Organization and Operations

The Company

Proteon Therapeutics, Inc. (the “Company”) is a biopharmaceutical company that has historically 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.

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 Series A Preferred. The registration statement became effective on

August 21, 2017.

As of

March 31, 2019,

340

shares of the Series A Preferred were converted into

341,743

shares of the Company’s common Stock.

Recent Developments

March 28, 2019,

the Company announced top-line results from PATENCY-

its Phase

clinical trial of investigational vonapanitase in patients with chronic kidney disease, or CKD, undergoing creation of a radiocephalic fistula for hemodialysis. The PATENCY-

clinical trial had

two

co-primary endpoints:

•	Fistula use for hemodialysis . 69.7 % of vonapanitase-treated patients achieved use of the fistula for hemodialysis, compared to 65.1% of placebo-treated patients ( p=0.328 ), a result that is not statistically significant. Fistula use is defined as use of the fistula for two -needle hemodialysis for at least 90 days or, if hemodialysis was not initiated at least 90 days prior to the last study visit, for at least 30 days and including the patient’s last study visit.

•	Secondary patency . A comparison of the Kaplan-Meier curves did not demonstrate a statistically significant difference in favor of vonapanitase ( p=0.932 ). At the end of one year, 78% of vonapanitase-treated patients maintained secondary patency, compared to 76% of placebo-treated patients. Secondary patency is a measure of the length of time from surgical creation of the fistula until the fistula experiences final failure and must be abandoned.

Top-line results also included data relating to primary unassisted patency,

one

of PATENCY-

2’s

other efficacy endpoints. Primary unassisted patency is the length of time from fistula surgical creation to the

first

occurrence of a fistula thrombosis or corrective procedure to restore or maintain patency (blood flow). Vonapanitase-treated patients had a

15%

reduction in the risk of primary unassisted patency loss over

one

year, compared to placebo (

p=0.178

), a result that is

not

statistically significant.

The proportions of patients experiencing adverse events were comparable between the vonapanitase and placebo arms of the study. The most common adverse events were consistent with medical events experienced by patients with CKD undergoing creation of a radiocephalic fistula and are summarized in the table below.

Proportions of Patients Experiencing Common Adverse Events

	Vonapanitase N=399			Placebo N=204
Vascular Stenosis		35.1	%		41.7	%
Fistula Thrombosis		16.8	%		18.6	%
Local swelling		5.0	%		2.0	%
Hematoma		5.0	%		3.9	%

Note: Includes any adverse event that occurred in at least

of patients in either treatment group.

Current Strategy

Following the release of top-line data from the PATENCY-

clinical trial of vonapanitase on

March 28, 2019,

the Company began to evaluate its strategic alternatives focusing on enhancing stockholder value. It is conducting the process with the assistance of financial and legal advisors and is evaluating the full range of potential strategic alternatives, including but

not

limited to, a merger or sale of the Company, including a sale of assets or intellectual property, business combinations, joint ventures, public and private capital raises and recapitalization options. Since these efforts

may

not

be successful, it is also considering other possible alternatives, including a wind-down of operations and a liquidation and dissolution of the Company. The Company has discontinued substantially all its research and development activities (see Note

), including a reduction in workforce, to reduce operating expenses while it evaluates these opportunities. The Company remains subject to a number of risks similar to other companies in the biotechnology industry, including compliance with government regulations, protection of proprietary technology, dependence on

third

parties and product liability.

As of

March 31, 2019,

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

$16.8

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

2020.

The Company had an accumulated deficit of

$217.0

million as of

March 31, 2019.

The Company anticipates operating losses to continue for the foreseeable future due to, among other things, costs related to its administrative organization. These conditions raise substantial doubt about its ability to continue as a going concern within

one

year after the date that the financial statements are issued. To alleviate the conditions that raise substantial doubt about the Company’s ability to continue as a going concern, management has implemented a reduction in expenditures plan and is currently exploring strategic alternatives as a source of funding. While the current reduction in spending expenditure plans will allow the Company to fund its operations in the near-term, there can be

assurance that the Company will be able to achieve its future strategic alternatives raising substantial doubt about its ability to continue as a going concern. Accordingly, the Company has prepared the financial statements on the going concern basis.