Organization and Operations

The Company

Proteon Therapeutics, Inc. (the “Company”) is a late-stage biopharmaceutical company focused on the development of novel,

first

-in-class pharmaceuticals to address the medical needs of patients with kidney and vascular disease. The Company was formed in

June 2001

and incorporated on

March 24, 2006.

The Company devotes substantially all of its efforts to product research and development, initial market development and raising capital. The Company has

not

generated any product revenue related to its primary business purpose to date and is subject to a number of risks similar to those of other development stage companies, including dependence on key individuals, competition from other companies, the need for development of commercially viable products and the need to obtain adequate additional financing to fund the development of its product candidates. The Company is also subject to a number of risks similar to other companies in the biotechnology industry, including regulatory approval of products, uncertainty of market acceptance of products, competition from therapeutic alternatives and larger companies, compliance with government regulations, protection of proprietary technology, dependence on

third

parties and product liability.

As of

March 31, 2018,

the Company had cash, cash equivalents and available-for-sale investments of

$36.8

million. The Company believes that its existing cash, cash equivalents and available-for-sale investments will be sufficient to fund operations and capital expenditures into the

fourth

quarter of

2019.

The Company had an accumulated deficit of

$195.8

million as of

March 31, 2018.

November 12, 2015,

the Company filed a shelf registration statement on Form S-

(the “Registration Statement”), and entered into a Sales Agreement with Cowen and Company, LLC (the “Sales Agreement”) to establish an at-the-market (“ATM”) equity offering program pursuant to which they are able, with the Company’s authorization, to offer and sell up to

$40

million of the Company’s Common Stock at prevailing market prices from time to time. The Registration Statement became effective on

January 12, 2016.

The Company pays Cowen a commission equal to

of the gross proceeds of the sales price of all shares sold through it as sales agent under the Sales Agreement. The offering costs are offset against proceeds from the sale of common stock under this agreement. The Company filed a prospectus supplement on

March 14, 2018

because the Company is currently subject to General Instruction

I.B.6

of Form S-

which limits the amounts that the Company

may

sell under the Registration Statement. For the year ended

December 31, 2017,

the Company sold

896,811

shares of Common Stock under the Sales Agreement for aggregate gross proceeds of

$1.4

million offset by total offering costs of

$0.1

million. The Company did

not

sell any shares of Common Stock under the Sales Agreement during the

three

months ended

March 31, 2018.

June 22, 2017,

the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a syndicate of current and new institutional investors, led by an affiliate of Deerfield Management Company, L.P., pursuant to which the Company agreed to issue and sell to the investors an aggregate of

22,000

shares of the Company’s Series A Convertible Preferred Stock, par value

$0.001

per share (the “Series A Preferred”), for a purchase price of

$1,000

per share, or an aggregate gross purchase price of

$22.0

million, all upon the terms and conditions set forth in the Purchase Agreement (the “Series A Financing”). The Company closed the Series A Financing on

August 2, 2017 (

see Note

Pursuant to the Series A Financing, on

August 2, 2017,

the Company entered into a registration rights agreement with the holders of the Series A Preferred (the “Registration Rights Agreement”). On

August 3, 2017,

in accordance with the Registration Rights Agreement, the Company filed a registration statement on Form S-

to register the common stock issuable upon conversion of the Preferred Shares. The registration statement became effective on

August 21, 2017.