rights and they may not have the same level of protection as a shareholder in a Dutch company that fully complies with the DCGC.

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We intend to rely in certain cases on NASDAQ Stock Market rules that permit us to comply with applicable Dutch corporate governance practices, rather than the corresponding domestic U.S. corporate governance practices, and therefore our shareholders’ rights will differ from the rights they would have as a shareholder of a domestic U.S. issuer.

As a foreign private issuer whose ordinary shares are listed on the NASDAQ Global Market, we are permitted in certain cases to follow Dutch corporate governance practices instead of the corresponding requirements of the NASDAQ Marketplace Rules. A foreign private issuer that elects to follow a home country practice instead of NASDAQ requirements must submit to NASDAQ in advance a written statement from an independent counsel in such issuer’s home country certifying that the issuer’s practices are not prohibited by the home country’s laws. In addition, a foreign private issuer must disclose in its annual reports filed with the SEC each such requirement that it does not follow and describe the home country practice followed instead of any such requirement. We intend to follow Dutch corporate governance practices with regard to the quorum requirements applicable to meetings of shareholders and the provision of proxy statements for general meetings of shareholders, rather than the corresponding domestic U.S. corporate governance practices. In accordance with Dutch law and generally accepted business practices, our articles of association do not provide quorum requirements (other than those which follow from Dutch law) generally applicable to general meetings of shareholders. Although we do intend to provide shareholders with an agenda and other relevant documents for the general meeting of shareholders, Dutch law does not have a regulatory regime for the solicitation of proxies and the solicitation of proxies is not a generally accepted business practice in the Netherlands. Accordingly, our shareholders may not be afforded the same protection as provided under NASDAQ’s corporate governance rules.

Any U.S. or other foreign judgments that investors may obtain against us may be difficult to enforce against us in the Netherlands.

We are incorporated under the laws of the Netherlands. We currently have only limited operations in the United States. Most of our assets are currently located in the Netherlands. The majority of our management board, supervisory board and officers reside outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon such persons or to enforce against them or the Company in U.S. courts, including judgments predicated upon the civil liability provisions of the federal securities laws of the United States. In addition, it is not clear whether a Dutch court would impose civil liability on the Company or any of our managing directors or supervisory directors in an original action based solely upon the federal securities laws of the United States brought in a court of competent jurisdiction in the Netherlands.

The United States and the Netherlands currently do not have a treaty providing for the reciprocal recognition and enforcement of judgments, other than arbitration awards, in civil and commercial matters. Consequently, a final judgment for payment given by a court in the United States, whether or not predicated solely upon U.S. securities laws, would not automatically be recognized or enforceable in the Netherlands. In order to obtain a judgment which is enforceable in the Netherlands, the party in whose favor a final and conclusive judgment of the U.S. court has been rendered will be required to file its claim with a court of competent jurisdiction in the Netherlands. Such party may submit to the Dutch court the final judgment rendered by the U.S. court. If and to the extent that the Dutch court finds that the jurisdiction of the U.S. court has been based on grounds which are internationally acceptable and that proper legal procedures have been observed, the Dutch court will, in principle, give binding effect to the judgment of the U.S. court, unless such judgment contravenes principles of public policy of the Netherlands. Dutch courts may deny the recognition and enforcement of punitive damages or other awards. Moreover, a Dutch court may reduce the amount of damages granted by a U.S. court and recognize damages only to the extent that they are necessary to compensate actual losses or damages. Enforcement and recognition of judgments of U.S. courts in the Netherlands are solely governed by the provisions of the Dutch Code of Civil Procedure.

Based on the lack of a treaty as described above, U.S. investors may not be able to enforce against us or our management board or supervisory board members, representatives or certain experts named herein who are residents of the Netherlands or countries other than the United States any judgments obtained in U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities laws.

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Item 4: Information on the Company

A. History and development of the company

ProQR Therapeutics is dedicated to changing lives through the creation of transformative RNA therapies for the treatment of severe genetic rare diseases with a focus on inherited retinal diseases such as Leber congenital amaurosis 10, Usher syndrome type 2, and autosomal dominant retinitis pigmentosa. Based on our unique proprietary RNA platform technologies, we are growing our pipeline with patients and loved ones in mind.

ProQR was founded in 2012 by Daniel de Boer, Gerard Platenburg, the late Henri Termeer and Dinko Valerio. Since September 18, 2014, our ordinary shares have been listed on the NASDAQ Global Market under the ticker symbol “PRQR”. As of December 31, 2020, we had raised € 304 million in gross proceeds from our public offerings of shares and private placements of equity securities, as well as € 13 million in convertible debt. In addition, we have received grants, loans and other funding from patient organizations and government institutions supporting our programs, including from Foundation Fighting Blindness and the Dutch government under the innovation credit program.

Our legal name is ProQR Therapeutics N.V. and we were incorporated in the Netherlands on February 21, 2012. We reorganized from a private company with limited liability to a public company with limited liability on September 23, 2014. Our company has its statutory seat in Leiden, the Netherlands. The address of its headquarters and registered office is Zernikedreef 9, 2333 CK Leiden, the Netherlands, telephone number +31 88 166 7000. Our US office is located at 245 Main Street, Cambridge, MA 02142, USA. The name and address of our agent for service in the United States is CT Corporation System, 111 Eighth Avenue, New York, NY 10011.

The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers like ProQR that file electronically with the SEC. The address of that website is www.sec.gov. We maintain a corporate website at www.ProQR.com. The information contained on our website or available through our website is not incorporated by reference into and should not be considered a part of this Annual Report on Form 20-F, and the reference to our website in this Annual Report on Form 20-F is an inactive textual reference only.

B. Business overview

We are developing a broad pipeline of potentially life changing RNA therapies for inherited retinal diseases, a group of rare debilitating eye diseases, affecting over two million people in the world, for which there are currently no treatment options available. We believe our RNA platform based on intravitreal delivery may be suitable to repair defective RNA in the retina and stop progression or even reverse vision loss associated with the diseases. As we deepen our relationships with the community of people living with inherited retinal diseases, we believe we are well positioned to bring these medicines to patients independently, and are therefore preparing for commercialization, particularly in the Western world.

Beyond our clinical portfolio, we discovered and developed two novel proprietary RNA editing platform technologies, Axiomer and TRIDENT™. Axiomer’s editing oligonucleotides, or EONs, are designed to recruit endogenous Adenosine Deaminases Acting on RNA, or ADAR, enzymes to make single nucleotide changes in the RNA in a highly specific and targeted manner at a desired location. We believe our Axiomer platform may be applicable to more than 20,000 disease-causing mutations. TRIDENT is our RNA pseudouridylation platform that enables the selective suppression of nonsense mutations that cause human genetic disease.

We continuously evaluate opportunities for beneficial collaborations or partnerships to efficiently bring our medicines to patients. In addition, using our discovery engine that is designed to generate a broad pipeline of product candidates, we seek to enter into strategic partnerships for programs that we believe will benefit from such a partnership.

Our RNA Therapies

Our investigational RNA therapies aim to repair defective RNA to stop or reverse genetic diseases. Genetic diseases are caused by mutations in genes in the DNA. The mutation is copied into the RNA that serves as a blueprint for protein production. By designing our RNA therapies to repair the specific mutation in the RNA, the function of the protein can be restored. This approach allows us to take away the underlying cause of the disease without having to make permanent changes to a patient’s DNA.

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Our investigational RNA therapies are single-stranded RNA oligonucleotides chemically modified to enhance stability and cellular uptake. While all our compounds are RNA-based, a variety of mechanisms of actions are used, depending on the type of mutation causing the disease. Each RNA therapy is designed to repair a specific RNA mutation and we believe this targeted approach may offer several advantages compared to other therapeutic approaches in the treatment of the rare genetic diseases we target. Our primary focus is on our ophthalmology pipeline that we intend to develop and commercialize. However, given the potential broad applicability of RNA therapies in several other diseases, we also have a discovery effort that seeks to identify molecules for other rare genetic diseases.

Research and development pipeline

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Sepofarsen for Leber Congenital Amaurosis 10

Leber congenital amaurosis (LCA) is the most common genetic cause of childhood blindness, with LCA Type 10 (LCA10) being one of the most severe forms. People with LCA10 typically become blind within the first few years of life and currently there are no approved therapies. The most common mutation is c.2991+1655A>G (also known as p.Cys998X) in the CEP290 gene. We estimate this mutation occurs in approximately 2,000 patients in the Western world.

We are developing sepofarsen (formerly named QR-110) for patients who have LCA10 due to the p.Cys998X mutation. Sepofarsen aims to repair the underlying cause in the RNA by splice correction. This RNA splice correction allows the production of a normal (wild-type) CEP290 protein which can restore vision in patients with LCA10. Sepofarsen is administered through intravitreal injections in the eye. Beyond sepofarsen we have an additional discovery-stage program, QRX-136, for another mutation in CEP290.

A Phase 1/2 clinical trial of sepofarsen in adults and children with LCA10 due to the p.Cys998X mutation has been completed. We presented final data from this trial at the Association for Research in Vision and Ophthalmology (ARVO) Annual Meeting in 2020, where sepofarsen demonstrated clinical proof-of-concept in LCA10 patients as shown by a significant, rapid and sustained improvement in vision in majority of the patients. The Phase 2/3 clinical trial Illuminate was initiated in April 2019, completed enrollment in January 2021 with top-line data expected during the first half of 2022.

Sepofarsen has been granted orphan drug designation by the FDA and European Medicines Agency (EMA) for LCA and received fast track designation by the FDA for LCA10. In 2019, we also received PRIME designation from the EMA for LCA due to the CEP290 p.Cys998X mutation as well as rare pediatric disease designation from the FDA for LCA10.

QR-421a for Usher Syndrome Type 2 and Non-Syndromic Retinitis Pigmentosa

Usher syndrome is the leading cause of combined hearing loss and blindness. Patients are usually born with moderate to severe hearing loss that may worsen over time. The retinal phenotype, known as retinitis pigmentosa, or RP, starts with night blindness followed by progressive loss of peripheral visual fields (tunnel vision) until no vision is left. The retinal phenotype can exist without the hearing loss, this disease is called non-syndromic RP, or nsRP. Both Usher syndrome and non-syndromic nsRP can be caused by mutations in the USH2A gene, which encodes a protein called usherin. To date, there are no therapies approved or product candidates in clinical development that treat the vision loss associated with USH2A mutations.

We are developing QR-421a for patients with USH2A exon 13 mutations. In the Western world, approximately 16,000 patients have vision loss due to mutations in exon 13 of the USH2A gene.

QR-421a is a first-in-class RNA therapy aimed at modulating the RNA that then results in the expression of functional usherin protein in the eye to maintain vision. This candidate is intended to be administered by intravitreal injections. Beyond QR-421a, we have additional early-stage programs QR-411 for the USH2A PE40 mutation and QRX-461, for another mutation in USH2A.

A Phase 1/2 clinical trial of QR-421a, named Stellar, is ongoing in adults with Usher syndrome or nsRP due to exon 13 USH2A mutations. Results were reported in March 2021 demonstrating that QR-421a given as a single intravitreal injection was observed to be well tolerated with no serious adverse events noted. QR-421a-treated patients responded on endpoints consistent with their disease stage in both advanced and early-moderate patient populations, including BCVA and static perimetry, respectively. Concordant improvements were also measured in other endpoints assessing retinal structure and function. Based on initial Regulatory guidance, the Company plans to submit protocols to start two Phase 2/3 trials. Each trial could potentially serve as the sole registration trial depending on the findings.

QR-421a and QR-411 received orphan drug designation for the treatment of RP from the FDA and EMA. QR-421a was also granted fast track designation for Usher syndrome type 2 and rare pediatric disease designation for RP caused by USH2A exon 13 mutations by the FDA.

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QR-1123 for Autosomal Dominant Retinitis Pigmentosa

Autosomal-dominant retinitis pigmentosa (adRP) is characterized by progressive loss of vision. Symptoms typically start in early teenage years and include night blindness and reduction of peripheral vision, which leads to tunnel vision. Eventually patients lose their central vision and become completely blind during adulthood. In the United States, the P23H mutation in the RHO gene is the most common mutation causing adRP and affects approximately 2,500 patients.

QR-1123 was discovered by Ionis Pharmaceuticals and we in-licensed this candidate in October 2018 to further develop it. QR-1123 is designed for the treatment of P23H adRP by suppressing the formation of the toxic mutant protein. By mutant-specific knockdown, QR-1123 selectively targets the mutant P23H RNA for destruction by RNase H1 cleavage without affecting the wild-type RNA. By reducing the mutant RNA, the resulting toxicity (induced loss of photoreceptors and subsequent loss of vision) can potentially be stopped or reversed.

Currently, a Phase 1/2 clinical trial, named Aurora, is ongoing in adults with adRP due to the P23H mutation and it is anticipated that the first clinical data from this program will be reported in 2021. QR-1123 has been granted orphan drug designation for RP due to the P23H mutation and fast track designation by the FDA for adRP.

QR-504a for Fuchs Endothelial Corneal Dystrophy

Fuchs endothelial corneal dystrophy (FECD) is a common age-related, degenerative disorder of the corneal endothelium. FECD can lead to corneal edema, scarring, corneal clouding, and consequential vision loss. Corneal blisters can cause pain in end-stage disease. Current treatment consists of corneal transplant for late-stage disease, an invasive procedure with limitations and associated complications, and therefore a high unmet medical need still remains. The most common genetic cause for FECD are trinuclear repeat (TNR) expansions in the TCF4 gene causing FECD type 3 (FECD3).

We are developing QR-504a as an RNA therapy for the treatment of FECD3. The primary goal of the development plan for QR-504a is to provide a therapy to prevent or slow down the corneal degeneration in patients with FECD3.

We plan to advance the QR-504a program into a first clinical trial in late-stage disease patients. The Fuchs Focus study is an open label, single-dose, dose escalation, exploratory study to evaluate safety, tolerability, and molecular biomarker(s) in corneal endothelium following a single intravitreal injection in patients with FECD3 scheduled for corneal transplant.

Deep pipeline in Ophthalmology

More than two million people in the World have vision loss due to an Inherited Retinal Disease (IRD), caused by a mutation in the approximately 300 genes that are associated with IRDs. Only a small fraction of those two million patients currently has a treatment available. At ProQR we believe that our RNA therapy platform technology has the potential to treat a large number of the mutations that cause IRDs. Therefore we have set up a dedicated effort to discover potential new treatments for IRDs that currently have no treatment. Although the total IRD population is fragmented in many mutations that cause the disease, we believe our RNA therapies have a set of common characteristics that makes them applicable across many IRD mutations. Today we have novel treatments in various stages of preclinical discovery and development for over 25 different IRD causing mutations. This preclinical pipeline includes molecules for other mutations in Leber congenital amaurosis, Usher syndrome, and other inherited retinal diseases. In the coming years we are working to bring several of these molecules into clinical development with the ultimate goal to create transformative RNA therapies where currently no treatment options exist.

Novel RNA Technologies

Antisense oligonucleotides (AONs) have been used as therapeutics for the last few decades. ProQR has built an extensive pipeline of investigational RNA therapies based on the technologies already available. But our scientists have gone beyond that and invented entirely new ways of using oligonucleotides for the treatment of genetic diseases. Both the Axiomer RNA editing platform and the TRIDENT RNA Pseudouridylation platforms are novel, proprietary RNA technologies invented at ProQR. We have built a broad intellectual property estate around these technologies and together with the leading academic experts in the RNA field, we continue to advance these technologies.

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Our Axiomer RNA editing technology enables the editing of specific single nucleotides in RNA. The technology is based on editing oligonucleotides, or EONs, designed to recruit endogenous ADAR enzymes (Adenosine Deaminases Acting on RNA) to make single adenosine-to-inosine (A-to-I) changes in the RNA in a highly specific and targeted manner. This technology could reverse the more than 20,000 G to A mutations in the human population that cause disease. In vitro and in vivo work indicates that the EONs are generally applicable for the correction of mRNA G-to-A mutations.

Our TRIDENT RNA pseudouridylation platform enables the suppression of nonsense mutations and premature stop codons (PTC) that cause human genetic diseases. Since all premature stop codons contain uridine, pseudouridylation of that uridine converts those nonsense codons into sense codons. TRIDENT technology harnesses endogenously expressed pseudouridylation machinery to guide RNAs to inhibit nonsense mRNA-mediated decay (NMD) in a sequence-specific manner and promote PTC readthrough. The TRIDENT technology has the potential to be applied in approximately 11% of all genetic mutations.

Our Strategy

We are dedicated to improving the lives of patients and their loved ones through the development of RNA therapies for severe genetic diseases, focusing on the eye. We believe the strategy as outlined below enables us to build a sustainable independent business which creates value for all stakeholders involved. Key elements of our strategy include:

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Develop RNA therapies for patients in need. Through our patient-focused approach, we work to develop best-in-class therapies and to advance the understanding of conditions that we target. As RNA therapies have become an established modality, we are translating new applications in a pipeline of product candidates for patients suffering from rare diseases.

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Rapidly advance our ophthalmology platform. The positive results of sepofarsen and QR-421a in Phase 1/2 clinical trials have built confidence in the potential opportunity for RNA therapies in treating genetic eye diseases. Therefore, we have focused our pipeline and plan to rapidly advance programs for diseases with limited or no treatment options.

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Commercialize portfolio of ophthalmic therapies independently. We plan to commercialize our portfolio of medicines for inherited retinal diseases (IRDs) independently in North America and Europe and seek partners for other geographic areas. While building the commercial infrastructure for a potential commercial launch of sepofarsen, we expect this same infrastructure to serve patients with other IRDs like Usher syndrome. There are approximately 30 hub centers specialized in IRD care allowing for an efficient and targeted commercial infrastructure.

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Leverage our pipeline through strategic consideration of out-licensing, spinouts or collaborative partnerships. We plan to continue to advance the programs and technologies in our discovery pipeline beyond ophthalmology and selectively engage with partners for development and commercialization of programs and products that we do not intend to independently develop.

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Expand our RNA-editing technologies into select therapeutic areas. Our novel and proprietary RNA editing platform technology, Axiomer, is a new way to use oligonucleotides to edit single nucleotides in the RNA. We believe the Axiomer technology may be applicable to more than 20,000 disease-causing mutations. Our TRIDENT RNA platform enables the suppression of nonsense mutations and premature stop codons (PTC) that cause genetic diseases by harnessing endogenously expressed pseudouridylation machinery to inhibit nonsense mRNA-mediated decay to promote PTC readthrough. We intend to use these platforms to develop novel therapies for inherited retinal diseases and continue to validate and create value for the platforms through pursuing licensing, partnering and other strategic relationships outside this core therapeutic area.

Patient Focused Approach

ProQR is dedicated to developing best-in-class RNA therapies to improve the lives of patients, families and communities affected by rare and underserved conditions. In order to achieve this goal, ProQR strives to integrate the patient voice

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into our decision-making throughout the drug development process as we believe that a patient focused strategy is crucial to our success. Therefore, our Patient and Medical Community Engagement (PMCE) team actively collaborates with and listens to the communities we serve to ensure that the patient voice is at the heart of all the work we do here at ProQR.

A key initiative at driving this patient voice to the heart of the work we do at ProQR is the Global Patient & Caregiver Steering Committee. Launched in January 2020, the Steering Committee is a forum for direct patient input on a wide range of topics, to ensure ProQR is meeting the needs of individuals we are striving for a solution.

In 2020 ProQR partnered with Foundation Fighting Blindness in the My Retina Tracker Program, a collaborative, open access program providing no-cost genetic testing and genetic counseling for individuals living in the United States with a clinical diagnosis of an IRD. Genetic testing is crucial to receiving an accurate diagnosis to then move forward with the best care. Through its participation in the program, ProQR hopes to provide IRD patients with easier access to genetic diagnostics, improve access to clinical trials and facilitate therapeutic development in IRDs associated with CEP290, USH2A and RHO genes.

Sepofarsen for Leber Congenital Amaurosis 10 (LCA10)

LCA Background

Leber congenital amaurosis (LCA) is the most common genetic cause of blindness in childhood. The c.2991+1655A>G mutation (also known as p.Cys998X) in the CEP290 (centrosomal protein of 290 kDa) gene is the most prevalent mutation which generally accounts for the most severe disease phenotype (LCA10). This mutation leads to significant decrease in CEP290 protein within the photoreceptor cells in the retina. Patients affected by this mutation typically lose sight in the first years of life. Clinical features of LCA10 include loss of vision, involuntary eye movement or nystagmus, abnormalities of pupil reactions and no detectable photoreceptor electrical signals on electroretinography (ERG).

Representation of the p.Cys998X mutation causing LCA10

LCA Genetics

More than 20 genes have been associated with the genetic defect that causes LCA. The most common mutation is the p.Cys998X in the CEP290 gene causing LCA10. The p.Cys998X mutation is a single nucleotide substitution in the

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CEP290 gene that creates a new splice site, also called a cryptic splice site, between exon 26 and 27. During the splicing of the pre-mRNA this causes a part of the intron, or pseudoexon, to be included in the mRNA. The pseudoexon contains a premature stop codon, thus the mRNA is not translated into the full length CEP290 protein. CEP290 protein is involved in the formation and stability of the connecting cilium in photoreceptor cells, which facilitates the transport of proteins from the inner segment to the outer segment of the cell. When CEP290 is absent, there is a disturbance in normal protein transport to the outer segments of the photoreceptor cell, which provokes the shortening of the outer segment and its inability to perform its light transducing function.

LCA Prevalence and Diagnosis

LCA affects about 15,000 patients in the Western world. Although diagnosis rates vary, our estimations indicate the most common p.Cys998X mutation occurs in approximately 2,000 patients in the Western world.

Patients are initially diagnosed through the presence of clinical symptoms. Nystagmus, rapid involuntary movements of the eyes, tends to be the first symptom visible as well as oculo-digital signs comprising eye poking, pressing, and rubbing. Vision impairment or blindness becomes obvious as age increases. After an ophthalmological examination, LCA is diagnosed. A genetic screening including all known mutations causing LCA is performed to confirm the diagnosis and determine the type of LCA in order to give the patient the most accurate prognosis possible.

Approaches for the Treatment of LCA10

There are currently no treatments approved for patients with p.Cys998X associated LCA10 and disease management is currently supportive in nature. The eye is highly suitable for oligonucleotide therapies as it is a contained organ with physical cellular barriers. These natural barriers strongly limit the free entry and exit of cells and larger molecules in and out of the eye, therefore limiting the systemic exposure of locally administered therapies.

Sepofarsen for LCA10, splice correction for p.Cys998X CEP290 mRNA

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Sepofarsen binds to pre-mRNA and silences the cryptic splice site leading to production of normal mRNA.

Sepofarsen for the Treatment of LCA10

Sepofarsen (formerly named QR-110) is designed to treat LCA10 by splice correction. By binding to the pre-mRNA, sepofarsen aims to silence the cryptic splice site caused by the p.Cys998X mutation. The splicing machinery can thus process the pre-mRNA correctly resulting in normal mRNA and we expect the production of full-length functional wild-type CEP290 protein. Sepofarsen is administered by intravitreal injection.

Sepofarsen received orphan drug designation from the FDA and EMA for the treatment of LCA. Sepofarsen was also granted fast track designation for LCA10 and rare pediatric disease designation by the FDA for LCA10 and PRIME designation by EMA for the treatment of LCA due to the CEP290 p. Cys998X mutation.

Clinical Development for Sepofarsen

The activity seen in our preclinical models of LCA10 provided strong support for the clinical development and therapeutic potential of sepofarsen. The clinical development of sepofarsen began in the second half of 2017 with a Phase 1/2 open-label, multiple dose, dose escalation study to evaluate the safety and tolerability of sepofarsen, study PQ-110-001. This trial was completed in 2019 and enrolled five children (age 8 - 17 years) and six adults (≥ 18 years) who have LCA10 due to one or two copies of the p.Cys998X mutation in the CEP290 gene. Participants received up to four intravitreal injections of sepofarsen into one eye, every three to six months. The study was conducted in three centers with significant expertise in genetic retinal disease in the U.S. and Europe.

The primary objective of the trial was to evaluate safety and tolerability. Secondary objectives included the assessment of pharmacokinetics and improvement of visual function and retinal structure through ophthalmic endpoints such as best-corrected visual acuity (BCVA), full-field stimulus testing (FST), mobility course, and optical coherence tomography (OCT).

Safety Data:

Sepofarsen was observed to be well-tolerated with manageable safety findings. In total, eight cases of cataract (lens opacity) were observed (three in the target registration dose cohort and five in a higher dose cohort). All subjects who had lens replacement surgery regained their pre-cataract vision. Four cases (in three subjects) of retinal findings were observed in the now retired 320/160 µg dose group: two incidences of mild cystoid macular edema were resolved with topical treatment and two incidences of subclinical retinal thinning stabilized within two months of last dose without additional treatment.

Efficacy Data:

The final analysis of efficacy data from PQ-110-001 confirmed clinical proof-of-concept as shown by improvement in BCVA and supported by improvement in performance on the mobility course and mechanistic proof-of-concept was confirmed by improvement in FST. Importantly, these endpoints showed concordant improvement (Table 1). In approximately 60% of subjects, multiple independent measures of visual function were improved in the treated eye, but not in the contralateral eye.

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Table 1. Summary of Efficacy Endpoints

Endpoint	Units	Direction Showing Improvement	Responder Threshold	Change from Baseline at Month 12 Mean (SEM)
Endpoint	Units	Direction Showing Improvement	Responder Threshold			Treated	Untreated
Overall
Best corrected visual acuity				-0.55 (0.26)
(ETDRS/BRVT) (n=11)	LogMAR	↓= improved	≥ -0.3	p<0.05 vs. CE	-0.122 (0.07)
Full field stimulus red (FST red)				-0.91 (0.18)
(n=10)	log cd/m²	↓= improved	-0.5	p<0.01 vs. CE	-0.16 (0.16)
Full field stimulus blue (FST blue)				-0.79 (0.23)
(n=10)	log cd/m²	↓= improved	-0.5	p<0.02 vs. CE	-0.02 (0.11)
Mobility course				2.5 (0.98)
(n=10)	Level	↑= improved	≥ 2	p=0.1 vs. CE	1.75 (0.75)

Abbreviations: BRVT=Berkeley Rudimentary Vision Test; cd/m²=logarithm of candelas/square meter; ETDRS=Early Treatment Diabetic Retinopathy Study; LogMAR=Logarithm of the Minimum Angle of Resolution, CE=contralateral eye

Measurements of BCVA and functional vision (mobility) confirm vision improvement in these subjects. In addition, clear improvement in FST was seen at both red and blue wavelengths in the treated eye only.

BCVA is an accepted registration endpoint for treatments of retinal diseases, with a generally accepted threshold for clinically meaningful improvement of -0.3 LogMAR (3 lines or 15 letters on an eye chart) in the U.S and -0,2 LogMAR (2 lines or 10 letters) in Europe. At Month 12, this threshold was exceeded in treated, but not untreated eyes, in the overall population, both in adult and pediatric subjects.

Performance on a mobility course was also improved. Concordant improvement in the mechanistic and functional outcome measures confirm that these observations are due to on-target benefits of sepofarsen. Results from the individual endpoints are discussed in more detail below.

Best Corrected Visual Acuity (BCVA)

To assess BCVA, either the ETDRS eye charts or BRVT eye charts were used. ETDRS is useful up to and including LogMAR 1.6, and BRVT extends the range to LogMAR 2.9.

Data from the Month 3 and 12 assessment of BCVA for both dose groups and pooled are presented in Table 2 and show that the BCVA improvement in treated eyes started within the first 3 months of treatment and was maintained thereafter. Expectedly, BCVA in contralateral eyes which did not receive treatment did not change appreciably.

Table 2. BCVA at Month 3 and Month 12

Mean ΔBCVA LogMAR	Treated eye (SEM)		Untreated eye (SEM)
Mean ΔBCVA LogMAR		month 3	month 12	month 3	month 12
Pooled analysis (n=11)	-0.5	-0.55	0.0	-0.11
	(0.24)	(0.26)	(0.04)	(0.07)
160μg/80μg (n=6)	-0.81	-0.93	0.01	-0.22
Target registration dose	(0.41)	(0.43)	(0.08)	(0.11)
320μg/160μg (n=5)	-0.13	-0.11	0.0	0.01
	(0.1)	(0.07)	(0.0)	(0.04)

Abbreviations: BCVA=Best-corrected visual acuity; LogMAR=logarithm of the minimum angle of resolution; SEM=standard error of the mean

The 160μg/80μg dose was selected as the target dose for the Phase 2/3 study. This is supported by the results in Table 2.

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Figure 1 depicts mean BCVA change from baseline for individual subjects (n=6) at the target registration dose (160μg/80μg)), where at Month 12 the change was -0.93 LogMAR, equivalent to approximately 9 lines improvement (or 45 letters) on the ETDRS chart.

Figure 1. BCVA Change - Target registration dose (160 µg/80 µg) group

BCVA change from baseline for individual subjects in the target registration dose (160μg/80μg) is depicted in Figure 2, supporting the strategy to enrich the Phase 2/3 study population by including patients with hand motion or better visual acuity (LogMAR 3.0 or better). Although the largest responder was at light perception (LP) only, or LogMAR 4.0, the remaining four light perception patients did not have any changes in BCVA (these patients had their greatest responses on FST).

Figure 2. Individual BCVA Change from Baseline at 12 Months

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Concordant improvements were also observed in Full-Field Stimulus Test (FST) and mobility as shown in Figure 3.

Figure 3. Change over Time in FST and Mobility – Target registration dose (160 µg/80 µg) group

Conclusions from Phase 1/2 Study PQ-110-001

In Phase 1/2 testing, sepofarsen was observed to significantly improve vision and the response was durable up to 12 months. Concordant improvements in key secondary outcome measures supported the observed change in vision. In the target registration dose group (160µg/80µg) sepofarsen was well-tolerated with a favorable benefit/risk profile.

Available data from PQ-110-001 confirm clinical proof-of-concept as shown by the significant improvement in BCVA and supported by improvement in performance on the mobility course and FST. Importantly, the three endpoints analyzed showed concordant improvement.

These results support the assumptions underpinning the design of the Phase 2/3 Illuminate study including the target registration dose, the 6-month dosing interval and the inclusion of subjects with vision of hand motion or better.

Phase 1/2 Insight Extension Study

The Insight study, or PQ-110-002, is an open-label extension study to evaluate the safety, tolerability, efficacy, and pharmacokinetics (PK) of sepofarsen in subjects who completed participation in study PQ-110-001. Insight will provide continued access to the investigational product in the treated eye, as well as treatment of the contralateral eye. It is envisaged that the Insight study will remain open for as long as the benefit-risk continues to be positive, until drug registration or provision of continued treatment by other means is available.

In July 2020, preliminary data from the Insight study were presented, which showed benefit consistent with the Phase 1/2 findings. Patients who completed the Phase 1/2 trial were able to continue dosing their first treated eye, as well as initiate treatment of the second eye. Four patients received sepofarsen in their second eye and clinically meaningful BCVA improvements were reported in the second treated eye, similar to improvements observed in their first treated eye as shown in Figure 4. All four patients showed an FST improvement, generally similar to the first treated eyes. One patient developed a cataract in both eyes, and no other safety findings were reported. We plan to report additional and updated data from the Insight study during the second half of 2021.

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Figure 4. Change from baseline to 3 months after dosing – consistent response observed in both eyes treated

Phase 1/2 Brighten Study

Brighten is a Phase 1/2 trial of sepofarsen in pediatric patients less than 8 years old. The primary objectives of this study, which is planned to start in 2021, are safety and tolerability.

Phase 2/3 Illuminate Pivotal Trial

Illuminate (PQ-110-003) is a Phase 2/3 pivotal trial that aims at defining safety and quantifying the treatment effect, relative to masked, sham-treated control subjects, at more than one dose level (160μg/80µg target registration dose level and 80μg/40µg). This study randomized 36 patients aged 8 years or older to receive sepofarsen at the target registration dose, a low dose, or sham treatment. Enrollment was completed in January 2021 Illuminate is planned to be the sole pivotal study in support of the eventual Marketing Authorization Application (MAA) in the European Union and the New Drug Application (NDA) in the United States. The clinical study design incorporates advice provided by the CHMP and FDA.

The primary endpoint (mean change from baseline in BCVA, based on ETDRS and/or BRVT, of treatment versus sham) will be assessed at Month 12, and top-line results are expected in the first half of 2022. Thereafter, treatment of the contralateral eye or crossover to active study drug for sham-treated subjects may be considered. We will continue to follow up on subjects for 24 months to assess long-term safety and efficacy. See below a schematic of the Illuminate study.

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QR-421a for Usher Syndrome Type 2 and Non-syndromic Retinitis Pigmentosa (nsRP)

Usher Syndrome and nsRP Background

Usher syndrome is the leading cause of combined inherited deafness and blindness. Patients with this syndrome generally progress to a stage in which they have very limited central and peripheral vision and are divided in two subgroups. Patients that have Usher syndrome and patients that have non-syndromic retinitis pigmentosa, or nsRP, due to a mutation in the USH2A gene. Patients with Usher syndrome are usually born with moderate to severe hearing loss that may worsen over time, in addition to developing the vision loss, where patients with nsRP develop only vision loss. Each subgroup is about 50% of the total population.

The retinal phenotype, known as retinitis pigmentosa, or RP, is characterized by photoreceptor degeneration that leads to progressive vision loss. The first visual symptoms typically appear during the second decade of life and start with night blindness due to the start of degeneration of rod photoreceptors. When rod degeneration progresses, patients lose their peripheral visual fields until only a residual central island of vision (tunnel vision) is left. As the disease progresses further, cone photoreceptors degenerate which eventually results in complete blindness.

Representation of exon 13 mutations causing Usher syndrome type 2

Usher Syndrome and nsRP Genetics

Usher syndrome type 2 is caused by autosomal recessive mutations in the USH2A gene, encoding the protein usherin. Mutations in the USH2A gene can disrupt the production of usherin, a protein expressed in photoreceptors where it is required for their maintenance. Usherin is also expressed in the ear, where it is required for normal development of cochlear hair cells and hence, normal hearing. In the eye, defects in usherin cause RP. Mutations in USH2A can also cause nsRP, in which patients experience visual loss but do not suffer from hearing loss. Exon 13 mutations represent the most common mutations in the USH2A gene.

Disease Prevalence and Diagnosis

The diagnosis of the disease is based on clinical symptoms and ophthalmologic evaluations. A genetic screening can determine the specific mutation that is causing the disease. The number of patients with vision loss due to USH2A exon 13 mutations is estimated to be around 16,000 in the Western world. Lack of access to genotyping may result in significant underdiagnosis in many inherited retinal diseases.

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Approaches for the Treatment of Usher Syndrome and nsRP

While the hearing deficit in patients with Usher syndrome type 2 can be at least partially mitigated using hearing aids or cochlear implants, there is no approved treatment for the vision loss associated with USH2A mutations. Disease management is supportive in nature. We believe that intravitreal RNA therapy QR-421a is the only product candidates in development for the treatment of patients with RP caused by exon 13 mutations in the USH2A gene. Due to the size of the USH2A gene, this type of RP is not amenable to a gene therapy approach. Also, given the disease affects both the peripheral and central retina, current gene replacement and gene editing approaches have fundamental limitations as these therapies must be delivered with a surgical procedure to a limited subretinal area. The important deficit in peripheral vision of USH2A patients are thereby not addressed.

QR-421a for the Treatment of Usher Syndrome and nsRP

QR-421a is being developed as a treatment for RP caused by mutations in exon 13 of the USH2A gene. Mutations in exon 13, including the prevalent c.2299delG mutation, can disrupt the production of usherin, which is required for photoreceptor maintenance. QR-421a aims to induce excision, or skipping, of exon 13 from USH2A mRNA leading to an in-frame deletion in the USH2A mRNA. Since exon 13 encodes for a repetitive part of the usherin protein, excision of exon 13 is expected to lead to a truncated (partial), however, functional usherin protein. Because of the exon skipping approach, QR-421a is not specific to a single mutation but targets any mutation present in exon 13 of the USH2A gene.

USH2A exon 13 exon skip

QR-421a received orphan drug designation from the FDA and EMA for the treatment of RP. QR-421a was also granted fast track designation for Usher syndrome type 2 and rare pediatric disease designation for RP caused by USH2A exon 13 mutations by the FDA.

Clinical Development of QR-421a

Stellar (PQ-421a-001) is a Phase 1/2 randomized, single ascending dose study designed to evaluate the safety and tolerability of QR-421a in subjects with vision loss due to mutations in exon 13 of the USH2A gene. The primary objective of the trial is to evaluate safety and tolerability. Secondary objectives include evaluating visual acuity (as measured by BCVA), visual fields (as measured by static perimetry and microperimetry), and changes in retinal

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structure (as measured by optical coherence tomography, or OCT). The study is being conducted at expert sites in North America and Europe.

In March 2020, initial findings from a planned interim analysis of the Stellar showed that QR-421a was observed to be generally well tolerated with no serious adverse events noted, and preliminary signals of biological activity and target engagement were observed. Based on these findings, the 100µg cohort was expanded with additional subjects who are homozygous for exon 13 mutations. Dose escalation to 200µg (“high dose”) occurred in parallel.

The Stellar trial completed enrollment in late 2020. The study included a total of 20 patients, of which 14 received a single dose of QR-421a and six received a single sham procedure for masking. The 14 treatment patients (mean age of 46 years) enrolled varied in their disease stage and were classified as advanced patients (defined as patients with baseline visual acuity of <70 letters or equivalent to worse than 20/40 on a Snellen chart) or early-moderate patients. Six patients had advanced disease and eight patients had early-moderate disease. Three different dose levels were studied. The population also varied in disease characteristics with both Usher syndrome (n=7) and nsRP (n=7) and genetic background with both homozygous (n= 9) and heterozygous (n=5) subjects for USH2A exon 13 mutations. The majority of the patients were followed for up to 48 weeks, with one patient followed up to 96 weeks.

In March 2021, results from the Stellar trial were reported.

Safety Data

QR-421a was observed to be well tolerated with no serious adverse events reported. Two cases of pre-existing cataracts were observed, one in the treated eye and one in the untreated eye of the same patient. Both are considered not treatment related. Cataracts are known to occur as part of the background disease in in over 30% of the patients. No new cataracts were reported in the study. Cystoid macular edema, or CME, is frequently associated with the disease and is part of the natural history of the disease in over 30% of the patients, and is usually managed adequately with topical eyedrops. One subject with pre-existing CME was enrolled into the 200µg cohort. The CME progressed during the study but was classified as mild and managed with standard of care therapy. No new cases of CME occurred during the study.

Efficacy

Due to the different rates of progression between patients, a patient’s untreated contralateral eye was used as a control. In advanced patients, the primary measure of efficacy is best corrected visual acuity, or BCVA. In early-moderate patients, the primary measure of efficacy is measurement of visual fields by static perimetry. QR-421a-treated patients responded on endpoints consistent with their disease stage in both advanced and early-moderate patient populations. Concordant improvements were also measured in other endpoints assessing retinal structure and function.

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Advanced patients finding

BCVA is a measure of central vision, or sharpness of sight, as measured on an ETDRS letter chart. Across all treated patients (n=14), a mean benefit of 6.0 letters was observed at week 48 in the treated eyes compared to the untreated (contralateral) eyes. Among advanced disease patients (n=6), a mean benefit of 9.3 letters was observed at week 48 in the treated eyes as compared to the untreated eyes and the benefit was maintained for >12 months, as depicted in Figure 5. All six advanced patients had a benefit in the treatment eye, whereas none of the patients in the sham group had a benefit.

Figure 5. Mean changes from baseline in BCVA for the advanced population

Early-moderate patients finding

Static perimetry assesses retinal sensitivity in the peripheral retina. As shown in Figure 6, across all treated patients, a mean improvement benefit of 40dB was observed in the treated eyes compared to the untreated eyes, at peak, and the benefit was maintained for >6 months.

Figure 6. Total retinal sensitivity improvement using static perimetry for all QR-421a treated patients

The number of retinal locations (loci) that improved by ≥7db in retinal sensitivity demonstrated a benefit in the treated eyes compared to the untreated eyes, with up to a mean of 9 loci in the treated eyes improving by ≥7db. In early-moderate patients (n=8), a mean of up to 13 loci in the treated eyes improved by >7db compared to 7 loci for the untreated eyes at the same timepoint, as shown in Figure 7. Of the eight patients that were early-moderate, 7 had a benefit in this analysis.

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Figure 7. Mean number of retinal loci with 7dB improvement in static perimetry for the early-moderate population

Concordant benefits were observed in both advanced and early-moderate patients in objective structural endpoint (OCT) that measures retinal structure, as well as microperimetry, as shown in Figure 8.

Figure 8. Mean change from baseline in ellipsoid zone area and microperimetry seeing zones for all QR-421a treated patients

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Sham treated eyes responded similarly to the untreated eyes across multiple concordant endpoints, as shown in Figure 9.

Figure 9. Sham treatment responses in OCT, BCVA and static perimetry

As shown in Figure 10, the data established the dosing interval at 6 months with a sustained effect of approximately 6 months across multiple endpoints. The 6-month durability of effect is in line with the half-life of QR-421a and will be the dosing regimen in the pivotal trials.

Figure 10. Sustained effect of approximately 6 months in OCT, BCVA and static perimetry

There were no observed differences in responses at the different dose levels or responses between homozygotes and heterozygotes as well as usher syndrome and nsRP patients.

Phase 2/3 “Sirius” and “Celeste” pivotal trials of QR-421a

Based on initial Regulatory guidance, the Company plans to submit protocols to start two Phase 2/3 trials. Each trial could potentially serve as the sole registration trial depending on the findings.

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"Sirius" is a Phase 2/3 trial that will focus on advanced patients with baseline BCVA ≤20/40. The primary endpoint will be BCVA at the 18-month timepoint, with the potential for an earlier interim analysis at 12 months. In parallel, “Celeste” is a Phase 2/3 study that will further study QR-421a in early-moderate population. The primary endpoint will be static perimetry at the 18-month timepoint.

The Company plans to align on the protocols with regulators and then expects to start the trials by the end of 2021.

Phase 1/2 “Helia” extension study

An extension study, Helia, is also planned which would permit continued dosing of eligible subjects who complete the Stellar trial. Patients will be offered repeated dosing in both eyes.

QR-1123 for Autosomal Dominant Retinitis Pigmentosa (adRP)

adRP Background

Retinitis pigmentosa (RP) is a group of hereditary retinal diseases in which patients first experience loss of night vision in childhood followed by loss of peripheral vision in young adulthood, and central vision in later life, which ultimately progresses to complete blindness. The worldwide prevalence of RP is about 1 in 4000 for a total of more than 1 million aﬀected individuals. The disease can be inherited as an autosomal-dominant (about 30–40% of cases), autosomal-recessive (50–60%), or X-linked (5–15%) trait.

Autosomal-dominant RP (adRP) is characterized by abnormal, diminished or absent a- and b-waves in the electroretinogram (ERG), reduced peripheral vision (visual field) and the presence of visual defects such as reduced visual acuity and poor photo- and contrast sensitivity. Symptoms typically start in the early teenage years, which include night blindness and reduction of the peripheral vision due to the degeneration of the rod photoreceptors. As the disease progresses, cone photoreceptors are also affected, which translates into loss of central vision and eventually complete blindness in adulthood.

adRP Genetics

Mutations in more than 25 genes can cause adRP, but mutations are most commonly found in the rhodopsin (RHO) gene, accounting for approximately 25% of adRP cases. The rhodopsin protein is a light sensitive pigment that is present in the rod photoreceptors in the retina. Rhodopsin, when exposed to light, undergoes conformational changes that are converted into an electrical signal which is sent to the brain where it is interpreted as vision. In the United States, the most prevalent mutation associated with adRP is the P23H mutation (also known as c.68C>A) in the RHO gene. The mutant P23H rhodopsin protein is misfolded and toxic to the rod photoreceptor cells causing loss of vision. Although some wild-type protein is being made, there is substantial evidence that the mutant P23H rhodopsin protein elicits a dominant-negative mechanism, such that it diminishes the function of the wild-type protein.

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Representation of the P23H mutation causing adRP

Disease Prevalence and Diagnosis

In the United States the P23H mutation in the RHO gene is the most common mutation causing adRP and affects approximately 2,500 patients. The diagnosis of adRP is based on clinical symptoms and ophthalmologic evaluations. A genetic screening can determine what specific mutation is causing the disease.

Approaches for the Treatment of adRP

We believe QR-1123 is the only candidate in development for the treatment of patients with adRP caused by the P23H mutation. Disease management is currently supportive.

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QR-1123 for adRP, mutant specific knock-down of P23H mRNA

QR-1123 for the Treatment of adRP

QR-1123, discovered by Ionis Pharmaceuticals and in-licensed by ProQR in 2018, is designed for the treatment of P23H adRP. QR-1123 is an allele-specific gapmer that aims to suppress the formation of the mutant protein by selectively targeting the mutant RNA and causing its destruction by RNase H1 cleavage without affecting the wild-type RNA. With reducing the mutant RNA, we believe the toxicity-induced loss of the photoreceptors and subsequent loss of vision can be stopped or potentially reversed.

Clinical Development of QR-1123

Currently a Phase 1/2 clinical trial, named Aurora, is ongoing in adults with adRP due to the P23H mutation. Aurora, or PQ-1123-001, is a first-in-human study that will initially include approximately 10 adults with adRP due to the P23H mutation in the rhodopsin (RHO) gene. The trial will include single-dose escalation in which an intravitreal injection of QR-1123 will be given in one eye. The objectives of the trial include evaluation of safety and tolerability. Efficacy as measured by improvement of visual function and retinal structure will be assessed through ophthalmic endpoints such as visual acuity, visual field and optical coherence tomography. The trial will be conducted at expert sites in North America. We anticipate reporting the first clinical data from this trial in 2021.

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Design of Phase 1/2 Aurora Study of QR-1123

Preclinical Evidence for QR-1123

In vitro and in vivo experiments have been performed to study the specificity of QR-1123 for the P23H mutant RNA. In vivo experiments have been performed to study the effect of QR-1123 on retinal degradation and ERG measurements.

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QR-1123 was observed to selectively target the human P23H mutant rhodopsin mRNA, whilst sparing the human wild-type mRNA in cell models (Figure 11, left panel).

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In mice expressing wild-type RHO, no difference in RHO mRNA was observed between groups treated with QR-1123 or a control (Figure 11, right panel) while mutant P23H-RHO mRNA was reduced after a single QR-1123 injection in the eyes of transgenic mice expressing the mutant mRNA (Figure 11, center panel) confirming the specificity for the P23H allele.

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A rat model of P23H adRP given QR-1123 surrogate had an improved scotopic a-wave response amplitude at all stimulus intensities (Figure 12, left panel). This improved ERG response was not observed in the control-treated eyes (Figure 12, left panel).

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A single IVT administration of QR-1123 retarded the progressive retinal degeneration in a mouse model of P23H adRP (Figure 13, top panel). Importantly, the activity was observed throughout all regions of the retina (Figure 13, lower panel). This shows that QR-1123 has the capability to stop retinal degeneration and indicates that a mechanism based on inhibition of the formation of toxic mutant version of rhodopsin protein has the potential to improve a clinically relevant functional outcome in RP.

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QR-1123 did not have a significant effect on wild-type RHO mRNA levels in cynomolgus monkey (Figure 14) suggesting that QR-1123 is specific to the P23H mutant RHO mRNA and does not affect the expression of WT RHO mRNA.

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Figure 11: Transgenic mice expressing human P23H RHO treated with QR-1123 or a control; data are presented as percent of contralateral eye PBS-treated RNA level. Right Panel: Transgenic mice expressing human wild-type (WT) RHO treated with QR-1123 or a control; data are presented as percent of contralateral eye PBS-treated RNA level.

Figure 12: ONL preservation and ERG improvement after QR-1123 treatment. Left Panel: Representative retinal micrographs of P23H-1 rhodopsin transgenic rat eyes from the PBS or QR-1123 surrogate-treated eye 30 days post IVT injection. Right Panel: Improved ERG response in P23H-1 transgenic rats after a single QR-1123 surrogate treatment with IVT injections at P13 (A) or P14 (B), with ERG measurements made at P48. (A, B). Amplitude versus stimulus intensity curves for scotopic a-waves (circles). The scotopic a-waves of eyes injected with QR-1123 surrogate were signi�cantly greater than PBS-injected contralateral eyes while eyes treated with control were similar to those of PBS-injected contralateral eyes (t-test; *P < 0.05; **P < 0.01; ***P < 0.001; ****P < 0.0001). In the data points without apparent error bars, the error bars are obscured by the symbol.

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Figure 13: Preservation of ONL in a Tg mouse model after treatment with QR-1123. Top panel: Depicted is a spider diagram of the outer nuclear layer measurements of the entire retina of eyes treated with either PBS (red line) or QR-1123 treated eyes (Green line). Lower Left panel: Average superior region ONL thickness at baseline and in PBS and QR-1123 treated mice. Lower Right panel: Average inferior region ONL thickness at baseline and in PBS and QR-1123 treated mice. Two-tailed t test; **p < 0.01, ****p<0.0001.

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Cynomolgus monkey

Figure 14: Levels of monkey WT RHO mRNA were measured by qRT-PCR 14 days after IVT injections. The RHO levels of individual animals were normalized to CRX mRNA levels. Values are presented as % of mean of the vehicle group.

QR-504a for Fuchs Endothelial Corneal Dystrophy (FECD)

FECD Background

Fuchs endothelial corneal dystrophy (FECD) is a common age-related, degenerative disorder of the corneal endothelium. FECD leads to severely impaired endothelial cell function resulting in corneal edema, scarring, corneal clouding, and consequential vision loss. Repeated bullae (blister) formation is a major cause of pain in end stage FECD patients.

Representation of the TNR mutation causing FECD3, and TCF4 trinucleotide repeat expansion targeting by QR‑504a

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FECD Genetics

The inheritance pattern of FECD is primarily autosomal dominant and genetic and environmental modifiers such as age and gender are known to affect its prevalence. The genetic basis of the most prevalent form (FECD type 3) has been attributed to CTG TNR expansions in the TCF4 gene. TCF4 is a widely expressed gene, yet trinucleotide repeat (TNR) expansion in TCF4 only causes disease in the corneal endothelium.

In FECD3, the TNR expansions are transcribed into aggregation-prone RNA molecules, which cause the formation of characteristic nuclear RNA foci. These foci sequester various proteins, such as the essential mRNA splicing factor MBNL1. This sequestration of MBNL1 causes widespread mis-splicing, eventually resulting in FECD3. The number of the TNR repeats has been shown to correlate positively with FECD3 disease severity.

Disease Prevalence and Diagnosis

FECD is a common disorder; it is estimated that FECD affects more than 4% of individuals over the age of 40 in the U.S., and similar prevalence is noted for other global regions. Trinucleotide repeat expansion in the third intron of TCF4 is strongly associated with FECD, and a repeat length >50 is highly specific for the disease. This group is known as FECD type 3 (FECD3). In the population of European descent, between 73 - 79% of FECD patients were reported to have one or more expanded copies of the CTG repeat expansion allele.

Clinical FECD diagnosis is based on confirmation of confluent central guttae by slit-lamp biomicroscopic examination and concomitant edema, scarring, and loss of vision.

Approaches for the Treatment of FECD

Currently no treatment options are available to address the underlying cause of FECD and disease management is aimed to reduce symptoms. The only effective therapy for late-stage FECD is corneal transplantation. The availability of donors, risk of rejection, and the inherent risk of an invasive procedure are some of the limitations of this procedure. A high unmet medical need exists in this sight-threatening condition. QR-504a is the only product in clinical development for the treatment of patients with FECD3 caused by TNR expansions in intron 3 of the TCF4 gene.

QR-504a for the Treatment of FECD3

The primary goal of the development plan for QR-504a is to provide a therapy to prevent or slow down the corneal degeneration in patients with FECD3. QR-504a is designed to target the intronic TNRs in the TCF4RNA. The aim is to reduce aggregation and the formation of RNA foci in order to normalize the RNA splicing patterns, and prevent or halt corneal degeneration in patients with FECD3.

Clinical Development of QR-504a

We plan to advance the QR-504a program into a Phase 1 first-in-human clinical trial in late-stage disease patients in 2021, pending lifting of restrictions due to COVID-19 at the study site. The study, named Fuchs Focus, is an open-label, single-dose, dose escalation, exploratory study to evaluate safety, tolerability, and molecular biomarker(s), i.e., target engagement, in corneal endothelium following a single IVT injection of QR-504a in approximately 10 patients with advanced FECD3 scheduled for corneal transplant (Descemet Membrane Endothelial Keratoplasty, or DMEK) with paralleled lens replacement, as shown in figure 15.

Following DMEK surgery of the first eye (Eye 1), corneal endothelium will be collected to assess selected molecular biomarkers. At least 4 weeks prior to the scheduled DMEK in Eye 2, the participant will receive a single intravtreal (IVT) injection of QR-504a in Eye 2. Following the DMEK in Eye 2 corneal endothelium will be collected for molecular biomarker assessments. Data generated from Eye 1 (untreated) will serve as intra-subject control for data generated from Eye 2 (treated).

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Figure 15: Design of Fuchs Focus Study

Preclinical Evidence for QR-504a

The effects of QR-504a have been studied in primary corneal endothelial cell (CEC) models developed using FECD patient tissue. These models recapitulate the pathology of FECD3, such as displaying RNA foci composed of TCF4 TNR expansions, which cause cellular toxicity by sequestration of certain essential mRNA splicing factors (e.g. MBNL1), and consequently mis-splicing of other mRNAs, all of which have been correlated to disease causation. In collaboration with Moorfields Eye Hospital and University College London, we are using these CEC models successfully to study and select suitable molecules for the development of a FECD therapy.

We have conducted in vitro and in vivo preclinical studies that support the clinical development of QR-504a:

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Treatment with the QR-504a surrogate by transfecting CEC models did not only specifically and significantly reduce the nuclear RNA foci incidence, but also led to desequestration of MBNL1 as well as the normalization of splicing toward a ‘non-FECD’ profile as observed in control cells.

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RNA target engagement of QR-504a was confirmed when directly comparing it to the surrogate AON, as illustrated by the improved reduction of nuclear RNA foci in the FECD3 patient-derived CEC model (Figure 16).

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IVT administration of AONs has been shown to result in corneal uptake into the corneal endothelial cells (the target site of pharmacological action for QR-504a) in mice. This was recently confirmed in an ocular biodistribution study in mice, where a single IVT injection of QR-504a showed superior corneal uptake compared to topical administration.

Reduced RNA Foci Incidence in FECD Patient-Derived CECs After Transient Transfection of QR-504a

Figure 16: Percentage of nuclei that contain RNA foci after treatment with either PBS (control), QR-504a-surrogate (QR-504) or QR-504a.

Other Pipeline Programs

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Beyond the clinical-stage programs mentioned above, we have additional early stage programs in our pipeline.

QR-1011 for Stargardt Disease

Stargardt disease is the most common inherited macular dystrophy causing progressive loss of central vision, for which there are no treatments currently available. It is associated with mutations in the ABCA4 gene resulting in the loss of photoreceptor cells in the retina. The c.5461-10T>C mutation affects about 7,000 patients in the Western world and leads to aberrant splicing of ABCA4 mRNA. QR-1011 aims to restore normal splicing, leading to the production of wild-type mRNA and protein, thereby stopping or potentially reversing the disease. QR-1011 is currently in the advanced lead optimization phase.

QR-411 for USH2A PE40 mutation

QR-411 is intended to be administered by intravitreal injection and to restore functional usherin protein in the eye to restore vision. Similar to the approach of sepofarsen, QR-411 is targeted at correcting the splicing of a pseudoexon. In patients, the specific c.7595-2144A>G (PE40) mutation leads to aberrant inclusion of this pseudoexon in the mature mRNA and consequently absence of a functional usherin protein. Correction of splicing with QR-411 could potentially lead to restoration of normal, wild-type usherin protein. In the Western world, approximately 1,000 patients are affected by the PE40 mutation. QR-411 is currently in preclinical testing. It has received orphan drug designation for the FDA and EMA.

QRX-461 for an undisclosed mutation in USH2A

QRX-461 is a discovery-stage program for another mutation in USH2A.

QRX-136 for an undisclosed mutation in LCA

Beyond sepofarsen, we have an additional discovery-stage program, QRX-136, for another mutation in CEP290.

Human Resources

We believe in passion and commitment and we have built a strong team of ProQRians from all walks of life and approximately 35 different nationalities, who are up to the challenge and committed to make a difference to the patients we serve. We actively create a caring atmosphere filled with fun and joy, in which we love to work and maintain productive and happy lives. At ProQR we foster empowerment, self-development, creativity and a sense of community.

As an employer, we are a true believer in the value of a workforce in which people from diverse backgrounds are encouraged to develop themselves both personally and professionally. This is reflected in our equal gender balanced leadership team and broader workforce. We believe that happy and energized people, working well together in an environment in which they thrive, will do phenomenal and awesome things.

We are committed to ensure that no employee, candidate or job applicant receives less favorable treatment on the grounds of race, age, disability, pregnancy, religion, gender identity and expression, sexual orientation, marriage or civil partnership status. At ProQR we want to create an inclusive culture where everyone can be valued for who they are and in which individual differences and the contributions in all forms are recognized and valued.

Animal Welfare

It is required by regulatory authorities to demonstrate the safety and, if possible, efficacy of a new drug in animals, before it can be tested in humans. The welfare of animals in our preclinical studies is of great importance to ProQR for reasons of ethics, quality, reliability and applicability of scientific studies. To assure high quality (scientific) research, animal welfare is essential. By actively pursuing the 3R principles (Reduce, Refine and Replace), ProQR is committed to reduce the number of animals needed, minimize discomfort and pain of animals used, and use alternatives to animal research whenever possible.

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Animal experiments will be performed only if there are no alternatives such as performing in silico, in-vitro or ex-vivo studies. Study designs will be evaluated with the aim to identify opportunities to reduce the number of animals needed to achieve the objectives of the study. By conducting small pilot (tolerability) studies and by using innovative new technologies and modeling approaches, ProQR further pursues the ambition to reduce, refine and replace animal studies. Approval by the (institutional or national) animal care and use committees is required prior the execution of in vivo studies.

External collaborators contracted for the execution of our in-vivo preclinical studies (contract research organizations, CROs) are selected based on their expertise, quality and accreditations for laboratory animal care and welfare. CRO facilities are audited by ProQR prior contracting to ensure that the housing, husbandry and animal welfare complies with the highest international standards. Personnel responsible for housing, husbandry and care of the animals must have received adequate and relevant documented education.

Manufacturing and Supply

We do not currently own or operate manufacturing facilities to produce clinical or commercial quantities of any of our product candidates. We currently contract with drug product manufacturers for the production of sepofarsen solution for intravitreal injection, QR-421a solution for intravitreal injection, QR-1123 for intravitreal injection and QR-504a for intravitreal injection, and we expect to continue to do so to meet the planned clinical requirements of our product candidates.

Currently, each of our active ingredients for our manufacturing activities are supplied by single source suppliers. We have agreements for the supply of such active ingredients with manufacturers that we believe have sufficient capacity to meet our demands. In addition, we believe that adequate alternative sources for such supplies exist. We typically order clinical supplies and services on a purchase order basis and do not enter into long-term dedicated capacity or minimum supply arrangements. We have a commercial supply agreement in place for the manufacturing of the active ingredient in sepofarsen. This agreement took effect in July 2019 to cover the process qualification activities, and will remain effective until ten years after the date of first commercial sale of sepofarsen. The agreement may be terminated earlier by either party in case of a material breach of the agreement, or by us in case (i) the product or the development thereof is discontinued, (ii) of insufficient supplies of the product, or (iii) of a refusal to implement changes required by regulatory authorities. During the first five years after the first commercial sale, we shall be required to exclusively order our demand of sepofarsen under this agreement, and thereafter only half the demand. Every half year, we shall submit 36 months forecasts of which the first 12 months are a binding take or pay commitment.

Manufacturing is subject to extensive regulations that impose various procedural and documentation requirements, which govern record keeping, manufacturing processes and controls, personnel, quality control and quality assurance, amongst others. The contract manufacturing organizations we use manufacture our product candidates under cGMP conditions. cGMP is a regulatory standard for the production of pharmaceuticals that will be used in humans.

Competition

The pharmaceutical industry is highly competitive and subject to rapid and significant technological change. Our potential competitors include large pharmaceutical, biotechnology, specialty pharmaceutical, and generic drug companies, academic institutions, government agencies and research institutions. Key competitive factors affecting the commercial success of our product candidates are likely to be efficacy, safety and tolerability profile, delivery, reliability, convenience of dosing, patient recruitment for clinical studies, price and reimbursement. Many of our existing or potential competitors have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of product candidates, obtaining FDA, EMA and other regulatory approvals of products and the commercialization of those products. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a small number of our competitors. Accordingly, our competitors may be more successful than we may be in obtaining FDA or EMA approval for therapies and achieving widespread market acceptance. Our competitors’ products may be more effective, or more effectively marketed and sold, than any product candidate we may commercialize and may render our therapies obsolete or non-competitive before we can recover development and commercialization expenses.

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Our competitors are working on similar technologies in the field of RNA repair and RNA editing, but also in the field of gene editing and gene therapy as well as other types of therapies, such as small molecules, protein replacement or antibodies. The industry targeting hereditary ophthalmology indications is driven by gene therapy, gene editing, and other approaches.

Intellectual Property

We strive to protect our technology platforms and our product candidates through a variety of approaches, including obtaining and maintaining patent and trade secret protection for our current and future technology platforms, our product candidates as well as their methods of use and processes for their manufacture, and any other inventions or discoveries that are commercially important to our business. We seek to obtain domestic and international patent protection and endeavor to promptly file patent applications or in-license patent rights relating to new, commercially valuable inventions to expand our intellectual property portfolio.

Our commercial success will depend in part upon obtaining and maintaining patent and trade secret protection for our current and future technology platforms and product candidates, as well as successfully defending our patent rights against third-party challenges. Our ability to prevent or stop third parties from making, using, selling, offering to sell or importing our product candidates will depend in part upon whether we have valid and enforceable patent rights that cover the activities of third parties.

We cannot be sure that patents will be granted with respect to any of our own or our in-licensed pending patent applications or with respect to any patents applications we may own or in-license in the future, nor can we be sure that any of our own or in-licensed patents or any patents we may own or license in the future will be useful in protecting our technology. Please see “Risk Factors—Risks Related to Our Intellectual Property” for additional information on the risks associated with our intellectual property strategy and portfolio.

Patent Rights

We have been building and will continue to build our patent portfolio. Where possible, we pursue or plan to pursue multi-tiered patent protection for our technology platforms and our product candidates as well as their manufacture, formulation and use. In addition to the United States, we file, and plan to file, patent applications in various countries and regions where we think such filings are likely to be cost effective.

The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file or plan to file, the patent term is 20 years from the earliest date of filing of a non-provisional patent application. In the United States, a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the U.S. PTO in granting a patent. However, the term of a United States patent may be shortened if a patent is terminally disclaimed by its owner over another patent. In addition, depending upon the circumstances, certain United States patents may be eligible for a patent term extension which compensates a patentee for delays in granting marketing approval for a patented active ingredient or use of an active ingredient. In Europe, a similar mechanism is available, such that patents may be eligible for a supplementary protection certificate to compensate for the time lost in obtaining marketing authorization for the active ingredient.

Patent Rights Relating to Our LCA Program

With regard to our LCA Program and our lead candidate in the LCA space, sepofarsen, we entered into an exclusive license agreement with the Radboud University Medical Center, Nijmegen, the Netherlands in April 2014 to obtain rights in a patent family with composition of matters claims directed to antisense oligonucleotides for treating LCA and method of use claims relating to modulation of the splicing of the CEP290 gene product. Patents were granted in Europe (EP 2753694 B1), in the U.S. (US 9,771,580 and US 10,167,470), in Australia (AU 2012305053), and in Eurasia (EA 033653),, and applications are currently pending in the U.S. (continuation application) as well as Brazil and Canada. The term of any patents resulting from these applications would be expected to extend to at least 2032. Furthermore, we entered into an exclusive license agreement with Inserm Transfert SA and Assistance-Publique-Hôpiteaux de Paris (AP-HP), Paris, France in January 2018 to obtain rights in a patent family with composition of matters claims directed to antisense oligonucleotides for treating LCA and method of treatment claims relating to modulation of the splicing of the

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CEP290 gene product. Patents were granted in the U.S. (US 9,012,425; US 9,487,782; US 9,777,272) and in Europe (EP 2718437 B1) and applications are currently pending in the U.S. (continuation application) and Europe (divisional application). The term of any patents resulting from these applications would be expected to extend to at least 2032. We amended the aforementioned license with Inserm Transfert SA and AP-HP to add a non-exclusive license with respect to a patent family with method claims directed to methods for performing antisense oligonucleotide-mediated exon skipping in the retina of a subject in need thereof. Patents were granted in Europe (EP 3019610 B1) and applications are currently pending in the U.S. (continuation application). The term of any patents resulting from these applications would be expected to extend to at least 2034.

To further strengthen our position on sepofarsen, we filed our own international patent application in February 2016 to obtain intellectual property rights to a variety of improved antisense oligonucleotides, including sepofarsen, and the use thereof in the treatment of LCA. Patents were granted in South Africa (ZA 2017/05331) and the U.S. (US 10,421,963) and applications are currently pending in the U.S. (continuation application), Europe, Australia, Brazil, Canada, China, Eurasia, India, Israel, Japan, South Korea, Mexico, and New Zealand. The term of any patents resulting from these applications would be expected to extend to at least 2036.

Patent Rights Relating to Our Usher Program

With regard to our Usher Program and our lead candidates in the Usher space, QR-411 and QR-421a, we entered into an exclusive license agreement with the Radboud University Medical Center, Nijmegen, the Netherlands in June 2015 to obtain rights in a patent family with composition of matters claims directed to antisense oligonucleotides for treating Usher syndrome type II and method of use claims relating to modulation of the splicing of the USH2A gene product. A patent was granted in the U.S. (US 10,131,910) and applications are currently pending in the U.S. (continuation application) as well as Europe, Canada, Australia, and Israel. The term of any patents resulting from these applications would be expected to extend to at least 2035.

To further strengthen our position on the lead candidates QR-411 and QR-421a, we filed two international patent applications in April 2017 and September 2017, respectively. Both applications were continued in the U.S. and Europe and several other countries. The term of any patents resulting from these applications, if issued, would be expected to extend to at least 2037.

Patent Rights Relating to Our Axiomer Program

With regard to our Axiomer program, we filed several national and international patent applications from 2014 to 2020, several of which were continued in national and regional patent applications after the respective international phases. The term of any patents resulting from these applications, if issued, would be expected to extend to at least between 2035 and 2040.

Patent Rights Relating to Our TRIDENT Program

With regard to our TRIDENT program, we filed an international patent application in 2019 directed to antisense oligonucleotides that are applicable for nucleotide-specific pseudouridylation. In the TRIDENT program we are working together with Prof. Yi-Tao Yu at the University of Rochester, NY, USA. The international application was continued in national and regional patent applications. The term of any patents resulting from these applications, if issued, would be expected to extend to at least 2039.

Patent Rights Relating to Our Autosomal Dominant Retinitis Pigmentosa Program

On October 26, 2018, we and Ionis Pharmaceuticals, Inc. entered into a License Agreement, pursuant to which Ionis granted us an exclusive, worldwide, royalty-bearing license to us to develop and commercialize certain pharmaceutical products, including the product designated by Ionis as IONIS-RHO-2.5Rx, which has been re-designated by us as QR-1123, for the prevention or treatment of autosomal dominant retinitis pigmentosa, or adRP, in humans, including patient screening. Ionis also granted to the Company certain sub-license rights. Ionis licensed us non-exclusive rights under a range of technology and manufacturing patent families, as well as an exclusive right to one patent family related to QR-

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1123. The product patent family contains a granted patent in the U.S. (US 10,426,789) and pending applications in the U.S. (continuation application), Europe, Brazil, Canada, Israel, India, Mexico, and New Zealand.

Trade Secrets

In addition to patent protection, we rely on trade secrets and know-how to develop and maintain our competitive position. Trade secrets and know-how can be difficult to protect. Nevertheless, we seek to protect our trade secrets and know-how via, among other things, confidentiality and invention assignment agreements with our employees and consultants. We also seek to preserve the confidentiality of our trade secrets and know-how by implementing and maintaining security of our premises and information and limiting access to our trade secrets and know-how.

License Agreement with Radboud for LCA

In April 2014 we entered into a Patent License Agreement with Radboud University Medical Center, or Radboud, in the field of antisense oligonucleotide-based therapy for Leber congenital amaurosis, or LCA. Under the terms of this license agreement, we have an exclusive, world-wide royalty-bearing license under certain Radboud patent rights to develop, make, have made, use, sell offer for sale and import of certain licensed products of Radboud for use in all prophylactic and therapeutic uses in the field of LCA. Pursuant to the terms of the license agreement, we are obligated to pay Radboud net-sales-related royalties in the low single digits which shall be determined on a product-by-product and country-by-country basis. If we are required to pay any third-party royalties, we may deduct that amount from that which is owed to Radboud. Radboud shall provide human resources, materials, facilities and equipment that are necessary for preclinical and clinical trials and if we do not purchase such trial facilities from Radboud, we are required to pay an increased net-sales-related royalty. In our sole discretion, we may elect to convert our obligation to pay net-sales-related royalties into one of the two lump-sum royalty options contained in the license agreement, the amount of which depends on whether we elect to convert prior to or after regulatory approval has been filed.

We may sublicense our rights to any third-party provided such sub-license includes the same obligations on the sub-licensee as are on us and we promptly furnish Radboud with a copy of the executed sublicensing agreements.

The license agreement will remain in effect until the date on which all of the relevant patent applications and all granted patents ensuing from such applications have expired or is terminated earlier in accordance with the agreement. Either party may terminate the agreement if the other party is in default of a material obligation under the agreement which has not been cured within 30 days of notice of such default. Either party may also terminate the agreement if the other party declares bankruptcy, dissolves, liquidates or is subject to other analogous proceedings. Radboud may also terminate the license agreement if we do not pay any amount owed under the agreement and such payment remains overdue for at least 30 days after receiving notice from Radboud of the amount due.

License Agreement with Radboud for Usher syndrome

In June 2015, we entered into another license agreement with Radboud University Medical Center, or Radboud. Under the terms of this license agreement, we have an exclusive, world-wide royalty-bearing license under certain Radboud patent rights to develop, make, have made, use, sell offer for sale and import of certain licensed products of Radboud for use in all prophylactic and therapeutic uses in the field of Usher syndrome. Pursuant to the terms of the license agreement, we are obligated to pay Radboud net-sales-related royalties in the low single digits which shall be determined on a product-by-product and country-by-country basis. If we are required to pay any third-party royalties, we may deduct that amount from that which is owed to Radboud. Radboud shall provide human resources, materials, facilities and equipment that are necessary for preclinical and clinical trials and if we do not purchase such trial facilities from Radboud, we are required to pay an increased net-sales-related royalty. In our sole discretion, we may elect to convert our obligation to pay net-sales-related royalties into one of the two lump-sum royalty options contained in the license agreement, the amount of which depends on whether we elect to convert prior to or after regulatory approval has been filed.

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License Agreement with Inserm Transfert SA for LCA

In January 2018, we entered into a license agreement with Inserm Transfert SA and Assistance-Publique-Hôpiteaux de Paris. Under the terms of the agreement, we have a world-wide, exclusive, royalty-bearing license under patent rights belonging to Inserm Transfert SA and other co-owners to develop, have developed, make, have made, use, have used and sell, have sold or otherwise distribute certain licensed products related to antisense oligonucleotides for treating LCA and method of treatment claims relating to modulation of the splicing of the CEP290 gene product.

We have the right to grant sublicenses to third parties subject to certain limitations such as the sublicensee’s activities not conflicting with the public order or ethical obligations of Inserm Transfert SA or any co-owner and not tarnishing the image of Inserm Transfert SA or any co-owner.

In January 2020, the license agreement with Inserm Transfert SA and Assistance-Publique-Hôpiteaux de Paris was amended so as to include a world-wide, non-exclusive, royalty-bearing license under patent rights belonging to Inserm Transfert SA and other co-owners to develop, have developed, make, have made, use, have used and sell, have sold or otherwise distribute certain licensed products for use in a method for antisense oligonucleotide-mediated exon skipping in photoreceptor cells.

In partial consideration of the rights and licenses granted by the license agreement, we are required to pay a lumpsum payment and an annual license maintenance fee, as well as to make payments upon the completion of certain milestones: completion of a clinical trial more advanced than First in Man, such as a Phase 2b; and the first marketing authorization or any foreign equivalent for a first product. In further consideration of the rights and license granted under the agreement, we shall pay to Inserm Transfert SA a running royalty in the low single digits on net sales of products sold by us or our sublicensee.

Unless terminated earlier pursuant to termination provisions of Agreement, the license agreement will remain in effect on a country-by-country basis, until the later to occur of the following events (i) the invalidation or expiration of the last to expire or to be invalidated patent rights which covers the manufacture, use or sale of the product in the relevant country or until the expiration of the exclusive commercialization right granted by a regulatory agency to a product as an orphan drug or (ii) five years after the first commercial sale of a product in the country in which the product is sold. The agreement may be terminated by either party in the event of an uncured breach by the other party. Inserm Transfert SA may terminate the agreement if we become the subject of voluntary or involuntary winding-up proceedings or judicial recovery, if we or our sublicensees interrupt development activities for at least one year, if we or our sublicensees interrupt commercialization for more than twelve months after the first commercialization in a country, if we do not commercialize a product within two years following our obtaining of marketing approval in a country, or if we or our sublicensees do not put a product into commercial use and do not keep products reasonably available to the public within twelve years of the effective date of the agreement.

License Agreement with Ionis Pharmaceuticals, Inc. for adRP

In October 2018, we entered into a license agreement with Ionis Pharmaceuticals, Inc. Under the License Agreement, we are required to make an upfront payment of an aggregate of up to $ 6.0 million in installments, and certain payments up to an aggregate of $ 20.0 million upon the satisfaction of certain development and sales milestones. In addition, Ionis is entitled to royalty payments in the low double digits of aggregate annual net sales, subject to minimum sales in certain circumstances, and subject to reduced rates in certain circumstances. The royalty term lasts on a product-by-product and country-by-country basis, until the later of the expiration of the patent rights licensed to us and the expiration of regulatory-based exclusivity for such product in such country. The License Agreement may also be terminated by either

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party based upon certain uncured material breaches by, or insolvency of, the other party, or by us at any time with advanced notice.

In connection with the upfront payments and development milestone payments, we also simultaneously entered into a Stock Purchase Agreement with Ionis, pursuant to which we agreed to issue an aggregate of $ 2.5 million of ordinary shares to satisfy the first installment upfront payment, and the remaining installment of the upfront payment in ordinary shares determined upon the due date of such installment. In addition, the Stock Purchase Agreement provides for the ability for us, at our discretion, to pay the development milestone payments in ordinary shares when such payments are due. We may not issue ordinary shares to Ionis to the extent that such issuance would result in Ionis owning in excess of 18.5% of our issued and outstanding shares, nor may we issue ordinary shares if such issuance, together with previous issuances under the Stock Purchase Agreement, would exceed 19.9% of our outstanding ordinary shares as of the date of the execution of the Stock Purchase Agreement. Under these circumstances, we are required to pay the remainder of the upfront and/or development milestone payments in cash.

In addition, in connection with the Stock Purchase Agreement, we also entered into an Investor Agreement with Ionis, pursuant to which we agreed to register for resale the ordinary shares issued by us under the Stock Purchase Agreement, under the circumstances described in the Investor Agreement. The Investor Agreement also contains customary covenants related to our registration of such shares, preparation of filings in connection therewith and indemnification of Ionis. The Investor Agreement also contains lockup provisions prohibiting the disposition of our ordinary shares issued under the Stock Purchase Agreement for a period of 12 months from the applicable issuance date, as well as voting provisions requiring Ionis to vote its ordinary shares in accordance with the recommendations of our board of directors, in each case subject to certain exceptions.

Other License Agreements

In January 2016, we entered into an agreement with Leiden University Medical Center, or LUMC, which gives us a world-wide, exclusive, royalty-bearing license in the field of amyloid beta related diseases, notably Alzheimer’s disease and HCHWA-D, under certain patent rights of LUMC regarding antisense oligonucleotide based therapies. This license agreement contains certain diligence obligations for the Company coupled to milestone payments and complements the Company’s intellectual property relating to its CNS program. The royalties payable under this license agreement are in the low single digits. On September 12, 2017, we spun out this program into Amylon Therapeutics B.V., in which we maintain a majority ownership.

In January 2017, we entered into an agreement with LUMC, which gives us a world-wide, exclusive, royalty-bearing license in the field of Huntington’s disease, under certain patent rights of LUMC regarding antisense oligonucleotide based therapies. This license agreement contains certain diligence obligations for the Company coupled to milestone payments and complements the Company’s intellectual property relating to the HD program. The royalties payable under this license agreement are in the low single digits.

In February 2019, we entered into an agreement with the University of Rochester, New York, which gives us a world-wide, exclusive, royalty-bearing, sublicensable license in the field of antisense oligonucleotides for use in nucleotide specific RNA editing through pseudouridylation, under certain patent rights of University of Rochester. This license agreement contains certain diligence obligations for the Company coupled to milestone payments and complements the Company’s intellectual property relating to the Axiomer/pseudouridylation program. The royalties payable under this license agreement are in the low single digits.

In September 2020, the Company entered into an agreement with Vico Therapeutics B.V., which gives us a world-wide, exclusive, royalty-bearing, sublicensable license in the field of the prophylactic and therapeutic use of antisense oligonucleotide for the treatment of Fuch’s Endothelial Corneal Dystrophy (FECD) caused by a trinucleotide repeat, under certain patent rights of Vico Therapeutics B.V. The royalties payable under this license agreement are in the low single digits. In partial consideration of the rights and licenses granted by the license agreement, the Company is required to make annual maintenance payments. Unless terminated earlier in accordance with the license agreement, the agreement will stay in effect until the expiration of all of the licensed patent rights. The license agreement may be terminated by either party in the event of an uncured breach by the breaching party. Vico Therapeutics B.V. may terminate the license agreement if the Company applies for an order or an order is made declaring the Company bankrupt or granting the Company suspension of payments, or a liquidator is appointed for the Company, or the

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Company is dissolved, liquidated, or ceases to carry on all or a substantial part of its business or a decision is taken to that effect, or in the event uncured payment defaults.

Regulatory Matters

Government Regulation and Product Approval

Government authorities in the United States at the federal, state and local level, and in other countries, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, marketing, export and import of products such as those we are developing.

U.S. Drug Development Process

The process of obtaining regulatory approvals and compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process, or after approval, may subject an applicant to administrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, untitled or warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties. The process required by the FDA before a drug may be marketed in the United States generally involves the following:

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completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices, or GLP, regulations;

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manufacture of the drug product in accordance with current Good Manufacturing Practice, or GMP, regulations;

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

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performance of adequate and well-controlled human clinical trials according to Good Clinical Practice, or GCP, regulations to establish the safety and efficacy of the proposed drug for its intended use;

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preparation and submission to the FDA of an NDA;

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satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product, or components thereof, are produced to assess compliance with cGMP;

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satisfactory completion of an FDA audit of clinical trial sites to assess compliance with GCP; and

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review and approval by the FDA of the NDA.

The testing and approval process require substantial time, effort and financial resources and we cannot be certain that any approvals for our product candidates will be granted on a timely basis, if at all.

Once a pharmaceutical product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations of product chemistry, toxicity, formulation and stability, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data and any available clinical data or literature, to the FDA as part of the IND. The sponsor must also include a protocol detailing, among other things, the objectives of the initial clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated if the initial clinical trial lends itself to an efficacy evaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns or questions related to a proposed clinical trial and places the trial on a clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any

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outstanding concerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during clinical trials due to safety concerns or non-compliance and may be imposed on all drug products within a certain class of drugs. The FDA also can impose partial clinical holds, for example, prohibiting the initiation of clinical trials of a certain duration or for a certain dose.

All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. These regulations include the requirement that all research subjects provide informed consent in writing before their participation in any clinical trial. Further, an IRB must review and approve the plan for any clinical trial before it commences at any institution, and the IRB must conduct continuing review and reauthorize the trial at least annually. An IRB considers, among other things, whether the risks to individuals participating in the clinical trial are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the information regarding the clinical trial and the consent form that must be provided to each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed.

Each new clinical protocol and any amendments to the protocol must be submitted for FDA review, and to the IRBs for approval. Protocols detail, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, the parameters to assess efficacy and the parameters to be used to monitor subject safety.

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

Phase 1. The product is initially introduced into a small number of healthy human subjects or patients and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion and, if possible, to gain early evidence on effectiveness. In the case of some products for severe or life-threatening diseases, especially when the product is suspected or known to be unavoidably toxic, the initial human testing may be conducted in patients.

Phase 2. Involves clinical trials in 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 and schedule.

Phase 3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population. These clinical trials are intended to establish the overall risk/benefit relationship of the product and provide an adequate basis for product labeling.

Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA. Within 15 calendar days after the sponsor determines that the information qualifies for writing, written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected suspected adverse events, any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator's brochure, or any findings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the product drug. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within seven calendar days after the sponsor’s initial receipt of the information. Phase 1, Phase 2 and Phase 3 testing may not be completed successfully within any specified period, if at all. The FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the product and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

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A drug being studied in clinical trials may be made available to individual patients in certain circumstances outside of clinical trials, known as expanded access or “compassionate use”. There is no requirement for a company to provide expanded access to its investigational product. However, if a company decides to make its investigational product available for expanded access, FDA reviews each request for expanded access and determines if treatment may proceed. Under the FDCA, a sponsor of one or more investigational products for the treatment of a serious disease or condition is required to make publicly available, such as by posting on its website, its policy on evaluating and responding to requests for individual patient access to such investigational drug. This requirement applies on the earlier of the first initiation of a Phase 2 or Phase 3 trial of the investigational drug, or as applicable, 15 days after the drug receives a designation as a breakthrough therapy, fast track product, or regenerative advanced therapy.

U.S. Review and Approval Processes

The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the drug, proposed labeling and other relevant information, are submitted to the FDA as part of an NDA for a new drug, requesting approval to market the product. The submission of an NDA is subject to the payment of a substantial user fee; a waiver of such fee may be obtained under certain limited circumstances. For example, the agency will waive the application fee for the first human drug application that a small business or its affiliate submits for review. The sponsor of an approved NDA is also subject to an annual prescription drug product program fee.

The FDA reviews all NDAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA may request additional information rather than accept an NDA for filing. In this event, the NDA must be re-submitted with the additional information. The re-submitted application also is 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. The FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing is cGMP-compliant to assure the product’s identity, strength, quality and purity. Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is or will be manufactured. 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. The FDA may refer the NDA to an advisory committee for review, evaluation and recommendation as to whether the application should be approved and under what conditions. An advisory committee is a panel of experts, including clinicians and other scientific experts, who provide advice and recommendations when requested by the FDA. The FDA is not bound by the recommendation of an advisory committee, but it considers such recommendations when making decisions.

The approval process is lengthy and difficult, and the FDA may refuse to approve an NDA if the applicable regulatory criteria are not satisfied or may require additional clinical data or other data and information. Even if such data and information are submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data. The FDA will issue a complete response letter if the agency decides not to approve the NDA in its present form. The complete response letter usually describes all of the specific deficiencies that the FDA identified in the NDA that must be satisfactorily addressed before it can be approved. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical trials. Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application or request an opportunity for a hearing.

If a product receives regulatory approval, the approval may be significantly limited to specific patients and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. In addition, the FDA may require post-approval studies, including Phase 4 clinical trials, to further assess a drug’s safety and effectiveness after NDA approval and may require testing and surveillance programs to monitor the safety of approved products that have been commercialized. The FDA may require a Risk Evaluation and Mitigation Strategy, or REMS, program as a condition of approval, which could entail requirements for long-term patient follow-up, a medication guide,

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physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools.

Fast Track Designation and Accelerated Approval

The FDA has a Fast Track program that is intended to expedite or facilitate the process for reviewing new drugs that meet certain criteria. Specifically, new drugs are eligible for Fast Track designation if they are intended to treat a serious or life-threatening disease or condition for which there is an unmet medical need and demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to the combination of the product and the specific indication for which it is being studied. The sponsor of a new drug may request the FDA to designate the drug as a Fast Track product concurrently with, or at any time after, submission of an IND, and the FDA must determine if the drug candidate qualifies for fast track designation within 60 days of receipt of the sponsor’s request. In addition to other benefits, such as the ability to engage in more frequent interactions with the FDA, the FDA may initiate review of sections of a Fast Track drug’s NDA before the application is complete. This rolling review is available if the applicant provides, and the FDA approves, a schedule for the submission of each portion of the NDA and the applicant pays applicable user fees. However, the FDA’s time period goal for reviewing an application does not begin until the last section of the NDA is submitted. Additionally, 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.

Under FDA’s accelerated approval regulations, the FDA may approve a drug for a serious or life-threatening illness that provides meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, 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. In clinical trials, a surrogate endpoint is a marker, such as a measurement of laboratory or clinical signs of a disease or condition that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. A drug candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of post-approval clinical trials sometimes referred to as Phase 4 trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or to confirm a clinical benefit during post-marketing studies, will allow the FDA to withdraw the drug from the market on an expedited basis. All promotional materials for drug candidates approved under accelerated regulations are subject to prior review by the FDA.

Breakthrough Designation

A drug product can be designated as a breakthrough therapy if it is intended to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that it may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. A sponsor may request that a drug product be designated as a breakthrough therapy concurrently with, or at any time after, the submission of an IND, and the FDA must determine if the drug candidate qualifies for breakthrough therapy designation within 60 days of receipt of the sponsor’s request. If so designated, the FDA shall act to expedite the development and review of the product’s marketing application, including by meeting with the sponsor throughout the product’s development, providing timely advice to the sponsor to ensure that the development program to gather preclinical and clinical data is as efficient as practicable, involving senior managers and experienced review staff in a cross-disciplinary review, assigning a cross-disciplinary project lead for the FDA review team to facilitate an efficient review of the development program and to serve as a scientific liaison between the review team and the sponsor, and taking steps to ensure that the design of the clinical trials is as efficient as practicable.

Priority Review

The FDA may grant an NDA a priority review designation, which sets the target date for FDA action on the application for a new molecular entity at six months after the FDA accepts the application for filing. Priority review is granted where there is evidence that the proposed product would be a significant improvement in the safety or effectiveness of the treatment, diagnosis, or prevention of a serious condition. If criteria are not met for priority review, the application is subject to the standard FDA review period of ten months after FDA accepts the application for filing. Priority review

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designation does not change the scientific/medical standard for approval or the quality of evidence necessary to support approval.

Rare Pediatric Disease Priority Review Voucher

The FDA may grant rare pediatric disease designation for indications in the treatment or prevention of a rare disease or condition that affects fewer than 200,000 individuals in the United States and that is a serious or life-threatening disease that primarily affects individuals aged from birth to 18 years, including age groups often called neonates, infants, children and adolescents. Under the FDCA, a sponsor who receives approval of an NDA for a product that is for the prevention or treatment of a rare pediatric disease and meets certain additional criteria, may qualify for a rare pediatric disease priority review voucher, or PRV. A PRV can be redeemed to receive priority review under an expedited timeframe for a subsequent marketing application for a different product. A PRV may also be sold or transferred from the initial sponsor to another sponsor and may be further transferred any number of times before it is used. On December 27, 2020, the Rare Pediatric Disease Priority Review Voucher Program was extended. Under the current statutory sunset provisions, after September 30, 2024, FDA may only award a voucher for an approved rare pediatric disease product application if the sponsor has rare pediatric disease designation for the drug or biologic, and that designation was granted by September 30, 2024. After September 30, 2026, FDA may not award any rare pediatric disease priority review vouchers. It is possible the authority for FDA to award rare pediatric disease priority review vouchers will be further extended by Congress.

Post-Approval Requirements

Any products for which we receive FDA approval are subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and distribution requirements, complying with certain electronic records and signature requirements and complying with FDA promotion and advertising requirements. Moreover, each component of a combination product retains their regulatory status (as a drug or device, for example) and is subject to the requirements established by the FDA for that type of component. The FDA strictly regulates labeling, advertising, promotion and other types of information on 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. Further, manufacturers must continue to comply with cGMP requirements, which are extensive and require considerable time, resources and ongoing investment to ensure compliance. In addition, changes to the manufacturing process generally require prior FDA approval before being implemented and other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.

Manufacturers and other entities involved in the manufacturing and distribution of approved products are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. The cGMP requirements apply to all stages of the manufacturing process, including the production, processing, sterilization, packaging, labeling, storage and shipment of the product. Manufacturers must establish validated systems to ensure that products meet specifications and regulatory standards, and test each product batch or lot prior to its release. We rely, and expect to continue to rely, on third parties for the production of clinical quantities of our product candidates. Future FDA and state inspections may identify compliance issues at the facilities of our contract manufacturers that may disrupt production or distribution or may require substantial resources to correct.

The FDA may withdraw a product approval if compliance with regulatory requirements is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market. Further, the failure to maintain compliance with regulatory requirements may result in administrative or judicial actions, such as fines, untitled or warning letters, holds on clinical trials, product seizures, product detention or refusal to permit the import or export of products, refusal to approve pending applications or supplements, restrictions on marketing or manufacturing, injunctions or civil or criminal penalties.

From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the approval, manufacturing and marketing of products regulated by the FDA. In addition to new

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legislation, FDA regulations, guidance, and policies are often revised or reinterpreted by the agency in ways that may significantly affect our business and our product candidates. It is impossible to predict whether further legislative or FDA regulation or policy changes will be enacted or implemented and what the impact of such changes, if any, may be.

Patent Term Restoration and Marketing Exclusivity

Depending upon the timing, duration and specifics of FDA approval of the use of our product candidates, some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and the submission date of an NDA plus the time between the submission date of an NDA and the approval of that application, except that the review period is reduced by any time during which the applicant failed to exercise due diligence. Only one patent applicable to an approved drug is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The U.S. Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we intend to apply for restorations of patent term for some of our currently owned or licensed patents to add patent life beyond their current expiration dates, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant NDA; however, there can be no assurance that any such extension will be granted to us.

Market exclusivity provisions under the FDCA can also delay the submission or the approval of certain applications. The FDCA provides a five-year period of non-patent marketing 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 or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application, or ANDA, or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing 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, for example, new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the conditions of use associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original active agent. Five-year and three-year exclusivity 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.

Pediatric exclusivity is another type of exclusivity in the United States. Pediatric exclusivity, if granted, provides an additional six months to an existing exclusivity or statutory delay in approval resulting from a patent certification. This six-month exclusivity, which runs from the end of other exclusivity protection or patent delay, may be granted based on the voluntary completion of a pediatric clinical trial in accordance with an FDA-issued “Written Request” for such a clinical trial.

Orphan Drugs

Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition—a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making a drug in the United States for this type of disease or condition will be recovered from sales of the product. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. The first NDA applicant to receive FDA approval for a particular active ingredient to treat a particular disease or condition with FDA

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orphan drug designation is entitled to a seven-year exclusive marketing period in the United States for that product, for that indication. During the seven-year exclusivity period, the FDA may not approve any other applications to market the same drug for the same disease or condition, except in limited circumstances, such as if the second applicant demonstrates the clinical superiority of its product to the product with orphan drug exclusivity through a demonstration of superior safety, superior efficacy, or a major contribution to patient care. Orphan drug exclusivity does not prevent FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA application user fee.

Pediatric Information

Under the Pediatric Research Equity Act of 2003, as amended, NDAs or supplements to NDAs must contain data adequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective. The FDCA requires that a sponsor who is planning to submit a marketing application for a drug product that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit an initial Pediatric Study Plan, or PSP, within sixty days of an end-of-Phase 2 meeting or as may be agreed between the sponsor and the FDA. The initial PSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including study objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of data or full or partial waivers. The FDA and the sponsor must reach agreement on the PSP. A sponsor can submit amendments to an agreed-upon initial PSP at any time if changes to the pediatric plan need to be considered based on data collected from preclinical studies, early phase clinical trials, and/or other clinical development programs.

Disclosure of Clinical Trial Information

Sponsors of clinical trials of FDA-regulated products, including drugs, are required to register and disclose certain clinical trial information, which is publicly available at www.clinicaltrials.gov. Information related to the product, patient population, phase of investigation, trial sites and investigators, and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure of the results of these trials can be delayed until the new product or new indication being studied has been approved. Competitors may use this publicly available information to gain knowledge regarding the progress of development programs.

Pharmaceutical Coverage, Pricing and Reimbursement

Significant uncertainty exists as to the coverage and reimbursement status of any drug products for which we may obtain regulatory approval. In the United States, sales of any products for which we may receive regulatory approval for commercial sale will depend in part on the availability of coverage and reimbursement from third-party payors. Third-party payors include government authorities, managed care providers, private health insurers and other organizations. The process for determining whether a payor will provide coverage for a drug product may be separate from the process for setting the reimbursement rate that the payor will pay for the drug product. Third-party payors may limit coverage to specific drug products on an approved list, or formulary, which might not include all of the FDA-approved drugs for a particular indication. Moreover, a payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.

Third-party payors are increasingly challenging the price and examining the medical need and cost-effectiveness of medical products and services, in addition to their safety and efficacy. In order to obtain coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical need and cost-effectiveness of any products, in addition to the costs required to obtain regulatory approvals. Our product candidates may not be considered medically necessary or cost-effective. If third-party payors do not consider a product to be cost-effective compared to other available therapies, they may not cover the

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product after approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow a company to sell its products at a profit.

The U.S. government and state legislatures have shown significant interest in implementing cost containment programs to limit the growth of government-paid health care costs, including price controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs. For example, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, collectively, the Affordable Care Act (ACA), contains provisions that may reduce the profitability of drug products, including, for example, increased rebates for drugs reimbursed by Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatory discounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies’ share of sales to federal health care programs. Adoption of government controls and measures, and tightening of restrictive policies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals.

The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. In addition, an increasing emphasis on cost containment measures in the United States has increased and we expect will continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

Other Healthcare Laws and Compliance Requirements

If we obtain regulatory approval of our products, we will be subject to various federal and state laws targeting fraud and abuse in the healthcare industry. These laws may impact, among other things, our proposed sales, marketing and education programs. In addition, we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:

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the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order, or recommendation of, an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs. A person or entity can be found guilty of violating the statute without actual knowledge of the statute or specific intent to violate it. The term remuneration has been interpreted broadly to include anything of value. Further, courts have found that if “one purpose” of remuneration is to induce referrals, the federal Anti-Kickback statute is violated. Violations are subject to significant civil and criminal fines and penalties for each violation, plus up to three times the remuneration involved, imprisonment, and exclusion from government healthcare programs. In addition, a claim submitted for payment to any federal healthcare program that includes items or services that were made as a result of a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act, or FCA. The Anti-Kickback Statute has been interpreted to apply to arrangements between biopharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers, among others, on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, and on November 20, 2020, the Office of Inspector General, or OIG, finalized further modifications to the federal Anti-Kickback Statute;

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federal civil and criminal false claims laws and civil monetary penalty laws, including the FCA and civil monetary penalty laws which impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making a false statement or record to avoid, decrease or conceal an obligation to pay money to the federal government. A claim that includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim under the FCA. Manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims. The FCA also permits a private individual acting as a “whistleblower” to bring qui tam actions on behalf of the federal government alleging violations of the FCA and to share in any

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monetary recovery or settlement. When an entity is determined to have violated the FCA, the government may impose civil fines and penalties for each false claim, plus treble damages, and exclude the entity from participation in Medicare, Medicaid and other federal healthcare programs;

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the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes federal criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also created federal criminal laws that prohibit knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statements or using or making any false or fraudulent document in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity can be found guilty of violating HIPAA fraud provisions without actual knowledge of the statute or specific intent to violate it;

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the federal transparency laws, including the provision of the ACA referred to as the federal Physician Payment Sunshine Act, that requires applicable manufacturers of covered drugs to disclose payments and other transfers of value provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals and physician ownership and investment interests. Effective January 1, 2022, these reporting obligations will extend to include transfers of value made in the previous year to certain non-physician providers such as physician assistants and nurse practitioners;

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HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information on certain covered healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their respective business associates; and

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state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

Healthcare legislative reform

In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that could impact our ability to sell our products profitably. In particular, in 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the ACA, was enacted, which, among other things, subjected biologic products to potential competition by lower-cost biosimilars; addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program; extended the Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations; subjected manufacturers to new annual fees and taxes for certain branded prescription drugs; created a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (increased to 70% pursuant to the Bipartisan Budget Act of 2018, effective as of January 1, 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; and provided incentives to programs that increase the federal government’s comparative effectiveness research.

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Tax Act, the remaining provisions of the ACA are invalid as well. On December 18, 2019, the Fifth Circuit U.S. Court of Appeals held that the individual mandate is unconstitutional, and remanded the case to the lower court to reconsider its earlier invalidation of the full ACA. On March 2, 2020, the United States Supreme Court granted the petitions for writs of certiorari to review this case and held oral arguments on November 10, 2020. Pending a decision, the ACA remains in effect, but it is unclear at this time what effect these developments will have on the status of the ACA.

Further, on January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. On October 13, 2017, former President Trump signed an Executive Order terminating the cost-sharing subsidies that reimburse insurers under the ACA. The Trump administration concluded that cost-sharing reduction, or CSR, payments to insurance companies required under the ACA have not received necessary appropriations from Congress and announced that it will discontinue these payments immediately until those appropriations are made. Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017. On August 14, 2020, the U.S. Court of Appeals for the Federal Circuit ruled in two separate cases that the federal government is liable for the full amount of unpaid CSRs for the years preceding and including 2017. For CSR claims made by health insurance companies for years 2018 and later, further litigation will be required to determine the amounts due, if any. Further, on June 14, 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. On April 27, 2020, the United States Supreme Court reversed the U.S. Court of Appeals for the Federal Circuit's decision and remanded the case to the U.S. Court of Federal Claims, concluding the government has an obligation to pay these risk corridor payments under the relevant formula. It is unclear what impact these rulings will have on our business.

It is possible that other repeal and replacement initiatives, if enacted into law, could ultimately result in fewer individuals having health insurance coverage and/or in individuals having insurance coverage that provides less generous benefits. Thus, the full impact of the ACA, any law replacing elements of it, or the political uncertainty surrounding its repeal or replacement on our business remains unclear. Adoption of government controls and measures, and tightening of restrictive policies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals.

European Union Drug Review Approval

In the European Economic Area, or EEA (which is comprised, as of January 31, 2020, of the 27 Member States of the European Union plus Norway, Iceland and Liechtenstein), medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. There are two types of marketing authorizations: the Community MA, which is issued by the European Commission through the Centralized Procedure based on the opinion of the Committee for Medicinal Products for Human Use, or CHMP, a body of the EMA, and which is valid throughout the entire territory of the EEA; and the National MA, which is issued by the competent authorities of the Member States of the EEA and only authorized marketing in that Member State’s national territory and not the EEA as a whole.

The Centralized Procedure is mandatory for certain types of products, such as biotechnology medicinal products, orphan medicinal products, advanced-therapy medicines such as gene-therapy, somatic cell-therapy or tissue-engineered medicines, and medicinal products containing a new active substance indicated for the treatment of HIV, AIDS, cancer, neurodegenerative disorders, diabetes, auto- immune and other immune dysfunctions and viral diseases. The Centralized Procedure is optional for products containing a new active substance not yet authorized in the EEA, or for products that constitute a significant therapeutic, scientific or technical innovation or for products which are in the interest of public health in the European Union. The National MA is for products not falling within the mandatory scope of the Centralized Procedure. In general, there are three alternative routes to authorize medicinal products at a national level in the European Union:

Decentralized Procedure. Using the decentralized procedure, an applicant may apply for simultaneous authorization in more than one European Union country of medicinal products that have not yet been authorized in any European Union country and that do not fall within the mandatory scope of the Centralized

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Procedure. The competent authority of the reference member state will lead in the assessment of the application.

Mutual Recognition Procedure. In the mutual recognition procedure, a medicine is first authorized in one European Union Member State, in accordance with the national procedures of that country. Following this, further marketing authorizations can be sought from other European Union countries in a procedure whereby the countries concerned agree to recognize the validity of the original, national marketing authorization.

National Procedure. Applicants following the national procedure will be granted a marketing authorization that is valid only in a single member state. This procedure is not available for applicants seeking approval in more than one member state.

Regulation in the European Union

Product development, the regulatory approval process, and safety monitoring of medicinal products and their manufacturers in the European Union proceed in much the same manner as they do in the United States. Therefore, many of the issues discussed above apply similarly in the context of the European Union. In addition, drugs are subject to the extensive price and reimbursement regulations of the various European Union Member States.

Clinical Trials

As is the case in the United States, the various phases of preclinical and clinical research in the European Union are subject to significant regulatory controls. The Clinical Trials Directive 2001/20/EC, as amended, (and which will be replaced by Regulation (EU) No 536/2014) provides a system for the approval of clinical trials in the European Union via implementation through national legislation of the Member States. Under this system, approval of the clinical trial application must be obtained from the competent national authorities of the European Union Member States in which the clinical trial is to be conducted. Furthermore, a clinical trial may only be started after a competent ethics committee has issued a favorable opinion. The clinical trial application, which must be supported by an investigational medicinal product dossier with supporting information prescribed by the Clinical Trials Directive and corresponding national laws of the Member States and further detailed in applicable guidance documents. The sponsor of a clinical trial, or its legal representative, must be based in the European Economic Area. European regulators and ethics committees also require the submission of adverse event reports during a trial and a copy of the final study report.

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. It is expected that the new Clinical Trials Regulation will come into effect by December 2021. It will overhaul the current system of approvals for clinical trials in the European Union. Specifically, the new regulation, which will be directly applicable in all Member States (meaning that no national implementing legislation in each Member State is required), aims at simplifying and streamlining the approval of clinical trials in the European Union. For instance, the new Clinical Trials Regulation provides for a streamlined application procedure using a single entry point and strictly defined deadlines for the assessment of clinical trial applications.

Following the end of the Transition Period, the MHRA continues to authorize clinical trials in the UK. Although there is not currently a pronounced divergence between the UK and the EU regimes, it is unclear whether the UK will align its rules with the provisions of the new Clinical Trials Regulation when it becomes applicable.

PRIME Designation

PRIME is a voluntary scheme launched by the EMA to enhance support for the development of medicines that target an unmet medical need. The scheme focuses on medicines that may offer a major therapeutic advantage over existing treatments, or benefit patients without treatment options. These medicines are considered priority medicines by EMA. The scheme is open to medicines under development and for which the applicant intends to apply for an initial marketing authorization application through the Centralized Procedure. This scheme is based on enhanced interaction and early dialogue with developers of promising medicines, to optimize development plans and speed up evaluation to enable accelerated assessment of medicines applications. Medicines under the PRIME scheme can expect to be eligible for

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accelerated assessment at the time of application for a marketing authorization. Where, during the course of development, a medicine no longer meets the eligibility criteria, support under the PRIME scheme may be withdrawn.

Acceptance into the PRIME scheme is based on the medicine’s demonstration of potential to benefit patients with unmet medical needs based on early clinical data. Applicants from the academic sector and micro-, small- and medium-sized enterprises (SMEs) can apply earlier on the basis of compelling non-clinical data and tolerability data from initial clinical trials.

Once a candidate medicine has been selected for PRIME, the EMA will:

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appoint a rapporteur from the Committee for Medicinal Products for Human Use (CHMP) or from the Committee on Advanced Therapies (CAT) in the case of an advanced therapy to provide continuous support and help to build knowledge ahead of a marketing-authorization application;

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organize a kick-off meeting with the CHMP/CAT rapporteur and a multidisciplinary group of experts, so that they provide guidance on the overall development plan and regulatory strategy;

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assign a dedicated contact point;

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provide scientific advice at key development milestones, involving additional stakeholders such as health-technology-assessment bodies, to facilitate quicker access for patients to the new medicine; and

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confirm potential for accelerated assessment at the time of an application for marketing authorization.

Marketing Approval

Marketing approvals under the European Union regulatory system may be obtained through a centralized or decentralized procedure. The Centralized Procedure results in the grant of a single marketing authorization that is valid for all—currently 27—European Union Member States. The centralized procedure will continue to apply to the United Kingdom for a transition period following Brexit, which was scheduled to run until December 31, 2020. However, it is not clear whether the Centralized Procedure will continue to apply to the United Kingdom (although marketing approvals already granted under the Centralized Procedure will continue to apply in the United Kingdom).

Pursuant to Regulation (EC) No. 726/2004, as amended, the Centralized Procedure is mandatory for certain drugs, including drugs designated as orphan drugs pursuant to Regulation (EC) No. 141/2000. The CHMP also has the discretion to permit other products to use the Centralized Procedure if it considers them sufficiently innovative or they contain a new active substance. Given that sepofarsen and QR-421a have been granted orphan designation in the EU, they qualify, at the present time, for the Centralized Procedure.

In the marketing authorization application, or MAA, the applicant has to properly and sufficiently demonstrate the quality, safety and efficacy of the drug. Under the centralized approval procedure, the CHMP, possibly in conjunction with other committees, is responsible for drawing up the opinion of the EMA on any matter concerning the admissibility of the files submitted in accordance with the Centralized Procedure, such as an opinion on the granting, variation, suspension or revocation of a marketing authorization, and pharmacovigilance.

The CHMP and other committees are also responsible for providing guidance and have published numerous guidelines that may apply to our product candidates. These guidelines provide additional guidance on the factors that the EMA will consider in relation to the development and evaluation of drug products and may include, among other things, the preclinical studies required in specific cases; and the manufacturing and control information that should be submitted in a MAA; and post-approval measures required to monitor patients and evaluate the long term efficacy and potential adverse reactions. Although these guidelines are not legally binding, we believe that our compliance with them is likely necessary to gain approval for any of our product candidates.

The maximum timeframe for the evaluation of an MAA by the CHMP under the Centralized Procedure is 210 days after receipt of a valid application, excluding clock stops where additional information or written or oral explanation is to be provided by the applicant in response to the questions of the CHMP. Clock stops may extend the timeframe of evaluation of an MAA considerably beyond 201 days. When an application is submitted for a marketing authorization in respect of a drug which is of major interest from the point of view of public health and in particular from the viewpoint

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of therapeutic innovation, the applicant may request an accelerated assessment procedure. If the CHMP accepts such request, the timeframe of 210 days for assessment will be reduced to 150 days (excluding clock stops) but it is possible that the CHMP can revert to the standard time-limit for the Centralized Procedure if it considers that the application is no longer appropriate to conduct an accelerated assessment.

If the CHMP concludes that the quality, safety and efficacy of the product is sufficiently proven, it adopts a positive opinion. This is sent to the European Commission which drafts a decision. After consulting with the Member States, the European Commission adopts a decision and grants a marketing authorization, which is valid for the whole of the European Union. The marketing authorization may be subject to certain conditions, which may include, without limitation, the performance of post-authorization safety and/or efficacy studies.

European Union legislation also provides for a system of regulatory data and market exclusivity. According to Article 14(11) of Regulation (EC) No. 726/2004, as amended, and Article 10(1) of Directive 2001/83/EC, as amended, upon receiving marketing authorization, new chemical entities approved on the basis of complete independent data package benefit from eight years of data exclusivity and an additional two years of market exclusivity. Data exclusivity prevents regulatory authorities in the European Union from referencing the innovator’s data to assess a generic (abbreviated) application. During the additional two-year period of market exclusivity, a generic marketing authorization can be submitted, and the innovator’s data may be referenced, but no generic medicinal product can be marketed until the expiration of the market exclusivity. The overall ten-year period will be extended to a maximum of eleven years if, during the first eight years of those ten years, the marketing authorization holder, or MAH, obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. Even if a compound is considered to be a new chemical entity and the innovator is able to gain the period of data exclusivity, another company nevertheless could also market another version of the drug if such company obtained marketing authorization based on an MAA with a complete independent data package of pharmaceutical test, preclinical tests and clinical trials. However, products designated as orphan medicinal products enjoy, upon receiving marketing authorization, a period of ten years of orphan market exclusivity—see also “—Orphan Drug Regulation”. Depending upon the timing and duration of the EU marketing authorization process, products may be eligible for up to five years’ supplementary protection certification, or SPC, pursuant to Regulation (EC) No. 469/2009. Such SPCs extend the rights under the basic patent for the drug.

Additional rules apply to medicinal products for pediatric use under Regulation (EC) No. 1901/2006. Potential incentives include a six-month extension of any supplementary protection certificate granted pursuant to Regulation (EC) No. 469/2009, however not in cases in which the relevant product is designated as orphan medicinal products pursuant to Regulation (EC) No. 141/2000, as amended. Instead, medicinal products designated as orphan medicinal product that qualify for additional protections under Regulation (EC) No. 1901/2006 may enjoy an extension of the ten-year market exclusivity period granted under Regulation (EC) No. 141/2000 to twelve years subject to the conditions applicable to orphan drugs.

Marketing Approval – Post-Brexit Regime

Following the end of the Transition Period, the MHRA is the UK’s stand-alone medicines and medical devices regulator, taking any decisions and carrying out any functions which were previously carried out at the EU-level by the EMA (except for decisions on marketing authorization applications made through the EU procedures to market products in Northern Ireland).

All existing marketing authorizations issued through the Centralized Procedure were automatically converted into “UK MAs”, effective in Great Britain from January, 1 2021. MAHs could choose to opt out (by January 21, 2021) of the conversion process for all or some of their products approved under the Centralized Procedure. To support ongoing regulation of these converted MAs, the MHRA requires certain baseline data to be submitted by the MAH within a year of the end of the Transition Period (in accordance with the applicable regulatory provisions and guidance). There are additional processes and procedures for applications under the Centralized Procedure which were pending on January 1, 2021, as well as for products that were approved or pending approval under the decentralized and mutual recognition procedures. Under the Northern Ireland Protocol, existing centrally authorized products will remain valid for marketing products in Northern Ireland.

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Going forward, the MHRA has several routes through which applicants can apply for a new marketing authorization (the particular route depending on the intended market and type of application). In addition to solely national procedures, for two years from January 1, 2021, the MHRA may rely on decisions taken by the European Commission on the approval of new MAs through the Centralized Procedure. The MHRA may also have regard to MAs approved in European Union member states (or Iceland, Liechtenstein, Norway) through decentralized or mutual recognition procedures, with a view to granting MAs in the UK or Great Britain.

Orphan Drug Regulation

In the European Union, Regulation (EC) No. 141/2000, as amended, states that a drug will be designated as an orphan drug if its sponsor can establish:

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that it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than five in ten thousand persons in the Community when the application is made, or that it is intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition in the European Union and that without incentives it is unlikely that the marketing of the drug in the European Union would generate sufficient return to justify the necessary investment; and

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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, that the drug will be of significant benefit to those affected by that condition compared to products available for the condition.

Regulation (EC) No. 847/2000 sets out further provisions for implementation of the criteria for designation of a drug as an orphan drug. An application for the designation of a drug as an orphan drug must be submitted at any stage of development of the drug before filing of a marketing authorization application. Orphan drug designations have been granted by the European Commission to sepofarsen (EU/3/16/1641) QR-421a (EU/3/18/1973), and QR-411 (EU/3/17/1853).

If a European Union-wide community marketing authorization in respect of an orphan drug is granted pursuant to Regulation (EC) No. 726/2004 or if all the European Union Member States have granted marketing authorizations in accordance with the procedures for mutual recognition, the European Union and the Member States will not, for a period of ten years, accept another application for a marketing authorization, or grant a marketing authorization or accept an application to extend an existing marketing authorization, for the same therapeutic indication, in respect of a “similar medicinal product”. A “similar medicinal product” is defined as a medicinal product containing a similar active substance or substances as contained in an authorized orphan medicinal product, and which is intended for the same therapeutic indication. This ten year period may however be reduced to six years if, at the end of the fifth year, it is established, with respect to the drug concerned, that the criteria for orphan drug designation are no longer met, for example when it is shown on the basis of available evidence that the product is sufficiently profitable not to justify maintenance of market exclusivity. Notwithstanding the foregoing, a marketing authorization may be granted, for the same therapeutic indication, to a similar drug if:

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the holder of the marketing authorization for the original orphan drug has given its consent to the second applicant;

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the holder of the marketing authorization for the original orphan drug is unable to supply sufficient quantities of the drug; or

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the second applicant can establish in the application that the second drug, although similar to the orphan drug already authorized, is safer, more effective or otherwise clinically superior.

Regulation (EC) No. 847/2000 lays down definitions of the concept of ‘clinical superiority’. Other incentives available to orphan drugs in the European Union include financial incentives such as a reduction of fees or fee waivers and protocol assistance. Orphan drug designation does not shorten the duration of the regulatory review and approval process.

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The MHRA has assumed responsibility for orphan designation in Great Britain. Currently, the requirements for orphan designation in Great Britain largely replicate the requirements in the EU (which will still apply to applications made from Northern Ireland), although there may be divergences over time.

Manufacturing and Manufacturers’ License

Pursuant to Directive 2003/94/EC, as transposed into the national laws of the Member States, the manufacturing of investigational medicinal products and approved drugs is subject to a separate manufacturer’s license and must be conducted in strict compliance with cGMP requirements, which mandate the methods, facilities, and controls used in manufacturing, processing, and packing of drugs to assure their safety and identity. Manufacturers must have at least one qualified person permanently and continuously at their disposal in the European Union. The qualified person is ultimately responsible for certifying that each batch of finished product released onto the market has been manufactured in accordance with cGMP and the specifications set out in the marketing authorization or investigational medicinal product dossier. cGMP requirements are enforced through mandatory registration of facilities and inspections of those facilities. Failure to comply with these requirements could interrupt supply and result in delays, unanticipated costs and lost revenues, and subject the applicant to potential legal or regulatory action, including but not limited to warning letters, suspension of manufacturing, seizure of product, injunctive action or possible civil and criminal penalties.

The provisions of Directive 2003/94/EC, as transposed in the UK, have generally been preserved in the UK following the end of the Transition Period (subject to applicable amendments to ensure its effective operation in the post-Brexit context). The UK-EU Trade and Cooperation Agreement also contains provisions relating to the mutual recognition of cGMP inspections and documentation.

Advertising

In the European Union and the UK, the promotion of prescription medicines is subject to intense regulation and control, including EU and national legislation as well as self-regulatory codes (industry codes). Advertising legislation inter alia includes a prohibition on direct-to-consumer advertising. All prescription medicines advertising must be consistent with the product’s approved summary of products characteristics, and must be factual, accurate, balanced and not misleading. Advertising of prescription medicines pre-approval or off-label is not allowed. Some jurisdictions require that all promotional materials for prescription medicines be subjected to either prior internal or external regulatory review and approval.

Other Regulatory Requirements

A holder of a marketing authorization for a medicinal product is legally obliged to fulfill a number of obligations by virtue of its status as an MAH. The MAH can delegate the performance of related tasks to third parties, such as distributors or marketing partners, provided that this delegation is appropriately documented and the MAH maintains legal responsibility and liability.

The obligations of an MAH include:

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Manufacturing and batch release. MAHs should guarantee that all manufacturing operations comply with relevant laws and regulations, applicable good manufacturing practices, with the product specifications and manufacturing conditions set out in the marketing authorization and that each batch of product is subject to appropriate release formalities.

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Pharmacovigilance. MAHs are obliged to establish and maintain a pharmacovigilance system, including a qualified person responsible for oversight, submit safety reports to the regulators and comply with the good pharmacovigilance practice guidelines adopted by the EMA.

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Advertising and promotion. MAHs remain responsible for all advertising and promotion of its products, including promotional activities by other companies or individuals on their behalf and in some cases must conduct internal or regulatory pre-approval of promotional materials. Regulation in this area also covers interactions with healthcare practitioners and/or patient groups, and in some jurisdictions obligations to disclose such interactions exist.

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Medical affairs/scientific service. MAHs are required to disseminate scientific and medical information on its medicinal products to healthcare professionals, regulators and patients.

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Legal representation and distributor issues. MAHs are responsible for regulatory actions or inactions of their distributors and agents.

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Preparation, filing and maintenance of the application and subsequent marketing authorization. MAHs must maintain appropriate records, comply with the marketing authorization’s terms and conditions, fulfill reporting obligations to regulators, submit renewal applications and pay all appropriate fees to the authorities.

Likewise, in the UK, a holder of a marketing authorization is subject to a number of ongoing obligations.

We may hold any future marketing authorizations granted for our product candidates in our own name, or appoint an affiliate or a collaboration partner to hold marketing authorizations on our behalf. Any failure by an MAH to comply with these obligations may result in regulatory action against an MAH and ultimately threaten our ability to commercialize our products.

Reimbursement

In the European Union, the pricing and reimbursement mechanisms by private and public health insurers vary largely by country and even within countries. The public systems reimbursement for standard drugs is determined by guidelines established by the legislator or responsible national authority. The approach taken varies by Member State. Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed. Other Member States allow companies to fix their own prices for medicines, but monitor and control company profits and may limit or restrict reimbursement. The downward pressure on healthcare costs in general, particularly prescription drugs, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products and some of EU countries require the completion of studies that compare the cost-effectiveness of a particular product candidate to currently available therapies in order to obtain reimbursement or pricing approval. Special pricing and reimbursement rules may apply to orphan drugs. Inclusion of orphan drugs in reimbursement systems tend to focus on the medical usefulness, need, quality and economic benefits to patients and the healthcare system as for any drug. Acceptance of any medicinal product for reimbursement may come with cost, use and often volume restrictions, which again can vary by country. In addition, results based rules of reimbursement may apply.

The UK also has its own pricing and reimbursement rules.

C. Organizational structure

At December 31, 2020, ProQR Therapeutics N.V. is the ultimate parent company of the following entities:

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ProQR Therapeutics Holding B.V. (the Netherlands, 100%);

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ProQR Therapeutics I B.V. (the Netherlands, 100%);

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ProQR Therapeutics II B.V. (the Netherlands, 100%);

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ProQR Therapeutics III B.V. (the Netherlands, 100%);

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ProQR Therapeutics IV B.V. (the Netherlands, 100%);

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ProQR Therapeutics VI B.V. (the Netherlands, 100%);

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ProQR Therapeutics VII B.V. (the Netherlands, 100%);

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ProQR Therapeutics VIII B.V. (the Netherlands, 100%);

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ProQR Therapeutics IX B.V. (the Netherlands, 100%);

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ProQR Therapeutics I Inc. (United States, 100%);

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Amylon Therapeutics B.V. (the Netherlands, 80%);

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Amylon Therapeutics, Inc. (Unites States, a 100% subsidiary of Amylon Therapeutics B.V.).

ProQR Therapeutics N.V. is also statutory director of Stichting Bewaarneming Aandelen ProQR (“ESOP Foundation”) and has full control over this entity. At December 31, 2020, ProQR Therapeutics Holding B.V. holds a 20% minority shareholding in Wings Therapeutics Inc.

D. Property, plants and equipment

The Company leases office and laboratory facilities of 4,795 square meters at Zernikedreef in Leiden, the Netherlands, where our headquarters and our laboratories are located. The current lease agreement for these facilities terminates on June 30, 2031 and may be renewed for subsequent 5-year terms. The Company also leases office space in the United States, at CIC Cambridge. The office space currently measures 13 square meters and is located at 245 Main Street, Cambridge, MA 02142. We believe that our existing facilities are adequate to meet current needs and that suitable alternative spaces will be available in the future on commercially reasonable terms.

Item 4A: Unresolved staff comments

Not applicable.

Item 5: Operating and Financial Review and Prospects

You should read the following discussion and analysis of our financial condition and results of operations together with the information under Item 3.A: “Selected financial data” and our audited financial statements, including the notes thereto, included elsewhere in this annual report. The following discussion is based on our financial statements prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) which might differ in material respects from generally accepted accounting principles in the United States. The following discussion includes forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those described under Item 3.D: “Risk factors”.

A. Operating results

Overview

To date, we have financed our operations primarily through our initial public and follow-on offerings, our ATM facility and private placements of equity securities, convertible loans, and to a lesser extent through funding from governmental bodies and patient organizations, Foundation Fighting Blindness (FFB) and Netherlands Enterprise Agency (RVO).

In July 2020, the Company entered into a convertible debt financing agreement with Pontifax Medison Debt Financing. Under the agreement, the Company will have access to up to $ 30,000,000 in convertible debt financing in three tranches of $ 10,000,000 each that will mature over a 54-month period and have an interest-only period of 24 months. One tranche of $ 10,000,000 had been drawn down as at December 31, 2020. A second close of the convertible debt financing agreement was completed in August 2020 with Kreos Capital. Under the second agreement, the Company will have access to up to € 15,000,000 in convertible debt financing in three tranches of € 5,000,000 each that will mature over a 54-month period and have an interest-only period of 24 months. One tranche of € 5,000,000 had been drawn down as at December 31, 2020.

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In December 2019, the Company issued 371,306 shares in the aggregate amount of $ 3,501,000, at $ 9.43 (€ 8.51) per share to Ionis Pharmaceuticals, Inc. Under the terms of the agreement, the second installment of the upfront payment in ordinary shares to the Company’s common stock was made to Ionis upon the dosing of the first patient in the phase 1/2 Aurora clinical trial for QR-1123. The first installment of the upfront payment in ordinary shares to its common stock was made to Ionis upon signing the worldwide license agreement in November 2018. The Company was granted an exclusive worldwide license to QR-1123 and relevant patents. The Company will also make future milestone payments, certain of which will be made in equity and others in cash or equity at the company’s discretion, and royalties on net sales of 20% through the royalty term.

In October 2019, the Company consummated an underwritten public offering of 10,454,545 ordinary shares at an issue price of $ 5.50 per share. The gross proceeds from this offering amounted to € 51,597,000 while the transaction costs amounted to € 3,047,000, resulting in net proceeds of € 48,550,000.

At December 31, 2020, we had cash and cash equivalents of € 75,838,000. To date, we have not generated any revenues from royalties or product sales. Based on our current plans, we do not expect to generate royalty or product revenues for the foreseeable future.

We have generated losses since our inception in February 2012. For the years ended December 31, 2020, 2019 and 2018, we incurred net losses of € 46,614,000, € 56,746,000 and € 37,086,000, respectively. At December 31, 2020, we had an accumulated deficit of € 257,747,000. We expect to continue incurring losses for the foreseeable future as we continue our preclinical studies of our product candidates, continue clinical development of our product candidates sepofarsen, QR-421a and QR-1123, advance QR-504a into clinical development, increase investments in our other research programs, apply for marketing approval of our product candidates and, if approved, build a sales and marketing infrastructure for the commercialization of our product candidates.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. There have been no material adjustments to prior period estimates for any of the periods included in this annual report.

Our significant accounting policies are fully described in the notes to our financial statements appearing elsewhere in this annual report.

Recent Accounting Pronouncements

There are no IFRS standards as issued by the IASB or interpretations issued by the IFRS interpretations committee that are effective for the first time for financial years beginning on or after January 1, 2020 that had a material impact on our financial statements.

A number of new standards, amendments to standards and interpretations are effective for annual periods beginning on after January 1, 2021 and have not been applied in preparing these consolidated financial statements. None of these are expected to have a material impact on the Group in the current or future reporting periods and on foreseeable future transactions. The Group does not plan to adopt these standards early.

Foreign Private Issuer Exemptions

As a foreign private issuer, we are not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and Exchange Commission, or SEC. Under the Exchange Act, we will be subject to reporting obligations that, in certain respects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, although we intend to report our financial results on a quarterly basis, we will not be required to issue quarterly

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reports, proxy statements that comply with the requirements applicable to U.S. domestic reporting companies, or individual executive compensation information that is as detailed as that required of U.S. domestic reporting companies. We will also have four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly as U.S. domestic reporting companies. We may also present financial statements pursuant to IFRS instead of pursuant to U.S. GAAP. Furthermore, although the members of our management and supervisory boards will be required to notify the Dutch Authority for the Financial Markets of certain transactions they may undertake, including with respect to our ordinary shares, our officers, directors and principal shareholders will be exempt from the requirements to report transactions in our equity securities and from the short-swing profit liability provisions contained in Section 16 of the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protections available to you in comparison to those applicable to a U.S. domestic reporting companies.

Financial Operations Overview

Other Income

Other income mainly consists of grant income from government-related organizations and charities. (Government) Grants are recognized in other income in the same period in which the related R&D costs are recognized.

Research and Development Costs

Research and development expenses consist principally of:

●

salaries for research and development staff and related expenses, including social security costs and share-based compensation expenses;

●

costs related to our preclinical and clinical activities and trials;

●

costs for production of clinical and preclinical compounds and drug substances by contract manufacturers, including supporting studies such as stability studies and other analysis of the compounds;

●

fees and other costs paid to contract research organizations, or CROs, in connection with additional preclinical testing;

●

costs of related facilities, materials and equipment;

●

costs associated with obtaining and maintaining patents and other intellectual property; and

●

depreciation of tangible fixed assets used to develop our product candidates.

Our research and development expenses primarily relate to the following key programs:

●

Sepofarsen for the treatment of LCA

The research and development costs relating to our product candidate sepofarsen primarily consist of salaries and costs paid to CROs for clinical studies, including statistical analyses, and manufacturing of process performance qualification drug substances batches as well as (pre-)commercial drug product batches. Other significant costs are our internal laboratory costs, including the materials used in the labs and rent allocated to the lab space, as well as consultancy costs in the support of our research and development activities.

●

QR-421a for the treatment of Usher syndrome

The research and development costs relating to our product candidate QR-421a primarily consist of salaries, costs paid to CROs for managing the clinical study and costs for statistical analyses. Other significant costs are our

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internal laboratory costs, including the materials used in the labs and rent allocated to the lab space, as well as consultancy costs in the support of our research and development activities.

●

QR-1123 for the treatment of autosomal dominant Retinitis Pigmentosa

The research and development costs relating to our product candidate QR-1123 primarily consist of salaries and costs paid to CROs for our clinical study. Other significant costs are our internal laboratory costs, including the materials used in the labs and rent allocated to the lab space, as well as consultancy costs in the support of our research and development activities.

●

QR-504a for the treatment of Fuchs endothelial corneal dystrophy

The research and development costs relating to our product candidate QR-504 primarily consist of toxicology studies and salaries.

●

Other development programs

Other research and development expenses mainly relate to our innovation unit, which is our internal discovery engine. Our innovation unit has been active in building a pipeline based upon our toolbox of RNA technologies that we have in-licensed or developed in-house. These expenses primarily consist of salaries, costs for production of the preclinical compounds and costs paid to CROs for our preclinical studies.

For the years ended December 31, 2020, 2019 and 2018, we incurred expenses of € 38,135,000, € 46,491,000 and € 29,514,000, respectively, on research and development.

Our research and development expenses may vary substantially from period to period based on the timing of our research and development activities. Research and development expenses are expected to moderately increase as we initiate and continue clinical trials for sepofarsen, QR-421a, QR-1123 and QR-504a, and advance any other product candidate in preclinical studies.

Changes in internal or external variables with respect to the development of sepofarsen, QR-421a, QR-1123, QR-504a, or any other product candidate that we may develop could result in a significant change in the costs and timing associated with the development of such product candidate. For example, if the FDA, EMA or other regulatory authority were to require us to conduct preclinical and clinical studies beyond those which we currently anticipate will be required for the completion of clinical development or if we experience significant delays in enrollment in any clinical trials, we could be required to expend significant additional financial resources and time on the completion of our clinical development programs.

General and Administrative Costs

Our general and administrative expenses consist principally of:

●

salaries for employees other than research and development staff and related expenses, including social security costs and share-based compensation expenses;

●

professional fees for auditors and other consulting expenses not related to research and development activities;

●

professional fees for lawyers not related to the protection and maintenance of our intellectual property;

●

cost of facilities, communication and office expenses;

●

IT expenses; and

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●

depreciation of property, plant and equipment not related to research and development activities, including depreciation expenses on the right-of-use asset related to our Leiden head office lease contract.

Since our IPO in September 2014 we have incurred additional costs associated with operating as a public company. These public company-related expenses include costs of additional personnel, additional legal fees, accounting and audit fees, managing directors’ and supervisory directors’ liability insurance premiums and costs related to investor relations. We expect that our general and administrative expenses will remain fairly stable in upcoming years.

Share-Based Compensation

Share-based compensation reflects the costs of our equity-settled share option plan, which are measured at the fair value of the options at the grant date, and which are recognized over the course of each of the separate vesting tranches of the applicable vesting period of the options involved. The share-based compensation is recognized in the income statement, with a corresponding entry to the equity-settled employee benefits reserve, which is part of equity. We expect that our share-based compensation costs will increase in the future as the number of awarded options and other share-based compensation instruments increases. See note 12(d) to the financial statements included elsewhere in this annual report for additional information on share-based compensation.

Finance Income

To date, our cash and cash equivalents have been deposited primarily in savings and short-term deposit accounts. Savings and deposit accounts generated a limited amount of interest income or interest expense. In 2020, 2019 and 2018 we held deposits in US dollars.

Income tax

Due to the operating losses incurred since inception the Company has no income tax provisions as at December 31, 2020, except for the income tax provision for our US subsidiary. Realization of deferred tax assets is dependent on future earnings, if any, the timing and amount of which are uncertain. Accordingly, we have not yet recognized any deferred tax asset related to operating losses. Also, no other transactions have occurred that would lead to a deferred tax position.

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Results of Operations

Comparison of the periods ended December 31, 2020 and 2019

The following table sets forth our results of operations for the periods indicated.


	Year ended December 31,
	2020	2019	Change

	(€ in thousands)

Other income	9,452	1,933	7,519
Research and development costs	(38,135)	(46,491)	8,356
General and administrative costs	(13,685)	(12,887)	(798)
Operating result	(42,368)	(57,445)	15,077
Finance income and expense	(3,716)	402	(4,118)
Results related to financial liabilities measured at fair value through profit or loss	(84)	—	—
Results related to associates	(322)	429	(751)
Corporate income taxes	(124)	(132)	8
Net loss	(46,614)	(56,746)	10,216

Other income

In 2020 ProQR received a final waiver of the full amount of the Innovation credit for the Company’s cystic fibrosis program. Consequently, other income included a gain of € 8,423,000 relating to this waiver. In 2020, other income also included grant income from the Foundation Fighting Blindness (FFB) for the purpose of developing QR-421a. FFB grant income amounted to € 624,000 in 2020 compared to € 1,312,000 in 2019.

Research and development costs

Research and development costs amounted to € 38,135,000 for the year ended December 31, 2020 compared to € 46,491,000 for the year ended December 31, 2019. These costs were primarily related to our product candidates, sepofarsen, QR-421a, QR-1123, QR-504a and our innovation unit. Our research and development expenses are highly dependent on the development phases of our product candidates and are expected to stay largely at the same level, although they may fluctuate significantly from period to period.

The decrease in research and development costs in the year ended December 31, 2020 compared to the year ended December 31, 2019 is mainly due to:

●

in 2019, we made payments to Ionis Pharmaceuticals, Inc. under the terms of the license agreement for QR-1123. We made no such payments in 2020;

●

costs we incurred for the Phase 2/3 clinical trial for sepofarsen, which decreased in 2020 compared to 2019 due to delays caused by the COVID-19 pandemic;

●

costs we incurred for the first-in-human clinical trial for QR-421a, which decreased in 2020 compared to 2019 due to delays caused by the COVID-19 pandemic;

●

decreased costs for externally conducted studies, which included various in vivo studies, proof of concept studies and dose ranging and toxicity studies in 2019. We conducted fewer such studies in 2020;

●

the above effects are partly offset by increased share-based compensation, reflecting grants of share options to research and development staff.

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General and administrative costs

General and administrative costs amount to € 13,685,000 for the year ended December 31, 2020 compared to € 12,887,000 for the year ended December 31, 2019. We expect that general and administrative costs will remain fairly stable in upcoming years.

Finance income and expense

We had net finance expenses of € 3,716,000 for the year ended December 31, 2020, as compared to net finance income of € 402,000 for the year ended December 31, 2019. The financial income and expenses mainly reflect foreign exchange results on cash and cash equivalents denominated in U.S. dollars.

Comparison of the periods ended December 31, 2019 and 2018

Reference is made to our 2019 annual report on form 20-F, filed on March 31, 2020, for a comparison of the periods ended December 31, 2019 and 2018.

B. Liquidity and capital resources

To date, we have financed our operations through our IPO, follow-on offerings, ATM facility, private placements of equity securities, convertible loans and funding from governmental bodies and patient organizations.

On March 31, 2020, the Company entered into a sales agreement, which permitted the offering, issuance and sale by the

Company of up to a maximum aggregate offering price of $ 75,000,000 of its ordinary shares that may be issued and sold in one or more at-the-market offerings with Citigroup Global Markets, Inc. and Cantor Fitzgerald & Co. In 2020, no shares were issued pursuant to this ATM facility.

Sales of the shares under the agreement will be made in transactions that are deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended, including sales made directly on the NASDAQ Global Market at market prices, in negotiated transactions at market prices prevailing at the time of sale, or at prices relating to such prevailing market prices, and/or any other method permitted by law.

The description of the agreement set forth above does not purport to be complete and is qualified in its entirety by reference to the full text thereof, which is attached hereto as Exhibit 4.17 and incorporated by reference herein.

As at December 31, 2020 the Company’s outstanding shares totaled 50,204,810. The following items may result in future dilution for our shareholders:

●

1,172,924 treasury shares held by the Company, which can be used for all general purposes including option exercises under the employee stock option plan;

●

2,753,819 treasury shares held by the ESOP foundation, which can be used for option exercises under the employee stock option plan;

●

7,530,772 shares authorized for issuance for future grants under the employee stock option plan;

●

2,320,062 conversion options and warrants held by convertible debt holders.

If all of the above items were converted into shares at December 31, 2020, the number of outstanding shares would be 63,982,337.

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Cash Flows

The table below summarizes our statement of cash flows for the years ended December 31, 2020 and 2019.


	Year ended December 31,
	2020	2019	Change

	(€ in thousands)

Net cash used in operating activities	(47,060)	(43,970)	(3,090)
Net cash used in investing activities	(924)	(580)	(344)
Net cash generated by financing activities	14,500	50,199	(35,699)
Net increase/(decrease) in cash and cash equivalents	(33,484)	5,649	(39,133)
Currency effect cash and cash equivalents	(2,628)	721	(3,349)
Cash and cash equivalents at the beginning of the period	111,950	105,580	6,370
Cash and cash equivalents at the end of the period	75,838	111,950	(36,112)

Net cash used in operating activities increased from € 43,970,000 in the year ended December 31, 2019 to € 47,060,000 in the year ended December 31, 2020. This is caused mainly caused by changes in working capital and increased interest payments.

Net cash used in investing activities increased from € 580,000 in the year ended December 31, 2019 to € 924,000 in the year ended December 31, 2020. This increase was primarily due to our investments in laboratory equipment and equipment used in our clinical studies. In addition, various leasehold improvements were incurred in 2020.

Net cash generated by financing activities decreased from € 50,199,000 in the year ended December 31, 2019 to € 14,500,000 in the year ended December 31, 2020. In 2019, the Company raised gross proceeds of € 51,597,000 from the issuance of 10,454,545 ordinary shares. Transaction costs amounted to € 3,047,000, resulting in net proceeds of € 48,550,000. In 2020, we issued convertible loans resulting in net proceeds of € 13,791,000.

Reference is made to our 2019 annual report on form 20-F, filed on March 31, 2020, for a comparison of the periods ended December 31, 2019 and 2018.

Cash and Funding Sources

The table below summarizes our main sources of financing for the years ended December 31, 2020, 2019 and 2018.


	Equity	Convertible	Government
	Capital	Loans	Borrowing	Total

	(€ in thousands)

Year ended December 31, 2018	84,191	1,132	264	85,587
Year ended December 31, 2019	48,550	690	2,027	51,267
Year ended December 31, 2020	—	13,791	579	14,370
Total	132,741	15,613	2,870	151,224

In 2020, our primary source of financing was the issuance of convertible loans, resulting in net proceeds of € 13,791,000. In 2019, our primary source of funding was the underwritten public offering of 10,454,545 ordinary shares in October, resulting in net proceeds of € 48,550,000. Our main source of financing in 2018 was our offering in September providing net proceeds of € 84,191,000.

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access to up to € 15 million in convertible debt financing in three tranches of € 5 million each that will mature over a 54-month period and have an interest-only period of 24 months. One tranche of € 5 million had been drawn down as at December 31, 2020.

Pontifax and/or Kreos may elect to convert the outstanding loans into ProQR ordinary shares at any time prior to repayment at a fixed conversion price of $7.88 per share. ProQR also has the ability to convert the loans into its ordinary shares, at the same conversion price, if the Company’s stock price reaches a pre-determined threshold. In connection with the loan agreement, the Company issued to Pontifax and Kreos warrants to purchase up to an aggregate of 302,676 shares of its common stock at a fixed exercise price of $7.88.

Convertible loans were issued to Amylon Therapeutics B.V. in 2018 and 2019 and are interest-bearing at an average rate of 8% per annum. They are convertible into a variable number of ordinary shares within 36 months at the option of the holder or the Company in case financing criteria are met. Any unconverted loans become payable on demand after 24 – 36 months in equal quarterly terms.

At December 31, 2020, we had borrowings of € 17,324,000, which consisted of borrowings from a government body (€ 3,077,000) and convertible loans (€ 14,247,000). Cash is denominated in both U.S. dollars and euros.

At December 31, 2019, we had borrowings of € 13,052,000, which consisted of borrowings from a government body (€ 10,315,000) and convertible loans (€ 2,737,000). Cash is denominated in both U.S. dollars and euros.

For a description of our financial commitments, see below.

Funding Requirements

We expect that our cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into 2023. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. Our present and future funding requirements will depend on many factors, including, among other things:

●

the progress, timing, resumption and completion of preclinical testing and clinical trials for our current or any future product candidates;

●

the number of potential new product candidates we identify and decide to develop;

●

the costs involved in growing our organization to the size needed to allow for the research, development and potential commercialization of our current or any future product candidates;

●

the costs involved in filing patent applications and maintaining and enforcing patents or defending against claims or infringements raised by third parties;

●

the time and costs involved in obtaining regulatory approval for our product candidates and any delays we may encounter as a result of evolving regulatory requirements or adverse results with respect to any of these product candidates;

●

any licensing or milestone fees we might have to pay during future development of our current or any future product candidates;

●

selling and marketing activities undertaken in connection with the anticipated commercialization of our current or any future product candidates and costs involved in the creation of an effective sales and marketing organization; and

●

the amount of revenues, if any, we may derive either directly or in the form of royalty payments from future sales of our product candidates, if approved.

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For more information as to the risks associated with our future funding needs, see Item 3.D: “Risk Factors”.

Capital Expenditures

The following table sets forth our capital expenditures for the years ended December 31, 2020, 2019 and 2018:


	Year ended December 31,
	2020	2019	2018

	(€ in thousands)

Purchases of tangible fixed assets	924	835	312

The increase in purchases of tangible fixed assets from € 312,000 in 2018 to € 835,000 in 2019 was primarily due to our investments in laboratory equipment and equipment used in our clinical studies in 2019. Purchases of tangible fixed assets increased further to € 924,000 in 2020. This increase was primarily due to our investments in laboratory equipment and equipment used in our clinical studies. In addition, various leasehold improvements were made in 2020.

Contractual Obligations and Commitments

The table below analyzes ProQR’s undiscounted liabilities into relevant maturity groupings based on the remaining period at December 31, 2020 until the contractual maturity date:


	Less than	Between 1	Between 2
	1 year	and 2 years	and 5 years	Over 5 years

	(€ in thousands)
At December 31, 2020
Borrowings	2,391	6,674	13,808	—
Lease liabilities	2,079	2,079	6,235	11,432
Trade payables and other payables	7,067	—	—	—
Total	11,537	8,753	20,043	11,432

Commitments

Rent

Since 2012, the Company is domiciled in Leiden, the Netherlands. We are currently a party to a lease agreement for laboratory and office space in Leiden. The commitment for lease liabilities that is included in the table under ‘Contractual obligations and commitments’ above solely consists of our commitment under this laboratory and office space lease agreement.

Patent license agreements

The Company and the Radboud University Medical Center have entered into a Patent License Agreement under which we were granted a world-wide exclusive license pursuant to which we might have certain royalty obligations in relation to our product candidate sepofarsen for Leber congenital amaurosis.

The Company and the Radboud University Medical Center have also entered into a Patent License Agreement under which we were granted a world-wide exclusive license pursuant to which we might have certain royalty obligations in relation to Type II Usher Syndrome.

The Company and the Leiden University Medical Centre have entered into a Patent License Agreement under which we were granted a world-wide exclusive license pursuant to which we might have certain royalty obligations in relation to several CNS diseases.

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The Company and Inserm Transfert SA and Assistance-Publique-Hôpiteaux de Paris have entered into a Patent License Agreement under which we were granted a world-wide license pursuant to which we might have certain royalty obligations in relation to our product candidate sepofarsen for Leber congenital amaurosis, which license is exclusive with respect to one licensed patent family, and non-exclusive with respect to another patent family.

On October 29, 2018, ProQR signed of an agreement with Ionis Pharmaceuticals to license QR-1123 (formerly “IONIS-RHO-2.5Rx”), an RNA medicine for autosomal dominant retinitis pigmentosa (adRP) caused by the P23H mutation in the rhodopsin (RHO) gene. Under the terms of the agreement, ProQR was granted an exclusive worldwide license to QR-1123 and relevant patents. In 2018, ProQR paid the first installment of an upfront payment in ordinary shares in the aggregate amount of $ 2,500,000 at $ 22.23 per share, which represents a 20% premium (based on the volume weighted average price of the previous 20 trading days) to its common stock, to Ionis upon signing the agreement. In 2019, ProQR paid the second installment of the upfront payment in ordinary shares in the aggregate amount of $ 3,501,000, at $ 9.43 per share. ProQR will also make future milestone payments, certain of which will be made in equity and others in cash or equity at ProQR’s discretion, and royalties on net sales of 20% through the royalty term.

The Company and Vico Therapeutics B.V. have entered into a Patent License Agreement under which we were granted a world-wide exclusive license pursuant to which we may have certain royalty obligations in relation to our product candidate QR-504 for Fuch’s Endothelial Corneal Dystrophy.

Refer to Item 4.B: “Business Overview” for more details on patent license agreements.

Clinical support agreements

On February 9, 2018, we entered into an agreement with Foundation Fighting Blindness, or FFB, under which FFB will provide funding of $ 7.5 million to advance QR-421a into the clinic and will receive future milestones.

Pursuant to the terms of the agreement, we are obligated to make a one-time milestone payment to FFB of up to $ 37.5 million, payable in four equal annual installments following the first commercial sale of QR-421a, the first of which is due within 60 days following the first commercial sale. We are also obligated to make a payment to FFB of up to $ 15 million if we transfer, sell or license QR-421a other than for certain clinical or development purposes, or if we enter into a change of control transaction. However, the payment in the previous sentence may be set-off against the $ 37.5 million milestone payment. Either FFB or we may terminate the agreement for cause, which includes our material failure to achieve certain commercialization and development milestones. Our payment obligations survive the termination of the agreement.

In August 2014, we entered into an agreement with Cystic Fibrosis Foundation Therapeutics, Inc., or CFFT, a subsidiary of the Cystic Fibrosis Foundation, pursuant to which CFFT agreed to provide the Company with up to $ 3 million to support the clinical development of eluforsen.

Pursuant to the terms of the agreement, we are obligated to make a one-time milestone payment to CFFT of up to approximately $ 16 million, payable in three equal annual installments following the first commercial sale of eluforsen, the first of which is due within 90 days following the first commercial sale. We are also obligated to make a one-time milestone payment to CFFT of up to $ 3 million if net sales of eluforsen exceed $ 500 million in a calendar year. Lastly, we are obligated to make a payment to CFFT of up to approximately $ 6 million if we transfer, sell or license eluforsen other than for certain clinical or development purposes, or if we enter into a change of control transaction prior to commercialization. However, the payment in the previous sentence may be set-off against the $ 16 million milestone payment. Either CFFT or we may terminate the agreement for cause, which includes our material failure to achieve certain commercialization and development milestones. Our payment obligations survive the termination of the agreement.

Research and development commitments

The Company has committed itself to a number of obligations amounting to € 12,003,000 at December 31, 2020 (2019: € 19,472,000). Of these obligations an amount of € 6,491,000 is due in 2021, the remainder is due in 1 to 5 years.

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Our commitments are set out in more detail in note 22 and 23 to the financial statements as included elsewhere in this annual report.

C. Research and development, patents and licenses, etc.

See Item 4.B: “Business Overview” and Item 5: “Operating and Financial Review and Prospects”.

D. Trend information

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2020 to December 31, 2020 that are reasonably likely to have a material adverse effect on the Company’s net income, profitability, liquidity or capital resources, or that caused the reported financial information to be not necessarily indicative of future operating results or financial conditions. For a discussion of trends, see Item 5.A: “Operating results”.

E. Off-balance sheet arrangements

During the periods presented in this annual report, we did not have any off-balance sheet arrangements.

F. Tabular disclosure of contractual obligations

See Item 5.B: “Liquidity and capital resources”.

G. Safe harbor

This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Refer to “Forward-looking statements” at the beginning of this report.

Item 6: Directors, Senior Management and Employees

A. Directors and senior management

We have a two-tier board structure consisting of our management board (‘raad van bestuur’) and a separate supervisory board (‘raad van commissarissen’). Below is a summary of relevant information concerning our supervisory board, management board and senior management.

Supervisory Board

The following table sets forth information with respect to each of our supervisory board members and their respective dates of birth. The terms of office of all our supervisory board members expire according to a rotation schedule drawn up by our supervisory board. The business address of our supervisory board members is our registered office address at Zernikedreef 9, 2333 CK Leiden, the Netherlands.

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Our supervisory board is currently composed of the following members, all of whom are independent under applicable NASDAQ standards and all of whom, with the exception of Mr. Dinko Valerio, are independent under the Dutch Corporate Governance Code (DCGC):

Name

Date of Birth

Position

Member Since

Term expires

Dinko Valerio

August 3, 1956

Member of the Supervisory Board (Chairman)

January 1, 2014

2024

Alison Lawton

September 26, 1961